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Kiwi Dollar Spike Tomorrow

While today is relatively uneventful in terms of major economic news around the world, this will not be the case for long. There is a chance that the forex market could witness a Kiwi Dollar spike tomorrow due to the Reserve Bank of New Zealand (RBNZ) announcing their latest interest rate hike at 8 pm ET. With market forecasts currently expecting the Official Cash Rate to increase by 75 basis points, hitting 4.25% (surpassing the United States’ Federal Funds Rate), all eyes will be on NZD to see if it retains its bullish momentum. With the RBNZ set to issue a Monetary Policy Statement in conjunction with their rate hike, and a press conference to follow an hour later at 9 pm ET, how the markets interpret the RBNZ’s commentary will help decide the fate of the New Zealand Dollar.

Three Pairs to Watch

The EdgeFinder, A1 Trading’s market scanner, currently holds NZD in high esteem: all the pairs with the strongest buy and sell signals are NZD pairs, with biases that corroborate Kiwi Dollar bullishness. Three of these pairs are listed below with their respective ratings, biases, and corresponding charts.

1) GBP/NZD - Receives a ‘-9’ Rating, or a ‘Strong Sell’ Signal

Kiwi Dollar Spike Tomorrow
Every line item in the Score Summary list favors NZD over GBP, factoring in fundamental, technical, and sentiment analysis.
Kiwi Dollar Spike Tomorrow
This monumental downtrend is years in the making.

2) AUD/NZD - Receives a ‘-9’ Rating, or a ‘Strong Sell’ Signal

Kiwi Dollar Spike Tomorrow
Every line item in the Score Summary list favors NZD over AUD, factoring in fundamental, technical, and sentiment analysis.
Kiwi Dollar Spike Tomorrow
October's huge breakout to the downside of trendline support has given way to an aggressive new downtrend.

3) NZD/JPY - Receives a ‘5’ Rating, or a ‘Buy’ Signal

Kiwi Dollar Spike Tomorrow
Although NZD beats JPY in a number of key categories, perhaps the most crucial is interest rate divergence, as the RBNZ and the Bank of Japan engage in starkly different projects in terms of monetary policy.
Kiwi Dollar Spike Tomorrow
This uptrend has held strong for over two years now.
3 Strongest Pairs to Buy

As we wait for major economic news releases this week (such as monetary policy meeting minutes from the Reserve Bank of Australia tonight at 7:30 pm ET, United States Producer Price Index numbers tomorrow at 8:30 am ET, and Consumer Price Index updates from the UK on Wednesday at 2 am ET), it can be helpful to consider what pairs the Edgefinder already signals to be particularly worth watching. With this in mind, here are the EdgeFinder’s current 3 strongest pairs to buy this week, listed below with their respective ratings, signals/biases, and corresponding charts. Additional comments on fundamentals and technical analysis will also be provided.

1) CHF/JPY (Receives a 5, or ‘Buy’ Signal)

3 Strongest Pairs to Buy
Despite the similarities between these two countries' economies in terms of stability and hot labor markets, the Swiss National Bank's willingness to raise interest rates is decidedly bullish for CHF, while the Bank of Japan instead continues to keep its monetary policy 'ultraloose'.
3 Strongest Pairs to Buy
While the uptrend has paused, strong support has been found around the 146 level.

2) USD/CAD (Receives a 5, or ‘Buy’ Signal)

3 Strongest Pairs to Buy
The US economy notably outpaces Canada's in terms of labor market activity, economic growth, inflation, and central bank aggression.
3 Strongest Pairs to Buy
Despite the steep fall over the past month, price action is encountering a key support zone; Keltner Channel walls suggest oversold conditions.

