CFD Markets News and Forecasts — 11-11-2022

• The Euro finds sellers at 0.8775 and remains moving sideways.
• UK economy contracts less than expected in Q3.
• EURGBP: Still keeping the three-month forecast at 0.89 – Rabobank.

The Euro recovery attempt from Thursday’s lows at 0.8695 has been capped at 0.8775 in Friday’s early US session before retreating to 0.8740. From a wider perspective, the pair remains wavering. Between 0.8687, practically unchanged in the weekly chart

UK GDP data shows a softer-than-expected contraction in Q3

According to preliminary estimations, UK Gross Domestic Product contracted by 0.2% in the third quarter, well above the -0.5% market consensus after having grown 0.2% in the previous quarter. Year on year, the UK economy slowed down to 2.4% from 4.4%, also improving expectations of a 2.1% reading.

These figures confirm the forecasts of the Bank of England anticipating a is entering a lengthy recession ahead. The market, however, has shown a certain relief which has reflected in a moderate appreciation of the British Pound.

EURGBP: Still keeping the three-month forecast at 0.89 – Rabobank

Looking forward, analysts at Rabobank maintain a positive outlook on the pair: Over the coming weeks, we would expect GBP investors to be focused on the impact of the November 17 Autumn Statement, the ability of PM Sunak to hold the Tory party together, the outlook for UK growth/recession and BoE interest rates (…) We would expect issues surrounding the protocol only to have a clear impact on GBP as any related deadlines approach.  We are yet to be persuaded to alter our bearish view on the pound and maintain a 3-month forecast of EUR/GBP 0.89.”

Technical levels to watch

• The USDJPY is set to finish the week with losses of more than 5%.
• From a daily chart perspective, the USDJPY is neutral-to-downward biased if the major stays below the 100-day EMA.

The USDJPY extended its free fall and plummeted another 200 plus pips on Friday, below the 100-day Exponential Moving Average (EMA) at 140.76. Speculations that the Federal Reserve might slow the pace of rate hikes and US Treasury yields falling are the two main factors weighing on the US Dollar (USD). Therefore, the USDJPY is trading at 138.54, below its opening price by 1.73%.

USDJPY Price Analysis: Technical outlook

The USDJPY portrays that Thursday’s price action broke a one-month-old upslope support trendline, exacerbating a fall toward the 100-day EMA at 140.74. On Friday, the USDJPY hit a daily high at around 142.50 before diving sharply, as buyers failed to clear the September 22 swing low at 140.34, which shifted the pair’s bias from neutral to neutral downwards. The Relative Strength Index (RSI) tumbled toward the bearish territory, entering oversold conditions.

Even though the USDJPY cleared key support levels, a break of the 200-day EMA is needed so that Japanese Yen (JPY) buyers could be in charge. Otherwise, the USDJPY might be subject to buying pressure.

Therefore, the USDJPY first support would be the 138.00 figure. Break below will expose the 137.50 psychological level, followed buy a six-month-old upslope trendline that passes around 136.50, ahead of the 136.00 mark.

On the flip side, the USDJPY's first resistance would be the July 14 daily high at 139.38, followed by the psychological 140.00, ahead of the 100-day EMA.

USDJPY Key Technical Levels

• The Pound continues appreciating and reaches a 2, 1/2-month high at 1.1840.
• UK GDP contracted less than expected in Q3.
• The US Dollar remains under pressure on Fed easing hopes.

The pound has rallied for the second consecutive day against a battered US Dollar, to hit fresh two-week highs at 1.1840 so far. On the weekly chart, the pair is on track to a 4.8% rally in its best weekly performance in more than two years.

UK GDP contracts less than expected in Q3

Preliminary UK Gross Domestic Product has shown a 0.2% contraction in the third quarter, significantly above the -0.5% market consensus following a 0.2% advance in the previous quarter. Year on year, the UK economy slowed down to 2.4% from 4.4%, still better than the 2.1% reading anticipated by market analysts.

Although these figures confirm the Bank of England’s forecasts that the country is entering a lengthy recession, the market seems to have welcomed the data, which has allowed the pair to extend its sharp two-day rally.

On the other end, the US Dollar has extended its sell-off, triggered by the softer US inflation figures seen on Thursday, which has acted as a tailwind for the pair. US CPI slowed down to a 7.7% yearly rate in October, according to data from the US Bureau for Labor Statistics, well below market expectations of 8% and down from the 8.2% reading seen in September.

These data suggest that inflationary pressures may be easing, which has boosted expectations of a dovish shift by the US Federal Reserve over the coming months. This has crushed demand for the US and boosted world equity markets.

In a very thin US calendar, the Preliminary Michigan Consumer Sentiment Index anticipated a sharper-than-expected deterioration in November. Higher prices and concerns about the increasing interest rates are weighing on consumers’ confidence.

Technical levels to watch

• Silver's rally fails at $22.05 and retreats to $21,50.
• The precious metal has reached an important resistance near $22.00.
• With RSI at overbought levels, some consolidation is likely.

Silver prices’ uptrend from early November lows in the area of $19.00 have been halted on Friday at five-month highs of $22.05, before pulling back to the mid-range of $21.00. On the weekly chart, however, the pair is on track to post a nearly 5% rally.

The precious metal has reached an important resistance hurdle in the vicinity of $22.00, where the 50% Fibonacci retracement level of the April - September downtrend and the June 16, 17, and 21 highs are holding back the bulls.

Beyond that, the pair has reached overbought levels on hourly and daily charts, which suggest that some consolidation or even a moderate pullback is still consistent with the possibility of further appreciation.

On the upside, above the mentioned $22.00, the pair might target June 3 and 6 highs at $22.50 before aiming for the 61.8% retracement of the mentioned downtrend, at $23.00.

Bearish attempts are so far held above the 200-day MA, now at $21.45, with the next potential support levels at $20.95 (October 10 low) and $20.35 (November 7 low).

XAGUSD daily chart

Technical levels to watch

• The AUDUSD tests the 100-day EMA, propelled by an inverted head-and-shoulders chart pattern.
• Once the head-and-shoulders pattern is achieved, the AUUSD could extend its gains toward the 200-day EMA.

The AUDUSD is rallying sharply in the North American session and challenges the 100-day Exponential Moving Average (EMA) at 0.6701. Fundamental factors, but also an inverted head-and-shoulders chart pattern in the AUDUSD daily chart, underpinned the Australian Dollar (AUD), which is gaining 1.24%. At the time of writing, the AUDUSD is trading at 0.6701 after hitting a daily low of 0.6577.

AUDUSD Price Analysis: Technical outlook

The AUDUSD daily chart depicts the AUD clearing the inverted head-and-shoulders neckline on Thursday, November 11. It should be noted that during that day, the AUDUSD registered a daily low of 0.6412. But a softer US Consumer Price Index (CPI) report lifted the AUDUSD, which rallied almost 190 pips.

At the time of typing, the AUDUSD probes the 100-day EMA, which, once cleared, could pave the way for further gains. Traders should be aware that the Relative Strength Index (RSI) is at bullish territory. So the path of least resistance in the AUDUSD is upward biased.

The AUDUSD's first resistance would be the 100-day EMA at 0.6701. The break above will expose the 0.6800 psychological mark, followed by the inverted head-and-shoulders target at 0.6870. However, a breach of the latter will pave the way toward key resistance areas like the September 13 swing high at 0.6916 and the 200-day EMA at 0.6956.

AUDUSD Key Technical Levels

• WTI’s trim some of their weekly losses, bolstered by a weak US Dollar.
• Easing inflation in the United States undermined the US Dollar as traders brace for a less aggressive Fed.
• China’s refineries asked Saidu Aramco to reduce December’s crude-oil volumes, capping WTI’s recovery.

Western Texas Intermediate (WTI), the US crude oil benchmark, is recovering some ground during the North American session following the United States (US) inflation report that informed prices are easing. Another factor that boosted the appetite for Oil is China’s easing Covid-19 restrictions, underpinned oil prices. At the time of writing, WTI is trading at $88.29 per barrel, gaining 2.37%.

Sentiment remains positive as a cooler-than-expected US Consumer Price Index (CPI) information showed that the US economy is feeling the impact of the Federal Reserve (Fed) monetary policy. The headline inflation came at 7.7% YoY, and the core CPI fell to 6.3% YoY, both below expectations. Following the release, speculations piled up that the Fed might gradually increase the Federal Funds rate (FFR) instead of raising rates on 75 bps ones. The reflection is that odds for a Fed 50 bps rate hike in December jumped from 50% to 85%.

Therefore, the US Dollar (USD) weakened across the board, as the US Dollar Index plunged 3.76% in the week, undermined by US Treasury yields, plummeting almost 30 bps.

Aside from this, Chinese officials announced that quarantines for inbound travelers would be cut by two days to five, a sign cheered by investors.

According to Reuters, several Chinese refiners asked Saudi Aramco to reduce December-loading crude oil volumes, meaning that China’s economy is accounting for a deceleration as it’s struggling to avoid a recession.

WTI Price Analysis: Technical outlook

WTI is neutral-biased, as shown by the daily chart. It should be noted that Friday’s daily high at $90.08 tested a one-month-old downslope trendline drawn from September highs. However, WTI was quickly rejected and retreated above November’s 10 daily high at $87.31. The Relative Strength Index (RSI) in bullish territory suggests Oil prices could increase. However, WTI needs to clear the $90.00 mark, alongside the 100-day Exponential Moving Average (EMA) at $91.07, to turn the bias neutral to upwards.

• The Kiwi rallies to fresh two-month highs past 0.6100.
• Hopes of a softer Fed tightening pace are crushing US Dollar demand.
• NZDUSD to consolidate over the next days/weeks – ANZ.

The New Zealand Dollar is going through a sharp two-day rally, boosted by a positive market sentiment on Friday. The pair has surged about 3.8% in the last two days to reach prices right above 0.6100 at the moment of writing.

Broad-based Dollar weakness has sent the NZD surging

The positive market sentiment following the release of US inflation data on Thursday has hammered the US dollar, boosting demand for the sentiment-linked Kiwi.

US Consumer inflation eased beyond expectations in October, with yearly inflation down to 7.7% from 8.2% in September. These data suggest that price pressures may have started to ebb which has spurred expectations of a ‘dovish pivot’ by the Federal Reserve.

Furthermore, news that Chinese authorities have decided to ease COVID-19 restrictions has buoyed market sentiment further, acting as a tailwind for the NZD, as New Zealand is one of China’s main trade partners.

In the economic calendar, the US Preliminary Michigan Consumer Sentiment Index anticipated a sharper-than-expected deterioration in November. Higher prices and concerns about the increasing interest rates are weighing on consumers’ confidence.

NZDUSD: Consolidation for the next days/weeks – ANZ

Looking forward, analysts at ANZ expect the pair to consolidate gains over the next days or weeks: “The US Dollar slumped sharply lower after the release of much softer than expected US CPI data (…) However, we’re not out of the woods yet, and US markets are still pricing in cuts from June, and if these get priced out, that could slow the USD’s adjustment (…) Local interest rates will also fall today, and that might slow further NZD progress a touch, and leave markets in more of a consolidatory mood for the next few days/weeks.”

Technical levels to watch

• The dollar dives to fresh six-week lows at 1.3255.
• The CAD extends gains on higher oil prices and risk appetite.
• US consumer sentiment deteriorated beyond expectations in November.

The US Dollar has extended losses against its Canadian counterpart on Friday, reaching a fresh six-week low at 1.3255. The pair remains on the defensive after having depreciated nearly 2% over the last two days with upside attempts capped below 1.3300 so far.

The Canadian Dollar rises on risk appetite and higher oil prices

Oil prices appreciated nearly 3% on Friday, with the US benchmark WTI oil struggling to return above the $88.00 mark after bouncing off at $84.00 on Thursday. This has underpinned the Loonie's advance, as Canada is one of the world’s major crude producers.

On Thursday, the softer-than-expected US inflation data, with the yearly CPI easing to 7.7% in October from 8.2% in September, hammered the Greenback across the board. These figures have added to evidence that price pressures are starting to ease, which has prompted investors to anticipate a Federal Reserve shift towards slower rate hikes.

US Inflation data has boosted appetite for risk, sending US Treasury bonds and the greenback. The USD Index, which measures the value of the Dollar against a basket of currencies has plummeted 3.3% over the last two days to hit levels sub-107.00 for the first time since mid-August.

In a very thin macroeconomic calendar, with the US celebrating Veteran’s Day, the Preliminary Michigan Consumer Sentiment index has deteriorated beyond expectations, weighed by concerns about inflation and higher interest rates.

Technical levels to watch

• The GBP extended its gains towards 1.1790s after a soft US inflation report.
• The US Dollar plunges sharply, as shown by the US Dollar Index, down 1.20%, below the 107.000 mark.
• Consumer sentiment in the United States worsened as inflation expectations rose.

The Pound Sterling rises in the North American session, following a softer inflation report in the United States, which augmented speculations that the Federal Reserve might lift rates at a slower pace. Also, China’s Covid-19 restrictions were relaxed, a sign that could bolster the world’s second-largest economy. At the time of writing, the GBPUSD is trading at 1.1795., above its opening price by 0.65%.

Wall Street’s cling to Thursday gains, a reflection of an upbeat sentiment. The University of Michigan’s (UoM) Consumer Sentiment for November fell to a four-month low, from 59.5 to 54.7, while inflation expectations rose. Americans expected inflation in one-year would rise to 5.1%, and for five to 10 years, consumers foresee inflation peaking at 3%. Joanne Hsu, director of the survey, said, “Continued uncertainty over inflation expectations suggests that such entrenchment in the future is still possible.”

Aside from this, the latest US Consumer Price Index (CPI) report is still weighing on the US Dollar (USD), as headline CPI and core CPI for October fell below expectations. Therefore, speculations that the Federal Reserve would lift rates in smaller sizes increased. Reflection of that is the Fed CMEWatchTool showing traders expecting the Fed to hike rates by 50 bps in its December meeting, as chances lie at 85.4%, unchanged from Thursday.

Elsewhere, a slew of Federal Reserve officials commented that it was “appropriate” to slow the pace of interest-rate hikes. Nevertheless, most of them commented that the Fed is still tightening monetary policy, as the Dallas Fed President Lorie Logan said that “a slower pace should not be taken to represent easier policy.”

In the meantime, the US Dollar Index, a gauge of the buck’s value against a basket of peers, plunges more than 1%, below the 107.000 mark, for the first time since August 18, a tailwind for the GBPUSD.

Aside from this, on the UK front, the Gross Domestic Product (GDP) for Q3 shrank more than foreseen in September, indicating the beginning of a prolonged projected recession by the Bank of England (BoE). UK GDP fell 0.6% between August and September, more than the 0.4% contraction estimates by analysts.

The latest data would provide a rugged backdrop to the newest Chancellor, Jeremy Hunt, who is expected to tighten fiscal policy as the UK battles 40-year high inflationary pressures. Rishi Sunak’s budget is considering tax rises and cutting public spending up to GBP 55 Billion a year.

Of late, crossing newswires, the US Treasury Secretary and former Federal Reserve Chair Janet Yellen said October’s inflation reading was positive. Still, she cautioned that core CPI was lower, but shelter prices remain high.

GBPUSD Key Technical Levels

Analysts at the Research Department at BBVA explained that Industrial Production in Türkiye grew by just 0.4% in September below the 3% expected. They forecast a GDP growth rate at near 5.5% during 2022. 

Key Quotes: 

“In seasonal and calendar adjusted series, IP declined in September (-1.6% m/m) on the back of a broad-based deterioration in subcomponents. The slowdown in industrial activity was more pronounced in quarterly terms with IP contracting by 4.1% in 3Q (vs. 0.8% in 2Q), led by the intermediate goods production contributing 2.2pp to the decline. This was followed by consumer goods (mainly non-durables), capital and energy goods, respectively.”

“According to our nowcasts, GDP growth has started to decelerate more clearly as of 3Q and the slow-down has started to become much faster than expected with 4Q early indicators. The political priority to maintain pro-growth policies at all costs leads us to expect more countercyclical fiscal measures ahead of the elections in addition to the continuation of ultra-loose monetary policy. Therefore, we expect 2022 GDP growth to reach near 5.5%, which would be followed by a strong pace in the first half of the year with around 5%.”
 

