CFD Markets News and Forecasts — 07-11-2024

• USD/CAD trades flat around 1.3860 in Friday’s early Asian session. 
• The Fed decided to cut the interest rate by a quarter percentage point on Thursday. 
• The Canadian employment report will be closely watched. 

The USD/CAD pair flat lines near 1.3860 during the early Asian session on Friday. The Greenback faces some selling pressure after the US Federal Reserve's interest rate decision. Later on Friday, the advanced Michigan Consumer Sentiment and the Fed’s Bowman speech will be in the spotlight, along with the Canadian employment report. 

As widely expected, the Federal Open Market Committee (FOMC) lowered its benchmark overnight borrowing rate by 25 basis points (bps) to a target range of 4.50%-4.75% at its November meeting on Thursday. Fed Chair Jerome Powell said the central bank is pursuing interest rate cuts as monetary policy still remains tight, adding that the Fed will continue assessing data to determine the "pace and destination" of interest rates as inflation has slowed nearing the Fed’s 2% target.

The US Dollar (USD) edges lower after the Fed’s Powell failed to offer any strong clues about the path of the rate cut in the near term. According to the CME Group's Fed Watch Tool, traders are pricing a 75% chance the Fed will cut rates again in December, up from 69% before the Fed rate decision. 

Data released by the US Department of Labor (DoL) on Thursday showed that the Initial Jobless Claims climbed to 221K in the week ending October 25. This figure matched initial estimates and was higher than the previous reading of 218K (revised from 216K).

The Canadian employment report is due later on Friday. The unemployment rate is expected to tick higher to 6.6% in October from 6.5% in September. Any signs of a weakening labor market in Canada could support the Bank of Canada (BoC) making another super-sized interest rate cut and weighing on the Loonie. 

“A further loosening in the labor market, primarily through a higher unemployment rate, would increase the odds of a 50-basis-point [cut] for a second straight [Bank of Canada] meeting in December,” noted Benjamin Reitzes, managing director and Canadian rates and macro strategist at BMO Capital Markets. 

• Gold benefited from Fed’s dovish rate cut and hints of flexibility in future policy direction.
• Powell signals rate cuts could adapt to labor market shifts, keeping investors cautious.
• Upcoming UoM Consumer Sentiment report and inflation expectations may further impact gold's momentum.

Gold prices climbed above $2,700 after the Federal Reserve (Fed) decided to lower interest rates and acknowledged that US election effects would not be felt in the near term.  At the time of writing, XAU/USD trades at $2704, up more than 1.7%.

Wall Street extended its gain after the Fed reduced the federal funds rate by a quarter of a percentage point on a unanimous decision. In the monetary policy statement, officials recognized the solid economic expansion, although labor market conditions softened. They acknowledged that inflation has moved closer to the Fed’s 2% goal but remains somewhat elevated.

Fed policymakers also noted that the risks of meeting their dual mandate are “roughly balanced” but acknowledged uncertainty in the economic outlook. They will remain vigilant to risks on both sides of the mandate.

In his press conference, Jerome Powell avoided giving specific guidance on future rate moves, leaving room for flexibility at the December meeting and beyond. He emphasized that the Fed could afford to take its time to lower rates due to the strong economy. He acknowledged that policy remains restrictive, even after today’s rate cut, as officials aim to bring rates to neutral levels.

Regarding the pace of rate cuts, Powell mentioned that the Fed could speed up if the labor market weakens or slows down as it nears neutral. However, he clarified that no final decisions have been made yet.

Earlier, the US Bureau of Labor Statistics (BLS) reported an anticipated increase in the number of Americans filing for unemployment benefits compared to the previous week.

Ahead of the week, the US economic schedule will feature the University of Michigan (UoM) Consumer Sentiment for November on Friday, alongside a review of inflation expectations.

Daily Digest Market Movers: Gold price rallies boosted by lower US Real yields

• Gold prices soared sharply as US real yields, which inversely correlate against Bullion, tumbled over eleven basis points, down to 1.95%.
• In the meantime, the US Dollar Index (DXY), which tracks the buck’s performance against six peers, plunges 0.76% to 104.31. Yields, particularly the 10-year benchmark note coupon, fall ten basis points to 4.33%.
• The Bureau of Labor Statistics reported that U.S. Initial Jobless Claims rose from 218K to 221K for the week ending November 2, aligning with expectations.
• Earlier in the week, data indicated a widening trade deficit and a slight slowdown in business activity. S&P Global noted a decline in October's service sector activity, while the ISM Services PMI showed improvement for the same month.
• According to the Chicago Board of Trade's December fed funds rate futures, investors anticipate 49 basis points of Fed rate cuts by the end of the year.

XAU/USD Technical Outlook: Gold price tumbles with sellers eyeing $2,650

Gold rebounded at around the 50-day Simple Moving Average (SMA) at $2,639 and aimed towards $2,700, but buyers lacked the strength to push prices higher. The first key resistance area for bulls would be $2,700. If cleared, the next stop would be the 20-day SMA at $2,716, ahead of $2,750, followed by October 23 high at $2,758.

On the other hand, a drop below the November 6 low of $2,652 could push the yellow metal to challenge $2,639, ahead of testing the October 10 low of $2,603.23. Momentum shifted neutral as the Relative Strength Index (RSI) turned bullish but shows signs of consolidation.

The Greenback came under pressure as investors cashed out part of Wednesday’s “Trump trade” robust gains, while the Fed delivered a largely telegraphed 25 bps rate cut and Chief Jerome noted that inflation keeps heading towards the 2% target.

Here is what you need to know on Friday, November 8:

Following Wednesday’s climb to multi-month tops, the US Dollar Index (DXY) gave away part of those gains amidst a widespread profit-taking session as investors continued to digest Trump’s win and the Fed’s rate cut. The advanced Michigan Consumer Sentiment will take centre stage ahead of the speech by the Fed’s Bowman.

EUR/USD managed to reverse part of Wednesday’s “Trump trade” steepsell-off, coming just short of the key 1.0800 barrier. The ECB’s McCaul and Cipollone are due to speak.

In line with the broad-based resurgence of the buying interest in the risk complex, GBP/USD recouped part of the ground lost on Wednesday, retargeting the key 1.3000 hurdle. The RICS House Price Balance will be published along the speech by the BoE’s Pill.

USD/JPY could not sustain the earlier advance to multi-week tops around 154.70, eventually retreating to the mid-153.00s on the back of the renewed offered bias in the US Dollar and diminishing US yields. Household Spending, the weekly Foreign Bond Investment figures and the flash Coincident Index and the Leading Economic Index are expected at the end of the week.

AUD/USD gathered strong pace and rapidly left behind Wednesday’s sharp retracement, reaching new multi-day highs near 0.6670. The RBA’s Jones is due to speak.

WTI prices added to Wednesday’s losses and challenged the $70.00 mark per barrel as traders kept digesting Trump’s win and assessing lower crude oil imports from China.

Gold prices rebounded from Wednesday’s Trump-led sharp pullback and approached the key $2,700 mark per ounce troy amidst a weak Greenback and lower US yields. Silver prices followed suit and quickly left behind recent lows in the sub-$31.00 mark per ounce.

• US Dollar Index (DXY) declined marginally after the Federal Reserve's 25 basis point rate cut.
• Fed officials see the economy expanding solidly but that labor market conditions have eased.
• The rate cut decision was unanimous.

Daily digest market movers: US Dollar dips amid profit-taking after Fed cut

• The US Dollar Index (DXY) dipped marginally following the Fed's 25 basis point interest rate cut, currently trading around 104.50.
• The Fed lowered its Fed Funds Target Range to 4.50%-4.75%, as widely anticipated by the market.
• This cut marks a reduction from the 50 basis point cut implemented at the September 18 meeting.
• Economic indicators suggest continued solid economic expansion, though the outlook remains uncertain with risks balanced.
• The Fed statement acknowledged progress towards the 2% inflation target, while acknowledging that inflation remains somewhat elevated.
• The rate cut decision was unanimous, with all policymakers, including Governor Michelle Bowman, supporting the move.
• The statement highlighted the Fed's continued commitment to balancing its dual mandate of price stability and maximum employment.
• The Fed emphasized that labor market conditions have eased, but the economy continues to expand at a solid pace.
• During the press conference, Chair Powell stated that rconomic policy is shifting toward a more neutral stance, with inflation progress steady and labor market conditions stable.
• He also mentioned that caution is prioritized to balance growth and inflation, adjusting rates as needed based on economic signals and resilience.

DXY technical outlook:  DXY technical analysis: Bullish momentum resurges despite pullback

• USD/JPY swirled around 153.20 after the Fed broadly met market expectations on November's rate call.
• The Fed delivered a follow-up quarter-point cut on Thursday; markets now bet on odds of a December three-peat.
• According to the CME FedWatch Tool, markets see over 66% odds of one last 25 bps rate trim in 2024.

USD/JPY roiled just north of the 153.00 handle on Thursday as investors grapple to find something motivational after the Federal Reserve (Fed) widely met market expecations and delivered a quarter-point interest rate cut on November 7. One more rate call meeting remains on the docket for 2024, and market participants remain cautiously optimistic that the Fed has at least one more 25 bps rate trim in the bag for the year.

According to the CME's FedWatch Tool, rate markets are pricing in about 66% odds of one last quarter-point rate drop in 2024.

more to come...

USD/JPY daily chart

• Gold gains after Fed cuts rates by 25 bps, in line with expectations.
• Fed notes balanced risks but economic uncertainty, supporting Gold’s safe-haven allure.
• Powell’s upcoming remarks may offer further insights into the Fed’s rate path and economic vigilance.

Gold prices held firm and posted gains of over 1% after the Federal Reserve (Fed) lowered interest rates by 25 basis points (bps), as expected. Yet, per the golden metal reaction, it seems that it was already priced. The XAU/USD trades at $2,692 after bouncing off a daily low of $2,643.

XAU/USD climbs to $2,692 as investors weigh Fed’s cautious outlook on inflation and economic expansion.

The statement highlights that Fed officials observed solid economic expansion, even though labor market conditions have softened. They remarked that inflation has moved closer to the Fed’s 2 percent target but remains somewhat elevated.

Fed policymakers also noted that the risks of meeting their dual mandate are “roughly balanced” but acknowledged uncertainty in the economic outlook. They will remain vigilant to risks on both sides of the mandate.

The FOMC will consider new data, the evolving outlook, and the balance of risks when making future decisions. The decision was unanimous, with Governor Michelle Bowman supporting the rate cut.

Concerning the balance sheet, Fed officials plan to continue reducing their holdings of Treasury, agency debt, and agency mortgage-backed securities.

Next would be the Fed Chair Jerome Powell's press conference at 14:00 ET.

XAU/USD Price Chart – Daily

Gold rebounded at around the 50-day Simple Moving Average (SMA) at $2,639 and aimed towards the $2,700, but buyers lacked the strength of push prices higher. The first key resistance area for bulls would be $2,700; if cleared, the next stop would be the 20-day SMA at $2,716, ahead of $2,750.

On the other hand, a drop below November’s 6 low of $2,652 could push the yellow metal to challenge $2,639, ahead of testing the October 10 low of $2,603.

• AUD/USD declined despite a 25 bps rate cut from the Federal Reserve.
• The Dollar Index trimmed daily losses after the Fed's decision, which weighed on the AUD/USD despite its initial rise.
• Fed policymakers expressed a balanced economic outlook, with risks to inflation and growth.

The AUD/USD currency pair declined but holds gains around 0.6640 after the Federal Reserve (Fed) cut its target range for the federal funds rate by 25 basis points on Thursday. Despite the Fed's rate cut, the AUD/USD's initial increase was capped by a recovery in the US dollar. The Fed's move comes amid ongoing concerns about rising inflation, with the central bank acknowledging a mixed economic outlook.

In their statement, Fed policymakers acknowledged the economic expansion but noted easing labor market conditions. They also recognized the progress made towards their inflation target but emphasized that it remains elevated. Despite these concerns, the Fed expressed a neutral outlook, indicating that risks to inflation and growth are roughly balanced. The central bank's decision to continue reducing its balance sheet and its commitment to data-dependent policymaking suggest a cautious approach to future rate cuts.

• The USD holds losses around the 104.50 area on Thursday's session.
• Despite the daily losses, the Dollar Index gained momentum after the Fed's decision and trimmed daily losses.
• The Committee seems confident to achieve inflation at the rate of 2% over the longer run.

The US Dollar Index (DXY) rebounded somewhat after the Federal Reserve (Fed) cut its benchmark interest rate by 25 basis points, bringing it to 4.50%-4.75%. This followed a larger 50 basis point cut by the Fed at its September 18th meeting.

In a highly anticipated move, the Federal Reserve reduced its Fed Funds Target Range by 25 basis points, bringing it to a 4.50%-4.75% range. This decision aligns with market expectations and suggests the Committee's commitment to achieving maximum employment and inflation at the rate of 2% over the longer run.

While the decision was in line with expectations, it did not provide a clear indication of the future course of monetary policy. The Committee stated that it will continue to assess incoming data and the evolving outlook when making future decisions. However, it did note that the risks to achieving its goals are roughly in balance, suggesting that it is not yet ready to signal a significant shift in its policy stance.

• EUR/USD trimmed gains on Thursday after the Fed met market expectations on another rate cut.
• The Fed trimmed its main reference rate by 25 basis points as investors broadly predicted.
• Market participants now pivot to the question of whether or not the Fed has one more rate cut in the barrel for 2024.

EUR/USD trimmed its wick on Thursday, easing back below the 1.0800 handle after the Federal Reserve (Fed) delivered a widely-anticipated 25 bps rate trim. With November's rate call firmly in the bag, rate traders and global markets will immediately pivot to a wait-and-see for December 18, when the Fed is hoped to slap one more quarter-point rate cut on the table to round out the year's Fed rate action.

more to come...

EUR/USD daily chart

• GBP/USD holds at 1.2963 after Fed's unanimous 25 bps rate cut.
• Fed acknowledges solid growth and easing labor conditions; inflation remains “somewhat elevated.”
• Powell’s upcoming remarks could signal Fed’s stance on future easing amid balanced risks.

The GBP/USD barely moved after the Federal Reserve (Fed) cut rates by 25 basis points (bps) to the 4.50%—4.75% range. At the time of writing, the pair is at 1.2963, up 0.64%, as traders brace for Fed Chairman Jerome Powell's press conference.

Fed trims rates to 4.50%-4.75% range, highlights economic resilience and cautious inflation progress

The statement mentions that Fed officials continued to see the economy expand solidly, although labor market conditions had eased. Regarding inflation, they noted that it “has made progress toward the Committee's 2 percent objective but remains somewhat elevated.”

Fed policymakers added that the risks of achieving its dual mandate “are roughly in balance,” adding that the economic outlook is uncertain. They will remain attentive to the risks of both sides of the dual mandate.

Regarding the balance sheet, they would continue to reduce its holdings of Treasury securities, agency debt and agency mortgage‑backed securities.

When making future decisions, the FOMC will consider incoming data, the evolving outlook, and the balance of risks. It is worth noting that the decision was unanimous, as Governor Michelle Bowman supported the rate cut.

Next would be the Fed Chair Jerome Powell's press conference at 14:00 ET.

GBPUSD Price Chart – Daily

The pair barely moved, though it remained below the confluence of the 20- and 100-day Simple Moving Averages (SMAs) at 1.2982-87. Powell's hawkish message could push the GBP/USD lower, first to 1.2950, ahead of the 1.2900 figure.

On the other hand, the GBP/USD could test the daily high at 1.3009.

• Mexican Peso posts four consecutive days of gains; USD/MXN tumbles below 20.00.
• Mixed Mexican data as inflation rises, but core inflation dips, potentially allowing further Banxico easing.
• Supreme Court dismisses judicial reform challenge, easing Mexico’s political tensions.
• Fed expected to cut rates; Powell's comments could hint at a cautious easing approach.

The Mexican Peso rallied against the Greenback on Thursday after Donald Trump’s victory in the US presidential election. Mexico revealed mixed figures on Auto Exports and Inflation, overshadowed by the Fed's upcoming monetary policy decision. The USD/MXN trades at 19.85, down 1.08%.

The Instituto Nacional de Estadística Geografía e Informatica (INEGI) revealed that headline inflation for Mexico in October rose above estimates, but core dipped, clearing the way for further easing by the Bank of Mexico (Banxico). A day ago, INEGI announced Auto Exports grew for the same period, but production stalled.

Meanwhile, political turmoil faded after the Supreme Court dismissed Judge Juan Luis González Alcántara Carranca's proposal to invalidate some parts of the judicial reform bill approved in September.

President Claudia Sheinbum said she spoke with presumptive US President Donald Trump.  “We had a very cordial call with President-elect Donald Trump in which we talked about the good relationship that there will be between Mexico and the United States,” she published on her X account.

