After the recent avalanche of central bank decisions, traders can be forgiven for pausing for breath in a quieter week for the economic calendar. However, there is always something to move markets. Once more, the US is in focus.

The US Mid-term elections on Tuesday will be worth watching initially. Primarily though with outlook for US inflation still critical for Fed monetary policy, the US CPI looms large later in the week. Elsewhere, the first look at UK Q3 GDP is expected to confirm a move into technical recession. In Latin America, it is all about inflation, with the Mexican Central Bank set to hike rates aggressively again. 

Watch for: 

  • North America – US Mid-terms, CPI inflation and Michigan Sentiment.
  • Europe – EU Retail Sales and Q3 UK GDP
  • Asia – China CPI inflation
  • LatAm – Inflation for Chile, Mexico and Brazil, along with Mexican Central Bank interest rates.

North America

N.B. Forecasts are the latest available consensus 

US dollar (USD)

Ahead of the FOMC meeting, the USD had been under corrective pressure against several major currencies as talk was of the Fed pivot. However, Fed chair Powell has kicked the pivot further down the road and the USD is driving significant strength once more on major forex pairs. The October high around 114.00 on the Dollar Index is the next resistance, but the September high around 114.80 cannot be ruled out in the coming weeks. 

This USD strength is likely to continue this week, at least until the US CPI. This is the next major risk event in the economic calendar for the USD. Recent forecasts on CPI have consistently expected a drop in headline CPI and a small rise in core CPI. These have tended to be beaten to the upside, driving renewed USD upside. Any repeat of this would likely see the same result. 

As for the US Mid-terms, the latest polling suggests that it could be a difficult result for President Biden and the Democrats. Polling according to the Politico website has the House of Representatives highly likely to become Republican-controlled, whilst the Senate “is a coin toss”. If the Senate falls Republican too, it would make the next two years very hard work for Biden. The market impact may therefore play into the risk negative and USD positive bias.

Canadian dollar (CAD)

With the Bank of Canada more cautious in its monetary policy hikes, this has been gradually weighing on the performance of CAD. The unemployment data at the end of the week is expected to show an uptick in unemployment and something that will play further into the BoC caution. In the meantime though, if the oil price continues to rally then this will help to ease some of the selling pressure on CAD.

  • USD/CAD – As the CAD strengthened towards the end of last week leaving the pair with resistance at 1.3808 there is the interesting prospect of a big head and shoulders top. The support around 1.3500 will be key this week. For now, though this is still a range play.


US real yields and the USD moved higher again in the wake of the FOMC meeting. The negative correlations of both remain an important driver for commodities priced in USD. Therefore we continue to favour downside and selling into strength on gold. Silver is holding up curiously well, for now. But if gold moves lower to test recent support, this would likely drag on silver too. 

It is interesting to see that oil is now starting to trend higher over the past six weeks. The question remains whether oil demand will suffer as major central banks continue to tighten into likely recessions. This may begin to weigh on the recovery in the oil price. For now, though the move is higher.

  • Brent Crude Oil – The uptrend over the past five weeks is growing in stature and the recovery is increasingly turning a near-term bear rally into something more considerable. Whilst the market trades under $100 the medium-term outlook will be neutral. Support at $93.40 is key.
  • Gold – With the primary downtrend intact and moving averages falling, this remains a market to sell into strength. There is mounting resistance between $1670 and $1690 now. We favour pressure on $1615 with a downside break opening $1560.
  • Silver – Near-term volatility within a medium-term range as the market has oscillated between $17.55/$21.25 for the past four months. Holding above $18.80/$19.10 support leaves a slight positive bias but the near-term outlook remains uncertain. 

Wall Street

We are now more than halfway through the US earnings season and what initially looked to be fairly encouraging is beginning to be dragged into the mediocre. Companies issuing negative guidance outweigh those that are positive. According to Factset data, blended earnings growth (both actual and still expected) has been revised lower to close to 2% (the weakest since Q3 2020). It seems as though it was the prospect of a Fed pivot that was carrying the October rally on Wall Street. With this now being pushed further out, the potential for renewed selling into the strength is elevated. 

  • S&P 500 futures – Falling over so dramatically in the wake of the Fed is a big deterioration for the outlook. Adding to key resistance around 3885/3935 the market is now at risk of selling into strength. A lower high in the pivot band $3757/3820 would be bearish this week.
  • NASDAQ 100 futures – The tech stocks have fallen hard in the past week, leaving strong resistance now at 11730. With the corrective momentum configuration, this favours using near-term rallies as a chance to sell for a test of the 10485 October low.
  • Dow futures – The outperformance of the lower-risk Dow, versus NASDAQ is especially remarkable. However, the Dow has been weighed by the Fed and a big bearish engulfing leaves resistance at 33100 and a corrective near-term outlook. Support is at 30875/31400.


