Hot forecast for EUR/USD on 08/09/2022

The single currency has come close to parity, and this has nothing to do with the third assessment of the eurozone GDP in the second quarter. Which, by the way, turned out to be somewhat better than the previous one, which showed a slowdown in economic growth from 5.4% to 3.9%. According to the latest data, the growth rate slowed down to only 4.1%. So Europe is a little further away from recession than previously thought. But the euro did not immediately start rising after the release of the data, but only after a couple of hours. This happened amid growing confidence that the European Central Bank will raise the refinancing rate by 75 basis points today. It is quite obvious that this is the main driving force and the central event of the week. More important than this is the upcoming board meeting of the Federal Open Market Committee. The very fact of raising the refinancing rate, although it will lead to further growth of the single currency, is not strong. Yes, and not long. In fact, much more important is what ECB President Christine Lagarde will say during the subsequent press conference. If Lagarde announces a further significant tightening of monetary policy, then the euro's growth will be quite serious and prolonged. Otherwise, everything will return to normal pretty quickly, and the single currency will again fall below parity.

Change in GDP (Europe):

The EURUSD currency pair tried to overcome the control value of 0.9900 for three consecutive days, but the market participants failed to stay below it in the daily period. As a result, there was a price rebound, which led to a reverse move towards the parity level.

Technical instruments RSI H4 jumped above 60 due to the pullback stage. This is the highest indicator since August 12. In the case of further growth in the value of the euro, there may be a premature overheating of long positions. At the same time, RSI D1 is moving in the lower area of the indicator, which corresponds to a downward trend in the medium term.

Moving MA lines on Alligator H4 have primary intersections with each other. This signal emerged due to a sharp price momentum during the past day. In this case, it indicates a slowdown in the downward cycle. The Alligator D1 indicator line is directed downward, which corresponds to the direction of the main trend.

Expectations and prospects

Despite the possible overheating of long positions in short-term time periods, speculators can still send the euro up due to the results of the ECB meeting. In this case, local price movement above 1.0050 is not excluded.

In the work, it is worth considering that speculative hype is not the basis for a stable price movement. In the event of a slight change in the mood of speculators, mass consolidation of long positions is possible, which will lead to a reverse price movement.

Comprehensive indicator analysis in the short-term and intraday periods indicate an upward signal, due to the rollback stage from the value of 0.9900. In the medium term, technical instruments, as before, are focused on a downward trend.

But we don't care: USD/JPY is rushing like a tank, ignoring all the negative factors

After Friday's fall, the dollar-yen pair finds the strength to rush upward. The asset demonstrates a confident upward trend at the beginning of the week, despite the predominance of negative factors.

Recall that last Friday the USD/JPY pair underwent intense sales. The quote fell by more than 1%, being under pressure from the growing risk of foreign exchange intervention.

The Japanese authorities significantly tightened their warning of their intervention after the yen came close to a new 24-year low of 145 in the middle of the week.

Many analysts believe that this key threshold is a red line for the Japanese government. As soon as the yen crosses it, officials will move from words to deeds.

Over the weekend, the risk of actual rather than verbal intervention increased significantly. On Sunday, Deputy Cabinet Secretary General Seiji Kihara said the authorities were deeply concerned about the excessive fall in the yen.

According to him, in the near future the government should take a number of measures in order to stop the depreciation of the national currency.

At the same time, Kihara refused to give any comments on the country's monetary and credit rate. This once again confirms that at this stage, Japanese politicians are not considering the possibility of helping the yen by raising interest rates.

The only option now being discussed at the top echelon is foreign exchange intervention. But will it bring the desired result if it is one-sided?

– For intervention to be effective, support from the Federal Reserve and other central banks is needed. However, right now, as major central banks fight inflation with policy tightening, global official support for the yen looks unlikely, said National Australia Bank currency strategist Rodrigo Catril.

The expert is confident that the yen will stop falling only as a result of a change in the exchange rate of the Bank of Japan.

To strengthen the currency, the central bank must abandon its ultra-soft policy and start raising the rate. Otherwise, the yen is waiting for a further collapse.

With no signs of BOJ capitulation on the horizon right now, the market has no choice but to ignore yet another warning of FX intervention.

