CFD Markets News and Forecasts — 23-11-2022

• A formation of an ascending triangle indicates a consolidation ahead.
• Overlapping of the 50-EMA with the cross dictates a sheer contraction in volatility.
• Oscillation in the 40.00-60.00 range by the RSI (14) indicates that investors are awaiting a potential trigger.

The AUD/JPY pair is struggling to overstep the immediate hurdle of 94.00 in the early Asian session. The cross is displaying a lackluster performance broadly due to the absence of key triggers for decisive action.  Meanwhile, the market sentiment is extremely positive as US yields are facing immense pressure led by rising odds of a slowdown in the rate hike pace by the Federal Reserve (Fed).

On Thursday, Japanese markets will open after a close on Wednesday on account of Thanksgiving Day. Therefore, volatility could be immense as investors will look to manage their positions accordingly.

On an hourly scale, the cross is auctioning in an Ascending Triangle chart pattern, which indicates a sheer decline in volatility. The horizontal resistance of the above-mentioned chart pattern is placed from November 18 high at 94.10 while the upward-sloping trendline is plotted from Monday’s low at 93.19.

The 50-period Exponential Moving Average (EMA) at 93.87 is overlapping with the asset’s price, which indicates a consolidation ahead.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which states the unavailability of a potential trigger for making an informed decision.

For an upside move, the asset is needed to violate Wednesday’s high at 94.14, which will send the cross towards November 16 high at 94.66 and the round-level resistance of 95.00.

Alternatively, a breakdown of the chart pattern if the asset drops below Tuesday’s low at 93.57, will expose the cross for further downside towards Monday’s low at 93.19 followed by November 11 low at 92.60.

AUD/JPY hourly chart

• AUD/USD picks up bids to reverse the pullback from weekly high.
• Softer US data, FOMC Minutes triggered weighed on the US Dollar, cautious optimism also favored Aussie pair bulls.
• Downbeat PMIs from Australia, China’s Covid woes gained little attention.
• Thanksgiving holiday, light calendar can allow buyers to take a breather.

AUD/USD remains on the buyer's radar despite the latest inaction around 0.6730-40 during Thursday’s Asian session. The reason could be linked to the broad-based US Dollar selling and the market’s cautious optimism.

The US Dollar Index (DXY) dropped the most in a fortnight the previous day after the latest Federal Open Market Committee (FOMC) Meeting Minutes signaled that the policymakers discussed the need of slowing down the interest rate hikes. Additionally weighing on the Greenback were chatters over the “sufficiently restrictive” level of the Federal Reserve’s (Fed) interest rates, as indicated in the Fed Minutes.

It should be noted that the softer US PMIs for November and strong Jobless Claims figures also acted as a negative catalyst for the AUD/USD pair. The preliminary readings of the US S&P Global Manufacturing PMI for November eased to 47.6 from 50.0 expected and 50.4 prior whereas the Services PMI also followed the suit while declining to 46.1 compared to 47.9 market forecasts and 47.8 previous readings. Overall, the S&P Global Composite PMI for November dropped to 46.3 versus 47.7 expected and 48.2 prior readouts.

That said, the United States Weekly Jobless Claims rose the most since June, to 240K versus 225K expected and 223K prior, which in turn favored the sentiment and drowned the US Dollar.

Alternatively, strong prints of the US Durable Goods Orders, up 1.0% in October versus 0.4% marked expectations and downwardly revised 0.3% prior, joined China’s covid woes and downbeat prints of Australia’s S&P Global PMIs for November to challenge the AUD/USD bulls. However, the market’s concentration on the Fed Minutes and hopes of overcoming the Coronavirus woes appeared to have favored the Aussie pair buyers.

Amid these plays, Wall Street closed in the positive territory while the US Treasury yields were downbeat and drowned the US Dollar.

Moving on, an absence of major data/events and a holiday in the US could allow the AUD/USD pair to consolidate some of its latest gains. On the same line could be the COVID-19 fears emanating from China and dovish bias at the Reserve Bank of Australia (RBA). However, the bulls are likely to keep the reins amid the receding hopes of the Fed’s aggressive rate hikes.

Technical analysis

A clear upside break of the 100-SMA and a one-week-old descending trend line, respectively near 0.6695 and 0.6590, keep the AUD/USD pair buyers directed toward the monthly high surrounding 0.6800.

• USD/CHF is expected to decline further to near 0.9400 as traction has shifted in favor of the risk-on profile.
• Less-hawkish cues from FOMC minutes have weakened the US Dollar and yields.
• A situation of robust consumer demand and weak real income could force households to bank upon higher borrowings.

The USD/CHF pair is hovering around 0.9423 in the early Asian session after two consecutive ultra-bearish sessions. Bears have snapped a six-day recovery in the past two trading sessions led by soaring investors’ risk appetite. Less-hawkish cues from Federal Open Market Committee (FOMC) minutes triggered a sell-off in the Greenback.

The major is expected to deliver more weakness and may slide to near the round-level support of 0.9400 as upbeat market sentiment is here to stay. The FOMC minutes indicate that the period of bigger rate hike announcements is over and a slowdown in the rate hike pace is necessary to observe the efforts made by central banks in achieving price stability.

Less-hawkish commentary from Federal Reserve (Fed) policymakers on interest rates guidance has weakened the US Dollar Index (DXY). The US Dollar has declined to near 106.10 and is expected to test the previous week’s low at 105.34. As the option of the fifth consecutive 75 basis points (bps) rate hike by the Fed is getting out of the picture, the returns generated by US Treasury bonds are losing their glory. The long-term US Treasury yields have dropped below 3.70%. Meanwhile, US markets are closed on Thursday on account of Thanksgiving Day.

Also, upbeat US Durable Goods Orders failed to support the US Dollar. The economic data improved by 1.0% vs. the expectations and the prior release of 0.4%. A situation of robust consumer demand and weak real income could force households to bank upon higher borrowing, which could lead to higher delinquency costs for the credit providers.

On the Swiss franc front, Swiss National Bank (SNB) Chairman Thomas J. Jordan 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 restrictive enough to perform the job.

• USD/CAD bears ignited on FOMC minutes and eye 1.3300.
• Bulls could be on the verge of a meanwhile scalp with 1.3375 eyed. 

The Canadian dollar bounced back on Wednesday against the greenback and all the other G10 currencies despite the drop in oil prices. USD/CAD ended the US session offered at 1.3350 after falling from a high of 1.3440 on the day. The Federal Open Market Committee minutes were dovish and this weighed on the US Dollar, propelling the greenback forward. 

USD/CAD prior analysis

The pair has broken the trendline this month and had corrected back into the resistance making prospects of a downside continuation as illustrated on the following hourly chart also:

USD/CAD update

After the FOMC minutes, the price dropped to the first target of 1.3350:

There is further downside potential on a convincing close below here to 1.3300:

However, a correction could be in order first of all with 1.3375 as a possible resistance area.

• GBP/JPY tumbled after testing 169.00, the head-and-shoulders right shoulder, so the pattern is still in play.
• Short term, the GBP/JPY might consolidate around 168.00-169.00.
• GBP/JPY Price Analysis: Break below 168.00 could pave the way toward 167.00.

The British Pound (GBP) climbed and tested the head-and-shoulders right shoulder but retreated after sellers stepped in just below the 169.00 figure, exacerbating a fall toward the 168.10 area. Hence, the GBP/JPY is trading at 168.16, registering minuscule losses of 0.04% as the Asian session begins.

GBP/JPY Price Analysis: Technical outlook

The GBP/JPY daily chart remains neutral-to-upward biased. Failure to break above the right shoulder kept the pattern intact; hence, further downside is expected. However, the GBP/JPY must clear the November 23 daily low of 167.69, which would exacerbate a fall towards the head-and-shoulders neckline around 165.30/50. Even though the Relative Strength Index (RSI) is in bullish territory, its slope is flat, closer to the 50-midline. So, if the cross drops below 168.00, the RSI could give a sell signal, exacerbating a fall toward the neckline and beyond.

Short term, the GBP/JPY 4-hour chart depicts the cross advancing steadily on smaller chunks, registering a fresh daily high for the last eight days. On Wednesday, after hitting a daily high of 168.99, the cross plunged 90 pips as sellers stepped in on the top-trendline of an ascending channel. That said, the GBP/JPY is trading below Thursday’s daily pivot point, so the path of least resistance is downwards.

The GBP/JPY first support would be the confluence of the S1 pivot and the upslope trendline around 167.63. Once cleared, the next demand area will be the confluence of the 200-Exponential Moving Average (EMA) and the S2 daily pivot at 167.01.

GBP/JPY Key Technical Levels

• Gold price grind higher following a rebound from the key support.
• Federal Reserve Minutes appeared dovish as policymakers discussed softer interest rate hikes, pivot point.
• Softer United States statistics also weighed on the US Dollar, as well as propelled Gold prices.
• China-linked market fears, Thanksgiving Holiday can allow XAU/USD to pare recent gains.

Gold price (XAU/USD) consolidates the recent gains at around $1,750 during Thursday’s Asian session, after posting the biggest daily jump in a fortnight. In doing so, the precious metal struggles for clear directions amid a lack of major data/events, as well as a Thanksgiving holiday in the United States.

Gold price cheers softer US Dollar as Federal Reserve Minutes spot ‘pivot’ discussions

Gold price benefited from the softer US Dollar as the US Dollar Index (DXY) marked the biggest daily slump in two weeks as the Federal Reserve (Fed) officials discussed the need of slowing down the interest rate hikes. That said, the Greenback’s gauge versus the six major currencies refreshed a one-week low following the latest Federal Open Market Committee (FOMC) Meeting Minutes, defensive near 106.15 at the latest.

In addition to the debate over the softer interest rate hikes, the “sufficiently restrictive” level of the Federal Reserve’s (Fed) interest rates also fuelled the US Dollar and favored the Gold price buyers.

United States statistics also fuelled the Gold price advances

Mostly downbeat statistics from the United States also weighed on the US Dollar and favored the Gold price to rise further. The preliminary readings of the US S&P Global Manufacturing PMI for November eased to 47.6 from 50.0 expected and 50.4 prior whereas the Services PMI also followed the suit while declining to 46.1 compared to 47.9 market forecasts and 47.8 previous readings. Overall, the S&P Global Composite PMI for November dropped to 46.3 versus 47.7 expected and 48.2 prior readouts.

Additionally, the United States Weekly Jobless Claims rose the most since June, to 240K versus 225K expected and 223K prior, which in turn favored the sentiment and drowned the US Dollar while fueling the Gold price.

Alternatively, the US Durable Goods Orders increased by 1.0% in October versus 0.4% marked expectations and downwardly revised 0.3% prior.

Risk catalysts, Thanksgiving Day in United States may test XAU/USD bulls

Be it the market’s cautious optimism due to the expectations of softer interest rates or the downbeat statistics from the United States, not to forget the below-mentioned technical details, the Gold price has more positives to cheer about. However, China’s Covid woes could join the likely inaction on the floor, due to the Thanksgiving Day holiday in the US, to allow the bullion buyers to take a breather. Even so, downbeat prints of the United States Treasury bond yields and firmer closing of Wall Street benchmarks keep Gold buyers hopeful.

Gold price technical analysis

Gold price defends the bounce off a convergence of the 100-day and 21-day Exponential Moving Average (EMA), despite the latest retreat.

That said, bullish signals from the Moving Average Convergence and Divergence (MACD) indicators also keep the Gold buyers hopeful of piercing the 200-day EMA hurdle, currently around $1,760.

However, a downwards-sloping resistance line from early July, around $1,778 by the press time, could challenge the Gold price upside.

Alternatively, a convergence of the aforementioned EMAs, around $1,724, restricts the Gold price downside, a break of which could direct the XAU/USD sellers toward the $1,700 threshold.

In a case where Gold price remains bearish past $1,700, July’s low near $1,680 could limit the bullion’s further downside.

Overall, the Gold price remains on the buyer’s radar but further upside appears limited.

Gold price: Daily chart

Trend: Limited upside expected

• Upbeat market sentiment has strengthened the Pound Sterling.
• A breakout of a VCP results in wider ticks formation and heavy volume.
• The formation of a Rising Channel indicates that the broader trend is towards the north.

The GBP/USD pair is displaying a sideways performance in the early Tokyo session after a juggernaut rally to near 1.2080. The Cable witnessed an immense buying interest after sustaining above the round-level resistance of 1.1900. A significant improvement in investors’ risk appetite strengthened the Pound Sterling.

Meanwhile, the US dollar index (DXY) has dropped 106.00 despite a firmer jump in the US Durable Goods Order data. It seems that less-hawkish cues on interest rate guidance from the Federal Open Market Committee (Fed) minutes have impacted the US Dollar. Investors should know that US markets are closed today on account of Thanksgiving Day.

On a daily scale, the Cable has delivered a breakout of a Volatility Contraction Pattern (VCP) that results in the formation of wider ticks and heavy volume. Broadly, a Rising Channel formation satisfies the condition of a long-term upside trend. Also, advancing the 20-period Exponential Moving Average (EMA) at 1.1738 adds to the upside filters.

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

Going forward, the mighty 200-period EMA at 1.2110 could be a hurdle for the Pound Sterling bulls.

For further upside, the asset is required to establish firmly above the psychological resistance of 1.2000. But for a run-up, the Cable is needed to overstep the 200-EMA at 1.2110 firmly, which will drive GBP/USD towards the round-level resistance of 1.2200, followed by August 2 high at 1.2280.

On the flip side, a drop below Monday’s low at 1.1780 will drag the asset toward November 14 low at 1.1710. A slippage below November 14 low will expose the asset to the horizontal support plotted from October 27 high at 1.1646.

GBP/USD daily chart

• NZD/USD is looking to print a fresh three-month high above 0.6250 amid multiple tailwinds.
• Widened RBNZ-Fed policy divergence, positive market sentiment, and a weak US Dollar have supported the Kiwi Dollar.
• A significant improvement in US Durable Goods Orders has failed to support the US Dollar.

The NZD/USD pair is on the edge of refreshing its three-month high above 0.6250 ahead. The presence of multiple tailwinds such as risk-on profile, widened Reserve Bank of New Zealand (RBNZ)-Federal Reserve (Fed) policy divergence, and weak US Dollar Index (DXY) have strengthened the Kiwi Dollar against the Greenback.

The risk profile is extremely upbeat as plenty of Fed policymakers are expecting a slowdown in the rate hike pace ahead. Positive market sentiment empowered the S&P500 to carry forward its upside momentum on Wednesday. Meanwhile, the US dollar index (DXY) slipped firmly to near 106.10 despite a robust increase in demand for Durable Goods.

The US Durable Goods Orders data landed at 1%, significantly higher than the estimates and the prior release of 0.4%. This has indicated that consumer demand is still solid despite accelerating interest rates and higher inflation rates.

The returns on US Treasury bonds have dropped further as the minutes of the Federal Open Market Committee (FOMC) dictated that a slowdown in the rate hike pace would allow Fed chair Jerome Powell to judge progress on their goals. The 10-year US Treasury yields have dropped below 3.70%.

On the New Zealand front, investors are still in a hangover of 75 basis points (bps) rate hike and consideration of the full percent rate in its monetary policy meeting on Wednesday. It seems that the battle against a historic surge in inflation is demanding more blood and sweat from RBNZ Governor Adrian Orr. The RBNZ has pushed its Official Cash Rate (OCR) to 4.25%, which has widened the RBNZ-Fed policy divergence.

“Canadian inflation remains high and broad-based and more interest-rate increases will be needed to cool the overheating economy,” said Bank of Canada (BOC) Governor Tiff Macklem in a testimony at the House of Commons late Wednesday, reported Reuters.

Additional comments

USD/CAD bears take a breather

USD/CAD remains sidelined, actually bouncing off the intraday low to 1.3355, despite the hawkish comments from BOC’s Macklem.

Also read: USD/CAD tumbles toward 1.3350 after the Fed released dovish minutes

• EUR/USD dribbles around one-week high after crossing short-term key hurdle.
• Nearly overbought RSI conditions could challenge bulls around monthly peak.
• 50-SMA, resistance-turned-support line restrict immediate downside amid bullish MACD signals.

EUR/USD bulls take a breather around a one-week high near 1.0400 during Thursday’s Asian session, following a two-day uptrend. Even so, the major currency pair remains on the way to the monthly top, as well as appears capable of crossing it, on crossing the short-term key hurdles, now nearby supports.

Not only a successful break of a one-week-old descending trend line and the 50-SMA but bullish MACD signals also keep the EUR/USD buyers hopeful of approaching the monthly high near 1.0480, as well as the 1.0500 threshold.

Though, nearly overbought conditions of the RSI (14) could challenge the quote’s further advances.

If the pair remains firmer past 1.0500, late June’s peak surrounding 1.0615 will gain the EUR/USD buyer’s attention before highlighting the June month’s high of 1.0786.

Alternatively, the 50-SMA level, close to 1.0340, precedes the previous resistance line from November 15, around 1.0280, to restrict short-term EUR/USD downside.

Even if the EUR/USD pair drops below 1.0280, an ascending trend line from October 04, close to 1.0220, should be eyed closely as a clear break of which won’t hesitate to direct the bears toward the 200-SMA support near the parity level.

EUR/USD: Four-hour chart

Trend: Further upside expected

• US Dollar weakened on the release of dovish Federal Reserve November minutes.
• The Canadian Dollar strengthened due to a soft US Dollar.
• USD/CAD Price Analysis: To resume its downtrend towards the head-and-shoulders target of 1.3030.

The US Dollar (USD) extended its losses vs. the Canadian Dollar (CAD), as Wall Street ended Wednesday's session in the green after the release of dovish Federal Reserve (Fed) November monetary policy minutes. Policymakers agreed to slow down the pace of rate hikes, so investors shifted to risk-perceived assets in the FX space, particularly the Canadian Dollar. At the time of writing, the USD/CAD is trading at 1.3349.

Federal Reserve minutes a headwind for the US Dollar

On Wednesday, the Federal Reserve revealed its latest minutes, which showed that officials are ready to begin hiking rates on smaller sizes after lifting rates by 75 bps four times in 2022. It should be noted that officials are unaware of where the Federal Funds rate (FFR) would peak, though most expressed that 5% could be the peak for some participants.

Mixed US economic data, another factor spurring USD weakness

Data-wise, S&P Global PMIs revealed for the US showed that the economy is slowing faster than expected, with Manufacturing, Services, and Composite Indices lying in contractionary territory. Aside from this, Consumer Sentiment remained positive, according to a University of Michigan (UOM) survey, at 56.9, above estimates but below the preliminary reading of November. Inflation expectations remained unchanged.

Earlier, the US economic docket featured Initial Jobless Claims for the last week, which jumped above expectations, flashing that the labor market is easing. At the same time, US Durable Good Orders for October rose sharply by 1% MoM, against 0.4% estimates, as consumers' resilience kept manufacturing activity from slowing down.

Of late, the Bank of Canada (BoC) Governor Tiff Macklem said that they expect rates to rise further. Macklem added that inflation in Canada remains high and broadens, reflecting increases in goods and services.

USD/CAD Price Analysis: Technical outlook

The USD/CAD resumed its downtrend after testing the head-and-shoulders neckline on Monday, though failure to crack it kept the chart pattern in play. Before the release of the Fed minutes, the USD/CAD registered a daily high of 1.3440 before diving toward its low of 1.3344. That said, the USD/CAD path of least resistance is downwards.

Therefore, the USD/CAD first support is 1.3300. Break below will expose the 100-day Exponential Moving Average (EMA) at 1.3264, followed by 1.3200.

• AUD/USD remains on the front side of the daily trendline with the 0.6900s eyed.
• FOMC minutes help the bulls out and keep US Dollar on the backfoot. 

As per the prior analysis, AUD/USD Price Analysis: Bulls are lurking in daily support, 0.6570/50, the market shot higher from the anticipated support and has reached 0.6738 on the back of some dovish Federal Open Market Committee minutes.

The following illustrates how the price action has opened prospects of a move higher to test 0.6750 and then 0.6850 and 0.6900 for an onward bullish cycle for the rest of the year. 

AUD/USD prior analysis

The four-hour chart showed the price meeting the 50% mean reversion of the following daily chart's prior bullish impulse: 

AUD/USD update

AUD/USD has moved higher as forecasted and is set to extend the bullish rally while on the front side of the daily trendline with the 0.6900s eyed.

Reuters reported that New Zealand's central bank governor said on Thursday that the central bank cash rate was officially contractionary as it tries to bring down inflation.

"We are sorry that New Zealanders are being buffeted by significant shocks and inflation is above target. As we've said before, inflation is no one's friend and causes economic costs," Reserve Bank of New Zealand governor Adrian Orr told a committee at parliament.

NZD/USD update

The Kiwi is higher having made a fresh high for the current upswing, and regaining a 0.6250 area while it was approaching its strongest levels in nearly three months. The Reserve Bank of New Zealand delivered a supersized 75 basis point rate hike to get ahead of inflation.

That hike was the largest since the RBNZ introduced the OCR in 1999 and brought the policy rate to a 14-year high of 4.25%. Meanwhile, in the statement, it was explained that the central bank's board expects the cash rate to peak at 5.5% in September 2023 according to its latest forecasts. Additionally, a dovish set of Federal Reserve minutes helped.

What you need to take care of on Thursday, November 24:

The Greenback came under selling pressure on Wednesday and finished the day sharply down against all of its major rivals. The American Dollar got hit by poor growth-related data and dovish US FOMC Meeting Minutes.

The document showed that most participants agreed that, despite the risk to the inflation outlook remaining skewed to the upside, a slower pace of interest rate hikes would be appropriate soon. Furthermore, they believe the monetary policy is approaching a “sufficiently restrictive” level. The US Dollar fell further as an immediate reaction to the news, while US indexes picked up an upward pace. Chances of a 50 bps hike rose to 79% following the release and according to Fedwatch, while the terminal rate is now seen at 5.03%.

