This week saw strong risk aversion enter markets at the start of the week as equity markets witnessed heavy selling pressure. The risk off sentiment in these markets saw risk flows into both the JPY and the USD. The USD saw some solid days of buying with the Dollar Index taking out the 94.00 handle midweek. The EURUSD fell down through a key daily channel and below a weekly trend line below 1.1750. Any further risk off sentiment on global recovery fears is likely to further benefit USD buyers and increasingly weigh on the EURUSD in the coming week.

Key events from the past week

• NZD: RBNZ rate decision, September 23. The RBNZ kept interest rates unchanged at 0.25% & asset purchases the same at NZD $100 billion. The RBNZ confirmed that a negative interest rate move remains under consideration. This should keep the NZD pressured in the medium term. See full statement here.
• Gold falls: Dollar strength drags gold lower. The USD strengthened on risk aversion and quarter end USD flows. This dragged gold lower down through the large symmetrical triangle pattern forming on the daily. Next major support is seen at $1820.
• EUR: A ‘V’ Shaped in doubt: Weds Sep 23. Services PMI’s were weaker from the Eurozone this week coming in below market expectations at 47.6 vs expectations of 50.5. With COVID-19 restrictions increasing across Europe this sends out a signal to encourage EURUSD sellers looking for a move below 1.1600.

Key events for the coming week

• CNY: Manufacturing PMI, September 30. Chinese PMI data this week has the potential to bring the AUD lower. After the investment bank Westpac projected a coming RBA rate cut, any weakness in China’s data this week will drag on Australia’s economy and may increase expectations of a coming RBA rate cut.
• GBP: Monetary Policy Report hearings, September 30. At the latest BoE rate meeting the chances of a negative rate cut were increased with the news that the BoE instructed the Monetary Policy Committee to investigate the implications of negative rates. Any further hints at negative rates will weaken the GBP.
• USD: Employment data, October 02. US Employment data will be in key focus next week to see how the US labour market is holding up. At the moment the Fed is set to keep rates unchanged for three years. What signals will the US labour market send on Friday?