CFD Markets News and Forecasts — 13-11-2024

• USD/CAD extends the rally to around 1.4000 in Thursday’s early Asian session. 
• US CPI matched estimates in October. 
• The expectation of a more aggressive rate cut from the BoC than the Fed, lower crude oil prices weigh on the Loonie. 

The USD/CAD pair gains momentum to near 1.4000, the highest level since 2020 during the early Asian session on Thursday, bolstered by the stronger Greenback. The attention will shift to the US October Producer Price Index (PPI), which is due later on Thursday. 

The US Dollar (USD) climbed to the highest level since November 2023 due to so-called Trump trades and US inflation data for October. Donald Trump's victory in last week's US presidential election sparked expectations of potentially inflationary tariffs and other measures by his incoming administration, boosting the Greenback. 

US inflation increased as expected in October. Data released by the Labor Department's Bureau of Labor Statistics on Wednesday showed that the Consumer Price Index (CPI) rose by 2.6% YoY in October, matching prior forecasts. Additionally, the core CPI, which excludes the more volatile food and energy categories, jumped by 3.3% YoY during the same period, in line with expectations. This report could result in fewer interest rate cuts from the Federal Reserve next year, which might lift the USD against the Canadian Dollar (CAD). 

On the Loonie front, the expectation that the Bank of Canada (BoC) would keep on cutting rates faster than the Fed drags the CAD lower against the USD. The policymakers discussed the usual 25 basis point (bps) cut but saw a strong consensus among them for the larger step, the summary of deliberations said. 

Furthermore, the decline in crude oil prices continues to undermine the Loonie as  Canada is the largest oil exporter to the United States (US). The rebound in crude oil prices could support the CAD and cap the upside for the pair for the time being. 

Reserve Bank of Australia Governor Michele Bullock said on Thursday that the interest rates are restrictive enough and will stay there until the central bank is confident about inflation.  

Key quotes

Market reaction

At the time of writing, AUD/USD is trading 0.19% higher on the day at 0.6495.

• EUR/USD has edged further lower, inching toward 1.0550.
• Euro continues to find little support in broader markets.
• EU GDP, US PPI inflation updates due Thursday.

EUR/USD continued to drift into the basement on Wednesday, clipping into a 54-week low and settling within touch range of 1.0550. Fiber continues to shed weight on the charts as broader FX markets pivot full-bore into holding the Greenback. 

US Consumer Price Index (CPI) inflation figures came in stickier than many had hoped, but still well within median market forecasts, helping to keep investor sentiment elevated. Headline CPI held steady at 0.2% MoM as expected, while annualized headline CPI inflation accelerated to 2.6% YoY from the previous 2.4%, as markets predicted. Core CPI inflation also met market expectations, holding at 0.3% MoM and 3.3% on an annualized basis.

Euro traders will be looking ahead to pan-EU Gross Domestic Product (GDP) growth figures due early Thursday; final GDP growth is unlikely to buck the previous preliminary figures, and EUR bulls will have their fingers crossed that final GDP in the third quarter will stick to 0.4% QoQ, while the annualized figure is forecast to hold steady at a thoroughly unremarkable 0.9% YoY.

Also coming up on Thursday will be a fresh print of US Producer Price Index (PPI) business level inflation, which is forecast to accelerate in October to 3.0% from 2.8% YoY. 

EUR/USD price forecast

The EUR/USD daily chart reveals a strong bearish trend, as the pair trades firmly below both the 50-day (blue line) and 200-day (black line) exponential moving averages (EMAs), currently at 1.0882 and 1.0884, respectively. This alignment, with the 50-day EMA below the 200-day EMA, signifies a bearish outlook in both the short and long term. The recent sell-off has pushed the pair closer to a significant psychological level at 1.0550, which could act as immediate support. If this level fails to hold, further declines may be on the horizon.

The MACD indicator on the chart underscores the prevailing bearish momentum. The MACD line is positioned below the signal line in negative territory, reflecting strong selling pressure. Furthermore, the expanding gap between the MACD and signal lines, along with a series of red histogram bars, indicates that bearish momentum is still intact. Without signs of a bullish divergence, the technical picture suggests limited buying interest, and any potential recovery could be met with resistance around the moving averages.

Looking ahead, a sustained break below the 1.0550 support level could open the door to a deeper retracement, possibly targeting the 1.0500 level in the coming sessions. On the flip side, for EUR/USD to reclaim a more bullish outlook, it would need to break back above the 200-day EMA, currently around 1.0884. Such a move would likely require a shift in market sentiment, potentially triggered by favorable economic data from the Eurozone or broad-based U.S. dollar weakness. Until such a recovery materializes, the technical setup remains bearish, with further downside expected if the support at 1.0550 gives way.

EUR/USD daily chart

• GBP/USD tested below the 1.2700 handle on Wednesday, easing back further.
• Cable shed another third of a percent and sold off for a fourth straight day.
• US PPI inflation, UK GRDP growth update loom ahead.

GBP/USD eased further into the low end on Wednesday, trimming further south of the 200-day Exponential Moving Average (EMA) in a one-sided bearish decline as the pair closes in the red for a fourth consecutive trading day. The Pound Sterling shed extra weight against the broadly-recovering Greenback, sparked by a US Consumer Price Index (CPI) inflation print that didn’t deliver markets the easing inflation hint they were hoping for, but still came in at forecasts.

Coming up on Thursday will be a fresh print of US Producer Price Index (PPI) business level inflation, which is forecast to accelerate in October to 3.0% from 2.8% YoY. On the UK side, Cable traders will be settling in for a wait to Thursday’s UK Gross Domestic Product (GDP) print for the third quarter, which is forecast to slump to a scant 0.2% QoQ from the previous 0.5%.

US Consumer Price Index (CPI) inflation figures came in stickier than many had hoped, but still well within median market forecasts, helping to keep investor sentiment elevated. Headline CPI held steady at 0.2% MoM as expected, while annualized headline CPI inflation accelerated to 2.6% YoY from the previous 2.4%, as markets predicted. Core CPI inflation also met market expectations, holding at 0.3% MoM and 3.3% on an annualized basis.

GBP/USD price forecast

The GBP/USD daily chart shows a pronounced bearish momentum, with the price decisively breaking below the 200-day EMA (black line) around 1.2867, a significant support level that had held since early November. This breakdown below the 200-day EMA indicates a shift toward a medium-term bearish outlook, as the currency pair struggles to hold above this key long-term moving average. Moreover, the 50-day EMA (blue line) remains below the price level, reinforcing the downward bias and suggesting that selling pressure is likely to persist as long as the price trades beneath these critical EMAs.

The MACD indicator at the bottom of the chart reflects intensifying bearish momentum, with the MACD line diverging further below the signal line in negative territory. This bearish crossover, accompanied by declining histogram bars, underscores the weakness in GBP/USD and hints at a potential extension of the downtrend. The lack of any bullish divergence on the MACD suggests that buying interest is limited, and without a substantial catalyst, the pair may struggle to regain positive momentum. Traders might look to the MACD and any potential decrease in selling pressure as initial signs of a trend reversal, though such signals are currently lacking.

The next support level to watch lies around the psychological handle of 1.2700, which is close to the current price level. A break below this area could expose GBP/USD to further downside risks, potentially targeting the 1.2600 mark as the next support level. On the flip side, if the pair manages to recover and reclaim the 200-day EMA, it could signal a shift in sentiment; however, this would require substantial buying pressure, likely tied to positive economic data from the UK or a broad weakening in the US dollar. Until such developments occur, the technical setup favors the bears, with further downside likely if GBP/USD fails to stabilize above the immediate support.

GBP/USD daily chart

• EUR/AUD recovers from daily lows, and traders await the October job report in Australia.
• Technical stance shows EUR/AUD near key support; a drop below 1.6238 could target 1.6200 and lower supports.
• Upside potential exists with resistance at 50-day, 100-day, and 200-day SMAs at 1.6315, 1.6356, and 1.6386 respectively.

The shared currency stages a recovery against the Aussie Dollar on Wednesday, printing gains of over 0.18%, as traders await Australia’s job report. At the time of writing, the EUR/AUD trades at 1.6284 after hitting a daily low of 1.6238.

The Australian Bureau of Statistics (ABS) will reveal employment figures for October. The Employment Change is estimated to have created 25K jobs, below September’s outstanding 64.1K, with the Unemployment Rate expected to remain at 4.1%.

EUR/AUD Price Forecast: Technical outlook

The EUR/AUD is neutral to downward biased after the cross plunged below the 200, 100, and 50-day Simple Moving Averages (SMAs), within a confluence zone at around 1.6315/86. Although the exchange rate aimed higher during the last three days, a drop below the November 13 low of 1.6238 could pave the way for 1.6200. A breach of the latter will expose intermediate support at 1.6161, the latest cycle low reached on November 7, followed by the year-to-date (YTD) low of 1.6003.

Conversely, on further EUR/AUD strength, buyers must clear the 50-day SMA at 1.6315. If surpassed, up next would be the 100-day SMA at 1.6356, followed by the 200-day SMA at 1.6386. Once surpassed, the following resistance would be the 1.6400 figure.

EUR/AUD Price Chart – Daily

• NZD/USD tumbled by 0.80% on Wednesday, currently trading around 0.5880.
• Pair continues moving towards August 5 lows around 0.5870.
• The RSI and the MACD both indicate that selling pressure is rising in the NZD/USD pair.

The NZD/USD pair extended its downtrend on Wednesday, declining by 0.8% to 0.5880, continuing its move towards the August 5 lows. The pair's overall momentum seems to be bearish, as indicated by both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD).

The RSI, which measures overbought or oversold conditions, is around 33, indicating increasing selling pressure. The MACD, which measures trend strength and momentum, is red and rising, also suggesting a bearish outlook. The MACD histogram is also red and rising, further confirming the presence of the bearish forces. Although the RSI is currently oversold, which could potentially trigger a recovery, the overall technical outlook remains negative.

Resistance levels are seen at 0.5900, 0.5930, and 0.5950, and support levels at 0.5870, 0.5830, and 0.5815.

