Market Outlook

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US Dollar Bounces from 95.00, Global Stocks Attempt to Build Support

Price action and Macro.

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US Dollar Talking Points:

- Global equities have finally found some semblance of support after a brutal two-day sell-off. There did not appear to be a singular driver behind the selling, and this perhaps helped to soften the blow a bit; and when taken with the fact that Q3 was a very bullish period for stocks in the US, it becomes easier to qualify this move as a simple correction as opposed to a harbinger of doom as we wind down 2018. Nonetheless, the sell-off happened, and until markets see a convincing return of bullish price action, caution should be utilized across the equity space.

- For all intents and purposes, currencies were relatively calm during this equity rout. There were consistent patterns of weakness in the US Dollar and this drove strength into both EUR/USD and GBP/USD but, nothing appeared out of the norm as all three of those markets were working within the context of prior price action.

- DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

Global Equities Catch Support, but Can it Hold?

This week has brought an interesting twist as a global stock sell-off caught many by surprise; and this follows what was a very bullish Q3 across a number of indices. The move was very pronounced during Wednesday’s US session, and that pain held through the Asian open. Support began to show in the Dow and S&P and that largely held through yesterday’s European and US opens, with another fresh wave of selling showing up near yesterday’s US close. The Dow quickly moved down to test the 25,000 level and a bounce began to show. Buyers continued to drive overnight, and at this point, we can see prices attempting to hold higher-low support around the 61.8% Fibonacci retracement of the January sell-off in the index.

Dow Jones Hourly Price Chart: Attempted Build of Support After 25k Test

Dow Jones Hourly Price chart DJIA DIA

Chart prepared by James Stanley

Next Week’s Economic Calendar

While this week’s economic calendar was rather light, with the highlight being yesterday’s US CPI report, next week’s economic docket is a bit busier, as we have multiple high-impact releases every day Monday-Friday.

DailyFX Economic Calendar High-Impact Events for the Week of October 15, 2018

DailyFX Economic Calendar High Impact for the Week of October 15, 2018

Chart prepared by James Stanley

US Dollar Bounces From 95.00 After Two-Day Sell-Off

While US equities were plunging on Wednesday and again near yesterday’s US equity close, the US Dollar was in the midst of a fairly consistent sell-off. The currency had initially started the week by bouncing up to resistance, soon finding sellers around the same 96.10 level that had offered resistance last week. But that’s when the music stopped for bulls, and prices trended-lower until we were back to the same 95.00 level that had previously marked the October low.

US Dollar Hourly Price Chart: Support Attempts to Build at 95.00 After Consistent Sell-Off From Resistance

US Dollar Hourly Price Chart

Chart prepared by James Stanley

EUR/USD Comes Off of Resistance After Early-Week Sell-Off

Coming into the week, fears around Italy continued to hold a bearing on EUR/USD price action. In short order, a bear flag formation had broken as the pair traded down to fresh lows. But Tuesday morning saw support build-in around 1.1430, and prices put in a rather consistent pullback (going along with that consistent sell-off in the US Dollar), until a an interesting area of resistance came into play around the 1.1600-handle.

EUR/USD Four-Hour Price Chart: Euro Softens Near Resistance

eurusd eur/usd four hour price chart

Chart prepared by James Stanley

At this stage, either side of the trade could be justified and for those without an overriding bias, steering clear and letting matters clean up a bit could be the most attractive way of moving forward. If we do see a topside break of this resistance zone, the door appears open for a re-test of the longer-term resistance area around 1.1736. If we break back-below 1.1500, then we’re likely seeing a re-emergence of fears around Italy, and that can bring on panic-like selling as investors duck for cover.

EUR/USD Two-Hour Price Chart

eurusd eur/usd two hour price chart

Chart prepared by James Stanley

EUR/JPY Catches Support Within Bull Flag

Coming into this week, EUR/JPY had an interesting setup as there was a bull flag formation on longer-term charts, and inside of that channel was a shorter-term descending triangle formation.

The descending triangle is often approached in a bearish fashion, and in short order that setup had filled in as prices broke down to start this week. That run was fairly pronounced on Monday but, similar to what was seen in EUR/USD, support began to catch mid-week and prices tilted higher. At this stage, resistance continues to hold below prior support, but bulls have shown no signs yet of relenting. If we do see a continued Euro recovery, a topside break of this flag could re-open the door to bullish strategies in the pair. The level of interest there would be the zone that runs from 130.59-130.77, as this was prior support from the descending triangle formation, and a topside break through this area also means a bullish push above the channel that makes up the bull flag formation.

EUR/JPY Two-Hour Price Chart: Descending Triangle Break

eurjpy eur/jpy two hour price chart

Chart prepared by James Stanley

GBP/USD Pulls Back From Three-Week High, UK Inflation on Deck

Next week brings September inflation numbers out of the UK, and this has been a big driver in the currency of recent. There’s another driver of note, however, as Brexit proceedings continue to produce two-sided volatility; but the lack of further negative developments this week, combined with that weakness in the US Dollar, have helped GBP/USD to push up to fresh three-week-highs.

