Markets Shift Focus to Central Bank Decisions Amid Tensions (10.16.2024)

The EUR/USD ended its four-day losing streak, stabilizing around 1.0890 as traders await key decisions from the ECB and upcoming Eurozone inflation data. 

In USD/JPY, the yen continues to struggle near 149 as the dollar rallies on solid US data, while the BOJ signals caution in future rate hikes. Gold remains steady at $2,665 per ounce, with investors focused on the Fed's next moves and rising geopolitical tensions, particularly in the Middle East. Meanwhile, GBP/USD has dropped to 1.3010 following disappointing UK CPI data, increasing expectations for a Bank of England rate cut. Silver (XAG/USD) continues to gain, supported by safe-haven demand and rising Middle East tensions.

EUR/USD Ends Losing Streak, Focus Shifts to ECB and HICP Data

EUR/USD stabilized around 1.0890 during the Asian session on Wednesday, ending a four-day losing streak. The euro may face downward pressure as the European Central Bank (ECB) is widely expected to cut both the Main Refinancing Operations and the Deposit Facility Rate by 25 basis points in Thursday's policy meeting. Traders are closely monitoring the Harmonized Index of Consumer Prices (HICP) data from the Eurozone, set to be released on Thursday, ahead of the ECB's decision. Additionally, the ECB's Monetary Policy Statement and President Christine Lagarde's remarks during the post-meeting press conference will be crucial, as they could offer insights into the bank's future monetary policy direction.

In the EUR/USD pair, the first support level is at 1.0875. If this level is breached, the next supports to watch will be 1.0830 and 1.0800. On the upside, the first resistance is at 1.0900; if this level is surpassed, the next targets will be 1.0920 and 1.0950.

JPY Stabilizes Around 149 After BOJ Board Member's Comments

The Japanese yen stabilized around 149 per dollar on Wednesday, recovering from a dip to nearly 150 earlier in the week as investors reacted to recent comments from Bank of Japan board member Seiji Adachi. Adachi stated that conditions are in place to normalize monetary policy but emphasized the need for the central bank to raise interest rates at a "very moderate" pace. He cautioned that the BOJ should avoid drastic policy changes due to uncertainties regarding the global economic outlook and domestic wage growth. Earlier this month, the yen faced pressure from dovish signals by BOJ Governor Kazuo Ueda and opposition to further rate hikes from new Prime Minister Shigeru Ishiba. Additionally, the yen weakened against the dollar as investors anticipated a more cautious approach from the U.S. Federal Reserve regarding further interest rate cuts.

From a technical perspective, the first resistance level is at 150.00. If this level is surpassed, the next targets will be 150.75 and 151.25. On the downside, the initial support is at 149.20; if this level is breached, the next supports to watch will be 148.70 and 148.00.

Gold Holds Steady at $2,665 as Investors Eye Fed's Next Move

Gold was trading around $2,665 per ounce on Wednesday, maintaining gains from the previous session as investors sought more signals to evaluate the Federal Reserve’s monetary policy direction. The precious metal gained traction on Tuesday after the U.S. dollar and Treasury yields dipped slightly in response to disappointing manufacturing data. The NY Empire State Manufacturing Index unexpectedly fell in October to its lowest level in five months, indicating a contraction in business activity in New York after previously showing growth in September. Investors are now focused on U.S. retail sales data set to be released on Thursday and a speech by Fed Governor Waller on Friday for further insights. Currently, markets are pricing in nearly a 98% probability of a 25 basis point rate cut in the fed funds rate in November. Additionally, heightened tensions in the Middle East may support upward momentum for gold.

Technically, the first support level is at 2,640. If this level is breached, the next supports to watch will be 2,630 and 2,605. On the upside, the initial resistance is at 2,675; if this level is surpassed, the next targets will be 2,685 and 2,700.

GBP/USD Falls Sharply to 1.3010 on Subdued UK CPI Figures

The GBP/USD pair is trading at 1.3010 on Wednesday morning, following a sharp decline after lower CPI figures. The UK CPI was released at 1.7%, falling short of the anticipated 1.9%. This release has strengthened expectations for a rate cut from the Bank of England, driven by a slowing economy and subdued inflation, resulting in a nearly 60-pip drop in GBP/USD.

For GBP/USD, the initial support is at 1.3000, followed by 1.2960 and 1.2925 below. On the upside, the first resistance is at 1.3100, with subsequent levels at 1.3160 and 1.3200 if the pair breaks above this resistance.

Silver (XAG/USD) Gains Ground as Middle East Conflict Escalates

Silver prices (XAG/USD) are trading around $31.70 per troy ounce during the Asian session on Wednesday. The non-yielding metal has found support as U.S. Treasury yields declined following disappointing manufacturing data released on Tuesday. Additionally, safe-haven demand due to ongoing uncertainties in the Middle East conflict is increasing silver prices. Reports from Reuters indicate that Israel may intensify its ground operations against Hezbollah while enhancing its defenses, with Israeli troops reportedly clearing landmines and establishing new barriers along the border between the Israeli-occupied Golan Heights and the adjacent demilitarized zone in Syria.

From technical perspective, the first resistance level to watch is at 31.85. If silver breaks above this level, the next resistance levels to watch will be 32.10 and 32.70, respectively. On the downside, the initial support level is at 31.40, with subsequent support levels at 30.70 and 30.30.