Market Analysis & Price Expectations: October 20-24, 2025

Market Pulse & Key Theme

The week of October 13-17, 2025, was characterized by a complex interplay of risk-on and risk-off sentiment, with the U.S. dollar demonstrating surprising resilience against a backdrop of easing geopolitical tensions. The EUR/USD pair experienced a bullish correction, closing near 1.1674 after pulling back from a weekly high of 1.1730, as market participants digested a mix of European political news and falling U.S. Treasury yields. Gold (XAU/USD) continued its historic rally, hitting an all-time high near $4,380 before a sharp pullback on Friday, driven by central bank demand and safe-haven flows amid concerns over a potential U.S.-China trade war. Concurrently, the German DAX 40 index entered a short-term downtrend, breaking below the key 24,300 support level amid global risk-off pressure stemming from renewed trade tensions and domestic economic caution.

The most significant development of the week was the escalation of U.S.-China trade relations. Following President Trump’s announcement of a 50% tariff on copper imports, he threatened a 100% tariff on certain Chinese goods, prompting retaliatory measures from Beijing. Although a meeting between the leaders was planned, the impasse highlighted the persistent volatility risk for global markets. This was compounded by renewed concerns over France’s sovereign rating, adding another layer of Eurozone uncertainty. In a notable policy shift, ECB President Christine Lagarde signaled that the ECB is in a “good place” and suggested an end to the tightening cycle might be near, though she did not commit to imminent rate cuts, stating growth risks are balanced. This nuanced message contrasted with the increasingly dovish stance of the Federal Reserve, creating divergent expectations for monetary policy across the Atlantic.

For the upcoming week of October 20-24, the single most important catalyst to watch is the Eurozone Flash PMI data due on Wednesday, October 23 at 11:30 Nicosia time (08:30 UTC). This report will provide the first comprehensive snapshot of economic activity in the Eurozone following the recent increase in inflation to 2.2% in September and the intensifying trade war rhetoric. A weaker-than-expected print could further fuel speculation about the ECB’s next move, potentially strengthening the case for a rate cut at its November meeting. Conversely, a stronger-than-expected number could bolster the euro and dampen gold’s appeal. Given the high degree of uncertainty surrounding this data point, it is poised to be the primary driver of market direction and volatility for the major currency pairs and related assets.

Sentiment indicators reflect this heightened uncertainty. The CNN Fear & Greed Index dropped to 33, indicating a move toward “Extreme Fear,” which typically supports safe-haven assets like gold but weighs on risk-sensitive currencies like the euro. On the technical front, sentiment appears divided. For EUR/USD, some analysts see a bullish bias above 1.1600, while others note a mild bearish bias if the price fails to hold above the 20-day moving average. For XAU/USD, despite being in overbought territory per the RSI, strong buying pressure remains, suggesting momentum could persist. In the DAX, retail traders showed a 55% bullish stance, but institutional traders held a net long position of 62%, indicating a strong consensus among large players that the current uptrend is intact.

Event Watch (Actionable Calendar)

The week of October 20-24 is packed with high-impact events, particularly from the Eurozone and the United States. These releases will likely dictate market volatility and direction. The table below outlines the top five events, their expected impact on EUR/USD, XAU/USD, and DE40, and the potential market reaction to a beat or miss scenario.

Note: All times are in GMT.

EUR/USD Deep Dive

The EUR/USD pair is navigating a precarious tightrope walk, caught between the dovish outlook of the European Central Bank (ECB) and the unexpectedly resilient U.S. economy. As of October 18-19, 2025, the pair was trading in a range around 1.1649-1.1674, with conflicting signals from different time frames. While the overall medium-term trend shows a bullish context above a zone of 1.1570-1.1536, the immediate-term picture is more cautious.

