CFD Markets News and Forecasts — 14-11-2022

• Gold price struggles around a three-month high, after posting a bearish candlestick.
• Federal Reserve officials challenge United States inflation-led optimism.
• Jitters surrounding China also test Gold prices amid a light calendar.
• Downside risk appears escalating amid the US Dollar rebound.

Gold price (XAUUSD) remains depressed at around $1,770 while justifying the previous day’s bearish candlestick formation, as well as sluggish market conditions, during Tuesday’s Asian session.

The yellow metal’s latest weakness could also be linked to the mixed comments from the US Federal Reserve (Fed) officials, as well as fears surrounding China. It should be noted, however, that a light calendar also offers trading filters for the Gold price.

Federal Reserve officials challenge optimism over the Gold price

Having promoted the easy rate hikes and teased pivot talks in the last week, the US Federal Reserve policymakers began the week on a mixed footing as Vice-Chair Lael Brainard favored 50 bps rate hike but also stated, “We have additional work to do.” Earlier on Monday, Federal Reserve Governor Christopher Waller also promoted the ideal of a 0.50% rate hike while also warning against the market’s perception of the pivot. Such comments from the US Federal Reserve officials tame optimism surrounding future policy moves and renewed the US Dollar's strength.

Headlines from China also tease Gold price downside

China is the largest customer of bullion and hence the latest mixed headlines from the dragon nation probe the Gold price. Recently, US President Joe Biden and his Chinese counterpart Xi Jinping talked face-to-face for the first time in three years and tried to promote healthy competition, which in turn should have favored the Gold price. However, the thorny issue surrounding Taiwan soured the optimism surrounding the event.

Elsewhere, China’s easing of some of the Covid restrictions and help to the real-estate sector joins the jump in the daily coronavirus numbers to challenge the Gold traders.

US Treasury yields are the key

Given the US Treasury yields’ rebound underpinning the US Dollar’s comeback, the Bond coupons will be crucial to watch for clear directions, especially amid mixed updates and a light calendar. Should the bond bears keep fearing recession and hold control, the Gold price is likely to remain firmer. That said, the benchmark US 10-year Treasury yields remain unchanged near 3.86% by the press time.

US inflation expectations are important too

It’s worth noting that an increase in the New York Federal Reserve’s (Fed) inflation expectations appeared to have renewed the US bond selling and hence headlines surrounding price pressure should also be watched for near-term Gold price directions. As a result, today’s US Producer Price Index (PPI) for October, expected 8.3% YoY versus 8.5% prior, should be watched carefully to aptly forecast the near-term Gold price moves.

Technical analysis

Gold price justifies the previous day’s bearish Doji candlestick, as well as the oversold conditions of the Relative Strength Index (RSI), located at 14, while printing mild losses.

That said, the Gold price could approach September’s high surrounding $1,735 during further downside, as the Moving Average Convergence and Divergence (MACD) also appears to ease the bullish bias.

However, the previous resistance line from late April, around $1,703 at the latest, could challenge the further downside of the Gold price.

Alternatively, a daily closing beyond the previous day’s high near $1,775 could recall the bullion buyers.

Even so, a convergence of the 200-DMA and multiple levels marked since mid-May, around $1,805-08, appears a tough nut to crack for the Gold price to cross before convincing the buyers.

Gold price: Daily chart

Trend: Further downside expected

• The downside momentum could get pause due to Harami Cross formation near the long-term trendline.
• Risk impulse has turned quiet which has shifted the DXY into the rangebound territory.
• Contrary to candlestick formation, a bearish range shift by the RSI (14) indicates more weakness ahead.

The USDCHF pair has attempted a pullback move after testing the previous week’s low around 0.9414 in the late New York session. The asset is displaying rangebound moves as the US dollar index (DXY) has turned sideways on a relatively quiet market mood.

The upside in the DXY has been capped due to lower chances for the continuation of 75 basis points (bps) rate hike by the Federal Reserve (Fed), while the downside is restricted due to anxiety ahead of the US midterm elections outcome. S&P500 futures have rebounded in Tokyo after a bearish Monday, which might bring the risk-on mood back into traction.

On a daily scale, the asset has displayed a perpendicular fall after failing to sustain above the critical resistance of 1.0100. The major has dropped sharply to near the upward-sloping trendline placed from the 6 January 2021 low at 0.8758.

A sheer decline in the pair has turned the 50-and 200-period Exponential Moving Averages (EMAs) at 0.9830 and 0.9645 respectively towards the downside. This indicates that the short- and long-term trend is bearish now.

Adding to that, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00 for the first time in 15 months, which indicates more weakness ahead.

On Monday, the asset formed a Harami Cross candlestick pattern that indicates a pause in the downside direction. A broad market profile could either be a continuation of the downside momentum or a reversal due to a loss in the downside momentum. Investors need to perform actively at this stage as it could be a make-or-a-break situation ahead.

Should the asset drop below Friday’s low around 0.9400, the Swiss franc bulls will drag the pair towards January 31 high at 0.9343, followed by March 31 low around 0.9200.

On the flip side, a break above the psychological resistance of 0.9500 will drive the asset toward the 200-EMA at 0.9645. A breach above the 200-EMA will send the asset toward the round-level resistance at 0.9700.

• EURUSD could be on the verge of a downside correction, but only time will tell.
• Bears will await the Asian highs and lows and a set up for the day ahead. 

The US Dollar gained against the euro on Monday but has been unable to take off as investors are still in two minds about whether there is going to be a slower pace of Federal Reserve interest rate hikes going forward. 

The US Dollar got a boost when Christopher Waller crossed the wires and said Friday's inflation report was "just one data point," and that markets are "way out in front". This has been the theme that is gathering pace in the opening sessions. 

DXY daily chart

The daily chart in the US Dollar is showing signs of a corrective nature which opens risk for the downside in the euro as follows: 

EURUSD H1 chart

Bears will be reluctant to make their move in the face of caution around the Fed sentiment, but the resistance is compelling for a move to the downside on the hourly chart. The price needs to form a topping formation below the trendline, with a break of structure, 1.0320. 

EURUSD daily chart

Correction in the making? 

EURUSD weekly chart

The price is on the front side of the major trend but the back side of the recent trend and this leaves the focus on a move towards 1.0500 following a correction that could be imminent. 

Early Tuesday morning in Asia, at 00:30 GMT, the Reserve Bank of Australia (RBA) will release the minutes of the latest monetary policy meeting held in November.

The Australian central bank surprised markets by announcing a softer rate hike of 0.50% versus 0.75% in its latest meeting, which in turn raised expectations that the pivot is already established. The same could be confirmed from the latest comments of the RBA officials and make it important for the policy hawks to step back.

As a result, today’s RBA Minutes will be closely observed for the details on the latest decision which surprised traders and triggered talks of easy rate hikes moving forward. Also important inside the Minutes statement, especially for the AUDUSD pair traders, will be the economic outlook and the central bankers’ optimism towards overcoming the recession fears.

Westpac is on the same line and said,

How could the minutes affect AUD/USD?

AUD/USD portrays the market’s indecision as it remains sidelined after pausing a bearish Doji candlestick at the two-month high the previous day.

That said, the Aussie pair’s further upside hinges on how the RBA Minutes manage to keep the bulls happy even after promoting the 50 bps rate hike. That being said, talks over the economic transition and neutral rate, as well as surrounding employment conditions, will also be crucial to watch for short-term AUDUSD forecast ahead of this week’s Australia Wage Price Index for the third quarter (Q3), up for publishing on Wednesday.

Technically, the bearish candlestick formation joins overbought RSI (14) and a failure to provide a daily closing beyond the 100-DMA, around 0.6700 by the press time, to keep AUDUSD sellers hopeful. However, the quote’s further downside needs validation from July’s low near 0.6680.

Key Notes

AUDUSD Forecast: Bulls happily adding at lower levels

AUDUSD subdued after Federal Reserve official’s commentary, as RBA minutes loom

About the RBA minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.

• Federal Reserve policymakers are committed to tackling inflation in the United States, bolstering the US Dollar.
• Australia’s Consumer Confidence improved, Aussie Dollar traders eye RBA minutes.
• AUDUSD Price Analysis: The inverted head-and-shoulders pattern remains in play, targets 0.6870.

The Australian Dollar (AUD) is almost flat as the North American session winds down after two Fed officials emphasized the Federal Reserve’s (Fed) commitment to tackle inflation at around 7.7% YoY, bolstering the US Dollar (USD). However, both policymakers acknowledged that it would be “appropriate” to slow the pace of interest-rate increases, spurring a risk-on impulse. Nevertheless, sentiment shifted sour. At the time of writing, the AUDUSD is trading at 0.6700.

Fed officials compromised to bring inflation to Fed’s target

Wall Street finished Monday’s session in the red. Fed Vice-Chair Lael Brainard said that the Federal Reserve might slow the pace of interest-rate increases and said she favors a 50 bps hike in December. Brainard added that the Central Bank would not pause or ease monetary conditions, adding that “we have additional work to do.” Earlier, Fed Governor Christopher Waller echoed Brainard’s comments and commented that the Fed could moderate the size of interest-rate increases to 50 bps at their December meeting or the one after that. Although it was a hawkish statement, and the USD was bolstered, the AUD clung to its last week’s gains, as shown by the AUDUSD hitting a daily low at 0.6663 before challenging the 0.6700 figure.

Data-wise, the United States (US) calendar featured the New York Fed inflation expectations, with one and three-year horizons expanding by 5.9% and 3.1%, from 5.4% and 2.9%, respectively. The jump in inflation expectations is attributed to high gasoline prices.

Australia’s Consumer Confidence improved, but the AUDUSD remains subdued

Aside from this, Australia’s economic docket features the ANZ-Roy Morgan Consumer Confidence, which rose 2.7% after declining 10.4% over the previous six weeks. Delving into the report, Weekly Inflation expectations dropped 0.3% though they remained elevated at around 6.5%. Traders did not react to the data, as the AUDUSD was in choppy trading as the Asian session began.

RBA’s monetary policy minutes eyed

The Reserve Bank of Australia’s (RBA) November monetary policy meeting minutes would be revealed after the Central Bank lifted the Overnight Cash Rate (OCR) 25 bps to 2.85%. Some analysts expect that the RBA will return to a faster pace of tightening after September’s inflation report increased by 7.3%. However, the RBA upgraded its inflation forecast, and now they see inflation at around 8%.

AUDUSD Price Analysis: Technical outlook

The AUDUSD remains neutral-to-upward biased. It should be noted that an inverted head-and-shoulders remains in play, though the Aussie Dollar is struggling to reclaim the 100-day Exponential Moving Average (EMA) at 0.6697. Once the latter is cleared, the uptrend towards the inverted head-and-shoulders pattern target at 0.6870 is on the cards, but critical resistance levels need to be surpassed, like the 0.6800 figure.

• AUDJPY has sensed a buying interest of around 93.50 ahead of RBA minutes/Japan’s GDP.
• The RBA minutes will dictate the reasoning behind announcing a 25 bps rate hike in November.
• BOJ’s Kuroda sees a recovery in the economy as the impact of supply constraints and the pandemic eases.

The AUDJPY pair has witnessed an intermittent pullback after dropping to near 93.50 in early Asia. A short-term relief cushion around 93.50 doesn’t seem long-lasting citing price action and volatility ahead. The release of the Reserve Bank of Australia (RBA) policy minutes and Japan’s Gross Domestic Product (GDP) would bring wild gyrations into the asset.

The release of the RBA minutes will clarify the rationale behind the announcement of the 25 basis points (bps) despite a historic surge in the inflation rate. For the third quarter, the headline inflation soared to 7.3% vs. the projections of 7.0% and the prior release of 6.3%. Therefore, think thanks were expecting that RBA Governor Philip Lowe will return to the 50 bps rate hike regime. The absence of exhaustion in the inflationary pressures can be cared for by aggressive policy tightening measures.

Later this week, investors will focus on the employment data, which will release on Thursday. As per the projections, the Australian economy has added 15k jobs in October month vs. the former release of 0.9k. The jobless rate is seen unchanged at 3.5%.

On the Tokyo front, investors are looking for the release of the Gross Domestic Product (GDP) data. Analysts at ING believe that the third quarter GDP is expected to grow 0.5% QoQ, seasonally adjusted, which is a slower pace than the previous quarter. Reopening effects still led the overall growth but higher inflation and the weak yen partially offset the recovery.”

Meanwhile, positive commentary from Bank of Japan (BOJ) Governor Haruhiko Kuroda failed to fuel sheer optimism in Japanese yen. BOJ Governor is of the view that the economy is likely to recover as the impact of supply constraints and the pandemic eases. The tight labor market will drive wages and the inflation rate to grow around 3% this fiscal year.

Japan’s Finance Ministry is up for releasing the first version of the third quarter (Q2) Gross Domestic Product (GDP) figures for 2022 at 23:50 GMT on Monday, early Tuesday morning in Asia.

Market consensus bears the burden of the global supply chain blockade, mainly due to the Russia-Ukraine tussle, which in turn weighs on the GDP forecasts suggesting a 0.30% QoQ figure versus 0.9% prior. The details mention that the Annualized GDP is expected to have eased 1.1% from 3.5% in previous readings.

Considering the Bank of Japan’s (BOJ) defense of the easy money policies, today’s Japanese GDP data appears the key to the USDJPY pair buyers, especially due to the latest rebound.

Ahead of the event, Westpac mentioned,

How could it affect USD/JPY?

Considering the risks to Asia’s major economy highlighted by the BOJ policymakers, in the latest meeting, any further weakness in the GDP figures will push the Japanese central bank towards further easing. However, the policymakers are already conveyed their easy-money policy during the times when the major central banks were rushing towards higher rates. Hence, today’s Japanese GDP numbers, even if provide a positive surprise, might not be able to renew the Japanese Yen’s (JPY) strength unless being extremely high.

Technically, the USDJPY pair’s daily closing below the 100-DMA support, now immediate resistance around 140.85, keeps the pair directed towards an upward-sloping support line from late May, close to 136.80 at the latest.

Key Notes

USDJPY reclaims 140.00, after dropping to multi-month lows at around 138.00s

About the Japanese Q3 GDP

The Gross Domestic Product released by the Cabinet Office shows the monetary value of all the goods, services and structures produced in Japan within a given period of time. GDP is a gross measure of market activity because it indicates the pace at which the Japanese economy is growing or decreasing. A high reading or a better than expected number is seen as positive for the JPY, while a low reading is negative.

• NZDUSD struggles to extend the week-start pullback from a two-month high.
• The two-day-old symmetrical triangle, weekly support line restrict immediate moves.
• Oscillators favor bears but 0.6070 limited short-term declines.
• Monthly top, September’s high add to the upside filters.

NZDUSD struggles to keep bears on the board, after their fresh entry the previous day, as the quote seesaws near 0.6100 during Tuesday’s initial Asian session. In doing so, the Kiwi pair remains inside a symmetrical triangle formation established since the last Friday.

Given the bearish MACD signals and the downbeat RSI (14), not oversold, the NZDUSD bears are likely to keep the reins.

However, a clear downside break of the stated triangle’s support line around 0.6070 at the latest appears necessary. That said, the 50-HMA adds strength to the stated support levels.

Should the quote breaks the 0.6070 support confluence, the odds of witnessing a slump toward November 08 peak surrounding the 0.60000 psychological magnet can’t be ruled out.

However, an ascending trend line from November 03, close to 0.5890 by the press time, will challenge the NZDDUSD bears afterward.

Alternatively, an upside clearance of the triangle’s upper line, around 0.6120 at the latest, isn’t an open invitation to the NZDUSD bulls as the monthly high could probe the upside momentum around 0.6130.

Additionally, tops marked in September around 0.6165 also challenge the pair’s north-run.

NZDUSD: Daily chart

Trend: Limited downside expected

• GBPUSD has sensed pressure around 1.1800, following the footprints of the sideways DXY.
• UK Autumn Statement will deliver further clarity on closing the fiscal gap.
• British jobless claims may decline by 12.6k vs. an expansion of 25.5k reported earlier.

The GBPUSD pair declined in the early Asian session after sensing selling pressure while attempting to surpass the immediate hurdle of 1.1800. The Cable has turned sideways after a vertical rally as a market impulse has turned quiet ahead of the US midterm elections outcome.

S&P500 is facing immense pressure ahead of the midterm elections outcome. A majority win of Republicans for the House of Representatives will slow down the execution of expansionary policies ahead as they would be required confirmation from the former too before execution. Also, it will trigger political uncertainty in the economy.

The US dollar index (DXY) is auctioning in a chartered territory after registering a fresh three-month low of around 106.30.

This week, all eyes will remain on the contents of the UK Autumn Budget Statement from Chancellor Jeremy Hunt. The bifurcation of GBP 54bln into spending cuts and tax rises and dismantling of the ‘mini budget’ announced two months earlier by then UK PM Liz Truss will remain in focus. UK Chancellor warned earlier that everyone needs to sacrifice a bit by paying higher taxes to support the economy.

Support for energy bills from the government would be scaled down but support could be there for the low-income group.

Analysts at Danske Bank believe that “While we expect the Autumn Statement to deliver further clarity on closing the fiscal gap, we broadly expect a muted reaction in GBP.”

But before that, investors will keep an eye on the UK employment data, which will release on Tuesday. The jobless claims are expected to display a withdrawal of 12.6k against claims executed in the prior release. The Unemployment Rate is seen as stable at 3.5%.

UK Prime Minister (PM) “Rishi Sunak will announce a significant rise in the national living wage and give eight million households cost of living payments worth up to £1,100 as he prioritizes support for the poorest over universal measures,” per The Times.

The news also adds, “The Times has been told that the prime minister and Jeremy Hunt, his chancellor, will accept an official recommendation to increase the living wage from £9.50 an hour to about £10.40 an hour — a rise of nearly 10 percent. The move will benefit 2.5 million people. One government source suggested that the increase could be even higher.”

Earlier in the day, UK Chancellor Jeremy Hunt was cited drawing lines for the new windfall tax on electricity generators, per the Financial Times (FT). “Jeremy Hunt is preparing a raid on electricity generators with a new tax on their “excess returns” as he tries to find money to pay for an inflation-linked rise in benefits and pensions while extending help for households with energy bills,” mentioned the news.

GBPUSD remains pressured

With the dicey markets and the Cable pair trader’s anxiety ahead of the key UK employment report, GBPUSD remains depressed around 1.1750, keeping the previous day’s pullback from the 11-week high.

• USDCAD grinds higher after bouncing off the 100-DMA.
• Downbeat RSI, MACD conditions favor bears but multiple hurdle before 1.3200 challenge further downside.
• 50-DMA, monthly resistance line add to the upside filters.

USDCAD treads water around 1.3315, after bouncing off the two-month low surrounding the 100-DMA during early Tuesday morning in Asia.

That said, a clear downside break of the support-turned-resistance line from early August, around 1.3400 by the press time, keeps sellers hopeful.

Also keeping sellers hopeful are the downbeat Relative Strength Index (RSI), (located at 14), as well as the bearish MACD signals.

However, a daily closing below 1.3315 becomes necessary for the USDCAD bears to aim for the early September swing high, surrounding 1.3200.

Alternatively, the aforementioned resistance line, previous support near 1.3400, precedes the 50-DMA hurdle surrounding 1.3530 to challenge USDCAD bulls.

In a case where the USDCAD pair manage to stay firmer past 1.3530, a downward-sloping resistance line from October 13, close to 1.3730, will act as the last defense of the pair bears.