Traders are well aware that even in the event of an actual intervention, the recovery of the yen will be very short-lived, so they resume long positions on the USD/JPY pair again.

The asset returned to the area above 143 on Monday morning.

Even the news that Japan intends to further weaken border controls when entering the country did not prevent its rise.

According to the Nikkei newspaper, the Japanese government may lift all current restrictions on foreign nationals entering the country by October.

The authorities hope that the rise in inbound tourism will help revive the fragile Japanese economy and thereby support the yen that has fallen heavily this year.

Another negative factor that the USD/JPY pair stubbornly turns a blind eye to this morning is tomorrow's release of US inflation statistics for August.

According to forecasts, the consumer price index on an annualized basis will decrease to 8.1% from the previous value of 8.5%.

It would be quite logical to expect that the weakening of inflationary pressure for the second consecutive month will force the Fed to reduce the degree of aggressiveness in relation to interest rates.

Despite a possible decline in inflation, prices still remain well above the 2% target.

Based on this, the markets continue to believe that the US central bank will raise rates by 75 bps in September. The probability of such a step is now estimated at 85%.

Traders' unwavering confidence in the Fed's determination is a key driver for the dollar, especially against the Japanese yen.

Most analysts believe that the USD/JPY asset could again demonstrate an impressive rally in the coming days, as moment X is just around the corner.

The US central bank's meeting on monetary policy issues, at which the decision on interest rates will be announced, will be held on September 20-21.

As the event approaches, hawkish expectations about the Fed's course should intensify even more. This will push the dollar to new heights, and the yen - to the next anti-records.

Hot forecast for EUR/USD on 14/09/2022

Inflation in the United States of course slowed down, but not to 8.1%, but to 8.3%. At the same time, in monthly terms, it increased by 0.1%, while it was expected to decline by 0.2%. In addition, the core inflation rate, instead of remaining unchanged, accelerated from 5.9% to 6.3%. Monthly data on the core inflation rate showed an increase of 0.6%, while the forecast was 0.4%. After that, everyone immediately started talking about the fact that in just a week the Federal Reserve would raise the refinancing rate by 100 basis points. And the single currency literally fell below parity in the blink of an eye.

Inflation (United States):

The situation is aggravated by the fact that until next Wednesday, when the meeting of the Federal Open Market Committee takes place, representatives of the Fed will not make any official statements. They can't even comment on the situation with inflation. Internal rules forbid it. In other words, market participants will be able to focus only on macroeconomic statistics and its interpretation by various media. Data on producer prices will be released today, the growth rate of which seems to be slowing down from 9.8% to 8.9%. If these forecasts are confirmed, then it will be possible to assume that inflation will still gradually slow down, and then a rebound is possible, and the euro's return above parity. But if the producer price index declines even a little less, then the market will panic again, and the dollar will further strengthen its positions.

Producer Price Index (United States):

The EURUSD currency pair fell over 200 points in the course of speculative operations during the past day. This movement led to the return of quotes below the parity level.

Technical instruments RSI H1 during the intensive weakening of the local euro fell below 22. This signal indicated a high level of oversold in short-term time periods. RSI H4 and D1 are moving in the lower area of the 30/50 indicator, which corresponds to a downward trend.

The MA moving lines on Alligator H4 changed direction from top to bottom, this was caused by sharp price changes a day earlier.

Expectations and prospects

The overheating of euro short positions led to a technical rollback, which is considered a common phenomenon in the market in case of inertial movement. A gradual recovery of the euro exchange rate is possible, but only in case prices are stable above the parity level. Under this scenario, growth in the direction of 1.0050-1.0120 is possible.

An alternative scenario for the development of the market considers the continuation of the downward cycle, in which the technical signal of oversold will be ignored by traders. In this case, keeping the price below 0.9950 will eventually lead to a new low of the downward trend.

Comprehensive indicator analysis in the short-term and intraday periods indicate a downward cycle, due to the inertial price movement. In the medium term, technical instruments have a sell signal, which corresponds to a downward trend.

USD/JPY: is black swan event possible?

USD/JPY traders are awaiting the policy meetings of the Federal Reserve and the Bank of Japan this week. For many market players, the outcome of these meetings is obvious. However, some analysts do not rule out an unexpected turn of events.

