CFD Markets News and Forecasts — 15-11-2022

• GBPJPY remains pressured near a short-term key support line.
• Convergence of 50-SMA, two-week-old descending trend line restricts immediate upside.
• Six-week-old horizontal support lures bears, 100-SMA acts as extra filters to the north.
• RSI, MACD favor sellers as the pair fades the bounce off the monthly low.

GBPJPY remains pressured around 164.80 as sellers poke a one-week-old ascending support line during Wednesday’s Asian session. In doing so, the cross-currency pair fades the recovery moves from a two-week low while portraying a downtrend since October 31.

That said, the quote’s failure to cross the convergence of a 50-SMA and a fortnight-long descending resistance line, around 166.00-20, joins the retreat of the Relative Strength Index (RSI) placed at 14 to tease the sellers. On the same line could be the receding bullish bias of the Moving Average Convergence and Divergence (MACD) indicator.

With this, the GBPJPY bears are likely to conquer the immediate support line around 164.80, which in turn could drag the quote towards a 1.5-month-old broad support area between 162.60 and 163.00.

Although the quote is more likely to rebound from the aforementioned key support zone, a downside break of 162.60 won’t hesitate to challenge the previous monthly low near 159.70.

Alternatively, a daily closing beyond 166.20 could quickly propel GBPJPY toward the 100-SMA hurdle of 167.85.

Following that, the previous week’s top and the October 31 peak, respectively near 169.10 and 172.10, could challenge the pair buyers.

GBPJPY: Four-hour chart

Trend: Further downside expected

• AUDJPY is sensing initial selling action as sentiment has turned sour amid Russia-Poland tensions.
• The Japanese yen has still to show the impact of a contraction in growth rates.
• This week, the Australian payroll data will be of utmost importance.

The AUDJPY pair is facing headwinds in sustaining above the crucial support of 94.00 in the early Tokyo session. The asset is declining after facing barricades around 94.50 and is expected to remain on the tenterhooks ahead of the Australian employment data, which will release on Thursday.

The cross is been declining on escalating geopolitical tensions. The risk profile has soured after Russian rebels expanded their military activities to NATO-member Poland. In response to that, Russian Federation has denied any attack from their side, however, Poland has called for a meeting with NATO members.

On Tuesday, the risk barometer remained majorly in the bounded territory despite the release of the Reserve Bank of Australia (RBA) minutes. As per the RBA minutes, the chances for a 25 bps rate hike stood at 75% despite a historic surge in the inflation rate to 7.3%.

The board agreed that acting consistently on policy rates would support confidence in the monetary policy framework among financial market participants and the community more broadly. Also, RBA policymakers believed that the Official Cash Rate (OCR) has been elevated materially in a short span of time. Apart from that, interest rate guidance has been escalated to 8%.

Meanwhile, Japanese investors reacted less to the negative Gross Domestic Product (GDP) data released on Tuesday. The Japanese economy has displayed a contraction of 0.3% in the third quarter against expectations of a growth rate of 0.3% and the prior release of 0.9%. On an annualized basis, the economic catalyst has displayed a negative growth rate at 1.2% against an expansion of 1.1% as expected and the prior release of 3.5%.

This week, the critical trigger for the asset will be the Australian payroll data. As per the consensus, the economy has added 15k in October vs. a marginal increment of 0.9k earlier. While the Unemployment Rate is seen higher at 3.6% against the prior release of 3.5%.

• A Russian missile fired as part of an attack on Ukraine's energy systems landed in NATO member Poland.
• WTI spikes after a key pipeline bringing Russian oil to Eastern Europe was halted.

West Texas Intermediate, (WTI) put in a short squeeze in the final part of the Wall Street session on Tuesday, moving into in-the-money shorts from the start of the week's trading. At the time of writing, the black gold is trading at $87.47 and is higher by some 0.7% on the day so far. 

The main news of the day comes with reports of a Russian missile fired as part of an attack on Ukraine's energy systems landed in NATO member Poland, killing two. Poland's leaders are in an emergency meeting referred to as a "crisis situation". Polish media reported two died in the attack near the village of Przewodow, close to the country's border with Ukraine. Polish foreign ministry has since confirmed that a Russian-produced rocket fell on the Polish village Przewodów. In response, NATO Security General Stoltenberg will chair an emergency meeting of NATO Wednesday morning.

Prices spiked late in the session after a key pipeline bringing Russian oil to Eastern Europe was halted after power was cut, analysts at ANZ Bank reported. ''The Ukrainian pipeline manager said Russian artillery was the cause. The halt affects flows to Hungary, Czech Republic and Slovakia. The length of the pipeline outage is still unknown. This comes ahead of European sanctions on Russian crude oil imports on 5 December. Crude oil prices had been under pressure earlier in the session amid concerns over demand.''

The report offset the bearish IEA news that said the agency has cut its forecast for 2023 demand growth to 1.6-million barrels per day from 2.1-million bpd this year, while expecting demand in the final quarter of this year to contract by 240,000 bpd. "The GDP outlook has worsened and 4Q22 global oil use will contract (-240 kb/d) compared with last year. China's persistently weak economy, Europe's energy crisis, burgeoning product cracks and the strong US dollar are all weighing heavily on consumption," the agency said in its report. 

''Earlier this week, OPEC also voiced its concern about demand and subsequently cut its fourth quarter demand forecast. Rising COVID-19 cases in China also weighed on sentiment, despite hopes of easing virus restrictions earlier in the week,'' analysts at ANZ Bank explained. ''Several major cities continue to record high levels of cases. Travel also remains subdued across the country as the public remains concerned it will be caught up in quarantine.''

In separate news, China has reported a surge in Covid infections and many people under lockdown in the manufacturing hub of Guangzhou took to the streets to protest by breaking the confinement barriers. Weak demand from China has been weighing on oil prices. Reuters reported ''new cases in Guangzhou rose above 5,000 for the first time, raising concerns the city of more than 15 million could face wider lockdowns, with the country on Monday reporting a total 17,772 new cases of the coronavirus, up from 16,072 a day earlier.''

• AUDUSD prints mild losses at the highest levels in two months.
• NATO Ambassadors to hold emergency meeting as Russian missile struck Poland.
• Upbeat sentiment favored AUDUSD buyers despite softer data from US, China and Australia.
• Firmer Aussie wage numbers can renew buying but risk-aversion, US data are more important to watch for clear directions.

AUDUSD grinds lower around 0.6750, after refreshing a two-month high, as risk-off mood joins pre-data anxiety to challenge buyers during early Wednesday in Asia.

The Aussie pair’s latest weakness could be linked to the headlines surrounding Russia’s missiles that struck Poland, a North Atlantic Treaty Organization (NATO) nation. Following that hit, the global leaders criticized Moscow’s attempt whole the NATO ambassadors called for an emergency meeting even if Russia's defense ministry denied claims of Moscow’s strike on Poland.

Just after the news broke Wall Street pared initial gains and the US Treasury yields rebounded from the intraday low. That said, the S&P 500 Futures print mild losses by the press time.

The risk-off mood underpins the US Dollar’s safe-haven demand and weighs on the AUDUSD prices, mainly due to the pair’s risk barometer status.

On Tuesday, the Reserve Bank of Australia’s (RBA) openness for all moves joined the absence of major negatives from the Group of 20 Nations (G20) meeting in Indonesia to favor the AUDUSD prices initially. On the same line was China’s readiness for more stimulus and the softer US Producer Price Index (PPI) for October and the Federal Reserve Bank of New York's Empire State Manufacturing Index for the said month.

Given the latest risk aversion, as well as the pre-data caution, the AUDUSD pair is likely to remain pressured ahead of Australia’s Wage Price Index for the third quarter (Q3), expected 0.9% QoQ versus 0.7% prior. That said, an improvement in the wages could help the RBA to turn down the dovish expectations, which in turn may help the Aussie pair to consolidate the latest losses. However, US Retail Sales for October, expected 1.0% versus 0.0% prior, will be more important considering the growing chatters of the Federal Reserve’s (Fed) pivot.

It should be noted that the latest statements from the International Monetary Fund (IMF) challenges the AUDUSD bears and keeps buyers hopeful ahead of the key Aussie data. “Australia should keep tightening monetary and fiscal policy to help cool domestic demand and keep inflation expectations in check, the IMF said,” reported Bloomberg.

Technical analysis

Despite the latest pullback, the AUDUSD pair defends the previous day’s upside break of the 100-DMA, around 0.6700 by the press time, which in turn keeps the buyers hopeful of visiting September’s high near 0.6920.

• Producer Price Index in the United States drops, supporting Federal Reserve’s case for diminishing interest-rate size increases.
• Russia’s – Ukraine conflict extends to Poland, spurring safe-haven flows toward Gold.
• US Treasury bond yields plunged on Fed policymakers, paving the path for slower rate hikes.
• XAUUSD prepares to assault the $1800 figure ahead of the 200-day EMA.

Gold Price is trading with solid gains on Tuesday after the release of a soft Producer Price Index(PPI) report in the United States, strengthening the Federal Reserve (Fed) case for tempering the pace of interest-rate increases. Another factor that propelled Gold Prices was geopolitical jitters linked to Russia’s invasion of Ukraine, which involved Poland and NATO. Therefore, the XAUUSD is trading at $1779 a troy ounce.

US Producer Price Index ratchet down, debilitate the US Dollar

The US Department of Labor (DoL) reported the US PPI for October decelerated compared to last month’s 8.2% and rose by 8% YoY, less than estimates of 8.3%. Excluding volatile items, the so-called core PPI advanced by 6.7% YoY, below the September 7.1%, and lower than the 7.2% uptick expected.

Given that Federal Reserve policymakers laid the ground to temper the tightening cycle after a positive Consumer Price Index (CPI) for October, Gold Prices are expected to rally. Traders should be aware that following the CPI release on Thursday, US Treasury bond yields plunged, with the 10-year benchmark note sliding 27 bps from 4.117% to 3.818%, a headwind for the US Dollar, which bolstered XAU.

Geopolitical tensions arose as Russia’s missiles landed in Poland

In the meantime, the Gold Price spiked late in the North American session on headlines: “Two Russian missiles landed on Poland, killing two Polish.” Even though there has not been a confirmation by Poland’s sources, the headline bolstered XAUUSD’s price from around $1767 to $1785, a troy ounce.

Delving into the latest newswires, a senior US intelligence official said that Russian missiles crossed into NATO member Poland, killing two people. After the incident, Polish Prime Minister Mateusz Morawiecki called an urgent meeting of a government committee for national security and defense affairs, according to a government spokesman, as reported by Reuters.

Federal Reserve policymakers committed to driving inflation down

Elsewhere, a slew of  Federal Reserve officials continued to express the need to keep raising rates, though welcoming October’s CPI and PPI reports, as Atlanta’s Fed President Raphael Bostic noted, “There are glimmers of hope,” in an essay posted in the Atlanta Fed Website. Bostic was echoing comments from the Fed Vice-Chair Lael Brainard, who said the central bank could slow the pace of rate hikes but emphasized the work is not done. In the same tone, Fed Governor Christopher Waller commented there’s a “ways to go” before interest-rate hikes are done.

That said, XAUUSD is set to extend its gains but faces solid resistance around January 28 daily-low-turned-resistance at $1780. Nevertheless, once cleared, the Gold Price would resume its uptrend toward the 200-day Exponential Moving Average (EMA) at $1803.

Gold Price Analysis: Technical outlook

Gold Price remains neutral-to-upward biased, set to test the psychological $1800 figure, immediately followed by the 200-day Exponential Moving Average (EMA). Nevertheless, XAUUSD needs to clear November’s 15 daily high at $1786 before reaching the $1800 mark. Once cleared, the 200-day EMA at $1803 is up for grabs. Of note, if Gold achieves a daily close above the latter, a June 23 high test at $1857 is on the cards.

• USDCHF oscillates above 0.9400 as investors look for developments on Russia-Poland tensions.
• Hawkish commentaries from Fed policymakers have failed in supporting US Treasury yields.
• SNB Jordan sees more expansion in interest rates to keep inflation in a 0-2% range.

The USDCHF pair is witnessing rangebound moves above the immediate support of 0.9400 in early Asia. The asset has been trading in a tight range as a rebound in negative market sentiment after geopolitical tensions between Russia and Poland is supporting from the floor while hawkish guidance from Swiss National Bank (SNB) Chairman Thomas J. Jordan is capping the upside.

Escalating geopolitical tensions after Russia strike two stray missiles in the region of NATO-member Poland shifted traction in favor of safe-haven assets. The US dollar index (DXY) witnessed a sheer rebound after registering a fresh three-month low at 105.34. Gains in the DXY were trimmed quickly but still have left steam for an upside.

Meanwhile, the alpha generated by the US government bonds is not reflecting any positive reaction to hawkish commentaries from Federal Reserve (Fed) policymakers. Atlanta Fed President Raphael Bostic said on Tuesday that he wasn't expecting to see the full impact of monetary policy on inflation for months, as reported by Reuters.

He further added that indicators showing ease in inflationary pressures have not been witnessed yet so anticipating more rate hikes ahead. Also, Fed Governor Lisa Cook reiterated on Tuesday that inflation in the United States is still "much too high" and added that the focus for the Fed is on addressing inflation.

On the Swiss franc front, SNB Chairman cleared that monetary policy is still expansionary and ''we have most likely to adjust monetary policy again.'' The Swiss central bank is entitled to bring the inflation rate in the 0-2% range and in response to that current monetary policy is not restrictive enough to perform the job.

Going forward, investors will keep an eye on the outcome of NATO talks over Russia-Poland tensions. Poland's government has called for a meeting with NATO ambassadors after exercising Alliance’s Article 4. The outcome of the meeting will provide a fresh impetus for further action.

US inflation expectations, per the breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, dropped during the five consecutive days in the last.

That said, the US Inflation expectations on the 10-year and 5-year horizons print 2.35% and 2.40% at the latest, matching the lowest levels since early October during the five-day downtrend.

The recent easing in the US inflation precursor adds strength to the talks surrounding the US Federal Reserve’s (Fed) monetary policy pivot and tried to pressure the US Dollar (USD) towards the south. However, the risk-off mood appeared to have challenged the USD bears of late.

It’s worth noting that the latest easing in the US Producer Price Index (PPI) for October and improvement in the Federal Reserve Bank of New York's Empire State Manufacturing Index for November also seemed to have favored the risk-on mood previously.

Moving on, the US Retail Sales for October, expected at 1.0% versus 0.0% prior, will be crucial for the market players to watch as the recent US numbers have been positive for the market’s risk profile, by pushing back the need for aggressive rate hikes.

• USDCAD licks its wounds at the lowest levels in two months, pressured near multi-day low of late.
• Convergence of 100-DMA, four-month-old horizontal support challenge bears.
• A two-week-long descending trend line restricts recovery moves.
• Bearish MACD signals, failure to rebound from the key support area keep bears hopeful.

USDCAD holds lower grounds around 1.3280, fading the bounce off a two-month low amid Wednesday’s initial Asian session.

Not only the USDCAD pair’s failure to defend the recovery from the 1.3220-30 support zone but bearish MACD signals and a two-week-old descending trend line also favor the Loonie pair sellers.

That said, a clear downside break of the 1.3220 mark could quickly direct USDCAD towards an upward-sloping trend line from early June, around 1.3050 by the press time.

It’s worth noting that the USDCAD weakness past 1.3050 will be restricted by the 1.3000 psychological magnet and 200-DMA support level near 1.2990.

Alternatively, an upside clearance of the aforementioned short-term resistance line, around 1.3380 by the press time, could renew the USDCAD buying.

Even so, lows marked during October, around 1.3495-3505, appear tough nut to crack for the USDCAD bulls before approaching the yearly high surrounding 1.3980.

Overall, USDCAD remains on the bear’s radar but the downside room appears limited.

USDCAD: Daily chart

Trend: Further weakness expected

• NZDUSD turns sideways as investors await more development on Russia-Poland tensions.
• NATO Ambassadors to meet on Wednesday as Poland exercises Alliance’s Article 4.
• An improvement in US Retail Sales despite a decline in inflation indicates robust retail demand.

The NZDUSD pair is witnessing a volatility contraction around the crucial hurdle of 0.6150 in the early Asian session. The asset witnessed an escalation in standard deviation on Tuesday after Poland's economy reported an attack by Russian rebels through two stray missiles. This led to a resurgence in the risk-off mood, however, the overall optimism regained glory.

The asset sensed selling pressure from the round-level resistance of 0.6200 and eased the majority of gains recorded on early Tuesday. Later, it turned sideways as expansion in volatility can be tamed by a period of contraction in the same.

Meanwhile, the US dollar index (DXY) has eased after a vertical movement to near 107.00 from a fresh three-month low of 105.34. Uncertainty amidst the Russian attack on NATO-member Poland is expected to remain for a while. In response to Russian military activity, Poland's administration has requested NATO Ambassadors to meet on Wednesday by enforcing Alliance’s Article 4, reported Reuters.

The returns on US government bonds are continuously losing their all support areas as the market participants don’t see the continuation of the 75 basis points (bps) rate hike structure by the Federal Reserve (Fed). The 10-year US Treasury yields have dropped to 3.77% and are expected to remain on tenterhooks ahead.

On Wednesday, the US Retail Sales data will remain in the spotlight. The economic data is seen higher at 0.9%vs. the prior release of 0%. An increment in Retail Sales data despite a decline in headline CPI figures in October indicates a robust demand by the households.

Meanwhile, Kiwi bulls are still solid on optimism fueled by upbeat Business NZ PSI data. The economic catalyst landed higher at 57.4 vs. the prior release of 55.9%. This week, the NZ economic calendar has nothing important to offer, therefore, the entire focus of investors will remain on geopolitical events for further guidance.

“The ambassadors to the North Atlantic Treaty Organization (NATO) will meet on Wednesday at the request of Poland on basis of the alliance's Article 4,” reported Reuters while quoting two European diplomats after an explosion in Poland close to the Ukrainian border reportedly caused by a stray Russian missile.

The news also defines Article 4 as it said, “According to article 4 of the alliance's founding treaty, members can raise any issue of concern, especially related to the security of a member country.”

Reuters also quotes one of the European diplomats as saying, “The alliance would act cautiously and needed time to verify how exactly the incident happened.”

Elsewhere, the United States and Western allies said they were investigating but could not confirm a report on Tuesday that a blast in NATO member Poland resulted from stray Russian missiles, while Russia's defense ministry denied it.

Also read: Ukrainian Pres': Russian missile strikes on NATO territory are ‘a significant escalation, action is needed’

Market implications

The news quickly reversed the market’s previous risk-on mood and helped the US Dollar to recover, which in turn exerts downside pressure on the EURUSD price. That said, the major currency pair stays pressured around 1.0350 at the latest.

Also read: EURUSD stays defensive near 1.0350 amid shift in sentiment, US Retail Sales, ECB’s Lagarde eyed

• EURUSD remains depressed after reversing from 4.5-month high.
• US Dollar bounces off three-month low as Russian missiles killed two in Poland.
• US/EU data, G20 updates enabled the previous run-up ahead of the key updates.
• Risk catalysts may entertain traders, mostly the bears, ahead of the US Retail Sales, speech from ECB’s Lagarde.

