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Market News Foreign exchange trading reminder on October 27: The U.S. dollar rose to a one-week high and the yen led the decline. Pay attention to the Bank of Canada interest rate resolution

Foreign exchange trading reminder on October 27: The U.S. dollar rose to a one-week high and the yen led the decline. Pay attention to the Bank of Canada interest rate resolution

The U.S. dollar index rose slightly on October 26, refreshing its high since October 18 to 94.02. Intraday trading fell into a narrow range. The market awaits the upcoming central bank meeting, which may trigger volatility. As the stock market narrowed its gains, the U.S. dollar had mixed ups and downs against G-10 currencies. Most of the commodity currencies that rose earlier were basically the same, and the yen led the decline of G10 currencies. The Bank of Canada will meet on Wednesday.

Eden
2021-10-27
7333

On Tuesday (October 26), the U.S. dollar rose 0.12% to 93.95, and the U.S. 10-year US Treasury yield fell for the third consecutive day; previous data showed that U.S. consumer confidence unexpectedly increased in October; analysts said that during a series of central bank meetings Before the economic data is released, the US dollar may continue to stabilize. These meetings and data may change people's views on interest rates, inflation and growth rates.

Joseph Trevisani, a senior analyst at FXStreet.com, said the market is just taking a breather.

The euro to US dollar fell 0.1% to 1.1596. The euro has recently weakened due to expectations that the European Central Bank will adopt a dovish stance at the meeting. There was news on Tuesday that bond investors’ inflation expectations for the euro zone had reached a seven-year high of more than 2.07%.

The British pound, Australian dollar and Japanese yen fluctuated greatly. The pound once touched more than $1.38 after British retailers announced stronger-than-expected sales in October, confirming the prospect of rising interest rates. The pound subsequently fell and was flat at $1.3764 for the day. The euro against the pound hit its lowest since February 2020.

Valentin Marinov, head of G-10 foreign exchange strategy at Crédit Agricole Bank: Although there are concerns about possible stagflation, due to favorable spreads and global risk sentiment is still generally optimistic, it seems that not many customers hold short positions in the pound.

The U.S. dollar to yen rose 0.4% to 114.16, lower than the four-year high of 114.695 hit last week; the Bank of Japan is expected to maintain its large-scale stimulus plan when it meets on Thursday and revise its inflation expectations for this year, indicating that it has no intentions. Follow the policies of other central banks preparing to exit the crisis mode.

The Canadian dollar rose slightly, and the intraday trend was ups and downs. The Bank of Canada will meet on Wednesday, and it is expected that the Bank of Canada will continue to withdraw support for the economy, paving the way for a rate hike next year amid inflation concerns. The Bank of Canada will raise inflation expectations and to a large extent end the stimulus measures for bond purchases during the epidemic.

TD Securities strategist Andrew Kelvin wrote in a research report that concerns about stagflation benefit the Canadian dollar, making it the most overbought currency among G-10 currencies.

Strategists at ING pointed out that so far in 2021, the currencies of energy exporting countries-such as the Canadian dollar or the Norwegian krone-have performed well, and the central banks of these countries are preparing to tighten their policies.

The Australian dollar, which tends to follow the trend of commodity prices, led the rise of the G-10 currency for the second day in a row. It rose by 0.44% at one time and then gave up the gains; Monex’s Simon Harvey said that the Australian dollar benefited from the stabilization of iron ore export prices and other export commodities. Price increased.

Wednesday preview


timeareaindexThe former valuePredictive value
08:30AustraliaCPI annual rate in the third quarter (%)3.83.1
08:30AustraliaCPI quarterly rate in the third quarter (%)0.80.8
09:30ChinaAnnual profit rate of industrial enterprises above designated size in September-single month (%)10.1
14:00GermanyNovember Gfk Consumer Confidence Index0.3-0.5
16:00SwitzerlandOctober Credit Suisse/CFA Economic Expectation Index25.7
20:30AmericaInitial monthly rate of durable goods orders in September (%)1.8-1
20:30AmericaInitial value of monthly rate of wholesale inventory in September (%)1.21
22:30AmericaChanges in EIA crude oil inventories in the week ending October 22 (10,000 barrels)-43.1180
22:30AmericaChanges in EIA refined oil inventories as of the week of October 22 (10,000 barrels)-391.3-223.5
22:30AmericaChanges in EIA gasoline inventories as of the week of October 22 (10,000 barrels)-536.8-225


19:30 British Chancellor of the Exchequer Sunak publishes a semi-annual update report on public finances and economic prospects
22:00 The Bank of Canada announces interest rate resolution and monetary policy report
23:00 The Governor of the Bank of Canada McCallum held a press conference

Summary of Institutional Views


Financial website Fxstreet analyst Joseph Trevisani looks forward to the trend of the US-Canada currency pair this week


The Bank of Canada is expected to announce on Wednesday’s interest rate decision that it will further reduce the size of bond purchases from 2 billion Canadian dollars a week to 1 billion Canadian dollars a week, which is only a quarter of the original 4 billion Canadian dollars. Considering that the U.S. dollar has fallen sharply against the Canadian dollar in the past month, the actions of the Central Bank of Canada are expected to be reflected in the prices of the United States and Canada. If the Bank of Canada maintains its aggressive stance this week, the Canadian dollar will reiterate its advantage against the US dollar. It is expected that in the coming week, commodity prices (especially oil) will continue to provide support for the Canadian dollar. In addition, the possibility that the market expects the Fed to adopt a tougher policy has been increasing in recent weeks. Before the Fed makes a decision, this possibility should keep the US-Canada currency pair down.

Market analysis: The European Central Bank is expected to stay on hold this week or adjust its policy in December


It is expected that the European Central Bank will stand still while maintaining the size of the PEPP at 1.85 trillion euros. In view of the decision on the PEPP purchase speed in the fourth quarter at the September meeting, and the adjustment decision on the asset purchase plan is not expected to be made until December, the upcoming meeting this week will not bring much spark. The post-PEPP policy may begin to be discussed at the meeting, but the market is unlikely to get too much information on the details. Finally, European Central Bank President Lagarde’s speech at a press conference may focus on postponing the current 10-basis-point rate hike in December 2023.

HSBC: AUD/USD may not be able to rise further in the near future


The recent gains in Australia and the United States reflect the rebound in broad risk sentiment, strong exports and the boost from reopening. Hawks in the market are expected to boost the Australian dollar, but the dovish RBA and US dollar market shows that the upward trend of the Australian dollar may be unsustainable. We expect Australia's economic recovery in the fourth quarter to be slower than last year (after the initial outbreak of the epidemic). The Reserve Bank of Australia is expected to maintain a dovish stance at the next meeting.

United Overseas Bank: New Zealand dollar against the US dollar upward momentum weakened


The New Zealand dollar was trading in the 0.7130-0.7177 range yesterday, slightly lower than our expected 0.7130-0.7180 range. Further sideways trading will not be surprising, although the slightly stronger tone suggests that the New Zealand dollar will rise to a higher range of 0.7140-0.7185. We believe that the upward momentum of New Zealand and the United States has begun to weaken. If it falls below 0.7125 (strong support level), it indicates that the momentum of the New Zealand dollar’s strength that began more than a week ago has ended. In order to restore the weak momentum, the currency pair must move and stay above 0.7180 within these 1-2 days, otherwise it is not surprising that it falls below 0.7125.

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