S&P Global published the preliminary estimates of its November PMIs. The EU figures were better than anticipated but remained within contraction levels. US indexes, however, disappointed big, triggering the first bout of dollar selling. EUR/USD trades near the 1.0400 figure ahead of the close.

The GBP/USD pair hovers around 1.2050, holding on to most of its intraday gains. UK S&P Global PMIs were better than anticipated but signal persistent economic contraction in the country. Market is paying little attention to Brexit-related headlines, but it seems the issue is making yet another comeback. Finally, the UK Supreme Court rules against Scotland’s bid to hold a new independence referendum.

Commodity-linked currencies benefited from the upbeat tone of global stocks. Asian and European indexes closed in the green, while US indexes gained upward momentum after FOMC Meeting Minutes. AUD/USD trades around 0.6730 while USD/CAD declined towards the 1.3360 price zone.

Safe-haven currencies were among the best performers against the US Dollar. USD/CHF is down to 0.9420, while USD/JPY trades around 139.45. Spot gold remained subdued for most of the day, jumping above the $1,750 mark late in the US afternoon, retaining its intraday gains.

Crude oil prices, on the other hand, edged lower, with WTI trading at around $77.80 a barrel. The black gold fell despite the US Energy Information Administration reporting inventories of oil were down by 3.7 million barrels over the week ended November 18.  Speculations of upcoming sluggish demand, particularly due to the COVID situation in China, weighed on oil prices.

The US celebrates Thanksgiving on Thursday, which means action across financial markets will be limited heading into the weekend.

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• Gold bulls jump into action around a dovish FOMC minute.
• Thanksgiving holidays around the corner are holding up the bid.

Gold had rallied to a high of $1,753 on the back of a dovish set of Federal Open Market Committee minutes but has since come off to test below $1,750 again and is oscillating between the range of the move. Thanksgiving holidays are upon us which likely means there are fewer participants around the event. 

Nevertheless, the minutes show that a substantial majority of participants at the November meeting judged a slowing in the pace of the interest rate hikes would likely still be appropriate. In other key statements, the minutes showed that a slower pace of rate hikes would better allow the FOMC to assess progress toward its goals given the uncertain lags around monetary policy. A few participants said slowing the pace of rate hikes could reduce the financial system risks; others that slowing should await more progress on inflation.

Prior to the event, the US PMI data had given the US Dollar bears a head start before the FOMC minutes were released. A slew of US economic data (including durable goods orders, PMIs, claims, new home sales, and final Michigan sentiment), for the most part, was solid but the emphasis was put on the shocking result in the US Manufacturing PMI that missed expectations by a mile:

• US: S&P Global Manufacturing PMI drops to 47.6 in November vs. 50 expected

The US Dollar index, as a consequence,  has fallen more than 1% toward 106, the lowest since mid-August, as traders raise bets of only a 50 bps rate hike by the Fed in December.

US Dollar H1 chart

Gold technical analysis

The price has shot higher into resistance and the bulls will look for a discount on the backside of the trendline for a higher price ahead. With the Thanksgiving holidays, markets have fewer participants and hence there is little in the way of a follow-through so far.

• The Euro appreciated as the US Dollar weakened on the release of the Federal Reserve November minutes.
• Federal Reserve officials agreed to slow the rate hikes, weakening the US Dollar.
• EUR/USD Price Analysis: Daily close above 1.0400 can exacerbate a rally to 1.0500.

The Euro (EUR) jumped against the US Dollar (USD) following the release of the Federal Reserve (Fed) monetary policy minutes showed that policymakers agreed to slow the pace of rate hikes at the Federal Reserve’s (Fed) November meeting. At the time of writing, the EUR/USD is volatile, trading at around 1.0396, testing the 200-day Exponential Moving Average (EMA) at 1.0396.

Remarks of the Federal Reserve Open Market Committee (FOMC) November minutes

As mentioned above, Fed officials agreed to slow the rate hikes spurred US Dollar weakness, as the EUR/USD advanced towards its daily high of 1.0400. Furthermore, policymakers expressed that monetary policy is approaching a “sufficiently restrictive” level, acknowledging that the Federal Funds rate (FFR) peak is more important than the rate itself.

Regarding inflation, Fed policymakers agreed that there were few signs of easing inflationary pressures, though they emphasized that inflation risks were skewed to the upside.

Officials expressed a high level of uncertainty about the peak of the FFR. However, several predicted interest rates would peak at a higher level, as the Federal Reserve Chairman Jerome Powell expressed at the monetary policy press conference.

In the meantime, money market interest-rate futures odds for a 50 bps hike increased to 79% in the December meeting after the release of the FOMC minutes.

The US Dollar Index (DXY), a gauge of the greenback’s value against a basket of six currencies, extended its losses to almost 1%, down at 106.161, while US Treasury bond yields retreated.

EUR/USD Price Analysis: Technical outlook

The EUR/USD is upward biased, as shown by the 1-hour chart, after breaking above the 100 and 200-Exponential Moving Averages (EMAs). Additionally, on its way north, the EUR/USD cleared the R1, R2 and is testing the R3 daily pivot point at around 1.0400. If the Euro clears the latter, the major could rally towards 1.0500.

Hence, the EUR/USD first resistance would be the November 16 daily high at 1.0438, ahead of the R4 pivot level at 1.0440, followed by the R5 pivot point at 1.0490 ahead of the psychological 1.0500 mark.

There is volatility in the markets following the Fed minutes that show a substantial majority of the board sees slowing hikes soon.

Key notes

Fed says rate peak to be higher than previously expected.
Uncertain lags, magnitudes reasons cited for Fed slowdown.
Few participants: slowing pace reduces financial risks.
Few officials: Advantageous to wait before slowing pace.

Full statement

As a consequence of the dovishness, US stocks are higher, Gold is up and the US Dollar is bleeding out, supporting the commodity complex such as the Canadian dollar. 

• US Dollar remains offered across the board against most G8 currencies.
• A broken rising wedge in the USD/JPY 4-hour chart targets a fall towards 138.00.

The USD/JPY prolonged its losses to two consecutive days and cleared the 100-day Exponential Moving Average (EMA), cementing the case of the USD/JPY bias turning neutral-to-downwards, albeit remained trading above the 200-day EMA. Hence, the USD/JPY is trading at 139.83, below its opening price by 0.96%.

USD/JPY Price Analysis: Technical outlook

Once the USD/JPY dropped below the 100-day EMA, the bias shifted neutral downwards, though it should be noted that crucial support levels lie below the spot price. If Japanese Yen (JPY) buyers would like to extend their gains, they need to clear the three-month low of 137.65, which would exacerbate a fall toward a six-month-old upslope support trendline of around 136.70.

Short term, the USD/JPY 4-hour chart broke a rising wedge, a continuation pattern formed after a first leg-down. That said, the USD/JPY is comfortably trading around the S3 daily pivot. Therefore, the USD/JPY first support would be the 139.00 psychological level, followed by the S4 daily pivot level at 138.87, ahead of the November 15 low at 137.65.

USD/JPY Key Technical Levels

• NZD/USD perched near the highs of the week ahead of FOMC.
• US Dollar is under pressure amid poor PMIs while NZD is supported by a hawkish RBNZ. 

NZD/USD rallied to a high of 0.6236 on Wednesday, from a low of 0.6123 and was approaching its strongest levels in nearly three months after the Reserve Bank of New Zealand delivered a supersized 75 basis point rate hike to get ahead of inflation.

That hike was the largest since the RBNZ introduced the OCR in 1999 and brought the policy rate to a 14-year high of 4.25%. Meanwhile, in the statement, it was explained that the central bank's board expects the cash rate to peak at 5.5% in September 2023 according to its latest forecasts.

The members of the board had considered a 100Bp rate rise which fuelled the rally in the bird. Stubbornly high inflation and near-record-low unemployment in New Zealand supported the case for a more aggressive move. Finance Minister Grant Robertson said before the event that the country was well-positioned to withstand a global recession due to robust growth and a stable financial system.

The projected peak of 5.5% was well above consensus which led to the two-year swap rates to surge 29 basis points to 5.285%, the biggest daily jump since 2009. Analysts at ANZ Bank have revised their forecasts higher, now expecting an additional 50 bp increase in April and a 25 bp one in May, which would take the peak to 5.75%.

FOMC minutes eyed

Meanwhile, the US Dollar sold off on Wednesday in the early New York trade on the back of PMI's that are giving the bears a head start before the FOMC minutes are released. The overall data, for the most part, was solid but the emphasis was put on the shocking result in the US Manufacturing PMI that missed expectations by a mile:

• US: S&P Global Manufacturing PMI drops to 47.6 in November vs. 50 expected

In the prior statement, it read "In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."

This statement gave rise to volatility in markets as investors positioned for a softer approach from the Fed which Chair Jerome Powell pushed back against in his presser by suggesting that there will likely be a higher terminal rate. Therefore, the minutes will be scrutinised for clarity in this regard. ''We expect the November FOMC meeting minutes to shed further light on the FOMC's deliberations regarding the expected downshift in the pace of rate increases in upcoming meetings,'' analysts at TD Securities said. 

''But above all, we look for the minutes to place a lot of emphasis on the likelihood that the terminal rate will need to end up higher than anticipated initially. The Fed still needs to grind down the labour market to align wage and household spending growth with rates more consistent with the inflation target.''

• USD/CAD is pressured below 1.3440/50 and trendline resistance. 
• FOMC minutes are eyed for direction in the US Dollar.

The Canadian dollar weakened on Wednesday against the greenback and all the other G10 currencies as oil prices fell. USD/CAD is up 0.3% having travelled between a low of 1.3356 and a high of 1.3440 on the day so far ahead of a parliamentary appearance by Bank of Canada Governor Tiff Macklem and the Federal Open Market Committee minutes. 

The Loonie was pressured despite US dollars moving lower that followed a slew of US economic data (including durable goods orders, PMIs, claims, new home sales, and final Michigan sentiment). The data, for the most part, was solid but the emphasis was put on the shocking result in the US Manufacturing PMI that missed expectations by a mile:

US: S&P Global Manufacturing PMI drops to 47.6 in November vs. 50 expected

Nevertheless, the price of oil has blown off to the downside on Wednesday as China continues to struggle with rising Covid-19 infections, imposing mass testing and lockdown measures, lowering economic growth and cutting demand for oil from the world's No.1 importer. At the same time, the European Union readies to impose a price cap on Russian oil exports. Additionally, a report showed a larger-than-expected drop in US inventories.

Besides the FOMC minutes, Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers will appear before the House of Commons Standing Committee on Finance at 4:30 p.m. ET (2130 GMT).

FOMC minutes eyed

The PMI data today has given the US Dollar bears a head start before the FOMC minutes are released. Firstly, the recent cooler-than-expected US Consumer Price data has already created sentiment for a Fed pivot and investors' hopes that the central bank may be in a position to moderate its pace of hikes. In the prior statement, it read "In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."

This statement gave rise to volatility in markets as investors positioned for a softer approach from the Fed which Chair Jerome Powell pushed back against in his presser by suggesting that there will likely be a higher terminal rate. Therefore, the minutes will be scrutinised for clarity in this regard. ''We expect the November FOMC meeting minutes to shed further light on the FOMC's deliberations regarding the expected downshift in the pace of rate increases in upcoming meetings,'' analysts at TD Securities said. 

''But above all, we look for the minutes to place a lot of emphasis on the likelihood that the terminal rate will need to end up higher than anticipated initially. The Fed still needs to grind down the labour market to align wage and household spending growth with rates more consistent with the inflation target.''

In such a scenario, this could put a bid into the US Dollar that has been downtrodden ahead of the event. Nevertheless, USD/CAD is on the backside of a trend and below a topping pattern daily charts as the following illustrate:

USD/CAD technical analysis

The pair has broken the trendline this month and has corrected back into the resistance with prospects of a downside continuation as illustrated on the following hourly chart also:

• A softer US Dollar is weighing on the USD/CHF, down by almost 1%.
• A bearish-engulfing candle pattern exacerbated a fall of 200 pips in the USD/CHF.
• Short term, the USD/CHF is downward biased and might test 0.9300.

The USD/CHF dives sharply, extending its losses to two straight days, after reaching a new two-week high of 0..9600, nearby the 200-day Exponential Moving Average (EMA) at 0.9628. Failure to reclaim the former exacerbated a 200-pip fall. Therefore, the USD/CHF is trading at 0.9430, losing almost 1%.

USD/CHF Price Analysis: Technical outlook

The USD/CHF daily chart portrays the formation of a bearish-engulfing candle chart pattern formed with Monday and Tuesday’s USD/CHF price action. On Wednesday, the major continued its downward path, after printing a daily high of 0.9533, right at the 23.6 % Fibonacci retracement, defended by sellers, as shown by the USD/CHF plunging 100 pips. Even though the Relative Strength Index (RSI) followed suit, it turned flat in bearish territory, opening the door for consolidation.

In the short term, the USD/CHF collided with the 50-period Exponential Moving Average (EMA) around 0.9488, and a downslope trendline was drawn since the beginning of November. Hence, the US Dollar (USD) buyers unable to break above 0.9500 exposed the pair to selling pressure.

Therefore, the USD/CHF first support will be the 0.9400 figure, followed by the November 15 swing low at 0.9356. A decisive break will expose the 0.9300 figure. Upwards, the USD/CHF key resistance level lie at 0.9500, which, once cleared, could open the door towards 0.9600 and beyond.

USD/CHF Key Technical Levels

• GBP/USD exchanges hands above its opening price by 1.50%.
• US S&P Global PMIs flashed that the economy is slowing faster than expected.
• Consumer sentiment in the US remains positive, while inflation expectations eased.
• Durable Good Orders in the United States exceeded forecasts, showing consumers resilience.

The Pound Sterling is rallying back above 1.2000 after the release of mixed economic data out of the United States (US), weighed on the US Dollar (USD). At the same time, a risk-on impulse keeps European and US equities trading with gains ahead of the release of the Federal Reserve’s (Fed) last meeting minutes. At the time of writing, the GBP/USD is trading at 1.2051 after hitting a daily low of 1.1872.

US economic data was mixed, undermining the US Dollar

Data released from the US came mixed, undermining the US Dollar. The University of Michigan (UoM) Consumer sentiment came at 56.9, above estimates but below the preliminary reading of November. Delving into the report, 1-year inflation expectations were lowered from 5.1% to 4.9%, while the 5-10 year horizon remained unchanged at 3.0%. Meanwhile, US New Home Sales surprisingly jumped to 632K from 570K, even though higher mortgage rates, nearly 7%, were sparked by the Federal Reserve tightening monetary conditions,

Earlier, S&P Global reported that October’s Manufacturing, Services, and Composite PMIs for the US, are flashing a recession, remaining each at 47.6, 46.1, and 46.3, respectively. The biggest plunge was observed in the Manufacturing index, diving from 50.4 in the previous reading and below estimates of 50.

Before Wall Street opened, the US Department of Commerce revealed that Durable Good Orders in October rose by 1%, vs. 0.4% estimates, smashing September’s 0.3% figure while excluding transportation, the so-called core Durable Good Orders, climbed 0.5% above forecasts. At the same time, the US Department of Labor (DoL) revealed that Initial Jobless Claims for the week ended November 19 increased to 240K, above estimates of 225K, amidst a period of high-tech companies laying off workers.

That said, the GBP/USD jumped from around 1.1950 to its new three-month high at 1.2080, a level last seen on August 17, 2022. The US Dollar Index, a gauge of the buck’s value against six peers, dives 0.72%, down to 106.374.

Data revealed during the European session showed that the UK S&P Global/CIPS PMIs were unchanged, at contractionary territory, further cementing the case of an economic contraction. After the Bank of England (BoE) revealed its latest monetary policy report, policymakers expressed that the UK was already in a recession.

What to watch

Traders’ focus shifts to the release of the Federal Reserve Open Market Committee (FOMC) minutes of the November meeting. Analysts are searching for clues about how high policymakers expect rates to go, how many participants support that view, and how many support a slowdown in rate increases.

GBP/USD Key Technical Levels

Bank of England (BoE) Chief Economist Huw Pill said on Wednesday that further policy action will likely be required to ensure that inflation returns sustainably to the 2% target, as reported by Reuters.

Pill further added that he does not anticipate raising bank rate to levels priced by markets ahead of the November monetary policy report.

Market reaction

These comments don't seem to be having a noticeable impact on the Pound Sterling's market valuation. As of writing, GBP/USD was trading at 1.2055, where it was up 1.43% on a daily basis.

• Mexican peso rises again versus US dollar.  
• USD/MXN tests critical support around 19.25/30.
• Upside remains limited while under 19.55/60.

The USD/MXN is falling on Wednesday for the second day in a row, amid a weaker US Dollar and ahead of the release of the FOMC minutes. The pair is pulling back after the upside was capped by the 19.60 horizontal resistance and the 20-day Simple Moving Average at 19.55.  

Recently USD/MXN bottomed at 19.32, the lowest level in six days. So far the pair has been able to remain above the critical support area around 19.25/30. Below that area, the next target is seen at 19.00/05, with an intermediate resistance at 19.15.

Technical indicators are turning south again. RSI is moving to the downside but far from the 30 level. Price holds below key moving averages.  A consolidation between 19.30 and 19.60 over the next sessions seems likely.

The Dollar needs to break and hold above 19.60 in order to improve the outlook. A daily close above would point to more gains, toward the next barrier at 19.80.

USDMXN daily chart

Gold remains capped by the 200-Day Moving Average (DMA) at $1,801. A move above here is needed to open up further gains toward the $1,877 June high, strategists at Credit Suisse report.

Beak back below the 55DMA at $1,685 to inject fresh downside momentum

“A break back below the 55DMA at $1,685 is needed to inject fresh downside momentum into the market again, with next supports seen at the recent YTD low at $1,614, before the 50% retracement of the whole 2015/2020 upmove seen at $1,560.”

“Above the 200DMA at $1,801 is needed to open the door for a potential rise toward the $1,877 June high, as well as reassert a broad consolidation phase.”

• Consumer confidence rise above expectations in November.
• New Home Sales jump unexpectedly 7.5% in October.
• S&P Global Composite falls more than expected in November.
• EUR/USD soars to its highest level since Friday amid a weaker Dollar.

The EUR/USD is trading around the 1.0375 zone, at the highest level since Friday boosted by a weaker US Dollar and ahead of the FOMC minutes. The Greenback lost momentum following the release of economic reports.

The pair made a clear break above 1.0350 and gained strength. If it continues to rise, the next resistance area is seen at 1.0400. On the flip side, a slide under 1.0320 should weaken the current intraday bullish bias.

Dollar down after US data

The Greenback is losing ground across the board as US yields tumble. The DXY is falling by 0.83%. The US 10-year yield fell to 3.70% while the 2-year dropped to 4.47%.

Earlier on Wednesday, economic data showed an increase to multi-week highs in jobless claims, offset by a bigger-than-expected increase in Durable Goods Orders. More recently, the November preliminary PMI S&P Global showed a decline in the Composite index to 46.3 from 48.3, below the 47.7 of market consensus.  New Home Sales jumped 7.5%, surpassing expectations. The University of Michigan Consumer Sentiment Index recovered from 54.7 to 56.8, above the 55 expected.

Later on Wednesday, the Federal Reserve will release the minutes of its latest meeting. Market participants will look for clues about a potential slowdown in rate hikes. “We look for the minutes to place a lot of emphasis on the likelihood that the terminal rate will need to end up higher than anticipated initially. The Fed still needs to grind down the labor market to align wage and household spending growth with rates more consistent with the inflation target”, said analysts at TD Securities.

On Thursday, Wall Street will remain close due to Thanksgiving Day. In Japan, the Jibun Bank Manufacturing PMI and the Leading Index are due.

Technical levels

• October’s upbeat data from the United States bolstered the US Dollar as Gold edges lower.
• US Durable Good Orders came better than expected amidst a gloomy economic outlook.
• The labor market in the US continued to ease, as shown by Initial Jobless Claims.
• Short term, XAU/USD is neutral biased but would turn upwards if it reclaims $1750.

Gold Price registers minuscule gains of 0.19% following the release of economic data from the United States (US), on the busiest day of the current week calendar, which failed to underpin the US Dollar (USD), ahead of the release of the Federal Reserve (Fed) monetary policy meeting minutes at around 18:00 GMT. At the time of writing, the XAU/USD is trading at $1741 after hitting a daily high of $1745.77.

Durable Good Orders rose sharply, underpinning the US Dollar

Sentiment is mixed as Wall Street fluctuates between gainers and losers. Data reported by the US Department of Commerce (DoC) revealed that Durable Good Orders in October jumped by 1%  compared to September’s 0.3%, showing consumers’ resilience amidst a time of high inflation, elevated borrowing costs, and a deteriorated economic outlook. Delving into the report, core Durable Orders, which exclude transportation and aircraft, rose 0.5% MoM for the same period, well above September’s -0.9% contraction, and expectations of coming unchanged.

The US labor market begins to ease

At the same time, the US Department of Labor (DoL) revealed that Initial Jobless Claims for the week ending on November 19 increased to 240K above estimates of 225K, amidst a period of high-tech companies laying off workers. Meanwhile, continuing claims climbed by 48K to 1.55 million in the week ended November 12, the highest since March, flashing signs that the labor market is easing.

The XAU/USD seesawed on data, hitting a daily low of $1725.23 before rallying towards the daily high at $1747.69 and stabilizing around current spot prices. In the meantime, the US Dollar Index (DXY), a gauge of the US Dollar value vs. six currencies, extended its losses, down by 0.51%, at 106.600.

Federal Reserve officials committed to tame inflation, as traders eye FOMC minutes

Elsewhere, Federal Reserve officials commented that the central bank’s primary goal is to bring inflation to 2%, though acknowledging that borrowing costs should moderate. On Tuesday, the Cleveland Fed President Loretta Mester said, “Maintaining price stability is a critical objective that will be accomplished using all available means.” On Monday, Mester commented that she Is open to moderate rate hikes, though she emphasized that a pause is off the table. She echoed some of the comments made by San Francisco Fed President Mary Daly’s saying that the Federal Funds rate (FFR) needs to peak at around 5%.