Across the border, the US Bureau of Labor Statistics (BLS) revealed that the number of Americans applying for unemployment benefits rose above the prior week’s report, as expected.

USD/MXN traders are awaiting the Federal Reserve’s (Fed) decision. The Fed is expected to lower borrowing costs by 25 basis points (bps) later in the day and again at December’s meeting.

Brown Brothers Harriman Senior Analyst Win Thin said, “In our view, the vote split and Chair Powell’s post-meeting press conference will likely signal that the bar is high for the FOMC [to] cut rates more aggressively.”

Daily digest market movers: Mexican Peso soars ahead of Fed rate decision

• The USD/MXN will likely remain volatile after the US elections. Trump’s harsh rhetoric against Mexico and threats of imposing tariffs could increase the action. Traders should be aware of everything he says or tweets.
• Mexico’s Inflation in October rose from 4.58% to 4.76% YoY, exceeding estimates of 4.72%. Underlying prices dumped from 3.91% to 3.80% YoY, below forecasts of 3.85%.
• Automobile Exports rose from 4.8% to 5% YoY. Meanwhile, production dropped from 11.7% to 1.1%, hinting at the ongoing deceleration in the manufacturing sector.
• The BLS revealed that US Initial Jobless Claims for the week ending November 2 increased from 218K to 221K as widely expected.
• On Tuesday, the US economic schedule revealed that the Balance of Trade deficit widened while business activity cooled slightly.
• S&P Global revealed that October’s service activity dipped, while the Institute for Supply Management’s (ISM) Services PMI improved for the same period.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 49 bps of Fed easing by the end of the year.

USD/MXN technical outlook: Mexican Peso’s offensive continues as USD/MXN drops under 20.00

The USD/MXN uptrend remains intact after the pair trimmed all of its November 6 gains. This saw the Peso depreciate toward 20.80 before staging a comeback as the pair drifted below the 20.00 figure.

If sellers want to remain in charge, they need to push the exchange rate below the five-month lower support trendline at 19.76, which would expose the 50-day Simple Moving Average (SMA) at 19.68. On further weakness, the next stop would be the psychological figures of 19.50, followed by the October 14 low of 19.23.

On the upside, USD/MXN must surpass the 20-day SMA at 19.89. This would shift the intraday bias to bullish, exacerbating a move toward the 20.00 figure. A breach of the latter will expose the August 5 high at 20.22, followed by the two-year high at 20.80.

• The Dow Jones is trading tightly on Thursday, cruising near record highs.
• Investors are battening down the hatches and waiting for the Fed’s latest rate call.
• Markets broadly anticipate another quarter-point rate trim from Fed Chair Jerome Powell.

The Dow Jones Industrial Average (DJIA) is trading in a tight range on Thursday, testing close to record highs set earlier this week near 43,800. Markets surged this week after 2024’s US presidential election revealed a clear path to victory for former President Donald Trump, and markets are holding close to the top end in preparation for a further push higher on the back of a widely-anticipated rate cut from the Federal Reserve (Fed).

According to the CME’s FedWatch Tool, rate traders are pricing in an all-but-confirmed 25 bps rate trim from the Fed late during Thursday’s US market session, with99.1% odds for a quarter-point rate cut to follow-up September’s outsized 50 bps opening rate slash. Investors hoping for a final quarter-point rate trim in December are battling it out with some expectations that the Fed may hold after November, with 67% odds of one last 25 bps rate cut on December 18.

University of Michigan (UoM) Consumer Sentiment Index figures due on Friday will wrap up the week’s hectic release schedule. Median market forecasts expect the UoM’s sentiment survey to tick upwards to 71.0 in November after the previous month’s cautious step into 70.5.

Dow Jones news 

The Dow Jones is shuffling its feet on Thursday, with the major equity board pulling into the middle. Intel (INTC) has recovered around 4%, climbing to $26 per share in a rebound after it was announced that the legacy chipmaker would be removed from the Dow Jones this week, ending a 25-year on the major stock index. On the low end, JPMorgan Chase (JPM) slipped nearly 4% lower, falling below $238 per share following a stellar post-election rally.

Dow Jones price forecast

The Dow Jones’ latest bullish push has sent the major equity index within reach of the 44,000 major handle. The DJIA is now up nearly 17% on the year, climbing 5.33% bottom-to-top in October alone.

With the Dow Jones testing deep into bull country, short pressure will be building to drag price action back down to the 50-day Exponential Moving Average (EMA) near the 42,000 key price level. Despite a clear way forward for bears, a lack of technical turnaround points with bids tapping record high territory makes it difficult to price in a short entry point; it turns out rising knives are just as difficult to catch as falling ones.

Dow Jones daily chart

• The EUR/GBP declined on Thursday, extending its losses to three consecutive sessions.
• Technical indicators suggest that the bearish trend may continue in the near term.
• The pair is currently testing support at 0.8320-0.8330, with a break below this level potentially leading to further declines.

The EUR/GBP pair has been under pressure in recent sessions, breaking below its 20-day Simple Moving Average (SMA). This move has pushed the pair to its lowest point in over a week. Technical indicators are now signaling a potential increase in selling pressure, suggesting that the bearish trend may continue in the near term.

The Relative Strength Index (RSI) is at 44, indicating that the pair is in negative area. The slope of the RSI is mildly declining, suggesting that selling pressure is rising. The Moving Average Convergence Divergence (MACD) is green but decreasing, indicating that buying pressure is declining.

The EUR/GBP currency pair has witnessed a significant decline, breaking below its crucial 20-day Simple Moving Average (SMA). This move has pushed the pair to its lowest levels in over a week, indicating a shift in momentum. Technical indicators, such as the RSI and the MACD, are now signaling a buildup of selling pressure. The RSI has dropped below 50 neutral level, while the MACD prints lower green bars, suggesting a potential further decline in the EUR/GBP.

EUR/GBP daily chart

The Bank of England’s MPC cut the benchmark rate by 25bp to 4.75%. This was fully expected by analysts and markets. The vote was split 8-1, with only Mann dissenting, Rabobank’s Senior Macro Strategist Stefan Koopman notes.

The next cut to 4.50% to commence in February

“The theme of gradualism remains key. Governor Bailey gave no spoilers, but we continue to interpret this as a quarter per quarter. We expect the next cut to 4.50% in February.”

“The MPC thinks the Budget adds to both growth and inflation, so it can’t cut interest rates too quickly or by too much. That said, it also thinks inflation will be under control with Bank rate falling to 3.7% by the end of 2025.”

“We also forecast Bank rate ending up at 3.75% in late 2025.”

Gold is trading like bitcoin now, but a comprehensive flows-based approach doesn't corroborate the last leg of this rally, TDS’ Senior Commodity Strategist Daniel Ghali notes.

Downside momentum likely to accelerate below $2580

“The momentum break experienced on election day typically marks the end of such moves. But if that is the case, what can we expect from here? The melt-up has created a notable margin of safety for macro fund positions, which now hold significant paper profits on their extremely bloated length. Large scale selling activity from CTAs will only kick off below $2580/oz.”

“Given downside momentum is only likely to accelerate below this threshold, other cohorts will have to do the heavy lifting. Overall, this suggests the most vulnerable cohorts are ETF holders, given their recent inflows and Shanghai traders, who are still holding onto their near-record length.”

“Don't forget how significant TINA has been for this cohort — the last weeks have seen significant selling activity in Shanghai concurrently with improving Chinese sentiment. Silver, on the other hand, is more vulnerable to CTA selling activity in a continued downtape, but even a flat tape will likely lead trend following algos to reaccumulate their recently shed length.”

• EUR/JPY is unfurling a consolidation phase within an uptrend. Eventually it is expected to break higher. 
• An open gap just below price presents a short-term bearish risk, however, and a deeper pullback might evolve first. 

EUR/JPY is still unwinding a consolidation phase within a short and medium-term uptrend. Given the technical analysis maxim that “the trend is your friend”, however, the odds still favor an eventual continuation higher once this phase ends.

EUR/JPY 4-hour Chart 

A break above 166.69 (October 31 high) would probably confirm such a continuation higher. Resistance at 167.96 (July 30 swing high) could provide an initial target and act as a barrier to further upside. 

The minimum target for the breakout from the range, however, lies higher, at 169.68, the 61.8% Fibonacci extrapolation of the height of the range to the upside. 

That said, there is a risk of a deeper pullback first, due to the open gap which lies just below price between 164.90 and 164.45 (red-shaded rectangle on chart). gaps have a tendency to be filled, according to technical analysis theory. If so, EUR/JPY may weaken initially and fall to the bottom of the open gap at 164.45, before perhaps recovering and resuming its dominant uptrend. 

The Moving Average Convergence Divergence (MACD) momentum indicator has been falling during the unwiding of the consolidation phase and this decline in momentum without a corresponding fall in price is a sign of underlying weakness. It is another mild indication of the risk of possible near-term weakness materializing. 

• USD/CAD falls below 1.3900 after failing to hold Wednesday’s rally.
• Investors await the Fed policy decision and Canada Employment data.
• The Fed is expected to cut interest rates by 25 bps to 4.50%-4.75%.

The USD/CAD pair corrects below the round-level figure of 1.3900 in Thursday’s North American session. The Loonie pair drops after rallying on Wednesday as the US Dollar (USD) faces some unwinding ahead of the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 19:00.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, retraces 50% gains of Wednesday’s session in which it rose almost 1.60%.

Traders have priced in that the Fed to cut interest rates by 25 basis points (bps) to 4.50%-4.75%, according to the CME FedWatch tool. Investors will look for cues about the likely monetary policy action in December and the impact of Republican Donald Trump’s victory on the inflation outlook.

Meanwhile, the Canadian Dollar (CAD) will be influenced by the domestic employment data for October, which will be published on Friday. Economists expect the Canadian economy to have added 25K new workers, lower than 46.7K in September. In the same period, the Unemployment Rate is estimated to have increased to 6.6% from 6.5%.

USD/CAD trades near the upper boundary of the Ascending Triangle chart pattern on a weekly timeframe around 1.3950. Upward-sloping 50-week Exponential Moving Average (EMA) around 1.3640 suggests a strong uptrend.

The 14-day Relative Strength Index (RSI) hovers near 60.00. Should RSI (14) sustain above 60.00, a bullish momentum will be triggered.

More upside would appear if the asset breaks above the immediate high of 1.3950. The scenario will pave the way for the psychological resistance of 1.4000 and the round-level resistance of 1.4100.

On the contrary, a downside move below the October 29 low of 1.3875 will expose the asset to the October 15 high near 1.3840, followed by the round-level figure of 1.3800.

USD/CAD weekly chart

• EUR/GBP sinks back down to lows not seen since 2022 after the Bank of England decision on Thursday. 
• Even though the BoE decided to cut interest rates as expected, their uncertainty over the impact of the Budget supported GBP. 
• The Euro had a mixed day after weak German export and industrial data but strong overall Retail Sales from the region. 

EUR/GBP trades marginally lower on Thursday, in the 0.8320s as it consolidates just above two-and-a-half year lows, and the bottom of a five-week range. 

The pair started Thursday deep in the red after the release of lackluster German Industrial Production and Export data weighed on the Euro (EUR). 

EUR/GBP Daily Chart

World-renowned exporter Germany suffered a bad month in September as exports fell 1.7%, below both the previous and expected rate. Industrial Production in Europe’s largest economy, meanwhile, declined 2.5% in the same period, also below the estimates of economists, though not as low as the month before.

EUR/GBP then recovered and rose during the European session after upbeat Eurozone Retail Sales data showed shoppers continuing to spend liberally despite relatively high borrowing costs and constrained growth. This gave the Single Currency a boost and the pair sailed higher.

Retail Sales in the Euro Area rose by 2.9% YoY in September, and were revised up from 0.8% to 2.3% in August. The result also beat expectations of 1.3%.

On a monthly basis, Retail Sales rose 0.5% which was above expectations of 0.4% but below the previous month’s 1.1%, although that figure too was revised up substantially from 0.2%. 

EUR/GBP fell back to the bottom of its five-week range in the low 0.8300s, however, following the Bank of England (BoE) meeting despite the MPC voting by a clear majority of eight to one to lower the bank rate by 0.25% (25 basis points) to 4.75%, with one dissenter preferring them to remain unchanged. This was one more than voted to cut last time.

Lowering interest rates is usually negative for a currency as it reduces foreign capital inflows, however, in the case of the Pound Sterling (GBP) this was not the case on Thursday. Part of the reason may have been because the move was widely telegraphed, another because it remains well above the European Central Bank’s (ECB) comparable rate of 3.4% and the divergence favors the Pound. 

Yet another reason for GBP’s outperformance could be the BoE’s uncertainty regarding the outlook post the new government’s autumn Budget.

In the Budget, the government announced an estimated 70 billion (GBP) of increased spending as well as a rise in the minimum wage. This led economists at the Office of Budgetary Responsibility (OBR) to revise up their forecasts for inflation in the UK to 2.6% in 2025 from 1.1% previously. This, in turn, is expected to lead the BoE to keep interest rates relatively elevated next year, resulting in a stronger Pound. 

In his press conference after the decision, BoE Governor Andrew Bailey said the BoE would be keeping a close eye on inflation but that although he expected the decisions in the Budget to raise prices they would fall back down to target, and that confidence “allowed us to cut rates today”. 

At the same time, he added that he did not expect the projected path of interest rates to deviate much as a result of the Chancellor’s autumn statement. 

"I do not think it is right to conclude that the path of interest rates will be very different due to budget," said Bailey at the press conference. 

The Bank of England cut Bank Rate today by 25bps, as universally expected. The vote was 8-1 in favour, with one dissent to hold from Mann. Guidance was left broadly unchanged, with the MPC noting that ‘a gradual approach to removing policy restraint remains appropriate’, TDS’ macro analysts note.

BoE guidance virtually unchanged

“As nearly universally expected, the Bank of England cut Bank Rate today by 25bps to 4.75%. The vote to cut was decisive, at 8-1. The MPC's analysis of the recent budget yielded a substantial boost to growth and inflation, reinforcing its guidance of gradual cuts.”

“The upgrades to inflation and growth were met with unchanged guidance. This left rates markets with a rather blurry picture. We still think that the BoE decision should help somewhat to calm the rates space after last week's budget. Trading wise we favour steeper 2s10s curves.”

“The GBP strength from the BoE decision can be short-lived with the risk of hawkish FOMC and the looming risk of US election implications. GBP positioning is still more optimistic than non-USD peers making it vulnerable to a correction. We like GBP lower vs USD and JPY.”

•  Initial Jobless Claims matched consensus and increased to 221K.
• Continuing Jobless Claims climbed to 1.892M in the week ending October 25.

US citizens filing new applications for unemployment insurance rose to 221K for the week ending November 1, as reported by the US Department of Labor (DoL) on Thursday. This print matched initial estimates and was higher than the previous week's tally of 218K (revised from 216K).

The report also highlighted a seasonally adjusted insured unemployment rate of 1.2%, while the four-week moving average retreated to 227.25K, marking a decrease of 9.750K from the prior week’s revised average.

Moreover, Continuing Jobless Claims went up by 39K to reach 1.897M for the week ending October 25.

Market reaction

The greenback corrects lower and recedes to the 104.50 region when tracked by the US Dollar Index (DXY) amidst the broad-based recovery in the risk-linked universe.

• Silver price recovers slightly after a bloodbath on Wednesday with Fed policy on the horizon.
• The Fed is expected to cut interest rates by 25 bps to 4.50%-4.75%.
• Silver price sees key support near $29.00 if it weakens further.

Silver price (XAG/USD) bounces back above $31.00 in Thursday’s North American session after a sharp nosedive move on Wednesday. The white metal stays vigilant with investors focusing on the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 19:00 GMT.

The Fed is widely anticipated to cut interest rates by 25 basis points (bps) to 4.50%-4.75%, according to the CME FedWatch tool. This would be the second interest rate cut by the Fed this year. The Fed started the policy-easing cycle in September, however, the rate-cut size was 50 bps.

Ahead of the Fed’s policy, the US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, tumbles to near 104.60. The USD index retraces almost half of Wednesday’s rally, which was inspired by Republican Donald Trump’s victory in United States (US) presidential elections. 10-year US Treasury yields drop to near 4.41%.

Investors will pay close attention to the press conference of Fed Chair Jerome Powell’s speech to get cues about the impact of Trump’s victory on inflation and the interest rate outlook. Trump vowed to raise import tariffs and lower corporate taxes, which could boost inflationary pressures and labor demand.

Silver technical analysis

Silver price slides to near $31.00 after breaking below the horizontal support plotted from the May 21 high of $32.50. The near-term trend of the Silver price has turned bearish as it has dropped below the 50-day Exponential Moving Average (EMA), which trades around $31.60.

The asset could find support near the upward-sloping trendline around $29.00, plotted from the February 28 low of $22.30.

