All Eyes On Forex | Daily Market Analysis

Key events:

UK - GDP (MoM)

UK - Manufacturing Production (MoM) (Jul)

UK - Monthly GDP 3M/3M Change

The EUR/USD chart shows an upside movement of the quotes

USD: there is a risk of further declines in the near term

The recent pullback in the U.S. dollar makes analysts more cautious about further growth in the dollar in the near term.

The dollar's pullback has made us more cautious about further growth in the near term. We are not sure if this is the start of a more sustained downward reversal for the US dollar, but there is a risk that it could fall further in the near term.

One potential downside risk for the U.S. dollar in the coming week is the release of the U.S. CPI index for August. The Fed has already downplayed the weaker U.S. CPI for July, but another weaker CPI report for August could cast doubt on market expectations for a third consecutive 75bp rate hike later this month.

Canada: despite weak labor figures, another BoC rate hike is still likely

Canada's employment report released Friday showed weaker-than-expected numbers, with an unexpected drop in net employment. Analysts note that the weak underlying numbers may cause the Bank of Canada to question its apparent commitment to even more interest rate hikes, but they note that the numbers could rebound in the coming months thanks to employment in education.

Weak core indicators could cause the Bank of Canada to question its apparent commitment to even more interest rate hikes. However, given that the significant drop in education employment may change in the future, and there

The U.S. dollar dropped sharply in early European trade Friday after hawkish comments from the European Central Bank prompted traders to reassess global rate hike expectations.  Weak core indicators could cause the Bank of Canada to question its commitment to even more interest rate hikes. GBP has strengthened against USD amid the weakness of the latter. Here is what you should know on September, 12th.

Historic high from ECB

Last week the ECB (European Central Bank) raised its key interest rate for the first time in its history immediately by 75 bps to 1.25% per annum. It should be noted that it was not a surprise, this step was predicted. Euro/Dollar decreased by about 1%, reaching 0.9930, but then it corrected and is trading near 1.01 at the moment of writing this review (however we should add, that in this case we do not observe the euro growth, but the US dollar decline, which is proved by the dynamics of the other main pairs). Considering the EUR/USD chart, we can see the growth of quotes to the strong resistance (which is also in the middle of the range 0.99-1.0370). Considering that strong moves without a subsequent bounce usually do not happen, we can assume that the current upside potential is not great.

will be another labor force survey before the Bank meets in October, it still seems likely that at least one more hike will take place before the pause for a rate hike.

USD/JPY: an uptrend could quickly resume

The increased risk of intervention and/or policy changes by the Bank of Japan has already helped the yen bounce in recent days. Still, the commentary must be backed up by action in order for the USD/JPY pullback to be sustainable.

Without political action from Japan, the USD/JPY uptrend could quickly resume amid expectations of divergence in monetary policy between the BoJ and the Fed. There are no signs that the Fed is considering scaling back its own policy tightening plans in the near future.

USD/JPY chart

GBP/USD: amid the weakening dollar

While the UK is in national mourning over the death of Queen Elizabeth II, and market participants are assessing statements by the new British Prime Minister Liz Truss on the future plans of the British government, the pound has strengthened against the dollar, while remaining vulnerable in major cross pairs.

GBP/USD is trading above the support level of 1.1578. In the alternative scenario, we cannot dismiss the possibility of a rise to the resistance levels of 1.1820, and 1.1910. If the buyers of the dollar fail to quickly gain control over the situation and overcome the dangerous momentum of the dollar weakening, the breakdown of the local resistance level of 1.1650 may provoke further growth of GBP/USD, as we noted above, towards the resistance levels of 1.1820 and 1.1910.

GBP/USD chart shows the recent increase