Later in the day, the US economic calendar will reveal the Federal Reserve Open Market Committee (FOMC) minutes from the November meeting, which analysts will scrutinize. They are searching for clues about how high policymakers expect rates to go, how many participants support that view, and how many support a slowdown in rate increases.

Gold Price Analysis (XAU/USD): Technical outlook

After dropping to a new two-week low of around $1725.23, testing the August 22 swing low of $1727.90, XAU/USD is staging a comeback, as the spot price is back above $1740. Traders should be aware that the Relative Strength Index (RSI) shifted flat, though as it stays in bullish territory, a resumption of the uptrend Is on the cards.

If XAU/USD buyers reclaim $1750, the Gold Price might return to trade within the $1750-$1760 area before launching an assault to $1800. On the flip side, failure to do it will expose XAU/USD’s to a fall toward the 100-day Exponential Moving Average (EMA) at $1711.24, followed by a test of the $1700 figure.

There is clearly a change in tone in the US Dollar in the air. History suggests the early stages of US recessions are typically associated with USD weakness, economists at Scotiabank report.

CHF and JPY have tended to benefit in periods of US recessions

“On average (looking at the last five US recessions of 1981, 1990, 2001, 2007 and 2020) the USD declines a little more than 2% in the first three months of US recessions, with losses contained to 0.5% on average over a six-month view. This suggests to us that mild USD rebounds versus G3 currencies remain a sell in the next few months.”

“The USD’s role as a safe-haven has evolved over time and its linkage to risk appetite has strengthened in the post-Great Financial Crisis environment, our long-run correlation studies indicate. That may limit pressure on the exchange rate in the coming recession to some extent. But history suggests that the more ‘usual’ havens– that is to say, strong external account currencies, such as the CHF and JPY – have tended to benefit in periods of US recessions.”

“A situation where US yields decline and commodity prices ease, both developments which are conceivable under a recession scenario, should be favourable for the JPY (as these conditions would imply less onerous yield spreads and an improvement in Japan’s weak terms of trade) even considering Japan’s weakened trade balance (and recently diminished haven status).” 

• New Home Sales in the US rose unexpectedly in October.
• US Dollar Index stays deep in negative territory at around 106.50.

Sales of new single‐family houses rose by 7.5% in October to a seasonally adjusted annual rate of 632,000, the data published jointly by the US Census Bureau and the Department of Housing and Urban Development showed on Wednesday.

This reading followed September's contraction of 11% and came in much better than the market expectation for a decrease of 3.8%.

Market reaction 

This data failed to help the US Dollar, which came under heavy selling pressure on disappointing PMI figures, find demand. As of writing, the US Dollar Index was down 0.55% on the day at 106.55.

• The index loses the grip further and targets 106.00.
• US Flash Manufacturing PMI is expected at 47.6 in November.
• Markets’ attention will be on the release of the FOMC Minutes.

The greenback accelerates losses and trades in 4-day lows near 106.30 when tracked by the USD Index (DXY) on Wednesday.

USD Index looks at FOMC Minutes

The index extends the recent breakdown of the 107.00 mark and drops to new lows in the proximity of 106.00 on the back of persevering appetite for the risk complex and rising prudence prior to the publication of the FOMC Minutes.

On the latter, market participants will closely follow the release of the Minutes of the November event, where the centre of the debate is expected to be around any debate surrounding the next steps by the Fed when it comes to future interest rate hikes.

In the US docket, the flash Manufacturing PMI is seen at 47.6 in November and 46.1 when it comes to the Services gauge.

What to look for around USD

The dollar faltered just ahead of the 108.00 barrier and sparked a so far 2-day corrective move to the area below the 107.00 yardstick pari passu with the recovery in the risk-linked galaxy.

While hawkish Fedspeak maintains the Fed’s pivot narrative in the freezer, upcoming results in US fundamentals would likely play a key role in determining the chances of a slower pace of the Fed’s normalization process in the short term.

Key events in the US this week: MBA Mortgages Applications, Building Permits, Durable Goods Orders, Initial Jobless Claims, Flash Manufacturing/Services PMIs, Final Michigan Consumer Sentiment, New Home Sales, FOMC Minutes (Wednesday).

Eminent issues on the back boiler: 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 0.59% at 106.51 and the breakdown of 105.34 (monthly low November 15) would open the door to 105.22 (200-day SMA) and finally 104.63 (monthly low August 10). On the other hand, the next up barrier comes at 107.99 (weekly high November 21) followed by 109.18 (100-day SMA) and then 110.63 (55-day SMA).

• US S&P Global Services PMI fell more than expected in early November.
• US Dollar struggles to find demand following the disappointing PMI surveys.

The business activity in the US service sector continued to contract at an accelerating pace in early November with the S&P Global Services PMI dropping to 46.1 from 47.8 in October. This print missed the market expectation of 47.9.

"In line with weak demand, new business fell at a solid pace in November," S&P Global elaborated. "The second successive monthly decrease in new orders was the sharpest seen since May 2020."

"On the price front, input costs rose at a slower pace midway through the fourth quarter," the publication further read. "The increase in cost burdens was the softest in almost two years, as firms noted lower prices for some key inputs." 

Market reaction

The US Dollar stays under heavy selling pressure after this data and the US Dollar Index was last seen losing 0.6% on the day at 106.52.

The Riksbank is set to announce its Interest Rate Decision on Thursday, November 24 at 08:30 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of five major banks for the upcoming central bank's meeting. 

Riksbank meets is expected to hike rates by 75 basis points to 2.50%. At the last meeting, the bank delivered a hawkish surprise and hiked rates 100 bps to 1.75%.  

ING

“Given that the ECB has continued with its 75 bps rate hikes – and the Riksbank has been vocal about staying out in front of the eurozone’s interest rate policy – we expect further aggressive tightening by Swedish policymakers. Remember this is Riksbank’s last meeting before February, and we, therefore, expect a 75 bps hike on Thursday. We’d expect the new interest rate projection published alongside the decision to pencil in at least another 25 bps worth of tightening early next year, but ultimately there are limits to how far it can go given the fragile housing market.”

Danske Bank

“We expect Riksbank to hike its policy rate by 75 bps, which is largely priced in the markets already.”

TDS

“We now look for the Riksbank to deliver a 75 bps hike despite signaling for a 50 bps increase in Sep, as core CPIF has surged and major CBs have hiked more than the Bank expected. While markets see ~50% odds of a 100 bps hike, we think a 50 bps move is more likely, as headline CPIF is much lower than the Bank's forecast.”

Swedbank

“We expect the Riksbank to raise by 75 bps to 2.5%. We also expect its new rate path to show another hike of 25 bps in the first half of 2023. But in reality, we think it will raise more than that – namely, 50 basis points – at the February meeting to a level of 3%. The decision to stop reinvesting securities at the start of next year isn’t likely to change. In other words, monetary policy is getting tighter.”

Nordea

“We expect the Riksbank to increase the policy rate by 75 bps to 2.50%, but our conviction is low. October core CPI, large rate hikes by ECB and Fed, few Riksbank meetings and higher foreign inflation would be the main drivers for a 75 bps hike. A 50 bps hike is the Riksbank’s guidance from September and an obviously possible outcome. The bond purchase amounts should in our view be phased out completely in Q1 2023. The Riksbank could decide to continue purchases in smaller amounts in order to ‘keep readiness’ for future interventions.”

• US S&P Global Manufacturing PMI dropped below 50 in early November.
• US Dollar Index extended its daily slide after the data.

Business activity in the US manufacturing sector contracted in early November with the S&P Global Manufacturing PMI dropping to 47.6 from 50.4 in October. This reading came in weaker than the market expectation of 50.

"Contributing to the decrease in the headline figure was a renewed fall in output and a sharper decline in new orders," S&P Global explained in its publication.

Commenting on the survey, "in this environment, inflationary pressures should continue to cool in the months ahead, potentially markedly, but the economy meanwhile continues to head deeper into a likely recession," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

Market reaction

The US Dollar Index fell sharply with the initial reaction to this data and was last seen losing 0.6% on the day at 106.50.

• Japanese yen gains momentum during the American session amid lower US yields.
• US data mixed: jobless claims at monthly highs while Durable Goods Orders rise above expectations.
• USD/JPY extends retreat from above 142.00, eyes 140.50/60.

The USD/JPY is falling for the second day in a row on Wednesday before more US data and the FOMC minutes. The pair continues to pull back after hitting on Monday the highest level in two weeks above 142.00. Recently the pair printed a fresh daily low at 140.50 and it remains near the lows, with a bearish bias.

USD/JPY looking at 140.50

The outlook for the dollar suffered a deterioration on Wednesday, with price under the 20-Simple Moving Average in four hours chart.  Still USD/JPY remains above the 140.50/60 key support area. A break lower would point to more losses.

If the pair manages to remain above 140.50, the greenback could recover strength. On the upside, the immediate resistance is seen at 141.50 followed by 142.05/10.

Yen up as US yields drop

Economic data from the US showed a bigger-than-expected increase in jobless claims while Durable Goods Orders rose above expectations. The Dollar fell after the data.

Next on the calendar is the November preliminary PMI S&P Global. Later, during the second half of the American session, the Federal Reserve will release the minutes of its latest meeting. Market participants will look for clues about the next moves of the Fed. The next FOMC meeting is December 13 and 14. Recent comments from Fed officials warrant another rate hike but it could be smaller than 75 bps.

US bond yields are falling ahead of the data and the minutes, supping the Japanese yen across the board that is not being affected by risk appetite. In Wall Street, the Dow Jones is rising by 0.25% and the Nasdaq by 0.16%.

Technical levels

NZD/USD is testing the top of its recent range at 0.6203/05. A close above there would expose the 200-day Moving Average (DMA) at 0.6302, analysts at Credit Suisse report.

Only above 200 DMA would mark firmer medium-term upside

“We continue to expect an eventual break above the last week’s highs at 0.6203/05, above which would open the door to the 200 DMA at 0.6302. Should a convincing break above here be achieved, this would suggest further medium-term strength, with the next firm resistance seen at the August highs at 0.6456/68.” 

“Immediate support remains seen at the 13-Day Exponential Moving Average and recent lows at 0.6069/60, but we look for support at 0.6000/5983 to try to prevent any sharper move lower to avoid a lengthier consolidation.”

Softer-than-expected US inflation triggered a sell-off in the US Dollar, helping Gold prices to recover. That is unlikely to last, in the opinion of economists at ANZ Bank.

Fed rate hikes hang over Gold

“The recent Gold price rally was triggered by softer-than-expected US inflation for October. However, we believe the market reaction to the latest inflation print was exaggerated as inflation remains near 7.7%, which is well above the central bank’s target of 2%. Further, the month-on-month increase was still 0.4% for both September and October.” 

“It is not enough for the Fed to be confident that inflation is on track to move back to 2% sustainably. Any hawkish comments from the Fed could reverse the recent bullish move in XAU/USD.” 

“Retreating inflation and rising rates until early 2023 would keep real rates rising, leaving the backdrop challenging for non-yielding Gold.”

• AUD/USD lacks any firm intraday directional bias on Wednesday and oscillates in a range.
• The prevalent USD selling bias offers some support, though a softer risk tone caps gains.
• The mixed US data fails to provide any impetus as the focus remains on FOMC minutes.

The AUD/USD pair struggles to gain any meaningful traction and seesaws between tepid gains/minor losses through the early North American session on Wednesday. The pair is currently placed around mid-0.6600s, nearly unchanged for the day, as traders keenly await the release of the November FOMC meeting minutes.

In the meantime, the prevalent US Dollar selling bias continues to offer support to the AUD/USD pair. Investors seem convinced that the Federal Reserve will slow the pace of its policy-tightening cycle and have been pricing in a greater chance of a relatively smaller 50 bps rate hike in December. This, in turn, is seen as a key factor weighing on the Greenback.

The USD maintains its offered tone and fails to gain any respite from mixed US economic releases. The Weekly Initial Jobless Claims in the US rose to the highest since August and largely offset the upbeat US Durable Goods Orders data. That said, the cautious market mood helps limit losses for the safe-haven buck and keeps a lid on the risk-sensitive Australian Dollar.

From a technical perspective, the AUD/USD pair has managed to hold comfortably above the 0.6600 round figure. The said handle should protect the immediate downside and act as a pivotal point for intraday traders. A convincing break below will expose a strong resistance breakpoint, around the 0.6560-0.6550 area, which coincides with the 200-period Exponential Moving Average on the 4-hour chart.

Some follow-through selling will negate any near-term positive outlook and shift the bias in favour of bearish traders. The AUD/USD pair might then turn vulnerable to accelerate the fall towards the 0.6500 psychological mark. The downward trajectory could get extended towards the 0.6435 intermediate support before spot prices eventually drop to sub-0.6400 levels.

On the flip side, immediate resistance is pegged ahead of the 0.6700 mark, which if conquered should pave the way for additional gains. The AUD/USD pair might then climb to the 0.6740-0.6745 hurdle and make a fresh attempt to conquer the 0.6800 mark. The momentum could get extended towards a technically significant 200-day Simple Moving Average, currently around the 0.6845 region. The pair has also formed a harami Japanese candelstick pattern on the daily chart at the recent November 21-22 lows and if Wednesday's price provides bullish confirmation in the form of a green candlestick the short-term trend may flip bullish. 

AUD/USD 4-hour chart

Key levels to watch

• EUR/USD adds to Tuesday’s advance and retests 1.0350.
• Next on the upside comes the key 200-day SMA near 1.0400.

EUR/USD advances for the second session in a row and climbs to 3-day highs around 1.0350.

The continuation of the rebound should initially target the key 200-day SMA, today at 1.0395. The surpass of this region is needed to challenge the so far November high at 1.0481 (November 15).

The pair’s outlook is expected to shift to positive above the 200-day SMA.

EUR/USD daily chart

• Initial Jobless Claims in the US rose by 17,000 in the week ending November 19.
• US Dollar Index struggles to gain traction, stays below 107.00.

There were 240,000 initial jobless claims in the week ending November 19, the weekly data published by the US Department of Labor (DOL) showed on Wednesday. This print followed the previous week's print of 223,000 and came in worse than the market expectation of 225,000.

Further details of the publication revealed that the advance seasonally adjusted insured unemployment rate was 1.1% and the 4-week moving average was 226,750, an increase of 5,500 from the previous week's revised average.

"The advance number for seasonally adjusted insured unemployment during the week ending November 12 was 1,551,000, an increase of 48,000 from the previous week's revised level," the DOL noted in its publication.

Market reaction

The US Dollar Index stays under modest bearish pressure after this data and was last seen losing 0.22% on the day at 106.90.

• Durable Goods Orders in the US rose more than expected in October.
• US Dollar Index stays in negative territory below 107.00 after the data. 

Durable Goods Orders in the US rose by 1%, or by $2.8 billion, on a monthly basis in October to $277.4 billion, the monthly data published by the US Census Bureau revealed on Tuesday. This reading followed September's 0.3% expansion and came in better than the market expectation for an increase of 0.4%. 

"Excluding transportation, new orders increased 0.5%," the publication further read. "Excluding defense, new orders increased 0.8%. Transportation equipment, up six of the last seven months, led the increase, $2.0 billion or 2.1% to $97.8 billion."

Market reaction

The US Dollar Index edged lower with the initial reaction and was last seen losing 0.3% on the day at 106.80.

• USD/CAD catches some bids on Wednesday and recovers a part of the overnight losses.
• A fresh leg down in oil prices undermines the Loonie and remains supportive of the move.
• Bets for less aggressive Fed rate hikes weigh on the USD and might cap gains for the pair.
• Traders now look to the US macro data for some impetus ahead of the key FOMC minutes.

The USD/CAD pair attracts some buying near the 1.3360-1.3355 area and stages a goodish bonce from the weekly low touched earlier this Wednesday. The pair reaches a fresh daily high near the 1.3425 region during the early North American session and for now, seems to have stalled this week's corrective slide from the vicinity of the 1.3500 psychological mark.

A fresh leg down in crude oil prices is seen undermining the commodity-linked loonie and turning out to be a key factor acting as a tailwind for the USD/CAD pair. An imminent price cap on Russian oil by the Group of Seven (G7) nations, along with worries that a new COVID-19 outbreak in China will hurdle fuel demand, weigh on the black liquid. Moreover, the Organisation for Economic Cooperation and Development (OECD) sees a deceleration in global economic expansion next year and further adding pressure on crude oil prices.

The US Dollar, on the other hand, remains depressed for the second straight day amid growing acceptance that the Fed will slow the pace of its policy tightening. In fact, the markets are currently pricing in a greater chance of a relatively smaller 50 bps Fed rate hike move in December. Furthermore, stable performance in the equity markets is seen as another factor weighing on the safe-haven greenback. This, in turn, might cap any further gains for the USD/CAD pair as the market focus remains glued to the FOMC meeting minutes.

Investors will look for clues about the Fed's policy outlook and future rate hike path. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the USD/CAD pair. Heading into the key event risk, the US economic docket - featuring the releases of Durable Goods Orders, Weekly Initial Jobless Claims, flash PMIs and New Home Sales data - might produce short-term trading opportunities.

Technical levels to watch

GBP/USD pushes higher as momentum remains positive. Economists at Scotiabank believe that Cable could test the 1.21 in the near-term.

Short-term technical patterns remain GBP-positive

“Short-term technical patterns remain GBP-positive; Cable is edging out of the short-term consolidation pattern (bull wedge) than has formed over the past week, putting a test of the 1.21 zone (at least) on the near-term radar.”

“Intraday gains still face some tough resistance points – 1.1960 high tested twice last week and the 1.2025/30 peak from Nov 15th.”

“Support is (firm) at 1.1870/75 now.”

EUR/USD edges lower from 1.0350 test after mixed Eurozone PMIs. The pair needs to defend 1.03 in order to retain bullish momentum, economists at Scotiabank report.

Weakness below 1.03 will point to renewed losses

“The data were mixed but the aggregate Eurozone data were better than forecast and unchanged or slightly stronger than the Oct report. All data prints were below 50, suggesting economic contraction, but the data will not prevent further ECB tightening in Dec. Modest EUR dips are liable to remain supported, we expect.”

“The short-term uptrend remains intact but soft price action may see spot test support around the 1.0300 zone intraday; holding the figure zone should renew bullish momentum for a retest (and break) of 1.0350.”

“Weakness below 1.03 will point to renewed losses towards the low 1.02s at least.”  

• GBP/USD scales higher for the second straight day and climbs to a fresh weekly high.
• Bets for less aggressive Fed rate hikes weigh on the USD and offer support to the pair.
• Better-than-expected UK PMI underpins the GBP and contributes to the positive move.
• Investors now look to US macro data for some impetus ahead of the key FOMC minutes.

The GBP/USD pair builds on the previous day's positive move and gains some follow-through traction for the second successive day on Wednesday. The pair maintains its bid tone through the early North American session and is currently placed near the weekly high, just below the mid-1.1900s.

A combination of factors keeps the US Dollar bulls on the defensive, which, in turn, is seen acting as a tailwind for the GBP/USD pair. Investors now seem convinced that the US central bank will slow the pace of its rate-hiking cycle and have been pricing in a greater chance of a relatively smaller 50 bps lift-off in December. This, along with a generally positive tone around the equity markets, continues to weigh on the safe-haven greenback.

The British Pound, on the other hand, draws support from reports that the UK government might look to pursue a Swiss-style relationship with the European Union. This comes on the back of expectations that the Bank of England will lift interest rates further to tame inflation. Furthermore, the flash UK PMIs showed that economic activity slowed less than expected in November, which is further underpinning the  Sterling and pushing the GBP/USD pair higher.

Apart from the aforementioned fundamental factors, the possibility of some short-term trading stops being triggered on a sustained strength beyond the 1.1900 mark provides an additional lift to spot prices. That said, a bleak outlook for the UK economy might keep a lid on any further gains for the GBP/USD pair. Traders might also refrain from placing aggressive bets and prefer to wait for the release of the FOMC minutes, due later during the US session.

In the meantime, the US economic docket - featuring the releases of flash PMIs, Durable Goods Orders, Weekly Initial Jobless Claims and New Home Sales - might provide some impetus to the GBP/USD pair. The market reaction to the US macro data, however, is more likely to be muted as investors await fresh clues about the Fed's policy outlook and future rate hike path. This will influence the USD price dynamics and determine the near-term trajectory for the major.

Technical levels to watch

The S&P 500 has rallied 10% from its October low, 10-year Treasury yields are 42 bps below their peak, and the USD has depreciated by 5.7% since its September high. But economists at UBS see reasons to suggest this reversal trade is not the start of a new market regime.

It is too early to expect a Fed pivot

“Fed officials have pushed back against hopes for a pause in rate hikes to try to prevent financial conditions from easing too much. If Chair Jerome Powell reiterates this in the next two weeks, this would be an even stronger headwind for the reversal trades. For now, we can be pretty confident that the Fed will continue to hike rates into 1Q23 and growth will continue to slow, a combination that’s not good for risk assets.”

“The market tailwind from hedge fund and systematic investor re-risking over the past month is fading now that positioning is less extreme. Also, the net bullish sentiment shown by the American Association of Individual Investors’ survey has moved up to -7 from -43 two months ago. When sentiment reached similar levels on three occasions earlier in the year, the S&P 500 subsequently experienced selloffs with an average decline of 16%.”

“The S&P 500 forward P/E has risen to slightly above 17x. Historically, when the P/E has been more than 18x, expected earnings growth averages 14%. Currently, bottom-up consensus expects much lower growth (5% over the next year), and we believe earnings will fall 4% next year. In other words, we think it’s hard to justify much – if any – valuation expansion right now.”

The US recession outlook suggests the USD/CAD pair may delay its decline until later in 2023, according to economists at Scotiabank.

CAD’s performance through US recessions is mixed

“For the CAD, slower growth in the US is likely to go more or less hand in hand with slower growth at home; indeed, our macro-economic outlook anticipates a mild recession a little later in Canada (H1 2023).”