NZD/USD daily chart

• Silver struggles near 100-day SMA, with downside potential towards $30.00 and lower supports.
• Technical outlook suggests further weakness, with a key support at $30.18 and the 200-day SMA at $28.63 in focus.
• Recovery above $31.00 could challenge resistance at the 50-day SMA and extend towards $32.00.

Silver price drops below $30.50 for the second consecutive session, prints losses of over 0.90% following a tempered US inflation report. The US CPI came as expected, though he hinted that disinflation has stalled. The XAG/USD trades at $30.40, set to end the session lower.

XAG/USD Price Forecast: Technical outlook

Silver price consolidated during the last two days at around the 100-day Simple Moving Average (SMA) at $30.31. However, the mid-term bias is tilted to the downside, and once bears push prices below August’s 26 high turned support at $30.18, they will test the psychological $30.00 mark. A breach of the latter will expose the 200-day SMA at $28.63, followed by the September 6 swing low of $27.69.

If Silver moves back above $31.00, this could pave the way for challenging the 50-day SMA at $31.51. Once surpassed, XAG/USD's next resistance would be $32.00.

Oscillators like the Relative Strength Index (RSI) hint that further XAG/USD’s downside is seen, as RSI remains shy of being oversold.

XAG/USD Price Chart – Daily

• NZD/JPY declines on Wednesday, trading near 91.45.
• The pair completed a bearish crossover between the 20 and 100-day SMA.
• The RSI and MACD technical indicators suggest the NZD/JPY pair outlook remains mixed.

The NZD/JPY pair witnessed a slight pullback during Wednesday's session, dipping below the 91.50 level. This retracement follows a period of gains on Tuesday, but the pair remains confined within a clear trading channel between 92.00 and 91.00. Additionally A bearish crossover, recently completed between the 20 and 100-day Simple Moving Average (SMA) might push the pair lower.

Technically, the Relative Strength Index (RSI) suggests that buying pressure is declining, as it stands at 53, in positive terrain, but declining. Additionally, the Moving Average Convergence Divergence (MACD) histogram is flat and red, suggesting that selling pressure is present. Therefore, the overall outlook for the pair remains mixed, and it is worth monitoring the price action around the 91.00 and 92.00 boundaries.

Support levels are located at 91.00, 90.50, and 90.00, while resistance levels are at 92.00, 92.50, and 93.00.

NZD/JPY daily chart

• The Australian Unemployment Rate is foreseen stable at 4.1% in October.
• Employment Change is expected at 25K, much lower than the 51.6K posted in September. 
• AUD/USD is under pressure and may soon pierce the 0.6500 mark. 

The Australian Bureau of Statistics (ABS) will release the October monthly employment report at 00:30 GMT on Thursday. The country is expected to have added 25K new job positions, while the Unemployment Rate is expected to remain stable at 4.1%. The Australian Dollar (AUD) trades near multi-week lows against the US Dollar (USD) ahead of the event amid continued USD demand, with the AUD/USD pair trading just above the 0.6500 mark.

The ABSEmployment Change report separates full-time from part-time jobs. According to its definition, full-time jobs imply working 38 or more hours per week and usually include additional benefits, but they mostly represent consistent income. On the other hand, part-time employment generally offers higher hourly rates but lacks consistency and benefits. This iswhy full-time jobs have more weight than part-time ones when setting the directional path for the AUD. 

The September report showed the Oceanic country created 51.6K full-time jobs and 12.5K part-time positions, resulting in a net Employment Change of 64.1K. The Unemployment Rate, in the meantime, printed at 4.1% for a second consecutive month.  

Australian Unemployment Rate seen steady in October

Market analysts anticipate that the Unemployment Rate will remain steady at 4.1% in October. Ahead of employment figures, Australia released some good news related to the sector: Australian wage growth slowed in the third quarter of the year, according to the quarterly Wage Price Index report. The index advanced at an annual pace of 3.5% in the three months through September, easing from the 4.1% posted in Q2, also below the 3.6% expected. On a quarterly basis, wages were up 0.8%, matching the previous quarter’s figure and slightly below the 0.9% anticipated. Wage data indicate easing inflationary pressures as quarterly gains are the lowest in two-and-a-half years.

Wage-related inflation is relevant amid its impact on the Reserve Bank of Australia (RBA) monetary policy decisions. The central bank has held the Official Cash Rate at 4.35% since late 2023 amid the slow pace of disinflation and overall labor market resilience. 

The central bank aims for inflation to stay between 2% and 3%. The annualised Wage Price Index at 3.5% may be encouraging, but it is still hotter than “comfortable.”

With that in mind, easing wage inflation coupled with an around 4% Unemployment Rate is enough to support the generalised idea of an initial RBA interest rate cut as early as February 2025, albeit not enough to think about an earlier trim. 

Regarding job creation, the country has been solidly adding full-time positions in the last couple of months, and while it may sound positive for the economy, it also means the labor market remains tight, opposite to the RBA’s desired loosening.

Generally speaking, substantial full-time job creation is seen as tighter. At the same time, an increase in part-time positions could be more encouraging regarding upcoming interest rate cuts. 

In the meantime, recent developments in the United States (US) could affect the upcoming RBA’s decision. The world’s largest economy held a presidential election and former President Donald Trump’s victory paints a new global scenario for the next four years.

Trump has pledged to establish tariffs, which may affect the performance of every other major economy interacting with the US. RBA Governor Michele Bullock noted last week that Trump’s presidency could send inflation in different directions in her appearance before a Senate committee.

At the same time, Bullock noted that, at this point, the RBA maintains its inflation forecast, indicating that price pressures won’t fall significantly within the target band until 2026. 

When will the Australian employment report be released and how could it affect AUD/USD?

The ABS will publish the October employment report early on Thursday. As previously stated, Australia is expected to have added 25K new job positions in the month, while the Unemployment Rate is foreseen at 4.1%. Finally, the Participation Rate is expected to hold at 67.2%.

Generally speaking, a strong report will boost the AUD, even if the larger increase comes from part-time jobs. Any weak underlying subcomponent will likely fuel hopes of rate cuts, but not enough to trigger an AUD sell-off. The opposite case is also valid, with soft figures putting pressure on the Aussie.

Ahead of the announcement, the AUD/USD pair trades a handful of pips below the 0.6500 mark and is technically bearish as the USD maintains the post-election momentum. 

Valeria Bednarik, Chief Analyst at FXStreet, notes: “The AUD/USD pair is under pressure and near the 0.6500 mark. From a technical point of view, the risk skews towards the downside, given that the pair develops below all its moving averages in its daily chart, while technical indicators in the same time frame maintain modest downward slopes within negative territory. Even further, the 20 Simple Moving Average (SMA) has recently crossed below directionless 100 and 200 SMAs, reflecting prevalent selling interest.”

Bednarik adds: “AUD/USD bottomed at 0.6513 on Tuesday, and any extension below the level should favor a bearish continuation towards the 0.6470 price zone. Once below the latter, the pair could target the 0.6420/30 region, where it posted multiple daily lows back in April and May. To the upside, Wednesday’s high at 0.6545 provides near-term resistance en route to the 0.6600 threshold. Sellers will likely reappear should the pair approach to the latter.”

• Gold retreats amid stable US inflation data, continuing a four-day losing streak.
• US Dollar Index reaches a year-to-date high of 106.52, buoyed by market expectations of less dovish Fed.
• Upcoming economic events, including Fed Chair Powell's speech and US Retail Sales, to further influence Gold's trajectory.

Gold's price tumbled on Wednesday following October’s inflation report, which was aligned with estimates. The yellow metal hit a daily peak of $2,618 but retreated as US Treasury yields climbed, and the Greenback extended its gains to a new year-to-date (YTD) high, according to the US Dollar Index (DXY). The XAU/USD trades at $2,581, losing more than 0.60%.

Bullion extended its losses for the fourth straight day after the US Bureau of Labor Statistics (BLS) revealed that headline and core inflation figures for October came in as Wall Street expected.

The buck printed solid gains, although market participants had almost entirely priced in 25 basis points by the Federal Reserve (Fed) at the December meeting. According to the CME FedWatch Tool data, odds rose from 58% a day ago to 82%.

The DXY, which tracks the performance of the US Dollar against a basket of peers, hit a YTD high of 106.52, surpassing the April 16 high of 106.51. As of writing, the DXY hovers around 106.49, gaining 0.50%.

US Treasury bond yields continued to rise with the 10-year benchmark note yielding 4.453%, two and a half basis points above its opening yield.

Market participants remain aware that Trump's presidency might dent the Fed from easing policy if inflation climbs due to low taxes and new tariffs.

Looking forward to this week, traders are eyeing Fed Chair Jerome Powell's speech. The US Producer Price Index (PPI) and jobs data are due on Thursday. On Friday, Retail Sales will update the status of American consumers.

Daily digest market movers: Gold remains pressured by a firm US Dollar

• Gold prices fell as US real yields, which inversely correlate against Bullion, edged up one basis point to 2.089%.
• The US CPI rose as anticipated to 2.6% YoY, up from 2.4%, with a 0.2% monthly increase as expected.
• Core CPI also aligned with forecasts, rising 3.3% annually and 0.3% on a monthly basis, matching private analyst projections.
• Minneapolis Fed President Neel Kashkari stated that the US central bank would need to lower borrowing costs, adding that inflation heads “in the right direction.”
• Echoing some of his comments was the Dallas Fed’s Lorie Logan, stating the US central bank “most likely” needs to reduce its restrictive policy, though it must proceed cautiously.
• St. Louis Fed’s Alberto Musalem said that although inflation data was stronger, it doesn’t change his view that policy is on path to neutral.
• Kansas City Fed Jeffrey Schmid was more cautious, saying “it remains to be seen” how much more the Fed will cut rates.
• According to the Chicago Board of Trade’s December fed funds rate futures, investors now anticipate approximately 23 basis points of Fed easing by the close of 2024.

XAU/USD Technical Outlook: Gold price tumbles below $2,600

The Gold price has shifted neutral to bearishly biased, once it cleared the October 10 swing low of $2,603. Once bears achieved a daily close below the latter, it opened the door to challenge the 100-day Simple Moving Average (SMA) at $2,540. On further weakness, the next support would be $2,500.