EURUSD teases the bear’s return by holding lower ground near the mid-1.0300s after rising to the highest levels since early July. The major currency pair cheered the market’s risk-on mood and upbeat data from home to refresh the multi-day high before the fresh geopolitical fears dragged prices ahead of important data/events.

News that Russian missiles struck in Polish border with Ukraine and killed two triggered the latest risk aversion as Poland is a North Atlantic Treaty Organization (NATO) nation. Ukrainian President Volodymyr Zelenskyy harshly criticized Russian missile strikes while NATO Ambassadors are up for a meeting early Wednesday to discuss the issue. Meanwhile, a Polish reporter was quoted on the blasts tonight while saying, ''My sources in the services say that what hit Przewowo is most likely the remains of a (Russian) rocket shot down by the Armed Forces of Ukraine.''

Talking about data, Germany’s ZEW Economic Sentiment Index improved to -36.7 in November versus -59.2 prior and the market expectation of -50. Further, the nation’s ZEW Current Situation Index also rose to -64.5 from -72.2 previous readings and the analysts' estimate of -68.4.  Additionally, the second estimate of the Euro Area Gross Domestic Product (GDP) for the third quarter (Q3) matched the initial forecasts of 2.1% YoY and 0.2% QoQ.

On the other hand, US Producer Price Index (PPI) for October eased to 8.0% YoY versus market forecasts of 8.3% and the downwardly revised prior of 8.4%. It’s worth noting that the monthly figure reprinted the 0.2% prior (revised from 0.4%) while easing below 0.5% expectations. Moreover, the Federal Reserve Bank of New York's Empire State Manufacturing Index jumped to 4.5 in November from -9.1 in October and the market expectation of -5.

The recently softer data from the US and Eurozone renewed concerns about the Fed’s pivot and favored the market optimists previously. On the same line was an absence of major negatives from the Group of 20 Nations (G20) meeting in Indonesia. Further, China’s readiness for more stimulus, especially after witnessing downbeat data, also favored the risk-on mood and the EURUSD buyers previously.

Amid these plays, Wall Street closed with smaller gains than the early-day moves while the US 10-year Treasury yields struggle at six-week low.

Moving on, EURUSD is likely to remain pressured ahead of the US Retail Sales for October, expected 1.0% versus 0.0% prior, amid sour sentiment. Should the actual outcome of the data appear softer the pair may rebound. However, the recovery also depends upon the speech from European Central Bank (ECB) President Christine Lagarde amid looming fears of recession and recently mixed comments from the policymakers over the next hawkish step.

Technical analysis

A failure to provide a daily closing beyond the 200-DMA hurdle, around 1.0425 by the press time, joins overbought RSI conditions to challenge the bulls.

• GBPUSD is looking to recapture 1.2000 as risk-on regains traction post-Poland noise.
• Declining odds for a 75 bps rate hike by the Fed have weighed heaving on US Treasury yields.
• A significant rise in oil and food prices is expected to accelerate UK headline CPI to 10.7%.

The GBPUSD pair has turned sideways after resurfacing from the critical support of 1.1800 in the late New York session. The Cable bulls are expected to recapture the psychological resistance of 1.2000 as the risk-on impulse has regained traction.

A significant responsive buying move in the US dollar index (DXY) after registering a fresh three-month low of 105.34 has concluded around 107.00 as initiative sellers have stepped in. The S&P500 futures recovered sharply after a vertical decline as escalated geopolitical tensions mounted volatility in the global markets.

The cross of two stray Russian rockets into the territory of NATO-member Poland led to a resurgence of geopolitical tensions as the market participants considered that Russia is expanding its invasion plans to other NATO members. However, Russian defenses have denied the same.

Meanwhile, the 10-year US Treasury yields dropped further to 3.77% as the Federal Reserve (Fed) is highly expected to drop the continuation of the 75 basis points (bps) rate hike regime in its December monetary policy meeting. As per the CME FedWatch tool, chances for a 75 bps rate hike have tumbled below 15%.

On the UK front, Pound bulls capitalized on improvement in labor cost data but Poland's noise dented market sentiment. The Average Earnings landed higher at 5.7% than the consensus of 5.6%. Households in the UK region are already facing turbulence of decline in real income due to escalating inflationary pressures. An improvement in earnings data may support them to offset inflation-adjusted payouts.

Going forward, investors will keep an eye on the inflation data. The headline Consumer Price Index (CPI) is seen extremely higher at 10.7% vs. the prior release of 10.1%. While the core CPI that excludes oil and food prices may decline marginally to 6.4% against the former release of 6.5%.

• AUDUSD bulls stick to the course but meet key resistance. 
• Geopolitical risks have raised their ugly head surrounding Poland, Russia noise.

AUDUSD is higher by some 1% and has rallied from a low of 0.6685 to test a key daily resistance line near 0.6800. However, there has been a glitch that is due to lending support to the risk-off complex, namely the US Dollar, in today's escalation of geopolitical tensions in the Russian / Ukraine conflict. 

In midday trade on Wall Street, news that at least two are dead after Russian missiles landed in NATO state Poland on the Ukraine border, according to the Express. Poland and Hungary have convened national security committee meetings and the US Pentagon is seeking to collaborate on the news. A NATO official said ''we are looking into these reports linked to blast in Poland and closely coordinating with our ally Poland.'' Volodymyr Zelenskyy, the Ukrainian president, said the Russian missile strikes on NATO territory are a significant escalation, and action is needed.  The Latvian defense minister said NATO ''could provide air defenses to Poland and part of the territory of Ukraine.''

RBA vs. geopolitical risks

The implications of this are highly bearish for financial markets and the high beta currencies such as the Aussie. Given that AUD is now meeting a daily trendline, see below, the path of least resistance is to the downside. For now, however, it is hovering near its strongest levels in nearly two months as traders digested the latest central bank policy meeting minutes, which showed that policymakers are open to either pausing the tightening cycle or returning to larger interest rate hikes depending on incoming data.

Reserve Bank of Australia Deputy Governor Michelle Bullock also recently stated that the cash rate would likely rise further. However, he added that an eventual pause in rate hikes is getting nearer. Earlier this month, the RBA delivered a smaller-than-expected 25 basis point rate increase and has now lifted the cash rate by a total of 275 basis points since May.

Meanwhile, investors remained cautious as Federal Reserve officials signaled that US rates could end higher than previously anticipated. Hawkish Fed speakers are lending support to the greenback which is now fuelled by geopolitical risks also. Nevertheless, Tuesday's Producer Price Index mirrored that of last week's Consumer Price Index. The DXY fell to its lowest since mid-August around 105.35 and was on track to test the August 10 low near 104.636. However, the bulls have moved in and are treading water again:

US yields reacted accordingly to the PPI whereby the headline came in at 8.0% vs. 8.3% expected and a revised 8.4% (was 8.5%) in September. The core came in at 6.7% YoY vs. 7.2% expected and actual in September.  ''The PPI data will do nothing to dispel the notion that the Fed is moving closer to a pivot,'' analysts at Brown Brothers Harriman argued. 

Aussie jobs eyed

Looking ahead on the domestic front, Aussie employment data will be in focus. ''Wages growth is likely to pick up again, boosted by the adjustment from the Fair Work Commission decision while private sector wage adjustment usually occurs in the third quarter,'' analysts at TD Securities said. ''On the other hand, we expect employment losses in October, contrary to expectations. A weak jobs number may drive expectations that the RBA is coming closer to a pause though we think it is still premature.''

AUDUSD technical analysis

The daily and weekly charts are offering a bearish outlook while the price remains on the front side of the bearish trendlines and below the weekly horizontal structure. 

• The producer Price Index in the United States decelerates, flashing the impact of the Federal Reserve’s policy.
• After two US inflation reports, the US Dollar weakened on hopes that the Fed will pause rate hikes.
• Japan’s GDP contracted, justifying the Bank of Japan’s loose policy.
• Russian missiles hit Poland, though pending confirmation remained.

The USDJPY struggles to gain traction above the 100-day Exponential Moving Average (EMA) at 140.82 and drops following the release of a soft US inflation report, strengthening the case for the Federal Reserve and moderating the pace of rate hikes. Also, geopolitical tensions arose as reports emerged that two Russian missiles hit Poland. The USDJPY is trading at 139.05, below its opening price by 0.58%.

Sentiment remains fragile following the Poland events. Reports emerged that Ukrainian forces intercepted a Russian rocket, which dived into Poland, causing the tragedy. Of note, Polish authorities have not expressed an official version of what happened. At the time of typing, the White House said it couldn’t confirm the reports coming out from Poland.

Aside from this, US equities have recovered some ground after the Poland headlines. The US Department of Labor (DoL) revealed that the Producer Price Index (PPI) for October expanded 8% YoY, beneath 8.3% estimates, while excluding volatile items, the so-called core PPI jumped by 6.7% YoY, less than 7.1% foreseen. Now that CPI and the PPI reports are in the rearview mirror, suggesting that US inflation is cooling,

Elsewhere, Federal Reserve officials commented that a deceleration of tightening monetary conditions would be appropriate, but at the same time, emphasized that the work is not done. On Tuesday, Atlanta’s Fed President Raphael Bostic said that the Fed needs to be persistent. Meanwhile, the Fed Vice-Chair for Supervision, Michael Barr, cautioned that the economy could see “significant softening” following the Fed’s actions.

On the Japanese front, data revealed that Gross Domestic Product (GDP)for Q3 shrank by 1.2% against a 1.1% growth estimated by analysts, justifying the Bank of Japan’s (BoJ) monetary policy. The BoJ  Governor Haruhiki Kuroda continually expressed that the central bank would keep monetary policy conditions loose to stimulate the Japanese economy.

What to watch

Ahead in the calendar, the Japanese economic calendar will feature Machinery Orders and Tertiary Industry Index for September. In the US, the docket will feature the MBA 30-year Mortgage Rate alongside Import and Export Prices, Retail Sales, and Industrial Production. Also, Fed speakers like the New York Fed President John Williams will cross newswires.

USDJPY Key Technical Levels

Ukrainian President Volodymyr Zelenskyy said the Russian missile strikes on NATO territory are ‘a significant escalation, action is needed’.

More to come

What you need to take care of on Wednesday, November 16:

 It was another volatile day in the FX sphere, with optimism and fears mixing throughout the day. The American Dollar plummeted to fresh monthly lows against most major rivals ahead of Wall Street’s opening but posted a nice comeback ahead of the close.

Modest concerns surged at the beginning of the day following tepid Chinese data. According to official sources,  Industrial Production grew by 5% YoY in October, missing the market expectation for an expansion of 5.2%. Also, Retail Sales contracted by 0.5% in the same period, worse than the 1% advance anticipated.

The market sentiment improved following the release of the US Producer Price Index as it rose by 8% YoY, improving from the previous 8.4%.

The mood changed following news that Russian missiles hit Poland, killing at least two people. Missiles landed in the Polish village of Przewodów, near the border with Ukraine, and the government called an emergency meeting. Worth remembering Poland is a NATO member, and things could escalate fast. Some Poland sources suggest it is most likely the remains of a Russian rocket shot down by the Armed Forces of Ukraine.

The EURUSD peaked at 1.0480, then fell to 1.0292. It currently trades at around 1.0320. GBPUSD hovers around 1.1830 after surging to 1.2028. UK-employment-related data was generally disappointing. The ILO Unemployment Rate rose to 3.6% in September, while wage inflation rose in October. The country will publish the October Consumer Price Index on Wednesday.

Commodity-linked currencies ended the day with modest gains vs their American rival, with AUDUSD trading at around 0.6750 and USDCAD surrounding 1.3300. Save-have currencies remained under pressure, with USDCHF now trading at 0.9450 and USDJPY at 139.40.

Gold extended its monthly rally but ended Tuesday with modest gains at around $1,776 a troy ounce. Crude oil prices rallied with Russian-Ukraine news, and WTI settled at around $86.80 a barrel.

Former US President Donald Trump said he would do an announcement at his house at Mar-a-Lago tonight.  Market players anticipate he will announce he will run for President again in 2024.

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Crypto Season faces resistance

A Polish reporter was quoted on the blasts tonight:

''My sources in the services say that what hit Przewowo is most likely the remains of a [Russian] rocket shot down by the Armed Forces of Ukraine.''

S&P 500 M15 chart

The stocks are rallying on the relief of the prospects that this is a false alarm. Nevertheless, markets will be on the lookout for the outcome of official confirmation from the Pentagon, Polish, and Hungarian defense committees. The S&P 500 is technically in the bearish territory while on the back side of the broken trendline and while below the resistance as per the drawings above. A close below 3,955 will be significantly bearish.

• Two Russian missiles hit the city of Przewodow, killing two Polish.
• The Polish Prime Minister called an urgent meeting, according to Reuters.
• EURUSD plunged after hitting a daily high at 1.0481, approaching 1.0270s.

The EURUSD is plunging in the North American session on confirmation that two Russian missiles landed on Poland, killing two poles, near the Polish city of Hrubieszow on the border with Ukraine. Therefore, the EURUSD is plummeting from around 1.0388 to 1.0303 at the time of writing.

Reports confirmed by the AP said that a senior US intelligence official said Russian missiles crossed into NATO member Poland, killing two people.

In the meantime, Polish Prime Minister Mateusz Morawiecki called an urgent meeting of a government committee for national security and defense affairs, according to a government spokesman, as reported by Reuters.

Market’s Reaction

The EURUSD dived from around 1.0380s, extended its losses beneath the daily pivot point, and edged towards the S1 pivot level at around 1.0280. Meanwhile, US equities are pairing earlier gains, while the US Dollar Index is rising more than 0.19% at around 107.080 after hitting a daily low at 105.340.

EURUSD Price Analysis: Technical outlook

Therefore, the EURUSD is neutral-to-upward biased and briefly pierced the 200-day EMA at 1.0427 but retreated at around the London Fix, diving below 1.0360. if the EURUSD does not achieve a daily close above the November 11 high of 1.0364, it will exacerbate a fall beneath the 1.0300 figure. The EURUSD’s next support would be the 1.0200 figure, followed by the 100-day EMA at 1.0026.

• Gold perks up on risk-off turn in markets on Poland news.
• US Dollar could be on the verge of a significant correction, a weight on Gold. 

The Gold price is headed higher on the day, now trading at $1,778, up 0.4% on news that at least two are dead after Russian missiles landed in NATO state Poland on the Ukraine border, according to the Express. Poland has convened a national security committee meeting according to a spokesman. Before the news, the yellow metal was sliding.

The US Dollar had been pressured on Monday following Producer Price Index data that mirrored last week's Consumer Price Index. The DXY fell to its lowest since mid-August around 105.35 and was on track to test the August 10 low near 104.636. However, the bulls have moved in and are treading water again. US yields reacted accordingly to the PPI whereby the headline came in at 8.0% vs. 8.3% expected and a revised 8.4% (was 8.5%) in September. The core came in at 6.7% YoY vs. 7.2% expected and actual in September.  ''The PPI data will do nothing to dispel the notion that the Fed is moving closer to a pivot,'' analysts at Brown Brothers Harriman argued. 

Meanwhile, the US 2-year yield is trading near 4.37%, just above the recent low near 4.29% last Thursday. The 10-year yield is trading near 3.80%, below the recent low near 3.81% last Thursday. ''Yields are likely to continue probing the downside this week until the data say otherwise,'' analysts at BBH argued. 

Equity markets had latched onto the PPI data as confirmation of the CPI data but flaked out on the day and started to melt towards the lows of the day, suddenly propelled lower on the geopolitical disruption:

The above is the 15-minute knee-jerk reaction in the SP 500 to the news. When coupled with the China COVID risks and an inverted US yield curve, that indicate that the US economy is likely to go into recession over the next 12 months or so, stocks could continue to feel the pressure. Such a scenario could play back into the hands of the US Dollar bulls and remain a weight on Gold prices in the face of hawkish Fed speakers. 

Gold technical analysis

Prior to the news, there were prospects of a downside extension on the 4-hour chart. However, the news has put a bid into the yellow metal as per the following 15 minute chart:

Nevertheless, the state of play is bullish for a correcting US Dollar as seen in the following DXY chart: 

This could be the makings of a significant correction as per the daily chart, capping Gold's advances:

• The United States Producer Price Index for October was softer-than-expected, justifying Fed officials’ case of moderating rate hikes.
• US economic data overshadowed Canadian economic data.
• USDCAD Price Analysis: Struggles at the 100-day EMA, reclaims 1.3300 on geopolitical woes.

The USDCAD climbed toward 1.3335 during the North American session after dropping beneath the 1.3300 figure following the release of a soft inflation report in the United States. A weaker-than-expected October Producer Price Index (PPI) report strengthened the case for the Federal Reserve to moderate increases. Nevertheless, geopolitical jitters caused a risk-off impulse at the time of typing, so the USDCAD is trading at 1.3322, above its opening price.

The US Department of Labor (DoL) revealed that the Producer Price Index (PPI) for October jumped by 8% YoY, below 8.3% expected, while the so-called core PPI increased by 6.7% YoY, less than 7.1% foreseen. Of late, the New York Empire State Manufacturing Index showed conditions improved in the New York Fed area, rose 4.5, vs. estimates for a -6 contraction.

Given that October’s inflation data in the United States is in the rearview mirror, it justifies the deceleration of interest-rate increases to the Federal Funds rate (FFR), as said by Federal Reserve (Fed) officials. On Monday, the Federal Reserve board members Christopher Waller and Vice-Chair Lael Brainard expressed that need, though Brainard emphasized that the Fed has “additional work” to tame inflation.

Traders should be aware that even though Fed policymakers support less aggressive monetary policy, they are still in a hiking cycle, so there’s no Federal Reserve pivot yet. Unless they lay the path of where they expect the FFR to peak and inflation continues its downtrend, further US Dollar (USD) strength is expected.

On the Canadian side, September’s Wholesales jumped 0.1%, exceeding a contraction of 0.2% estimates by economists, as reported by Statistics Canada. At the same time, Manufacturing Sales were unchanged in September after four straight months of declines.

USDCAD Price Analysis: Technical outlook

That said, the USDCAD edged lower as it continued towards achieving the head-and-shoulders chart pattern target at around 1.3030. However, buyers are stepping at around the 100-day Exponential Moving Average (EMA) at 1,3234, which probed to be a tough nut to crack. Key resistance levels lie at 1.3400, followed by the psychological 1.3500, ahead of the 50-day EMA at 1.3525.

Wall Street is printing in the red with benchmarks at the lows of the day following news that at least two are dead after Russian missiles landed in NATO state Poland on the Ukraine border, according to the Express. 

Poland has convened a national security committee meeting according to a spokesman. 

More to come...

Market reaction

US stocks are turning into a sea of red with the benchmarks heading south as per the SP 500 index:

The US Dollar can find support on the news also, potentially leading to a significant correction for the days ahead as geopolitics come to the fore:

The European Central Bank's Robert Holzmann has crossed the wires saying interest rates will be increased further.

More to come...

Swiss National Bank Chairman Thomas Jordan says monetary policy is still expansionary and ''we have most likely to adjust monetary policy again.''

This is a rehash of prior commentary where he has been continuously hinting that further interest rate hikes were on the way from the central bank.

In prior remarks recently made, he was 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 that 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 comments

More to come ...