“The CAD’s performance through US recessions is mixed but, on average, USD/CAD declines are very modest in the early stages (-0.14% on average in the first three months). USD/CAD tends to strengthen (average gain of 1.6%) over the six-month timeframe but, again, trends are mixed.”

“The bottom line is that a sustained decline in USD/CAD may be delayed by a US slowdown until later in 2023 (when we assume a rebound in risk appetite will lift the CAD) and the CAD may soften somewhat on the crosses in early 2023 as North American FX underperforms.”

US Durable Goods Orders overview

Wednesday's US economic docket highlights the release of Durable Goods Orders data for October. The US Census Bureau will publish the monthly report at 13:30 GMT and is expected to show that headline orders rose by 0.4% for the second straight month. Orders excluding transportation items, which tend to have a broader impact, are anticipated to remain flat in October as compared to the 0.5% fall recorded in the previous month.

How could it affect EUR/USD?

Ahead of the data, the US Dollar remains on the defensive near the weekly low amid rising bets for a less aggressive policy tightening by the Fed. Any disappointment from the US macro data will be enough to prompt fresh selling around the buck and assist the EUR/USD pair to capitalize on the previous day's bounce from over a one-week low. Conversely, a stronger report could force traders to lighten their USD bearish bets heading into the FOMC meeting minutes, due for release later during the US session. The immediate market reaction, however, is likely to remain limited as traders keenly await clues about the Fed's future rate-hike path.

Eren Sengezer, Editor at FXStreet outlines important technical levels for the EUR/USD pair: “Previous nine four-hour candles for EUR/USD closed higher but the pair lost its bullish momentum near the 50-period Simple Moving Average (SMA), currently located at 1.0350. Just slightly above that SMA, 1.0360 aligns as a static level, forming a resistance area in 1.0350/60. In case the pair rises above that hurdle and starts using it as support, it could target 1.0420 (end-point of the latest uptrend) and 1.0480 (November 15 high).”

“On the downside, first support is located at 1.0300 (20-period SMA, psychological level) before 1.0250 (Fibonacci 23.6% retracement) and 1.0200 (psychological level, static level),” Eren adds further.

Key Notes

 •  EUR/USD Forecast: Technicals struggle to turn bullish ahead of key data releases

 •  EUR/USD to extend its rally to 1.0400/1.0450 in the coming days – ING

 •  EUR/USD: No reason as yet to shift end-2022 target at 1.0350 – Credit Suisse

About US durable goods orders

The Durable Goods Orders, released by the US Census Bureau, measures the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments they are sensitive to the US economic situation. The final figure shows the state of US production activity. Generally speaking, a high reading is bullish for the USD.

• DXY adds to Tuesday’s pessimism and breaches 107.00.
• Extra weakness could force the index to drop to the 105.30 area.

DXY remains offered and briefly tests the 106.80 region, or 3-day lows, on Wednesday.

In case the selling pressure accelerates, the dollar could shed further ground and dispute the November low at 105.34 (November 15). This area of contention appears underpinned by the proximity of the always relevant 200-day SMA, today at 105.22

While above the 200-day SMA, the outlook for the index should remain constructive.

DXY daily chart

GBP/USD took advantage of the US Dollar's modest weakness on Tuesday and raced higher. Nonetheless, economists at ING expect Cable to struggle at the 1.20 level. EUR/GBP, meanwhile, is expected to continue its decline.

EUR/GBP to test 0.8600 in the coming days

“The extended correction in the Dollar is now pushing the Cable towards the 1.2000 gravity line. Expect some resistance around that level given the lack of strong domestic bullish drivers for the Pound though.”

“GBP’s greater sensitivity to risk sentiment compared to the Euro means that further improvements in global risk sentiment can push EUR/GBP to test 0.8600 in the coming days.”

• EUR/JPY climbs to multi-session peaks above 146.00.
• Further up comes the monthly high just above 147.00.

EUR/JPY extends the weekly rebound and advances to multiday tops past the 146.00 region on Wednesday.

So far, the corrective rebound looks well in place and the cross should face initial resistance at the so far November high at 147.11 (November 9). Above the latter, the door could open to a more meaningful move to the 2022 peak at 148.40 (October 21).

In the longer run, while above the key 200-day Simple Moving Average at 138.62, the positive outlook is expected to remain unchanged.

EUR/JPY daily chart

Could inflation turn into hyperinflation in the United States or the eurozone? Economists at Natixis determine the conditions that must be met for inflation to turn into hyperinflation.

Is there a risk of hyperinflation?  

“In the US, given that monetary policy is becoming restrictive (especially due to quantitative tightening), wage-price indexation is limited, the exchange rate is appreciating and the fiscal deficit has been sharply reduced, it is very difficult to defend the idea that the country will experience hyperinflation.”

“In the eurozone, if wage-price indexation increases, if interest rates (actual and expected) rise only slightly if the exchange rate continues to depreciate, and if fiscal policy does not become restrictive, inflation will be higher than in the US for a long time even if there is no hyperinflation.”

In its monthly report, Germany's central bank noted that the effect of gas and electricity price brakes on inflation will reverse once they expire. "The inflation rate could stay in double digits also beyond the turn of the year," the Bundesbank added.

"From a macroeconomic perspective, it makes it easier to return to lower wage increases when the temporary components expire," the publication further read. "This could reduce the extent of second-round effects on the inflation rate, especially in the medium-term, and help ensure that the current high inflation rates do not further solidify."

Market reaction

EUR/USD showed no immediate reaction to this report and was last seen trading modestly higher on the day at 1.0317.

Economists at Société Générale believe that the S&P 500 should be trading in a wide range of 3,500 to 4,000. Ultimately, they expect the S&P 500 to end 2023 at 3,800. 

US Equities not cheap yet

“The US equities risk premium is currently below average despite having declined this year, and we put the S&P 500’s fair value at 3,650 based on our inflation moderation valuation framework. But for 2023, we expect EPS to decline in 1Q23, a Fed pivot in 2Q, China’s reopening in 3Q and rising US recession risk in 4Q. These factors should see the S&P 500 trade in a wide range of 3,500-4,000 at somewhere around our 3,650 fair value number.”

“Ultimately, we expect the S&P 500 to end 2023 at 3,800.”

Today, it's all about the Fed minutes, as bulls hope to find signs that Chair Powell's hawkishness was conditional on a strong Consumer Price Index (CPI) reading.

Ready to scan the Fed minutes

“Today, all eyes are on the FOMC minutes. Expect another rally in risk assets should the minutes provide hints of conditionality of Powell’s post-meeting hawkishness to a prolonged stickiness in inflation readings. In the absence of such hints, there may not be much for risk bulls to cling on to, given that the November meeting was still a largely hawkish one and the post-meeting (and also post-CPI) Fedspeak has been rather cautious on a dovish pivot.”

“The Dollar has faced a new round of selling. We don’t exclude that this correction will run a little further, but we continue to expect a rather radical inversion in the bearish Dollar trend in December as the Fed remains broadly hawkish, energy prices rise again and the global economy slows.”

• Gold price lacks any firm directional bias and remains confined in a range just above the weekly low.
• Bets for less aggressive Fed rate hikes weigh on the USD and offer some support to the commodity.
• A positive risk tone caps gains for the XAU/USD as traders keenly await the FOMC meeting minutes.

Gold price struggles to gain any meaningful traction on Wednesday and seesaws between tepid gains/minor losses through the first half of the European session. The XAU/USD is currently hovering near the weekly low, just above the $1,735 level, as traders await the November FOMC meeting minutes before placing fresh directional bets.

The recent hawkish signals by several Federal Reserve officials suggest that the US central bank might continue to tighten its monetary policy to tame inflation. Hence, investors will closely scrutinize the minutes for fresh clues on the Fed's future rate hikes. This will play a key role in determining the near-term trajectory for the non-yielding Gold price.

In the meantime, rising bets for a relatively smaller 50 bps lift-off at the next FOMC policy meeting in December keep the US Dollar bulls on the defensive. This, in turn, is seen as a key factor lending some support to the Dollar-denominated Gold price. That said, a generally positive risk tone acts as a headwind and seems to cap the safe-haven precious metal.

Heading into the key event risk, market participants will look to the US macro releases - Durable Goods Orders and the usual Weekly Initial Jobless Claims - for some trading opportunities around the Gold price. The mixed fundamental backdrop, however, might hold back traders from placing aggressive bets and supports prospects for an extension of the sideways consolidative price move.

Technical levels to watch

NZD/USD is climbing toward 0.6200. Economists at Société Générale expect the rebound to extend towards 0.6260, the 200-Day Moving Average at 0.6310/0.6340.

Defending 0.6060/0.6040 is essential to avert a short-term pullback

“Daily MACD is within positive territory which denotes upward momentum is regaining.”

“The bounce is likely to persist towards 0.6260 and the 200-DMA at 0.6310/0.6340. It would be interesting to see if the pair can establish itself beyond this MA.”

“Defending the lower limit of recent consolidation at 0.6060/0.6040 is essential for averting a short-term pullback.”

The risk rally sent EUR/USD back above 1.0300. Economists at ING expect the pair to reach 1.0400/50 in the coming days.

Only a Dollar function

“Some improvement in China-related sentiment is a positive development for eurozone assets and the Euro, but swings in the pair remain primarily a function of broader Dollar moves.”

“The Fed minutes are the most important event for EUR/USD today, along with further changes in the market's sentiment on China.”

“An extension of the rally to 1.0400/1.0450 is surely possible in the coming days, but a return to parity in the next few weeks remains our base case as we enter a challenging winter for the eurozone economy.”

• GBP/USD remains confined in a narrow trading band through the first half of the European session.
• Slightly better-than-expected UK PMIs fail to provide any impetus amid a bleak economic outlook.
• A mildly softer tone around the USD offers some support ahead of the key FOMC meeting minutes.

The GBP/USD pair struggles to gain any meaningful traction on Wednesday and oscillates in a narrow band through the first half of the European session. The pair moves little and remains below the 1.1900 mark following the release of flash UK PMI prints.

The preliminary report from S&P Global research showed that business activity in the UK manufacturing and services sectors contracted at a slightly slower pace than anticipated in November. Nevertheless, the data adds to a bleak outlook for the British economy, which, in turn, is seen acting as a headwind for the Sterling Pound and capping the GBP/USD pair. The downside, however, remains cushioned amid a mildly softer US Dollar, weighed down by rising bets for a less aggressive policy tightening by the Fed.

Investors now seem convinced that the US central bank might slow the pace of its rate-hiking cycle. In fact, the current market pricing indicates a greater chance of a relatively smaller 50 bps at the next FOMC policy meeting in December. This has been a key reason behind the recent sharp pullback in the US Treasury bond yields and weighs on the USD. That said, hawkish signals by several Fed officials suggest that the US central bank might continue to raise borrowing costs to combat stubbornly high inflation.

Hence, the market focus will remain glued to the November FOMC monetary policy meeting minutes, due later during the US session. Market participants will look for clues about the Fed's policy outlook and future rate hikes. This, in turn, will influence the USD price dynamics and provide a fresh directional impetus to the GBP/USD pair. Heading into the key event risk, the US macro data - Durable Goods Orders and the usual Weekly Initial Jobless Claims - could allow traders to grab short-term opportunities.

Technical levels to watch

• EUR/USD fades part of the earlier advance to the 1.0350 region.
• Germany flash Manufacturing PMI seen rebounding a tad in November.
• Markets’ attention will be on the release of the FOMC Minutes later in the day.

The European currency extends the recent optimism and lifts EUR/USD to the 1.0350 zone on Wednesday, where it appears to be encountering some initial resistance.

EUR/USD focuses on the Fed, data

EUR/USD advances for the second session in a row so far against the backdrop of renewed selling pressure in the Greenback, which also appears weighed down by the lack of traction in US yields.

In the German debt market, the key 10-year bund yield remains flat-lined just below the 2.0% yardstick.

There is no meaningful reaction in the pair to the mixed results from the advanced PMIs in both Germany and the broader Euroland for the month of November. Indeed, the Manufacturing PMI came out at 46.7 (from 45.1) in Germany and 47.3 (from 46.4) in the euro bloc, while the Services gauge is seen at 46.4 (from 46.5) and 48.6 (from 48.6), respectively.

Later on the US docket, all the attention is expected to gyrate around the publication of the FOMC Minutes, seconded by Initial Claims, Durable Goods Orders, flash PMIs, New Home Sales and the final Consumer Sentiment.

What to look for around EUR

EUR/USD trades on a firm note and reaches the mid-1.0300s, as cautiousness keeps the US Dollar under the microscope ahead of the release of the FOMC Minues.

In the meantime, 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 remains the exclusive driver of the pair’s price action for the time being.

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 an important domestic headwind facing the Euro on the short-term horizon.

Key events in the euro area this week: EMU, Germany Advanced PMIs (Wednesday) – Germany IFO Business Climate, ECB Accounts (Thursday) – Germany Final Q3 GDP Growth Rate, GfK Consumer Confidence (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. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.09% at 1.0312 and faces the next up barrier at 1.0395 (200-day Simple Moving Average (SMA)) ahead of 1.0481 (monthly high November 15) and finally 1.0500 (round level). On the flip side, a breach of 1.0222 (weekly low November 21) would target 1.0023 (100-day SMA) en route to 0.9935 (low November 10).

• UK Manufacturing PMI stays unchanged at 46.2 in November, surpassing estimates.
• Services PMI in the UK comes in at 48.8 in November, beating estimates.
• GBP/USD keeps its range near 1.1900 on upbeat UK PMIs.

The seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) holds steady at 46.2 in November versus 45.8 expected and 46.2 – October’s final revision.

Meanwhile, the Preliminary UK Services Business Activity Index for November arrived at 48.8 when compared to October’s final print of 48.8 and 48.0 expected.

Chris Williamson, Chief Business Economist at S&P Global, commented on the survey

“A further steep fall in business activity in November adds to growing signs that the UK is in recession, with GDP likely to fall for a second consecutive quarter in the closing months of 2022. If pandemic lockdown months are excluded, the PMI for the fourth quarter so far is signalling the steepest economic contraction since the height of the global financial crisis in the first quarter of 2009, consistent with the economy contracting at a quarterly rate of 0.4%.”

“Forward-looking indicators, notably an increasingly steep drop in demand for goods and services, suggest the downturn will deepen as we head into the new year.”

FX implications

Upbeat UK Services PMI fails to impress the GBP/USD pair. The spot is trading at 1.1894, adding 0.11% on the day.  

Gold price is extending previous gains amid weak US Dollar, US Treasury bond yields. XAU/USD could gather bullish momentum ahead of Federal Reserve minutes and critical economic data from the United States, FXStreet’s Dhwani Mehta reports.

United States data, Federal Reserve minutes hold the key

“The United States Durable Goods Orders for October are foreseen at 0.4% while the S&P Global Preliminary Manufacturing and Services PMis are seen heading into contraction for November. Softer economic data from the United States could bolster expectations of smaller rate increases in the coming months, with markets now pricing about 75% odds of a 50 basis points (bps) rate hike in December.”

“The Federal Reserve November meeting minutes will be closely scrutinized too for fresh signals on the central bank’s future policy course. Therefore, the Federal Reserve’s Statement of Economic Projections (SEP) alongside the Dot Plot chart will hold the key to determining the peak rate.”

USD/CNH is still forecast to trade within the 7.0600-7.2100 range in the next weeks, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We did not expect the sharp drop in USD to 7.1330 yesterday (we were expecting sideways trading). While downward momentum is not particularly strong, USD could weaken further. That said, any decline is unlikely to break 7.1100. Resistance is at 7.1480, a breach of 7.1650 would indicate that USD is unlikely to weaken further.”

Next 1-3 weeks: “We continue to hold the same view as from last Friday (18 Nov, spot at 7.1460) where USD has likely moved into a consolidation phase. We expect USD to trade sideways for now, likely to be between 7.0600 and 7.2100.”

Germany’s Chancellor Olaf Scholz is expressing his take on the German energy crisis during his appearance on Wednesday.

Key quotes

Related reads

• German Preliminary Manufacturing PMI improves to 46.7 in November vs. 45.0 expected
• ECB’s de Guindos: Will keep raising rates to try to bring inflation down towards mid-term goals

• NZD/USD rallies back to a multi-month high after the RBNZ announced its policy decision.
• The prevalent USD selling bias provides an additional lift to the pair and remains supportive.
• The RBNZ’s warning of a deeper economic downturn keeps a lid on any meaningful upside.
• Traders also seem reluctant ahead of important US macro data and the key FOMC minutes.

The NZD/USD pair catches fresh bids on Wednesday and jumps closer to a multi-month top in reaction to a more hawkish Reserve Bank of New Zealand (RBNZ). The pair maintains its bid tone through the early part of the European session, with bulls still awaiting a sustained strength beyond the 0.6200 round-figure mark before positioning for further gains.

As was widely anticipated, the RBNZ raised its benchmark rate by a record 75 bps to 4.25% - the highest since the 2008 financial crisis - and provided a goodish lift to the domestic currency. This, along with some follow-through US Dollar selling, is seen acting as a tailwind for the NZD/USD pair. Despite the supporting factors, spot prices lack any follow-through buying in the wake of the RBNZ's warning of a potential economic downturn in the near term.

Furthermore, investors remain concerned about a new COVID-19 outbreak in China and the imposition of fresh lockdown measures. This, along with fears of a further escalation in the Russia-Ukraine conflict, is seen as acting as a headwind for the risk-sensitive Kiwi. The US Dollar, on the other hand, remains on the defensive amid expectations that the Fed will slow the pace of its policy tightening and deliver a relatively smaller 50 bps rate hike in December.

That said, the recent hawkish signals by various Fed officials suggest that the US central bank is still far from pausing its rate-hiking cycle. Adding to this, a modest uptick in the US Treasury bond yields lends some support to the greenback and further contributes to capping the NZD/USD pair. Traders also seem reluctant and prefer to wait for a fresh catalyst from the release of the November FOMC meeting minutes, due later during the North American session.

Market participants will look for fresh clues about the Fed's policy outlook and future rate hikes. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the NZD/USD pair. In the meantime, the US economic docket - featuring the releases of Durable Goods Orders and the usual Weekly Initial Jobless Claims - might assist traders to grab short-term opportunities.

Technical levels to watch

• Eurozone Manufacturing PMI arrives at 47.3 in November vs. 46.0 expected.
• Bloc’s Services PMI steadies at 48.6 in November vs. 48.0 expected.
• EUR/USD defends gains near 1.0300 on the encouraging Eurozone PMIs.

The Eurozone manufacturing sector fell further into contraction in November, the latest manufacturing activity survey from S&P Global research showed on Wednesday.

The Eurozone Manufacturing purchasing managers index (PMI) arrived at 47.3 in November vs. 46.0 expectations and 46.4 last. The index hit a two-month top.

The bloc’s Services PMI stood at 48.6 in November vs. 48.0 expected and October’s 48.6.

The S&P Global Eurozone PMI Composite climbed to 47.8 in November vs. 47.0 estimated and 47.3 previous. The gauge registered fresh two-month highs.

Comments from Chris Williamson, Chief Business Economist at S&P Global

“A further fall in business activity in November adds to the chances of the eurozone economy slipping into recession. So far, the data for the fourth quarter are consistent with GDP contracting at a quarterly rate of just over 0.2%.”

“However, the November PMI data also bring some tentative good news. In particular, the overall rate of decline has eased compared to October.”

FX implications

EUR/USD pares back gains to challenge 1.0300 despite the upbeat euro area PMIs. The spot trading modestly flat on the day.

The Swiss franc (CHF) has stayed relatively strong benefiting from hawkish policy comments. In the view of economists at Standard Chartered, Franc’s upside risk on SNB hawkishness is set to diminish over time.

CHF strength is a reflection of SNB's credibility

“We expect USD/CHF to trade largely in a narrow 0.95-1.00 range in coming quarters but weaken against the EUR as 2023 progresses, inflation declines and risk appetite is restored.”

“We doubt that intervening to push CHF stronger is the SNB’s preferred outcome but the threat is credible enough as long as inflation is a concern. For the time being investors will likely be reluctant to fight the SNB on CHF strength or use the CHF as the short leg against higher beta currencies.” 

“The risk for CHF appreciation is further SNB hawkishness, an unexpected deterioration in EU energy supplies, political tensions within the EU or easing of other geopolitical issues.”

“CHF is likely to remain among the lowest yielders globally so the downside risk would be any risk-positive shock that pushed yields higher globally, leaving Swiss rates behind. The other downside risk is a material improvement in EU energy security or deterioration in Switzerland’s.”

European Central Bank (ECB) Vice President Luis de Guindos said on Wednesday, “the ECB will keep raising interest rates to try to bring inflation down towards our mid-term goals.”

Additional comments

Market reaction

At the time of writing, EUR/USD is trading 0.18% higher on the day at 1.0318, awaiting the Eurozone PMIs.

Gold has snapped a four-day losing streak. Economists at Société Générale recommend holding the yellow metal in order to stabilise portfolio volatility. 

Holding Gold and CHF can help stabilise portfolio volatility

“Systemic risks are a common feature after a round of policy tightening of this kind. Holding Gold and CHF can help stabilise portfolio volatility.”

“We see Gold at $1,650 by 4Q23 but $1,900 by 2025.”

See – Gold Price Forecast: XAU/USD will only recover lastingly once an end to rate hikes is in sight – Commerzbank

• German Manufacturing PMI arrives at 46.7 in November vs. 45.0 expected.
• Services PMI in Germany rises to 46.4 in November vs. 46.2 expected.
• EUR/USD remains unfazed at around 1.0330 on upbeat German PMIs.

The German manufacturing and services sectors’ contraction eased in November as price pressures retreated from recent highs, the preliminary manufacturing activity report from S&P Global/BME research showed this Wednesday.

The Manufacturing PMI in Eurozone’s economic powerhouse came in 46.7 at this month vs. 45.0 expected and 45.1 prior. The index jumped to two-month highs.