On the other hand, if Gold clings to $2,600, buyers will eye the 50-day SMA at $2,647, ahead of $2,650. Once surpassed, the next resistance would be the November 7 high at $2,710.

Momentum has shifted bearishly as the Relative Strength Index (RSI) distanced itself from its neutral line, indicating that XAU/USD might extend its losses.

• AUD/USD continues its decline, nearing August lows.
• US headline inflation accelerated to 2.6% in October from 2.4% in September, while core CPI grew by 3.3%.
•  Australia's October employment data is expected to show a modest increase in jobs added.

The AUD/USD declined by 0.69% to 0.6490 in Wednesday's session. AUD/USD hovers slightly below 0.6500 after the US inflation data for October. The US headline inflation and core CPI showed no surprises, while focus now shifts to Australia's October employment data is expected to show a modest increase in jobs added. 

The Australian dollar has declined due to the strength of the US dollar, supported by positive economic indicators and increased confidence. Australia's central bank maintains a neutral stance, signaling a potential rate cut in mid-2025, providing support for the Aussie. 

Daily digest market movers: Australian Dollar down ahead employment data, US CPI

• The US headline inflation accelerated to 2.6% in October, while the core CPI grew by 3.3%.
• The inflation report didn’t shake the expectations among investors which continue to bet on another cut in December.
• On the other hand, the RBA is expected to keep interest rates unchanged this year despite rising inflationary pressures.
• Markets do not anticipate a 25 basis point rate cut by the RBA until May 2025.
• Datawise, the Australian economy is projected to have added 25,000 new jobs in October, and the unemployment rate is expected to remain at 4.1%.
• Australian data might shake up the expectations on the timetable of the RBA’s easing cycle.

AUD/USD technical outlook:  Pair approaches lows since August, oversold signals loom

The AUD/USD pair has extended its decline below the 0.6500 level, reaching its lowest point since August. This move is supported by technical indicators, which remain deeply in negative territory. The Relative Strength Index (RSI) is near 30, indicating oversold conditions, while the Moving Average Convergence Divergence (MACD) is below zero, suggesting bearish momentum. These signals suggest that the downtrend may continue in the near term.

The US Dollar extended further its move higher, regaining traction after a negative first half of the session and climbing to new 2024 peaks after US CPI ticked higher in October as well as prudent remarks from Fed officials.

Here is what you need to know on Thursday, November 14:

The US Dollar Index (DXY) rose to YTD highs north of 106.50, always on the back of the Trump-infused rally and mixed US yields. US inflation data will remain in centre stage with the release of Producer Prices for the month of October, seconded by the usual weekly Initial Jobless Claims and the EIA’s report on US crude oil inventories. In addition, the Fed’s Barkin, Powell, and Williams are due to speak.

EUR/USD lost further ground and weakened to new yearly lows near 1.0550 on the back of the intense uptrend in the US Dollar. Another estimate of the EMU’s Q3 GDP Growth Rate is due followed by the Employment Change index, Industrial Production and the ECB’s Accounts. Additionally, the ECB’s De Guindos, and Schnabel are also expected to speak.

GBP/USD broke below the 1.2700 support to reach new lows amid further gains in the Greenback. The RICS House Price Balance index will be published along the speech of the BoE’s Bailey and the Mansion House speech by Chancellor Reeves.

USD/JPY surpassed the 155.00 barrier to print new four-month highs and extend its positive performance so far this week. The weekly Foreign Bond Investment figures will be unveiled.

Extra weakness in commodity prices put AUD/USD under extra pressure and motivated it to put the 0.6500 support to the test. The release of the Australian jobs report will take centre stage along with Consumer Inflation Expectations and the speech by the RBA’s Bullock.

Prices of WTI reversed their multi-day bearish trend and managed to regain balance after bottoming out below the $67.00 mark per barrel early in the day.

Gold prices dropped further and broke below the $2,600 mark per ounce troy to hit new to two-month lows amid the unabated march north in the US Dollar. By the same token, prices of the ounce of Silver faded Tuesday’s small advance, hovering around the $30.50 zone.

• The Dow lurched 200 points higher in a midweek rebound.
• US CPI inflation held steady and accelerated on the backend, but met expectations.
• Equities continue to hold ground on the high end after the post-election rally.

The Dow Jones Industrial Average (DJIA) clawed back over 200 points at its peak on Wednesday, recovering ground after an early-week plunge from record highs. The post-election rally following presidential candidate and former President Donald Trump sent markets into dizzying new heights, but investors remain unwilling to let prices fall too far back despite the clear need for a breather.

US Consumer Price Index (CPI) inflation figures came in stickier than many had hoped, but still well within median market forecasts, helping to keep investor sentiment elevated. Headline CPI held steady at 0.2% MoM as expected, while annualized headline CPI inflation accelerated to 2.6% YoY from the previous 2.4%, as markets predicted. Core CPI inflation also met market expectations, holding at 0.3% MoM and 3.3% on an annualized basis.

Dow Jones news

Despite a notable lack of inflation easing in October’s CPI figures, investors remain confident during the midweek market session, with around two-thirds of the Dow Jones finding positive territory for the day. Boeing (BA) still found the red, declining around 2.5% and sliding below $142 per share as the battered airospace manufacturer begins issuing layoff notices as part of the company’s plans to layoff 17,000 workers, or an entire tenth of the airplane builder’s global workforce.

On the high side, Amazon surged to a fresh all-time high on Wednesday, breaching $215 dollars per share. The mega-conglomerate that covers everything from internet and cloud computing services to online retailing is surging after Amazon announced plans to begin their own production system for AI-focused computer chips in a bid to take a chunk out of Nvidia’s market share in the large data modeling space. Amazon has also announced plans to launch a discount e-commerce segment of their large-frame warehousing and online retailing segment, directly targeting the growing sector currently dominated by social media adspace scourge Temu.

Elsewhere on the Dow Jones equity board, Home Depot (HD) is marching its way back toward $410 per share in a post-glut rebound after shedding weight recently on the back of declining sales figures.

Dow Jones price forecast

The Dow Jones launched into a fresh round of bullish pressure last week, breaching into new record highs a stone’s throw away from 44,500. This week saw a brief pullback from record highs as lopsided bullish momentum began to spark concerns of overbought conditions. Despite the Dow Jones’ one-sided chart performance, bidders continue to pile into the space, keeping the battle constrained to chart paper near the 44,000 handle.

The Dow Jones is up nearly 20% bottom-to-top for the year, and has added an eye-watering 31.5% since the last time price action touched the 200-day Exponential Moving Average (EMA) near the 34,000 handle in November of 2023. Short interest is circling the waters, looking for a low-pressure fallback to the 50-day EMA near 42,330, but downside momentum remains elusive.

Dow Jones daily chart

Federal Reserve (Fed) Bank of Kansas President Jeffrey Schmid made a rare appearance on Wednesday, flagging potential pitfalls on the path toward lower interest rates.

Key highlights

Federal Reserve (Fed) Bank of St. Louis President Alberto Musalem hit the wires on Wednesday, noting that sticky inflation figures make it difficult for the Fed to continue to ease rates. The Fed's Musalem spun focus onto the overall healthy appearance of the US labor market to ease negative pressure from admitting that inflation continues to flaunt downward pressure from the Fed.

Key highlights

• DXY holds gains around 106.00 after Fed's Bullard comments.
• US CPI data showed inflation in October rising by 2.6%, in line with estimates.
• Core CPI rises by 3.3%, exceeding expectations and driving US yields higher.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, has surged higher on Wednesday in response to hawkish comments from Federal Reserve (Fed) officials. Dallas Fed President Robert Kaplan expressed caution regarding the possibility of a December rate cut, dampening expectations that had been building in the market. The DXY has climbed above 106.00, reaching a fresh six-month high as a result of these comments but mildly retreated after Consumer Price Index (CPI) data from October, which didn’t show major surprises.

Daily digest market movers: US Dollar holds gains after US CPI

• The DXY is experiencing a mild corrective decline after the release of US CPI data for October.
• The DXY is hovering around 105.80, supported by a marginal retracement in US yields across the curve.
• The Bureau of Labor Statistics reported that the headline CPI rose by 2.6% YoY last month, matching prior forecasts.
• Core CPI, which excludes food and energy, increased by 3.3% over the last 12 months.
• The Fed members are cooling down the market’s expectations of the central bank’s aggressive easing cycle, but investors are quite confident of another 25 bps cut in December.

DXY technical outlook:  Bullish momentum continues for Greenback

Despite a slight pullback on Wednesday, technical indicators for the DXY Index remain bullish, suggesting a potential continuation of the uptrend. The RSI and MACD indicate continued positive momentum. While consolidation or a pullback is possible before a further advance, the overall technical outlook remains positive with resistance levels at 106.50, 107.00 and 107.30 and support levels at 105.50, 105.30 and 105.30.

That being said, the DXY's surge above 106.00, approaching its highest level since July, is supported by positive indicators. However, the indicators are approaching overbought territory, indicating a potential reversal or consolidation. Traders should monitor the index's behavior around these levels to assess the sustainability of the uptrend. A rejection at the overbought area could signal a pullback or a change in market sentiment, while a sustained break above these levels could extend the bullish momentum.

• Mexican Peso finds its foot after US inflation data announced ahead of Banxico decision.
• US inflation report meets forecasts, raising chances of a Fed rate cut in December to 82%.
• Banxico expected to reduce rates to 10.25%, potentially narrowing the interest rate differential with the US.

The Mexican Peso stayed firm against the US Dollar during the North American session on Wednesday as investors digested the latest US inflation report. Alongside that, traders braced for the Bank of Mexico (Banxico) monetary policy decision on Thursday, expecting the central bank will slash rates. At the time of writing, the USD/MXN trades at 20.57, virtually unchanged.

US inflation data in October was in line with analysts’ expectations. Therefore, investors became optimistic that the Federal Reserve (Fed) could lower interest rates by 25 basis points at the December meeting. According to CME FedWatch Tool data, odds for a rate cut increased from 58% a day ago to 82% at the time of writing.

