CFD Markets News and Forecasts — 28-11-2022

• AUD/JPY is declining towards 92.00 as China’s unrest-inspired volatility will stay for longer.
• Stable Japan’s employment numbers may weigh on the cross ahead.
• This week, the Caixin Manufacturing PMI data will be of utmost importance.

The AUD/JPY pair is expected to extend its downside journey towards the crucial support of 92.00 as the Statistics Bureau of Japan has reported stable employment data. The Unemployment Rate has landed at 2.6% higher than the expectations of 2.5% but in line with the prior release of 2.6%. While, the Jobs/Applicants ratio has been recorded similarly to the projections at 1.35, higher than the former figure of 1.34.

The risk barometer is going through a rough phase as enlarging unrest in China against the rollback of Covid-19 lockdown measures by the Chinese authorities has crippled the Aussie dollar. After meeting the headlines of public protest against curbs, economists didn’t waste a single second in providing weak economic projections for the Chinese economy.

No one could deny the fact that the impact of weaker projections for China won’t restrict to the dragon economy only. Its trading partners like Australia and New Zealand are also facing the heat. China’s protest-inspired risk aversion theme has dragged the AUD/JPY pair to near the critical hurdle of 92.00.

It is worth noting that individuals’ demand for democracy in the place of dictatorship could bring political instability to the Chinese economy. This could weaken investors’ risk appetite further.

Going forward, investors will focus on the Caixin Manufacturing PMI data, which will release on Thursday. The economic data is seen lower at 48.6 vs. the prior release of 49.2. A weaker-than-projected Caixin Manufacturing data could escalate volatility in the cross ahead.

• US Dollar Index struggles to extend the upside momentum after rising the most in a week.
• Clear break of three-week-old descending resistance line, bullish MACD signals favor buyers.
• Double bottoms around 105.30 appear as the key support.

US Dollar Index (DXY) remains sidelined around 106.60 amid early Tuesday, following the biggest daily jump in a week, as bulls seek more clues to extend the latest rebound. Also challenging the upside momentum is the 21-Day Moving Average (DMA).

However, a daily closing beyond the previous resistance line from November 03 joins the bullish MACD signals to suggest further upside of the Greenback’s gauge versus the major six currencies.

It’s worth noting, however, that the 21-DMA hurdle surrounding 106.85 isn’t the ultimate key to the DXY’s rally as a horizontal area established since September 12, near 108.00, could challenge the US Dollar bulls afterward.

Following that, the 61.8% Fibonacci retracement level of the DXY’s August-September upside, near 108.55, could act as the last defense of the bears.

Alternatively, pullback moves may initially aim for the resistance-turned-support line, close to 105.95 by the press time, before revisiting the latest double bottoms marked near 105.30.

In a case where the US Dollar Index remains bearish past 105.30, the odds of witnessing a south-run challenging August month low of 104.63 can’t be ruled out.

US Dollar Index: Daily chart

Trend: Further upside expected

• AUD/USD fell at the start of the week as China's covid spread, lockdowns and protests drive investors into safe havens. 
• Iron Ore prices remain robust and have shrugged off China's covid woes. 
• The Federal Reserve speakers on Monday fanned the flames of risks of higher for longer. 
• US Dollar bulls move in for the kill and eye a break of 107.00, DXY. 

AUD/USD is flat as we approach Tokyo but is at risk of updates relating to China's coronavirus spread, subsequent lockdowns and protests thereof. The risk-off mood has been supporting a move into the US Dollar while a Federal Reserve, (Fed), speaker at the start of the week made hawkish comments, pouring cold water on the brewing sentiment of a Fed pivot. 

China covid woes

Global stocks closed ended lower on Monday as social unrest from China’s prolonged Covid restrictions weighed on investor sentiment. Local governments tightened Covid controls as cases surged, even though earlier this month Beijing adjusted some policies that suggested the world’s second-biggest economy was on its way to reopening. In spite of the readministered stringent measures, China's case numbers last week hit all-time records since the pandemic began. 

The risk-off sentiment that sent global stocks lower was driven by demonstrations that broke out in mainland China as frustrations with Beijing’s zero-Covid policy flooded major cities. In the cities of Shanghai, Wuhan, Guangzhou and Beijing protesters were heard chanting ''down with XI''. 

On Wall Street, supporting a bid in the US Dollar and weighing on the high beta currencies, such as AUD, the Dow Jones Industrial Average lost 497.57 points, or 1.45%, to end at 33,849.46. The S&P 500 fell 1.54% to end at 3,963.94. The Nasdaq Composite finished down 1.58% to close at 11,049.50.

US Dollar bounces back to life, weighing on AUD

The US Dollar, as measured by the DXY index, clawed back earlier losses on Monday. At 106.74 the high, the index was on the way to testing the bear's commitments near 107 the figure as a hawkish Federal Reserve official laid out the case for further rate hikes. James "Bullard, president and CEO of the Federal Reserve Bank of St. Louis said that rates need to go higher to bring inflation down. ''We've got a ways to go to get restrictive on policy,'' he said hawkishly.

Looking ahead, comments from Fed Chair Jerome Powell on Wednesday will be scrutinised closely by investors looking for fresh signals on further tightening. This will come ahead of the end of the week's potential showdown even in the key US Nonfarm Payrolls data. Bullard also said today that a ''tight labour market'' gives the Fed a ''license to pursue a disinflationary strategy.'' At this stage, the Fed is expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14. 

Australian macro is thrown a lifeline by Iron Ore

Despite the bleak outlook for the Chinese economy, Iron Ore, one of Australia's major exports, rose at the start of the week. ''Sentiment remains buoyed by recent measures to support the country’s beleaguered real estate sector,'' analysts at ANZ Bank explained. 

''The People’s Bank of China cut the reserve ratio requirement by 25bp on Friday, following the State Council’s suggestion that monetary tools will be used to maintain liquidity. China also removed restrictions on fundraising used by developers in the past,'' the analysts added. ''They will now be able to raise capital via equity markets that can then be used for debt repayments and acquisitions. This follows earlier this month the release of a 16-point plan which it hopes will boost the real estate market.'' 

China economic data will be key 

On November 20, China will release the NBS PMIs (for the month of November), in the Manufacturing and Non-Manufacturing sector.  Analysts at TD Securities said that the PMIs are likely to fall further due to the rising Covid cases and tightening Covid restrictions that likely weighed heavily.

''Additionally, property woes continue to pressure construction. High-frequency indicators have slowed. Meanwhile, both exports and imports continue to weaken. Separately, increasing Covid cases in high-risk areas will continue to weigh on service sector activity.''

AUD/USD technical analysis

Now on the backside of the trendline, in the 4-hour time frame, the price is carving out the downside in a series of bearish impulses:

Zoomed in on the same time frame, we can see that the price is correcting at support having broken 0.6650. Should resistance hold, at old support, then there will be prospects of yet another bearish impulse for the sessions ahead.  The 0.6580s guard 0.6550 and then 0.6500.

• GBP/JPY remains sidelined after falling the most since early November.
• Risk-aversion, fears surrounding labor strikes in UK weighed on the prices.
• Japan data, BOE Governor Bailey’s speech will direct intraday moves, bears may keep the reins amid sour sentiment.

GBP/JPY stays defensive around 166.00 during early Tuesday, after posting the biggest daily loss in three weeks the previous day. In doing so, the cross-currency pair portrays the market’s inaction, or a search for more clues, following a negative start to the key week.

Looming fears of public servants’ nationwide strike in the UK joined British Prime Minister (PM) Rishi Sunak’s readiness to jostle with China and the Covid woes emanating from the dragon nation to weigh on the GBP/JPY prices the previous day. On the same line could be the downbeat prints of the Confederation of British Industry's (CBI) latest Distributive Trades Survey for November.

As per the latest readings, published on Monday, the CBI Retail Sales for November printed -19 figures versus +18 prior while the gauge showing the Expected Retail Sales for December slumped to the lowest since March 2021, to -21 versus -9 previous readings.

UK PM Rishi Sunak’s indirect attack on Chinese policies joined British Foreign Secretary James Cleverly’s statements pushing Beijing to take note of the lockdown protests to highlight the recently sour terms between Britain and China. On the other hand, “Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over the restrictions flared for the third day and spread to several cities, with police on Monday stopping and searching people at the sites of weekend protests in Shanghai and Beijing,” reported Reuters.  The news joins the all-time high of daily virus infections from the dragon nation to weigh on the sentiment.

Against this backdrop, Wall Street closed in the red and the US Treasury yields improved after an initial slump.

Looking forward, Japan’s Retail Trade and employment numbers for October can offer immediate directions to the GBP/JPY pair traders ahead of a speech from the Bank of England (BOE) Governor Andrew Bailey.

That said, the risk-off mood could gain additional support from BOE’s Bailey and may drown the pair further toward the south amid the recent wave of speculations supporting easy rate hikes.

Technical analysis

A daily closing below the 21-DMA, around 166.90 by the press time, directs GBP/JPY bears towards a seven-week-long ascending support line, near 164.80 at the latest.

• Risk aversion weighed on risk-perceived currencies, bolstering the safe-haven Japanese Yen.
• Hawkish commentary by Federal Reserve officials kept the New Zealand Dollar pressured.
• NZD/JPY Price Analysis: Double top in the daily chart, targets a fall to 80.50.

The New Zealand Dollar (NZD) dropped on Monday, courtesy of US central bankers reassessing further rate hikes for the next year, alongside dented risk appetite by the Covid-19 crisis in China, triggering riots in the country. Therefore, the risk-perceived NZD/JPY weakened and tumbled by 1.55%. As the Asian session begins, the NZD/JPY is trading at 85.62.

NZD/JPY Price Analysis: Technical outlook

The NZD/JPY daily chart dropped from around 86.70 to 85.60s, exacerbated by the formation of a “double top” chart pattern and the fall below last week’s low of around 86.01. Oscillators led by the Relative Strength Index (RSI) turned bearish, which would open the door for the NZD/JPY to test the 100-day Exponential Moving Average (EMA) at 84.86, followed by the 50-day EMA at 84.52. If the NZD/JPY extends its losses, it will probe the confluence of the November 11 swing low and the 200-day EMA around 83.84/84.00. A breach of the latter would confirm the “double top” and will target a fall.

The NZD/JPY first ceiling level would be the 86.00 mark as an alternate scenario. A breach of the latter will expose the 87.00 mark, followed by the two-month high at 87.45. Once cleared, it will invalidate the double top and pave the way toward the YTD high at 87.86.

NZD/JPY Key Technical Levels

• The formation of the Double Bottom chart pattern supports a bullish reversal.
• The asset is on the verge of shifting its business comfortably above the 20-period EMA.
• A range shift by the RSI (14) into 40.00-60.00 indicates a loss in the downside momentum.

The USD/CHF pair is oscillating in a narrow range below the psychological resistance of 0.9500 in the early Tokyo session. The asset witnessed a juggernaut rally on Monday after sensing strength around 0.9410. The US Dollar received significant attention for parking funds by the market participants amid the risk-aversion theme.

The US Dollar Index (DXY) is having a sigh after a vertical rally and is also preparing to extend its rally amid a significant decline in investors’ risk appetite.

On a four-hour scale, the asset has rebounded after forming a ‘Double Bottom’ chart pattern. The formation of the above-mentioned chart pattern indicates a bullish reversal as the asset tested previous lows on November 24 around 0.9388 with less selling pressure.

The major is attempting to cross the 20-period Exponential Moving Average (EMA) at 0.9482, which will turn the short-term trend towards the upside.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range from the bearish range of 20.00-40.00, which signals a loss in the downside momentum.

Going forward, a decisive move above the psychological resistance of 0.9500 will drive the pair towards the 50-EMA at 0.9572, followed by November 21 high around 0.9600.

Alternatively, a drop below November 24 low at 0.9388 will drag the asset towards November 15 low at 0.9356. A slippage below the latter will expose the asset for more downside towards February 10 high around 0.9300.

USD/CHF hourly chart

• USD/CAD seesaws around the highest levels in two weeks after a heavy upside move.
• Oil prices struggle to defend the corrective bounce off the yearly low.
• Hawkish Fedspeak, fears emanating from China keep buyers hopeful.
• Canada’s Q3 GDP, US CB Consumer Confidence will be important for fresh impulse.

USD/CAD bulls take a breather around a fortnight top, making rounds to 1.3500 during Tuesday’s Asian session, after posting the biggest daily jump in 1.5 months the previous day.

The Loonie pair’s rally on Monday could be linked to the US Dollar’s broad run-up on hawkish comments from the Federal Reserve (Fed) officials, as well as Covid woes from China. It should be noted that with the improvement in prices of WTI crude oil, Canada’s key exports failed to weigh on the USD/CAD prices.

“Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over the restrictions flared for the third day and spread to several cities, with police on Monday stopping and searching people at the sites of weekend protests in Shanghai and Beijing,” reported Reuters.  The news joins the all-time high of daily virus infections from the dragon nation to weigh on the sentiment.

Elsewhere, Federal Reserve Bank of Cleveland President Loretta Mester marked the need to see several more good inflation reports and more signs of moderation to back the pause in rate hikes. On the same line, St. Louis Fed President James "Jim" Bullard stated that the situation calls for much higher interest rates than what we've been used to. Further, New York Federal Reserve Bank President John Williams said that he believes the Fed will need to raise rates to a level sufficiently restrictive to push down on inflation and keep them there for all of next year. Recently, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

Amid these plays, Wall Street closed in the red and the US Treasury yields improved after an initial slump. Further, WTI crude oil refreshed the yearly low before closing on the positive side, retreating to $76.60 as of late.

Looking forward, Canada’s third quarter (Q3) Gross Domestic Product (GDP) Annualized, expected to improve from 3.3% to 3.5%, will be important for the USD/CAD pair traders to watch for clear directions. Also crucial will be the monthly US Confederation Board’s (CB) Consumer Confidence for November and the aforementioned risk catalysts. Above all, Friday’s employment numbers from the US and Canada should be awaited before making any major trade decision.

Technical analysis

A daily closing beyond the convergence of the 21 and 50 Exponential Moving Averages (EMAs), around 1.3440 by the press time, favors USD/CAD buyers to aim for the six-week-old resistance line, around 1.3600 at the latest.

• Unable to crack the 200-day EMA, the GBP/USD fell beneath the psychological 1.2000 figure.
• Short-term, the GBP/USD is downward biased, and once reclaiming 1.1900, it might fall to 1.1820s.

The GBP/USD moved downward on Monday, spurred by tensions arising in China due to Covid-19 zero-tolerance restrictions. US central bankers foresee a 2023 year of high-interest rates as they commit to higher for longer bolstered the US Dollar (USD). At the time of writing, the GBP/USD is trading at 1.1957, below its opening price by 0.07%, as the Asian session begins.

GBP/USD Price Analysis: Technical outlook

On Monday, the GBP/USD dived below the 1.2000 figure, exacerbated by Pound Sterling (GBP) buyers unable to crack the 200-day Exponential Moving Average (EMA) around 1.2170. Therefore, the GBP/USD dropped below the 1.2000 figure, eyeing a re-test of an upslope trendline drawn from September lows that pass around 1.1640/60. For that scenario to play out, the GBP/USD needs to drop below the November 23 daily low of 1.1872, which, once cleared, could pave the way for the previously mentioned upslope trendline.

Short term, the GBP/USD is testing the 50-Exponential Moving Average (EMA) in the 4-hour chart at 1.1953. The Relative Strength Index (RSI) sliding below the 50-midline suggests sellers outweigh buyers. Hence, the GBP/USD path of least resistance is downward biased.

The GBP/USD first support would be 1.1953. A decisive break will expose the 1.1900 figure, followed by the S1 daily pivot at 1.1890, ahead of the S2 daily pivot at 1.1828. On the flip side, the GBP/USD first resistance would be 1.2000, followed by the daily pivot point at 1.2010, followed by the R1 daily pivot at 1.2070.

GBP/USD Key Technical Levels

• Gold price has shifted into an inventory adjustment after a sheer decline amid a downbeat market mood.
• The USD Index is aiming to smash the 107.00 hurdle amid an improvement in safe-haven’s appeal.
• Fed’s Mester needs more good inflation reports for supporting the rate hike pause scenario.

Gold price (XAU/USD) has turned sideways in the early Asian session after a perpendicular downfall above the key resistance of $1,760.00. The precious metal is building a cushion of around $1,740.00, at the time of writing. Later, it will be discovered whether the inventory adjustment is an accumulation or a distribution.

The risk profile is still negative, therefore, the odds are favoring the inventory adjustment as a distribution one. The US Dollar Index (DXY) is displaying back-and-forth moves around 106.70 and is aiming to kiss the critical resistance of 107.00 ahead. Meanwhile, the 10-year US Treasury yields are still auctioning below 3.70% despite hawkish commentaries from Federal Reserve (Fed) policymakers.

New York Fed Bank President John Williams is favoring pushing the interest rates to a restrictive level solid enough to propel inflation down and holding them till CY2024. Also, Cleveland Fed Bank President Loretta Mester believes that the Fed is not near to a pause in a rate hike, as reported by Financial Times. She added that more good inflation reports and more signs of moderation are required before building an action plan of pausing rate hikes.

Gold technical analysis

On an hourly scale, gold price is struggling to hold itself above the 23.6% Fibonacci retracement (plotted from November 3 low at $1,616.69 to November 15 high at $1,758.88) at $1,746.50. The precious metal has surrendered the critical support of the 200-period Exponential Moving Average (EMA) at $1,748.10, which was acting as major support earlier.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates more weakness ahead.

Gold hourly chart

• EUR/USD holds lower ground after breaking a three-week-old ascending trend line.
• Impending bear cross on MACD, U-turn from five-month-long resistance line adds strength to bearish bias.
• 61.8% Fibonacci retracement level lures sellers, bulls need validation from monthly top.

