Week ahead forecast Oct 23rd-29th: USD/JPY, AUD/USD and EUR/USD

Global equities ended a challenging week with all three major US indices experiencing their worst losses in a month. The S&P 500 fell below its 200-day moving average for the first time since March, and Hong Kong's Hang Seng index hit its lowest level of the year once again. The yield on the US 10-year treasury hit a 16-year high at the beginning of the new week, briefly surpassing the 5% threshold.

In the past week, China reported that its Q3 GDP exceeded market expectations, coming in at 4.9%, bringing Beijing's annual growth target of 5% within reach. However, the ongoing softening of housing prices and weak consumption demand in China continues to weigh on Asian markets. In the world of commodities, the price of gold reached a five-month high, nearing the $2000 mark, driven by soaring safe-haven demand as geopolitical tensions in the Middle East escalate.

In the days ahead, the spotlight will be on US GDP growth for Q3, US Core Personal Consumption Expenditure (PCE), and personal income data. Given Federal Reserve Chair Powell's recent warning about the risk of higher inflation, these releases are poised to fuel the already-heated discussion about the timing of the next rate hike. So, how could these updates move the currency pair below:

USD/JPY
After briefly testing the 150 mark on Monday, USD/JPY has cooled down slightly and fell to 149 following the Bank of Japan's announcement of another unscheduled bond-purchase operation. This marks the fifth intervention by the Bank of Japan to support the weakening Yen since late July.

While the overall uptrend for the pair remains intact, the breaking of the July-October trendline may trigger a brief retreat, potentially leading the price to retest the support level at 148.81.

However, in a scenario where the upcoming US GDP and PCE releases indicate a combination of higher inflation and a stronger economy, the likelihood of the pair resuming its uptrend momentum, targeting the 150 mark once again, could rise.

AUD/USD
The upcoming days will be crucial for the AUD as Australia is set to release its quarterly and monthly inflation data on Wednesday. With quarterly inflation expected to be at 5.1%, traders will closely watch for any potential upside surprises that could influence the outcome of the next RBA meeting scheduled for November 7th. Currently, the futures market indicates a 25% probability of the RBA raising interest rates by another 25 basis points in next meeting.

From a technical point of view, a convincing break above its July-October trendline may support a move to retest the 0.64 level where the 50-day MA sits at the moment. On the flip side, a failure to break the 0.635 level may see the price pulling back to its bottom of the year at 0.6291.

EUR/USD
This week's ECB meeting has brought EUR/USD into focus. Although there are no expectations for another rate hike by the European Central Bank, the EUR/USD saw an early-week surge of nearly 1% to its 4-week-high.

A decisive breakout from the descending trendline, coupled with conquering the resistance level at 1.067, implies the potential for a short-term uptrend toward its mid-September high at 1.074.

Conversely, in the event of a strong US dollar exerting pressure on the pair, immediate support can be found at 1.061.