Forex-novosti i prognoze od 29-11-2022

• USD/CHF pauses four-day uptrend as traders await the key data/events.
• Market sentiment dwindles despite China-linked optimism, softer US data.
• Powell’s first speech since November FOMC will be crucial for pair bulls amid hawkish hopes.
• Second-tier Swiss data and early signals for Friday’s US NFP are important too.

USD/CHF treads water at a one-week high surrounding 0.9550 as traders await the key data/events scheduled for publishing on Wednesday. That said, the Swiss Franc (CHF) pair rose during the last four days amid the market’s cautious optimism even as the US Dollar Index (DXY) managed to rebound of late.

The latest positives for the market are from China as the dragon nation announced multiple measures to ease the strict lockdown in the key areas after witnessing a retreat in the daily Covid infections from a record high. Even so, the world’s second-largest economy kept its Zero-Covid policy intact. Bloomberg reported the reopening of some city buildings in the greater Zhengzhou region, the home of a key iPhone plant. Earlier on Tuesday, the news broke that China's Guangdong province will allow the close contacts of Covid cases to quarantine at home.

Even so, Wall Street closed mixed and the US 10-year Treasury bond yields ended Tuesday on a firmer footing, up six basis points (bps) to 3.748. The same helped the US Dollar Index (DXY) to print a three-day uptrend around 106.80 despite softer statistics from the United States. The reason could be linked to the hawkish comments supporting the US Federal Reserve’s steadily high-interest rates, even if a mild cut in the aggression is expected.

New York Federal Reserve Bank President John Williams and St. Louis Fed President James "Jim" Bullard were the latest supporters of higher rates. On the other hand, the US Conference Board (CB) Consumer Confidence Index dropped to 100.2 in November versus 102.2 prior (revised down from 102.5).

At home, Swiss Gross Domestic Product (GDP) for the third quarter (Q3) eased to 0.5% YoY versus 1.0% market forecasts and 2.2% prior (revised down from 2.8%).

Moving on, Federal Reserve (Fed) Chairman Jerome Powell’s first public appearance since November Federal Open Market Committee (FOMC) meeting will be crucial for the USD/CHF pair traders amid hopes of witnessing a hawkish message. Additionally, an early signal for Friday’s United States Nonfarm Payrolls (NFP), namely the ADP Employment Change for November, expected 200K versus 239K prior, will also be important to watch. Furthermore, the second reading of the United States Gross Domestic Product (GDP) for the third quarter (Q3), expected to confirm 2.6% Annualized growth, will populate the economic calendar too.

That said, the Swiss KOF Leading Indicator and Zew Survey for November are some of the second-tier data from home that can keep the USD/CHF pair traders busy.

Technical analysis

A convergence of the 50-day and 100-day Exponential Moving Average (EMA), around 0.9700-05 appears a tough nut to crack for the USD/CHF bulls.

• AUD/JPY has slipped after facing hurdles around 92.80 as investors await Australian inflation data.
• An increment in Aussie CPI could force the RBA to return to a 50 bps rate hike culture.
• Chatters of unwinding of BOJ’s monetary easing have strengthened the Japanese yen.

The AUDJPY pair has dropped after the short-lived rebound near 92.48 terminated around 92.80 in the Tokyo session. The risk barometer has remained extremely volatile in a couple of trading sessions led by public protests in China against the rollback of lockdown measures to restrict the epidemic.

The cross is expected to continue its volatile gyrations after the release of the monthly Australian Consumer Price Index (CPI) data. As per the estimates, the monthly CPI data is expected to escalate to 7.4% vs. the prior release of 7.3%.

An increment in inflationary pressures could be followed by hawkish commentaries from Reserve Bank of Australia (RBA) policymakers. It is worth noting that Australian inflation has not displayed signs of exhaustion yet nor a peak has been formed, which will continue to create havoc for the RBA. This might force RBA Governor Philip Lowe to ditch the smaller rate hike culture and to return to 50 basis points (bps) rate hike structure in its December monetary policy meeting in order to chain the roaring inflation.

Meanwhile, the Chinese city of Zhengzhou, home to Apple Inc.’s largest manufacturing site in China, said that it was lifting a lockdown of its main urban areas put in place five days ago as Covid cases climbed. The headline could infuse optimism in the cautious market mood ahead.

On the Tokyo front, chatters over the unwinding of the Bank of Japan (BOJ)’s monetary easing are strengthening the Japanese yen. According to an economists’ poll by Reuters, more than 90% of economists have supported the view of phasing out monetary easing in the latter half of CY2023.

• USD/CAD struggles to extend three-day uptrend near the highest levels in three weeks.
• Break of two-month-old horizontal support, bearish MACD signals favor buyers.
• 50-DMA, seven-week-long descending trend line restrict immediate upside.

USD/CAD remains sidelined around 1.3585-90, recently picking up bids, as traders struggle with the key hurdle during early Wednesday morning in Asia. In doing so, the Loonie pair probes the three-day uptrend around a multi-day top marked the previous day.

Even so, the USD/CAD pair’s sustained trading beyond the previous key resistances and the 100-DMA joins the bullish MACD signals to keep the buyers hopeful.

That said, a downward-sloping trend line from October 13 and the 50-DMA restrict immediate USD/CAD moves between 1.3600 and 1.3580, a break of which could quickly propel the quote towards the monthly top near 1.3810.

However, multiple hurdles around 1.3840 and 1.3860 could challenge the USD/CAD bulls past 1.3810, which if ignored will highlight the yearly top marked in October surrounding 1.3980.

Alternatively, pullback moves remain elusive unless the quote stays beyond the horizontal support established since early October, near 1.3490 by the press time.

Following that, an upward-sloping trend line from August 11, currently at 1.3340, will precede the 100-DMA support of 1.3287 to challenge the USD/CAD bears.

Overall, USD/CAD is likely to remain firmer but the road to the north appears bumpy.

USD/CAD: Daily chart

Trend: Further upside expected

• GBP/USD is looking to test weekly lows at 1.1940 as the risk-off impulse has remained solid.
• The US Treasury yields have accelerated as Fed policymakers see no halt in rate hike culture in the near term.
• The speech from Andrew Bailey failed to provide cushion to Pound bulls.

The GBP/USD pair is seeking a cushion around the immediate hurdle of 1.1950 in the early Tokyo session. The Cable displayed volatile moves on Tuesday after failing to sustain above the psychological resistance of 1.2000 as the FX domain turned currency-specific. The further road is still favoring a bumpy ride for the Pound Sterling as a speech from Federal Reserve (Fed) chair Jerome Powell could infuse adrenaline rush into the US Dollar index (DXY).

The Cable is expected to test the weekly low at 1.1940 amid a cautious market mood. Meanwhile, the US Dollar Index (DXY) is aiming to shift its business above 106.80 as the risk-aversion theme has improved safe-haven’s appeal. The 10-year US Treasury yields have accelerated to 3.75% as Fed policymakers see no halt in rate hike culture in the near term.

The speech from Fed chair Jerome Powell is expected to weaken obscurity over the extent of an interest rate hike for December monetary policy. Apart from that, minutes of the Fed’s Beige Book will remain under the radar, which will provide regional status of employment, consumer spending, and the extent of economic activities.

This week, the US Nonfarm Payrolls (NFP) is the show-stopper event. But before that, investors will focus on US Automatic Data Processing (ADP) Employment data doe meaningful cues. As per the consensus, the United States economy has added fresh 200k jobs in the labor market lower than the prior release of 239k.

On the UK front, the speech from Bank of England (BOE) Governor Andrew Bailey on Tuesday failed to provide a cushion to Pound bulls. Testifying at the Lord's Economic Affairs Committee, BOEE Governor cited that "There has been no discussion with the government on the pace and timing of BoE asset sales." He believes that the “UK labor market has turned out to be much more constrained than we thought, different to other countries."

• Deteriorated market sentiment, weighed on the Pound Sterling, bolstered the Japanese Yen.
• GBP/JPY’s failure to hold around 168.00 exacerbated a fall to 165.00.

The Pound Sterling (GBP) extends its losses against the Japanese Yen (JPY) amid a risk-off impulse as traders get to the sidelines ahead of the Federal Reserve (Fed) Chairman Jerome Powell’s speech on Wednesday. In the FX space, risk-perceived currencies like the GBP were defensive against the safe-haven status of the JPY. At the time of writing, the GBP/JPY is trading at 165.71.

GBP/JPY Price Analysis: Technical outlook

From a daily chart perspective, the GBP/JPY plummeted 300 pips on Monday towards the 165.00 region, but the pair attempted to trim some of its losses. Albeit the GBP/JPY printed a daily high of 166.67, the cross dived to fresh weekly lows at 165.52. Even though the cross’s path of least resistance in the near term is downwards, the GBP/JPY will face solid support levels at the 50 and 100-day Exponential Moving Averages (EMAs) at 165.34 and 164.27, respectively. Once those two support levels are broken, that could pave the way to test November’s low at 163.03.

The GBP/JPY 4-hour chart portrays the pair in a downtrend, trading within the boundaries of a descending channel, with a 150 pip width. And due to the proximity of GBP/JPY’s price action to the channel’s top trendline, a correction downwards is suggested. Further cementing the case is the Exponential Moving Averages (EMAs) above the spot price, with a bearish slope, alongside the Relative Strength Index (RSI) at bearish territory.

Therefore, the GBP/JPY first support would be the S1 daily pivot at 165.21. Break below will expose the 165.00 psychological level, followed by the S2 pivot at 164.83, ahead of the bottom-trendline of the descending channel at 164.00.

GBP/JPY Key Technical Levels

• AUD/USD fails to extend the previous day’s corrective bounce, treads water of late.
• Easing of lockdown conditions in China fails to cheer the buyers amid firmer US Dollar.
• US Treasury bond yields stay upbeat ahead of Fed Chairman Jerome Powell’s first speech since November meeting.
• China’s PMIs, Aussie inflation will be eyed for immediate directions.

AUD/USD portrays the typical pre-data anxiety as it seesaws near 0.6685-90 during the early hours of Wednesday’s Asian session. In doing so, the Aussie pair fails to cheer the risk-positive headlines from Australia’s major customer China amid the recently firmer US Dollar.

That said, Chinese authorities took a sigh of relief and announced multiple measures to ease the strict lockdown in the key areas after witnessing a retreat in the daily Covid infections from a record high. However, the dragon nation kept its Zero-Covid policy intact.

Recently, Bloomberg reported the reopening of some city buildings in the greater Zhengzhou region, the home of a key iPhone plant. Earlier on Tuesday, the news broke that China's Guangdong province will allow the close contacts of Covid cases to quarantine at home.

Elsewhere, US 10-year Treasury bond yields ended Tuesday on a firmer footing, up six basis points (bps) to 3.748% by the end of the North American trading session. The same helped the US Dollar Index (DXY) to print a three-day uptrend around 106.80 despite softer statistics from the United States. The reason could be linked to the hawkish comments supporting the US Federal Reserve’s steadily high-interest rates, even if a mild cut in the aggression is expected.

New York Federal Reserve Bank President John Williams and St. Louis Fed President James "Jim" Bullard were the latest supporters of higher rates. On the other hand, the US Conference Board (CB) Consumer Confidence Index dropped to 100.2 in November versus 102.2 prior (revised down from 102.5).

Amid these plays, Wall Street closed mixed even as equities in the Asia-Pacific and Europe/UK were mildly positive.

Looking forward, AUD/USD traders will pay attention to the latest version of Australia’s Monthly Consumer Price Index for October, expected 7.4% YoY versus 7.3% prior. Although the inflation numbers are likely to print a firmer outcome and may offer an immediate uptick in matching the forecasts, the Reserve Bank of Australia’s (RBA) dovish mood can continue favoring the Aussie pair bears. Other than the Aussie inflation data, China’s NBS Manufacturing PMI for November, expected 49.0 versus 49.2 prior, will also be important for immediate directions.

Above all, Federal Reserve (Fed) Chairman Jerome Powell’s first public appearance since November Federal Open Market Committee (FOMC) meeting will be crucial for the AUD/USD pair traders amid hopes of witnessing a hawkish message. The same could weigh on the pair in case Powell keeps liking bulls. Ahead of the meeting, Analysts at the ANZ said, “We expect Powell to reaffirm the Fed’s unwavering commitment to tackling inflation, the need for more measured rate rises taking account of increased two-way economic risks as policy becomes restrictive, and a degree of optimism that the Fed will be able to pull off a soft landing.”

Technical analysis

AUD/USD stays on the bear’s radar unless breaking 0.6770 level comprising the previous support line from early November, an 11-week-old descending trend line and a 61.8% Fibonacci retracement of the pair’s August-October downturn.

• NZD/USD is facing hurdles around 0.6200 as anxiety soars ahead of Fed Powell’s speech.
• Fed’s higher interest rates are responsible for weaker projections for US employment data.
• The reopening of a few manufacturing sites in the Chinese city of Zhengzhou may infuse optimism into risk impulse.

The NZD/USD pair is displaying a sideways auction profile near the round-level hurdle of 0.6200 in the early Asian session. The kiwi asset has turned rangebound after a vertical drop from the 0.6250 hurdle. The major is expected to remain on tenterhooks as investors are awaiting the speech from Federal Reserve (Fed) chair Jerome Powell to get clarity over rate hike deceleration chatters.

Meanwhile, the risk impulse has turned asset-specific as a few risk-sensitive currencies are still solid. The US Dollar index (DXY) is facing barriers in sustaining above the critical hurdle of 106.80. The 10-year US Treasury yields have recovered dramatically above 3.75%. The recovery in the US yields could be linked to a speech from Jerome Powell ahead as it will trim ambiguity over interest rate projections for December monetary policy meeting.

Apart from Fed Powell’s speech, the economic data will be crucial for the market participants in the United States Automatic Data Processing (ADP) Employment data. As per the projections, the US economy has added fresh 200k jobs in the labor market lower than the prior release of 239k. This has been the outcome of accelerating interest rates by the Fed, which has forced firms to postpone their expansion plans to dodge higher interest obligations.

Also, the Gross Domestic Product (GDP) data will be crucial for investors. The annualized GDP for the third quarter is seen unchanged at 2.6%. A decline in the growth rate would cement expectations of a slowdown in inflation.

On the New Zealand front, the Kiwi Dollar is still in the havoc of China’s unrest, being one of the leading trading partners. Public protest against the rollback of Covid-19 lockdown measures by Chinese authorities is expected to make the epidemic situation more vulnerable ahead.

Late Tuesday, the Chinese city of Zhengzhou, home to Apple Inc.’s largest manufacturing site in China, said that it was lifting a lockdown of its main urban areas put in place five days ago as Covid cases climbed. The headline is expected to infuse optimism in the cautious market mood ahead.

• EUR/USD pares the biggest monthly gains since September 2010.
• Recently hawkish comments from Federal Reserve officials underpinned United States Treasury Yields and US Dollar.
• Softer statistics, easing Covid fears from China and looming concerns over Eurozone recession keeps traders on their toes.
• Firmer Eurozone inflation may help EUR/USD to grind but Federal Reserve Chairman Jerome Powell could favor the month-end consolidation.

EUR/USD remains pressured around 1.0330, after printing a two-day downtrend, as it prepares for the big day during early Wednesday in Asia. Even so, the major currency pair stays on the way to posting the biggest monthly run-up in 12 years as Federal Reserve’s (Fed) signals for easy rate hikes got appreciation, even if the latest hawkish Fed talks allowed the United States Treasury bond yields and the US Dollar to consolidate monthly losses.

United States Treasury bond yields, US Dollar lick their wounds

US 10-year Treasury bond yields ended Tuesday on a firmer footing, up six basis points (bps) to 3.748% by the end of the North American trading session. The same helped the US Dollar Index (DXY) to print a three-day uptrend around 106.80 even as statistics from the United States weren’t so upbeat. The reason could be linked to the hawkish comments supporting the US Federal Reserve’s steadily high-interest rates, even if a mild cut in the aggression is expected.

It’s worth noting, however, that the stated bond yields remain negative on a monthly basis, posting the first monthly loss in four, whereas the US Dollar Index stays on the way to printing the biggest monthly loss since September 2010.

That said, New York Federal Reserve Bank President John Williams and St. Louis Fed President James "Jim" Bullard were the latest supporters of higher rates. On the other hand, the US Conference Board (CB) Consumer Confidence Index dropped to 100.2 in November versus 102.2 prior (revised down from 102.5).

Optimism surrounding China contrasts with fears from Eurozone to weigh on EUR/USD

Easing tensions from China contrasts with looming economic fears from the Eurozone and challenge the EUR/USD buyers of late.

After witnessing a retreat in the daily Covid infections from a record high, Chinese authorities took a sigh of relief and announced multiple measures to ease the strict lockdown in the key areas.

Recently, Bloomberg reported the reopening of some city buildings in the greater Zhengzhou region, the home of a key iPhone plant. Earlier on Tuesday, the news broke that China's Guangdong province will allow the close contacts of Covid cases to quarantine at home.

On the other hand, mixed statistics from Eurozone and comments from the officials failed to push back the chatters surrounding the bloc’s economic slowdown.

That said, the Euro area Economic Sentiment Indicator improved to 93.7 in November versus 93.5 expected and 92.7 prior (revised). However, the bloc’s Business Climate gauge eased to 0.54 from 0.74 previous readings while the Consumer Confidence reprinted -23.9 figures for the said month. Further, Germany’s preliminary inflation, as per the Harmonized Index of Consumer Prices (HICP) indicator, eased to 11.3% YoY while matching the market forecasts versus 11.6% prior. Additionally, inflation as measured by the Consumer Price Index (CPI), declined to 10% YoY during November from 10.4% previous readings. Following the data, Germany’s Economy Minister Robert Habeck said on Tuesday that “We will be and remain a strong land.”

It’s worth mentioning that the bloc is in consultation with the Group of Seven (G7) nations to announce a price cap on Russian Oil exports and teases another round of geopolitical tension with Moscow as Deputy Prime Minister Alexander Novak said on Tuesday that Russia won't supply Oil under price cap in any case. The same could amplify recession concerns in the bloc and can weigh on the regional currency even if the European Central Bank (ECB) officials appear hawkish. Recently, European Central Bank (ECB) Vice President Luis de Guindos anticipated a decline in headline inflation during the first half of the next year while speaking at a virtual event XIII Encuentro Financiero on Tuesday.

All eyes on Federal Reserve Chairman Jerome Powell

Although a lot is at stake and in the line, market players will pay more attention to the speech from Federal Reserve (Fed) Chairman Jerome Powell’s first public appearance since November Federal Open Market Committee (FOMC) meeting. The event should exert more downside pressure on the EUR/USD price if the Fed boss meets the hawkish expectations of the market.

Ahead of the meeting, Analysts at the ANZ said, “We expect Powell to reaffirm the Fed’s unwavering commitment to tackling inflation, the need for more measured rate rises taking account of increased two-way economic risks as policy becomes restrictive, and a degree of optimism that the Fed will be able to pull off a soft landing.”

Also important will be the preliminary inflation data from Eurozone. As per the Harmonized Index of Consumer Prices (HICP) indicator, the inflation in the bloc is likely to ease to 10.4% YoY versus 10.6% prior, which in turn could weigh on the EUR/USD. The reason could be linked to the impending recession fears and the European Central Bank’s (ECB) readiness to ease if needed, per the latest comments from the officials.

Other than Fed Chair Powell’s speech and Eurozone inflation, an early signal for Friday’s United States Nonfarm Payrolls (NFP), namely the ADP Employment Change for November, will also be closely watched by the EUR/USD traders. The private employment gauge is likely to register downbeat figures of 200K versus 239K prior.

Furthermore, the second readings of the United States Gross Domestic Product (GDP) for the third quarter (Q3), expected to confirm 2.6% Annualized growth, will also be crucial for the EUR/USD pair if posting a change.

EUR/USD technical analysis

EUR/USD bulls faced rejection from a 3.5-month-old ascending resistance line, as well as the 200-Day Moving Average (DMA).

The following pullback took clues from the Moving Average Convergence and Divergence (MACD) indicator and the Relative Strength Index (RSI) line, placed at 14.

The reason could be linked to a bearish divergence on the RSI and an impending bear cross on the MACD. That said, the higher high on price joins the lower tops on RSI (14) to portray the bearish RSI divergence while the MACD line’s piercing of the signal line from below teases bear cross.

As a result, the EUR/USD bears are all set to approach an 11-week-old horizontal support area surrounding 1.0220-200. However, the quote’s further downside needs validation from the October peak near 1.0095 before directing the sellers toward July’s low of 0.9952.

Alternatively, the 200-DMA and an upward-sloping resistance line from August 10, respectively near 1.0380 and 1.0510, could restrict the immediate upside of the EUR/USD pair.

Following that, the 61.8% Fibonacci retracement level of the EUR/USD’s south-run trajectory from late March to September 28, close to 1.0555, will precede the June 27 swing high near 1.0615 to challenge the pair buyers.

Overall, EUR/USD bulls run out of steam as traders await the key events.

EUR/USD: Daily chart

Trend: Further downside expected

“The Chinese city of Zhengzhou shuttered hundreds of buildings and apartment blocks hours after lifting broader lockdown measures, as officials strive to make their Covid controls more targeted in line with Beijing’s directives,” reported Bloomberg.

Earlier on Tuesday, the news broke that China's Guangdong province will allow the close contacts of the Covid cases to quarantine at home.

Key quotes

Markets remain jittery

Although the news should have ideally helped AUD/USD, the Aussie pair remains inactive around 0.6690, fading the previous day’s corrective bounce ahead of the key data/events.

Also read: Forex Today: All eyes on Federal Reserve's Powell, Aussie CPI and China PMIs

• Despite a risk-off mood, the New Zealand Dollar recovered some ground vs. the Japanese Yen.
• The double-top formation in the NZD/JPY daily chart remains in play.
• Short term, the NZD/JPY is headed downwards, eyeing the 85.00 psychological figure.

The New Zealand Dollar (NZD) remains bid against the Japanese Yen (JPY) even though a risk-off impulse surrounds the financial market, except for the FX space, with risk-perceived currencies rising. That said, high beta currencies like the NZD are appreciating. Hence, the NZD/JPY is recovering, trading at 85.98, above its opening price by 0.42%.

NZD/JPY Price Analysis: Technical outlook

The NZD/JPY daily chart suggests a double top formation emerged of late, sparked by Monday’s plunge of more than 130 pips, driving the exchange rate towards its weekly lows of 85.42, reached on Tuesday. However, the cross-currency pair bounced toward its daily high of 86.29, and its later retracement below 86.00 could exacerbate a fall to the 200-day Exponential Moving Average (EMA) at 84.10, ahead of the November low of 83.84.

In the near term, the NZD/JPY 4-hour chart portrays the pair tested the 100-EMA around 86.17 three times before diving to the 200-EMA at 85.68. However, the NZD/JPY bounced to the daily pivot point at 85.94, shy of the 86.00 figure, which, once broken, could open the door for a re-test of the 100-EMA. But the Relative Strength Index (RSI) is in bearish territory, and possible deterioration in market mood suggests the path of least resistance is downwards.

Therefore, the NZD/JPY first support will be the 200-EMA at 85.69, which, once cleared, will send the pair diving to the S1 daily pivot at 85.52, followed by the S2 pivot at 85.04.

NZD/JPY Key Technical Levels

US President Joe Biden crossed wires late Tuesday while speaking at SKI Siltron CSS's semiconductor facility in Bay City, Michigan. The US leader cheered the easing prices for gasoline, clothes and appliances as "good news for the holiday season," while also stating that it would take time for inflation to return to normal levels.

Key quotes

Market implications

The news failed to gain any major reaction amid the late hours of the day, as well as anxiety ahead of the key data/events scheduled for publishing on Wednesday.

Also read: Forex Today: All eyes on Federal Reserve's Powell, Aussie CPI and China PMIs

• Gold price is facing immense pressure in holding itself above the crucial hurdle of $1,750.00.
• The US Treasury yields have rebounded firmly amid anxiety ahead of Fed Powell’s speech.
• Apart from a speech from Jerome Powell, investors are awaiting GDP, core PCE, and Employment data.

Gold price (XAU/USD) is facing hurdles in sustaining above the critical hurdle of $1,750.00 in the early Tokyo session. The precious metal is highly likely to deliver a sideways auction as investors are awaiting the speech from Federal Reserve (Fed) chair Jerome Powell. Also, the release of other triggers such as United States Automatic Data Processing (ADP) Employment, Gross Domestic Product (GDP), core Personal Consumption Expenditure (PCE), and Fed’s Beige Book.

Meanwhile, the US Dollar Index (DXY) has shifted its business above the crucial barricade of 106.75 as the risk-off impulse remained active for some specific risky assets. The market has become currency specific as a cautious market mood is not impacting the entire gamut of risk-perceived assets. S&P500 remained subdued on Tuesday as investors await multiple triggers for making an informed decision.

While the 10-year US Treasury yields roared back dramatically above 3.75% as Fed policymakers are expecting no slowdown in the pace of interest rate hikes as one good monthly inflation report is not sufficient to infuse confidence. Going forward, the US ADP data will be very crucial. As per the estimates, the US economy has created additional 200k jobs in November vs. the prior release of 239k.

Gold technical analysis

On an hourly scale, Gold price is displaying a sideways performance in a range of $1,740-1,760 ahead of the release of key economic catalysts. The 20-period Exponential Moving Average (EMA) at $1,751.35 is overlapping with the asset, which indicates a consolidation ahead.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which states that investors have been sidelined ahead of key events.

Gold hourly chart

Here is what you need to know for Wednesday, November 30:

Risk markets were touch and go as month end approached ahead of Fed Chairman Powell’s address on the economy on Wednesday and US Nonfarm Payrolls on Friday. Risk appetite had worsened on Monday after protesters and police clashed over the stringent COVID restrictions, supporting the US Dollar index, DXY, that had otherwise fallen to 106.82 from a 20-year high of 114.78 on Sept. 28. 

Jerome Powell will be expected to reaffirm the Fed’s unwavering commitment to tackling inflation, analysts at ANZ Bank said. The analysts also highlighted the prospects of Powell mentioning the ''need for more measured rate rises taking account of increased two-way economic risks as policy becomes restrictive and a degree of optimism that the Fed will be able to pull off a soft landing.''

Meanwhile, the US central bank is expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14, though the odds of a 75-basis-point increase have risen over the past several weeks and now stand at a 37% probability. WIRP suggests that is fully priced in, with around 15% odds of a larger 75 bp move. The swaps market is still pricing in a peak policy rate of 5.0%, with small odds of a 5.25% peak.

In markets, Wall Street was mixed on Tuesday, with losses in Apple and Amazon. At the time of writing, the S&P 500 was down 0.14% and is headed for its second straight month of gains in November amid bets that recent inflation readings showing a slight cooling in prices will lead the Fed to scale back. The Nasdaq declined 0.70% while the Dow Jones Industrial Average was flat. In Europe, the Euro Stoxx 50 was broadly unchanged and the FTSE 100 up 0.5%.

The US 10-year yield was up 6bp to 3.74%, weighing on the euro which was down some 0.1% to 1.0330. The inflation rate in Germany slowed to 10% in November from 10.4% in October but remained close to high levels not seen since the reunification. The sentiment remains supportive of the Euro in that the European Central Bank remains committed to raising interest rates to dampen high inflation. The British pound hovered at 1.1950 and down 0.1% on the day, meeting recent lows in what could turn out to be a double bottom on the hourly timeframe. 

The Aussie was better bid as the sentiment improved on hopes that China would reopen from COVID shutdowns. AUD/USD rallied to a high of 0.6748 and was ending around 0.5% higher on the day. WTI was higher despite some speculation that OPEC will leave quotas unchanged, falling some 1.5% into channel resistance. Gold fell 0.3% to below $1,750 reaching a low of $1,747 while Bitcoin rallied over 1.5%  after re-testing its yearly lows yesterday.

For the day ahead, Aussie Consumer Price Index and Chinese PMIs will be key in the Asian sessions.

• WTI bears are moving in at a critical juncture.
• A break of horizontal support leaves the downside exposed.

West Texas Intermediate is higher on the day so far, up over 2.45% at the time of writing, having ranged between a low of $76.03 and $79.61 so far. The price has been consolidating at the top of a channel and the prior day's short squeeze. Risk markets were soft amid light activity as month-end approaches.

Meanwhile, West Texas Intermediate was bid on the hopes China is easing its strict zero-Covid policies while OPEC+ decided to meet virtually for its Dec.4 meeting to set production quotas. The good news came for markets when China's government announced that it will boost Covid-19 vaccination while stepping back from its quarantine policies.

Elsewhere, and despite market rumours, OPEC has not indicated it plans further cuts in its meeting as European sanctions on Russian oil imports take effect on December 5. Nevertheless, negotiations on a price cap for Russian oil go on. 

Analysts at ANZ Bank said that ''Germany warned it can’t rule out temporary supply bottlenecks when a ban on imports on Russian crude starts next month. OPEC also appears to be reducing output in line with its agreement to cut production.''

For the week ahead, the focus is on Federal Reserve Chairman Jerome Powell’s address on the economy and the US labour market in Friday's Nonfarm Payrolls event. 

WTI technical analysis

As illustrated, the price is meeting the channel top, on the front side of the trendline resistance, breaking horizontal structure and posied for a downside continuation.

• Mixed sentiment was no excuse for the Australian Dollar to appreciate against the US Dollar.
• Investors continue to assess the latest Federal Reserve hawkish commentary.
• Fed Williams commented that the path of rates is higher than September’s projections.
• Chinese officials urged local governments to avoid lockdowns and committed to vaccinating older adults.

The Australian Dollar (AUD) is erasing some of Monday’s losses against the US Dollar (USD) even though market sentiment deteriorated, as shown by Wall Street, set to end in the red. Latest Federal Reserve (Fed) officials’ hawkish comments,  China’s Covid-19 woes, and weak retail sales data in Australia are the main drivers of the day. At the time of writing, the AUD/USD is trading at 0.6684, above its opening price b 0.50%, but off the day’s high of 0.6748.

Hawkish Fed commentary deteriorated investors’ mood as Fed Chair Jerome Powell is eyed

The equity markets in the United States (US) wavered by a slide in mega-cap equities. Federal Reserve policymakers led by the St. Louis Fed President James Bullard said the central bank has “ways to go to a restrictive policy.” Bullard added that the Fed needs to increase rates until 2023 and foresees the Federal Funds rate (FFR) to peak at around 5% to 7%. Echoing some of his remarks was the New York Fed President John Williams, adding that the strong economy in the US “suggests a modestly higher path for policy relative to September. Not a massive change, but somewhat higher.” Williams added that inflation could fall to 5.0%-5.5% by the end of 2022 and 3.0%-3.5% by late 2023.

Given that the Federal Reserve Open Market Committee (FOMC) November minutes opened the door to slow the pace of borrowing cost increases, Wednesday’s speech of the Federal Reserve Chair Jerome Powell is eyed ahead of the last meeting of 2022.

Consumer Confidence in the United States falls to a 4-month low

Data-wise, the US economic calendar revealed that Consumer Confidence or November, reported by the Conference Board (CB), dropped to a four-month low of 100.2, weighed by the combination of inflation and interest rate hikes, posing a challenge to consumers, threatening to slow the economic growth in 2023.

Elsewhere, the US Dollar Index (DXY), a measure of the greenback value against a basket of six currencies, bounced off daily lows around 106.058 and climbed to 106.795, registering moderate gains of 0.12%, capping the AUD/USD gains.

China’s Covid-19 riots waned, but weak Australian retail sales weighed on the AUD

Aside from this, the Covid-19 riots in China appeared to wane as cases edged lower. On Monday, China reported 38,421 new local cases, down from the 40,052 record high reported for Sunday, with no deaths for two straight days. Health officials urged local governments to avoid unnecessary and lengthy lockdowns. Chinese health officials said the Omicron variant is less severe while committed to vaccinating elder people aged 80 or older.

Also, Australia’s weaker-than-expected October Retail Sales report put a lid on Tuesday’s AUD/USD rally. Figures showed that sales plunged 0.2% MoM against a 0.5% expansion estimate.

Australia and US economic calendar

Australia’s economic calendar will feature Housing Data and the Reserve Bank of Australia (RBA) Governor Kearns’s speech. On the US front, the docket would be busy with employment figures to be released, GDP, the Goods Trade Balance, Wholesales Inventories, the Chicago PMI, Pending Home Sales, and Fed speaking, led by the Federal Reserve Chairman Jerome Powell.

AUD/USD Price Analysis: Technical outlook

The AUD/USD remains neutral-to-upward biased, though failure to crack 0.6750 caused a 70-pip retracement on the pair, back below 0.6700. Albeit the inverted head-and-shoulders is still in play, Tuesday’s candlestick printed a sizeable upper wick, suggesting that sellers stepped in around the 23.6% Fibonacci level around 0.6703. Therefore, the AUD/USD path of least resistance near term is downwards.

The AUD/USD key support levels are the 38.2% Fibonacci retracement at 0.6643, followed by the figure at 0.6600 and the 61.8% Fibonacci retracement at 0.6546.

• GBP/USD is below a key trendline resistance and neckline of the H&S pattern.
• The bias remains firmly to the downside with eyes on 1.1900. 

As per the prior analysis, GBP/USD continues to slide below 1.2000 and the coil, GBP/USD remains on the backfoot while gathering bearish momentum and leaning against a bearish structure below the psychological 1.2000 level. The short-term dynamic support was broken in prior sessions as fears of a lengthy UK recession are still seen weighing on sentiment. 

GBP/USD, prior analysis

It was stated that the bears were moving on the trendline support and were breaking out of a coil. A 100% measured move of the range was to target the prior structure at 1.1900 and then a 200% measure move aligns with 1.1800.

GBP/USD H4 charts, update

The price broke the trendline, corrected and is now forming a bearish continuation structure:

GBP/USD H1 chart

Meanwhile, a micro correction on the hourly chart is underway. However, while below the trendline resistance and neckline of the H&S pattern, the bias remains firmly to the downside. 

• Silver price advances and faces resistance at the 200-day EMA.
• US Dollar got bid as of late, courtesy of sentiment deterioration.
• Silver Price Analysis: Downward biased after breaking below a one-month upslope trendline.

Silver price is recovering some ground against the US Dollar (USD), rising some 1.50% on Tuesday, as sentiment continues to deteriorate, with US equities tumbling while US Treasury yields advanced. Nevertheless, the XAG/USD erased some of its Monday losses, trading at $21.27, above its opening price, after hitting a daily low of $20.92.

Investors’ mood shifted sour, weighed by a big US tech company slide. Data revealed by the US Conference Board (CB) showed that consumer confidence dropped to a four-month low of 100.2. “The combination of inflation and interest rate hikes will continue to pose challenges to confidence and economic growth into early 2023,” said Lynn Franco, senior director of economic indicators at the Conference Board.

Elsewhere, Federal Reserve officials remained hawkish, led by the St. Louis Fed President James Bullard saying that the US central bank has “ways to go to a restrictive policy.” The New York Fed President John Williams echoed some of his comments, adding that the strong economy in the US “suggests a modestly higher path for policy relative to September. Not a massive change, but somewhat higher.” Meanwhile, money market futures have priced in a 50 bps hike in December, with odds of a 75 jumbo increase at 15%.

In the meantime, the Covid-19 riots in China appeared to wane as health officials urged local governments to avoid unnecessary and lengthy lockdowns. Chinese health officials said the Omicron variant is less severe while committed to vaccinating elder people aged 80 or older.

Aside from this, the US 10-year Treasury bond yield continued to climb five bps, at 3.735%, capping XAG/USD gains. Of note, Silver rested the 200-day Exponential Moving Average (EMA) at $21.32, though failure to break it could pave the way for a re-test of the $20.00 psychological level.

Meanwhile, the US Dollar Index (DXY), a measure that tracks the greenback’s value against a basket of peers, is gaining 0.05% up at 106.705, putting a lid on XAG/USD prices.

The US docket would be busy with the release of ADP figures, GDP, the Goods Trade Balance, Wholesales Inventories, the Chicago PMI, JOLTs report, Pending Home Sales, and Fed speaking, led by the Federal Reserve Chairman Jerome Powell.

Silver Price Analysis (XAG/USD): Technical outlook

Even though Silver reclaimed $21.00, the white metal broke below a one-month-old upslope trendline drawn since the beginning of November, which, intersects with the 200-day EMA around $21.32, a difficult resistance to surpass. The Relative Strength Index (RSI) at bullish territory suggests buyers are in charge, though lacking the strength to break the latter. Tuesday’s candle, with a long upper wick, portrays sellers stepping in; therefore, the XAG/USD might consolidate.

XAG/USD key resistance levels lie at the 200-day EMA at $21.30, followed by November’s 24 high of $21.67, ahead of $22.00. On the flip side, XAG/USD first support would be $21.00, which, once cleared, could send the white metal sliding to the 50-day EMA at $20.00.

• EUR/USD bulls are being pushed back in a switch on Wall Street.
• Eyes will be on the Federal Reserve chairman Jerome Powell. 

EUR/USD is back to flat as the North American session heads into the late afternoon trading. EUR/USD fell from a high of 1.0394 to a low of 1.0325 on the day so far and sits near 1.0340 at the time of writing. Growth stocks on Wall Street have extended declines, overshadowing a rise in energy shares after oil prices pared back gains on OPEC+ output concerns, overall weighing on riskier currencies as the US Dollar rebounds. 

The euro was initially buoyed earlier on Tuesday due to the hopes of a potential easing in China's strict pandemic restrictions following an unprecedented episode of unrest in the country. Consequently, DXY fell 0.4% to 106.19. Nevertheless, two economic indicators sauntered through the door on Tuesday, missing expectations, and potentially weighing on risk sentiment. 

The Conference Board's (CB) index shaved off 2 points to come in at 100.2, a hair above the 100 consensus. Additionally, the S&P DJI Case-Shiller home price data showed monthly declines across the board in its 20-city composite. Year-over-year, the composite added 10.4%, vs. August's 13.1% reading. Eyes will now be on the November employment report in Nonfarm Payrolls which is expected on Friday.

Fed's Powell coming up

Meanwhile, flash euro zone inflation figures for November are due on Wednesday, with economists polled by Reuters expecting inflation to come in at 10.4% year-on-year. The key event, however, for Wednesday will be in the comments from Fed Chair Jerome Powell. These will be scrutinised for new signals on further tightening. The Fed is widely expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14. WIRP suggests that is fully priced in, with around 15% odds of a larger 75 bp move. The swaps market is still pricing in a peak policy rate of 5.0%, with small odds of a 5.25% peak.

However,  St Louis Fed CEO James Bullard said the Fed has “a ways to go to get to” restrictive policy, adding that the first 250 bp of tightening was just enough to get to neutral. He added that the Fed needs to move further into a restrictive territory and may need to keep rates higher through 2023 and 2024. Additionally, Bullard stressed that markets are underpricing the risks that the Fed may be more aggressive.  

''Bullard and the hawks have been right the whole time,'' analysts at Brown Brothers Harriman said.  ''We think the less hawkish ones at the Fed are pushing back a bit now but will likely be forced to capitulate once again if inflation remains sticky, as we expect.''

• The Japanese Yen strengthened against the US Dollar amid a deteriorated mood.
• USD/JPY Price Analysis: Downward biased, but failure to reclaim 137.50 could exacerbate a rally to 140.00.

The US Dollar (USD) falls against the Japanese Yen (JPY)  amid a risk-off sentiment as shown by US equities trading in the red, while US Treasury yields rise and the USD remains on the back foot. At the time of writing, the USD/JPY is trading at 138.39 after hitting a daily high of 139.35.

USD/JPY Price Analysis: Technical outlook

Following Monday’s price action that formed a hammer with an extended bottom wick, the USD/JPY registered moderate losses though stays above the psychological 138.00 figure. It should be noted that the 50 and 100-day Exponential Moving Averages (EMAs) slopes are getting flat, meaning the pair is trendless, stuck within the 137.00-139.50 area. Furthermore, the Relative Strength Index (RSI) at 34.20 turned flat.

Short-term, the USD/JPY 4-hour chart is downward biased, trading below the 50, 100, and 200 (EMAs) ordered in a perfectly bearish way. The USD/JPY faces solid support at the S1 daily pivot point at 137.80. Traders should be aware that a five-month-old upslope trendline passes around 137.50, which, once cleared, could open the door towards the 137.00 figure, followed by the S2 daily pivot at 136.68 and the S3 pivot level at 135.87.

On the flip side, the USD/JPY first resistance would be the daily pivot at 138.61. Break above will expose the confluence of the R1 daily pivot and the 50-EMA at 139.73/85, followed by the 140.00 psychological level, ahead of the R3 daily pivot point at 140.55.

USD/JPY Key Technical Levels

Growth data released on Tuesday showed the Canadian economy expanded 0.1% in September on a monthly basis and at a 0.7% rate in the third quarter, surpassing expectations of a 0.4% rate. Analysts at CIBC, point out that while headline growth was stronger than expected in the third quarter it shouldn’t change the trajectory for Bank of Canada policy. They continue to expect a final 50bp rate hike to a peak of 4.25%. 

Key Quotes: 

“On the surface, the Canadian economy performed much better than expected in Q3, with GDP rising by 2.9% (consensus +1.5%) and representing only a modest cooling relative to the prior quarter. However, the more you dig into the detail, the weaker the economy looks, with growth driven largely by exports and inventory building.”

“Domestic demand was actually lower than in the prior quarter, with that drop including an unexpected decline in consumer spending. Because of this, the stronger headline growth figure shouldn’t be a concern for the Bank of Canada, and we continue to see only a further 50bp of tightening to a peak interest rate of 4.25%.”
 

Preliminary data released on Tuesday showed a larger-than-expected decline in annual inflation in Germany to 10%. According to Sebastian Becker, Senior Economist at Deutsche Bank, the downward surprise is largely explained by the unexpected energy price drop. He warns that core inflation dynamics might remain strong for now.

Key Quotes: 

“Today's downward CPI surprise has further nourished hopes that the inflation peak might be near (or could already be behind us). However, we reckon that the lower-than-expected November print for the year-over-year CPI inflation rate can be largely attributed to the unexpected drop in the CPI energy price component (and not ebbing core inflation dynamics). Although lower crude oil prices and a stronger EUR exchange rate might help further to tame energy price inflation in the near to medium term, we believe that electricity and gas prices might still climb considerably further – and hence might be only dampened more substantially once the "energy price brakes" take effect in early 2023.”

“Moreover, in our opinion core inflation dynamics might remain strong in the foreseeable future as companies might still have to pass over significant parts of their higher input costs to their customers.”

“Overall, we expect the CPI inflation rate (annual average) to reach a high 8.1% in 2022 before easing to around 7.5% in 2023 and 3.8% in 2024. That said, we expect that the introduction of the "energy price brakes" for gas, district heating and electricity in early 2023 are set to considerably dampen household energy prices and hence headline inflation.”

Citing five sources familiar with the matter, Reuters reported on Tuesday that OPEC and its allies including Russia, known collectively as OPEC+, was likely to stick with the existing oil output policy at the December 4 meeting.

Two other sources, however, told Reuters that the group could consider further reducing the oil output.

Market reaction

Crude oil prices came under modest selling pressure following this headline. As of writing, the barrel of West Texas Intermediate (WTI) was trading at $77.75, where it was still up 1.6% on a daily basis.

Silver posted a disappointing performance this year as it moved from a high of just over $26.40 in March to a low of $17.81 in early September. Strategists at TD Securities expect XAG/USD to extend its correction lower before staging a recovery phase in late 2023 and 2024.

Pending sell-off will be more severe than that of Gold

“As the Fed keeps on tightening into early 2023, we expect Silver to trend down to below the Q1-2023 average of $18. Its higher volatility and sensitivity to the industrial economy prompts us to believe that the pending sell-off will likely be more severe than that of Gold.”

“Silver is projected to reach $21+ by Q4-2023 and over $23 in late 2024.”

• US Dollar falls again versus Emerging Market currencies.
• USD/MXN hits lowest level since February 2020 and the rebounds.

The USD/MXN broke below 19.25 and fell to 19.03, reaching the lowest level since February 2020. During the beginning of the American session, the dollar started to recover ground. As of writing, the pair is hovering around 19.17, far from the lows, still on its way to the lowest daily close in years.

The area around 19.00/05 is a major support. A break lower would open the doors to more losses. As long as it remains above, a consolidation between 19.00/05 and 19.25/30 seems likely.

The decline took place amid a rally of emerging market currencies. USD/BRL is falling by 1.20%, USD/KRW by 1.05% and USD/ZAR by 1.05%.

Key data ahead

US Q3 GDP data is due on Wednesday. The critical report of the week will be on Friday with the numbers from the US official employment report. Non-farm payrolls are expected to rise by 200K and the unemployment rate to remain at 3.7%.

In Mexico, the central bank will release on Wednesday its quarterly inflation report. The November CPI is due December 8. While inflation headline have been trading lower, the core is at multi-year highs.

“At the last policy meeting November 10, the bank hiked rates 75 bp to 10.0% and said “In its next meetings, the Board will assess the magnitude of the upward adjustments to the reference rate based on the prevailing conditions.”  This suggests a potential downshift to 50 bp at the next meeting December 15.  Indeed, there was one dissent in favor of a smaller 50 bp move and others may follow if inflation pressures ease”, explained analyst at BBH.

Technical levels

• Federal Reserve’s hawkish commentary failed to underpin the US Dollar.
• Improvement in risk appetite linked to China’s Covid-19 outbreak bolstered the British Pound.
• US Conference Board Consumer Confidence fell to a four-month low, weighed on the USD.

The GBP/USD advances as the North American session begins, amid a mixed sentiment, due to US Federal Reserve (FED) officials’ hawkish comments and no escalation in China’s riot linked to the recent Covid-19 outbreak. Data from the United States (US) was largely ignored by market players, with most focused on Wednesday’s crowded docket and Fed Chairman Jerome Powell’s speech. At the time of writing, the GBP/USD is trading at 1.2010.

Market mood remains positive, weighing on the USD

US equities wavered as Wall Street opened. On Monday, the St. Louis Fed President James Bullard said the Fed has “a ways to go to get to restrictive policy,” adding that the first 250 bps was to get rates neutral. He emphasized that rates need to be at around 5% to 7% through 2023 and 2024. Echoing some of his comments was the New York Fed John Williams, who said that the strong economy in the US “suggests a modestly higher path for policy relative to September. Not a massive change, but somewhat higher.” Meanwhile, money market futures have priced in a 50 bps hike in December, with odds of a 75 jumbo increase at 15%.

Aside from this, the Covid-19 outbreak in China has not escalated as initially thought, as global equities remained mixed but tilted to the upside. According to the Wall Street Journal, the National Health Commission urged local governments to avoid unnecessary and lengthy lockdowns. Chinese health officials said the Omicron variant is less severe while committed to vaccinating elder people aged 80 or older.

Meanwhile, the US Dollar Index (DXY), a measure that tracks the greenback’s value against a basket of six currencies, is losing 0.26%, down at 106.393, a tailwind for the GBP/USD pair. Of note, US Treasury yields are rising, even though the buck remains defensive.

Data-wise, the US economic calendar featured the Conference Board (CB) Consumer Confidence, which decreased to 100.2 to a 4-month low. Lynn Franco, senior director of economic indicators at the Conference Board, said, “The combination of inflation and interest rate hikes will continue to pose challenges to confidence and economic growth into early 2023.”

As of writing, the Bank of England (BoE) Governor Andrew Bailey said that the “scale of QE hasn’t blurred the distinction between monetary and fiscal policy.”

What to watch

The UK economic calendar will feature the Bank of England Huw Pill crossing wires. The US docket would be busy with the release of ADP figures, GDP, the Goods Trade Balance, Wholesales Inventories, the Chicago PMI, JOLTs report, Pending Home Sales, and Fed speaking, led by the Federal Reserve Chairman Jerome Powell.

GBP/USD Key Technical Levels

Eurostat will release the Eurozone Harmonised Index of Consumer Prices (HICP) data for November on Wednesday, November 30 at 10:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of six major banks regarding the upcoming EU inflation print.

The headline annualized HICP is expected to slow to 10.4% in November vs. 10.6% in October, with the core figure seen steady at 5.0%. On a monthly basis, the HICP in the old continent is expected to stay unchanged at 1.5% in the reported period while the core HICP is also seen flat at 0.6%.

Commerzbank 

“The development of energy prices is likely to have pushed down the inflation rate by around 0.4 percentage points in November. This contrasts with the continued sharp rise in food prices, which was largely responsible for the increase in the inflation rate in recent months. And the inflation rate excluding energy, food and beverages is also likely to have risen slightly further in November, from 5.0% to 5.1%. Overall, the inflation rate is therefore likely to fall only slightly from 10.6% to 10.4%. Moreover, the inflation rate could mark a new record high as early as December. Nevertheless, the slight decline in the inflation rate in November is likely to play into the doves' hands, who are in favor of a more moderate key rate hike of only 50 basis points in December.”

Danske Bank

“We look for euro inflation to rise to 10.8% YoY from 10.6% YoY but that core inflation holds steady at 5.0% YoY.”

Nomura

“We forecast headline HICP inflation to accelerate by 0.2pp to 10.8% YoY, whereas we expect core HICP inflation to accelerate by 0.1pp to 5.1% YoY. In our view, this will be pivotal for the ECB in deciding whether to hike by 75 bps at its December meeting versus hiking by 50 bps.”

TDS

“We now look for aggregate euroarea headline inflation to come down to 10.3% YoY. We think energy will be the big story this month, as the sharp drop in wholesale natural gas prices passes through to weaker energy inflation; however, uncertainty is high in this regard, which leaves both upside and downside risks to our forecast. Market focus should mainly be on the core number, which we think ticked down to 4.9% YoY, as ECB officials have deemed it a deciding factor in shaping their views for the December decision. While a big upside surprise could further skew risks towards a third consecutive 75 bps hike, anything else will likely further cement calls for a pivot to a 50 bps increase.”

SocGen

“We think HICP could decrease for the first time since mid-2021, falling from 10.6% to 10.2% in November. However, inflation has consistently surprised to the upside and there is a risk it could end up being higher than we expect. Due to negative base effects, we also see core inflation temporarily falling from 5% to 4.7%.” 

Citibank

“The November HICP reading is a key data release likely influencing the outcome of the December ECB meeting, between a 50 bps and a 75 bps hike. Headline inflation could post the first decline since mid-2020, driven by falling energy inflation. Uncertainty though remains on the energy HICP forecast, as retail gas prices may have dropped more than expected in some countries. Core dynamics however should stay strong. Euro Area: HICP Inflation, November: Citi Forecast 10.4% YoY, Prior 10.7% YoY (first decline since mid-2020); Core Inflation, November: Citi Forecast 5.0% YoY, Prior 5.0% YoY (still strong 0.4% MoM).”

Bank of England Governor (BOE) Andrew Bailey is testifying on policy and inflation outlook before the Lords Economic Affairs Committee.

Key takeaways via Reuters

"I do not think the scale of QE has blurred the distinction between monetary and fiscal policy."

"There has been no discussion with the government on the pace and timing of BOE asset sales."

"UK labour market has turned out to be much more constrained than we thought, different to other countries."

"QE was never intended to raise revenue for the UK government."

"Paying bank rate on boe reserves is the simplest way to pin down interest rates in line with BOE goals."

"No monetary policy reason to change reserve remuneration."

Market reaction

GBP/USD edged higher in the last hour and was last seen gaining 0.45% on the day at 1.2010.

The Reserve Bank of Australia (RBA) has slowed the speed of its tightening measures. An upside surprise on inflation data could raise concerns about the RBA’s stance and weigh on the Aussie, economists at Commerzbank report.

Is the RBA overly cautious?

“Price pressure in Australia remains high as inflation data tonight is likely to illustrate. As a result, the FX market might be of the view that RBA is not acting decisively enough against inflation.”

“If inflation were to surprise on the upside the market might get concerned that the RBA might underestimate inflation dynamics. Even though the RBA signalled that future rate decisions would be data dependent, the surprise slowing of the rate hike speed in October is likely to have caused doubts about the RBA’s determination.”

“The situation in China, Australia’s most important trade partner, might fuel additional concerns on that front. That means it might get difficult for the AUD to gain further ground against the USD.”

See: Australian CPI Preview: Forecasts from three major banks, inflation to accelerate further

The data published by the Conference Board showed on Tuesday that the Consumer Confidence Index declined to 100.2 in November from (revised from 102.5) 102.2 in October.

The Present Situation Index edged lower to 137.4 from 138.9 and the Expectations Index fell to 75.4 from 78.1 in the same period. Finally, the one-year inflation rate expectations rose to 7.2% from 6.9% in October.

Market reaction

These figures don't seem to be having a noticeable impact on the US Dollar's performance against its rivals. As of writing, the US Dollar Index was virtually unchanged on the day at 106.58.

EUR/CAD has regained the 1.40 handle for the first time since March. Solid trend points to more gains, economists at Scotiabank report.

Key support seen around the 1.3750/1.3850 zone

“There is sufficient momentum behind this move to lift the target to 1.44 (50% Fib at 1.4427).”

“Trend momentum signals are aligned and strongly EUR-bullish across short-, medium- and long-term timeframes. This will not only support additional gains in the EUR but it should also limit corrective losses significantly moving forward.” 

“We expect firm support on minor dips to the high 1.39s from here and see key support around the 1.3750/1.3850 congestion zone.”

• EUR/USD fails to extend the recovery beyond 1.0400.
• The 9-month resistance line still caps the upside.

EUR/USD alternates gains with losses in the low-1.0300s following another failed attempt to retake the 1.0400 barrier earlier on Tuesday.

So far, the 9-month resistance line, today around 1.0430, continues to cap occasional bullish attempts.

A sustained breakout of this region is needed to allow for the continuation of the uptrend to, initially, 1.0481 (November 15) ahead of 1.0496 (November 28).

EUR/USD daily chart

• The index struggles to continue the rebound around 106.70.
• The dollar keeps the positive outlook above the 200-day SMA.

DXY reverses the initial downside and looks to extend the move further north of the 106.00 mark on Tuesday.

In case the recovery becomes more serious, then the US Dollar could attempt to retest the weekly high at 107.99 (November 21) ahead of the temporary 100-day Simple Moving Average (SMA), today at 109.12.

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

DXY daily chart

Gold posted a disappointing performance this year, moving from a high of just over $2,050 in March to a low of $1,617 in early-November. Economists at TD Securities expect the yellow metal to move below $1,600 in the coming months.

Gold to post a sustainable rally above $1,800 in the latter part of 2023

“Notwithstanding the recent rally, a continued sharp increase in US real and nominal rates along the short end of the curve is projected to drive Gold toward $1,575 in Q1-2023. “

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

Australian Monthly Consumer Price Index (CPI) figures are due on Wednesday, November 30 at 00:30 GMT and as we get closer to the release time, here are forecasts from economists and researchers of three major banks regarding the upcoming inflation data.

Headline is expected at 7.4% year-on-year in October vs. 7.3% in September.

Westpac

“Considering the partial indicators we have, and making reference to the timing of the surveys for the various components of the CPI, we are forecasting the Monthly Indicator to lift 0.6% in October holding the annual rate flat at 7.3%. We are nearing the peak in the annual pace of inflation but given the timing of the various surveys, we don’t expect to see it until December. From there we expect to moderate as we move through 2023 with the usual monthly volatility.”

ING

“We think the outcome will probably be close to the recent month-on-month rate of increase, which would keep it roughly in line with the same period last year and leave inflation at about 7.3%. That could be interpreted as the peak, so markets may respond positively to that.”

NAB

“Fuel prices, airfares, and rents suggest we should expect a high print and we pencil in a lift to 7.7% YoY (1.0% MoM) from 7.3% YoY in September based on the limited data that we have for the month. The RBA no doubt will take notice of the data, but the lack of updates on many of the market services categories likely limits interpretation. We expect the data to further solidify the need for the RBA to continue hiking in the near-term and see the RBA hiking rates by 25 bps in December, February, and March to 3.60%. Thereafter the key for the RBA outlook is whether wages growth remains consistent with a return of inflation to target as we assume – Governor Lowe has previously cited WPI wages growth of around 3½-4.0% as being consistent assuming a 1% productivity assumption. In coming months, the market services components of CPI will be watched closely given its sensitivity to wage outcomes and the tendency for services inflation to be stickier than for goods.”

Ho Woei Chen, Economist at UOB Group, reviews the recent move by the PBoC.

Key Takeaways

“The People’s Bank of China (PBoC) announced on Fri (25 Nov) that it will lower banks’ reserve requirement ratio (RRR) by 25 bps, effective from 5 Dec. This is the second RRR cut this year.”

“Coming on the back of the 16-point rescue package for the real estate market, the RRR cut was not unexpected and could contribute to the additional credit support to the country’s developers by reducing the amount of reserves that banks need to hold. It is estimated to release CNY500 bn of long-term liquidity into the system while banks have pledged at least CNY925 bn since the announcement.”

“The PBoC is likely not done with its monetary policy easing yet, as we see possibility of another cut to the RRR and/or the interest rate in 1Q23. We now expect the 1Y LPR to fall to 3.55% by end-1Q23 from current 3.65% and the 5Y LPR to 4.20% from current 4.30%.”

“Given increasing headwinds facing the economy, we expect 4Q22 GDP at 3.9%y/y (instead of our earlier forecast of 4.5%). The main source of uncertainty is the current surge in COVID-19 infections and spreading anti-lockdown protests that are unprecedented in China. We are keeping our full-year GDP forecast for 2022 at 3.3% for now, after incorporating the stronger than expected 3Q22 data.”

“We are also maintaining our 2023 GDP forecast for China at 4.8% as we anticipate further gradual easing of its COVID-19 measures next year as well as flow-through of the stimulus measures to be positive for the economy.”

• USD/CAD attracts fresh buying near the 1.3400 mark and jumps to a nearly three-week high.
• A goodish recovery in the US bond yields and a softer risk tone help revive the USD demand.
• The mixed Canadian GDP report weighs on the Loonie and further provides a lift to the major.

The USD/CAD pair reverses an intraday slide to the 1.3400 neighbourhood and climbs to a nearly three-week high during the early North American session. The buying interest picks up pace following the release of the monthly Canadian GDP print and lifts spot prices to the 1.3545-1.3550 region in the last hour.

Statistics Canada reported that the domestic economy expanded a nominal 0.1% in September and by 0.7% during the third quarter, beating estimates for a reading of 0.4%. This, however, was largely offset by a lower-than-anticipated annualized growth rate of 2.9% during the July-September period. The mixed data, along with a modest pullback in crude oil prices, weighs on the commodity-linked Loonie and acts as a tailwind for the USD/CAD pair.

The US Dollar, on the other hand, trims a part of its intraday losses, which is seen as another factor lending support to the USD/CAD pair. The initial optimism led by hopes that the Chinese government will scale back its strict anti-COVID restrictions fades rather quickly amid worries about a deeper global economic downturn. Apart from this, a goodish intraday bounce in the US Treasury bond yields helps revive demand for the safe-haven buck.

The overnight hawkish remarks by influential FOMC members seem to act as a tailwind for the US bond yields and the USD. In fact, St. Louis Fed President James Bullard, New York Fed President John Williams and Fed Vice Chair Lael Brainard stated that more rate hikes were warranted and there was a long way to go to fight inflation. Furthermore, technical buying above the 1.3500 psychological mark provides an additional boost to the USD/CAD pair.

Next on tap is the release of the Conference Board's US Consumer Confidence Index. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand. Apart from this, traders will take cues from oil price dynamics to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch

• Canadian economy grew at a much softer pace than expected in Q3.
• USD/CAD rose above 1.3500 with the initial reaction to the disappointing data. 

The real Gross Domestic Product (GDP) in Canada expanded at an annualized rate of 2.9% in the third quarter, Statistics Canada reported on Tuesday. This reading followed the 3.2% (revised from 3.3%) growth recorded in the second quarter and missed the market expectation of 3.5% by a wide margin. On a quarterly basis, the real GDP grew by 0.7%. 

"Growth in exports, non-residential structures, and business investment in inventories were moderated by declines in housing investment and household spending," Statistics Canada noted in its press release.

Market reaction

The USD/CAD pair shot higher with the initial reaction and it was last seen trading at its highest level since November 10 at 1.3525, gaining 0.2% on a daily basis.

• EUR/JPY adds to Monday’s retracement and revisits 143.00.
• Further decline could see the mid-142.00s revisited near term.

EUR/JPY extends the pessimism seen at the beginning of the week and puts the 143.00 area to the test on Tuesday.

In case the selling pressure gathers extra steam, then the cross could attempt a move to the November low at 142.54 (November 11) ahead of the temporary 100-day SMA, today at 141.62.

In the longer run, while above the key 200-day SMA at 138.89, the positive outlook is expected to remain unchanged.

EUR/JPY daily chart

GBP/USD regains positive traction on Tuesday and trades above the 1.2000 mark. Economists at Scotiabank believe that a move above 1.2060 will add to positive momentum.

Support aligns at 1.1940, then 1.1900

“Regaining the 1.20 area has helped steady the Pound and we think that additional gains through 1.2060 intraday will add to positive momentum.” 

“Support is 1.1940, ahead of 1.1900, intraday.”

“Sterling should remain generally better supported on mild dips for now.”

See: GBP to strengthen against the USD in 2023 – HSBC

• Gold price catches fresh bids on Tuesday amid the emergence of fresh US Dollar selling.
• Bets for less aggressive rate hikes by the Federal Reserve continue to weigh on the USD.
• A positive risk tone seems to keep a lid on any further gains for the safe-haven XAU/USD.

Gold price regains positive traction on Tuesday and reverses the previous day's retracement slide from more than a one-week high. The XAU/USD maintains its bid tone heading into the North American session and trades near the top end of its daily range, around the $1,755 region.

Renewed US Dollar selling benefits Gold price

The US Dollar fails to capitalize on the overnight bounce from a technically significant 200-day Simple Moving Average (SMA) amid expectations for a less aggressive policy tightening by the Federal Reserve. The emergence of fresh selling around the Greenback turns out to be a key factor driving flows towards the US Dollar-denominated Gold price.

Expectations for a dovish Federal Reserve weigh on US Dollar

The minutes of the November Federal Open Market Committee (FOMC) meeting released last week cemented bets for a relatively smaller 50 bps rate hike in December. This is reinforced by sliding US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond languishes near a two-month low and continues to weigh on the US Dollar.

Upside potential for Gold price seems limited

That said, the overnight hawkish remarks by Federal Reserve officials should limit the downside for the US bond yields and the US Dollar. In fact, St. Louis Fed President James Bullard, New York Fed President John Williams and Fed Vice Chair Lael Brainard stated that more rate hikes were warranted and there was a long way to go to fight inflation.

Apart from this, a modest recovery in the global risk sentiment, as depicted by a stable performance in the equity markets, might also contribute to capping the safe-haven Gold price. Investors turned optimistic amid speculation that the Chinese government is considering scaling back its strict anti-COVID policies to prevent more protests.

The mixed fundamental backdrop warrants some caution for aggressive traders and before positioning for any further appreciating move for Gold price. Market participants now look to the release of the Conference Board's US Consumer Confidence Index. This, along with the US bond yields, will influence the USD and provide a fresh impetus to Gold price.

The focus, however, will remain on Fed Chair Jerome Powell's speech on Wednesday. Investors will be seeking more clarity on the central bank’s policy stance and future rate hikes. Furthermore, this week's important US macro data, including the closely-watched Non-Farm Payrolls (NFP) report, should determine the near-term trajectory for Gold price.

Gold price technical outlook

From a technical perspective, any subsequent move up is likely to confront resistance near the $1,770-$1,772 region. A sustained strength beyond will be seen as a fresh trigger for bulls, allowing Gold price to surpass the $1,778 intermediate hurdle and retest the $1,786 area, or its highest level since mid-August touched earlier this month. The momentum could further get extended and assist the XAU/USD to reclaim the $1,800 psychological mark.

On the flip side, the $1,740-$1,739 region now seems to have emerged as immediate strong support ahead of the $1,736-$1,735 region and the $1,725 zone, or a nearly two-week low touched last Wednesday. Failure to defend the said support levels might negate the positive outlook and prompt some technical selling, dragging Gold price further towards the $1,700 round-figure mark.

Key levels to watch

"Medium-term inflation expectations are very important for my assessment of where bank rate should go," Bank of England (BOE) policymaker Catherine Mann said on Tuesday, as reported by Reuters.

"Once inflation expectations have been managed, the bank rate can come off a future peak," Mann added and noted that the foreign exchange rate is an "important ingredient" for the UK inflation.

Market reaction

These comments don't seem to be having a significant impact on Pound Sterling's performance against its rivals. As of writing, GBP/USD was up 0.55% on the day at 1.2025.

• Annual CPI in Germany fell more than expected in November.
• EUR/USD continues to trade in positive territory slightly below 1.0400.

Inflation in Germany, as measured by the Consumer Price Index (CPI), declined to 10% on a yearly basis in November from 10.4% in October. This reading came in lower than the market expectation of 10%. On a monthly basis, the CPI declined 0.5%.

Meanwhile, the Harmonised Index of Consumer Prices (HICP), the European Central Bank's (ECB) preferred gauge of inflation, edged lower to 11.3% on a yearly basis, as expected.

Market reaction

These figures failed to trigger a noticeable market reaction and the EUR/USD pair was last seen rising 0.42% on the day at 1.0380.

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest release of inflation figures in Malaysia.

Key Takeaways

“Headline inflation decelerated for the second straight month to 4.0% y/y in Oct (from +4.5% in Sep), in line with our estimate (4.0%) and Bloomberg consensus (3.9%). It was primarily due to the base effects in electricity component, cheaper non-subsidized fuels, accommodation services, and furnishing & household appliances in the month.”

“Year to date (ytd) as of Oct, Malaysia’s headline inflation averaged 3.3%, suggesting that our 2022 full-year inflation estimate of 3.5% remains plausible (MOF est: 3.3%, 2021: 2.5%). We expect inflation to continue its downtrend going into 2023 and likely to average 2.8% (MOF est range: 2.8%-3.3%), assuming no changes in domestic policy particularly the fuel and electricity subsidies as well as price cap for staple food.”

“However, core inflation continued to reach a fresh high of 4.1% (from +4.0% in Sep) and lifted ytd core inflation rate up to 2.8% (BNM’s 2022 full-year est: 2.0%-3.0%). This signals the persistent buildup of demand-pull price pressures as the economy improves along with higher wages. It will justify further preemptive moves by BNM in the coming months to anchor inflation expectations amid a continuation of Fed rate hikes and domestic political resolution that paves the way for pro-growth policy and reforms. We reiterate our OPR call for a 25bps hike at each of the next two monetary policy meetings in Jan and Mar next year, before taking a pause at 3.25% thereafter.”

In an interview with the Associated Press, the International Monetary Fund (IMF) Managing Director Kristalina Georgieva said it is time for China to move away from lockdowns toward a more targeted Covid-19 approach, as reported by Reuters.

Additional takeaways

"Too early for the US Federal Reserve to back off interest rate increases."

"Energy crisis from Russia's invasion of Ukraine opens the opportunity to accelerate the transition to low-carbon energy supplies."

"More investments in resilient agriculture and support for small farmers, in addition to food waste curbs, can help solve world's hunger."

Market reaction

These comments don't seem to be having a noticeable impact on risk mood. As of writing, the US Dollar Index was down 0.3% on the day at 106.35.

USD/CAD steadies after retest of 1.35. Economists at Scotiabank note that the Canadian Dollar has struggled to advance against a soft greenback.

Firm resistance seen at 1.3490/00 

“USD gains late yesterday saw spot challenge the 1.35 area, which held the USD advance to keep the longer run bear pattern (Head and Shoulders reversal) in play. The reality is, however, that the CAD has found it hard to progress against a soft USD overall in the past couple of weeks and absent a concerted run lower in funds in the near-term, the scope for more significant losses is getting narrower.” 

“Intraday resistance should be firm at 1.3490/00.” 

“Support is 1.3400/10; weakness below here should give the USD a clearly negative jolt.”

The US Dollar Index (DXY) has given up some of its gains from yesterday and is trading near 106.25. A break under the 200-Day Moving Average (DMA) at 105.43 would set up a test of the August 10 low near 104.63, economists at BBH report.

Near-term USD weakness is likely

“The 200DMA provided support yesterday and come s in near 105.434 today. A clean break below would set up a test of the August 10 low near 104.636.”

“While we still like the Dollar higher due to our constructive fundamental outlook, we acknowledge that near-term Dollar weakness is likely until the Fed narrative shifts once again in our favor.”

USD/JPY touched its lowest level since late August at 137.50 on Monday. A break below here would open up the August 23 low near 135.80, economists at BBH report.

Japan reported October labor market and Retail Sales data

“USD/JPY remain heavy near 138 and seems likely to test yesterday’s cycle low near 137.50. A break below would set up a test of the August 23 low near 135.80.”

“The unemployment rate was expected to fall a tick to 2.5% but remained steady at 2.6%, while the job-to-applicant ratio rose a tick as expected to 1.35.  Despite the firm labor market, wage growth remains low. Until we see wage growth pick up further, the BoJ is likely to remain on hold.”

“Sales came in at 0.2% MoM vs. 1.0% expected and a revised 1.5% (was 1.1%) in September. As a result, the YoY rate came in at 4.3% vs. 5.1% expected and a revised 4.8% (was 4.5%) in September. Recent weakness in the real sector data should also keep the BoJ on hold.”

USD/BRL has been capped at 5.40, but further tactical upside is possible, in the view of analysts at Société Générale.

Recent bullish gap at 5.20 should provide support

“The pair defended the graphical support near 5.01 earlier this month resulting in a quick rebound. It has retested the peak of July at 5.51. Currently a pause is taking shape however recent bullish gap at 5.20 should provide support.” 

“The bounce is likely to persist towards the upper limit of the channel at 5.62/5.64. This remains a crucial hurdle and must be overcome to affirm next leg of uptrend.”

US Dollar Index has fallen back to support from the 200-Day Moving Average at 105.40. DXY could decline further on evidence of easing inflation and slowing growth, economists at MUFG Bank report.

US yield curve has become even more inverted this month

“The US Dollar is open to further weakness in the near-term especially if the release of the latest ISM manufacturing survey, PCE deflator report and/or Nonfarm Payrolls report reveals more evidence that inflation pressures are easing and growth is beginning to slow more notably heading into next year.”

“The US yield curve has become even more inverted this month signalling a higher risk of recession even as financial conditions have eased recently”.

Economist at UOB Group Ho Woei Chen comments on the latest interest rate decision by the Bank of Korea (BoK).

Key Takeaways

“Bank of Korea (BoK) reverted to a smaller rate hike in Nov as it raised the benchmark base rate by 25bps to 3.25%, dialing down from 50bps hike in Oct. This is due to a less hawkish Fed, credit market stress, higher growth risks and a more stable KRW.”

“The BoK kept its 2022 GDP growth forecast at 2.6% but sharply downgraded its forecast for 2023 to 1.7% from 2.1%.”

“The central bank also marginally lowered its CPI inflation forecasts by 0.1% point for both 2022 and 2023 to 5.1% and 3.6% respectively. However, the inflation is expected to remain elevated at the 5% level in the near-term.”

“This is BoK’s final meeting for 2022 and the next meeting will be on 13 Jan 23 where we now expect the central bank to hike for a final 25bps to 3.50% before staying on pause throughout 2023.”

• EUR/USD bounces off Monday’s lows and resumes the upside.
• EMU Final Consumer Confidence came at -23.9 in November.
• Germany’s flash Consumer Price Index comes next in the docket.

The European currency regains some balance, lifting EUR/USD back to the boundaries of the 1.0400 barrier on Tuesday.

EUR/USD looks to data, US Dollar

EUR/USD manages to advance after two daily pullbacks in a row in response to the renewed offered bias in the Greenback. Indeed, the US Dollar gives away part of the ground gained at the beginning of the week, as the risk complex gathers some steam on turnaround Tuesday.

The shared currency now looks firm after Monday’s volatile session saw the pair climb to as high as the boundaries of the 1.0500 mark just to suddenly reverse course and drop to the 1.0330 region, where some decent support appears to have turned up so far.

The uptick in the pair so far comes in tandem with some weakness in the German 10-year bund yields, which extend the drop below the 1.90% yardstick.

In the domestic calendar, final figures saw the Consumer Confidence gauged by the European Commission at -29.3 for the month of November and the Economic Sentiment improve a tad to 93.7 for the same month.

Later, German preliminary Consumer Price Index (CPI) and Harmonized Index of Consumer Prices (HICP) will take centre stage seconded by the US Consumer Confidence and the House Price Index.

What to look for around EUR

EUR/USD starts the week in a volatile fashion and now looks to reclaim the 1.0400 mark and beyond amidst some fresh selling pressure around the Dollar and prevailing appetite for the risky assets.

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-European Central Bank (ECB) policy divergence. In addition, markets repricing of a potential pivot in the US Federal Reserve'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: EMU Final Consumer Confidence, Economic Sentiment, Germany Flash CPI and HICP (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 0.43% at 1.0385 and faces the next up barrier at 1.0496 (monthly high November 28) ahead of 1.0500 (round level) and finally 1.0614 (weekly high June 27). On the flip side, a breach of 1.0330 (weekly low November 28) would target 1.0222 (weekly low November 21) en route to 1.0035 (100-day Simple Moving Average (SMA)).

As the Dollar corrected lower during the past month, the Loonie has lagged behind its G10 counterparts. But economists at ING expect the Canadian Dollar to outperform next year.

Growth figures should allow 50 bps hike next week

“We continue to see the upside risks for oil prices into the new year, and CAD’s limited exposure to China/Ukraine and superior liquidity are good arguments to expect CAD to outperform other procyclical currencies in 2023, should risk sentiment stabilise.”

“Today, Canada’s third-quarter growth data will be published, and expectations are for a 1.5% annualised read. This should enable the Bank of Canada to hike by 50 bps next week.”

• NZD/USD gains strong positive traction on Tuesday amid the emergence of fresh USD selling.
• Bets for less aggressive Fed rate hikes and a positive risk tone weigh on the safe-haven buck.
• The fundamental backdrop supports prospects for a further appreciating move for the major.

The NZD/USD pair catches aggressive bids on Tuesday and stalls its recent pullback from the vicinity of the 0.6300 mark, or over a three-month low touched last week. The intraday rally remains uninterrupted through the first half of the European session and lifts spot prices back closer to mid-0.6200s.

The US Dollar struggles to capitalize on the previous day's solid rebound from the very important 200-day SMA and meets with a fresh supply, which, in turn, provides a goodish lift to the NZD/USD pair. A dovish assessment of the November FOMC meeting minutes released last week cemented market bets for a relatively smaller 50 bps rate hike in December. This triggers a fresh leg down in the US Treasury bond yields and continues to undermine the greenback.

Apart from this, a modest recovery in the global risk sentiment is seen as another factor undermining the safe-haven USD and benefitting the risk-sensitive Kiwi. Investors turn optimistic amid speculation that the Chinese government is considering scaling back its strict anti-COVID policies. This is evident from a stable performance in the European equity markets, though worries about a deeper global economic downturn might cap any positive move.

Furthermore, the overnight hawkish remarks by Fed officials could lend some support to the USD. It is worth recalling that St. Louis Fed President James Bullard, New York Fed President John Williams and Fed Vice Chair Lael Brainard reiterated that more rate hikes were warranted to combat inflation. That said, an unprecedented 75 bps rate hike by the Reserve Bank of New Zealand (RBNZ) last week favours the NZD/USD bulls and supports prospects for additional gains.

Market participants now look forward to the Conference Board's US Consumer Confidence Index, due for release later during the early North American session. This, along with the US bond yields and the broader market risk sentiment, will influence the USD and provide some impetus to the NZD/USD pair. The focus, however, will remain on Fed Chair Jerome Powell's speech on Wednesday and this week's important US economic data, including the NFP report on Friday.

Technical levels to watch

The S&P 500 has gained 12.6% from its 2022 low in mid-October. However, the recent equity rally looks vulnerable, in the view of analysts at UBS.

Earnings will fall 4% next year

“While data for October showed an encouraging fall in inflation and Fed comments have recently been less aggressive, we believe the market moved too quickly to assume that the central bank has succeeded in ending the threat from inflation.”

“The path back toward the Fed’s 2% inflation target could be bumpy, sparking renewed concerns about how high rates will have to rise. In addition, we believe markets have been downplaying the threat posed by slowing growth to earnings.” 

“We expect S&P 500 earnings to fall 4% next year, compared to a consensus for a 5% increase in earnings based on bottom-up forecasts.”

• USD/CAD comes under fresh selling pressure and is weighed down by a combination of factors.
• A follow-through rally in Oil prices underpins the Loonie and exerts pressure amid a weaker USD.
• The emergence of some buying around the 1.3400 mark warrants some caution for bearish traders.
• Investors now look to monthly Canadian GDP and US Consumer Confidence for a fresh impetus.

The USD/CAD pair struggle to capitalize on its recent move up to over a two-week high - just above the 1.3500 psychological mark - and meets with a fresh supply on Tuesday. Spot prices, however, manage to find some support ahead of the 1.3400 round figure and bounce back to the 1.3450 area during the first half of the European session.

The overnight US Dollar bounce from a technically significant 200-day Simple Moving Average (SMA) fades rather quickly amid growing acceptance that the Fed will slow the pace of its policy tightening. Apart from this, a strong follow-through rally in Crude Oil prices underpins the commodity-linked Loonie and exerts downward pressure on the USD/CAD pair.

Crude Oil prices build on the previous day's solid recovery from the YTD low and rally around 2% amid speculations that OPEC will announce more supply cuts at its meeting on Sunday. The upside for the black liquid, however, remains capped amid worries that the worsening COVID-19 situation in China will hurt economic activity and dent fuel demand.

Moreover, the overnight hawkish remarks by Fed officials, along with the cautious mood, lend support to the safe-haven buck and the USD/CAD pair. It is worth recalling that St. Louis Fed President James Bullard, New York Fed President John Williams and Fed Vice Chair Lael Brainard reiterated that more rate hikes were warranted to combat inflation.

That said, a dovish assessment of the November Federal Open Market Committee (FOMC) meeting minutes released last week cemented bets for a relatively smaller 50 bps lift-off in December. This might continue to act as a headwind for the USD and cap gains for the USD/CAD pair. Hence, it will be prudent to wait for a sustained strength beyond the 1.3500 mark before placing fresh bullish bets.

Market participants now look forward to Tuesday's economic docket, featuring the release of monthly Canadian GDP print and the Conference Board's US Consumer Confidence Index. This, along with the risk sentiment, will drive the USD demand. Traders will further take cues from Oil price dynamics to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch

• Economic sentiment in the euro area improved modestly in November.
• EUR/USD continues to trade in positive territory, stays below 1.0400.

The data published by the European Commission showed on Tuesday that the Economic Sentiment Indicator (ESI) for the Euro area improved to 93.7 in November from 92.7 in October. This reading came in slightly better than the market expectation of 93.5. For the EU, the ESI rose by 1 point to 92.2.

Further details of the publication revealed that the Industrial Confidence for the euro area declined to -2 from -1.2 and the Services Confidence edged higher to 2.3 from 2.1. 

Market reaction

The EUR/USD pair showed no immediate reaction to these figures and it was last seen rising 0.32% on the day at 1.0370.

Markets are keeping an eye on developments in China. Furthermore, Fed Chair Jerome Powell's speech tomorrow and Nonfarm Payrolls on Friday are two key risk events. All in all, stars may be aligning for a Dollar recovery, in the view of economists at ING.

Bracing for a hawkish Powell

“Investors appear to be gravitating towards the risk-negative narrative of possible instability in China, despite the fact that this may prompt China to expedite its exit from Covid restrictions – likely a risk-on development.”

“This week's events, which include tomorrow’s speech by Fed Chair Jerome Powell (where we see a higher likelihood that he will sound hawkish) and US jobs data (which could stay strong), may cause the Fed's communicated and perceived narrative to drift away from dovish pivot expectations.”

“A 2Y10Y UST curve displaying a 75/80 bps inversion is indicating a common perception that the Fed will push forward with tightening into a recession. This should be a Dollar-positive combination.”

“We believe the Dollar can find some further support today as markets favour defensive trades ahead of key events later this week. Prior to Powell's speech, a return to 107.00/107.50 levels in DXY is possible.”

In the view of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, further upside could see USD/CNH challenge the 7.2800 area in the short-term horizon.

Key Quotes

24-hour view: “The strong surge in USD to a high of 7.2551 yesterday appears to be overdone. In other words, USD is unlikely to advance further. Today, USD is more likely to trade between 7.2000 and 7.2500.”

Next 1-3 weeks: “While the rapid rise in USD the last couple of days appears to be running ahead of itself, there is room for USD to test the major resistance at 7.2800. At this stage, the odds of a sustained rise above 7.2800 are not high. On the downside, a break of 7.1750 (‘strong support’ level) would indicate that USD is not ready to test 7.2800.”

• The index gives away part of Monday’s advance.
• US yields navigate without direction on Tuesday.
• Consumer Confidence, House Price Index next on tap.

The greenback, in terms of the USD Index (DXY), leaves behind part of Monday’s strong advance and retreats to the vicinity of the 106.00 neighbourhood on turnaround Tuesday.

USD Index focuses on data

The index partially reverses the optimism seen at the beginning of the week and comes under pressure against the backdrop of the generalized upbeat sentiment in the risk-associated universe.

Adding to the dollar’s offered stance, US yields tread water around Monday’s close across the curve, as the hawkish rhetoric from Fed speakers seem to have dissipated for the time being.

Later in the NA session, the Consumer Confidence tracked by the Conference Board will be in the centre of the debate seconded by the FHFA’s House Price Index.

What to look for around USD

The dollar loses part of the recent shine and returns to the proximity of the 106.00 zone in the first half of the week, always looking at the broad risk trends and recent developments from China as initial drivers for the week.

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 0.3% at 106.32 and the breakdown of 105.42 (200-day SMA) would open the door to 105.32 (weekly low November 28) 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 109.12 (100-day SMA) and then 110.39 (55-day SMA).

• GBP/USD regains positive traction on Tuesday amid the emergence of fresh USD selling.
• Bets for less aggressive Fed rate hikes continue to weigh on the buck amid a positive risk tone.
• A bleak outlook for the UK economy acts as a headwind for the GBP and caps gains for the pair.

The GBP/USD pair attracts fresh buying on Tuesday and reverses a major part of the previous day's slide to a three-day low. The pair, however, retreats a few pips from the daily peak touched during the first half of the European session and is currently trading just above the 1.2000 psychological mark.

A combination of factors prompts fresh selling around the US Dollar, which, in turn, is seen extending some support to the GBP/USD pair. The global risk sentiment gets a minor lift after Chinese authorities hinted to loosen COVID-19 restrictions, despite a nationwide surge in cases. This is evident from signs of stability in the equity markets and undermines the safe-haven Greenback. Furthermore, expectations that the Fed will slow the pace of its policy tightening exert additional downward pressure on the buck.

In fact, the November Federal Open Committee Market (FOMC) meeting minutes released last week cemented market bets for a relatively smaller 50 bps rate hike in December. This leads to a fresh leg down in the US Treasury bond yields and continues to weigh on the USD. The British Pound, on the other hand, draws support from rising bets for further substantial Bank of England rate hikes. That said, a bleak outlook for the UK economy acts as a headwind for the Sterling and keeps a lid on any meaningful appreciating move for the GBP/USD pair, at least for now.

There isn't any major market-moving macro data due for release from the UK on Tuesday, while the US economic docket features the Conference Board's Consumer Confidence Index. Apart from this, speeches by BoE MPC Member Catherine Mann and Governor Andrew Bailey will be looked upon for some impetus. Traders will also take cues from the broader risk sentiment, which might influence the USD and produce short-term opportunities around the GBP/USD pair.

Technical levels to watch

Brent has now more than fully reversed the sharp rise following Russia’s invasion of Ukraine. Nonetheless, economists at UBS expect Brent Crude Oil to move back higher toward $110 next year. 

Downward pressure on Oil from a weaker global economy should be offset by lower global supplies

“Pandemic curbs in China look likely to remain a near-term headwind for Crude, adding to worries over ebbing demand as the global economy slows. That said, we remain positive about the outlook, and expect Brent to trade around $110 a barrel through next year.” 

“Leaders of OPEC+ exporting nations meet on December 4 and will consider steps to address the recent fall in prices. The price of Oil should be supported by the European Union’s ban on Russian Crude imports, which comes into force on December 5. Meanwhile, the US and other OPEC governments are ending the sale of Oil from official stockpiles.”

While speaking on the  economic challenges, Germany’s Economy Minister Robert Habeck said on Tuesday that “we will be and remain a strong land.”

“15-year term of the deal is great, would have nothing against 20 or more but companies have to be aware of Germany's long-term climate goals,” he said when asked about the LNG deal with Qatar.

He added that there is “no reason to expect a change in supply problem soon, as Nord stream pipelines are destroyed.”

Finally commenting on the US Inflation Reduction Act, Habeck said that “Europe must respond by creating an attractive investment framework.”

Market reaction

EUR/USD is unfazed by the above comments, trading at 1.0375, up 0.43% on a daily basis.

EUR/USD failed to break the 1.0500 threshold yesterday and has dropped back to the 1.0350/1.0400 area. Economists at ING expect the pair to drop below 1.0300.

Few signs of abating inflation

“The Eurozone's exposure to China is one key driver to watch for the Euro, and it could easily outweigh the benefits of lower energy prices.”

“The consensus is for German headline inflation to stabilise at 10.4% and Eurozone figures to slow slightly tomorrow. It's difficult to see this significantly altering the ECB's narrative, but an above-consensus print may prompt markets to seriously consider a 75 bps hike in December (61 bps are currently priced).”

“Still, hawkish ECB expectations have not often translated into a stronger Euro, and we continue to see the Dollar doing the heavy lifting in driving EUR/USD moves. At this point, we believe a drop below 1.0300 is more likely than a rebound to 1.0500.”

• Silver regains strong positive traction on Tuesday and reverses the previous day’s downfall.
• The technical set-up favours bullish traders and supports prospects for further intraday gains.
• Acceptance below the $21.00-$20.90 area is needed to negate the near-term positive outlook.

Silver shows some resilience below the $21.00 mark and regains positive traction on Tuesday, reversing a major part of the overnight slide to a four-day low. The white metal sticks to its intraday gains through the first half of the European session and is currently placed around the $21.35 region, up nearly 2% for the day.

From a technical perspective, the emergence of aggressive buying near the $20.90 static support favours bullish traders and supports prospects for additional gains. The constructive outlook is reinforced by the fact that oscillators on hourly charts have again started gaining positive traction. This, in turn, supports prospects for a further intraday appreciating move for the XAG/USD.

That said, any subsequent move up might continue to confront stiff resistance near the $21.60-$21.70 supply zone. Some follow-through buying will reaffirm the bullish bias and allow the XAG/USD to reclaim the $22.00 mark. This is followed by a five-month high, around the $22.25 zone, above which spot prices could climb to the $22.50-$22.60 area en route to the $23.00 round figure.

On the flip side, the $21.00-$20.90 area should continue to act as immediate strong support. A convincing break below the latter could negate the positive outlook and possibly shift the near-term bias in favour of bearish traders. The XAG/USD might then accelerate the downfall to the $20.60-$20.55 area before eventually dropping to challenge the $20.00 psychological mark.

Silver 4-hour chart

Key levels to watch

Make virtual opening remarks at XIII Encuentro Financiero on Tuesday, European Central Bank (ECB) Vice President Luis de Guindos noted that the central bank must continue to monitor underlying inflation.

more to come ...

“Russia won't supply oil under price cap in any case,” the country’s Deputy Prime Minister Alexander Novak said on Tuesday.

Novak said: “Russia, Kazakhstan and Uzbekistan are discussing gas union for shipments, including to China.”

Market reaction

Novak’s comments join the upbeat market mood, lifting WTI 2.5% to trade at around the $79 mark, at the press time.

A number of hawkish comments were heard yesterday from individual members of the Federal Reserve. But what matters is the data, in the opinion of economists at Commerzbank.

Just words are not enough

“After the latest inflation data, the market continues to be rather unimpressed by the hawkish statements. It would probably be more convincing if the upcoming economic data indicated that price pressures in the US are still very high. However, it remains to be seen whether the labor market data can convince the market this week. We expect a further slowdown in job creation.”

“There will probably be more hawkish statements from the Fed in the near future, but as long as the market does not get more solid arguments, especially that the key interest rate in the US will not be cut again next year, the USD is still unlikely to benefit.”

USD/JPY remains under pressure for the time being, although a deeper pullback to the 137.00 region looks out of favour in the short term, comment Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “Yesterday, USD dropped sharply but briefly to 137.48 before rebounding strongly. Downward pressure has eased with the rebound and USD appears to have moved into a consolidation phase. In other words, USD is likely to trade sideways today, expected to be within a range of 138.20/139.30.”

Next 1-3 weeks: “In our latest narrative from last Thursday (24 Nov, spot at 139.20), we held the view that the risk for USD has shifted to the downside towards 137.70. Yesterday (28 Nov), USD dropped to 137.48 before rebounding. While further USD weakness is not ruled out, downward momentum has waned and this combined with oversold conditions suggests the chance of USD dropping to the next support at 137.00 is not high. Overall, only a break of 139.60 (‘strong resistance’ level) would indicate that USD is not weakening further.”

• USD/JPY comes under renewed selling pressure on Tuesday amid broad-based USD weakness.
• Rising bets for less aggressive rate hikes by the Fed continue to weigh heavily on the greenback.
• A positive risk tone could undermine the safe-haven JPY and help limit the downside for the pair.

The USD/JPY pair fails to capitalize on the previous day's recovery from the 137.50 area, or a three-month low and meets with a fresh supply on Tuesday. The intraday selling picks up pace during the early European session and drags spot prices back closer to the 138.00 mark in the last hour.

The overnight US Dollar bounce from a technically significant 200-day SMA fades rather quickly amid expectations that the Fed will slow the pace of its policy tightening. In fact, the markets now expect the US central bank to deliver a relatively smaller 50 bps rate hike in December, which led to the recent sharp decline in the US Treasury bond yields. This, in turn, continues to weigh on the USD and is seen as a key factor exerting downward pressure on the USD/JPY pair.

The Japanese Yen, on the other hand, draws support from speculations that the Bank of Japan (BoJ) will exit its ultra-lose policy stance. In fact, a Reuters poll indicated on Tuesday that more than 90% of economists expect that BoJ's next policy move will be to unwind its massive monetary easing. The change, however, is not anticipated before the latter half of 2023. This, along with a positive risk tone, could undermine the safe-haven JPY and lend support to the USD/JPY pair.

The global risk sentiment gets a boost amid hints that Chinese authorities intend to loosen COVID-19 restrictions, despite a nationwide surge in cases. This is evident from a modest uptick in the equity markets, which tends to drive flows away from traditional safe-haven currencies, including the JPY. This makes it prudent to wait for strong follow-through selling below the overnight swing low, around the 137.50 region, before positioning for any further losses for the USD/JPY pair.

Market participants now look forward to the release of the Conference Board's US Consumer Confidence Index, due later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will also take cues from the broader market risk sentiment to grab short-term opportunities. The focus, however, will be on Fed Chair Jerome Powell's speech on Wednesday and the NFP report on Friday.

Technical levels to watch

Considering advanced figures from CME Group for natural gas futures markets, open interest shrank for the second session in a row on Monday, now by just 709 contracts. Alternatively, volume remained erratic and went up by around 16.8K contracts.

Natural Gas: Immediately to the upside comes $7.60

Monday’s uptick in prices of natural gas was accompanied by a small drop in open interest, which could hint at the view that the uptrend could start losing momentum in the very near term. The continuation of the recovery, in the meantime, is expected to remain focused on the November peak at $7.60 per MMBtu (November 23).

When asked if the protest will prompt them to reconsider the zero-Covid policy, an official at the Chinese Center for Disease Control and Prevention (CDC) said on Tuesday, they will continue to fine-tune policy to reduce the impact on society and the economy.

The CDC official sadi, “we will promptly and effectively solve the urgent and difficult problems reported by the masses.”

Meanwhile, another Chinese health official clarified that people's complaints are about extra COVID-19 measures and one size fits all approach and not the measures themselves.

In the opinion of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, NZD/USD now looks poised to trade between 0.6100 and 0.6240 in the next weeks.

Key Quotes

24-hour view: “The sharp drop in NZD to a low of 0.6156 appears to be overdone. However, with no sign of stabilization just yet, NZD could dip below 0.6140. The major support at 0.6100 is unlikely to come under threat. On the upside, a break of 0.6210 (minor resistance is at 0.6190) would indicate that NZD is unlikely to weaken further.”

Next 1-3 weeks: “After reaching a high of 0.6289 last Thursday (24 Nov), NZD not only failed to hold on to its gains but also fell sharply by 1.38% yesterday (NY close of 0.6161). Upward momentum has fizzled out and NZD is likely to consolidate and trade between 0.6100 and 0.6240 for now.”

GBP/USD dropped below 1.1950 late Monday but reversed its direction early Tuesday. Economists at ING expect the Pound to remain vulnerable into the end of the year.

Bank of England Governor Andre Bailey's testimony in focus

“A significant shift in Bailey's policy rhetoric two weeks before the BoE meeting appears unlikely, but the proximity to the meeting also means that markets tend to over-interpret MPC members' comments. In our opinion, the most likely scenario for the December announcement is a 50 bps increase; markets are currently pricing in 57 bps.”

“Cable has fallen back below 1.2000 as the Dollar regained some ground, and we see room for further depreciation into the end of the year as the greenback finds more support and the Pound suffers from a bleak UK economic outlook.”

CME Group’s flash data for crude oil futures markets noted traders scaled back their open interest positions by more than 6K contracts on Monday, reversing two daily builds in a row at the same time. Volume, on the other hand, kept the choppiness unchanged and rose by nearly 432K contracts.

WTI: A test of $70.00 is not ruled out

Prices of the WTI charted an inconclusive session on Monday, reversing an initial drop to new 2022 lows. The move was amidst shrinking open interest and a marked build in volume, exposing a probable bounce in the very near term while not ruling out further weakness in the longer run. On the latter, the $70.00 mark per barrel emerges as the immediate support.

The ECB continues to attract attention with hawkish comments. But November inflation figures in the Eurozone could dampen rate fantasies on easing inflation, economists at Commerzbank report.

Eurozone inflation expected to have eased slightly in November

“The recently hawkish ECB comments have fuelled speculation about a 75 bps step. If the inflation data today and above all tomorrow was to surprise on the upside, speculation is likely to increase further.”

“After EUR/USD made another attempt towards 1.05 yesterday but then failed in the end, a surprise on the upside on the inflation front might finally push the pair above this mark.”

“We, just like the majority of analysts polled by Bloomberg, expect Eurozone inflation to have eased slightly in November. If today’s data from Germany was to point in that direction, rate fantasies on the market and thus the Euro might suffer a dampener, with downside pressure on EUR likely to be limited though thanks to hawkish ECB comments and the still high inflation rate.”

• EUR/GBP lacks any firm intraday direction and remains confined in a narrow trading band.
• Talks for more aggressive rate hikes by the ECB underpin the Euro and lend some support.
• Traders look to the flash German CPI and BoE Governor Bailey’s speech for some impetus.

The EUR/GBP cross struggles to capitalize on a two-day-old recovery move from the 0.8575-0.8570 support zone and oscillates in a narrow trading band on Tuesday. The cross, however, manages to hold above the 100-day SMA and trades around mid-0.8600s during the early European session.

The downside for the EUR/GBP cross remains cushioned in the wake of more hawkish comments by European Central Bank (ECB) policymakers recently, which point to a series of interest rate hikes ahead. In fact, ECB President Christine Lagarde said on Monday that Eurozone inflation has not peaked yet. Adding to this, Dutch central bank chief Klaas Knot noted that the risk of doing too little is clearly more pronounced than doing too much. This, along with the emergence of fresh US Dollar selling, continues to underpin the shared currency and offers support to the cross.

Adding to this, a bleak outlook for the UK economy contributes to the British Pound's underperformance and acts as a tailwind for the EUR/GBP cross. This, however, is offset by expectations that the Bank of England (BoE) will continue to raise borrowing costs to combat stubbornly high inflation. The mixed fundamental backdrop, in turn, is holding back traders from placing aggressive directional bets and capping the upside for the EUR/GBP cross. Market participants also seem reluctant ahead of the flash German CPI figures and BoE Governor Andrew Bailey's scheduled speech on Tuesday.

From a technical perspective, repeated failures to find bearish acceptance below the 100 DMA warrants some caution for bearish traders. That said, the EUR/GBP pair's inability to gain any meaningful traction makes it prudent to wait for strong follow-through buying before confirming a near-term bottom and positioning for further gains.

Technical levels to watch

GBP/USD is now seen navigating the 1.1850-1.2080 range in the next few weeks, suggest Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “Yesterday, GBP rose to 1.2188 before plummeting to close at 1.1958 (-1.08%). While oversold, the weakness in GBP could extend to 1.1915 before stabilization is likely. Resistance is at 1.2000, but only a breach of 1.2030 would indicate that the weakness has stabilized.”

Next 1-3 weeks: “The recent build-up in upward momentum has faded as GBP dropped sharply by 1.08% yesterday (NY close of 1.1958). GBP appears to have moved into a consolidation phase and is likely to trade within a range of 1.1850/1.2080.”

USD/INR has so far defended the ascending trend line since February now at 80.70/80.50. A break below here would expose the 80.00 level and the 200-Day Moving Average (DMA), analysts at Société Générale report.

82.10 is acting as an interim resistance

“Currently a bounce is under way however neckline of the pattern at 82.10 is acting as an interim resistance.” 

“Daily MACD is in negative territory denoting prevalence of downward momentum.”

“Holding below 82.10, a revisit of the trend line near 80.70/80.50 is not ruled out. In case this gets violated, the decline could extend towards 80.00 and perhaps even towards the 200-DMA at 79/78.50.” 

Open interest in gold futures markets dropped for yet another session on Monday, this time by nearly 4K contracts according to preliminary readings from CME Group. Volume, instead, remained erratic and went up by around 68.6K contracst.

Gold keeps targeting $1,786

Gold started the week on the defensive, although the daily pullback was amidst shrinking open interest. That said, further downside appears unlikely in the very near term, allowing instead for a potential rebound. The next target remains at he November high at $1,786 per ounce troy (November 15).

Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group now see EUR/USD moving into a consolidative phase in the next weeks.

Key Quotes

24-hour view: “EUR soared to a 5-month high of 1.0496 yesterday before plummeting to close at 1.0337 (-0.56%). While downward momentum has not improved much, EUR could drop to 1.0300. EUR is unlikely to test the next support level at 1.0260. On the upside, a breach of 1.0400 (minor resistance is at 1.0370) would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “In our latest narrative from last Thursday (24 November, spot at 1.0400), we indicated that the rapid build-up in momentum is likely to lead to further EUR gains. We added, ‘The level to watch is at 1.0480’. Yesterday (28 Nov). EUR soared to a high of 1.0496 before dropping sharply. Upward momentum has more or less dissipated with the rapid drop. In other words, EUR is unlikely to strengthen further. For the time being, EUR is likely to trade between 1.0260 and 1.0430.”

• AUD/USD regains positive traction on Tuesday amid the emergence of fresh USD selling.
• Bets for less aggressive Fed rate hikes, a recovery in the risk sentiment weighs on the buck.
• China’s COVID-19 woes should cap optimistic moves and act as a headwind for the Aussie.

The AUD/USD pair attracts some dip-buying near the 0.6640 region on Tuesday and maintains its bid tone through the early European session. The intraday positive move lifts spot prices back above the 0.6700 mark and is supported by the emergence of fresh US Dollar selling.

A combination of factors fails to assist the greenback to capitalize on the overnight goodish rebound from the very important 200-day SMA and offers some support to the AUD/USD pair. A dovish assessment of the November FOMC meeting minutes released last week cemented market bets for a relatively smaller 50 bps rate hike in December. This, along with a slight recovery in the global risk sentiment, undermines the safe-haven USD and benefits the risk-sensitive Aussie.

That said, the worsening COVID-19 situation in China, should keep a lid on any optimistic move in the markets and act as a headwind for the China-proxy Australian Dollar. In fact, China reported another record-high number of COVID-19 infections on Monday and the imposition of new restrictions prompted a wave of protests in several cities. This adds to worries about a further slowdown in economic activity and might continue to weigh on the market sentiment.

Furthermore, the overnight hawkish comments by influential FOMC members should help limit the downside for the buck and further contribute to capping the upside for the AUD/USD pair. It is worth recalling that St. Louis Fed President James Bullard, New York Fed President John Williams and Fed Vice Chair Lael Brainard reiterated that more rate hikes are coming. This, in turn, warrants some caution for aggressive bullish traders and positioning for further gains.

Nevertheless, the AUD/USD pair, for now, seems to have snapped a two-day losing streak and remains at the mercy of the USD price dynamics. Market participants now look to the release of the Conference Board's US Consumer Confidence Index for some impetus later during the early North American session. The focus, however, will remain on Fed Chair Jerome Powell's speech on Wednesday and this week's important US economic data, including the NFP report on Friday.

Technical levels to watch

FX option expiries for Nov 29 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0265 451m
• 1.0380 321m
• 1.0450 707m

- USD/JPY: USD amounts                     

• 137.50 448m
• 139.00 550m

- AUD/USD: AUD amounts  

• 0.6500 303m
• 0.6725 387m

- USD/CAD: USD amounts       

• 1.3275 514m
• 1.3500 371m

- EUR/GBP: EUR amounts        

• 0.8600 500m

Gold is staging a recovery rally above the $1,750 level this Tuesday. As FXStreet’s Dhwani Mehta notes, XAU/USD recovery needs acceptance above $1,760.

Downside to remain cushioned so long as the $1,740 mark is defended

“Gold price has recaptured the 23.6% Fibo level and the rising trendline support-turned-resistance, now at $1,747 and $1,749 respectively. The next upside barrier is seen at the $1,760 round figure. Acceptance above the latter is critical to unleashing the additional recovery toward $1,770.”

“On the flip side, the downside will likely remain cushioned so long as the $1,740 mark is defended. The bullish 21-Daily Moving Average (DMA) at $1,728 will be next in play. The $1,722 strong support will be the level to beat for Gold bears. That level is the confluence of the 38.2% Fibo level and the November 23 low.”

• GBP/USD pares the first daily loss in three, retreats from intraday high top of late.
• One-week-old horizontal resistance area tests Cable buyers.
• RSI, MACD favor further upside, 200-HMA restricts the bear’s entry.

GBP/USD extends pullback from intraday high to 1.2000 as the Cable traders consolidate the first daily gains in three heading into Tuesday’s London open.

In doing so, the quote retreats from a one-week-long horizontal resistance area ahead of the key event, namely Bank of England (BOE) Governor Andrew Bailey’s testimony before the Lords Economic Affairs Committee.

It should, however, be noted that the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator and upbeat Relative Strength Index (RSI), placed at 14, keep the GBP/USD pair buyers hopeful.

That said, the 200-HMA level surrounding 1.1955, challenges intraday sellers of the pair ahead of the 61.8% Fibonacci retracement level of November 21-24 upside, near 1.1920.

In a case where the GBP/USD bears keep the reins past 1.1920, the 1.1900 threshold may act as an intermediate halt during the likely south-run targeting the previous weekly low of 1.1778.

On the flip side, recovery moves need to cross the aforementioned immediate horizontal near 1.2025-30 to retake control.

Even so, a convergence of the previous support line from November 21 and a downward-sloping trend line from the last Thursday, close to 1.2100, will be a tough nut to crack for the GBP/USD buyers.

GBP/USD: Hourly chart

Trend: Pullback expected

Here is what you need to know on Tuesday, November 29:

Following Monday's risk-off action, the market mood seems to have improved early Tuesday with major Asian equity indices registering impressive daily gains. The US Dollar Index, which rose more than 0.5% on Monday, turned south with the US Dollar struggling to find demand as a safe haven. European Commission will release the business and consumer sentiment surveys later in the session. Germany's Destatis will publish the November inflation figures and the US economic docket will feature September Housing Price Index data alongside the Conference Board's Consumer Confidence Index. Third-quarter Gross Domestic Product (GDP) data from Canada will also be looked upon for fresh impetus.

China's securities regulator announced that it will allow real-estate developers to access refinancing. "The fresh move, adding to a flurry of recent government actions to stabilize the housing market and the economy at large, is meant to let listed developers use the capital market to ease their funding woes," Global Times reported. Following this development, the Shanghai Composite remain on track to end the day more than 2% higher and Hong Kong's Hang Seng gains nearly 4%.

Additionally, Global Times commentator Hu Xijin tweeted out "China may walk out of the shadow of COVID-19 sooner than expected," providing an additional boost to risk sentiment. Reflecting the improving market mood, US stock index futures are up between 0.2% and 0.5% in the early European morning.

EUR/USD gained its traction after having closed in negative territory on Monday and was last seen edging higher toward 1.0400. While testifying before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament on Monday, European Central Bank (ECB) President Christine Lagarde reiterated that interest rates will remain their main tool for fighting inflation. Commenting on the economic outlook, Lagarde noted that growth in the Eurozone was expected to continue to weaken for the remainder of this year and the beginning of 2023.

GBP/USD dropped below 1.1950 late Monday but reversed its direction early Tuesday. At the time of press, the pair was trading in positive territory at around 1.2000. Bank of England (BOE) Governor Andrew Bailey is scheduled to deliver a speech at 1500 GMT.

USD/JPY touched its lowest level since late August at 137.50 on Monday as the Japanese Yen capitalized on safe-haven flows. With the US Dollar staying on the back foot early Tuesday, the pair is having a hard time staging a rebound.  Reuters reported on Tuesday that 24 of 26 economists that were polled recently said that they were expecting the Bank of Japan's next policy to be "unwinding its ultra-easy monetary policy."

New from China helped Gold price gather bullish momentum and XAU/USD already erased all losses it suffered on Monday. The pair was last seen rising 0.7% on the day at $1,755. The benchmark 10-year US Treasury bond yield stays quiet below 3.7%, allowing the risk perception to drive XAU/USD's action.

Falling crude oil prices weighed on the Canadian Dollar on Monday and USD/CAD climbed to its highest level in nearly three weeks at 1.3505. With the barrel of West Texas Intermediate gaining nearly 3% early Tuesday, USD/CAD stays under bearish pressure and trades deep in negative territory at around 1.3430. The Canadian economy is forecast to grow at an annualized rate of 3.5% in the third quarter, up slightly from 3.3% recorded in the second quarter.

Bitcoin started to edge higher and was last seen gaining 1.5% on the day at $16,450 after having closed the previous four trading days in negative territory. Supported by the upbeat market mood, Ethereum is up 3% on the day, trading slightly above $1,200.

• Gold price picks up bids to reverse the previous day’s losses amid cautious optimism in the financial markets.
• Easing in China Covid numbers, efforts to defend reality sector join downbeat US Dollar to favor Gold buyers.
• Lackluster yields of United States Treasury bonds, mixed comments from Federal Reserve officials challenge XAU/USD upside.
• Bull cross on the hourly chart, hopes of more positives from China signal further upside of Gold price.

Gold price (XAU/USD) picks up bids to reverse the previous day’s loss, the heaviest in a week, around $1,755 during early Tuesday morning in Europe. The yellow metal’s latest gains could be linked to the mildly positive sentiment in the global financial markets, mainly led by upbeat headlines from China. However, anxiety ahead of the key events restricts the Gold price upside as of late.

China renews market’s optimism and favors Gold price

China’s daily covid infections dropped from an all-time high of 40,347 to 38,645, as per the latest official readings conveyed by Reuters. This also joins the upbeat performance of Chinese equities as the national securities regulator lifted a ban on equity refinancing for listed property firms, per Reuters. “The China Securities Regulatory Commission (CSRC) said late on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed Chinese developers, lifting a ban that has been in place for years,” mentioned the news.

While portraying the mood, the US stock futures and equities in the Asia-Pacific region print mild gains despite the downbeat performance of Wall Street. The same exert downside pressure on the US Dollar’s safe-haven demand and favor the Gold price upside.

United States Treasury bond yields struggle amid mixed Federal Reserve signals

Although the overall tone of the US Federal Reserve (Fed) officials appeared positive, individual comments didn’t rule out the need for softer interest rate hikes and hence failed to propel the US Treasury bond yields.

Richmond Federal Reserve Bank President Thomas Barkin recently mentioned that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation. Previously, Cleveland Fed 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. Additionally, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

That said, the benchmark US 10-year Treasury yields remain sidelined near 3.70% so far during the current week, after posting a three-week downward trajectory.

It’s worth noting that the US Dollar weakness gains momentum amid sluggish Treasury bond yields. That said, the US Dollar Index (DXY) drops 0.40% intraday to 106.25 by the press time, which in turn favors the XAU/USD bulls.

China Covid Conference, Federal Reserve signals will be key for XAU/USD traders

Having witnessed the much-needed easing in the Coronavirus numbers, Chinese authorities are up for conveying COVID prevention and control measures at 3 p.m. (07:00 GMT) on Tuesday. The same could help the Gold price to gain more strength in case of a positive outcome.

Additionally, comments from the Fed policymakers may also help the XAU/USD bulls to keep the reins in a case where the easy rate hikes are chatters.

It should be noted that Federal Reserve (Fed) Chairman Jerome Powell is up for his first public appearance since November’s Federal Open Market Committee (FOMC) meeting and could propel the XAU/USD if he reiterates the bearish bias.

Gold price technical analysis

Gold price grinds higher as bulls poke the 38.2% Fibonacci retracement of the bullion’s upside between November 09 and 15.

The upside momentum also takes clues from the bullish Moving Average Convergence and Divergence (MACD) indicator, as well as the firmer Relative Strength Index (RSI), placed at 14.

It’s worth noting that the 50-Hour Moving Average (HMA) aims to pierce the 200-HMA and confirm a “Bull Cross”, which in turn keeps the Gold buyers hopeful.

However, a one-week-old descending trend line near $1,763 and the monthly peak near $1,786 could challenge the short-term Gold price upside ahead of the $1,800 threshold.

On the flip side, a clear break below the area comprising the 50-HMA and the 200-HMA, surrounding $1,750, holds the key to the gold seller’s entry.

Following that, the latest swing low and the 61.8% Fibonacci retracement, also known as the “Golden ratio”, could lure the XAU/USD bears to aim for $1,739 and $1,734 levels respectively.

Gold price: Hourly chart

Trend: Further upside expected

• USD/CAD is declining towards 1.3400 amid a sheer recovery in oil prices.
• The risk-off impulse has faded after china announces economic stimulus to offset the Covid-inspired volatility.
• Apart from Fed Powell’s speech, the US/Canada GDP data will be keenly watched.

The USD/CAD pair is looking for an immediate cushion after a massive sell-off post failing to sustain above the critical hurdle of 1.3500. The loonie asset is hovering around 1.3433 and is expected to extend its losses towards the round-level support of 1.3400 amid a vertical rally in oil prices. Also, the recovery in the risk-appetite theme is expected to strengthen the Canadian Dollar further.

Meanwhile, the US Dollar Index (DXY) has refreshed its day’s low at 106.14 amid a decline in safe-haven’s appeal. Contrary to that, 10-year US Treasury yields have recovered to near 3.71% as investors have turned anxious ahead of the speech from Federal Reserve (Fed) chair Jerome Powell.

On the United States front, investors are awaiting the release of the quarterly Gross Domestic Product (GDP) data, which will release on Wednesday. The growth rate is expected to remain stable at 2.6%. Federal Reserve (Fed) policymakers brace for a slowdown in the growth rate as it will lead to a deceleration in inflation.

Meanwhile, loonie investors are also awaiting GDP figures, which are due on Tuesday. The annualized GDP is expected to improve to 3.5% vs. the prior release of 3.3%. While, on a quarterly basis, the economic data could decline to 0.4% against the former release of 0.8%.

On the oil front, oil prices have roared firmly on expectations of consideration of supply cuts by the OPEC cartel to offset the recent weakness. Meanwhile, public unrest in China has been calmed for a while as Chinese marshals have barricaded people at home under coercion. However, the situation has not been solved entirely.

It is worth noting that Canada is a leading oil exporter to the United States, therefore, a meaningful recovery in oil prices supports the Canadian Dollar.

• Asian indices have displayed mixed responses as Chinese stocks have roared while Nikkei225 remained weak.
• Fresh economic stimulus considered by Beijing has infused an adrenaline rush into domestic equities.
• Oil prices have recovered dramatically in expectations of further supply cuts by OPEC.

Markets in the Asian domain have recovered dramatically after Chinese authorities considered economic stimulus to offset Covid-inspired bleak economic projections. Chinese equities have soared vigorously as public unrest has been restricted by marshals. On Monday, Beijing stocks faced an intense sell-off as the general public came on the roads for anti-Covid lockdown protests. This has resulted in a recovery in investors’ risk appetite.

At the press time, Japan’s Nikkei225 surrendered 0.45%, China50 soared 3.73%, Hang Seng climbs 4.32%, and Nifty50 gained 0.43%.

The announcement of fresh stimulus by the Chinese authorities has managed to offset the dented market sentiment for the time being but downside risks are still solid as the general public is filled with frustration and anger led by the rollback of Covid-19 lockdown curbs. Going forward, investors will shift their focus on Caixin Manufacturing PMI data, however, the fears of a resurgence in public unrest will stay for a while.

Meanwhile, Japanese equities have continued their downside bias despite a weakening risk-off mood. It seems that mixed Retail Sales data has impacted sentiment. The annual economic data landed at 4.3%, lower than projections of 5.0%. While monthly Retail Sales are grown by 0.2% against a de-growth of 0.3% as expected.

On the oil front, oil prices have recovered dramatically on potential supply cuts by OPEC in its meeting scheduled for December 4. The market participants are expecting that the recent weakness in oil prices could force the OPEC cartel to announce more supply cuts. Also, economic stimulus considered by Chinese authorities to curtain the impact of nationwide Covid-19 has brought optimism to oil prices.

• EUR/USD picks up bids to reverse two-day downtrend amid market’s cautious optimism.
• Retreat in China’s covid infections from record high, efforts to revive real-estate sector improved sentiment.
• Hawkish comments from the Fed, ECB policymakers test the pair buyers ahead of the key data/events.
• German HICP precedes Eurozone inflation to offer early signal, US CB Consumer Confidence will also be important for fresh impulse.

EUR/USD rises half a percent as buyers approach the 1.0400 threshold heading into Tuesday’s European session. In doing so, the major currency pair prints the first daily gains in three ahead of the key German inflation gauge, namely the Harmonized Index of Consumer Prices (HICP) for November, as well as the US Confederation Board’s (CB) Consumer Confidence for the said month.

The quote’s latest run-up could be linked to the easing of China-linked fears and softer US Treasury yields, as well as mixed comments from the US and the European monetary policy authorities.

China’s daily covid infections dropped from an all-time high of 40,347 to 38,645, as per the latest official readings conveyed by Reuters. This also joins the upbeat performance of Chinese equities as the national securities regulator lifted a ban on equity refinancing for listed property firms, per Reuters. “The China Securities Regulatory Commission (CSRC) said late on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed Chinese developers, lifting a ban that has been in place for years,” mentioned the news.

On the other hand, European Central Bank (ECB) President Christine Lagarde mentioned on Monday that the economy is set to weaken for the rest of year and start 2023. ECB’s Lagarde further added that interest rates will remain their main tool for fighting inflation. On the same line were comments from ECB policymaker and Slovak central bank President Peter Kazimir who said, the “risk of recession in the Eurozone is growing.” Further, ECB Governing Council member Klaas Knot stated, “recession not a foregone conclusion.” Additionally, ECB policymaker Pablo Hernandez de Cos mentioned that the (rate) hikes so far (are) not enough to return inflation to goal.

Federal Reserve (Fed) officials were also active and tried suggesting the next moves of the US central bank, while also probing the EUR/USD moves.

Richmond Federal Reserve Bank President Thomas Barkin recently mentioned that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation. Previously, Cleveland Fed 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.

Also, 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. Additionally, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

While portraying the mood, the US stock futures and equities in the Asia-Pacific region print mild gains despite the downbeat performance of Wall Street. Further, the US 10-year Treasury yields remain depressed near 3.69% by the press time and weigh on the US Dollar amid the risk-on mood.

Moving on, the first readings of German HICP for November, expected 11.3% YoY versus 11.6%, could challenge the EUR/USD buyers if posting a softer outcome, which is less likely. However, an anticipated deterioration in the US consumer sentiment gauge might help the pair buyers to remain hopeful ahead of Wednesday’s Eurozone HICP and a speech from Fed Chair Jerome Powell.

Technical analysis

Unless crossing a three-week-old previous support line, currently around 1.0410, the EUR/USD pair’s recovery remains elusive.

• USD/JPY is facing selling pressure above 138.50 as the risk-off impulse has lost its traction.
• Market participants are divided on decisions over deceleration in an interest rate hike by the Fed.
• A Reuters poll claims that the BOJ could consider unwinding monetary easing in the second half of 2023.

The USD/JPY pair has witnessed a rebound after dropping below 138.50 in the Asian session. The rebound seems to lack confidence and is expected to witness fresh selling pressure after dropping below the same. Meanwhile, the risk-off impulse has lost its glory as China has announced stimulus to offset bleak economic projections amid escalating Covid-19 infections.

The risk-appetite theme has recovered sharply and is impacting the US Dollar Index (DXY). The USD Index has refreshed its intraday low near 106.25 and is expected to extend its losses further. Meanwhile, the 10-year US Treasury yields have extended their gains above 3.71% ahead of the speech from Federal Reserve (Fed) chair Jerome Powell.

Market participants are divided on the decision over deceleration in the interest rate hike by the Fed. A decline in inflation in October month and rising financial risks in the United States economy have resulted in expectations for a slowdown in the rate hike pace.  

Apart from that Fed’s Beige Book will also remain in focus. The Fed’s Beige Book will provide projections for growth rate and inflation, the current situation of consumer spending, and other economic catalysts. Also, the US Automatic Data Processing (ADP) Employment data will be keenly watched. The US economy is expected to display a decline in employment generation amid rising interest rates.

On the Tokyo front, the Bank of Japan (BOJ) is expected to consider unwinding the prolonged monetary easing, according to an economists’ poll by Reuters.  More than 90% of economists have supported the view of phasing out monetary easing in the latter half of CY2023. This might strengthen the Japanese yen bulls further as BOJ’s ultra-loose policy has been a major factor behind the yen’s weakness.

• USD/CHF renews intraday low during the first negative daily performance in four.
• Improvement in market sentiment, downbeat US Treasury bond yields weigh on the US Dollar.
• Swiss Q3 GDP, US CB Consumer Confidence could offer immediate directions.

USD/CHF takes offers to refresh the intraday low near 0.9460 heading into Tuesday’s European session as it snaps the three-day uptrend. Although the risk-on mood seems to weigh on the Swiss Franc (CHF) pair, a cautious mood ahead of the key data/events tests the downside momentum of late.

The market’s optimism could be linked to the easing of China’s daily covid infections from an all-time high of 40,347 to 38,645. Further, a rally in the Chinese reality stocks, backed by the national securities regulator’s lifting of a ban on equity refinancing for listed property firms, also seemed to have favored the market optimism and weighed on the US Dollar. “The China Securities Regulatory Commission (CSRC) said late on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed Chinese developers, lifting a ban that has been in place for years,” mentioned the news.

It should be noted that the mixed comments from the US Federal Reserve (Fed) policymakers and cautious mood before the release of Switzerland’s third quarter (Q3) Gross Domestic Product (GDP) seem to probe the pair sellers of late.

That said, Richmond Federal Reserve Bank President Thomas Barkin recently mentioned that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation. Previously, Cleveland Fed 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. Additionally, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

Amid these plays, the US stock futures and equities in the Asia-Pacific region print mild gains despite the downbeat performance of Wall Street. Further, the US 10-year Treasury yields remain depressed near 3.69% by the press time and weigh on the US Dollar amid the risk-on mood.

Looking forward, the Swiss GDP Annualized for the Q3, expected to ease to 1.0% YoY versus 2.8% prior, could direct USD/CHF traders ahead of the US Confederation Board’s (CB) Consumer Confidence for November. Though, Wednesday’s speech from Fed Chair Jerome Powell and Friday’s US jobs report will be crucial for clear directions.

Technical analysis

Unless successfully crossing the 200-DMA hurdle, currently around 0.9640 by the press time, USD/CHF remains vulnerable to refreshing the monthly low, near 0.9355 at the latest.

• USD/CNH holds lower ground near intraday bottom, snaps four-day uptrend.
• Bearish MACD signals favor sellers but 100-SMA acts as extra filter to the south.
• Monthly resistance line holds the key to buyer’s dominance.

USD/CNH takes offers as bears attack 7.1800 to defy the fortnight-old bullish chart formation during early Tuesday. In doing so, the offshore China Yuan (CNH) prints the first daily loss in five.

That said, the Moving Average Convergence and Divergence (MACD) indicator hints at the pair’s further weakness as it flashes the bearish signals when sellers poke the support line of the upward-sloping trend channel, around 7.1780 by the press time.

It should be noted, however, that the 100-SMA level of 7.1600, acts as the extra challenge for the USD/CNH bears before taking control.

Following that, a southward trajectory towards the monthly low of 7.0194 can’t be ruled out. Also acting as the short-term key support is the previous monthly low near 7.0126.

Meanwhile, recovery moves could aim for the 7.2000 round figures before the stated channel’s upper line, close to 7.2780 at the latest.

In a case where the USD/CNH buyers keep the reins past 7.2780, the 7.2800 round figure and a downward sloping resistance line from late October, near 7.2820, could challenge the upside momentum before trying to refresh the record high marked in the last month.

USD/CNH: Four-hour chart

Trend: Limited downside expected

• AUD/USD has recaptured the 0.6700 resistance as China announces stimulus to offset weaker economic projections.
• A significant recovery in investors’ risk appetite has dragged the USD Index to near 106.20.
• This week, US ADP Employment and Caixin Manufacturing PMI will be of utmost importance.

The AUD/USD pair has witnessed a sheer responsive buying action after dropping to near 0.6640 in the Tokyo session. The Aussie dollar has gained significant strength and has managed to push the asset above the round-level hurdle of 0.6700. Investors’ risk appetite has improved sharply as Chinese marshals are working on restricting protests from individuals against Covid-19 lockdown measures.

The US Dollar index (DXY) has dropped sharply to near 106.20 as the risk aversion theme is losing its grip quickly. Meanwhile, S&P500 futures have extended their recovery. The 10-year US Treasury yields have overstepped the critical hurdle of 3.70% amid anxiety ahead of the speech from Federal Reserve (Fed) chair Jerome Powell, which is due on Wednesday.

The speech from the Fed chair will provide cues about the likely monetary policy action in December monetary policy meeting. Also, it will trim obscurity over the chatters about a deceleration in the interest rate hike pace.

Apart from that, investors will focus on the release of the United States Automatic Data Processing (ADP) Employment data. As per the projections, the US labor market has been added with 200K fresh jobs vs. the prior release of 239K.

Meanwhile, the Australian Dollar has picked significant bids as China has announced fresh stimulus to offset concerns over economic projections due to fresh Covid-19 lockdown measures. Being, a leading trading partner of China, the fresh stimulus will also bring more business to the Australian economy.

Going forward, investors will keep an eye on Thursday’s Caixin Manufacturing PMI data, which is seen lower at 48.6 vs. the prior release of 49.2.

The Bank of Japan's (BOJ) next policy move will unwind, rather than strengthen, it's massive monetary easing, according to more than 90% of economists polled by Reuters. The survey update also mentioned that most said the change was unlikely before the latter half of 2023.

Additional findings

Also read: USD/JPY slides towards 138.50 on mixed Japan data, pullback in yields, focus on China, Fed talks

• NZD/USD picks up bids to snap two-day uptrend, eyes the biggest daily gain in a week.
• NZIER forecasts highlight inflation, interest rates as key headwinds for economy.
• Easing Covid numbers from China, help for ailing real-estate market favor sentiment.
• US CB Consumer Confidence, NZ Building Permits may entertain intraday traders.

NZD/USD snaps a two-day downtrend as it prints 0.75% intraday gains around 0.6205 during early Tuesday morning in Europe. In doing so, the Kiwi pair pays a little heed to the downbeat economic forecasts from the New Zealand Institute of Economic Research (NZIER) amid cautious optimism in the market.

NZIER released its quarterly economic forecasts earlier in the day and stated that rising interest rates and high inflation worldwide pose a threat to New Zealand’s economic recovery over the coming years. The economic update also conveyed hawkish expectations from the Reserve Bank of New Zealand (RBNZ) and dimmed the negative impacts of the announcement.

Also read: NZIER: Inflation and rising interest rates remain key headwinds for the economy

Elsewhere, an easing in China’s daily covid infections from an all-time high of 40,347, to 38,645, seemed to have triggered cautious optimism. On the same line could a rally in the Chinese reality stocks as the national securities regulator lifted a ban on equity refinancing for listed property firms, per Reuters. “The China Securities Regulatory Commission (CSRC) said late on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed Chinese developers, lifting a ban that has been in place for years,” mentioned the news.

Alternatively, hawkish comments from the US Federal Reserve (Fed) officials seemed to challenge the NZD/USD bulls ahead of the key event, namely Wednesday’s speech from Fed Chair Jerome Powell, the first since the November Fed meeting.

If we take a look at the latest Fedspeak, Richmond Federal Reserve Bank President Thomas Barkin recently mentioned that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation. Previously, Cleveland Fed 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. Additionally, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

Against this backdrop, the US stock futures and equities in the Asia-Pacific region print mild gains despite the downbeat performance of Wall Street. Further, the US 10-year Treasury yields remain depressed near 3.69% by the press time and weigh on the US Dollar amid the risk-on mood.

Looking forward, risk catalysts will be important for the immediate directions ahead of the US Confederation Board’s (CB) Consumer Confidence for November. However, major attention will be given to Fed’s Powell and then to Friday’s US jobs report for clear directions.

Technical analysis

NZD/USD rebound remains elusive unless it stays comfortably beyond the 200-DMA and refreshes the monthly high, respectively near 0.6241 and 0.6290 by the press time.

• USD/INR holds lower ground near intraday bottom amid mildly positive markets.
• Easing in China covid numbers, property market optimism weigh on the US Dollar.
• S&P cuts India’s economic growth forecast but Morgan Stanley stays bullish.
• Firmer oil prices, hawkish Fedspeak poke pair sellers ahead of India Q3 GDP, Fed Chairman Jerome Powell’s speech.

USD/INR remains depressed around the intraday low of 81.48, picking up bids to 81.60 by the press time, as market sentiment improves during early Tuesday. Even so, mixed headlines surrounding New Delhi and firmer oil prices challenge the pair sellers of late.

Having witnessed a downbeat start to the key week, an easing in China’s daily covid infections from an all-time high of 40,347, to 38,645, seemed to have triggered cautious optimism. On the same line could a rally in the Chinese reality stocks as the national securities regulator lifted a ban on equity refinancing for listed property firms, per Reuters. “The China Securities Regulatory Commission (CSRC) said late on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed Chinese developers, lifting a ban that has been in place for years,” mentioned the news.

On the other hand, the global rating agency S&P cuts India’s economic growth forecast to 7.0% for the current Fiscal Year (FY), from 7.3% forecasted in September. S&P also stated that the domestic demand-led economy will be less impacted by the global slowdown.

Alternatively, analysts at Morgan Stanley expect India's Sensex stock index may hit 80,000 by the end of next year if the country is included in global bond indexes and prices of commodities such as oil and fertilizers drop sharply. “The brokerage also sees a 50% chance of the Sensex hitting 68,500 by the end of next year, assuming that the effects of the Ukraine-Russia conflict do not spill over into 2023, domestic growth continues its strong path and the United States does not slip into a protracted recession,” mentioned Reuters.

It’s worth noting that the Fed policymakers’ defense of the aggressive measures and firmer WTI crude oil, up 1.80% intraday near $78.25 by the press time, also seemed to challenge the USD/INR bears of late.

Looking forward, the US Confederation Board’s (CB) Consumer Confidence for November could entertain USD/INR traders ahead of the key Wednesday when the third quarter (Q3) Indian Gross Domestic Product (GDP) and Fed Chair Jerome Powell’s speech will be crucial to watch.

Technical analysis

Sustained trading below the 50-DMA, around 81.90 by the press time, keeps the USD/INR bears hopeful.

• Gold price has extended its recovery above the $1,750.00 hurdle as the risk-off impulse eases.
• A recovery in risk-on profile has failed to ease US Treasury yields gains.
• United States inflation will face significant heat on a slowdown in growth rate.

Gold price (XAU/USD) has extended its recovery above the immediate hurdle of $1,750.00 in the Asian session. A responsive buying action around the critical support of $1,740.00 has marked a recovery in Gold price. The risk aversion theme is losing its grip, therefore, the US Dollar Index (DXY) has dropped sharply below 106.30.

S&P500 futures have displayed a recovery after a sell-off on Monday, indicating a recovery in investors’ risk appetite. Meanwhile, the 10-year US Treasury yields are holding their gains around 3.70%.

Chinese marshals have stopped the general public from coming to roads to weaken protests against the rollback of Covid-19 lockdown measures by the administration. Although, the process is temporary as individuals are filled with frustration and anger.

On the United States front, investors are awaiting the release of the quarterly Gross Domestic Product (GDP) data, which will release on Wednesday. The growth rate is expected to remain stable at 2.6%. Federal Reserve (Fed) policymakers brace for a slowdown in the growth rate as it will lead to a deceleration in inflation. This will be supportive of the Fed while designing a strategic plan for December’s monetary policy meeting.

Gold technical analysis

On an hourly scale, gold price has managed to recapture 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 downward-sloping trendline from November 16 high at $1,784.42 will act as a major barricade for the gold bulls.

The precious metal has overstepped the 20-period Exponential Moving Average (EMA) at $1,746.00, which indicates that the short-term trend has turned positive again.

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

Gold hourly chart

• GBP/USD picks up bids to snap two-day downtrend as market sentiment improves.
• Softer Covid infections from China, a stimulus measure for real-estate firms favored mild risk-on mood.
• Hawkish Fedspeak, pre-event anxiety and looming concerns over the UK government workers’ nationwide strike test bulls.
• BOE Governor Bailey Testimony, US CB Consumer Confidence eyed for fresh impulse.

GBP/USD cheers the broad-based US Dollar selling amid firmer sentiment while refreshing the daily top to 1.2000 during early Tuesday morning in Europe. In doing so, the Cable pair also portrays the trader’s optimism ahead of Bank of England (BOE) Governor Andrew Bailey’s testimony before the Lords Economic Affairs Committee.

The recovery in the market’s mood could be linked to an easing in China’s daily covid infections from an all-time high of 40,347, to 38,645. On the same line could be the upbeat performance of Chinese equities as the national securities regulator lifted a ban on equity refinancing for listed property firms, per Reuters. “The China Securities Regulatory Commission (CSRC) said late on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed Chinese developers, lifting a ban that has been in place for years,” mentioned the news.

Elsewhere, looming fears of public servants’ nationwide strike in the UK joined British Prime Minister (PM) Rishi Sunak’s readiness to jostle with China to challenge the GBP/USD bulls ahead of the key event, namely BOE Governor Bailey’s testimony.

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.

It should be noted, however, that the hawkish Fedspeak and doubts over China’s ability to overcome the pandemic fears challenge the GBP/USD bulls. That said, Richmond Federal Reserve Bank President Thomas Barkin recently mentioned that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation. Previously, Cleveland Fed 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. Additionally, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

While portraying the mood, the US stock futures and equities in the Asia-Pacific region print mild gains despite the downbeat performance of Wall Street. Further, the US 10-year Treasury yields remain depressed near 3.69% by the press time and weigh on the US Dollar amid the risk-on mood.

Moving on, the tone of BOE Governor Bailey will be crucial for the GBP/USD pair traders as markets brace for a 50 bps rate hike in December. That said, the BOEWatch tool suggests a nearly 85% chance of the UK central bank’s announcements of a 50 basis points (bps) rate hike in the next monetary policy meeting.

Also important will be the monthly US Confederation Board’s (CB) Consumer Confidence for November, as well as multiple speeches from the US Federal Reserve (Fed) officials ahead of Wednesday’s scheduled public appearance of Fed Chairman Jerome Powell.

Technical analysis

Although the 10-DMA triggered the GBP/USD pair’s rebound, currently around 1.1960, the recovery moves remain elusive unless crossing the previous support line from November 10, close to 1.2095 at the latest.

Risk sentiment is witnessing a fresh boost, as investors assess the latest tweets from Hu Xijin, a commentator at the highly-influential Chinese state media, Global Times.

Hu tweeted: “The new Omicron variant is spreading fast, pushing adjustment in COVID response in many parts of China. China's current rate of severe cases is about 0. 025%. Most Chinese people are no longer afraid of being infected. China may walk out of the shadow of COVID-19 sooner than expected.”

Another tweet read: “Protests took place in many places in China over the past weekend. With the relaxation of the epidemic prevention and control measures, public sentiment will soon calm down. I can give an absolute prediction: China will not become chaotic or out of control.”

This set of tweets suggests that China could soon abandon its zero-Covid policy, boosting the S&P 500 futures 0.30% higher while the AUD/USD pair recaptures 0.6700, up 0.80% on the day.

• Downbeat market sentiment has weakened the Euro bulls.
• A Double Top formation around 1.0500 has triggered a bearish reversal for the major currency pair.
• The (RSI) (14) has shifted into the 40.00-60.00 range, which signals a loss in the upside momentum.

The EUR/USD pair has dropped after facing barricades around the immediate hurdle of 1.0360 in the Asian session. Hawkish commentaries from Federal Reserve (Fed) policymakers joined China protests-inspired volatility and now have strengthened the risk aversion theme.

The US Dollar Index has found support around 106.40 and is looking to recapture an intraday high of around 106.75. Meanwhile, the 10-year US Treasury yields have recovered to near 3.70%.

On a four-hour scale, the asset has declined after forming a ‘Double Top’ chart pattern. The formation of the above-mentioned chart pattern indicates a bearish reversal as the asset tested previous highs on Monday around 1.0500 with weak buying interest.

The major currency pair has dropped below the 20-period Exponential Moving Average (EMA) at 1.0360 while the 50-EMA at 1.0277 is still advancing.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range from the bullish range of 60.00-80.00, which signals a loss in the upside momentum.

Should the asset drops below Monday’s low at 1.0330, the US Dollar bulls will drag the pair towards the round-level support at 1.0330, followed by November 21 low at 1.0222.

On the contrary, a break above the psychological resistance of 1.0500 will drive the major currency pair to a fresh five-month high above 1.0536. A breach of the latter will drive the asset toward June 28 high of around 1.0600.

EUR/USD four-hour chart

USD/JPY remains depressed at an intraday low around 138.55 as bears keep the reins during a second consecutive day amid early Tuesday.

The yen pair’s latest losses could be linked to the market’s easing of the previous fears, as well as downbeat options market signals for the USD/JPY pair.

That said, the one-month risk reversal (RR) for the USD/JPY pair, the ratio between call and put premiums, and braces for the second consecutive weekly print with the previous day’s -0.210 RR figure.

On the other hand, an easing in China’s daily covid infections from an all-time high and the announcement of more support measures for the nation’s ailing real-estate sector seemed to have favored the USD/JPY pair’s latest weakness.

Also read: USD/JPY slides towards 138.50 on mixed Japan data, pullback in yields, focus on China, Fed talks

• Silver price snaps three-day downtrend inside short-term triangle.
• Bearish MACD signals keep sellers hopeful unless crossing $21.55 hurdle.
• Convergence of five-week-old ascending trend line, 50% Fibonacci retracement level appears the key support.

Silver price (XAG/USD) renews its intraday high around $21.15 as buyers cheer the latest bounce off the 21-day Exponential Moving Average (EMA) during early Tuesday.

In doing so, the bright metal prints the first daily gains in four while staying inside a three-week-old symmetrical triangle formation, currently between $21.55 and $20.70.

That said, the bearish MACD signals keep the XAG/USD sellers hopeful but a downside break of the stated triangle’s support line near $20.70 becomes necessary to reject the latest recovery hopes.

Even so, a joins of the ascending trend line from October 20 and the 50% Fibonacci retracement level of the metal’s September-November upside, near $19.90, could challenge the Silver bears afterward.

In a case where Silver prices remain weak past $19.90, the odds of witnessing a slump toward the monthly low surrounding $18.85 can’t be ruled out.

On the flip side, recovery moves need validation from the stated triangle’s upper line, close to $21.55.

Following that, the previous weekly high of around $21.70 and the monthly top of $22.25 will gain the Silver buyer’s attention before June’s peak of $22.51.

Overall, the Silver price may witness further upside but the room towards the north appears limited.

Silver price: Daily chart

Trend: Limited recovery expected

• WTI extends the previous day’s corrective bounce off yearly low.
• Downbeat daily infections, support measures for real-estate firms favor markets in China and abroad.
• Rumors over OPEC+ production cuts, European Union’s struggle over Russian oil price cap keeps oil buyers hopeful.
• Risk catalysts, weekly industry inventory data can direct short-term moves.

WTI crude oil picks up bids to refresh intraday high near $77.25 while extending the late Monday’s recovery from the yearly low during Tuesday’s Asian session.

The commodity’s latest rebound could be linked to the market’s cautious optimism as well as speculations that the OPEC+ will aim for production cuts during the next meeting. Also keeping the energy buyers hopeful is the European Union’s struggle to announce a price cap on Russian crude oil exports.

An easing in China’s daily covid infections from an all-time high of 40,347 to 38,645 appeared to have triggered the market’s latest cautious optimism. On the same line could be the upbeat performance of Chinese equities as the national securities regulator lifted a ban on equity refinancing for listed property firms, per Reuters. “The China Securities Regulatory Commission (CSRC) said late on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed Chinese developers, lifting a ban that has been in place for years,” mentioned the news.

Elsewhere, Reuters quoted an anonymous diplomat from the bloc to highlight the deadlock surrounding the European Union’s (EU) push for restricting the price of Russian oil. “European Union governments failed to agree on Monday on a price cap on Russian seaborne crude oil, as Poland insisted that the cap had to be set lower than proposed by the G7 to cut Moscow's ability to finance its invasion of Ukraine, diplomats said,” reported Reuters.

On a different page, speculations that the global may aim for more production cuts also seemed to have favored the oil buyers of late. “The rumors of a possible cut outweighed an earlier sell-off built on the weak outlook out of China, where hundreds of demonstrators and police clashed on Sunday over strict COVID restrictions that have limited free moment among millions of residents,” per Reuters.

Against this backdrop, the US stock futures and equities in the Asia-Pacific region print mild gains despite the downbeat performance of Wall Street, which in turn favor riskier assets like WTI crude oil.

Moving on, developments surrounding the aforementioned risk catalysts will be crucial for WTI traders to watch. Also important will be the API Weekly Crude Oil Stock for the period ended on November 25, prior -4.8M.

Technical analysis

Despite the latest rebound, triggered mainly due to the oversold RSI conditions, the WTI crude oil remains on the bear’s radar unless crossing a three-week-old resistance line, near $80.25.

• AUD/USD bulls eye a correction into resistance near 0.6770/00.
• Bears seek a move to test the 0.6580s guard that 0.6550 and then 0.6500.

AUD/USD is offered due to record COVID cases in China and citizens protesting against the country's zero-COVID rules have increased safe-haven flows to the U.S. dollar. 

Moreover, investors have flipped their net long US Dollar positions, anticipating weakness on the back of expectations that the Federal Reserve will slow the pace of interest rate increases. This leaves more room for paring back of recent speculative short positions in the greenback and that leaves the downside vulnerable in AUD/USD as follows:

AUD/USD daily chart

The double top on the daily chart has led to a break of trendline support which is a bearish development for the week ahead. 0.6600 is vulnerable for the coming forex sessions. 

AUD/USD H4 chart

In the 4-hour time frame, the price is moving  in a series of bearish impulses:

The price is moving up in Asia but the bears penetrate below 0.6650 at the start of this week and cleared out some of the weaker hands. Therefore, should resistance hold at prior support near 0.6700, then there will be prospects of yet another bearish impulse for the sessions ahead.  The 0.6580s guard 0.6550 and then 0.6500.

In its latest Quarterly Predictions, The New Zealand Institute of Economic Research (NZIER) said that rising interest rates and high inflation worldwide pose a threat to New Zealand’s economic recovery over the coming years.

Key takeaways

“Central banks globally have lifted interest rates at a rapid pace in response to the widespread surge in inflation.”

“However, resilient demand and continued capacity pressures are keeping costs high in the New Zealand economy.”

“The Reserve Bank expects to undertake further substantial monetary policy tightening in order to dampen demand to rein in inflation.”

“We expect the negative impact of higher interest rates on demand will become more apparent around mid-2023, such that the Reserve Bank will not need to increase interest rates by as much as it currently expects to.”

“Nonetheless, we expect further increases in the OCR and for it to peak at 5 percent over the coming year."

Market reaction

Despite a cautious risk tone, NZD/USD is recovering ground toward 0.6200. as the US Dollar is fading its recovery momentum. The pair is trading at 0.6185, up 0.33% on the day, as of writing.

• GBP/USD has dropped after the conclusion of the short-lived pullback to near 1.1976 amid a risk-off mood.
• Hawkish commentary from Fed policymakers is aiming to bring US Treasury yields back to life.
• The UK economy is expected to deliver negative GDP growth for four consecutive quarters.

The GBP/USD pair has witnessed selling pressure around 1.1976 in the Tokyo session. The short-lived recovery in the Cable from the cushion of 1.1940 has been terminated as hawkish commentaries from Federal Reserve (Fed) policymakers have strengthened the risk aversion theme.

The US Dollar Index (DXY) has resumed its upside journey after a corrective move to near 106.60. S&P500 futures have rebounded marginally in the Asian session but the road to reversal is still far. Meanwhile, the 10-year US Treasury yields have recovered to near 3.69%.

The alpha generated by US Treasury bonds has resurfaced as investors believe that deceleration in the interest rate hike doesn’t resemble a pause in further policy tightening. The headline United Stated inflation is at 7.7%, far from the targeted rate of 2%, and required a heap of effort from the Federal Reserve (Fed) policymakers.

Richmond Fed Bank President Thomas Barkin said on Monday that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation, as reported by Reuters.

Also, Cleveland Fed Bank President Loretta Mester believes that the Federal Reserve 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.

Going forward, the US Gross Domestic Product (GDP) data will be keenly watched. The preliminary GDP for the third quarter is seen unchanged at 2.6%. As the Fed is 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 into inflation as solid GDP indicates robust demand from individuals, which doesn’t lead to the path of a decline in price growth.

On the Pound front, Economists at Danske Bank have confirmed that the United Kingdom has entered a recession. They expect negative GDP growth for four consecutive quarters and growth not to return until the fourth quarter of CY2023.

• USD/CAD retreats from the highest levels in a fortnight, snaps two-day uptrend.
• Bearish candlestick formation, overbought RSI (14) signals pullback.
• Convergence of two-day-old support line, previous resistance from November 10 challenge bears.
• Bulls need validation from 200-DMA to suggest further upside.

USD/CAD prints mild losses around 1.3490 as it probes the two-day uptrend at the highest levels in a fortnight during early Tuesday.

In doing so, the Loonie pair justifies the bearish candlestick formation, namely the Gravestone Doji, on the four-hour play. Also supporting the pullback move is the RSI (14) line that stays near the overbought region.

As a result, the quote’s pullback towards the 1.3440 support confluence, encompassing an ascending trend line from Friday and the resistance-turned-support from November 10, appears imminent.

However, the 1.3400 threshold and a two-week-old upward-sloping trend line near 1.3340 could challenge the USD/CAD bears afterward.

In the case where the pair remains bearish past 1.3340, the odds of witnessing a fresh monthly low, currently around 1.3225, can’t be ruled out.

Meanwhile, the USD/CAD pair’s upside momentum needs a successful break above the 1.3500 round figure to defy the bearish candlestick formation. Even so, the 200-SMA level surrounding 1.3530 could challenge the pair buyers.

Should the quote manage to remain firmer beyond the 200-SMA, a run-up toward the monthly high near 1.3810 could gain more acceptance.

USD/CAD: Four-hour chart

Trend: Pullback expected

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.1989 vs. the last close 7.2066.

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 has dropped into a key support area.
• 0.6150 would be expected to hold and result in a meanwhile correction.

As per the prior analysis, NZD/USD Price Analysis: Bulls seek out 0.6300 while bears eye signs of distribution, the bears indeed moved in and distribution has been in play. 

The tweezer top was highlighted as a dominant feature in the prior chart, a bearish candle stick combination pattern that showed sellers were in the market.

NZD/USD prior analysis

The price was now testing the next trendline support and a break there opened the risk of a move to the downside to test below 0.6250 and with eyes that were on 0.6236 as the prior lows and trendline before 0.6200:

With that being said, it was explained that it would have been unusual for the market to simply melt without a revisit to the peak formation as distribution takes a while to play out, usually as per the following topping scenario shown on the 15-minute chart:

NZD/USD M15 chart

NZD/USD update

As can be seen, the price indeed returned the upside prior to the full breakdown into 0.6200 and then to the 0.6150s. Going forward a tougher challenge awaits the beats at trendline support:

Zoomed in, the current support near 0.6150 would be expected to hold and result in a meanwhile correction. So long as 0.6200 holds, 0.6100 will be eyed on a test of the trendline support. 

• Gold price poke a three-week-old ascending support line after snapping a four-day uptrend.
• Market sentiment struggles for clear directions amid a light calendar, mixed clues.
• Coronavirus headlines, Fed policymakers’ comments will be helpful for intraday directions.

Gold price (XAU/USD) flirts with the $1,740 support amid a sluggish Asian session on Tuesday, following a downbeat start to the key week. The metal’s latest inaction could be linked to the failures to cross the short-term crucial support line, as well as the mixed signals received from the markets.

Among the key catalysts, comments from the US Federal Reserve (Fed) officials appear to be a major grind for the Gold price.

Richmond Federal Reserve Bank President Thomas Barkin recently mentioned that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation. Previously, Cleveland Fed 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. Additionally, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

Elsewhere, China refreshed the all-time high daily Covid infections by printing around 40,300 new cases on Monday and justified the government’s status quo on the Zero-Covid policy despite the widespread protests to turn down the same. “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.  

Amid these plays, S&P 500 Futures print mild gains despite Wall Street’s downbeat closing whereas the US 10-year Treasury yields remain pressured around 3.69% at the latest.

Looking forward, the monthly US Confederation Board’s (CB) Consumer Confidence for November will join multiple speeches from the Fed policymakers to entertain the Gold traders. Though, major attention should be given to the central bankers and the Coronavirus updates.

Technical analysis

Gold price attacks a three-week-old ascending support line, near $1,740 by the press time, amid the bearish MACD signals.

With this, the yellow metal’s downside break of the stated support line, close to $1,740, immediately precedes the metal’s fall toward the 100-day Exponential Moving Average (EMA) surrounding $1,726.

It’s worth noting, however, that the quote’s weakness past $1,726 won’t hesitate in aiming for the late October swing high surrounding $1,676. That said, the $1,700 threshold could probe the bears during the anticipated fall.

Alternatively, recovery moves could initially aim for the $1,765 hurdle before challenging a downward-sloping resistance line from early July, close to $1,780 at the latest.

If the metal price rally beyond $1,780, the XAU/USD bulls can easily aim for the $1,800 round figure.

Gold price: Daily chart

Trend: Further downside expected

• EUR/USD has turned sideways as investors await the release of the Eurozone HICP for further guidance.
• After hawkish commentaries from Federal Reserve policymakers, the speech from Jerome Powell has become more critical.
• The Eurozone economy is staring at a recession as interest rates are rising despite unfavorable economic developments.
• EUR/USD is expected to decline to near 1.0300 amid risk-off flows.

EUR/USD has taken a sigh around 1.0330 in the Asian session after nosediving from the critical hurdle around 1.0500. The major currency pair is still inside the grip of US Dollar bears and is expected to drag it further toward the round-level support of 1.0300 amid negative market sentiment. The impact of people's unrest against the rollback of COVID-19 lockdown measures has not remained restricted to China. Western economies are also facing significant pressure amid inter-dependency.

Favor for risk aversion theme by the market participants has strengthened the US Dollar Index (DXY). The USD Index has taken a breath after a juggernaut rally around 106.70 and is aiming to extend its gains ahead. While a significant decline in investors’ risk appetite brought a sell-off in S&P500.

Meanwhile, the returns on US treasury bonds have resurfaced after dropping below 3.65%. The 10-year US Treasury yields have rebounded above 3.69% on hawkish commentaries from Federal Reserve (Fed) policymakers over interest rate guidance.

Federal Reserve policymakers see no halt in interest rate hike culture sooner

No doubt, the United States inflation has shown a meaningful drop in its October month report and market participants have also punished US Dollar and US Treasury yields for the same. The headline United States Consumer Price Index (CPI) landed at 7.7% while core CPI was trimmed to 6.3%. The headline CPI figure is far from the targeted rate of 2%, therefore, consideration of a halt in the interest rate hike by the Federal Reserve (Fed) doesn’t seem lucrative in the near term.

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 Federal Reserve 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.

For more meaningful cues on interest rate guidance, the speech from Federal Reserve chair Jerome Powell, scheduled on Wednesday, will be keenly watched.

US Dollar to remain volatile due to multiple economic catalysts

Last week, a light economic calendar kept the US Dollar on the sidelines but this week is quite different. The US Dollar will face volatility from the releases of Unites States Automatic Data Procession (ADP) Employment data, quarterly Gross Domestic Product (GDP) numbers, core Personal Consumption Expenditure (PCE), ISM Manufacturing PMI, and the Nonfarm Payrolls (NFP) that will be the show-stopper event.

According to the estimates, the United States economy has created additional 208K jobs in November vs. the prior release of 261K. The Unemployment Rate is seen unchanged at 3.7%. Higher interest obligations due to severe policy tightening by the Federal Reserve have forced firms to postpone their expansion plans, which has trimmed the requirements for more manpower. Also, weaker economic projections have led to the utilization of current manpower in an optimal manner.

Eurozone stares a recession amid rising interest rates and unfavorable prospects

Inflationary pressures in Eurozone are skyrocketing and economic development has been stagnant due to supply-chain shocks that fuelled energy prices. 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.” He further added that the rise in interest rates continues despite unfavorable economic developments.

Adding to it, analysts at Danske Bank have also supported the view citing a recession in the Eurozone seems difficult to avoid. They cornered supply-side shocks, the major reason behind escalating odds of a recession in the Eurozone. The supply-side shocks set the scene for an extended period of high inflation coupled with lackluster growth. A recession seems difficult to avoid and we expect GDP to decline by 0.9% in 2023, followed by stagnation in 2024.” This will have significant pressure on the Euro going forward.

Meanwhile, investors are shifting their focus on the release of the Eurozone Harmonized Index of Consumer Prices (HICP), which will release on Tuesday. 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%.

EUR/USD technical outlook

EUR/USD has declined after forming a ‘Double Top’ chart pattern on a four-hour scale. The formation of the above-mentioned chart pattern indicates a bearish reversal as the asset tested previous highs on Monday around 1.0500 with weak buying interest.

The major currency pair has dropped below the 20-period Exponential Moving Average (EMA) at 1.0360 while the 50-EMA at 1.0277 is still advancing.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range from the bullish range of 60.00-80.00, which signals a loss in the upside momentum.

Japan's Nikkei 225 share average will rally to the psychological 30,000 level by the middle of next year for the first time since September 2021, per the latest Reuters poll.

The survey findings also mentioned that investors see inflation peaking in the United States and elsewhere, which could cause governments to loosen monetary policy.

“Lower interest rates or higher economic growth would improve the outlook for Japanese corporate profits,” adds Reuters poll.

More findings

Also read: USD/JPY slides towards 138.50 on mixed Japan data, pullback in yields, focus on China, Fed talks

• EUR/JPY takes offers to refresh intraday low, extends pullback from 21-DMA.
• Bearish MACD signals, downbeat RSI also favors sellers targeting ascending trend line from early August.
• Monthly bearish channel keeps the downside bias intact.

EUR/JPY renews its intraday low around 143.30 while extending the week-start fall during early Tuesday.

In doing so, the cross-currency pair also justifies the sustained trading below the 21-DMA and downbeat MACD signals, as well as softer RSI (14), to keep the bears hopeful inside a one-month-old bearish channel.

That said, an upward-sloping support line from early August, around 142.10 by the press time, appears imminent support for the EUR/JPY bears to watch.

Following that, the stated descending channel’s lower line, close to 141.50, will be in focus.

Alternatively, the 21-DMA hurdle surrounding 145.00 could challenge the short-term recovery of the EUR/JPY pair ahead of highlighting the bearish channel’s upper line, close to 145.85 at the latest.

In a case where the pair buyers manage to cross the 145.85 hurdle, the 146.00 round figure may act as an intermediate halt during the run-up towards the previous monthly top of 148.40.

Overall, EUR/JPY is likely to remain weak inside a short-term bearish chart formation while a multi-day-old support line lures the downside momentum of late. It should be noted, however, that, the 141.50 is the key support to watch before ruling out the odds of the pair’s rebound.

EUR/JPY: Daily chart

Trend: Further downside expected

• USD/JPY fades bounce off three-month low, renews intraday low of late.
• Japan Unemployment Rate remained unchanged, Retail Trade eased in October.
• China Covid woes, protests join hawkish Fedspeak to challenge bears.
• Second-tier US data will decorate the calendar ahead of the key US jobs report.

USD/JPY takes offers to renew intraday low near 138.60 as Tokyo opens on Tuesday. The Yen pair’s latest losses could be linked to the recent retreat by the US Treasury yields, as well as mixed data from Japan. In doing so, the risk barometer pair fails to respect the US Dollar strength, mainly backed by the hawkish comments from the Federal Reserve (Fed) policymakers and the Covid woes emanating from China.

Japan’s Unemployment Rate reprinted 2.6% mark for October versus 2.5% expected whereas Jobs / Applicants Ratio improved to 1.35 by matching upbeat forecasts compared to 1.34 prior. Further, Japan’s Retail Trade eased to 4.3% YoY during the stated month, versus 5.0% market consensus and 4.8% (revised up) prior, while the monthly Retail Trade rose 0.2% compared to downbeat forecasts of -0.3% and 1.1% previous readings.

Elsewhere, the US 10-year Treasury yields ease to 3.688%, down 1.4 basis points (bps), as traders weigh comments from the Fed speakers.

That said, Richmond Federal Reserve Bank President Thomas Barkin recently mentioned that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation. Previously, Cleveland Fed 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. Additionally, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

China refreshed the all-time high daily Covid infections by printing around 40,300 new cases and justified the government’s status quo on the Zero-Covid policy despite the widespread protests to turn down the same. “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.  

Against this backdrop, the market sentiment remains sluggish and weighs on the US stock futures, following a downbeat performance of Wall Street.

Moving on, the monthly US Confederation Board’s (CB) Consumer Confidence for November will join multiple speeches from the Fed policymakers to entertain USD/JPY traders ahead of Friday’s key US employment data. However, major attention should be given to the central bankers and the Coronavirus updates for clear directions.

Technical analysis

A two-week-old descending trend line restricts the short-term USD/JPY upside near 139.50.