On Thursday, Banxico is expected to cut rates from 10.50% to 10.25%, according to 19 of 20 analysts polled by Reuters. This would reduce the interest rate differential between Mexico and the US, implying that USD/MXN could rise and challenge the year-to-date (YTD) peak at 20.80.

Aside from this, the risk appetite remains fragile after US President-elect Donald Trump named two China hawks to his cabinet. Rumors that Mike Waltz was appointed as National Security Advisor and Marco Rubio as Secretary of State would toughen the US posture against China but also against Mexican drug cartels and illegal immigration.

Meanwhile, Minneapolis Fed President Neel Kashkari crossed the wires. He stated the Fed would need additional rate cuts, adding, “I think inflation is heading in the right direction and have confidence in that.”

Last, Dallas Fed President Lorie Logan added that the US central bank “most likely” needs to reduce its restrictive policy, though it must proceed cautiously. She added it's challenging to know how many cuts are needed and how soon they need to happen.

Ahead this week, Mexico’s economic docket will feature the Banxico policy decision. On the US front, Fed speakers, inflation on the producer side, and Retail Sales will help dictate the USD/MXN pair’s direction.

Daily digest market movers: Mexican Peso steadies against US Dollar

• The USD/MXN remains steady, despite the fact that the US Dollar Index (DXY), which tracks the performance of the American currency against another six, climbs to a seven-month high of 106.39, up by over 0.40%.
• In October, the US Consumer Price Index (CPI) rose as expected to 2.6% YoY, up from 2.4%. On a monthly basis, the CPI rose by 0.2% as foreseen.
• The Core CPI expanded by 3.3% YoY, as projected, and 0.3%, as estimated by private analysts.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 23 bps of Fed easing by the end of 2024.

USD/MXN technical outlook: Mexican Peso counterattacks as USD/MXN hovers around 20.55

The USD/MXN upward bias remains, even though the pair has failed to re-test weekly highs seen at 20.69. Once surrendered, the next resistance would be the year-to-date (YTD) high of 20.80 on November 6. If surpassed, the next resistance would be the psychological 21.00 figure, followed by the March 8, 2022 peak at 21.46.

Conversely, sellers must push the exchange rate below 20.50, so they can remain hopeful of driving the spot to the 20.00 figure. A breach of the latter will expose the 50-day Simple Moving Average (SMA) at 19.73, followed by the psychological figure at 19.50 and the October 14 low of 19.23.

• EUR/USD slipped below 1.0600 on Wednesday, heading into 1.0550.
• A brief recovery off the back of US CPI inflation is unlikely to hold.
• Euro is set to close in the red against the Greenback for a fourth straight day.

EUR/USD continued to backslide on Wednesday, falling into 1.0550 and finding only a meager bounce from 54-week lows after US Consumer Price Index (CPI) inflation for October printed closely to median market forecasts. The Euro continues to shed fans as market participants struggle to find reasons to bid Fiber, leaving EUR/USD at the mercy of broad-market US Dollar flows.

US CPI inflation for October came in broadly as-expected on Wednesday, however final figures failed to make any progress toward cooling targets, and key annual measures accelerated on a yearly basis. US CPI rose 0.2% MoM in October, in-line with the previous month’s inflation print, while ‘supercore’ CPI for the year ended in October rose 4.37% YoY compared to the previous period’s print of 4.26%.

The US Dollar eased slightly post-CPI, giving Fiber a chance to recover its stance from year-long lows, however momentum remains thin as global markets broadly focus on US labor figures to spark further rates cuts from the Federal Reserve (Fed).

EUR/USD price forecast

With the Euro testing 54-week lows against the Greenback, the pressure is on for bidders to find a floor and push off from it before things decay to the point that EUR/USD backslides below the technical floor priced in near 1.0500. It’s been a sharp turnaround in Fiber bids this year: just seven weeks ago, the Euro had set a year-plus high against the US Dollar just shy of 1.1300.

EUR/USD daily chart

What just happened?

US Consumer Price Index (CPI) inflation came in broadly as-expected in October, not delivering any nasty surprises to traders, but not delivering any good news, either. Headline and core CPI inflation remained unchanged through October on a monthly basis, printing at 0.2% and 0.3% MoM respectively. However, early core CPI inflation accelerated to 2.6% YoY from 2.4%.

Why does CPI inflation matter?

CPI inflation is a measure of the month-on-month change in consumer-level prices for a mixed basket of consumer goods that represents a significant cross-section of the overall consumption economy. While the CPI index lacks consumer price information for rural residents, measuring only the cost changes in urban goods, the CPI index as a broader measure of consumer inflation captures roughly 93% of the US population.

Since controlling inflation via interest rates is a full half of the Fed’s mandate (with the other half being stable employment, a feature unique to the Federal Reserve not shared by other central banks), CPI inflation is used by markets as a key method of estimating when the Fed will make changes to the Fed funds rate, and by how much. With inflation continuing to run above the Fed’s target levels, upticks in key inflation metrics makes it harder for the Fed to deliver rate cuts as fast or as furiously as investors would like to see.

What happens next?

With CPI inflation registering within market expectations, but not delivering any meaningful reductions in price growth, investors will be turning to the rest of the economic data docket for signs of weakness that might spur the Fed back into a faster pace of rate cuts heading into the end of the year. Labor market weakness has been earmarked as a likely ignition point for further higher-than-expected rate reductions. However, too far into the red on jobs data or other inflation metrics (like the Personal Consumption Expenditure Price Index) could also spark fear of a widespread recession in the US economy, leaving investors in a challenging ‘Goldilocks’ position: markets are hoping for soft spots in the US economy to force the Fed to reduce interest rates, but a direct tip-over into recession will render rate cuts a moot point.
 

• EUR/JPY traded neutral in Wednesday's session and stands around above 164.00.
• The main SMAs converged toward the 164.00-165.00 area, forming a resistance zone that has been hard for the bulls to break.
• The MACD and RSI were giving conflicting signals hence suggesting that the outlook was mixed.

The EUR/JPY was seen around 164.00 in Wednesday's session, with indicators sending mix signals. The 164.00-165.00 area remains crucial for short-term direction.

The technical outlook for the EUR/JPY is mixed. The Relative Strength Index (RSI) is in positive territory at 51, but its flat slope suggests that buying pressure is flat. The Moving Average Convergence Divergence (MACD) is red and rising, suggesting that selling pressure is rising. The overall outlook is mixed, with the RSI and MACD giving conflicting signals.

The 164.00-165.00 range serves as a crucial resistance zone, while the RSI's flat buying pressure and the MACD's growing selling pressure create an uncertain momentum. Traders should closely monitor whether bulls can break through this resistance area to confirm a bullish trend, or if bears push the pair lower towards key support levels at 163.00 and 162.00.

EUR/JPY daily chart

• GBP/USD extends losses, breaking below the 200-day SMA, with further downside potential.
• Technical indicators suggest continuing bearish momentum with support at 1.2665 in focus.
• Recovery above 1.2700 could test resistance at the recent high of 1.2873.

The Pound Sterling registers losses against the US Dollar in early trading during the North American session, sponsored by Bank of England´s (BoE) Catherine Mann's hawkish rhetoric. This and the latest US inflation report came as expected, keeping the GBP/USD trading at around 1.2697, down by over 0.37%.

GBP/USD Price Forecast: Technical outlook

The GBP/USD bearish momentum extended after the pair cleared 1.2817, the 200-day Simple Moving Average (SMA), opening the door to challenge 1.2800. Momentum remains tilted to the downside, with the pair hitting a daily low of 1.2686, shy of testing intermediate support seen at the August 8 swing low of 1.2665. If cleared, the next support would be the 1.2600 figure.

Conversely, buyers must push the exchange rate toward 1.2700. If surpassed, the next stop would be the November 12 high at 1.2873.

Oscillators such as the Relative Strength Index (RSI) hints that sellers are in charge. Therefore, further GBP/USD downside is seen.

GBP/USD Price Chart – Daily

• USD/JPY pulls back after the Japanese Yen strengthens following release of Japanese Producer Price Index for October. 
• Higher prices could filter through into broader inflation and lead the BoJ to hike interest rates, strengthening JPY. 
• The US Dollar remains underpinned by still-high US inflation data and expectations of US fiscal and trade policy. 

USD/JPY retreats after reaching a new three-month high on Wednesday after the release of Japanese factory-gate price inflation data (producer prices) supported the Japanese Yen (JPY) after they showed a higher-than-expected rise in October. The increase in producer prices  could filter through into consumer prices, pushing up the main consumer inflation indexes. This, in turn, is likely to make the Bank of Japan (BoJ) raise interest rates, and higher interest rates strengthen a currency as they lead to increased net capital inflows. 

The US Dollar (USD) remains supported after the release of US Consumer Price Index (CPI) data showed headline inflation ticking higher in October, although all the readings were in line with economists forecasts. The stubbornly high inflation data is likely to keep the USD supported as it could encourage the US Federal Reserve (Fed) to reconsider cutting interest rates, resulting in a lift for the US Dollar. This in turn is likely to limit losses for the USD/JPY. 

Despite the pullback, USD/JPY continues to trade in a short and medium-term uptrend due to a strengthening US Dollar. This comes amid market expectations that President-elect Donald Trump’s mix of protectionism, higher tariffs and lower taxes will be inflationary for the US. This, in turn, is likely to flatten the trajectory for interest rates which had been expected to fall steeply. Although the market still sees odds of over 80% in favor of the Fed making a cut of 25 basis points (bps) (0.25%) to its main interest rate in December, according to the CME FedWatch tool, the outlook for 2025 may increasingly be more dependent on the inflationary impact (or not) of the new policies espoused by the Trump administration. 

The Japanese Producer Price Index (PPI) rose by 3.4% YoY in October from an upwardly revised 3.1% in the previous month and above the 3.0% expected. On month, PPI rose by 0.2% from an upwardly-revised 0.3% previously and above expectations of 0.0%. 