EUR/USD remains depressed around 1.0340, following the biggest daily fall in a week. In doing so, the major currency pair also justifies the previous day’s downside break of a three-week-old support line.

Not only the trend-line break but the looming bear cross on the MACD and the EUR/USD pair’s U-turn from the downward-sloping resistance line from late June, around 1.0475, also keeps the bears hopeful.

That said, the pair’s latest weakness aims at the 61.8% Fibonacci retracement level of May-September downside, near 1.0310.

Following that, the previous weekly low and tops marked in September, respectively around 1.0225 and 1.0200, could lure the EUR/USD sellers.

Alternatively, recovery needs to stay beyond the support-turned-resistance, around 1.0410, to lure the short-term EUR/USD buyers. Even so, the multi-day-old descending resistance line, around 1.0475, could stop the quote’s further advances.

Even if the quote stays firmer past 1.0475, the monthly high near 1.0500 appears the last defense of the EUR/USD bears.

Overall, EUR/USD remains on the bear’s radar even if the downside room appears limited.

EUR/USD: Daily chart

Trend: Further downside expected

The Democratic leader of the U.S. Senate urged lawmakers on Monday to back his proposal to bar the US government from doing business with companies that use semiconductors made by producers the Pentagon considers Chinese military contractors, reported Reuters late Monday.

The news quotes Senator Chuck Schumer as he speaks on the Senate restart after the Thanksgiving holiday recess.

“If American business wants the federal government to buy their products or services, they shouldn't be using the kind of Chinese-made chips that, because of Chinese government involvement, put our national security at risk," said Senator Schumer.

"We need our government and our economy to rely on chips made right here in America,” the diplomat adds.

Key quotes

Schumer and Republican Senator John Cornyn introduced their proposal as an amendment to the National Defense Authorization Act, or NDAA, an annual bill setting policy for the Department of Defense expected to pass the Senate and House of Representatives in December.

As one of the only major pieces of legislation Congress passes every year, the NDAA is closely watched by a broad swath of industry and other interests because it determines everything from purchases of ships and aircraft to pay increases for the troops and how to address geopolitical threats.

Lawmakers also use the bill as a vehicle for a wide range of policy measures. The proposal from Schumer and Cornyn would broaden an existing ban on government use of Chinese chips.

Risk-aversion gets more to watch

The news adds strength to the market’s risk-off mood but gets no major immediate response amid the early hours of the Asian session.

Also read: Forex Today: Safe havens in demand on China COVID woes

“The successive shocks to global supply chains from the pandemic and the war in Ukraine could ‘herald a shift’ to an era of more volatile inflation and force central banks to guard against it with tighter monetary policy,” Fed vice chair Lael Brainard said in remarks released on Monday by the U.S. central bank, reported Reuters.

Additional comments

EUR/USD stays pressured

Hawkish Fedspeak has recently helped the EUR/USD bears and so did the comments from Fed’s Brainard. That said, the major currency pair remains pressured near 1.0340 by the press time.

• NZD/USD has witnessed an attempt of recovery after dropping to near 0.6160.
• More downside in the kiwi asset is still favored as the risk-off impulse is still solid.
• This week, Fed Powell’s speech and US ADP Employment data will be of utmost importance.

The NZD/USD pair has sensed some bids after a vertical drop to near 0.6160 in the late New York session. The kiwi asset witnessed intense selling pressure on Monday after surrendering the round-level support of 0.6200. An attempt of a recovery near 0.6160 should not be considered a reversal yet as the market mood is still cautious and a cushion is yet to be finalized.

The US Dollar Index (DXY) has extended its gains to near 106.67 after a V-shape recovery from a low of 105.40. Rising protests against the Covid-19 lockdown in China have posed a significant impact on commodity-linked currencies, being their major trading partners. Therefore, the decline in antipodeans is higher in comparison with gains recorded in the USD Index.

S&P500 has experienced significant losses, portraying a sour market mood. Meanwhile, the returns on US Treasury bonds are still subdued ahead of a speech from Federal Reserve (Fed) chair Jerome Powell. The 10-year US Treasury yields are still below 3.70% after a mild recovery. It seems that anxiety ahead of Fed Powell’s speech has sidelined them.

Apart from Fed Powell’s speech, investors are keeping an eye on the United States Automatic Data Processing (ADP) Employment data. As per the estimates, the US economy has created additional 200k jobs in November vs. the prior release of 239k. The job creation numbers are declining in the past few months as higher interest rates and weaker economic projections have forced firms to use their current manpower in the best manner and postponement of the recruitment process.

It was a volatile start to the week and the US sessions stayed with the theme. The US Dollar edged up to 106.74 on Monday, slightly recovering from a 3-1/2-month low of 105.32 with investors concerned about a global slowing economy and the spread of coronavirus in China.

Federal Reserve policymakers also spoke on Monday and bucking the sentiment that it will be soon time to slow the pace of interest rate hikes for the central bank to assess the economic landscape. Instead, due to a tight labour market James "Jim" Bullard, president and CEO of the Federal Reserve Bank of St. Louis said that this gives the Fed a license to pursue a disinflationary strategy now.

New York Federal Reserve Bank President John Williams on Monday said that he believes the Fed will need to raise rates to a level sufficiently restrictive to push down on inflation, and keep them there for all of next year:

 "I do think we're going to need to keep the restrictive policy in place for some time; I would expect that to continue through at least next year," Williams said at a virtual event held by the Economic Club of New York, adding that he does not expect a recession.

Earlier this month, the Fed delivered its fourth straight 75 basis point rate increase and pushed borrowing costs to the highest since 2008 to tame stubbornly high inflation. Money markets are now pricing in a 70% chance that the central bank would deliver a smaller 50-bps rate hike in December.

Meanwhile, risk-off markets weighed on high beta currencies such as the pound, AUD and euro. ''The lockdowns may make it challenging for China to achieve its forecast economic growth which will also have implications for global economic growth,'' analysts at ANZ Bank said in a note at the start of Tuesday's trade in Asia.

In late afternoon trading, the S&P 500  was down 1.59%. The Nasdaq Composite declined 1.5% while Dow Jones Industrial Average was down 1.44%.

EUR/USD was down some 0.44% falling to a low of 1.0333 from a higher of 1.0496. GBP/USD dropped to 1.1940 from 1.2117. AUD/USD sank to 0.6642 from 0.6727. The yield on the US 10-year note was up 3bp to 3.71%. Oil prices dropped to their lowest level in nearly a year, but then rebounded as the lower prices ignited demand. WTI was up 0.5% to $76.93. Gold fell 0.7% to $1,741.02/oz. BTC/USD was down 1.2% and near the low of the day at 16,004.

• US Dollar got bolstered by Federal Reserve policymaker’s hawkish commentary.
• New York Fed John Williams expects rate cuts by 2024.
• Weaker Retail Sales in Australia and protests in China weighed on the Australian Dollar.
• AUD/USD Price Analysis: Short-term downward biased, eyeing 0.6600.

The Australian Dollar (AUD) plunges as the week begins due to Federal Reserve (Fed) officials’ hawkish commentary, risk aversion spurred by China’s Covid-19 riots, and a weaker-than-expected retail sales report from Australia. Therefore, the US Dollar (USD) is appreciating, as shown by the US Dollar Index (DXY). At the time of writing, the AUD/USD is trading at 0.6650, below its opening price by 1.50%.

Federal Reserve officials to keep hiking rates, eyeing cuts in 2024

Investors’ sentiment remains negative. Federal Reserve officials said that additional rate hikes are needed. St. Louis Fed President James Bullard said the Fed needs to keep increasing rates until 2023. He commented that rates must reach the low end of the 5%-7% rate range, adding that a recession is not inevitable. Echoing some of his comments was the New York Fed President John Williams commenting that he expects inflation to fall to 5.0%-5.5% by the end of 2022 and 3.0%-3.5% by late 2023 and noted that the baseline forecast does not predict a recession for the US. However, traders should know that Williams said the Fed could reduce rates in 2024.

Traders should remember that the Federal Reserve Open Market Committee (FOMC) minutes for the last meeting indicated that “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” cementing the Fed’s moderating interest rates.

China’s Covid-19 riots and weak Australian retail sales weighed on the AUD

Aside from this, protests in China related to Covid-19 lockdowns and mass testing, and fears that if it escalates might derail the global economy, weighed on investors’ mood. According to Bloomberg, “the protests are shaping up one of the biggest threats to the Communist Party since the 1989 Tiananmen crackdown,” keeping investors on their toes.

During the Asian session, Australia’s Retail Sales for October fell by 0.2% MoM vs. estimates of a 0.5% expansion, portraying a more “cautious consumer spending mood after 9 straight months of increase,” according to TD Securities analysts.

“However, sales are still robust on an annual basis at 12.5% y/y. Given the rapid rise in interest rate, household budgets are under pressure, and this is starting to be reflected in the slowdown in consumer spending,” TD analysts wrote.

What to watch

An absent Australian economic calendar will leave traders adrift to US Dollar dynamics. On the US side, the S&P/Case-Shiller Home Prices for September and the Conference Board (CB) Consumer Confidence for November will offer a fresh catalyst to AUD/USD traders.

AUD/USD Price Analysis: Short term

The AUD/USD 4-hour chart suggests that sellers are gathering momentum, pushing prices toward the 38.2% Fibonacci retracement at 0.6643. Additionally, the Relative Strength Index (RSI) dropped to bearish territory, exacerbated by weak Aussie economic data and the AUD/USD exchange rate falling beneath 0.6700. Therefore, the AUD/USD path of least resistance is downwards.

Therefore, the AUD/USD first support would be the 100-Exponential Moving Average (EMA) at 0.6631. Break below will expose the 50% Fibonacci retracement at 0.6594, followed by the 61.8 Fibonacci level at 0.6546. on the flip side, the AUD/USD first resistance would be 0.6700. A breach of the latter will expose the 0.6720 S1 daily pivot-turned-resistance, followed by the daily pivot at 0.6750.

• EUR/USD dropped into key support on risk-off themes.
•  An inverse head & shoulders could be in the making.

At the time of writing, EUR/USD is down some 0.29% falling to a low of 1.0354  from a higher of 1.0496. Risk currencies, such as the Euro are under pressure as protests against COVID restrictions in China weighed on market sentiment.

The violent protests in major Chinese cities over the weekend against the country's strict zero-COVID curbs have knocked growth expectations in the world's second-largest economy. This is creating a flight to safety in support of the yen, US Dollar and CHF.

Meanwhile, the economic challenges facing the euro area are not the same as in the US which is a weight on the euro. ''Supply-side shocks set the scene for an extended period of high inflation coupled with lacklustre growth. A recession seems difficult to avoid and we expect Gross Domestic Product to decline by 0.9% in 2023, followed by stagnation in 2024,'' analysts at Danske Bank argued.  

Key points:

Fed speakers in play

Federal Reserve speakers will be important this week. On Monday, New York Federal Reserve Bank President John Williams said that he believes the Fed will need to raise rates to a level sufficiently restrictive to push down on inflation, and keep them there for all of next year:

 "I do think we're going to need to keep the restrictive policy in place for some time; I would expect that to continue through at least next year," Williams said at a virtual event held by the Economic Club of New York, adding that he does not expect a recession.

James "Jim" Bullard, president and CEO of the Federal Reserve Bank of St. Louis, has said that rates need to go higher to bring inflation down. ''We've got a ways to go to get restrictive on policy.'' He also said the Fed ''will have to keep rates at a sufficiently high level all through 2023 and into 2024.'' 

Bullard also said that a ''tight labour market gives us a license to pursue disinflationary strategy now.''

In this regard, for the week, investors will keep a close watch on Nonfarm Payrolls for November, as well as the second estimate for third-quarter gross domestic product and consumer confidence this month.

EUR/USD technical analysis

Despite the risks of a downside continuation, an inverse head & shoulders could be in the making at this juncture. Bullish commitments around 1.0300/50 would be forming the right-hand shoulder of the bullish pattern.

• Silver price falls below the psychological $21.00 after failing to hurdle the 200-day EMA.
• The break of an upslope trendline exacerbated a fall from daily highs around $21.60s.
• XAG/USD Price Analysis: Break below $20.89 to pave the way to $20.00.

Silver price tumbles below $21.00 late in the North American session amidst risk aversion and the recovery of the US Dollar (USD), as shown by the US Dollar Index (DXY) gaining 0.40% in the day. At the time of writing, the XAG/USD is trading at $20.95, below its opening price by almost 2%.

Silver Price Analysis (XAG/USD): Technical outlook

After XAG/USD failed to crack the 200-day Exponential Moving Average (EMA) at $21.34, the white metal is extending its losses below the $21.00 figure. It should be noted that Silver broke below a 20-day-old upslope trendline, exacerbating Silver’s drop. The Relative Strength Index (RSI), aiming towards the 50-midline, is accelerating, suggesting that sellers are gathering momentum.

Short term, the XAG/USD 4-hour chart portrays sellers’ strength. Notably, XAG/USD hit a daily high of around $21.61 before tumbling and reclaiming the 50 and 100-EMAs. Therefore, the XAG/USD path of least resistance is tilted to the downside. That said, the XAG/USD first support would be November 23, swing low at $20.89. Once cleared, the next support would be the November 21 pivot low at $20.56, followed by the 200-Exponential Moving Average (EMA) at $20.15.

As an alternate scenario, XAG/USD first resistance would be the confluence of the S1 pivot and the 40-EMA at $21.16, followed by the daily pivot point at $21.36, ahead of the R1 pivot at $21.55.

Silver Key Technical Levels

• Markets are risk-off and that is sending GBP below 1.2000.
• GBP/USD is breaking out of a coil which is significant.
• A 100% measured move of the range will target the prior structure at 1.1900.

At the time of writing, GBP/USD is down some 0.9% falling to a low of 1.1976 from a high of 1.2111. Risk currencies, such as the British pound, are under pressure as protests against COVID restrictions in China knocked market sentiment.

GBP/USD is falling below the psychological 1.2000 level and meeting short-term dynamic support. Additionally, fears of a lengthy UK recession were seen weighing on sentiment. Investors await to see what the Bank of England's (BoE) next move will be. There will be several BoE members due to speak this week, including BoE governor Andrew Bailey on Tuesday and chief economist Huw Pill on Wednesday.

The Old Lady has been trying to combat soaring inflation without damaging the economy too much in the process. ''Inflation pressures will remain elevated during 2023, forcing the Bank of England to deliver further hikes,'' analysts at Danske Bank explained. ''We do however see the peak rate well below market pricing and we expect the first cut to be delivered during 2024.''

Ears out for Fed speakers

Meanwhile, Federal Reserve speakers will be key this week. On Monday, New York Federal Reserve Bank President John Williams said that he believes the Fed will need to raise rates to a level sufficiently restrictive to push down on inflation, and keep them there for all of next year:

 "I do think we're going to need to keep the restrictive policy in place for some time; I would expect that to continue through at least next year," Williams said at a virtual event held by the Economic Club of New York, adding that he does not expect a recession.

James "Jim" Bullard, president and CEO of the Federal Reserve Bank of St. Louis, has said that rates need to go higher to bring inflation down. ''We've got a ways to go to get restrictive on policy.'' He also said the Fed ''will have to keep rates at a sufficiently high level all through 2023 and into 2024.''

GBP/USD technical analysis

The bears are moving on the trendline support. However, a correction could be on the cards first as illustrated on the hourly chart above. Nevertheless, the price is breaking out of a coil and a 100% measured move of the range will target the prior structure at 1.1900 and then a 200% measure move aligns with 1.1800.

• AUD/USD bears breaking 4-hour supporting trendline. 
• 0.6650 and then 0.6580 will be key milestones to leave the bears fully in control with 0.6550 and 0.6500 eyed. 

Protests against China's strict zero-COVID policy and restrictions on freedoms in the nation have led to a risk-off start to the week, weighing head8ily on the Aussie as the following technical analysis will show. AUD/USD is currently down some 1.13% having lost its footing from a high of 0.6727 to a low of 0.6665 on the day so far.

AUD/USD daily chart

The price is testing a meanwhile trendline support on the daily chart, with resistance in a double top at the daily structure, as shown on the chart above. The bias is on the downside as follows: 

AUD/USD H4 chart

The 4-hour time frame sees the price testing below the trendline and after a correction into the Fibonacci scale, the bears have moved back in. This puts the focus on the recent lows of 0.6665. However, it will not be until the price break below 0.6650 and then 0.6580 that the bears will be in fully control with 0.6550 and 0.6500 eyed. 

• The Canadian dollar extended its losses amid a risk-off mood.
• New York Fed President Williams said the Fed could hike in 2024.
• Canada printed a deficit on its current account, a headwind for the Loonie.

The Loonie (CAD) extended its losses to two straight days, though it trimmed some of its losses after the USD/CAD hit a daily high of 1.3473 but retreated toward the current spot price. Factors like China’s riot due to Covid-19 zero-tolerance policies and Federal Reserve (Fed) officials laying the ground for slower borrowing cost increases capped the USD/CAD rally. At the time of writing, the USD/CAD is trading at 1.3442, above its opening price.

Fed’s Williams shifted dovish, eyeing the first-rate cut

Risk aversion is the name of the game on Monday. Protests in China related to Covid-19 lockdowns and mass testing, and fears that if it escalates might derail the global economy, weighed on investors’ mood. Federal Reserve officials crossing newswires, led by the New York Fed President John Williams, said that the Fed could reduce rates in 2024, a dovish statement that caused a fall in the USD/CAD from 1.3452 to 1.3420s.

Earlier, Williams said he expects inflation to fall to 5.0%-5.5% by the end of 2022 and 3.0%-3.5% by late 2023 and noted that the baseline forecast does not predict a recession for the US. In the meantime, the St. Louis Fed President James Bullard said the Fed needs to keep increasing rates until 2023. He commented that rates must reach the low end of the 5%-7% rate range, adding that a recession is not inevitable.

