EURUSD fades recovery as traders await October PMI data

China rate cuts fail to inspire optimists

Market sentiment remains shaky early Monday after a volatile week, with traders looking for clues to support expectations of significant rate cuts from major central banks. Participants struggled to respond to the People’s Bank of China’s (PBoC) rate cuts and new hopes for a humanitarian ceasefire in the Israel-Iran conflict. Last week’s US data and the European Central Bank’s (ECB) rate cut contributed to a three-week uptrend in the US Dollar Index (DXY), despite a pullback from the 200-SMA on Friday amid mixed signals from the Fed.

EURUSD, GBPUSD retreat but USDJPY lacks upside momentum

Despite Friday's pullback, doubts about dovish expectations for the US Federal Reserve (Fed), fueled by strong US inflation data and hawkish Fed comments, are pressuring EURUSD and GBPUSD buyers. While these major pairs saw a corrective bounce late last week due to slightly positive Eurozone and UK data, rising expectations for further rate cuts from the ECB and Bank of England (BoE) are weighing on the Euro and the Pound.

Meanwhile, discussions about increasing monetary policy divergence between the Bank of Japan (BoJ) and the US Federal Reserve put pressure on USDJPY buyers after a retreat from an 11-week high.

Antipodeans remain pressured

The strength of the US Dollar, along with mostly disappointing data from Australia and New Zealand, is putting pressure on AUDUSD and NZDUSD. The Reserve Bank of Australia (RBA) Deputy Governor emphasized data dependency, while New Zealand credit card spending fell. Meanwhile, USDCAD remains strong, hitting an 11-week high last Tuesday, as falling crude oil prices and a dovish outlook for the Bank of Canada (BoC) add to the anticipation ahead of this week’s BoC interest rate decision.

Gold stays firmer, Crude Oil holds lower grounds

The PBoC rate cuts, Chinese stimulus, and the festive season in India have driven gold prices to record highs, even as the US Dollar strengthens. This surge in bullion prices also reflects the market's flight to traditional safe-haven assets during times of economic uncertainty.

Crude oil prices remain under pressure near monthly lows due to concerns about lower energy demand from China, increased OPEC+ output, and easing geopolitical tensions in the Middle East.

Cryptos rally despite US Dollar gains, thanks to ETF inflows and policy optimism

Bitcoin (BTCUSD) saw its largest weekly gain in nine weeks, while Ethereum (ETHUSD) had its biggest rally since late September. This surge is fueled by record ETF inflows and optimism for easier crypto regulations post-US Presidential Elections.

Latest moves of key assets

• WTI Crude oil snaps six-day losing streak while bouncing off a three-week low to $69.00 by the press time.
• Gold prints a five-day uptrend despite retreating from the all-time high of $2,733 to $2,726 at the latest.
• The USD Index picks up bids to reverse the previous day’s retreat from 200-SMA, mildly bid near 103.60 as we write.
• Wall Street closed with mild gains but the Asia-Pacific shares drifted lower. Further, European and British equities print minor losses during the initial trading hour.
• BTCUSD posts minor gains near $69,100 while ETHUSD pares weekly gains with mild intraday losses near $2,740 at the latest.

A quieter trading week ahead, focus on PMI, BoC

After a volatile week, the upcoming days may feel quiet due to a lighter calendar and mixed risk factors. Key events to watch include the Bank of Canada’s monetary policy announcement on Wednesday and the preliminary October PMIs for the Eurozone, UK, and US on Thursday. Also notable are speeches from BoE Governor Andrew Bailey and ECB President Christine Lagarde on Tuesday, along with Friday’s US Durable Goods Orders.

The US Dollar may pull back if the PMIs and Durable Goods Orders raise hopes for two more Fed rate cuts, especially if FOMC speakers tone down hawkish views.

EURUSD might struggle due to weak expectations from the EU PMIs and a dovish ECB stance.

GBPUSD could remain cautious unless upcoming data shows strong gains and Bailey dismisses rate cut speculation.

The Japanese Yen and Gold may perform well due to their safe-haven status and the hawkish Bank of Japan. USDCAD could decline if Crude Oil rebound and the BoC defy heavy rate cut hopes, even if traders expect a 0.50% cut this week.

Cryptocurrencies may continue to rise on optimism and technical breakouts, while equities and Antipodean currencies might face challenges due to uncertainty around China and central banks’ actions.

Predictions for Key Assets

• Recovery Expected: USDCAD, USDJPY, US Dollar, Silver
• Further Downside Likely: AUDUSD, NZDUSD, GBPUSD
• Mostly Sideways Expectations: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Slow & Gradual Fall Expected: DAX, FTSE 100, EURUSD, Crude Oil

May the trading luck be with you!