• US dollar extends losses on Friday, even as stocks decline.
• Japanese yen is among the best performers of the day and the week.  
• USDJPY heads for a weekly loss of near 900 pips.

The USDJPY is testing levels under 139.00 during Friday’s American session, holding onto significant weekly losses. During the last two days, the pair dropped more than 700 pips.

The October US CPI triggered sharp market moves that favored the yen. On Friday, the USDJPY rose to 142.40/50 only to turn to the downside again breaking under 140.00.

Terrible week for USD, outlook still negative

The collapse of the Dollar and lower US yields sent the USDJPY down during the week from 147.15 to levels under 139.00, falling almost 6% on the worst week in years. The pair is back at August levels and clearly below the 20-week Simple Moving Average for the first time since January 2021.

The DXY is extending weekly losses late on Friday as it drops 1.12%, to 106.70, the lowest since mid-August. Not even a decline in equity prices, nor a bad reading in US Consumer Sentiment is helping the Dollar.

Next week, attention will continue to be on the USD’s trend. Economic data in the US includes the Producer Price Index on Tuesday and Retail Sales on Wednesday. In Japan, the National CPI will be released Friday with an increase expected from 3.0% to 3.7%. “In a sign that inflation is becoming more broad-based, core ex-energy is expected at 2.4% y/y vs. 1.8% in September.  Yet the BOJ shows no signs of pivoting under Governor Kuroda.  The next policy meeting is December 19-20 and no change is expected then”, said analysts at Brown Brothers Harriman.

Technical levels

• The Euro rallies further and hits fresh three-month highs above 1.0300.
• Hopes of softer Fed rate hikes have hammered the Dollar.
• EUR/USD might reach 1.05 but it is seen at 0.97 in three months – Nordea.

The Euro remains strongly bid for the second consecutive day against a weak US dollar. The pair has breached the 1.0300 level to reach fresh three-month highs and approach August’s peak at 1.0365.

Soft US inflation figures have sent the Dollar plunging

The common currency has rallied beyond 3% over the last two days, with the US dollar hammered by a softer-than-expected US inflation report released on Thursday, and is on track to close its best weekly performance in more than two years.

Consumer prices accelerated at a 7.7% yearly pace in October, down from the 8.2% increase posted in September and well below the 8% reading forecasted by the market. These figures suggest that inflationary pressures are starting to ease, which clears the way for the US Federal Reserve to lift its feet off the rate hike accelerator over the next month.

Hopes of some Fed easing have boosted risk appetite, which has favored equity markets, triggering sharp declines in the US Dollar and US Treasury bonds.

Beyond that, news reporting that the Chinese authorities have decided to relax their strict COVID-19 restrictions and shorten quarantine periods have eased fears about a new set of lockdowns next winter and boosted market sentiment further.

EURUSD might reach 1.05 but it is seen at 0.97 in three months – Nordea

Analysts at Nordea Bank, however, are skeptical about the sustainability of the current Euro uptrend: While EURUSD could rise until the start of December, we still see a lower EURUSD at 0.97 in three months (…) The Fed's fight against inflation is still not yet over given the high wage growth and tightness in the labor market (…) The interest differentials between EUR and USD are likely to move in favor of a lower EURUSD.

Technical levels to watch 

On Thursday, the Bank of Mexico rose the key interest rate by 75 basis points as expected to 10%. According to the Research Department at BBVA, Banxico will likely still match December’s Federal Reserve interest rate hike but they point out that a decouple in February seems now possible.

Key Quotes: 

“Banxico acknowledged for the first time, when explaining what it took into account for today’s decision, the “policy stance that has already been reached in this hiking cycle. Also hinting at a near end of the tightening cycle, Mr Gerardo Esquivel
voted for a smaller 50bp rate hike.”

“We continue to think that Banxico will still stick to its strategy of matching December’s Fed most likely hike of 50bp. Yet, we now think that today’s acknowledgement of “the policy stance that has already been reached” with inflation set to soften ahead and the monetary stance becoming more restrictive by the first meeting of next year (in Feb) opens the door for a decoupling for the Fed as soon as in Feb.”

Bank of England (BOE) policymaker Jonathan Haskel said on Friday that it's important for the monetary policy to stand firm against the risk of persistent inflationary pressure, as reported by Reuters.

Additional takeaways

"Concern for me is the risk that if price rises become embedded, monetary policy would have to be tighter for longer."

"Latest signs of activity suggest the UK is already slowing down."

"Signs of slowdown do not imply less tightening given strength of labour market, rise in inactivity."

"Supply-side stresses risk persistent inflationary pressure."

Market reaction

GBPUSD showed no immediate reaction to these comments and was last seen rising 0.6% on the day at 1.1780.

The stars do seem to be aligning for a more sustained rebound in the oversold EUR in the next few weeks at least. Economists at Scotiabank list five factors that are set to underpin the shared currency.

Euro helped by unhedged equity inflow

“Purchases of FX unhedged European equity ETFs are outpacing hedged ETFs which may help underpin EUR gains in the near-term.”

“Nominal and real yield spreads have narrowed in the past few weeks – whilst admittedly remaining very negative for the EUR.”

“Positioning and sentiment data have turned more supportive of the EUR; the latest CFTC data showed speculative accounts holding a net long of some 106k contracts, the biggest bullish bet on the EUR since mid-2021.”

“Technical factors suggest that – finally – the EUR is showing some significant, positive traction on the charts; major bear trend resistance off the early 2022 high has been clearly broken and EURUSD is within fractions of breaking the pattern of successively lower lows and lower highs that has persisted since February. Longer-term charts also indicate that the EUR slide has stalled (at least) while a high close on the month (Nov) will form the third leg of a bullish ‘morning star’ monthly reversal.”

“Dec is historically the strongest month of the year for the EUR (average return of +1.29% over the past 25 years, 1.25% over 20 years, 0.48% over the past 10 years and 1.14% over the past 5 years).” 

Gold has reached its highest level since August above $1,760. Next resistance is seen at $1,780, then the $1,800 figure, FXStreet’s Eren Sengezer reports.

$1,720 aligns as significant support

“$1,760 aligns as interim resistance and in case this level is confirmed as support, XAUUSD could target $1,780 (Fibonacci 38.2% retracement) and $1,800 (200-day SMA, psychological level).”

“On the downside, $1,720 (100-day SMA, Fibonacci 23.6% retracement) aligns as significant support. Only a daily close below that level could be seen as a significant bearish development and open the door for further losses toward $1,700 (psychological level) and $1,675 (50-day SMA).”

• The Aussie consolidates at six-week highs near 0.6700.
• Investors are pricing in a softer Fed monetary tightening ahead.
• China's decision to ease COVID-19 restrictions has contributed to improving sentiment.

The Australian Dollar keeps rallying for the second consecutive day, buoyed by a weak US dollar on the back of increasing hopes that the US Federal Reserve will start to relax its monetary tightening path over the coming months as well as easing COVID-19 restirctions in key trading neighbour China.

On Friday, the pair appreciates about 0.8%, and is nearly 4% higher over the last two days, after having hit a fresh six-week high at 0.6690, with bearish attempts capped above 0.6650 so far.

Hopes of Fed easing have boosted market sentiment

Investors’ appetite for risk surged on Thursday following the release of cooler-than-expected US Consumer Prices Index data. Yearly inflation slowed down to 7.7% in October from 8.2% in the previous month, beating expectations of an 8% reading.

These figures suggest that inflationary pressures might have peaked and provided some leeway to the US central bank to ease its monetary tightening cycle over the next months.

The US Dollar and Treasury yields tanked in the data, sending equities and risk-sensitive currencies like the AUD skyrocketing over the last sessions.

Beyond that, news that China is relaxing some of its strict COVID-19 restrictions and cutting quarantine periods has eased concerns about the potential impact on the global economy of a new set of lockdowns which has boosted investor sentiment further. As a result of the news the price of Iron Ore, a key export of Australia to China has rallied substantially overnight and its correlation to AUD will help boost the currency.  

The economic calendar is rather thin today with the US celebrating Veterans Day. The only relevant indicator is the Preliminary Michigan Sentiment Index, which has eased beyond expectations, to 54.7 from 59.9 in October while the consensus anticipated a softer decline to 59.5.

Technical levels to watch

It is nearly two full days after the mid-term elections in the US and while we still do not know the outcome, markets may know enough to forecast its impact, strategists at Morgan Stanley report.

Republicans controlling at least one chamber of Congress is enough to yield a divided government

“It may take several days, maybe weeks to determine which party will control the Senate. But knowing which party controls the Senate won't matter much if Republicans gain a majority in the House of Representatives, as they appear likely to do as of this recording. That's because Republicans controlling at least one chamber of Congress is enough to yield a divided government, meaning that the party in control of the White House is not also in control of Congress and so can't unilaterally choose its legislative path.”

“For bond markets, this is a mostly friendly outcome. It takes off the table the scenario that could have led to fiscal policy from Congress that would cut against the Fed's inflation goals. That outcome might have suggested inflation was less a political and electoral concern than previously thought, and through a broader Senate majority, given Democrats more room to legislate.”

• Consumer confidence in the US deteriorated in early November.
• US Dollar Index stays deep in negative territory below 107.00.

Consumer sentiment in the US weakened in early November with the University of Michigan's (UoM) Consumer Confidence Index falling to 54.7 (flash) from 59.9 in October. This reading came in below the market expectation of 59.5.

"Inflation expectations are little changed. The median expected year-ahead inflation rate was 5.1%, up from 5.0% last month," the publication further read. "Long run inflation expectations, currently at 3.0%, have remained in the narrow (albeit elevated) 2.9-3.1% range for 15 of the last 16 months."

Market reaction

This report failed to trigger a significant market reaction and the US Dollar Index was last seen losing 1% on the day at 106.88.

Dollar bulls have been shaken. However, Kit Juckes, Chief Global FX Strategist at Société Générale, warrants caution before confirming the turn of the Dollar.

More twists and turns before Euro’s clear uptrend towards 1.12 emerges

“We are confident that the Dollar will be significantly weaker in six months’ time, but we remain wary in the coming weeks. There are still traps for over-enthusiastic bears.”

“In Europe, we’re confident that we have seen the low in GBPUSD, but not 100% sure we’ve seen the low in EURUSD. After all, the Russian elephant is still loitering in the corner of the room. EURUSD has broken out of its downtrend, but there will be a few more twists and turns before a clear uptrend towards 1.12 emerges.”

“Where we are more confident is in Asia/Pacific; the yen has continued to track 10-year Treasury yields and if they have peaked, so has USDJPY.”

• SNB Chairman says monetary policy not sufficiently restrictive enough.
• The Swiss Franc soars across the board, EURCHF falls hundred pips in minutes.
• USDCHF drops to its lowest in three months under 0.9500.

The USDCHF fell sharply to 0.9450, reaching the lowest level since mid-August following comments from the chair of the SNB Thomas Jordan. The Swiss Franc became the top performer of the American session with the EURCHF falling a hundred pips to 0.9743, the lowest in a month.

Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, said on Friday the central bank is reading to take all necessary measures to bring inflation back into the range of price stability. He mentioned they have to take action and mentioned monetary policy is not sufficiently restrictive enough.

Jordan’s comments boosted the Swiss Franc. The USDCHF was already lower on the back of the broad-based slide of the US Dollar and tumbled to 0.9450 on his comments. It then rebounded back toward 0.9500.

The pair is about to post a weekly loss of more than 450 pips, extending the reversal after making a double top at 1.0150.  The Dollar is suffering the worst weekly performance in months amid expectations of a less aggressive Federal Reserve ahead.

Data release on Thursday showed inflation cooled in the US in October. On Friday, the University of Michigan presented the November Consumer Sentiment report: the Sentiment Index declined from 59.9 to 54.7 while 5-year Inflation expectations rose from 2.9% to 3%.

Technical levels

The US October inflation figures came out below expectations. Nonetheless, economists at Danske Bank believe that price pressures are still set to persist.

Inflation risks are not over yet

“While markets have reacted very positively to the October CPI print, we continue to see further risks of more persistent inflation and think it is too early to trade a clear Fed pivot.”  

“Still elevated underlying price growth, tight labour markets, inflationary market reaction and China reopening risks all favour remaining cautious on inflation.” 

“The figures challenge our hawkish call for a 75 bps hike in December, but Fed’s focus remains on terminal rate level and maintaining financial conditions restrictive. Slower hiking pace could extend the cycle further into 2023.”

• Gold prices marched firmly following the release of a soft United States Consumer Price Index in October.
• The US Dollar extends its weekly losses, down 3.31%.
• Federal Reserve policymakers agreed to slow down the pace of rate hikes and clarified they’re not easing policy.

Gold price advances steadily in the North American session, clinging to its Thursday gains. Factors like a  softer US Consumer Price Index (CPI) report, and China’s relaxing some Covid-19 restrictions, were cheered by investors, as shown by US equity futures trading in the green. At the time of writing, the XAUUSD is trading at $1761, above its opening price, after hitting a daily low of $1747.

Gold gains as speculations for a less aggressive Fed, augmented

US equities are set for a higher open, as shown by the futures market. The crypto turmoil keeps the Nasdaq pressured, as FTX began the chapter 11 process, but an optimistic US inflation report augmented speculations for a less aggressive Federal Reserve (Fed). The October US inflation report showed that headline and core CPI’s, albeit above the Fed’s target, eased compared with the last month’s figures. US CPI rose by 7.7% YoY, below estimates of 7.9% and core CPI, which excludes volatile items and was bucking the CPI downtrend, fell to 6.3% YoY, below the 6.5% expected.

Gold’s reacted positively to the report and finished Thursday’s session at $1757, for a 2.86% gain. Contrarily, US Treasury bond yields plunged, with the US 10-year Treasury yield dropping 28 bps, closing at 3.829%. Of note, the US bond market will be closed on Friday in observance of the Veteran’s Day Holiday.

Following the data release, a slew of Federal Reserve officials commented that it was “appropriate” to slow the pace of interest-rate hikes. Nevertheless, most of them commented that the Fed is still tightening monetary policy, as the Dallas Fed President Lorie Logan said that “a slower pace should not be taken to represent easier policy.”

Meanwhile, the CME FedWatch Tool shows investors expect the Fed to lift rates by 50 bps in its December meeting, as chances lie at 85.4%, unchanged from Thursday.

Of late, crossing newswires, the US Treasury Secretary and former Federal Reserve Chair Janet Yellen said October’s inflation reading was positive. Still, she cautioned that core CPI was lower, but shelter prices remain high.

Ahead in the US calendar, the University of Michigan (UoM) Consumer Sentiment will be informed at 15:00 GMT, with expectations lying at 59.5, and inflation expectations will be updated.

Gold Price Analysis: Technical outlook

The XAUUSD is testing the August 25 daily high at $1765.48. After hitting a daily high of $1766.62, the yellow metal slid below the latter, and Gold remains above Thursday’s $1757.26 high. Of note, the Relative Strength Index (RSI), at bullish territory, suggests further upside ahead. However, as traders are bracing for the weekend, XAUUSD might consolidate in the $1757-$1766 range.

XAUUSD’s first resistance level would be $1765.48. Break above will expose the $1800 figure, followed by the 200-day Exponential Moving Average (EMA). On the downside, the XAUUSD’s first support would be Thursday’s high at $1757.26, followed by the $1750 psychological level and the August 22 swing low at $1727.80.

EURUSD has risen sharply. The pair could rise even more until the beginning of December, however, economists at Nordea expect EURUSD to fall to 0.97 in three months.

The Fed will keep rates higher for longer than what markets expect

“In the very short-term, until the start of December, the USD could weaken more with EURUSD rising to 1.05. The USD does usually weaken during times of risk-on as we could see in the weeks to come.”

“While EURUSD could rise until the start of December, we still see a lower EURUSD at 0.97 in three months.” 

“The Fed's fight against inflation is still not yet over given the high wage growth and tightness in the labour market. The Fed could need to hike rates more next year than we and markets currently expect. The interest differentials between EUR and USD are likely to move in favour of a lower EURUSD. Moreover, higher rates also imply that risk-off could re-enter the arena in the next three months, leading to a lower EURUSD.”

