USD MAKES COMEBACK AS FED TAPERING BETS RISE

The US dollar rose on Monday as the market reacted to a report that the Federal Reserve is set to wind down its $120 billion per month asset purchase program in November. The report said that Fed officials are still worried about how soon inflationary pressures will fade. Some officials believe that inflation will remain for a while until the main causes such as supply chain challenges are resolved. According to the WSJ, the Fed will taper by reducing its asset purchases by about $15 billion per month. The goal will be to end the program completely by June next year.

The euro declined against the US dollar and the British pound after the relatively weak German sentiment data. Data by the ifo Institute showed that the country’s business climate declined from 98.9 in September to 97.7 in October. This decline was lower than the median estimate of 97.9. Meanwhile, the German current assessment declined from 100.4 to 100.1 while business expectations declined from 97.4 to 95.4. In general, companies are worried about the rising cost of doing business and supply shortages.

American futures rose modestly ahead of a big week for corporate earnings. Dow Jones, S&P 500, and Nasdaq 100 index futures rose by about 0.1% today. This week, some of the biggest companies in the indices like Microsoft, Facebook, and Alphabet will publish their quarterly results. Some of the top movers today were PayPal, whose shares jumped sharply after it confirmed that it was not pursuing Pinterest. Last week, the company said that it was considering buying the company in a $40 billion deal. In Europe, the HSBC share price rallied after the company reported strong quarterly results and boosted its buyback program.

EURUSD

The EURUSD pair declined to a low of 1.1620 after the WSJ report on high-interest rates. This was an important price because the pair has struggled moving below the level several times before. The pair has moved to the 25-day moving average and is below the key resistance at 1.1670. Therefore, a bearish breakout will be confirmed if the pair manages to move below the key support at 1.1610. Such a drop will increase the possibility that the pair will move below 1.1600.

GBPUSD

The GBPUSD pair tilted lower as the US dollar made a comeback. The pair is trading at 1.3766, which is along the lower side of the ascending channel pattern. The price is also at the same level as the 61.85 Fibonacci retracement level. The MACD has formed a bearish divergence pattern and has moved below the 25-day moving average. Therefore, a bearish breakout will be confirmed if the price manages to move below the lower line of the ascending channel.

SPX500

The S&P 500 is hovering near its all-time high ahead of the important quarterly results scheduled for later this week. The index is trading at $4550, which was also the highest level in September. It has formed a cup and handle pattern and moved above the 25-day and 50-day moving averages. Therefore, the index will likely keep rising as bulls start targeting the next key resistance at $5,000.