From a technical standpoint, the daily chart suggests a bullish correction is underway, having pulled back from its weekly high. However, the week saw the price fail to sustain strength above the 50-day Exponential Moving Average (EMA), indicating ongoing selling pressure. Key resistance remains firmly in place around the 1.1700 mark, with a confluence of levels forming a significant barrier. A break below the 20-day Simple Moving Average (SMA) at approximately 1.1685 has introduced a mild bearish bias. Further downside is anchored by a critical support zone between 1.1630 and 1.1660. If this zone fails, the path of least resistance turns decidedly bearish, targeting the 1.1600 handle and potentially deeper support around 1.1550-1.1525. On the upside, a decisive break above the 1.1710-1.1755 zone would signal a resumption of the broader uptrend, with initial targets at 1.1800-1.1810. A sustained move beyond this area could pave the way for tests of 1.1825 and higher resistance at 1.1964.

The fundamental narrative is heavily influenced by the divergent paths of the ECB and the U.S. Federal Reserve. ECB President Christine Lagarde’s comments have been pivotal, suggesting the ECB is in a “good place” and signaling an end to the tightening cycle may be near, though she stopped short of promising imminent rate cuts. This dovish tilt should theoretically support the euro. However, the U.S. economy continues to defy expectations of a sharp slowdown. The latest data for Initial Jobless Claims, for instance, came in better than expected, contributing to a resilient U.S. dollar. Furthermore, persistent geopolitical risks, such as threats of U.S. tariffs on Chinese goods, continue to drive safe-haven demand into the U.S. dollar, acting as a ceiling on the euro.

Key Levels for EUR/USD:

Given the mixed signals, a swing trader should focus on the outcome of the Eurozone Flash PMI release on October 23. A strong beat could trigger a long entry above the 1.1660 support zone with a stop-loss just below this level. Targets would then be the 1.1720-1.1755 resistance area and potentially the 1.1810-1.1825 zone. Conversely, a significant miss on the PMI data would suggest looking for short opportunities upon any failed rally attempts near the 1.1710-1.1755 resistance, with a stop-loss placed above it. The breakdown of the prior trend line noted by some analysts serves as a crucial invalidation level for any bullish thesis.

XAU/USD (Gold) Deep Dive

Gold is currently entrenched in a powerful, albeit volatile, bull market. After hitting an unprecedented all-time high near $4,380 earlier in the week, the precious metal faced a sharp correction, pulling back to the low-$4,200s by mid-week. Despite this pullback, the underlying trend remains strongly bullish, with prices holding well above the critical long-term support zone of $4,000–$4,080. The rally has been relentless, gaining over 4% in recent sessions and surging 56.20% year-to-date through October 2025. This surge is primarily fueled by a potent combination of macroeconomic factors, including expectations of aggressive rate cuts by the U.S. Federal Reserve, persistent geopolitical risk, a flight to safety, and robust central bank purchasing.

The intermarket relationship with the U.S. dollar and real interest rates is paramount. The recent rally in gold has occurred despite a strengthening U.S. dollar, which is highly unusual and points to the dominance of fear-driven safe-haven demand overriding traditional negative correlations. However, the threat of a hawkish surprise from the ECB, which could strengthen the euro and indirectly support the dollar, remains a key risk factor. More directly, gold’s performance is inversely correlated with real yields (nominal yields minus inflation). With the 10-year U.S. Treasury yield stabilizing near 4.35% and the Fed widely expected to begin cutting rates soon, the stage is set for declining real yields to act as a powerful tailwind for gold. Technical indicators reflect this strength; the Relative Strength Index (RSI) has remained elevated, often in overbought territory, signaling strong buying momentum that can persist even in such conditions.

Several technical frameworks support the bullish case. An Elliott Wave analysis suggests that long positions are viable above $4,055, with wave (3) of a larger-degree 5-wave structure nearing completion. Another analysis points to a Wedge reversal pattern that could precede a continuation of the uptrend towards 1.2075. The price action has also formed a clear bullish channel, with a rebound from the lower boundary signaling continued upward potential. Key support levels include the $4,240–$4,270 zone, followed by the psychologically important $4,200 level and the previously mentioned $4,000–$4,080 floor. Crucially, a break below the support near $3,865-$3,890 would invalidate the primary bullish outlook.

