Forex Market Update for October 2024

Central Bank Decisions and Economic Data

• European Central Bank (ECB): The ECB is set to meet on October 17th, and there is speculation about whether they will maintain their current stance or cut interest rates again. Major brokerages like Goldman Sachs and JPMorgan expect a quarter-point cut due to economic weakness and slowing inflation in the Eurozone.
• Bank of Japan (BoJ): The BoJ will hold its policy meeting on October 31st. Analysts anticipate the possibility of a rate hike, which could continue the strength of the Japanese Yen.

Currency Forecasts

US Dollar (USD)

• The USD is expected to experience increased volatility in October due to the upcoming US presidential election on November 5th. The Fed's recent 50 basis point rate cut and potential further cuts in November could impact the USD's performance.
• Historically, October is a volatile month for the USD, and with the election looming, this volatility is likely to persist.

Euro (EUR)

• The euro's performance will be heavily influenced by the ECB's decision. If the ECB cuts rates, it could reverse the current uptrend of the euro against the USD. Otherwise, the euro might hold its ground.
• Key levels for EURUSD are expected to be between 1.1275 and 1.1010.

British Pound (GBP)

• The GBP has seen a rise in September and is expected to continue its bullish run in October, potentially breaking above the 1.34 mark. However, the Bank of England's (BoE) future rate decisions will be crucial, with potential rate cuts if wage and price expectations decline.
• GBPUSD key levels are between 1.3600 and 1.3180.

Japanese Yen (JPY)

• The BoJ's policy decision at the end of October will be critical for the JPY. If the BoJ raises rates, it could further strengthen the yen. Historically, October is a bearish month for USDJPY, with an average decline of -0.25% since the Bretton Woods agreement.
• Key levels for USDJPY are between 149.25 and 140.35.

Seasonal Trends

• Historical Performance: Most major currencies have historically strengthened against the USD in October, with the exception of the Canadian Dollar. The EURUSD pair has an average return of 0.30% in October over the last 50+ years, and GBPUSD has seen solid bullish price action with average returns of around +0.26% since 1971.
• Australian Dollar (AUD): AUDUSD has seen lackluster returns in October but may outperform its typical returns if bullish fundamental momentum holds up, particularly with large stimulus announcements in China.

Long-Term Outlook for 2024

• US Dollar: Expected to remain mildly bullish in 2024, influenced by tighter interest rates and anticipated shifts in US monetary policy. However, there is a projection of rate cuts starting in the second quarter of 2024, which could impact its strength.
• Australian Dollar: Predicted to increase against the USD, with forecasts from Westpac and NAB suggesting an AUD/USD exchange rate of 0.76 to 0.78 by June 2024.
• Global Economic Factors: The potential for a global recession could make the US Dollar more attractive, while the European Central Bank's strong stance could strengthen the Euro against the Dollar.

Key Levels and Technical Analysis

• EURUSD: Currently below the significant 1.1068 support level, indicating strong bearish pressure. Key levels are between 1.1275 and 1.1010.
• GBPUSD: Broke below the crucial 1.3312 support level, suggesting a potential reversal of the upward move from 1.3001. Key levels are between 1.3600 and 1.3180.

Conclusion

October 2024 is set to be a volatile month in the forex market, driven by central bank decisions, economic data releases, and the upcoming US presidential election. Traders should be cautious and monitor key levels and seasonal trends to navigate the market effectively.

References https://www.forextraders.com/forex-news/forex-market-forecast-for-october-2024/ https://www.stonex.com/en/thought-leadership/09-30-2024-forex-seasonality-for-october/ https://www.forexcycle.com/date/2024/10 https://blueberrymarkets.com/market-analysis/forex-predictions-2024-trends-shaping-the-future-of-forex-markets/

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