GBPUSD RETREATS AS FEARS OF NEW UK LOCKDOWNS RISE

The GBPUSD pair declined on Wednesday as the market reflects on the relatively weak UK inflation data and speculation around a possible lockdown. Data published by the Office of National Statistics (ONS) showed that the headline consumer price index (CPI) declined from 3.2% to 3.1% on a year-on-year basis. The prices declined from 0.7% to 0.4% on a month-on-month. Meanwhile, core CPI declined from 3.1% to 2.9% in the same period. Still, analysts expect that the drop in prices will be temporary considering that energy prices have risen while the government has ended the VAT relief for hospitality companies.

The sterling and FTSE 100 index also declined as worries about the new wave of Covid-19 in the UK. The country recorded a daily death toll of 223 on Tuesday, the highest number since early March. At the same time, the total number of new Covid-19 cases rose to more than 40,000. Hospitalizations have also risen to almost 1,000. Therefore, there are concerns that the government will reinstate new restrictions. In a statement, the NHS Confederation said that the government should bring back restrictions as soon as possible. It warned that failure to do so will lead to a major crisis during winter. The top performers in the UK were companies like Deliveroo and The Hut Group.

The EURUSD pair was little changed after the latest EU inflation numbers. Data published by Eurostat were in line with what the organization reported two weeks ago. Consumer prices rose from 3.0% in August to 3.4% in September. In the same period, the core CPI rose from 1.6% to 1.9%. Like in the UK, prices will keep rising in the coming months as prices remain elevated. Indeed, some countries in the region have announced billions of euros in a bid to offset gas prices hike.

Elsewhere, data showed that the Chinese economy is struggling. Data by the National Bureau of Statistics showed that the country’s home prices declined in September, the first month-on-month drop in more than six years. Prices rose by 3.8% on a year-on-year basis. Still, the MoM decline is of concern since it came two days after the country published weak GDP data. The situation could worsen as Xi Jinping continues to reduce risks in the industry. This has seen companies like Evergrande and Fantasia Holdings move closer to collapse.

EURUSD

The 30-minute chart shows that the EURUSD pair has been in a bearish trend recently. The pair has moved below the important support at 1.1628, which was the lowest level this week. It has moved below the 25-period moving average while the Relative Strength Index (RSI) and MACD have declined. The pair has also moved below the chin of the double-top pattern. Therefore, the pair will likely continue dropping as bears target the next key support at 1.1600.

AUDUSD

The AUDUSD pair maintained a bullish trend as investors remained optimistic that the RBA will hike rates sooner than predicted. The pair is trading at 0.7485, which was also the highest level on September 3. The pair has formed a cup and handle pattern on the four-hour chart. It is also slightly above the 25-day and 15-day moving averages. Therefore, the pair will likely keep rising as bulls target the next key resistance at 0.7550.

USDJPY

The USDJPY pair bullish momentum continued as the Japanese yen weakness continued. The pair is trading at 114.45, which is substantially higher than this month’s low of 110.74. On the daily chart, the pair is above the short and longer moving averages. The DeMarker indicator has moved to the highest level since March. The MACD, RSI, and other oscillators have also continued rising. Therefore, the pair will likely keep rising in the near term.