Following that, a run-up toward refreshing the yearly high, currently around 1.3980, can’t be ruled. Also acting as an upside filter is the 1.4000 psychological magnet.

Overall, USDCAD is likely to recover but the upside move appears tepid.

USDCAD: Daily chart

Trend: Limited recovery expected

• EURUSD is facing barricades around 1.0350 amid the unavailability of any potential trigger.
• Fed Brainard supported the view of trimming the rate hike pace due to a steep fall in October inflation report.
• Going forward, Eurozone GDP will be of utmost importance.

The EURUSD pair is sensing a capped upside around 1.0350 in the Tokyo session. Quite market mood due to the absence of a potential trigger has shifted the currencies into the rangebound structure. On a broader note, the asset is displaying topsy-turvy moves in a 1.0271-1.0350 range from Monday’s trading session.

The upside in the US dollar index (DXY) is restricted due to rising odds for a slowdown in the pace of rate hikes by the Federal Reserve (Fed). While anxiety ahead of the US midterm elections is providing some cushion to the mighty DXY at the downside.

Chances of shifting hands of stewardship for the US House of Representatives to Republicans weighed pressure on S&P500. A majority win of Republicans will not be in favor of expansionary policies to be announced later as those policies will have to go through Republicans’ confirmation before execution.

A rebound move in the 10-year US Treasury yields remained marginal to near 3.87% as the CME FedWatch tool claims that the chances of a fifth consecutive rate hike by 75 basis points (bps) in December monetary policy are extremely low.

Also, Fed Vice Chair Lael Brainard supported the view of reducing the pace of policy tightening. He cited that “It will soon be appropriate for the Federal Reserve to reduce the pace of its interest rates hikes”, in an interview with Bloomberg.

On the Eurozone front, the Gross Domestic Product (GDP) data will be of utmost importance. As per the consensus, the annual Gross Domestic Data (GDP) is expected to remain stable at 2.1%. The economy is facing the turbulence of soaring inflation, energy crisis, and supply chain bottlenecks due to Russia-Ukraine tensions. Therefore, a stable GDP data might be supportive for the shared currency.

• Gold could be on the verge of a move into the recent length built in November's rally.
• Bears are lurking at critical resistance as Monday establishes a fresh corrective high.

Despite a firmer US Dollar, the Gold price edged higher on Monday to a fresh three-month high even as US yields moved higher following Friday's US Consumer Price Index miss vs. the expectations. The yellow metal continues to garner demand based on traders betting that the Federal Reserve would ease off on big interest rate hikes following Friday's inflation data. 

Despite a hawkish Federal Reserve meeting, whereby the Fed Chair, Jerome Powell, pushed back against the market's reaction to a dovish statement by arguing that the terminal rate could be higher than first anticipated, commodity prices have been staging a rally off year-to-date lows. There are a number of components to the switch in sentiment, including speculation that China will ease its restrictive zero-Covid policies. There had been growing speculation, due to a series of less inflationary outcomes in the US data of late, that a Fed pivot was on the horizon. 

Friday's US consumer prices rose 0.4% for the month of October, up 7.7% over the year. This was down from 8.2% year over year in September and 0.2 percentage points below consensus, as was the ex-food and energy reading of 6.3%. This was a welcome report and the market reaction included a 5.5% surge in the S&P 500 and a 26 basis point drop in the 2-year Treasury yield that sent gold through the roof and the greenback off a cliff. Gold traders had already been focused on the rise in money manager short positioning over the last months leading to substantial short covering beyond the $1,720 resistance.

Fed speakers eyed

Meanwhile, risk events for the week ahead will lie with the Fed speakers, US Retail Sales, Chinese activity data, and updates with regard to the COVID noise in Chinese markets. As for Fed speakers, the US Dollar was thrown a lifeline by Fed's Christopher Waller who crossed the wires before the open and said Friday's inflation report was "just one data point," and that markets are "way out in front". 

Consequently, the US Dollar was bid at the start of the week: US Dollar bulls could start to emerge in the opening sessions:

On the other side of the spectrum, Fed Vice Chair Lael Brainard said on Monday that it will soon be appropriate for the Fed to reduce the pace of its interest rate hikes. 

A slew more speakers are slated and analysts at TD Securities said ''Fed speakers are likely to push back on the overly dovish market reaction after the October CPI report. Officials will make clear that following the positive news on the inflation front, there must be further evidence of sustained monthly core inflation that is more in line with their 2% target. And given the persistent strength of the labor market, this may take a while.''

As for US Retail Sales, the analysts at TDS said, ''we look for retail sales to accelerate in October, following a largely sideways move in September. Spending was likely boosted by a significant increase in auto sales and the first gain in gasoline station sales in four months. Importantly, control group sales likely rose firmly, while those for bars/restaurants probably retreated following two months of expansions.''

Gold technical analysis

As per the start of the week's pre-open analysis, Gold, The Chart of the Week: XAUUSD bears licking their lips, watching for lower timeframe distribution, the yellow metal bears are lurking with the price on the backside of the now broken trendlines (counter trendlines): 

• Broad US Dollar strength keeps most G8 currencies weakening, except for the NZD.
• Vice-Chair Brainard boosted hopes that the Federal Reserve might slow its pace of interest-rate increases.
• The New Zealand Dollar (NZD) traders focus shifts on housing data, to be released around 21:30 GMT.

The New Zealand Dollar (NZD) advances in the North American session, even though Fed speaking bolstered the US Dollar (USD), a late intervention of the Federal Reserve (Fed) Vice Chair Brainard turned sentiment positive. Therefore, the NZDUSD is trading at 0.6113, above its opening price by 0.49%.

Federal Reserve’s Vice-Chair Brainard shifted sentiment positively

US equities turned green. Fed Vice-Chair Lael Brainard said that the Fed would soon reduce the pace of rate hikes and supports a 50 bps interest-rate increase. Nevertheless, she emphasized that the US central bank would not ease and acknowledged that “we have additional work to do.” Echoing her comments was Fed Governor Christopher Waller, who said that the Fed “still got a ways to go” in tightening monetary conditions. He added that the US Central Bank could moderate to 50 bps increases in December or following that meeting and cautioned Fed officials are not close to pausing.

Data-wise, the New York Fed survey of consumer inflation expectations in October rose to 5.9% in a one-year horizon, while the 3-year jumped to 3.1%. Increases in inflation expectations reflect high gasoline prices.

Meanwhile, the US Dollar Index advances 0.27%, up at 106.710, failing to underpin the USD against the NZD.

Aside from this, on Monday’s Asian session, New Zealand’s calendar revealed that the services and Composite Performance of Services (PSI) jumped by 1.5 points, exceeding the previous month’s reading from 55.9 to 57.4, while the latter edged lower to 53.1 from 54.1

What to watch

The New Zealand economic docket will feature REINZ housing data. On the US front, the October Producer Price Index (PPI) and Fed speakers like Patrick Harker, Lisa Cook, and Michael Barr.

NZDUSD Key Technical Levels

• USDCAD is on the brink of a move higher as the US Dollar firms. 
• WTI pressured on Covid cases in China, denting CAD. 

USDCAD is making tracks on the upside on Monday, partly as oil prices fall and the greenback rallies against a basket of major currencies. The US Dollar is accumulating as investors kept their focus on the Federal Reserve's interest rate hiking path. Ahead of the open, a Fed member poured cold water over the US consumer Price Index upside surprise, arguing it was too soon to call for a pivot. 

At the time of writing, USDCAD is trading at 1.3286, up 0.27% on the day having traded between a low of 1.3239 and 1.3309 so far. The US Dollar index, DXY, is up some 0.2% having climbed from a low of 106.41 and reached a high of 107.27 so far, supported by comments from Federal Reserve Governor Christopher Waller. He crossed the wires and said Friday's inflation report was "just one data point," and that markets are "way out in front". 

Key comments

• Will need to see a run of CPI reports to take a foot off the brake.    
• Positive that goods prices came down with some moderation in services, but it needs to continue.  
• US policy rate is "not that high" given level of inflation.  
• Rate hikes so far has not "broken anything.  
• The US housing market needed to slow down. 
• Signal was to pay attention to the endpoint not the pace of rate increases, and until inflation slows the endpoint is "a ways out".  

Meanwhile, both US and Canadian government bond yields have been mixed following the Remembrance and Veterans Day holidays on Friday.  In this regard, we will have the Canadian inflation data for October, due on Wednesday. This could offer clues on the Bank of Canada's policy outlook. Money markets expect the central bank to raise interest rates by at least 25 basis points at its Dec. 7 policy announcement. 

Elsewhere, the price of oil has been falling since the start of the day. The reports of surging new Covid-19 infections in China, even after the country relaxed some of its quarantine policies last week, have dented the market's stability. West Texas Intermediate crude is down some 3.3% falling from a high of $89.82 to a low of $85.68. The drop came, as Reuters reports, following the news agency's report that ''new Covid-19 infections were surging in Beijing and other cities even as the country, the world's No.1 oil importer last week relaxed some of the Zero-Covid policies that shut-down major cities for weeks at a time, cutting in demand, while the new policies are seen as supportive for the country's economy.''

USDCAD weekly chart

The M-Formation is a compelling bullish feature, but there could still be some downside to come. 

A break of the support opens up the way to dynamic trendline support.

What you need to take care of on Tuesday, November 15:

The American Dollar enjoyed some temporal demand at the beginning of the week but quickly resumed its decline ahead of the US opening, ending the day near its recent lows against most major rivals. Market players saw the greenback’s near-term appreciation as an opportunity to sell it, reflecting that the tie has changed.

Global stocks struggled to extend last week’s rally, but most indexes posted gains, while US government bond yields ticked modestly higher.

Market players struggled to digest negative news coming from China,  as the country keeps reporting record coronavirus contagions in Beijing and other big cities. The government has a zero-covid policy, which may lead to stricter lockdowns and the interruption of global shipments.  The country will release some first-tier macroeconomic figures on Tuesday, which may lead the market’s sentiment, at least throughout the Asian session.

On the other hand, there are growing hopes tensions between Russia and Ukraine could soon ease after Moscow retreated and Ukrainian President Volodymyr Zelenskyy noted the country is ready for peace. However, the news should be taken with a pinch of salt, as it seems pretty unlikely Russia will back from the separatist regions.

Meanwhile, US President Joe Biden met his Chinese counterpart Xi Jinping during the G20 summit in Bali. The versions of the outcome differ according to national sources. On the one hand, US President Biden said they are not looking for conflict and will not be a new Cold War. On the other, Chinese media reported that President Xi warned his US counterpart about crossing a “red line” on Taiwan. Both Presidents said they wanted to find the right direction and manage their differences.

The EURUSD pair trades a few pips below Friday’s high at 1.0363 while GBPUSD battles to regain the 1.1800 level. The Australian Dollar reached a fresh November high in the 0.6720 area and is poised to extend its advance. The USDCAD pair, on the other hand, ticked north and trades around 1.3290 amid the poor performance of oil. Crude oil prices were sharply down amid Chinese news, with WTI trading at around $86.10 a barrel.

On the other hand, spot gold remained strong, with XAUUSD now hovering around $1,773 a troy ounce.

The USDJPY is up, a few pips below the 140.00 threshold, while USDCHF is down, hovering around 0.9410.

FTT price barely holds $1 as Binance's CZ hints at a new proof of reserve mechanism

• Federal Reserve members stressed the need to prolong rate hikes, even though at a slower pace, bolstering the US Dollar.
• The Swiss Franc continues to strengthen against the US Dollar.
• Based on data, SNB Governor Thomas J. Jordan said they could hike in December.
• USDCHF Price Analysis: To continue weakening once it clears 0.9370.

The USDCHF extends some of last week’s losses, courtesy of the Federal Reserve’s official hawkish commentary, which spurred risk aversion in the financial markets. Therefore, global equities dropped while the safe-haven status of the US Dollar rose. At the time of writing, the USDCHF is trading at 0.9410, registering decent losses of 0.18%.

Vice-Chair Brainard sees appropriate slowing the pace of rate hikes

US equities dwindled following remarks by two Federal Reserve (Fed) board members. During the weekend, Christopher Waller said that the Fed “still has ways to go” regarding tightening monetary conditions. He added that the Central Bank is not close to pausing and that it could moderate the size of interest-rate increases to 50 bps at their December meeting or the one after that, reiterating that the US central bank is not close to pausing.

Of late, the Fed Vice-Chair Lael Brainard commented that it’s appropriate to slow the pace of rate hikes, though emphasized that “we(Fed) have additional work to do.” Brainard added that it would take some time for the cumulative tightening “to flow through” the economy. She said that October’s CPI print might suggest that the Fed’s favorite gauge for inflation, the Core PCE, “might be also showing a little bit of reduction.”

On the Swiss Franc side, the Swiss National Bank (SNB) Chairman of the Governing Board, Thomas J. Jordan, crossed newswires. He said that Swiss growth is foreseen to be weaker in 2023 than in the current year and added that unemployment would not prevent additional rate hikes. Jordan said inflation has broadened and predicts a “great probability” that the SNB would need to tighten conditions. Regarding the December meeting, he said that the Central Bank could hike, but it will depend on data.

Therefore, the USDCHF is expected to lean on US and Switzerland’s economic data alongside monetary policy. However, speculations for a Fed pivot would likely keep the US Dollar on the defensive, propelling the Swiss Franc prospects for a stronger Swissy. Hence, the USDCHF could test August’s monthly lows at around 0.9370 before extending its fall to the YTD low at 0.9091.

USDCHF Price Analysis: Technical outlook

From a technical perspective, the USDCHF free fall will likely continue after dropping below the 200-day Exponential Moving Average (EMA) at 0.9617. Also, once the USDCHF tumbles below the August 11 daily low at 0.9379, that could open the door towards testing the YTD low at 0.9091. Of note, the Relative Strength Index (RSI) is oversold, but due to the strength of the downtrend, it could fall towards 20, marked by “some” analysts, as the most extreme oversold condition.

Therefore, the USDCHF key support levels lie at 0.9400, followed by the August 11 low at 0.9379. A Break below will expose the April 12 swing low at 0.9286, ahead of the February 21 daily low at 0.9150.

• AUDUSD bears are lurking at a key area of resistance.
• US Dollar showing signs of accumulation in lower time frames. 

As per the start of the week's pre-open analysis: AUDUSD Price Analysis: A deceleration opens risk of a break to 0.6650 and below, the price continues to decelerate on Monday. 

So far, AUDUSD has stuck to a 0.6663 / 0.6716 range and is flat on the day so far:

AUDUSD H1 chart

The bears are pressing below 0.6750 and 0.6700 is under pressure. A break of 0.6650/40 opens the risk of a significant bearish correction.

AUDUSD daily chart

The daily chart's W-formation is a significant feature for the week ahead. This is a reversion pattern whereby the price would be expected to move into the neckline of the formation in due course. The Fibonacci scale has the 61.8% ratio aligned with the neckline on the way down below the first target as being the 38.2% Fibo below 0.66 the figure. 

The trajectory will depend on the US Dollar which is currently showing all of the signs of accumulation on the hourly chart: 

• Federal Reserve officials and risk aversion underpin the US Dollar.
• The Japanese Yen fails to gain traction after BoJ’s Kuroda comments.
• The USDJPY is forming a bullish harami, which could exacerbate a test of 142.50.

After diving more than 5% in the last week, the USDJPY is staging a comeback, bouncing off the last week’s lows around 138.00 and climbing over 150 pips. Factors, like Federal Reserve’s policymaker hawkish commentary, triggered a risk-off impulse, as depicted by US equities falling. At the time of writing, the USDJPY is trading at 140.28, above its opening price by 1.10%.

US Dollar underpinned by Federal Reserve commentary

Sunday’s hawkish commentary by Federal Reserve (Fed) Governor Christopher Waller shifted sentiment sour. Waller commented that the Fed “still has ways to go” lifting interest rates and added that the Central Bank could moderate the size of interest-rate increases to 50 bps at their December meeting or the one after that, reiterating that the US central bank is not close to pausing.

Meanwhile, the Fed Vice-Chair Lael Brainard is crossing newswires, saying that the most recent CPI suggests that Core Personal Consumption Expenditures (PCE)  could also show a reduction. She added that it would be appropriate to slow the pace of hikes, and further rate hikes would be data-dependent.

The US Dollar Index, a gauge of the greenback’s value against a basket of peers, extended its gains by 0.36%, up at 106.807, after falling to three-month lows at 106.281. in the meantime, the US 10-year Treasury yield edged down one bps at 3.865%, capping the USDJPY rally around the current exchange rates.

Japanese economy picking up, says BoJ Kuroda

Aside from this, in the Asian session, the Bank of Japan (BoJ) Governor Haruhiko Kuroda said the economy was picking up and reiterated that monetary policy conditions would remain at ease to support the US economy. Kuroda added that the BoJ is watching the impact of raw material inflation and monitoring the effects of the FX market.

USDJPY Price Analysis: Technical outlook

The USDJPY is neutral biased, even though it cleared the 100-day Exponential Moving Average (EMA) at 140.79, exposing the USDJPY to selling pressure. Of note, the Relative Strength Index (RSI) exited from oversold conditions, suggesting that sellers are losing momentum. Also, USDJPY’s last two days’ price action is forming a bullish-harami pattern.

If the USDJPY clears the 100-day EMA, the next resistance would be the psychological 141.00 figure. Once cleared, the following resistance would be November’s 11 daily high at 142.48, followed by the 50-day EMA at 145.37.

Swiss National Bank Chairman Thomas Jordan who hinted recently that further interest rate hikes were on the way from the central bank, saying "determined action" is required to check rising prices has said in trade today there is a "great probability" that the SNB will need to tighten monetary policy further as inflation is likely to remain elevated for a while.

He also said the nominal appreciation of the Swiss franc is helping guard against inflationary pressure. Jordan had said last week the SNB was prepared to take "all measures necessary" to bring inflation back down to its 0-2% target range and that current monetary policy was not restrictive enough to do the job.

Key quotes

USDCHF update

Meanwhile, USDCHF's downside is decelerating and the M-formation could be a significant feature for the week ahead as a reversion pattern that is kicking in at a 150% range expansion of the first week of business conducted in November:

It will soon be appropriate for the Federal Reserve to reduce the pace of its interest rates hikes, Fed Vice Chair Lael Brainard said on Monday.

"I do think there is very strong agreement among committee members about the need to show resolve," Brainard said in an interview with Bloomberg in Washington.

"But we do have, and I think this is really important, we do have very full discussions among committee members...(about) how much restraint, for how long, what data do we look at...So I think there's healthy discussions and I do believe that it's going to be very important to have those different perspectives informing our policy deliberations."

Key comments

Her comments follow Fed's Christopher Waller who sparked a bid into the US Dollar at the start of the week when he said, Friday's inflation report was "just one data point," and that markets are "way out in front". He added ''will need to see a run of CPI reports to take a foot off the brake. ''

DXY is in a phase of accumulation for the start of the week as per the hourly chart above. 

The USDCAD is seen moving to the upside over the next quarters, although at a slower pace after the recent decline of the US Dollar, according to analysts from Danske Bank. They forecast USDCAD at 1.36 in a month, and at 1.39 in a six-month horizon. 

Key Quotes: 

“Similar to other central banks that have lead the global tightening cycle Bank of Canada has also slowed down its hiking pace amid weaker growth prospects. With BoC having hiked policy rates to 3.75% and with signs of slowing growth and not least housing market we maintain a final 50bp hike for the December meeting which we expect will mark the final hike of this cycle.”