Meanwhile, Services PMI eased from 46.5 booked previously to 46.4 in November as against the 46.2 estimated. The PMI hit the lowest level in two months.

The S&P Global/BME Preliminary Germany Composite Output Index arrived at 46.4 in November vs. 44.9 expected and October’s 45.1. The gauge reached a three-month peak.

Key comments from Phil Smith, Economics Associate Director at S&P Global

“November’s flash PMI survey doesn’t alter the narrative that Germany is likely heading for a recession, but it does offer some hope that the contraction in the economy will perhaps be shallower than first feared.”

“Positively, data showed a reduction in the downward pressure on factory production, as manufacturers reported an improvement in material availability and an overall shortening of supplier delivery times for the first time in almost two-and-a-half years.”

FX implications

EUR/USD is keeping its pullback intact despite the upbeat German data. The spot was last seen trading at 0.1.0325, still up 0.25% on the day. 

GBP has been among the top performers over the past week. New talks in the UK about its trade relationship with the EU are positive for the British Pound, economists at Credit Suisse report.

UK looking for Swiss inspiration 

“What is new and striking is the internal conversation that appears to have begun in the UK about the future of its relationship with the EU in the aftermath of Brexit, with talk of ‘Swiss style’ arrangements doing the rounds. While unlikely in practice, GBP can derive a rare ray of sun from the existence, finally, of a debate on how to improve the UK trade relationship with the EU.” 

“We have argued that EUR/GBP is likely to remain bound near term in a 0.8600-0.8800 range. While we do not yet call for a breakout, the single most likely path to GBP outperformance in 2023 remains the possibility of a softer line on EU trade relations that allow for a better growth outlook. The bar remains high given the still-hostile attitude of the ERG and the right of the Conservative Party, but this space now finally needs to be watched as a potential source of upside surprises for GBP.”

“It is very likely that we will see negative growth rates in the fourth quarter in the Eurozone,” European Central Bank (ECB) Vice President Luis de Guindos said on Wednesday.

Further comments

Market reaction

EUR/USD is receding from intraday highs of 1.0349 following the above comments and mixed French S&P Global Preliminary PMIs. The pair is still up 0.33% on the day.

• Silver attracts some dip-buying on Wednesday and spikes to a multi-day high.
• The move confirms a breakout through a one-week-old descending trend line.
• A sustained break below the $21.00 mark is needed to negate the positive bias.

Silver reverses an intraday dip to sub-$21.00 levels and surges to a four-day high during the early European session on Wednesday. The white metal is currently trading around the $21.25-$21.30 region, up over 0.80% for the day, with bulls now awaiting a sustained move beyond the 200-hour SMA before placing fresh bets.

From a technical perspective, the momentum confirms a breakout through a one-week-old descending trend-line resistance. Meanwhile, oscillators on the daily chart are holding in the bullish territory and have just started gaining positive traction on hourly charts. This, in turn, supports prospects for an extension of the recovery from a nearly two-week low, around the $20.60-$20.55 area touched on Monday.

Some follow-through buying beyond the $21.35 region (200-hour SMA) will reaffirm the constructive outlook and lift the XAG/USD towards the $21.75-$21.80 resistance zone. This is followed by the $22.00 mark and over a five-month high, around the $22.25 area, which if cleared will set the stage for a move towards the $22.50-$22.60 supply zone. Spot prices could eventually reclaim the $23.00 round figure.

On the flip side, the $21.00-$20.90 area might continue to protect the immediate downside. The said support represents an ascending trend-line extending from the weekly low touched on Monday. A convincing break below will negate the positive set-up and shift the near-term bias in favour of bearish traders. The XAG/USD might then slide to the $20.60-$20.55 area (weekly low) and the $20.00 psychological mark.

Silver 1-hour chart

Key levels to watch

FX option expiries for Nov 23 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0280 398m
• 1.0300-10 1.9b
• 1.0350 804m

- GBP/USD: GBP amounts        

• 1.1800 303m

- USD/JPY: USD amounts                     

• 140.00 900m
• 141.75 773m
• 142.00 491m
• 144.50 1.4b

- AUD/USD: AUD amounts  

• 0.6475 400m
• 0.6600 342m

- NZD/USD: NZD amounts

• 0.6910 1.7b

- EUR/GBP: EUR amounts        

• 0.8725 358m
• 0.8750 315m
• 0.8775 376m
• 0.8800 368m

• The index adds to Tuesday’s losses and drops below 107.00.
• US yields trade in a mixed fashion on Wednesday.
• The FOMC Minutes will take centre stage later in the NA session.

The USD Index (DXY), which gauges the greenback vs. a basket of its main competitors, trades on the defensive and slips back below the 107.00 mark on Wednesday.

USD Index now looks at FOMC Minutes, data

The dollar looks offered and retreats for the second session in a row against the backdrop of further improvement in the risk complex and mixed performance in the US money markets so far.

The index remains under pressure and investors appear prudent ahead of the release of the FOMC Minutes of the November event, where the centre of the debate will surely be on any discussion regarding the next steps by the central bank, namely the pace/size of the next interest rate hikes.

Other than the FOMC Minutes, the US calendar looks busy ahead of the Thanksgiving Day on Thursday, as usual weekly Claims, Durable Goods Orders, Mortgage Applications, flash PMIs, housing data results and the final Michigan Consumer Sentiment are all due later in the NA trading hours.

What to look for around USD

The dollar faltered just ahead of the 108.00 barrier and sparked a so far 2-day corrective move to the area below the 107.00 yardstick pari passu with the recovery in the risk-linked galaxy.

While hawkish Fedspeak maintains the Fed’s pivot narrative in the freezer, upcoming results in US fundamentals would likely play a key role in determining the chances of a slower pace of the Fed’s normalization process in the short term.

Key events in the US this week: MBA Mortgages Applications, Building Permits, Durable Goods Orders, Initial Jobless Claims, Flash Manufacturing/Services PMIs, Final Michigan Consumer Sentiment, New Home Sales, FOMC Minutes (Wednesday).

Eminent issues on the back boiler: 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 0.18% at 106.95 and the breakdown of 105.34 (monthly low November 15) would open the door to 105.22 (200-day SMA) and finally 104.63 (monthly low August 10). On the other hand, the next up barrier comes at 107.99 (weekly high November 21) followed by 109.18 (100-day SMA) and then 110.63 (55-day SMA).

Japanese Yen has eased by 22% against the greenback since the start of 2022. Is JPY depreciation of 22% little or a lot? Economists at Commerzbank analyze the JPY performance this year.

If the Fed cut its key rate again in 2023 things can move in the opposite direction again quite quickly

“The rate disadvantage of the Yen became dramatic this year, and in view of that development, its performance on the FX market was not excessive. Quite the contrary. Instead, things could have developed very differently, as there is a lot to suggest that at least a considerable share of the rate disadvantage of the Japanese currency will remain in place long term.”

“Of course that does not mean for the coming year that the Yen has to depreciate further. If – as the market is currently expecting – the US central bank Fed will cut its key rate again in 2023 things can move in the opposite direction again quite quickly.”

EUR/USD closed above 1.0300 on Tuesday. Economists at Credit Suisse maintain their year-end target at 1.0350.

Upside surprise for the Nov preliminary euro area CPI needed to propel the EUR higher

“Turning to EUR/USD, last week we suggested that the post-US Oct CPI (10 Nov) low at 1.0130 would prove a touch nut to crack, and thus far even the 1.0200 level hasn’t been breached.”

“We see no reason as yet to shift our end-2022 target at 1.0350.”

“With market pricing around 60 bps for the 15 Dec ECB, it will take something special like an upside surprise for the Nov preliminary CPI data on 30 Nov to propel the EUR higher by forcing markets to price in 75 bps. In the meantime, the fact there is an effective floor on what can be priced out still for December also undermines the argument for more EUR weakness in the immediate future.”

According to UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, USD/JPY faces prospects for further gains above the 142.50 level in the short term.

Key Quotes

24-hour view: “We held the view yesterday that ‘the overbought USD advance could test 142.50 before the risk of a pullback increases’. However, USD did not test 142.50 as it pulled back to a low of 141.13 in late NY trade. The pullback has room to extend to 140.60. The strong support at 140.30 is unlikely to come under threat. Resistance is at 141.50, followed by 141.80.”

Next 1-3 weeks: “After the strong rise in USD on Monday, we highlighted yesterday (22 Nov, spot at 141.80) that upward momentum is building. However, we were of the view that USD has to break and hold above 142.50 before further gains are likely. USD subsequently pulled back to a low of 141.13. There is no change in our view as long as the ‘strong support’ at 140.30 (no change in level) is not breached. Looking ahead, if USD breaks below 140.30, it would suggest a period of consolidation for USD.”

The Reserve Bank of New Zealand (RBNZ) hiked the official cash rate by 75 bps to 4.25%. FX markets responded well to the news, with the Kiwi spiking. Economists at ANZ Bank expect the decision to support the NZD.

Recession fears may weigh on the Kiwi

“Markets went into today’s decision pricing in favour of a 75 bps hike, and they got it. What they were unprepared for was the magnitude of the upgrade to the RBNZ’s OCR track, which now peaks at 5.5%. The RBNZ’s track is a technical projection, and it’s not supposed to signal that policy is on a pre-set path, but if we try to back-solve what is implied at each decision by the track, it points to another 75 bps hike in February, followed by 25 bps hikes in April and May.”

“We think this decision will ultimately be NZD supportive on the grounds that the RBNZ’s track points to the OCR coming to rest above where markets expect the US Fed Funds rate to peak (markets are pricing in a 5.08% peak).”

“Getting on top of inflation should also be positive for the NZD in that it should reduce the need for markets to price in an inflation discount to the real exchange rate. However, this decision will stoke recession fears, and that may weigh on the Kiwi.”

Considering advanced prints from CME Group for natural gas futures markets, open interest remained choppy on Tuesday and shrank by around 3.2K contracts, while volume went down by nearly 5K contracts, partially reversing the previous daily build.

Natural Gas: Extra gains in store above $7.20/30

Prices of the natural gas extended the rebound on Tuesday against the backdrop of declining open interest and volume, which supports the view of a corrective move in the very near term. In the meantime, natural gas flirts with the key resistance area around $7.20/30 and a breakout of this region should open the door to further advances in the next sessions.

• AUD/USD gains some follow-through traction on Wednesday amid the prevalent USD selling bias.
• Bets for less aggressive Fed rate hikes and stability in the equity markets weigh on the greenback.
• Investors now look to the US macro data for some impetus ahead of the FOMC meeting minutes.

The AUD/USD pair attracts some buying near the 0.6630 area on Wednesday and climbs to a two-day high during the early European session, albeit lacks follow-through. The pair is currently placed just above the 0.6650 level and remains well supported by modest US Dollar weakness.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, is seen extending its pullback from over a one-week high and losing ground for the second straight day. Growing acceptance that the Federal Reserve will slow the pace of its policy-tightening cycle turns out to be a key factor that continues to weigh on the greenback. Apart from this, stability in the equity markets further undermines the safe-haven buck and benefits the risk-sensitive Aussie.

That said, concerns about the potential economic headwinds stemming from a spike in new COVID-19 cases in China and the imposition of fresh lockdowns keep a lid on the optimism. Furthermore, the recent hawkish remarks by several Fed officials suggest that the US central bank might continue to raise borrowing costs to tame inflation. This, in turn, should limit any deeper losses for the buck and cap the upside for the AUD/USD pair. Traders might also refrain from placing aggressive bets and prefer to wait for a fresh catalyst from the release of the November FOMC meeting minutes.

Hence, it will be prudent to wait for strong follow-through buying before confirming that the pullback from over a two-month high touched last week has run its course and positioning for any further gains. Heading into the key event risk, traders on Wednesday might take cues from the US macro data - Durable Goods Orders and the usual Weekly Initial Jobless Claims. This, along with the broader risk sentiment, will influence the USD demand and provide some impetus to the AUD/USD pair.

Technical levels to watch

The short burst of USD strength that pushed EUR/USD to levels below 1.0250 the day before yesterday seems to be over again. Economists at Commerzbank expect USD weakness to remain in place.

Compared with levels at the start of the month, considerable USD weakness will remain in place

“Slowly it is becoming clear that compared with levels at the start of the month considerable USD weakness will remain in place.”

“If a rate hike cycle becomes foreseeable the corresponding currency benefits. In a similar manner it is a negative argument if the market focusses on the fact that the cycle seems to end. In particular if afterwards (as in the case of the Fed) a rapid reversal (i.e. rate cuts) is then expected.”

“At the moment FX traders are likely to be torn between the continued hawkish comments by Fed members and the prospect of what the Fed will do in 2023. I therefore consider it to be unlikely that the USD levels at which the market is currently settling are already fully reflecting the end of Fed rate hikes.”

The Bank of Korea (BoK) will hold its Monetary Policy Committee (MPC) meeting on Thursday, November 24 at 01:00 GMT and as we get closer to the release time, here are the expectations as forecast by the economists and researchers of six major banks. 

BoK is expected to hike rates by 25 basis points to 3.25%. At the last policy meeting, the bank hiked rates by 50 bps to 3.00%. 

SocGen

“The BoK is likely to hike rates by 25 bps to 3.25%. A plunge in USD/KRW exchange rate in November will support a ‘baby step’ hike, just as the surging USDKRW exchange rate in September justified the ‘big step’ of a 50 bps hike. A slight rebound in October headline inflation has seen calls for continued monetary tightening, while clearer signs of a slowdown in activity indicators and the sustained ‘credit crunch’ in the corporate credit market also lessen the chances of a 50 bps hike. In the quarterly review of macroeconomic forecasts, the BoK is expected to lower its 2023 GDP forecast but maintain its inflation forecasts.”

ANZ

“We expect the BoK to hike its policy rate by 25 bps to 3.25%. The combination of still elevated inflation, with the latest headline print at 5.7% YoY and core inflation at 4.2% YoY and a hawkish US Federal Reserve means that the central bank’s rate-hike cycle has further room to run. Amid climbing concerns about growth and the credit market, the case for hiking at a more gradual pace has strengthened further. We are sticking with our terminal policy rate forecast of 3.50% by Q12023.”

Standard Chartered

“We expect the BoK to hike the base rate by 25 bps, moderating the pace of hikes; it had hiked by 50 bps in October. We think the BoK will be under pressure to provide more liquidity to the market to maintain financial stability, especially amid growing concerns about a liquidity crunch in the bond market. Recent KRW appreciation and foreign capital inflows should provide breathing room for the BoK to relax its hawkish stance. Still, we expect the central bank to continue hiking its base rate, in order to narrow the interest rate differential with the Fed. Also, inflation remains elevated at above 5%; further tightening of monetary policy is therefore expected.” 

ING

“We expect the BoK to carry out a 25 bps hike. Consumer prices edged up in October but inflation appears to have passed its peak. The recent FX market move probably would be one factor for BoK to adjust its pace of tightening after its recent jumbo increase. However, given that financial market stresses remain high, the BoK will need to consider market stability for its policy decision.”

TDS

“Inflation stayed elevated in Oct but BoK Governor Rhee struck a less hawkish tone and noted that prices have ‘somewhat stabilise’". We think the BoK has little appetite to proceed with a big hike given the increase in financial market volatility recently. Further, KRW has rebounded 6.9% MTD against the USD and lessens the need for BoK to proceed with big hikes to support KRW.”

MUFG

“We see the BoK likely to raise its 7-day repo rate by 25 bps to 3.25%.”

Further decline in AUD/USD could retest the 0.6530 level once 0.6570 is cleared, suggest UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we held the view that AUD ‘could drop to 0.6570 first before a rebound is likely’. Our expectations did not materialize as AUD traded in a relatively quiet manner between 0.6601 and 0.6650. The price actions appear to be part of a consolidation phase and AUD is likely to within a range of 0.6615/0.6675 today.”

Next 1-3 weeks: “We continue to hold the same view as yesterday (22 Nov, spot at 0.6605) where AUD is under mild downward pressure. That said, AUD has to break and stay below 0.6570 before a decline to 0.6530 is likely. On the upside, a breach of 0.6690 (no change in ‘strong resistance’ level) would indicate that the current mild downward pressure has eased.”

• USD/JPY attracts some buying on Wednesday, though the uptick lacks bullish conviction.
• Bets for less aggressive rate hikes continue to weigh on the USD and cap gains for the pair.
• The downside seems limited amid the Fed-BoJ policy divergence, ahead of FOMC minutes.

The USD/JPY pair reverses an intraday dip to sub-141.00 levels and bounces over 50 pips from the daily low. Spot prices, however, struggle to capitalize on the move and meet with a fresh supply near the 141.50 level amid the prevalent selling bias surrounding the US Dollar.

Despite the recent hawkish comments by several Fed officials, investors now seem convinced that the US central bank will slow the pace of its policy tightening. In fact, the current market pricing indicates a greater chance of a relatively smaller 50 bps rate hike at the next FOMC policy meeting in December. This, in turn, has been a key factor behind the recent sharp pullback in the US Treasury bond yields and continues to act as a headwind for the greenback.

The Fed, however, is still far from pausing its rate-hiking cycle and is expected to continue raising borrowing costs to curb inflation. This should limit the downside for the US bond yields and lend some support to the buck. Hence, the market focus will remain glued to the release of the November FOMC meeting minutes, due later during the US session. Investors will look for clues about future rate hikes, which will influence the near-term USD price dynamics.

In the meantime, a more dovish stance adopted by the Bank of Japan (BoJ), along with signs of stability in the equity markets, could undermine the safe-haven Japanese Yen and offer support to the USD/JPY pair. In fact, BoJ, so far, has shown no inclination to hike interest rates. Moreover, BoJ Governor Haruhiko Kuroda reiterates last week that the central bank will stick to its monetary easing to support the economy and achieve the 2% inflation target in a stable fashion.

This marks a big divergence in comparison to the Fed and supports prospects for the emergence of some buying around the USD/JPY pair at lower levels. Even from a technical perspective, Monday's sustained move back above the 100-day SMA resistance, around the 141.00 mark, confirmed a breakout through a one-week-old trading range. This adds credence to the positive outlook and warrants some caution before positioning for any meaningful depreciating move, at least for now.

Technical levels to watch

Here is what you need to know on Wednesday, November 23:

Markets stay relatively quiet early Wednesday as investors stay on the sidelines while waiting for key macroeconomic data releases. The US Dollar Index, which snapped a three-day winning streak on Tuesday, moves sideways near 107.00 while the 10-year US Treasury bond yield and US stock index futures trade flat on the day. S&P Global will publish the preliminary November Manufacturing and Services PMI surveys for Germany, the Eurozone, the UK and the United States (US). The US economic docket will also feature Durable Goods Orders and New Home Sales data for October, weekly Initial Jobless Claims and the University of Michigan's Consumer Sentiment Survey. Finally, the US Federal Reserve will publish the minutes of the October policy meeting ahead of the Thanksgiving holiday.

US S&P Global PMI Preview: Will markets continue to price in a 50 bps Fed hike?

During the Asian trading hours, the Reserve Bank of New Zealand (RBNZ) announced that it hiked its policy rate by 75 basis points (bps) to 4.25% as expected. In its policy statement, the RBNZ said that it was forecasting the policy rate to peak at 5.5% next year and it was expecting the economy to tip into recession in mid-2023. While speaking at a press conference, RBNZ Governor Adrian Orr noted that policymakers spent more time considering whether they should raise the policy rate by 75 or 100 bps rather than 50 bps. NZD/USD climbed toward 0.6200 with the initial reaction to the rate decision but retreated toward 0.6150 into the European morning.

RBNZ’s Orr: It will be a brief recession.

Meanwhile, the CME Group's FedWatch Tool shows that markets are currently pricing in a 75% probability of the US Federal Reserve (Fed) opting for a smaller, 50 basis points, rate increase in December. In October's policy statement, the Fed said that policymakers will take the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation into account when determining the pace of rate increases. 

FOMC Meeting Minutes Preview: Three reasons to expect a US Dollar downer.

EUR/USD gained nearly 50 pips on Tuesday and closed above 1.0300. The pair continues to edge higher in the early European morning. S&P Global PMI surveys are expected to show that the business activity in Germany's and the Eurozone's manufacturing and services sectors continued to contract in early November.

GBP/USD took advantage of the US Dollar's modest weakness on Tuesday and climbed toward the upper limit of its weekly range near 1.1900. The pair trades in a relatively tight range near that level early Wednesday.

USD/JPY retreated from the 10-day high it touched above 142.00 earlier in the week and ended up losing 100 pips on Tuesday. The pair seems to have gone into a consolidation phase above 141.00 mid-week.

Gold price struggled to gather bullish momentum on Tuesday and stretched lower toward $1,730 in the Asian session on Wednesday before staging a rebound. Although the US T-bond yields hold steady, XAU/USD is having a tough time attracting bulls amid growing concerns over the demand outlook with China starting to tighten coronavirus restrictions.

Following the sharp decline witnessed earlier in the week, Bitcoin gained nearly 3% on Tuesday and extended its recovery toward $16,500 early Wednesday. Similarly, Ethereum gained traction and was last seen trading above $1,150, where it was up 2% on the day.

CME Group’s flash data for crude oil futures markets noted traders scaled back their open interest positions by around 11.8K contracts, reaching the third consecutive daily drop. Volume, in the same line, went down for the second straight session, this time by around 517.2K contracts, the largest single day pullback since February 25.

WTI: Another visit to $75.30 should not be ruled out

Prices of the WTI charted decent gains amidst diminishing open interest and volume on Tuesday. That said, further progress of this recovery appears unlikely in the very near term and therefore the commodity could revisit the November low at $75.30 (November 21).

• Gold price rebounds from intraday low to pare recent losses ahead of the key catalysts.
• Market sentiment remains sluggish as holiday in Japan restricts bond moves, pre-data caution also challenges XAU/USD traders.
• Bullion bears await the clear signs of Fed’s 75 bps rate hike in December.

Gold price (XAU/USD) picks up bids to consolidate the intraday losses around $1,738 during early Wednesday morning in Europe.