• A soft US Producer Price Index further cements Federal Reserve officials’ case for slowing the pace of tightening.
• Eurozone’s GDP beat estimates, though it continues to decrease as an upcoming recession looms.
• EURUSD will extend its losses if it dives below 1.0360 after struggling at the 200-DMA.

The EURUSD is climbing in the North American session, though it remains beneath the highs of the day at 1.0481, reached on the release of a softer-than-expected Producer Price Index (PPI) for the United States. That said, PPI and CPI report in the US, flashing signs that inflation is cooling down, added to Federal Reserve’s policymakers laying the ground for a slower pace of rate hikes, spurred a risk-on impulse. At the time of writing, the EURUSD is trading at 1.0364.

Inflation in the US is cooling as CPI and PPI ease in October

Global equities continue to rally, between 0.70% and 2.10%. The US Department of Labor (DoL) reported that PPI for October rose by 8% YoY, below 8.3%, while excluding volatile items, the so-called core PPI jumped by 6.7% YoY, less than 7.1% foreseen. Now that CPI and the PPI reports are in the rearview mirror, suggesting that US inflation is cooling, Federal Reserve (Fed) policymakers are lying the ground to decrease the size of rate hikes from 75 bps to 50. Therefore, US Dollar (USD) weakened on the release, as shown by the EURUSD spiking towards a new 5-month high at 1.0481, piercing on its way north of the 200-day Exponential Moving Average (EMA) at 1.0427, before retreating to the current exchange rates.

Meanwhile, a slew of Fed members crossed newswires led by Lisa Cook, which said that inflation remains too high and that the central bank’s focus will be addressing inflation. The Philadelphia Fed President Patrick Harker said that he’s not “overly worried” about inflation expectations and suggested that the Fed could pause as long as the US central bank stays committed to tame inflation.

Aside from this, the New York Fed Empire State Manufacturing Index rose by 4.5, smashing expectations for a contraction of 6, though the PPI report overshadowed it.

On the Eurozone front, European Central Bank (ECB) member Francois Villeroy said that the ECB would probably keep raising rates beyond the 2% level. He added that monetary policy divergence around the globe exerts downward pressures on the Euro and more on the Japanese Yen (JPY).

Data-wise, the Eurozone economic calendar featured the Eurozone’s GDP for Q3, with data showing that the block grew at 2.1% YoY, aligned with estimates but below Q2’s number. At the same time, the ZEW Economic Sentiment Index for the Euro area and Germany improved, though it remained negative, with both figures reaching -36.7 from -59.7 and -59.2, respectively.

EURUSD Price Analysis: Technical outlook

Therefore, the EURUSD is neutral-to-upward biased and briefly pierced the 200-day EMA at 1.0427 but retreated at around the London Fix, diving below 1.0360. if the EURUSD does not achieve a daily close above the November 11 high of 1.0364, it will exacerbate a fall beneath the 1.0300 figure. That said, the EURUSD’s next support would be the 1.0200 figure, followed by the 100-day EMA at 1.0026.

Atlanta Federal Reserve President Raphael Bostic said on Tuesday that he wasn't expecting to see the full impact of monetary policy on inflation for months, as reported by Reuters.

Additional takeaways

"Fed must look to economic signals other than inflation as policy guideposts."

"Seen clues that tighter financial conditions may be pinching commercial real estate, banking."

"Tighter financial conditions have not yet constrained business activity enough to seriously dent inflation."

"Anticipating that more interest rate hikes will be needed."

"Indicators of broad-based easing of inflation need to be seen."

"There are glimmers of hope in goods inflation, need to see services inflation slow as well."

"Labor market remains tight, seeing upward pressure on wages."

"Fed's number one job is to tame unacceptably high inflation."

"Fed's policy actions risk inducing a recession but that is preferable to high inflation getting entrenched."

"Recession is not a foregone conclusion, Fed will try to avoid one if possible."

"There are many scenarios in which a recession could turn out to be mild."

"Once Fed reaches appropriately restrictive policy, it needs to stay there until there is convincing evidence inflation is firmly on track to 2% target."

Market reaction

US Dollar Index showed no immediate reaction to these comments and was last seen losing 0.6% on the day at 106.30.

Gold has plunged from $2,050 in March to as low as $1,617 in early-November. Strategists at TD Securities expect XAUUSD to trade lower on further real rate increases before rallying later in 2023.

XAUUSD set to go into $1,575 territory over the next several months

“A continued sharp increase in US real and nominal rates along the short end of the curve is projected to drive Gold toward $1,575 in early 2023.” 

“The yellow metal may well start to trend up toward $1,800 after Q1, as it becomes clear that the Fed is approaching the end of its tightening cycle and the market starts to look toward cuts on the horizon.”

Analysts at MUFG Bank have now a bullish bias for the EURUSD pair. They see it trading in the range 0.9800-1.0800 over the next weeks. They point out that a consolidation above the 200-day SMA at 1.0435 would increase the risks of a rally toward 1.0800.

Key Quotes:

The EUR has staged a strong rebound against the USD in recent weeks resulting in EUR/USD moving further above the low from the end of September at 0.9536. The down trend that had been in place since the start of the Ukraine conflict from late February has just been broken providing a strong technical signal that the balance of risks has become less favourable for the USD in the near-term. The best-case scenario for the USD in the month ahead is that it begins to consolidate at lower levels against the EUR between 1.0000 and 1.0500.”

“There is a heightened risk that the USD sell-off could extend further if EURUSD breaks above resistance provided by the 200-dma at around 1.0435 that would open the door to a further leg higher towards the next resistance area between 1.0800-1.1100. The pair has not closed above the 200-dma since June 2021.” 

“The main downside risk to our bullish EURUSD bias in the month ahead would be a sharper sell-off for risk assets triggered by intensified fears over a hard landing for the global economy. It would trigger a renewed safe haven bid into the USD pulling EURUSD back below parity and towards year to date lows. The most likely triggers would be a stronger US CPI report for November followed by a hawkish Fed policy update next month.”

• Mexican peso loses momentum across the board on Tuesday.
• USDMXN holds bearish bias, but strong support at 19.30 prevails.
• US Dollar faces resistance at the 19.60 zone.

The USDMXN is trading flat on Tuesday, after hitting the lowest intraday level since March 2020 at 19.24, following the release of the October US Producer Price Index. The greenback reversed sharply after a few minutes and gained momentum across the board. The pair rose back above 19.30.

The area around 19.30 is the critical support in the short-term. A daily close below keep the doors open to more losses with the next key area at 19.00/05 (intermediate support at 19.15). The RSI is moving away from oversold readings but not showing yet an upside slope. Momentum remains flat.

While above 19.30, losses seem limited for USDMXN. Still the outlook is constructive for the Mexican peso. Only a recovery above 19.60 would alleviate the bearish tone for the greenback. Before that area, there is a resistance at 19.45.

USDMXN daily chart

Economists at TD Securities forecast the Lira to depreciate substantially over the course of the last quarter of the year and the start of 2023.

There could be scope for a TRY rally in H2 2023

“TRY will not find support in CBRT's expansive policy (and deeply negative real rates) and the sharply deteriorating current account deficit.”

“The macro trends, global risks and policy missteps are likely to trigger a currency crisis in 22Q4 or 23Q1.”

“We expect USDTRY to leapfrog to 27 or higher before emergency hikes stabilize the lira.”

“With a crucial election by June 2023 and the possible ousting of Erdogan, there could be scope for a TRY rally in H2 2023. This is entirely predicated on Erdogan and the AKP losing the vote and conceding to the opposition.”

The United Kingdom will release the Consumer Price Index (CPI) data on Wednesday, November 16 at 07:00 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of four major banks regarding the upcoming UK inflation print.

Headline is expected at 10.7% vs. 10.1% in September while Core, which excludes volatile food and energy prices, is expected at 6.4% year-on-year vs. 6.5% in September.

Wells Fargo

“We look for another jump in electricity and gas prices, and see the October CPI rising 1.8% MoM and rising to 10.9% YoY. The latter would represent the fastest pace of CPI inflation for multiple decades. Broader price pressures will likely remain steady, however, and we anticipate the increase in the October core CPI will be similar to the 6.5% YoY gain seen in September. As the energy price cap becomes more binding, the BoE expects CPI inflation to remain through the rest of Q4, before easing from early 2023. The elevated rates of inflation will probably see the BoE raise its policy rate further at upcoming meetings. However, with the UK likely already in sharp recession, easing of inflation could be enough to curtail central bank rate hikes, and we see a peak in the UK policy rate of 3.75% by early 2023.”

TDS

“UK inflation likely rose significantly in Oct (11% YoY) due to a sharp increase in energy prices. While the ex-PM's £2500 energy price cap protected households from an 80% increase, household energy bills still rose by about 25% in Oct. Core inflation will be weighed down by base effects from last October's VAT hike, but we think firm services inflation will keep the YoY rate at 6.5%.”

SocGen

“Despite the Energy Price Guarantee (EPG) coming into effect in October, helping limit a potentially eye-watering 80% increase in utility prices, rising utility prices will almost certainly be the largest contributor to CPI inflation rising from 10.1% to 10.5% in October. Consequently, according to the CPI index, utility prices will increase by 27% and add around 0.7pp to CPI on a YoY rate. Outside of utility prices, a fall in fuel prices should shave 0.2pp off headline inflation, but this will be partially offset by an acceleration in food prices from 14.5% to 15.5%. However, there is always the risk that these volatile components surprise to the upside, as they have for the past few months. For core, we see price growth decelerating from 6.5% to 6.4%, driven by a marginally lower services inflation to 2.6% while goods inflation may remain stable at 2.3%.”

Citibank

“Inflation in the UK is also likely to increase with headline CPI jumping to 10.8% YoY. The Bank expects 10.9%. The main driver here is the move to a new Ofgem price cap, which alone is likely to add 60 bps to headline inflation. We believe RPI will print at 14.1% YoY. The marginal downside surprise versus the Bank’s forecast primarily reflects the impact of the tuition fee freeze in place over the coming years. Otherwise, we think underlying momentum remains robust. This will likely keep rates elevated through Q4, although Citi Research expect inflation to begin to fall back through 2023.”

• US data: PPI below market consensus while Empire Index soars.
• US Dollar tumbles after economic reports and then reverses.
• USDJPY recovers all PPI losses, after a bounce of more than 150 pips.

The USDJPY pair recovered more than 150 pips during the last hours, rising back to the 139.50 area. Previously the pair reached fresh two-month lows at 137.62, following the US PPI report.

Inflation down, activity up

The Producer Price Index (PPI) rose 8% from a year earlier in October, below the 8.3% of market consensus and down from the 8.4% of September. It was the lowest reading since mid-2021. The numbers contribute to increasing expectations that the Federal Reserve might slow down its rate hikes. The Empire Manufacturing Index soared in November from -9.1 to 4.5 surpassing expectations.

Federal Reserve Bank of Philadelphia President Patrick Harker said on Tuesday that he is not overly worried about inflation expectations. "As long as we're moving consistently to collapse inflation down, we can pause."

On Asian hours, Japan reported that GDP contracted unexpectedly by 0.3% during the third quarter. It was the first negative reading since the third quarter of 2021. “Weakness in inventories and net exports were the main drivers.  In a nutshell, this is why policymakers are worried about removing stimulus too soon.  To us, this is a green light to buy USD/JPY.  Next BOJ meeting is December 19-20 and another dovish hold is expected”, said analysts at Brown Brothers Harriman.

Dollar down then up

The US Dollar reacted as expected initially after the PPI with a sharp decline to fresh lows across the board. But it then reversed sharply, rising above the level it had before the PPI, even as US yields remain down for the day and amid higher equity prices.

The USDJPY is hovering above 139.00, still with a negative bias in the short-term but far from the lows. A slide below 138.50 would increase the bearish pressure, while above 139.60, the US Dollar could gain strength for a test of the daily high at 140.60.

Technical levels

Economists at TD Securities maintain a bearish view on the Pound and expect the British currency to struggle at the start of 2023.

Further terminal rate divergence between the Fed/BoE

“GBP should have a tough start of the year, reflecting a mix of external and local factors.” 

“On the global side, the USD outlook will feature prominently in the gyrations of GBP. We anticipate further terminal rate divergence between the Fed/BoE, especially as UK growth looks vulnerable to housing risks.”

“Fiscal prudence comes at a cost, likely undermining UK growth relative to the rest of the G10. In turn, low real rates and weak growth won't capture the capital flows needed to plug the current account balance. GBP remains the shock absorber.” 

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting comment on the release of GDP figures in Malaysia.

Key Takeaways

“Malaysia’s economy surprised on the upside in 3Q22 with real GDP growth accelerating further to 14.2% y/y last quarter (from +8.9% in 2Q22). It was the strongest gain since 2Q21, beating our estimate (+13.6%) and Bloomberg consensus (+12.5%). On a seasonally adjusted basis, real GDP grew by 1.9% q/q (2Q22: +3.5% y/y).”

“The outperformance of 3Q22 GDP was credited to favourable base effects, the ongoing transition to endemicity since Apr this year, continued government subsidies, higher national monthly minimum wages and strong global demand for Malaysia’s electrical & electronics (E&E) products. This led to a robust improvement in both domestic and external demand amid modest stock replenishment activities last quarter. All economic sectors also logged respectable growth, led by services, manufacturing and construction sectors.”

“We revise our 2022 full-year real GDP growth estimate up to 8.3% (from 6.5% previously) after taking into account a much stronger-than-initially-expected economic expansion of 9.3% in the first nine months of 2022 and a projected normalization to 5.5% growth in 4Q22. For 2023, we maintain a moderate real GDP growth projection at 4.0% (official est: 4.0%-5.0%) given a confluence of more challenging external factors.”

Economists at TD Securities think the outlook for the Canadian Dollar remains troubled and expect the Loonie to underperformance early next year.

Fundamental concerns about the CAD overall

“We have been bearish CAD since mid-2022 on the basis that the higher rates go to fight inflation, the greater the downside macro shock associated with household debt servicing and hence the more the CAD will need to reflect it. That should intensify in the months ahead.”

“Moreover, slowing global growth is likely to put a spotlight on Canada's energy trade balance, which has masked historical weakness in the non-energy trade balance.”

“After a resilient 2022, we see scope for broad CAD underperformance early next year.”

• Prices paid by producers in the United States ticked lower, a welcomed sign by investors seeking risk, and the US Dollar weakened.
• Employment data in the UK was mixed, though the GBP is supported by overall US Dollar weakness.
• Federal Reserve officials committed to tackling inflation, albeit slowing the pace of interest-rate increases.

The Pound Sterling soars sharply against the US Dollar (USD) following the release of prices paid by producers in the United States, showing that inflation is easing. Also, an upbeat UK employment data report underpinned the Cable, as shown by the GBPUSD gaining more than 1.50%. At the time of writing, the GBPUSD is trading at 1.1915.

Inflation in the US is cooling as CPI and PPI ease in October

The sentiment is upbeat, triggered by two Federal Reserve (Fed) officials saying it would be appropriate to slow the pace of rate hikes following the release of a soft October US Consumer Price Index report. Also, the Producer Price Index (PPI) for the same period expanded by 8% on an annual pace, below the 8.3% estimated, as shown by a US Department of Labor (DoL) survey. The core PPI, which excludes volatile items, rose 6.7% YoY, below the expected 7.1%. Given that US CPI and PPI readings are beginning to flash signs that inflation in the United States is starting to cool down, the Federal Reserve has some reasons to slow down the pace of tightening. Therefore, further US Dollar weakness is expected.

On the US PPI release, the GBPUSD edged towards its daily high at 1.2028, registering a three-month fresh high, but retreated some of its gains, as the GBPUSD sits below the 1.2000 figure.

Of late, several Federal Reserve policymakers crossed newswires. Lisa Cook, one of the newest Fed Governors, said that inflation is much too high and the central bank’s focus is on addressing inflation. At the same time, Philadelphia’s Fed President Patrick Harker expressed that removing $2.5 trillion from the Fed’s Balance Sheet is a “best guess.”Harker added that he is not “overly worried” about inflation expectations and that the Fed can pause as long as the central bank continues to fight inflation.

Meanwhile, the NY Fed Empire Manufacturing rose by 4.5, smashing expectations for a contraction of 6.

On the UK side, the UK’s Chancellor of the Exchequer, Jeremy Hunt, gave some clues regarding the Autumn Budget, to be released on Thursday. He said that those who have more will be asked to provide more and that “inflation-busting pay awards would just fuel inflation,” suggesting that the new Tory government would be fiscally responsible.

Data wise, employment data in the UK showed that the number of people in work in the UK dropped 52K, more than the 25K falls estimated by street economists. At the same time, the Unemployment Rate rose by 3.6%, exceeding the 3.5% expected.

That said, the UK economic docket will feature the Consumer Price Index (CPI), the Producer Price Index (PPI), and Retail Sales for October. On the US front, the calendar will reveal Retail Sales, Industrial Production, Capacity Utilization, and Fed speak.

GBPUSD Key Technical Levels

• The index seems to have met some initial contention near 105.30.
• US yields keep navigating in the negative territory on Tuesday.
• US Producer Prices rose less than expected in October.

The USD Index (DXY), which tracks the greenback vs. a basket of its main rivals, resumes the intense leg lower and retests the 105.30 region on Tuesday.

USD Index rebounds from 3-month lows

The index rapidly sets aside Monday’s bullish attempt and resumes the downtrend on turnaround Tuesday, briefly revisiting the 105.30 region for the first time since mid-August just to pick up some pace afterwards.

Also collaborating with the decline in the dollar comes another negative session in US yields across the curve, amidst unabated repricing of a Fed’s pivot in its policy.

Extra pessimism in the dollar came after US Producer Prices rose less than expected 0.2% MoM in October and 8% over the last twelve months, supporting the view that inflation has lost some traction as of late.

Additional results saw the NY Empire State Manufacturing Index improve to 4.5 in November (from -9.1).

What to look for around USD

The index remains under heavy pressure, always stemming from the probability of a slower rate path in the next months by the Fed and its positive impact on the risk-associated universe.

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 retreating 0.82% at 106.06 and the breakdown of 105.34 (monthly low November 15) would open the door to 104.89 (200-day SMA) and finally 104.63 (monthly low August 10). On the other hand, the next up barrier aligns at 109.10 (100-day SMA) seconded by 110.91 (55-day SMA) and then 113.14 (monthly high November 3).

"My best guess is we will remove about $2.5 trillion from the balance sheet overall but data will guide us," Federal Reserve Bank of Philadelphia President Patrick Harker said on Tuesday, as reported by Reuters.

"We want to reduce the balance sheet methodically until we start to see where we need to stop," Parker added and noted he is not overly worried about inflation expectations while adding that they are moving in the right direction.

Market reaction

The US Dollar (USD) stays on the back foot following these comments and the US Dollar ındex was last seen losing 0.85% on the day at 106.05.

Additional takeaways

"I don't like to base policy on a couple of headline numbers."

"As long as we're moving consistently to collapse inflation down, we can pause."

"I don't want to move interest rates way up and then way down."

"We need to balance minimizing job losses while getting inflation under control."

"I think that outcome is still possible."