In the short-term, economists at Wells Fargo expect a range bound Mexican Peso, while MXN can gradually strengthen over the second half of 2023 into early 2024.

USDMXN to hover between the 19.50-19.75 range into mid-2023

“Going forward, we expect the dynamic of attractive carry and stable local politics to continue, and for the Peso's recent stability to persist for the time being.”

“Through the end of this year and into mid-2023, we believe the USDMXN exchange rate can hover between the 19.50-19.75 range.”

“Over the second half of 2023 and into early 2024, we believe the USDMXN exchange rate can gradually move toward 19.00.” 

EURUSD has surged higher. Economists at Credit Suisse look for further strength to resistance at 1.0350/90, which is set to cap at first, albeit with next resistance at 1.0440.

1.0097/95 support to keep the immediate risk higher

“With weekly MACD momentum having already crossed higher a while ago we stay bullish for a test of the key price pivot from May/August and trend resistance at 1.0350/95. With the 200-day not far above at 1.0440, we would look for a major barrier here. Should strength directly extend though we believe this would clear the way for a test of resistance at the 38.2% retracement of the entire 2021 -2022 fall at 1.0612/15. 

“Support is seen at 1.0197 initially, then 1.0034 with 1.0097/95 now ideally holding to keep the immediate risk higher. Below can see a setback to the 13-day exponential average, now at 1.0014, with fresh buyers expected here.”

• The index melts below the 107.00 barrier, fresh 3-month lows.
• The appetite for the riskier assets remains on the rise on Friday.
• US Flash Michigan Consumer Sentiment comes next in the docket.

The selling pressure gathers further steam and drags the dollar to new 3-month lows in the 106.70 region when gauged by the USD Index (DXY) at the end of the week.

USD Index melts, as risk-on trade surges

The sentiment around the dollar continues to deteriorate on Friday, forcing the index to slip back to levels last traded in mid-August near 106.70. The DXY has already lost nearly 4% since Thursday’s tops near the 111.00 neighbourhood to the current area of multi-week lows.

The increasing appetite for the risk complex keeps propping up the intense selling bias in the dollar in line with rising speculation that the Federal Reserve could slow the pace of its future interest rate hikes. A decision on the latter could very well be on the table at the FOMC’s event in December.

In the data space, the only release of note will be the preliminary Michigan Consumer Sentiment for the month of November.

What to look for around USD

The index extends the sharp decline in the aftermath of US inflation figures and against the backdrop of a firmer sentiment in the risk-linked galaxy.

In the meantime, investors’ repricing of a probable pivot in the Fed’s policy now emerges as a fresh and quite reliable source of weakness for the dollar, in line with a corrective decline in US yields across the curve.

Key events in the US this week: Preliminary Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: US midterm elections. Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is retreating 1.06% at 106.78 and the breakdown of 104.78 (200-day SMA) would open the door to 104.63 (monthly low August 10) and finally 103.67 (weekly low June 27). On the other hand, the next up barrier aligns at 109.06 (100-day SMA) seconded by 110.99 (55-day SMA) and then 113.14 (monthly high November 3).

Softer US inflation offered markets some long-awaited relief, sending the Norwegian krone and the Swish krona up. Economists at Nordea believe that the Scandinavian currencies could remain resilient until December.

EURNOK and EURSEK will likely rise in the next 3M, to 10.60 and 10.90 respectively

“If our expectation for a continuation of risk-on until December materialises, that would be good news for the NOK and SEK, which are both extremely sensitive to sentiment.”

“EURNOK could come around 10.00 and we could see USDNOK around 0.95 in the next few weeks. However, we don’t expect this situation to last for a long time.”

“The Fed could stop the rally with a hawkish message in December as good market developments are not in favour of reducing inflationary pressures, the Fed wants tighter financial conditions (stocks down; credit spreads, rates and USD up). This is why we see EURNOK at 10.60 (USDNOK around 10.90) and EURSEK at 10.90 (USDSEK around 11.25) in three months’ time.”

USDJPY plunges lower and is now trading below 140.00. Economists at BBH expect the pair to test the August 23 low near 135.80.

Japan reported October PPI

“USDJPY broke below its September 22 low near 140.35 and sets up a test of the August 23 low near 135.80.”

“October PP came in at 9.1% YoY vs. 8.8% expected and a revised 10.2% (was 9.7%) in September. That revised September reading was the highest in 42 years.  It’s tempting to say PPI has peaked but if the drop is sustained, that bodes well for CPI in the coming months.”

• AUDUSD builds on the post-US CPI rally and climbs to its highest level since September 21.
• A slightly overbought RSI on hourly charts could hold back bulls from placing aggressive bets.
• A sustained break below the mid-0.6500s horizontal support will negate the positive outlook.

The AUDUSD pair builds on the overnight softer US CPI-inspired blowout rally and gains traction for the second successive day on Friday. The pair sticks to its intraday gains through the early North American session and is currently placed near the 0.6670-0.6680 region, or the highest level since September 21.

Firming expectations that the Federal Reserve will slow the pace of its policy tightening amid signs of easing inflationary pressures drags the US Dollar to a two-and-half-month low. Adding to this, the risk-on mood is seen as another factor undermining the safe-haven buck and further benefiting the risk-sensitive Aussie. This, in turn, acts as a tailwind for the AUDUSD pair and remains supportive of the intraday positive move.

From a technical perspective, a slightly overbought RSI (14) on hourly charts suggests that any further gains are likely to remain capped near the 100-day SMA, currently around the 0.6700 round figure. This is followed by the 0.6740 barrier, representing the top end of a descending channel extending from May 2022, which should act as a pivotal point for the AUDUSD pair. A convincing breakthrough will be seen as a fresh trigger for bulls.

Spot prices might then accelerate the momentum towards reclaiming the 0.6800 round-figure mark, above which the AUDUSD pair could test the next relevant hurdle near the 0.6850-0.6855 supply zone.

On the flip side, the 0.6640-0.6635 region now seems to protect the immediate downside ahead of the 0.6600 round figure and the daily low, around the 0.6580-0.6575 area. Any further pullback is likely to attract fresh buying and remain limited near the 0.6545-0.6540 horizontal resistance breakpoint. That said, some follow-through selling will negate the near-term positive outlook and prompt some technical selling around the AUDUSD pair.

The next relevant support to the downside is pegged near the 0.6500 psychological mark, below which spot prices would turn vulnerable to test the 0.6440 support zone. The AUDUSD pair could eventually slide back to the 0.6400 mark. Some follow-through selling below the weekly low, around the 0.6385 region, will shift bias in favour of bearish traders.

AUDUSD daily chart

Key levels to watch

Bank of England (BOE) policymaker Silvana Tenreyro explained on Friday that her main rationale for a further tightening of the monetary policy last week was risk management, as reported by Reuters.

Key takeaways

"Too early to judge whether the labour market will loosen as forecast by the BOE."

"I expect this risk management rationale to be weaker in future months."

"I would expect that bank rate held at 3% over 2023 would reduce output further below potential."

"Policy would have to loosen, perhaps in 2024, to try to prevent inflation falling below target."

Market reaction

GBPUSD preserves its bullish momentum following these comments and was last seen rising 0.55% on the day at 1.1780.

Gold price climbed to $1,760 after the US inflation data sparked another surge in precious metals prices. Today’s Commodity Futures Trading Commission (CFTC) data could curb the rally if short positions were reduced, economists at Commerzbank report.

XAUUSD has considerable upside potential once the Fed rate hikes come to an end

“US consumer prices rose much less sharply than expected in October, thereby dampening Fed rate hike expectations, putting pressure on the US Dollar and causing US bond yields to fall noticeably.”

“Yesterday’s price response shows once again that the gold price has considerable upside potential once the Fed rate hikes come to an end.”

“Today’s CFTC data are likely to reveal whether the surge in the gold price was attributable to speculative short covering. If short positions were indeed reduced substantially in the last reporting week, one key price-driving factor would fall away in future. If so, the upswing could run out of steam.”

GBPUSD edges higher and is currently trading around the mid-1.1700s. Economists at BBH expect Cable to test the August 26 high near 1.19.

Monthly UK data dump began

“Cable broke above its September 13 high near 1.1740 and sets up a test of the August 26 high near 1.19.”

“Q3 growth came in at -0.2% QoQ vs. -0.5% expected and 0.2% in Q2, which translated into a YoY rate of 2.4% vs. 2.1% expected and 4.4% in Q2. This is just the beginning, as the BoE has warned that the recession had already started and would likely last two years. Of note, strong government spending, GFCF, and net exports all boosted the overall number and those components are likely to be large drags in Q4 and beyond.”

• USDJPY dives to its lowest level since late August amid sustained USD selling bias.
• Oversold conditions help bulls to defend the 61.8% Fibo. level support amid risk-on.
• The technical setup supports prospects for an extension of the recent sharp downfall. 

The USDJPY pair attracts fresh selling following an intraday uptick to the 146.50 area and dives to its lowest level since late August during the mid-European session. The pair, however, recovers a few pips from the daily low and is currently placed just below mid-139.00s.

The post-US CPI US Dollar (USD) selling pressure remains unabated on the last day of the week amid bets for smaller rate hikes by the Federal Reserve. Furthermore, the narrowing US-Japan rate differential boosts the Japanese Yen and exerts additional downward pressure on the USDJPY pair. That said, the risk-on mood undermines the safe-haven JPY and offers some support to the major.

From a technical perspective, a sustained break below the 140.75 confluence support is seen as a fresh trigger for bearish traders. The said area breakpoint comprises the 100-day SMA and the 50% Fibonacci retracement level of the strong rally from the August monthly low to a 32-year high touched in October. This, in turn, should now act as a pivotal point for the USDJPY pair.

The sharp intraday downfall, meanwhile, stalls near 61.8% Fibo. level amid extremely oversold conditions on intraday charts. Furthermore, the RSI (14) on the daily chart has moved on the verge of breaking below the 30 mark. This is holding back bearish traders from placing fresh bets around the USDJPY pair. Nevertheless, the setup still supports prospects for additional losses.

Hence, any recovery back above the 140.00 psychological mark could be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 140.75 confluence support breakpoint. That said, some follow-through buying beyond the 141.00 round figure could trigger a short-covering rally towards the 142.00 mark en route to the daily peak, around mid-142.00s.

On the flip side, the 138.75 region, or 61.8% Fibo. level might continue to protect the immediate downside. A convincing breakthrough will set the stage for an extension of the recent sharp pullback from the vicinity of the 152.00 mark. The USDJPY pair might then accelerate the fall towards the 138.00 mark and eventually drop to the 137.50 horizontal support.

USDJPY daily chart

Key levels to watch

EURUSD accelerates the upside to the boundaries of 1.0300. Economists at BBH expect the pair to test the August 10 high near 1.0370.

European Union updated its macro forecasts

“EURUSD broke above its September 12 high near 1.02 and sets up a test of the August 10 high near 1.0370.”

“Eurozone growth is seen at 3.2% this year but slowing sharply to 0.3% next year vs. 1.4% previously. Growth is expected to recover to 1.5% in 2024. Inflation is seen at 8.5% this year, up nearly a percentage point from the previous forecast. Inflation is expected to slow to 6.1% next year vs. 4.0% previously, and then to 2.6% in 2024.”

• EURUSD accelerates the upside to the boundaries of 1.0300.
• The August top at 1.0368 emerges as the next target.

EURUSD adds to Thursday’s strong advance and flirts with the key barrier at the 1.0300 neighbourhood at the end of the week.

The continuation of the recovery looks the most likely scenario in the very near term. Against that, further upside could motivate the pair to challenge the August high at 1.0368 (August 10) ahead of the always relevant 200-day SMA, today at 1.0437.

In the longer run, the pair’s bearish view should remain unaltered while below the latter.

EURUSD daily chart

• DXY’s decline gathers extra pace and tests 3-month lows.
• Next support of note now emerges at the key 200-day SMA.

DXY extends the post-CPI sell-off to the vicinity of the 107.00 region, or fresh multi-week lows.

Considering the recent price action, the dollar looks poised to extend the current bearish tone in the short-term horizon. That said, the next target of relevance is now seen at the critical 200-day SMA, today at 104.78.

While above the latter, the index is expected to maintain its constructive stance.

DXY daily chart

Economists at the Bank of America Global Research analyze how the balance of payments dynamics will impact a basket of currencies next year. In their view, the likes of the Euro, the British Pound and the New Zealand Dollar are the most vulnerable to these dynamics. 

Balance of payments dynamics will be supportive for AUD and NOK

“In recent reports, we have discussed the potential areas of concern, which we think will be an important theme for FX. One key area, which we will be focusing on is the balance of payments dynamics.” 

“The impact of rising energy costs and the relative speed of central bank policy normalization has affected both sides of the balance of payments ledger. We looked at how this may impact the G10 FX landscape over the coming year and conclude that balance of payments dynamics will be a headwind for the likes of EUR, NZD and GBP, whilst supportive for AUD and NOK.”

• EURJPY adds to the weekly leg lower and breaks below 143.00.
• Next on the downside now comes the October lows near 140.90.

EURJPY accelerates its decline and breaches the key support at 143.00 the figure so far on Friday.

The cross seems to have embarked on a corrective phase and the continuation of this stance could now extend to the October low near 140.90, an area coincident with the 3-month support line (off the August low).

In the longer run, while above the key 200-day SMA at 138.08, the constructive outlook is expected to remain unchanged.

EURJPY daily chart

Precious metals prices have recovered of late. But Silver could suffer a setback if the Silver Institute factors the high ETF outflows into its forecasts, strategists at Commerzbank report.

Risk of setback on Silver market

“Next week could see the Silver Institute spark gloomier sentiment again. For one thing, it will probably not be quite as optimistic about global physical Silver demand as it was back in the spring. Accordingly, the supply gap will presumably no longer be quite as high. And for another thing, Silver ETFs have been registering sizeable outflows since the early summer, which could even over-compensate for the deficit.” 

“Silver is likely to drop back again somewhat against this backdrop.”

GBPUSD swings above the 1.17 level. The pair could extend its race higher on a break past the 1.1760/1.1840 area, economists at Société Général report.

Near-term support aligns at 1.1330

“GBPUSD has crossed above the trend line since February denoting short-term upside.”

“The pair could revisit July and 2016 low of 1.1760/1.1840 and projections of 1.2070.”

“The 50-Day Moving Average near 1.1330 is near-term support.”

See – GBPUSD: At risk of rather fast corrections as domestic picture for Sterling remains uncertain at best – ING

• GBPUSD edges higher to its highest level since late August, albeit lacks follow-through.
• The heavily offered tone surrounding the USD is seen as a key factor offering support.
• A bleak outlook for the UK economy is holding back bulls from placing aggressive bets.

The GBPUSD pair attracts some buying near the 1.1650-1.1645 region on Friday and climbs to its highest level since late August during the first half of the European session. The pair is currently trading around the mid-1.1700s and is looking to build on the previous day's post-US CPI strong bullish momentum beyond the 100-day SMA.

The US Dollar (USD) selling remains unabated amid firming expectations that the Fed will slow the pace of its policy tightening. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, drops to a two-and-half-month low and turns out to be a key factor acting as a tailwind for the GBPUSD pair.

The British Pound, on the other hand, draws some support from mostly upbeat UK economic data released earlier this Friday. The UK Office for National Statistics reported this Friday that the domestic economy contracted by 0.6% in September against -0.4% expected and the previous month's upwardly revised reading of -0.1%.

Furthermore, the quarterly GDP print, the yearly growth rate, along with the Manufacturing and Industrial production, came in better than market expectations and offers additional support to the GBPUSD pair. Spot prices, however, lack follow-through buying amid a gloomy outlook for the UK economy, which is holding back bulls from placing fresh bets.

It is worth recalling that the Bank of England (BoE) warned last week that a recession in the UK could last for all of 2023 and the first half of 2024. This, in turn, warrants caution before positioning for any further near-term appreciating move. Traders now look to the Preliminary Michigan US Consumer Sentiment Index for a fresh impetus.

Technical levels to watch

USDJPY thunders lower by 3.5% in two days. The pair could extend its decline towards 137.80 and even 132.50 on failure to hold 140.30/139.40, economists at Société Générale report.