3) NZD/CAD (Receives a 4, or ‘Buy’ Signal)

3 Strongest Pairs to Buy
Despite the Reserve Bank of New Zealand lagging behind the Bank of Canada regarding interest rate divergence, this may not last long, considering New Zealand is currently leading in terms of holistic overheating.
3 Strongest Pairs
It appears a significant breakout to the upside may have just occurred within the past week, disrupting a year-long downtrend.
Caution: US Midterm Elections Tonight

For those trading stocks or the US Dollar this week, we would like to encourage caution: US midterm elections tonight may become fundamental catalysts, creating volatility across markets. With hundreds of millions of potential voters going to the polls across the United States today to decide who they want to represent them in government, these decisions will ostensibly have significant impacts on financial market activity, especially with federal elections. With Democrats projected to lose their current majority in the House of Representatives and a slew of close races to determine a new Senate majority locked in a dead heat, the policy-making landscape in the US could be quite different in January 2023, when those newly elected take office.

What Impacts Might This Have?

If Democrats manage to beat expectations and keep both chambers of Congress, even adding to their current majorities, this will likely pave the way for more federal spending packages over the next two years, potentially adding to both GDP growth and inflation. On the other hand, if Republicans take one or both chambers, this could effectively nullify President Biden’s future agenda by preventing new spending packages from passing over the next two years, reducing potential GDP growth and inflation.

Thus, my personal guess is that a) a sweeping Democrat victory would create shorter-term stock rallies and longer-term USD bullishness (due to increased stimulus), and b) one or more chambers being won by Republicans would cause longer-term stock support and slight bearishness/neutrality for USD (due to increased austerity). However, this is only speculation; we will have to wait and see how the markets respond. This reaction may take some time to culminate, as some states take longer than others to tally votes and report election victories, meaning some results may not be known for days.

Two Potential Pairs to Watch

If you are bullish on USD and looking for potential trade setups as midterm results emerge, the following two pairs are currently rated favorably by the A1 EdgeFinder for those interested in going long on the Greenback. They are listed below with their respective ratings, signals/biases, and corresponding charts.

1) USD/JPY (Earns a 5, or ‘Buy’ Signal)

Caution: US Midterm Elections Tonight
Caution: US Midterm Elections Tonight

2) USD/CHF (Earns a 3, or ‘Buy’ Signal)

Caution: US Midterm Elections Tonight
Caution: US Midterm Elections Tonight
This Strong Currency May Surprise You

One of the main reasons why the EdgeFinder, A1 Trading’s market scanner, is so helpful is because of its ability to convey nuance when presenting analysis. For example, one currency pair may have strong bullish fundamentals while institutional sentiment somehow remains quite bearish, and the EdgeFinder is able to present this data concomitantly. This makes it even more compelling when the market scanner issues ‘strong’ buy or sell signals, indicating that a significant combination of fundamental, sentiment, and technical analysis have aligned for a pair. As of today, two new minor pairs have earned ‘strong sell’ signals; they share the same quote currency, and this strong currency may surprise you. It is the Kiwi Dollar, which has only recently been gaining bullish steam in the forex market. Boasting hot labor markets, strong GDP growth, high inflation, and a relatively hawkish central bank to match, New Zealand’s economy makes NZD seem quite promising. Institutional traders are only just now beginning to affirm this, with over 10% more of them going long on NZD than in the previous week.

Two Potential Pairs to Sell

The following two pairs are rated extremely favorably for bears, and for those planning to go long on NZD. They are listed below with their respective EdgeFinder ratings, signals/biases, and corresponding charts.

1) AUD/NZD (Earns a -9, or ‘Strong Sell’ Signal)

This Strong Currency May Surprise You
NZD currently beats AUD in every listed category.
This Strong Currency May Surprise You
October saw a steep breakout beneath key trendline support.