EUR is powering ahead, reaching its highest level against the USD since July. Economists at Scotiabank expect the EURUSD pair extend its race higher to the 1.05/1.07 range

Technical momentum drives gains

“While it is a little difficult to pin down a precise reason for the EUR’s pop higher, the technical logic is clear; EUR gains picked up strong momentum after trading through technical resistance at 1.0350 that had capped spot gains three times over the past 24 hours or so.”

“The EUR is now trading well through the high 1.02s (38.2% Fib retracement of the 2022 decline at 1.0286) which puts additional strength to the 1.05/1.07 range (50% retracement at 1.0517) on the cards.”

“Key support is 1.0340/50 intraday.”

Federal Reserve Governor Lisa Cook reiterated on Tuesday that inflation in the United States is still "much too high" and added that the focus for the Fed is on addressing inflation, as reported by Reuters.

Market reaction

These comments don't seem to be helping the US Dollar (USD) find demand. Following the softer-than-expected October Producer Price Index (PPI), the US Dollar Index turned south and touched its lowest level in three months below 105.50 before staging a rebound. As of writing, the index was down 0.9% on the day at 105.95.

Economists at Riksbank expect EURSEK to move higher over the coming months to 11.20. On a six to 12-month horizon, they see a recovery and sustainable support to risk assets and the Krona.

SEK weakness to return

“We stick to our non-consensus view on a weaker SEK amid weak growth dynamics, especially for Europe, scope for another downturn in global equities and relative monetary policy. We therefore forecast EURSEK at 11.20 in 6M.”

“Further out, we expect recovery and sustainable support to risk assets and the SEK and forecast EURSEK at 11.00 in 12M.”

“The key downside risks to our forecasts are a dovish Fed pivot, sustained equities rebound, brighter growth outlook not least for Europe or a shift in Riksbank monetary policy stance including a shift in FX policies.”

• EURUSD quickly sets aside Monday’s drop and surpasses 1.0400.
• The continuation of the uptrend could now look at 1.0600 and above.

EURUSD resumes the upside and clinches new multi-month peaks north of the 1.0400 hurdle on turnaround Tuesday .

The continuation of the recovery looks the most likely scenario in the very near term. Against that, a close above the always relevant 200-day SMA, today at 1.0427, should spark further gains in the short-term horizon.

In such a scenario, there are no up barriers of note until the weekly top at 1.0614 (June 27).

EURUSD daily chart

Sterling is one of the better performers today. Economists at Scotiabank note that the GBPUSD pair could climb as high as 1.20/21.

Technical tone is very constructive

“Sterling’s extension to new cycle highs keeps the technical tone here very constructive as well.” 

“Now, gains through key technical resistance in the upper 1.17 zone mean there is little – technically, at least – in the way of a further rise to the 1.20/1.21 range in the near term.”

“Key support now is seen at 1.1765/75.” 

• Gold rallies to its highest level since mid-August amid the prevalent USD selling bias.
• Bets for less aggressive Fed rate hikes, sliding US bond yields weigh on the greenback.
• The softer-than-expected US PPI adds to the heavily offered tone surrounding the buck.
• A positive risk tone caps the XAUUSD amid a slightly overbought RSI on the daily chart.

Gold prolongs its recent upward trajectory and touches its highest level since mid-August, around the $1,784-$1,785 region on Tuesday. The XAUUSD maintains its bid tone through the early North American session, with bulls now eyeing a move towards reclaiming the $1,800 psychological mark.

Following the previous day's modest bounce, the US Dollar comes under some renewed selling pressure and extends the softer US consumer inflation-inspired downfall. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, drops to a fresh three-month low and acts as a tailwind for the dollar-denominated gold.

The US CPI report released last week indicated that the worst of the post-pandemic price spike is over and fueled speculations for a less aggressive policy tightening by the Federal Reserve. This is evident from the ongoing decline in the US Treasury bond yields, which continues to weigh on the greenback and offers additional support to the non-yielding gold.

The intraday USD selling picks up pace following the release of the softer-than-expected US Producer Price Index (PPI). The US Bureau of Labor Statistics reported that PPI declined to 8% YoY in October from 8.4% in September, missing expectations for a reading of 8.3%. The Core PPI also missed estimates and decelerated to 6.7% during the reported month from 7.2% in September.

That said, a positive risk tone and indications of a strong opening in the US equity markets keep a lid on any further gains for the safe-haven precious metal. Apart from this, a slightly overbought RSI (14) on the daily chart holds back bulls from placing fresh bets around gold. The fundamental backdrop, however, supports prospects for additional near-term gains.

Hence, any meaningful corrective pullback might still be seen as a buying opportunity and is more likely to remain limited, at least for the time being. Gold seems poised to reclaim the $1,800 mark, which coincides with a technically significant 200-day SMA. This, in turn, should act as a pivotal point for the next leg of a directional move for spot prices.

Technical levels to watch

• NY Fed Empire State Manufacturing Index rose sharply in November.
• US Dollar (USD) stays under stroıng selling pressure on Tuesday. 

The headline General Business Conditions Index of the Federal Reserve Bank of New York's Empire State Manufacturing survey improved sharply to 4.5 in November from -9.1 in October. This reading came in much better than the market expectation of -5.

"New orders decreased slightly, while shipments expanded modestly," NY Fed noted in its publication.

"Labor market indicators pointed to a solid increase in employment and a longer average workweek. Input prices increased at about the same pace as last month, while selling price increases picked up. Looking ahead, firms expect business conditions to worsen over the next six months."

Market reaction

The relentless US Dollar (USD) selloff continues in the early American session and the US Dollar Index was last seen losing 1.4% on the day at 105.45.

• Producer inflation in the US rose at a softer pace than expected in October.
• US Dollar Index stays deep in negative territory below 106.00.

The Producer Price Index (PPI) for final demand in the US declined to 8% on a yearly basis in October from 8.4% in September, the data published by the US Bureau of Labor Statistics revealed on Tuesday. This print came in lower than the market expectation of 8.3%.

The annual Core PPI edged lower to 6.7% from 7.2% in the same period, compared to analysts' estimate of 7.2%. On a monthly basis, the Core PPI was unchanged.

Market reaction

The US Dollar remains under heavy selling pressure after the PPI data and it was last seen losing 1% on the day at 105.85.

Economists at TD Securities think EURUSD will decline back below parity despite the most recent uptick. 

EURUSD likely to bottom out around 0.96

“The EUR is not out of the wood yet, leaving us to expect another trip below parity to start 2023.”

“The macro outlook provides a weak handoff to the EUR to start a new year. EUR is closely linked with European and global growth expectations. We don't expect the global outlook to bottom until Q2.”

“EUR is also exposed to a winter terms of trade shock, especially if the weather runs cooler than expected.”

“EURUSD likely to bottom out around 0.96, paving the way for a sharp rally in H2.”

• NZDUSD gains strong positive traction on Tuesday and rallies to its highest level since August.
• Bets for less aggressive Fed rate hikes, sliding US bond yields continue to weigh on the USD.
• The risk-on impulse also undermines the safe-haven buck and benefits the risk-sensitive Kiwi.

The NZDUSD pair catches aggressive bids on Tuesday and sticks to its strong gains above mid-0.6100s, or its highest level since late August heading into the North American session.

The positive momentum is sponsored by the emergence of fresh selling around the US Dollar, which hits a three-month low amid expectations for a less aggressive policy tightening by the Federal Reserve. Last week's softer US consumer inflation figures fueled speculations that the US central bank will slow the pace of its rate-hiking cycle. In fact, the markets are now pricing in over a 90% chance of a 50 bps rate hike at the next FOMC policy meeting in December.

Apart from this, a generally positive tone around the equity markets is exerting additional downward pressure on the safe-haven buck and further benefitting the risk-sensitive Kiwi. Furthermore, sustained strength above the 0.6100 mark seems to have prompted some technical buying. This could also be cited as another factor contributing to the NZDUSD pair's strong follow-through momentum. That said, a slightly overbought RSI on the daily chart warrants caution for bulls.

Adding to this, fears that China could impose economically-disruptive COVID-19 lockdowns in some cities might prompt bulls to lighten their positions around the NZDUSD pair. Hence, any intraday corrective slide, back towards the 0.6100 mark, looks like a distinct possibility. Next on tap is the US macro data - the Empire State Manufacturing Index and Producer Price Index (PPI). This, along with speeches by Fed officials and the US bond yields, will drive the USD demand.

Technical levels to watch

USDRUB has unfolded an elongated consolidation. Economists at Société Générale expect the pair to stage an up move on a break past 65.

Near term support aligns at the 56 mark

“The USDRUB pair appears to be evolving within an ascending triangle which consists of a rising lower band and a horizontal upper limit. The pattern points towards the upside, however, a break beyond the upper band near 65 is essential to affirm an extended up-move.”

“September low of 56 is near term support.”

The central question swirling around markets nowadays is whether the USD has peaked. While the correction can extend for a bit longer, it is still early for a reversal, in the opinion of economists at TD Securities.

USD has a bit more juice left in the tank

“While the USD has started its peak, we don't expect the reversal yet, suggesting room for consolidation in the near term.”

“The best of the relentless USD move is now behind us, leading to a broader reversal through next year. Still, we think that will require some patience as sequencing will likely follow a cadence of peak, consolidation, and then reversal.”

• Silver corrects from a fresh five-month high touched earlier this Tuesday.
• Acceptance above the 200-day SMA supports prospects for further gains.
• A break below the $21.00 mark is needed to negate the positive outlook.

Silver retreats from the $22.25 area, or its highest level since July 7 touched earlier this Tuesday and drops to a fresh daily low during the mid-European session. The white metal is currently trading just below the $22.00 round-figure mark, down over 0.50% for the day.

Given that RSI (14) remains close to overbought territory, bulls seem inclined to take some profits off the table following the recent rally of around 18% from the monthly low touched on November 3. That said, acceptance above a technically significant 200-day SMA for the first time since April supports prospects for a further near-term appreciating move.

Hence, any subsequent fall is more likely to find decent support and attract fresh buyers around the $21.45 region (200 DMA). This should limit the downside for the XAGUSD near the $21.20-$21.15 area. This is closely followed by the $21.00 mark, which if broken decisively will negate the positive outlook and shift the bias in favour of bearish traders.

The XAGUSD might then turn vulnerable to weaken below the $21.00 mark - a strong horizontal resistance breakpoint now turned support - and test the next relevant support near the $20.40-$20.35 region. The corrective slide could further get extended towards the $20.00 psychological mark en route to the $19.65-$19.60 zone and the $19.10-$19.00 support zone.

On the flip side, momentum back above the $22.00 mark now seems to confront resistance near the daily swing high, around the $22.25 region. A sustained strength beyond will reaffirm the constructive outlook and lift the XAGUSD towards the $22.50-$22.60 supply zone. Bulls might eventually aim to reclaim the $23.00 round figure and test the $23.25-$23.30 hurdle.

Silver daily chart

Key levels to watch

• DXY breaks below the 106.00 support to clinch new multi-month lows.
• Immediately to the downside now emerges the 200-day SMA.

DXY quickly fades Monday’s bull run and refocuses on the downside, breaking below the 106.00 mark for the first time since mid-August.

If the selling bias gathers extra pace, then the index could dispute the critical 200-day SMA, today at 104.89.

Below this region, the dollar’s outlook should shift to negative.

DXY daily chart

• EURJPY adds to Monday’s uptick and surpasses 145.00.
• The recovery faces the next hurdle at the 147.00 zone.

EURJPY extends the auspicious start of the week and reclaims the area above the 145.00 barrier on Tuesday.

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 138.21, the constructive outlook is expected to remain unchanged.

EURJPY daily chart

Alvin Liew, Senior Economist at UOB Group, assesses the latest release of US inflation figures.

Key Takeaway

“US headline consumer price index (CPI) inflation rose by 0.4% m/m, same pace as Sep but slower against Bloomberg’s estimate of an increase by 0.6% m/m. As a result, headline inflation continued to come off from recent highs (9.1% y/y in Jun 2022) but was still elevated at 7.7% y/y in Oct (from 8.2% y/y in Sep), below Bloomberg’s estimate of 7.9% and the first time the y/y inflation was below 8% since Feb 2022.”

“The core CPI inflation (which excludes food and energy) continued to increase sequentially, but at a pace below expectations which sparked hopes of abating underlying momentum for price pressures. On a m/m basis, core inflation rose by 0.3% in Oct, down from 0.6% in Sep, and below Bloomberg estimate of 0.5%. Compared to a year ago, it rose by 6.3% y/y in Oct, down from 6.6% y/y in Sep, below Bloomberg estimate for 6.5%.”

“US Inflation Outlook – With the latest US headline inflation printing further below the 9.1% recorded in Jun, while core inflation also eased from its recent high of 6.6% y/y (in Sep), we will adjust our forecasts for 2022 accordingly. We revise our headline CPI inflation forecast to average 8.2% (from 8.5% previously) and our core CPI inflation forecast at average 6.3% for 2022 (from 6.5% previously). FOMC Outlook – While we still see the balance of inflation risks to the upside, the latest inflation outcome does give us confidence for our current call for a smaller 50-bps Fed rate hike in Dec FOMC (after four consecutive 75-bps hikes).”

GBPUSD climbs back above mid-1.18s. Economists at Société Générale expect the pair to see additional gains.

Further up move expected

“The GBPUSD pair has overcome the trend line since February denoting short-term upside.”

“Cable is expected to head higher towards projections near 1.2070.” 

“The 50-Day Moving Average near 1.1330 is near term support. In case the pair violates this MA, there could be a risk of a deeper pullback.”

See: Relatively narrow range-trading for GBP on the crosses ahead of the fiscal update – Scotiabank

The drop in USDJPY last week was the largest since October 2008. Economists at MUFG Bank expect the pair to see further falls.

JPY remains best placed to outperform if peak inflation here

“Peak USDJPY is now likely in place in our view and if that view broadens and the conviction level increases, renewed declines are likely.” 

“Intervention by the Japanese authorities adds another factor favouring JPY outperformance once the fundamental backdrop changes.”

“Our yield spread model that incorporates a Terms of Trade component is signalling the potential for further declines in USDJPY from here. Indeed, the model is more consistent with USDJPY trading closer to 130.00 rather than 140.00. But USDJPY fell by over 10 big figures in just sixteen trading days so we might get some consolidation. However, the rate spread and energy price moves if sustained are consistent with further USDJPY declines.”

Last week’s sell-off in the USD is unlikely to extend further due to geopolitics, according to economists at Rabobank.

Volatility is set to remain high

“NATO chief Stoltenberg has warned that ‘we should not make the mistake of underestimating Russia’ and that ‘the coming months will be difficult’. Additionally, there remains plenty of risk that tensions between the US and China, Europe and China and Japan/Australia and China will flare again.”

“From the point of view of the FX market, the strongest conclusion that can be drawn from the geopolitical news flow of the past week is that volatility is set to remain high.”

“While recent news has brought welcome relief, resolution on either the war or on the differences between China and the West and its allies still appears distant, and this should act as a restraint on USD bears.”

Senior Economist at UOB Group Julia Goh and Economist Loke Siew Ting review the latest GDP figures in the Philippines.

Key Takeaways

“The Philippines’ real GDP growth unexpectedly accelerated further to 7.6% y/y in 3Q22 (from an upwardly revised 7.5% in 2Q22 vs 7.4% previously) as a result of further reopening of economic and social activities, higher minimum wages from 16 Jul 2022, and improving job opportunities during the quarter. The 3Q22 GDP growth reading defied our and market’s expectations for a deceleration to 6.8% and 6.2% respectively.”

“We tweak our 2022 full-year GDP growth estimate higher to 7.4% (from 7.0% previously) to reflect a stronger economic expansion of 7.7% in the first nine months of 2022 and a slower growth of 6.5% for 4Q22. The weaker outlook for 4Q22 mainly takes into account the impact of adverse weather and natural disasters striking the country at the end of the year as well as diminishing purchasing power. For 2023, we stick to the view that the economic growth will taper off further to an average of 5.0% given heightened global headwinds, restrictive BSP policy and expectations for more permanent inflationary pressures.”

“Prior to today’s robust 3Q22 GDP data and a nearly 14-year high of inflation outturn last Fri (4 Nov), BSP had on last Thu (3 Nov) pre-announced a 75bps rate hike. This will bring the overnight reverse repurchase (RRP) rate to 5.00% effective from 17 Nov. In response to the BSP’s strong intention to keep pace with the US Fed’s actions, a potentially higher terminal US interest rate by 1Q23 and persistent upsides risks to the nation’s inflation outlook, we had raised our BSP outlook last Thu (3 Nov) with a RRP rate of 5.50% by end-2022 and 6.00% by end-2023.”

EURCHF has continued its move higher and is currently trading around 0.98. Economists at Danske Bank expect the pair to hover around that level in the near term before staging a downfall to 0.94 over the coming months.

SNB to hike by 50 bps in December

“We expect the SNB to hike by 50 bps in December bringing the policy rate to 1.00%. In the near-term, we expect relative rates to prove a headwind for CHF, why we expect the cross to remain elevated at 0.98 in 1M.”

“Further out, we continue to forecast the cross to move lower on the back of fundamentals and a tighter global investment environment. We forecast the cross at 0.94 in 12M.”

“The key upside risks to our forecast are global yield curves steepening amid a shift in the global investment environment and/or the SNB falling further behind the curve.”

• GBPUSD catches fresh bids on Tuesday amid broad-based US Dollar weakness.
• Bets for less aggressive rate hikes by the Federal Reserve weigh on the buck.
• Stronger UK wage growth data underpins the Sterling and remains supportive.
• A move beyond 1.1860 should pave the way for additional gains for GBPUSD.

The GBPUSD pair regains positive traction on Tuesday and maintains its bid tone through the first half of the European session. The pair is currently placed around the 1.1860 region, or its highest level since August 26.

Fresh US Dollar selling pushes GBPUSD higher

A combination of factors drags the US Dollar to a fresh three-month low, which, in turn, is seen acting as a tailwind for the GBPUSD pair. The softer US consumer inflation figures for October released last week fueled speculations for a less aggressive policy tightening by the Federal Reserve. In fact, Fed fund futures are currently pricing in over a 90% chance of a 50 bps rate increase at the next FOMC meeting in December. The prospects for smaller rate hikes contribute to the ongoing slide in the US Treasury bond yields and continue to weigh on the greenback. Apart from this, a generally positive tone around the equity markets further undermines the safe-haven buck.

Stronger UK wage growth data underpins the Sterling

The British Pound, on the other hand, benefits from stronger-than-expected UK wage growth data. The UK Office for National Statistics reported that the Average Earnings Excluding Bonuses rose 5.7% from 5.5%, beating estimates for an uptick to 5.6%. Including bonuses, wages rose by 6.0% as compared to the forecast of 5.9%. This adds to pressure on the Bank of England to continue raising borrowing costs and helps offset a rather weak UK employment data. Britain's jobless rate unexpectedly edged up to 3.6% during the three months to September. Adding to this, the number of people claiming unemployment-related benefits came in at 3.3K against a fall of 12.6K estimated.