“In terms of spot we regard relative rates and the global environment as supportive of USD/CAD. The cross will remain highly sensitive to markets pricing Fed pivot and China optimism – in either direction – leaving the potential of big spot moves in the months ahead.”

“In light of the recent drop in the broad USD, we lower our USD/CAD profile but maintain an upward slowing trajectory.”

Analysts at Danske Bank continue to see the EURUSD pair with a bearish bias over the next months. They forecast the pair at 1.00 in a month and at 0.95 in a six-month horizon. 

Key Quotes: 

“The large negative terms-of-trade shock to Europe vs US, a further cyclical weakening among trading partners, the coordinated tightening of global financial conditions, broadening USD strength and downside risk to the euro area makes us keep our focus on EUR/USD moving still lower (targeting 0.93) – a view not shared by the consensus.”

“The key risk to shift EUR/USD towards 1.15 is seeing global inflation pressures fade and industrial production increase. However, ‘transitory’ has substantially lost credibility and European industrial production continues to be weak. This will continue as manufacturing PMIs heads below 50. The upside risk also include a renewed focus on easing Chinese credit policy and a global capex uptick but neither appear to be materialising, at present.”
 

• The USDCAD marches firmly toward 1.3300 following Fed official hawkish remarks.
• Federal Reserve Waller said the Fed could hike 50 bps in December or after that meeting.
• The US Dollar got bolstered by Waller’s remarks, while US Treasury yields rose.
• The Loonie is at the expense of Canadian CPI and GDP data throughout the week.

The USDCAD slightly recovers after losing for two consecutive days. The pair bounced around the 100-day Exponential Moving Average (EMA) at 1.3229, following hawkish remarks by Fed officials on Sunday. Even though factors like China’s easing Covid-19 conditions added to investors’ optimism, Fed’s Waller remarks, suggesting further tightening, spurred risk aversion. At the time of writing, the USDCAD is trading at 1.3280, up by 0.20%.

US Dollar bolstered by Fed policymaker remarks

Risk aversion is the name of the game on Monday. Sunday remarks by Federal Reserve (Fed) Governor Christopher Waller triggered a risk-off impulse. Waller said that the Fed “still has ways to go” hiking rates and commented that the US central bank could moderate the size of interest-rate increases to 50 bps at their December meeting or the one after that, reiterating that the US central bank is not close to pausing.

The US Dollar (USD), underpinned by Waller’s remarks, edged higher, as shown by the USDCAD, bottoming at around 1.3250 and climbing toward its daily high at 1.3306.

Canadian CPI and GDP data will influence Loonie’s direction

Meanwhile, on the Canadian front, the Bank of Canada (BoC) Governor Tiff Macklem said that inflation is too high and that lower-income Canadians will be “disproportionally” affected by the economic slowdown. Aside from this, the Loonie would be at the expense of the Canadian Consumer Price Index (CPI) on Wednesday, with investors expecting CPI to edge higher to 7.0% YoY in October.

Ahead in the week, the US economic docket will feature the Fed Vice-Chair Lael Brainard, October’s Producer Price Index (PPI), and the NY Empire State Manufacturing Index. On the Canadian front, New Motor Vehicle Sales, and Manufacturing/Wholesale Sales MoM for September, will shed some light ahead of Q3 GDP.

USDCAD Price Analysis: Technical outlook

From a technical perspective, the USDCAD is neutral-to-downward biased, though it would be “firmly” cemented if CAD buyers clear the 100-day EMA, as the head-and-shoulders chart pattern remains in play. The head-and-shoulders target is  1.3033, ahead of the 200-day EMA at 1.2979.

If the USDCAD clears the 1.3300 figure, a test of the November 11 daily high at 1.3360 is on the cards. Otherwise, the major could fall towards the 100-day EMA, ahead of the 1.3200 figure. A breach of the latter will expose the 1.3100 figure ahead of the head-and-shoulders chart pattern target.

Investors will likely remain on the defensive regarding Brazil taking into account the transition to a new government after Lula's triumph, according to analysts from Rabobank. They see USDBRL at 5.30 by year-end.  

Key Quotes: 

“Externally, US consumer price positively surprised and increased less than consensus in October, suggest inflation is colling down. The CPI core index also came below the expected. On Friday, China announced measures to relax some measures against Covid. Among the main measures announced, the Chinese government reduced the period of mandatory quarantine for travellers entering the country. And from now on, people who have had contact with carriers of the Covid-19 virus will be isolated for only 5 days, two less than previously required.”

“We still believe the Fed will remain hawkish, the USD will keep its safe haven status, and domestically the transition to a new government will feed defensive positions. We still see the USDBRL at 5.30 by end-22.”

• Dollar’s recovery loses momentum, even as US yields rebound.
• EURUSD stabilizes around 1.0300, holds firm onto recent gains.
• More US inflation data due on Tuesday.

The EURUSD pair erased intraday losses after climbing back to the 1.0330 zone. Earlier the pair bottomed at 1.0270 but then the Greenback lost momentum across the board, triggering the rebound.

EURUSD holds onto recent gains

After an impressive two-day rally, EURUSD stabilized around 1.0300. So far the correction has been limited and the bias continues to point to the upside, despite overbought readings. While under 1.0350/60, gains seem limited.

The Dollar pulled back during the American session even as US yields moved higher. The US 10-year stands at 3.89% and the 2-year at 4.43%. Equity prices in Wall Street are moving off highs.

EURUSD holds onto most of recent gains that followed the release of the October US Consumer Price Index that boosted expectations of a less aggressive Federal Reserve. On Tuesday, the Producer Price Index is due and could impact markets. More signs of a slowdown in inflation could weigh further on the dollar, while the contrary could prompt a steep correction of the dollar.

“The market is now leaning into this week’s slew of scheduled Fed commentary with the risk that the collective tone will remain hawkish.  Over the weekend, the Fed’s Waller suggested that “the market seems to have gotten way out in front over this one CPI report”.  Strong resistance awaits in the EUR/USD1.03.50/70 area.  We see risk that parity will be hit again before this area is breached”, explained analysts at Rabobank.

In the Eurozone, data released on Monday showed a bigger than expected increase in Industrial Production. On Tuesday, data to be released includes Q3 employment, GDP and confidence.

Technical levels

The Federal Reserve Bank of New York's monthly Survey of Consumer Expectations showed on Monday that the US consumers' one-year inflation expectation rose to 5.9% in October from 5.4% in September.

Additional takeaways

"Expected inflation three years from now rises to 3.1% in October vs Sept 2.9%."

"Expected inflation five years from now rises to 2.4% in October vs Sept 2.2%."

"Year-ahead gasoline price marks record one month expected jump, hits 4.8% in October."

"Expected year-ahead home price change steady at 2% in October."

"Year-ahead expected household income rise hits record 4.3% in October."

"Expected unemployment level year from now highest since April 2020."

Market reaction

The US Dollar Index showed no immediate reaction to this publication and it was last seen gaining 0.45% on the day at 106.90.

According to Reuters, last week the USD suffered the biggest weekly decline since the era of freefloating exchange rates began over 50 years ago. Nonetheless, economists at Rabobank expect the EURUSD to return to parity.

New dawn or false dawn?

“The market’s focus on peak inflation is misplaced with the issue for the Fed more likely to be about the persistence of price pressures. This implies that once Fed rates do reach their peak level, that they will then stay higher for longer. This suggests that the USD could hold on to most of this year’s gains for longer.”

“By the ECB’s next policy meeting, Germany may already be in recession. As has been in the case in the UK in recent months, there is no guarantee that the EUR will response favourably to higher rates if the economic backdrop appears grim. Although we see the risk of recession in the US next year, the outlook is not as severe as in Europe.” 

“Strong resistance awaits in the EURUSD 1.03.50/70 area. We see risk that parity will be hit again before this area is breached.” 

• Pound under pressure at the beginning of an important week.
• EURGBP approached last week high near 0.8830.
• Consolidation above 0.8830 could open the doors for 0.8900.

The Pound is among the worst performers across the G10 space on Monday. EURGBP broke above 0.8800 and climbed to 0.8813, reaching the highest level since Thursday.

EURGBP gains momentum 

The cross remains near the top supported by a weaker Pound across the board. While GBPUSD trades at daily lows under 1.1730, EURUSD is moving toward daily highs above 1.0330.

Economic data from the Eurozone showed an increase in Industrial Production of 0.9% in September, above the 0.5% expected. On Tuesday, employment and GDP data are due.

In the UK, employment data will be reported Tuesday. The unemployment rate is expected to remain steady at 3.5%. On Wednesday, October CPI is due, with the headline expected to rise to 10.7% from 10.1%.

The key event will be the Autumn Budget statement on Thursday. “Markets await Chancellor Hunt’s Autumn Statement on Thursday. Hunt faces a delicate balance of trying to shore up UK policy credibility to reassure markets and the GBP, whilst making spending cuts and revenue enhancements that do not weaken already soft support for the Conservatives even further”, said analysts at Scotiabank.

Technical levels

Gold capitalized on risk flows and the broad-based US Dollar weakness last week and gained over 5%. In the absence of high-impact macroeconomic data releases this week, the risk perception is likely to continue to impact the US Dollar's valuation and Gold price's action. 

Risk flows are likely to continue to weigh on US Dollar

“October Industrial Production and Retail Sales figures from China will be released on Tuesday. Investors, however, are likely to ignore these data and stay focused on developments surrounding the Covid restrictions. In case China continues to ease its rules, Gold price should stretch higher on improving demand outlook.”

“On Wednesday, the US Census Bureau will publish the October Retail Sales data. The Federal Reserve Bank of Philadelphia’s Manufacturing Survey and the US Department of Labor’s weekly Initial Jobless Claims data will be the last data of the week from the US on Thursday.

Since the above-mentioned data releases don’t have the potential to move the markets in a significant way, participants will keep a close eye on Fedspeak and the overall risk perception.”

“In case global equity indexes preserve the bullish momentum, XAUUSD could capitalize on the broad US Dollar weakness.”

Japan will release third quarter (Q3) Gross Domestic Product (GDP) figures on Monday, November 14 at 23:50 GMT and as we get closer to the release time, here are forecasts from economists and researchers of four major banks regarding the upcoming growth data. 

Growth is expected at 1.2% SAAR vs. 3.5% in Q2 and expected at 0.3% quarter-on-quarter vs. 0.9% in Q2.

Standard Chartered

“We expect GDP growth to have slowed to 0.3% QoQ (seasonally adjusted) from 0.9% in the previous quarter when the growth rebound was boosted by pent-up demand. We expect GDP to continue to expand, albeit at a slow pace, reflecting a gradual recovery from the pandemic impact. Also, weaker global growth due to China’s zero-COVID policy and the prolonged Russia-Ukraine war likely weighed on Japan’s exports. That said, easing supply bottlenecks in the auto sector and an improving COVID-19 situation may have supported growth. Japan’s job market has also remained resilient, likely supporting consumption, but limited wage growth likely weighed on consumption growth.”

ING

“Third quarter GDP in Japan is expected to grow 0.5% QoQ, seasonally adjusted, which is a slower pace than the previous quarter. Reopening effects still led the overall growth but higher inflation and the weak yen partially offset the recovery.”

Wells Fargo

“Japan is expected to report slower economic growth for Q3. Third-quarter GDP growth is forecast to slow to 1.2% QoQ annualized, reflecting a sharp slowdown in consumer spending even as investment spending is expected to continue rising at a steady clip. Against this relatively subdued economic backdrop, the BoJ appears unlikely to adjust its monetary policy stance for the time being, while the government is also pursuing another fiscal stimulus package to help consumers deal with higher living costs, while also supporting growth in the quarters ahead.”

SocGen

“We forecast real GDP growth of +0.3% QoQ (annualised, +1.2% QoQ) for 3Q22. Growth is expected to slow somewhat from the previous quarter due to downward pressure from the rapid spread of the novel coronavirus pandemic. A substantial increase in imports will also significantly depress growth in 3Q22.”

• GBPUSD dived from last week’s highs at around 1.1850s.
• Federal Reserve’s Waller: Could hike 50 bps at December’s meeting or the next one.
• After Waller’s remarks, the US Dollar rose, and the GBPUSD tumbled below 1.1800.
• The GBP would remain choppy trading ahead of the UK’s budget release on Thursday.

The Pound Sterling tumbled from around last week’s highs above 1.1800 against the US Dollar (USD) after a Federal Reserve (Fed) official stated that a move of 50 bps is on the radar for the next meeting or the one after that. Therefore a risk-off impulse capped the GBP rally, bolstering the USD. At the time of writing, the GBPUSD is trading at 1.1734, below its opening price by 0.80%.

Fed's Waller hawkish remarks boosted the US Dollar

Amidst the lack of US economic data in the calendar, investors are leaning on Fed officials speaking, particularly on Christopher Waller. Waller said that the Fed “still has ways to go” hiking rates and commented that the US central bank could moderate the size of interest-rate increases to 50 bps at their December meeting or the one after that, and reiterated that the Fed is not close to pausing.

The market reacted negatively to the remarks, as the GBPUSD dropped below 1.1800, while the greenback bounced off, as shown by the US Dollar Index (DXY), rising 0.56%, at 107.031. Regarding US Treasury bond yields, following Friday’s holiday, the 10-year benchmark note rate reached a daily high at 3.904% before dipping towards 3.863%.

Meanwhile, the Pound Sterling is expected to trade choppy as investors await the UK’s budget on Thursday, as Chancellor Jeremy Hunt is expected to release a fiscally responsible package. Newswires reported that around 40% of the GBP 55 billion of savings would come from tax hikes and 60% from spending cuts.

According to the Scotiabank analysts, they spot key support at around 1.1550, but firstly, the GBPUSD needs to surpass 1.1625/35. On the upside, a break above 1.2045, it’s the first resistance level.

What to watch

On Tuesday, the UK economic calendar will release employment figures for September. On the US front, the New York Empire Manufacturing Index for November, the October Producer Price Index (PPI), and Fed speakers like Patrick Harker, Lisa Cook, and Michael Barr.

GBPUSD Price Analysis: Technical outlook

From a daily chart perspective, the GBPUSD is neutral-biased after rallying above the 100-day Exponential Moving Average (EMA). Notably, falling below the September 13 daily high at 1.1738 would open the door for further losses. Why? UK fundamental data would likely keep the GBP pressured so that the GBPUSD might test the 100-day EMA at 1.1652. Once cleared, the next support would be the psychological 1.1600 figure, followed by the October 5 daily high-turned-support at 1.1495.

US Dollar rebounds to start the week as risk rally fades. Nonetheless, economists at Scotiabank note that USD risk reversals reflect a clear weakening in broader USD bull sentiment.

Further gains in US equity markets to weigh on the broader USD tone

“We note that USD risk reversals reflect a clear weakening in broader USD bull sentiment – a view we concur with, given the USD’s overextended gains.”

“The USD may find itself a bit more susceptible to soft economic data in the near-term at least and may struggle to improve materially, even if policymakers maintain a hawkish outlook for rates.”

“Further gains in US equity markets are liable to weigh on the broader USD tone.”

• The index reclaims the area above the 107.00 mark on Monday.
• US yields tread water amidst a generalized absence of direction.
• Fed’s Vice Chair L.Brainard discusses the “Economic Outlook” later.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors, keeps the bid tone unchanged following the opening bell in Wall St. on Monday.

USD Index appears supported around 106.30

The index regains some poise after the sharp decline seen in the second half of the last week, which was particularly sparked in response to lower-than-expected US inflation figures for the month of October and rising speculation of a Fed’s pivot in its policy.

The dollar appears bid at the beginning of the week on the back of some respite in the risk rally and some profit taking following the recent broad-based advance in the risky assets.

Nothing in the US docket on Monday should leave Fed Brainard’s discussion on the “Economic Outlook” as the main event later in the session.

What to look for around USD

The index attempts a moderate bounce past the 107.00 yardstick and partially leaves behind the post-CPI bearish move to the 106.30/25 band on Monday.

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: Producer Prices (Tuesday) - MBA Mortgage Applications, Retail Sales, Industrial Production, Business Inventories, NAHB Index, TIC Flows (Wednesday) - Building Permits, Initial Jobless Claims, Housing Starts, Philly Fed Index (Thursday) - CB Leading Index, Existing Home Sales (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 gaining 0.62% at 107.07 and faces the next up barrier at 109.08 (100-day SMA) seconded by 110.95 (55-day SMA) and then 113.14 (monthly high November 3). On the flip side, the breakdown of 106.28 (monthly low November 11) would open the door to 104.83 (200-day SMA) and finally 104.63 (monthly low August 10).

USDIDR gapped lower on Friday after being in a narrow range of about 15,650-15,750 over the past week. Economists at MUFG Bank expect the pair to trade within a 15,390-15,590 range this week.

USDIDR seen at 15,700 by the end of the year

“For the week ahead, we see a range of 15,390 to 15,590.”

“We currently forecast USDIDR at 15,700 at the end of the year. This comes as there may still be threats of Dollar strength in the coming months, even if we see slight downside risks to our forecast.”

S&P 500 has developed a steady rebound after failing to give a decisive break below graphical levels of 3,700/3,630. Economists at Société Générale expect the index to extend its bounce.

Defending 3,815 is essential for persistence in bounce

“Cross above last month high has resulted in a series of higher peaks and troughs highlighting short-term upside.”

“The index is expected to inch higher towards projections of 4,120/4,150 and perhaps even towards previous bearish gap near 4,218.” 

“August high of 4320 could be an important resistance.”

“Defending 3,815, the 38.2% retracement of recent move is essential for persistence in bounce.”

While speaking at a press conference following his meeting with Chinese President Xi Jinping, United States (US) President Joe Biden said that he does not think there is any imminent attempt by China to invade Taiwan.

Key quotes

"The US is bringing together a broad coalition together, will meet climate targets."

"We're going to compete vigorously but looking to manage competition responsibly."

"One-China policy has not changed."

"There need not be a new cold war."

"Xi and I agreed that we would have top officials meet to discuss details of every issue that we raised."

"Xi was direct and straightforward, think he is willing to compromise on certain key issues."

Market reaction

These comments don't seem to be having an impact on the US Dollar's performance against its major rivals. As of writing, the US Dollar Index was up 0.55% on the day at 107.00.

Sterling is softer, in line with most of its peers, in the session. In the view of economists at Scotiabank, GBP caution is likely to prevail ahead of Autumn Statement on Thursday.

Key support is 1.1550

“Markets await Chancellor Hunt’s Autumn Statement on Thursday. Hunt faces a delicate balance of trying to shore up UK policy credibility to reassure markets and the GBP, whilst making spending cuts and revenue enhancements that do not weaken already soft support for the Conservatives even further.”

“Expect relatively narrow range-trading for the GBP on the crosses ahead of the fiscal update.”

“Cable gains look to have stalled on the short-term chart. Broader trends – bullish longer-term price signals and the break above the major bear trend in place since the start of the year – remain intact, however.”

“We spot support at 1.1625/35. Key support is 1.1550. Resistance is 1.2045 (50% Fibonacci retracement of the 2022 decline).”

"Inflation is too high around the world, rapid increases in interest rates are raising the costs of servicing debt," Bank of Canada (BOC) Governor Tiff Macklem said on Monday, as reported by Reuters.

Macklem further noted that lower-income households will be disproportionately affected by the slowdown in economic activity that is needed to rebalance demand and supply.

Market reaction

These comments don't seem to be having an impact on USDCAD's action. As of writing, the pair was trading at 1.3275, where it was up 0.15% on a daily basis.