Market expectations
Last week, the US dollar found strong support in US CPI data for August.

According to the report, inflation in the US decreased to 8.3% in August from 8.5% in July, falling short of expectations.

Inflation in the US remains above the Fed's target level of 2% and continues to be persistent, increasing expectations of more aggressive Fed monetary tightening.

The markets are currently pricing in an 81% probability of a 75 basis points hike. Some market players even believe the Federal Reserve could increase interest rates by 100 bps at its next meeting on September 20-21.

Both scenarios would fuel the US dollar's upward momentum against other major currencies, particularly against the Japanese yen.

Since the beginning of 2022, the yen decreased by 20% against the dollar due to a growing monetary policy gap between the Bank of Japan and the Federal Reserve.

While Fed policymakers are actively fighting inflation by rapidly hiking interest rates, their Japanese counterparts keep interest rates at very low levels.

Many traders now expect the BOJ to maintain their ultradovish policy course this week.

Recent decisions by the Bank of Japan suggest the regulator remains committed to its dovish course. Last week, the BOJ increased bond purchases twice to keep yields at their low level.

The BOJ's policy meeting is concurrent with the Fed meeting in the US. If decisions of both central banks match market expectations, it would send USD/JPY skywards once again.

Both events could give redoubled support to the instrument in the next few days. Many analysts predict significant upward movement for the pair in the short term.

Currency strategists at the Goldman Sachs see the yen fall to 155 against the dollar. An outlook by Rabobank predicts that JPY could slide down to 150, while RBC Capital Markets forecast a decline to 147. HSBC Holdings predicts that the yen could decrease to 145 against the US dollar.

What could go differently
Many analysts warn that USD/JPY would be highly volatile this week.

There are numerous factors listed above that could push the US dollar up. However, a Japanese yen rally should not be ruled out.

The most obvious driver for the Japanese yen is a currency intervention. Last week, high-ranking Japanese policymakers have repeatedly raised the topic of a possible currency intervention.

If the yen once again approaches the key mark of 145 before or after policy meetings of the Fed and the BOJ, this could trigger an intervention by the Japanese government.

A less obvious scenario that could halt the uptrend of USD/JPY would involve the Bank of Japan giving up its current stance.

So far, few believe that the Bank of Japan could amend its policy, but their number is steadily increasing. According to reports by Reuters, swap rates betting on a shift in policy have sharply increased over the past several days as the regulator stopped referring to inflation as "temporary".

The Bank of Japan stopped labeling inflation as "temporary" in its transcripts and minutes of the policy meetings in July.

That month, Japanese core CPI hit 2.4%, the highest level in more than 7 years.

Inflation in Japan has exceeded its target level of 2% for a fourth consecutive month.

Furthermore, most BOJ policymakers expect core consumer prices to rise to 3% in October, Reuters reported.

This inflation surge could be driven by rising food prices. According to a survey by private research firm Teikoku Databank, about 80% of Japanese food companies plan to raise prices next month.

This price hike would affect more than 20,000 food items, which are expected to go up by 14% on average.

As a result, many BOJ policymakers have revised their inflation outlooks upwards, Reuters reported. It remains to be seen when the Bank of Japan will express its concern over price growth.

Some experts believe the first signs of such a shift could happen at the next BOJ policy meeting.

If the Bank of Japan begins to lose its sticky deflationary mindset and acknowledges that price growth is an issue that must be resolved, this would be regarded as the first hawkish signal by the market.

Such an event would pose a threat to USD/JPY rally.

Tips for beginner traders in EUR/USD and GBP/USD on September 23, 2022

Details of the economic calendar for September 22
The Bank of England, as expected, raised the rate by 50 basis points to 2.25%. At the same time, the regulator lowered its inflation forecast. According to their expectations, it may reach 11%, and inflation will peak in October.

The market reaction was zero, because the rate increase by 50 bps has already been taken into account in the quotes. The pound sterling began to weaken.

During the American trading session, weekly data on jobless claims in the United States were published, which recorded a decrease in their total volume. This is positive news for the US labor market.