UK CPI, BoE's Monetary Policy Report Hearings, UK Chancellor Hunt's Autumn Statement in focus

The market focus now shifts to the latest UK consumer inflation report, which is due for release on Wednesday and is expected to accelerate to 10.7% in October. Investors will further take cues from the BoE's Monetary Policy Report Hearings on Wednesday. Apart from this, UK Chancellor Jeremy Hunt’s Autumn Statement on Thursday. This will play a key role in influencing the sentiment surrounding the Sterling and provide a fresh directional impetus to the GBPUSD pair. In the meantime, Tuesday's US macro data - the Empire State Manufacturing Index and Producer Price Index (PPI) - will be looked upon for some trading opportunities later during the early North American session.

GBPUSD technical outlook

From a technical perspective, the emergence of fresh buying on Tuesday adds credence to last week's sustained breakout through the 100-day SMA and supports prospects for additional gains. That said, it will still be prudent to wait for some follow-through buying beyond the 1.1850-1.1860 region before placing aggressive bullish bets around the GBPUSD pair.

On the flip side, the 1.1800 round-figure mark now seems to protect the immediate downside. Any subsequent fall might attract some buyers near the daily swing low, around the 1.1740 region. This, in turn, should help limit the downside near the 1.1710-1.1700 area. The latter should act as a strong base for the GBPUSD pair, which if broken might negate the positive outlook.

The Swedish inflation report this morning was a mixed bag. All in all, economists at ING expect the EURSEK to move back to the 11.00/10.90 area in the near term.

Riksbank may go for 75 bps after all

“Headline inflation rose less than expected (from 10.8% to 10.9% YoY), CPIF inflation surprisingly declined (from 9.7% to 9.3%) but core CPIF rose (7.4% to 7.9%). Ultimately, the latter may matter more than the others for the Riksbank, which announces policy on 24 November, and that may tilt the balance towards a 75 bps rate hike.”

“Implications for the Krona should remain quite limited – today’s muted FX reaction to CPI was a case in point.” 

“We think SEK remains in a disadvantageous position compared to other procyclical currencies to benefit from an improvement in risk sentiment given the still clouded European outlook.”

“We see room for a return toward 10.90/11.00 in EURSEK in the near term.”

• Euro area GDP grew by 2.1% (YoY) in Q3 as expected.
• EURUSD trades at multi-month highs near 1.0400 after the latest data.

The euro area economy expanded at an annual rate of 2.1% in the third quarter, Eurostat reported on Tuesday. This reading came in line with the flash estimate and the market expectation.

Other data revealed that the euro area trade deficit narrowed to €34.4 billion in September from €52.4 billion. Finally, Employment Change in the third quarter came in at +0.2% on a quarterly basis, compared to analysts' estimate of +0.3%.

Market reaction 

These figures don't seem to be having a significant impact on the Euro's (EUR) performance against its major rivals. As of writing, EURUSD was up 0.75% on the day at 1.0400.

• The index resumes the downside and flirts with 106.00.
• The appetite for the risk complex gathers extra steam on Tuesday.
• Producer Prices, Fedspeak take centre stage later in the NA session.

The greenback, in terms of the USD Index (DXY), resumes the leg lower and approaches the key support at 106.00 the figure on Tuesday.

USD Index focuses on data, Fedspeak

The index remains under pressure and now loses ground for the second week in a row after rapidly leaving behind Monday’s bullish attempt.

Indeed, the risk-on mood returns to the markets on turnaround Tuesday and puts the buck to the test once again, always on the back of further repricing of the likelihood that the Fed could slow the pace of the future interest rate hikes.

The above was also reinforced by Vice Chair L.Brainard at her discussion on the “Economic Outlook” on Monday.

So far, the chances of the Fed to hike by half percentage point at the December 14 meeting is now at nearly 81%, as per CME Group’s FedWatch Tool.

The resumption of the downtrend in the dollar is so far accompanied by a small decline in US yields across the curve.

In the US calendar, Producer Prices for the month of October will be in the limelight later in the session along with the speech by FOMC L.Cook (permanent voter, centrist) and the testimony from Vice Chair for Supervision M.Barr (permanent voter, centrist) before the Senate.

What to look for around USD

The index remains under heavy pressure, always stemming from the probability of a slower rate path in the next months by the Fed and its positive impact on the risk-associated universe.

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 retreating 0.72% at 106.16 and the breakdown of 106.09 (monthly low November 15) would open the door to 104.89 (200-day SMA) and finally 104.63 (monthly low August 10). On the other hand, the next up barrier aligns at 109.10 (100-day SMA) seconded by 110.91 (55-day SMA) and then 113.14 (monthly high November 3). On the flip side,

• Economic sentiment in Germany and the Eurozone improved in November.
• EURUSD clings to strong daily gains above 1.0400.

The German ZEW headline numbers for October showed that the Economic Sentiment Index improved sharply to -36.7 in November from -59.2 in October, beating the market expectation of -50 by a wide margin. Furthermore, the Current Situation Index rose to -64.5 from -72.2, compared to analysts' estimate of -68.4. 

The ZEW Economic Sentiment Index for the Eurozone edged higher to -38.7 from -59.7.

Commenting on the data, the ZEW Institute said that the rising sentiment was related above all to the hope that inflation rates will fall soon.

"In this case, policymakers would not have to hit the brakes on monetary policy as hard and/or for as long as feared," the publication further read. "However, the economic outlook for the German economy is still clearly negative."

Market reaction

The Euro (EUR) preserves its strength after this report and EURUSD was last seen rising 0.8% on the day at 1.0408.

The Dollar is inching lower again. Some extra near-term USD weakness is possible, but economists at ING suspect we are reaching the bottom of the recent downtrend.

Extra dose of Dollar weakness

“Dollar appears to be lacking any strong support at the moment. While we don’t buy the one-way traffic, and the USD-bearish narrative in the longer run, there may be extra downside room for the greenback this week.”

“We still suspect it is too early to point at China as the key driver for a broader recovery in risk sentiment (and Dollar descent), considering the still sizeable economic challenges affecting China going beyond its Covid policy (e.g. real estate fragility, slowing global demand).”

“For now, we read recent Fedspeak as further indication that a bearish Dollar call on the back of Fed dovish pivot bets still appears premature.”

If USDCNH keeps the downside pressure it could retest the 7.0130 region in the short term, according to UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted yesterday that ‘there is a chance for USD to drop to 7.0450 before the risk of a rebound increases’. However, USD dropped to 7.0200 first before rebounding. USD appears to have moved into a consolidation phase and is likely to trade within a range of 7.0260/7.0800 today.”

Next 1-3 weeks: “Yesterday (14 Nov, spot at 7.0745), we expected USD to weaken further. We indicated the levels to watch are at 7.0300, followed by Oct’s low near 7.0130. USD subsequently dropped to a low of 7.0200 before rebounding. Oversold short-term conditions could lead to a couple of days of consolidation first but as long as 7.1200 (‘strong resistance’ level was at 7.1660 yesterday) is not breached, there is room for USD to drop to 7.0130. Looking ahead, a clear break of 7.0130 will shift the focus to 6.9700.”

• USDJPY comes under fresh selling pressure on Tuesday amid broad-based USD weakness.
• Bets for smaller Fed rate hikes, sliding US bond yields continue to weigh on the greenback.
• A positive risk tone might undermine the safe-haven JPY and help limit losses for the pair.

The USDJPY pair retreats nearly 150 pips from the daily swing high and drops to a fresh intraday low, around the 139.20-139.15 region during the first half of the European session.

The US Dollar comes under renewed selling pressure on Tuesday and hits a fresh three-month low, which, in turn, is seen as a key factor exerting downward pressure on the USDJPY pair. Indications that the worst of the post-pandemic price spike is over reaffirmed expectations that the Federal Reserve will slow the pace of its policy tightening in the coming months. In fact, Fed fund futures point to over a 90% chance of a 50 bps rate hike at the next FOMC meeting in December and continues to weigh on the greenback.

The repricing of the pace of the Fed's rate-hiking cycle is evident from a further decline in the US Treasury bond yields. The resultant narrowing of the US-Japan rate differential offers some support to the Japanese Yen and further contributes to the offered tone surrounding the USDJPY pair. That said, speculations that the Bank of Japan will stick to its dovish policy stance, bolstered by Tuesday's weaker domestic growth figures, could act as a headwind for the Japanese Yen. This could limit losses for the major.

Government data released this Tuesday showed that the Japanese economy unexpectedly contracted at an annual rate of 1.2% during the July-September quarter. The reading was well below the 4.6% growth recorded in the second quarter and a 1.1% expansion estimated. Furthermore, a generally positive tone around the equity markets, which tends to undermine the safe-haven JPY, supports prospects for the emergence of some buying around the USDJPY pair. This, in turn, warrants caution before positioning for a further slide.

Market participants now look forward to the US economic docket - featuring the release of the Empire State Manufacturing Index and Producer Price Index (PPI) later during the early North American session. Apart from this, speeches by influential FOMC members and the US bond yields will drive the USD demand. This, along with the broader risk sentiment, might contribute to producing some trading opportunities around the USDJPY pair.

Technical levels to watch

The New Zealand Dollar has been under pressure for much of this year. Economists at Westpac expect the Kiwi to regain some ground next year once investors are satisfied that global inflation is turning the corner and that the peak in interest rates is near.

NZDAUD to hold its ground at around 0.90 over the next year or two

“We think that the US Dollar’s appeal will wane only once investors are satisfied that global inflation has turned a corner, and that the peak in central bank policy rates is in sight. That could be a while away yet, with core inflation measures still on the rise in many economies. However, we do expect to see some weakening in the USD over the coming year in response to a strengthening in the Chinese economy and more confidence around Europe’s energy security. This would see the NZD rise from around 0.59 currently to 0.65 by the end of next year.”

“We expect the NZDAUD to hold its ground at around 0.90 over the next year or two.”

Economists at Danske Bank expect USDJPY to inch higher in the next few months but expect the pair to turn back lower in the long-run.

Pressure on JPY will wear off

“The key driver of USDJPY remains the global inflation outlook and US treasury yields.”

“With the US labour market still in good shape, we are not convinced global inflation pressures are yet turning and thus, in the short run, JPY headwinds will remain in place. Looking further ahead, we do expect the pressure on JPY will wear off.”

“We forecast the cross at 143 (1M), 144 (3M), 139 (6M) and 130 (12M).”

• USDCHF slides back closer to the YTD low amid the emergence of fresh USD selling.
• Bets for less aggressive Fed rate hikes, sliding US bond yields weigh on the greenback.
• A positive risk tone could undermine the safe-haven CHF and help limit the downside.

The USDCHF pair meets with a fresh supply following an early uptick to the 0.9455 region on Tuesday and slides back closer to YTD low during the early part of the European session. The pair is currently placed around the 0.9400 mark and is pressured by the heavily offered tone surrounding the US Dollar.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, hits a fresh three-month low amid hopes for smaller rate hikes by the Federal Reserve. A surprise drop in the US consumer inflation in October fueled speculations about a less aggressive policy tightening by the US central bank. This is evident from the ongoing downfall in the US Treasury bond yields and continues to weigh on the greenback.

That said, a generally positive tone around the equity markets could undermine the safe-haven Swiss franc and help limit the downside for the USDCHF pair. This makes it prudent to wait for some follow-through selling below the 0.9370 region, or the YTD low touched in August, before positioning for any further near-term appreciating move. Nevertheless, the fundamental backdrop seems tilted firmly in favour of bearish traders.

Hence, any attempted recovery could be seen as a selling opportunity and runs the risk of fizzling out rather quickly. Traders now look forward to the US macro data - the Empire State Manufacturing Index and Producer Price Index (PPI). This, along with speeches by influential FOMC members and the US bond yields, will drive the USD demand. Apart from this, the broader market risk sentiment should provide a fresh impetus to the USDCHF pair.

Technical levels to watch

• EURUSD regains the upside and surpasses 1.0400 on Tuesday.
• The dollar plummets to new 3-month lows near 106.00.
• ECB’s Villeroy opened the door to more flexible rate hikes.

The rapid drop in the dollar allows EURUSD to climb to fresh 4-month peaks past 1.0400 on turnaround Tuesday.

EURUSD in multi-month highs

EURUSD advances further and revisits levels last traded back in early July and is already flirting with the critical 200-day SMA, today near 1.0430.

Indeed, the pair navigates the second consecutive week with gains sustained by the persistent weakness hurting the greenback, as investors continue to reprice a potential Fed’s pivot in its policy in the near term.

From the ECB’s backyard, board member Villeroy advocated during early trade a more flexible and slower pace of rate hikes in the future, at the time when he added that jumbo rate hikes won’t become a new trend. He also welcomed last week’s lower-than-expected US inflation figures.

In the domestic calendar, another revision of the Q3 EMU GDP is due seconded by the ZEW Economic Sentiment in both Germany and the euro area. Across the pond, Producer Prices will be in the limelight.

What to look for around EUR

EURUSD comes back stronger following Monday’s hiccup and breaks above the key 1.0400 barrier to print fresh multi-month highs.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. In addition, markets repricing of a potential pivot in the Fed’s policy has become the exclusive source of the sharp advance in the pair in recent sessions.

Back to the euro area, 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 – emerges as the main headwinds facing the euro in the short-term horizon.

Key events in the euro area this week: 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 gaining 0.76% at 1.0405 and faces the next up barrier at 1.0417 (monthly high November 15) seconded by 1.0427 (200-day SMA) and finally 1.0614 (weekly high June 27). On the other hand, a breach of 1.0026 (100-day SMA) would target 0.9935 (low November 10) en route to 0.9730 (monthly low November 3).

In the opinion of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, further decline in USDJPY should meet a solid support around 138.00 in the short term.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the rebound amid oversold conditions suggests USD is unlikely to weaken much further’ and we expected USD to ‘trade between 138.40 and 140.30’. USD subsequently traded in a wider range than expected (138.56/140.73) before closing at 139.88 (+0.79%). The underlying tone has improved somewhat and USD is likely to edge higher today but a break of 141.00 is unlikely. On the downside, support is at 139.90 but only a break of 139.40 would indicate that the current mild upward bias has subsided.”

Next 1-3 weeks: “Yesterday (14 Nov, spot at 139.05), we held the view that 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. There is no change in our view. On the upside, a break of the ‘strong resistance’ at 141.00 would indicate that USD is unlikely to weaken further.”

November’s ZEW survey is the main release to watch in the eurozone’s calendar today. EURUSD has surpassed the 1.04 level and could reach 1.05, according to economists at ING.

Eyes on ZEW

“ZEW expectations are for a generalised improvement on the back of lower energy prices.”

“EURUSD strength is largely a USD story, and any support to the euro appears largely driven by energy prices if anything.” 

We could see another leg higher in the pair over the coming days, and 1.0500 could be at reach, even if we expect a relatively fast descent over the winter.”

See: EURUSD to advance further in case of a solid recovery of the ZEW index – Commerzbank

USDCAD slides back below 1.3300 mark. Economists at Scotiabank expect the pair to sustain further losses on a break below 1.3255/65.

A broader turn may be developing

“Intraday and daily trend strength signals are aligned bearishly for the USD and the weekly DMI has clearly moderated from the strongly bullish position seen through Sep/Oct.”

“Longer-term (monthly) price signals suggest a broader turn in the USD may be developing but we think there is likely to be significant support for the USD around the 1.30 level (major congestion zone from 2021/22).

“Minor USD gains (to the low/mid 1.33s) look a sell.”

“We expect USD losses to resume on a break under 1.3255/65 in the short run.”

• AUDUSD rallies to over a two-month high amid the emergence of fresh USD selling.
• Bets for less aggressive Fed rate hikes and the risk-on mood undermines the buck.
• A sustained strength beyond the 100-day SMA supports prospects for further gains.

The AUDUSD pair catches fresh bids on Tuesday and climbs to over a two-month high during the early part of the European session. The momentum lifts spot prices beyond mid-0.6700s in the last hour, confirming a bullish breakout through the 100-day SMA resistance.

The US Dollar comes under some renewed selling pressure and drops to its lowest level since mid-August, which, in turn, is seen as a key factor acting as a tailwind for the AUDUSD pair. A surprise drop in the US consumer inflation in October lifted hopes for smaller rate hikes by the Federal Reserve. This is evident from sliding US Treasury bond yields, which continue to weigh on the buck.

Apart from this, a positive risk tone - as depicted by a fresh leg up in the equity markets - is seen as another factor undermining the safe-haven greenback and benefitting the risk-sensitive Aussie. It, however, remains to be seen if the AUDUSD pair is able to capitalize on the strength or if the momentum runs out of steam at higher levels amid mixed signals from China.

Economic data released earlier today showed industrial output slowed to 5.0% YoY in October from 6.3% previous. Adding to this, Chinese Retail Sales unexpectedly fell by 0.5% in October - marking the first drop since May. This, along with fears that China could impose additional lockdowns in some cities, overshadows the optimism over an eventual scaling back of restrictive measures.

This, in turn, warrants caution before positioning for any further appreciating move. Nevertheless, a sustained move beyond a technically significant 100-day SMA favours bullish traders. Market participants now look to the US macro data - the Empire State Manufacturing Index and Producer Price Index (PPI) - for some impetus later during the early North American session.

Technical levels to watch

India’s headline CPI inflation eased to 6.8% year-on-year. Regarding USDINR, economists at Commerzbank expect the pair to settle between 80-82. 

Good news on inflation

“Headline CPI inflation for October moderated as expected to a three-month low of 6.8% YoY. Inflation remained above RBI’s 2-6% target range for the 10th consecutive month but the good news is that the trend is pointing down and we have probably seen the peak. Inflation should continue to moderate and should fall below 6% in December.”

“For RBI, it has hiked aggressively by 50 bps for the past three meetings. They are still likely to hike again in December but by a smaller amount of 30-40 bps. Domestic demand remains firm and RBI would not want to prematurely end the tightening cycle.” 

“For USDINR, the softer USD has provided some reprieve for INR and we look for consolidation near term between 80-82.”

Economists at Danske Bank forecast EURGBP at 0.88 in one-month but expect the pair to head lower in the medium to long-term.

Key risk to see EURGBP moving above 0.90 is a sharp sell-off in risk

“In the near-term, we expect fragile risk appetite, too aggressive market pricing on the BoE and lower energy prices to continue to prove a headwind for GBP. We thus forecast EURGBP at 0.88 in 1M.”

“Further out, we remain cautiously optimistic that the cross will head lower as a global growth slowdown and the relative appeal of UK assets to investors are a positive for GBP relative to EUR.”

“The key risk to see EURGBP moving above 0.90 is a sharp sell-off in risk where capital inflows fade and liquidity becomes scares. Other risks are the outlook for the UK economy deteriorating sharply compared to the Euro Area, lower energy prices and renewed escalations in EU-UK tensions.”

“Forecast: 0.88 (1M), 0.88 (3M), 0.87 (6M), 0.86 (12M).”

In Sweden, inflation is due for publication today. An upside surprise is required to provide support to the Swedish Krona, economists at Commerzbank report.

Inflation data from Sweden likely to support further hikes

“The data for October, due for publication today, is unlikely to point towards an improvement on the inflation front, thus confirming that the Riksbank will have to take a further 50 bps rate step next week.”

“The market also expects 50 bps next week. That means today’s inflation data would have to surprise on the upside to provide support for SEK, as this would fuel speculation that the Riksbank will have to raise its rate path again, meaning that it would expect rates to peak at more than 2.50%.” 

“Market sentiment of course also remains an important factor for further SEK gains.”