2) GBP/NZD (Earns a -9, or ‘Strong Sell’ Signal)

This Strong Currency May Surprise You
NZD currently beats GBP in every listed category.
This Strong Currency May Surprise You
This downtrend spans nearly two decades, as shown in the 1-Month timeframe above.
NFP and More Tomorrow

Tomorrow morning at 8:30 am Eastern Time, the Bureau of Labor Statistics (BLS) will be reporting the latest data for three major measures of US labor market activity. Average Hourly Earnings is forecast to increase by 0.3% month-over-month, Non-Farm Employment Change (NFP) is expected to see net 197,000 jobs added last month, and the new unemployment rate is anticipated to clock in at 3.6%, increasing by 0.1%. However, these market expectations are thrown into question by the Automatic Data Processing NFP estimates released yesterday: 178,000 jobs were forecast, whereas the final estimation was a whopping 239,000 Non-Farm Payrolls added last month. If this same hot labor upset plays out in the BLS’ data on NFP and more tomorrow, we could experience yet another bullish fundamental catalyst for USD, lending even more credibility to the Fed’s concerns that high inflation is far from dealt with.

Three Potential Pairs to Sell

For those interested in going long on USD, here are three pairs to watch for selling opportunities. They are reviewed favorably for USD bulls by the EdgeFinder, A1 Trading’s handy market scanner. They are listed below in order of favorability, along with their respective ratings, signals/biases, and corresponding charts.

1) XAU/USD (Gold) - Earns a -8, or ‘Strong Sell’ Rating

NFP and More Tomorrow
NFP and More Tomorrow

2) AUD/USD - Earns a -6, or ‘Strong Sell’ Rating

NFP and More Tomorrow
NFP and More Tomorrow

3) EUR/USD - Earns a -6, or ‘Strong Sell’ Rating

NFP and More Tomorrow
NFP and More Tomorrow
New Aussie CPI Data Tonight

Tonight at 8:30 pm Eastern Time, the Australian Bureau of Statistics will release new Aussie CPI data tonight, providing two key measurements of inflation. Quarter-over-quarter CPI, as well as quarter-over-quarter ‘Trimmed Mean’ CPI (which excludes the 30% most volatile items), will be made available to the public. CPI is forecast to increase by 1.6% and Trimmed Mean CPI by 1.5%; if the real numbers exceed these expectations, AUD could experience further bullish momentum following a multiyear downtrend. However, if the reports fail to meet market forecasts, AUD may see a continuation of these longform downtrends across pairs. You can check on the results here.

Thus far, Australia’s annual inflation (currently sitting at 6.1%) has lagged behind that of many other countries, giving the Reserve Bank of Australia little reason to indulge in comparable hawkishness. With over 67% of institutional traders shorting the Australian Dollar, both fundamentals and sentiment currently weigh against the currency, making the likelihood of the latest Australian CPI data becoming a bearish fundamental catalyst for AUD quite plausible.

Best Pairs to Watch

For those interested in shorting the Australian Dollar, the following two pairs are viewed favorably for AUD bears by the EdgeFinder, A1 Trading’s market scanner. They are listed below with their respective ratings, signals/biases, and corresponding charts.

1) AUD/NZD (Receives a -6, or ‘Strong Sell’ Signal)

New Aussie CPI Data Tonight
New Aussie CPI Data Tonight

2) AUD/USD (Receives a -4, or ‘Sell’ Signal)

New Aussie CPI Data Tonight
New Aussie CPI Data Tonight
USD Falling on the Philly Fed News

This morning, at 8:30 am Eastern Time, the Federal Reserve Bank of Philadelphia released an unfortunate batch of news for the US economy. The Philadelphia Fed Business Outlook Survey, otherwise known as the Philly Fed Manufacturing Index, which surveys over 200 Philadelphia manufacturers on a monthly basis, indicated worsening business conditions this month. While a score of -5 was anticipated, and would have already been a pessimistic indication, the real number was a bleaker -8.7. Considering that American manufacturing is a crucial component of US exports, these disappointing conditions ostensibly highlight the toll that a strong US Dollar is taking on trade, which carries negative implications for US GDP growth, or the lack thereof. With USD falling on the Philly Fed News today, monetary tightening-induced recession fears continue to haunt financial markets.

End of the Road for USD?

While the USD bullish run cannot last forever, a reversal currently seems unlikely anytime soon. High core inflation and hot labor markets are still incentivizing the Federal Reserve to continue their aggressive rate hike strategy, which they show little sign of stopping, regardless of UN criticism. Those bullish on USD may want to watch bearish movements like these for potential trade setups, which could yield potential discounted opportunities for going long on the Greenback.  