The 14-day Relative Strength Index (RSI) dives to near 40.00. Should RSI (14) fall below 40.00, a bearish momentum will be triggered.

Silver daily chart

Bank of England (BoE) Governor Andrew Bailey speaks on the policy outlook and responds to questions from the press following the decision to lower the policy rate by 25 basis points (bps) at the November meeting.

Key takeaways

"We work with all US administrations on financial regulation, look forward to working with new Trump administration."

"We do not make any presumptions about policy of future Trump administration."

"We will watch very closely what Trump administration does on trade."

"I'm sure there will be very open dialogue between UK and US administration."

Bank of England (BoE) Governor Andrew Bailey speaks on the policy outlook and responds to questions from the press following the decision to lower the policy rate by 25 basis points (bps) at the November meeting.

Key takeaways

"Budget does have upward impact on inflation but it does return to target, allowed us to cut rates today."

"We will need to see more on how budget affects inflation."

"I do not think it is right to conclude that path of interest rates will be very different due to budget."

"Rise in bond yields since this is budget is very different to after some other fiscal events in past two years."

"US election, not UK budget reaction, has dominated gilt market moves since Friday afternoon."

"Market today is pretty settled."

• NZD/USD falls in a three-wave ABC pattern with wave C reaching to within a pip of its downside target. 
• The MACD is turning higher in a bullish-looking turn which could signal a change in the trend cycle. 

NZD/USD has fallen in the C wave of a bearish ABC pattern which began life at the September 30 highs.  

ABCs are zig-zag patterns in which waves A and C are usually of a similar length or a Fibonacci 61.8% of the other.

NZD/USD Daily Chart 

NZD/USD fell to 0.5912 on November 6, one pip above the 0.5911 minimum estimated endpoint of wave C as 61.8% of the length of A. It is possible we can take this as the pair reaching its target given one pip lies within a margin of error, however, it is also still possible that it could still fall further and properly hit the downside target. 

In a really bearish scenario the Kiwi pair could even fall all the way to the major support level at 0.5849 (August 5 low). 

The pair remains in a bearish short and medium-term downtrend, and given the technical analysis theory that “the trend is your friend” it is biased to decline further. On a long-term basis the pair is in a sideways trending consolidation. 

The (blue) Moving Average Convergence Divergence (MACD) momentum indicator line is turning above its red signal line giving a fairly strong buy signal. This is a bullish signal and could indicate the short and medium-term trends are turning up, however, it is still too soon to be confident. If NZD/USD is about to turn higher it would be more or less in line with the pair reaching the floor of the long-term range.

Bank of England (BoE) Governor Andrew Bailey speaks on the policy outlook and responds to questions from the press following the decision to lower the policy rate by 25 basis points (bps) at the November meeting.

Key takeaways

"We still need to see services price inflation come down more broadly to keep CPI at 2%."

"Not for us to judge on merit of national insurance rise but to respond to inflation impact."

"Gradual approach to cutting rates will help give us time to assess impact of national insurance rise and other risks."

"UK labour market giving mixed signals."

"BoE agents and I have consistently heard from firms they expect to raise wages by 2-4% in 2025 vs 6-6.5% in 2023."

" BoE survey shows firms' pay growth expectations stabilising at 4% in recent months."

"There could be lingering persistence in wage inflation pressures beyond what is in our forecast."

• The US Dollar pares some gains on Thursday with markets focusing on the Fed rate decision. 
• Although Fed Chairman Powell is expected not to answer questions on politics, markets will be eager to see his reaction to what the Trump presidency means for the Fed. 
• The US Dollar index heads into 104-territory after failing to hold its head above 105.00. 

The US Dollar (USD) is fading under profit-taking pressure on Thursday after the Greenback had its best performance in years in reaction to Donald Trump winning the US presidential election. Traders’ attention shifts now to the Federal Reserve (Fed), which is set to cut interest rates by 25 basis points (bps) this Thursday. With the rate decision fully priced in, the focus will be on Fed Chairman Jerome Powell, specifically on the inflation and rate outlook for December and beyond in light of the US presidential election outcome. 

The US economic calendar is picking up in weight, with the weekly Jobless Claims set to be released. The quarterly Nonfarm Productivity and Unit Labor Costs will add some weight to the price reaction as well. Right at the end of the trading day, the Fed will release its rate decision, followed by Fed Chairman Powell’s press conference shortly thereafter. 

Daily digest market movers: Normal programming until January

• The US economic calendar kicks off at 13:30 GMT with a string of data:
  • The Initial Jobless Claims for the week ending on November 1 are expected to come in at 221,000, higher than the 216,000 of the previous week. 
  • The preliminary reading for the third quarter Nonfarm Productivity is expected to come in at 2.3% compared to 2.5% in the previous quarter. 
  • The preliminary third quarter Unit Labor Cost is expected to tick up to 0.5%, from 0.4% previously. 
• At 19:00 GMT, the Fed is publishing its interest rate decision. Expectations are for a rate cut to 4.75% from 5%.
• At 19:30 GMT, Fed Chairman Jerome Powell will take the stage to deliver a speech and comments on the recent rate decision. During the press conference, there are bound to be questions on the Fed’s stance in light of the recent Trump presidential election win. 
• The CME FedWatch Tool shows a 70.8% chance that the interest rate will be 50 basis points (bps) lower than the current level in the Federal Reserve’s December 18 meeting. Assuming a 25 bps cut in November, a new 25 bps cut could be expected in December. A smaller 28.4% chance is present for the interest rate to be 25 bps lower than the current level in December, implying no cut that month after trimming rates in November.. 
• The US 10-year benchmark rate trades at 4.42%, settling down a bit after hitting 4.47% earlier.  

US Dollar Index Technical Analysis: It is still a long way until inauguration

The US Dollar Index (DXY) has played its hand and has made markets clear what the famous Trump trade will mean for markets when US President-elect Donald Trump takes office on January 20, 2025. While the Fed is set to continue its interest rate-cut cycle, a tug-of-war might occur. Traders could expect the second phase of the Trump trade in January with a stronger Greenback, while the Fed rate-cutting cycle suggests a softer Greenback. Refrain from expecting this to be a straight line-up for the DXY and rather expect to see substantial easing first before Trump takes office. 

The first upper level is 105.53 (April 11 high), a very firm cap resistance, with 105.89 (May 2 high) just above. Once that is broken, 106.52, the high of April and a double top, will be the last level standing before starting to talk about 107.00.

On the downside, last week’s peak at 104.63 looks to be the first pivotal support nearby. Should the fade become bigger, the round level of 104.00 and the 200-day Simple Moving Average (SMA) at 103.85 should refrain from sending the DXY any lower. 

US Dollar Index: Daily Chart

• USD/CHF might be developing a Bull Flag continuation pattern. 
• This suggests there will be an extension of the uptrend to upside targets higher. 

USD/CHF – which looked as if it might be reversing trend and starting a new short-term downtrend at the start of the week – suddenly turned on a dime and spiked higher on Wednesday. 

The pair rallied to a higher high, giving the established uptrend a shot in the arm. USD/CHF has since peaked and started to go sideways, forming what looks like a potential Bull Flag continuation price pattern.

USD/CHF 4-hour Chart 

If it is indeed a Bull Flag pattern it indicates more upside is on the cards for USD/CHF. 

A break above the flag’s high of 0.8775 would probably result in a continuation higher to a target at 0.8832, the 61.8% Fibonacci extrapolation of the  flagpole or “Pole” higher. The flagpole is the steep rally prior to the consolidation. 

The Relative Strength Index (RSI) momentum indicator is not yet overbought but it is close. This suggests there is still more scope for upside before the uptrend becomes temporarily exhausted. If RSI enters the overbought zone it will be a signal for long-holders not to add to their positions. 

The market has strongly priced in the fact that the Riksbank will frontload, as it expects the bank to cut rates by a whopping 50 basis points today, from 3.25% to 2.75%. It had also signaled this frontloading in September, when it cut by only 25 basis points. It signaled a rate cut at each of the two remaining meetings this year (November and December), even mentioning the possibility of 50 basis points at one of the two meetings. According to the market, the time for 50 bp has come today, Commerzbank’s FX Analyst Antje Praefcke notes.

Riksbank to proceed more gradually

“In my view, the Riksbank wants to use the rapid interest rate cuts to support the economy and avoid inflation falling to excessively low levels, since it has fallen significantly in recent months and is now below the inflation target. The new figures for October, which will be released today before the Riksbank decision, should confirm the picture, although base effects could lead to a slight increase in the annual rate. Furthermore, the latest economic data have tended to fuel concerns that the economy is still growing only sluggishly and could use support.”

“I expect it to change its wording only slightly today. The market is pricing in 50 basis points today, sees only a small chance of a further interest rate move in December, but then a 50 bp move again in January. I think the Riksbank will proceed more gradually. So if it really is planning 75 basis points by year-end, pricing in 50 basis points makes sense for today. If it plans only 50 basis points by year-end, it will cut 25 basis points today and in December.

“In my opinion, such sharp jumps of 50 bp at every second meeting make no sense in view of the fact that the Riksbank has often emphasized in the past that it prefers a gradual monetary policy. The SEK also generally suffers from ongoing market uncertainty. Depending on what the Riksbank indicates for the upcoming meetings, there may still be shifts in interest rate expectations. However, these are likely to revolve primarily around the timing of the cuts (gradual, less gradual), rather than the ‘terminal rate’, so I expect only a minor impact on the SEK.”

• Crude Oil retraces for the second straight day, losing over  1% on Thursday. 
• Storm Rafael disrupts short-term US Oil output while Trump is set to boost shale production substantially. 
• The US Dollar Index fades under profit-taking as markets now focus on the Fed interest rate-cutting cycle. 

Crude Oil dips for a second day in a row on Thursday as commodity traders assess the impact of the Trump trade on Oil prices in the long term. US President-elect Donald Trump has vowed to boost shale Oil production in the US, which would add more barrels of Oil to the markets. Meanwhile, the tropical storm Rafael is set to take out roughly 1.55 million barrels per day in production as of Friday. 

The US Dollar Index (DXY), which tracks the performance of the Greenback against six other currencies, is fading under profit-taking from the steep rally that materialized after President-elect Donald Trump won the US presidential election over current Vice President Kamala Harris. Expect the focus now to dial down on Trump’s presidency until he takes office in January 2025, with the focus back on US economic numbers and the Federal Reserve (Fed), which is expected to cut its monetary policy rate by 25 basis points this Thursday. 

At the time of writing, Crude Oil (WTI) trades at $70.73 and Brent Crude at $74.23

Oil news and market movers: Oil outlook gets distorted again

• Tropical storm Rafael is hitting the shores of Cuba, making its way to the US Gulf region, Reuters reports. 
• Oil imports into China sank again last month, highlighting the sluggish consumption in the largest consuming country while traders weigh the implications of Donald Trump capturing the White House and potential supply rises from OPEC+ in 2025, Bloomberg reports. 
• On Wednesday, the Energy Information Administration (EIA) reported a surprise build of 2.149 million barrels in the week ending on November 1, bigger than the expected 1.8 million. The previous week’s number was a drawdown of 0.515 million barrels.

Oil Technical Analysis: ‘Leave the Oil to Me’

Crude Oil prices could be set for a bear cycle as Donald Trump is set to become the next US President in January 2025. Trump has already committed in the runup to the presidential election that regulation and permitting will become less strict. At the same time, funds allocated to green energy will be diverted towards shale Oil and fossil fuel projects. That means structural additional supply is set to be released in 2025, on top of OPEC+’s foreseen supply normalization. 

On the upside, the hefty technical level at $74.20, with the 100-day Simple Moving Average (SMA) and a few pivotal lines, is the next big hurdle ahead. The 200-day SMA at $76.80 is still quite far off, although it could get tested in case tensions in the Middle East arise. 

The 55-day SMA at $70.86, has lost control of the situation and no longer supports prices while being chopped up intraday. Traders need to look much lower at $67.12, a level that supported the price in May and June 2023. In case that level breaks, the 2024 year-to-date low emerges at $64.75, followed by $64.38, the low from 2023.

US WTI Crude Oil: Daily Chart

In Norway, inflation has remained at high levels for a long time compared to other countries, especially the core rate. But over the summer, the disinflation process in Norway has made significant progress, and seasonally adjusted data in recent months are broadly consistent with the inflation target. So far, Norges Bank has been very cautious about rate cuts. In its current interest rate path from September, it does not signal a first possible interest rate cut until March 2025. However, in view of the positive inflation trend of recent months, the risks have increased that Norges Bank could become active sooner, Commerzbank’s FX Analyst Antje Praefcke notes.

The NOK continues to be weak

“I think it is out of the question for Norges Bank to lower rates today. That would come as a surprise and be too early, especially since the inflation data for October will not be published until tomorrow. However, I can imagine that Norges Bank will give a first hint today that the key rate could be lowered sooner rather than later. In December, it could then lower the key rate on the basis of the new forecasts in the new Monetary Policy Report, or in January.”

“In my opinion, January is likely to come into focus, because at the December meeting, Norges Bank will have the inflation data for October and November. These could influence Norges Bank's new forecasts to the extent that it considers a first cut in January to be necessary. Norges Bank could then adjust the interest rate path accordingly in December and prepare the market for the interest rate turnaround.”

“The NOK remains weak due to the uncertain geopolitical situation and the weak oil price, although it was able to gain slightly against the euro yesterday, but primarily due to the weakness of the euro. It is therefore questionable whether it can benefit from Norges Bank's decision. In addition, the real interest rate would have to improve significantly compared to other currency areas. I fear that the NOK will continue to have a hard time for the time being.”

In between central bank decisions from the far north and the US, the Bank of England (BoE) meets today, Commerzbank’s FX Analyst Michael Pfister notes.

BoE to cut rates more than the market expects

“We (and the market) expect the BoE to cut rates by 25 basis points to 4.75%, the second cut since the first one in August. This is supported by the fact that inflation surprised to the downside again in September after an uptick - and is thus on track to come in well below the BoE's latest forecast. With inflation figures like this, and with other central banks having already made a few more rate cuts, few analysts are likely to be critical of today's likely rate cut.”

“For the Pound Sterling (GBP), the new forecasts and any indications of future interest rate cuts are likely to be more interesting. It is worth remembering that BoE Governor Andrew Bailey recently indicated more significant rate cuts. Therefore, they are likely to reduce their inflation forecasts and hint at further rate cuts. For the GBP, there is a particular risk that the BoE will be perceived as more dovish than before.”

“The view that the UK is behaving more like the US, i.e. that faster growth and higher inflation require higher interest rates, seems to have taken hold. Although we still think the pound is well placed against the euro, we do see a risk, at least in the short term, that the Bank of England will cut rates more than the market expects. If this becomes apparent today, we would not be surprised to see EUR/GBP move slightly higher after today's decision.”

Not only was there a political bang in the US yesterday, but also in Germany late last night. After Chancellor Olaf Scholz fired Finance Minister Christian Lindner, the so-called “Ampelkoalition” (a coalition between the Christian Democrats, the Social Democrats and the Greens) is now history, Commerzbank’s FX Analyst Antje Praefcke notes.

Euro can quickly recover short term

“Will the lights go out in Berlin now that the coalition has broken up? Hardly likely. The most likely scenario is a minority government followed by new elections in March. But even then, forming a government will likely be difficult. The euro has not yet reacted to the events in Germany. This could still happen when trading starts in Europe, as political uncertainty in the largest country in the euro zone is certainly not positive news for the single currency.”

“However, the consequences are likely to be limited. For a start, the political turmoil in Germany would have to lead to considerable negative economic consequences that have a significant impact on growth in the euro zone and thus influence the ECB's monetary policy to such an extent that it lowers the key interest rate more than expected. However, this is not to be expected (at least not at the moment).”

“The fact that the euro zone will only make sluggish economic progress in the coming months, due in part to weak growth in Germany, is likely to be already largely priced into the euro. As long as it is not clearly foreseeable that the euro zone will see lower trend growth in the future than previously expected, sustained losses in the euro are unjustified. As a result, the euro should only react briefly, if at all, to the news from Berlin, but should then quickly recover.”

• The Federal Reserve is widely expected to lower the policy rate after Donald Trump won the US presidential election.
• Fed Chairman Powell’s remarks could provide important clues about the rate outlook.
• The US Dollar rally could lose steam in case the Fed leaves the door open for another rate cut in December.  

The US Federal Reserve (Fed) will announce monetary policy decisions following the November policy meeting on Thursday, just barely two days after Donald Trump was elected as the 47th president of the United States. Market participants widely anticipate that the US central bank will lower the policy rate by 25 basis points (bps) to the range of 4.5%-4.75%.

The CME FedWatch Tool shows that investors are fully pricing in a 25 bps cut, while there is a nearly 70% probability of another rate reduction in December. The market positioning suggests that the US Dollar (USD) faces a two-way risk heading into the event.

