Last week (10/16-10/20), the US Dollar Index fell by 0.45%, while non-US currencies experienced mixed movements. The Japanese Yen depreciated by 0.2%, and the Euro appreciated by 0.8%.

【Source: MacroMicro；Date2023/10/16-2023/10/20】

【Source: MacroMicro；Date2023/1/1-2023/10/20】

Last week, the US dollar index experienced volatile consolidation, declining after Powell's dovish remarks, with an overall decrease of 0.45%. Against this backdrop, the euro rebounded against the US dollar, accumulating a 0.8% gain.

【Source：MacroMicro 】

This week, the European Central Bank (ECB) will announce its latest interest rate decision. September CPI data released last week showed further easing of inflationary pressures in the Eurozone: overall inflation decreased from 5.2% in August to 4.3% in September, and core inflation dropped from 5.3% to 4.5%, both meeting market expectations.

【Source：MacroMicro 】

Market participants believe that the significant alleviation of inflationary pressures and the downward economic pressure faced by the Eurozone recently will lead the ECB to maintain interest rates unchanged at this week's meeting.

However, there is still uncertainty about whether the ECB's tightening cycle has already ended, and a rate hike is still possible in December. It is necessary to pay attention to President Lagarde's views on the economic situation and interest rate trends during the press conference.

Mitrade Analyst：

If ECB President Lagarde adopts a hawkish stance at this interest rate meeting, the market may raise expectations of a rate hike in December, thereby providing some support for the Euro. Additionally, attention should be paid to Eurozone and US PMI data this week. If the economic gap between the Eurozone and the US continues to widen, EUR/USD could face downward pressure. Conversely, if US PMI data weakens, short-term profit-taking pressure may affect the bullish momentum of the US dollar, leading to a further rebound of the Euro.

From a technical perspective, EUR/USD has broken above the 21-day moving average and breached the downtrend line. If it manages to hold above the 21-day moving average this week, there is a possibility of further upward movement for EUR/USD, with resistance around 1.065. On the other hand, if it falls below the 21-day moving average again, support levels can be seen at 1.05 and 1.045.

【Source：TradingView】

Last week, despite fluctuations in the US dollar and US bond yields, the USD/JPY remained stable around the 150 level, indicating strong resistance at that point and market divergence on the future trend of the yen.

According to the latest data from Japan's Ministry of Internal Affairs and Communications, Japan's September CPI dropped from the previous reading of 3.2% to 3.0% on a year-on-year basis. The core CPI also decreased from the previous reading of 3.1% to 2.8%, while the core-core CPI, excluding fresh food and energy, fell from 4.3% to 4.2%. Although inflation overall declined, it still exceeded expectations.

【Source：MacroMicro 】

Bank of Japan Governor Ueda Kazuo delivered a speech stating that the central bank will patiently maintain an ultra-loose monetary policy and respond flexibly to developments in financial and foreign exchange markets, while warning that uncertainty surrounding the economy and inflation remains high. Additionally, with the dissipation of cost-driven pressures, inflation may slow down, but it is expected to pick up again due to the strengthening economy and changes in corporate wage-setting behavior.

Local media reported that the policy meeting scheduled for October 31st will discuss whether adjustments should be made to the Yield Curve Control (YCC) policy.

Mitrade Analyst：

This week, attention is focused on whether the USD/JPY exchange rate can break through 150. If it surpasses 150, we will be watching for Japan's authorities to implement a currency inspection and foreign exchange intervention. It is expected that this week the market will maintain a high-level volatile trend with a range of 148-151.

From a technical perspective, the USD/JPY has been oscillating above the 21-day moving average, but has failed to break through the key level of 150. If it continues to rise above this level during the week, the resistance level to watch is 152. On the other hand, if it remains unable to successfully break through 150 this week, the probability of a price decline increases significantly, with support levels seen at 149 and 147.5.

【Source：TradingView】