EURUSD pares weekly gains amid mixed mood, focus on next week’s ECB

The risk appetite remains sour despite the latest indecision of the markets amid early Friday. Geopolitical woes surrounding Israel join strong yields to keep the optimists off the table even as the US Dollar Index (DXY) braces for a weekly loss.

Thursday’s speech from Fed Chair Powell and the mixed US data drowned the US Dollar the previous day but the lackluster trading allowed Greenback sellers to take a breather, especially amid a lack of major data/events.

With this, the commodities and Antipodeans are on the way to posting the weekly gains led by the Gold price that prints a three-month high. It should be noted that the EURUSD struggles to lure the bulls, even as the weekly move appears positive, as the markets prepare for next week’s European Central Bank (ECB) monetary policy meeting. Even so, the GBPUSD remains pressured and the USDJPY edges higher amid the UK’s downbeat data and Japan’s defense of the easy-money policy, as well as due to the firmer yields.

On a different page, BTCUSD braces for the biggest weekly gain in four months while the ETHUSD snaps a two-week downtrend amid optimism surrounding the ETF approvals.

Following are the latest moves of the key assets:

• Brent oil grinds at the highest level in three weeks, mildly bid near $93.50 by the press time.
• Gold price remains on the front foot at a three-month high, up for the fourth consecutive day near $1,980 at the latest.
• USD Index licks its wounds around 106.35, printing minor gains near the weekly low of late.
• Wall Street closed negative and so did the Asia-Pacific stocks, as well as equities in Europe and the UK.
• BTCUSD and ETHUSD stay firmer to around $29,400 and $1,590 as we write.

US Dollar retreats on Fed’s hesitance

Despite the multi-year high Treasury bond yields and the risk-off mood, the US Dollar braces for the weekly loss as Fed talks failed to bolster the hawkish hopes. Adding to this could be the market’s preparations for next week’s preliminary PMIs for October and the ECB Monetary policy meeting. However, the comparatively firmer US fundamentals keep the Greenback on the bull’s radar which in turn challenges the latest recovery in the commodities and Antipodeans.

The geopolitical tensions continue to spoil the risk appetite as Israel prepares for a ground invasion of Gaza, especially after US President Joe Biden showed open support for removing Hamas. It’s worth noting that US President Biden addressed the nation early Friday in Asia and criticized Iran, as well as Russia, in their invasion of Gaza and Ukraine respectively. The Washington Chief also showed readiness to provide full support to Israel in fighting while also conveying the plan to send humanitarian help to the citizens of Gaza. It should be observed that the US-China ties appear soothing of late and hence join the mixed data, as well as the Fed concerns, to exert downside pressure on the US Dollar.

Talking about the recent data, US Weekly Initial Jobless Claims dropped to the lowest level in seven months while the Philadelphia Fed Manufacturing Index improved to -9.0 for October, from -13.6. Further, the Existing Home Sales slumped 2.0% in September compared to -0.7% prior contraction. That said, Fed Chairman Jerome Powell ruled out an interest rate hike in the short term and praised the rally in bond yields while defending the restrictive monetary policy. However, Federal Reserve Bank of Dallas President Lorie Logan reiterated her support for the higher rates.

On early Friday, the markets consolidated recent moves amid a light calendar and a lack of major data/events. Even so, the People’s Bank of China (PBoC) kept the 1-year and 5-year Loan Prime Rates (LPRs) unchanged at 3.45% and 4.20% respectively whereas the German PPI dropped and the UK Retail Sales printed unclear figures for September.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

Nothing major ahead of PMIs, ECB eyed

The volatile week is likely to end on a softer note amid a lack of major catalysts on the economic calendar. Additionally challenging the momentum could be the anxiety ahead of the next week’s preliminary PMIs for the major economies for October, as well as the monetary policy meetings of the ECB and the BoC. Above all, developments surrounding Israel, Russia and China will contribute to the geopolitical tensions and the market moves. That said, US Treasury bond yields are likely to remain firmer and can challenge the US Dollar after a limit, which in turn suggests the US Dollar’s rebound in the next week.

May the trading luck be with you!