Donald Trump’s victory in the presidential election triggered a rally in the US Treasury bond yields and boosted the USD on Wednesday. Additionally, Republicans gained the majority in the Senate and looked on track to control the House, paving the way for faster implementation of policies.

Assessing the outcome of the election, “Republican clean sweep makes it significantly easier to implement full policy agenda. Risks very firmly tilted to the downside for US and global economic growth and to the upside for US inflation,” said ABN Amro analysts in a recently published report. 

“While Fed policy could be tighter than our current base line, the ECB could cut rates faster. Republican sweep sets the stage for US-European rates divergence. Parity for EUR/USD could be on the cards,” they added. 

When will the Fed announce its interest rate decision and how could it affect EUR/USD?

The US Federal Reserve is scheduled to announce its interest rate decision and publish the monetary policy statement on Thursday at 19:00 GMT. This will be followed by Fed Chairman Jerome Powell's press conference starting at 19:30 GMT. 

A 25 bps rate cut is unlikely to trigger a significant market reaction because this decision is already priced-in. But investors will pay close attention to comments from Chair Powell in the post-meeting press conference, which could be more market-moving.

In case Powell leaves the door open for one more 25 bps rate cut in December, the immediate reaction could hurt the USD. Powell will surely be asked about the potential impact of proposed Trump policies on the inflation and growth outlook. The Chairman is likely to refrain from commenting on these issues and reiterate the data-dependent approach to policymaking, regardless of the winner of the election. 

If Powell voices concerns over the potential impact of tariffs on inflation expectations, this could be seen as a sign that the US central bank could take its time to ease the policy further. In this scenario, the USD could extend its weekly rally and cause EUR/USD to stretch lower. 

Nevertheless, it’s too early for policymakers to assess the potential changes to the monetary policy due to proposed policies during the campaigning period. In December, the Fed will publish the revised Summary of Projections and that publication is likely to provide more useful information on what officials expect from the economy under the Trump administration.

Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:

“EUR/USD remains technically bearish following the sharp decline seen on Wednesday. The Relative Strength Index (RSI) indicator on the daily chart stays slightly above 30, suggesting that the pair has more room on the downside before turning technically oversold.”

"On the downside, static support seems to have formed at 1.0700 before 1.0600 (static level from April) and 1.0500 (static level from October 2023, round level). In case EUR/USD gathers recovery momentum on a dovish Fed tone, it could face strong resistance at 1.0870, where the 200-day Simple Moving Average (SMA) is located. Technical buyers could take action once the pair flips that level into support. In this scenario, the 100-day SMA coils be seen as next hurdle at 1.0940 before 1.1000 (static level, round level)."

• AUD/USD climbs back to near 0.6630 as the impact of RBA’s hawkish interest rate guidance remains intact.
• Australia’s monthly Trade Balance unexpectedly came in lowest since March.
• Investors await the Fed policy meeting in which it is expected to cut interest rates by 25 bps.

The AUD/USD pair recovers almost entire Wednesday’s losses and climbs back to near 0.6630 in Thursday’s European session. The Aussie pair bounces back strongly on the Australian Dollar’s (AUD) outperformance against its major peers despite the Australian monthly Trade Balance for September coming in weaker than expected.

The Australian Bureau of Statistics showed that the trade surplus surprisingly came in lower at 4,609 million in September against 5,284 million in August. Economists expected the trade surplus to rise slightly to 5,300 million. This was the lowest figure since March due to a decline in both exports and imports by 4.3% and 3.1%, respectively.

It seems that the Reserve Bank of Australia’s (RBA) hawkish interest rate guidance has prompted a strong recovery in the Australian Dollar. The RBA left its key Official Cash Rate (OCR) unchanged at 4.35%, as expected, in its monetary policy meeting on Tuesday and emphasized the need to maintain a policy stance restrictive due to the strong labor market and the presence of upside risks to inflationary pressures.

In addition to RBA’s hawkish guidance, expectations of a quick rollout of economic stimulus by China’s government to diminish growth risks boosted by US Republican Donald Trump’s victory in presidential elections have also strengthened the AUD. A scenario that will prompt investments, spending, and consumption in China and will benefit Australia, being its leading trading partner.

Meanwhile, the US Dollar (USD) faces some unwinding after Trump’s inspired rally on Wednesday ahead of the Federal Reserve’s (Fed) policy meeting at 19:00 GMT. The US Dollar Index (DXY), which gauges the greenback’s value against six major currencies, slumps to nearly 104.80 from the four-month high of 105.30. The Fed is expected to cut interest rates by 25 basis points (bps) to 4.50%-4.75%, according to the CME FedWatch tool.

Apart from the fact that it has postponed its meeting by one day, the US election won’t change anything for the Fed in the short term. It will continue to decide on its monetary policy independently of the well-known outcome, Commerzbank’s FX Analyst Antje Praefcke notes.

Fed’s independence is in question

“Since its mission is close to being accomplished with respect to inflation, the labor market has been the focus for some time. But here, too, things look favorable for the Fed: it is weakening slowly, but there is no sign of a slump. The unemployment rate has risen moderately and the number of new jobs created is gradually declining. In this respect, the Fed can confidently lower the key rate further in order to get less restrictive.”

“The market is currently pricing in just under 50 basis points by the end of the year. There are good arguments for the Fed to proceed cautiously for the time being and not to consider any further major steps of more than 25 basis points. After all, growth proved to be extremely resilient in the third quarter as well. Moreover, the decline in core inflation has recently stalled. According to our experts, this argues for a cautious approach by the Fed and cuts of only 25 basis points at today's and the December meeting.”

“We have often argued that the markets would react very sensitively to an attack on the Fed's independence, even if it were only through verbal statements, which Trump would certainly make loudly. For the dollar, a Fed that is not ‘allowed’ to react appropriately to inflation risks is the biggest risk. But this issue will in all likelihood not concern us and the Fed until next year.”

The US Dollar (USD) could rise above 7.2200; the next resistance at 7.2400 is unlikely to come into view. In the longer run, surge in momentum suggests further USD strength, but the pace and extent is likely to be more moderate. The level to watch is 7.2400, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The level to watch on the upside is 7.2400

24-HOUR VIEW: “We indicated that despite USD surging in early Asian trade yesterday, ‘the impulsive advance could extend to 7.1550 before levelling off.’ However, USD surged further to 7.2095, closing on a strong note at 7.2040 (+1.48%). Not surprisingly, conditions are severely overbought. However, USD could rise above 7.2200. The next resistance at 7.2400 is unlikely to come into view. To maintain the momentum, USD must not break below 7.1600 (minor support is at 7.1800).”

1-3 WEEKS VIEW: “Yesterday (05 Nov, spot at 7.1340), we revised our negative view to neutral, indicating that ‘downward momentum has largely faded.’ We also indicate that USD ‘could trade in a broad 7.0900/7.1800 range.’ We clearly did not anticipate USD to lift off and skyrocketed to 7.2095. The surge in momentum suggests further USD strength, but severely overbought conditions suggest the pace and extent is likely to be more moderate. The level to watch on the upside is 7.2400. On the downside, should USD breach 7.1300, it would indicate that the rally is ready to take a breather.”

The Bank of England (BoE) is widely expected to cut rates by 25bp today, bringing the policy rate to 4.75%, ING’s FX Analyst Chris Turner notes.

Governor Andrew Bailey's press conference may impact GBP

“Most expect the vote count to prove 8-1 in favour of a cut, although the Pound Sterling (GBP) could quite easily receive a temporary boost if the vote is 7-2 or 6-3. More impactful for GBP, however, should be Governor Andrew Bailey's press conference. He's likely to be asked how stimulative he finds last week's UK budget.”

“Recall that the budget helped the market re-price the BoE easing cycle higher by some 25bp. And we think the market's pricing of the BoE lending rate at above 4.00% next year is too high. We think the BoE will cut more than that. We therefore think there is downside risk to UK rates and GBP today if Bailey downplays the significance of the UK budget to the BoE easing cycle.”

“That means EUR/GBP could enjoy a temporary spike back to the 0.8370/8400 area. Medium term, however, we increasingly expect EUR/GBP to prove a 0.82/83 story as the fall-out of trade wars weighs more heavily on the euro than the GBP.”

Overbought US Dollar (USD) rally could extend above 155.00 before pausing; the next resistance at 156.00 is unlikely to be tested. In the longer run, spike in momentum suggests USD could continue to rise, possibly to 156.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

USD can continue to rise, possibly to 156.00

24-HOUR VIEW: “We noted yesterday that ‘the outlook is unclear’, and we expected USD to ‘trade in a broad range of 151.20/153.35.’ We did not anticipate the ensuing rally that sent it skyrocketing to 154.70. While severely overbought, the rally in USD could extend above 155.00 before pausing. The next resistance at 156.00 is unlikely to be tested. To keep the momentum going, USD must remain above 153.50, with minor support at 154.00.”

1-3 WEEKS VIEW: “Our most recent update was from last Friday (01 Nov, spot at 152.05), wherein ‘The USD advance from early last month has ended.’ We indicated that ‘downward momentum is beginning to build, but USD has to break and remain below 151.05 before a more sustained decline can be expected.’ After edging to a low of 151.27 early yesterday, USD jumped and broke above our ‘strong resistance’ level of 153.35. It surged further to 154.70. Given the spike in momentum, USD could continue to rise, possibly to 156.00. On the downside, should USD break below 152.50 (‘strong support’ level), it would mean that the current upward pressure has eased.”

The market is looking for a 50bp rate cut from Sweden's Riksbank today, ING’s FX Analyst Chris Turner notes.

Riksbank can impact EUR/SEK even with a 25bp rate cut

“The market prices a 44bp cut today and the bigger EUR/SEK impact would likely come from just a 25bp rate cut. Like other currency pairs, EUR/SEK has come a long way quite quickly over the last month and some consolidation may be due.”

“But corporates might seek to take advantage of any short-term correction to the 11.55/60 area given the SEK could prove a victim of the looming trade war.”

The New Zealand Dollar (NZD) could drop to 0.5900 before the risk of a more sustained recovery increases. In the longer run, NZD could drop to 0.5875 before a rebound is likely, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD can drop to 0.5875 before a rebound is likely

24-HOUR VIEW: “We indicated yesterday that ‘there is room for NZD to break the major support at 0.5940, but a clear break below this level is unlikely.’ NZD fell more than expected to 0.5912, recovering slightly to close at 0.5939 (-1.14%). Although downward momentum seems to have slowed, NZD could drop to 0.5900 before the risk of a more sustained recovery increases. The next support at 0.5875 is unlikely to be tested. Resistance level is at 0.5975, followed by 0.5995.”

1-3 WEEKS VIEW: “We revised our NZD outlook from negative to neutral two days ago (04 Nov, spot at 0.5985), indicating that ‘the weakness in NZD from early last month has ended.’ We also indicated that NZD ‘has likely entered a range trading phase and is expected to trade between 0.5940 and 0.6040 for now.’ Yesterday, NZD broke clearly below 0.5940, reaching a fresh three-month low of 0.5912. Although the increase in momentum indicates further NZD weakness, conditions remain oversold due to the recent month-long decline. In other words, the potential of any weakness may be limited. Overall, as long as 0.6015 is not breached, NZD could drop to 0.5875 before a rebound is likely.”

The German government has collapsed. The bone of contention in the end was the use of fiscal stimulus and disagreement over the suspension of the German debt brake, ING’s FX Analyst Chris Turner notes.

New German government may fight better against Trump

“This puts into stark relief the challenge for the European economy faced by a looming trade war and weak domestic demand. The prospect of a new German government next March might actually increase the chance of some fiscal stimulus and provide better ammunition for Europe to withstand Trump's trade agenda in 2025.”

“EUR/USD found support below 1.07 yesterday – perhaps not a surprise after a peak-to-trough drop of 2.3% on the day and even moving more aggressively than the FX options market had been pricing.”

“While profit-taking on EUR/USD short positions could drag it back to the 1.0800 area, we tend to think EUR/USD will tend to trade in the lower half of its 1.0550-1.1150 two-year range for the rest of the year. For example, it will be interesting to see what Trump's election means for European investment intentions – the IMF had noted this as a key negative factor under increased tariffs.”

Central-case terminal rate forecast was lowered from 2.25% to 1.50%, Deutsche Bank’s team of economists note.

1.00-1.75% to be the main landing zone for the ECB

“Rather than the ECB policy rate returning to neutral in mid-2025 we now see the rate falling moderately below neutral by end-2025. The rationale in part relates to the prospect of US tariffs under a new Trump Administration and in part a weaker underlying macro performance and the emerging threat of below-target inflation.”

“Uncertainty is high on many levels, from the exact impact of US tariffs to the timing of their implementation to how and when Europe responds. As such, we emphasize wide confidence bands around the outlook for European growth, inflation and monetary policy. Capturing this uncertainty, we consider 1.00-1.75% to be the main landing zone for the ECB terminal rate.”

“The factors that will determine the path to and the level of the terminal rate will include (1) fiscal policy, (2) Germany, (3) China, and (4) oil prices. In aggregate, the global economy may now be in a different regime and Europe could be heading for more divergent macro conditions relative to the US.”

• Eurozone Retail Sales jump 2.9% YoY in September vs. 1.3% forecast.
• Retail Sales in the bloc arrived at 0.5% MoM in September, beating estimates.

Eurozone’s annual Retail Sales increased by 2.9% in September after rising by a revised 2.4% in August, the official data released by Eurostat showed on Thursday. The data beat the market forecast of +1.3%.

On a monthly basis, Retail Sales in the old continent rose by 0.5% in the same period vs. August’s revised +1.1%, beating the expected 0.4% print.

FX implications

The upbeat Eurozone data fails to provide a fresh boost to the Euro. At the time of writing, the EUR/USD pair is trading 0.21% higher on the day at 1.0750.

• EUR/GBP revives intraday losses as BoE policy meeting takes center stage.
• The BoE is expected to cut interest rates by 25 bps to 4.75%.
• The Euro is expected to remain under pressure due to multiple headwinds.

The EUR/GBP reverses intraday losses and bounces back to near 0.8300 in the European trading session on Thursday. The cross rebounded strongly after posting a fresh weekly low near 0.8310 ahead of the Bank of England’s (BoE) interest rate decision, which will be announced at 12:00 GMT.

The BoE is widely anticipated to cut interest rates by 25 basis points (bps) to 4.75%. This will be the second interest rate cut by the BoE this year. The BoE initiated the policy-easing cycle in the August policy meeting in which it cut interest rates by 25 bps to 5%, but it kept them steady in the September meeting.

Out of the nine-member led Monetary Policy Committee (MPC), seven members are expected to vote in favor of a rate reduction, while two are expected to support leaving interest rates unchanged at 5%. BoE external MPC member Catherine Mann, an outspoken hawk, is likely to be one of those who would support keeping rates stable.

Investors will pay close attention to BoE Governor Andrew Bailey’s press conference to get cues about the impact of Republican Donald Trump’s victory in the United States (US) presidential elections and United Kingdom (UK) Labour’s firm Autumn Forecast Statement on the inflation and the interest rate outlook.

Though the Euro (EUR) has shown a strong recovery against the Pound Sterling (GBP) ahead of the BoE policy meeting, its near-term outlook remains vulnerable due to multiple tailwinds such as weak Eurozone economic prospects due to Trump’s victory, the collapse of German three-party coalition and expectations that the European Central Bank (ECB) could fasten its policy-easing cycle.

On the economic data front, month-on-month German Industrial Production data for September has come in worse than expected. The Industrial Production declined by 2.5% after expanding by 2.6% in August. Economists expected the data to have contracted by 1%.

Potential for the Australian Dollar (AUD) to decline to 0.6500; the likelihood of a sustained break below this level is not high, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

A breach of 0.6640 to push AUD higher

24-HOUR VIEW: “After AUD fell sharply early yesterday, we indicated that it ‘could drop further but a break of the major support at 0.6535 is unlikely.’ We underestimated the downward momentum, as AUD fell to a three-month low of 0.6513. AUD recovered swiftly from the low, closing at 0.6571, down by 1.00% for the day. The bounce from the low has resulted in a slowdown in momentum. This, combined with oversold conditions, suggests that AUD is unlikely to weaken further. Today, it is more likely to trade in a range, probably between 0.6530 and 0.6610.”

1-3 WEEKS VIEW: “Our most recent narrative was from Monday (04 Nov, spot at 0.6585), wherein the recent ‘month-long AUD weakness has stabilised,’ and AUD is expected to ‘trade in a 0.6535/0.6655 range for now.’ Yesterday (Wednesday), it touched 0.6645, then reversed abruptly and plummeted to a low of 0.6513. Despite the decline, there has been no significant increase in momentum. That said, there is potential for AUD to decline to 0.6500. Currently, the likelihood of a sustained break below this level is not high. On the upside, a breach of 0.6640 would mean that AUD is not weakening further.”

