As we head into Wednesday, October 23, 2024, global forex markets are set for a volatile session driven by crucial economic data and central bank decisions. The spotlight will be on the Canadian dollar, with the Bank of Canada (BoC) announcing its latest interest rate decision. Traders are also assessing U.S. consumer sentiment data, while durable goods orders and PMI figures continue to provide momentum for the U.S. dollar. Sentiment surrounding policy remarks from the ECB and BoJ will play a key role in the movements of the euro and yen, respectively.
The U.S. dollar remains a primary focus for traders, supported by resilient economic indicators despite ongoing concerns about global growth. Meanwhile, the euro faces pressure amid disappointing PMI data, while the yen is reacting to shifts in risk sentiment and the BoJ’s ongoing dovish stance. The BoC’s policy statement, coupled with U.S. home sales data later in the day, could trigger significant swings in USD/CAD. With central banks and economic releases dominating the agenda, traders should prepare for heightened volatility across multiple pairs.
EUR/USD
Technicals in Focus
The EUR/USD pair continued its downward trajectory, reaching 1.0797, as weak Eurozone PMI figures weighed heavily on the euro. The composite PMI dropped to 49.7, under the 50.0 mark, signaling contraction. Meanwhile, U.S. strength, driven by steady consumer expectations and durable goods orders, added pressure on the pair.
On the technical side, the MACD signals bearish momentum, with histograms deep in the negative zone. The Stochastic Oscillator suggests oversold conditions, hinting at a potential corrective bounce. However, the RSI remains below 40, reinforcing the bearish trend.
Trading Strategy: Sell Bias
Sell below 1.0810 with targets at 1.0770-1.0740 and a stop loss above 1.0835. Alternatively, consider buying above 1.0840 if the pair rebounds, targeting 1.0880-1.0900 with stops below 1.0810.
USD/JPY
Technicals in Focus
The USD/JPY pair exhibited choppy movement, fluctuating near 151.05. Traders are closely monitoring comments from BoJ officials and the broader risk sentiment. The yen remains vulnerable amid the Bank of Japan’s continued ultra-loose policy, while the U.S. dollar maintains strength with U.S. bond yields elevated and PMI data showing resilience.
Technically, the MACD indicates neutral momentum, with minor shifts above the zero line. The RSI is hovering around 50, reflecting indecision. The Stochastic Oscillator is pointing toward a possible upward correction as it exits oversold territory.
Trading Strategy: Neutral to Buy
Buy above 151.10 with targets at 151.50-151.90, and stop loss below 150.80. Alternatively, sell below 150.50, targeting 150.00-149.70, with stops above 151.10.
GBP/USD
Technicals in Focus
The GBP/USD pair continued to slide, testing the 1.2975 level. The British pound faced pressure after softer-than-expected labor productivity data, while U.S. consumer sentiment remained stable. Market participants are now awaiting further comments from BoE officials for clues on future rate paths.
On the technical front, the MACD shows bearish momentum, with the signal line trending downward. The RSI is nearing oversold territory, currently at 35, suggesting caution. The Stochastic Oscillator indicates a slight divergence, possibly hinting at a minor bounce.
Trading Strategy: Neutral to Sell
Sell below 1.2960 with targets at 1.2920-1.2890 and a stop loss above 1.3000. Alternatively, buy above 1.3010 if the pair rebounds, aiming for 1.3050-1.3080, with stops below 1.2960.
Market Outlook
Looking ahead, Wednesday will be pivotal as the Bank of Canada releases its monetary policy statement and interest rate decision. The Canadian dollar could experience heightened volatility, with markets expecting a rate hike to 4.25%. Additionally, U.S. existing home sales data will provide further insight into the U.S. economic landscape.
The yen’s performance will be closely tied to remarks from BoJ officials as traders assess the central bank’s stance amid global yield differentials. In Europe, the euro remains under pressure, with attention being paid to the ECB’s communication and Eurozone data throughout the week.
Overall, traders should brace for potential volatility, particularly in USD/CAD and USD/JPY, as central bank decisions and economic data drive sentiment.