Three Potential Pairs to Trade

According to the A1 EdgeFinder’s market analysis, the following pairs rank favorably for those interested in going long on USD. They are listed below with their respective ratings, signals/biases, and corresponding charts.

1) USD/CHF (Earns a Score of 4, or a ‘Buy’ Signal)

USD Falling on the Philly Fed News
USD Falling on the Philly Fed News

2) EUR/USD (Earns a Score of -5, or a ‘Sell’ Signal)

USD Falling on the Philly Fed News
USD Falling on the Philly Fed News

3) AUD/USD (Earns a Score of -4, or ‘Sell’ Signal)

USD Falling on the Philly Fed News
USD Falling on the Philly Fed News
Top 4 Minor Pairs to Trade

As many traders and analysts grapple with today’s big economic news (namely, the UK’s disappointing 0.3% month-over-month contraction in GDP, the US’ surprise 0.4% jump in month-over-month PPI, and the FOMC meeting minutes set to release at 2 pm), many are similarly preparing for tomorrow's new round of CPI data in the US. Scheduled for reporting by the Bureau of Labor Statistics at 8:30 am on Thursday, October 13th, the public will learn how prices for US consumers changed in September. Because CPI is a proxy for inflation, this news will likely cause a great deal of volatility across financial markets, potentially offering another fundamental catalyst for USD bulls if September’s hot jump in PPI is any indication. While major pairs like EUR/USD, GBP/USD, and USD/JPY are thus still ripe for trading, it can also be worthwhile to explore some less frequently traded pairs as well. Here are the A1 EdgeFinder’s top 4 minor pairs to trade, along with some additional analysis for each.

1) CHF/JPY (Earns a 3, or ‘Buy’ Rating)

Top 4 Minor Pairs to Trade
Fundamentals still favor CHF and may continue to do so until the Bank of Japan finally raises interest rates.
Top 4 Minor Pairs to Trade
Trendline support appears to be holding steady.

2) EUR/CHF (Earns a 3, or ‘Buy’ Rating)

Top 4 Minor Pairs to Trade
Fundamentals are mixed due to Europe's energy crisis and unemployment, though the Swiss National Bank lags behind the ECB in hawkishness.
Top 4 Minor Pairs to Trade
It appears a breakout to the upside may have occurred at the start of October.

3) AUD/JPY (Earns a -3, or ‘Sell’ Rating)

Top 4 Minor Pairs to Trade
Fundamentals are mixed: Japan's economy is performing better, but inflation and mild rate hikes nominally favor AUD.
Top 4 Minor Pairs to Trade
A month-long downtrend could potentially see a breakout below the depicted support zone.

4) AUD/NZD (Earns a -3, or ‘Sell’ Rating)

Top 4 Minor Pairs to Trade
New Zealand's economy appears to be significantly stronger than Australia's, though inflation is beginning to favor AUD.
Top 4 Minor Pairs to Trade
This uptrend does appear to be strong; we will have to watch and see if NZD fundamentals are enough to cause a breakout to the downside.
Caution: 3 Big Catalysts Tomorrow

Transpiring between 2 am and 2 pm Eastern Time, the forex market will be subjected to several bits of significant economic news on Wednesday, October 12th. Because of these potential fundamental catalysts, there is a chance that financial markets will experience substantial volatility accordingly. Let’s explore what this news could be and how it may influence price action as we exercise caution: 3 big catalysts tomorrow will be pulling no punches, after all.

Catalyst #1: United Kingdom GDP

At 2 am ET, the UK’s Office for National Statistics will report any month-over-month change in the UK’s Gross Domestic Product (GDP), a key measurement of economic output. A change of exactly 0% is currently forecast. If it is revealed that the UK’s economy in fact grew, this could be bullish for GBP, perhaps making the cautious Bank of England more comfortable with rate hikes. However, if the real numbers indicate a contraction, GBP could plummet against other currencies, ushering in a return to recent instability.