In doing so, the yellow metal cheers the US Dollar weakness ahead of the key data/events scheduled for publishing today. Also likely to have recently favored the metal prices could be the mixed signals from China, despite spreading the coronavirus woes. However, the market’s cautious mood and hopes of hawkish central bank actions join the pessimism surrounding Beijing to keep the XAU/USD bears hopeful.

US Dollar Index (DXY) takes offers to refresh the intraday low near 106.95, down for the second consecutive day, as the US Treasury yields remain pressured as European markets become active. The bond coupons remained mostly sluggish and allowed the DXY bears to take a breather earlier in the day amid a holiday in Tokyo. The reason could be linked to Japan’s status as Asia’s major bond trader.

Recently firmer US data and mixed comments from the Federal Reserve (Fed) officials seemed to have challenged the hawkish expectations from the US central bank, which in turn reduces the US Dollar’s safe-haven demand.

Elsewhere, China’s daily coronavirus counts head towards the record top marked in April while the virus numbers from Beijing, Shanghai and Chongqing also increased. On the same line were headlines from the South China Morning Post (SCMP) quoting Nomura’s Chief Economist Lu Ting as saying, “China’s economic growth next year appears to entirely hinge on a potential exit from its zero-covid policy, and even if such a shift occurs, more pain is inevitable before the real recovery.”

However, an absence of any virus-led deaths from Beijing, after the previous day’s two, joins hopes of recovery and more stimulus to underpin the XAU/USD rebound.

Amid these plays, the US stock futures remain sluggish but the equity traders in Europe and the UK appear optimistic after the previous day’s upbeat closing of Wall Street.

Hence, a likely cautious optimism could help the metal prices to pare recent losses but the overall pessimism surrounding China and Fed’s next moves can weigh on the XAU/USD prices.

Also read: Gold Price Forecast: Federal Reserve minutes could help XAU/USD confirm a bull flag

Technical analysis

A sustained U-turn from the multi-day-old resistance line joins the 10-DMA breakdown and impending bear cross on the Moving Average Convergence and Divergence (MACD) indicator to keep the Gold sellers hopeful.

That said, tops marked in September and October, respectively near $1,735 and $1,729, lure the intraday sellers of the XAU/USD ahead of highlighting the previous resistance line from September 12, around $1,720.

In a case where the yellow metal remains bearish past $1,720, July’s low of $1,680 will be in focus.

Meanwhile, the 50% Fibonacci retracement level of Gold’s June-September downturn, near $1,748, restricts immediate recovery of the metal ahead of the 10-DMA level of $1,757.

It’s worth noting, however, that the XAU/USD bulls should remain cautious unless witnessing a clear upside break of the $1,778 resistance confluence, comprising the previously stated resistance line from July 04 and the 61.8% Fibonacci retracement level.

Gold price: Daily chart

Trend: Further downside expected

Gold closed in the green for the first time in five days on Tuesday. As FXStreet’s Dhwani Mehta notes, XAU/USD is about to confirm a bull flag.

Favorable daily technical setup

“The wait for a bull flag confirmation almost seems over, as Gold price holds fort above the falling trendline resistance at $1,737. Daily closing above the latter is critical to validate the bullish continuation pattern and revive the uptrend toward the three-month highs of $1,787. Ahead of that, bulls will face immediate hurdles at the psychological $1,750 level and this week’s high near $1,770.”

“The 14-day Relative Strength Index (RSI) is holding firmer above the midline, endorsing the bullish potential. Adding credence to a likely upside, the upward-sloping 21-Daily Moving Average (DMA) is on the verge of cutting the mildly bearish 100DMA from below, portraying an impending bull cross.”

“On the flip side, a strong cushion is seen at Monday’s low of $1,733, below which the falling trendline support at $1,712 will be tested. At that level, the 100DMA creeps in. Further south, the bullish 21DMA at $1,708 will come into play, offering the last line of defense for the Gold price.”

See – Gold Price Forecast: XAU/USD to resume its downtrend and fall below $1,700 – ANZ

In the opinion of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, GBP/USD is expected to navigate within the 1.1680-1.1940 range in the next few weeks.

Key Quotes

24-hour view: “We highlighted yesterday that GBP ‘could retest the 1.1780 level before a more sustained rebound is likely’. However, GBP did not test 1.1780 as it rebounded from 1.1815 (high has been 1.1905). Despite the rebound, upward momentum has not improved much. That said, GBP could edge higher but any further advance is unlikely to break the major resistance at 1.1940. On the downside, a break of 1.1830 (minor support is at 1.1860) would indicate that the current mild upward pressure has eased.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (22 Nov, spot at 1.1825). As highlighted, GBP appears to have moved into a consolidation phase and is likely to trade between 1.1680 and 1.1940 for the time being.”

• GBP/USD grinds higher around intraday top, remains inactive on a daily format.
• Bullish megaphone, steady RSI joins upside break of one-week-old descending trend line to favor the Cable pair buyers.
• Sellers need validation from 1.1650-25 support area to retake control.

GBP/USD remains inactive around 1.1890, despite crossing a weekly hurdle the previous day, as the Cable pair traders await fresh clues from the British PMIs during early Wednesday.

It’s worth noting that the steady prints of the Relative Strength Index (RSI) placed at 14 and the bullish megaphone chart formation keeps the GBP/USD buyers hopeful.

That said, the quote’s further upside hinges on a clear break of the 1.1900 threshold, which in turn could direct the pair towards the weekly high surrounding 1.1955.

However, the aforementioned megaphone’s upper line and the monthly peak, respectively near 1.2015 and 1.2030, could challenge the GBP/USD bulls afterward.

Alternatively, the pair sellers should wait for a clear downside break of the previous resistance line from November 15, close to 1.1865 by the press time.

Following that, the trend-widening pattern’s lower line, around 1.1800, could challenge the GBP/USD pair’s further downside, a break of which will highlight an upwards-loping support line from November 03, adjacent to 1.1775 at the latest.

It’s worth noting, however, that multiple levels marked since October 26 join the 100-SMA to highlight 1.1650-25 region as a tough nut to crack for the GBP/USD bears.

GBP/USD: Four-hour chart

Trend: Further upside expected

Open interest in gold futures markets prolonged the downtrend for yet another session on Tuesday, this time by around 12.6K contracts according to preliminary readings from CME Group. Volume, in the same line, resumed the downside and dropped by 19.3K contracts.

Gold faces an interim support at $1,711

The earlier move to the $1,750 region lacked followed through and gold prices ended Wednesday’s session marginally up. The move, however, was amidst shrinking open interest and volume and is indicative that further recovery is not favoured for the time being. That said, the next support emerges at the 100-day SMA, today at $1,711 per ounce troy.

EUR/USD is now seen trading between 1.0180 and 1.0379 in the next weeks, note UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “Our view for EUR to ‘weaken further’ was incorrect as it rebounded strongly to a high of 1.0307 before closing on a firm note at 1.0302 (+0.60%). The rebound appears to have scope to extend but the major resistance at 1.0375 is unlikely to come into view (there is another strong resistance at 1.0325). Support is at 1.0280, a breach of 1.0260 would indicate EUR is not advancing further.”

Next 1-3 weeks: “We highlighted yesterday (22 Nov, spot at 1.0240) that the pullback in EUR could extend to 1.0150. We did not expect the strong rebound to a high of 1.0307. While our ‘strong resistance’ level at 1.0325 is not breached, downward momentum has eased considerably. In other words, instead of a deeper pullback, the current price movement is likely part of a broad consolidation phase and EUR is more likely to trade within a range of 1.0180/1.0375 for the time being.”

• USD/TRY remains sidelined for the second consecutive day.
• Turkiye’s geopolitical tension with Syria jostles with improved Consumer Confidence to challenge traders.
• US Dollar inaction ahead of the key data/events also restricts the Turkish Lira pair’s immediate moves.

USD/TRY seesaws around 18.60-65 during the second day of inaction heading into Wednesday’s European session.

In doing so, the Turkish Lira (TRY) pair struggles between the geopolitical and economic catalysts ahead of the key US data and the Federal Open Market Committee (FOMC) Meeting Minutes.

“Turkiye will attack militants with tanks and soldiers soon,” said President Tayyip Erdogan on Tuesday per Reuters. The national was also quoted in the news as signaling a possible ground offensive against a Kurdish militia in Syria after retaliatory strikes escalated along the Syrian border.

Elsewhere, Turkish Consumer Confidence rose for the fifth consecutive month to 76.6 in November, per the latest readings flashed the previous day. The sentiment gauge rebound from a record low of 63.4 in June despite a continuing surge in inflation, according to Reuters. “The biggest improvement in confidence was seen in the general economic situation expectation over the next 12 months, which rose 3.4% from a month earlier, to stand at 80.5 points,” added the news.

On the other hand, China’s daily coronavirus counts head towards the record top marked in April while the virus numbers from Beijing, Shanghai and Chongqing also increased, which in turn defends the USD/TRY bulls. On the same line were headlines from the South China Morning Post (SCMP) quoting Nomura’s Chief Economist Lu Ting as saying, “China’s economic growth next year appears to entirely hinge on a potential exit from its zero-covid policy, and even if such a shift occurs, more pain is inevitable before the real recovery.” Hence, Covid woes appear a drag for the USD/TRY pair.

Against this backdrop, the US Treasury yields remain unchanged while the S&P 500 Futures also remain static as traders await the key US PMIs for November, as well as the Fed Minutes. That said, the USD/TRY pair’s further downside hinges on how well the FOMC rejects dovish calls from the policymakers.

Technical analysis

The USD/TRY pair’s repeated failure to cross the 19.00 threshold keeps sellers hopeful.

According to the latest Reuters poll of economists, the Bank of England (BoE) is seen raising the bank rate by 50 basis points (bps) to 3.50% on December 1.

Key findings

“Over 75% of respondents, 43 of 56, opted for 50 basis points while 13 said 75.”

“December's move by the BoE will be followed by another 75 basis point lift across its two meetings next quarter, with the poll suggesting the Bank will then pause at 4.25%, matching the terminal rate given last month.”

“When asked about the probability of a recession within a year, poll respondents gave a median response of 90%, sharply higher than the 75% given in October.”

“Inflation will peak at 10.7% this quarter. It will then gradually fall, dipping to 10.0% next quarter and then to 7.7%, 6.5% and 4.5% in the following quarters.”

• EUR/USD has established above the critical hurdle of 1.0300 as the US dollar refreshes the day’s low at 107.00.
• A bull cross, represented by the 20-and 50-period EMAs, indicates more upside ahead.
• The RSI (14) has shifted into the bullish range of 60.00-80.00, which adds to the upside filters.

The EUR/USD pair has displayed a firmer recovery after dropping to near 1.0310 in the Asian session. The asset has shifted its business profile above the psychological resistance of 1.0300 as the risk-on impulse has resurfaced confidently.

Meanwhile, the US dollar index (DXY) has refreshed its day’s low at 107.00 amid a significant improvement in investors’ risk appetite. The US Dollar is expected to remain dwindled as investors have turned anxious ahead of the Federal Open Market Committee (FOMC) minutes.

On an hourly scale, the EUR/USD pair has extended its recovery above the critical resistance plotted from November 17 low at 1.0305, which has turned into support now for the shared currency bulls.

The 20-and 50-period Exponential Moving Averages (EMAs) have delivered a bullish crossover at 1.0288, which indicates more upside ahead.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00. This states that a bullish momentum has been triggered.

For further upside, the asset is required to overstep Friday’s high at 1.0396, which will drive the asset towards November 16 high at 1.0439, followed by November’s high at 1.0482.

Alternatively, the shared currency bulls could lose control of the asset drops below Monday’s low at 1.0223, which will drag the pair towards November 11 low at 1.0163. A slippage below the latter would deliver more downside towards November 8 high around 1.0100

EUR/USD hourly chart

• USD/CAD grinds higher while paring the biggest daily fall in a fortnight.
• 50-SMA, ascending trend line from early September restrict immediate downside.
• Seven-week-old horizontal support area challenge buyers before 200-SMA.
• Bearish MACD signals, steady RSI favor short-term sellers.

USD/CAD seesaws around the intraday high of 1.3391 as bulls struggle to retake control heading into Wednesday’s European session. That said, the Loonie pair reversed from the 1.5-month-old horizontal resistance the previous day while posting the biggest daily loss in two weeks.

However, the quote’s sustained trading beyond the 50-SMA and an upward-sloping support line from September 13, respectively near 1.3340 and 1.3255, seem to keep the USD/CAD buyers hopeful.

Even so, the bearish steady prints of the Relative Strength Index (RSI), placed at 14, join the bearish signals from the Moving Average Convergence and Divergence (MACD) indicator, to suggest that the quote has limited upside momentum.

As a result, the latest recovery may aim for the aforementioned resistance line surrounding the 1.3500 hurdle. However, any further upside will need validation from the 200-SMA level of 1.3580 to convince the USD/CAD buyers.

In a case where the Loonie pair stays firmer past 1.3580, the odds of witnessing a run-up toward the monthly high near 1.3810 can’t be ruled out.

On the contrary, a downside break of the 50-SMA and aforementioned short-term support line, close to 1.3340 and 1.3255 in that order, could challenge the USD/CAD pair’s fresh declines.

Following that, the monthly low of 1.3226 could act as the last defense of the pair buyers.

USD/CAD: Four-hour chart

Trend: Limited recovery expected

Analysts at Scotiabank enlist three critical things to watch for in the US Federal Reserve’s November meeting minutes that will be published on Wednesday at 1900 GMT.

Also read: FOMC Meeting Minutes Preview: Three reasons to expect a US Dollar downer 

Key quotes

“Watch for three things:

The discussion that bolsters Powell’s guidance that the terminal rate estimates are likely to be revised higher in December’s ‘dot plot’ compared to September and the range of opinions around the issue using the Fed’s frequency of citations language (one, a couple, a few, some, several, many, most, all etc).”

“Also watch for the frequency of opinions around timing the downshifting in the pace of rate hikes after Powell said “that timing is coming and it may come as soon as the next meeting or the one after it.” Markets are priced for a downshift to 50bps in December and could be vulnerable to any indications that the FOMC is still considering a larger move.”

“Finally, expect further rejection of pausing the tightening stance given Powell’s guidance that is “very premature.”

• Asian indices are displaying a subpar performance as anxiety soars ahead of FOMC minutes.
• Rising Covid-19 infections in China have restricted upside in related indices.
• Accelerating supply worries and a consecutive drop in oil inventories are supporting oil prices.

Markets in the Asian domain are displaying a subpar performance despite solid gains reported by S&P500 on Tuesday. Asian equities have turned cautious ahead of the release of the Federal Open Market Committee (FOMC) minutes, which are due on Thursday. The US dollar index (DXY) has displayed signs of recovery after dropping to near 107.00 amid mixed responses from the market sentiment.

At the press time, ChinaA50 declined marginally by 0.10%, Hang Seng gained 0.65%, and Nifty50 added 0.12%. Meanwhile, Japan’s Nikkei225 is closed on Wednesday on account of Thanksgiving Day.

Chinese markets are failing to gain traction despite overall optimism in the global markets. Rising infections of Covid-19 are expected to force the Chinese administration to return to lockdown curbs as the only measure to curtail the spread.

Outside Asia, the Reserve Bank of New Zealand (RBNZ) has announced a rate hike by 75 basis points (bps). Earlier, the central bank was hiking its Official Cash Rate (OCR) by 50 bps. The RBNZ hiked its OCR by 50 bps consecutively in five monetary policies.  A bigger rate hike announcement by the RBNZ cleared that the central bank is worried about escalating inflationary pressures. The price rise index has not displayed signs of exhaustion nor has a peak yet confirmed.

On the oil front, accelerating supply worries and a consecutive drop in oil inventories reported by the American Petroleum Institute (API) are supporting oil prices. Oil cartel has confirmed that the current OPEC+ deal will continue till the end of 2023. Earlier, the oil exporting countries agreed to cut production of oil by two million barrels each day to boost oil prices. While, US API has reported a drop in oil stockpiles by 4.8 million barrels for the week ending November 18.

• NZD/USD remains mildly bid even as Reserve Bank of New Zealand announced 75 bps lift in the benchmark interest rate.
• Fears of recession, China Covid woes challenge New Zealand Dollar buyers.
• Multiple statistics from the United States, Minutes of the latest US Federal Reserve (Fed) meetings will offer clear directions.

NZD/USD pares the Reserve Bank of New Zealand (RBNZ) inspired gains as it retreats to 0.6160 heading into Wednesday’s European session. In doing so, the New Zealand Dollar (NZD) struggles to cheer hawkish moves of the RBNZ amid mixed sentiment and cautious mood ahead of the key data/events.

The New Zealand Dollar’s latest weakness could be linked to the fears of recession spread by downbeat comments from the RBNZ Governor Adrian Orr.

Reserve Bank of New Zealand failed to impress New Zealand Dollar buyers

Reserve Bank of New Zealand matched market forecasts while announcing 75 basis points (bps) of a rate hike during its updates to convey the tenth interest rate lift on Thursday. The RBNZ also raised inflation forecasts during its quarterly economic projections while suggesting a peak Official Cash Rate (OCR) of 5.5%, versus 4.25% at the latest.

As a result, the New Zealand Dollar traders should have seen the central bank’s move as utterly hawkish due to not only the pace of the rate increase but the predictions for the OCR peak as well.

It should be noted, however, that downbeat economic forecasts suggesting New Zealand’s recession in 2023 and sour comments from New Zealand Finance Minister Grant Robertson also challenged the New Zealand Dollar buyers.

That said, New Zealand’s 10-year Treasury bond yields jumped 3.87% intraday to 4.30% following the RBNZ move while Auckland’s benchmark equity index NZX50 dropped 0.70% intraday by the press time.

China’s Covid woes, and pre-event anxiety also challenge NZD/USD bulls

China’s daily coronavirus counts head towards the record top marked in April while the virus numbers from Beijing, Shanghai and Chongqing also increased. On the same line were headlines from the South China Morning Post (SCMP) quoting Nomura’s Chief Economist Lu Ting as saying, “China’s economic growth next year appears to entirely hinge on a potential exit from its zero-covid policy, and even if such a shift occurs, more pain is inevitable before the real recovery.” Hence, Covid woes appear a drag for the New Zealand Dollar.

On the other hand, the scheduled releases of flash readings of November’s activity numbers for the US will precede the US Durable Goods Order for October and the Federal Open Market Committee (FOMC) Meeting Minutes also keep the New Zealand Dollar traders on the edge. The reason could be linked to the recently mixed messages from the United Stated economic data and comments from the Federal Reserve (Fed) officials.

Clues for Federal Reserve’s 50 bps rate hike could tease New Zealand Dollar bears

While most of the scheduled data from the US are less likely to offer any clear signals, unless providing strong numbers, the New Zealand Dollar traders will pay attention to the Minutes of the latest Federal Reserve Meeting for clear directions. Should the Fed convey increasing odds of easing the rate hike bias, the Kiwi Dollar may have a reason to remain firmer. Otherwise, a pullback can’t be ruled out.

NZD/USD price technical analysis

NZD/USD remains inside a one-week-old trading range between 0.6210 and 0.6060, despite the Reserve Bank of New Zealand (RBNZ) inspired moves.

In addition to the aforementioned trading range, the 200-day Exponential Moving Average (EMA) also adds strength to the 0.6210 hurdle for the New Zealand Dollar buyers.

It’s worth noting, however, that the lower highs on the Relative Strength Index (RSI) placed at 14 also challenge the Kiwi pair’s short-term upside. Even so, the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator keep the New Zealand Dollar on the buyer’s radar.

On the flip side, pullback moves have multiple barriers to challenge the NZD/USD traders, apart from the bottom of the previously mentioned range near 0.6060.

Among them, the 100-day EMA level surrounding 0.6020 could initially challenge the New Zealand Dollar bears before highlighting the 0.6000 psychological magnet and an upward-sloping trend line from October 13, close to 0.5950 at the latest.

Overall, NZD/USD remains on the buyer’s radar unless the New Zealand Dollar sellers break 0.5950 support.

NZD/USD: Daily chart

Trend: Bullish

Trafigura Chief Executive Officer Jeremy Weir said at Financial Times Commodities Asia Summit in Singapore on Wednesday, the European gas crisis has been “potentially alleviated”.

Key quotes

“The outlook for next year is improving thanks to a warm autumn and robust storage.“

“Concerns about the gas shortage in Europe have abated, and the region should have sufficient gas supplies this winter as long as the pipeline through Ukraine stays open.”

“Should that be the case, we may not have so much of a problem the following winter, which was actually the real concern.”

Market reaction

The above comments fail to have any material impact on the Euro, as EUR/USD clings to the recovery gains above 1.0300, +0.18% on the day.

• Gold price has dropped to near three-day's low around $1,730.00 ahead of FOMC minutes.
• A 75 bps rate hike by the RBNZ has also weakened gold prices.
• The precious metal has sensed selling pressure after testing the 23.6% Fibo retracement at $1,746.67.

Gold price (XAU/USD) has declined sharply to near $1,730.00 in the Tokyo session as the risk impulse is displaying mixed responses ahead of the release of the Federal Open Market Committee (FOMC) minutes. The precious metal is witnessing sheer volatility as FOMC minutes will also provide clues about the interest rate guidance. However, the detailed explanation behind hiking interest rates by 75 basis points (bps) for the fourth time consecutively will remain crucial.

Meanwhile, the US dollar index (DXY) has displayed signs of recovery after dropping to near the round-level support of 107.00.

Outside the West, the Reserve Bank of New Zealand (RBNZ) has gone for a bigger rate hike amid its battle against mounting inflation. RBNZ Governor Adrian Orr ditched the 50 bps rate hike regime and went for a rate hike of 75 bps, in line with the expectations.

The commentary from RBNZ Governor indicated that policymakers were also considering a full percent rate hike. Although the Federal Reserve (Fed) is expected to slow down its rate hike pace, other central banks are still bidding for bigger hikes as inflation is still a reason for worry.