Traders should remember that the Federal Reserve Open Market Committee (FOMC) minutes for the last meeting indicated that “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” cementing the Fed’s moderating interest rates.

Of late, the Cleveland Federal Reserve President Loretta Mester stated that she does not believe that the Fed is close to a pause on tightening, reiterating its hawkish stance. Traders should know that Mester expects the FFR to end at around 5%.

Canada posted a current account deficit of C$11.1-billion ($8.3-billion) in the third quarter after surpluses in the first two quarters of 2022, data from Statistics Canada showed.

USD/CAD Key Technical Levels

Reuters reported that the New York Federal Reserve Bank President John Williams on Monday said that he believes the Fed will need to raise rates to a level sufficiently restrictive to push down on inflation, and keep them there for all of next year:

 "I do think we're going to need to keep restrictive policy in place for some time; I would expect that to continue through at least next year," Williams said at a virtual event held by the Economic Club of New York, adding that he does not expect a recession.

"I do see a point, probably in 2024," when the Fed will start reducing interest rates, he said.

US Dollar update

The US Dollar is higher in the North American trade with US stocks on the backfoot amid a global risk-off start to the week. Major market averages opened trading on Monday lower as protests in China over COVID lockdowns brought some selling pressure to global equities.

Early on the Dow dipped 0.4%, the S&P 500 slid 0.5%, and the Nasdaq lost 0.4%. DXY is up 0.18% to 106.25, but the downside is open while below 106.60:

James "Jim" Bullard, president and CEO of the Federal Reserve Bank of St. Louis has said that rates need to go higher to bring inflation down.

Key comments

• USD/JPY tumbled to a fresh three-month-low but rebounded towards 138.70s.
• A double bottom in the USD/JPY daily chart targets a rise to 145.00.
• USD/JPY Price Analysis: Break above 139.00 will exacerbate a rally to 140.00.

The USD/JPY is falling in the North American session, comfortable below the 139.00 figure after hitting a daily low of 137.49, reaching a fresh three-month low on a soft US Dollar (USD). At the time of writing,  the USD/JPY is trading at 138.80, below its opening price by 0.25%.

USD/JPY Price Analysis: Technical outlook

After testing during the last month, the 137.00 mark, the USD/JPY rebounded strongly, reclaiming the 138.00 figure, signaling that buyers stepped in. A possible formation of a “double bottom” chart pattern around 137.50/60 could open the door for a recovery, which could target the 50-day Exponential Moving Average (EMA) at 144.67, as the initial target, on its way to 147.00. Notably, the Relative Strength Index (RSI) remained unchanged as the USD/JPY price action dived toward a multi-month low. Hence, a positive divergence between RSI and price action could pave the way for further USD/JPY upside.

If that scenario continues, the USD/JPY first resistance would be the 140.00 mark. The break above will expose the 100-day EMA at 141.17, followed by the 142.00 figure, and the 50-day EMA at 144.67. In an alternate scenario, the USD/JPY first support would be 138.00. Once cleared, the next support would be the multi-month low around 137.49, ahead of an upslope trendline around 137.00.

USD/JPY Key Technical Levels

Economists at Deutsche Bank see the S&P 500 at 4500 in the first half of next year while EUR/USD is likely to hit 1.15 by late 2023.

2023 should be a more positive year for Treasuries

“When it comes to financial markets, our baseline view is that the current bear market equity rally will continue for now, taking the S&P 500 up to 4500 in the first half of 2023. However, as the recession takes hold from mid-year, we are likely to see the index slumping back.”

“With the end of the Fed’s tightening cycle, and then a recession, it should be a more positive year for Treasuries, with the 10-year yield ending 2023 around its current levels at 3.65%, but bunds will underperform, in our view, with 10-year yields moving to 2.60%.”

“Finally in FX, we see a reversal in the Dollar’s upswing, with EUR/USD strongly moving back above 1.10, likely reaching 1.15 by late 2023.”

• Gold price tumbles below $1750 on traders’ negative sentiment, spurred by geopolitical reasons.
• China’s Covid-19 riots across the country keep Gold on the defensive.
• Soft US Dollar, courtesy of the Fed’s moderating rate hikes, stalled the XAU/USD downfall.
• US Dollar to get direction on a busy economic calendar in the United States.
• Gold Price Analysis: Neutral-upwards, but capped around the $1725-$1770 range.

Gold price edges lower as trading in the United States (US) begins after hitting a daily high of $1763.75. China’s protests about its Covid-19 zero-tolerance policy and its economic consequences weigh on sentiment even though Federal Reserve (Fed) officials laid the ground for moderated rate hikes. A busy economic calendar in the United States might cap last week’s losses in the US Dollar (USD) after the Fed’s dovish November minutes. At the time of writing, the XAU/USD is trading at $1747.11, below its opening price by 0.40%.

Negative sentiment spurred by China's crisis keeps Gold defensive

Global equities are trading in the red, spurred by China’s civil unrest, as protesters take the streets sparked by the Covid-19 zero-tolerance policy and mass testing. According to Bloomberg, “the protests are shaping up one of the biggest threats to the Communist Party since the 1989 Tiananmen crackdown,” keeping investors on their toes. However, Gold’s safe-haven status kept the yellow metal from falling further while also benefitting from a soft US Dollar.

Federal Reserve ready to moderate borrowing costs increases

Since the last couple of weeks, Federal Reserve policymakers opened the door to some moderation in the pace of interest-rate increases. However, they emphasized that inflation is too high and that the Federal Funds rate (FFR) peak would be higher than September’s projections. It should be noted that the Federal Reserve Open Market Committee (FOMC) minutes for the last meeting indicated that “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” further confirming the aforementioned.

Of late, the Cleveland Federal Reserve President Loretta Mester stated that she does not believe that the Fed is close to a pause on tightening, reiterating its hawkish stance. Traders should know that Mester expects the FFR to end at around 5%.

Busy economic calendar in the United States

In the meantime, the US docket will be busy. On the labor market side, the release of November’s ADP Employment Change report, October’s JOLTs Job Openings, Initial Jobless Claims for the last week, and the Nonfarm Payrolls for November would update the employment situation. Regarding the PMIs, the ISM Manufacturing PMIs would be released alongside the Chicago PMI and the S&P Global PMI.

On the Fed speaking side, ahead of the blackout period, for the December meeting, Williams, Bullard, Cook, Bowman, Logan, Barr, Evans, and Powell will speak during the week.

Gold Price Analysis (XAU/USD): Technical outlook

XAU/USD remains neutral-upward biased, as shown by the daily chart. However, it should be noted that in the last week, Gold’s failure to crack the $1770 resistance exacerbated a fall towards $1725.71 the previous week’s low, but a “packed” economic calendar could impact the yellow metal price in the second half of the week.

Upwards, the XAU/USD first resistance would be $1750, followed by the daily high of $1761.18. As an alternate scenario, XAU/USD first support would be $1725.71, followed by the 100-day Exponential Moving Average (EMA) at $1711.74, followed by $1700.

Gold Price closed the choppy week virtually unchanged. The focus shifts to the highly-anticipated November jobs report from the US and coronavirus headlines from China, FXStreet’s Eren Sengezer reports.

China Covid jitters, US NFP to drive XAU/USD's action

“There won’t be any high-impact data releases on Monday and investors should stay focused on coronavirus headlines from China.”

“On Thursday, the ISM will release the Manufacturing PMI data for November. The market reaction to S&P Global’s PMI surveys suggests that the US Dollar might come under selling pressure if the ISM’s PMI report shows that price pressures continued to ease in November while the activity contracted. In that scenario, Gold could push higher with the initial reaction.”

“The US Bureau of Labor Statistics will publish labor market data for November on Friday. Nonfarm Payrolls (NFP) are projected to decline by 30K following October’s growth of 261K. A negative print is likely to weigh heavily on the US Dollar and open the door for a bullish XAU/USD action ahead of the weekend. On the other hand, a positive NFP surprise should have the opposite effect on financial markets and force Gold price to decline.”

• Euro rises on Monday on the back of hawkish comments.
• EUR/GBP finds support again at the 0.8570 zone.

The EUR/GBP is rising sharply on Monday, boosted by a stronger Euro across the board. The cross peaked at 0.8675, hitting the highest level since Wednesday. It is hovering around 0.8560, up more than 50 pips for the day so far.

Key support at 0.8570

Last week and also during October, the 0.8570 area capped the downside. The mentioned area continues to be a critical support that if broken would open the doors to more losses, targeting the 0.8500 area.

As long as the cross remains above 0.8570, losses seem limited. On the upside, the crucial resistance is seen at 0.8690/0.8700, the convergence of horizontal levels and the 20-day Simple Moving Average. A break above would strengthen the outlook for the euro.

Hawkish comments from ECB officials

European Central Bank President Christine Lagarde testified before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament. She reiterated that interest rates will remain their main tool for fighting inflation. Earlier on Monday, ECB Governing Council member Klaas Knot pointed out that more tightening was necessary.

The comments boosted the euro across the board. EUR/USD hit a fresh multi-month high before pulling bank modestly while EUR/CHF peaked at 0.9888, a one-week high.

Technical levels

Federal Reserve Bank of Cleveland President Loretta Mester told the Financial Times that she didn't think that the Federal Reserve was near a pause in interest rate rises. Mester noted that she would need to see several more good inflation reports and more signs of moderation.

"It’s very easy to be caught out by the good news, but we don’t want wishful thinking to take the place of really compelling evidence", Mester explained and added that costs of stopping too early would be too high.

Market reaction

The US Dollar Index,  which dropped to a multi-month low of 105.32, has gone into a recovery phase in the early American session and was last seen losing 0.12% on the day at 105.94.

Brent Crude Oil has broken below the key support level of $83.00. Strategists at Société Générale note that the next targets are located at $79.20/$77.50, then $73.00.

Resistance aligns at $86.80 

“Breakdown below the low of September affirms persistence in decline. Next potential objectives are at $79.20/$77.50, the 50% retracement of the whole uptrend since 2020 and projections of $73.00.”

“Recent pivot high near $86.80 is near-term resistance.”

See: WTI renews yearly low as Coronavirus woes join fears of higher supplies, Oil price cap

• EUR/USD trims part of the earlier advance to the 1.0500 zone.
• The dollar attempts a rebound from initial multi-month lows.
• Lagarde notes high inflation is dampening spending and production.

The still soft note in the dollar motivates EUR/USD to keep the upside bias well and sound above the 1.0400 barrier.

EUR/USD firm on USD-selling

EUR/USD trims part of its earlier advance to the boundaries of 1.0500 the figure at the beginning of the week on the back of the so far lacklustre recovery in the dollar, while yields keep the inconclusive performance on both sides of the Atlantic so far on Monday.

Nothing scheduled in the euro docket leaves all the attention to the speech by Chair Lagarde before the European Parliament. In fact, Lagarde notes that interest rates remain the exclusive tool for fighting inflation and that fiscal policy must be considerate and not add to inflationary pressures. Lagarde also said that inflation risks remain on the upside, at the time when she declined to comment on whether inflation has peaked.

In the US docket, the Dallas Fed Manufacturing Index is due next ahead of the speech by New York Fed J.Williams.

What to look for around EUR

EUR/USD remains firm and manages to surpass once again the 1.0400 hurdle on the back of some renewed weakness in the dollar amidst alternating risk appetite trends.

In the meantime, the European currency is expected to closely follow dollar dynamics, the impact of the energy crisis on the region 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 bloc emerges as an important domestic headwind facing the euro in the short-term horizon.

Key events in the euro area this week: ECB Lagarde (Monday) - EMU Final Consumer Confidence, Economic Sentiment, Germany Flash Inflation Rate (Tuesday) - Germany Unemployment Rate, Unemployment Change, EMU Flash Inflation Rate (Wednesday) - Germany Retail Sales, ECB General Council Meeting, Germany/EMU Final Manufacturing PMI, EMU Unemployment Rate (Thursday) - ECB Lagarde, Germany Balance of Trade (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 0.48% at 1.0434 and faces the next up barrier at 1.0496 (monthly high November 15) ahead of 1.0500 (round level) and finally 1.0614 (weekly high June 27). On the flip side, a breach of 1.0222 (weekly low November 21) would target 1.0032 (100-day SMA) en route to 0.9935 (low November 10).

While Gold is not a strategic asset class, there are tactical reasons to consider adding it. See three ways to go about it, according to strategists at Morgan Stanley.

Physical Gold 

“Investors can buy Gold bars and coins. Investors may pay a premium over the spot price of Gold. Storage fees usually apply. Investors can also take delivery of physical Gold if they want to store it themselves. In such cases, delivery fees would apply.”

Gold funds that own the metal

“Some mutual funds and exchange-traded funds offer investors exposure to Gold. For funds that offer the most direct exposure, their value tracks the price of Gold. The fund shoulders the cost of holding physical supply and passes it along to the investors in the expense ratio. There are some drawbacks: Some Gold funds are taxed as collectibles, so they don’t benefit from the lower long-term capital-gains rates for which stocks may qualify. Plus, they don’t produce any income, so the expense ratio can eat into principal every year.”

Mining companies

“Investors can get exposure through equity in companies that mine for Gold, including the purchase of individual stocks or as part of a fund.”

• EUR/USD climbs to multi-month highs near 1.0500.
• Extra gains look likely beyond the 1.0500 hurdle.

EUR/USD picks up extra upside traction and pokes with the key barrier at 1.0500 the figure on Monday.

Once 1.0500 is cleared, the pair is expected to refocus on the weekly peak at 1.0614 (June 27) ahead of the June top at 1.0773 (June 9) and the May high at 1.0786 (May 30).

Above the 200-day SMA (1.0382), the pair’s outlook should remain constructive.

EUR/USD daily chart

The GBP/USD spotlight turns to its 200-Day Moving Average (DMA), currently seen at 1.2176. Economists at Credit Suisse expect Cable to struggle to surpass this hurdle.

Support at 1.2025 needs to hold to keep the immediate risk higher

“We look for the 200 DMA, now at 1.2176, to cap at first on a closing basis for some fresh consolidation. However, our bias would be to view a pause again as temporary, ahead of a close above the 200 DMA in due course for a test of the 50% retracement of the 2021-2022 fall and August highs at 1.2278/98. Our bias remains to look for this to then cap to define the top of a broader range. Should strength directly extend, we see resistance next at 1.2668.” 

“Support at 1.2025 needs to hold to keep the immediate risk higher. Below can see a setback to 1.1958/52, then the 13 DMA and price support at 1.1910/00 but with fresh buyers expected to show here.”

While testifying before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament in Brussels, European Central Bank (ECB) President Christine Lagarde reiterated that interest rates will remain their main tool for fighting inflation.

Additional takeaways

"In December, we will also lay out the key principles for reducing the bond holdings in our asset purchase programme portfolio."

"It is appropriate that the balance sheet is normalised over time in a measured and predictable way."

"How much further rates need to go, and how fast, will be based on our updated outlook, the persistence of the shocks, the reaction of wages and inflation expectations, and on our assessment of transmission."

"Strong labour markets are likely to support higher wages."

"Fiscal policy needs to be considerate to not add to inflationary pressures."

"Incoming data suggest that wages are picking up, and we will continue to assess their implications."

"Rate adjustments will take some time to be felt in the economy."

"Growth is expected to continue weakening for the remainder of this year and the beginning of next year."

Market reaction

EUR/USD retreated from the multi-month high it touched near 1.0500 earlier in the day and it was last seen trading at 1.0445, where it was up 0.5% on the day.

• The index resumes the downtrend and revisits the 105.30 region.
• The loss of the 200-day SMA opens the door to extra losses.

The US Dollar Index (DXY) comes under extra selling pressure and extends the breakdown of the key 106.00 barrier at the beginning of the week.

The selling pressure motivates the index to flirt with the always relevant 200-day Simple Moving Average (SMA), today at 105.36. A drop below the latter is expected to allow for losses to accelerate and target the August low at 104.63 (August 10).

South of the 200-day SMA, the outlook for the index should shift to bearish.

DXY daily chart 

• GBP/USD reverses an intraday dip amid the emergence of heavy selling around the USD.
• Spot prices lack bullish conviction and remain below a technically significant 200-day SMA.
• The said hurdle coincides with ascending channel resistance and should act as a pivot point.

The GBP/USD pair attracts some buying near the 1.2025 region on Monday, albeit struggles to capitalize on the modest intraday uptick. The pair seesaws between tepid gains/minor losses through the early North American session and now seems to have stabilized in neutral territory, around the 1.2060 area.

The US Dollar comes under heavy selling pressure amid rising bets for a relatively smaller Fed rate hike in December and turns out to be a key factor offering support to the GBP/USD pair. That said, the risk-off mood helps limit the downside for the safe-haven buck. Apart from this, a bleak outlook for the UK economy contributes to capping any meaningful gains for the major.

From a technical perspective, spot prices have been trending higher along an upward-sloping channel over the past two months or so. The top boundary of the said channel, currently around the 1.2170-1.2175 zone, coincides with the very important 200-day SMA. This should now act as a pivotal point, which if cleared decisively will be seen as a fresh trigger for bullish traders.

Meanwhile, oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought zone, favouring bullish traders. That said, it will still be prudent to wait for a convincing breakout through the aforementioned confluence hurdle before positioning for any further appreciating move towards the 1.2270-1.2275 resistance zone.

On the flip side, the daily swing low, around the 1.2025 area, could protect the immediate downside ahead of the 1.2000 psychological mark. Any further decline is more likely to attract fresh buyers and remain limited near the 1.1965 horizontal support. Failure to defend the said support levels will make the GBP/USD pair vulnerable to weakening further below the 1.1900 mark.