US headline CPI, meanwhile, rose by 2.6% YoY in October from 2.4% in the previous month and was in line with expectations. MoM headline CPI increased by 0.2% from 0.2% previously and the same expected. 

US Core CPI, meanwhile, rose by 3.3% in October, from the same in the previous month and 3.3% forecast. On month it rose by 0.3%, from the same both previously and expected. 

The BoJ’s October policy meeting Minutes, released on Sunday, revealed a divide among policymakers over the timing of future interest rate hikes. However, the Governor of the BoJ Katsuo Ueda has always said that if economic data meets the BoJ’s forecasts it will go ahead and hike rates. So far, the data has mostly met or exceeded estimates. In the meeting Minutes, the central bank maintained its forecast that it could raise its benchmark policy rate to 1.0% (from 0.25%) by the second half of fiscal 2025.

US consumer prices rose by 0.2% in October from September, and by 0.3% excluding energy and food. This was in line with expectations in both cases. However, it is becoming apparent that inflationary pressure is only declining very slowly. The data do not argue against further policy easing by the Federal Reserve, but they could support those who want to slow the pace of the rate cuts, Commerzbank’s economists Dr. Christoph Balz and Bernd Weidensteiner note.

Fed to perform a 25 b.p. cut in December

“The US consumer price data for October is not disastrous, but it does not show any clear progress either. This applies in particular to the core rate, i.e. the inflation rate excluding volatile energy and food prices, which provides a better indication of the trend. Here, the month-on-month rate was 0.3%. This was the same as in August and September and too high given the Fed's inflation target.”

“In fact, consumer prices excluding energy and food rose at an annualized rate of 3.6% in the last three months, which means that momentum picked up again. However, there have been several such phases in the past. These proved to be only temporary and the year-on-year rate therefore tended to fall further. We would therefore not yet proclaim the end of the downward trend in inflation this time either.”

“However, it remains to be seen whether the situation will ease again this time. In any case, the figures support our assessment that US inflation will remain above the central bank's target over the longer term. This applies even more in light of the emerging policy of the future president, Trump, who is relying heavily on tariffs and reduced immigration which would lead to a tightening of the labor market.”

Dallas Federal Reserve President Lorie Logan urged caution on Wednesday, advising the bank to move slowly with additional rate cuts to avoid unintentionally stoking inflation.

Key Quotes

• Silver price bounces back to near $31.00 after the US inflation report, which showed that price pressures remain sticky.
• Annual headline and core CPI rose by 2.6% and 3.3%, respectively, as expected.
• The optimism on Trump trades will keep the Silver price edgy.

Silver price (XAG/USD) holds recovery to near $31.00 in Wednesday’s North American session after the release of the United States (US) Consumer Price Index (CPI) data for October. The Bureau of Labor Statistics (BLS) reported that price pressures remain sticky as the annual headline inflation accelerated to 2.6% from 2.4% in September.

The core CPI – which excludes volatile food and energy prices – rose in line with estimates and the former release of 3.3%. On month, the headline and core inflation grew expectedly by 0.2% and 0.3%, respectively.

Sticky price pressures are less likely to impact market speculation for Federal Reserve (Fed) interest rate cuts in December as officials are more worried about preventing job losses, with high confidence over inflation remaining on track toward the bank’s target of 2%.

After the US inflation data release, the US Dollar Index (DXY) drops slightly but clung to gains near 106.00. 10-year US Treasury yields slide to near 4.38%.

The overall outlook of the Silver price remains weak on so-called “Trump trades” as demand for those assets that are expected to perform better in US President-elected Donald Trump’s administration is upbeat.

Therefore, the Silver price could face selling pressure as Trump’s policies, such as higher import tariffs by 10% and lower corporate taxes, would boost US economic growth and price pressures, a scenario that will be favorable for US bond yields as the Federal Reserve (Fed) would be needed to keep interest rates restrictive. Historically, higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets, such as Silver.

Silver technical analysis

Silver price remains on track toward the upward-sloping trendline around $29.00, plotted from February 28 low of $22.30. The white metal weakened after the breakdown of the horizontal support plotted from May 21 high of $32.50.

The near-term trend of the Silver price has weakened as the 20-day Exponential Moving Average (EMA) starts declining, which trades around $32.00.

The 14-day Relative Strength Index (RSI) slides to near 40.00. A bearish momentum will trigger if the RSI (14) sustains below the same.

Silver daily chart

• EUR/GBP bounced from multi-year lows after weak UK labor market data led to a sell-off in the Pound. 
• The pair remains pressured, however, by risks to the outlook for the Eurozone as the US gears up to implement tariffs. 
• Political uncertainty in Germany and the Pound’s positive relationship to risk are further bearish factors for EUR/GBP. 

EUR/GBP bounces off two-and-a-half year lows in the 0.8200s to trade back up in the 0.8330s on Wednesday after UK labor market data showed a rise in the Unemployment Rate which increased speculation the Bank of England (BoE) might cut interest rates in December. 

Previously the UK central bank had been one of the few major central banks expected not to cut rates at the end of the year because of stubbornly high inflation. The expectation of interest rates remaining relatively elevated in the UK had been a supportive factor for the Pound Sterling (GBP), since they attract greater inflows of foreign capital. 

The UK Unemployment Rate rose to 4.3% in the three months to September from 4.0% in the previous period, according to data from the Office of National Statistics (ONS), released on Tuesday. The reading was also well above economists’ expectations of 4.1%. It indicated a weakening labor market and could put pressure on the BoE to cut interest rates in order to stimulate borrowing, growth and job creation.  

That said, other UK employment data was not as poor suggesting the Pound Sterling (GBP) could recover and EUR/GBP upside is likely to remain capped. UK Average Earnings Including Bonus’ increased 4.3% from a revised up 3.9% previously and 3.9% expected. UK Average Earnings Excluding Bonus’ rose by 4.8%, beating estimates of 4.7%, though below the 4.9% previously. The higher wages suggest inflationary pressures might increase, forcing the BoE to keep interest rates at their current elevated level, thereby strengthening Sterling, with bearish implications for EUR/GBP. 

The Euro (EUR) also remains vulnerable due to growth concerns, the political crisis in Germany and fear of the US imposing tariffs on European imports, further weighing on the pair. President-elect Donald Trump warned he would make the Eurozone “pay a big price” for not buying enough American-made goods, which suggests he is working up to slapping tariffs on Euro Area imports. The imposition of tariffs has led economists to downgrade their forecasts for Eurozone Gross Domestic Product (GDP) by “a minimum of 0.3pp cumulative over 2025-26” according to Japanese lender Nomura.  

The Single Currency is feeling the pressure from political uncertainty in Germany after the collapse of Chancellor Olaf Scholz's governing coalition. The country is set to hold snap elections on February 23, 2025, however, until then Germany’s political problems will probably be a continued source of risk for the Euro, and a downside risk to EUR/GBP. 

According to analysts at Goldman Sachs, the Pound is more resilient to the geopolitical shocks compared to the Euro and this is bearish for the pair. GBP is also more positively aligned to risk-on and has a “positive beta to global risk”. Should US equities continue to rally as a result of the outlook due to the new administration in Washington, this should further support Sterling, suggesting downside pressure for EUR/GBP which could even revisit its over-two-year lows. 

(This story was corrected on November 13 at 14:56 GMT to say that UK employment data was released on Tuesday not Wednesday).

 

• The US Dollar trades in positive territory for a fourth consecutive trading day on Wednesday. 
• Traders brace for US CPI data for October, with an uptick in inflation expected. 
• The US Dollar index trades above 106.00, nearing a fresh six-month high. 

The US Dollar (USD) tires to continue its uprising on Wednesday, signaling it still has fuel in its tank for a push higher supported by rising US yields. The Trump trade is getting more and more priced in, and,  while the Fed remains data dependent, traders are gradually paring back bets of another interest-rate cut in December, a scenario that could give the Greenback another push higher. 

The US economic calendar is having one of its focal points for this week with the release of the US Consumer Price Index reading for October. Expectations for the monthly headline figure are in a very tight range between 0.1% to 0.3%, making a consensus call of 0.2%. That means that any number outside that range will trigger a substantial move in markets. 

Daily digest market movers: December rate cut hanging by a thread

• The Mortgage Bankers Association (MBA) kicks off this Wednesday’s calendar at 12:00 GMT  with its weekly Mortgage Applications tracker. Last week, applications fell by a steep 10.8%. 
• The US Consumer Price Index (CPI) release for October is due at 13:30 GMT:
• Monthly headline inflation is expected to remain stable at 0.2%, and the yearly reading is expected to tick up to 2.6% from 2.4%.
• Monthly core inflation is expected to remain unchanged at 0.3%, with the yearly figure also stable at 3.3%.
• Five Federal Reserve members are set to speak out this Thursday:
  • Federal Reserve Bank of Minneapolis President Neel Kashkari is interviewed on Bloomberg TV at 13:30 GMT.
  • Near 14:30, Federal Reserve Bank of New York President John Williams delivers welcome remarks at the Academy for Teachers Master Class in New York.
  • Federal Reserve Bank of Dallas President Lorie Logan delivers opening remarks at the ninth joint energy conference hosted by the Federal Reserve Banks of Dallas and Kansas City near 14:45 GMT.
  • Federal Reserve Bank of St.Louis President Alberto Musalem delivers a speech and participates in a Q&A session about the US economy and monetary policy at the Economic Club of Memphis at 18:00 GMT.
  • Around 18:30 GMT, comments are expected from Federal Reserve Bank of Kansas City President Jeffrey Schmid, who delivers a keynote speech at the ninth joint energy conference hosted by the Federal Reserve Banks of Dallas and Kansas City.
• Equities are looking for direction after their lacklustre performance on Tuesday. Marginal gains and losses are seen in both the European and US equity markets. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 62.4%. A 37.6% chance is for rates to remain unchanged. While the rate-cut scenario is the most probable, traders have pare back some of the rate-cut bets compared with a week ago.
• The US 10-year benchmark rate trades at 4.41%, after briefly ticking 4.45% this Wednesday in Asian trading. 

