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Economic growth

Weekly Forex Outlook: DXY, NZD/USD, GBP/USD

China’s economic growth exceeded expectations and the US dollar weakened as investors worried over world economics. The UK is currently in recession, but China managed to do better than expected with their third-quarter GDP data showing resilience during this time period and growing by 3.9%.

Headlines

  • Chinese GDP grew 3.9% in the third quarter but retail sales drop
  • The US dollar retreats after weaker housing starts and stronger BoJ interventions

U.S. Dollar Index

The US dollar index, which gauges how the dollar performs versus a basket of other currencies, decreased to nearly $112, a considerable decline from the month’s high of over $115.

The index performed well for the majority of the week up until Friday, when interventionist moves by either the Bank of Japan or the Japanese Ministry of Finance caused the USD/JPY rate to crash, weakening the US Dollar globally.

In addition to the US stocks mounting a rebound and the decline in the CBOE Volatility Index (VIX), the US dollar also declined when the US released relatively weak building permits, housing starts, and new home sales data.

Overall, the DXY Index dropped by -1.26%, and rates for the USD/JPY dropped by -0.72%. Around the time of UK Prime Minister Liz Truss’ departure, EUR/USD rates increased by +1.42%, while GBP/USD rates increased by +1.06%. Gold prices in US dollars (XAU/USD) almost hit a new low for the year but managed to recover by +0.80%.

DXY index

US Dollar Index

NZD/USD

Monday saw a decline in the value of the New Zealand Dollar as buying power waned following a recent surge. The expectation that the U.S. Federal Reserve would consider less drastic rate increases helped propel that move on Friday. Today, though, buyers stayed away as they returned to their earlier worries about global growth.

The Kiwi increased 1.2% on Friday as part of a broader risk rally sparked by reports that the Fed was considering when to lower the rate of hikes and possibly indicate a pause at its November meeting.

NZD/USD index

USD/NZD Daily

The primary trend, according to short-term technical analysis, is downward. However, the momentum is moving upward. The major trend will switch to up if a trade is made through.5814. A move-through.5512 will indicate that the downturn has resumed.

Minor trends are upward. This is managing the forward motion. If a transaction goes through.5600, the minor trend will turn downward. Minor values vary from.5512 to.5793. Support is found at its retracement zone, or.5652.

The range for the near term is.6162 to.5512. The pivot at.5837 will serve as the primary upside goal and potential resistance if the main trend switches to up. 

GBP/USD

The GBP/USD exchange rate increased slightly and to its highest level since Thursday at 1.1298. It went marginally above the pivot point and the 50-day EMA. The Relative Strength Index (RSI) increased at the same time, moving over the neutral level of 50.

Plans to reverse the debt-fueled tax cuts of Kwasi Kwarteng were unveiled by the new UK chancellor. Additionally, he will repeal some of Liz Truss’ energy subsidies.

As a result, analysts anticipate that the UK will experience a recession in the near future. The country could experience a recession in the upcoming three quarters, according to a forecast by EY. The business anticipates a third-quarter economic contraction of 0.3%, followed by fourth- and first-quarter contractions of 0.2%. 

EUR/USD

After hitting a weekly low of 0.9706 on Thursday, the EUR/USD exchange rate rose on Friday. The current price is significant since it was its lowest on September 6, and it has crossed the ascending trendline depicted in green.

The next European Central Bank (ECB) interest rate announcement, set for Thursday this week, is currently the center of attention. In an effort to combat the growing inflation, analysts anticipate that the bank will increase interest rates by an additional 75 basis points.

In light of this, the pair will probably continue to rise as bulls aim for the crucial resistance level at parity in advance of the ECB meeting and the US consumer confidence report. If it moves over the resistance at 0.9870, this will be verified. 

AUD/USD

On Monday, the AUD/USD exchange rate continued to rise as the US dollar fell and in response to generally positive Chinese economic data. It increased to a high of 0.6378, which was marginally higher than the low of 0.6200 for this month.

Due to the enormous amount of trade that occurs between China and Australia, Chinese economic statistics are significant for that country. Most of Australia’s important exports, including iron ore, natural gas, coal, and gold, are bought by China. The Australian dollar is frequently used as a stand-in for the Chinese economy as a result.

The impending quarterly consumer inflation figures, which are due out on Tuesday, will be the next major driver of the Australian dollar. As energy costs remained high, analysts anticipate the statistics will indicate that overall inflation increased from 6.1% in Q2 to 7.0% in Q3. 

China GDP Resilient

As the effects of the Covid-zero strategy and corporate deleveraging persisted, the Chinese economy remained in a challenging position. The carefully monitored retail sales numbers decreased from 5.4% to 2.5% in September, according to data released by the National Bureau of Statistics (NBS).

The unemployment rate remained at 5.2% during this time, and the housing price index (HPI) has been trending downward since 2021. As industry worries persisted in September, the HPI fell by 1.5 percent. Overall, the economy grew 3.9% year over year.

Although the government gave no justification for the delay, it was widely assumed that it was an effort to avoid drawing attention away from the congress, which takes place only every five years and replaces the Communist party’s senior echelons. 

Upcoming Earnings Release

Ahead in the week, some companies are set to report earnings Monday, October 24th.

Cadence Design Systems Inc

Monday 24th, following the closing of the market, Cadence Design Systems Inc. is anticipated to release its earnings. The financial quarter covered by the report will expire in September 2022. The consensus EPS expectation for the quarter is $0.76, based on analyst projections. For the same period the previous year, there was a reported EPS of $0.65.

Discover Financial Services

Additionally, Discover Financial Services will release financial results on Monday, following market close. The financial quarter covered by the report will expire in September 2022. The consensus EPS expectation for the quarter is $3.66, based on analyst projections. For the same quarter the previous year, the reported EPS was $3.54.

HSBC Holdings plc

HSBC Holdings plc is also anticipated to release earnings on Monday. The consensus EPS expectation for the quarter is $1.08, based on analyst projections. For the same period, the previous year’s reported EPS was $0.85.

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Author

  • Phyllis Wangui

    Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.