Economist at UOB Group Ho Woei Chen reviews the latest inflation figures in the Chinese economy.

Key Takeaways

“Headline CPI inflation eased to just 2.1% y/y in Oct, lowest since Apr-May when the inflation was also at 2.1% y/y. Tightened COVID curbs took a toll on domestic demand as core inflation (excluding food & energy) remained at an 18-month low of 0.6% y/y.”

“Inflation had averaged 2.0% y/y in Jan-Oct with full-year 2022 inflation likely well-below our forecast of 2.2% (2021: 0.9%). We keep our 2023 inflation forecast at 2.8% given expectation that China will ease its zero-COVID policy and start to reopen its borders.”

“PPI dipped into deflation for the first time since Dec 2020, to -1.3% y/y in Oct. A high comparison base will likely keep PPI in deflation through 1H23 while uncertainties remain for global commodity price movements that could affect the costs for producers.”

“We continue to see full-year PPI averaging 4.0-4.5% for 2022 (2021: +8.1%) and expect the PPI to be flat in 2023 as we factor in weaker global demand and expected PPI deflation in 1H23.”

“The disinflation pressure will likely stay in place until China starts to ease its strict zero-COVID policy. The PBoC may further ease its monetary policy amid weaker outlook for the economy.”

Economists at ABN Amro have revised their ECB view. They now see the terminal rate higher, but with cuts by the end of 2023.

ECB to start cutting rates in the final quarter of 2023

“We now expect the ECB to raise its deposit rate to 2.50% by the end of 2023Q1. Previously, our base case was for the ECB to hike to a peak level of 2.0% in December 2022 and, subsequently, pause.”

“We now also expect the central bank to start cutting rates again in the final quarter of 2023.”

• Gold corrects from a nearly three-month high amid the emergence of some USD buying.
• Bets for less aggressive Fed rate hikes act as a tailwind and help limit any further losses.
• Any meaningful pullback might be seen as a buying opportunity and remain cushioned.
• The XAUUSD still seems poised to climb further towards the $1,800 psychological mark.

Gold kicks off the new week on a weaker note and reverses a major part of Friday's gains to its highest level since August 17. A goodish pickup in the US Treasury bond yields, bolstered by Federal Reserve Governor Christopher Waller's hawkish comments on Sunday, assists the US Dollar to stage a solid bounce from the post-US CPI slump to a nearly three-month low. This, in turn, is seen as a key factor exerting some downward pressure on the dollar-denominated commodity. That said, rising bets for smaller interest rate hikes by the US central bank help limit deeper losses for the non-yielding yellow metal, at least for the time being.

Gold Price: Key levels to watch

The Technical Confluence Detector shows that any subsequent slide is likely to find decent support near the $1,756-$1,753 region - comprising Fibonacci 61.8% 1-Day and Pivot Point 1-Day S1. A convincing break below could accelerate the fall towards the $1,745 area - Fibonacci 23.6% 1-Week and Bollinger Band 1-Day Upper. Some follow-through selling below the $1,741 region - Pivot Point 1-Day S1 - will expose the $1,734 zone - Pivot Point 1-Day S3 - and the $1,730 level - Previous Month High and SMA 100 1-Hour.

On the flip side, immediate resistance is pegged near the $1,774 region - Pivot Point 1-Month R2. A sustained strength beyond should allow bulls to reclaim the $1,800 psychological mark - Fibonacci 161.8% 1-Month. The latter should act as a pivotal point, which if cleared decisively should pave the way for an extension of the upward trajectory witnessed over the past two weeks or so.

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’s rally seems to have met initial resistance around 1.0360.
• The surpass of this region opens the door to extra gains.

EURUSD comes under some marked downside pressure soon after hitting fresh peaks around 1.0360.

The continuation of the recovery looks the most likely scenario in the very near term. Against that, further upside could motivate the pair to trespass the August high at 1.0368 (August 10) and then target the always relevant 200-day SMA, today at 1.0432.

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

EURUSD daily chart

Extra weakness in USDIDR should meet tough contention around 15,340 in the short-term horizon, notes Markets Strategist Quek Ser Leang at UOB Group’s Global Economics & Markets Research.

Key Quotes

“While USD/IDR dropped sharply by 1.56% (Friday’s close of 15,490) last week, downward momentum has not improved much.”

“While USD/IDR could weaken further this week, any decline is expected to face solid support at 15,340 (minor support is at 15,450). Resistance is at 15,640, followed by 15,680.”

• USDJPY stages a goodish bounce from the 61.8% Fibo. level amid resurgent USD demand.
• The 141.00 confluence support breakpoint might keep a lid on the attempted recovery move.
• Bears might now wait for sustained weakness below the 138.45 area before placing fresh bets.

The USDJPY pair attracts some buying near the 61.8% Fibonacci retracement level of the August-October rally and reverses a major part of Friday's losses to a three-month low. The pair maintains its bid tone through the early European session and is currently placed comfortably above the 140.00 psychological mark.

The US Dollar kicks off the new week on a stronger note in reaction to hawkish remarks by Fed Governor Christopher Waller, saying that the US central bank was not softening its fight against inflation. Waller added that it will take a string of soft CPI reports for the US central bank to take its foot off the brakes.

The Japanese Yen, on the other hand, is undermined by the widening of the US-Japan rate differential, which is seen as another factor lending support to the USDJPY pair. It, however, remains to be seen if bulls are able to capitalize on the move amid firming expectations for less aggressive interest rate hikes by the Fed.

From a technical perspective, any subsequent move up is likely to confront stiff resistance near the 141.00  confluence support breakpoint. The said handle comprises the 100-day SMA and the 50% Fibo. level. Sustained strength beyond could trigger a short-covering rally and allow the USDJPY pair to reclaim the 142.00 mark.

On the flip side, the 140.00 round figure now seems to protect the immediate downside. Any further decline might continue to find support near the 61.8% Fibo. level, around the 139.00 mark. This is followed by Friday's swing low, near the 138.45 region, which if broken decisively will set the stage for a further depreciating move.

USDJPY daily chart

Key levels to watch

The USDCAD pair dropped to a little under 1.3250 in thin trading on Friday. Economists at Scotiabank see scope for further losses to the 1.3025 mark in the next few weeks. 

Minor USD gains look a sell from a technical perspective

“We spot resistance at 1.3325/50 and firmer USDCAD support at 1.3190/00.”

“We still think the measure move objective of the Head and Shoulders breakdown at 1.3025 is reachable in the next few weeks.”

“Minor USD gains look a sell from a technical perspective.”

USDSGD broke below the 1.4000 level, touching a low of 1.3767 in early 11 November trading. Economists at MUFG Bank expect the pair to trade within a range of 1.3610 to 1.3980 this week.

Still positive outlook for SGD

“In the near-term, we still see high inflation in Singapore anchoring expectations that the tight MAS monetary policy will stay, as a pull towards lower USDSGD. We anticipate that core inflation may only ease more markedly in H2-2023. 

“For the coming week, we see a range of 1.3610 to 1.3980 for USDSGD. We now see downside risks to our year-end forecast of 1.42.”

• USDCAD bounces off the 100 DMA support and is supported by a combination of factors.
• Falling oil prices undermine the Loonie and act as a tailwind amid a solid USD rebound.
• Bets for less aggressive Fed rate hikes might cap any further gains for the buck and the pair.

The USDCAD pair stages a modest recovery from the 100-day SMA support, around the 1.3240-1.3235 region and recovers a major part of Friday's losses to a nearly two-month low. The pair sticks to its intraday gains through the early North American session and is hovering around the 1.3300 mark.

Crude oil prices fell nearly 1.5% on the first day of a new week after OPEC lowered its forecast for 2022 global oil demand growth for the fifth time since April. This, in turn, undermines the commodity-linked Loonie, which, along with resurgent US Dollar demand, acts as a tailwind for the USDCAD pair.

The US Treasury bond yields regain positive traction in reaction to more hawkish comments by Federal Reserve Governor Christopher Waller on Sunday. During a conversation in Sydney, Australia, Waller noted that markets have overreacted to the softer October consumer price inflation last week.

Waller added that the US central bank was not softening its fight against inflation, and it will take a string of soft CPI reports for the Fed to take its foot off the brakes. Apart from this, a softer risk tone provides an additional lift to the safe-haven buck and continues to push the USDCAD pair higher.

That said, the latest optimism over an eventual scaling back of COVID-19 measures in China could help limit losses for crude oil prices. Apart from this, rising bets for less aggressive rate hikes by the Fed seem to cap any further gains for the buck and the USDCAD pair, at least for the time being.

In the absence of any major market-moving macro data, the fundamental backdrop warrants some caution before positioning for an extension of the intraday move up. This, in turn, makes it prudent to wait for strong follow-through buying before confirming that the USDCAD pair has formed a bottom.

Technical levels to watch

EURSEK has embarked on a pullback. Economists at Société Générale note that the pair could fall to the 10.64/60 support zone.

Daily MACD is dipping within negative territory

“Daily MACD is dipping within negative territory denoting possibility of continuation in decline.”

“A revisit of the 200-Day Moving Average and projections at 10.64/10.60 is not ruled out. This is a potential support zone. Achievement of this can lead to a short-term bounce towards the recent lower peak at 10.94.”

See: EURSEK to see choppy activity around the 10.90 level – Rabobank

• DXY’s sell-off appears to have met some contention near 106.30.
• Next on the upside now emerges the interim 100-day SMA above 109.00.

DXY sets aside two strong daily pullbacks and regains the area above 107.00 the figure at the beginning of the week.

In case bulls push harder, then the index could meet a temporary and initial hurdle at the 100-day SMA, today at 109.08, ahead of the now multi-month resistance line around 109.40.

Above the latter, the index could resume the upside in a more sustainable fashion.

DXY daily chart

In the view of Markets Strategist Quek Ser Leang at UOB Group’s Global Economics & Markets Research, USDMYR could extend further the corrective decline.

Key Quotes

“The uptrend in USD/MYR appears to have ended as it plunged by 2.55% last week. Strong downward momentum suggests the pullback in USD/MYR has room to extend.”

“In view of the oversold conditions, a sustained decline below 4.5500 is unlikely this week. On the upside, a break of 4.6500 would indicate that the weakness in USD/MYR has stabilized.  Looking ahead, the next support level below 4.5500 is at 4.5200.”

EURUSD corrects from peaks. However, economists at Scotiabank expect still think that broader trends are bullish.

Key support aligns at 1.0095/00

“EUR losses look a little more material on the short-term chart, with spot well-capped in the upper 1.03 zone. However, EUR losses may still reflect a consolidation, rather than a reversal. We look for firmer support in the low/mid 1.02s in the short run.”

“Broader trends are bullish and do support the impression of a longer run base/reversal in the EUR in development.”

“Key resistance is 1.0375/80. Key support is 1.0095/00.”

• EURJPY fades part of the sharp pullback to the sub-143.00 area.
• Further rebound should see the 147.00 region revisited.

EURJPY manages to lure some dip buyers in and attempt a marked bounce to the vicinity of the 145.00 hurdle on Monday.

If the corrective bounce gathers extra steam, then the cross should face initial resistance at the so far November high at 147.11 (November 9). The surpass of this level could open the door to a more meaningful move to the 2022 peak at 148.40 (October 21).

In the longer run, while above the key 200-day SMA at 138.14, the constructive outlook is expected to remain unchanged.

EURJPY daily chart

GBPUSD has continued to rebound over the past week climbing above the high from 13th September at 1.1738. In the view of economists at MUFG Bank, there is room for Cable to rebound further on back of USD sell-off.

GBP under-performance against most of the non-USD G10 currencies to go forward

“While there is room for the rebound in Cable to extend further up towards the 1.20 level in the near-term as the USD is correcting lower from significantly overvalued levels, we do not expect the GBP to benefit against other G10 currencies given the weak growth outlook in the UK and ongoing scaling back of BoE rate hike expectations.”

“We have decided to switch our short GBP exposure from against the EUR to the JPY to reflect more confidence that yields in the UK and globally are peaking out.”

Markets Strategist Quek Ser Leang at UOB Group’s Global Economics & Markets Research suggests USD/THB risks a deeper decline in the short term.

Key Quotes

“USD/THB nosedived by 3.53% last week. Such an outsized weekly drop is rare; the last time USD/THB had a large weekly decline was back in 2007.”

“While the large decline has shifted the risk to the downside, the pace of any further decline is likely to be at a slower pace, and the major support at 35.06 (low in Aug) is unlikely to come into view this week (there is a minor support at 35.45). Resistance is at 36.17, followed by 36.65.”

Today, we have higher yields, mixed equities, and a stronger Dollar. However, Kit Juckes, Chief Global FX Strategist at Société Générale, expects the Australian Dollar, the Japanese Yen and the New Zealand Dollar to remain resilient if this week’s data do not provide major surprises.

Even GBP may hold up reasonably well

“If the week’s data throw out no major scares, the benign view of the outlook will gain popularity and the worst G10 currencies of the last three months, AUD, NZD and JPY, are likely to maintain their rehabilitation.”

“Even GBP may hold up reasonably well in the face of tighter fiscal policy, still-rising inflation and growth fears, simply because the consensus view of the economic outlook is already so dire.”

Does peak inflation mean peak Dollar? Developments last week have led analysts at MUFG Bank to turn USD bearish over the short-term at least.

Have we just passed the three peaks?

“After a significant CPI downside surprise, we have seen a big drop in US yields and the US dollar which leads to the justifiable question – have we just seen the three peaks for inflation, rates and the US Dollar. Of the three, it is the USD that would have to do the most work to get to new highs – about a 7% gain would be needed.”

“The inflation data is just one month of data but the pipeline data available does suggest the decline can be extended further over the coming months. That could then mean a peak in rates could also have been achieved. The Fed is set to remain hawkish though which may limit the scale of any further decline.”

“While it makes sense to hold a bearish view now on the USD with the potential for some further signs of easing inflation, the DXY index is now over 5% down since last Friday and hence selling on rallies might make more sense from here.”

Dollar bulls are feeling the squeeze. Kit Juckes, Chief Global FX Strategist at Société Générale, notes that Dollar bulls are in retreat if hard landing fears are kept at bay.  

Dollar sentiment is turning

“While there are still some nasty tail risks out there, we are in the process of seeing inflation peak, and while growth is slowing and, in many cases, recession is likely, this will be a common or garden economic downturn, with mild recession already priced into credit spreads and currency levels.”

“Fed rate hikes are priced in, the high has been for bond yields; the Chinese authorities will support the housing sector and slowly reopen the economy; emerging markets are turning a corner and offer attractive entry levels in currencies and bonds. And so on…”  

“As the narrative shifts, growth data become even more important. We won’t see inflation make a nice tidy peak and just fall back, but forward-looking measure are likely to be supportive for a while.” 

“With the Dollar so highly priced, the big question will be whether what happens next is a softish landing for the global economy, or a harder one. The harder the landing, the more volatile and dangerous the Dollar’s turn will be, but a soft landing is a Goldilocks market scenario where credit, emerging markets, and growth-sensitive currencies can do well.”

The severity of the EURUSD correction has caught out many. Economists at ING believe that the pair could race even higher to 1.05.

EURUSD may struggle to trade under 1.0250/70 today

“The very difficult question is whether this short EURUSD squeeze has run its course near 1.0365 or needs to trade higher still. Given the depth, conviction, and one-sided nature of long Dollar positioning (quite understandable given a sustained Dollar rally since summer 2021), we all need to be careful about prematurely calling an end to this correction. Indeed, EURUSD could easily trade to 1.05 were conditions/data to fall into place.”

“Pricing of the ECB tightening cycle has remained quite resilient over recent days – prompting quite a sharp narrowing in the two-year EUR-USD swap differential – normally a EURUSD positive. Those caught short EURUSD may mean EURUSD struggles to trade under 1.0250/70 today.”

• GBPUSD kicks off the new week on a softer note amid a goodish pickup in the USD demand.
• Hawkish remarks by Fed’s Waller push the US bond yields higher and underpins the greenback.
• A bleak outlook for the UK economy weighs on the Sterling and contributes to capping gains.
• Chancellor Jeremy Hunt will now play a key role in determining the near-term trend for GBPUSD.

The GBPUSD pair struggles to capitalize on last week's breakout momentum beyond the 100-day SMA barrier and kicks off the new week on a softer note. The pair remains on the defensive through the first half of the European session and is currently trading just above mid-1.1700s amid resurgent US Dollar demand. The downside, however, remains cushioned as the focus remains glued to this week's key macro data and event risk from the UK.

Hawkish remarks by Fed's Waller revive USD demand

The US Dollar stages a goodish recovery from its lowest level since mid-August set in the aftermath of softer US consumer inflation figures last week and acts as a headwind for the GBPUSD pair. The US Treasury bond yields edge up in reaction to more hawkish remarks by Fed Governor Christopher Waller on Sunday. During a conversation in Sydney, Australia, Waller said that the US central bank was not softening its fight against inflation. This, along with a softer tone around the equity markets, is seen offering some support to the safe-haven greenback.

Gloomy outlook for the UK economy weighs on Sterling

Apart from this, the worsening outlook for the UK economy continues to undermine the British Pound and further contributes to capping the upside for the GBPUSD pair. In fact, the National Institute of Economic and Social Research (NIESR) warned that there is a significant risk of a deeper economic downturn in 2023. The think tank now forecasts flat GDP in Q4, with an elevated risk of a contraction, and a fall in the first three months of 2023. This, in turn, is holding back traders from placing aggressive bullish bets and capping the upside for the GBPUSD pair.

Focus remains on Chancellor Hunt's Autumn Statement

Despite the aforementioned negative factors, market participants prefer to wait on the sidelines ahead of key domestic data - the monthly employment details on Tuesday and the CPI report on Wednesday. The big event for the Sterling, meanwhile, comes on Thursday when Chancellor Jeremy Hunt lays out his fiscal plans. After being warned by the UK Office for Budget Responsibility about a larger-than-estimated government borrowing, Hunt is planning a big package of spending cuts and tax increases. This could further act as a headwind for the Sterling and the GBPUSD pair.

Technical Outlook

From a technical perspective, last week's sustained move and acceptance above the 100-day SMA for the first time since February could be seen as a fresh trigger for bullish traders. That said, failure near the top end of a one-and-half-month-old ascending channel warrants caution. This makes it prudent to wait for some follow-through buying beyond the said barrier, currently around the 1.1850-1.1860 region, before positioning for any further gains.

Conversely, any meaningful pullback towards the 1.1700 round-figure mark might still be seen as a buying opportunity. This, in turn, should limit the downside for the GBPUSD pair near the 100-day SMA resistance breakpoint, now turned support, currently around the 1.1670-65 region.

• Industrial Production in the euro area grew at a stronger pace than expected in September.
• EURUSD trades deep in negative territory at around 1.0300.

Industrial Production in the euro area and the European Union expanded by 0.9% on a monthly basis in August, the data published by Eurostat revealed on Monday. This reading came in better than the market expectation for an increase of 0.3%.

On a yearly basis, Industrial Production in the euro area grew by 4.9%, surpassing analysts' estimate of 2.8% by a wide margin.

Market reaction

The Euro (EUR) failed to capitalize on the upbeat data and EURUSD was last seen losing 0.45% on the day at 1.0305.

• EURUSD faces some profit taking mood and corrects from peaks.
• The dollar bounces tepidly following the recent sharp sell-off.
• EMU’s Industrial Production surprised to the upside in September.