The corrective decline could drag spot prices towards the next relevant support near the 1.1845-1.1840 region en route to the 1.1800 mark. Some follow-through selling will expose the 1.1730 intermediate support, the 1.1700 round figure and the 100-day SMA, currently around the 1.1650-1.1640 area.

GBP/USD daily chart

Key levels to watch

NZD/USD’s gains late last week have been halted at the 200-Day Moving Average (DMA) at 0.6296. This barrier is likely to remain a cap for now in the near term, in the opinion of analysts at Credit Suisse.

Kiwi has rejected the 200DMA at 0.6296

“NZD/USD has seen a tentative rejection of major resistance at the 200DMA and the trendline from June at 0.6296/6304. With this rejection in place and daily RSI now again hovering close to overbought levels, we think another pause is likely to unfold. That said, should a break above .here be seen and a break below the 200DMA in the DXY also take place, this would be seen to signal further medium-term strength, with next key resistance seen at the August highs at 0.6456/68.” 

“Near-term support is seen at 0.6162/58 and then at the 13-Day Exponential Average at 0.6135, though only below the recent lows at 0.6062/60 would bring more near-term stability.”

• AUD/USD edges lower for the second successive day, though lacks follow-through selling.
• China’s COVID-19 weigh on investors’ sentiment and undermines the risk-sensitive Aussie.
• The USD remains depressed amid bets for less aggressive Fed rate hikes and offer support.

The AUD/USD pair opens with a modest bearish gap on the first day of a new week and remains depressed through the early North American session. The pair, however, rebounds a few pips from a three-day low and now seems to have stabilized around the 0.6700 round-figure mark.

The global risk sentiment takes a hit amid the worsening COVID-19 situation in China and drives flows away from the perceived riskier Australian Dollar. In fact, China reported a record-high number of daily infections on Saturday. Moreover, the public discontent and widespread protests over the Chinese government's zero-COVID policy raise concerns about a further slowdown in economic activity. This, in turn, triggers a fresh wave of the risk-aversion trade, though the emergence of heavy US Dollar selling helps limit the downside for the AUD/USD pair.

The November FOMC meeting minutes released last week cemented market bets for a relatively smaller 50 bps rate hike by the US central bank in December. This, along with the flight to safety, contributes to the ongoing downfall in the US Treasury bond yields and drags the USD back closer to the monthly low. The fundamental backdrop makes it prudent to wait for strong follow-through selling before confirming that the AUD/USD pair has topped out. Moreover, absent relevant market-moving economic releases further warrant some caution for aggressive bearish traders.

Market participants now look for speeches by influential FOMC members - St. Louis Fed President James Bullard and New York Fed President John Williams. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the AUD/USD pair. The focus, however, will remain on this week's important US macro data, including the closely-watched monthly jobs report (NFP) and fresh developments in China.

Technical levels to watch

GBP/USD trades slightly below the 1.21 level. The pair needs to clear the 1.2080/90 region to open up room for further gains, economists at Scotiabank report.

Key support aligns at 1.2000/10

“Cable is trying to break out of last week’s bull flag consolidation (ceiling resistance at 1.2082). A clear move through the 80/90 zone should see the pair pick up a little more momentum – and perhaps allow the GBP to play catch up with the EUR to some extent – towards 1.2150/55.”

“Key support is 1.2000/10.”

USD/JPY is falling sharply again. Economists at Credit Suisse stay bearish for an eventual test of the 200-Day Moving Average (DMA), now at 134.09.

Initial resistance seen at  139.00

“We maintain our core bearish outlook and we look for an eventual sustained break lower for a test of the 200DMA, now at 134.09. We would not rule out an overshoot to the 38.2% retracement of the 2021/2022 uptrend not far below at 133.09, but we continue to look for a floor in this 134/133.09 zone.” 

“Resistance is seen at 139.00 initially, with a break above 139.46/60 needed to ease the immediate downside bias for a recovery back to the 13DMA at 140.63, but with fresh sellers expected here.”

EUR/USD has reached its highest since the summer. Economists at Scotiabank believe that the pair could hit the 1.06 region.

Test of the low 1.05 area is beckoning

“A test of the low 1.05 area (50% retracement of the 2022 decline) is beckoning.”

“Broader trends are bullish, with the EUR trading above its 200-day MA and finding additional support from bullishly aligned DMI (trend strength) oscillators.”

“Further gains to the low 1.06 region are possible.”

See: EUR/USD could trade back up to the 1.0480/1.0500 area again – ING

• USD/JPY dives to a fresh three-month low on Monday and is pressured by a combination of factors.
• Bets for less aggressive Fed rate hikes and sliding US bond yields continue to weigh on the USD.
• The risk-off mood benefits the safe-haven JPY and also contributes to the sharp intraday decline.

The USD/JPY pair kicks off the new week on a downbeat note and dives to a fresh three-month low during the mid-European session. Spot prices, however, rebound a few pips from the 137.50 area and climb back above the 138.00 mark in the last hour.

The US Dollar fails to capitalize on its modest intraday uptick and comes under heavy selling pressure amid the prospects for a less aggressive policy tightening by the Fed. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, dives back closer to the monthly low and turns out to be a key factor exerting pressure on the USD/JPY pair.

The November FOMC meeting minutes released last week cemented bets for a relatively smaller 50 bps rate hike by the US central bank in December. This is reinforced by the ongoing downfall in the US Treasury bond yields, narrowing the US-Japan rate differential. Apart from this, the risk-off mood benefits the safe-haven Japanese Yen and contributes to the USD/JPY pair's intraday decline.

Investors remain worried about a new COVID-19 outbreak in China and the imposition of strict lockdown measures in several cities. Furthermore, a wave of protests in China over the government’s zero-COVID policy takes its toll on the risk sentiment. Apart from this, technical selling below last week's swing low, around the 138.00 mark, aggravates the bearish pressure surrounding the USD/JPY pair.

That said, the Fed-BoJ policy divergence helps limit deeper losses and assists spot prices to find decent support near the mid-137.00s, at least for the time being. In the absence of any relevant economic data from the US, traders on Monday will take cues from speeches by influential FOMC members - St. Louis Fed President James Bullard and New York Fed President John Williams.

This, along with the US bond yields, will drive the USD demand and provide some impetus to the USD/JPY pair. Adding to this, the broader risk sentiment should allow traders to grab short-term opportunities ahead of the Japanese Unemployment Rate and Retail Sales figures, due for release during the Asian session on Tuesday.

Technical levels to watch

• EUR/JPY adds to Friday’s uptick and approaches 145.00.
• Next on the upside comes the minor hurdle at 146.13.

EUR/JPY extends the recent rebound to the vicinity of the 145.00 neighbourhood at the beginning of the week.

The cross manages to leave behind the earlier pullback to the 143.00 region and now targets the 145.00 zone. The continuation of the bounce exposes a potential test of the weekly high at 146.13 (November 23) in the short term.

In the longer run, while above the key 200-day SMA at 138.83, the positive outlook is expected to remain unchanged.

EUR/JPY daily chart

Recently, the British Pound has rallied largely alongside risk appetite. As the external backdrop is set to improve, economists at HSBC expect the GBP to strengthen against the USD in 2023.

GBP outperformance, despite challenging UK outlook

“The prospect of a fiscal deficit of around 5% of GDP next year is likely to keep structural concerns about the GBP to the fore, but at least the situation is not set to get worse. This may be enough to support a currency that has weakened so much already, especially as there are early signs that the trade balance has begun to improve.”

“The domestic situation is likely to remain challenging, but external sentiment has been the dominant factor for the GBP in recent years. In an environment where global growth bottoms out, rate volatility peaks, and risk sentiment picks up, the GBP is likely to benefit in 2023.” 

The Indian Rupee is set to remain within the 80-83 range against the US Dollar as the Reserve Bank of India (RBI) will be involved in FX intervention, economists at Deutsche Bank report.

RBI to be proactively involved in FX intervention

“We expect the RBI to be proactively involved in FX intervention, to keep Rupee broadly within the 80-83 range, though we don't rule out intermittent overshoot and undershoot from time to time.” 

“We expect USD/INR to be around 82.50 levels by end-Dec'23.”

As far as the need for replenishing FX reserves are considered, one potential positive could be if DXY continues to weaken meaningfully through 2023. This can then add to valuation gains for INR and push up FX reserves (in contrast to the large valuation losses that have led to the depletion in India’s FX reserves in 2022).”

USD/JPY pushes lower and trades below 138.00 for the first time in two weeks. A break under 137.68/137.00 would open up projections of 135.40 and the 200-Day Moving Average near 134.00, economists at Société Générale report.

Initial resistance seen at 139.60

“Daily MACD is in deep negative territory denoting an overstretched move however signals of a meaningful up-move are not yet visible.”

“The pair is close to the low formed earlier this month near 137.68/137.00. Failure to defend this can extend the decline towards projections of 135.40 and 200DMA near 134.00.”

“First resistance is at 139.60.” 

• Gold price climbs to a one-week high on Monday and draws support from a combination of factors.
• Bets for less aggressive rate hikes by the Federal Reserve weigh on the US Dollar and offer support.
• China’s COVID-19 woes weigh on investors’ sentiment and further benefit the safe-haven XAU/USD.

Gold price reverses an intraday dip to the $1,746 area and climbs to over a one-week high during the first half of the European session. Currently trading just above the $1,760 level, the XAU/USD is now looking to build on last week's goodish bounce from the $1,725 region amid the emergence of fresh US Dollar selling.

Weaker USD continues to underpin Gold price

The prospects for a less aggressive policy tightening by the Federal Reserve continue to weigh on the greenback, which, in turn, is seen benefitting the Dollar-denominated Gold. The minutes of the November Federal Open Market Committee (FOMC) meeting released last week revealed that a substantial majority of policymakers judged that a slowing rate hike would soon be appropriate. Moreover, officials were largely satisfied they could stop front-loading the rate increases and move in smaller steps.

Sliding US Treasury bond yields further benefits Gold price

The dovish assessment of the minutes, meanwhile, cemented market bets for a relatively smaller 50 bps lift-off at the next FOMC policy meeting in December. This is evident from an extension of the recent downfall in the US Treasury bond yields, which is seen as another factor weighing on the US Dollar. In fact, the yield on the benchmark 10-year US government bond drops to its lowest level since September and further contributes to driving flows towards the non-yielding Gold price.

China’s COVID-19 woes also boost the safe-haven Gold price

Apart from this, the risk-off impulse - amid the worsening COVID-19 situation in China - provides an additional lift to the safe-haven XAU/USD. China reported a record-high number of daily infections on Saturday. Moreover, public discontent over the zero-COVID policy flared protests across China and raised concerns about a further slowdown in economic activity. This, in turn, takes its toll on the global risk sentiment and boosts demand for the traditional safe-haven Gold price.

Gold price seems poised to appreciate further

The fundamental backdrop seems tilted firmly in favour of bullish traders and supports prospects for a further intraday appreciating move for Gold price. Hence, a subsequent strength towards the next relevant hurdle, around the $1,770 horizontal zone, looks like a distinct possibility. In the absence of any relevant macro data from the US, traders on Monday will take cues from speeches by influential FOMC members - St. Louis Fed President James Bullard and New York Fed President John Williams.

Gold price technical outlook

From a technical perspective, some follow-through buying beyond the $1,770-$1,772 region will be seen as a fresh trigger for bulls and reaffirm the positive outlook. Gold price might then surpass intermediate hurdles near the $1,778 zone and retest its highest level since mid-August, the $1,786 area touched earlier this month. The momentum could assist the XAU/USD to aim to conquer the $1,800 psychological mark.

On the flip side, the intraday low, around the $1,746 area, now seems to protect the immediate downside ahead of the $1,736-$1,735 region. The next relevant support for Gold price is pegged near the $1,725 zone, or a nearly two-week low touched last Wednesday. A convincing break below the latter might prompt some technical selling and drag spot prices further towards the $1,700 round-figure mark.

Key levels to watch

The outlook for the US economy appears challenging. Economists at Danske Bank expect growth to continue moderating.

Recession looming in 2023

“The US economy continues to face rapid inflation stemming from aggregate demand remaining too high. The Fed will continue to tighten financial conditions and push the US economy towards a recession starting in Q2 2023. We expect US GDP to contract by 0.2% in 2023 followed by a gradual recovery of 0.5% in 2024.” 

“While macro momentum has clearly cooled over the recent months, the US economy still remains on a path of modest growth towards the winter, supported by strong exports and resilient private consumption.”

“Risks remain tilted towards inflation pressures turning out more persistent than expected, and thus we expect the Fed to take a cautious approach in eventually easing its monetary policy stance. We expect the Fed Funds rate to rise to 5.00-5.25% in February 2023, and look for four 25 bps cuts only in 2024.” 

• EUR/USD starts the week in a positive fashion well above 1.0400.
• The dollar trades on the defensive amidst lower US yields.
• ECB’s C.Lagarde will speak later in the session on Monday.

The weak note in the greenback allows EUR/USD to advance further north of the 1.0400 mark and clinch fresh 2-week peaks on Monday.

EUR/USD firmer on weak dollar, looks at Lagarde

EUR/USD resumes the upside and leaves behind Friday’s retracement on the back of the so far pronounced pullback in the dollar, which is also accompanied by declining US yields across the curve.

Still around the money market, the German 10-year bund yields slip back below the key 2.0% mark, in line with their American peers.

Earlier on Monday, ECB Board member Knot reiterated that underlying inflation trends are worrisome, at the time when he hinted at the likelihood of potential negative economic growth in the last quarter.

Moving forward, Chair Lagare is due to speak before the European Parliament later on Monday.

Across the pond, the Dallas Fed Manufacturing Index will be the sole release in the docket seconded by the speech by New York Fed J.Williams.

What to look for around EUR

EUR/USD remains firm and manages to surpass once again the 1.0400 hurdle on the back of some renewed weakness in the dollar amidst alternating risk appetite trends.

In the meantime, the European currency is expected to closely follow dollar dynamics, the impact of the energy crisis on the region 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 bloc emerges as an important domestic headwind facing the euro in the short-term horizon.

Key events in the euro area this week: ECB Lagarde (Monday) - EMU Final Consumer Confidence, Economic Sentiment, Germany Flash Inflation Rate (Tuesday) - Germany Unemployment Rate, Unemployment Change, EMU Flash Inflation Rate (Wednesday) - Germany Retail Sales, ECB General Council Meeting, Germany/EMU Final Manufacturing PMI, EMU Unemployment Rate (Thursday) - ECB Lagarde, Germany Balance of Trade (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 0.56% at 1.0442 and faces the next up barrier at 1.0481 (monthly high November 15) ahead of 1.0500 (round level) and finally 1.0614 (weekly high June 27). On the flip side, a breach of 1.0222 (weekly low November 21) would target 1.0032 (100-day SMA) en route to 0.9935 (low November 10).

GBP/USD fluctuates below 1.2100. Economists at ING expect Sterling to remain under pressure amid prospects of recession.

GBP/USD gains will not last

“Three-month GBP/USD traded volatility prices are now under 12% having been near 19% in late September. Clearly, Sterling trading conditions have settled down even as recession expectations solidify.”

“Our view is that these GBP/USD gains will not last and we would not be surprised to see fresh selling interest emerging near the 200-Day Moving Average at 1.2177 or at best the 50% retracement of the 2021-22 drop – at 1.2300.” 

“The current inversion in yield curves around the world does, for a change, look to be a likely harbinger of recession. And with its large current account deficit, Sterling should be expected to remain vulnerable.”

The UK economy has entered a recession. Economists at Danske Bank expect negative GDP growth for four consecutive quarters and growth not to return until the fourth quarter of 2023.

Inflation to stay elevated during 2023

“Q3 GDP figures marked the official start of the recession and the economy is likely to weaken further from here. We expect negative GDP growth for four consecutive quarters. Positive growth will not return until the fourth quarter of 2023. The unemployment rate will increase to 5% by the end of the forecast period.”

“Mortgage rates are pushed higher by a higher central bank rate and political turmoil will most likely be persistently higher. Housing markets have been strong during the pandemic, but due to higher interest rates and a weakening economy, we expect a drop in housing prices of approximately 8% from the top.”

“Inflation pressures will remain elevated during 2023, forcing the Bank of England to deliver further hikes. We do however see the peak rate well below market pricing and we expect the first cut to be delivered during 2024.” 

• GBP/USD reverses an intraday dip amid the emergence of fresh selling around the USD.
• Bets for less aggressive rate hikes by the Fed, sliding US bond yields weigh on the buck.
• China’s COVID-19 jitters could offer support to the safe-haven USD and cap the major.

The GBP/USD pair attracts some dip-buying near the 1.2025 region on Monday and climbs to a fresh daily peak during the early part of the European session. The pair is currently placed around the 1.2100 mark and remains well within the striking distance of its highest level since August 12 touched last week.

Following a modest intraday uptick, the US Dollar comes under some renewed selling pressure and is seen as a key factor lending support to the GBP/USD pair. A dovish assessment of the November FOMC meeting minutes released last week cemented bets for a relatively smaller 50 bps rate hike in December. This is evident from a further decline in the US Treasury bond yields and continues to weigh on the greenback.

The British Pound, on the other hand, continues to draw support from firming expectations that the Bank of England will continue to raise borrowing costs to combat stubbornly high inflation. This provides an additional lift to the GBP/USD pair and remains supportive. That said, a bleak outlook for the UK economy could act as a headwind for the STerling and cap the upside for the major, at least for now.

Apart from this, the prevalent risk-off mood - amid worries about the worsening COVID-19 situation - could offer some support to the safe-haven buck and keep a lid on the GBP/USD pair. In the absence of any major market-moving economic releases, either from the UK or the US, the fundamental backdrop warrants some caution for aggressive traders and before positioning for any further appreciation.

