Weekly Market Update: 27 September 2022

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U.S Dollar heads into the new week renewing 20-year highs.

Dollar

The Dollar begins the week on the front foot, refreshing its 20-year highs as risk aversion intensifies in the global markets. Key drivers thus far have been comments from various FED members, which indicate their proclivity towards maintaining their hawkish stance to keep fighting record high inflation. Other key elements adding to the risk aversion is the increasing realisation from other central banks around the world, that they might need to take some action to defend their respective currencies from a rampant Dollar.

Technical Analysis (H4)

In terms of market structure, price action printed out a bullish continuation pattern in the form of a bull flag around the 109.00 range and subsequently printed out an impulsive wave. Current price action is locked in a range between the 113.06114.30 area, where a significant break above will see bulls continue to drive price, or a break below will give sellers an opportunity to test the 111.00 area.

Euro

The Euro kicks off the week under significant pressure as it attempts to pull back from fresh 20-year lows. The renewed buying interest can be attributed to the latest hawkish comments coming from ECB officials as well as Christine Lagarde saying, “we expect to raise interest rates further over the next several meetings”. Additionally, the prospect of easing the energy crisis in the bloc with a delay on the proposed price caps of Russian oil imports has relieved some of the pressure on the currency as hopes of a stable energy plan take centre stage. Going forward key drivers will continue to be the divergence between the FED and ECB as well as geopolitical effervescence and macroeconomic data.

Technical Analysis (H4)

In terms of market structure, price action printed out a bearish continuation pattern in the form of a bear flag around the 1.00 range and subsequently printed out an impulsive wave to the downside. Current price action is locked in a range between the 0.9700.955 area, where a significant break above will see bulls challenge the 0.948 area, or a break below will give sellers an opportunity to drive price even further down.

Pound

Sterling begins the week rebounding from record lows amid fears of a “mismanagement of the UK economy” under the newly formed Tory government. The fears are centred around proposed tax cuts as well as a new energy bill which could potentially increase the rate of inflation and general debt incurred by the government. With that being said, there are speculations of an emergency rate hike by the BoE to alleviate some of the pressure on the currency, and investors have priced in roughly 175 basis points of hikes by November.

Technical Analysis (H4)

In terms of market structure, price has been in a downtrend, printing bearish continuation patterns to the downside with lower-lows and lower-highs. Current price action is locked in a range between the 1.0931.033 area, where a break below will see sellers continue to drive price potentially towards parity, conversely a break above will put buyers in line to challenge the 1.134 area.

Gold

Gold heads into the new week bouncing from a 29-month low as investors eye the pullback from the Dollar. The yellow metal remains bearish as investors await comments from FED chairman Jerome Powell as well as data in the form of Consumer confidence for the month of September for further fundamental impetus.

Technical Analysis (H4)

In terms of market structure, price action has confirmed the formation of the bear flag that formed around the $1 672 range by yielding an impulsive wave to the downside. Henceforth, buyers could retest the lows of the broken pattern around the $1 660 area or bears could continue the path of least resistance and keep moving price southbound

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