Sellers have returned to the markets and EURUSD gives away part of the recent strong upside on Monday.

EURUSD: Upside limited around 1.0360

After flirting with the August peaks near 1.0370 on Friday, EURUSD now faces some downside pressure although it so far manages well to keep the trade above the key 1.0300 mark at the beginning of the week.

It seems investors are cashing up part of the strong advance seen during the past week, which it is worth noting it was particularly triggered by lower-than-expected US inflation figures during October, which, in turn, fed into speculations that the Federal Reserve could slow the pace of the future interest rate hikes.

In the meantime, the daily downtick in spot comes in line with an equally lacklustre retracement in the German 10-year bund yields at the beginning of the new trading week.

Data wise in Euroland, the Industrial Production in the broader bloc expanded 4.9% from a year earlier in September.

Across the pond, the focus of attention is expected to be on the discussion on Economic Outlook by Vice Chair L.Brainard.

What to look for around EUR

EURUSD faces some downside pressure on Monday following a steep advance in the second half of the last 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: EMU Industrial Production (Monday) - EMU Flash Q3 GDP, ZEW Economic Sentiment, Germany ZEW Economic Sentiment (Tuesday) - ECB Financial Stability Review, ECB C.Lagarde (Wednesday) - Final EMU Inflation Rate (Thursday) - ECB C.Lagarde (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 retreating 0.46% at 1.0305 and faces the next up barrier at 1.0364 (monthly high November 11) seconded by 1.0368 (monthly high August 12) and finally 1.0432 (200-day SMA). On the other hand, a breach of 1.0027 (100-day SMA) would target 0.9935 (low November 10) en route to 0.9730 (monthly low November 3).

European Central Bank (ECB) executive board member Fabio Panetta said on Monday that the monetary policy has to continue to tighten to ensure that inflation in the Eurozone does not become entrenched, as reported by Reuters.

Key takeaways

"The impact of the current shocks on the output gap is clearly unclear."

"It would be misguided to base an aggressive tightening on assumptions which cannot be conclusively substantiated."

"It may then be too late to fully reverse the consequences of possible errors."

"For as long as inflation expectations remain anchored, monetary policy should adjust but not overreact."

Market reaction

The Euro (EUR) is struggling to find demand following these comments and EURUSD was last seen losing 0.45% on the day at 1.0305.

GBPUSD is staging a downward correction. Economists at ING expect Cable to move back lower to 1.10 over the coming months.

1.1670/1.1750 could be the short-term corrective low for GBPUSD

“The UK Chancellor, Jeremy Hunt, has been ramping up the rhetoric that Thursday's autumn statement is going to hurt – comprising tax rises for all and a large cut in government spending. None of the choices are politically palatable, but failure to deliver would trigger another round of Gilt and Sterling sales.” 

“1.1670/1.1750 could be the short-term corrective low for GBPUSD before a possible push to 1.20 on a further short-squeeze (short GBP had been a conviction call amongst fund managers). But in the bigger picture, even these current GBPUSD levels near 1.18 should prove attractive for those with GBP receivables.”

“We suspect that Cable may trade back to 1.10 over coming months.”

Considering the recent price action, USD/CNH could drop further and probably revisit the 7.0300 region in the near term, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “USD plunged to a low of 7.0592 in Asian trade last Friday before trading sideways for the rest of the sessions. While downward momentum has waned, there is a chance for USD to drop to 7.0450 before the risk of a rebound increases. The major support at 7.0300 is unlikely to come into view today. Resistance is at 7.1000, followed by 7.1225.”

Next 1-3 weeks: “The sharp sell-off in USD last week was accompanied by strong downward momentum. Further USD weakness appears likely and the levels to monitor are at 7.0300, followed by Oct’s low near 7.0130. Resistance is at 7.1225 but only a break of the ‘strong resistance’ at 7.1660 would indicate the weakness in USD has stabilized.”

You only need one hand to count the number of times that US Dollar Index (DXY) has fallen 4% in a single week. Economists at ING believe that the correction could run a little further.

DXY to go higher later this year

“This week is a quiet one for data and central bank policy action – meaning it is hard to rule out this correction running a little further. Could the DXY correction extend to 105 (from 106.90 currently)? Yes, but we would think 105 might be the extent of it.”

“We do have a preference for DXY going higher later this year, but we have to allow position adjustment to run its course. That could see DXY trade 106.50-107.50 today.”

• AUDUSD remains on the defensive amid a modest USD bounce from a nearly three-month low.
• Hawkish remarks by Fed’s Waller push the US bond yields higher and revive the USD demand.
• Bets for smaller rate hikes by the Fed act as a headwind for the buck and limit losses for the pair.

The AUDUSD pair fails to capitalize on its modest intraday bounce from the 0.6665 area and remains on the defensive through the first half of the European session. The pair is currently trading around the 0.6685-0.6680 region, with bulls still awaiting a sustained strength beyond the 100-day SMA resistance.

A combination of factors assists the US Dollar to gain some positive traction on the first day of a new week, which, in turn, is seen acting as a headwind for the AUDUSD pair. The US Treasury bond yields edge up in reaction to more hawkish remarks by Fed Governor Christopher Waller on Sunday. This, along with a softer tone around the equity markets, benefits the safe-haven buck and exerts some downward pressure on the risk-sensitive Aussie.

During a conversation in Sydney, Australia, Waller noted that markets have overreacted to the softer-than-expected October consumer price inflation data last week. Waller added that the Fed was not softening its fight against inflation and that it will take a string of soft CPI reports for the US central bank to take its foot off the brakes. That said, expectations that the Fed will slow the pace of its policy tightening seem to cap the USD.

Furthermore, the optimism over an eventual scaling back of COVID-19 measures in China offers support to the China-proxy Australian Dollar and limits losses for the AUDUSD pair. Hence, the subdued price move might be categorized as a bullish consolidation phase, suggesting that any corrective pullback might still be seen as a buying opportunity. This, in turn, warrants caution for bearish traders in the absence of any relevant market-moving economic releases from the US.

Technical levels to watch

• The index manages to leave behind part of the recent strong decline.
• US yields kicks in the week on the defensive across the curve.
• FOMC’s L.Brainard is due to speak later in the NA session.

The dollar appears somewhat bid at the beginning of the week and briefly revisits the 107.00 neighbourhood when gauged by the USD Index (DXY).

USD Index refocuses on 107.00 and above

Following two consecutive and strong daily pullbacks, the index now attempts a moderate rebound to the 107.00 region on the back of a tepid selling bias in the risk complex.

The dollar’s rebound comes in contrast with a small drop in US yields across the curve, as market participants continue to reprice a potential Fed’s pivot sooner rather than later.

So far, and according to CME Group’s FedWatch Tool, the probability of a 50 bps interest rate hike at the December 14 meeting is at nearly 81%, from around 60% a week ago and nearly 37% a month ago.

The US calendar is empty on Monday, leaving all the attention to the discussion on the Economic Outlook by Fed’s Vice Chair L.Brainard (permanent voter, dove).

What to look for around USD

The index attempts a mild bounce to the vicinity of the 107.00 region and partially leaves behind the post-CPI bearish move to the 106.30/25 band.

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: Producer Prices (Tuesday) - MBA Mortgage Applications, Retail Sales, Industrial Production, Business Inventories, NAHB Index, TIC Flows (Wednesday) - Building Permits, Initial Jobless Claims, Housing Starts, Philly Fed Index (Thursday) - CB Leading Index, Existing Home Sales (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 gaining 0.19% at 106.62 and faces the next up barrier at 109.08 (100-day SMA) seconded by 110.95 (55-day SMA) and then 113.14 (monthly high November 3). On the flip side, the breakdown of 106.28 (monthly low November 11) would open the door to 104.83 (200-day SMA) and finally 104.63 (monthly low August 10).

Economists at HSBC expect the Japanese Yen to strengthen against the US Dollar next year.

More downward pressure ahead

“We believe the JPY’s near-term fortunes are likely to remain more tied to the US monetary policy outlook than that of Japan.”

“It is worth noting that the relationship between USDJPY and its yield differentials has become less stable since Japan’s Ministry of Finance (MoF) took action to support the JPY on 22 September. More intervention is possible, so as to curb the upward momentum in USDJPY.” 

“We think that an undervalued JPY should help improve the fundamental backdrop. For example, a weak JPY may encourage tourism revenue, probably narrowing the trade deficit going forward, especially now that Japan has lifted most travel restrictions. A weak JPY may also discourage outward direct investment and attract foreign direct investment.”

The continuation of the decline in USD/JPY is seen facing tough contention in the 138.00 region in the near term, suggested Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “USD plunged to a low of 138.45 in late NY trade last Friday before rebounding. The rebound amid oversold conditions suggests USD is unlikely to weaken much further. For today, USD is more likely to trade between 138.40 and 140.30.”

Next 1-3 weeks: “Last week, USD lost a whopping 5.32%, its largest 1-week drop since 2008. While further USD weakness is not ruled out, any further decline is likely to be at a slower pace and the major support at 138.00 is expected to offer solid support. On the upside, a break of the ‘strong resistance’ at 141.00 would indicate that USD is unlikely to weaken further.”

• Silver reverses an intraday dip to the $21.30 area, though lacks follow-through buying.
• Repeated failures to capitalize on the move beyond 200 DMA warrants caution for bulls.
• A convincing break below the $21.00 mark will shift the bias in favour of bearish traders.

Silver attracts some dip-buying near the $21.30 region on Monday and hits a fresh daily peak during the first half of the European session. The white metal is currently placed around the $21.65-$21.70 area, though remains below a five-month high touched on Friday.

Looking at the broader picture, the XAGUSD, so far, has been struggling to capitalize on its positive move beyond the very important 200-day SMA. This makes it prudent to wait for some follow-through buying before positioning for any further near-term appreciating move.

From current levels, the multi-month high, around the $22.05 region, could act as an immediate hurdle. The next relevant resistance is pegged near the $22.45-$22.50 supply zone, which if cleared will be seen as a fresh trigger for bulls and pave the way for additional gains.

The XAGUSD might then accelerate the momentum towards the $23.00 mark and eventually climb to the May swing high, around the $23.25-$23.30 area. Given that RSI on the daily chart is on the verge of breaking into the overbought zone, the latter should act as a tough nut to crack for bulls.

On the flip side, the daily low, around the $21.35 region, now seems to protect the immediate downside. Any further pullback could be seen as a buying opportunity and remain limited near the $21.00 mark, which should now act as a pivotal point for short-term traders.

A convincing break below could trigger some technical selling and drag the XAGUSD to the $20.40 support zone. Failure to defend the said support levels might negate the near-term positive outlook and shift the bias in favour of bearish traders.

Silver daily chart

Key levels to watch

In light of advanced prints from CME Group for natural gas futures markets, open interest shrank by nearly 2K contracts after two daily builds in a row at the end of last week. Volume, on the other hand, rose by around 322.5K contracts after three consecutive daily drops.

Natural Gas points to extra consolidation

Friday’s moderate pullback in prices of natural gas was on the back of shrinking open interest and hints at the view that a deeper pullback seems not favoured in the very near term. The uptick in volume also points to some consolidative mood ahead. The 200-day SMA at $6.84 per MMBtu, in the meantime, continues to cap the upside for the time being.

Republicans are still the favorites to win control of the House, which would end up with a divided Congress. Judging by the 2011 episode, a standoff over the US debt ceiling could upset equities and the Australian Dollar, Sean Callow, Senior Currency Strategist at Westpac, reports.

US Midterm Elections: Implications for AUD

“The most obvious parallel is with 2011 when President Obama faced an emboldened Republican House majority. While a default was narrowly avoided, the multi-month standoff prompted S&P to cut their US credit rating from AAA to AA+ on 5 August 2011. Bloomberg economists estimate that a similar showdown in 2023 could cut US GDP growth by almost 1%.” 

“The dramatic 2011 standoff reverberated around the world. A flight to safety sparked intervention by the Bank of Japan and Swiss National Bank to stem the surge in their currencies. The AUD was extremely high in July 2011, around 1.10, bolstered by the gap between the RBA cash rate at 4.75% versus a Fed funds rate still at its post-financial crisis low of 0.25%.” 

“But the turmoil generated by the US debt ceiling showdown spilled over to the Aussie, which tumbled 10 cents from above 1.10 in late July to around parity in mid-August. Of course, there are always many differences in the macro environment, but the Aussie remains sensitive to bouts of risk aversion from whatever source.”

• EURGBP gains some positive traction for the second straight day, though lacks any follow-through.
• A modest USD rebound is weighing on the common currency and acting as a headwind for the cross.
• Traders also seem reluctant ahead of this week’s UK macro data and Chancellor Hunt’s statement.

The EURGBP cross edges higher for the second successive day on Monday and sticks to its modest intraday gains through the early European session. The cross is currently placed above the mid-0.8700s, though lacks any follow-through buying or bullish conviction.

The shared currency continues to draw some support from bets for a more aggressive policy tightening by the European Central Bank (ECB). The British Pound, on the other hand, is undermined by the gloomy outlook for the UK economy. In fact, the National Institute of Economic and Social Research (NIESR) expects the UK GDP growth to be flat in Q4 and noted that the risk of a contraction remains elevated. This, in turn, is seen lending some support to the EURGBP cross.

That said, the prospects for further interest rate hikes by the Bank of England act as a tailwind for the Sterling. Apart from this, a modest US Dollar recovery from a nearly three-month low exerts some pressure on the Euro and keeps a lid on any meaningful upside for the EURGBP cross, at least for now. Traders also seem reluctant to place aggressive bets ahead of this week's important UK macro data - the monthly jobs report on Tuesday and the CPI report on Wednesday.

Investors will further take cues from the BoE's Monetary Policy Report Hearings on Wednesday and Chancellor Jeremy Hunt’s Autumn Statement on Thursday. This will play a key role in influencing the near-term sentiment surrounding the GBP and determine the next leg of a directional move for the EURGBP cross. In the meantime, spot prices seem more likely to consolidate in a range amid absent relevant market-moving economic releases, either from the Eurozone or the UK.

Technical levels to watch

The US Dollar Index (DXY) plunged 4.1% last week, its largest weekly on record. Economists at DBS Bank are closely monitoring comments from US Federal Reserve officials, including Vice Chair Lael Brainard.

Markets are less likely to be one-sided this week

“DXY is near the 105 low in August, from which it rallied into the hawkish Fed’s hawkish Jackson Hole Symposium and the September FOMC meeting.”

“The fall in the US Treasury 10Y and 2Y yields to 3.81% and 4.33%, respectively, could invite some backlash from the Fed this week.”

“Today, Fed Vice Chair Lael Brainard should remind markets that the Fed is only debating a smaller 50 bps hike at the December meeting and is looking to peak and pause rates in 2023 above the 4.6% level projected in September.”

The Kiwi ended the session on Friday yet another notch higher, coming to rest above 0.61, to round out a gain of over two cents over the week. Economists at ANZ Bank note that NZDUSD is now in an established uptrend channel.

Cycle lows may be in for the NZD

“Although domestic data and considerations aren’t really playing a role, the Kiwi should at least benefit from having the highest bond yields in the G10, and what looks like a fair degree of economic resilience. The vibe in the market seems to also be that cycle lows may be in for the NZD. Let’s see.” 

“Price action certainly looks fairly solid; NZDUSD is now in an established uptrend channel.”

“Support 0.5875/0.6000 Resistance 0.6235/0.6450/0.6575”

Economists at Deutsche Bank assess the outlook for markets and the global economy regarding the pace of rate hikes by central banks and inflation. 

Rate hiking cycle has claimed another victim with regards to FTX

“It’s feels to me we’re in a race against time for markets and the global economy over the next 12 months. Can inflation slow quickly enough for central banks to be able to slow down their hiking cycles enough to avoid systemic accidents? Last week was a great mini case study of the race to come as the bankruptcy of crypto exchange FTX battled it out with a big downward surprise in US inflation. Ultimately the latter won out handsomely, but you can’t help thinking that the rate hiking cycle has claimed another victim with regards to FTX even if other things might also be at play with this company.”

“Most people I speak to don’t think the current crypto implosion is systemic and this could very well be correct. However, what’s next to unwind/unravel in a hiking cycle that’s not over yet even with slower US inflation last week? The way I like to think about it is that it’s much easier for things not to be systemic when US payrolls are still averaging +289K as they have been over the last 3 months. They averaged +444K in H1. Fast forward 6-9 months when they’re likely to be negative and things that break in the financial system could easily turn more systemic.”

We have seen a correction in high USD valuations. But in the view of economists at Crédit Agricole, the US Dollar is not completely defeated. 

Eurozone fiscal stimulus may not prevent recession

“The USD is not yet completely defeated. The US economy remains quite resilient and the Fed’s struggle against inflation is far from over. Fed speak and US Retail Sales will refocus investors’ attention on how much more work the Fed has to do tame inflation.”

“Eurozone fiscal stimulus may not prevent recession and instead contribute to more aggressive ECB tightening and further exacerbation of Eurozone sovereign credit risks. This could hurt the EUR’s appeal as it did the UK during the mini-budget saga last month.”

• NZDUSD is seen consolidating last week’s post-US CPI rally to a two-month high.
• Rebounding US bond yields helps revive the USD demand and acts as a headwind.
• The downside remains limited amid rising bets for smaller rate hikes by the Fed.

The NZDUSD pair struggles to capitalize on last week's breakout momentum through the 100-day SMA and seesaws between tepid gains/minor losses through the early European session on Monday. The pair is currently placed just below the 0.6100 mark, nearly unchanged for the day and remains well within the striking distance of a two-month high touched on Friday.

A combination of factors assists the US Dollar to stall softer US consumer inflation figures-inspired slump to its lowest level since mid-August, which, in turn, acts as a headwind for the NZDUSD pair. The US Treasury bond yields edge up in reaction to more hawkish remarks by Fed Governor Christopher Waller on Sunday. This, along with a softer tone around the equity markets, is seen benefitting the safe-haven greenback and exerting some downward pressure on the risk-sensitive Kiwi.

During a conversation in Sydney, Australia, Waller noted that markets have overreacted to the softer-than-expected October consumer price inflation data last week. Waller added that the Fed was not softening its fight against inflation and that it will take a string of soft CPI reports for the US central bank to take its foot off the brakes. This pushes the US Treasury bond yields higher and helps revive the USD demand, though the intraday uptick lacks bullish conviction.

Firming expectations that the Fed will slow the pace of its policy tightening is holding back the USD bulls from placing aggressive bets. Furthermore, the optimism over an eventual scaling back of COVID-19 measures in China offers some support to the NZDUSD pair and limits the downside. Hence, the intraday subdued price move might be categorized as a bullish consolidation phase, suggesting that any meaningful pullback is more likely to get bought into and remain limited.

There isn't any major market-moving economic data due for release from the US on Monday, leaving the USD at the mercy of the US bond yields. Apart from this, traders will take cues from a scheduled speech by Fed Governor Lael Brainard. This, along with the broader risk sentiment, will be looked upon for short-term trading opportunities around the NZDUSD pair ahead of the Chinese data dump on Tuesday.

Technical levels to watch

• GBPUSD takes offers to poke previous resistance line from early October.
• Impending bear cross on MACD suggests further downside.
• Fortnight-old horizontal support, the convergence of the key SMAs challenge bears.
• Buyers need validation from the late August highs.

GBPUSD extends the week-start losses as sellers jostle with the one-month-old previous resistance around 1.1760 heading into Monday’s London open. In doing so, the Cable pair prints the first daily loss in three while reversing from a three-month high.