USD/SGD rose, tracking the rise in broad USD, UST yields as Trump won elections. Pair was last at 1.3294 levels, OCBC’ FX analysts Frances Cheung and Christopher Wong note.

To consolidate for now

“Daily momentum is flat but rise in RSI moderated. We see consolidation for now. Resistance at 1.3350 (200 DMA). Support at 1.3290 (61.8% fibo retracement of Jun high to Oct low), 1.3190 (50% fibo), 1.31 (38.2% fibo).”

“S$NEER eased; last at 1.38% above model-implied mid.”

• EUR/USD recovers to near 1.0770 ahead of Fed policy while Trump's victory keeps downside bias intact
• German three-party coalition collapsed, paving the way for snap elections in early 2025.
• The Fed is expected to cut interest rates by 25 bps to 4.50%-4.75%.

EUR/USD rebounds to near 1.0770 in European trading hours on Thursday. The major currency pair bounces back after posting a more than four-month low below 1.0700 on Wednesday. The recovery comes as the US Dollar (USD) corrects ahead of the Federal Reserve’s (Fed) interest rate decision, which will be published at 19:00 GMT. 

On Wednesday, the USD Index surged more than 1.6% – the highest single-day gain in almost four years – as United States (US) citizens chose Republican Donald Trump in the presidential elections over Democratic candidate Kamala Harris. The reasoning behind the US Dollar’s rally was Trump’s promise to raise import tariffs and lower corporate taxes. On Thursday, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops to near 104.80 after Wednesday’s rally.

Higher tariffs would make imported products more expensive for US citizens and corporations, likely fuelling inflation. Lower taxes could also stimulate spending, contributing to price pressures as well. This scenario would make it more difficult for the Federal Reserve (Fed) to continue with its rate-cutting cycle.

As for the Fed’s monetary policy meeting, traders have priced in a 25 basis points (bps) interest rate cut that will push interest rates lower to 4.50%-4.75%, according to the CME FedWatch tool. As the Fed is widely anticipated to cut interest rates, investors will pay close attention to the monetary policy statement and Fed Chair Jerome Powell’s press conference. Investors would like to know whether the Fed will slow its policy-easing cycle if Trump implements what he promised during the campaign.

Daily digest market movers: EUR/USD rebounds despite multiple headwinds

• EUR/USD recovers sharply to near 1.0770 at the US Dollar’s expense. However, the outlook of the major currency pair remains vulnerable as the Eurozone economy is expected to face a significant burden from Trump’s protectionist policies.
• The blanket 10% tariff on all imported goods advocated by Trump would have a negative impact of 0.1% on the European Union’s (EU) Gross Domestic Product (GDP), according to a recent London School of Economics and Political Science paper.
• At the conference in London on Wednesday, European Central Bank (ECB) Vice President Luis de Guindos warned that tariffs from the US could lead to a vicious cycle of trade war globally. "If you impose a tariff, you have to bear in mind that the other party is going to react, and it’s going to retaliate, and that could give rise to a vicious circle of in terms of inflation, tariffs, which could be the worst possible result and outcome," Guindos said, Reuters reported.
• Meanwhile, the collapse of the German three-party coalition has also added to downside risks of economic growth in the shared continent. On Wednesday, German Chancellor Olaf Scholz fired Federal Minister of Finance Christian Lindner, paving the way for snap elections in early 2025. “It was necessary to prevent harm to our country,” Scholz said, CNN reported.
• On the economic data front, German Industrial Production declined by 2.5%, faster than 1% contraction expected by market participants in September on month.

Technical Analysis: EUR/USD bounces back to near 1.0770

EUR/USD rebounds to near 1.0770 after discovering buying interest below the key support of 1.0700. However, the major currency pair’s recovery appears to be lacking strength as declining 20-day and 50-day Exponential Moving Averages (EMAs) near 1.0860 and 1.0920, respectively, suggest a strong bearish trend.

Additionally, the 14-day Relative Strength Index (RSI) retreats below 40.00, suggesting a resumption of the bearish momentum.

The upward-sloping trendline around 1.0800, which is plotted from the April 16 low at around 1.0600, will act as a key resistance zone for Euro (EUR) bulls. Looking down, the shared currency pair could decline to the year-to-date (YTD) low of 1.0600.

• Gold finds a floor on Thursday after experiencing a 3.0% fall on Wednesday following the news of Donald Trump’s victory in the presidential race. 
• A stronger US Dollar, capital pivoting into riskier assets, and potential unwinding of geopolitical risks were all bearish drivers. 
• Technically, XAU/USD extends its short-term downtrend although the RSI momentum indicator is oversold. 

Gold (XAU/USD) steadies in the $2,660s on Thursday after falling three percent on the previous day when now President-elect Donald Trump had secured a victory in the US presidential election.  

Gold falls 3.0% as Donald Trump wins election 

Gold's steep decline on Wednesday was partly a result of the US Dollar (USD) strengthening due to Trump’s Dollar-positive economic agenda and preference for pro-tariff protectionism. Since Gold is mainly priced and traded in USD, the stronger Dollar had an immediate negative impact on its price.

Trump won the presidency by passing the 270 electoral votes threshold. On Thursday, Trump has 295 votes to Harris’ 226, according to the Associated Press. The Republican party also has a majority in the United States (US) Senate – 52 over 44 – and is in the lead to win a majority in the US Congress, with 206 seats versus the Democrat’s 191 so far, although 38 have still to be called. 

The precious metal may have been further hit by investors’ preference for alternative, riskier assets, such as Bitcoin (BTC), which hit a new all-time high due to expectations that Trump would relax crypto regulation. Stocks also rose to record heights due to anticipated tax cuts and a looser regulatory environment overall. These all came at the cost of Gold, which saw outflows as investors rebalanced portfolios. 

Gold also rises during geopolitical crises and wars from increased safe-haven demand. Trump’s claims that he can end the conflicts in the Middle East and Ukraine, though seemingly exaggerated (“I will have that (Ukraine-Russia) war settled in one day – 24hrs,” Trump said once), however, probably also hit safe-haven flows. 

Technical Analysis: XAU/USD enters short-term downtrend

Gold shatters the glass of $2,700 and falls to the mid $2,650s on Thursday. The precious metal is now in a short-term downtrend and, given the principle that “the trend is your friend,” it is vulnerable to further weakness in the near term.

XAU/USD 4-hour Chart

That said, the Relative Strength Index (RSI) momentum indicator has entered deep into oversold territory, indicating short-holders should not add to their positions. If the RSI exits oversold, sellers are advised to close their trades and open tentative longs, as it will be a signal that the price will probably correct higher.

Due to the bearish short-term trend, a break below the $2,643 daily low would confirm a continuation, probably to the next downside target at $2,605, the trendline for the long-term trend.

The precious metal remains in an uptrend on a medium and long-term basis, with a material risk of a reversal higher in line with these broader up cycles. At the moment, however, there are no technical signs of this happening.

A break above the all-time high of $2,790 would re-confirm the medium-term uptrend and probably lead to a move up to resistance at $2,800 (whole number and psychological number), followed by $2,850. 

Betting markets currently give the Republicans a 93% chance of winning the House and therefore a clean sweep. Global financial markets reacted to the prospect of Donald Trump having carte blanche to pursue his policy agenda by: buying the dollar, re-pricing the Fed easing cycle higher, selling (especially longer-dated) US Treasuries, buying US equities and punishing those likely to be on the receiving end of his trade policies, such as BMW who's shares were marked down 7% yesterday, ING’s FX Analyst Antje Praefcke notes.

DXY to consolidate in the 104.50-105.50 area

“The challenge for investors is how to position now. The US election event risk has passed with a surprisingly clean outcome, but Trump's policy agenda will not emerge until 2025, and perhaps not even until late in 2025. Before then, however, the market will be subject to his social media posts and presumably his choice for top posts in his administration, such as the next US Treasury Secretary.”

“That is all for the future. Today very much presents a return to the state of the domestic economy and how central bankers will respond. The overriding position currently is one in which the disinflation process is true and restrictive interest rates are no longer required. That should be the core story from today's FOMC meeting, where the market fully prices a 25bp rate cut. We doubt Chair Jay Powell is ready to endorse the market's less dovish re-pricing of the Fed's easing cycle by saying prospective Republican policy is inflationary.”

“It would be a bullish dollar surprise if he did. We do not think there is a strong reason for the dollar to hand back much of its recent gains. But it would not be a surprise to see DXY undertaking some well-earned consolidation in the 104.50-105.50 area as investors try to better understand the timings of the next market drivers.”

• The Mexican Peso has rebounded after hitting multi-year lows during the US presidential election. 
• The Federal Reserve’s November meeting on Thursday could be pressuring the US Dollar. 
• USD/MXN rolls over after peaking but remains in a solid uptrend overall.  

The Mexican Peso (MXN) maneuvers a U-turn that an F1 driver would be proud of during the volatility accompanying the US presidential election. On Wednesday, the Peso took a beating as it became increasingly clear that President-elect Donald Trump would win the election. His vow of putting tariffs on Mexican imports – of between 25% and 300%, depending on which comments you take – was the main cause of MXN’s steep sell-off. 

Yet, after Trump was actually “crowned Caesar”, MXN recovered and made back all its earlier losses. On Thursday, the Mexican Peso continues marginally outperforming its peers in its three most heavily traded pairs: USD/MXN, EUR/MXN and GBP/MXN. 

Mexican Peso bounces from multi-year low

The Mexican Peso leaps out of its grave as markets settle down following the tumult that accompanied Donald Trump’s victory over his rival Democrat candidate, Kamala Harris, in the 60th US presidential election. 

Part of the Peso’s recovery – against the US Dollar (USD) at least – could be put down to the proximity of the US Federal Reserve’s (Fed) November meeting on Thursday, as the Fed is still expected to deliver a 25 basis point (bps) (0.25%) cut to US interest rates, despite the inflationary outlook from Trumponomics. Lower interest rates are negative for the Dollar since they reduce foreign capital inflows. 

30-Day Fed Funds futures prices continue to show a 100% probability that the Fed will announce a 25 bps rate cut and even a slim 2.6% chance of a larger 50 bps (0.50%) reduction, according to the CME FedWatch tool. Strangely, this was not the case before the election result when markets saw no chance of a 50 bps cut and a circa 5% probability of the Fed not cutting at all. Additionally, swap rates are showing a high probability of another 25 bps cut coming down the pipe in December. If these predictions continue, the US Dollar is likely to see its upside capped for the time being in all pairs, including against the Mexican Peso.

A further reason for the Peso’s recovery could be the realization that much of Trump’s policies, such as his threats to place tariffs on Mexican imports, may be difficult to implement. The United States-Mexico-Canada Agreement (USMCA) free trade deal stipulates that Mexican car imports to the US must contain a high percentage of US components, for example. According to the US International Trade Administration, 49.2% of Mexican imported cars are made up of US-made parts. Adding punitive tariffs would, therefore, hurt US companies that supply those components. That said, it is also possible Trump could wish to have more of the manufacturing process repatriated, ultimately to Mexico’s detriment.   

Congressional win for Republicans could add pressure to Peso

Trump won the presidency by passing the 270 threshold of electoral votes required to win the race. He currently has 295 electoral votes to Harris’ 226, according to Associated Press. The Republican party also gained a majority in the United States (US) Senate – 52 over 44 – and is in the lead to win a majority in the US Congress, with 206 seats versus the Democrat’s 191 so far, although 38 have still to be called. 

If the Republicans win a majority in Congress, they will have a “clean sweep,” and Trump will be able to implement his policies with less friction and delay. 

According to forecasts by Mexican financial news website El Financiero, a Republican majority in Congress with Trump as President could lead the Peso to weaken even further against the USD. They estimate a band of between 21.14 and 22.26 for USD/MXN in such a scenario. The pair currently trades in the 20.10s. 

If the Republicans fail to win a majority in Congress, the pair is likely to end up in a range between 19.70 and 21.14, says El Financiero. 

Technical Analysis: USD/MXN executes U-turn after peaking

USD/MXN shot to an over two-year high on Wednesday but promptly rolled over, eating back up all the prior gains.

USD/MXN 4-hour Chart 

However, USD/MXN is in an overall uptrend on a short, medium and long-term basis. Further, it is trading in a bullish rising channel. Given the technical principle that “the trend is your friend,” the odds favor an eventual continuation higher. 

The Moving Average Convergence Divergence (MACD) momentum indicator has crossed below its signal line, which is a bearish sign. However, it remains above its zero line, suggesting the trend remains bullish. 

A break above the 20.80 high set on Wednesday would probably confirm more gains, with 21.00 as the next key target and resistance level (round number, psychological support). 

Silver prices (XAG/USD) broadly unchanged on Thursday, according to FXStreet data. Silver trades at $31.18 per troy ounce, broadly unchanged 0.07% from the $31.20 it cost on Wednesday.

Silver prices have increased by 31.02% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 85.43 on Thursday, up from 85.28 on Wednesday.

(An automation tool was used in creating this post.)

USD broadly strengthened in the aftermath of Trump’s victory. Market reaction was well flagged and expected. Near term, we may still see USD supported, largely on tariffs, inflation and fiscal concerns. We also expect policymakers to be more vigilant of the potential policy risks associated with Trump as President. Hence, excessive, one-sided moves in FX markets may be countered with smoothing pressure. DXY was last at 104.80 levels, OCBC’ FX analysts Frances Cheung and Christopher Wong note.

Fed is not expected to deliver a 25bp cut at the meeting

“Elsewhere, China’s NPC (4 – 8 Nov) should not be written off. The meeting is likely to factor in US election risk premium and we believe Chinese policymakers should still be determined on delivering support measures to mend the economy and repair sentiment. Larger than expected stimulus may help to support sentiment and partially offset against CNH depreciation. Over the next 24 – 48 hours, we should expect FX to continue trading with 2-way risks as markets digest election outcome, including who takes the House and if existing lawsuits against Trump will have any implications.

“FX volatility should continue to ease but remain elevated relative to year’s average. Trump's threat on tariff is clearly one of the biggest risks that markets are concerned about, but we do not know how long it takes for those policies to be in place. That said, the uncertainty may be sufficient to keep USD/AXJs supported.”

“Daily momentum is flat while RSI rose. Resistance at 105.20, 105.60 levels (76.4% fibo). Support at 104.60 (61.8% fibo), 103.70/80 levels (21, 200 DMAs, 50% fibo retracement of 2023 high to 2024 low). Moving on, FOMC is on tap next (3am SGT Fri morning). We do not expect the election outcome to impact this particular FOMC meeting and still expect Fed to deliver a 25bp cut at the meeting. Focus is on the tone and language.”

• NZD/USD tests the 14-day Exponential Moving Average at the 0.6000 level.
• The 14-day RSI remains below the 50 level, indicating an ongoing bearish bias for the pair.
• The immediate support appears at the upper boundary of the descending channel, aligned with the nine-day EMA at 0.5984 level.

The NZD/USD pair has recovered its recent losses from the previous session, trading around 0.5990 during the European hours on Thursday. Daily chart analysis indicates a weakening bearish bias, with the pair breaking above the nine-day Exponential Moving Average (EMA), aligned with the lower boundary of the descending channel.

However, the 14-day Relative Strength Index (RSI), a key momentum indicator, remains below the 50 level, suggesting a prevailing bearish trend. A further approach toward the 50 mark would improve the momentum of the NZD/USD pair.

Adding to this outlook, the nine-day Exponential Moving Average remains below the 14-day EMA, suggesting weakness in the short-term price momentum for the NZD/USD pair.

Regarding the resistance, the NZD/USD pair is testing the 14-day EMA at 0.6000 level. A break above this level would improve the price momentum and support the pair to explore the area around the psychological level of 0.6100 level.

On the downside, NZD/USD may find immediate support at the upper boundary of the descending channel, in case of re-entering the channel, aligned with the nine-day EMA at 0.5984 level.

A return into the channel would reinforce the bearish bias and put downward pressure on the NZD/USD pair to navigate the region around the lower boundary of the descending channel near a psychological level of 0.5900.

A break below the descending channel could strengthen the bearish bias and lead the NZD/USD pair to revisit the throwback support at the 0.5850 level.

NZD/USD: Daily Chart

• Silver trades with negative bias for the second straight day, though lacks follow-through selling.
• A fall below the 50-day SMA validates an ascending channel breakdown and favors bearish traders.
• Any meaningful recovery attempt might now be seen as a selling opportunity and remain limited.

Silver (XAG/USD) remains on the back foot through the first half of the European session on Thursday, albeit manages to hold above the $31.00 mark. The technical setup, however, seems tilted in favor of bearish traders and suggests that the path of least resistance for the white metal remains to the downside. 

The overnight downfall and a subsequent weakness below the 50-day Simple Moving Average (SMA) confirmed a short-term ascending trend-channel breakdown. Furthermore, oscillators on the daily chart have been gaining negative traction and add credence to the near-term negative outlook for the XAG/USD. Any further decline, however, is likely to find decent support near the 100-day SMA, currently pegged near the $30.40-$30.35 region.