N.B. Forecasts are the latest available consensus 

Euro (EUR)

The hawkish voices on the ECB Governing Council are growing in the wake of the big upside surprise in Eurozone inflation. However, this is doing little to support EUR. Although Eurozone bond yields are rising, the core/periphery spreads are widening and this is weighing on EUR performance. Eurozone retail sales will be eyed this week, but there is little data to change the narrative here. This points to further struggles for EUR versus USD especially, but also JPY as risk appetite falters too. 

  • EUR/USD – The bull failures in the past week have strengthened what is once more resistance at 0.9900/1.0000 and a decisive corrective outlook has formed. Rallies look to be a chance to sell this week for pressure on the 0.9700 and possibly the key higher low at 0.9630. 

British pound (GBP)

The Economist magazine recently wrote about the “Moron Risk Premium” for UK assets which was weighing on GBP. The more stable political outlook has removed some of this “Moron Risk Premium”, but we are now left with an increasingly negative economic outlook. The Bank of England hiked by an aggressive 75bps. However, the messaging also looked as though it did not want to. Hiking aggressively into a recession is economically damaging, even if inflation is over 10%. GBP is now under mounting selling pressure and there is very little data this week that can change this path. The expected announcement of negative GDP in Q3 will only add to the pressure.

  • GBP/USD – The huge sell-off in the wake of the Fed and Bank of England has decisively changed the outlook. Reaction to near-term strength will be key but rallies now look to be a chance to sell. A bull failure around or below the 1.1380 old support will be a bearish signal. We favour a pressure on 1.0925/1.1060 support. 


European indices are once more outperforming Wall Street. We favour the DAX & CAC outperformance during the risk rallies. However, when risk appetite sours, the more defensive FTSE 100 begins to outperform.

  • DAX – The sharp uptrend may have been breached but the strong positive momentum configuration on the RSI shows that weakness is still being bought into. Holding the support band 13000/13030 will be important for this to continue so that a test of resistance between 13440/13560 is seen.
  • FTSE 100 – The strong recovery completed a base pattern above 7105 to imply a move towards 7430. With strong positive momentum and the support of the uptrend, weakness continues to be bought into. Holding the support at 7090/7105 will help to sustain this.


N.B. Forecasts are the latest available consensus 

Japanese yen (JPY)

As major markets trade with an increasingly risk negative bias, there are hints of stronger performance coming through in the JPY. Although this is not seen against the resurgent USD, elsewhere in its major crosses, JPY is performing much better. This will certainly be something to keep an eye on if the post-FOMC trends continue in major forex.

  • USD/JPY – The strong run higher has given way to a more volatile and uncertain phase of trading. Near-term moves are more choppy now, but there is still a positive bias to the outlook. Holding the support around 145/146 there is still appetite to buy into weakness. Above 149 opens the highs again above 150. 
  • AUD/JPY – There is a far more volatile feel to the market moves, with less decisive trending. The end-of-week rally means there is now a range formation of 92.85/95.75. A closing break of this range would begin to generate a more decisive direction. 

Australian dollar (AUD)

The Reserve Bank of Australia played it very straight as it hiked by 25bps as expected last week. With no hawkish bias and broader risk appetite deteriorating, this is leaving the high beta AUD under corrective pressure. 

  • AUD/USD – The bull failure at 0.6520 came under the three-month downtrend and confirms the strategy of selling into strength. We look for lower highs this week and for downside pressure to grow. Back under 0.6270 would open what we still favour as a test of the 0.6170 key October low in due course.

New Zealand dollar (NZD)

The more hawkish Reserve Bank of New Zealand is enabling a better performance on the NZD compared to most major forex. The Kiwi is still decisively outperforming the USD in the past month. If the post-FOMC trends continue this week, it is a performance that is likely to hold up relatively well. 

  • NZD/USD – The pair has held up relatively well recently and there is no explicit technical outlook that points to an extended downside. With the 21-day moving average rising as a basis of support and RSI momentum above 50 if support between 0.5650/0.5740 can hold then the recovery outlook can be sustained.


N.B. Forecasts are the latest available consensus 

Brazilian real (BRL)

With Lula winning the election and Bolsonaro authorising the transition process (although without formally conceding defeat), Brazil can begin to shift to a new presidency. Market reaction has been remarkably positive with BRL performing very well, despite renewing USD strength. The expectation of a continued sharp decline in inflation should help to sustain this performance.  

  • USD/BRL –the BRL strength of the past week has pulled the pair down to test the key medium-term range lows between 5.0500/5.1500. The importance of a breakdown would be sizeable. Subsequently, seeing confirmation would be important. Resistance is growing around 5.2500/5.3000.

Mexican peso (MXN)

There is a gradual but growing strength in the performance of MXN. With inflation starting to roll over a 75bps rate hike to 10% may signal the end of the aggressive tightening by the Mexican Central Bank. However, we expect the strength of the MXN performance to continue.

  • USD/MXN –a downside break of the medium-term support band at 19.750/19.850 is a key move that opens pressure on the crucial support of the May low at 19.410. How the market now reacts to upside moves will be key. The old support becomes a band of resistance at 19.750/19.850 and it would need a decisive move above 20.040 to change the outlook.  

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