Catalyst #2: United States PPI

At 8:30 am ET, the US Bureau of Labor Statistics will make public the month-over-month change in the Producer Price Index (PPI), which measures changes in the prices of goods and services sold (a mode of gauging inflation). An increase of 0.2% is currently expected. If the real numbers exceed expectations, this will be bullish for USD, and feed into the Fed’s hawkish narrative. However, if the report fails to meet this forecast, it could theoretically be bearish for USD, though it may take a lot of economic cooling for the Fed’s aggression to be tempered.

Catalyst #3: United States FOMC

AT 2 pm ET, the Federal Reserve will release the meeting minutes from the Federal Open Market Committee’s (FOMC) latest meeting. While we will not have concrete numbers to work with as with the other potential catalysts, these documents are extremely important for market fundamentals, since the FOMC is the portion of the Fed that sets monetary policy. If their minutes come across as hawkish, USD bullishness may likely continue, while an unexpected dovish change of tune could easily prompt a bout of USD bearish momentum.

Three Potential Pairs to Trade

Here are three possible pairs to trade for those desiring to capitalize on tomorrow’s potential catalysts. Each is reviewed favorably for either GBP bears and/or USD bulls by the EdgeFinder, A1 Trading’s market scanner tool; they are listed below with their respective ratings, biases/signals, and corresponding charts.

1) GBP/USD (Earns a -5, or ‘Sell’ Rating)

Caution: 3 Big Catalysts Tomorrow
Caution: 3 Big Catalysts Tomorrow

2) AUD/USD (Earns a -5, or ‘Sell’ Rating)

Caution: 3 Big Catalysts Tomorrow
Caution: 3 Big Catalysts Tomorrow

3) USD/JPY (Earns a 4, or ‘Buy’ Rating)

Caution: 3 Big Catalysts Tomorrow
Caution: 3 Big Catalysts Tomorrow
Incoming US Jobs Data

According to this morning’s Job Openings and Labor Turnover Survey (JOLTS) results from the US Bureau of Labor Statistics (BLS), job openings at the end of August were far lower than expected. Just over 11 million employment opportunities were forecast, while the actual number barely exceeded 10 million. This incoming US jobs data, which verifies that America’s labor market is indeed cooling, has likely fed into bearish momentum for the US Dollar this morning.

However, this is not the only crucial labor-related USD news that traders will have to work with this week. Tomorrow at 8:15 am Eastern Time, Automatic Data Processing, Inc. will release their Non-Farm Employment Change (NFP) estimates for September, and on Friday at 8:30 am ET, the BLS will reveal September’s changes in Average Hourly Earnings and NFP, as well as the new US unemployment rate.

How Might This Be Significant?

These have the potential to be huge fundamental catalysts, which may still favor USD bulls despite low JOLTS results; this is because, as Fed Chair Powell has recently pointed out, US job openings nearly outnumber those seeking work two-to-one. Due to this disparity, we could potentially encounter a situation where job openings continue to decline while wages and new hires keep increasing nonetheless, at least for a time.

Possible Pairs to Trade

For those who are hoping to go long on USD, the following pairs are rated favorably by the EdgeFinder, A1 Trading’s market scanner that offers helpful fundamental analysis, sentiment analysis, and more. They are listed in order of favorability, along with their respective ratings and biases/signals. As you can tell from each of the corresponding charts, the recent selling pressure for the Greenback might provide USD bulls with some optimal points of entry, judging from the resistance levels being hit.

1) EUR/USD (Earns a -5, or ‘Sell’ Rating)

Incoming US Jobs Data
Incoming US Jobs Data

2) GBP/USD (Earns a -4, or ‘Sell’ Rating)

Incoming US Jobs Data
Incoming US Jobs Data

3) USD/JPY (Earns a 4, or ‘Buy’ Rating)

Incoming US Jobs Data
Incoming US Jobs Data

4) AUD/USD (Earns a -4, or ‘Sell’ Rating)

Incoming US Jobs Data
Incoming US Jobs Data
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