Some follow-through selling could drag the XAG/USD below the $30.00 psychological mark, toward testing the next relevant support near the $29.70 zone. The downward trajectory could extend further towards the $29.00 round figure en route to the very important 200-day SMA, currently pegged near the $28.50-$28.40 region.

On the flip side, the 50-day SMA support breakpoint, around the $31.35 area, now seems to act as an immediate hurdle. A sustained strength beyond could trigger a short-covering rally towards the $31.75 intermediate resistance, the $32.00 round figure and the $32.25-$32.30 supply zone. Any further move up is more likely to attract fresh sellers and remain capped near the ascending channel support breakpoint, around the $32.75 region.

Silver daily chart

The Pound Sterling (GBP) could retest the 1.2835 low; for now, it does not appear to have enough momentum to break below 1.2800. In the longer run, breach of the 1.2900 support suggest GBP could continue to weaken but note that there is a weekly support at 1.2800, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Can fall all the way to the weekly support at 1.2800

24-HOUR VIEW: “Yesterday, we highlighted that GBP could trade in a broad range of 1.2900/1.3040. We did not expect GBP to plunge to a low of 1.2835. GBP rebounded from the low and closed at 1.2880 (-1.24%). While the weakness has not stabilised, downward momentum has slowed to an extent. Today, GBP could retest the 1.2835 low before stabilisation is likely. For now, it does appear to have enough momentum to break the significant support level at 1.2800. Resistance is at 1.2930; a breach of 1.2960 would mean that the weakness has stabilised.”

1-3 WEEKS VIEW: “Our most recent narrative was from two days ago (05 Nov, spot at 1.2955), wherein GBP ‘is likely to trade in a 1.2900/1.3030 range for the time being.’ Yesterday, it broke below the strong support at 1.2900, reaching a low of 1.2835. The breach of the support suggest that GBP could continue to weaken. However, note that 1.2800 is a weekly support level. To maintain the rapid buildup in momentum, GBP must remain below 1.3000.”

The Euro (EUR) continued to trade with a heavy bias, in response to US elections outcome. Pair was last seen at 1.0762 levels, OCBC’ FX analysts Frances Cheung and Christopher Wong note.

Risks skewed to the downside

“Threat of Trump tariff on all imports by up to 20% can hurt EUR as US was the largest partner for EU exports of goods in 2023. There are also concerns if Trump may interfere with support for European security. Momentum turned flat while RSI fell. Risks skewed to the downside.”

“Next support at 1.0660/70 levels. Resistance at 1.0740 (76.4% fibo), 1.0830 (61.8% fibo retracement of 2024 low to high).”

As long as 1.0800 is not breached, the Euro (EUR) could drop to 1.0665 before stabilisation can be expected. In the longer run, price action suggests further EUR weakness; the levels to watch are 1.0665 and 1.0600, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR can drop to 1.0665 before stabilisation

24-HOUR VIEW: “After EUR dropped sharply in early Asian trade yesterday, we indicated that ‘The sharp drop could extend but is unlikely to break the major support at 1.0780.’ However, EUR plunged through 1.0780 and dropped further to 1.0681. EUR closed at 1.0728, lower by a whopping 1.85%. After the frenetic price action yesterday, EUR is likely to settle into a more moderate range today. Overall, as long as 1.0800 is not breached, EUR could drop to 1.0665 before stabilisation can be expected. A sustained break below this level seems unlikely.”

1-3 WEEKS VIEW: “Our most recent narrative was from last Friday (01 Nov, spot at 1.0885), wherein ‘upward momentum is beginning to build, but any advance in EUR is likely to face significant resistance at 1.0935.’ EUR tested the significant resistance on Tuesday, reaching a high of 1.0936. Yesterday (Wednesday). EUR reversed abruptly and nosedived, reaching a low of 1.0681. During this move, it broke a significant weekly support level near 1.0740. The price action suggests further EUR weakness. The support levels to watch are 1.0665 (low in Jun) and the year-to-date low of 1.0600 in April. For the coming few days, any rebound is likely to remain below the ‘strong resistance’ level, currently at 1.0870.”

• EUR/JPY meets with some supply on Thursday as JPY benefits from intervention fears.
• The BoJ rate hike uncertainty and the risk-on mood cap gains for the safe-haven JPY.
• Bets for less aggressive ECB rate cuts lend some support to the Euro and the cross.

The EUR/JPY cross struggles to capitalize on the previous day's goodish bounce from levels just below the 165.00 psychological mark and attracts fresh sellers on Thursday. Spot prices remain depressed through the first half of the European session and currently trade around the 165.70-165.65 area, though lack follow-through and remain confined in a familiar range held over the past week or so. 

Wednesday's surge in the USD/JPY pair, triggered by Donald Trump's victory in the US election, prompted verbal intervention by Japanese authorities. This leads to some unwinding of the bearish positions around the Japanese Yen (JPY), which, in turn, is seen exerting downward pressure on the EUR/JPY cross. That said, the uncertainty over the Bank of Japan's (BoJ) rate-hike plan keeps a lid on any meaningful appreciating move for the JPY.

Investors seem convinced that Japan's political landscape could make it difficult for the BoJ to tighten its monetary policy further. Moreover, government data released this Thursday showed that Japan's inflation-adjusted wages fell for the second straight month in September, raising doubts about how soon the BoJ could raise rates again. This, along with the risk-on mood, caps the upside for the safe-haven JPY and offers support to the EUR/JPY cross. 

The shared currency, on the other hand, draws support from bets for a less dovish European Central Bank (ECB). In fact, data released last week showed that inflation in the Eurozone rose to 2% in October. This, along with the better-than-expected GDP growth figures from the Eurozone's largest economies, suggests that the ECB will stick to a 25 basis points (bps) rate cut at the December meeting and helps limit the downside for the EUR/JPY cross.

Even from a technical perspective, the range-bound price action might still be categorized as a bullish consolidation phase on the back of the recent breakout above the very important 200-day Simple Moving Average (SMA). This, in turn, suggests that the path of least resistance for the EUR/JPY cross is to the upside. Hence, any subsequent decline might still be seen as a buying opportunity and is more likely to remain cushioned.

• WTI price may find immediate support at a nine-day EMA at $70.72, aligned with and 14-day EMA at $72.62.
• If the 14-day RSI falls below the 50 level, it could signal the start of a bearish trend.
• WTI price may find resistance to re-entering the ascending channel.

West Texas Intermediate (WTI) Oil price extends its losses for the second successive session, trading around $71.40 per barrel during the early European hours on Thursday. The technical analysis of a daily chart indicates a weakening bullish bias as the pair has broken below the ascending channel pattern.

However, the 14-day Relative Strength Index (RSI) consolidates just above the 50 level, indicating a bullish bias is still in play. A break below the 50 mark would cause an emergence of a bearish trend.

Additionally, the WTI price is positioned above the nine- and 14-day Exponential Moving Average (EMA), suggesting a bullish momentum in the short-term trend.

In terms of support, WTI price could test the nine-day EMA at $70.72, followed by the 14-day EMA at $70.62. A break below these EMAs would increase downward pressure on the Oil price to navigate the region around a two-month low at $66.18 level, which was observed on October 1.

Additional support emerges near the $64.75 level, the lowest point since May 2023, last recorded on September 10.

On the upside, WTI price may attempt to re-enter the ascending channel pattern around the three-week high of $72.37 level, which was marked on November 5. A return into the channel would reinforce the bullish bias and support the pair to navigate the region around the upper boundary of the channel near the $75.10 level.

WTI Price: Daily Chart

• The Pound Sterling rebounds strongly against the US Dollar, which corrects after Wednesday’s rally.
• The US Dollar should remain well-supported by Trump’s victory in the US presidential election.
• Investors await the Fed and the BoE’s monetary policy decisions, with markets expecting both central banks to cut interest rates by 25 bps.

The Pound Sterling (GBP) bounces sharply to near 1.2935 against the US Dollar (USD) in Thursday’s London session after refreshing an almost 11-week low near 1.2830 on Wednesday. The GBP/USD pair rebounds as the US Dollar (USD) corrects slightly after a sharp rally. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, drops to near 104.90 after posting a fresh four-month high around 105.40.

The US Dollar had a strong run-up on Wednesday due to a landslide victory of Republican candidate Donald Trump over his Democratic rival Kamala Harris. The appeal of the Greenback improved sharply as Trump has vowed to raise tariffs on imports by 10% universally and lower corporate taxes if he wins the presidential elections, measures that traders interpreted as a positive for the US Dollar.

Higher tariffs could push demand for domestic output, while corporate lower taxes would leave more money in the hands of corporations, which will boost investments. A scenario that will result in higher investments, spending and labor demand will escalate price pressures and allow the Federal Reserve (Fed) to take a hawkish stance on interest rates.

To get meaningful cues about the impact of Trump’s victory on the United States (US) interest rate path and the inflation outlook, investors will focus on the Fed’s policy meeting at 19:00 GMT. Officials are widely anticipated to cut interest rates by 25 basis points (bps) to the 4.50%-4.75% range. 

Daily digest market movers: Pound Sterling outperforms major peers

• The Pound Sterling performs strongly against its major peers, except Asia-Pacific currencies, ahead of the Bank of England’s (BoE) monetary policy decision at 12:00 GMT. The BoE is expected to cut interest rates by 25 basis points (bps) to 4.75%, with a 7-2 vote split. The two divergent votes of the Monetary Policy Committee (MPC) are seen supporting leaving interest rates at the current levels.
• This will be the second interest rate cut by the BoE this year. The BoE started reducing interest rates in August by cutting borrowing rates by 25 bps, but opted to keep them steady in September.
• The press conference of BoE Governor Andrew Bailey after the policy decision will be interesting to watch. Bailey is expected to face a slew of questions regarding the impact on monetary policy and inflation from both Donald Trump’s victory in the US presidential election and the Autumn Forecast Statement presented last week.
• According to the National Institute of Economic and Social Research (NIESR), the growth rate of the UK economy could be more than halved to 0.4% if Trump implements tariff hikes as he promised in the election campaign.

Technical Analysis: Pound Sterling stays above 200-day EMA

The Pound Sterling rebounds sharply after posting a fresh 11-week low near 1.2830 against the US Dollar. The GBP/USD pair recovered after discovering buying interest near the 200-day Exponential Moving Average (EMA) around 1.2860.

However, the near-term trend remains bearish as the 20-day and 50-day Exponential Moving Average (EMAs)around 1.2990 and 1.3030, respectively, are declining.

The breakdown from the lower boundary of a rising channel on the daily time frame has also added to evidence supporting more downside.

The 14-day Relative Strength Index (RSI) hovers near 40.00. A bearish momentum would resume if the RSI (14) fails to hold this level.

Looking down, the round-level support of 1.2800 will be a major cushion for Pound Sterling bulls. On the upside, the Cable will face resistance near the psychological figure of 1.3000.

• EUR/GBP remains under selling pressure around 0.8315 in Thursday’s early European session.
• The UK central bank is likely to cut the benchmark rate by 25 bps at its November meeting on Thursday. 
• German Industrial Production came in at -2.5% MoM in September vs. -1.0% expected. 

The EUR/GBP cross extends its downside to near 0.8315 on Tuesday during the early European session. The Bank of England (BoE) interest rate decision will be in the spotlight on Thursday. 

The BoE is widely expected to cut interest rates on Thursday, bringing the benchmark rate to 4.75% from 5.0%. Political developments will influence the central bank's decision on Thursday, particularly last week's Budget given by Chancellor Rachel Reeves. The UK officials stated that they would push inflation and interest rates higher in the short term, triggering more doubt about whether the UK central bank will cut interest rates again following its meeting in December.

The expectation that the BoE would cut rates less aggressively than the European Central Bank (ECB) could provide some support to the Pound Sterling (GBP) and cap the upside for the cross in the near term. 

The ECB has already reduced rates three times this year as inflation risks in the Eurozone ease faster than expected. The rising ECB rate cut bets exert some selling pressure on the shared currency. Money markets see the ECB cut rates by around 125 basis points (bps) over the next year.

Data released by Destatis on Thursday showed that Germany’s industrial sector activity declined by 2.5% MoM in September versus a rise of 2.6% (revised from 2.9%) in August, weaker than the estimation of 1.0% decline. The Euro remains weak in an immediate reaction to the downbeat Industrial Production data. 

Germany’s industrial sector activity declined in September, the latest data published by Destatis showed on Thursday.

Industrial output in the Eurozone’s economic powerhouse decreased by 2.5% MoM, the federal statistics authority Destatis said in figures adjusted for seasonal and calendar effects, as against the estimated drop of 1.0%  and a revised 2.6% increase registered in August.

German Industrial Production plunged by 4.6% in the year through September versus August’s -3.0%.

EUR/USD reaction to the German Industrial Production data

The discouraging German data fails to deter Euro buyers, as EUR/USD continues to hold higher ground near 1.0750. The pair is up 0.20% on the day, at the press time.

• Investors expect the Bank of England to cut its policy rate by 25 bps.
• UK disinflationary pressure gathered further steam in September.  
• The 200-day SMA near 1.2810 holds the downside in GBP/USD. 

Market consensus points to further easing by the Bank of England's (BoE) upcoming interest rate decision on Thursday. The BoE has held rates steady at 5.00% in the previous gathering, but shifting investor sentiment now suggests a possible 25-basis-point cut this week.

No surprises are expected at the BoE meeting

At the bank’s September 19 meeting, policymakers stuck to quarterly rate cuts for now, with a November cut the most likely outcome. Regarding quantitative tightening, the committee voted unanimously to maintain the pace of reducing bond holdings by GBP 100 billion over the next 12 months, which again was in line with expectations.

The only dovish elements were the slight downgrades to Q3 GDP and Q4 CPI, though this is more a case of marking to market, which of course is subject to change depending on incoming data.

Looking ahead, indicators of inflation persistence—labour market tightness, private pay growth, and services CPI—should continue to guide policy.

Back to inflation, the headline Consumer Price Index (CPI) receded to 1.7% YoY in September, while the core CPI (which excludes food and energy costs) eased to 3.2% over the last twelve months, and Service inflation remained elevated at 4.9% from a year earlier.

Following the September BoE event, policymaker Catherine Mann expressed a cautious stance on the likelihood of multiple interest rate cuts in the coming months, emphasizing the importance of keeping policy restrictive.

However, early in October, Governor Andrew Bailey indicated that the Bank of England could take a "more activist" approach to rate cuts if there is continued positive news on inflation. Aligning behind Mann’s approach, Chief Economist Huw Pill stated that the British central bank should adopt a gradual approach when reducing interest rates.

Ahead of the BoE’s meeting, TD Securities analysts noted: “We anticipate a 7-2 majority to cut Bank Rate by 25bps and little change from September's guidance. Incoming growth and inflation data has been softer than the MPC expected in their August projection, but the budget will force some tweaks to the projection (but these will be less positive than markets expect). We do not expect any signal about December's policy decision.”

How will the BoE interest rate decision impact GBP/USD?

Even though the inflation pressure slowed its pace in September, market participants still appear to favour a rate cut at the BoE's monetary policy meeting on November 7 at 12 GMT.

FXStreet’s Senior Analyst, Pablo Piovano, notes that a rate cut could put further pressure on the British Pound, which could see additional downside if GBP/USD falls below its November low of 1.2833 (November 6). In that case, the next contention should emerge at the key 200-day SMA at 1.2811, prior to the July low of 1.2615.

“On the upside, bulls will be initially eyeing the provisional 55-day SMA at 1.3119. The breakout of that region could put a potential visit to the 2024 peak at 1.3434 (September 26) back into focus”, Pablo concludes.

Here is what you need to know on Thursday, November 7:

The US Dollar (USD) outperformed its major rivals on Wednesday as markets reacted to Donald Trump winning the US presidential election. Early Thursday, the USD Index corrects lower and fluctuates below 105.00 as investors gear up for the Federal Reserve's (Fed) monetary policy decisions. Additionally, the Bank of England (BoE) will release its Monetary Policy Report and announce the interest rate.

The USD Index registered its largest one-day gain of the year, rising over 1.5% on the day on Wednesday. The benchmark 10-year US Treasury bond yield surged higher and gained nearly 4%. Additionally, Wall Street's main indexes rallied after the opening bell, with the S&P 500 Index ending the day 2.5% higher. The Fed is widely forecast to lower the policy rate by 25 basis points to the range of 4.5%-4.75%. Fed Chairman Jerome Powell will speak on the policy outlook and respond to questions in a press conference starting at 19:30 GMT. Ahead of the Fed decision, the US economic calendar will feature the weekly Initial Jobless Claims and Unit Labor Costs data for the third quarter. 