Statistics details:

The volume of continuing claims for benefits fell from 1.401 million to 1.379 million.

The volume of initial claims for benefits rose from 208,000 to 213,000.

What is pushing the market?
The first is the results of the September Fed meeting, where the regulator clearly indicated that the main goal is to curb inflation, and it is ready to further tighten monetary policy.

The second factor is the Russia-Ukraine situation, where, at the moment, there is a large flow of information that puts speculators into action.

Analysis of trading charts from September 22
The EURUSD currency pair, in the stage of a pullback from the low of the downward trend, locally returned to the previously passed level of 0.9900, where the price rebounded with a reverse move.

The GBPUSD currency pair, after a short pullback, which was caused by a strong overheating of short positions, again moved to the decline. This movement indicates the prevailing downward sentiment among market participants who are in a stage of inertia.

Economic calendar for September 23
Today, a preliminary estimate on business activity indices in Europe, the United Kingdom and the United States is expected to be published. Indices, except for the USA, are expected to decrease. Thus, the dollar may well receive support in the market.

Time targeting:

EU business activity indices – 08:00 UTC

UK business activity indices – 08:30 UTC

US business activity indices – 13:45 UTC

Trading plan for EUR/USD on September 23
With the opening of European platforms, a new round of depreciation of the euro emerged, which led to the price holding below 0.9800. As a result, the speculative-inertial move continues to form, which allows the rate to decline to the subsequent control value of 0.9650, where the lower border of the flat 0.9650/1.0000 passed earlier in history.

It should be noted that the market is already experiencing overheating of euro short positions, which allows for a new technical pullback.

Trading plan for GBP/USD on September 23
The pound sterling, following the euro, continued to decline, which resulted to the breakdown of the level of 1.1200. A stable hold of the price below this level allows the subsequent weakening of the British currency towards the psychological mark of 1.1000. Also, do not forget about the overheating of short positions and possible technical pullbacks.

Tips for beginner traders in EUR/USD and GBP/USD on September 27, 2022

Details of the economic calendar for September 26
The macroeconomic calendar was empty; no important statistics were published. Investors and speculators worked out the information flow of the past week.

The UK Treasury yesterday commented on everything that is happening in the country's economy, the main theses:

- The medium-term financial plan will be presented on November 23.

- The budget plan will set out additional details, including ensuring that the share of UK debt to GDP falls in the medium term.

At the same time, the Bank of England made its comments:

- We closely monitor the market for significant revaluation of financial assets;

- We will not hesitate to raise the interest rate to bring inflation back to the target level of 2.0%.

According to media reports, traders are waiting for an unscheduled rate hike by the Bank of England amid the collapse of the national currency. Perhaps this was the reason for such a significant pullback. There is no confirmation of rumors regarding an unscheduled rate hike. If the regulator does not take any drastic action, the pound will continue to decline.

Analysis of trading charts from September 26
The EUR/USD currency pair opened a new trading week with an update of the low of the downward trend. As a result, the quote reached the levels of June 2002, at 0.9553, relative to which the stage of technical pullback occurred.

The GBP/USD currency pair has set several records at once. The absolute low was updated, the quote overcame the level of 1985, eventually reaching the value of 1.0345. The scale of the pound's collapse from last Friday to the beginning of Monday's trading amounted to almost 1,000 points, while the pullback caused by the fatal overheating of short positions on the pound was about 550 points.

Economic calendar for September 27
Today, data on orders for durable goods in the United States will be published, which may decrease by 0.9%. This is a fairly strong reduction, which foreshadows a noticeable decline in consumer activity, which is the locomotive of the American economy. As a result, these negative data, if confirmed, can put pressure on dollar positions.

Also, U.S. Federal Reserve Chairman Jerome Powell and ECB President Christine Lagarde are scheduled to give a speech. It is worth listening to what they will say, although everything has already been said before.

Time targeting:

Fed Chairman Jerome Powell Speech – 11:30 UTC

ECB President Christine Lagarde Speech – 11:30 UTC

U.S. Durable Goods Orders (August) – 12:30 UTC

Trading plan for EUR/USD on September 27
At the moment, there is a characteristic stagnation, where the pullback stage has slowed down its formation despite the continuing technical signal about the oversold euro. In order for the pullback to be prolonged and become the starting point for a full-size correction, the quote first needs to stay above the value of 0.9700 for at least a four-hour period.

