Markets Report - 26 September 2022

A daily breakdown of the markets for the 26th September 2022, provided to you by Sterlex.

🇪🇺💶EUR plummeted briefly below 0.9600 during Asian hours before snapping back up. EUR extended its decline during Asian hours today. The impulsive and outsized drop suggests EUR could continue to weaken, possibly to 0.9500. On the upside, a breach of 0.9810 (‘strong resistance’ level was at 0.9940 last Friday) would indicate that the current weakness in EUR has stabilized.”. As EUR dropped, in our latest narrative from last Thursday (22 Sep, spot at 0.9830), we indicated that EUR is likely to continue to head lower in the coming days. On Friday (23 Sep), EUR sliced through both 0.9770 and 0.9720. We stated ‘the levels to watch are at 0.9770 and 0.9720’. 24-hour view: “We did not expect the outsized drop in EUR of 1.48% (NY close of 0.9690) last Friday (we were expecting range-trading). In other words, EUR could weaken further even though 0.9500 is unlikely to come under threat for now. Resistance is at 0.9700 and 0.9740.” Next 1-3 weeks: “We have held a negative EUR view for more than a week now. Despite the bounce, the weakness in EUR has not stabilized.

🇬🇧💷GBP/USD consolidates the daily loss around the record low, picking up bids to 1.0660 heading into London open on Monday, amid talks of the Bank of England’s (BOE) rate hike. As per the latest updates, GBP/USD traders price 150 basis points (bps) of the BOE rate hike by November. Also fueling the cable of late could be the comments from UK Opposition Labour Finance Spokesperson Rachel Reeves who said, “The fall in sterling puts pressure on the Bank of England to raise interest rates.” The shadow Chancellor also mentioned that She is incredibly worried about the market reaction to the mini-budget. Moving on, GBP/USD remains at the mercy of the BOE intervention and could plummet if the “Old Lady”, as the central bank is mostly known, disappoints the pair traders.

🇺🇸 🏦DXY adds to the ongoing rally and climbs above the 114.00 barrier for the first time since May 2002. The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 7-month support line near 106.80. That said, occasional bouts of weakness could be deemed as buying opportunities with the immediate target now emerging at the round level at 115.00 ahead of the May 2002 high at 115.32. The move higher in the dollar comes in tandem with further upside in yields in the short-end of the curve – a barometer of Fed’s next steps when it comes to rate hikes - which approach the 4.35% area for the first time since August 2007.