GBP/USD lost more than 1% on Wednesday and registered its lowest daily close since mid-August. The pair rebounds in the European morning on Thursday and trades comfortably above 1.2900. The BoE is forecast to cut the bank rate by 25 bps to 4.75%. BoE Governor Andrew Bailey will deliver the policy statement at 12:30 GMT.

EUR/USD fell nearly 2% on Wednesday and touched its weakest level in over four months below 1.0700. The pair holds its ground early Thursday and trades near 1.0750. Eurostat will release Retail Sales data for September.

During the Asian trading hours, the data from China showed that Exports rose by 12.7% on a yearly basis in October, while Imports declined by 2.3% in the same period. As a result, China's trade surplus widened to $95.27 billion from $81.71 billion in September. After losing 1% on Wednesday, AUD/USD gained traction early Thursday and erased a large portion of its losses. At the time of press, the pair was up nearly 0.8% on the day above 0.6600.

USD/JPY gathered bullish momentum and climbed to its highest level since late July above 154.40. The pair corrects lower on Thursday and trades near 154.00.

Pressured by surging US yields and the broad-based USD strength, Gold suffered large losses on Wednesday, closing the day with a 3% loss. XAU/USD struggles to stage a rebound on Thursday and trades marginally lower on the day below $2,660.

• USD/CHF weakens to around 0.8750 in Thursday’s early European session. 
• Investors brace for the US Fed rate decision on Thursday. 
• The safe-haven demand could lift the Swiss Franc against the Greenback. 

The USD/CHF pair softens to near 0.8750 during the early European trading hours on Thursday. Traders might prefer to wait on the sidelines ahead of the US Federal Reserve (Fed) interest rate decision on Thursday. 

The downside for the US Dollar (USD) might be limited as traders expect a Donald Trump presidency will push up inflation and reduce the pace of interest rate cuts. However, the markets might turn cautious later in the day ahead of the US Fed monetary meeting. The US central bank is widely expected to cut interest rates by 25 basis points (bps). According to the CME FedWatch tool, markets have priced in nearly a 98% possibility of a quarter-point reduction and near 70% odds of a similar-sized move in December. 

On the Swiss front, data released by the State Secretariat for Economic Affairs (SECO) on Tuesday showed that the seasonally adjusted Unemployment Rate in Switzerland arrived at 2.6% in October. The figure remained unchanged compared to September. 

The Swiss National Bank (SNB) Chairman Martin Schlegel said last week that the central bank could further cut interest rates to maintain price stability in the mid-term. Markets currently have priced in 72% odds for a 25 bps and a 28% chance for a 50 bps reduction in the December meeting.

Meanwhile, the uncertainty about the global economic outlook and the ongoing geopolitical risks might boost the safe-haven flows, benefiting the Swiss Franc (CHF). As the Middle East teeters on the verge of war, with Iran threatening to react to an Israeli attack on its territory earlier this month, there are worries that Trump's win could enable Netanyahu to hit Iran's nuclear facilities, something the Biden administration has cautioned against, per CNN. 

FX option expiries for Nov 7 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

EUR/USD: EUR amounts

• 1.0650 1.6b
• 1.0725 1.1b
• 1.0775 2.3b
• 1.0900 1.8b

USD/JPY: USD amounts                     

• 152.50 1b
• 153.00 592m

AUD/USD: AUD amounts

• 0.6450 690m
• 0.6475 490m

USD/CAD: USD amounts       

• 1.3750 1.8b
• 1.3800 860m
• 1.3900 733m
• 1.4050 2b

• USD/CAD may appreciate as the US Dollar (USD) receives support from Trump trades.
• US Treasury yields correct downward after surging to 4.31% and 4.47%, respectively, on Wednesday, their highest levels since July.
• The commodity-linked CAD receives support from the improved crude Oil prices.

USD/CAD retreats from its all-time high of 1.3958, reached in the previous session. The pair trades around 1.3900 during the Asian hours on Thursday. However, this downside of the USD/CAD pair could be limited as the US Dollar (USD) may receive support from Trump trades following the victory of Republicans in the US election.

However, the US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, pulls back from a four-month high of 105.44, recorded on Wednesday. The DXY trades around 105.00 amid a downward correction in US Treasury yields. US yields surged to their highest levels since July to 4.31% and 4.47%, respectively, on Wednesday.

US Federal Reserve’s (Fed) policy decision will be eyed on Thursday, with markets expecting a modest 25 basis point rate cut in the November meeting. The CME FedWatch Tool shows a 98.1% probability of a quarter-point rate cut by the Fed in November.

The commodity-linked Canadian Dollar (CAD) might have received support from the improved Oil prices as Canada is the largest Oil exporter to the United States (USD). West Texas Intermediate (WTI) Oil price appreciates toward $72.00 at the time of writing.

A summary of the Bank of Canada’s (BoC) discussions showed concerns among some officials that a large rate cut could raise fears of a deeper economic downturn. However, BoC officials emphasized that markets should not expect half-point cuts at every meeting, as future decisions will be driven by incoming economic data.

People's Bank of China (PBOC) Governor Pan Gongsheng gave foreign financial institutions an in-depth explanation of China's current monetary policy stance, and considerations related to the adjustment of the monetary policy framework on Thursday.

Key quotes

• GBP/JPY seesaws between tepid gains/minor losses as traders keenly await the BoE policy decision.
• Fears of a possible government intervention offer support to the JPY and caps the upside for the cross.
• The BoJ rate-hike uncertainty, along with the risk-on environment, keeps a lid on the safe-haven JPY.

The GBP/JPY cross retreats a few pips after touching a one-week high, around the 199.55 region during the Asian session on Thursday, albeit it lacks follow-through selling. Spot prices currently trade just above the 199.00 mark, nearly unchanged for the day as traders look to the Bank of England (BoE) policy decision before positioning for the next leg of a directional move.

The UK central bank is widely expected to focus on a longer-term picture of slowing inflation and vote to cut interest rates by 25 basis points (bps) for the second time this year. The focus, however, will be on the BoE's forward guidance amid concerns that the expansive Autumn Budget introduced by Chancellor Rachel Reeves would boost inflation. Hence, the release of the final Monetary Policy Report for 2024, along with the BoE Governor Andrew Bailey's remarks at the post-meeting press conference, will influence the British Pound (GBP) and provide a fresh impetus to the GBP/JPY cross.

Heading into the key central bank event risk, some verbal intervention by Japanese authorities offers support to the Japanese Yen (JPY) and acts as a headwind for the currency pair. Japan's chief cabinet secretary Yoshimasa Hayashi reiterated on Wednesday that the government intended to closely watch moves in the FX market, including speculative moves, with a higher sense of urgency. Adding to this, Atsushi Mimura, Japan’s Vice Finance Minister for International Affairs and top FX official, said on Thursday that the government is ready to take appropriate actions for excess FX moves if necessary.

That said, doubts over the Bank of Japan's (BoJ) ability to hike interest rates further in the wake of the political uncertainty in Japan and the prevalent risk-on mood continues to undermine the safe-haven JPY. This, in turn, supports prospects for an extension of the GBP/JPY pair's recent move-up witnessed over the past week or so. Bulls, however, need to wait for some follow-through buying beyond the 199.70-199.80 region, or over a three-month high touched last week before placing fresh bets.

• EUR/USD may depreciate further as the US Dollar (USD) receives support from Trump trades.
• Republicans to gain significant authority to push through an expansive agenda focused on tax and spending cuts.
• The ECB may consider cutting rates to near zero by 2025 if Europe's economic growth falters due to Trump's tariffs.

EUR/USD holds ground after depreciating around 2% in the previous session, trading near 1.0740 during the Asian session on Thursday. The downside risk for the EUR/USD pair seems possible as the US Dollar (USD) may receive support from Trump trades following the victory of Republicans in the US election.

Donald Trump's Republicans appeared poised to potentially take control of both chambers of Congress, granting them significant authority for the first time in eight years to push through an expansive agenda focused on tax and spending cuts, energy deregulation, and border security.

According to Reuters, Republican lawmakers and aides indicated that early priorities would likely include extending Trump's 2017 tax cuts, funding the US-Mexico border wall, cutting unspent funds allocated by Democrats, dismantling the Department of Education, and limiting the powers of agencies such as the Consumer Financial Protection Bureau.

However, the US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, retreats from a four-month high of 105.44, recorded on Wednesday. The DXY trades around 104.90 amid a downward correction in US Treasury yields. US yields surged to their highest levels since July on Wednesday to 4.31% and 4.47%, respectively, on Wednesday.

Traders anticipate the US Federal Reserve (Fed) will lower its benchmark interest rate by 25 basis points at its November meeting on Thursday. The CME FedWatch Tool indicates a 98.1% probability that the Fed will make this quarter-point rate cut in November, showing strong market consensus for a modest reduction this week.

If Europe's growth stalls due to Trump's tariffs, the European Central Bank (ECB) may be forced to take aggressive action, potentially cutting rates to near zero by 2025, according to Euronews. Markets expect the ECB to lower the Deposit Facility Rate by the typical 25 basis points (bps) in December.

EU-based market data is relatively sparse this week. Pan-EU Retail Sales figures are scheduled for release on Thursday, with the EU leaders’ summit concluding on Friday. ECB President Lagarde is also set to make a follow-up appearance on Saturday.

• AUD/JPY jumps to around 102.05 in Thursday’s Asian session, up 0.49% on the day. 
• Risk-on sentiment, the BoJ rate-hike uncertainty weigh on the Japanese Yen.
• The encouraging Chinese economic data support the China-proxy Australian Dollar. 

The AUD/JPY cross extends its upside to near 102.05 on Thursday during the Asian trading hours. The risk-on mood and the uncertainty surrounding the Bank of Japan's (BoJ) rate hike exert some selling pressure on the Japanese Yen (JPY). 

The victory of Republican Donald Trump in the US presidential election drags the JPY lower. Additionally, the minutes released by the BoJ on Wednesday showed that the Japanese central bank would not raise its policy interest rate under financial and capital market instability. 

"In the current phase, the BoJ should patiently maintain the current accommodative financial conditions to support economic activity," another Policy Board member said. The BoJ rate-hike uncertainty is likely to undermine the JPY in the near term. 

Nonetheless, the downside for the JPY might be capped after the verbal intervention from the Japanese authorities. Japan's top currency diplomat Atsushi Mimura said on Thursday that authorities were ready to act against "excessive" currency moves.

On the other hand, China’s Trade Balance grew more than expected in October as Exports rose, boosting the China-proxy Australian Dollar (AUD). The Trade Balance grew to $95.27 billion in October versus $81.71 billion prior, higher than expectations of $75.1 billion. Meanwhile, Exports climbed by 12.7% YoY in October, compared to 2.4% in the previous reading. The figure was above the market consensus of 5.0%. 

Gold prices fell in India on Thursday, according to data compiled by FXStreet.

The price for Gold stood at 7,200.05 Indian Rupees (INR) per gram, down compared with the INR 7,209.26 it cost on Wednesday.

The price for Gold decreased to INR 83,979.65 per tola from INR 84,087.41 per tola a day earlier.

FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.

(An automation tool was used in creating this post.)

• Silver remains under some selling pressure on Thursday and hangs near a three-week low.
• The recent breakdown below key technical levels supports prospects for additional losses.
• Any attempted recovery might now be seen as a selling opportunity and remain capped.

Silver (XAG/USD) trades with negative bias for the second straight day on Thursday and languishes near the $31.00 mark, just above its lowest level since mid-October touched the previous day. 

From a technical perspective, the overnight decline confirmed a short-term ascending trend-channel breakdown. A subsequent slide below the 50-day Simple Moving Average (SMA) was seen as a fresh trigger for bearish traders. Furthermore, oscillators on the daily chart have been gaining negative traction and suggest that the path of least resistance for the XAG/USD remains to the downside. 

Hence, some follow-through weakness towards testing the 100-day SMA support, currently pegged near the $30.40-$30.35 area, looks like a distinct possibility. The downfall could eventually drag the XAG/USD below the $30.00 psychological mark, toward the next relevant support near the $29.70 zone en route to the $29.00 round figure and the key 200-day SMA, around the $28.55 region.

On the flip side, the 50-day SMA breakpoint, near the $31.40 area, now seems to act as an immediate hurdle, above which a bout of a short-covering move could allow the XAG/USD to reclaim the $32.00 mark. Any further move up, however, might be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the ascending channel support breakpoint, around the $32.65 region.

The latter should act as a key pivotal point, which if cleared decisively will suggest that the recent corrective slide from the vicinity of the $35.00 psychological mark, or a 12-year high touched in October is over. This, in turn, might shift the near-term bias in favor of bullish traders and lift the XAG/USD beyond the $33.00 round figure, towards the $33.60-$33.70 static resistance zone.

Silver daily chart

Japan’s Finance Minister Katsunobu Kato on Tuesday that “we must take this chance to achieve an escape from deflation and recovery in Japanese economy.”

He further noted that it is “important to achieve fiscal health while we strongly push for economic recovery.”

Market reaction

USD/JPY remains in the red near 154.30 following these above comments, losing 0.22% on the day.

• NZD/USD attracts some buyers on Thursday amid a modest USD weakness.
• Elevated US bond yields should help limit the USD losses and cap the major. 
• The markets react little to Chinese trade data as the focus remains on the Fed.

The NZD/USD pair builds on the previous day's bounce from the 0.5910 region, or over a three-month trough and gains some positive traction during the Asian session on Thursday. Spot prices stick to intraday gains near the 0.5975-0.5980 area amid a modest US Dollar (USD) downtick and move little following the release of Chinese trade data.

China's Trade Balance for October, in Chinese Yuan (CNY) terms, came in at CNY679.1 billion, expanding from the previous figure of CNY582.62 billion, led by an 11.2% YoY rise in exports. This comes on the back of signs that China's big stimulus push is helping improve business conditions, which, in turn, offers some support to the NZD/USD pair. 

Meanwhile, the USD ticks lower amid some profit-taking following the previous day's blowout rally to its highest level since July 30 touched in reaction to Donald Trump’s comeback as the 47th President of the United States (US). This offers additional support to the NZD/USD pair, though a combination of factors should cap any meaningful upside. 

Investors turned optimistic amid hopes that Donald Trump's policies could push up growth and inflation. This could reduce the pace of interest rate cuts by the Federal Reserve (Fed), which remains supportive of elevated US Treasury bond yields, which, in turn, should act as a tailwind for the Greenback and keep a lid on the NZD/USD pair. 

Moreover, expectations that Trump will slam fresh tariffs on China, along with bets for more aggressive rate cuts by the Reserve Bank of New Zealand (RBNZ), should contribute to capping antipodean currencies, including the Kiwi. Traders might also opt to wait for the outcome of a two-day Federal Open Market Committee (FOMC) policy meeting. 

The Fed is scheduled to announce its policy decision later this Thursday and is widely expected to lower borrowing costs by 25 basis points (bps). Market participants, however, will scrutinize Fed Chair Jerome Powell's remarks for cues about the future rate-cut path, which might influence the buck and provide a fresh impetus to the NZD/USD pair.

• Gold price depreciated as the US Dollar appreciated to a four-month high due to Trump trades.
• Precious metals are under pressure as safe-haven flows decline due to market optimism.
• The non-yielding XAU/USD faces challenges as US Treasury yields trade near the highest levels since July.

Gold price (XAU/USD) extends its losses for the second successive session on Thursday. The dollar-denominated precious metal faces downward pressure from a stronger US Dollar (USD) following the victory of former President Donald Trump in the US election.

Gold prices are under pressure as safe-haven flows decline amid market optimism and “Trump trades.” This shift is driven by the clarity of a presidential victory, while the market had previously been anticipating a contested outcome.

US Federal Reserve’s (Fed) policy decision will be eyed on Thursday. Markets expect a modest 25 basis point rate cut this week. This could provide support for Gold as lower interest rates reduce the opportunity cost of holding non-interest-bearing assets.

The CME FedWatch Tool shows a 98.1% probability of a quarter-point rate cut by the Fed in November.

Daily Digest Market Movers: Gold price struggles due to market optimism, Trump trades

• Non-yielding Gold faced downward pressure as US Treasury yields surged to their highest levels since July on Wednesday. The 2-year and 10-year US Treasury bond yields rose to 4.31% and 4.47%, respectively.
• Gold price may receive support as Republican Donald Trump could lead to higher inflation, given his pledge to significantly raise trade tariffs. This may prompt investors to seek safe-haven assets as a hedge against long-term inflation risks.
• Trump’s economic policy includes imposing tariffs, increasing the fiscal deficit, and reducing taxes. These proposals conflict with the Federal Reserve’s efforts to control inflation, likely prompting the US central bank to take a more gradual approach to easing monetary policy.
• The decline in the safe-haven XAU/USD seems relatively unaffected by concerns over Iran's plans for a retaliatory strike against Israel’s attack on its territory on October 26.
• On Tuesday, the US ISM Services Purchasing Managers Index increased to 56.0 in October, up from 54.9 in September, exceeding the forecast of 53.8. In contrast, the S&P Global Services PMI registered at 55.0 in October, slightly below the prior reading and the expected 55.3.