Gold technical analysis

On a four-hour scale, the gold price has sensed selling pressure after testing the 23.6% Fibonacci retracement (placed from November 3 low at $1,616.39 to November 15 high at $1,786.55) at $1,746.67. Also, the 20-period Exponential Moving Average (EMA) at around $1,747.00 has acted as a major barricade for the counter.

Meanwhile, the Relative Strength Index (RSI) (14) is hovering around the bearish range of 20.00-40.00. A slippage inside the bearish range will trigger a bearish momentum.

Gold four-hour chart

• USD/CNH extends the rebound from resistance-turned-support line towards 100-SMA.
• RSI suggests further grinding below the key Simple Moving Averages (SMAs).
• 200-SMA adds to the upside filters, sellers need validation from 7.1180-60 support confluence.

USD/CNH buyers keep the reins around 7.1630 during early Wednesday morning in Europe, defending Tuesday’s U-turn from the previous resistance line.

In doing so, the offshore Chinese Yuan (CNH) reverses the previous day’s losses while bracing for the 100-SMA hurdle surrounding 7.1850.

Given the steady prints of the Relative Strength Index (RSI), placed at 14, the latest recovery is likely to prevail.

Also favoring the USD/CNH bulls is the pair’s sustained trading beyond the convergence of the ascending trend line from November 13 and the aforementioned resistance-turned-support, around 7.1180-60.

If the quote drops below 7.1160, the odds of witnessing a slump toward the monthly low of 7.0195 can’t be ruled out. However, October’s low of 7.0126 could challenge the USD/CNH pair’s further declines.

Alternatively, the 200-SMA level of 7.2105 acts as an extra filter towards the north, in addition to the 100-SMA hurdle near 7.1850.

Should the USD/CNH bulls keep the reins past 7.2105, the 61.8% Fibonacci retracement of the pair’s downturn between October 25 to November 15, around 7.2400, will precede the November 09 swing high of 7.2800 to please the buyers.

USD/CNH: Four-hour chart

Trend: Further upside expected

• USD/INR picks up bids to reverse the previous day’s pullback from two-week high.
• Chatters surrounding RBI intervention near 81.80-90 join oil prices retreat to challenge bulls.
• China COVID-19 woes, cautious mood ahead of the key data, FOMC Minutes keep buyers hopeful.
• Support for Fed’s 75 bps rate hike, upbeat US data could portray further upside.

USD/INR stays defensive around 81.75, despite the recent pick-up, as traders await Wednesday’s key data/events amid mixed concerns. Even so, hawkish hopes from the US Federal Reserve (Fed) and the coronavirus fears emanating from China keeps the Indian Rupee (INR) bears hopeful.

That said, the USD/INR pair took a U-turn from the highest levels in a fortnight the previous day amid a broad US dollar pullback. On the same line could be the study by asset manager Invesco, shared by Reuters, suggesting that India has emerged as the second most coveted investment market after the United States for sovereign wealth funds and public pensions funds in 2022.

However, the recovery in the Crude Oil prices and the market’s cautious mood seemed to have favored the INR bears afterward.

Recently, the WTI crude oil retreated to $81.00 amid demand fears due to the COVID-19 woes, as well as chatters surrounding the OPEC+-inspired increase in energy supplies.

It should be noted that China’s daily coronavirus counts head towards the record top marked in April while the virus counts from Beijing, Shanghai and Chongqing also increased. On the same line were headlines from the South China Morning Post (SCMP) quoting Nomura’s Chief Economist Lu Ting as saying, “China’s economic growth next year appears to entirely hinge on a potential exit from its zero-covid policy, and even if such a shift occurs, more pain is inevitable before the real recovery.”

Additionally, market chatters that the Reserve Bank of India (RBI) intervenes around 81.80-90 also seemed to challenge the USD/INR bulls of late.

That said, the USD/INR pair is likely to remain on the bull’s radar but the upside momentum appears limited. Even so, today’s flash readings of November’s activity numbers for the US will precede the US Durable Goods Order for October and the Federal Open Market Committee (FOMC) Meeting Minutes to offer clear signals.

Technical analysis

A daily closing beyond the 21-DMA, around 81.80 by the press time, becomes necessary for the USD/INR bulls.

• GBP/USD is eyeing an establishment above 1.1900 for further upside.
• US yields could remain at 4% or above till 2025 as the Fed may ignore economic prospects for bringing price stability.
• An underperformance is expected from UK S&P PMI data.

The GBP/USD pair is hovering around the immediate hurdle of 1.1900 in the Asian session. The Cable is struggling to sustain above the aforementioned resistance despite a cheerful market mood. The optimism from the pair has not faded yet as the US dollar index (DXY) is witnessing intense selling pressure amid a decline in safe-haven’s appeal.

The mighty DYX is auctioning near the round-level support of 107.00 and is expected to test Monday’s low at 106.88. Escalating anxiety ahead of the release of the Federal Open Market Committee (FOMC) minutes has brought volatility to the DXY. Meanwhile, the returns on US government bonds have dropped below 3.76% amid escalating signs of a slowdown in the interest rate hike pace by the Federal Reserve (Fed).

A report from Goldman Sachs claim that long-term US yields will remain at 4% or above till the end of 2024, as reported by Bloomberg. The reasoning behind the claim is that the Fed is ignoring economic contraction in its battle against multi-decade high inflation. The investment-banking firm sees no recession in the US and the inflation will remain above target in 2023.

Apart from the FOMC minutes, investors are also focusing on Wednesday’s Durable Goods Orders data. The consumer demand indicator is expected to display a consistent improvement of 0.4%.  This could dent the Fed’s plans of cutting consumer spending as it is the only measure to trigger a slowdown in the inflationary pressures.

On the UK front, the release of the S&P PMI numbers will be significant for the market participants. The Manufacturing PMI is seen lower at 45.8 vs. the prior release of 46.2. And, the Services PMI is expected to decline to 46.2 from the former release of 46.5.

Wang Yiming, an adviser to the monetary policy committee of the People's Bank of China (PBOC), said on Wednesday, “slower Fed hikes in 1H 2023 will give China more policy room.”

Additional comments

Market reaction

USD/CNY was last seen trading at 7.1456, up 0.09% on the day.

• Bulls are hopeful amid a significant recovery in the risk-on impulse.
• The DXY is expected to remain on the tenterhooks ahead of the Fed minutes release.
• The RSI (14) is oscillating in a 40.00-60.00 range, which indicates a consolidation ahead.

The AUD/USD pair has witnessed a firmer rebound after a minor correction to near 0.6636 in the Tokyo session. The asset is gaining strength as the U dollar index (DXY) is on the verge of testing the 107.00 support amid optimism in the global markets.

Meanwhile, the 10-year US Treasury yields have dropped below 3.76% amid anxiety ahead of the release of the Federal Open Market Committee (FOMC) minutes. This will provide a detailed reasoning behind the announcement of the fourth consecutive 75 basis points (bps) rate hike.

On a four-hour scale, the asset has displayed a mean reversion to the 20-period Exponential Moving Average (EMA) at around 0.6650. The major could display a rangebound structure as the upside is capped by the downward-sloping trendline placed from November 16 high at 0.6793 while the downside is supported by the upward-sloping trendline plotted from November’s low at 0.6272.

The Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range, which indicates a consolidation ahead.

Should the asset oversteps Monday’s high at 0.6685, Aussie bulls will get strengthened and will drive the asset towards November 17 high at 0.6751, followed by November’s high around 0.6800.

On the contrary, the Greenback bulls could be supported if the asset surrenders Monday’s low at 0.6585. This will drag the asset towards November 8 high and low at 0.6551 and 0.6444 respectively.

AUD/USD four-hour chart

• EUR/USD picks up bids to defend the previous day’s recovery moves.
• US Dollar remains pressured despite mixed sentiment in the market, absence of bond moves.
• Buyers seek confirmation of Fed’s 50 bps rate hike in December.
• Flash PMIs, US Durable Goods Orders and risk catalysts are extra catalysts to watch for fresh impulses.

EUR/USD remains mildly bid near 1.0320 as it cheers the US Dollar weakness during early Wednesday morning in Europe. That said, the quote’s latest upside, however, appears shallow ahead of the key data/events.

US Dollar Index (DXY) prints a two-day downtrend around 107.00, down 0.10% intraday by the press time, as sluggish US Treasury yields challenge the greenback buyers.

It’s worth noting that a holiday in Japan restricts the US bond moves in Asia. Additionally challenging the DXY bulls are mixed updates surrounding China’s Covid conditions and fears of economic slowdown in the bloc, mainly due to the bloc’s readiness to cap Russian Oil prices and Moscow’s threat to pause gas supplies via Ukraine.

Although China reports a further rise in the daily COVID-19 numbers, the death toll returns to zero, after a quick uptick to two, which in turn keeps the traders hopeful that the dragon nation could tackle the virus woes this time. Also likely to keep the pair buyers hopeful are hopes of easy activity numbers from the United States, as well as the recently mixed comments from the US Federal Reserve (Fed) policymakers versus hawkish remarks from the European Central Bank (ECB) officials.

Amid these plays, S&P 500 Future remains directionless while the stocks in the Asia-Pacific region trade mixed.

It should be noted that the growing uncertainty surrounding the Fed’s next move, especially after the mixed Fedspeak and upbeat US data, keeps the EUR/USD sellers hopeful. Hence, traders will pay close attention to today’s flash readings of November’s activity numbers for the initial directions before the US Durable Goods Order for October and the Federal Open Market Committee (FOMC) Meeting Minutes could offer clear signals.

Technical analysis

A convergence of the 10-DMA and a one-week-old descending trend line restricts immediate EUR/USD upside near 1.0320, a break of which could quickly propel the quote towards the 200-DMA hurdle surrounding 1.0400. Alternatively, pullback moves remain elusive until the quote stays beyond the previous resistance line from early October, around 1.0200 by the press time.

Analysts at Goldman Sachs offer their outlook on the US Dollar for 2023, noting that they see scope for another leg higher in the US Dollar before topping out.

Key quotes

"The US Dollar still has a lot going for it. US activity and labor markets are proving resilient, and on our modal path, the US economy is likely to avoid recession. However, increasing financial stability, mortgage market, and recession concerns in many other parts of the world mean that other global central banks may struggle to keep up with the Fed.”

"There are risks on both sides. We may need to wait longer for a Dollar turn if we move squarely towards a recession in the US and there is a marked worsening in the risk-taking environment.”

“On the other side, an early end to China's zero-Covid policies in line with recent signals and price action or an unexpected easing in Russia-Ukraine tensions would likely set in motion macro and market dynamics that could contribute to an earlier Dollar turn by fostering a better environment for global growth and risk assets.”

• NZD/USD fades upside momentum inside one-week-old trading range.
• RBNZ announced 75 bps rate hike, Governor Orr expects shallow recession.
• Bulls remain hopeful as convergence of the six-week-old ascending trend line, 200-EMA appears a tough nut to crack for sellers.
• Late August high could lure buyers past 0.6206.

NZD/USD retreats from intraday high surrounding 0.6200 to 0.6166 during early Wednesday as bulls run out of steam on the latest commentary from Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr.

Also read: RBNZ’s Orr: It will be a brief recession

Even so, the Kiwi pair remains inside an eight-day-long symmetrical formation and keeps the buyers hopeful.

Also suggesting the NZD/USD pair’s further upside are the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator, as well as the steady Relative Strength Index (RSI) placed at 14.

That said, the 50-EMA level surrounding 0.6100 offers immediate support to the quote ahead of the aforementioned trading range’s bottom, near 0.6060.

Following that, the 200-EMA and an upward-sloping trend line from October 10, close to 0.5945, becomes crucial for NZD/USD sellers to retake control.

Alternatively, an upside clearance of 0.6206 could direct the pair buyers toward the late August high surrounding 0.6255.

However, the NZD/USD pair’s successful run-up beyond 0.6255 will enable the bulls to aim for the August month’s peak near 0.6470.

NZD/USD: Four-hour chart

Trend: Further upside expected

• USD/CAD grinds near intraday high after posting the biggest daily fall in two weeks.
• Oil prices stabilize following a rebound from the 10-month low.
• Market’s anxiety ahead of the key data/events joins China’s Covid woes to challenge the Canadian Dollar.

USD/CAD picks up bids to refresh intraday high near 1.3380 during early Wednesday. The Loonie pair’s latest rebound could be linked to the market’s sour sentiment, as well as a pause in the WTI crude oil’s recovery moves. However, a cautious mood ahead of the key data/events challenges the pair buyers.

Risk appetite fades the previous day’s optimism as headlines suggesting a jump in China’s Covid numbers joined the Reserve Bank of New Zealand’s (RBNZ) utterly hawkish move to suggest that the global central banks aren’t out of steam. Additionally, anxiety ahead of the preliminary readings of November’s PMIs, the Federal Open Market Committee (FOMC) Meeting Minutes and the US Durable Goods Orders for October also weigh on the sentiment.

While portraying the mood, S&P 500 Futures print mild losses while the US 10-year Treasury yields struggle for clear directions near 3.75%.

It’s worth noting that prices of Canada’s biggest export-item WTI crude oil seesaw around $81.00 after bouncing off a 10-month low the previous day. The black gold rose the previous day amid fears of a supply crunch and talks of the oil price cap, as well as Saudi Arabia’s rejection to support the OPEC+ output increase signals.

On Tuesday, firmer sentiment and recovery in oil prices favored the USD/CAD bears. On the same line could be the upbeat prints of Canada’s Retail Sales for September. In doing so, the Loonie pair ignored firmer US data and hawkish comments from the US Federal Reserve (Fed) officials. That said, Richmond Fed Manufacturing Index improved to -9 for November versus -10 prior while Kansas City Federal Reserve President Esther George recently said, “(We) could well take a higher interest rate for some time to convince households to hold on to savings.”

Moving on, USD/CAD is likely to witness a sluggish day amid the market’s pre-event fears. However, traders will pay major attention to the oil fundamentals and the Fed Minutes for clear directions.

Technical analysis

A clear U-turn from the 21-DMA hurdle of 1.3466, as well as a downside break of the one-week-old ascending trend line, currently around 1.3390, keeps the USD/CAD bears hopeful of refreshing the monthly low surrounding 1.3230.

Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr is speaking at the November post-monetary policy meeting press conference this Wednesday, endorsing the central bank’s hawkish 75 basis points (bps) Official Cash Rate (OCR) rate hike announced earlier on.

Key quotes

RBNZ's Chief Economist Paul Conway said that “inflation expectations are higher than expected.”

Another RBNZ official said that the neutral interest rate has increased and that monetary conditions are not as contractionary.

Market reaction

NZD/USD is unfazed by Orr’s comments, keeping its range at around 0.6170, adding 0.47% on the day.

• Gold stalls at a 61.8% ratio ahead of FOMC minutes.
• Gold bulls seek a meanwhile bullish correction depending on the outcome of the FOMC minutes.

The Gold price is higher on Wednesday buoyed by a weaker greenback that retreated across the board on Tuesday and remains offered in Asia. Investors are looking past worries about China's COVID flare-ups ahead of Wednesday's Federal Open Market Committee Minutes.

Equities and high-beta currencies were favoured overnight, putting the US Dollar to the bottom of the leaderboard and supporting gold prices a touch higher. The DXY index, that measure the greenback vs. a basket of currencies was last seen below the overnight highs and scraping the bottom of the 107's.

The S&P 500 was closing at its highest level in 2-1/2 months. The Dow Jones Industrial Average rose 397.82 points, or 1.18%, to 34,098.1, the S&P 500 gained 53.64 points, or 1.36%, to 4,003.58 and the Nasdaq Composite added 149.90 points, or 1.36%, to 11,174.41. US stock futures were little changed on Wednesday as investors braced for the latest Federal Reserve meeting minutes that could guide the US rates outlook.

Meanwhile, supportive of Gold, there are prospects of a pivot from the Federal Reserve due to recent cooler-than-expected inflationary data within economic releases, notably the last US Consumer Price Index.  A rally in bonds also pushed the 10-year yield down 6bps to 3.77%, helping support investor appetite. Market participants are awaiting the minutes of Fed's Nov. 1-2 policy meeting due at 1900 GMT.

On Tuesday, Kansas City Fed President Esther George said the Fed may need to raise interest rates to a higher level and hold them there for longer in order to successfully moderate consumer demand and bring down high inflation. Fed Bank of Cleveland President Loretta Mester explained that getting inflation down remains the most critical.

Gold technical analysis

 A deeper correction has taken on the $1,750 level as per the confluence of the 38.2% Fibonacci and has subsequently moved in on the 61.8% ratio:

This could lead to a meanwhile bullish correction depending on the outcome of the FOMC minutes and sentiment surrounding the Fed.

• AUD/JPY remains sidelined after printing bearish candlestick the previous day.
• Bearish MACD signals, sluggish RSI adds strength to the downside bias.
• 50-DMA restricts recovery inside monthly symmetrical triangle, 200-DMA offers additional support.

AUD/JPY steadies near 93.80-85 for the second consecutive day on early Wednesday, after stating the week on a firmer footing. In doing so, the cross-currency pair struggles with the 50-DMA hurdle inside a symmetrical triangle formation comprising multiple levels marked since November 01.

It’s worth noting, however, that bearish signals from the Moving Average Convergence and Divergence (MACD) indicator join sluggish Relative Strength Index (RSI) placed at 14 to keep sellers hopeful. Additionally, the previous Doji candlestick on the daily formation also favors the bears.

However, a clear downside break of the stated triangle’s support line, around 93.40 by the press time, appears necessary for the AUD/JPY bears to retake control. Even so, the 200-DMA level of 92.50 could challenge the quote’s further downside.

Though, the AUD/JPY pair’s successful trading below the 200-DMA will make it vulnerable to testing the previous monthly low surrounding 90.85 before highlighting the 90.00 psychological magnet.

Meanwhile, a daily closing beyond the 50-DMA hurdle surrounding the 94.00 threshold appears necessary for the bull’s conviction. Following that, a run-up towards the aforementioned triangle’s top, close to 94.35, could become imminent.

Should the AUD/JPY bulls keep the reins past 94.35, the monthly high near 95.55 and October’s peak of 95.75 could lure the upside moves.

AUD/JPY: Daily chart

Trend: Further downside expected

• NZD/JPY has refreshed a two-week high at 87.40 as RBNZ has pushed interest rates to 4.25%.
• The RBNZ has elevated its OCR by 75 bps after five consecutive 50 bps hikes.
• Japanese markets are closed on account of Thanksgiving Day.

The NZD/JPY pair has displayed a firm perpendicular move to 87.40 after a bigger rate hike announcement by the Reserve Bank of New Zealand (RBNZ). The New Zealand central bank has ditched the 50 basis points (bps) structure after deploying it consecutively five times. RBNZ Governor Adrian Orr has pushed the Official Cash Rate (OCR) to 4.25%.

The decision has remained in line with the expectations as a battle against a historic surge in inflationary pressures demands an extremely restrictive monetary policy. The inflation rate for the third quarter was recorded at 7.2%.

It seems that the unavailability of significant exhaustion signals in the price growth has forced the central bank to play with big chips. However, a significant hike in the OCR has left less room for more rate hikes, which will shift more responsibilities on economic dynamics to play ahead. The catalyst which has also led to a significant jump in the cross is the consideration of a 100 bps rate hike by RBNZ policymakers. An ‘extremely-hawkish’ stance considered by the central bank has infused fresh blood into the Kiwi Dollar.

Meanwhile, rising Covid-19 infections in China are still a major concern ahead. Economic projections for the dragon economy have been hit hard. This could impact the Kiwi Dollar, being the leading trading partner of China.

On the Tokyo front, investors are awaiting the release of the PMI numbers, which will release on Thursday. The Jibun Bank Manufacturing PMI is seen as stable at 50.7. While Services PMI is expected to decline marginally to 53.1. Investors should be aware that Japanese markets are closed on Wednesday on account of Thanksgiving Day.

New Zealand (NZ) Deputy Prime Minister and Finance Minister Grant Robertson made some comments on the economic outlook and inflation concerns on Wednesday.

Key quotes

Related reads

• NZD/USD is volatile on RBNZ hawkish 75Bp hike
• New Zealand 10-year Treasury bond yields rally 4.0% on RBNZ-led action

• New Zealand’s benchmark Treasury yields rally, equities drop on RBNZ-inspired move.
• RBNZ matches market forecasts of announcing 0.75% rate hike, unveiled recession fears.
• NZ 10-year Treasury yields refresh one-week high, NZX 50 declines 0.70% intraday.
• Speech from RBNZ Governor Adrian Orr will be important for fresh clues.

Markets in New Zealand (NZ) portray a stark reaction to the Reserve Bank of New Zealand’s (RBNZ) Interest Rate Decisions on early Wednesday.

That said, the RBNZ matched market forecasts while announcing 75 basis points (bps) of a rate hike during its updates to convey the tenth interest rate lift. It should be noted, however, that downbeat economic forecasts suggesting recession in 2023 and sour comments from New Zealand Finance Minister Grant Robertson, suggesting a recession is on the doorstep, also played their roles.

While portraying the moves, NZ 10-year Treasury yields jump 3.87% intraday to 4.30% whereas New Zealand’s benchmark equity index NZX50 dropped 0.70% intraday by the press time.

In addition to the actual 75 bps rate hike, the tenth in the line, the statements from the monetary policy report suggesting that the policymakers also considered a 100 bps rate hike, before announcing the latest move, seemed to portray the utter hawkish move by the RBNZ. On the same line is the RBNZ’s prediction of the Official Cash Rate (OCR) peak of 5.5%, versus the current level of 4.25%.

That said, traders from Auckland are likely to witness further liquidation in equities, as well as a rush towards disowning the Kiwi bonds, ahead of the key activity numbers and the Federal Open Market Committee (FOMC) Meeting Minutes. It should be noted that the press conference from RBNZ Governor Adrian Orr will be closely watched for immediate directions as traders will seek more clues backing the latest hawkish.

Also read: Breaking: NZD/USD is volatile on RBNZ hawkish 75Bp hike

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.1281vs. the last close of 7.1410.