Given the looming bearish signals from the MACD, as well as the Cable pair’s failure to stay beyond 1.1800, the sellers are likely to break the resistance-turned-support.

However, a 13-day-old horizontal support near 1.1650 and a convergence of the 50-SMA and the 100-SMA, close to 1.1470, could challenge the GBPUSD bears afterward.

In a case where the Cable pair breaks the 1.1470 key support, the odds of witnessing a south-run towards the monthly low near 1.1150 can’t be ruled out.

Meanwhile, recovery moves need to refresh the monthly peak, currently surrounding 1.1855, to convince the GBPUSD buyers.

Even so, tops marked during late August, around 1.1900 threshold, could act as an additional upside filter to challenge the bulls.

Overall, GBPUSD is likely to witness a short-term downside but the room to the south is limited unless the pair breaks the 1.1470 support confluence.

GBPUSD: Four-hour chart

Trend: Limited downside expected

In the opinion of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, AUD/USD could extend the advance to the 0.6775 level in the short term.

Key Quotes

24-hour view: “While overbought, the strong surge in AUD could extend further. However, a break of the major resistance at 0.6775 is unlikely today (there is another resistance at 0.6735). On the downside, a break of 0.6635 (minor support is at 0.6665) would indicate that the upward pressure has subsided.”

Next 1-3 weeks: “The impulsive upward acceleration in AUD last week was accompanied by strong upward momentum. Further AUD strength is likely even though any advance is likely to be at a slower pace. The level to monitor is 0.6775. Support is at 0.6635 but only a break of 0.6595 would indicate that AUD is not advancing further. Looking ahead, the resistance above 0.6775 is at 0.6820.”

• Copper snaps four-day uptrend to ease from the highest levels since June.
• Market sentiment sours Fed’s Waller emphasized the need for more data to welcome policy doves.
• Anxiety ahead of the Biden-Xi meeting adds strength to the risk aversion.
• China’s easing of Covid controls, supports for real-estate sector restricts downside moves.

Copper price dropped from a five-month high as buyers take a breather amid mixed sentiment, as well as the US Dollar’s rebound, during early Monday morning in Europe.

While portraying the mood of the metal traders, the Copper Futures in COMEX drop 1.24% intraday as it reverses from the highest levels since late June to $3.88 by the press time. On the same line, Reuters conveyed that a three-month Copper contract on the London Metal Exchange (LME) was down 0.4% at $8,453 a tonne by 05:43 GMT.

The red metal began the week on a positive side while tracking the weekend announcements from China suggesting a further easing of the Covid controls and measures taken to ease the pain of the real estate market by a 16-point plan.

However, comments from US Federal Reserve (Fed) Governor Christopher Waller, as well as gloomy statements from the International Monetary Fund (IMF), exerted downside pressure on the market’s sentiment and the Copper price.

Fed’s Waller said, “Rates will not fall until there is ‘clear, strong evidence’ inflation is falling,” which in turn curtailed the dovish bets on the Fed’s next moves. The policymaker, however, also mentioned that the Fed can begin to consider moving at a slower pace. On the other hand, the IMF blamed the darker outlook on tightening monetary policy triggered by persistently high and broad-based inflation, weak growth momentum in China, and ongoing supply disruptions and food insecurity caused by Russia’s invasion of Ukraine, per Reuters.

Elsewhere, anxiety ahead of the Group of 20 Nations (G20) meeting in Bali, especially the meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, also exerts downside pressure on the metal prices. Ahead of the event, up for taking place around 09:30 AM GMT, Reuters quotes US President Biden as saying that the US communication lines with China would stay open to prevent conflict, with tough talks almost certain in the days ahead. The news also mentioned, “The United States would ‘compete vigorously’ with Beijing while "ensuring competition does not veer into conflict", said Biden, stressing the importance of peace in the Taiwan Strait during an address to the East Asia Summit in Cambodia. He arrived in Bali on Sunday night.” On the same line, US Treasury Secretary Janet Yellen also mentioned, per Reuters, “Biden-Xi meeting aimed at stabilizing u.s. relationship with china, but have been clear about national security concerns.”

Amid these plays, the Asia-Pacific shares trade mixed whereas the US stock futures print mild losses. Further, the US Treasury yields trigger the US Dollar Index (DXY) rebound from a three-month low, up 0.32% intraday at the latest.

Moving on, updates from Bali and the Fedspeak will be crucial for the metal traders amid a light calendar.

FX option expiries for Nov 14 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 0.9900 518m
• 0.9990-00 1.32b
• 1.0025-35 692m
• 1.0100 291m
• 1.0200 483m
• 1.0300 258m
• 1.0370 361m
• 1.0390 242m

- GBP/USD: GBP amounts        

• 1.1715 557m

- USD/JPY: USD amounts                     

• 140.00 510m
• 142.25 232m
• 142.50-55 340m

- AUD/USD: AUD amounts  

• 0.6720 210m

- EUR/GBP: EUR amounts        

• 0.8800 475m

- EUR/JPY: EUR amounts

• 146.00 1.84b

Gold price is retreating from three-month highs. In the view of FXStreet’s Dhwani Mehta, the pullback could provide an opportunity to reclaim the $1,800 level. 

Gold price appears a ‘buy the dips’ trade

“The immediate support is now seen at Friday’s low of $1,747, below which a sharp drop toward the September 12 high at $1,735 will be in the offing.”

“If the upside regains traction, Gold bulls could recapture resistance at the August 25 peak of $1,766, making another attempt to test the three-month highs at $1,772. The next relevant target for Gold buyers is seen at the confluence of the bearish 200-Daily Moving Average (DMA) and the August top near the $1,805 mark.”

• USDJPY struggles to capitalize on its modest recovery gains and remains below the 140.00 mark.
• Rebounding US bond yields revive the USD demand, though fail to provide any meaningful lift.
• Bets for smaller Fed rate hikes continue to act as a headwind for the buck and capping the major.

The USDJPY pair attracts some buying near the 138.80 region on the first day of a new week and reverses a part of Friday's slide to its lowest level since late August. Spot prices, however, lack bullish conviction and remain below the 140.00 psychological mark through the early European session.

The US Dollar stages a modest recovery from a nearly three-month low touched on Friday in reaction to hawkish remarks by Fed Governor Christopher Waller and acts as a tailwind for the USDJPY pair. in a conversation in Sydney, Australia, Waller noted that markets have overreacted to the softer-than-expected October consumer price inflation data last week.

Waller added that the Fed was not softening its fight against inflation and that it will take a string of soft CPI reports for the US central bank to take its foot off the brakes. This, in turn, pushes the US Treasury bond yields higher. The resultant widening of the US-Japan rate differential undermines the Japanese Yen and offers additional support to the USDJPY pair.

Bulls, however, seem to struggle to capitalize on the attempted recovery amid rising bets for smaller rate hikes by the Fed. In fact, the markets are pricing in a greater chance of a 50 bps liftoff at the next FOMC policy meeting in December. This, in turn, holds back the USD bulls from placing aggressive bets and capping the upside for the USDJPY pair, at least for now.

Apart from this, a softer risk tone offers some support to the safe-haven JPY and is seen as another factor acting as a headwind for spot prices. This makes it prudent to wait for strong follow-through buying before confirming that the USDJPY pair has formed a near-term bottom in the absence of any relevant market-moving economic releases from the US.

Technical levels to watch

Here is what you need to know on Monday, November 14:

Following the strong risk rally witnessed in the second half of the previous week, markets seem to have turned cautious to begin the new week as investors assess the latest developments. The US Dollar Index stages a rebound after losing nearly 4% last week and US stock index futures trade in negative territory. Eurostat will publish September Industrial Production data and the US economic docket will not feature any high-impact macroeconomic data releases. Nevertheless, investors will pay close attention to comments from US Federal Reserve officials, including Vice Chair Lael Brainard and NY Fed President John Williams.

Commenting on the reaction to the soft October Consumer Price Index (CPI) data, Federal Reserve Governor Christopher Waller argued that markets were "way out in front" and added rates will not fall until there is "clear, strong" evidence inflation is falling. Meanwhile, San Francisco Fed President Mary Daly advised that markets should stop thinking about the pace of rate hikes and start thinking about the level. 

On November 12, the number of daily coronavirus in China rose to nearly 15,000 from 11,950 on November 11. Explaining the changes that they have made to coronavirus restrictions, China's top health officials noted that they were not "relaxing rules" but instead refining them. "It is necessary to maintain strategic focus, and scientifically and accurately do the work of epidemic prevention and control," China's National Health Commission (NHC) said in a statement on Sunday.

EUR/USD gained more than 100 pips on Friday and registered its highest weekly close since the last week of June above 1.0300. The pair seems to have gone into a consolidation phase and was last seen trading in negative territory slightly above 1.0300.

GBPUSD reached its highest level since August 26 at 1.1855 late Friday and posted impressive weekly gains. The pair is staging a downward correction and was last down 0.7% on the day at around 1.1750. 

USDJPY closed the fourth straight week in negative territory and dropped below 140.00 for the first time in 10 weeks on Friday. "Abnormally one-sided, sharp yen weakening appears to have paused, thanks partly to the government’s FX intervention," Bank of Japan (BoJ) Governor Haruhiko Kuroda said on Monday and noted that the wasn't expecting the US Dollar's "solo strength" to last indefinitely. USDJPY is currently trading in a tight range near 139.50.

Gold capitalized on risk flows and the broad-based US Dollar weakness last week and gained over 5%. XAUUSD stays on the back foot early Monday and trades at around $1,760.

Bitcoin extended its slide over the weekend and finished the week with a 22% loss at $16,300 as investors reacted to the latest developments surrounding the collapse of the FTX. Similarly, Ethereum lost more than 20% last week but seems to have steadied near $1,200, at least for now.

FTX exchange and FTX US allegedly hacked, uninstall app to protect against malware.

Crypto experts allege Gate.io and Crypto.com could collapse like FTX: Accident or proof-of-reserves?

• EURUSD prints a bullish chart formation near a three-month high.
• Convergence of three-day-old support, flag’s bottom challenge bears of late.
• Steady RSI suggests further grinding but buyers stay hopeful.

EURUSD bulls take a breather at a three-month high, after posting the biggest weekly gains since March 2020. That said, the major currency pair seesaws inside an immediate bull flag while snapping a two-day uptrend near 1.0300 heading into Monday’s European session.

Not only the adjacent bull flag but the steady RSI (14) also teases EURUSD buyers of late.

The recovery moves, however, need to cross the 1.0335 hurdle to confirm the bullish formation suggesting a run-up towards May’s top near 1.0790.

It’s worth noting that the late June top around 1.0615 could act as a buffer during the EURUSD rush towards the theoretical target.

Alternatively, an upward-sloping trend line from Thursday joins the lower line of the flag, close to 1.0290, restricts immediate EURUSD declines.

Should the quote breaks the 1.0290 support confluence, the bullish chart pattern gets defied, which in turn could direct the bears towards the 100 and 200 SMAs, respectively near 1.0200 and 1.0120 in that order.

During the EURUSD weakness past 1.0120, the previous monthly peak near 1.0090 could act as the last defense of the pair buyers.

Overall, the pair buyers hold control despite the major currency pair’s latest pullback.

EURUSD: 30-minute chart

Trend: Limited downside expected

Open interest in crude oil futures markets reversed the previous drop and increased by around 16.3K contracts on Friday according to preliminary readings from CME Group, the largest single day build since September 23. Volume, in the meantime, dropped fir the second day in a row, now by nearly 52K contracts.

WTI faces the next hurdle at $93.73

Friday’s second improvement in a row in prices of the WTI was accompanied by increasing open interest, which suggests that extra gains appear on the cards in the near term. That said, the next resistance turns up at the November high at $93.73 per barrel (November 7).

Extra upside in GBP/USD could revisit the 1.1910 and even 1.2000 in the short-term horizon, suggested Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “The deeply overbought rally in GBP from Friday appears to be overdone and GBP is unlikely to advance much further. For today, GBP is more likely to trade between 1.1725 and 1.1860.”

Next 1-3 weeks: “Despite surging by an outsized 4.08% last week, solid upward momentum suggests there is room for the rally in GBP to extend to 1.1910, possibly 1.2000. The upside risk is intact as long as GBP does not break below the ‘strong support’ level of 1.1660.”

CME Group’s flash data for gold futures markets noted traders added around 12.7K contracts to their open interest positions on Friday, reaching the 5^th consecutive daily build. Volume, instead, remained choppy and shrank by around 98.3K contracts.

Gold still targets the $1,800 region

Gold prices extended the sharp rebound on Friday amidst rising open interest. Against that, further upside momentum could motivate the precious metal to challenge the critical hurdle at the $1,800 region per ounce troy. This area coincides with the key 200-day SMA.

Australian Prime Minister Anthony Albanese said Monday he will have a meeting with Chinese President Xi Jinping on Tuesday.

Further comments

"Australia will put forward our own position.”

“I look forward to having a constructive discussion with President Xi tomorrow.”

“We enter the discussion with goodwill.”

Market reaction

The Australian-Sino headlines are helping AUDUSD with a minor recovery, as the pair trades at 0.6675, still down 0.35% on the day. The Aussie hit an intraday low at 0.6664 earlier in the Asian session.

Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group see the next up barrier of note for EUR/USD at 1.0400 in the next few weeks.

Key Quotes

24-hour view: “EUR surged to a high of 1.0364 in late NY trade last Friday before closing at 1.0352 (+1.41%). The sharp and swift rally appears to be overdone and EUR is unlikely to advance much further. For today, EUR is more likely to range-trade between 1.0265 and 1.0365.”

Next 1-3 weeks: “EUR lifted off last week and gained a whopping 3.94%, its largest 1-week advance since Mar 2020. Upward momentum is strong and EUR is likely to advance further. That said, overbought short-term conditions could lead to 1 to 2 days of consolidation first. The next level to watch is at 1.0400. Only a break of 1.0200 (‘strong support’ level) would indicate that the solid upward momentum has subsided.”

British Embassy said in a statement on Monday that the UK Prime Minister Rishi Sunak will “call for coordinated global action to address international economic instability and the rising cost of living at G20 Summit.

Additional points

Market reaction

At the time of writing, GBPUSD is attempting a tepid bounce above 1.1750 on the above headlines, still down 0.63% on the day.

• USDINR bounces off 100-DMA to print the biggest daily gain in seven weeks.
• Biden-Xi headlines, Fed’s Waller triggered risk-off mood amid a light calendar.
• Moody’s cuts India’s 2022 GDP growth forecasts by citing higher interest rates, inflation and global economic slowdown.

USDINR braces for the biggest daily jump in nearly two months as it picks up bids to 81.20 during early Monday morning in Europe. In doing so, the Indian Rupee (INR) pair cheers the US Dollar’s rebound amid the risk-off mood.

The downbeat sentiment takes clues from anxiety ahead of the Group of 20 Nations (G20) meeting in Bali. Also weighing on the risk profile are the comments from US Federal Reserve (Fed) Governor Christopher Waller, as well as gloomy statements from the International Monetary Fund (IMF). It should be noted that Moody’s downgrading of Indian growth forecasts for 2022 exerts additional downside pressure on the INR.

“Rating agency Moody's cut India's growth projections for the current and next calendar year due to higher inflation, high-interest rates and slowing global growth that, it believes, will dampen economic momentum more than it had expected,” said Reuters. The global rating giant now expects India’s Gross Domestic Product (GDP) to grow 7.0% in 2022 versus 7.7% in previous forecasts. Moody’s also expected GDP growth to deteriorate to 4.8% in 2023 before recovering to 6.4% in 2024. It should also be noted that the Reserve Bank of India (RBI) expects India to grow by 7.0% in 2022.

On the other hand, Fed’s Waller said, “Rates will not fall until there is ‘clear, strong evidence’ inflation is falling,” which in turn curtailed the dovish bets on the Fed’s next moves. The policymaker, however, also mentioned that the Fed can begin to consider moving at a slower pace.

Elsewhere, the IMF blamed the darker outlook on tightening monetary policy triggered by persistently high and broad-based inflation, weak growth momentum in China, and ongoing supply disruptions and food insecurity caused by Russia’s invasion of Ukraine, per Reuters.

While portraying the mood, S&P 500 Futures drop half a percent whereas stocks in the Asia-Pacific region traded mixed. Further, the US 10-year Treasury yields snap a three-day downtrend of around 3.90% at the latest.

Moving on, the USDINR traders should pay attention to the G20 meeting, especially to the meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, for clear directions. Ahead of the event, up for taking place around 09:30 AM GMT, Reuters quotes US President Biden as saying that the US communication lines with China would stay open to prevent conflict, with tough talks almost certain in the days ahead. The news also mentioned, “The United States would ‘compete vigorously’ with Beijing while "ensuring competition does not veer into conflict", said Biden, stressing the importance of peace in the Taiwan Strait during an address to the East Asia Summit in Cambodia. He arrived in Bali on Sunday night.” On the same line, US Treasury Secretary Janet Yellen also mentioned, per Reuters, “Biden-Xi meeting aimed at stabilizing u.s. relationship with china, but have been clear about national security concerns.”

Technical analysis

Although the 100-DMA restricts immediate USDINR downside near 80.45, the recovery moves need validation from a seven-day-old descending resistance line, around 81.52 by the press time.

• USDCAD has sensed buying interest around 1.3250 as DXY rebounds ahead of US midterm elections outcome.
• The change of the House of Representatives' stewardship to Republicans will dampen expansionary policies.
• Loonie investors are eyeing the release of the inflation figures.

The USDCAD pair is displaying a rangebound structure after gauging the cushion around 1.3250 in the Tokyo session. The risk-on impulse has started fading led by rising volatility ahead of the outcome of the US midterm elections and the extended weekend due to the Veterans Day holiday last Friday. The risk-sensitive currencies are facing a loss in the upside momentum.

Anxiety ahead of the US midterm elections has weighed on S&P500 futures. The changing hands of stewardship for the House of Representatives will impact the expansionary policies as additional approval from Republicans will stretch the time for policy execution. Investors have turned anxious as the occurrence could trim economic projections ahead in already vulnerable times when the US economy is subject to recession due to accelerating interest rates.

The US dollar index (DXY) has extended its pullback move to near 107.00 despite the fact that the Federal Reserve (Fed) won’t go for hefty rate hikes as red-hot inflation has cooled down. Also, the long-term US Treasury yields have rebounded to near 3.90%.

Meanwhile, Loonie investors are awaiting Wednesday’s inflation numbers for further guidance. The headline Consumer Price Index (CPI) is seen marginally higher at 7.0% vs. the prior release of 6.9%. While the core CPI that excludes oil and food prices is seen at 6.3%, higher than the prior release of 6.0%.

On the oil front, oil prices have dropped after facing barricades of around $89.00 despite easing Covid-19 restrictions in China. It seems that oil bulls need some solid reasoning for extending its recent rally further.

• Gold price fades upside momentum at three-month high amid US Dollar rebound.
• United States consumer-centric data propels Fed pivot discussion and keeps XAUUSD bulls hopeful.
• Cautious mood ahead of Biden-Xi meeting teases intraday sellers of gold.

Gold price (XAUUSD) remains pressured around the intraday low near $1,760, snapping two-day uptrend at the highest levels in three months heading into Monday’s European session.

The yellow metal’s latest weakness, or a pullback, could be linked to the comments from US Federal Reserve (Fed) Governor Christopher Waller, as well as anxiety ahead of the Group of 20 Nations (G20) meeting in Bali. Additionally, the return of the bond traders after Friday’s off also provided an opportunity for the XAUUSD bulls to take a breather.