At the same time, the downward scenario will become relevant again as soon as the current low is updated.

Trading plan for GBP/USD on September 27
In this situation, there is still a speculative rush on the market, which allows new price jumps. In order to prolong the current pullback, the quote needs to stay above the high of the previous day at 1.0928. At the same time, the scenario of further decline will be considered by traders if the price holds below 1.0630.

USD/JPY: When will Groundhog Day end?

The USD/JPY pair continues to tread in the 144-145 range, in which it has been stuck since the beginning of the week. Consolidation is pretty boring for both bulls and bears, but there is no trigger on the horizon yet.

This year, the Japanese currency has fallen in price relative to its American counterpart by more than 20%. The reason for the weakening of the yen was the strong monetary divergence between the US and Japan.

Last week, the dollar-yen pair set another high-profile record. After the Federal Reserve raised rates again, and the Bank of Japan left the indicator unchanged, the quote jumped to a new 24-year high at 145.90.

The sharp fall of the yen forced the Japanese government to intervene in support of its national currency for the first time since 1998. As a result of the intervention, the USD/JPY pair went into a steep peak.

However, the asset did not stay as a loser for long. It only took a couple of days for it to get back on track leading to the main goal for today – level 145.

Since the beginning of this week, the dollar-yen pair has already come close to the cherished mark several times, but each time it rolled back.

According to analysts, the main deterrent for dollar bulls at the moment is the risk of repeated currency intervention.

Given the huge number of warnings from the Japanese authorities, traders still prefer not to get into trouble. However, the situation may change dramatically if a particularly powerful trump card in favor of the dollar appears on the market.

You may ask: isn't it here now? Indeed, the dollar received strong support from the Fed last week. The US central bank not only raised rates, but also made it clear that it intends to tighten its monetary policy in the future.

This week, American politicians have further intensified hawkish rhetoric, which contributed to the explosive growth of the dollar. The greenback has reached a new 20-year high, showing impressive dynamics in almost all directions, but not paired with the yen.

The psychologically important 145 barrier still remains impregnable for the USD/JPY asset. This suggests that the market has already taken into account the further growth of discrepancies in the monetary policy of the Fed and the BOJ.

Now traders need specifics: how big the gap in US and Japanese interest rates can become.

If in the near future American officials again talk about raising the indicator by 100 bps, perhaps this will be the very impetus for the dollar, which will move it from the dead point.

– Of course, the Japanese Ministry of Finance is aware of the current vulnerability of the yen. Probably, the authorities will continue to intimidate traders with interventions to deter speculators, Rabobank analysts warn. – Nevertheless, we are still guided in our 3-month forecast for the USD/JPY pair to the level of 147.

As for the short-term dynamics of the asset, do not expect miracles in the coming days. Most experts believe that the dollar-yen pair will remain in the zone of broad consolidation.

The technical picture for the USD/JPY
200-day exponential moving average at 141.20 scales higher. This indicates that the long-term trend is still stable.

At the same time, the relative strength index (RSI) fluctuates in the range of 40.00-60.00, which indicates that the movement continues within the current range.

For a decisive bearish reversal, the asset needs to fall below the previous week's low at around 140.35.

Dollar bulls may push the pair higher after overcoming the previous week's high at 145.90.

This may lead the quote to the August 1998 high at 147.67. And its breakthrough will send the dollar even further upward – to psychological resistance in the area of 150.00.

Tips for beginner traders in EUR/USD and GBP/USD on October 4, 2022

Details of the economic calendar for October 3
Data on the European manufacturing sector came out worse than the preliminary estimate. The index fell during the period of September from 49.6 to 48.4, despite the expected decline to 48.5 points.

In the United Kingdom, manufacturing PMI for September rose from 47.3 to 48.4 but was predicted to rise to 48.5 points.

Meanwhile, the United States manufacturing PMI rose to 52.0 from 51.5, with forecast growth of 51.8.

There was no market reaction to the statistical data for the reason that all the attention of traders was focused on the information and news flow.