Failure to cross 145.00 could mean continuation in downside  

“USDJPY has dipped towards the lower limit of the channel drawn since March at 140.30/139.40 which is also the peak of July. This is first layer of support.”

“Failure to cross 145.00 could mean continuation in downside.”

“In case the pair struggles to defend 140.30/139.40, the down move could extend towards 137.80 and 132.50, the 38.2% retracement from 2020.” 

• USDCAD drops to its lowest level since September 20 and is pressured by a combination of factors.
• Rallying crude oil prices underpins the Loonie and drags the pair lower amid sustained USD selling.
• Bets for less aggressive Fed rate hikes, sliding US bond yields, the risk-on mood weigh on the buck.

The USDCAD pair struggles to capitalize on its modest intraday uptick to levels just above the 1.3600 mark and attracts fresh selling on the last day of the week. The pair drops to its lowest level since September 20, around the 1.3284 region during the first half of the European session and is pressured by a combination of factors.

Crude oil prices rally over 3% on Friday in reaction to the news that China, the world's top oil importer, eased some of the strict COVID restrictions. This, in turn, underpins the commodity-linked Loonie and drags the USDCAD pair lower for the second successive day, also marking the fifth day of a negative move in the previous six. Apart from this, the prevalent selling bias surrounding the US Dollar (USD) is seen as another factor exerting downward pressure on the major.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, hits a two-and-half-month low amid expectations for a less aggressive policy tightening by the Fed. The softer US consumer inflation figures released on Thursday indicated that the worst of the post-pandemic price spike is over. The data reaffirms bets for smaller Fed rate hikes in coming months, which leads to a further decline in the US bond yields and weighs on the greenback.

Furthermore, the risk-on mood - as depicted by a strong rally in the equity markets - takes its toll on the safe-haven buck. That said, slightly oversold conditions on intraday charts offer some support to the USDCAD pair and help limit the downside, at least for the time being. Traders now look forward to the US economic docket, featuring the release of the Preliminary Michigan US Consumer Sentiment Index for some short-term opportunities later during the early North American session.

Technical levels to watch

Yesterday’s US Consumer Price Index (CPI) read dealt a big blow to the Dollar. Nonetheless, economists at ING think it is premature for a sustained Dollar downtrend.

Too early for a broad Dollar downtrend

“It simply appears too early to call victory in the inflation battle, and more evidence will need to come from the jobs markets – which has remained exceptionally tight. There may not be much interest from the Fed to switch to a more dovish stance without having gathered all possible data before the December meeting.”

“There is still a lack of alternatives to the Dollar at the moment. European currencies are benefitting from lower gas prices, but that has been due to mild weather, and concerns about the energy crisis for this and next winter are unlikely to abate over the next few months. In China, markets are welcoming looser covid rules, but infection numbers are elevated and vaccination rates are low, which means that the path to complete removal of restrictions still looks long. A heavy return to other EMFX currencies also appears premature given the worsening financial conditions and slowing global demand.”

“Risk assets are facing downside risks that go beyond the Fed story: from likely contracting corporate profits to housing market woes and, recently, the turmoil in the crypto market.”

“The Dollar peak might be past us, but a Dollar downtrend may not be there yet. We remain moderately bullish on the Dollar into year-end.”

In its quarterly publication released on Friday, the European Commission projects Eurozone Gross Domestic Product (GDP) to grow 3.2% in 2022, slow down to 0.3% growth in 2023 and accelerate to 1.5% in 2024.

Key takeaways

European Economic Commissioner Paolo Gentiloni said, "We are approaching the end of a year in which Russia has cast the dark shadow of war across our continent once again.”

"The EU economy has shown great resilience to the shockwaves this has caused. Yet soaring energy prices and rampant inflation are now taking their toll and we face a very challenging period both socially and economically," he said.

Market reaction

The quarterly forecasts failed to move the need around the Euro, as EUR/USD continues to hover near 1.0260, up 0.50% on a daily basis.

Bank of England (BoE) Governor Andrew Bailey said on Friday, “more increases to interest rates likely in the coming months.”

Additional quotes

“Efforts to bring inflation under control are likely to take between 18 months and two years.”

“Sensible for firms to direct pay rises towards the lower paid.”

Market reaction

GBPUSD is keeping its range at around 1.1730 despite Bailey's hawkish remarks, adding 0.15% on the day.

• Gold climbs to its highest level since August 18 amid sustained USD selling bias.
• Bets for less aggressive Fed rate hikes, sliding US bond yields weigh on the buck.
• The risk-on mood might turn out to be the only factor capping gains for the metal.
• Some follow-through buying will set the stage for gains towards the $1,800 mark.

Gold builds on the previous day's post-US CPI breakout momentum beyond the 100-day SMA and gains some follow-through traction on Friday. The upward trajectory lifts the XAUUSD to its highest level since August 18, around the $1,766 region during the first half of the European session.

The softer US consumer inflation figures released on Thursday reaffirm bets for smaller rate hikes by the Federal Reserve. This, in turn, drags the US Dollar to a two-and-half-month low and acts as a tailwind for the dollar-denominated gold. Moreover, expectations for peak US interest rates dropped below 5%, which leads to a further decline in the US Treasury bond yields and offers additional support to the non-yielding yellow metal. That said, the prevalent risk-on mood might hold back bulls from placing aggressive bets and keep a lid on any further gains for the safe-haven XAUUSD.

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the next relevant hurdle for gold is pegged near the $1,770 area - Pivot Point 1-Week R3. This is closely followed by $1,773-$1,775 region - Pivot Point 1-Month R2 and Pivot Point 1-Day R1. Some follow-through buying will be seen as a fresh trigger for bullish traders and set the stage for a move towards the $1,790 level - Pivot Point 1-Day R2 - en route to the $1,800 psychological mark – Fibonacci 161.8% 1-Month.

On the flip side, the $1,757-$1,756 area - Previous High 1-Day - now seems to protect the immediate downside ahead of the $1,745 level - Fibonacci 23.6% 1-Day. A convincing break below might prompt some technical selling and accelerate the corrective slide, dragging gold to the $1,730 region - Previous Month High. The latter should act as a strong base for the XAUUSD, which if broken decisively could probably negate prospects for any further appreciating move.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

EURUSD is above 1.02 after the loosening of covid quarantine rules in China. Economists at Société Générale expect the pair to extend its advance toward the 1.0360/1.0450 region. 

The low for EURUSD is probably behind us

“The loosening of covid quarantine rules in China helps to lift the global economic gloom and will speed the normalisation of supply chains. From a macro perspective for Europe, the prospective re-opening of the Chinese economy is a second necessary condition after the Fed that justifies a more upbeat outlook for foreign trade and the currency.”

“Notwithstanding the energy crisis and pessimism over the conflict in Ukraine, inflation and growth, the low for EURUSD is probably behind us and medium-targets can be raided.”

“The pair is expected to inch higher towards projections of 1.0285 and August high of 1.0360/1.0450 which is also the 200-DMA. This could be a potential resistance zone.” 

“Defending 1.0000/0.9930 is crucial for persistence in up move.”

• EURUSD adds to Thursday’s gains well north of 1.0200.
• The dollar remains well on the defensive following US CPI.
• Germany final Inflation Rate came at 10.4% YoY in October.

The buying pressure keeps growing around the European currency and the rest of the risk complex and lifts EURUSD to new multi-week highs around 1.0270 on Friday.

EURUSD boosted by dollar weakness

EURUSD advances for the second session in a row and flirts with the 1.0270 region, an area last traded back in mid-August, at the end of the week.

The pair saw its upside abruptly reinvigorated after lower-than-estimated US CPI results in October lend support to the idea that inflation pressures could be cooling down and that the Fed could slow the pace of its current hiking cycle.

The daily uptick in the pair so far comes in tandem with a modest upside in German 10-year bund yields, which manage to set aside three consecutive daily pullbacks.

In the domestic calendar, final inflation figures in Germany showed the CPI rise 10.4% YoY and 0.9% vs. the previous month.

Across the Atlantic, the only release will be the preliminary Michigan Consumer Sentiment for the month of November.

What to look for around EUR

EURUSD’s post-US CPI rally remains unabated and trades closer the 1.0300 area at the end of the week.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair.

Furthermore, the increasing speculation of a potential recession in the region - which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the fragile sentiment around the euro in the longer run.

Key events in the euro area this week: Germany Final Inflation Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EURUSD levels to watch

So far, the pair is gaining 0.39% at 1.0247 and faces the next up barrier at 1.0273 (monthly high November 11) seconded by 1.0368 (monthly high August 12) and finally 1.0437 (200-day SMA). On the other hand, a breach of 1.0029 (100-day SMA) would target 0.9898 (55-day SMA) en route to 0.9730 (monthly low November 3).

GBPUSD catches a fresh bid above 1.1700 on upbeat UK Gross Domestic Product (GDP) data. However, economists at ING still believe that the domestic background remains challenging for Sterling.

Economic slump not as bad as feared, for now

“Second-quarter GDP numbers showed a smaller-than-expected contraction (-0.2% quarter-on-quarter), although that was mainly due to the upward revision in August’s figures. Incidentally, September figures have been heavily affected by the Queen’s funeral bank holiday.Still, our UK economist expects a contraction in every quarter until 2Q23, and a lot of focus will obviously be on the measures announced next week by the Treasury. 

“The domestic picture for Sterling remains uncertain at best, and we think this puts GBPUSD at risk of rather fast corrections should the support of a weaker USD evaporate.”

• USDJPY struggles to preserve its intraday recovery gains amid sustained USD selling.
• Bets for less aggressive Fed rate hikes and sliding US bond yields weigh on the buck.
• The risk-on impulse could undermine the safe-haven JPY and lend support to the pair.
• A more dovish BoJ might also hold back bears from placing fresh bets around USDJPY.

The USDJPY gains some positive traction on Friday and recovers a part of the previous day's softer US CPI-inspired slump to the 140.20 area, or a two-month low. The intraday uptick, however, falters in the vicinity of the mid-142.00s. The pair surrenders a major part of its intraday gains and slides back below the 141.00 mark during the first half of the European session.

The US Dollar (USD) drops to its lowest level since August 18 during the first half of the European session and turns out to be a key factor acting as a headwind for the USDJPY pair. The latest US consumer inflation figures released on Thursday indicated that the worst of the post-pandemic price spike is over. This, in turn, reaffirms expectations that the Federal Reserve will slow the pace of its policy tightening in the coming months, which, in turn, continues to weigh on the greenback.

In fact, the current market pricing points to over an 80% chance of a 50 bps Fed rate hike in December as compared to the probability of 56.8% before the US CPI report. Moreover, expectations for peak US interest rates also dropped below 5%, which is evident from a further decline in the US Treasury bond yields. The resultant narrowing of the US-Japan rate differential offers some support to the Japanese Yen and further contributes to the USDJPY pair's intraday pullback of over 170 pips.

That said, the prevalent risk-on mood, as depicted by a strong rally in the equity markets - might hold back traders from placing aggressive bullish bets around the safe-haven JPY. Apart from this, a more dovish stance adopted by the Bank of Japan could help ease the bearish pressure surrounding the USDJPY pair. Nevertheless, spot prices remain on track to register losses for the fourth successive week. Traders now look to the Preliminary Michigan US Consumer Sentiment Index for some impetus.

Technical levels to watch

• The index remains well on the defensive near 107.40.
• The persistent risk-on trade keeps hurting the dollar.
• Flash Michigan Consumer Sentiment next of note in the docket.

The dollar keeps losing ground and navigates an area last seen back in mid-August in the mid-107.00s when tracked by the USD Index (DXY) on Friday.

USD Index weaker post-CPI, risk-on mood

The index adds to Thursday’s post-CPI acute sell-off and flirts with the 107.50 region at the end of the week on the back of the robust performance of the risk complex and the loss of momentum in US yields across the curve.

The index drops to multi-week lows pari passu with markets repricing the Fed’s normalization process in the next months, where the central bank is expected to slow the pace of the upcoming interest rate hikes and turn to a more dovish stance.

In the US data space, the sole release will be the advanced print of the Michigan Consumer Sentiment for the month of November.

What to look for around USD

The index extends the sharp decline in the aftermath of US inflation figures and against the backdrop of a firmer sentiment in the risk-linked galaxy.

In the meantime, investors’ repricing of a probable pivot in the Fed’s policy now emerges as a fresh and quite reliable source of weakness for the dollar, in line with a corrective decline in US yields across the curve.

Key events in the US this week: Preliminary Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: US midterm elections. Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is retreating 0.49% at 107.38 and the breakdown of 104.87 (200-day SMA) would open the door to 104.63 (monthly low August 10) and finally 103.67 (weekly low June 27). On the other hand, the next up barrier aligns at 109.06 (100-day SMA) seconded by 111.00 (55-day SMA) and then 113.14 (monthly high November 3).

EURUSD is a straightforward dollar and risk sentiment story at the moment. Economists at ING expect the pair to return to parity in the near term.

Only a dollar story

“We struggle to see recent moves as the inception of a broad and sustained dollar downtrend, and we, therefore, think EURUSD may be close to its short-term peak.”

“There were already very few indications that the euro was particularly oversold before the recent upward correction: now, we are likely looking at an even more balanced positioning. We see room for a return to EURUSD parity in the near term.”

UK Finance Minister Jeremy Hunt said on Friday, “I am under no illusion that there is a tough road ahead – one which will require extremely difficult decisions to restore confidence and economic stability.”

Additional quotes

Market reaction

GBPUSD is extending gains above 1.1700, cheering upbeat UK GDP data and a broadly weaker US Dollar. The spot was last seen trading at 1.1741, up 0.24% on the day.

Economists at Danske Bank expect the British Pound to shrug off the UK Autumn Statement due out on November, 17. 

Global investment environment to weigh on GBP

“Going forward, we increasingly expect the global investment environment to weigh on GBP as we expect domestic political themes to take a back seat. This is a result of newly elected PM Rishi Sunak increasingly being focused on ensuring fiscal prudence.” 

“While we expect the Autumn Statement next week to deliver further clarity on closing the fiscal gap, we broadly expect a muted reaction in GBP.”

• AUDUSD adds to the overnight rally and climbs to its highest level since September 22.
• The softer US CPI-inspires USD selling remains unabated and offers support to the pair.
• The lack of follow-through buying warrants some caution for aggressive bullish traders.

The AUDUSD pair attracts some buying near the 0.6580-0.6575 region on Friday and climbs to its highest level since September 22 during the early European session. The pair is currently hovering around the mid-0.6600s and remains well supported by the prevalent selling bias surrounding the US Dollar.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, hits a two-and-half-month low amid expectations that the Fed will slow the pace of its policy tightening. The softer US consumer inflation figures released on Thursday reaffirmed bets for smaller rate hikes by the US central bank. The markets are currently pricing in over an 80% chance of a 50 bps increase at the December FOMC meeting.

Furthermore, expectations for peak US interest rates also dropped below 5%, which is evident from a further decline in the US Treasury bond yields. Apart from this, a sharp rise in the equity markets is seen undermining the safe-haven buck and offering additional support to the risk-sensitive Aussie. That said, worries about headwinds stemming from China's economically disruptive zero-COVID policy might keep a lid on the latest optimism.

This, along with the lack of strong follow-through buying, warrants some caution before placing fresh bullish bets around the AUDUSD pair and positioning for any further gains, at least for now. Traders now look to the US economic docket, highlighting the release of the Preliminary Michigan US Consumer Sentiment Index. This, along with the US bond yields and the broader risk sentiment, will influence the buck and provide some impetus to the AUDUSD pair.

Technical levels to watch

The USD slumped following softer US Consumer Price Index (CPI) data, which sent Kiwi sharply higher. Economists at ANZ Bank now expect the NZDUSD to stabilize in the next few days/weeks.

Falling local interest rates might slow further NZD progress a touch

“The US Dollar slumped sharply lower after the release of much softer than expected US CPI data. The data were certainly a relief to markets, and the repricing we have seen is entirely appropriate. However, we’re not out of the woods yet, and US markets are still pricing in cuts from June, and if these get priced out, that could slow the USD’s adjustment.” 

“Local interest rates will also fall today, and that might slow further NZD progress a touch, and leave markets in more of a consolidatory mood for the next few days/weeks.”