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.

• AUD/NZD takes offers to refresh multi-day low on RBNZ’s hawkish move.
• RBNZ matches market forecasts of announcing 0.75% OCR hike.
• Cautious optimism also favors upside momentum despite downbeat Aussie data.
• Speech from RBNZ Governor Adrian Orr, risk catalysts will be important for fresh impulse.

AUD/NZD stands on the slippery ground as it drops to the lowest levels since early April after the Reserve Bank of New Zealand (RBNZ) announces its latest Interest Rate Decisions on Wednesday. That said, the quote slumped to 1.0763 during an initial reaction before taking rounds to 1.0780 by the press time.

The cross-currency pair’s latest move could also be linked to the market’s risk-on sentiment, as well as the downbeat readings of Australia’s preliminary S&P Global PMIs for November seem to challenge the pair buyers of late.

RBNZ matched market forecasts while announcing 75 basis points (bps) of a rate hike during its updates to convey the tenth interest rate lift. It should be noted, however, that downbeat economic forecasts suggesting recession in 2023 and sour comments from New Zealand Finance Minister Grant Robertson, suggesting a recession is on the doorstep, seemed to have challenged the AUD/NZD bears of late.

Earlier in the day, Australia’s S&P Global Manufacturing PMI eased to 51.5 versus 52.4 expected and 52.7 prior whereas the Services counterpart dropped to 47.2 from 49.3 previous readings and 49.1 market forecasts.

Covid fears from China and mixed comments from Reserve Bank of Australia’s (RBA) Governor Philip Lowe, rejecting any pre-set path, seem to favor the AUD/NZD bears.

While portraying the mood, stocks in Europe and the UK, as well as Wall Street, closed positively whereas the US 10-year Treasury yields dropped six basis points (bps) to 3.76%. That said, the benchmark bond coupons remain mostly unchanged near 3.75% while S&P 500 Futures struggle for clear directions near 4,011 at the latest.

Moving on, a press conference from RBNZ Governor Adrian Orr will be closely watched for immediate directions as traders will seek more clues backing the latest hawkish move from New Zealand’s central bank. That said, the comments on the quarterly economic outlook and the OCR peak will be closely observed.

Technical analysis

AUD/NZD pair’s sustained trading below the 50% Fibonacci retracement level of September 2021 to 2022 upside, near 1.0885 by the press time, keeps sellers hopeful of testing the 61.8% Fibonacci retracement surrounding 1.0740, also known as the Golden Ratio.

• NZD/USD has displayed a wild move in a 50-pips range as the RBNZ has hiked its OCR by 75 bps to 4.25%.
• The risk profile is solid as investors have started averting China’s Covid-19 worries.
• Goldman Sachs sees long-term US Treasury yields at 4% or above till the end of 2024.

The NZD/USD pair has witnessed wild gyration in a 0.6130-0.6178 as the Reserve Bank of New Zealand (RBNZ) has hiked its Official Cash Rate (OCR) by 75 basis points (bps). The RBNZ has ditched the 50 bps rate hike regime this time and has gone for a much bigger rate hike this time. The interest rates have been pushed to 4.25%. The decision by RBNZ Governor Adrian Orr has remained in line with the expectations.

A Reuters poll on RBNZ’s rate hike projections was claiming an increment in the Official Cash Rate (OCR) by 75 bps.

The New Zealand economy is facing troubles due to a historic surge in inflationary pressures. In the third quarter, the inflation rate landed at 7.2% led by significant price growth in services.

Meanwhile, the risk profile is favoring risk-perceived currencies as optimism is fueled in global markets after investors shrugged off uncertainty over economic projections in China due to rising cases of Covid-19. S&P500 futures are trading flat in Tokyo after a bullish Tuesday. The US dollar index (DXY) has dropped below 107.10, carry-forwarding volatility observed in the previous trading session.

The 10-year US Treasury yields have dropped below 3.76% ahead of the release of the Federal Open Market Committee (FOMC) minutes. The minutes will provide a detailed explanation of hiking interest rates by 75 bps consecutively for the fourth time. Apart from that, cues about interest rate guidance will be of significant importance.

A report from Goldman Sachs claim that long-term US yields will remain at 4% or above till the end of 2024, as reported by Bloomberg. The reasoning behind the claim is that the Fed is ignoring economic contraction in its battle against multi-decade high inflation. The investment-banking firm sees no recession in the US and the inflation will remain above target in 2023.

The Reserve Bank of New Zealand has forecasted a higher peak cash rate and has hiked rates by 75 basis points as expected. The knee-jerk was volatile in forex seeing the Kiwi rally, drop and then rally again as the statements were digested. 

RBNZ key takeaways

The nuts and bolts are hawkish, putting a bid into the Kiwi:

RBNZ sees New Zealand economy entering recession in mid-2023.

Sees cash rate rising to higher peak of 5.5% in 2023.

Hikes official cash rate 75bps as expected to 4.25%.

Monetary conditions need to tighten further.

Members agreed that this level had increased since the time of the august statement.

Members agreed OCR needed to reach a level where it was confident it would reduce actual inflation to within the target range.

100 Bps was considered.

NZD/USD update

Resistance is at the November 18 high at 0.6207 with a break targeting 200-day MA at 0.6310:

(H1 and daily charts)

About the RBNZ interest rate decision and rate statement

The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.

• AUD/USD defends a 13-day-old ascending support line, prints mild gains of late.
• Market sentiment remains mildly bid amid a light calendar, pre-data/event anxiety.
• Downbeat Aussie PMIs, mixed concerns over China keep buyers hopeful to confirm the Fed’s 50 bps rate increase in December.

AUD/USD remains mildly bid around 0.6655-50 during early Wednesday, keeping the previous day’s rebound from two-week-old support amid mixed concerns. The Aussie pair’s latest inaction also suggests the indecision among the pair traders ahead of the key US activity data for November, as well as cautious mood ahead of the Federal Open Market Committee (FOMC) Meeting Minutes and the US Durable Goods Orders for October.

Meanwhile, China’s coronavirus conditions continue to worsen as the Daily cases head towards the record top marked in April while Chengdu announces mass COVID-19 testing for its residents from November 23 to 27. It’s worth noting that Beijing reported 388 symptomatic new locally transmitted COVID-19 infections and 1,098 asymptomatic cases for Nov. 22, local government authorities said on Wednesday, per Reuters.

Elsewhere, hopes of resumption of cordial relations with China joined the recently firmer equities and downbeat US Treasury yields to propel the AUD/USD bulls despite witnessing softer Aussie PMIs for November.

“Defence Minister Richard Marles said China’s willingness to reengage was expressed during a bilateral meeting on Tuesday with his Chinese counterpart General Wei Fenghe, their first since the Shangri La dialogues in Singapore in June,” Mentioned the Australian Financial Review (AFR) news.

On a different page, Richmond Fed Manufacturing Index improved to -9 for November versus -10 prior while Kansas City Federal Reserve President Esther George recently said, “(We) could well take a higher interest rate for some time to convince households to hold on to savings.” Earlier in the day, Australia’s S&P Global Manufacturing PMI eased to 51.5 versus 52.4 expected and 52.7 prior whereas the Services counterpart dropped to 47.2 from 49.3 previous readings and 49.1 market forecasts.

Against this backdrop, stocks in Europe and the UK, as well as Wall Street, closed positively whereas the US 10-year Treasury yields dropped six basis points (bps) to 3.76%. That said, the benchmark bond coupons remain mostly unchanged near 3.75% while S&P 500 Futures struggle for clear directions near 4,011 at the latest.

Moving on, traders will look for clues of more confirmatory signals for the economic transition and the Fed’s 50 basis points (bps) worth of rate hike in December to determine the short-term AUD/USD moves. That said, the preliminary readings of November’s PMIs. Also important will be the Federal Open Market Committee (FOMC) Meeting Minutes and the US Durable Goods Orders for October are important for clear directions.

Technical analysis

Despite the latest rebound from a two-week-old ascending support line, currently around 0.6625, AUD/USD bears remain hopeful as the monthly peak surrounding 0.6800 challenges the upside momentum. It’s worth noting that the Relative Strength Index (RSI) placed at 14 joins the recently softer signals from the Moving Average Convergence and Divergence (MACD) to challenge the AUD/USD buyers.

• USD/JPY bulls are hanging in there on the front side of dominant trenbd.
• Bears eye a break of trendline for downside continuation; FOMC minutes eyed. 

USD/JPY is on the back foot and is testing 141.00 with a low of 140.90 so far. The US Dollar retreated across the board on Tuesday and remains on the offer in Asia. Investors are looking past worries about China's COVID flare-ups ahead of Wednesday's Federal Open Market Committee Minutes.

 Equities and high-beta currencies were favored overnight, putting the US Dollar into a downward spiral. The DXY index, that measure the greenback vs. a basket of currencies was last seen down by over 0.5% near the lows of the day at 107.121. The S&P 500 was closing at its highest level in 2-1/2 months. The Dow Jones Industrial Average rose 397.82 points, or 1.18%, to 34,098.1, the S&P 500 gained 53.64 points, or 1.36%, to 4,003.58 and the Nasdaq Composite added 149.90 points, or 1.36%, to 11,174.41. US stock futures were little changed on Wednesday as investors braced for the latest Federal Reserve meeting minutes that could guide the US rates outlook. Meanwhile, there are prospects of a pivot from the Federal Reserve due to recent cooler-than-expected inflationary data within economic releases, notably the last US Consumer Price Index.

Investors will be parsing minutes from the Fed's November meeting for any clues about the December meeting and the outlook for interest rates thereafter with respect to the terminal rate. WIRP suggests a 50 bp hike on December 14 is still fully priced in, but the swaps are starting to gain price in around 30% odds of a terminal rate near 5.25%, according to analysts at Brown Brothers Harriman. ''Those odds will surely change after we get core PCE December 1, jobs data December 2, PPI December 9, and CPI December 13.  However, it’s worth noting that the US economy continues to grow above trend in Q4 and the market should not underestimate the Fed’s need to tighten further.''

Analysts at TD Securities see the minutes shedding light on the FOMC's deliberations regarding the expected downshift in the pace of rate increases. ''With that said, policymakers will also emphasize that the terminal rate is likely edging higher vs prior expectations as the labor market remains overly tight.''

USD/JPY technical analysis

As per the prior analyses, USDJPY Price Analysis: Bull move in and eye 143.00 area, and USD/JPY Price Analysis: The bears are lurking around daily resistance, 140.50 exposed the pair is at a key juncture as the following analysis will illustrate:

In prior analysis, it was stated that so long as the price stays on the front side of the daily trendline, there would be prospects for a significant bullish correction in the days ahead.

Update:

The price is meeting the imbalanced area and has been resisted, so far.

The W-formation is a reversion pattern and if the price holds at the support of the neckline then there will be prospects of a move into the imbalance as illustrated above. 

• A breakout of a symmetrical triangle states an expansion in volatility that results in wider ticks and heavy volume.
• Advancing 20-and 50-EMAs indicate more upside ahead.
• The RSI (14) has shifted into the bullish range of 60.00-80.00, which adds to the upside filters.

The GBP/USD pair has refreshed its three-day high at 1.1903 in the early Asian session as investors’ risk appetite is improving dramatically. The Cable is expected to display more gains as the US dollar index (DXY) is facing sheer pressure due to a significant recovery in the risk-on profile.

The DXY witnessed a steep fall after failing to recapture the round-level resistance of 108.00. Volatility in the DXY counter is expected to remain at the rooftop as investors eye the release of Federal Open Market Committee (FOMC) minutes and the US Durable Goods Orders.

On an hourly scale, the Cable has delivered a breakout of the Symmetrical Triangle chart pattern, which will result in wider ticks and heavy volume. The asset is surpassed the downward-sloping trendline plotted from November 15 high at 1.2029 while the upward-sloping trendline of the chart pattern is placed from November 14 low at 1.1710.

The asset is auctioning above the 20-and 50-period Exponential Moving Averages (EMAs) at 1.1876 and 1.1863 respectively, which adds to the upside filters.

Also, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which favors a bullish momentum.

For a decisive upside, the Cable needs to break Friday’s high at 1.1950, which will drive the asset towards November 15 high at 1.2029, followed by the round-level resistance at 1.2100.

On the flip side, a drop below Monday’s low at 1.1780 will drag the asset toward November 14 low at 1.1710. A slippage below November 14 low will expose the asset to the horizontal support plotted from October 27 high at 1.1646.

GBP/USD hourly chart

• EUR/USD picks up bids to defend the previous day’s rebound.
• Convergence of the 10-DMA, one-week-old resistance line challenges buyers.
• Bears need validation from resistance-turned-support stretched from early October.
• Oscillators seem running out of bullish bias as buyers brace for another battle with the 200-DMA.

EUR/USD prints mild gains around 1.0320 as buyers keep the previous day’s rebound from a one-week low during early Wednesday.

In doing so, the major currency pair jostles with a short-term key resistance comprising the 10-DMA and a one-week-old descending trend line.

It’s worth noting that the receding bullish bias of the Moving Average Convergence and Divergence (MACD) indicator joins the return of the Relative Strength Index, placed at 14, from overbought territory to suggest further hardships for the EUR/USD pair buyers.

Even so, a clear upside break of the 1.0320 resistance could quickly propel the EUR/USD prices toward the 200-DMA hurdle surrounding 1.0400. However, any further advances appear tough and can challenge the bulls.

Even if the EUR/USD buyers manage to cross the 1.0400 hurdle, the monthly high near 1.0481 could act as an additional upside filter.

Alternatively, pullback moves remain elusive until the quote stays beyond the previous resistance line from early October, around 1.0200 by the press time.

Following that, the southward trajectory could aim for the 1.0100 round figure and the previous monthly high near 1.0090.

EUR/USD: Daily chart

Trend: Limited upside expected

Covid-19 cases in China are spiraling toward record highs, forcing officials to again lock down large swaths of the country. China's capital Beijing reported 388 symptomatic new locally transmitted COVID-19 infections and 1,098 asymptomatic cases for Nov. 22, local government authorities said on Wednesday.

This is compared with 274 symptomatic and 1,164 asymptomatic cases the day before.

Authorities said 290 cases on Tuesday were found outside quarantined areas.

Meanwhile, Reuters reported that the Chinese city of Chengdu will conduct mass COVID-19 testing for its residents from Nov. 23 to Nov. 27, a government notice said late on Tuesday.

''Huang Hui, deputy director of the Chengdu Municipal Health Commission, said 'in order to detect infected people as soon as possible, cut off the transmission chain, and curb the rapid rise of the epidemic,' health authorities have decided to implement mass testing across the city from Nov. 23 to Nov. 27.'' 

In Shanghai rules were tightened for people entering the city as the country grapples with a spike in COVID cases, sparking worries about its impact on the economy.

Nevertheless, markets have looked past the threat of a global slowdown related to covid with the S&P 500 closing at its highest level in 2-1/2 months. The Dow Jones Industrial Average rose 397.82 points, or 1.18%, to 34,098.1, the S&P 500 gained 53.64 points, or 1.36%, to 4,003.58 and the Nasdaq Composite added 149.90 points, or 1.36%, to 11,174.41. US stock futures were little changed on Wednesday as investors braced for the latest Federal Reserve meeting minutes that could guide the US rates outlook.

• USD/CAD is displaying a balanced market after a downside momentum.
• Cheerful market mood amid expectation of slowdown in Federal Reserve rate hike pace has impacted the US Dollar.
• Firmer oil prices amid growing supply worries have supported the Canadian Dollar.
• USD/CAD is expected to deliver more downside amid anxiety ahead of the FOMC minutes release.

USD/CAD has turned sideways in the early Asian session after a breakdown of the critical support of 1.3380. The asset witnessed a significant fall on Tuesday after a significant recovery in the risk-on profile. The risk-on profile regained traction as investors chose optimism after remaining uncertain over the economic projections led by Covid-19 worries in China. Also, the market participants are hoping that the holiday season due to Christmas festivities could slow down inflation due to a decline in economic activities.

Meanwhile, the US Dollar Index (DXY) witnessed a vertical fall after failing to recapture the critical hurdle of 108.00. The mighty US Dollar became the victim of a significant improvement in investors’ risk appetite as its three-day winning streak got concluded. Going forward, the US Dollar is expected to remain on tenterhooks as the release of the United States Durable Goods Orders data and the Federal Open Market Committee (FOMC) minutes.

S&P500 witnessed significant gains on Tuesday amid a cheerful market mood. While the returns on US government bonds continued their downside journey amid chatters over a further slowdown in inflation as economic activities and demand for durable goods will hit in the upcoming festive season. The 10-year US Treasury yields have dropped to 3.76%.

United States Durable Goods Orders and FOMC minutes eyed

The risk-perceived currencies have gained traction in the current scenario, however, the optimism could get faded as the release of the United States Durable Goods Orders and the Federal Open Market Committee (FOMC) could infuse volatility in the global markets. As per the projections, the US Durable Goods Orders will land at 0.4%, similar to their prior release. A continuation of an improvement in demand for durable goods could push the prolonged efforts of the Federal Reserve (Fed) policymakers into vain. Federal Reserve chair Jerome Powell is putting his blood and sweat to trim consumer spending and a steady improvement in the demand for durable goods could get things back to the square.

On Thursday, the release of the FOMC minutes will provide detailed reasoning behind the announcement of the fourth consecutive 75 basis points (bps) rate hike. To combat mounting inflation, the Federal Reserve is continuously hiking interest rates. Exhaustion in the inflation pressures has been witnessed by the market participants. The headline inflation has already lowered to 7.7% from the peak of 9.1% and more rate hikes by the Federal Reserve would keep the inflation rate in check. Apart from that, interest rate guidance and current economic and financial prospects will be keenly watched.

Bank of Canada is set to return to a period of low inflation and solid growth

Due to escalating inflation, the Bank of Canada (BOC) has been continuously escalating interest rates. The headline inflation has also dropped to 6.9% after showing a peak at 8.1% in June. Senior Deputy Governor Carolyn Rogers is very much confident about a further slowdown in the inflationary pressures and cited that higher interest rates have started to slow the Canadian economy, putting pressure on households with elevated debt, said in a speech at the University of Ottawa. She further added that "It will take time to get back to solid growth with low inflation but we will get there,"

On Tuesday, Canada’s Retail Sales data dropped sharply by 0.5% vs. an expansion of 0.4% reported earlier. This indicates a sheer slowdown in consumer spending, which may add to the downside filters of the price rise index. Going forward, the speech from Bank of Canada Governor Tiff Macklem will remain in focus. The Bank of Canada Governor is expected to provide interest rate guidance and inflation projections to fade anxiety among market participants.

Firmer oil prices support the Canadian Dollar

Oil prices have displayed a V-shape recovery on a broader note after chatters over intervention by the OPEC+ in the oil market to support oil prices from its imbalanced movements got confirmed after Saudi Energy Minister said that the current OPEC+ deal will continue till the end of 2023. Earlier, the oil exporting countries agreed to cut production of oil by two million barrels each day to boost oil prices. The move is likely to disturb the current demand-supply mechanism, therefore, the oil prices are shaping themselves to turn efficient. The oil prices have recovered above $81.00 after printing a fresh 11-month low at $75.27. Also, a consecutive drop in oil stockpiles by the United States for the week ending November 18 has strengthened oil prices. The United States American Petroleum Institute (API) has reported a decline in oil inventories by 4.8 million barrels. It is worth noting that Canada is a leading exporter of oil to the United States and a significant jump in oil prices has a positive impact on the Canadian dollar.

USD/CAD technical outlook

USD/CAD has witnessed immense selling pressure after attempting to cross the mighty 200-period Exponential Moving Average (EMA) at the psychological resistance of 1.3500 on a four-hour scale. The asset has also dropped below the 20-period EMA at 1.3390, which has turned the short-term momentum in the favor of the Canadian Dollar. A downside move would find cushion around the horizontal support plotted from September 1 high at 1.3208.

Meanwhile, the Relative Strength Index (RSI) (14) has failed to sustain above the bullish range of 60.00-80.00, which indicates that investors are capitalizing rallies for adding shorts.

Early Wednesday at 01:00 GMT market sees the key monetary policy decision by the Reserve Bank of New Zealand (RBNZ) amid hopes of another hawkish play by the New Zealand central bank.

RBNZ is expected to announce the tenth back-to-back increase in its benchmark interest rate, from 3.5% to 4.25%. In doing so, New Zealand’s central bank is up for the first 75 basis points (bps) of a rate hike.

Although the rate hike is mostly priced in, the quarterly Monetary Policy Statement and the press conference by RBNZ Governor Adrian Orr make the event crucial for NZD/USD traders, especially when global inflation fears abate. The stated event is at 02:00 GMT.

Ahead of the event, Australia and New Zealand Banking Group (ANZ) said,

On the same line, analysts at Westpac said,

Considering the market consensus, FXStreet’s Dhwani Mehta said,

How could it affect NZD/USD?

NZD/USD remains sidelined around 0.6150 ahead of the key RBNZ announcements. Also increasing the pair trader’s anxiety are the scheduled release of the preliminary monthly activity data for November and Minutes of the US Federal Reserve’s (Fed) latest minutes

That said, early signals from the RBNZ have already confirmed a 75 bps increase in the Official Cash Rate (OCR) and the same may not please bulls apart from providing an immediate upside. Traders will be more interested in signals for the central bank’s future moves and hence the discussions over the OCR peak, as well as the quarterly economic projections, will be crucial for clear directions.

Technically, a clear break of the recent trading range between 0.6060 and 0.6200 appears necessary for clear directions. That said, a convergence of the 200-EMA and ascending trend line from October 13, around 0.5940, appears an additional important support to watch during the quote’s surprise downside.

Keynotes

NZD/USD portrays pre-RBNZ caution around 0.6150, FOMC Minutes eyed as well

RBNZ Interest Rate Decision Preview: NZD/USD – Buy the rumor, sell the fact on a 75 bps hike

About the RBNZ interest rate decision and rate statement

The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.