So the leverage for speculators was the rumor that the UK intends to cancel the plan to reduce the tax rate from 45% to 40%. This rumor was subsequently confirmed by UK Finance Minister Kwasi Kwarteng via Twitter.

"We get it, and we have listened," he wrote.

Based on this information, there was speculative interest in the position of the pound sterling, which locally jumped in value by 180 points, pulling the euro along with it.

Analysis of trading charts from October 3
The EURUSD currency pair, during the corrective movement, reached the resistance level of 0.9850, relative to which there was a reduction in the volume of long positions on the euro. As a result, there was a rebound in the market, which eventually turned into stagnation within the 0.9750/0.9850 range.

The GBP/USD currency pair continued to form a corrective move from the local low of the downward trend. As a result, in about a week, the British currency recovered its value by 10%, which is more than 1,000 points.

Economic calendar for October 4
Today, the euro may receive support from buyers as producer prices in the EU may accelerate from 37.9% to 43.6%. That is, with such data, inflation in Europe will continue to grow, which will lead to further tightening of the ECB's monetary policy. That is, interest rates will continue to rise.

During the American trading session, data on the Job Openings and Labor Turnover Survey (JOLTS) for August in the United States will be published, which is expected to decline. This is a negative factor in the labor market.

Time targeting:

EU Producer Price Index (Aug) – 09:00 UTC

US JOLTS Job Openings (Aug) – 14:00 UTC

Trading plan for EUR/USD on October 4
With the opening of European platforms, a breakdown of the upper limit of stagnation occurred. This step led to the prolongation of the corrective move in the market. A stable hold of the price above 0.9850 may eventually lead to a move towards parity.

Trading plan for GBP/USD on October 4
Despite such impressive price changes, which herald a technical overbought signal, the pound still has an upside margin. For this reason, holding the price above the level of 1.1410 in a four-hour period may lead to a subsequent increase in the volume of long positions. This process will lead to the prolongation of the current cycle.

If the level area of 1.1410 has a proper impact on sellers, then the first thing that will occur is a slowdown, relative to which a reverse price movement will be considered.

Tips for beginner traders in EUR/USD and GBP/USD on October 7, 2022

Exchange Rates analysis
Details of the economic calendar for October 6
The rate of decline in retail sales in the EU accelerated from -1.2% to -2.0%, which at first glance is better than forecasts that indicated a decline to -2.2%. It is worth noting that the previous data was revised for the worse from -0.9% to -1.2%. In any case, there is a rather impressive decline in consumer activity in the EU, which is a negative factor for the economy.

During the American trading session, weekly data on jobless claims in the United States were published, which recorded growth. This is a negative factor for the US labor market.

Statistics details:

The volume of continuing claims for benefits rose from 1.346 million to 1.361 million.

The volume of initial claims for benefits rose from 190,000 to 219,000.

Analysis of trading charts from October 6
The EURUSD currency pair has corrected quite strongly from the parity level. In just 48 hours, the rate fell by more than 200 points, as a result, the 0.9850 variable support level was passed. Such a rapid decline could well lead to an overheating of euro short positions in the short term.

The GBP/USD currency pair has partially lost what it gained during the recovery period. In two trading days, there has been an active decline, as a result of which the quote fell by more than 300 points. The area of 1.1410/1.1525, relative to which a reverse movement has occurred, serves as resistance.

Economic calendar for October 7
The main event of the outgoing week is considered to be the report of the United States Department of Labor, which is likely to have a strong impact on the market and speculators.

The unemployment rate is forecast to remain unchanged at 3.7%, while 290,000 new jobs could be created outside of agriculture. This is quite a lot, which can create prerequisites for a further reduction in unemployment. Everything indicates that the US dollar may still begin to strengthen, but we should not forget that the US currency is overbought, and everyone understands this very well. Thus, it may turn out that the report will come out well, but its indicators will be compared with the previous ones, where there was an increase in employment by 315,000. As a result, this factor will indicate a loss in the dynamics of the labor market recovery.

Time targeting:

US Department of Labor Report – 12:30 UTC

Trading plan for EUR/USD on October 7
The downward scenario is considered by traders as an inertial one, where technical signals about the local oversold euro will be ignored. In this case, keeping the price below 0.9750 may well stimulate speculators to action.