• Silver gains traction for the second straight day and climbs to over a five-month peak.
• The technical set-up favours bullish traders and supports prospects for further gains.
• A convincing break below the $21.00 mark is needed to negate the positive outlook.

Silver builds on the previous day's breakout momentum through the very important 200-day SMA and scales higher for the second successive day on Friday. The white metal jumps to over a five-month high during the early European session, though struggles to find acceptance above the $22.00 round-figure mark. The XAGUSD, however, sticks to its intraday gains and is currently placed near the $21.85-$21.90 region, still up nearly 0.90% for the day.

The overnight rally from sub-$21.00 levels and a subsequent strength beyond a technically significant moving average supports prospects for a further near-term appreciating move. That said, RSI (14) on the daily chart is on the verge of breaking into overbought territory and warrants caution for aggressive bullish traders. This makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for additional gains.

Nevertheless, the XAGUSD seems poised to climb beyond the $22.00 mark and could aim to test the next relevant hurdle near the $22.45-$22.50 region. The mentioned area marks a heavy supply zone and could act as a tough nut to crack for bulls. Some follow-through buying, however, will mark a fresh breakout and pave the way for a move towards reclaiming the $23.00 round figure. The momentum could eventually lift spot prices to May swing high, around the $23.25-$23.30 area.

On the flip side, the daily low, around the $21.45 region, which coincides with the 200 DMA breakout point should protect the immediate downside. Any further pullback could be seen as a buying opportunity and remain limited near the $21.00 mark. A convincing break below might trigger some technical selling and drag the XAGUSD to the $20.40 support zone. Failure to defend the aforementioned support levels could shift the near-term bias in favour of bearish traders.

Silver daily chart

Key levels to watch

Economists at Barclays Research expect the USDJPY to reverse back to the 130 level over the course of 2023 due to two reasons.

Fed to start cutting rates from September 2023

“In the medium term, we expect USDJPY to reverse its rally back towards 130 in 2023 due to tightening monetary policy divergence and an improving current account.”

“We expect the Fed to start cutting rates from September 2023 after holding its FF target range at 5.00-5.25% for six months, leading to tighter policy rate differentials between the US and Japan. Our baseline assumption is for no changes in BoJ policy until 2024, but the risk may be for an earlier move if domestic wage/inflation dynamics improve, global growth holds up, or fears about the limits of FX intervention arise.”

“The decline in global commodity prices (especially oil and food) and the reopening of Japan’s borders to foreign tourism should start reversing the negative terms of trade shock on the current account in 2022. Limited appetite for FX-unhedged investment as well as subdued outward M&A flows from corporates suggest that FX supply-demand will tilt in favor of the JPY in 2023.”

• EURGBP remains mildly bid while showing no major reaction to the UK, German data.
• UK’s Q3 GDP eased to -0.2% QoQ versus -0.5% expected and 0.2% prior.
• Germany’s HICP inflation gauge confirmed 11.6% YoY figures for October.
• The market’s cautious optimism underpins bullish bias, off in the US, and Canada restricts immediate advances.

EURGBP holds onto smaller gains around 0.8730, picking up bids of late, even as the UK’s third quarter (Q3) Gross Domestic Product (GDP) printed mixed data heading into Friday’s London open.

That said, the preliminary prints of the UK’s Q3 GDP signaled that the British economy contracted by 0.20% QoQ versus -0.50% market consensus and the previous expansion of the 0.20% QoQ figure.

On the other hand, the final prints of Germany’s inflation data for October, as per the
Harmonized Index of Consumer Prices (HICP) measure confirmed the 11.6% initial readings.

With this, the market’s cautious optimism and the Euro’s (EUR) benefit from the US Dollar’s (USD) south-run, mainly after the previous day’s US inflation data, keeps the EURGBP buyers hopeful.

It’s worth noting that the US Consumer Price Index (CPI) dropped to the lowest levels in the eight months the previous day and bolstered the hopes of an easy Fed rate hike. The same contrast with the hawkish comments from the European Central Bank (ECB) representatives and enable the EUR to remain firmer.

However, a bank holiday in the US and Canada restricts the market’s latest moves. On the same line are mixed concerns surrounding the US-China tussle over Taiwan and the Covid conditions in China.

Amid these plays, the US S&P 500 futures stay on their way to refreshing the two-month high while the US Treasury yields remain pressured, mostly inactive.

Moving on, EURGBP traders should pay attention to the updates from the UK government and the Bank of England (BOE) concerning the reaction to the UK Q3 GDP, for fresh impulse.

Technical analysis

A daily closing below the 21-DMA immediate support, around 0.8690 by the press time, appears necessary for the EURGBP bears to retake control. Until then, the bulls are all set to challenge the monthly resistance line, around 0.8825 by the press time.

• GBPUSD attracts some dip-buying near the 1.1650-1.1645 region, though lacks follow-through.
• The USD languishes near a two-month low and continues to lend some support to the major.
• Mostly better-than-expected UK macro releases fail to impress bulls or provide any impetus.

The GBPUSD pair reverses an intraday dip to the 1.1650-1.1645 region and climbs to the top end of its daily trading range during the early European session. The pair holds steady above the 1.1700 mark, or a nearly two-month high and moves little post-UK macro data.

The UK Office for National Statistics reported this Friday that the domestic economy contracted by 0.6%in September against -0.4% estimated and -0.3% previous. The disappointment, however, was offset by a better-than-anticipated Q3 print, which showed a contraction of 0.2% during the July-September period. Moreover, the yearly growth rate, coming in at 2.4%, along with the UK Manufacturing and Industrial output, surpassed market expectations and offers some support to the British pound.

The US Dollar, on the other hand, struggles to capitalize on its modest intraday uptick and languishes near its lowest level since August 26 touched in the aftermath of a softer US CPI report on Thursday. This is seen as another factor that contributes to limiting the downside for the GBPUSD pair. That said, the Bank of England's warning about a prolonged recession in the UK is holding back bulls from placing aggressive bets and acting as a headwind for spot prices, at least for the time being.

Hence, it will be prudent to wait for strong follow-through buying before traders start positioning for an extension of the recent strong recovery move from an all-time low touched in September. Traders now look forward to the US economic docket, featuring the release of the Preliminary Michigan US Consumer Sentiment Index. This, along with the US bond yields and the broader market risk sentiment, will influence the USD price dynamics and provide some trading impetus to the GBPUSD pair.

Technical levels to watch

Considering advanced prints from CME Group for natural gas futures markets, open interest added to the previous build and went up by more than 1K contracts on Thursday. On the other hand, volume dropped for the third consecutive session, now by around 109.7K contracts.

Natural Gas: Next on the upside comes $7.20

Thursday’s uptick in prices of natural gas was accompanied by another build in open interest, which allows for the continuation of the recent bounce. The sharp drop in volume, however, could also spark a knee-jerk in the very near term. The next up barrier of note, in the meantime, emerges at the November high at $7.22 per MMBtu (November 7).

The industrial sector recovery seems to have regained some momentum in September, the latest UK industrial and manufacturing production data published by Office for National Statistics (ONS) showed on Friday.

Manufacturing output arrived at 0% MoM in September versus -0.4% expectations and -1.6% booked in August while total industrial output came in at 0.2% vs. -0.2% expected and -1.8% last.

On an annualized basis, the UK manufacturing production figures came in at -5.8% in September, missing expectations of -6.6%. Total industrial output dropped by 3.1% in the ninth month of the year against a -4.3% reading expected and the previous -4.3% print. 

Separately, the UK goods trade balance numbers were published, which arrived at GBP-15.656 billion in September versus GBP-18.75 billion expectations and GBP-19.257 billion last. The total trade balance (non-EU) came in at GBP-8.551 billion in September versus GBP-11.079 billion previous.

Related reads

• GBPUSD holds steady above 1.1700 mark, moves little post-UK macro releases
• UK Preliminary GDP contracts 0.2% QoQ in Q3 vs. -0.5% expected

Here is what you need to know on Friday, November 11:

The upbeat market mood remains intact on the last trading day of the week as investors cheer the soft inflation data from the US and news of China easing the Covid-related restrictions. The US Dollar Index continues to edge lower below 108.00 after having lost more than 2% on Thursday and global stock indices push higher. Bond markets in the US will be closed in observance of the Veterans Day holiday but Wall Street will operate at the usual hours. The US economic docket will feature the University of Michigan's Consumer Sentiment Survey (preliminary) for November and investors will keep a close eye on central bank speakers ahead of the weekend.

The US Bureau of Labor Statistics announced on Thursday that inflation in the US, as measured by the Consumer Price Index (CPI), declined to 7.7% on a yearly basis in October from 8% in September. The Core CPI, which excludes volatile food and energy prices, fell to 6.3% from 6.6% in the same period. With both of these readings coming in below market expectations, the CME Group FedWatch Tool's probability of a 50 basis points Fed rate hike in December jumped above 80% from 50% earlier in the week. In turn, major equity indexes in the US registered impressive gains, the US Dollar suffered heavy losses and the benchmark 10-year US Treasury bond yield declined toward 3.8%, losing nearly 7% on the day.

US Inflation Analysis: Hiking is hard in the fog, Dollar set to decline (until the next CPI).

Earlier in the day, China's National Health Commission announced that they have decided to reduce the required quarantine times for travellers and people who had close contact with identified Covid cases. The Shanghai Composite Index was last seen rising nearly 2% on the day and Hong Kong's Hang Seng Index was up 6.8%. Reflecting the risk-positive market environment, US stock index futures are rising between 0.5% and 0.7%. 

The UK's Office for National Statistics (ONS) reported on Friday that the Gross Domestic Product (GDP) grew at an annualized rate of 2.4% in the third quarter, compared to the market expectation of 2.1%. Other data from the UK showed that Industrial Production expanded by 0.2% on a monthly basis in September. GBPUSD largely ignored the latest data and was last seen moving sideways slightly above 1.1700.

EURUSD registered impressive gains on Thursday and continued to edge higher during the Asian trading hours on Friday. The pair was last seen trading at its highest level since mid-August slightly above 1.0200.

USDJPY lost more than 400 pips on Thursday and touched its weakest level in seven weeks near 140.00 before staging a rebound on Friday. At the time of press, USDJPY was up 0.5% on the day at 141.65.

Fueled by plunging US Treasury bond yields, gold price rose nearly 3% on Thursday and registered one of its largest one-day gains of the year. XAUSD is currently trading above $1,750 and it's up nearly 5% since the beginning of the week.

Bitcoin gained 10% on Thursday after having lost more than 20% in the first half of the week. BTCUSD, however, seems to be having a difficult time gathering bullish momentum early Friday as markets keep a close eye on developments surrounding the FTX drama. As of writing, Bitcoin was down nearly 2% on the day at $17,250. Ethereum trades in negative territory at around $1,250 early Friday following Thursday's 17% gain.

California financial regulator announces FTX investigation.

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Cryptos bounce as FTX CEO vows to do right by investors.

• Quarterly GDP for the UK contracted 0.2% in Q3 vs. -0.5% expected.
• UK GDP arrived at -0.6% MoM in June vs. -0.4% expected.
• GBP/USD catches a fresh bid above 1.1700 on upbeat UK GDP.

The UK economy contracted 0.2% QoQ in the three months to September when compared with a 0.2% growth booked in Q2 and -0.5% expectations.

On an annualized basis, the UK GDP expanded 2.4% in Q3 vs. 2.1% expected and a 4.4% increase seen in the previous quarter.

The UK GDP monthly release showed that the economy contracted in September, coming in at -0.6% vs. -0.4% expected and -0.3% previous.

Meanwhile, the Index of services (September) arrived at 0% 3M/3M and 0.5% prior and 0.1% anticipated.

Market reaction

GBPUSD jumped briefly to near 1.1720 on the upbeat UK growth numbers before reverting to the 1.1700 area, where is now wavers. The spot is down 0.06% on the day, as of writing.

About UK GDP

The Gross Domestic Product released by the National Statistics is a measure of the total value of all goods and services produced by the UK. The GDP is considered as a broad measure of the UK economic activity. Generally speaking, a rising trend has a positive effect on the GBP, while a falling trend is seen as negative (or bearish).

Gold price is consolidating gains near $1,750. So, it appears another pause for buyers this Friday, as they contemplate the next big jolt higher, FXStreet’s Dhwani Mehta reports.

Another pause before next big XAUUSD rally

“Gold price is seeing a brief so-called bull flag formation on the daily timeframe. Therefore, another leg higher cannot be ruled out toward the $1,800 mark, especially after closing Thursday above the psychological $1,750 barrier. The bearish 200-Daily Moving Average (DMA) aligns near the $1,800 level.”

“The bullish 14-day Relative Strength Index (RSI) still lurks beneath the overbought territory, suggesting that there is more room to the upside.”

“Before resuming the uptrend, Gold price could correct toward the $1,740 round figure, below which the October high at $1,730 will be back in play.”

• EURUSD renews three-month high despite grinding higher of late.
• Clear break of 100-DMA, September’s high favor buyers amid bullish MACD signals.
• Nearly overbought RSI tests bulls on their way to 1.0355-70 resistance area.

EURUSD buyers keep the reins around 1.0231, the highest levels since mid-August, heading into Friday’s European session.

The major currency pair refreshed the multi-day peak the previous day on crossing the 100-DMA. However, failure to provide a daily closing beyond September’s high and nearly overbought RSI (14) tested buyers afterward.

That said, the quote’s latest upside again crossed the 1.0198 hurdle and refreshed the multi-day high.

Hence, the EURUSD bulls are on their way to a six-month-old resistance zone, around 1.0355-70 but a daily closing beyond 1.0200 becomes necessary.

In a case where the quote remains firmer past 1.0370, the 200-DMA hurdle of 1.0440 will gain the market’s attention.

Alternatively, a daily closing below the 1.0200 level could trigger the EURUSD pair’s pullback moves toward retesting the 100-DMA support of 1.0030.

Following that, the 1.0000 psychological manget and a downward-sloping trend line from late June, currently around 0.9850, also act as additional challenges for the EURUSD bears.

If the pair sellers dominate past 0.9850, lows marked during October, around 0.9630, will be crucial to watch for fresh impulse.

EURUSD: Daily chart

Trend: Limited upside expected

• NZDUSD reverses an intraday dip and climbs to a nearly two-month high on Friday.
• The USD consolidates the post-US CPI slump and continues to lend some support.
• The prevalent risk-on mood provides an additional boost to the risk-sensitive Kiwi.
• The lack of follow-through buying beyond the 100 DMA warrants caution for bulls.

The NZDUSD pair attracts some dip-buying near the 0.5985 region on Friday and hits a nearly two-month high during the early European session. The pair is currently placed just below mid-0.6000s and is now looking to build on the momentum further beyond the 100-day SMA.

The US Dollar struggles to register any meaningful recovery and languishes near its lowest level since August 26, which, in turn, offers some support to the NZDUSD pair. The softer US consumer inflation figures released on Thursday reaffirmed market expectations that the Federal Reserve will slow the pace of its policy tightening. This was evident from a steep decline in the US Treasury bond yields and continues to weigh on the greenback.

The prospects for smaller interest rate hikes by the US central bank boosted investors' appetite for riskier assets. This is evident from a sharp rise in the equity markets, which is could be cited as another factor weighing on the safe-haven buck and acting as a tailwind for the risk-sensitive Kiwi. That said, worries about headwinds stemming from China's economically disruptive zero-COVID policy might keep a lid on the optimism.

Moreover, the markets are still pricing in a greater chance of a 50 bps Fed rate hike move at the next policy meeting in December. This, in turn, could help ease the bearish pressure surrounding the buck and cap the upside for the NZDUSD pair, at least for now. Moreover, the lack of strong follow-through buying warrants some caution for bullish traders. Nevertheless, spot prices remain on track to register gains for the fourth successive week. 

Market participants now look forward to the US economic docket, highlighting the release of the Preliminary Michigan US Consumer Sentiment Index later during the early North American session. This, along with the US bond yields and the broader market risk sentiment, will influence the USD price dynamics and provide some impetus to the NZDUSD pair.

Technical levels to watch

CME Group’s flash data for crude oil futures markets noted traders increased their open interest positions for the second straight session on Thursday, this time by just 924 contracts. Volume, instead, reversed two daily builds in a row and shrank by around 191.2K contracts.