What is of great interest today is whether the German ZEW index will be able to support the Euro a little bit more. Solid data could allow the shared currency to enjoy further gains, economists at Commerzbank report.

Additional support for the Euro?

“A significant recovery of the index could be interpreted as a sign of reversal. It could then also confirm the view amongst market participants that the ECB can implement its signalled rate cycle as restrictively as it is clearly suggesting to. I could therefore imagine that against the background of the current Dollar weakness such a signal might provide additional support to the Euro.

“I would not be surprised if the Euro was able to appreciate further short-term in case of a solid recovery of the ZEW index.”

• EURGBP comes under some selling pressure on Tuesday, though the downside remains cushioned.
• The mixed UK employment figures reaffirm further BoE rate hikes and underpin the British Pound.
• Talks for a more aggressive tightening ECB  benefit the shared currency and lend support to the cross.

The EURGBP cross extends the previous day's modest pullback from the 0.8820-0.8830 resistance zone and edges lower through the early European session on Tuesday. The cross remains on the defensive around the 0.8770-0.8765 region and moves little following the release of the latest UK employment details.

The UK Office for National Statistics reported that the jobless rate unexpectedly ticks higher to 3.6% during the three months to September from 3.5% previous. Adding to this, the number of people claiming unemployment-related benefits came in at 3.3K against consensus estimates pointing to a fall of 12.6K. The disappointment, however, was offset by stronger wage growth figures.

In fact, the Average Earnings Excluding Bonuses rose to 5.7% from 5.5%, beating estimates for an uptick to 5.6%. The data reaffirms market bets for a further policy tightening by the Bank of England, which is seen offering some support to the British Pound. That said, a modest pickup in demand for the shared currency acts as a tailwind for the EURGBP cross and limits the downside.

Against the backdrop of talks for a more aggressive policy tightening by the European Central Bank (ECB), the emergence of fresh selling around the US Dollar offers support to the Euro. This, in turn, warrants some caution before placing aggressive bearish bets around the EURGBP cross and positioning for any further intraday losses ahead of the German ZEW Economic Sentiment.

Technical levels to watch

Here is what you need to know on Tuesday, November 15:

As the market mood improves early Tuesday, the US Dollar is having a difficult time building on Monday's modest recovery gains. Reflecting the risk-positive market environment, US stock index futures are up between 0.4% and 0.7% in the European morning. The European economic docket will feature the third-quarter Gross Domestic Product figures alongside the September Trade Balance data and the ZEW sentiment survey. Later in the day, the Federal Reserve Bank of New York's Empire State Manufacturing Survey and October Producer Price Index (PPI) data from the US will be looked upon for fresh impetus.

Earlier in the day, the data from China revealed that Industrial Production grew by 5% on a yearly basis in October, falling short of the market expectation for an expansion of 5.2%. Additionally, Retail Sales contracted by 0.5% in the same period following September's growth of 2.5%. Despite the disappointing data releases, Hong Kong's Hang Seng gained more than 3% and the Shanghai Composite rose nearly 1.5% on the day amid renewed optimism about China softening coronavirus restrictions.

Meanwhile, Republicans remain on track to gain the majority in the House with 218 seats. According to the Associated Press, Republicans have secured 217 seats with 13 seats left to be decided.

Source: Associated Press

EURUSD staged a rebound late Monday and ended up closing the day unchanged above 1.0300. The pair stays relatively quiet and fluctuates below 1.0350 in the European morning. 

GBPUSD trades modestly higher on the day at around 1.1800. The UK's Office for National Statistics reported that the ILO Unemployment Rate rose to 3.6% in September from 3.5% in August but this data was largely ignored by market participants.

Although the US Dollar is struggling to find demand on Tuesday, USDJPY clings to modest daily gains above 140.00. Earlier in the day, the data from Japan revealed that Industrial Production contracted by 1.7% on a monthly basis in September, compared to the market expectation for a decrease of 1.6%.

Following a downward correction in the first half of the day, Gold price reversed its direction late Monday as the 10-year US Treasury bond yield stayed below the key 4% level. XAUUSD holds steady at around $1,770 in the European morning.

Bitcoin snapped a three-day losing streak on Monday but struggled to preserve its bullish momentum early Tuesday. BTCUSD trades in a narrow range at around $16,700 in the European morning. Ethereum continues to stretch higher after having closed in positive territory on Monday and it was last seen rising more than 2% on the day at $1,270.

US Treasury Secretary Janet Yellen believes FTX collapse exposed weaknesses in crypto.

• UK ILO Unemployment Rate rose to 3.6% in September.
• GBPUSD stays in positive territory at around 1.1800.

The UK’s official jobless rate edged higher to 3.6% in September from 3.5% in August, the UK's Office for National Statistics announced on Tuesday. This reading came in slightly worse than the market expectation of 3.5%.

Further details of the jobs report revealed that the Claimant Count Rate remained unchanged at 3.9% in October. Additionally, wage inflation, as measured by the Average Earnings Excluding Bonus, rose to 5.7% from 5.5%, compared to analysts' estimate of 5.6%.

Market reaction

These data don't seem to be having a significant impact on Pound Sterling's performance against its major rivals. As of writing, GBPUSD was up 0.4% on the day at 1.1800.

• GBPUSD refreshes intraday high around the 11-week top after the mixed British jobs report.
• UK’s Claimant Count Change offered a positive surprise but Unemployment Rate increased.
• US Dollar’s retreat amid sluggish markets also underpins recovery moves.
• Risk catalysts could entertain intraday traders ahead of the US PPI.

GBPUSD buyers pierce off the 1.1800 to renew intraday top surrounding 1.1810 despite mixed details of the UK’s latest employment report, published early Tuesday in London. In doing so, the Cable pair might have cheered the US Dollar’s sluggish move, as well as geopolitical concerns surrounding Britain.

UK’s Claimant Count Change increased to 3.3K versus -12.6K forecasts and 25.5K prior whereas the Unemployment Rate rose to 3.6% while surpassing the market consensus and prior readings of 3.5%.

Also read: UK: ILO Unemployment Rate rises to 3.6% in September vs. 3.5% expected

Other than the data, chatters that UK Prime Minister Rishi Sunak will unveil a plan to increase the national living wage and give 8 million households cost-of-living payments worth up to 1,100 pounds($1,292.61), per The Times, also favor the GBPUSD buyers. “Chancellor of the Exchequer Jeremy Hunt and Sunak will accept an official recommendation to increase the living wage from 9.50 pounds an hour to about 10.40 pounds an hour, nearly a 10% rise,” the news adds.

Elsewhere, hopes of smaller rate hikes from the US Federal Reserve (Fed), backed by the recent comments from the policymakers, also seem to have favored the GBPUSD bulls of late. That said, the Fed’s Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, Michael Barr mentioned that the inflation is too high. Previously, Vice-Chair Lael Brainard favored a 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.

Against this backdrop, S&P 500 Futures prints 0.50% intraday gains near the monthly high but the US 10-year Treasury yields grind higher around 3.87%, which in turn challenges the US Dollar Index (DXY) recovery near 107.00 by the press time.

Moving on, GBPUSD traders should pay attention to the aforementioned risk catalysts for clear directions ahead of the US Producer Price Index (PPI) for October, expected at 8.3% YoY versus 8.5% prior. It should be noted that major attention will be given to Wednesday’s UK Consumer Price Index (CPI) for October and Thursday’s British Autumn Statement amid hopes of witnessing upbeat outcomes.

Technical analysis

GBPUSD buyers keep the reins unless the quote provides a daily closing below the 100-DMA support surrounding 1.1650. Alternatively, the pair’s recovery moves, however, need validation from the late August swing high of 1.1900 to keep the buyers on the table.

• USDCAD comes under some renewed selling pressure on Tuesday amid modest USD weakness.
• Bearish crude oil prices might undermine the Loonie and help limit the downside for the major.
• Investors now look to the US macro data and speeches by FOMC members for a fresh impetus.

The USDCAD pair struggles to capitalize on the previous day's bounce from the 100-day SMA support and meets with a fresh supply near the 1.3325 area on Tuesday. The pair maintains its offered tone through the early European session and is currently placed near the daily low, around the 1.3285-1.3280 region.

The US Dollar comes under some renewed selling pressure amid rising bets for a less aggressive policy tightening by the Fed. In fact, Fed fund futures are now pricing in a 91% chance of a 50 bps rate hike at the next FOMC meeting in December. This, along with a generally positive tone around the equity markets, is seen as another factor weighing on the safe-haven buck and exerting some downward pressure on the USDCAD pair.

The downside, however, seems cushioned in the wake of a mildly negative sentiment surrounding crude oil prices. Rising COVID-19 cases in China raise concerns about lower fuel consumption in the world's top crude oil importer. This comes after OPEC lowered its 2022 global demand forecast and continues to act as a headwind for the black liquid, which might undermine the commodity-linked Loonie and lend support to the USDCAD pair.

The mixed fundamental backdrop warrants some caution for aggressive traders and positioning for a firm near-term direction. Traders now look to the US macro data - the Empire State Manufacturing Index and Producer Price Index (PPI). This, along with speeches by influential FOMC members and the US bond yields, will drive the USD demand. Apart from this, oil price dynamics should provide a fresh impetus to the USDCAD pair.

Technical levels to watch

Gold is trading in a tight range near $1,770. XAUUSD seems poised to challenge 200-day SMA, around the $1,800 mark, FXStreet’s Haresh Menghani reports.

Break under $1,730-$1,725 to negate the positive bias

“A subsequent strength towards reclaiming the $1,800 psychological mark, nearing the very important 200-day SMA, looks like a distinct possibility. Given that RSI (14) on the daily chart has moved on the verge of breaking into overbought territory, bulls might opt to take some profits off the table near the technically significant moving average.”

“The overnight swing low, around the $1,753 area, now seems to protect the immediate downside. Any further pullback could be seen as a buying opportunity near the $1,730-$1,725 strong horizontal resistance breakpoint. The latter coincides with the 100-day SMA and should act as a strong near-term base for gold. The sustained weakness below will negate the positive bias and prompt some technical selling, paving the way for a slide back towards the $1,700 round figure.”

Considering advanced prints from CME Group for natural gas futures markets, open interest dropped for the second straight session on Monday, this time by just 503 contracts. Volume, too, went down by around 16.5K contracts and reversed the previous daily build.

Natural Gas: Further consolidation in store near term

Prices of natural gas printed decent gains on Monday. The uptick, however, was accompanied by dwindling open interest and volume, which removes some strength from the continuation of the uptrend. Against that, the commodity could likely face extra range bound trading for the time being. Occasional bullish moves, in the meantime, remain capped by the 200-day SMA near the $6.85 per MMBtu.

• Gold price remains mildly offered near three-month high, retreats of late.
• Mixed sentiment keeps XAUUSD buyers hopeful but steady yields and the US Dollar tease sellers.
• Multiple hurdles challenge gold traders between the $1,767 and $1,774 area as buyers run out of steam.

Gold price (XAUUSD) portrays the buyer’s exhaustion around $1,770, printing mild losses after a lackluster start to the week, as traders seek more clues to welcome the bears. Even so, comments suggesting inflation fears from the Federal Reserve (Fed) officials and downbeat statistics from China weigh on the metal prices. On the same line could be the global ire over Russia’s invasion of Ukraine at the Group of 20 Nations (G20) meeting in Indonesia. Furthermore, the Covid woes and recently firmer US Treasury yields also keep the XAUUSD bears hopeful as markets brace for the key US Producer Price Index (PPI) and Retail Sales for October.

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the gold price is clubbed inside a $7 range between $1,767 and $1,774 as bulls take a breather after posting the biggest weekly gains since March 2020.

That said, a convergence of the previous high on the four-hour and Pivot Point R2 on the monthly frame restricts the quote’s immediate upside.

Following that, the previous daily high near $1,776 and Pivot Point 1-Day R1 could challenge the buyers near $1,781 ahead of highlighting the $1,790 hurdle comprising the Pivot Point 1-Day R2

Alternatively, the previous weekly high and SMA5 on 4H joins the middle Bollinger on the one-hour to highlight $1,768 as immediate key support before 38.2% Fibonacci retracement of one-day, SMA10 4H and previous low on 4H, around $1,767.

Should the XAUUSD bears break $1,767 support, 61.8% Fibonacci retracement level on the daily formation, around $1,762 will precede the Pivot Point 1-day S1 and the previous bottom on the daily chart, respectively near $1,758 and $1,753, to entertain the gold sellers.

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.

The strong recovery in NZDUSD could see the 0.6160 level revisited in the near term, note UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we held the view that ‘the rally in NZD is likely to extend even though a clear break of 0.6160 is unlikely’. However, NZD traded sideways within a range of 0.6067/0.6120. Further sideways trading would not be surprising, likely between 0.6060 and 0.6120.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (14 Nov, spot at 0.6105). As highlighted, the price actions from late last week appear to be a clear upside breakout and further NZD strength would not be surprising. Overall, only a break of 0.6000 (no change in ‘strong support’ level from yesterday) would indicate that NZD is not ready to rise to 0.6160. Looking ahead, the next resistance is at 0.6200.”

CME Group’s flash data for crude oil futures markets saw traders add around 20.3K contracts to their open interest positions at the beginning of the week, clinching the 4^th consecutive daily build at the same time. In the same line, volume went up by around 130.3K contracts after two daily drops in a row.

WTI: Next on the downside comes $82.10

Monday’s strong decline in prices of the WTI was on the back of increasing open interest and volume, opening the door to the continuation of the leg lower in the very near term. Against that, the next target of note for the commodity is seen at the weekly low at $82.10 per barrel (October 18).

The continuation of the upside momentum in GBPUSD seems to favour a potential visit to the 1.1910 level in the next few weeks.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the deeply overbought rally in GBP from Friday appears to be overdone and GBP is unlikely to advance much further’. We expected GBP to ‘trade between 1.1725 and 1.1860’. GBP subsequently traded within a narrower range than expected (1.1714/1.1829). The current movement is likely part of an ongoing consolidation and we expect GBP to trade between 1.1700 and 1.1825 today.”

Next 1-3 weeks: “Our update from yesterday (14 Nov, spot at 1.1795) still stands. As highlighted, the solid upward momentum from late last week 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 1.1560 (no change in level from yesterday).”

Open interest in gold futures markets reversed five daily builds in a row and shrank by around 5.3K contracts on Monday, according to preliminary readings from CME Group. Volume followed suit and added to Friday’s retracement, this time by around 54.5K contracts.

Gold appears capped by $1,800

Gold prices started the week in an inconclusive fashion amidst shrinking open interest and volume. Against that, the absence of a clear direction looks likely for the time being, while further upside in the yellow metal is expected to remain limited by the key $1,800 region per ounce troy.

• AUDUSD recovers from intraday low after an inactive start to the week.
• Downbeat China data, hawkish RBA Minutes and the PBOC inaction failed to impress AUDUSD traders.
• Absence of major risk-negative headlines from G20 favors buyers amid sluggish session.
• Aussie Wage Price Index, US Retail Sales could entertain traders, risk catalysts are the key.

AUDUSD portrays the market’s cautious optimism during early Tuesday in Europe, up 0.10% intraday near 0.6710 at the latest. In doing so, the Aussie pair struggles to justify multiple data/events published earlier in the day from Canberra, as well as from Beijing, amid mildly positive headlines from the Group of 20 Nations (G20) meeting in Indonesia.

As per the latest RBA Minutes, “Board doesn't rule out return to 50bps, or pause.” The publication also mentioned that there is no pre-set path -considered a 50bps hike, saw the stronger case for 25bps in November.

On the other hand, China’s Retail Sales marked the lowest print in five months, to -0.5% YoY versus 1.0% expected and 2.5% prior, whereas the Industrial Production (IP) also dropped to 5.0% growth versus 5.2% market forecasts and 6.3% previous readings during October.

Elsewhere, the recently firmer Covid numbers from the dragon nation also propel the USDCNH price as Guangzhou reports 5,124 new local Covid-19 cases as of 00:00 November 15, 2022. With this, the daily numbers turn out to be double what they were over the weekend.

“A positive sign on the eve of the summit was a three-hour bilateral meeting between U.S. President Joe Biden and Chinese leader Xi Jinping in which the two leaders pledged more frequent communications despite many differences,” stated Reuters.

It should be noted that the concerns over major rate hikes challenge the AUDUSD buyers. That said, the Fed’s Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, Michael Barr mentioned that the inflation is too high. Previously, Vice-Chair Lael Brainard favored a 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.

Against this backdrop, S&P 500 Futures print mild gains but the US 10-year Treasury yields grind higher around 3.87%, which in turn challenges the US Dollar Index (DXY) recovery near 107.00 by the press time.

Looking forward, risk catalysts are important for the AUDUSD pair traders ahead of the US Producer Price Index (PPI) for October, expected at 8.3% YoY versus 8.5% prior, as well as the US Retail Sales for the said month. Additionally important will be Australia’s third quarter (Q3) Wage Price Index data, up for publishing on Wednesday.

Technical analysis

A clear upside break of the 100-DMA, around 0.6700 by the press time, becomes necessary for the AUDUSD bulls to keep the reins. Following that, the mid-September swing high near 0.6770 should lure buyers.

Alternatively, bears remain off the table unless witnessing a clear break of the 50-DMA support, around 0.6500 by the press time.

UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang suggest EUR/USD could advance further in the near term.

Key Quotes

24-hour view: “We expected EUR to ‘range-trade between 1.0265 and 1.0365’ yesterday. Our view was not wrong as EUR traded between 1.0270 and 1.0358. The price actions suggest EUR could continue to range-trade, likely between 1.0275 and 1.0375.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (14 Nov, spot at 1.0325). As highlighted, after the strong surge last week, upward momentum is strong and EUR is likely to advance further. That said, overbought short-term conditions could lead to 1-2 days of consolidation first. The next level to watch is at 1.0400. Overall, only a break of 1.0200 (no change in ‘strong support’ level from yesterday) would indicate that the solid upward momentum has subsided.”

• A recovery in positive market sentiment has underpinned the Kiwi bulls.
• The asset has built an auction profile above the breakout area of the Rising Channel formation.
• A bullish range shift by the RSI (14) adds to the upside filters.

The NZDUSD pair has refreshed its day’s high at 0.6119 as the risk-on impulse has regained traction. A smart recovery in the S&P500 futures after selling pressure on Monday has infused fresh blood into the risk-perceived assets.

The US dollar index (DXY) has slipped sharply after a long struggle around the immediate hurdle of 107.00 in Asia. Meanwhile, 10-year US Treasury yields are holding around 3.88% despite a decline in expectations of a bigger rate hike continuation by the Federal Reserve (Fed).

On a four-hour scale, the asset has built an auction profile above the Rising Channel formation. The upper portion of the chart pattern is placed from October 12 high at 0.5716 while the lower portion is plotted from October 13 low at 0.5512. The sustainability of the pair at elevated levels after a channel breakout indicates that kiwi bulls are extremely solid.

Meanwhile, the advancing 20-period Exponential Moving Average (EMA) at 0.6060, dictates that the upside trend is firmer.

Also, the Relative Strength Index (RSI) (14) is oscillating in a bullish range of 60.00-80.00, which signals that the upside momentum is intact.