Key Levels for XAU/USD:

For a swing trader, the tactical opportunity lies in managing exposure during periods of volatility. A potential strategy is to wait for a confirmed bounce from the key support zone of $4,240-$4,270 and enter a long position with a stop-loss just below $4,200. Targets could be set at the next resistance areas of $4,300, $4,335, and ultimately the previous all-time high near $4,380. It is essential to monitor the Eurozone PMI data closely, as a very strong result could strengthen the dollar and put temporary pressure on gold. Conversely, a weak print could reignite the rally.

DE40 (German DAX) Deep Dive

The German DAX 40 index is at a critical inflection point, transitioning from a powerful multi-month bull run into a phase of consolidation and risk. Having reached an all-time intraday high near 24,771 on October 8, 2025, the index experienced a sharp decline, closing at 23,986.8 on October 17, down 3.38% over the preceding five days. This downward pressure culminated in a breakdown below the key 24,300 support level, which had acted as a magnet for buying since July. This breach signals a potential shift in short-term sentiment, introducing significant bearish pressure into the market.

The fundamental drivers are a mixture of positive structural factors and negative headline risks. On the positive side, the anticipated series of ECB rate cuts and falling energy prices have been major tailwinds for German equities. The German trade balance for September was a strong positive, beating forecasts at 17.2 billion EUR, providing a boost to export-oriented firms within the index. However, these positives are being overshadowed by escalating global risks. Renewed U.S.-China trade tensions, including proposed 100% tariffs on Chinese goods, have created a palpable sense of risk-off sentiment globally, directly impacting German multinational corporations like Siemens and BMW. Domestically, Fitch’s review of France’s sovereign rating adds another layer of Eurozone-wide uncertainty.

Technically, the index is facing a formidable challenge. The breakdown below 24,300 invalidates the bullish flag pattern and opens the door for a deeper correction. The next significant support zone lies in the 23,700-23,750 region, which is considered a critical line of defense for the intermediate-term uptrend. A sustained break below this level would confirm a bearish scenario, with targets extending down towards 23,400 and potentially lower. On the upside, the immediate resistance is now clustered around the 24,000-24,050 area. A successful test and bounce from this zone could re-establish a bullish bias, with the next hurdle at 24,200-24,300, a Wyckoffian Supply Zone and the completion point of a Bullish Crab harmonic pattern. A decisive break above this zone would be necessary to extinguish the current bearish momentum. The DAX has a notable 70% inverse correlation with EUR/USD, meaning a strengthening dollar could weigh on the DAX, a factor to consider alongside the direct impact of trade war fears.

Key Levels for DE40:

For a swing trader, the current environment dictates a cautious approach. The breakdown below 24,300 warrants watching for short-selling opportunities on any rallies back towards the 24,200-24,300 resistance zone. A stop-loss for such a trade would logically be placed just above 24,300. The primary target would be the critical support at 23,700-23,750. Conversely, if the index manages to hold above the 23,700 support, a long entry could be considered on a confirmed bounce, with a stop-loss below this level. The key invalidation for this bearish view would be a decisive and sustained close above the 24,300 level.

Intermarket Insight

Understanding the interconnectedness of financial markets is crucial for identifying tactical opportunities and managing risk. This week, the relationships between the U.S. Dollar Index (DXY), EUR/USD, gold (XAU/USD), and the German DAX (DE40) reveal several key dynamics. The most prominent theme is the inverse relationship between the U.S. dollar and gold, which has been tested by the recent market turmoil. Typically, a strengthening dollar puts downward pressure on gold, as they are priced in USD. However, the pervasive fear and risk-off sentiment triggered by U.S.-China trade tensions have created a scenario where safe-haven flows into gold have temporarily overwhelmed the negative correlation with the dollar. This divergence presents a tactical opportunity for a carry trade: go long gold while simultaneously going short the U.S. dollar (via DXY or USD-related pairs), hedging against broad dollar movements while capturing the specific benefit from risk aversion.