Yields underpin the US Dollar rebound

US 10-year Treasury yields rose six basis points (bps) to 3.89%, printing the first daily gains in four. On the same line was the coupon for two-year US Treasury bonds, up 1.65% intraday near 4.42% at the latest. Given the firmer ties between the US Dollar and the Treasury bond yields, a rebound in the US bond coupons underpin the USD bounce, which in turn weighs on the XAUUSD price.

Fed’s Waller, IMF jostle with China’s Covid news to weigh on the Gold price

Although China’s easing of the coronavirus-led activity restrictions and measures taken to ease the pain of the real estate market by a 16-point plan appeared to have defended the market optimists of late.

However, comments from Fed’s Waller and the International Monetary Fund’s (IMF) gloomy outlook weigh on the sentiment, as well as the gold price. Additionally, teasing the XAUUSD bears are the latest statements from US President Joe Biden and US Treasury Secretary Janet Yellen.

Fed’s Waller said, “Rates will not fall until there is ‘clear, strong evidence’ inflation is falling,” which in turn curtailed the dovish bets on the Fed’s next moves. The policymaker, however, also mentioned that the Fed can begin to consider moving at a slower pace.

Given the recently firmer bets on the Fed’s 0.50% rate hike in December, mainly backed by the last week’s US Consumer Price Index (CPI) and the University of Michigan’s Consumer Confidence Index, the US dollar is likely to remain pressured unless policymakers raise doubts on further easing in the rates.

Eyes on Biden-Xi meeting

While signals relating to the Fed’s next moves and economic fears seemed to have triggered the XAUUSD pullback, the metal’s immediate performance hinges on the meeting between US President Joe Biden and his Chinese counterpart Xi Jinping on the sidelined of the G20.

Ahead of the meeting, Reuters quotes US President Biden as saying that the US communication lines with China would stay open to prevent conflict, with tough talks almost certain in the days ahead. The news also mentioned, “The United States would ‘compete vigorously’ with Beijing while "ensuring competition does not veer into conflict", said Biden, stressing the importance of peace in the Taiwan Strait during an address to the East Asia Summit in Cambodia. He arrived in Bali on Sunday night.” On the same line, US Treasury Secretary Janet Yellen also mentioned, per Reuters, “Biden-Xi meeting aimed at stabilizing u.s. relationship with china, but have been clear about national security concerns.”

Should the Sino-American tussles fail to ease, the gold price could have a further downside to track.

Technical analysis

Gold price remains mildly offered as sellers jostle with the 200-day EMA, around $1,760 by the press time, to retake control.

Although the XAUUSD sellers cheer the overbought RSI (14) to take a risk at the three-month high, a daily closing below the aforementioned key Exponential Moving Average (EMA) appears necessary for the bears.

Even so, a convergence of the 100-day EMA and the previous resistance line from early September, now support around $1,719-18, becomes crucial support to watch during the further downside of the gold price.

It’s worth noting that a five-month-old resistance-turned-support line, near $1,688, appears the last defense of the XAUUSD bulls.

Alternatively, the 61.8% Fibonacci retracement level of gold’s downside from June to September, around $1,778, restricts the metal’s immediate upside.

Gold price: Daily chart

Trend: Bullish

• A six-day losing spell has halted after kissing the upward-sloping trendline around 0.9400.
• The 50-and 200-EMAs have turned south which indicates that the short-and long-term trend has turned bearish.
• A bearish range shift by the RSI (14) adds to the downside filters.

The USDCHF pair has extended its recovery after overstepping the intraday hurdle of 0.9455 in the Asian session. As the risk-on impulse is losing its steam after remaining at the driver’s seat, the risk aversion theme is gaining traction. Six-day losing streak in USDCHF has been halted for now.

The US dollar index (DXY) has rebounded to near 106.90 after registering a three-month of 106.28. S&P500 futures are displaying losses after an extended weekend. Meanwhile, the 10-year US Treasury yields have resurfaced to 3.89%.

On a daily scale, the asset has displayed a perpendicular fall after failing to sustain above the critical resistance of 1.0100. The major has dropped sharply to near the upward-sloping trendline placed from the 6 January 2021 low at 0.8758.

A sheer decline in the pair has turned the 50-and 200-period Exponential Moving Averages (EMAs) at 0.9830 and 0.9645 respectively towards the downside. This indicates that the short- and long-term trend is bearish now.

Adding to that, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00 for the first time in 15 months, which indicates more weakness ahead.

Should the asset drop below Friday’s low around 0.9400, the Swiss franc bulls will drag the pair towards January 31 high at 0.9343, followed by March 31 low around 0.9200.

On the flip side, a break above the psychological resistance of 0.9500 will drive the asset toward the 200-EMA at 0.9645. A breach above the 200-EMA will send the asset toward the round-level resistance at 0.9700.

USDCHF daily chart

• GBPUSD retreats from 11-week high as market sentiment sours.
• Increasing odds of the Fed’s 50-bps rate hike favor buyers.
• Biden-Xi updates, light calendar and fears of tough guidance for the UK’s budget challenge previous upside.

GBPUSD takes offers to refresh the intraday low near 1.1750, and snaps a two-day uptrend during early Monday morning in Europe. The Cable pair’s latest losses could be linked to the market’s cautious mood ahead of the Group of 20 Nations (G20) meeting in Bali. Also teasing sellers could be the fears of harsh measures in the November 18 Autumn Statement to defend the British economy.

With the latest comments from US President Joe Biden and US Treasury Secretary Janet Yellen suggesting no relief to the US-China optimists, the sentiment turned sour ahead of the meeting between US President Biden and his Chinese counterpart Xi Jinping. Reuters quotes US President Biden as saying that the US communication lines with China would stay open to prevent conflict, with tough talks almost certain in the days ahead. The news also mentioned, “The United States would ‘compete vigorously’ with Beijing while "ensuring competition does not veer into conflict", said Biden, stressing the importance of peace in the Taiwan Strait during an address to the East Asia Summit in Cambodia. He arrived in Bali on Sunday night.” On the same line, US Treasury Secretary Janet Yellen also mentioned, per Reuters, “Biden-Xi meeting aimed at stabilizing u.s. relationship with china, but have been clear about national security concerns.”

It should be noted that Federal Reserve (Fed) Governor Christopher Waller said, “Rates will not fall until there is ‘clear, strong evidence’ inflation is falling,” which in turn curtailed the dovish bets on the Fed’s next moves. The policymaker, however, also mentioned that the Fed can begin to consider moving at a slower pace.

At home, Bloomberg came out with the news suggesting the UK Chancellor Jeremy Hunt may delay cuts to defend the British economy should have challenged the GBPUSD bears but the latest announcements suggesting more tax hikes and comments from UK Prime Minister Rishi Sunak weigh on the quote. “UK Chancellor Jeremy Hunt is expected to delay much of the £55 billion ($65 billion) of savings to fill the hole in the public finances until after the next election in an attempt to protect the economy and shore up Tory support as the country heads into recession,” said Bloomberg. Reuters quotes The Independent while stating, “The government must follow through on its promise of tax rises and spending cuts in this week's autumn statement or risk a market backlash destabilizing the UK economy, Rishi Sunak has said.”

Amid these plays, the S&P 500 Futures retreat from a one-month high, down 0.30% intraday near 3,990, whereas the US 10-year Treasury yields rise six basis points (bps) to 3.89%, printing the first daily gains in four.

It’s worth noting that the market’s consolidation could also be linked to the International Monetary Fund’s (IMF) comments that recently mentioned, “tightening monetary policy triggered by persistently high and broad-based inflation, weak growth momentum in China, and ongoing supply disruptions and food insecurity caused by Russia’s invasion of Ukraine,” as the key catalysts for gloomy outlook.

Looking forward, this week is important for the GBPUSD traders not only because it has the key data like Retail Sales and Consumer Price Index (CPI) for October but also because it will offer the Autumn Statement. Additionally, the Group of 20 Nations (G20) meeting in Bali will be eyed too as the UK and Europe are preparing to snub Russia there.

Given the recently increasing hopes of a 50 bps rate hike from the Fed in December, as well as the Bank of England’s (BOE) hawkish mood, the GBPUSD may witness further upside. However, the UK’s autumn statement and this week’s macros will be crucial for clear directions.

Technical analysis

Although a clear upside break of the 100-DMA favors GBPUSD buyers past 1.1655, nearly overbought RSI (14) restricts the Cable pair’s advances past the 78.6% Fibonacci retracement level of the pair’s August-September moves, near 1.1875.

Bank of Japan (BoJ) Governor Haruhiko Kuroda said on Monday, “abnormally one-sided, sharp yen weakening appears to have paused, thanks partly to government’s FX intervention.”

Key quotes

• EURUSD is facing hurdles while overstepping the immediate resistance of 1.0350.
• Fed’s continuation of rate hiking at an ongoing pace may infuse fresh blood into the US dollar.
• ECB could control inflation by recession in Eurozone which may bring volatility in Euro.
• EURUSD to focus on Eurozone GDP release for further cues.

EURUSD is facing barricades around the immediate resistance of 1.0350 in the Tokyo session. A meaningful drop in October’s inflation report released last week was expected to compel the Federal Reserve to calm down its current pace of hiking interest rates. However, the think tanks are still satisfied with a one-time meaningful fall and demand more evidence to change their view. This has brought a marginal rebound in the US dollar index (DXY) to near 106.70. The DXY could expand as anxiety ahead of the United States midterm elections outcome could spurt volatility. The Euro investors are further awaiting Eurozone Gross Domestic Product (GDP) figures for further action.

Federal Reserve’s continuation of rate hike regime to resurface US Dollar

Last week, the headline Consumer Price Index (CPI) dropped to 7.7% and market participants punished the American dollar in view of the fact that the Federal Reserve will slow down its pace of hiking interest rates. However, economists at Danske Bank have a say that price pressures in the US are set to persist. “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 Federal Reserve pivot.”Federal Reserve Governor Christopher Waller supports the view that 7.7% headline inflation is "enormous," and the Federal Reserve still has a long way to go, therefore, rates will stay high for a while. He further added that Rates will not fall until there is "clear, strong evidence" inflation is falling.   

In case of the continuation of policy tightening measures by the Federal Reserve, the odds for a recession situation in the US will keep buzzing. The Greenback bulls may shift into the grip of bulls and EURUSD may face significant pressure.

Hawkish ECB policymakers’ remarks support the Euro

European Central Bank (ECB) policymakers are continuing with their verdict of hiking interest rates as inflationary pressures are getting beyond their control. Hawkish commentaries from ECB and expectations for a retreat in the US dollar are restricting EURUSD in a limited territory. The Euro could face pressure as European Central Bank (ECB) Governing Council member Isabel Schnabel noted last week 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. He further added that only a deep recession in Eurozone could save the economy from mounting inflation. This may keep EURUSD on the tenterhooks.

Eurozone GDP data

This week, the Eurozone’s GDP will be under investors’ radar. As per the consensus, the annual Gross Domestic Data (GDP) is expected to remain stable at 2.1%. The economy is facing the turbulence of soaring inflation, energy crisis, and supply chain bottlenecks due to Russia-Ukraine tensions. Therefore, stable GDP data might be supportive of the shared currency.

EURUSD Technical Outlook

EURUSD has reached the horizontal resistance placed from June 15 low at 1.0363 on a four-hour scale. The Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which indicates that the bullish momentum in EURUSD is active.

The 50-and 200-period Exponential Moving Averages (EMAs) at 1.0080 and 0.9943 respectively are advancing, which will keep EURUSD into the grip of bulls. The American dollar could regain strength if the asset drops below the round-level support of 1.0200.

The International Monetary Fund (IMF) said on Monday, in a piece prepared for the summit of G20 leaders in Indonesia, recent high-frequency indicators "confirm that the outlook is gloomier,", particularly in Europe.

Additional takeaways

“Recent purchasing manager indices that gauge manufacturing and services activity signaled weakness in most Group of 20 major economies.”

“Economic activity set to contract while inflation remained stubbornly high, citing tightening monetary policy triggered by persistently high and broad-based inflation, weak growth momentum in China and ongoing supply disruptions and food insecurity caused by Russia’s invasion of Ukraine.”

Related reads

• EURUSD struggles around 1.0350 as Federal Reserve to continue with current rate hike pace
• Fed’s Daly: Fed faces tough task deciding when to stop raising rates

Analysts at Morgan Stanley predict that the United States Consumer Price Index (CPI) to soften further, revising down their CPI forecast for 2023.

Key quotes

“US CPI is currently 7.7%Y, but we forecast it to be under 2.0%Y by the end of next year.”

“Morgan Stanely cited five reasons:

Global demand should be weaker;

Supply chains are showing much less stress;

Inventories look increasingly elevated, inviting discounting for core goods;

And risk in shelter prices is much more balanced; and base effects shift materially.”

“We think that the Fed pauses after a January rate hike at 4.625%.”

• USDJPY snaps two-day downtrend but struggles to defend buyers around 11-week low.
• 2.5-month-old horizontal area challenges buyers amid bearish MACD.
• Oversold RSI restricts immediate downside around 61.8% Fibonacci retracement level.

USDJPY bulls struggle to keep the reins around the lowest levels since late August, despite positing the first daily gains in three around 139.15 during early Monday.

In doing so, the yen pair bounces off the 61.8% Fibonacci retracement level of the pair’s August-October upside, also known as the “golden ratio”. Also underpinning the current rebound are the oversold RSI (14) conditions.

However, a horizontal area comprising multiple levels marked since late August, around 140.25-40, guards the immediate upside of the USDJPY pair. Additionally challenging the pair buyers is the 100-DMA hurdle surrounding 140.80.

In a case where the quote remains firmer past 140.80, the support-turned-resistance line from early August, near 144.40, will be in the spotlight.

Alternatively, a daily closing below the stated golden ratio, around 138.65, could trigger a fresh bout of selling.

Following that, the early August swing high around 135.60 could test the USDJPY bears before directing them to August month’s low near 130.40.

Overall, USDJPY remains on the bear’s radar despite the latest corrective bounce.

USDJPY: Daily chart

Trend: Further weakness expected

San Francisco Federal Reserve Bank President Mary Daly said in a Financial Times (FT) interview that the US central bank faces the tough task of deciding when to stop raising rates.

Additional quotes

"This next phase of policymaking is much more difficult because you have to be mindful of so many things."

"You have to be mindful of the cumulative tightening that's already in the system. You have to be mindful of the lags in monetary policy. You have to be mindful of the risks that are all throughout the global economy and the tremendous uncertainty that we have even about what the evolution of inflation is going to be."

"If I can do one thing for the public, I would say: stop thinking about pace and start thinking about level."

"If I can hold it there [at an elevated level] for a year and really think that inflation is coming down, then that's probably a reasonable rate to stop at. Overnight to 2 percent is not my goal . . . but we can't be so patient that inflation continues to erode the real purchasing power of Americans."

Market reaction

The US Dollar Index was last seen trading at 106.70, adding 0.38% on the day, attempting a tepid recovery from three-month lows.

Bank of Japan (BoJ) Governor Haruhiko Kuroda is now speaking on the exchange rate, having comments on the monetary policy outlook earlier this Monday.

Key quotes

Market reaction

USDJPY is attempting a recovery, in tandem with the US Dollar and the Treasury yields, trading near 139.20, up 0.31% on the day.

• USDCAD remains pressured near the two-month low, picks up bids of late.
• Market sentiment deteriorates ahead of the key G20 meeting.
• Downbeat comments from IMF add strength to the risk aversion.
• Oil prices print three-day uptrend amid hopes of more demand from China, easy monetary policy.

USDCAD struggles for clear directions as the 100-DMA challenges the bears at the lowest levels in two months during early Monday. In doing so, the Loonie pair justifies the market’s anxiety, as well as the mildly bid prices of Canada’s main export item WTI crude oil.

Market sentiment sours amid a light calendar as traders remain cautious ahead of the key gathering of the Group of 20 Nations (G20) in Bali, starting from Monday. Also testing the previous optimism were the latest comments from US President Joe Biden, Federal Reserve (Fed) Governor Christopher Waller and the International Monetary Fund (IMF).

Reuters quotes US President Biden as saying that the US communication lines with China would stay open to prevent conflict, with tough talks almost certain in the days ahead. The news also mentioned, “The United States would ‘compete vigorously’ with Beijing while "ensuring competition does not veer into conflict", said Biden, stressing the importance of peace in the Taiwan Strait during an address to the East Asia Summit in Cambodia. He arrived in Bali on Sunday night.” On the same line, US Treasury Secretary Janet Yellen also mentioned, per Reuters, “Biden-Xi meeting aimed at stabilizing u.s. relationship with china, but have been clear about national security concerns.”

Elsewhere, Fed’s Waller said, “Rates will not fall until there is ‘clear, strong evidence’ inflation is falling.” The policymaker, however, also mentioned that the Fed can begin to consider moving at a slower pace.

It should be noted that the IMF blamed the darker outlook on tightening monetary policy triggered by persistently high and broad-based inflation, weak growth momentum in China, and ongoing supply disruptions and food insecurity caused by Russia’s invasion of Ukraine, per Reuters.

Alternatively, hopes of more stimulus from China and persistent geopolitical crisis, as well as the global oil producers’ supply cuts, defend the WTI crude oil buyers of late. “Oil prices rose nearly 1% on Monday, extending gains from the previous session as China eased some of its strict COVID-19 protocols, fuelling hopes of a recovery in economic activity and demand at the world's top crude importer,” said Reuters.

It’s worth noting that the previously released US data raised expectations of the Fed’s pivot and drowned the US dollar, which in turn highlights this week’s US Retail Sales for fresh impulse.

Technical analysis

Although the USDCAD pair’s sustained trading below the 50-DMA, around 1.3530 at the latest, keeps sellers hopeful, the 100-DMA level surrounding 1.3230 restricts the quote’s immediate downside.

The combination of China on Friday easing some of its COVID curbs, including shortening by two days quarantine times for close contacts of cases and for inbound travelers and scrapping a penalty on airlines that bring in infected passengers, along with news of a property rescue package is sending Chinese developers stocks on a tear. 

Firstly, the new rules were among the 20 measures examined at the first meeting of the new top leadership body of the ruling Communist Party on Thursday, amid a new push to optimize and improve COVID control policies.  Meanwhile, Beijing has reported the highest number of local Covid cases in more than a year today, reporting 404 new local Covid cases for Sunday.

Nevertheless, the news from Friday of sweeping directives to rescue China's property sector in the strongest signs yet that President Xi Jinping is turning his attention toward shoring up the world’s second-largest economy has sent market higher in the open. 

Bloomberg reported on Friday that financial regulators issued a 16-point plan to boost the real estate market, with measures that range from addressing developers’ liquidity crisis to loosening down-payment requirements for homebuyers, according to people familiar with the matter.

''The move coincided with a publicly announced 20-point playbook from the National Health Commission aimed at reducing the economic and social impact of containing Covid.''

As a consequence, Shares in Hong Kong jumped 593 points or 3.4% to trade at near 6-week highs at 17,912 on Monday, extending strong gains from the previous week. All sectors contributed to the rally, with sharp gains from Country Garden Holdings (34.4%), Longfor Group (24.7%), Country Garden Services (22.1%), and China Merchants (9.3%).

Meanwhile, US President Biden and China President Xi are meeting for the first time since Biden became president in Bali today on the sidelines of the G20 conference.