Going forward, a break above Friday’s high at 0.6130 will drive the asset towards the round-level hurdle at 0.6200, followed by August 25 high at 0.6251.

On the contrary, a downside move below November 7 low at 0.5863 will put the Greenback bulls into the driving seat and will drag the asset toward the round-level support of 0.5800. A slippage below the latter will open room for more downside toward November 3 low at 0.5741.

NZDUSD four-hour chart

• WTI pares the biggest daily loss in seven weeks, prints mild gains of late.
• Convergence of 50% Fibonacci retracement level, monthly support line restricts immediate downside.
• Bearish MACD signals and sustained trading below 200-SMA favor sellers.
• Buyers need validation from $88.10 to retake control.

WTI crude oil remains pressured around $84.70 while consolidating the previous day’s losses, the biggest in nearly two months, heading into Tuesday’s European session.

In doing so, the black gold pokes the $84.50 support confluence comprising the one-month-old ascending trend line and the 50% Fibonacci retracement level of the commodity’s September-November moves.

That said, the quote’s sustained trading below the 200-SMA and bearish MACD signals keep WTI bears hopeful of breaking the $84.50 support.

Following that, a slump toward the 61.8% Fibonacci retracement level of $82.50 appears imminent. However, October 18 swing low near $81.30 and the $80.00 psychological magnet could challenge the oil sellers afterward.

Meanwhile, recovery moves need to cross the 200-SMA hurdle of $86.65 to convince short-term buyers.

Even so, a downward-sloping resistance line from November 07, close to $88.10, holds the key to oil buyer’s entry.

If the commodity buyers stay dominant past $88.10, the $90.00 round figure and the monthly high near $93.00 should flash on their radars.

Overall, the energy benchmark’s latest inaction fails to push back the sellers targeting the late October’s low.

WTI: Four-hour chart

Trend: Further downside expected

UK Jobs report overview

Early Tuesday, the UK’s Office for National Statistics (ONS) will release the October month Claimant Count figures together with the Unemployment Rate in the three months to September at 07:00 AM GMT.

Today’s UK employment data becomes more important considering the Bank of England’s (BOE) latest efforts to keep the British economy in its liquid stage, coupled with the readiness to defend the rate hike trajectory. It should be noted that the jobs report also becomes important as it will be the first since Rishi Sunak won the Prime Minister’s (PM) seat.

The UK labor market report is expected to show that the Average Weekly Earnings, Including Bonuses, in the three months to September, remained unchanged at 6.0% while ex-bonuses, the wages are seen rising to 5.6% from 5.3% prior readings.

Further, the ILO Unemployment Rate is likely to remain intact at 3.5% for the three months ending in September. It’s worth noting that the Claimant Count Change figures are expected to deteriorate to -12.6K versus 25.5K in previous readouts.

Deviation impact on GBPUSD

Readers can find FXStreet's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined around 20-pips in deviations up to + or -2, although in some cases, if notable enough, a deviation can fuel movements over 60-70 pips.

How could they affect GBP/USD?

GBPUSD remains mildly bid around 1.1770, reversing the week-start pullback from a 2.5-month high, heading into Tuesday’s London open.

While the recent improvement in British economic growth numbers and firmer inflation data keeps pushing the BOE towards more rate hikes, today’s employment data need to stay in line to keep the GBPUSD buyers hopeful.

That said, a likely easing in the Claimant Count Change may help GBPUSD to extend the latest rebound but a negative surprise, which is more expected, will also justify the US dollar’s rebound to convince the bears.

Technically, GBPUSD buyers keep the reins unless the quote provides a daily closing below the 100-DMA support surrounding 1.1650. Alternatively, the pair’s recovery moves need validation from the late August swing high of 1.1900 to keep the buyers on the table.

Key notes

GBPUSD Price Analysis: Stays pressured inside bullish triangle ahead of UK employment data 

GBPUSD faces barricades around 1.1800 ahead of UK Employment/Autumn Statement

About UK jobs

The UK Average Earnings released by the Office for National Statistics (ONS) is a key short-term indicator of how levels of pay are changing within the UK economy. Generally speaking, positive earnings growth anticipates positive (or bullish) for the GBP, whereas a low reading is seen as negative (or bearish).

• Asian equities continue making gains despite a sell-off in S&P500 on Monday.
• A contraction in GDP numbers has failed to weigh down Nikkei225.
• Chinese stocks are accelerating despite weaker Retail Sales and a resurgence in Covid-19 cases.

Markets in the Asian domain are displaying positive moves despite the sell-off in S&P500 on Monday. The 500-stock basket was expected to face turbulence as US markets opened after an extended weekend, therefore, an enhancement in volatility was highly expected.

In the Asian session, the S&P500 futures have recovered meaningfully while the US dollar index (DXY) is displaying a rangebound structure ahead of the US Retail Sales data.

At the press time, Japan’s Nikkei225 added 0.13%, ChinaA50 jumped 1.03%, Hang Seng soared 3.60% and Nifty50 eased 0.15%.

Nikkei225 is holding the reins despite reporting a contraction in Gross Domestic Product (GDP) numbers for the third quarter of CY2022. The Japanese economy has displayed a de-growth of 0.3% in the third quarter vs. expectations of expansion by 0.3% and the prior release of 0.9%. On an annualized basis, the GDP data has displayed a negative growth rate at 1.2% against an expansion of 1.1% as expected and the prior release of 3.5%.

Meanwhile, Chinese equities are enjoying significant liquidity despite the release of downbeat Retail Sales data. The economic catalyst has turned negative at 0.5%. Prolonged follow-up of Covid-19 measures, weak real estate demand, and low inflation figures are responsible for a decline in Retail Sales. Also, Industrial Production landed lower at 5.0% against the consensus of 5.2%.

On the oil front, an upthrust in Covid-19 cases in China has led to a resurgence in weaker economic projections. Therefore, the oil demand will eventually face struggles ahead. It is worth noting that the administration has eased Covid-19 measures. However, Time magazine said in a focus piece that “China just relaxed some pandemic measures, but experts suggest 'Zero-COVID’ probably won’t be going away anytime soon,”

• EURUSD remains sidelined after reversing from a six-month-old horizontal hurdle.
• RSI’s retreat from overbought territory strengthens bearish bias.
• 200-DMA adds to the upside filters, sellers aim for September’s high.

EURUSD steadies around 1.0320 heading into Tuesday’s European session, keeping the week-start pullback from the key horizontal resistance. In doing so, the major currency pair seesaws around the highest levels in three months, marked the last Friday, amid bullish MACD signals.

Given the RSI’s retreat from the overbought territory, as well as the pair’s U-turn from an important resistance comprising multiple levels marked since May, around 1.0370, the EURUSD bears are likely to keep the reins.

That said, the quote’s latest weakness aims for September’s peak of 1.0200 before revisiting the 100-DMA support level surrounding 1.0030.

In a case where the EURUSD price remains weak past 1.0030, the 1.0000 parity level could challenge the downside momentum.

On the contrary, recovery moves need to provide a daily closing beyond 1.0370 to convince the EURUSD buyers.

Even so, the 200-DMA resistance near 1.0430 will be crucial to challenge the pair’s further upside.

Should the EURUSD bulls remain in the driver’s seat past 1.0430, the late June swing low near 1.0615 will be in focus.

Overall, EURUSD remains on the bear’s radar despite the latest inaction.

EURUSD: Daily chart

Trend: Further weakness expected

• USDINR takes the bids to refresh intraday high and extends the week-start run-up.
• India’s retail inflation dropped to three-month low in October.
• US Dollar traces yields to defend recovery from three-month low.
• US PPI, risk catalysts eyed for fresh impulse ahead of the key US Retail Sales.

USDINR renews its intraday high around 81.35 as it extends the previous day’s recovery to early Tuesday morning in Europe. In doing so, the Indian Rupee (INR) pair cheers downbeat prints of India’s retail inflation, as well as the US Dollar’s recovery amid mixed concerns.

“India's annual retail inflation eased to 6.77% last month, helped by a slower rise in food prices, data showed on Monday,” mentioned Reuters. It’s worth noting that the outcome was higher than the 6.73% forecasts and the Reserve Bank of India’s (RBI) tolerance limit adds to the news.

The same joins broad concerns over the major central banks’ pivot to suggest a softer rate hike from the RBI, which in turn propels the Indian equities and weighs on the INR price.

On the other hand, the US Dollar Index (DXY) remains mildly bid near 107.00, extending the week-start rebound from a three-month low, as hawkish comments from the US Federal Reserve (Fed) officials underpin the recovery moves of the US Treasury yields. That said, the Fed’s Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, Michael Barr mentioned that the inflation is too high. Before that, Vice-Chair Lael Brainard favored a 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.

It should be noted that the Covid fears from China and the absence of positive headlines from the first face-to-face meeting between US President Joe Biden and his Chinese counterpart Xi Jinping also challenge the market sentiment and keeps the USDINR buyers hopeful.

Against this backdrop, S&P 500 Futures print 0.50% intraday gains around the monthly high but the US 10-year Treasury yields grind higher around 3.87%.

Moving on, risk catalysts are important for the USDINR pair traders ahead of the US Producer Price Index (PPI) for October, expected at 8.3% YoY versus 8.5% prior, as well as the US Retail Sales for the said month.

Technical analysis

A 3.5-month-old ascending trend line, currently around 80.40, restricts short-term USDINR downside.

• USDIDR has recorded extra gains above the 15,500 hurdle as Indonesian exports have missed projections.
• US Retail demand has been robust amid the tight labor market.
• Fed Brainard has supported the view of rate hike slowdown consideration.

The USDIDR pair has extended its recovery above 15,500 in the Tokyo session as Indonesian exports have missed estimates. The export numbers increased by 12.30% vs. the Reuters poll of 13.85%, which has dented demand for the Indonesian Rupiah.

Lower-than-projected Indonesian export numbers could impact their trade balance ahead. Meanwhile, the US dollar index (DXY) is displaying a subdued performance in Tokyo. The mighty DXY is facing barricades while overstepping the immediate hurdle of 107.00. Market mood has turned quiet as the US economic calendar has nothing much to offer this week except the Retail Sales data, which will release on Wednesday.

The Retail Sales data for October month is seen climbing to 0.9% against the prior release of 0%. Retail demand has been robust amid the tight labor market. It is worth noting that the inflationary pressures declined in October. In spite of that, Retail Sales is seen higher, which indicates an upbeat households confidence.

Apart from that, mixed cues from Federal Reserve (Fed) policymakers over the policy tightening pace have shifted the DXY into a chartered territory. As per the CME FedWatch tool, the chances of fifth consecutive 75 basis points (bps) rate hike have slipped below 20%.

Fed Vice Chair Lael Brainard supports the view of reducing the pace of policy tightening. She 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.

• Gold price is displaying lackluster performance above the critical hurdle of $1,770.00.
• The DXY has turned sideways as the focus has shifted to the US Retail Sales data.
• A situation of decline in inflation along with a significant rise in retail sales indicates robust retail demand.

Gold price (XAUUSD) is juggling in a chartered territory above the critical hurdle of $1,770.00 in the Asian session. The precious metal has turned sideways amid obscurity in markets ahead of the US midterm elections. However, the street is expecting a clear win of Republicans for the House of Representatives.

The US dollar index (DXY) is struggling to cross the immediate hurdle of 107.00 as declining odds for the continuation of the current pace in rate hikes by the Federal Reserve (Fed) are capping the upside. Also, rising demand for US government bonds has crippled yields. Meanwhile, S&P500 futures have extended their recovery after witnessing pessimism on Monday.

Going forward, the US Retail Sales data will remain in focus. As per the projections, the economic data is seen at 0.9% vs. the prior release of 0%. October month’s core Consumer Price Index (CPI) has declined to 0.3% vs. the prior release of 0.6%. The situation of decline in price growth along with a significant rise in retail sales indicates that the retail demand is robust.

Gold technical analysis

On a daily scale, gold prices have overstepped the 200-period Exponential Moving Average (EMA) at $1,760.00. The asset has formed a ‘Dragonfly Doji’ candlestick pattern in an uptrend, which indicates that dips have been considered as a buying opportunity by the market participants.

Also, the bullish range trading by the Relative Strength Index (RSI) (14) indicates more upside ahead.

Gold daily chart

“Russia must withdraw all its troops and armed formations from Ukraine,” Ukrainian President Volodymyr Zelensky said in a speech to world leaders gathered at a G20 summit in Indonesia on Tuesday.

More to come

• USDJPY picks up bids to extend the week-start rebound from 2.5-month low.
• Clear break of 50-HMA, two-day-old descending trend line keeps buyers hopeful.
• Confluence of 100-HMA, Friday’s peak tests further upside momentum.

USDJPY stays on the front foot for the second consecutive day after declining to the lowest levels since late August, up 0.55% intraday near 140.45 during early Tuesday morning in Europe.

The Yen pair’s recovery moves could be linked to its ability to cross a short-term key resistance, now support, surrounding 140.00, comprising a downward-sloping trend line from Friday and the 50-HMA. Also favoring the advances are the bullish MACD signals.

With this, the USDJPY buyers are likely to keep the reins and extend the week-start rebound from an 11-week low.

However, the convergence of the 100-HMA and November 11 peak offers a tough nut to crack for the bulls around 142.50-55.

Following that, a run-up towards the top, marked the late last week around 146.80, should gain the market’s attention. It’s worth noting that October’s low near 145.10 may act as a validation point for the USDJPY pair’s upside past 142.55.

Meanwhile, the sellers need to wait for a clear downside break of the 140.00 resistance-turned-support confluence.

In that case, July’s high near 139.40 and the monthly low near 138.50 could lure the USDJPY bears.

USDJPY: Hourly chart

Trend: Limited upside expected

“We will probably continue to raise rates, but may do so in a more flexible and possibly less rapid manner,” the European Central Bank (ECB) Governing Council member and French central bank governor Francois Villeroy de Galhau said late Monday while speaking from Tokyo.

Additional comments

EURUSD grinds lower

Following the news, EURUSD price retreats towards the intraday low, down 0.12% on a day near 1.0315 by the press time.

Also read: EURUSD grinds lower towards 1.0300 amid recession fears, hawkish Fedspeak ahead of Eurozone GDP

• AUDUSD remains lackluster following the footprints of the DXY.
• Bulls are hopeful of a break above the supply zone placed in a 0.6702-0.6751.
• Advancing 20-and 50-EMAs add to the upside filters.

The AUDUSD pair is displaying a lackluster performance in the Asian session despite the release of the Reserve Bank of Australia (RBA) monetary policy minutes to provide detailed reasoning behind hiking interest rates by 25 basis points (bps) in November’s monetary policy meeting.

Also, the US dollar index (DXY) is witnessing back-and-forth moves amid a quiet market mood. The DXY is struggling to surpass the immediate hurdle of 107.00. A minor recovery in the 10-year US Treasury yields to 3.88% has been recorded.

On a four-hour scale, the asset is struggling to cross the demand zone placed in a narrow range of 0.6702-0.6751. The 20-and 50-period Exponential Moving Averages (EMAs) at 0.6642 and 0.6550 respectively are sloping north, which adds to the upside filters.

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

Should the asset overstep the above-mentioned demand zone decisively, room for extra gains will get uncovered. The pair will march towards September 2 high at 0.6814, followed by the critical resistance placed from September 13 high around 0.6900.

On the flip side, the greenback bulls will regain strength if the asset drops below Thursday’s low at 0.6387. This will drag the pair towards October 14 high at 0.6324 and November 3 low at 0.6272.

AUDUSD four-hour chart

.

• EURUSD holds lower ground after reversing from three-month high.
• Fed policymakers renew inflation woes, underpin rebound in US Treasury yields.
• Fears of economic contraction in the bloc, China’s covid woes add strength to the bearish bias.
• Second estimate of Eurozone Q3 GDP, US PPI for October will decorate calendar.

EURUSD portrays the pre-data anxiety as it gradually extends the week-start pullback from the multi-day high, down 0.07% intraday near 1.0325 during early Tuesday morning in Europe. It should also be noted that the mixed concerns surrounding the US Federal Reserve (Fed) and the European Central Bank’s (ECB) next moves also restrict the quote’s immediate moves. Even so, recovery in the US Treasury yields appears to defend the pair sellers ahead of the second estimate of the Eurozone Gross Domestic Product (GDP) for the third quarter (Q3).

Recently, the Fed’s Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, Michael Barr mentioned that the inflation is too high. Before that, Vice-Chair Lael Brainard favored a 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.

On the other hand, 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.

It’s worth noting that the chatters surrounding the price cap on Russian energy products and the Sino-American tension, as well as China’s Covid woes, are some additional hurdles that challenge the markets’ sentiment and weigh on the EURUSD price.

Amid these plays, S&P 500 Futures print mild gains but the US 10-year Treasury yields grind higher around 3.87%, which in turn underpins the US Dollar Index (DXY) recovery, up 0.08% intraday near 107.00 by the press time.

Moving on, the Eurozone GDP is likely to confirm the initial forecasts of 0.2% QoQ and may not help the EURUSD buyers to return. On the contrary, a downbeat print, which is more likely, could please the pair sellers. Even so, the US Producer Price Index (PPI) for October, expected at 8.3% YoY versus 8.5% prior, as well as the US Retail Sales for the said month should have waited for clear directions.

Technical analysis

Monday’s “hanging man” bearish candlestick joins overbought RSI conditions to keep the EURUSD bears hopeful unless the quote crosses the 200-DMA hurdle, currently around 1.0430.

Japanese Trade and Economy Minister Yasutoshi Nishimura said on Tuesday, he would prefer stability in forex rates.

Key quotes

“Not able to comment on forex levels, although prefer stability.”

“The Yen weakness should be used in order to give exports a boost.”

Market reaction

USDJPY is consolidating the latest uptick at around 140.30, adding 0.29% on the day. The Japanese Yen was smashed on the negative Japanese GDP print for the third quarter this year.

Following the release of the October activity numbers, China’s National Bureau of Statistics (NBS) released a statement, via Reuters, expressing their view on the economy.

Key quotes

China’s economy maintained a recovery trend in October despite pressures.

Economic recovery slows due to covid flareups.

Will actively expand demand, stabilize employment and prices.

more to come ...

Related reads

• China’s October Retail Sales and Industrial Output disappoint
• USDCNH rebounds from six-week low on downbeat China data, Covid woes

• USDCNH picks up bids to snap three-day downtrend at the lowest level in more than a month.
• China Retail Sales slump to print contraction, Industrial Production eased in October.
• China’s coronavirus numbers keep rising, doubled in Guangzhou.
• Fedspeak, firmer yields also underpin recovery moves amid the sluggish session.

USDCNH renews its intraday high near 7.0555 while printing the first daily gains in four amid downbeat China data and the coronavirus fears. Also likely to have weighed the offshore Chinese Yuan (CNH) is the market’s dicey mood and mixed comments from the US Federal Reserve (Fed) officials.

That said, China’s Retail Sales marked the lowest print in five months, to -0.5% YoY versus 1.0% expected and 2.5% prior, whereas the Industrial Production (IP) also dropped to 5.0% growth versus 5.2% market forecasts and 6.3% previous readings during October.

