EURUSD bulls set their sights on Fed’s Powell, EU inflation, and US NFP

China struggles to boost market sentiment ahead of key data/events

China's plans for more rate cuts and measures to boost its struggling housing market didn’t lift Asian buyers early Monday. This could be due to rising geopolitical tensions in the Middle East, particularly Israel's attacks on Iran and related military groups. Additionally, there's a cautious mood ahead of Fed Chair Jerome Powell's speech today and Friday’s US jobs report. A week-long holiday in China starting Tuesday, along with key data and events from the Eurozone and Japan, is also dampening market optimism.

However, increasing confidence in further rate cuts from the US central bank—especially after Friday's disappointing inflation data—keeps trading sentiment positive and puts pressure on the US Dollar. As a result, major currencies and Antipodeans remain strong, even though commodities are trading mixed.

US Dollar drops on dovish Fed bias

With softer US inflation and dovish signals from the Federal Reserve, combined with cautious market optimism, the US Dollar Index (DXY) is set for its third straight monthly decline, breaking its previous two-quarter uptrend. However, mixed news from China and geopolitical concerns in the Middle East are creating challenges for DXY bears, as the index seesaws near the lowest point since July 2023.

Major currencies trade mixed

The US Dollar’s weakness is giving EURUSD bulls a chance for monthly and quarterly gains, but last week, the pair struggled to gain momentum due to mixed EU data and worries about the European Central Bank (ECB) potentially cutting rates more aggressively. Additionally, the EURUSD is consolidating ahead of important inflation and US employment reports, as well as Fed Chair Powell’s upcoming speech, making it tough for the bulls.

On the other hand, GBPUSD is responding better to the US Dollar's weakness than EURUSD. Early signs from UK Retail Sales—an important factor for the British economy—suggest strength, allowing the Cable pair to remain strong for the fourth straight week, making rounds to its highest level since early 2022 marked the last week.

Meanwhile, USDJPY is set for its largest quarterly drop since late 2008 as expectations grow for a hawkish shift from the Bank of Japan (BoJ), especially with news that the new Prime Minister supports BoJ normalization. Despite mixed data, the dovish stance of the Fed and the Yen’s traditional safe-haven appeal are benefiting USDJPY bears.

Antipodeans stay firmer on China stimulus, softer USD

China's stimulus, along with positive news from Australia and New Zealand, is driving up the prices of AUDUSD and NZDUSD, even as US Dollar bears pause. Australia’s budget surplus and New Zealand’s Business Confidence are adding to this momentum, helping the Antipodeans prepare for monthly and quarterly gains. This comes despite the challenges faced by the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) in maintaining a hawkish stance.

Gold buyers take a breather, Crude Oil remains pressured

Gold is set for its largest quarterly gains since early 2016, driven by market uncertainty about rate cuts from major central banks, a weaker US Dollar, and China’s stimulus efforts. However, a resistance line from late 2023, currently near $2,695, poses a challenge for XAUUSD bulls, especially with key data and events coming up this week and China’s holidays underway.

Crude Oil fails to cheer the US Dollar and geopolitical tensions in the Middle East amid mixed feelings about the future supplies of black gold and energy demand. Also testing the black gold buyers is a cautious mood ahead of this week’s OPEC+ JMMC.

Cryptocurrencies are monthly gains

Like other major currencies and Antipodeans, the cryptocurrencies also benefit from the US Dollar weakness, especially amid optimism surrounding the crypto industry after the US Presidential Elections and heavy inflow into the ETFs. Even so, the month-end consolidation tests buyers of Bitcoin (BTCUSD) and Ethereum (ETHUSD) as the NFP week begins.

Latest moves of key assets

• WTI Crude oil extends the previous day’s corrective bounce despite lacking upside momentum near $69.00 by the press time.
• Gold remains pressured near $2,660 as we write, defending Friday’s retreat from the all-time high.
• The USD Index lacks momentum around 100.40 after falling to the lowest level since July 2023 the previous day.
• Wall Street closed mixed and so did the Asia-Pacific shares. Further, European and British equities lack momentum of late.
• BTCUSD and ETHUSD both consolidate the monthly gains while falling to around $64,500 and $2,640 respectively.

Exciting data/events to keep momentum traders engaged, despite China holidays

China’s headline PMI kicked off a busy week with important data and events on the horizon. Traders will focus on Fed Chairman Jerome Powell’s speech and the US PMI on Monday and Wednesday, followed by the crucial US Nonfarm Payrolls (NFP) report. Also, the first readings of Eurozone inflation and Japan's activity data, set for release on Tuesday, will heighten market volatility. However, China’s week-long holiday starting Tuesday may pose challenges for Antipodean buyers amid month-end consolidation.

With rising concerns about potential 0.50% rate cuts from the Fed in November and December, upcoming data and Powell’s speech may not lure US Dollar bulls unless there’s a significant shift from previous updates. Month-end moves and China’s absence could also challenge EURUSD bulls amid a dovish ECB bias.

On the flip side, GBPUSD may hold its recent gains unless the UK GDP and comments from Bank of England officials disappoint. Meanwhile, USDJPY may keep bears in play due to the divergence between the BoJ and the Fed. In other pairs, AUDUSD, NZDUSD, and USDCAD might lose recent gains, impacted by Chinese holidays and mixed sentiment, as well as potential weakness in crude oil prices from OPEC+ updates.

Gold is likely to remain attractive to bulls, although it may not refresh the all-time high set last week. That said, hawkish comments from Powell and strong US job numbers could lead to a much-anticipated pullback in gold prices.

Predictions for Key Assets

• Recovery Expected: USDCAD, USDJPY, US Dollar, Silver
• Further Downside Likely: AUDUSD, NZDUSD, GBPUSD
• Mostly Sideways Expectations: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Slow & Gradual Fall Expected: DAX, FTSE 100, EURUSD, Crude Oil

May the trading luck be with you!