US Dollar Index Technical Analysis: This is where it gets hot

The US Dollar Index (DXY) is adding more gains to its rally. That makes sense seeing where US yields are trading since this summer. The main issue could be that the trading is starting to overheat, increasing the chances of a correction soon under some profit taking. 

All eyes are now on 106.52, the high of April and a double top, as it would mean a fresh 2024 high. Once the level would snap, 107.00 comes into play with 107.35 the next pivotal level to look out for.

On the downside, the round level of 104.00 and the 200-day Simple Moving Average (SMA) at 103.88 should refrain from sending the DXY any lower. Before that level, there is not much in the way with maybe some slim support at 104.63 (high of October 30). 

US Dollar Index: Daily Chart

• Gold has found support from a major trendline and paused its short-term downtrend. 
• Gold had been selling off in November amid expectations of interest rates staying elevated in the US. 
• US CPI inflation data for October could impact interest rate cut expectations and Gold price. 

Gold (XAU/USD) trades just above $2,600 on Wednesday after the precious metal’s November sell-off to seven-week lows found technical support at a major trendline. Gold takes a breather as markets wait for the release of key inflation data from the US, which could impact the future trajectory of interest rates, a major driver of the non-interest-paying yellow metal. When interest rates fall, it is favorable for Gold as it makes it more attractive to investors compared to other assets. 

Whilst the US Federal Reserve (Fed) had been on course to slash interest rates because of declining inflation and concerns about a weakening labor market – and this drove Gold price to record highs – that all changed with the election of Donald Trump to the White House. Trump’s radical protectionism and “free market” economic policies are likely to drive inflation back up, according to experts, keeping interest rates high – a negative for Gold.  

The release of the US Consumer Price Index (CPI) data for October on Wednesday will provide the latest snapshot of the inflation situation and could impact market expectations of whether the Fed will cut interest rates at its December monetary policy meeting. The market-based probabilities are currently 62.1% in favor of a 25 basis point (bps) (0.25%) cut and 37.9% for the Fed to leave interest rates unchanged at 4.50%-4.75%, according to the CME FedWatch. This could shift if CPI surprises from economist’s expectations. Market-watchers are paying particularly close attention to elevated service inflation, which remains much higher than goods inflation and is the main contributor to the still-above-target CPI.

Gold ETF outflows, a factor in the recent decline

Gold price’s decline in November was partly driven by large outflows from US Exchange Traded Funds (ETF). These allow traders to purchase stocks in Gold without investors having to own bullion themselves. Gold ETFs shed around $809 million (12 tonnes) net in early November, driven by North American outflows and partially offset by Asian inflows, according to the World Gold Council (WGC) data. 

Demand for Gold is also expected to decline in China, the world’s largest consumer of the yellow metal, amid an economic slowdown that is expected to accelerate as the US imposes higher tariffs on Chinese imports.  

Gold is also falling due to competition from alternative assets such as Bitcoin (BTC), which is trading in the high $80,000s, close to all-time highs, because of expectations the Trump administration will relax crypto regulation. 

US stocks are also rising as investors anticipate lower corporation tax and looser regulations, boosting company profits, and this might also be diverting funds away from the precious metal. 

Gold generally rises as a result of investors seeking safety amid a rise in geopolitical risks. One such risk factor has been the Russia-Ukraine war, which Trump boasted he could bring an end to “in one day – 24 hours.” Still, this has not been the case in reality. Trump is said to have warned Russian President Vladimir Putin “not to escalate in Ukraine” in a telephone call. However, Putin does not appear to have heeded his advice, given reports of Russian casualties continuing to rise.  

Another geopolitical hotspot is the Middle East, where the possibility of peace now looks less likely given Trump’s appointment of Former Arkansas Governor Mike Huckabee as Ambassador to Israel. Huckabee is a known Zionist and supporter of Israeli Prime Minister Benjamin Netanyahu. He has said he does not support a two-state solution to the Israeli-Palestinian problem and sees the West Bank as belonging to Israel. His appointment will probably embolden Israel and bring further bloodshed to the region. If tensions rise, it could drive safe-haven flows to Gold. 

Technical Analysis: XAU/USD pauses at major trendline

According to technical analysis, the precious metal is now in a short-term downtrend, and, given it is a principle of technical analysis that “the trend is your friend,” the odds favor a continuation lower. However, Gold bounces off support from a major trendline for its long-term uptrend at around the $2,600 mark.

XAU/USD Daily Chart

A decisive break below the major trendline would confirm an extension of the short-term downtrend, probably to the next target at $2,540, the 100-day SMA and August highs. 

A decisive break would be one accompanied by a longer-than-average red candle that pierced well below the trendline and closed near its low, or three red candles that broke clearly below the trendline.

However, the precious metal remains in an uptrend on a medium and long-term basis, giving the material risk of a reversal higher in line with these broader up cycles. 

USD/THB traded sharply higher, in part due to stronger US Dollar (USD), softer gold prices and in part, due to concerns over central bank autonomy. USD/THB was last at 34.714, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

RSI is rising into overbought conditions

“There were reports of former Finance Minister being appointed as BoT Chairman. According to various media outlets, he had previously pressured BoT to lower rates and raise inflation target. The appointment is still pending approval (likely after 19 Nov).”

“BoT board can issue regulations on reserves management, but it doesn’t have the authority to directly manage the reserves. Market interpretation is that his appointment may lead to a dovish BoT.”

“Bullish momentum intact though RSI is rising into overbought conditions. Inverted head & shoulders pattern is typically associated with bullish reversal setup. Next resistance at 35.10, 35.40 (200 DMA). Support at 34.50 (100 DMA).”

USD/SGD inched higher, tracking moves in broad US Dollar (USD). Pair was last at 1.3380 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Consolidation is likely

“Daily momentum is mild bullish while RSI rose. Consolidation likely with slight risk to the upside. Resistance here at 1.3410 levels (76.4% fibo). Support at 1.3340 (200 DMA), 1.3290 (61.8% fibo retracement of Jun high to Oct low).”

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

• Crude Oil finds a floor at around $68 but is unable to significantly bounce off it. 
• OPEC’s fourth downside revision for global Crude Oil demand is just a drop on a hot plate.
• The US Dollar Index rallies further, although it faces some profit-taking.

Crude Oil trades broadly flat on Wednesday after an attempt on Tuesday to bounce off a supportive floor level near $68.00. The support came in the form of the monthly OPEC report, in which the Petroleum Exporting conglomerate penciled in a fourth downside revision to its global oil demand outlook for 2025. Markets took it as calling out the obvious, and Crude Oil is facing selling pressure again this Wednesday.

The US Dollar Index (DXY), which tracks the performance of the Greenback against six other currencies, is steady after having ticked higher earlier on Wednesday. The main focus is on the Consumer Price Index (CPI) release for October. An uptick in inflation would diminish the possibility of an interest-rate cut in December, just a day after Minneapolis Fed President Neel Kashakari warned markets that the December rate cut is not a given at all. 

At the time of writing, Crude Oil (WTI) trades at $68.50 and Brent Crude at $72.25.

Oil news and market movers: Waiting for API data     

• Crude inventories in the Amsterdam - Rotterdam - Antwerp region rose by 1.1 million barrels in the week ended Nov. 8 to 51.7 million barrels, Genscape data show. 
• Chinese Cnooc’s Huizhou Phase II refinery halted units on Tuesday due to fluctuating production processes, according to the city’s fire department, Bloomberg reports.
• The Abadan Oil refinery in Iran has communicated that it has taken measures to keep Oil exports stable under President Donald Trump, Reuters reports. 
• The American Petroleum Institute will release its weekly figures for the US Crude Stockpile change. Last week, there was a surprise build of 3.132 million barrels. Numbers are expected at 21:30 GMT. 

Oil Technical Analysis: Outlook not going anywhere

Crude Oil prices are unable to catch a break and remain facing substantial selling pressure. The fact that OPEC has revised its demand outlook for a fourth time is really not moving the needle at all for Oil prices as long as nothing fundamentally changes in terms of supply and demand. Treat brief geopolitical elements as blips on the radar as the overall trend sees Crude Oil prices sliding lower in the longer term. 

On the upside, The 55-day Simple Moving Average (SMA) at $70.40 is the first to be considered before the hefty technical level at $73.72, with the 100-day Simple Moving Average (SMA) and a few pivotal lines. The 200-day SMA at $76.71 is still quite far off, although it could get tested in case tensions in the Middle East arise. 

Traders need to look much lower, towards $67.12 – a level that held the price in May and June 2023 – to find the first support. 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

• EUR/CAD gauges a temporary cushion near 1.4800, however, more downside looks likely.
• The ECB is expected to reach a neutral rate by the first half of 2025.
• Investors expect the BoC to cut interest rates by 50 bps in December.

The EUR/CAD pair discovers temporary support near the round-level support of 1.4800 in European trading hours on Wednesday. The asset finds an interim cushion. However, the downside bias remains intact as US President-elected Donald Trump’s tariff policies are expected to result in a trade war between the Eurozone and the United States administration.

In the election campaign, Trump vowed to raise tariffs by 10% universally and mentioned that the Euro (EUR) bloc would "pay a big price" for not buying enough American exports. The impact is seen denting German’s output by 1%, which is Eurozone’s largest nation, according to European Central Bank (ECB) policymaker and President of the Bundesbank Joachin Nagel.

On Tuesday, Governing Council Member and Bank of Finland Governor Olli Rehn suggested that Europe should position itself better for Trump’s administration at a conference in London. On the interest rate outlook, Rehn said the central bank is heading towards the neutral rate and is seen reaching by the first half of the next year but the pace will be dependent on the overall assessment of dynamic factors at each meeting.

"Current market data and simple maths seem to imply that we would leave restrictive territory sometime in the spring/winter next year 2025," Rehn said, Reuters reported.

Meanwhile, the Canadian Dollar (CAD) has been underpinned by market participants against the Euro for the past few weeks but its own outlook against other major currencies is downbeat as the Bank of Canada (BoC) is expected to cut interest rates again by 50 basis points (bps) to 3.25% in the December meeting.