WTI retargets the November high at $93.73

Crude oil prices charted humble gains on Thursday amidst a small uptick in open interest, which is supportive of the continuation of the rebound in the very near term. Moving forward, the WTI now targets the so far November peak at $93.73 (November 7).

The UK Economic Data Overview

The British economic calendar is all set to entertain the Cable traders in early Friday, at 07:00 GMT, with the preliminary Gross Domestic Product (GDP) figures for the third quarter (Q3) of 2022. Also increasing the importance of that time are monthly GDP figures for September, Trade Balance, Manufacturing Production and Industrial Production details for the stated period.

Having witnessed a 4.4% YoY jump in economic activities during the previous quarter, market players will be interested in the first estimation of the Q3 GDP figures, expected 2.1% YoY, to back the BOE’s rate hikes. More interestingly, the QoQ figures are expected to turn negative with -0.5% expected versus 0.2% prior.

On the other hand, the GBPUSD traders also eye the Index of Services (3M/3M) for the same period, bearing forecasts of 0.5% versus -0.1% prior, for further insight.

Meanwhile, Manufacturing Production, which makes up around 80% of total industrial production, is expected to ease to -0.4% MoM in September versus -1.6% prior. Further, the total Industrial Production is expected to recover from the previous contraction of -1.8% to a -0.2% MoM for the said month.

Considering the yearly figures, the Industrial Production for September is expected to have improved to -4.3% versus -5.2% previous while the Manufacturing Production is also anticipated to have weakened to 6.6% in the reported month versus 6.7% the last.

Separately, the UK Goods Trade Balance will be reported at the same time and is expected to show a deficit of £18.75 billion versus a £19.257 billion deficit reported in the last month.

How could affect GBP/USD?

GBP/USD picks up bids to refresh a two-month high near 1.1730 ahead of the key UK GDP data on early Friday morning in Europe. The pair’s latest run-up could be linked to the market’s activity as European traders prepare to react to the previous day’s US inflation-led optimism. On the same line are optimism surrounding the UK’s new government’s ability as Prime Minister (PM) Rishi Sunak meets with representatives of European and Northern Ireland and conveys pleasure over the progress. Furthermore, headlines from the Bank of England (BOE), suggesting the British central bank’s plan to sell gilts, also favor the pair buyers.

That said, UK Q3 GDP bears downbeat forecasts and chatters over the Bank of England’s (BOE) easy rate hikes are on the table, which in turn challenges the GBPUSD pair traders while keeping it on the bull’s radar, mainly due to the market’s optimism.

Hence, downbeat prints of the UK Q3 GDP could probe the GBPUSD buyers for a while, unless being too extreme, whereas a positive surprise might enable the Cable pair buyers to overcome the immediate 1.1740 hurdle.

While considering this, FXStreet’s  Dhwani Mehta said,

Ahead of the release, Westpac said,

Key notes

GBP/USD Price Analysis: Bears are moving in but 1.1800 and then 1.2000 could be over the horizon 

GBPUSD marches towards two-month high at 1.1740 amid euphoric market mood, UK GDP eyed

UK GDP Preview: Barrelling toward recession. Pound Sterling set to fall?

About the UK Economic Data

The Gross Domestic Product released by the Office for National Statistics (ONS) is a measure of the total value of all goods and services produced by the UK. The GDP is considered a broad measure of the UK economic activity. Generally speaking, a rising trend has a positive effect on the GBP, while a falling trend is seen as negative (or bearish).

The Manufacturing Production released by the Office for National Statistics (ONS) measures the manufacturing output. Manufacturing Production is significant as a short-term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP. A high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or bearish).

The trade balance released by the Office for National Statistics (ONS) is a balance between exports and imports of goods. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP.

After the US Consumer Price Index (CPI)-led risk rally, markets witnessed another boost to risk sentiment in Friday’s early European trading after China reduced its quarantine period for travelers while the system penalizing airlines for bringing virus cases into the country will also be scrapped, per Bloomberg.

“Travelers into China will be required to spend five days in a hotel or government quarantine facility,” followed by three days confined to home, the country’s National Health Commission said in a statement Friday.

Market reaction

The US S&P 500 futures jumped 0.50% in reaction to the China headlines, as the move is seen a big pivot to Beijing’s strict zero-Covid policy. AUDUSD built on the rebound above 0.6600, currently trading at 0.6636, adding 0.30% on the day.

Open interest in gold futures markets rose for the 4^th consecutive session on Thursday, this time by around 4.7K contracts according to preliminary readings from CME Group. Volume followed suit and increased by around 81.7K contracts.

Gold now targets the $1,800 mark

Prices of the ounce troy of gold advanced markedly on Thursday amidst rising open interest and volume, exposing the continuation of the uptrend in the very near term and with the immediate target at the critical $1,800 mark.

Swiss National Bank (SNB) policymaker Andrea Maechler said on Friday, “further rate hikes are not out of the question.”

Additional quotes

• Gold price remains sidelined around 2.5-month high, mildly offered of late.
• Risk-on mood fades amid covid fears from China, anxiety ahead of Biden-Xi meeting challenge XAUUSD buyers.
• Sluggish yields, mildly offered US stock futures exert downside pressure on bullion.
• US Michigan CSI, risk catalysts eyed for fresh impulse.

Gold price (XAUUSD) portrays the market’s inaction around a 10-week high during early Friday morning in Europe, after rising the most in a week the previous day. In doing so, the bright metal seesaws around $1,755-50, recently printing mild losses despite picking up bids.

The bullion’s inaction could be linked to the market’s mixed concerns amid covid woes from China and optimism surrounding the Fed’s easy rate hike.

Beijing reports the biggest daily jump in the covid cases in over a year as the mainland sees the daily coronavirus numbers growing past 10,000 for the first time in seven months. On the same line could be anxiety ahead of Monday’s meeting between US President Joe Bide and his Chinese counterpart Xi Jinping.

On the flip side, an eight-month low print of the US Consumer Price Index (CPI) allowed the US Federal Reserve (Fed) policymakers to back easy rate hikes and drown the US Dollar, which in turn helped the market sentiment to bolster. Amid these plays, Asian stocks rise but the S&P 500 Futures struggles for clear directions around a two-month high.

That said, bank holidays in the US and Canada restrict the moves of the US 10-year Treasury yields. The benchmark bond coupons remain inactive around the monthly low near 3.81%, flashed on Thursday, after registering the heaviest slump since early December 2021.

Looking forward, fears emanating from China may challenge the XAUUSD traders ahead of the first readings of the US Michigan Consumer Sentiment Index (CSI) for November, expected 59.5 versus 59.9 prior. However, the buyers are likely to keep the reins unless today’s data prints an extremely high outcome.

Technical analysis

Overbought RSI conditions join the upper line of a weekly bullish channel, around $1,765 by the press time, to challenge the gold buyers.

The pullback moves, however, remain elusive unless the quote remains firmer past $1,719. Also acting as immediate support is the 50-HMA level near $1,723.

It’s worth noting that sustained trading beyond $1,765 won’t hesitate to challenge a five-month-old horizontal resistance area near $1,805.

To sum up, gold remains on the bull’s radar but the upside appears limited.

Gold: Hourly chart

Trend: Limited upside expected

• USDCAD has witnessed barricades around 1.3350 amid positive market sentiment.
• Loonie bulls are supported by BOC’s hawkish commentary and a recovery in oil prices.
• Going forward, US long-term inflation report will be of utmost importance.

The USDCAD pair has sensed selling pressure around 1.3350 in the Tokyo session after attempting a pullback move around 1.3300. The asset has turned sideways which indicates further inventory distribution, which will deliver more weakness in the counter.

Meanwhile, the risk profile has strengthened further as S&P500 futures are extending their gains post a bumper rally on Thursday. The US dollar index (DXY) has refreshed its day’s low at 108.00 and is expected to display more downside ahead.

A sheer decline in US inflation brought a bloodbath in US government bonds. The 10-year US Treasury yields dropped to 3.8% as chances from the CME FedWatch tool claim that 75 basis points (bps) rate hike is losing its stream now.

Going forward, investors will focus on long-term US inflation expectations. The US economy is needed to pass this test too as an increment in the longer-term inflation indicator may spoil the party for risk-perceived assets.

The Fed has been continuously reiterating that their long-term inflation expectations are well-anchored at around 2%. And, previously the economic data landed at 2.9%.

Meanwhile, Loonie bulls are supported by a hawkish commentary from the Bank of Canada (BOC) Governor Tiff Macklem and a decent recovery in the oil prices. BOC Governor cited that “Canadians should expect even more rate hikes to come on top of six that have already happened this year,” during an interview with CBC News in the late New York session.

He further added that layoffs will increase, the growth rate may come to zero in the next few quarters, and the central bank is fine with a mild recession as a price to bring down inflation to desired levels.

Oil prices have rebounded as a decline in US inflation has trimmed the risk of recession. A slowdown in the rate hike pace by the Fed may bring a recovery in the scale of economic activities, which will eventually accelerate oil demand ahead.

• A death cross formation, represented by the 50-and 200-EMA, signals a sheer downside ahead.
• An upbeat risk impulse has underpinned the Japanese yen bulls.
• The RSI (14) has shifted into the bearish range, which indicates more weakness ahead.

The USDJPY pair has turned sideways after a rebound move from around the psychological support of 140.00. The rebound move seems to lack confidence as the risk-on impulse is extremely solid after a sheer downside in short-term US inflationary pressures.

Meanwhile, the US dollar index (DXY) is hovering around its intraday low at 108.10 as the upside has been capped amid falling bets for the continuation of bigger rate hike announcements by the Federal Reserve (Fed).

On a four-hour scale, the asset has witnessed a short-term recovery after testing the horizontal support placed from September 22 low at 140.35. A death cross formation, represented by the 50-and 200-period Exponential Moving Averages (EMAs) at 146.00 indicates more weakness ahead.

The Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates that the downside momentum is active.

Should the asset drop below September 22 low at 140.35, the Japanese yen bulls will further drag the asset towards August 30 high at 139.08, followed by August 23 high at 137.71.

On the flip side, a decisive break above Wednesday’s high at 146.80 will drive the asset towards Monday’s high at 147.57 and October 31 high at 148.85.

USDJPY four-hour chart

• GBPJPY struggles to extend the daily gains amid sluggish yields, pre-data anxiety.
• Optimism surrounding Brexit, BOE’s next move keeps buyers hopeful but fears of Japan’s meddling test upside.
• Yields dropped after US inflation data amplified risk-on mood.
• Fears that UK Q3 GDP will amplify recession woes weigh on the prices.

GBPJPY prints mild gains around 165.80 while snapping a three-day downtrend at the lowest levels in a month. In doing so, the cross-currency pair struggles to cheer the Japanese Yen’s (JPY) weakness amid cautious optimism in the UK. The reason could be linked to the bank holiday in the US and anxiety ahead of the UK’s preliminary Gross Domestic Product (GDP) figures for the third quarter (Q3) of 2022.

Firmer equities in the Asia-Pacific region join the hopes of Japan’s meddling to defend the JPY to exert downside pressure on the Yen. Also likely to have favored the GBPJPY price could be the mixed readings of Japan’s Producer Price Index (PPI) for October, stronger-than-expected on YoY but matching forecasts on MoM.

Talking about the risks, an eight-month low print of the US Consumer Price Index (CPI) allowed the US Federal Reserve (Fed) policymakers to back easy rate hikes and drown the US Dollar, which in turn helped the market sentiment to bolster. Amid these plays, Asian stocks rise but the S&P 500 Futures struggles for clear directions around a two-month high.

It should be noted that the US 10-year Treasury yields remain inactive around the monthly low near 3.81%, flashed on Thursday, after registering the heaviest slump since early December 2021. Also challenging the GBPJPY buyers, other than the sluggish yields, are fears emanating from China’s covid conditions and anxiety ahead of Monday’s meeting between US President Joe Bide and his Chinese counterpart Xi Jinping.

At home, UK PM Rishi Sunak’s optimism to solve the Brexit issue appears to defend the GBPJPY buyers of late. “British Prime Minister Rishi Sunak said on Thursday he was pleased with the progress the government was making on resolving a long-running post-Brexit trade row with the European Union over Northern Ireland,” reported Reuters.

Furthermore, headlines from the Bank of England (BOE), suggesting the British central bank’s plan to sell gilts, also favor the pair buyers. “The Bank of England said on Thursday that from Nov. 29 it would start to sell back to the market some of the 19 billion pounds ($22 billion) of long-dated and index-linked gilts which it bought last month to quell market turmoil,” said Reuters.

Looking forward, the UK Q3 GDP is expected to print -0.5% QoQ figure versus 0.2% prior and may recall the pair bears. However, fears of a recession are already priced-in and hence a surprise positive could have a welcome reaction.

Also read: UK GDP Preview: Barrelling toward recession. Pound Sterling set to fall?

Technical analysis

Although a downside break of the one-month-old ascending trend line, around 166.75 by the press time, keeps sellers hopeful, the 100-day EMA challenges the bears around 164.25.

• Asian equities have soared following the footprints of the S&P500.
• A noteworthy decline in US inflation has brought a global market rally.
• Nikkei225 has been delighted amid a sharp recovery in the Japanese yen.

Markets in the Asian domain are displaying bumper gains after sensing ultra-bullish cues from the US equity market. S&P500 soared like there is no tomorrow after a sheer decline in US inflation for October. Investors flushed money into the risk-sensitive assets as a slowdown in inflationary pressures could result in a slowdown in policy tightening by the Federal Reserve (Fed).

At the press time, Japan’s Nikkei225 soared 2.74%, ChinaA50 climbed 2.24%, Hang Seng upsurged 5.57% and Nifty50 gained 1.53%.

Market euphoria brought a bloodbath in US Treasury yields as investors rushed toward US government bonds by dumping the US dollar index (DXY). The 10-year US Treasury yields plummeted to 3.81% while the DXY plunged to near a two-month low of around 107.70.

The headline inflation rate dropped to 7.7% vs. the projections of 8.0% while the core Consumer Price Index (CPI) declined to 6.3%. A cool off in red-hot inflation was highly expected as consumer spending slumped to 1.4% in the third quarter, as recorded from Fed’s Beige Book.

Japanese equities have rebounded amid a significant appreciation in the Japanese yen vs. the mighty Greenback. A prolonged weaker yen has been hurting firms that are highly dependent on raw materials imported from external economies. Now, a relief rally in the domestic currency will support corporate and eventually their profit margins.

On the oil front, oil prices have recovered above $86.00 as inflationary pressures have been curtailed and recession fears have been postponed. This has brought a sense of optimism in the oil demand prospects. Also, investors are shrugging off Covid-related risk in China.

US President Joe Biden hopes to limit deterioration of ties with China when he meets its leader Xi Jinping next week, but will be honest about U.S. concerns, including over Taiwan and human rights, a senior administration official said on Thursday, reported Reuters.

On the other hand, UK Today mentioned that the US has warned European countries that a conflict over Taiwan would trigger a huge global economic shock, in an effort to step up contingency planning amid rising concern about military action in the Indo-Pacific. “The US has warned European countries that a conflict over Taiwan would trigger a huge global economic shock, in an effort to step up contingency planning amid rising concern about military action in the Indo-Pacific,” adds the news.

The stakes are high as the White House conveyed that US President Biden will hold talks on Monday with Xi on the sidelines of a Group of 20 Nations (G20) summit in Indonesia, their first face-to-face meeting since Biden became President in January 2021.

Reuters also quotes a senior administration official from the US saying that there would be no joint statement from a meeting at which there are no expectations for specific agreements. “White House national security adviser Jake Sullivan told reporters later that the administration would brief Taiwan on the results of Biden's meeting with Xi, aiming to make Taipei feel "secure and comfortable" about U.S. support,” per the news.

AUDUSD remains mildly offered

The news challenges AUDUSD buyers, as well as the market’s risk-on mood, amid a sluggish Friday. That said, the Aussie pair was last seen picking up bids to 0.6620, down 0.15% intraday.