• AUDUSD retreats from 100-DMA, prints mild losses near two-month high.
• Bullish MACD signals, firmer RSI keeps buyers hopeful beyond 50-DMA.
• Seven-month-old resistance line adds to the upside filters, October’s peak lures short-term bears.

AUDUSD snaps a two-day uptrend as it jostles with the 100-DMA during Monday’s Asian session, printing mild losses near 0.6690-85 by the press time.

With this, the key moving average challenges the Aussie pair buyers near the highest levels since September 20. However, the quote’s sustained trading beyond the 50-DMA and bullish oscillators, namely the MACD and RSI, favor the buyers.

That said, a short-term pullback towards October’s peak of 0.6525 can’t be ruled out. Following that, the 50-DMA support of 0.6500 could gain the market’s attention.

It’s worth noting that the one-month-old ascending trend line, around 0.6320 by the press time, appears the last defense of the AUDUSD buyers.

Alternatively, a daily closing beyond the 100-DMA, around 0.6705 at the latest, isn’t an open invitation to the AUDUSD bulls as a descending resistance line from early April, near 0.6760, acts as an extra filter to the north.

In a case where AUDUSD buyers manage to keep the reins past 0.6760, the 200-DMA surrounding 0.6955 and the 0.7000 psychological magnet will be crucial for them.

Overall, AUDUSD is likely to witness a pullback but the bears have a long way to retake control.

AUDUSD: Daily chart

Trend: Limited downside expected

US Treasury Secretary Janet Yellen has crossed the wires, earlier saying that she will seek clarity on China's plans to ease its COVID-19 restrictions and deal with problems in its property sector when she meets on Monday with China's central bank chief.

The officials told reporters in Bali, ahead of a summit of the Group of 20 big economies, that it was important for top economic officials from the world's two largest economies to discuss global challenges face to face and learn more about each other's policy plans.

In more recent trade, she has stated that China's purchases of Russian oil are entirely consistent with the US desire to keep Russian oil on the global market and that energy difficulties could push Europe into recession.

• Market sentiment fades previous optimism ahead of the key G20 updates.
• US President Biden, China’s Xi will meet each other on the sidelines of G20 around 09:30 GMT.
• Fed’s Waller cited the need more evidence to confirm bearish bias and stayed hopeful of 50 bps rate hike in December.
• Talks of Fed’s pivot can keep optimists on the table if risk catalysts offer positive surprise.

After witnessing multiple days of optimism, markets remain sidelined, mildly offered, during Monday’s Asian session. The reason could be linked to the latest comments from US President Joe Biden and the Federal Reserve (Fed) Governor Christopher Waller. Also allowing the bulls to take a breather is the lack of major data/events.

While portraying the mood, the S&P 500 Futures retreat from a one-month high, down 0.30% intraday near 3,990, whereas the US 10-year Treasury yields rise six basis points (bps) to 3.89%, printing the first daily gains in four.

That said, Reuters quotes US President Biden as saying that the US communication lines with China would stay open to prevent conflict, with tough talks almost certain in the days ahead. The news also mentioned, “The United States would ‘compete vigorously’ with Beijing while "ensuring competition does not veer into conflict", said Biden, stressing the importance of peace in the Taiwan Strait during an address to the East Asia Summit in Cambodia. He arrived in Bali on Sunday night.” On the same line, US Treasury Secretary Janet Yellen also mentioned, per Reuters, “Biden-Xi meeting aimed at stabilizing u.s. relationship with china, but have been clear about national security concerns.”

Elsewhere, Fed’s Waller said, “Rates will not fall until there is ‘clear, strong evidence’ inflation is falling.” The policymaker, however, also mentioned that the Fed can begin to consider moving at a slower pace.

It should be noted that the downbeat prints of US consumer-centric data allowed the US dollar bears to sneak in during the last week. Among them, the Consumer Price Index (CPI) and the first readings of the University of Michigan Consumer Confidence Index were the keys. Also likely to have improved the market sentiment was Moscow’s retreat from Kherson.

However, anxiety ahead of today’s gathering of the Group of 20 Nations (G20) in Bali appears to weigh on the market sentiment as US President Biden and his Chinese counterpart Xi Jinping will meet face-to-face for the first time in three years.

Given the sour geopolitical ties between Washington and Beijing, as well as talks that the UK and Europe could snub Russia, the risk-off mood is likely to prevail, which in turn could allow the US Dollar (USD) to pare recent losses. However, major attention will be given to the US Retail Sales and the Fedspeak for clear directions.

Haruhiko Kuroda, the Bank of Japan's governor, has said now is the stage to continue monetary easing to support the economy.

Key comments

• Japan's economy is likely to recover as the impact of supply constraints and the pandemic eases. 
• Aiming for stable and sustainable chievement of price target including wage growth. 
• Tightening labour market and price gains so far will reflect in wage negotiations next spring.  
• Chances are high for tight job market to  drive up wages.   
• Labour shift towards high productive areas could push up wages.    
• Price gains will extend further toward the year end but will gradually lower after new year.
• Must be vigilant to uncertainties over economic outlook, risks from overseas economy, price trends.
• Expect cpi growth of around 3% this fiscal year but fall to around 1.5% next fiscal year.

Meanwhile, foreign investors have been net buyers of Japanese stocks of late as strong earnings outlook of some domestic companies boosted investor sentiment. Foreigners purchased Japanese stocks worth a net 247.9 billion yen, which compared with 178.89 billion yen worth of net buying in the previous week, data from exchanges showed. This can be offering some support to what has been a downtrodden currency. It has managed,  with the support of intervention from the Japanese authorities, to get beyond 140 vs the US dollar in recent trade. 

The daily chart, above, shows that the yen is now above critical resistance, USD/JPY support. 133.00/50 is the next objective. 

• NZDUSD juggles above 0.6100 amid quiet market mood.
• An increment in US long-term inflation expectations to 3% could spoil the risk appetite theme.
• Upbeat NZ Business PSI data has supported the antipodean.

The NZDUSD pair is displaying back-and-forth moves in the Tokyo session after reclaiming the 0.6100 hurdle. The commodity-linked currency is gaining momentum as the pullback move in the US dollar index (DXY), recorded at open, has started fading now.

The DXY displayed a minor pullback to near 106.70 after registering a fresh three-month low at 106.28 as the market mood is still bullish despite volatility amid an extended weekend for the US markets. S&P500 futures have displayed minor losses and the long-term US yields have rebounded to 3.88%.

A slowdown in October’s inflation report has indicated exhaustion in the inflationary pressures, however, a pause in policy tightening by the Federal Reserve (Fed) will take sufficient time. Fed Governor Christopher Waller has backed 50 basis points (bps) rate hike expectations for the December meeting but has cleared that rates won’t fall until clear evidence of a slowdown in inflation.

Also, economists at Danske Bank believe that due to the persistent nature of inflation, it would be early to call it a slowdown.  

Adding to that, the US long-term inflation expectations have improved to 3.0% from the prior release of 2.9%. This could cause a serious impact on the risk appetite theme as optimism in the market is backed by a decline in US inflation.

On the Kiwi front, the antipodean has benefitted from the upbeat Business PSI data released earlier. The economic catalyst has landed higher at 57.4 vs. the prior release of 55.9.

Going forward, the US Retail Sales data for October will remain focused, which is seen higher at 0.9% against the former release of 0%.

• WTI prints three-day uptrend inside a bullish chart formation.
• Upbeat oscillators and sustained trading beyond 50-HMA keeps buyers hopeful.
• 61.8% Fibonacci retracement level can test buyers ahead of $90.30 hurdle.

WTI remains on the front foot at around $89.00, up for the third consecutive day, as it portrays a bullish channel formation during Monday’s Asian session.

Even so, the black gold remains sidelined near the 200-HMA and 50.% Fibonacci retracement level of November 07-10 downside, close to $88.50-45.

It’s worth noting that the RSI (14) and the Moving Average Convergence and Divergence (MACD) remain in favor of commodity prices.

As a result, WTI bulls are all set to challenge the 61.8% Fibonacci retracement level, also known as the “Gold Ratio”, around $89.55.

Following that, the $90.00 psychological magnet and the stated channel’s upper line, close to $90.30, could test the oil buyers before directing them to the monthly high near $93.00.

On the contrary, $88.50-45 can restrict the short-term downside of the commodity price ahead of highlighting the channel’s lower line, at $88.00 by the press time.

Even if the WTI crude oil price drops below $88.00, the 50-HMA level near $86.50 can challenge the bears.

In a case where the crude oil remains weak past $86.50, sellers could aim for the monthly low and October trough, respectively near $84.00 and $81.30.

WTI: Hourly chart

Trend: Limited upside expected

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.2150 vs. the estimated 7.2173 and the previous 7.2292.

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.

People's Bank of China is expected to inject funds via a medium-term lending facility operation as yet another policy maneuver that is aimed at supporting the economy that is slowly recovering from COVID-19 shocks, at a time that other major economies are raising interest rates aggressively.

The article in the China Securities journal states that 1 trillion yuan (circa US$139 billion) is maturing and that the injection is expected to match the maturing amount according to a majority of analysts surveyed.

It's not all of them expecting this though.

Note also that one- and five-year loan prime rates (LPR) will be set on Monday, the 231st.

The rate set for the MLF will provide a clue of any change coming for the LPR rates. Currently at

3.65% for the one year.
4.30% for the five year.

Meanwhile, USD/CNH was trading heavily early Monday, falling to 7.0690 from Friday's close of 7.0892 as burgeoning hopes for China easing COVID measures weighs. 

There is potential for USD/CNH to test 7.0000 as the following chart illustrates:

• A breakout of the rising channel has underpinned the Cable bulls.
• Advancing 20-and 50-EMAs add to the upside filters.
• The RSI (14) has shifted into the bullish range of 60.00-80.00, which indicates more upside ahead.

The GBPUSD pair has witnessed a decline below the critical support of 1.1800 in the Tokyo session. The asset has turned sideways amid the unavailability of any potential trigger. However, the risk profile is continuously solid post the release of the US inflation report.

The US dollar index (DXY) has witnessed intermediate support around 106.30 after a perpendicular decline move. S&P500 futures have sensed pressure after a significant jump on Thursday. While the 10-year US Treasury yields have rebounded to near 3.9%.

On a four-hour scale, the Cable has delivered a breakout of the Rising Channel chart pattern. The upper portion of the chart pattern is placed from October 5 high at 1.1496 while the lower portion is plotted from September 26 low at 1.0339. The asset has surpassed the horizontal resistance placed from September 13 high at 1.1738, which adds to the upside filters.

Advancing 20-and 50-period Exponential Moving Averages (EMAs) at 1.1658 and 1.1546, indicate more upside ahead.

Also, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which signals that the bullish momentum is active.

Going forward, a decisive break above Friday’s high at 1.1855 will drive the asset toward the psychological resistance of 1.2000. A break above 1.2000 will unleash cable bulls for more upside towards 1.2144.

Alternatively, a downside move below Friday’s low at 1.1648 will push the asset back into the above-mentioned chart pattern, which will drag it towards Tuesday’s high at 1.1600, followed by October 25 high at 1.1500.

GBPUSD four-hour chart

• Gold price retreats from three-month high, snaps two-month uptrend.
• Cautious mood ahead of the key data/events, market’s consolidation amid a light calendar favor XAUUSD pullback.
• Fed’s signals for easy rate hikes keep gold buyers hopeful.
• Risk catalysts are the key for near-term directions, US Retail Sales eyed too.

Gold price (XAUUSD) consolidates the biggest weekly gains since March 2020 around $1,762 during Monday’s Asian session. In doing so, the bright metal prints mild losses inside a one-week-old bullish chart pattern.

It should be noted that the light calendar appeared to have triggered the XAUUSD pullback near the highest levels in three months. Also likely to have probed the gold buyers is the anxiety ahead of a meeting between US President Joe Biden and China's Prime Minister Xi Jinping on the sidelined of the Group of 20 Nations (G20) gathering in Bali.

On the same line are comments from Federal Reserve (Fed) Governor Christopher Waller who tried to defend the bulls while saying, “Rates will not fall until there is ‘clear, strong evidence’ inflation is falling.”

Against this backdrop, the S&P 500 Futures retreat from a one-month high, down 0.30% intraday near 3,990, whereas the US 10-year Treasury yields rise six basis points (bps) to 3.89%, printing the first daily gains in four.

Moving on, updates from Bali can entertain XAUUSD traders as market sentiment deteriorates. Any spark in China’s relations with its global counterpart, by supporting Russia, should exert more downside pressure on gold. However, the previous week’s talks of the Fed’s easy rate hikes in December, backed by the downbeat prints of US consumer-centric numbers, seem to keep the gold buyers hopeful.

Technical analysis

An impending bear cross on the MACD joins the overbought RSI (14) to challenge gold buyers inside a one-week-old bullish channel, currently between $1,785 and $1,741.

It should be noted, however, that the commodity’s trading below $1,741 isn’t an open welcome to the XAUUSD bears as the 200-SMA level surrounding $1,671 acts as the last defense of the gold buyers.

Alternatively, an upside break of the stated channel’s support line, close to $1,785, won’t hesitate to aim for the $1,800 threshold ahead of challenge August month’s peak near $1,808.

Overall, the gold price is likely to witness a short-term downside but the broadly bullish trend remains intact unless the quote stays beyond $1,671.

Gold: Four-hour chart

Trend: Limited downside expected

• EURUSD bulls take a breather around the highest levels in three months.
• Overbought RSI, the key resistance zone tests the pair’s further upside.
• 200-DMA adds to the upside filters before directing buyers to late June’s top.
• September’s high, 100-DMA challenges the bearish bias, 1.0280 appears immediate support.

EURUSD consolidates the biggest weekly gains since March 2020 as it prints 0.70% intraday loss, the first in three days, around 1.0330 during Monday’s Asian session.

In doing so, the major currency pair retreats from a six-month-old horizontal resistance area amid the overbought RSI (14) line.

Although the failure to cross the key resistance zone surrounding 1.0350-70 keeps sellers hopeful amid the overbought RSI conditions, the bears have tough challenges to tackle moving forward.

That said, the 38.2% Fibonacci retracement level of the EURUSD pair’s February-September downside, near 1.0280, appears to be the immediate support to watch during the quote’s further declines.

Following that, tops marked during September and the 100-DMA, respectively near 1.0200 and 1.0030 will be in focus.

In a case where EURUSD bears manage to conquer the 1.0030 support, the 1.0000 parity level will be the last defense of buyers.

Meanwhile, recovery moves need a daily closing beyond 1.0370 to aim for the 200-DMA hurdle surrounding 1.0435.

Should the EURUSD bulls manage to keep the reins past the 200-DMA, the odds of witnessing a run-up towards late June highs near 1.0570 can’t be ruled out.

Overall, EURUSD remains on the buyer’s radar but short-term pullback can’t be ruled out.

EURUSD: Daily chart

Trend: Pullback expected

• GBPJPY has sensed buying interest around 164.00 amid hawkish BOE bets.
• The UK administration may postpone investment tax breaks that induce capital spending by the private sector.
• Efforts for achieving price stability will continue for a period of 18 months to two years.

The GBPJPY pair has picked demand around 164.00 in the Tokyo session after facing barricades around the 165.00 hurdle. The cross is displaying signs of exhaustion in the downside momentum post four bearish trading sessions’ spell.

After mixed UK Gross Domestic Product (GDP) figures released on Friday, investors are shifting their focus toward the payrolls data, which is due on Tuesday. The annual GDP data jumped to 2.4% vs. the projection of 2.1%. While the monthly growth figure contracted by 0.6% against 0.4% contraction as expected.

This week, the UK Office for National Statistics may report a significant decline in Claimant Count Change by 12.6k against an increment of 25k reported earlier. The catalyst that will be critical for households will be the Average Earnings data, which is seen stable at 6%. Inflationary pressures in the UK economy have not displayed signs of exhaustion yet and subdued earnings may not offset inflated-payouts comfortably.

Meanwhile, hawkish Bank of England (BOE) bets have escalated as BOE Governor Andrew Bailey clarified on Friday, “more increases to interest rates likely in the coming months.” The UK central bank is also expecting “Efforts to bring inflation under control are likely to take between 18 months and two years.”

On the taxation reforms front, UK Chancellor Jeremy Hunt is looking to postpone UK Prime Minister Rishi Sunak’s plan of investment tax breaks till Spring. The administration may initially focus on filling the GBP 60bln financial hole through tax rises and spending cuts.

This week, the Japanese yen will be mentored by the Gross Domestic Product (GDP) data, which will release on Tuesday. The growth rate 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 bulls could be about to make their move.
• However, the trendline support remains a favourable target. 

The Canadian dollar strengthened to its strongest since September 19th, but a reversal could be about to take shape as per the following analysis. While the greenback is out of favor, and sentiment may take time to switch, the technical are aligned for a move up. 

USDCAD daily chart

USDCAD H1 and M15 charts

The price is making a move for it on the backside of the micro trendline. This is a bullish development for the days ahead. A break above 1.3390 opens the risk of a move to the major trendline opens the risk of a break above 1.3575 and much further. Looking at the M-formation on the weekly chart, for instance, we have the potential for a significant correction:

• USDJPY snaps two-day downtrend at the lowest levels since late August.
• Yields prints corrective pullback from monthly low but talks of Fed pivot test bond sellers.
• BOJ’s defense of easy-money policy, hopes of economic rebound highlight this week’s Japan Q3 GDP.
• Updates from G20 can direct immediate moves, US Retail Sales is also important for near-term directions.

USDJPY licks its wounds at a 2.5-month low as it consolidates recent losses with 0.70% intraday gains around 139.50 as markets in Tokyo open for Monday.

In doing so, the yen pair justifies the recent cautious mood as bond traders return from a long weekend. Also likely to have challenged the USDJPY bears is the anxiety ahead of a meeting between US President Joe Biden and China's Prime Minister Xi Jinping on the sidelined of the Group of 20 Nations (G20) gathering in Bali.

Also likely to have triggered the USDJPY rebound could be the comments from Fed Governor Christopher Waller who tried to defend the bulls while saying, “Rates will not fall until there is ‘clear, strong evidence’ inflation is falling.”

While portraying the mood, the S&P 500 Futures retreat from a one-month high, down 0.30% intraday near 3,990, whereas the US 10-year Treasury yields rise six basis points (bps) to 3.89%, printing the first daily gains in four.

It’s worth noting, however, that the chatters surrounding the US Federal Reserve’s (Fed) pivot, mainly backed by the last week’s US Consumer Price Index (CPI) for October and the November month’s first readings of the University of Michigan Consumer Confidence Index.

Additionally, talks of the Japanese Finance Ministry’s intervention to defend the Yen (JPY) also drowned the USDJPY prices.

Alternatively, the Bank of Japan (BOJ) policymakers’ defense of easy money and challenge to the market’s optimism from Russia and China appear to keep the bears on their toes.

Moving on, updates from the Group of 20 Nations (G20) meeting in Bali could entertain market players amid a light calendar and also because US President Joe Biden and China's Prime Minister Xi Jinping will be meeting there. However, major attention will be given to the first readings of Japan’s third quarter (Q3) Gross Domestic Product (GDP) and the US Retail Sales for October amid hopes of easing divergence between the Fed and the BOJ.

Technical analysis

Although the nearly oversold RSI (14) challenges USDJPY bears, a daily closing below the 100-DMA, around 140.85 by the press time, keeps sellers hopeful of testing an upward-sloping support line from late May, around 137.00 by the press time.