Market participants now look to speeches by influential FOMC members - St. Louis Fed President James Bullard and New York Fed President John Williams. This, along with the US bond yields and the broader risk sentiment, will drive the USD and provide some impetus to the GBP/USD pair. The focus, however, will be on this week's important US macro releases scheduled at the beginning of a new month.

Technical levels to watch

The US Dollar holds its ground following last week's slide. Economists at ING expect DXY to retest the 108-100 area into end-2022. 

USD can strengthen into year-end

“We just do not see conditions in place for a benign Dollar bear trend – even though the buy-side is desperate to put money to work away from the Dollar.” 

“Seasonally, the Dollar is weak in December, but our call is that this year, the greenback can strengthen into year-end.”

“We continue with the view that any weakness in DXY towards the 105.00 area this week will prove short-lived and favour a return to 108-110 into year-end.”

While presenting the financial stability report on Monday, European Central Bank (ECB) policymaker and Slovak central bank President Peter Kazimir said that the “risk of recession in the Eurozone is growing.”

“Rise in interest rates to continue despite unfavorable economic developments,” he added.

Market reaction

The staggering recovery in EUR/USD remains unfazed by these above comments, trading at 1.0440, up 0.45% on the day.

• The index fades Friday’s advance and returns to the sub-106.00 area.
• US yields gives away part of the recent gains on Monday.
• The Dallas Fed Manufacturing Index, Fedspeak come next in the docket.

The greenback starts the week on the defensive and slips back to the area below the 106.00 mark when tracked by the USD Index (DXY).

USD Index looks to risk trends

The index resumes the downside below the 106.00 mark in the wake of the opening bell in the European markets on Monday.

Indeed, the greenback sheds ground vs. the risk-complex, while a sharp decline vs. the Japanese yen follows the negative start of the week in US yields so far. Moving forward, the week will be marked by the speech by Chief Powell on “Economic Outlook, Inflation and the Labour Market” (Wednesday) and the relese of November’s Payrolls (Friday).

In the calendar, the only scheduled release will be the Dallas Fed Manufacturing Index, seconded by short-term bill auctions and a speech by New York Fed J.Williams (permanent voter, centrist).

What to look for around USD

The dollar loses its composure and returns to the sub-106.00 region at the beginning of the week and keeps looking at the risk trends and the social unrest in China as initial drivers for the week ahead.

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: FHFA House Price Index, Consumer Confidence (Tuesday) - Mortgage Applications, ADP Employment Change, GDP Growth Rate, Goods Trade Balance, Pending Home Sales, Fed Powell, Fed Beige Book (Wednesday) - PCE, Initial Jobless Claims, Personal Income/Spending, Final Manufacturing PMI, ISM Manufacturing, Construction Spending (Thursday) - Nonfarm Payrolls, Unemployment Rate (Friday).

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 0.34% at 105.69 and the breakdown of 105.36 (200-day SMA) would open the door to 105.34 (monthly low November 15) and finally 104.63 (monthly low August 10). On the other hand, the immediate resistance emerges at 107.99 (weekly high November 21) followed by 109.13 (100-day SMA) and then 110.44 (55-day SMA).

The Chinese economy has struggled since the COVID-19 virus mutated into the more contagious Omicron variant at the end of 2021. Economists at Danske bank expect China to continue struggling.

Low inflation leaves room for policy stimulus

“China faces three strong headwinds from a) zero-Covid policy, b) property crisis and c) fading exports as the US and Europe head for recession.”

“Growth is set to stay below trend in the coming quarters before recovering in the second half of 2023, where we look for an end to the zero-Covid policy. We look for GDP growth at 3.3% in 2022 rising to 4.9% in 2023 and 5.3% in 2024.”

“Inflation remains low in a global perspective, leaving room for continued stimulus. We look for measures to ease the property crisis to be stepped up.”

“The US-China rivalry continues at unabated pace and China faces challenges from new significant US tech export restrictions.”

• USD/CAD climbs to a one-week high and draws support from a combination of factors.
• Bearish oil prices undermine the Loonie and act as a tailwind amid modest USD strength.
• Bets for less aggressive Fed rate hikes cap the greenback and any further gains for the pair.

The USD/CAD pair builds on Friday's positive move and gains some follow-through traction on the first day of a new week. Spot prices, however, trim a part of intraday gains to a one-week high and retreat below mid-1.3400s during the early European session.

Investors remain worried that the worsening COVID-19 situation in China will dent fuel demand in the world's top crude importer. This, in turn, drags crude oil prices to a fresh YTD low and undermines the commodity-linked Loonie. Apart from this, a modest US Dollar strength - bolstered by the cautious mood - offers some support to the USD/CAD pair.

A wave of protests in China over the government’s zero-COVID policy adds to concerns about a deeper economic downturn and tempers investors' appetite for riskier assets. This is evident from a generally weaker tone around the equity markets and drives haven flows towards the USD. That said, retreating US Treasury bond yields keeps a lid on the greenback.

The global flight to safety, along with the prospects for a less aggressive policy tightening by the Fed, continue to exert downward pressure on the US bond yields. In fact, a dovish assessment of the November FOMC meeting minutes released last week reaffirmed market bets for a relatively smaller 50 bps lift-off at the next FOMC policy meeting in December.

This, in turn, holds back traders from placing aggressive bullish bets around the USD and caps gains for the USD/CAD pair, at least for the time being. Spot prices retreat over 40 pips from the daily high, though have managed to hold comfortably above the 1.3400 mark as traders now look to speeches by influential FOMC members for short-term opportunities.

Technical levels to watch

European Central Bank (ECB) Governing Council member Klaas Knot said on Monday, “recession not a foregone conclusion.”

Additional quotes

“Q4 economic growth will be weak, maybe negative.”

“Need weaker growth for inflation to return to goal.”

Market reaction

Despite the discouraging comments from the ECB policymakers, the EUR/USD is extending its recovery gains above 1.0400. At the press time, the pair is trading at 1.0421, up 0.27% on the day.

China’s Finance Ministry said on Monday that they will extend tariff exemptions on some imported products from the United States until May 31 next year.

No further details are provided on the same.

Market reaction

AUD/USD is keeping its recovery mode intact at around 0.6705, still down 0.65% on the day.  

The highlight of the eurozone data calendar this week will be November price figures. EUR/USD registered its highest weekly close since late June at 1.0402 and could test the 1.0480/1.0500 region, economists at ING report.

Waiting for the next inflation print

“The question is whether inflation will fall back from the highs (not far from 11% year-on-year) and allow the European Central Bank to potentially soften its hawkish rhetoric a little. Currently, the market prices a 62 bps rate hike on 15 December.” 

“We cannot rule out EUR/USD trading back up to the 1.0480/1.0500 area again (though the reasons for that are far from obvious) but reiterate that the second half of the week could potentially push EUR/USD back to the 1.02 area.”

FX option expiries for Nov 28 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0250 2.0b
• 1.0300 737m
• 1.0400 1.6b
• 1.0425 1.0b
• 1.0450 649m

- GBP/USD: GBP amounts        

• 1.1700 873m
• 1.2100 991m
• 1.2300 439m

- USD/JPY: USD amounts                     

• 135.80 600m
• 138.30 590m
• 138.50 842m

- USD/CHF: USD amounts        

• 0.9950 406m

- AUD/USD: AUD amounts  

• 0.6600 308m
• 0.6700 768m

- NZD/USD: NZD amounts

• 0.6140 313m
• 0.6405 312m

Gold price starts the week in the red but holds in a familiar trading range. Defending 23.6% Fibo is critical for XAU/USD’s further upside, FXStreet’s Dhwani Mehta reports.

Next topside resistance is at Friday’s high of $1,761

“The 14-day Relative Strength Index (RSI) remains in the bullish territory, while the 21 and 100-Daily Moving Average (DMA) bullish crossover keeps the upside potential intact.”

“The next topside resistance is at Friday’s high of $1,761, followed by the $1,770 round figure.”

“On the flip side, a breach of $1,747, the 23.6% Fibonacci Retracement (Fibo) level of the latest rally from the November 3 bottom at $1,617,  will open floors for a test of the $1,720. At that level, the ascending 21DMA and 38.2% Fibo level converge. Further down, the horizontal 50DMA at $1,712 will come to the rescue of Gold buyers.”

Another winter, another downturn. In the view of economists at Danske Bank, a recession in the eurozone seems difficult to avoid.

Double dip recession

“Supply-side shocks set the scene for an extended period of high inflation coupled with lacklustre growth. A recession seems difficult to avoid and we expect GDP to decline by 0.9% in 2023, followed by stagnation in 2024.”

“Elevated inflation pressures coupled with the risk of de-anchoring inflation expectations will keep the ECB firmly in tightening mode. Rate cuts could be on the cards in 2024, but uncertainty remains high.”

“Europe’s biggest fragility stems from the (geo)political front, as well as a renewed flaring up of the energy crisis or new COVID-19 outbreaks next winter. Upside risks to the growth outlook arise from pandemic-related private savings buffers, fiscal measures and accelerated investment spending.”

“Atructural reforms to address low productivity and adverse demographic trends as well as securing a leading position in the green transition race remain key.”

• NZD/USD remains under some selling pressure for the second successive day on Monday.
• A weaker risk tone benefits the safe-haven greenback and weighs on the risk-sensitive Kiwi.
• Bets for less aggressive Fed rate hikes cap the USD upside and help limit losses for the pair.

The NZD/USD pair opens with a modest bearish gap on Monday and retreats further from its highest level since August 18 touched last week. The pair remains depressed through the early European session and is currently placed around the 0.6200 mark, just a few pips above the daily low.

The global risk sentiment took a hit amid a wave of protests in China over the government’s zero-COVID policy, which has been fueling concerns about a deeper economic downturn. The anti-risk flow extends some support to the safe-haven US Dollar and turns out to be a key factor dragging the NZD/USD pair lower for the second straight day. That said, the prospects for a less aggressive policy tightening by the Fed keep a lid on any further gains for the greenback and should help limit losses for the major.

It is worth recalling that the minutes of the November FOMC meeting released last Wednesday showed that most policymakers agreed it would soon be appropriate to slow the pace of rate hikes. Furthermore, the markets are now pricing in a greater chance of a relatively smaller 50 bps lift-off at the December FOMC meeting. This is reinforced by the ongoing downfall in the US Treasury bond yields, which should hold back the USD bulls from placing aggressive bets and lend some support to the NZD/USD pair.

Apart from this, an unprecedented 75 bps rate hike by the Reserve Bank of New Zealand (RBNZ) last week supports prospects for the emergence of some dip-buying around the NZD/USD pair. This, in turn, makes it prudent to wait for strong follow-through selling before positioning for a deeper pullback. In the absence of any relevant economic data, traders on Monday will take cues from speeches by influential FOMC members - St. Louis Fed President James Bullard and New York Fed President John Williams.

Technical levels to watch

Economists at TD Securities view risks to the inflation outlook as skewed to the downside. But the Bank of England could deliver further rate hikes until a terminal rate of 4.25%.

Inflation risks are skewed to the downside

“After a prolonged period of time with risks to inflation firmly on the upside, we now think the risks are skewed to the downside as input costs continue to normalize and demand conditions deteriorate further.”

“Our forecast calls for 50 bps hikes to Bank Rate in December and February, with a final 25 bps hike in March that takes it to a terminal rate of 4.25%.”

“Should downside risks to inflation (and the labour market) materialise in the coming few months, however, the risks are that if anything, the BoE might stop its tightening cycle at a slightly lower terminal rate.”

Here is what you need to know on Monday, November 28:

Market mood sours and investors move away from risk-sensitive assets to start the week with China reporting record-high coronavirus cases for the fifth straight day. The US Dollar holds its ground following last week's slide and US stock index futures trade in negative territory in the European morning. The Federal Reserve Bank of Dallas' Texas Manufacturing Survey will be published later in the day. European Central Bank (ECB) President Christine Lagarde will deliver an introductory statement at a hearing before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament in Brussels. Finally, New York Fed President John Williams will speak at an event organized by the Economic Club of New York.

On Sunday, China's National Health Commission reported 40,347 new COVID-19 infections. Meanwhile, hundreds of protestors and police clashed in Shanghai over the weekend as frustrations over strict restrictions boiled over. The Shanghai Composite lost nearly 1% and Hong Kong's Hang Seng fell over 1.5%.

Meanwhile, crude oil prices fell sharply to start the week amid a worsening demand outlook and the barrel of West Texas Intermediate (WTI) dropped to a fresh 2022-low at around $73.50. At the time of press, the WTI was trading near $74, losing 3.5% on the day.

EUR/USD registered its highest weekly close since late June at 1.0402 but started the new week on the back foot. The pair was last seen trading in negative territory at 1.0380.

GBP/USD stays under modest bearish in the early European morning and fluctuates below 1.2100. The UK economic docket will not be featuring any high-impact macroeconomic data releases on Monday.

USD/JPY pushes lower and trades below 138.00 for the first time in two weeks as the Japanese Yen manages to find demand as a safe haven early Monday. Earlier in the day, Bank of Japan (BoJ) Governor Haruhiko Kuroda said that he was expecting the wage pressure to gradually increase with the labor market continuing to tighten.

Gold price dropped to $1,745 during the Asian trading hours on Monday but erased a large portion of its daily losses with the benchmark 10-year US Treasury bond yield falling to its lowest level since early October at 3.62%. XAU/USD was last seen losing 0.15% on the day at $1,752.

Bitcoin moved up and down in a very narrow range over the weekend but lost its traction early Monday. As of writing, BTC/USD was down more than 1% on the day, trading near $16,200. Ethereum dropped below $1,200 on Sunday and extended its slide toward $1,150 at the beginning of the week.

Considering advanced prints from CME Group for natural gas futures markets, open interest partially reversed the previous daily build and went down by around 3.3K contracts on Friday. Volume followed suit and shrank by almost 195K contracts.

Natural Gas: Immediately to the upside comes $7.60

Friday’s strong decline in prices of natural gas was amidst diminishing open interest and volume and opens the door to the continuation of the underlying uptrend in the very near term and with immediate hurdle at the November high at $7.60 per MMBtu (November 23).

• USD/JPY meets with a fresh supply on Monday amid reviving demand for the safe-haven JPY.
• The narrowing of the US-Japan rate differential also underpins the JPY and weighs on the pair.
• A modest USD strength could offer some support to the major and help limit any further losses.

The USD/JPY pair struggles to capitalize on Friday's modest bounce and comes under some renewed selling pressure on the first day of a new week. The pair maintains its offered tone through the early European session and is currently flirting with the daily low, around the 138.30-138.25 region.

The worsening COVID-19 situation drives haven flows towards the Japanese Yen, which is seen exerting downward pressure on the USD/JPY pair. In fact, China reported a record-high number of daily infections on Saturday, forcing the government to impose strict anti-COVID measures in several cities. Moreover, public discontent over the zero-COVID policy flared protests across China and raises concerns about a further slowdown in economic activity. This, in turn, keeps investors on the edge and boosts demand for traditional safe-haven assets.

The flight to safety, along with growing acceptance of a less aggressive policy tightening by the Fed, continue to drag the US Treasury bond yields lower. This results in the further narrowing of the US-Japan rate differential, which provides an additional lift to the Japanese Yen. That said, a modest US Dollar strength extends some support to the USD/JPY pair. This, along with a big divergence in the monetary policy stance adopted by the Federal Reserve and the Bank of Japan, could help limit any further losses, at least for the time being.

Despite a dovish assessment of the November FOMC meeting minutes, the US central bank is still expected to deliver another 50 bps rate hike in December. In contrast, BoJ, so far, has shown no inclination to hike interest rates. Moreover, BoJ Governor Haruhiko Kuroda reiterated that the central bank will stick to its monetary easing to support the economy and achieve the 2% inflation target in a stable fashion. In the absence of any relevant economic data, this warrants caution before placing fresh bearish bets around the USD/JPY pair.

Technical levels to watch

Silver price (XAG/USD) bounces off the daily lows surrounding $21.00 to $21.25 as European traders brace for the key week on Monday. In doing so, the bright metal justifies the mixed signals from the options market, as well as the risk-off mood.

That said, the one-month daily risk reversal (RR), a gauge of call options to put options, dropped in the last fortnight to the latest weekly print of -0.040. It’s worth noting, however, that the receding bearish bias appeared to have challenged the XAG/USD buyers.

Even so, the broad risk-aversion wave, due to the Covid fears, seems to keep the pair buyers hopeful. That said, the record-high daily virus infections from China and the protests to ease the Zero-Covid policy seemed to challenge the market sentiment of late.

On the contrary, alleged defense from Chinese authorities to safeguard equities appeared to trigger the XAG/USD’s latest rebound.

Above all, silver remains on the bear’s radar as the options market flashes downbeat signals, even if being softer of late.

Also read: EUR/USD Analysis: Bulls turn cautious near 200-DMA amid China’s COVID-19 jitters

Gold was largely unchanged last week. XAU/USD‘s technical outlook points to a slightly bullish bias in the short term, FXStreet’s Eren Sengezer reports.

$1,720 forms strong support

“Gold seems to have lost its bullish momentum following last week's action with the Relative Strength Index (RSI) indicator on the daily chart retreating slightly below 60. Nevertheless, XAU/USD holds comfortably above the 20-period Simple Moving Average (SMA), suggesting that sellers remain on the sidelines for the time being.”

“$1,780 aligns as initial resistance. With a daily close above that level, XAU/USD could test $1,800 and target $1,830 if it clears that resistance.”

“On the downside, $1,720 forms strong support ahead of $1,700.”

• EUR/USD pares intraday losses while also keeping bears hopeful.
• Downside break of two-week-old support line, bearish oscillators favor sellers.
• Fortnight-long resistance line, monthly high adds to the upside filters.