The link between the Eurozone economy and the DAX is exceptionally tight, with the index showing a 90% positive correlation with U.S. indices and a 70% inverse correlation with EUR/USD. This means a downturn in the U.S. market will almost certainly drag down the DAX, while a strengthening euro will tend to weaken the index. The upcoming Eurozone Flash PMI data is therefore a double-edged sword. A strong reading would not only support the euro but could also lift the DAX, while a weak reading would likely lead to a sell-off in both. A tactical strategy could involve taking a long position in the EUR/USD vs. DAX cross, betting that the DAX will underperform the euro if the PMI data disappoints. For example, if the PMI misses and the DAX falls sharply while the euro holds up, you would profit on both sides of the trade.

Furthermore, the DAX’s composition provides specific sector-level insights. The index’s recent performance has been heavily driven by technology giants SAP and Siemens, which account for over 20% of its year-to-date rise. Any adverse developments affecting these companies, such as the U.S. investigation into imports of machinery impacting Siemens Healthineers, represent a micro-risk that can influence the entire index. Similarly, the underperformance of auto stocks within the DAX highlights a specific vulnerability to the trade war, offering a tactical reason to short individual components like Porsche or Volkswagen if their relative weakness persists against the broader index.

Finally, the relationship between the ECB’s policy and these assets creates a complex dynamic. An unexpected hawkish turn from the ECB could strengthen the euro, weaken the DAX due to its inverse correlation, and put downward pressure on gold by boosting real yields. Conversely, dovish comments from the ECB would strengthen the case for the DAX and gold. Monitoring speeches from ECB officials alongside the ZEW economic sentiment survey (due Thursday) provides an early warning system for shifts in this delicate balance. By analyzing these intermarket connections, traders can identify hedges—for instance, buying gold to hedge against a potential dollar rally that might accompany a hawkish ECB—and exploit divergences between correlated assets for strategic trades.

Weekly Wrap & Closing Outlook

This week’s market analysis has centered on three key themes: the fragile state of the EUR/USD, the record-breaking rally in gold, and the critical juncture for the German DAX. The interplay between central bank policies, geopolitical risk, and economic data has created a volatile and uncertain environment. Looking ahead to the coming week, the outcome of the Eurozone Flash PMI release will be the single most important determinant of direction for all major instruments. A strong print could reignite the Eurozone recovery story, providing a significant boost to the euro and challenging the DAX’s bearish momentum. A weak print would likely deepen the risk-off sentiment, reinforcing the case for a stronger dollar and continued safe-haven demand for gold.

The final wrap-up of our calls from the previous week shows a mixed bag of results, underscoring the difficulty of predicting market behavior in such a turbulent landscape. The call for EUR/USD to attempt a test of resistance at 1.1825 was partially validated, as the pair did rally towards that level before pulling back. However, the failure to decisively break this barrier highlighted the underlying weakness in the euro. For gold, the forecast of a potential bearish correction was correct, as the price did indeed pull back from its all-time high, though the subsequent bounce from the $4,270 support zone suggests the bullish trend remains intact. In the DAX, the warning of downside risk following the breakdown below 24,300 was fully realized, with the index posting significant losses for the week.

The key takeaway for next week is the necessity of adaptability and strict risk management. The market is reacting to a constant stream of new information, making rigid, pre-defined setups difficult to execute successfully. The actionable takeaway is to prepare for multiple scenarios based on the Eurozone PMI data. Develop a plan for a long entry if the data beats expectations, a plan for a short entry if it misses, and a plan for waiting for clarity if the resulting volatility is too extreme to trade effectively. Do not force a trade; let the market’s reaction to the data define your next move. Always apply proper risk management—know your entry, your stop-loss, and your target before placing any order. The week ahead promises to be eventful; patience and discipline will be rewarded.

Disclaimer: This newsletter is for educational purposes only. Trade at your own risk and always apply proper risk management (position sizing, stop-losses, and discipline).