Also read: AUDUSD grinds near 0.6630 as China’s covid woes jostle with US inflation-led optimism

• AUDUSD picks up bids to pare intraday losses around seven-week high.
• China reports the biggest jump in daily coronavirus cases since April.
• The US Dollar licks US CPI-led wounds amid sluggish yields.
• Receding hawkish bets keep the greenback bears hopeful ahead of US Michigan CSI data.

AUDUSD consolidates intraday losses around 0.6630, the highest levels since late September, as the market’s cautious optimism contrasts with the risk-negative headlines from China during early Friday. That said, the Aussie pair rallied the most since October 2011 the previous day before the bulls took a breather amid a lack of major data/events during the day-start moves.

Considering Australia’s close trading ties with China, the latest surge in the dragon nation’s covid numbers challenges the AUDUSD bulls. It’s worth noting Beijing reports the biggest daily jump in the covid cases in over a year as the mainland sees the daily coronavirus numbers growing past 10,000 for the first time in seven months.

On the other hand, optimism in the Asia-Pacific equity markets, by tracking Wall Street’s strong close, challenges the risk-barometer pair’s sellers. However, a banking holiday in the US and Canada joins sluggish US Treasury yields to challenge the pair’s moves.

Amid these plays, Asian stocks rise but the S&P 500 Futures struggles for clear directions around a two-month high.

It should be noted that the eight-month low of the US Consumer Price Index (CPI) bolstered the case of the US Federal Reserve’s (Fed) easy rate hike the previous day and propelled the pair prices the most in 11 years.

Moving on, a light calendar and fears emanating from China may challenge the AUDUSD traders ahead of the first readings of the US Michigan Consumer Sentiment Index (CSI) for November, expected 59.5 versus 59.9 prior. However, the buyers are likely to keep the reins unless today’s data prints an extremely high outcome.

Technical analysis

AUDUSD stays on the bull’s radar unless it drops back below the 0.6500 support confluence, comprising the previous resistance line from August and the 50-DMA.

• USDINR licks its wounds at the lowest levels since late September.
• Eight-month low US CPI bolstered hopes of Fed’s easy rate hikes going forward.
• China-linked risk-aversion joins sluggish market moves to trigger USDINR consolidation.
• US Michigan CSI, risk catalysts eyed for fresh impulse.

USDINR prints mild gains around 80.70 as it pares the recent losses around a seven-week low during Friday’s Asian session. In doing so, the Indian Rupee (INR) pair takes clues from the market’s cautious mood, after a euphoric optimism, amid a sluggish start and a light calendar.

Other than the absence of major data/events, the coronavirus woes from China also propel the USDINR prices. That said, China’s Beijing reports the biggest daily jump in the covid cases in over a year. For the nation as a whole, the daily coronavirus numbers grew past 10,000 for the first time in seven months.

Elsewhere, firmer equities in the Asia-Pacific region and inactive yields, thanks to the strong Wall Street closing and bank holidays in the US and Canada, also underpin the USDINR rebound. Furthermore, the US 10-year Treasury yields remain inactive around the monthly low near 3.81%, flashed on Thursday, after registering the heaviest slump since early December 2021.

It should be noted that a sharp decline in the US Consumer Price Index (CPI) for October surprised markets by declining to 7.7% YoY, the lowest since last March, versus 8.0% expected and 8.2% prior. More importantly, the Core CPI dropped to 6.3% compared to 6.5% market forecasts and 6.6% previous readings.

While reacting to the US inflation, Dallas Federal Reserve President Lorie Logan said that October CPI inflation data is a welcome relief while adding that (it) may soon be appropriate to slow pace of rate increases. On the same line, Federal Reserve Bank of Philadelphia President Patrick Harker said on Thursday that the US Federal Reserve could slow the rate hike pace in the coming months, as reported by Reuters. It should be noted that Kansas City Federal Reserve President Esther George, Federal Reserve Bank of Cleveland President Loretta Mester and San Francisco Fed President Mary Daly also recently promoted easy rate hikes for future meetings.

As a result, the CME’s FedWatch Tool signals a nearly 80% probability of the Fed’s 50 basis points (bps) rate hike in December versus around 55% just following the last week’s Fed meeting.

It’s worth noting that the recently firmer oil prices, up 0.61% near $86.70 by the press time, also weigh on the Indian Rupee due to the nation’s heavy reliance on energy imports and a troublesome level of the Current Account Deficit (CAD).

Looking forward, the first readings of the US Michigan Consumer Sentiment Index (CSI) for November, expected 59.5 versus 59.9 prior, could join the updates from China and Fedspeak to entertain USDINR traders. Even so, the bears are likely to remain less affected considering the latest shift in the market’s outlook for the Fed’s next move due to the US inflation data.

Technical analysis

100-DMA joins the nearly oversold RSI conditions to challenge USDINR bears around 80.50. The recovery moves, however, remain elusive unless crossing the 50-DMA hurdle surrounding 81.45.

• EURUSD is eyeing more gains above 1.0200 amid an upbeat risk impulse.
• An increment in long-term inflation expectations might spoil the market mood.
• ECB Schnabel believes that only a deep recession with a sharp rise in unemployment would dampen inflation.

The EURUSD pair is hovering around the immediate hurdle of 1.0200 in the Tokyo session. The asset is displaying topsy-turvy moves after Thursday’s juggernaut rally and may resume its upside journey after surpassing the 1.0200 hurdle decisively. Bullish bets are accelerating for the Euro bulls as the risk profile is holding optimism.

The US dollar index (DXY) has witnessed a less-confident pullback after dragging to near a two-month low of around 107.70. The DXY is expected to conclude its pullback move sooner as bets over the continuation of 75 basis points (bps) rate hike pace are vanishing. S&P500 futures have displayed a minor correction but that doesn't warrant a reversal. The 10-year US Treasury yields are capped at around 3.81%.

After successfully passing October’s short-term inflation report, the US economy has to go through a litmus test of long-term inflation expectations. Federal Reserve (Fed) has been consoling market participants by reiterating that long-term inflation expectations are well-anchored at around 2% and annual inflation is a short-term pain, which can be contained through accelerating interest rates and balance sheet reduction. Previously, the economic data landed at 2.9%.

Investors should be aware that US markets will remain closed on Friday on account of Veterans Day.

On the Eurozone front, European Central Bank (ECB) Governing Council member Isabel Schnabel cited that only a deep recession with a sharp rise in unemployment would dampen inflation but this is unlikely now." The ECB won’t look for a pause in the monetary policy as inflation expectations are broadly anchored.

• Gold price is looking for an establishment above $1,750.00 amid euphoria in the market.
• The Fed believes that long-term inflation expectations are well anchored around 2%.
• The precious metal is hovering around the 200-EMA at $1,760.00

Gold price (XAUUSD) has recovered after a marginal correction that dragged the asset below $1,750.00 in the Tokyo session. The precious metal is aiming to shift its auction profile above $1,750.00 as the risk profile has continued its upbeat performance on Friday.

S&P500 futures are holding their Friday’s bumper gains and a minor recovery in the US dollar index (DXY) is getting exhausted. Rising demand for government bonds has trimmed their returns dramatically. The 10-year US Treasury yields have plummeted to 3.81%.

It is worth noting that US markets will be closed on Friday on account of Veterans Day.

October’s inflation report has clarified that the Federal Reserve (Fed) will re-consider its policy tightening plans and may slow down its current pace of hiking interest rates. However, Cleveland Fed Bank President Loretta Mester believes that restrictive policy measures by the US central bank should continue given the persistent nature of inflation.

The US economy will face one more test of inflation on Friday as long-term inflation expectations will release ahead. The Fed has been reiterating that long-term inflation expectations are well-anchored at around 2%. An increment in the economic data could spoil the market mood ahead.

Gold technical analysis

On the daily scale, the gold price is marginally far from kissing the 200-period Exponential Moving Average (EMA) at $1,760.00 for the first time in the past five months. The horizontal resistance placed from June 14 low at $1,805.11 will act as a major hurdle ahead.

The Relative Strength Index (RSI) (14) has overstepped 60.00 for the first time in seven months, showing no signs of divergence and overbought.

Gold daily chart

The US Dollar recovery faltered in Asian trading this Friday, following a tweet from the Wall Street Journal (WSJ) Chief Economics Correspondent and a US Federal Reserve (Fed) watcher, Nick Timiraos.

Timiraos tweeted out, “Goldman Sachs reports that its intra-day estimate of US financial conditions from its financial-conditions index eased by over 50 basis points today following the rally triggered by the October CPI print. That is the third-largest single day decline on record.”

The US Federal Reserve Insider’s tweet, citing Goldman Sachs, suggests that the easing of the financial-conditions index could temper the Fed’s expectations for a smaller interest rate hike increase, unnerving markets once again.

The US Dollar bulls lack a follow-through recovery momentum, as investors digest the latest WSJ headlines. The gauge is trading almost unchanged on the day at 108.22, at the time of writing, having stalled it rebound near 108.45.

• USDJPY grinds higher around intraday top while consolidating the biggest daily slump in 14 years.
• Talks over Japan’s meddling, China’s covid conditions trigger the Yen pair’s rebound amid a sluggish session.
• Biden-Kishida meet, preliminary readings of US Michigan Consumer Sentiment Index (CSI) could entertain traders.

USDJPY seesaws around the intraday high near 142.50 as it consolidates the biggest daily fall since October 1998 during Friday’s Asian session. In doing so, the yen pair takes clues from the market’s slightly sour sentiment, as well as inactive US Treasury yields, amid the sluggish session.

That said, the fears of coronavirus renew as China’s Beijing reports the biggest daily jump in the covid cases in over a year. For the nation as a whole, the daily coronavirus numbers grew past 10,000 for the first time in seven months. Elsewhere, the US 10-year Treasury yields remain inactive around the monthly low near 3.81%, flashed on Thursday, after registering the heaviest slump since early December 2021.

The reason for an inactive bond market could be linked to the bank holidays in the US and Canada, as well as the market’s waiting for more clues to confirm the slower rate hikes of the US Federal Reserve (Fed).

It should be noted that the increasing fears of Japan’s meddling in the forex market to defend the Yen and the Bank of Japan’s (BOJ) defense of the easy money policy, while also hoping for an economic rebound in the next years, also underpin the USDJPY rebound.

On Thursday, the US Consumer Price Index (CPI) for October surprised markets by declining to 7.7% YoY, the lowest since last March, versus 8.0% expected and 8.2% prior. More importantly, the Core CPI dropped to 6.3% compared to 6.5% market forecasts and 6.6% previous readings.

Following the data, Dallas Federal Reserve President Lorie Logan said that October CPI inflation data is a welcome relief while adding that (it) may soon be appropriate to slow pace of rate increases. On the same line, Federal Reserve Bank of Philadelphia President Patrick Harker said on Thursday that the US Federal Reserve could slow the rate hike pace in the coming months, as reported by Reuters. It should be noted that Kansas City Federal Reserve President Esther George, Federal Reserve Bank of Cleveland President Loretta Mester and San Francisco Fed President Mary Daly also recently promoted easy rate hikes for future meetings.

As a result, the CME’s FedWatch Tool signals a nearly 80% probability of the Fed’s 50 basis points (bps) rate hike in December versus around 55% just following the last week’s Fed meeting.

Given the latest hopes of an easy Fed rate hike in December, coupled with the BOJ’s favor for easy money policies, the USDJPY pair is likely to remain weak. However, today’s first readings of the US Michigan Consumer Sentiment Index (CSI) for November, expected 59.5 versus 59.9 prior, will precede Sunday’s meeting between US President Joe Biden and Japan’s Prime Minister (PM) Fumio Kishida to offer clear directions.

Technical analysis

An upward-sloping support line from early March and the 100-DMA challenge USDJPY bears around 141.00-140.85 area amid the oversold RSI conditions. The recovery moves, however, need to cross the late October swing low around 145.10 to convince buyers.

• NZDUSD takes offers to refresh the biggest daily gains in a week around two-month high.
• Update RSI, monthly support line keeps buyers hopeful.
• Buyers brace for seven-month-old resistance line unless breaking 0.5825.

NZDUSD holds lower ground near the intraday bottom as it pares the biggest daily gains in a week around 0.5990 during Friday’s Asian session. In doing so, the Kiwi pair seesaws around the highest levels since early September while reversing from the 100-DMA.

Even so, the upbeat RSI (14) conditions, not overbought, join the quote’s sustained trading beyond a one-month-old ascending trend line to keep the buyers hopeful of overcoming the 0.6020 immediate DMA hurdle.

Following that, a run-up towards the downward-sloping resistance line from April, around 0.6155 can’t be ruled out. Also acting as an upside filter is July 2022 bottom surrounding 0.6060.

It’s worth noting that the quote’s trading beyond the aforementioned multi-month-old resistance line appears doubtful considering the RSI line’s positioning near the overbought zone.

That said, the quote’s break of 0.6155 hurdle will not hesitate to challenge the 200-DMA hurdle surrounding 0.6290.

Alternatively, pullback remains elusive unless the quote stays beyond the aforementioned support line, near 0.5825.

Even if the quote drops below 0.5825, the early October swing high near 0.5815 and the 0.5800 round figure could challenge the NZDUSD bears before directing them to the yearly low of 0.5511.

NZDUSD: Daily chart

Trend: Further upside expected

• GBPUSD is meeting its highest levels since September 12. 
• With the price on the backside of the weekly countertrend, 1.2000 is a realistic prospect. 

The Pound rallied on Thursday, hitting the best level against the greenback since September 12. The moves were inspired by lower-than-expected inflation reading for the US in the day's Consumer Price Index data.  CPI rose 0.4% in October to match the prior month's increase, the Labor Department said. Economists polled by Reuters had forecast the CPI would advance by 0.6%.

The markets reacted in such a manner that this might allow the Federal Reserve to ease up on aggressively hiking interest rates and this gives rise to the prospects of a prolonged offer in the US Dollar, bullish for GBP. However, there are prospects of a correction and the Dollar bulls may not be out of the game entirely: 

GBPUSD daily chart

If 1.1800 gives way, then 1.2000 will be on the horizon as the price moves between support and resistance within the ascending channel. The W-formation is, however, a bearish feature as the price could be drawn into the support of the neckline as it is rejected at resistance. 

GBPUSD weekly chart

With the price on the backside of the weekly countertrend, 1.2000 is a realistic prospect. 

DXY technical analysis

The US Dollar has been sent into a critical support level as the following charts will illustrate: 

The DXY is now well below the counter trendline and has formed an M-formation. If the support holds, then there will be prospects of a significant correction. On the other hand, if the bears dig their teeth in again, the case for 1.2000 in Cable will be active. 

• Market’s optimism fades amid lack of major data/events, virus woes from China.
• Eight-month low US CPI bolstered trader’s confidence the previous day, Beijing reports a jump in covid cases.
• S&P 500 posted the biggest daily jump in three years.
• 10-year US Treasury yields dropped the most in 2022 before latest inaction around monthly low.

Global traders remain mostly inactive during early Friday, after witnessing a heavy risk-on mood, as a lack of major positive catalysts join the risk-negative headlines from China. Reassessment of the previous day’s solid move and bank holidays in the US and Canada also seem to challenge the market’s moves of late.

While portraying the mood, the S&P 500 Futures print mild gains around 3,970 following the biggest daily jump in nearly 2.5 years. That said, the US 10-year Treasury yields remain inactive around the monthly low near 3.81%, flashed on Thursday, after registering the heaviest slump since early December 2021.

“China’s daily Covid infections exceeded 10,000 for the first time since April, with Beijing’s cases at the highest level in more than a year, as the country’s top leaders urged more targeted restrictions aimed at controlling the virus,” said Bloomberg. The news joins fears of economic slowdown in the UK and Eurozone to challenge the market’s previous optimism.

That said, lower-than-expected prints of the US Consumer Price Index (CPI) for October, 7.7% YoY versus 8.0% expected and 8.2% prior, bolstered the hopes of the US Federal Reserve’s (Fed) softer rate hike in December. The concerns also gained support from the latest Fedspeak as Dallas Federal Reserve President Lorie Logan said that October CPI inflation data is a welcome relief while adding that (it) may soon be appropriate to slow the pace of rate increases. On the same line, Federal Reserve Bank of Philadelphia President Patrick Harker said on Thursday that the US Federal Reserve could slow the rate hike pace in the coming months, as reported by Reuters. It should be noted that Kansas City Federal Reserve President Esther George, Federal Reserve Bank of Cleveland President Loretta Mester and San Francisco Fed President Mary Daly also recently promoted easy rate hikes for future meetings.