As for the upward scenario, it will be considered by traders if the price returns above the level of 0.9850.

Trading plan for GBP/USD on October 7
In this situation, the subsequent increase in the volume of dollar positions may occur when the price is kept below 1.1080, which will lead to a gradual decline to the values of 1.1020 and 1.0900.

The upward scenario will be taken into account if the quote holds above 1.1230 in a four-hour period.

Tips for beginner traders in EUR/USD and GBP/USD on October 11, 2022

Details of the economic calendar for October 10
Monday, as usual, is accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kingdom, and the United States were not published.

In this regard, investors and traders have been focused on monitoring the information flow.

The main financial topics discussed in the media:

• The Bank of England is doubling down on potential bond buybacks as the contingency plan draws to a close.

• Fed officials Charles Evans and Lael Brainard continue to point to high inflation. At the same time, they mentioned in their speech that soon it will be necessary to limit the tightening of the monetary policy.

Analysis of trading charts from October 10
The EURUSD currency pair follows a downward trajectory from the parity level, which has recently played the role of resistance. Dollar positions have recovered by more than half relative to the recent correction.

The GBPUSD currency pair has formed a downward trend from the 1.1410/1.1525 area. As a result, sellers have already managed to weaken the pound by more than 450 points. Relative to the previous day, the quote conditionally stood in one place, having a lateral amplitude within 100 points. On the one hand, the scale of 100 points may seem large, but within two weeks this is the lowest activity, which could play the role of the accumulation of trading forces.

Economic calendar for October 11
Today, with the opening of the European session, data on the labor market in the UK was published. The unemployment rate fell from 3.6% to 3.5%, while employment in the country decreased by 109,000, which was expected to grow by 12,000. An additional factor that caused misunderstanding among investors is that the data for employment was for July, and unemployment was for August. With current figures, everything points to the fact that next month the unemployment data may be revised for the worse.

Trading plan for EUR/USD on October 11
The downward cycle has already led to the weakening of the euro by more than 300 points since the middle of last week. This price move indicates a technical signal that the euro is oversold in the short term. Based on this, a pullback scenario with respect to the current downward cycle cannot be ruled out. The level 0.9650 serves as a support on the way of sellers.

As for the strengthening of the downward cycle, for this scenario, it is necessary to stay below the support level for at least a four-hour period. In this case, speculators will ignore technical oversold signals, and the quote will move towards the base of the downward trend.

Trading plan for GBP/USD on October 11
In this situation, the stagnation was formed near the support level of 1.1000. Thus, for a downward scenario, the quote needs to stay below this level for at least a four-hour period. In this case, there will be a subsequent stage of recovery of dollar positions.

As for the upward scenario, the quote needs to stay above 1.1120 for it to be considered. With this outcome, a move towards 1.1220 is possible.

Loretta Mester: Fed sees no progress on inflation

As I mentioned in yesterday's article, the Fed's key rate decisions are in the spotlight. If earlier some traders expected a shift to a softer stance, now everyone is betting on further tightening. The regulator is likely to raise the interest rate at least 3 more times at its meetings. Some analysts reckon the Fed may continue to hike rates in 2023. At the start of this year, the Fed planned to raise the benchmark rate to 3.5%. Now, many Fed officials expressed the need to hike the key rate to 4.5%. If inflation does not begin to decline at the pace set by the central bank, the watchdog may switch to aggressive tightening.

The Fed's top priority is to tame inflation to 2%. However, the central bank admits that it may take years. Notably, inflation is not only an economic issue but also a political one. If Joe Biden's administration fails to slow down soaring consumer prices, the Democrats may lose their majority in the Senate and Congress. This is why Joe Biden and the Democratic Party need to push inflation down as soon as possible. The Fed is an independent organization. Yet, it should also achieve some positive shifts in the fight against inflation as confidence in the central bank has declined sharply during the pandemic and in the years after the pandemic.