Also read: China’s October Retail Sales and Industrial Output disappoint

Elsewhere, the recently firmer Covid numbers from the dragon nation also propel the USDCNH price as Guangzhou reports 5,124 new local Covid-19 cases as of 00:00 November 15, 2022. With this, the daily numbers turn out to be double what they were over the weekend.

On the other hand, an absence of positive headlines from the first face-to-face meeting between US President Joe Biden and his Chinese counterpart Xi Jinping weighs on the market sentiment and favors the pair buyers.

Furthermore, the latest commentary from the US Federal Reserve (Fed) officials renews inflation fears and underpins the USDCNH upside. Recently, the Fed’s Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, Michael Barr mentioned that the inflation is too high. Before that, Vice-Chair Lael Brainard favored a 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.

While portraying the mood, S&P 500 Futures print mild gains but the US 10-year Treasury yields grind higher around 3.87%, which in turn underpins the US Dollar Index (DXY) recovery, up 0.08% intraday near 107.00 by the press time.

Looking forward, the risk catalysts are likely to direct the short-term USDCNH moves. However, major attention will be given to the US Producer Price Index (PPI) for October, expected at 8.3% YoY versus 8.5% prior, as well as the US Retail Sales for the said month, for clear directions.

Technical analysis

Despite the latest pullback, the 100-DMA hurdle surrounding 7.1455-60 challenges USDCNH bulls.

China’s October Retail Sales YoY, declined sharply to -0.5% vs. 1.0% expected and 2.5% previous while Industrial Production YoY came in at 5.0% and 5.2% estimated and 6.3% prior.

Meanwhile, the Fixed Asset Investment YoY eased to 5.8% in October vs 5.9% expected and 5.9% last.

Market reaction

The Australian dollar remains little changed on the release of the discouraging Chinese data. The AUD/USD pair is holding steady on the day at 0.6695, as of writing.

• NZD  bulls might now be quite done yet with 0.6150 eyed vs USD.
• On the other hand, bears are on the back side of a key trendline. 

The New Zealand Dollar weakened below 0.61 the figure at the start of the week, retreating from two-month highs after a top US central banker warned investors against pricing in a Federal Reserve pivot so soon despite the US inflation data. The bird has not really been able to look back since and is poised for a correction vs. the US dollar as per the technical analysis below. 

Federal Reserve Governor 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 is a theme that is gathering pace in the open as per the following article: 

• US Dollar bulls could start to emerge in the opening sessions

''The degree of excitement around last week’s softer US CPI data is waning a touch, and it is just one data point,'' analysts at ANZ Bank said. ''Still, as we noted yesterday, there is a growing sense in the market that the days of USD dominance might be past us, and the Kiwi is in a neatly defined uptrend channel.''

Domestically, Reserve Bank of New Zealand officials said that high inflation and a tight labor market in the country call for demand to be cooled, though they flagged downside risks to the global economy. Investors are now looking for the RBNZ to raise interest rates by a larger increment of 75 basis points in November having delivered a half-percentage point increase in October.

NZDUSD techncial analysis

The price is now on the back side of the trendline and it may have established a high for the week. If so, then the above scenario could play out with a focus on a break of structure below 0.6070. On the other hand, the bulls might now be quite done yet with 0.6150 eyed: 

• Silver price retreats from five-month high but stays beyond the key resistance, now support.
• Overbought RSI suggests further pullback but bears should wait for $21.45 breakdown for clarity.
• An eight-month-old resistance line appears the key hurdle for XAGUSD buyers to tackle.

Silver price (XAGUSD) renews its intraday low near $21.90 as bulls run out of steam around a five-month high during Tuesday’s Asian session.

Even so, the bright metal stays beyond the convergence of the 200-DMA and the previous resistance line from early August, near $21.45, which in turn challenges the metal’s downside move.

It’s worth observing, however, that the overbought conditions of the RSI (14) direct XAGUSD towards the aforementioned key support confluence, previous resistance.

It should be noted that the tops marked in October and August, respectively near $21.25 and $20.85, could also probe the silver bears before giving them control.

On the flip side, recovery moves need to refresh the multi-day high, currently around $22.10, to lure the XAGUSD bears.

Following that, a downward-sloping resistance line from March, around $22.50, will be crucial to welcome the metal bulls.

Should the quote remains firmer past $22.50, the odds of witnessing a run-up toward March’s low near $24.00 can’t be ruled out.

Overall, the silver price is likely to remain pressured but the downside appears limited and bumpy unless the quote stays beyond $20.85.

Silver: Daily chart

Trend: Limited downside expected

• US Dollar Index stays defensive after the previous day’s rebound from a three-month low.
• Fed policymakers highlight pivot talks, inflation concerns to favor the DXY.
• China data dump and risk catalysts are important for clear directions.
• Buyers could cheer hopes of firmer rate hike, indecision over inflation concerns ahead of the key US statistics.

US Dollar Index (DXY) remains indecisive while struggling to extend the previous day’s U-turn from the lowest levels since mid-August, taking rounds to 106.95 during Tuesday’s Asian session. In doing so, the greenback’s gauge versus the six major currencies awaits clear directions amid sluggish hours of trading while waiting for the key US economics.

Even so, the DXY buyers remain hopeful as the latest commentary from the US Federal Reserve (Fed) officials renews inflation fears. Recently, Vice-Chair Lael Brainard favored a 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.

Elsewhere, an absence of positive headlines from the first face-to-face meeting between US President Joe Biden and his Chinese counterpart Xi Jinping weighs on the market sentiment. On the same line could be the recently firmer Covid numbers from the dragon nation as Guangzhou reports 5,124 new local Covid-19 cases as of 00:00 November 15, 2022. With this, the daily numbers turn out to be double what they were over the weekend.

It’s worth noting, however, that China’s recent efforts to defend the struggling real-estate markets and easing of the Covid-linked activity restrictions keep the DXY buyers hopeful, due to the greenback’s safe-haven appearance.

Amid these plays, S&P 500 Futures remain sidelined near 3,975-80, after reversing from a two-month high the previous day, whereas the US Treasury yields remain inactive near 3.86% following the first daily gain in four.

Looking forward, the risk catalysts will be crucial for the DXY moves amid a light calendar. However, China’s data dump for October and the US Producer Price Index (PPI) for the said month, expected at 8.3% YoY versus 8.5% prior, should also be watched carefully for clear directions ahead of the US Retail Sales.

Technical analysis

DXY recovery remains elusive unless crossing October’s trough surrounding 109.55. The downside moves, however, need to conquer the 200-DMA support of 105.82 to convince bears.

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.0421 vs the previous fix 7.0899 and prior close of 7.0710.

at the same time, the central bank injectedCNY172Bln Via 7 Day Reverse Repos at 2.0% in open market ops and 850bn yuan via a 1-year MLF, with rate unchanged at 2.75% with 1 trillion yuan maturing MLF.

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.

• USDCAD has established firmly above 1.3300 as downbeat risk profile recovered and oil prices plummeted.
• The DXY has climbed above 107.00 amid anxiety ahead of the US midterm elections outcome.
• A significant surge in China’s Covid-19 cases has weighed heavily on oil prices.

The USDCAD pair has shifted its auction profile above the round-level hurdle of 1.3300 in the Tokyo session. The asset picked bids after overstepping 1.3300 as the upbeat market mood has started fading now ahead of the US midterm elections outcome.

It is still tricky to confirm the risk profile as a negative one as the US dollar index (DXY) has advanced along with a recovery in the S&P500 futures. The DXY has climbed above the round-level hurdle of 107.00 after remaining in negative territory from the past few trading sessions.

The street is stamping a change in stewardship to Republicans for the House of Representatives. This may bring political instability and interference from Republicans in the passing of bills and laws that would hinder expansion plans.

The returns generated by US government bonds are marginally higher amid a rebound in risk-off mood as expectations for a slowdown in the pace of policy tightening by the Federal Reserve (Fed) have escalated. As per the CME FedWatch tool, the odds of announcing a fifth consecutive 75 basis point (bps) stand below 20%.

Meanwhile, Loonie investors are shifting their focus toward inflation data, which will release on Wednesday. The core Consumer Price Index (CPI) is seen higher at 6.3% while the headline CPI could inch higher to 7.0%.

On the oil front, oil prices witnessed a bloodbath on Monday as Covid-19 cases in China jumped heavily simultaneously when the administration relaxes measures. Time magazine said in a focus piece that “China just relaxed some pandemic measures, but experts suggest 'Zero-COVID’ probably won’t be going away anytime soon,” This triggered signals of further decline in economic projections and eventually the oil demand.

Weak oil prices must have weighed heavily on the Canadian dollar as Canada is a leading exporter of oil to the US.

Guangzhou reports 5,124 new local Covid-19 cases as of 0:00 November 15. This is double what it was from over the weekend. New coronavirus cases have surged in Guangzhou and other Chinese cities, official data showed last week.  Guangzhou is the global manufacturing hub and is becoming China's latest COVID-19 epicenter and testing the city's ability to avoid a Shanghai-style lockdown.

China has remained an international outlier on pandemic restrictions, persevering with Xi’s zero-Covid playbook of locking down buildings, suburbs or entire cities as well as mass testing, quarantine and electronic contact tracing. However, the speculation surged in recent weeks that Beijing was considering a more significant relaxation of the zero-Covid policy, supporting risk apptite in markets. Stocks in China, including Hong Kong, rallied for a second day on Monday, for instance, after the announcement of new measures to prop up the beleaguered property sector and the easing of the country's strict Covid-19 restrictions.

• GBPUSD holds onto the previous day’s bearish bias but lacks downside momentum ahead of the key UK data.
• Bearish MACD signals, downside break of the 50-HMA favor sellers.
• Further downside hinges of 1.1650-45 support break, bulls need to cross 1.1800 to retake control.

GBPUSD remains pressured around 1.1745, struggling to keep the bears hopeful despite extending the previous day’s pullback from an 11-week high, as the Cable pair stays inside a short-term descending triangle bullish chart pattern during early Tuesday in Asia.

That said, a clear downside break of the 50-HMA, around 1.1760 by the press time, directs GBPUSD towards the immediate triangle’s support line, close to 1.1710.

However, the GBPUSD pair’s downside past 1.1710 hinges on a three-week-old horizontal support area near 1.1650-45.

It should be noted that the GBPUSD weakness past 1.1645 might not hesitate to challenge the 1.1490-85 support confluence, comprising the 200-HMA and one-week-old ascending trend line.

Alternatively, an upside clearance of 1.1790 could confirm the bullish chart formation and can favor the GBPUSD buyers to challenge the monthly high surrounding 1.1855.

In the case GBPUSD remains firmer past 1.1855, the late August swing high near 1.1900 may offer an intermediate halt during the run-up towards August month’s peak near 1.2295.

Overall, GBPUSD remains on the buyers’ radar but a short-term pullback towards 1.1645 can’t be ruled out.

GBPUSD: Hourly chart

Trend: Limited downside expected

• AUDJPY has climbed to near 94.00 after detailed clarification of a 25 bps rate hike by the RBA.
• A significant contraction in Japan’s economic activities has impacted the Japanese yen.
• The RBA has elevated its inflation guidance to 8.0% after a decent surge in the third quarter.

The AUDJPY pair has advanced sharply to near 94.00 after retreating from the critical support of 93.00 in the Tokyo session. The cross has picked bids after the release of the rationale behind the announcement of the second consecutive 25 basis points (bps) rate hike by the Reserve Bank of Australia (RBA). Also, a contraction in Japan’s economic activities in the third quarter has weighed pressure on the Japanese yen.

As per the RBA minutes, the chances for a 25 bps rate hike despite a historic surge in the inflation rate to 7.3% stood at 75%. The board agreed that acting consistently would support confidence in the monetary policy framework among financial market participants and the community more broadly. Also, RBA policymakers believed that the Official Cash Rate (OCR) has been elevated materially in a short span of time.

This has weighed heavily on households’ consumption. Higher interest rates and price pressures have impacted households’ budgets despite falling housing prices due to higher interest obligations. After a rise in inflationary pressures above 7.0%, the RBA has elevated its inflation guidance to 8.0%.

Meanwhile, investors are punishing the Japanese yen broadly on releasing a contraction in economic activities for the third quarter. The Japanese economy has displayed a de-growth of 0.3% in the third quarter against expectations of a growth rate of 0.3% and the prior release of 0.9%. On an annualized basis, the economic catalyst has displayed a negative growth rate at 1.2% against an expansion of 1.1% as expected and the prior release of 3.5%.

• AUDUSD rebounds from intraday low on RBA Minutes.
• Minutes of the latest RBA Monetary Policy Meeting stated
• Risk-off mood, fears emanating from China exert downside pressure on the risk barometer pair.
• US PPI, risk catalysts should be eyed closely for clear directions.

AUDUSD picks up bids to justify the hawkish statements from the latest Minute Statement of the Reserve Bank of Australia’s (RBA) Monetary Policy Meeting, published early Tuesday. That said, the Aussie pair consolidates the daily loss near 0.6700, down 0.08% intraday at the latest.

As per the latest RBA Minutes, “Board doesn't rule out return to 50bps, or pause.” The publication also mentioned that there is no pre-set path -considered 50bps hike, saw stronger case for 25bps in November.

Also read: RBA Minutes: Board doesn't rule out return to 50bps, or pause

Despite the mixed statements from the RBA Minutes, the market’s sour sentiment keeps the AUDUSD bears hopeful.

That said, the covid fears of China and the tussles between Washington and Beijing, recently over Taiwan, appear to weigh on the risk appetite. Also challenging the mood could be the comments from the Federal Reserve (Fed) officials.

Recently, the Fed’s Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, Michael Barr mentioned that the inflation is too high. Previously, Vice-Chair Lael Brainard favored a 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.

Amid these plays, S&P 500 Futures print mild gains but the US 10-year Treasury yields grind higher around 3.87%, which in turn underpins the US Dollar Index (DXY) recovery, up 0.08% intraday near 107.00 by the press time.

Looking forward, the monthly prints of China’s Industrial Production and Retail Sales for October will offer immediate directions to AUDUSD traders. However, the qualitative catalysts, mainly surrounding the coronavirus and the Sino-American tussles, will be more important for a clear guide. Forecasts suggest downbeat prints of the scheduled data/events and hence the AUDUSD bears are likely to keep the reins unless the outcome offers a positive surprise.

Following that, US Producer Price Index (PPI) for October, expected at 8.3% YoY versus 8.5% prior, should also be watched carefully to aptly forecast the near-term AUDUSD moves, especially after the recently hawkish comments from the Fed policymakers.

Technical analysis

Monday’s Doji candlestick joins nearly overbought conditions of the RSI (14) to tease the AUDUSD bears. The pullback moves, however, need validation from July’s low near 0.6680.

The Reserve Bank of Australia (RBA) has released the minutes of the prior meeting as follows:

Members commenced their discussion of international economic developments by observing that inflation abroad had remained high.

Inflation outcomes for the major advanced economies had continued mostly to surprise on the upside – noticeably for the euro area, where higher prices for food and energy had boosted headline inflation.

More:

• Board doesn't rule out return to 50bps, or pause.
• No pre-set path -considered 50bps hike, saw stronger case for 25bps in November.

Read the full minutes here.

AUD/USD update

The Aussie is unchanged on the data as follows:

It is attempting to correct below the trendline and 0.67 the figure, reaching a low of 0.6688 so far on the day. 

About the RBA minutes

The Reserve Bank of Australia (RBA) publishes the minutes of its monetary policy meeting two weeks after the interest rate decision is announced. It provides a detailed record of the discussions held between the RBA’s board members on monetary policy and economic conditions that influenced their decision on adjusting interest rates and/or bond buys, significantly impacting the AUD. The minutes also reveal considerations on international economic developments and the exchange rate value.

• USDJPY has resurfaced firmly from 140.00 as Japan’s GDP has turned negative.
• Japan's GDP has contracted by 0.3% and 1.2% on a quarterly and an annualized basis respectively.
•  Going forward, the US Retail Sales data will be of utmost importance.

The USDJPY pair has delivered an upside break of the consolidation formed in a 140.00-140.20 range after the Japanese Cabinet Office reported a negative growth rate in economic activities. Earlier, the asset displayed a sideways performance above the psychological resistance of 140.00 in the Asian session after rebounding from 139.65.

The Japanese economy has displayed a de-growth of 0.3% in the third quarter against expectations of a growth rate of 0.3% and the prior release of 0.9%. On an annualized basis, the economic catalyst has displayed a negative growth rate at 1.2% against an expansion of 1.1% as expected and the prior release of 3.5%.

Earlier, Analysts at ING were expecting 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.”

A release of the negative growth rates has brought volatility in the Japanese yen. On Monday, Bank of Japan (BOJ) Governor Haruhiko Kuroda cited that the economy is on track for recovery. He stated that the economy is likely to recover as the impact of supply constraints and the pandemic have eased. The tight labor market will drive wages and the inflation rate to grow around 3% this fiscal year.

Meanwhile, the US dollar index (DXY) has inclined to near the round-level resistance of 107.00. Market mood is displaying mixed responses as the S&P500 futures have reflected a recovery after a weak Monday.

Going forward, the US Retail Sales data will remain in the spotlight, which is due on Wednesday. The monthly data is seen higher at 0.9% vs. the prior release of 0%. An incline in retail demand in spite of a monthly decline in price pressures indicates solid retail demand by households.

• GBPJPY renews intraday high even as Japan’s Q3 GDP registers contraction.
• Anxiety ahead of the UK’s key jobs report, sluggish yields add to the trading filters.
• Buyers remain hopeful amid BOE vs. BOJ divergence, optimism surrounding the UK’s new government.

GBPJPY justifies the downbeat Japan Gross Domestic Product (GDP) data during early Tuesday in Asia, as it refreshes the intraday high near 164.80 by the press time. In doing so, the cross-currency pair defends the previous day’s rebound from a one-month low ahead of the UK’s employment report.

That said, Japan’s GDP for the third quarter (Q3) of 2022 disappointed the Japanese Yen (JPY) traders as it dropped to -0.3% QoQ versus 0.3% expected and 0.9% prior. The Annualized figures also weighed on the JPY prices by declining to -1.2% compared to 1.1% market forecasts and 3.5% prior.

Also read: GBPJPY grinds higher towards 165.00 after downbeat Japan Q3 GDP, UK Employment data eyed

It’s worth noting that hopes of witnessing an increase in the UK’s minimum wage, as signaled by The Times, also underpinned the GBPJPY upside of late.

Above all, the monetary policy divergence between the Bank of England (BOE) and the Bank of Japan (BOJ) could be considered the key catalyst for the GBPJPY pair’s strength. That said, the BOJ has been defending its easy-money policies while BOE Governor Andrew Bailey signaled more rate hikes in the last week.

Moving on, the UK’s headline Claimant Count Change is likely to provide a welcome figure of -12.5K for October versus 25.5K. However, an anticipated no change in the Unemployment Rate of 3.5% for three months to September might tease the GBPJPY sellers in a case of a negative surprise.

Elsewhere, the recent rebound in the US Treasury yields and the market’s cautious optimism, emanating from hopes of easy rate hikes from the key central banks, keep the GBPJPY buyers hopeful.

Technical analysis

GBPJPY remains sidelined between the 100 and the 50 DMAs, respectively around 164.00 and 164.90. However, the downbeat RSI and the MACD conditions keep the sellers hopeful.