Time for payback has come

EUR:

Looking at the EUR/USD chart evolution last week, we can notice clearly how nervous the market was. Just like most major Forex currencies, the euro was driven by the debt ceiling negotiations from the US. As no major news came out and the situation looked blocked at the time of writing, the pair's drivers were mostly technical, even though, admittedly, even rumour and speculation left their mark on price action.

From a technical point of view, the pair managed to stay above 1.3522 support after having failed to reach yearly high level of 1.3710.

EUR/USD trading is choppy and will remain like this until no major news comes out to drive the market. Talking about market drivers, the 17 October debt ceiling deadline will be highly symbolic for the markets. Before that, forex traders will watch closely the German Zew index and the euro zone CPI figures to be released respectively on the 15 and 16 October. Better than expected figures should drive the euro higher given the on-going instability around the US dollar.

In case of a debt ceiling raise, the impact on EUR/USD should be similar to August 2011, just after the US debt ceiling raise and its downgrade by S&P. The worst scenario, the one every market operator refuses to believe in, would be a US default and this could be much more damaging on the global economy than the effect of the collapse of Lehman Brothers.

USD:

Despite the USD's slight appreciation on hope of reaching an accord with regards to the debt ceiling issues, the dollar remains exposed to a major risky event, if no deal is reached. For information, the DXY known as the Bloomberg Dollar Index rose by 0.35% from its opening at 80.078 to close the week at 80.362.

Failure to agree on raising the nation's $16.7 trillion debt ceiling by the 17 October could potentially see the US government default; as the government will run out of money to pay its bills and service its national debt. According to the International Monetary Fund, if this materializes it would result in higher interest rates for everybody across the world.
Another major event last week was the release of the US Federal Reserve Meeting Minutes for September. The minutes revealed that the decision to maintain stimulus was a "close call", but it also suggested that these still was broad support to taper the US Federal Reserve's bond-buying this year.
The US Government Shutdown enters into its third week, the outcome of the US debt ceiling will be crucial for the US dollar.

GBP:

The British pound kept losing ground last week and the GBP/USD ended the week below the 1.60 key level. From a technical perspective we can notice that the 30 days moving average acts like a good support for the price action behind the Cable; which rebounded after posting weekly lows at 1.5914 last Thursday.

The UK economic calendar will be quite throughout the course of the current week with some major news such as the Claimant Count Change and the ILO Unemployment rate to be released on Wednesday and the Retail Sales data next Thursday. Encouraging figures could provide a support for the current downtrend seen in the price action for the GBP/USD.

AUD:

Last week the Aussie appreciated against the US dollar for a second week in a row. Over the week, AUD/USD gained 0.39% opening at 0.9431 and closing at 0.9468 posting a low of 0.9388. This suggests that there was significant volatility on the pair.

This week the Aussie will be driven by many important macro data expected to be released on Friday 18 October. First, the speech of Glenn Stevens, the Reserve Bank of Australia's governor, is scheduled and later on that day we are expecting the release of the Chinese GDP figures for the third quarter of the current year. An optimistic speech and a good GDP could boost the Aussie higher maybe above 0.95 against the Greenback.

Gold:

On Friday Gold fell to 1263$/ounce in no longer than 30 minutes during the US opening, driven by a rumour of a possible deal between President Obama and the Republican House Speaker.

The 1.8% sudden drop was triggered by a massive 2 million ounces of gold in one trade, it was so violent that the CME stopped trading for 10 seconds in search of liquidity to match the offer.

From Friday's close of 1270$ an ounce to Monday's open at $1312 an ounce, there was a decline of 3.20%.
How will the US Debt Ceiling impact gold and silver prices next week?

Vincent Pellizzari is a trader at RTFX Ltd.