Technical Outlook: Gold price falls to near $2,650, next support around three-week lows

Gold price trades around $2,650 per troy ounce on Thursday, with technical analysis suggesting a potential continuation of the bearish bias. On the daily chart, the price remains below both the nine- and 14-day Exponential Moving Averages (EMAs). Furthermore, the 14-day Relative Strength Index (RSI) is below 50, which supports a bearish outlook for the yellow metal.

On the downside, the XAU/USD pair could test a three-week low of $2,603.53. A break below this level could put pressure on the Gold price to navigate the region around the psychological level of $2,500.00.

In terms of resistance, the psychological level of $2,700.00 appears as the immediate barrier, followed by the nine-day EMA at $2,711.40. A break above this level could support the pair to test the all-time high of $2,790.11, which was recorded on October 31.

XAU/USD: Daily Chart

China's Trade Balance for October, in Chinese Yuan (CNY) terms, came in at CNY679.1 billion, expanding from the previous figure of CNY582.62 billion.

Exports jumped by 11.2% YoY in October vs. 1.6% in September. The country’s imports dropped by 3.7% YoY in the same period vs. +0.7% registered previously.

In US Dollar (USD) terms, China’s trade surplus unexpectedly widened in October.

Trade Balance came in at +95.27B versus +75.1B expected and +81.71B previous.

Exports (YoY): 12.7% vs. 5.0% expected and 2.4% previous.

Imports (YoY): -2.3% vs. -1.5% expected and 0.3% last.

Additional takeaways

FX implications

AUD/USD holds its latest uptick above 0.6600 after China’s trade data. The pair is adding 0.75% on the day to trade near 0.6620 as of writing.

(This story was corrected on November 7 at 3:51 GMT to say that 'China’s trade surplus unexpectedly widened in October', not shrank.)

• GBP/USD scales higher amid some repositioning ahead of key central bank event risks. 
• The BoE and the Fed are due to announce their respective policy decision later today. 
• The fundamental backdrop warrants caution before placing bullish bets around the pair.

The GBP/USD pair attracts some buyers during the Asian session on Thursday and moves away from its lowest level since mid-August, around the 1.2835-1.2830 region touched the previous day. Spot prices now look to build on the momentum beyond the 1.2900 mark as the market attention shifts to key central bank event risks. 

The Bank of England (BoE) will announce its policy decision later today and is widely expected to lower interest rates for the second time this year on the back of slowing inflation. That said, expectations that UK Finance Minister Rachel Reeves' first budget would boost inflation, and cause the BoE to cut interest rates more slowly, offering some support to the British Pound (GBP). This, along with a modest US Dollar (USD) downtick, turn out to be key factors pushing the GBP/USD pair higher. 

However, any meaningful USD corrective slide, from a four-month top touched on Wednesday, seems elusive amid optimism about higher growth and inflation under Donald Trump's second presidency, which could reduce the pace of interest rate cuts. Hence, the outcome of a two-day Federal Open Market Committee (FOMC) policy meeting, along with Federal Reserve (Fed) Chair Jerome Powell's comments at the post-meeting press conference will play a key role in influencing the USD. 

In the meantime, the return of the so-called Trump trade keeps the US Treasury bond yields elevated near a multi-month peak. This, in turn, should act as a tailwind for the Greenback and cap the upside for the GBP/USD pair. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom. Meanwhile, bearish traders need to wait for a breakdown below the 200-day Simple Moving Average (SMA) before placing fresh bets.

• The Indian Rupee gains ground in Thursday’s Asian session. 
• The strengthening of the USD and higher bond yields might cap the INR’s upside. 
• The US Fed interest rate decision will take center stage on Thursday. 

The Indian Rupee (INR) rebounds on Thursday. Nonetheless, the upside of the local currency might be limited amid a rally in the US Dollar (USD) and higher bond yields, which are bolstered by Donald Trump’s victory in the US presidential elections. Market participants expect the INR to trade in the range on Thursday as the Reserve Bank of India (RBI) is expected to intervene in the market by selling the USD to avoid excess volatility. 

Meanwhile, persistent foreign fund outflows amid bond and foreign exchange volatility could exert some selling pressure on the INR in the near term. Investors will closely monitor the US Federal Reserve (Fed) meeting on Thursday, which is expected to cut interest rates by 25 basis points (bps). Also, the US weekly Initial Jobless Claims will be released.  

Daily Digest Market Movers: Indian Rupee edges higher, but potential upside seems limited

• “The rupee was trading in a narrow range for the past two years, and was a bit overvalued too. But now given that the dollar index is rising and other Asian currencies are depreciating, there will be an impact on the rupee too,” noted Gopal Tripathi, head of treasury and capital markets, Jana Small Finance Bank.
• The HSBC India Services PMI rose to 58.5 in October from 57.7 in September, exceeding a preliminary estimate of 58.3.
• "During October, the Indian services sector experienced strong expansions in output and consumer demand, as well as job creation," noted Pranjul Bhandari, chief India economist at HSBC.
• A narrow majority of economists in a Reuters poll expected the RBI to cut rates by 25 bps to 6.25% in December. 
• Financial markets are now pricing in nearly a 98% possibility of a quarter point reduction and near 70% odds of a similar-sized move in December, according to CME's FedWatch tool. However, traders have begun to trim bets for the number of rate cuts expected next year.  

Technical Analysis: USD/INR’s constructive outlook remains unchanged, eyes on overbought RSI 

The Indian Rupee recovers on the day. Technically, the positive view of the USD/INR pair prevails as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. However, the 14-day Relative Strength Index (RSI) stands above the midline near 73.45, indicating the overbought RSI condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation.

The crucial resistance level for USD/INR emerges near the upper boundary of the ascending trend channel at 84.30. The additional upside filter to watch is 84.50, followed by the 85.00 psychological level.

On the flip side, the lower limit of the trend channel and the high of October 11 in the 84.05-84.10 zone act as an initial support level for the pair. A breach of this level could pave the way to 83.80, the 100-day EMA. Extended losses could see a drop to 83.46, the low of September 24. 

• The Japanese Yen draws support from fears about a possible government intervention. 
• The BoJ rate-hike uncertainty and the risk-on environment should cap the safe-haven JPY.
• A bullish USD might further act as a tailwind for USD/JPY ahead of the key FOMC decision.

The Japanese Yen (JPY) struggles to register any meaningful recovery against its American counterpart and languishes near the lowest level since July 30. The uncertainty over the Bank of Japan's (BoJ) ability to hike interest rates further, along with the prevalent risk-on environment, continues to undermine the safe-haven JPY. Adding to this, elevated US Treasury bond yields, bolstered by Republican Donald Trump’s comeback as the 47th President of the United States (US), turns out to be another factor acting as a headwind for the lower-yielding JPY.

Meanwhile, the overnight slump prompted verbal intervention from Japanese authorities, which could offer some support to the JPY and help limit losses. The US Dollar (USD), on the other hand, held steady just below a four-month top touched on Wednesday amid optimism about higher growth and inflation, which could restrict the Federal Reserve’s (Fed) ability to cut interest rates. This could further act as a tailwind for the USD/JPY pair ahead of the highly anticipated Federal Open Market Committee (FOMC) policy decision later this Thursday.

Daily Digest Market Movers: Japanese Yen seems vulnerable despite some verbal intervention from authorities

Japan's Chief Cabinet Secretary, Yoshimasa Hayashi, reiterated on Wednesday that the government intended to closely watch moves in the FX market, including speculative moves, with a higher sense of urgency.
Adding to this, Atsushi Mimura, Japan’s Vice Finance Minister for International Affairs and top foreign exchange official, said on Thursday that the government is ready to take appropriate actions against excess FX moves if necessary.
The minutes of the September Bank of Japan meeting showed that the central bank plans gradual policy rate increases, though it remains cautious about overseas economic uncertainties, especially from the US.
Investors, however, seem convinced that the political uncertainty in Japan could make it difficult for the BoJ to tighten monetary policy further, which, along with the risk-on mood, undermines the Japanese Yen. 
The US Dollar recorded its biggest one-day gain since September 2022, touching the highest level since July amid hopes that Donald Trump's policies would push up inflation and reduce the pace of interest rate cuts.
Furthermore, the return of the so-called Trump trade triggered a sell-off in the US fixed-income market, pushing the yield on the benchmark 10-year US government bond to 4.45%, or its highest level since July.
This resulted in the further widening of the US-Japan rate differential, which might continue to weigh on the lower-yielding JPY and suggests that the path of least resistance for the USD/JPY pair is to the upside. 

Technical Outlook: USD/JPY seems poised to climb further and aim to reclaim the 155.00 psychological mark

From a technical perspective, the overnight breakout above the 153.80-153.85 supply zone and a subsequent strength beyond the 154.00 mark was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart are holding in positive territory and are still away from being in the overbought zone. This further validates the near-term positive outlook for the USD/JPY pair and supports prospects for a move towards reclaiming the 155.00 psychological mark. The momentum could extend further towards the next relevant hurdle near the 155.45-155.50 region.

On the flip side, the 154.00 round figure might now offer immediate support to the USD/JPY pair. Some follow-through selling below the 153.85-153.80 resistance-turned-support could drag spot prices to the 153.25 region en route to the 153.00 mark, which is closely followed by the 152.75 support. Any further corrective decline might still be seen as a buying opportunity and is more likely to remain limited near the 152.00 round-figure mark. 

Atsushi Mimura, Japan’s Vice Finance Minister For International Affairs and top foreign exchange official, said on Thursday, he is “closely watching FX moves with a high sense of urgency.”

He added that he is “ready to take appropriate actions for excess FX moves if necessary.”

Market reaction

USD/JPY eased off 154.72, its intraday high, losing 0.11% on the day to trade near 154.50 following these verbal warnings.

• The Australian Dollar struggles as the trade surplus fell to 4,609 million in September, against the expected 5,300 million.
• The Aussie Dollar may depreciate further as US Dollar receives support from Trump’s victory in the US election.
• US Federal Reserve is widely anticipated to lower its benchmark interest rate by 25 basis points on Thursday.

The Australian Dollar (AUD) remains subdued against the US Dollar (USD) for the second successive session on Thursday following the Trade Balance data. Additionally, the downside risks for the AUD/USD pair seem possible as the US Dollar (USD) appreciates following the victory of former President Donald Trump in the US election.

Australia’s trade surplus fell to 4,609 million in September, down from an expected 5,300 million and August’s figure of 5,284 million, as reported by the Australian Bureau of Statistics on Thursday. This was the smallest trade surplus since March, driven by a larger drop in exports compared to imports.

Traders anticipate the US Federal Reserve (Fed) will lower its benchmark interest rate by 25 basis points at its November meeting on Thursday. The CME FedWatch Tool indicates a 98.1% probability that the Fed will make this quarter-point rate cut in November, showing strong market consensus for a modest reduction this week.

Daily Digest Market Movers: Australian Dollar receives downward pressure from Trump’s victory

• Australia's Exports fell by 4.3% in September from the 0.2% decline seen a month earlier. Meanwhile, Imports fell by 3.1% MoM in September, compared to a decrease of 0.2% seen in August.
• The US ISM Services Purchasing Managers Index increased to 56.0 in October, up from 54.9 in September, exceeding the forecast of 53.8. In contrast, the S&P Global Services PMI registered at 55.0 in October, slightly below the prior reading and the expected 55.3.
• The Reserve Bank of Australia (RBA) decided to hold the Official Cash Rate (OCR) steady at 4.35% on Tuesday, marking its eighth consecutive pause. RBA Governor Michele Bullock reiterated a hawkish stance, emphasizing the need for restrictive monetary policy given persistent inflation risks and a strong labor market.
• Australia's Judo Bank Services PMI improved to 51.0 in October from 50.6 in the previous reading, above the market consensus of 50.6. The Composite PMI climbed to 50.2 in October versus 49.8 prior. Caixin China Services PMI also rose to 52.0 in October from 50.3 in September.
• The TD-MI Inflation Gauge rose by 0.3% month-over-month in October, up from a 0.1% increase in the prior month, marking the highest reading since July and ahead of the RBA's November policy meeting. Annually, the gauge climbed by 3.0%, compared to the previous 2.6% reading.
• ANZ Australia Job Advertisements increased by 0.3% month-over-month in October, a notable slowdown from the upwardly revised 2.3% gain in September. Despite slower growth, this marks the second consecutive month of increases.
• China’s Commerce Minister Wang Wentao met with Australia’s Trade Minister Don Farrell on Sunday. China expressed hopes that Australia will continue enhancing its business environment and ensure fair and equitable treatment for Chinese companies.

Technical Analysis: Australian Dollar hovers below 0.6600, nine-day EMA

The AUD/USD pair trades around 0.6570 on Thursday. The daily chart technical indicators indicate a possible continuation of the bearish trend. The pair is positioned below the nine- and 14-day Exponential Moving Averages (EMAs), indicating downward momentum. The 14-day Relative Strength Index (RSI) also remains under 50, reinforcing a bearish outlook.

For the AUD/USD pair, immediate support is near the three-month low at 0.6512, followed by key psychological support at 0.6500.

On the upside, the AUD/USD pair may encounter resistance at the nine-day EMA of 0.6594, with further resistance at the 14-day EMA of 0.6612. A breakout above these levels could signal increasing momentum, potentially targeting the significant psychological level of 0.6700.

AUD/USD: Daily Chart

• WTI edges lower to $71.45 in Thursday’s Asian session. 
• The stronger US Dollar weighs on the WTI price. 
• US crude inventories rose more than expected, according to the EIA.  

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $71.45 on Thursday. The WTI price edges lower amid the rise in the US Dollar (USD) after Republican candidate Donald Trump won the US presidential election.

Trump's victory has boosted the Greenback and dragged the USD-denominated WTI price lower. Meanwhile, the US Dollar Index (DXY), an index of the value of the USD relative to a basket of foreign currencies, climbed to the highest level since July near 105.44 before retreating to 105.20. 

Nonetheless, Trump's reelection could also mean the renewal of sanctions on Iran and Venezuela, which means the global market could become tighter and would be bullish for the WTI price. “Conceptually, the impact of a potential second Trump term on oil prices is ambiguous, with some short-term downside risk to Iran oil supply ... and thus upside price risk,” noted Goldman Sachs commodities analysts. 

The Energy Information Administration's (EIA) weekly report showed US crude stocks rose more than expected last week. Crude oil stockpiles in the United States for the week ending November 1 increased by 2.149 million barrels, compared to a decline of 0.515 million barrels in the previous week. The market consensus estimated that stocks would increase by 1.8 million barrels.

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Thursday at 7.1659, as compared to the previous day's fix of 7.0993 and 7.1679 Reuters estimates.

Australia’s trade surplus decreased to 4,609M MoM in September versus 5,300M expected and 5,644M in the previous reading, according to the latest foreign trade data published by the Australian Bureau of Statistics on Thursday.

Further details reveal that Australia's Exports fell by 4.3% in September from the 0.2% decline seen a month earlier. Meanwhile, Imports fell by 3.1% MoM in September, compared to a decrease of 0.2% seen in August.  

Market reaction to Australia’s Trade Balance

At the press time, the AUD/USD pair is down 0.06% on the day to trade at 0.6567.

• NZD/USD drifts lower to near 0.5940 in Thursday’s early Asian session. 
• Trump trades continue to underpin the US Dollar; the attention will shift to the Fed rate decision. 
• The rising bets of an aggressive RBNZ rate-cutting cycle might weigh on the Kiwi. 

The NZD/USD pair softens to around 0.5940 during the early Asian trading hours on Thursday. The bearish sentiment for the New Zealand Dollar (NZD) remains intact as markets priced in a victory for former President Donald Trump in the US presidential election.

The firmer US Dollar (USD) is supported by Trump's victory in the US election. Trump is seen as a proponent of a strong Greenback and his stance is a factor in pushing US bond yields higher. Additionally, traders speculate Republican Trump's proposed 60% tariffs on Chinese goods, which might exert some selling pressure on China-proxy NZD as China is a major trading partner to New Zealand. 

Financial markets expect the US Federal Reserve (Fed) to lower its benchmark borrowing cost by a quarter percentage point at its October meeting on Thursday. Investors will closely watch Fed Chair Jerome Powell’s press conference as it might offer some hints about the interest rate outlook. The markets have priced in another quarter-point reduction in December, followed by a January pause and then multiple rate cuts through 2025.

Given the weakness of New Zealand’s economy, the Reserve Bank of New Zealand (RBNZ) is likely to deliver another interest rate reduction to stimulate growth. The rising expectation of the RBNZ aggressive rate-cutting cycle might drag the Kiwi lower against the USD. The RBNZ is anticipated to cut the official cash rate (OCR) by 50 bps in the final meeting of the year on November 27, with a supersize 75 bps cut an outside possibility.