EUR/USD licks its wounds near 1.0360, off the daily low surrounding 1.0340, as traders seek more clues to extend the early-day fall heading into Monday’s European session.

The major currency pair’s latest rebound could be linked to a U-turn from the 50-SMA, currently around 1.0350 by the press time.

However, bearish MACD signals and a clear downside break of the two-week-old ascending trend line, close to 1.0400 at the latest, keeps the EUR/USD pair sellers hopeful. Additionally, the steady RSI (14) also defends the bears despite the latest corrective bounce.

Even if the quote crosses the 1.0400 support-turned-resistance, a downward-sloping resistance line from November 15, near 1.0440, will be crucial to challenge the pair buyers.

Following that, the monthly high near 1.0480 could also act as an upside filter before portraying the rally targeting the late June peak surrounding 1.0615.

On the flip side, a break of the 50-SMA support level, near 1.0350 as we write, could renew the downside momentum.

In that case, the previous week’s low near 1.0220 and the early November’s swing high near 1.0100 should gain the market’s attention ahead of the 200-SMA level surrounding 1.0055.

EUR/USD: Four-hour chart

Trend: Further downside expected

CME Group’s flash data for crude oil futures markets noted traders added just 715 contracts to their open interest positions at the end of last week, reaching the second consecutive build at the same time. Volume left behind the previous daily build and went down by around 312.4K contracts.

WTI: On its way to $70.00?

Prices of the barrel of WTI extended the downtrend on Friday amidst rising open interest, which is supportive of the continuation of the downside in the very near term. Against that crude oil prices could revisit the key $70.00 mark per barrel sooner rather than later.

• USD/CHF prints three-day uptrend as sour sentiment underpins US Dollar.
• China-linked woes join pre-data anxiety to favor USD/CHF bulls.
• Swiss Q3 GDP, Fed Chair Powell’s speech and US NFP are the key calendar events.
• Headlines surrounding China are also important for clear directions.

USD/CHF retreats from intraday high but stays on the bull’s radar for the third consecutive day, near 0.9465 heading into Monday’s European session. In doing so, the Swiss Franc (CHF) pair portrays the market’s risk-off mood ahead of the key data/events scheduled for publishing this week.

Although alleged defense from Chinese authorities to safeguard equities appeared to trigger the USD/CHF pair’s latest pullback, the broad risk-aversion wave, due to the Covid fears, seems to keep the pair buyers hopeful. That said, the record-high daily virus infections from China and the protests to ease the Zero-Covid policy seemed to challenge the market sentiment of late.

On the other hand, the cautious mood ahead of Switzerland’s third quarter (Q3) Gross Domestic Product (GDP), expected to grow by 1.0% YoY versus 2.8% prior growth, also seemed to have favored the USD/CHF bulls of late.

Elsewhere, hopes that Federal Reserve Chairman Jerome Powell may sound hawkish during his firmer publish appearance since the November meeting, while also signaling the easy rate hikes, appear to have offered additional strength to the USD/CHF bulls.

Furthermore, a record high online shopping by US citizens on Black Friday favored the US Dollar to pare recent losses. “US shoppers spent a record $9.12 billion online this Black Friday, a report showed on Saturday, as consumers weathered the squeeze from high inflation and grabbed steep discounts on everything from Smartphones to toys,” mentioned Reuters.

Against this backdrop, US stock futures are down 0.70% intraday and the key Treasury bond yields also extend the latest south-run.

Given the recent risk-off mood, the USD/CHF may remain firmer unless the Swiss GDP offers a positive surprise.

Technical analysis

A clear upside break of the two-week-old descending trend line, around 0.9450 by the press time, keeps the USD/CHF bulls hopeful of visiting the 200-DMA hurdle of 0.9636.

Open interest in gold futures markets extended the downtrend for yet another session on Friday, this time shrinking by nearly 4K contracts according to preliminary readings from CME Group. In the same line, volume remained choppy and went down by around 49.2K contracts.

Gold: Next on the upside comes $1,786

Friday’s downtick in gold prices was amidst diminishing open interest and volume, which should mitigate the probability of further weakness in the very near term. In case the rebound resumes, the next target comes at the November peak at $1,786 per ounce troy (November 15).

• Gold price has reclaimed $1,750.00 as the USD Index has failed to extend its recovery despite the risk-off mood.
• The speech from Federal Reserve chair Jerome Powell will trim ambiguity over interest rate slowdown chatters.
• Before United States NFP, US ADP Employment data will provide meaningful cues about the labor market status.
• Gold price is expected to remain on the sidelines ahead of Federal Reserve chair Jerome Powell’s speech and US ADP data.

Gold price (XAU/USD) has attempted a rebound after dropping below the critical support of $1,750.00 in the early European session. The precious metal has reclaimed the $1,750.00 hurdle again as the US Dollar Index (DXY) is struggling to extend its gains after sensing strength in the Tokyo session. The USD Index is failing to sustain above a two-day high at 106.40 despite a cautious market mood.

The situation of unrest in China as households have been frustrated being at home following Covid-19 protocols for a tad longer period. This has spooked the entire global market. S&P500 futures are extending their losses continuously, portraying a risk-aversion theme. Meanwhile, the returns on US Treasury bonds have weakened further as investors have turned anxious ahead of the speech from Federal Reserve (Fed) chair Jerome Powell, scheduled on Wednesday. The 10-year US Treasury yields have dropped to below 3.63%.

China’s unrest cripples Gold price recovery

Intensifying protests by individuals against anti-Covid lockdown measures by the Chinese authorities to curtail infections have dampened the risk-appetite theme. This has led to a sheer decline in the risk-sensitive currencies but has supported the US Dollar. It is worth noting that the decline in gold price is fairly lower than fall risk-perceived assets. The catalysts that are impacting gold price majorly are a recovery in the US Dollar, and anxiety ahead of the speech from Federal Reserve chair Jerome Powell.

Fed chair Jerome Powell’s speech to ease obscurity over 75 bps rate hike spell

Chatters over a slowdown in the current rate hike pace by the Federal Reserve have gone rooftop. Whatever the decision the Federal Reserve will take in the December monetary policy on interest rates, the risk-sensitive assets have enjoyed a ball. Last week’s Federal Open Market Committee (FOMC) minutes cleared that Federal Reserve policymakers are favoring a deceleration in the rate hike pace to reduce financial borrowings and to observe the efforts yet made to slow down inflation.

The speech from Federal Reserve chair Jerome Powell will provide cues to the market participants about whether the Federal Reserve will continue its 75 basis points (bps) rate hike spell or will shift to a lower rate hike extent. A softer tone used for interest rate guidance would strengthen Gold price ahead.

United States ADP Employment- a crucial trigger ahead of US Nonfarm Payrolls

This week, the United States Nonfarm Payrolls (NFP) data will be of significant importance. The extent of the change in employment level in the United States in November will have a critical impact on the interest rate decision by the Federal Reserve. But before that, investors will keep an eye on the United States Automatic Data Processing (ADP) Employment data. According to the estimates, the US economy has added 200k fresh jobs in the labor market, lower than the prior release of 239k.  

The Federal Reserve is continuously tightening its monetary policy, which has resulted in weaker economic projections. Firms have postponed their expansion plans due to higher interest obligations. This has also forced them to postpone their demand for manpower.

Gold technical outlook

Gold price has displayed a steep recovery after testing the 38.2% Fibonacci retracement (plotted from November 3 low at $1,616.69 to November 15 high at $1,758.88) at $1,722.00 and has also crossed the 23.65 Fibo retracement at $1,746.50 on an hourly scale.

The precious metal is hovering around the 50-period Exponential Moving Average (EMA) at $1,753.17, which indicates uncertainty over the short-term trend.

Meanwhile, the Relative Strength Index (RSI) (14) has rebounded after sensing support of around 40.00, which signals that dips are explosively capitalized by the market participants.

• AUD/USD pokes short-term key support confluence as it braces for the biggest daily loss in a week.
• Convergence of 100-DMA, three-week-old ascending trend line probes sellers.
• MACD, RSI conditions tease sellers to aim for a two-month-long horizontal support zone.

AUD/USD bears jostle with short-term key support surrounding 0.6690 as bears try to retake control during early Monday morning in Europe. In doing so, the Aussie pair justifies the market’s risk-off mood as it prepares for the biggest daily fall in a week.

That said, a joint of the 100-Day Moving Average (DMA) and an upward-sloping trend line from November 04, close to 0.6690, appears a tough nut to crack for the AUD/USD pair bears.

It’s worth noting that the impending bear cross on the MACD and the RSI (14) retreat keeps sellers hopeful of breaking the 0.6690 support.

Following that, a south-run towards a broad support region between 0.6550 and 0.6525, comprising multiple levels marked since late September, will gain the market’s attention.

In a case where AUD/USD remains weak past 0.6525, the odds of witnessing a south-run toward the yearly low of 0.6170 can’t be ruled out.

Alternatively, a descending trend line from September 13, close to 0.6775 by the press time, holds the key to AUD/USD buyer’s conviction.

Should the Aussie pair remains firmer past 0.6775, it can quickly refresh the monthly high, currently around 0.6800, by targeting September’s top surrounding 0.6915.

AUD/USD: Daily chart

Trend: Further weakness expected

• Asian indices have witnessed intense heat amid unrest in China due to the anti-Covid lockdown.
• The USD Index is struggling to surpass the immediate hurdle of 106.40 as investors await US GDP data.
• Oil prices have refreshed their 11-month low near $74.00 amid weaker projections.

Markets in the Asian domain are facing immense pressure amid unrest in China on Covid-19 restrictions. Individuals have come to the roads protesting for a rollback of Covid-19 restrictive measures.

The resurgence of Covid-19 in China has been sustained for several months and now households are frustrated and angry being at home without solid earnings to augment basic needs. The situation of protests in China along with slogans of ‘democracy not dictatorship’ has triggered the risk of civil war. This has triggered a risk-aversion theme in global markets, and, the Asia-Pacific region is facing immense heat. Meanwhile, state banks in China are heavily purchasing equities to propel battered markets.

At the press time, Japan’s Nikkei225 slipped 0.50%, ChinaA50 plunged 1.88%, Hang Seng plummeted 1.86% while Nifty50 has gained 0.24% as the China+1 strategy is going to strengthen Indian equity markets.

The US Dollar Index (DXY) is aiming to establish its business above the two-day high of 106.40 amid an improvement in safe-haven’s appeal. The USD index is expected to remain on tenterhooks ahead of the US Automatic Data Procession (ADP) employment data. As per the consensus, the US economy has added 200k jobs in November vs. the prior release of 239k. Accelerating interest rates and weaker economic projections have forced firms to postpone the recruitment process.

On the oil front, oil prices have refreshed their 11-month low near $74.00 as weaker projections for aggregate demand in China have also impacted guidance for oil demand. China is a leading importer of oil and sluggish demand in China is propelling oil bears.

• USD/INR retreats from intraday high as softer oil prices favor INR bulls.
• Covid woes weigh on the market sentiment as traders begin the key week.
• India’s Q3 GDP will be crucial ahead of Fed Chair Powell’s speech, US NFP.

USD/INR remains directionless around 81.70 as it drops from the intraday high during early Monday morning in Europe. In doing so, the Indian Rupee balances the positives from downbeat oil prices to the negatives emanating from China.

WTI crude oil renewed the yearly low around $73.90, near $74.10 by the press time, as fears of increasing supply and less demand, mainly due to the Covid woes, join woes surrounding a limit on Russian oil prices.

It should be noted that the record-high daily virus infections from China and the protests to ease the Zero-Covid policy seemed to challenge the market sentiment of late. On the same line could be the recently downbeat data from Beijing. China’s Industrial Profit dropped to -3.0% during the January to October period versus -2.3% marked for the January-September era.

Reuters mentioned, “Infections rose as hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China's stringent COVID restrictions spread to several cities.” The news also quotes China’s National Health Commission to report a fifth straight daily record of 40,347 new COVID-19 infections on Nov. 27, of which 3,822 were symptomatic and 36,525 were asymptomatic.

Amid these plays, the US stock futures drop nearly 0.70% while the US 10-year Treasury yields fall nearly two basis points (bps) to 3.65% by the press time.

Moving on, India’s third quarter (Q3) Gross Domestic Product (GDP) figures, expected 2.6% YoY versus 13.5% prior, will be crucial for the USD/INR traders to watch on Wednesday amid economic fears. Following that, a speech from the Federal Reserve (Fed) Chairman Jerome Powell and the United States' monthly employment data for November, up for publishing on Thursday and Friday respectively, will be the key to fresh impulse.

Technical analysis

A daily closing beyond the 21-DMA hurdle surrounding 81.70 appears necessary for the USD/INR bulls to retake control.

• GBP/USD prints two-day downtrend, struggles around the intraday low.
• Record daily infections in China, protests to remove Zero-Covid policy weigh on sentiment.
• Fears of widespread lockdowns in the UK supersede hopes of stimulus.

GBP/USD bears attack short-term key support around 1.2050 during the second downbeat performance heading into Monday’s London open. In doing so, the Cable pair struggles to cheer the stimulus hopes amid fears of major strikes in the UK, as well as the Covid woes in China.

“Britain's government intends to make 1 billion pounds ($1.2 billion) of public funding available for home insulation projects from early next year, widening access to assistance that was previously only available to poorer households,” reported Reuters.

On the other hand, the Coronavirus fears escalate amid the record-high daily infections from China and protests over the government’s Zero-Covid policy. The reason could be linked to the alleged fire that killed around 10 people in Shanghai as they couldn’t leave the building because it was partially locked down, per the rumors spread on the internet. “Infections rose as hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China's stringent COVID restrictions spread to several cities,” mentioned Reuters. The news also quotes China’s National Health Commission as it stated, “China reported a fifth straight daily record of 40,347 new COVID-19 infections on Nov. 27, of which 3,822 were symptomatic and 36,525 were asymptomatic.”

Elsewhere, Reuters reported that British public-sector pay will not be able to keep up with soaring inflation, transport minister Mark Harper said on Sunday, as the country faces a wave of industrial disputes. The news also mentioned, “Industrial action is becoming more widespread across Britain's transport network and last week Britain's Royal College of Nursing trade union announced dates for its members' first strike in more than 100 years.”

During the last week, UK’s key activity numbers marked downbeat performance for November and keep the Bank of England (BOE) struggling for clear directions even as hawks expect more rate hikes.

Against this backdrop, the S&P 500 Futures dropped half a percent while the US 10-year Treasury bond yields fell five basis points (bps) to 3.65% by the press time.

Looking forward, risk catalysts could entertain the GBP/USD pair traders ahead of a speech from the Federal Reserve (Fed) Chairman Jerome Powell and the United States' monthly employment data for November, up for publishing on Thursday and Friday respectively.

Technical analysis

A daily closing below a two-week-old ascending support line, near 1.2030 by the press time, appears necessary for the GBP/USD bears to take control. Until then, the buyers targeting the August month high near 1.2300 could keep the reins.

• EUR/USD is expected to resume its downside journey after surrendering the day’s low at 1.0340 as market mood sours.
• The long-term US Treasury yields have dropped further below 3.65% as anxiety ahead of Fed Powell’s speech soars.
• As the Fed is utterly dedicated to bringing price stability, a slowdown in the growth rate is highly recommended.

The EUR/USD pair has faced barricades around 1.0360 after attempting a recovery post a sheer fall to near day’s low at 1.0340. The asset has sensed selling interest as a rebound in the risk-off impulse has weakened risk-sensitive currencies.

The Euro bulls are having a bad day as protests in China by individuals having an agenda of rollback of Covid-19 lockdown measures have trimmed investors’ risk appetite. Meanwhile, the US Dollar Index (DXY) is struggling to sustain above a two-day high at 106.40 as investors are getting anxious ahead of the speech from Federal Reserve (Fed) chair Jerome Powell, which will be dictated on Wednesday.

S&P500 futures are continuously facing immense pressure. The 10-year US Treasury yields have extended their losses below 3.65%. As the Fed is expected to decelerate the rate hike pace led by minutes from the Federal Open Market Committee (FOMC), released last week, the returns on US Treasury bonds are declining vigorously.

The speech from Fed Chair will provide cues about the likely monetary policy action for December’s monetary policy. Apart from that, investors are focusing on the preliminary United States Gross Domestic Product (GDP) data.

The preliminary GDP for the third quarter is seen unchanged at 2.6%. As the Fed is utterly dedicated to bringing price stability, a slowdown in the growth rate is highly recommended. A spell of improvement in the growth rates will continue to keep reign as inflation as it indicates robust demand from individuals, which doesn’t lead to a decline in price growth by the manufacturers and service providers.

On the Eurozone front, investors are awaiting the release of the Eurozone inflation data. The headline HICP is expected to decline to 10.4% vs. the prior release of 10.6%. While the core HICP data that excludes oil and food prices is seen unchanged at 5%.

• China’s anti-Covid protest-inspired risk-off profile has weakened the New Zealand Dollar.
• The US yields have dropped amid anxiety ahead of Fed Powell’s speech.
• A momentum loss in the kiwi asset has been followed by a breakdown of 100-EMA.

The NZD/USD pair has dropped to a short-lived cushion around 0.6200 in the Tokyo session. China’s anti-Covid lockdown protests-inspired volatility has spooked the sentiment of market participants. In the currency domain, commodity-linked currencies have sensed immense selling pressure being a trading partner of China.

Meanwhile, the US Dollar Index (DXY) has tested a two-day high at 106.40 and is expected to sustain above the same. S&P500 futures have extended its losses further, portraying a risk-aversion theme. The 10-year US Treasury yields have tumbled below 3.65% amid anxiety ahead of a speech from Federal Reserve (Fed) chair Jerome Powell, which is due on Wednesday.