With this, the CME’s FedWatch Tool signals a nearly 80% probability of the Fed’s 50 basis points (bps) rate hike in December versus around 55% just following the last week’s Fed meeting.

Moving on, the first readings of the US Michigan Consumer Sentiment Index (CSI) for November, expected 59.5 versus 59.9 prior, may join the headlines surrounding coronavirus to entertain the traders. However, receding fears of the global central bankers’ aggressive rate hikes could keep the markets positive, which in turn could weigh on the safe-havens like the US dollar.

Also read: Forex Today: Dollar hurt by optimism

• AUDJPY is inching higher towards 94.00 as the focus has shifted to Tuesday’s RBA policy minutes.
• RBA minutes will provide a detailed explanation behind keeping the pace of the rate hike at 25 bps.
• Japan’s Kanda reiterated that officials are closely watching forex moves with a high sense of urgency.

The AUDJPY pair has extended its recovery after overstepping the immediate hurdle of 93.50 in the Tokyo session. The risk barometer is now marching towards the round-level hurdle of 94.00 as volatility has been trimmed amid a stellar recovery in the S&P500. Also, US Treasury yields have witnessed a bloodbath after a significant drop in inflation numbers.

Earlier, the cross found fresh demand near 93.00 after remaining in a negative trajectory for the past two trading sessions. The asset has picked bids as investors are shifting their focus toward the Reserve Bank of Australia (RBA)’s monetary policy minutes.

The RBA minutes will display the entire reasoning behind the announcement of the interest rate hike by 25 basis points (bps) despite a historic surge in inflationary pressures. For the third quarter, Australia’s inflation rate climbed to 7.3% vs. the projections of 7.0% and the prior release of 6.1%.

RBA Governor Philip Lowe was expected to return to a 50 bps hike regime for the Official Cash Rate (OCR). It seems that the RBA wants to capitalize on its frequent monetary policy meetings by announcing smaller rate hikes.

Meanwhile, Japan's top currency diplomat Masato Kanda reiterated that officials are closely watching forex market moves with a high sense of urgency and that if needed. ''Authorities remained ready to take action.'', reported Reuters.

On the economic data front, investors are awaiting the release of Tuesday’s Gross Domestic Product (GDP) report. The economic data is seen lower at 0.3% vs. the prior release of 0.9% on a quarterly basis while the annualized figure may decline to 1.1% from the former release of 3.5%.

• USDCAD pares recent losses at the lowest levels in seven weeks.
• Bearish MACD signals, clear break of three-month-old support line favor bears.
• Buyers need validation from 50-DMA while 100-DMA acts as an extra filter to the south.

USDCAD prints mild gains around 1.3330 as it consolidates the previous day’s downside near the lowest levels since late September. Even so, the Loonie pair remains on the bear’s radar as it stays below the previous key resistances.

That said, a sustained trading below the 50-DMA joins a clear downside break of the ascending support line from early August, now resistance around 1.3370, to challenge the USDCAD buyers.

Also keeping the pair sellers hopeful are the bearish MACD signals and an absence of the oversold RSI despite the previous day’s slump.

As a result, the USDCAD bears are all set to revisit the 100-DMA support surrounding 1.3230. However, the 61.8% Fibonacci retracement of the pair’s August-October upside, near 1.3200, could challenge the pair’s further downside.

Meanwhile, the aforementioned support-turned-resistance line restricts the USDCAD pair’s immediate recovery near 1.3370, a break of which could direct the buyers toward the 50-DMA level of 1.3525.

In a case where the USDCAD remains firmer past 1.3525, the odds of witnessing a run-up towards the monthly high near 1.3810 can’t be ruled out.

Overall, USDCAD is well-set for further downside despite the latest adversities.

USDCAD: Daily chart

Trend: Bearish

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.1907 vs. the estimated 7.1890 and the previous 7.2422.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

Reuters reported that China will not relax its COVID-19 measures but will keep improving them according to the changing epidemic situation and mutation of the virus and will be more scientifically accurate in their implementation, a disease expert said.

''China is very cautious in every adjustment it makes in its COVID policies, the National Health Commission said in a statement on Friday, citing Wang Liping, a researcher from the China Center for Disease Control and Prevention.''

''In its first meeting since being formed last month after the ruling Communist Party's twice-a-decade congress, the Politburo Standing Committee said China's epidemic prevention measures must not be relaxed, according to state media on Thursday.''

Meanwhile, China's covid cases are the highest since April. Beijing reports 64 new local symptomatic coronavirus cases (previous 34), 54 asymptomatic cases for Nov 10 (prev 61). 

China Reports 1,209 New confirmed coronavirus cases in Mainland on Nov 10 (prev 1,185). Elsewhere:

• China's Guangzhou reports 225 new local symptomatic.
• Coronavirus cases, 2,358 asymptomatic cases for Nov 10.
• China's Chongqing reports 782 new local covid cases for Nov 10.

As for the markets, there is the possibility that the US Dollar will bounce back to life on such implications to global growth:

• US Dollar put to the guillotine, but plenty to live on for

• EURGBP picks up bids to consolidate recent losses amid a sluggish session.
• Hawkish ECBSpeak, fears of downbeat UK Q3 GDP tease buyers ahead of the key data.
• Sentiment remains calm after witnessing a solid risk-on mood the previous day.
• Positive developments over Brexit, BOE’s plan to unwind emergency gilt buying lure sellers.

EURGBP consolidates the biggest daily fall in a month as bulls approach the intraday high near 0.8725 during Friday’s Asian session. In doing so, the cross-currency pair also prepares for the UK’s third quarter (Q3) Gross Domestic Product (GDP) amid a sluggish session after a volatile one.

The quote’s latest upside could also be linked to the hawkish comments from the European Central Bank (ECB) officials and the European currency’s cheering of downbeat US inflation data, as well as the recently softer Fedspeak.

ECB Governing Council member Isabel Schnabel noted on Thursday that inflation expectations in the Eurozone are still broadly anchored but added that risks of high inflation persistence had increased further, as reported by Reuters. On the contrary, an eight-month low print of the US Consumer Price Index (CPI) allowed the US Federal Reserve (Fed) policymakers to back easy rate hikes and drown the US Dollar, which in turn helped the regional currency due to its rivalry.

On the same line could be the headlines from the Bank of England (BOE) suggesting the British central bank’s plan to sell gilts. “The Bank of England said on Thursday that from Nov. 29 it would start to sell back to the market some of the 19 billion pounds ($22 billion) of long-dated and index-linked gilts which it bought last month to quell market turmoil,” said Reuters.

Alternatively, UK PM Rishi Sunak’s optimism to solve the Brexit issue appears to defend the EURGBP bears of late. “British Prime Minister Rishi Sunak said on Thursday he was pleased with the progress the government was making on resolving a long-running post-Brexit trade row with the European Union over Northern Ireland,” reported Reuters.

It should be noted that the calmer markets, after the heavy risk-on mood, also allow the EURGBP pair to prepare for downbeat UK growth numbers. That said, the UK Q3 GDP is expected to print -0.5% QoQ figure versus 0.2% prior.

Also read: UK GDP Preview: Barrelling toward recession. Pound Sterling set to fall?

Other than the UK GDP, final prints of Germany’s Harmonized Index of Consumer Prices (HICP) inflation numbers and comments from the various ECB policymakers will also be important for near-term directions.

Technical analysis

Unless witnessing a daily closing below the 21-DMA support near 0.8690, the EURGBP buyers remain hopeful.

• A test of an inverted H&S breakout with less volatility will present an optimal buying opportunity.
• Cheerful market mood post softer US October’s inflation report has strengthened the Aussie bulls.
• The 50-and 200-EMAs are on the verge of delivering a golden cross.

The AUDUSD pair has witnessed modest exhaustion in the upside momentum after printing a fresh six-week high of 0.6632. An upside bias for the asset is still solid as the market mood is jubilant after a noteworthy decline in the US inflation data.

Bets for a fifth consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed) are vanishing and the US dollar index (DXY) and yields on US government bonds are getting punished. Meanwhile, trading activity in the US could be on reduced volume as US markets will remain closed on Friday on account of Veterans Day.

On a four-hour scale, the asset has delivered a breakout of the Inverted Head and Shoulder chart pattern that signals a bullish reversal after a prolonged consolidation. The neckline of the aforementioned chart pattern is plotted from October 4 high at 0.6548.

The 50-and 200-period Exponential Moving Averages (EMAs) are on the verge of delivering a golden cross, which will further strengthen the antipodean.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which indicates more upside ahead.

Going forward, a test of the Inverted H&S neckline at 0.6548 will trigger a bargain buy and will drive the asset toward Thursday’s high at 0.6632, followed by the round-level resistance at 0.6700.

Alternatively, a decline below Thursday’s low at 0.6386 will drag the asset toward October 14 high at 0.6347. A downside break of October 14 high will expose the asset for more downside toward November 3 low at 0.6272.

AUDUSD four-hour chart

Japanese Finance Minister Suzuki said they will keep in close contact with US and other countries on FX.

Key quotes

''Have not decided yet on sources to fund increase in defence spending, will consult with ruling parties.''
    
''Will keep in close contact with us, other countries on FX.''
    
''Don't think japan being on monitoring list in us currency report meant us cast doubt on japan's currency policy.''

More to come...

• EURUSD pares the biggest daily gains in a week around multi-day high.
• RSI challenges buyers but 100-day EMA, previous resistance line from September restricts downside.
• Daily closing beyond September’s peak becomes necessary for further upside.

EURUSD bulls take a breather around the highest levels since early August, retreating to 1.0188 during Friday’s Asian session, as it pares the biggest daily jump in a week.

The nearly overbought RSI (14) and a failure to provide a daily closing beyond September’s high seemed to have triggered the major currency pair’s latest pullback amid a sluggish Asian session.

Even so, the quote remains well above the 1.0070 support confluence including the 100-day EMA and the resistance-turned-support line from early September.

In addition to the 1.0070 support, the 1.0000 psychological manget and a downward-sloping trend line from late June, currently around 0.9850, also act as additional challenges for the EURUSD bears.

Alternatively, a clear break of the September month high near 1.0200 becomes necessary for the pair’s fresh upside rally.

Following that, the 61.8% Fibonacci retracement of May-September downside, at 1.0310, could lure the EURUSD buyers.

However, a six-month-old horizontal resistance area around 1.0355-70 appears a tough nut to crack for the bulls afterward.

EURUSD: Daily chart

Trend: Pullback expected

Reuters reported that Japan's top currency diplomat Masato Kanda said on Friday that he was closely watching forex market moves with a high sense of urgency and that if needed. ''Authorities remained ready to take action.''

Kanda was speaking after the dollar fell sharply overnight as US Consumer Prices Rose less than expected in October. US Consumer Price Inflation rose 0.3% MoM in October as goods prices fell and service price inflation, ex-shelter, eased. Food price inflation also moderated, rising 0.6% MoM versus 0.8% in September. With pent-up demand for risk, investors have run with the idea that the Federal Reserve will react to the report and pivot and as a result, they are stampeding away from the US Dollar. 

USDJPY has plunged to a low of 140.20:

• Gold price remains sidelined around the highest levels since late August.
• Lack of major catalysts, market’s break after the US CPI-led storm challenge XAUUSD bulls.
• US inflation triggered setback for hawkish Fed bets, propelled equities and riskier assets.
• US Michigan CSI, further clues on inflation eyed for fresh impulse.

Gold price (XAUUSD) seesaws around the highest levels in 11 weeks as bulls seek more clues to extend the US inflation-led rally during Friday’s Asian session. That said, the yellow metal refreshed the multi-day peak around $1,757 after the downbeat US Consumer Price Index (CPI) data for October, before retreating to $1,752 by the press time.

An eight-month low print of the US CPI, to 7.7% YoY versus 8.0% expected and 8.2% prior, bolstered the case of the US Federal Reserve’s (Fed) easy rate hike of 50 basis points (bps) in December, which in turn propelled the market’s optimism and riskier assets like the XAUUSD. That said, the CME’s FedWatch Tool signals nearly 80% probability of the Fed’s 50 basis points (bps) rate hike in December versus around 55% just following the last week’s Fed meeting.

Not only had the headline CPI but the Core CPI also dropped to 6.3% compared to 6.5% market forecasts and 6.6% previous readings.

Following the data, Dallas Federal Reserve President Lorie Logan said that October CPI inflation data is a welcome relief while adding that (it) may soon be appropriate to slow pace of rate increases. On the same line, Federal Reserve Bank of Philadelphia President Patrick Harker said on Thursday that the US Federal Reserve could slow the rate hike pace in the coming months, as reported by Reuters. It should be noted that Kansas City Federal Reserve President Esther George, Federal Reserve Bank of Cleveland President Loretta Mester and San Francisco Fed President Mary Daly also recently promoted easy rate hikes for future meetings.

While portraying the mood, Wall Street benchmarks rallied and the US Treasury yields slumped, which in turn drowned the US Dollar Index (DXY) and helped the Gold price to portray a stellar run-up.

It’s worth noting that fears emanating from China’s covid conditions and a light calendar ahead of the first readings of the US Michigan Consumer Sentiment Index (CSI) for November, expected 59.5 versus 59.9 prior, may allow the gold price to pare some of the latest gains. Even so, the XAUUSD bulls are likely to keep the reins unless witnessing any strongly hawkish message surrounding the Fed’s next move.

Technical analysis

Gold buyers can ignore the latest inaction, mainly led by the overbought RSI (14), amid a clear upside break of the $1,716-15 hurdle, now support comprising the 100-DMA and a downward sloping trend line from September 12.

That said, the late August swing high of around $1,765 could act as an immediate upside hurdle before directing the XAUUSD bulls toward a five-week-old horizontal resistance area surrounding $1,805.

Alternatively, tops marked during October and September, respectively around $1,735 and $1,730, could challenge the Gold bears before highlighting the previous resistance confluence around $1,716-15.

Overall, gold stays on the buyer’s radar unless the quote stays beyond $1,716, a break of which could quickly drag it to the 50-DMA support near $1,675.

Gold price: Daily chart

Trend: Bullish

• USDJPY is expected to display more downside after dropping below the critical support of 140.00.
• Fed’s long-term inflation expectations are well-anchored at 2%, therefore a rise in data could trigger volatility.
• Tokyo investors will shift their focus toward Tuesday’s GDP data.

The USDJPY pair is facing barricades around 142.00 after a mild recovery in the early Tokyo session. The asset is expected to display further downside after dropping below the crucial support of 140.00. An optimism risk profile is extremely solid after a slowdown in mounting US inflationary pressures.

This has vanished bets over the continuation of a bigger rate hike cycle by the Federal Reserve (Fed) to a great extent. As per the CME FedWatch tool, the chances of a rate hike by 75 basis points (bps) for the fifth time in the December meeting have dropped below 15%. The impact of the decline in hawkish Fed bets is clearly visible in the US dollar index (DXY) and returns from the US government bonds.

The DXY is struggling to overstep the immediate hurdle of 108.00. And, the 10-year US Treasury yields are hovering around 3.81%.

A significant drop in the inflationary pressures banks upon a fall in consumer spending and easing gasoline prices. In the Fed’s Beige Book, consumer spending for the third quarter dropped to 1.4% from the prior release of 2.0% due to lower earnings by the households and the burden of inflation-adjusted payouts. A decline in consumer spending is a leading indicator for short-term inflation expectations, which indicates a slowdown in price growth ahead.

US markets will be closed on Friday on account of Veterans Day, during which currency traders will focus on the release of long-term US inflation expectations. Previously, the economic data landed at 2.9%. The Fed is keen to keep the long-term inflation expectations anchored around 2%. And, a rise in the economic data could fade the positive market sentiment.

On the Tokyo front, investors have shifted their focus toward the Gross Domestic Product (GDP) data, which will release on Tuesday. The economic data is seen lower at 0.3% vs. the prior release of 0.9% on a quarterly basis while the annualized figure may decline to 1.1% from the former release of 3.5%.