USD/INR has retracted after hitting the upper band of recent consolidation zone at 75.55/75.70. Although this level remains an interim hurdle, economists at Société Générale expect the pair to lurch higher towards 76.40 and last year’s high of 77.00.

Ascending trend line at 74.20 provides support

“Ascending trend line at 74.20 should provide support.”

“The up move could persist towards 76.40 and last year’s high of 77.00.”

 

EUR/USD is struggling to hold 1.16. Economists at Société Générale note that the pair needs to stay above the 1.1570 level to see further gains.

Break above 1.1730/1.1750 resistance zone to open up 1.1910

“Reclaiming multi month channel at 1.1730/1.1750 will be essential for extended rebound towards 1.1910.”

“First support is at 1.1570.”

 

USD/CNH has consistently struggled to reclaim the 200-day moving average (DMA) at 6.47 which has resulted in retraction of all the gains since May. Economists at Société Générale expect the pair to suffer a deep fall on a break below the 6.35 key support.

USD/CNH to stage a meaningful uptrend above the 200-DMA at 6.4650/6.4700 

“The low formed earlier this year near 6.3500 remains a crucial support.”

“An initial rebound can’t be ruled out towards daily Kijun line at 6.4250.” “Reclaiming the 200-DMA at 6.4650/6.4700 is critical for a meaningful uptrend.”

“In the event the pair breaks below 6.3500, next potential support levels could be at projections of 6.3200 and 6.2940.”

 

EUR/GBP has failed at initial resistance and is under pressure. Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, expects the pair to pungle towards the 0.8239 2019 low.

Bearish bias while below 55-day moving average at 0.8532

“EUR/GBP has tested and failed at key nearby resistance at 0.8471, which represents the April 2021 low and the May 2019. This is negative price action, and while we hold below the 55-DMA at 0.8532 we stay negative for now.”

“Attention is on the 0.8239 2019 low and the 200-month ma lies at 0.8159.” 

“The near-term bounce is viewed as corrective for now. EUR/GBP will need to regain the 55-DMA at 0.8532 in order to alleviate downside pressure and to challenge the 0.8659/73 highs since May.”

 

Here is what you need to know on Tuesday, October 26:

The greenback managed to outperform its European rivals on the back of rising US Treasury bond yields on Monday but stayed weak against risk-sensitive currencies. As investors gear up for this week’s high-impact events, the dollar holds its ground. The market sentiment remains relatively upbeat ahead of New Home Sales and CB Consumer Confidence Index data from the US. Brexit talks are set to continue in London and the European Central Bank (ECB) will release the findings of its Bank Lending Survey.

Risk mood: The S&P 500 hit a new record high of 4,572 on Monday and risk flows continue to dominate financial markets early Tuesday with US stock index futures rising between 0.2% and 0.5%. US President Joe Biden signed an order to lift travel restrictions on China, India and many European countries on Monday. Moreover, Democrats are reportedly closing in on a deal on the spending bill, that will be worth between $1.5 and $2 trillion. 

On a concerning note, coronavirus cases are on the rise again. China warned that the latest COVID-19 outbreak is likely to spread further and Russia reported a record-high number of 37,930 cases on Monday.

After failing to break above 1.7% last week, the benchmark 10-year US Treasury bond yield gained more than 1% during the day on Monday before closing flat around 1.65%, where it continues to move sideways on Tuesday.

EUR/USD lost nearly 40 pips on Monday as the latest data from Germany showed a deterioration in sentiment and Bundesbank revised its 2021 growth forecast lower. Currently, the pair is testing 1.1600.

GBP/USD is struggling to gain traction since David Frost, the British minister responsible for implementing the Brexit deal, said that the EU’s proposal on the Northern Ireland protocol was not going “far enough” to free up trade in the region.

Despite the renewed USD strength, gold climbed above $1,800 on Monday and seems to have gone into a consolidation phase. The sharp upsurge witnessed in XAU/USD and XAU/GBP pairs suggests that investors moving away from European currencies are ramping up the demand for the precious metal.

USD/JPY is clinging to modest gains around 114.00 as the safe-haven JPY fails to attract investors in the current market atmosphere.

Cryptocurrencies: After staging a correction toward $60,000, Bitcoin started to edge higher on reports claiming that Mastercard is looking to offer crypto services to banks and merchants in its network. Ethereum continues to edge higher toward $4,400, where the all-time high is located. 

FX option expiries for October 26 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts        

  • 1.1600-10 1.5b
  • 1.1700 272m
  • 1.1720-30 849m

– GBP/USD: GBP amounts        

  • 1.3800 278m

– USD/JPY: USD amounts                     

  • 113.55-60 626m
  • 113.85-114.00 1b
  • 114.20-25 500m
  • 114.50 1.1b

– AUD/USD: AUD amounts

  • 0.7400 772m

– USD/CAD: USD amounts       

  • 1.2300 370m
  • 1.2400 1b
  • 1.2500 258m
  • 1.2550 651m

Gold regained positive traction on Monday and inched back closer to multi-week tops. As FXStreet’s Haresh Menghani notes, acceptance above 100/200-day SMAs favours XAU/USD bulls. 

Pullback towards the $1,795-90 region seen as a buying opportunity

“Traders will take cues from Tuesday’s US economic docket, featuring the releases of the Conference Board’s Consumer Confidence Index, Richmond Manufacturing Index and New Home Sales. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold.”

“Repeated failures near the $1,812-14 intermediate hurdle warrant some caution before positioning for any further gains. Nevertheless, the bias remains tilted in favour of bullish traders and supports prospects for a move towards challenging the $1,832-34 heavy supply zone.”

“Any meaningful pullback towards the technically significant moving averages confluence resistance breakpoint, around the $1,795-90 region, should be seen as a buying opportunity. This, in turn, should help limit the downside near the $1,782-81 horizontal support. Some follow-through selling will negate the positive outlook and drag gold prices back towards the $1,760 support zone.”

 

  • EUR/GBP consolidates on Tuesday in the early European trading hours.
  • Additional gains for the pair if price decisively breaks 0.8440.
  • The Momentum oscillator holds onto the oversold zone with an upward bias.

EUR/GBP trades cautiously on Tuesday in the European trading hours. The pair confided in a narrow trade band with no meaningful traction. At the time of writing, EUR/GBP is trading at 0.8432, down 0.02% for the day.

EUR/GBP daily chart

On the daily chart, the EUR/GBP cross currency pair fell sharply after testing the high of 0.8658 on September 29, this also constituted a double top formation with a high made on July 21. A double top candlestick technical formation is a bearish pattern. Furthermore, the spot slipped below the 21-day Simple Moving Average (SMA) at 0.8567, which strengthened the case for the probable downside momentum. However, the price found shelter near the critical support near 0.8330.

If the price breaks above 0.8440, the immediate upside target would emerge at the 0.8465 horizontal resistance level. The Moving Average Convergence Divergence (MACD) holds onto the oversold zone. Any uptick in the MACD would intensify buying pressure toward the 21-day Simple Moving Average (SMA) at 0.8495.

A daily close above the psychological 0.8500 level would see the 0.8525 horizontal resistance level as the next upside target.
    
However, the Relative Strength Index (RSI) trades at 33, suggesting that the downside risks persist. If the price reverses direction, it could move back to Friday’s low of 0.8421. Next, on the horizon would be the February, 2020 low of 0.8282.

EUR/GBP additional levels