On an hourly scale, the Kiwi asset has dropped after facing a loss in the upside momentum. The major dropped to near the round-level support of 0.6200, which was a resistance earlier. The upward-sloping trendline from November 3 low at 0.5741 will continue to act as major support for the counter.

The Kiwi asset has dropped below the 100-period Exponential Moving Average (EMA) at 0.6215 while the 200-EMA at 0.6170 has not been challenged yet.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the bearish range of 20.00-40.00, which indicates more weakness ahead.

Going forward, a drop below November 23 low at 0.6130 will drag the kiwi asset towards the horizontal support placed from November 13 low at 0.6074 and the psychological support at 0.6000.

On the flip side, a break above Friday’s high at 0.6278 will drive the major towards August 1 high at 0.6353, followed by the round-level resistance at 0.6400.

NZD/USD hourly chart

• Gold price snaps four-day uptrend, pressured around intraday low of late.
• Coronavirus fears amplify risk-aversion as China keeps reporting record-high numbers.
• Cautious mood ahead of the key data/events also underpins the XAU/USD weakness.
• US Dollar stays firmer even as Treasury bond yields remain weak.

Gold price (XAU/USD) drops nearly half a percent around $1,750 as bears cheer the first daily negative in five during early Monday. The yellow metal’s latest weakness could be linked to the market’s risk-off mood, as well as the US Dollar’s mild gains.

Markets in the Asia-Pacific region are in the red, led by China, as the Coronavirus fears escalate in the dragon nation amid record-high daily infections and protests over the government’s Zero-Covid policy. The reason could be linked to the alleged fire that killed around 10 people in Shanghai as they couldn’t leave the building because it was partially locked down, per the rumors spread on the internet.

“Infections rose as hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China's stringent COVID restrictions spread to several cities,” mentioned Reuters. The news also quotes China’s National Health Commission as it stated, “China reported a fifth straight daily record of 40,347 new COVID-19 infections on Nov. 27, of which 3,822 were symptomatic and 36,525 were asymptomatic.”

It’s worth noting that the recently downbeat comments from the European Central Bank (ECB) Governing Council Member Gabriel Makhlouf also allowed the US Dollar to cheer remain firmer. That said, the US Dollar Index (DXY) prints mild gains around 106.40 by the press time.

The risk-off mood could also be witnessed by the downbeat performance of the S&P 500 Futures, as well as five basis points (bps) of a decline by the US 10-year Treasury bond yields to 3.65%.

Given the sour sentiment, the Gold price may witness further downside. However, a softer yield may stop the XAU/USD bears ahead of the key data/events. Among them, a speech from the Federal Reserve (Fed) Chairman Jerome Powell and the United States' monthly employment data for November, up for publishing on Thursday and Friday respectively, will be crucial for gold traders to watch. The reason could be linked to Powell’s first appearance since the latest Fed meeting.

Should Mr. Powell hesitate in conveying his routine hawkish comments, as well as the US jobs report ease, the Gold price may witness recovery.

Technical analysis

Be it the failure to cross a two-week-old descending trend line or a U-turn from a downwards-sloping resistance line from November 18, the Gold price called back the bears amid the market’s pessimism.

Also favoring the XAU/USD sellers are the bearish MACD signals, as well as the downbeat but not oversold RSI (14).

However, the 200-EMA level surrounding $1,747 challenge the metal’s immediate downside, a break of which could quickly drag the metal prices towards weekly horizontal support near $1,733.

Meanwhile, Gold buyers may initially confront the aforementioned resistance lines around $1,756 and $1,760 before highlighting the November 18 swing high near $1,768.

In a case where the Gold price remains firmer past $1,768, the monthly high near $1,787 will be in focus.

Overall, the Gold price returns on the bear’s radar but may remain there for a short time.

Gold: Hourly chart

Trend: Limited downside expected

Ashish Jha, US President Joe Biden’s response coordinator for the pandemic, said on ABC’s “This Week” on Sunday, China is unlikely to rein in the latest coronavirus outbreaks by lockdown restrictions unless an improved vaccination campaign is put in place.

Key quotes

“It’s going to be very, very difficult for China to be able to contain this through their Zero COVID strategy.”

“I would recommend that they pursue the strategy making sure everybody gets vaccinated, particularly their elderly.”

“That, I think, is the path out of this virus. Lockdowns and Zero COVID is going to be very difficult to sustain.”

His comments come as several parts of China are grappled with protests against the countries restrictive measures, calling for President Xi Jinping to step down.

Market reaction

At the time of writing, risk sentiment remains heavy, with the US S&P 500 futures down 0.65% on the day while AUD/USD is losing 1% so far to trade at 0.6682.

• USD/CNH steps back after refreshing the highest levels in two weeks.
• MACD turns the most bullish in a month, suggesting further upside.
• Ascending trend line from November 15 restricts immediate declines.

USD/CNH bulls take a breather around 7.2100, after refreshing a fortnight-high around 7.2600 level, during early Monday. In doing so, the offshore Chinese Yuan (CNH) pair witnesses a pullback from a two-month-old horizontal resistance area.

However, the pair’s sustained trading beyond a two-week-old ascending trend line joins the strongest price-positive MACD signals in a month to keep the USD/CNH buyers hopeful.

That said, a clear upside break of the 7.2600-2680 hurdle becomes necessary for the USD/CNH bulls to keep the reins.

Following that, a run-up towards refreshing the all-time high marked earlier in the year around 7.3750 can’t be ruled out.

It’s worth noting that the 7.3000 psychological magnet may act as an intermediate halt during the anticipated rally.

On the contrary, a downside break of the previously mentioned support line, close to 7.1655 by the press time, could recall the USD/CNH bears.

The same could direct the quote’s weakness towards the 50% Fibonacci retracement level of the August-October upside, near 7.0440.

Even so, the 100-Day Moving Average (DMA) support near 7.0065, quickly followed by the 7.0000 round figure could challenge the pair’s further declines.

USD/CNH: Daily chart

Trend: Further upside expected

• WTI holds lower ground nearly the yearly bottom, sidelined of late.
• China renews record high daily Covid infections, protestors demand easing of virus-led restrictions.
• Iraq teases more output ahead of OPEC+ meeting, EU-G7 discusses oil price cap on Russian energy exports.

WTI crude oil drops to the fresh low of 2022 as bears poked $73.90 amid a broad risk-aversion wave, as well as fears of increasing supply and less demand, during early Monday. In doing so, the black gold also portrays the market’s fears of witnessing a limit on Russian oil prices.

China reports another daily all-time high of Covid cases on Monday as it marked the 40,347 numbers to spot the grim conditions in the world’s second-largest economy. “Infections rose as hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China's stringent COVID restrictions spread to several cities,” said Reuters following that data.

Elsewhere, Iraq's state news agency quoted Saadoun Mohsen, a senior official at the country's state oil marketer (SOMO), as saying on Saturday that the nation plans to add a total of 1 million to 1.5 million barrels a day by 2025, per Bloomberg. “Export capacity from southern ports is due to increase between 150,000-250,000 barrels a day from next year,” mentioned the news.

Additionally weighing on the commodity price are the talks among the members of the Group of Seven Nations (G7) and the European Union (EU) continue to drag on the Russian oil price cap. As per the latest updates, the $65 per barrel is the sticking point as discussions are likely to resume on Monday.

Amid these plays, the US stock futures drop nearly 0.70% while the US 10-year Treasury yields fall 3.7 basis points (bps) to 3.66% by the press time.

To sum up, black gold could witness further downside as fears of demand depletion joins the hopes of higher supplies. However, talks surrounding the Russian oil price cap will be crucial for the near-term directions, in addition to the Covid-linked headlines.

Technical analysis

Double-top confirmation keeps WTI bears hopeful of witnessing the sub-$70.00 region on the chart.

Also read: WTI Price Analysis: Bears poke $76.00 with eyes on further downside

• AUD/JPY has fallen like a house of cards to near 92.50 as protests against Covid-19 restrictions in China worsen.
• Individuals in China are demanding democracy over dictatorship.
• A de-growth in Australian Retail Sales has joined China’s civil protests in hammering the Aussie dollar.

The AUD/JPY pair has witnessed an intense sell-off by the market participants as households’ protests in China against Covid-19 restrictions imposed by Chinese authorities have escalated. The risk barometer has fallen like a house of cards to near 92.50 after a gap-down opening to near 93.60.

Individuals in a state of anger and frustration have come out on the roads as the Chinese administration was forced to roll back lockdown measures to contain the Coronavirus spread. The economy recorded the highest number of Covid-19 cases on November 26 at around 40,000. The general public is flaring red flags for the government, shouting slogans of ‘Xi Jinping goes down and demanding democracy against dictatorship.

Escalating fears of civil risk are posing uncertainty for economic projections. China’s economy is already facing vulnerable economic growth and now civil protests will worsen the situation further. This has ignited a risk-off profile in the global markets. It is worth noting that Australia is a leading trading partner of China and China’s weaker economic prospects could have a significant impact on the Aussie dollar.

Meanwhile, de-growth in Australian retail sales data has also weakened the Aussie dollar.  The economic data landed in negative territory at 0.2% vs. the consensus of 0.4% growth and the prior release of 0.6%. A slowdown in retail demand could cheer Reserve Bank of Australia (RBA) policymakers as it might cool down inflationary pressures ahead.

Going forward, Australian monthly Consumer Price Index (CPI) data will remain in focus. The economic data is seen higher at 7.5% vs. the prior release of 7.3%. This might force the RBA chair Philip Lowe to reconsider the decision to a shift to lower rate hike structure.

On the Japanese yen front, Japanese Prime Minister Fumio Kishida said on Monday, “It is critical for the government and the Bank of Japan (BOJ) to collaborate closely and respond flexibly in order to achieve long-term, stable inflation.” Inflationary pressures in Tokyo have shown strength after months of yen weakness and elevated energy costs, as reported by Bloomberg. The headline Consumer Price Index (CPI) in Tokyo escalated to 3.8% vs. the consensus of 3.6%. While core CPI jumped to 2.5% against the projections of 2.1%.

• USD/JPY takes offers to refresh intraday low inside a two-week-long symmetrical triangle.
• Sluggish MACD challenges further downside, 50-SMA adds strength to the triangle’s resistance line.
• Bulls remain unconvinced below 142.50, sellers could aim for 135.80-60 zone on defying triangle formation.

USD/JPY stands on slippery grounds near 138.50 as risk-aversion intensifies during early Monday. Even so, the Yen pair remains inside a 12-day-old symmetrical triangle.

That said, the sluggish signals from the Moving Average Convergence and Divergence (MACD) indicator probe the USD/JPY bears as they approach the stated triangle’s support line, near 138.20 by the press time.

Even so, the 138.00 threshold and the Relative Strength Index (RSI), located at 14, could challenge the pair sellers afterward.

In a case where the USD/JPY stays bearish past 138.00, the odds of witnessing a slump towards the 135.80-60 support zone, comprising levels marked since early August, can’t be ruled out.

Alternatively, a convergence of the 50-SMA and upper line of the aforementioned triangle highlights 140.00 as a tough nut to crack for the USD/JPY bulls.

It should, however, be noted that a fortnight-old horizontal resistance near 142.30-50 will be crucial for the pair buyers as a break that could reverse the latest bearish trend.

Overall, USD/JPY is likely to decline further but the downside room appears limited.

USD/JPY: Four-hour chart

Trend: Limited downside expected

Analysts at Goldman Sachs believe that China may bring an end to its covid-Zero policy before April, earlier than their previous forecast.

Key quotes

“China may end its covid-Zero policy before April -- earlier than widely expected - forecasts a 30% probability of China reopening before the second quarter of 2023.”

“Some chance of a “disorderly” exit.”

“The central government may soon need to choose between more lockdowns and more Covid outbreaks.”

“Local governments have struggled to “balance quickly” controlling the spread of the virus while obeying recent measures mandating a more targeted approach.”

“Still see a Q2 exit from Covid Zero as having the highest chance of happening -- around 60%.”

• The bulls need to hold 1.0350 and get on the back side of the micro bearish trendline resistance.
• Bears eye a break below 1.0300 for the days ahead.

EUR/USD bears have moved in on the risk of the Chinese Communist Party losing power as protesters angered by strict anti-virus measures called for China’s powerful leader to resign. Markets have opened risk-off which is supporting the US Dollar, weighing on the euro as the following technical analysis illustrates: 

EUR/USD Weekly chart

While below 1.0480, the bias is for a downside correction into the support structure. A 50% mean reversion comes in near 1.0050.

EUR/USD daily charts

With that being said, an inverse head & shoulders could be in the making at this juncture. Bullish commitments around 1.0300/50 would be forming the right-hand shoulder of the bullish pattern.

The bears will be back in control on a break of 1.0220.

EUR/USD H4 charts

The bulls need to hold 1.0350 and get on the back side of the micro bearish trendline resistance on the 4-hour chart or face risks of a break below 1.0300. 

Reserve Bank of New Zealand (RBNZ) Karen Silk, Assistant Governor, expressed her view on the economic, inflation and monetary policy outlook in her speech on Monday.

Key quotes

Market reaction

Hawkish comments from RBNZ’s Silk fail to impress New Zealand Dollar bulls, as China-driven risk-aversion weighs heavily on higher-yielding Kiwi. The NZD/USD pair is trading at 0.6200, down 0.65% on the day.

• AUD/USD braces for the biggest daily loss in six weeks amid multiple negatives.
• Australia’s Retail Sales marked the first contraction of 2022, RBA Governor Lowe cites housing market fears.
• China’s virus conditions worsen but protestors demand scrapping of Zero-Covid policy.
• Qualitative catalysts will be more important for fresh directions.

AUD/USD justifies its risk-barometer status as it slumps to 0.6680 during early Monday, marking more than 1.0% daily loss amid the sour sentiment. In addition to the risk-off mood, downbeat data from Australia and the grim comments from Reserve Bank of Australia (RBA) Governor Philip Lowe also favor the Aussie pair’s sellers.

Markets in China are down nearly 3.0% as the Coronavirus fears escalate in the dragon nation amid record-high daily infections and protests over the government’s Zero-Covid policy. The reason could be linked to the alleged fire that killed around 10 people in Shanghai as they couldn’t leave the building because it was partially locked down, per the rumors spread on the internet.

Elsewhere, Australia’s Retail Sales marked a negative growth of 0.2% MoM for October versus the 0.4% expected expansion and 0.6% previous increase. “Australian retail sales suffered their first fall of 2022 in October as rising prices and higher interest rates finally seemed to have an impact on spending power, a surprisingly soft result that supports a slower pace of rate hikes,” mentioned Reuters after the downbeat Aussie data.

It’s worth noting that RBA Governor Lowe cited the wage-spiral risks and the housing market fears to exert more downside pressure on the AUD/USD prices.

While portraying the mood, the US stock futures drop nearly 0.70% while the US 10-year Treasury yields fall 3.7 basis points (bps) to 3.66% by the press time.

Given the risk-off mood and grim catalysts from Australia, AUD/USD is likely to witness further downside ahead of the nation’s recently initiated monthly inflation data, up for publishing on Wednesday. Following that, Thursday’s comments from RBA Governor Philip Lowe and Fed Chair Jerome Powell, as well as Friday’s US employment report for November, will be crucial to watch for clear directions.

Technical analysis

A daily closing below the 0.6690 support confluence, including the 100-DMA and a three-week-old ascending trend line, becomes necessary to recall the AUD/USD bears.

Japanese Prime Minister Fumio Kishida said on Monday, “it is critical for the government and the (Bank of Japan) BoJ to collaborate closely and respond flexibly in order to achieve long-term, stable inflation.”

Additional quotes

Market reaction

Risk-off flows remain at full steam, accelerating the downside in USD/JPY following these comments. At the time of writing, USD/JPY is trading 0.31% on the day at 138.68.

• GBP/JPY takes offers to refresh intraday low, eyes the biggest daily loss in two weeks.
• Virus concerns from China escalate amid record high infections, protests against Zero-Covid policy.
• UK government struggles amid the wage increase in the public sector.

GBP/JPY renews its intraday low around 167.00 during early Monday while bracing for the biggest daily fall in a fortnight as risk-aversion joins pessimism surrounding the UK’s economy.

“British public-sector pay will not be able to keep up with soaring inflation, transport minister Mark Harper said on Sunday, as the country faces a wave of industrial disputes,” reported Reuters. The news also mentioned that industrial action is becoming more widespread across Britain's transport network and last week Britain's Royal College of Nursing trade union announced dates for its members' first strike in more than 100 years.

Elsewhere, the news of the UK’s home insulation program and downbeat British data, as well as the Covid fears emanating from China, seem to weigh on the GBP/JPY prices.

“Britain's government intends to make 1 billion pounds ($1.2 billion) of public funding available for home insulation projects from early next year, widening access to assistance that was previously only available to poorer households,” reported Reuters.

In the last week, the UK’s key activity numbers marked downbeat performance for November and keep the Bank of England (BOE) struggling for clear directions even as hawks expect more rate hikes.

On a different page, protests against China’s Zero-Covid policy in Shanghai and Beijing gain the market’s attention and weigh on the risk appetite, as well as on the GBP/JPY prices. China reported an all-time high of COVID-19 daily cases with nearly 40,000 new infections on Saturday. The dragon nation has been using the stringent policy to limit the virus spread but the outcome hasn’t been a positive one so far. Meanwhile, a deadly fire in a building was allegedly linked to the virus-linked lockdown measures and resulted in mass protests in Beijing and Shanghai.

Amid these plays, the US stock futures drop nearly 0.70% while the US 10-year Treasury yields fall 3.7 basis points (bps) to 3.66% by the press time.

Looking forward, risk catalysts will be crucial for GBP/JPY traders to watch for clear directions. It’s worth noting that the Bank of Japan’s (BOJ) favor for easy money can keep the GBP/JPY buyers hopeful despite the latest weakness.