The long side of GBP/USD was highlighted in this week’s FX Setups of the week, looking to the key Fibonacci level at 1.3117 as a market for topside plays.

With prices now pulling back, the big question is where that next item of support may come in, and there have been a few areas of note in GBP/USD this week. The 1.3030 level was highlighted as part of the technical write-up on the pair that was released on Tuesday, and after a bullish push another area of swing resistance turned support developed at 1.3133. There’s also the zone of interest that runs from 1.3098-1.3117, so there is a backdrop for working with bullish strategies on the pair as we move into next week.

GBP/USD Two-Hour Price Chart

gbpusd gbp/usd two hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for

Contact and follow James on Twitter: @JStanleyFX

Yen May Fall Further in Risk-On Trade But Follow-Through Suspect

Fundamental analysis, economic and market themes.

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  • Japanese Yen may continue to retreat as markets’ risk appetite recovers
  • Canadian Dollar higher as crude oil prices rebound with stock futures
  • Sentiment rebound likely corrective, may not find lasting follow-through

The anti-risk Japanese Yen traded broadly lower in otherwise inconclusive Asia Pacific trade, reflecting a rebound on regional bourses after yesterday’s bloodletting. The Canadian Dollar edged higher, echoing a tepid recovery in crude oil prices amid the broadly risk-on mood. The rest of the G10 FX space showed little conviction, with prices oscillating near levels set at the close of the North American session.


Looking ahead, a quiet offering on the European economic calendar seems likely to keep sentiment trends in the spotlight. FTSE 100 and S&P 500 stock index futures are tracking sharply higher before the opening bell rings in London and New York, hinting that the recovery in sentiment has scope to continue. An expected uptick in the University of Michigan gauge of US consumer confidence may help.

Importantly, none of the issues that led the past 48 hours of breakneck volatility have been resolved or even addressed from a policy perspective. Markets continue to price in a better-than-even chance of a December Fed rate hike and envision at least two further increases in 2019 (although the likelihood of a third one has been marked down a bit). That leaves the apparent impetus for the selloff essentially intact.

With that in mind, any on-coming risk recovery might mean little more than a correction. Indeed, traders are probably keen to unwind any shorter-term risk-off exposure, preferring to avoid any pronounced skew in portfolios ahead of the weekend lull. To that end, follow-through on today’s price action is probably too much to reasonably ask for.

See our forecasts for currencies, commodities and equities to learn what will drive prices in Q4!


Asia Pacific Trading Session Economic Calendar


European Trading Session Economic Calendar

** All times listed in GMT. See the full economic calendar here.


--- Written by Ilya Spivak, Currency Strategist for

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

Brexit, Italy Bets Sink GBP/USD, Reversal Due? Asia Stocks to Rise

Classic technical analysis, macro and economic themes.

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Asia Pacific Market Open – S&P 500, US Dollar, British Pound, Euro

  • European shares gapped higher, then traded lower as markets might have taken Brexit, Italy bets
  • The US Dollar capitalized on its reserve currency status, climbing higher against its major peers
  • GBP/USD once again step closer to downside reversal, Asia Pacific stocks may echo S&P gains

We just released our 4Q forecasts for the British Pound in the DailyFX Trading Guides page

After declining since October 4th, the US Dollar took a pause and gained ground against most of its major counterparts as the global stock selloff took a breather. Gains notably accelerated, particularly against the British Pound, as the markets transitioned to Friday’s European trading session. There, the DAX and Euro Stoxx 50 gapped higher, but almost immediately began declining.

The US Dollar’s appreciation then picked up pace as local government bond yields declined, signaling traders prioritizing safety. Last week we saw the greenback failing to capitalize on its status as the world’s reserve currency. This could have been amidst optimism on Brexit progress as the Euro and British Pound appreciated, but this time was different.

This week offers a couple of notable event risk for the Pound and Euro. For the former, Tuesday holds the possibility that EU ministers could sign off on the draft of Brexit summit conclusions. For the latter, Italy is scheduled to send final budget to the European Commission on Monday for their approval. Perhaps investors were taking bets in the event things go wrong.

During Wall Street trading, the S&P 500 gapped higher before immediately heading lower. However, the index managed a last minute push to the upside. For now, this could only mean little more than a correction. With that in mind, baring adverse event risk that crosses the wires during the weekend, we may see the somewhat improvement in market mood echo into Monday’s Asia Pacific trading session.

GBP/USD Technical Analysis

After Friday’s performance, the British Pound is yet again facing another bearish engulfing reversal candlestick pattern against the US Dollar. However, the near-term ascending support line from earlier this month still holds. With that in mind, a close under could be confirmation that the next leg will be lower for GBP/USD. Meanwhile immediate resistance is around 1.3241.

GBP/USD Daily Chart

GBP/USD Daily Chart

What Else to Expect Ahead?

New Zealand Dollar Fundamental Outlook

Australian Dollar Technical Outlook

Analyst Pick:

AUD/NZD Long at 1.09168

US Trading Session

US Trading Session

Asia Pacific Trading Session

Brexit, Italy Bets Sink GBP/USD, Reversal Due? Asia Stocks to Rise

** All times listed in GMT. See the full economic calendar here

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter