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Retail Sales overview

Early Friday, the market sees preliminary readings of the Australia Retail Sales for October month at 00:30 GMT. Market consensus suggests an upbeat MoM print of +2.5% versus +1.3% prior readings, suggesting the sustained improvement in economic activity after positing the first positive figure in the last four months during September.

Given the recently strong inflation data crossing roads with the Aussie jobs report, not to forget the Reserve Bank of Australia’s (RBA) cautious optimism, today’s Retail Sales figures become all the more important for AUD/USD traders.

Ahead of the data, TD Securities said,

How could it affect AUD/USD?

AUD/USD remains on the back foot around a three-month low amid a quiet Asian session ahead of the key data. While an off in the US and a light calendar challenges momentum traders, the RBA v/s Fed battle keeps the Aussie pair sellers hopeful. Also weighing on the quote could be the recent coronavirus woes and the Sino-American tussles.

The Reserve Bank of Australia’s (RBA) intent to wait for further details before announcing rate hike plans will join the Aussie data disappointment and fresh covid fears to weigh on the quote should the Retail Sales reverse the previous month’s expansion. However, the recent unlocks in Australia tame fears of any such downbeat figures. Hence, a corrective pullback can be witnessed if the scheduled figure arrive as better than expected.

Technically, a sustained trading below a three-month-old support line, now resistance around 0.7260, joins downbeat MACD signals and a bear cross of the 20-DMA to 100-DMA to keep AUD/USD sellers hopeful.

Key Notes

AUD/USD bears head towards Oct daily lows

AUD/USD Forecast: Lower lows hint at a new leg south towards yearly lows

About Australian Retail Sales

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

• GBP/USD struggles to overcome the 2021 bottom, stays inside bearish chart pattern.
• MACD conditions hint at seller’s exhaustion but bulls need validation from 50-SMA, falling resistance line from November 09.
• 61.8% FE guards immediate downside amid oversold RSI conditions.

GBP/USD defends the 1.3300 threshold, taking rounds to the recently flashed yearly low during the early Asian session on Friday. In doing so, the cable stays inside a one-week-old falling trend channel.

Although the bearish channel keeps sellers hopeful, MACD and RSI conditions signal a corrective pullback targeting the channel’s upper line near 1.3340.

It’s worth noting that the quote’s upside momentum past 1.3340 need not only cross the 50-SMA level of 1.3415 but a 13-day-old falling trend line near 1.3435 to recall the GBP/USD buyers.

Following that, a run-up to the mid-November’s swing high close to 1.3515 can’t be ruled out.

Alternatively, 61.8% Fibonacci Expansion (FE) of the pair’s moves between November 03 and 18, around 1.3300 offers strong immediate support to the GBP/USD prices.

Even if the sellers manage to conquer the psychological magnet, the stated channel’s lower line may act as an extra filter to the south, around 1.3275, before directing the quote towards the 78.6% FE level of 1.3240.

GBP/USD: Four-hour chart

Trend: Corrective pullback expected

• EUR/JPY is range-bound as the Asian session begins, within the 129.20-52 range.
• EUR/JPY has a downward bias, but a daily close below Thursday’s low at 129.19 would expose the 128.00 figure.

The EUR/JPY is flat as the Asian Pacific session begins, is trading at 129.19 during the day at the time of writing. On Thursday, during the overnight session, the EUR/JPY remained in a choppy trading range, within the 129.20-52 range, as the market is headed towards a thin liquidity session In the observance of the US Thanksgiving.

At press time, the market sentiment is a mixed bag. Asian equity futures fluctuate between gainers and losers, while European and US stock futures rise.

The Japanese economic docket featured the Coincident Index and the Leading Economic Index, both readings for September. The Coincident Index rose to 88.7, higher than the 87.5 foreseen, while the Leading Economic Index increased to 100.9, higher than 99.7, estimations.

Concerning the Eurozone economic docket, the Gfk Consumer Confidence Survey for December contracted more than the foreseen, dropping to 1.6, lower than the 0.5. In the meantime, the German Gross Domestic Product for the Q3 rose by 1.7%, a tick lower than the 1.8% estimated.

That said, the EUR/JPY pair would lean on market sentiment, as long as the monetary policy between the European Central Bank (ECB) and the Bank of Japan (BoJ) converges. On the other hand, if the ECB moves towards a more neutral stance, the EUR would be favored by flows, as it would be viewed as a hawkish signal for investors.

EUR/JPY Price Forecast: Technical outlook

The EUR/JPY pair has a bearish bias, confirmed by the daily moving averages (DMA’s), which have a downslope, and remain above the spot price. Furthermore, the Relative Strength Index (RSI) at 40 flattish suggests EUR/JPY bears are taking a breather, before resuming the downtrend.

In that outcome, the first demand area would be the November 24 cycle low at 128.68, followed by the October 6 swing low at 128.33, and then the November 19 low at 127.97.

• NZD/USD licks its wounds around lowest levels since August, eyes biggest weekly loss in three months.
• Post-RBNZ disappointment spreads amid light calendar, US holiday.
• RBNZ’s Hawksby sounds cautiously optimistic, ANZ – Roy Morgan Consumer Confidence eased for November,
• No major data/events in sight, Aussie Retail Sales may entertain traders.

NZD/USD sellers take a breather following the south-run to smash September’s bottom and test the lowest levels in three months. That said, the Kiwi pair stays sidelined around 0.6860 by the press time of early Friday morning in Asia.

The US Thanksgiving Day holiday offered no respite to the NZD/USD prices as the quote dropped for the fifth consecutive day on its way to register the biggest weekly fall since mid-August.

While tracing the catalysts, the fresh covid concerns and the market’s dislike for the Reserve Bank of New Zealand’s (RBNZ) 0.25% rate hike could be linked. Also on the negative side were hawkish statements from the Fed officials and Fed Minutes, before the US markets closed for the holiday.

Recently, RBNZ Assistant Governor Christian Hawkesby crossed wires via an interview with Bloomberg TV and tried to defend the tighter monetary policy despite citing downside risk from covid.

Read: RBNZ's Hawkesby: We need to continue removing stimulus

It’s worth noting that the Sino-American tussles slowly escalates following the virtual meeting between US President Joe Biden and his Chinese counterpart Xi Jinping. While China’s inability to perform the phase one deal terms sparked initial fears of another round of the US-China tussles, issues relating to Vietnam and Taiwan recently added fuel to the fire. The US invites Taiwan to one of its home events and keeps its warships moving in the troubled water surrounding the Asian nation, which in turn hints at political jitters with Beijing. Given China’s close trade proximity to New Zealand, as well as the status of the world’s largest commodity user, such events challenge the Antipodeans.

Additionally, the recent jump in the covid numbers in Europe and a steady rise in infections in the UK signals the returns of the pandemic and renews fears of lockdowns that crippled the global economy a few months back.

Amid these plays, Gilts and Bunds were mildly offered while the stocks in Europe and the UK printed softer gains amid a sluggish day. However, gold remained mostly unchanged and the NZD/USD kept declining.

Looking forward, a light calendar may not entertain the momentum traders but the return of the US traders and Aussie Retail Sales will be important for the NZD/USD. Above all, the RBNZ-led disappointment may weigh on the quote while covid woes, US-China tension and fears of the Fed action can exert additional downside pressure on the pair.

Technical analysis

Having conquered a 14-month-old support line, NZD/USD bears smashed 61.8% Fibonacci retracement (Fibo.) of September 2020 to February 2021 upside, which in turn suggests the quote’s further weakness towards the yearly bottom of 0.6805. Alternatively, 61.8% Fibonacci retracement level of 0.6875 and the previous support line near 0.6900 guards short-term NZD/USD upside.

“New Zealand's economy is quite resilient,” said RBNZ Assistant Governor Christian Hawkesby during an interview with the Bloomberg TV amid early Friday morning In Asia.

More to come..

• AUD/USD bears intent on the Oct lows on a strong USD theme.
• RBA and the Fed are a focus for this pair with a hawkish bias towards the latter.

AUD/USD is flat on the day in quiet Thanksgiving market conditions, although that did not prevent the pair from sliding deeper towards the daily 0.7191 lows printed back in October. The price fell from a high of 0.7209 to a low of 0.7179 on the day. The majority of the supply happening in the London open with lows made in the New York open from where the pair has drifted sideways ever since. 

 The greenback edged lower on the day. It was drifting from its highest level since July 2020 that was printed against the euro, despite the covid concerns in Europe and the expectations that the US Federal Reserve will raise rates sooner than other major central banks. The DXY index, a measure of the US dollar vs a basket of rival major currency pairs fell to 96.652 from a high of 96.806 on the day and 96.887 the cycle high post-FOMC minutes. 

The minutes from the Fed's Nov. 2-3 meeting boosted the dollar as it was confirmed that the Fed had become more concerned about rising inflation. Various policymakers said they would be open to speeding-up the taper of their bond-buying programme, including Fed's Mary Daly who now also advocates for a faster pace.

Meanwhile, with the central banks in focus, the Reserve Bank of Australia's tightening could be elongated, analysts at ANZ Bank argued

''RBA Governor Phillip Lowe’s recent statements about the level of the neutral rate and the flatness of the Phillips curve could combine to imply a faster and more aggressive start to the tightening cycle when it eventually comes. If the RBA goes on slowly regardless of what it ‘should’ do, we may find that the tightening cycle is very elongated.''

• AUD/JPY slides for the second day in a row, despite risk-on market sentiment.
• On Thursday, the AUD/JPY remained subdued, without clear direction.

The AUD/JPY falls during the day, down some 0.15%, trading at 82.93 during the day at the time of writing. Despite thin liquidity conditions, the market sentiment remains upbeat as the US Markets remain closed in the observance of Thanksgiving. Major US equity futures indices rise between 0.11% and 0.23%, carrying on with the market mood witnessed in the European session.

On Thursday, during the overnight session, the AUD/JPY pair remained dull, trading in a choppy range, with the 50, the 100, and the 200-hour simple moving average (HSMA) are located within the 82.90-83.17 area, implying that in the near-term the AUD/JPY is range-bound.

That said, the AUD/JPY  in the near term would lie mostly in pure market sentiment unless the Reserve Bank of Australia (RBA), which has been more dovish than expected, changes its dovish posture towards a hawkish one. That would originate flows towards the Australian dollar without considering as much the market sentiment.

AUD/JPY Price Forecast: Technical outlook

The AUD/JPY has an upward bias, despite the ongoing correction, that has witnessed a test of the 50-day moving average (DMA), which was pierced on Wednesday but regained by AUD bulls on Thursday. At press time, the 50-DMA sits at 82.98, a level that would need to be reclaimed by AUD bulls.

The outcome of a daily close above 83.00 could pave the way for further upside. The first resistance for AUD/JPY traders to overcome would be the November 19 swing high at 83.35, followed by the November 16 cycle high at 84.15.

On the other hand, failure to reclaim 83.00 would open the door towards the 100-DMA at 81.85, though it would find some hurdles on the way down, like the November 19 swing low at 82.15.

What you need to know on Friday, November 26:

Little happened on Thursday, as US markets were closed due to the Thanksgiving holiday. Markets will work shortened hours on Friday, and muted trading is expected to continue. The bullish dollar's momentum took a breather, but the American currency maintained its leadership.

The EUR/USD pair surged to 1.1229, ending the day just above the 1.1200 figure. The coronavirus is taking its toll on the region, spurring concerns about the economic recovery.

So far, some Eastern European countries opted for strict lockdowns, while France announced on Thursday booster shots, refraining from imposing restrictions. Portugal declared a state of calamity and announced new restrictions due to the rise in cases, while Germany is expected to announce a decision on the matter on Friday, as cases in the country stand at record highs.

The GBP/USD fell to 1.3304, a fresh 2021 low, to end the day pretty much unchanged in the 1.3320 price zone, undermined by Brexit jitters. The French Fishing Association Body would be taking action on Friday to block French ports, and the Channel tunnel as the UK failed to grant fishing licenses.

 USD/JPY trades in the 115.30 area, unchanged on a daily basis. Commodity-linked currencies remained unchanged vs the greenback, with the AUD being the weakest.

There was no activity in gold markets, with the bright metal steady around $1,790 a troy ounce. Crude oil prices ticked lower, although the barrel of WTI held above $78.00.

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• GBP/JPY has traded within tight 153.50-154.00ish ranges on Thursday amid US market closures for Thanksgiving.
• The pair has formed a pennant, however, raising the risk of a technical break in the coming days.

GBP/JPY has remained stuck within recent ranges on Thursday, unable to surpass or even test weekly highs in the 154.10-20 area and finding good support below 153.50. FX market conditions have been tame on Thursday amid a lack of US market participants, with markets there closed for Thanksgiving. The pair continues to trade close to its 50-day moving average, which currently resides around 153.60. On the day, the pair trades broadly flat, despite further Brexit jawboning by the UK regarding triggering article 16 of the Northern Ireland protocol and despite news that French fishermen will be taking action to block UK/EU trade via sea and the channel tunnel on Friday.

Remarks from Bank of England Governor Andrew Bailey earlier in the session, who said that the supply chain problems causing inflation should be temporary, were broadly ignored by FX markets. Bailey added that the risk is that inflation expectations become embedded and, before noting that we have a very tight labour market in the UK. Policy guidance is more hazardous to give in times of elevated uncertainty, he said.

Technicians will note that over the past three days, GBP/JPY has formed a pennant structure. A break on the upside would likely see prices move back towards the 17 November highs on the 154.700s, while a break to the downside would open the door to a move towards recent lows around 152.50. This area also coincides with the 200DMA, and thus might present a good entry point for the dip buyers.

• USD/JPY bulls eye higher levels to come on Fed sentiment.
• The Fed is turning more and more hawkish as inflation fears ramp up.

USD/JPY is holding in the 115 area around 115.35 and sat in a Thanksgiving range of 115.24/45 as it consolidates the recent Federal Reserve sentiment as the hawks circle over 2051 Constitution Ave. 

Some short-squeezing in JPY seemed warranted by some support to US 10-year yields in mid-November and also given how overstretched the yen’s net-short positioning was.

The US dollar slipped slightly on Thursday with traders away for the holidays, but it remains in a positive territory around the highest levels seen since July 2020 against the euro and in the DXY index. The greenback has strengthened due to the markets anticipating that the US Federal Reserve will hike rates sooner than other major central banks.

On Wednesday, the minutes of the Fed's Nov. 2-3 meeting were supporting the case for a higher US dollar but did little on the day to send it much higher. There could be a delayed reaction here, perhaps with investors taking profits on long positions overall ahead of the long weekend.

However, the minutes have indicated that board members had become more concerned about rising inflation. p The December meeting will be a significant meeting whereby the pace of tapering of their bond-buying programme could start as many members have already advocated. as such the markets are getting set for a sooner than first anticipated liftoff.

USD/JPY levels

The hawkish bias is expected to keep USD/JPY afloat. Analysts at Commerzbank expect more from the pair with the 115.60 61.8% Fibonacci retracement of the move down from 2015 being in focus. ''Above here is the 117.56 level, the 1998-2021 resistance line and 119.41, the downtrend from 1975. We have a near term uptrend at 113.92.''

• EUR/GBP remains trapped around the 0.8375-0.8430 range, with no clear direction.
• Eurozone: COVID-19 fourth wave could severely impact Europe, as Germany prepares for the possibility of enacting lockdowns.
• Brexit: The EU and the UK, seem far for getting an agreement in the near term.

The EUR/GBP cuts some weekly losses during the day, up some 0.06%, trading at 0.8411 at the time of writing. On Thursday’s overnight session, the euro gained some ground against the British pound, shrugging off COVID-19 fourth wave Europe woes, while negotiations between the EU and the UK seem stuck regarding Brexit.

The fourth wave of COVID-19 is impacting severely in Europe, with cases rising at record levels. Austria −which reimposed a two-week lockdown−, and Germany who’s started to impose tighter rules amid the country’s worst COVID-19 surge, are studying mandatory vaccines measures throughout both countries. Also, Slovakia, the Czech Republic, Netherlands, and Hungary reported new highs in daily infections as winter approaches Europe.

Talking about Brexit jitters that could weigh on the British pound, a UK government spokesperson said that the UK PM had told the Irish PM that he was concerned about a substantial gap that remained between the UK and EU on the implementation of the Northern Ireland Protocol. Furthermore, the French Fishing Association threatened to take action on Friday, blocking French ports and the Channel tunnel, as the UK has faltered to get what they wanted. That would exacerbate supply chain disruptions that are already plaguing the UK economy.

That said, alongside central bank policy divergence, it seems to favor GBP bulls as the Bank of England prepares to tighten monetary policy conditions. However, Brexit jitters could cap any downside moves on the EUR/GBP pair.

EUR/GBP Price Forecast: Technical outlook

The EUR/GBP daily chart depicts the pair is range-trading between the 0.8370-0.8430 region, failing to break over/under the range. According to the daily moving averages (DMA’s), favors a bearish bias, as the DMA’s reside well above the spot price, with a downward slope, indicating that selling pressure could be mounting.

Further, the candlesticks of Monday and Wednesday left two large wicks on top of the real bodies, suggesting that sellers are under control, despite the strong support found around the 0.8370s area. 

In the continuation of the downtrend, the first support would be the November 22 swing low at 0.8380. A breach of the latter would expose the January 2020 swing lows around 0.8281

On the other hand, the first resistance would be the August 10 swing low-turned resistance at 0.8449, followed by the 50-DMA dynamic resistance at 0.8492.

• EUR/USD bears are testing bullish commitments at 1.12 the figure.
• EUR/USD is well on its way to the June 19 2020 lows of 1.1168.
• US Fed minutes are under review and divergence between Fed and ECB in play.

Despite the Thanksgiving holidays, markets have reacted in kind to the FOMC minutes of the Wednesday US session and we are seeing follow-throughs in currency trends. EUR/USD, however, is stubbornly holding above yesterdays low of 1.1186 although bears continue to pressure the 1.12 figure. At the time of writing, the single currency trades at 1.1209 and has travelled between a high of 1.1229 and 1.1193 on the day so far.

The greenback has gained around 2.8% this month, but the dollar index on the day is down 0.0.7% at 96.770 at compared to the 16-month high of 96.938 it reached late on Wednesday. in general, the greenback remains better bid but has been soft on the day, below the highest levels since July 2020 against the euro.

Minutes from the Fed's Nov. 2-3 meeting boosted the dollar on Wednesday as Fed members are showing concerns over rising inflation threats. A number of policymakers said they would be open to speeding up the taper of their bond-buying programme if high inflation held and move more quickly to raise interest rates.

Additionally, data on Wednesday showed that US jobless claims were at a 52-year low and consumer spending increased more than expected in October and inflation was rising. Also pressuring the pair,  a surge in coronavirus infections in Germany and unusually high inflation rates are weighing on the consumer morale in Europe's largest economy, a survey showed on Thursday. 

Medium-term, we continue to favour the USD., analysts at Rabobank said. ''However, with the market now long USD and short EUR and the money market very aggressively positioned for Fed rate hikes next year, there is scope for pullbacks in the currency pair.'

''Technically'', the analysts argue that, ''EUR/USD could recover back towards the 1.15 area and still remain in the downtrend that has been in play since early June.  Potential triggers could be the next round of US data including the December 3 payrolls release.  The guidance and tone of the December 15 FOMC meeting is also in view.  While there is growing risk that EUR/USD will reach the 1.10 area next year, the risk of pullbacks means that we are holding off from changing our 1.12 target for the time being.''

• NZD/USD extends its losses to five days straight, hovering around 0.6850s.
• The disappointment of the RBNZ failing to hike 50 basis points spurred a sell-off of the NZD.
• NZD/USD: A break of an upslope trendline fueled the downward move further, down to 0.6940.

The New Zealand dollar extends its free-fall to five days in a row, down 0.28%, trading at 0.6854 during the day at the time of writing.

In the overnight session, the pair attempted to reclaim the 0.6900 but failed, retreating towards the mid 0.6800s for the fifth consecutive day. On Wednesday, the Reserve Bank of New Zealand (RBNZ) hiked 25 basis points to the Overnight Cash Rate, though it fell short of investors’ expectations. The NZD/USD reaction to the downside seemed like a “buy the rumor, sell the fact” event.

The market sentiment is upbeat on Thursday, so the risk-sensitive NZD should be headed to the upside. However, FOMC last meeting minutes unveiled on Wednesday showed that some Fed policymakers would like to increase the pace of the bond taper so that the US central bank could have room to maneuver, in the case of inflation running hot. That, alongside thin liquidity conditions in the FX market, due to the observance of the US Thanksgiving holidays, capped the NZD upside move.

Also, the greenback is trading barely down during the day, with the US Dollar Index losing 0.08%, sitting at 96.76.

On Friday, an absent economic docket from New Zealand and the US would let NZD/USD traders leaning on the greenback dynamics and market sentiment, which could offer some fresh impetus on the NZD/USD pair.

NZD/USD Price Forecast: Technical outlook

Wednesday’s price action, witnessing the NZD/USD pair breaking an upslope trendline around 0.6932, which once broken, accelerated the downtrend towards 0.6850s until printing a close at 0.6870. The NZD/USD is tilted to the downside, as depicted by the daily moving averages (DMA’s) remain above the spot price, with a downslope, confirming the bearish bias.

In the outcome of the NZD/USD extending its free fall, the first support would be the September 28 swing low at 0.6859. A daily close below the latter would expose the August 20 cycle low at 0.6805.

On the other hand, the psychological 0.6900 figure would be the first resistance on the way north. A breach of that level would expose 0.6932.

Bank of England Governor Andrew Bailey said on Thursday that the supply chain problems causing inflation should be temporary, according to Reuters. The risk, he continued, is that inflation expectations become embedded and we have a very tight labour market in the UK. Policy guidance is more hazardous to give in times of elevated uncertainty, he said. 

Market Reaction

Pound sterling has not seen a notable reaction to these comments. Liquidity conditions are very thin amid US market closures. FX markets will close between 1800GMT and 2300GMT. 

• USD/TRY is consolidating around the 12.00 level on Thursday.
• The CBRT minutes, as well as a meeting of CBRT, bank regulators and Turkish banks, was ignored.
• The bank isn't showing any signs of a hawkish policy shift just yet, but strategists remain hopeful.

After a highly volatile few weeks, USD/TRY is finally able to take a breather on Thursday amid thin liquidity conditions given US market closures. The pair has spent most of the day consolidating around the 12.00 level and current trades lower by about 0.5%.

The pair hit record highs close to 13.50 earlier in the week as Turkish President Recep Erdogan defended his pressure tactics on the CBRT, where he is essentially forcing them to cut interest rates despite surging inflation. But speculation has built that, amid the lira’s tumble (it is now lost nearly 40% of its value versus the US dollar this year), a policy response will be forthcoming.

The minutes of last week’s CBRT policy meeting were released on Thursday. To recap, the bank opted to cut interest rates by a further 100bps to 14.0% (taking total cuts since September to 400bps) last week. The minutes did not impact the lira and contained the usual empty promises; the CBRT said will continue to use all available instruments decisively until inflation falls back to the bank’s medium-term 5.0% target.

Meanwhile, officials from the CBRT, Turkish bank regulators and Turkish banks met on Thursday. Following the meeting, the CBRT governor said that the banking sector was very strong and that he had informed banking officials about recent rate cuts. The discussions were routine, governor Şahap Kavcıoğlu said and surrounded on general evaluations on the economy and banking sector.

Those hoping that the meeting might have resulted in an immediate hawkish turnaround in CBRT policy in wake of the lira’s recent sharp depreciation were left down. Still, many analysts expect that over the coming months, as inflation continues to accelerate in Turkey, the CBRT will have its hands forced and rate hikes will eventually be forthcoming.

• GBP/USD has tentatively bounced from annual lows at 1.3300 ahead of a short market closure for Thanksgiving.
• Markets have been keeping one eye on Brexit developments, with French fishermen port/tunnel blockades now expected.
• While the pair has been under heavy selling pressure recently, it isn't yet in oversold territory.

Ahead of a five-hour FX market closure lasting between 1800GMT and 2300GMT due to the Thanksgiving holiday in the US, GBP/USD is trying to tentatively regain some composure. The pair had hit fresh annual lows just to the north of the 1.3300 level earlier on during Thursday’s session but has since bounced to the 1.3320s.

On the day, the pair is now flat. The tone of Brexit developments seems to be tacking a tone for the worse again. A UK government spokesperson on Wednesday evening said that the UK PM had told the Irish PM that he was concerned about a substantial gap that remained between the UK and EU on the implementation of the Northern Ireland Protocol.

Meanwhile, the French Fishing Association Body was scathing of the UK on Thursday, saying that they had still not got what they wanted regarding licenses. The body said that French fishermen would be taking action on Friday to block French ports and the Channel tunnel. The blockades will disrupt UK/EU trade and are likely to exacerbate the supply chain disruptions already plaguing the UK economy.

Data from the ONS released earlier in the morning showed that 14% of businesses in the UK had reported a shortage of workers in late November. Further evidence of a strong UK labour market likely increases the chances that the BoE will hike interest rates by 15bps to 0.25% next month and this might be helping to negate the impact of negative Brexit newsflow for GBP.

But UK money markets don’t seem to have viewed the ONS data this way. Three-month sterling LIBOR futures for December 2021 (a proxy of the market’s expectations of the BoE’s Bank Rate next month) rose to their highest since late September on Thursday at 99.820, up from 99.765 at the start of the week. That implies markets only anticipate about 8bps of rate hikes next month, or are only pricing slightly above a 50% chance that the bank will hike rates.

Sterling losses have further to run

If the BoE does disappoint expectations next month by refusing once again to hike interest rates, then GBP will see a negative reaction as hawkish bets are unwound. Though GBP/USD has come under heavy selling pressure in recent weeks and is down 2.6% on the month, the pair isn't yet in oversold territory.

Its 14-day Relative Strength Index score is 33.3, above the oversold 30 mark, while its Z-score to its 200DMA (the number of standard deviations away) is at -2.61. In the last five years, the GBP/USD’s Z-score has only been under -2.50 on two occasions and on both those occasions it needed to fall under -3.0 before GBP/USD rebounded.

• USD/CHF extends its rally to five consecutive days.
• USD/CHF: A break of a 4-month old downslope resistance trendline opened the door for a renewed test of 2021 year-to-date high.

The USD/CHF extends its gains the fifth consecutive day, up 0.25%, trading at 0.9355 during the day at the time of writing. Thin liquidity conditions in observance of Thanksgiving in the US keep the pair subdued.

Despite the abovementioned, European bourses closed in the green depicting risk appetite towards equities. Further, US equity futures are trading in the green, while the US Dollar Index, which tracks the buck’s performance against a basket of six rivals, slides 0.11%, sitting at 96.74. 

USD/CHF Price Forecast: Technical outlook

The USD/CHF has an upward bias in the daily chart, as shown by the daily moving averages (DMA’s) with an upslope, residing well beneath the spot price. Furthermore, the break of an eight-month-old downslope resistance trendline indicates that the USD/CHF is tilted to the upside, though it would need a daily close above the abovementioned.

In that outcome, the first resistance on the way up would be the psychological 0.9400 figure. A breach of the former would expose the April 1 swing high at 0.9473, followed by the June 29, 2020 cycle high at 0.9528.

On the other hand, failure to hold above 0.9330 would expose the 0.9300 figure. A break below that level would reveal the confluence of the 50-DMA and the November 19 swing low around the 0.9225-50 region, which, once giving way, would leave the 0.9200 as the last line of defense for USD bulls.

• XAU/EUR recovers some of its weekly losses, barely up