The inflation report is due tomorrow. Analysts do not expect a noticeable slowdown. The reading is likely to decline by 0.1-0.2% on an annual basis. Yesterday, Cleveland Fed President Loretta Mester said that the Fed is still unable to cap galloping inflation. "Unacceptably high and persistent inflation remains the key challenge facing the US economy. Despite some moderation on the demand side of the economy and nascent signs of improvement in supply-side conditions, there has been no progress on inflation," Mester said. When inflation comes down, the Fed will hold interest rates at high levels for some time to assess the cumulative impact of what the Fed has done. "Monetary policy is moving into restrictive territory and will need to be there for some time in order to put inflation on a sustained downward path to our 2% goal," she said, adding "I do not anticipate any cuts in the fed funds target range next year."

In my opinion, the Fed is ready to raise the interest rate even above 4.5%. If this scenario comes true, demand for the US currency may climb even more. The US dollar is steadily growing amid monetary tightening. So, it may rise even higher amid sharper rate hikes. If traders have already priced in the likelihood of the rate increase to 4.5%, they may factor in a bigger rate increase. If investors have ignored two ECB rate hikes and seven Fed rate hikes, then they may continue to do so in the coming months. I believe that the US currency is likely to reach new highs. In this case, the current wave markup of the euro/dollar pair is correct. However, the wave markup of the pound/dollar pair needs adjustments with the construction of a downward trend section.

I believe that there is a construction of a downward trend section now but it may end at any moment. The instrument could complete another upward correction wave. So, I advise selling with the target level located near 0.9397, the Fibonacci level of 423.6%. The MACD indicator is pointed downward. It is better to be cautious as it is unclear how long the euro may decline.

The British Finance Minister has been dismissed, and the Defense Minister is next in line.

Exchange Rates analysis
The political crisis in the UK is gaining momentum, which cannot but put pressure on the British pound. After the instrument has moved away from its low by more than 1000 basis points, the British pound is in danger again. But this time, political problems have also been added to the economic problems. On Friday, it became known that British Finance Minister Kwasi Kwarteng was dismissed. He spent only 38 days in his position. The reason for the resignation was the shock in the UK's financial markets caused by tax amendments to the legislation. These amendments have not even been adopted yet, and it is unknown whether they will be adopted. They concerned several tax rates, which, according to the British government, should be lowered to reduce the pressure from rising energy prices on households and businesses. However, the tax reduction plan was criticized by economists, and it immediately became known that its implementation would lead to a huge budget deficit.

Even the conservatives themselves spoke out against this plan, so the Liz Truss government had to urgently make a statement that the plan was still "raw" and needed improvements. It has already become known that the maximum tax rate of 45% will not be canceled, and the proposed changes may also be canceled for other taxes. Since someone had to "take over" responsibility for the shock in the financial and currency markets, most likely, this role was performed by Kwasi Kwarteng, who personally developed this plan. The media noted the importance of this event because Kwarteng was not just the Minister of Finance but also a close friend and colleague of Truss. Former Foreign Minister Jeremy Hunt may become the new finance minister.

However, this is not all the upheaval in Parliament. Yesterday, it became known that Defense Secretary Ben Wallace may resign if Liz Truss reneges on her promise to increase defense spending. Earlier, during the election campaign, Truss promised to increase defense spending to 2.5% of GDP by 2026 and 3% of GDP by 2030. It is reported that this promise prompted Wallace to support the candidacy of Truss and not Rishi Sunak, who refrained from such statements. Jeremy Hunt, who may now take up his new position, has already stated that spending on many items will have to be cut amid the developing recession and the energy crisis in Europe. At this time, there was talk about the possible departure of Wallace, who believed that the defense budget needed to be increased.

It is also reported that NATO recommended that all member countries of the union increase their defense budgets to 2.5% of GDP, and the UK was supposed to be one of the first to do so. The Bank of England somehow restored stability in the financial markets through an emergency program of buying bonds for 65 billion pounds. Still, political problems remain very serious, and the recession and the energy crisis may continue to pressure the pound and the UK economy.

The wave pattern of the pound/dollar instrument implies the construction of a new upward trend segment. Thus, now I advise buying a tool for MACD reversals "up" with targets located above the peak of wave 1. Buy and sell should be careful since it is unclear which wave markings (euro or pound) will require adjustments, and the news background may negatively affect both the euro and the pound. Corrective wave 2 may already be completed.