Technical analysis

A two-month-old ascending trend line, around 166.50 by the press time, appears crucial challenge for the GBP/JPY bears. Meanwhile, a downward-sloping trend line from November 07, close to 169.00 by the press time, restricts the short-term recovery of the pair.

• EUR/GBP is juggling around 0.8600 as the focus has shifted to Eurozone Inflation data.
• ECB’s Lane claimed wages as the primary driver of inflation for the coming years.
• Investors await UK PM Sunak’s first major foreign policy speech.

The EUR/GBP pair is displaying back-and-forth moves in a narrow range around the 0.8600 figure in the Tokyo session. The asset has turned sideways as investors are awaiting the release of the Eurozone inflation data for further guidance, which will release on Wednesday.

The asset is in a rangebound mode for the past week amid the unavailability of potential triggers. Now, the release of the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) will ease obscurity. As per the consensus, the headline HICP will decline to 10.4% vs. the prior release of 10.6%. While the core HICP data that excludes oil and food prices is seen unchanged at 5%.

European Central Bank (ECB) Chief Economist Philip Lane said on Friday, “Wages will be the primary driver of inflation over the coming years.” An adjustment in nominal wages due to a cumulative increment in the cost of living will play out for several years. A time will arise when inflationary pressures will cool down but accelerated nominal wages will sustain, which would lead to a robust demand culture.

Apart from that, investors await more development on the European gas price cap structure. Intercontinental Exchange (ICE) has warned that the finalization of the ceiling on European gas would force energy traders to stump up an additional $33 bln in margin payments, as reported by Financial Times. Such a large increase in margin requirements could “destabilize the market”,

On the United Kingdom front, investors are shifting their focus towards the first major foreign policy speech from UK Prime Minister Rishi Sunak, which he plans to deliver on Monday in London's financial district.

A report from Natixis on UK Pound citing “Sterling’s reserve currency role is under threat has spooked investors.  According to the report, the Sterling is a major reserve currency, accounting for 5% of global foreign exchange reserves while the United Kingdom accounts for only 3% of global GDP.

Bank of Japan (BoJ) Governor Haruhiko Kuroda said in an appearance on Monday that “tightening labor market will help drive up wages ahead.”

Additional quotes

Market reaction

The upbeat remarks from the BoJ Chief are helping the Japanese yen, with USD/JPY falling 0.23% on the day to 138.79, as of writing.

Chinese markets are tanking on the risk of the Chinese Communist Party losing power. 

Protesters angered by strict anti-virus measures called for China’s powerful leader to resign and markets have opened risk-off. Authorities in at least eight cities struggled to suppress demonstrations on Sunday that represent a rare direct challenge to the ruling Communist Party.

Police using pepper spray drove away demonstrators in Shanghai who called for Xi Jinping to step down and an end to one-party rule.

The main contract for FTSE China A50 Index tumbled by more than 3%. Hang Seng Index opens down 3.26%, Tech Index dips 4.5%, tech stocks are dropping, -7%, Tencent, Meituan, and are down 5%.

The US Dollar has benefitted from the risk-off moves: 

AUD/USD has broken key trendline support:

• USD/CAD picks up bids to refresh intraday high.
• Bulls jostle with a convergence of the 21-DMA and two-week-old resistance line.
• MACD teases buyers, 100-DMA appears a tough nut to crack for the USD/CAD bears.

USD/CAD renews intraday high around 1.3440 during the second daily run-up amid early Monday.

In doing so, the Loonie pair buyers attack a convergence of the 21-Day Moving Average (DMA) and a downward-sloping from November 10, around 1.3440 by the press time.

It should be noted that the pair’s successful trading above the 100-DMA and steady RSI joins the impending bull cross on the MACD to keep the USD/CAD buyers hopeful of crossing the 1.3440 hurdle.

Following that, the 38.2% Fibonacci retracement of the pair’s August-October upside, near 1.3500, will challenge the USD/CAD bulls before directing them to the six-week-old resistance line around 1.3610.

On the flip side, a two-week-old ascending support line, near 1.3320 could restrict the immediate downside of the USD/CAD pair before the 100-DMA support of 1.3275.

In a case where the Loonie pair remains weak past 1.3275, the 61.8% Fibonacci retracement level of 1.3207, quickly followed by the 1.3200 round figure, could act as the last defense of the USD/CAD buyers, a break of which will make the pair vulnerable to plunging towards 1.3000 psychological magnet.

Overall, USD/CAD is likely to portray further upside but the 1.3610 is a crucial resistance to watch for the pair traders.

USD/CAD: Daily chart

Trend: Limited recovery expected

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.1617 vs. the last close of 7.1635.

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.

• NZD/USD is aiming to build a cushion around 0.6220 after a gap-down open.
• China’s anti-Covid curbs protests have impacted commodity-linked currencies.
• This week, Fed Powell’s speech will be of utmost importance.

The NZD/USD pair has built a cushion around 0.6220 after a gap-down opening as China’s anti-Covid lockdown protests hammered commodity-linked currencies. The kiwi asset has been declining for the past week after failing to test the round-level hurdle of 0.6300.

Escalating civil risks in China as individuals have come on the roads, showing their denial against the no-tolerance Covid approach and dictatorship structure built by China’s leader Xi Jinping, has strengthened the risk-aversion theme in global markets. This has triggered a risk of economic growth and may add fuel to the already vulnerable real estate market. Soaring fears of civil risks could also lead to political instability that could dampen economic structure for a lengthy period.

It is worth noting that New Zealand is one of the leading trading partners of China and unrest in China could impact New Zealand Dollar

Meanwhile, the US Dollar Index (DXY) is enjoying liquidity from investors as safe-haven appeal has improved dramatically. The USD Index is hovering around 106.20 and is aiming for a volatility contraction as the downside is being supported by China’s anti-locking protests and the upside is capped by expectations of a halt in a bigger rate hike spell by the Federal Reserve (Fed).

S&P500 futures are facing immense heat from market participants amid a risk-off market mood. The 10-year US Treasury yields have dropped again to near 3.68% amid anxiety ahead of a speech from Fed chair Jerome Powell, which is due on Wednesday. The speech from Fed Chair might clear ambiguity on rumors over a halt in the current rate hike pace by the Fed.

• AUD/JPY remains pressured, prints the biggest intraday loss in two weeks.
• Australia’s Retail Sales registered the first contraction of 2022 in October.
• China’s Covid conditions and protests against the Zero-Covid policy weigh on the sentiment.
• Downbeat yields also keep AUD/JPY bears hopeful ahead of the key data/events.

AUD/JPY braces for the biggest daily loss as it drops to 93.30 during the aftermath of disappointing Australia Retail Sales figure, published early Monday. Also weighing on the risk-barometer pair is the downbeat sentiment, mainly due to headlines surrounding China.

Australia’s Retail Sales marked a negative growth of 0.2% MoM for October versus the 0.4% expected expansion and 0.6% previous increase. “Australian retail sales suffered their first fall of 2022 in October as rising prices and higher interest rates finally seemed to have an impact on spending power, a surprisingly soft result that supports a slower pace of rate hikes,” mentioned Reuters after the downbeat Aussie data.

The downbeat data justifies the early-day comments from Reserve Bank of Australia (RBA) Governor Philip Lowe and keep the AUD/JPY bears hopeful.

Also read: RBA Lowe: Worries about the housing supply as the population grows

Elsewhere, protests against China’s Zero-Covid policy in Shanghai and Beijing gain the market’s attention and weigh on the risk appetite, as well as on the AUD/JPY prices. China reported an all-time high of COVID-19 daily cases with nearly 40,000 new infections on Saturday. The dragon nation has been using the stringent policy to limit the virus spread but the outcome hasn’t been a positive one so far. Meanwhile, a deadly fire in a building was allegedly linked to the virus-linked lockdown measures and resulted in mass protests in Beijing and Shanghai.

It’s worth noting that the downbeat performance of the US Treasury yields also weighs on the AUD/JPY prices. As per the latest readings, the benchmark US 10-year Treasury yields dropped two basis points (bps) to 3.68%. In doing so, the key bond coupons remain pressured after declining in the last three weeks.

Looking forward, the risk catalysts are likely to direct short-term AUD/JPY move amid a light calendar for Monday. However, Australia’s monthly inflation data, comments from RBA Governor Philip Lowe and Fed Chair Jerome Powell, as well as Friday’s US employment report for November, will be crucial for a clear guide.

Technical analysis

A U-turn from the 21-DMA, around 94.00 by the press time, joins the AUD/JPY pair’s downside break of a six-week-old ascending trend line, close to 93.60, to keep the bears hopeful of visiting the 93.00 round figure.

• GBP/USD bears are moving in with eyes on the trendline support.
• Bears need to break 1.2050 lows to make way for the 38.2% ratio. 

GBP/USD is down on the day so far, losing 0.15%, with the price falling from a high of 1.2074 to a low of 1.2051 so far.

The sour tone of OBR forecasts has weighed on GBP in the spot market since the Autumn Statement and now the US Dollar is edging higher across the board in a risk-off start to the week.

The Greenback is correcting from multi-month lows on the prospects of the Federal Reserve moderating the pace of its policy tightening.

The following illustrates the prospects of a deeper correcting in cable that targets the trendline support as follows:

GBP/USD daily chart

Bears moved in at around 1.2150 and there are prospects of a deeper correction over the coming days with eyes to 1.1965, or a 38.2% ratio, and then the trendline support:

• AUD/USD remains muted on a negative growth in Retail Sales as China’s Covid-inspired risks carry enough weight.
• Market sentiment has turned cautious amid anti-Covid lockdown protests.
• The USD Index is holding its gains above 106.00 amid a decline in investors’ risk appetite.

The AUD/USD pair has not responded well to the downbeat monthly Retail Sales data as reported by the Australian Bureau of Statistics. The economic data has landed in negative territory at 0.2% vs. consensus of 0.4% growth and the prior release of 0.6%. The Aussie asset is expected to decline to 0.6700 as weaker retail sales data will join anti-Covid lockdown protests in China.

A slowdown in Retail sales might impact the Aussie dollar but will delight the Reserve Bank of Australia (RBA). A slowdown in retail demand usually propels a decline in the inflation rate. RBA Governor Philip Lowe is spending sleepless nights developing strategic plans to scale down inflation in Australia. The Australian inflation displayed a historic surge in its third-quarter report, which forced the RBA to escalate its inflation guidance to 8.0%.

Apart from that, anti-Covid curb protests in China have triggered a risk-aversion theme. Commodity-linked currencies are facing sheer heat amid a decline in the risk appetite of investors. Frustration led by prolonged Covid-19 curbs by Chinese authorities has forced individuals to shout slogans of ‘XI Jinping goes down. A demand for democracy over dictatorship could propel civil risks in China.

It is worth noting that Australia is a leading trading partner of China and China’s weaker economic prospects could have a significant impact on the Aussie dollar.

Meanwhile, the US Dollar Index (DXY) is holding a majority of its gains above 106.00 amid an improvement in safe-haven’s appeal. S&P500 futures have extended their losses portraying a cautionary mood of the market participants. The 10-year US Treasury yields have resumed their downside journey ahead of the speech from Federal Reserve (Fed) chair Jerome Powell.

The speech from Fed Chair, scheduled on Wednesday, will dictate the likely monetary policy action by the Fed in its December monetary policy meeting. Apart from that, United States Automatic Data Processing (ADP) Employment data will be of significant importance. The economic data is seen lower at 200k vs. the prior release of 239k.

• Gold price fades upside momentum amid risk aversion.
• China’s coronavirus concerns, cautious mood ahead of the key data, events weigh on Gold price.
• Federal Reserve Chairman Jerome Powell’s speech, United States Nonfarm Payrolls are crucial to watch for fresh impulse.
• Risk catalysts are the key for intraday moves of the XAU/USD price.

Gold price (XAU/USD) drops for the first time in five days while printing mild losses at around $1,750 during early Monday. In doing so, the yellow metal bears the burden of the market’s sour sentiment, as well as the cautious mood ahead of important data and events scheduled for publishing during the week.

China coronavirus conditions trigger Gold price drop

The virus woes in China escalated and joined the protest against the government’s Zero-Covid policy to add to the market’s pessimism, which in turn exerted downside pressure on the Gold price.

China reported an all-time high of COVID-19 daily cases with nearly 40,000 new infections on Saturday. The dragon nation has been using the stringent policy to limit the virus spread but the outcome hasn’t been a positive one so far. On the contrary, a deadly fire in a building was allegedly linked to the strict virus-inspired lockdown measures and resulted in mass protests in Beijing and Shanghai.

Considering China’s status as one of the key Gold consumers, negatives from the dragon nation won’t hesitate to push back the metal buyers.

It’s worth noting that the People’s Bank of China (PBOC) cut the Reserve Requirement Ratio (RRR) by 25 basis points (bps) effective from December 5 but failed to impress the Gold buyers as the news was already priced in. Alternatively, downbeat prints of China’s Industrial Profit seemed to have favored the XAU/USD bears. That said, China’s Industrial Profit dropped to -3.0% during the January to October period versus -2.3% marked for the January-September era.

US Dollar struggles ahead of the key catalysts

Although the risk-aversion wave should have ideally underpinned the United States currency, which in turn could have been more bearish for the Gold price, the US Dollar Index (DXY) prints mild losses around 106.20 by the press time. The reason for the USD's downbeat performance could be linked to the cautious mood of the Greenback traders ahead of a speech from the Federal Reserve (Fed) Chairman Jerome Powell and the United States monthly employment data for November.

It should be noted that Fed Chairman Powell’s speech will be the first after the US central bank’s latest Monetary Policy Meeting and hence will be observed closely for clear directions, especially after the recently dovish Federal Open Market Committee (FOMC) Meeting Minutes.

Additionally, the US employment data for November keeps the Gold buyers hopeful as the headline Nonfarm Payrolls (NFP) is likely to ease to 208K versus 261K whereas the Unemployment Rate may remain unchanged at 3.7%.

Other than the aforementioned catalysts, the second readings of the United States Gross Domestic Product (GDP) Annualized for the third quarter (Q3), expected to confirm the 2.6% initial forecasts, will also be important to clearly predict the Gold price.

Gold price technical analysis

Failures to cross the 50-Simple Moving Average (SMA) join the impending “bear cross” on the Moving Average Convergence and Divergence (MACD) indicator to keep the Gold sellers hopeful.

It’s worth noting that a two-week-old descending trend line and an absence of oversold signals on the Relative Strength Index (RSI), located at 14, also suggest a further downside of the Gold price.

That said, the 100-SMA level surrounding $1,737 appears immediate support for the XAU/USD bears to watch.

Following that, the Gold price will have to conquer an upward-sloping support line from November 08, close to $1,733 by the press time, to keep the sellers on the table.

In a case where the Gold price drops below $1,733, the odds of witnessing the $1,700 theshold on the chart can’t be ruled out.

Alternatively, an upside clearance of the 50-SMA and the aforementioned resistance line, close to $1,760, appears necessary for the Gold buyers to retake control and aim for the fresh high of the monthly, currently around $1,787.

Gold price: Daily chart

Trend: Further downside expected

The primary gauge of Australia’s consumer spending, Retail Sales, has come out as follows:

Australia October Retail Sales -0.2 pct MoM s/adj (Reuters poll +0.5 pct).

AUD/USD update

0.6700 area holds following failures at 4-hour resistance near the neckline of the M-formation. 

About Retail Sales

The Retail Sales released by the Australian Bureau of Statistics is a survey of goods sold by retailers is based on a sampling of retail stores of different types and sizes and it''s considered as an indicator of the pace of the Australian economy. It shows the performance of the retail sector over the short and mid-term. Positive economic growth anticipates bullish trends for the AUD, while a low reading is seen as negative or bearish

• USD/JPY is marching towards 140.00 as China’s anti-Covid lockdown-inspired fears have triggered negative sentiment.
• China’s individuals are demanding democracy against dictatorship in their protests.
• Fed Powell’s speech will provide more clarity on chatters over interest rate action in the December meeting.
• Japan’s employment and Retail Trade data will remain in focus.

The USD/JPY pair has sensed a decent buying interest after testing the 139.00 support in the early Tokyo session. The asset is aiming to extend its recovery towards the round-level resistance of 140.00 as the risk-off profile has come in action led by escalating civil risks in China.

Individuals are shouting slogans of ‘XI Jinping Go Down’ as strict Covid-19 restrictions by the Chinese authorities to contain the spread have frustrated the general public. Covid-19 cases in China recorded a massive high of around 40,000 on November 26, therefore, the administration is bound to keep the zero-Covid policy in action.

Escalated anti-Covid protests have triggered the risk of economic slowdown and further risk to already vulnerable real estate demand. Also, the demand for democracy not dictatorship from China’s individuals in a state of anger and frustration due to Covid-19 restrictions has underpinned the risk-aversion theme.

The US Dollar Index (DXY) has extended its recovery to near 106.32 and is likely to remain solid. S&500 futures have displayed some sell-off in Tokyo, portraying a risk-off impulse in action. Meanwhile, the 10-year US Treasury yields are holding at 3.70% ahead of a speech from Federal Reserve (Fed) chair Jerome Powell.

The speech from Fed Chair will provide more clarity on chatters over the conclusion of the 75 basis points (bps) rate hike structure by the Fed. As United States inflation has shown meaningful exhaustion in its October report, Fed policymakers have vouched for a ‘less-hawkish’ stance in December monetary policy meeting by the Fed.

On the Tokyo front, investors are shifting their focus toward the employment data, which is due on Tuesday. The Unemployment Rate is expected to decline to 2.5% vs. the prior release of 2.6%. Also, the Jobs/Applicants ratio is expected to display an improvement.

Apart from that, Retail Trade data will also remain in focus. The annual economic data is seen higher at 5.0% while monthly data could show a negative growth of 0.3%.