Growth & inflation tariff impact to drive Fed-ECB divergence. Growth and inflation forecasts in light of the US election result last week are being updated, ABN AMRO’s macro analysts note.

Fewer cuts by the Fed, more rate cuts by the ECB

 “While the election count has not fully concluded, the Republican party looks on course to win a House majority, to accompany the presidency and the Senate majority. By controlling all three branches of government, president Trump therefore has significant power to enact his policy platform.”

“It remains highly uncertain how far Trump will go with his tariff plans, and so there is naturally high uncertainty around our new forecasts. But broadly speaking, the main outcomes of the plans are likely to be: 1) much lower eurozone growth and inflation than in our prior baseline. 2) significantly higher US inflation, and (ultimately) lower growth.”

“This combination is likely to mean fewer interest rate cuts by the Fed, but more rate cuts by the ECB; this will in turn continue to weigh on the euro, which has already weakened significantly in recent weeks as markets moved to price in a Trump victory.”

USD/CNH traded higher but eased post CNY fix. Pair was last at 7.2236, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Bullish momentum on daily chart intact

“CNY fix came in much stronger than expected this morning – ‘conveys’ a message that recent spot USD/CNH move may be coming close to testing policymakers' threshold of tolerance for CNH weakness. On one hand, it may serve as a deterrence against further weakening in RMB but on the other, trump trade momentum may mean that USD/CNH remains better bid on dips.”

“Given a strong USD trend, policymakers can only slow pace of RMB depreciation at best. For USD/CNH to reverse trend, the USD needs to ease.”

“Bullish momentum on daily chart intact while RSI is near overbought conditions. Resistance at 7.25, 7.2750 levels. Support at 7.22, 7.20 (200 DMA).”

The Euro (EUR) continued to trade lower amid political uncertainties in Germany. Minority government faces economic and diplomatic challenges. EUR was last seen at 1.0612 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is bearish

“PM Scholz is seeking confidence vote earlier on 16 Dec instead of 15 Jan – but is expected to lose. Snap elections likely planned for 23 Feb. Elsewhere, EUR is likely to bear the brunt of the US election outcome. Trump presidency will result in shifts in US foreign, trade policies.”

“The potential 20% tariff (if implemented) can hurt Europe where growth is already slowing, and that US is EU’s top export destination. EU-UST yield differentials have already widened and may widen further as markets speculate on a dovish ECB, with chatters of 50bp cut at Dec meeting.”

“Daily momentum is bearish while RSI fell. Support at 1.06 levels (2024 low). Breach below this support will open way for further downside towards 1.0450/1.05 levels. Resistance at 1.0740 (76.4% fibo), 1.0810/30 levels (21 DMA, 61.8% fibo retracement of 2024 low to high).”

The US Dollar (USD) continued its march higher. As Trump nomination started to make its way to newswires, markets are also starting to adjust their expectations, believing that Trump may hit the ground running in Jan 2025, unlike in 2016 when he was less prepared. DXY was last at 105.95 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Trump policy uncertainty to keep USD supported on dips

This is helping to lend a boost to Trump trade (i.e. long USD, short CNH). Elsewhere, USD’s move higher was also likely in anticipation of Fedspeaks (Powell speaks on Fri morning), US data (CPI tonight and PPI tomorrow). Consensus expects core CPI to hold steady at 3.3% while headline CPI may come in higher at 2.6%. The uptick may raise doubts if Fed will still cut rates in Dec, adding to USD upward pressure.

“Tariff risk and Trump policy uncertainty may continue to keep USD supported on dips. Daily momentum is bullish while RSI rose. Near term risks skewed to the upside. Resistance here at 106.20, 106.50 levels (2024 high). Support at 104.60 (61.8% fibo), 103.70/80 levels (200 DMAs, 50% fibo retracement of 2023 high to 2024 low).”

The USD’s post-election strength has been driven by widening US bond yield differentials against its counterparts because of US inflation worries over Trump’s plans for blanket tariffs, mass deportation of illegal immigrants, and tax cuts, DBS’ Senior FX Strategist Philip Wee notes.

S&P 500 Index retreats for the first time in six sessions

“The US Treasury 10Y yield rose by 12.3 bps to 4.43%, fully retracing its third quarter’s decline despite the two Fed cuts in September and November. The S&P 500 Index retreated for the first time in six sessions from profit-taking.”

“The index fell by 0.3% to 5984 overnight after hitting the psychological 6000 level on Monday, driven by rising US Treasury yields after the bond markets returned from the Veteran’s Day holiday.”

“With the futures market pulling back more than 100 bps of next year’s Fed cuts since mid-September, let’s see if investors start to worry about economic growth hopes baked into equities from Trump’s policies. Be alert to profit-taking risks in Bitcoin after this month’s surge to 90k.”

• AUD/USD hovers slightly above 0.6500 ahead of the US inflation data for October.
• Investors expect that Trump’s policies will be inflationary for the US economy.
• The Australian Dollar will be guided by the labor market data for October.

The AUD/USD pair trades in a tight range near a three month-low, slightly above 0.6500 in the European trading session on Wednesday. The Aussie pair turns sideways as investors await the United States (US) Consumer Price Index (CPI) data for October, which will be published at 13:30 GMT.

According to the estimates, the headline inflation accelerated to 2.6% from 2.4% in September on year-on-year. In the same period, the core CPI – which strips off volatile food and energy prices – is estimated to have grown steadily by 3.3%. On month, headline and core inflation are expected to have risen at a steady pace of 0.2% and 0.3%, respectively. Investors will pay close attention to the inflation to get cues on the Federal Reserve’s (Fed) likely interest rate action in the December meeting.

The inflation data has regained its mojo lately as investors worry that the United States (US) inflation could rebound again, with a high probability that President-elected Donald Trump could raise import tariffs by 10% and lower corporate taxes in this administration.

On Tuesday, the comments from former Fed official Loretta Mester at the UBS European Conference in London indicated that she agreed with market expectations of fewer rate cuts in 2025 due to a potential tariff hike by Donald Trump. "The market is right," she remarked, "they're probably not going to have as many cuts next year as was assumed or expected in September," CNBC said, Reuters reported.

Meanwhile, the Australian Dollar (AUD) struggles to gain ground despite firm expectations that the Reserve Bank of Australia (RBA) will not start reducing interest rates this year. The RBA still sees upside risks to price pressures with labor market remaining steady. To get cues about the current labor market status, investors will focus on the Employment data for October, which will be published on Thursday. The Unemployment Rate is estimated to have remained steady at 4.1%. The Australian economy is expected to have added 25K new workers, lower than 64.1K in September.

The Dollar Index (DXY) powered higher for a third session to 106, fully retracing its third-quarter decline, DBS’ Senior FX Strategist Philip Wee notes.

Strong USD getting expensive

“Several exchange rates in the DXY basket are near critical levels.  EUR/USD bounced off April’s low of 1.06 overnight. GBP/USD fell below 1.28 to 1.2748, near August’s low of 1.2665.”

“The weaker European currencies pushed USD/CHF above 0.88 this week for the first time since late July. USD/JPY is near the psychological 155 level. USD/CAD’s rise stalled at a new year’s high of around 1.3970 this month.”

“Per the 14-day RSI, DXY appears overbought, and many currencies oversold from the Trump Trade.”

• EUR/USD remains vulnerable amid uncertainty over a potential trade war between the Eurozone and the US.
• ECB’s Rehn sees the Deposit Facility rate heading to the neutral rate in the first half of 2025.
• Investors await US inflation data and speeches from a slew of Fed officials.

EUR/USD extends its losing spell for the fourth trading day and touches a fresh year-to-date (YTD) low of 1.0592 during the European session on Wednesday amid caution ahead of the United States (US) Consumer Price Index (CPI) data for October, which will be published at 13:30 GMT. 

The CPI report is expected to show that the annual headline inflation accelerated to 2.6% from 2.4% in September. The core CPI – which excludes volatile food and energy prices – rose steadily by 3.3%.

The inflation data will influence market expectations for the Federal Reserve’s (Fed) likely monetary policy action in December. The Fed is expected to cut interest rates again by 25 basis points (bps) to 4.25%-4.50% next month, according to the CME FedWatch tool. However, the likelihood has eased to 62% from 70% a week ago. Market expectations for a Fed interest rate cut in December have lately slightly faded as investors expect that the United States (US) economic outlook will improve and price pressures will escalate under President-elect Donald Trump’s administration.

Trump vowed to raise import tariffs by 10% and lower corporate taxes in his election campaign. This move will increase demand for domestic goods and boost labor demand and business investment, eventually prompting inflationary pressures and forcing the Fed to follow a more gradual rate-cut cycle.

On Tuesday, Minneapolis Federal Reserve Bank President Neel Kashkari cautioned at a Yahoo! Finance event, "If inflation surprises to the upside before December, that might give us pause.” Kashkari added that the monetary policy is "modestly restrictive right now," and expects economic growth to persist.

In Wednesday’s session, investors will also focus on speeches from a slew of Fed officials for fresh guidance on interest rates.

Daily digest market movers: EUR/USD remains under pressure on Euro’s underperformance

• Euro’s (EUR) underperformance from the past week across the board has also kept the major currency pair on the back foot. The Euro is downbeat due to multiple headwinds, such as a potential trade war between the Eurozone and the US and the collapse of the German three-party government.
• On Tuesday, European Central Bank (ECB) Governing Council Member and Bank of Finland Governor Olli Rehn suggested that Europe should position itself better ahead of Trump’s second term. "If a trade war were to start, Europe must not be unprepared,” Rehn said. A trade war between both sides of the Atlantic looks likely, as Trump mentioned in his election campaign that the euro bloc will "pay a big price" for not buying enough American exports.
• When asked about his views on the ECB interest rate outlook, Rehn commented that the Deposit Rate could decline to the so-called neutral rate in the first half of 2025, Reuters reported. According to the ECB staff, the neutral rate is around 2% or 2.25%.
• Meanwhile, the collapse of the German three-party coalition after Chancellor Olaf Scholz sacked Finance Minister Christian Linder last week has also been a major cause of weakness in the Euro. According to a Focus Online report, German Olaf will call a confidence vote on December 18 and the snap election on February 23.
• Going forward, investors will focus on ECB President Christine Lagarde’s speech for fresh interest rate guidance, which is scheduled for Thursday.

