2023 September Outlook for G7 Currencies
2023 September Outlook for G7 Currencies
Dollar
Fundamental perspective:
Over the past month, the dollar displayed a mix of strength and vulnerability against its international peers. It initially surged above 105, driven by optimism from strong ISM services data and favorable unemployment claims, while eurozone economic concerns weighed on the euro. Speeches by FOMC members hinted at a cautious approach to balancing inflation and economic growth. Additionally, the currency continued strengthening, propelled by elevated CPI, PPI, and retail sales figures, although sentiment surveys pointed to economic pessimism. It maintained its strength as the US FOMC signaled a hawkish rate pause. Despite weakening consumer sentiment, GDP, and PCE price index, the currency ended the month above 106 due to rising 10-year treasury yields.
Technical perspective (GBPUSD):
On the daily timeframe, the price has a bearish order flow, forming lower highs and lower lows along a descending channel. A pullback to the key resistance zone at 1.2200 could provide bullish acceleration towards the support zone at 1.1850, which coincides with the 161.8% Fibonacci extension. Price is hovering below the Ichimoku cloud, supporting our bearish bias.
| S1 | S2 | R1 | R2 |
| 1.1850 | – | 1.2200 | 1.2380 |
Euro
Fundamental perspective:
The Euro faced challenges against the US dollar in the past month. It initially declined below $1.07 due to disappointing services PMI data and uncertainty surrounding the ECB’s rate hike decision. Economic sentiment remained pessimistic, and even a surprise 25bps rate hike by the ECB couldn’t prevent the Euro from weakening further. In the final part of the month, the Euro extended its decline, closing below $1.06 as regional inflation cooled. While German and Spanish CPI met expectations, Eurozone flash CPI estimates fell below market expectations, signaling potential challenges for the Eurozone ahead.
Technical perspective:
On the daily timeframe, the price exhibits a bearish downtrend, as manifested through a descending channel. Price has recently touched the lower bound of the channel, and there is potential for price to head towards a key support-turned-resistance level at 1.0490, which coincides with the 23.6% Fibonacci retracement, to see a continuation to the downside and key resistance-turned-support level at 1.0250, which is in line with the 141.4% Fibonacci extension. Price is hovering below Ichimoku cloud and 20 EMA, supporting our bearish bias.
| S1 | S2 | R1 | R2 |
| 1.0250 | – | 1.0490 |
1.0680 |
Kiwi
Fundamental perspective:
The kiwi had a lackluster month, with performance influenced by a lack of impactful economic news. However, optimism emerged as GDP figures exceeded expectations, pulling the country out of a technical recession. Attention is now shifted to the release of quarterly GDP figures and the RBNZ rate decision.
Technical perspective:
On the Daily timeframe, price has recently rejected off from a significant support-turned-resistance at 0.6050. If price breaks below the downside confirmation level at 0.5900, we expect a pullback to the resistance zone at 0.5980 could provide the bearish acceleration towards the next critical support zone at 0.5780. Price hovers below our Ichimoku cloud and 20 EMA, supporting our bearish bias.
| S1 | S2 | R1 | R2 |
| 0.5780 | – | 0.5980 | 0.6050 |