Technical Analysis: EUR/USD remains weak near YTD lows around 1.0600

EUR/USD hovers near the fresh year-to-date low around 1.0600 in European trading hours on Wednesday. The major currency pair is expected to face more downside, with the 20-day Exponential Moving Average (EMA) turning vertically south near 1.0800.

The return of the 14-day Relative Strength Index (RSI) in the range of 20.00-40.00 indicates bearish momentum gaining traction and adds to evidence of more downside.

Looking down, the pair could decline to near the psychological support of 1.0500 after breaking below 1.0600. On the flip side, the round-level resistance of 1.0700 will be the key barrier for the Euro bulls.

(The story was corrected at 10:30 GMT to say in the first bullet of daily digest market movers that "The Euro is downbeat due to multiple headwinds not tailwinds")

The US Dollar (USD) is likely to trade in a range between 7.2200 and 7.2500. In the longer run, the level to monitor now is 7.2800; the next resistance above 7.2800 is at 7.3115, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

USD/CNH can try to break and stay below 7.2200  

24-HOUR VIEW: “The following are the excerpts from our update yesterday, when USD was at 7.2240: ‘There has been a tentative slowdown in momentum. However, provided that USD remains above 7.2000 (minor support is at 7.2090), it could edge higher, and possibly test the major resistance at 7.2400 before a more sizeable and sustained pullback is likely.’ While our view of a stronger USD was correct, we underestimated its strength, as it soared to 7.2559 before easing off to 7.2440 (+0.23%). The rapid rise is deep in overbought territory, but there is no sign of a pullback just yet. Overall, it appears that USD is likely to trade in a range today, probably between 7.2200 and 7.2500.”

1-3 WEEKS VIEW: “We turned positive in USD last Thursday (07 Nov, spot at 7.2020), indicating that ‘The level to watch on the upside is 7.2400.’ Yesterday (12 Nov, spot at 7.2240), we indicated the following: ‘To continue to rise in a sustained manner, USD must break clearly above 7.2400. The likelihood of USD breaking clearly above 7.2400 will increase in the next few days, provided that 7.1720 (‘strong support’ previously at 7.1400) is not breached. Looking ahead, the next level to monitor above 7.2400 is 7.2800.’ USD subsequently soared to 7.2559. As indicated, the level to monitor now is 7.2800. Looking ahead, the next resistance above 7.2800 is 7.3115. The ‘strong support’ level has moved higher to 7.2000 from 7.1720.”

Of course, the US election and the increased likelihood of high US tariffs do not only affect the G10 currencies. Emerging markets are also likely to suffer from the US trade policy, especially Mexico. Nevertheless, the initial reaction of Latin American currencies to the result was somewhat surprising. Although the peso depreciated on election night, the weakness did not last long. In fact, the peso ended Wednesday higher, Commerzbank’s FX analyst Michael Pfister notes.

USD/MXN is targeting levels towards 21

“At the time, I thought this was a very surprising reaction and the reasons given by some analysts, such as profit-taking, did not seem very convincing. Since then, the picture has changed significantly, with the peso again depreciating sharply and USD/MXN targeting levels towards 21, which is above our latest forecasts. Despite this development, we still believe that the risks for USD/MXN are to the upside.”

“In addition to Mexico-specific reasons, the risks associated with the new Trump administration clearly support this view. We see the peso as one of the main losers from this election. This is because Mexico exports almost all of its goods to the US. If Trump follows through with his trade policies, Mexico is likely to be one of the biggest losers, even more than the euro area and other European countries. This is because these are much more diversified in terms of their trade flows. In short, the coming months are unlikely to bring many positive developments for the peso.”

“The situation in Brazil is somewhat different. The Brazilian economy is one of the few that can keep pace with the very strong US growth. Given this robust economy, the central bank is even raising interest rates again, further improving the carry versus the peso. In addition, the spillover from tariffs is likely to be smaller than in Mexico. After all, Brazil exports a much smaller share of its exports to the US. Fiscal risks remain the main factor holding back the BRL, although there are anecdotal signs that progress is being made here as well. We therefore continue to believe that the Brazilian real should be better positioned than the peso in the coming weeks.”

The US Dollar (USD) is likely to continue to rise, potentially reaching 155.45. The major resistance at 156.00 is unlikely to come into view. In the longer run, increase in momentum suggests further USD strength towards 156.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Further USD strength towards 156.00 is likely

24-HOUR VIEW: “The strong surge that sent USD soaring to 154.92 was surprising (we were expecting range trading). Not surprisingly, upward momentum is robust. Today, USD is likely to continue to rise, potentially reaching 155.45. The major resistance at 156.00 is unlikely to come into view for now. On the downside, any pullback is likely to stay above 154.00, with minor support at 154.35.”

1-3 WEEKS VIEW: “We indicated two days ago (11 Nov, spot at 152.80), that the recent “upward momentum has eased.” We expected USD to trade in a 151.30/154.70 range. We did not expect the momentum to rebuild so quickly, as USD soared and broke above 154.70 (high has been 154.92). The increase in momentum suggests further USD strength towards 156.00. To keep the momentum going, USD must remain above the ‘strong support’ level, currently at 153.35.”

The Turkish lira exchange rate has mildly depreciated against the US dollar in recent days, but not noticeably so. This is all the more impressive because the dollar itself has been rallying, which has put most emerging market currencies in the region – eastern European currencies in particular – on the backfoot. The steadiness of the lira is pertinent because policymakers have taken pains to highlight Turkey’s improving current-account fundamentals in recent months, and there is an implication that this must help the exchange rate, Commerzbank’s FX analyst Tatha Ghose notes.

Current account improves in Turkey

“At the same time, we must not forget that just a quarter ago, we were hearing a lot in the media about large capital inflows into Turkey, driven by optimism about the new policy setup – this was supposedly helping the lira at that time, but we are not hearing much about that these days. The figure below recapitulates the actual data on these issues. The current-account balance, in seasonally-adjusted terms, has indeed been averaging better in recent months.”

“But it is worth remembering that the current-account balance also recorded surpluses historically when the economy had to slow down. At present, presumably it is higher interest rates which are beginning to have their desired contractionary effect. The ongoing improvement is encouraging alright, but not yet massive by comparison. Historically, the problem always proved to be sustainability – the current-account improvement was driven by an economic downturn, and policymakers were inevitably reluctant to accept the downturn for very long.”

“If the economy incurs a narrower current account deficit, it needs to import less foreign capital. In this sense, the drop-off in inflow is consistent with the current-account surplus, and should not be a source of concern. But there is one difference. On certain rare occasions, both current and capital accounts can move positively together – which constitutes a disequilibrium by definition – the country’s FX reserves would rise at this time and the currency is likely to appreciate.”

The market has almost ignored the inflation numbers over the last two days within the Central and Eastern Europe (CEE) region and the global story seems to be in the spotlight still, ING’s FX analyst Frantisek Taborsky notes.

Declining EUR/USD can keep pressure on the CEE currencies

“Today will not be much different. The calendar offers current account numbers for September in Poland, the Czech Republic and Romania. Those produced a positive surprise last month in the Czech Republic and a negative one in Poland, which the market could watch this time around to see if it was a one-off or a trend reversal.”

“However, the main story remains the declining EUR/USD which should keep pressure on the CEE currencies. We remain bearish here. If anything we see PLN outperforming the region but perhaps later rather than sooner, however yesterday EUR/PLN bounced off 4.360 which seems like a key level.”

“While HUF seems like a separate story now PLN/CZK may get the market's attention given the bounce back from 5.800 which seems like a limit to PLN's weakness here and could get some support.”

The New Zealand Dollar (NZD) is likely to trade with a downward bias towards 0.5900; a sustained break below this level is unlikely. In the longer run, risk for NZD appears to have shifted to the downside; it is too early to tell if the major support at 0.5850 is within reach, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Major support at 0.5850 may be within reach

24-HOUR VIEW: “Our view for NZD to trade in a range between 0.5945 and 0.5985 yesterday was incorrect, as it dropped to 0.5911. NZD closed lower by 0.63% at 0.5927. There has been a slight increase in momentum, and NZD is likely to trade with a downward bias towards 0.5900 today. As conditions are approaching oversold levels, a sustained break below 0.5900 is unlikely. Resistance levels are at 0.5940 and 0.5955.”

1-3 WEEKS VIEW: “We highlighted on Monday (11 Nov, spot at 0.5965) that ‘The outlook is unclear after the sharp but short-lived swings.’ We were of the view that NZD ‘could trade in a broad range of 0.5915/0.6045 for now.’ Yesterday, NZD dipped slightly below 0.5915, reaching a low of 0.5911. Despite the slight increase in momentum, the risk for NZD appears to have shifted to the downside. However, it is too early to tell if the major support at 0.5850 is within reach. Note that there is another support at 0.5880. To maintain the buildup in momentum, NZD must remain below the ‘strong resistance’ level, currently at 0.5975.”

The main event in sterling markets today is a speech by Bank of England’s Catherine Mann, the most hawkish member of the MPC, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR/GBP can remain close to the 0.8300 gravity line

“Markets will be attentive to any comments about the implications of the recent budget for monetary policy and any colour on the latest jobs/wage figures. Given her arch-hawkish stance, we suspect she could stress – if anything – the inflationary aspect of the government’s spending boost and perhaps focus more on the sticky wage figure rather than the rise in the unemployment rate in September.”

“Ultimately, the GBP curve does not need many more hawkish hints to move at this stage. Markets are pricing little to no chance of a cut in December, and only 50bp in total by September 2025. In our view, the risks remain skewed towards a dovish repricing and consequent negative impact on sterling, although a repricing lower in rates may take some time to materialise as markets will tread carefully when assessing the inflationary implications of the budget.”

“The soft momentum for the EUR means EUR/GBP could remain close to the 0.8300 gravity line.”

• Silver price gains ground due to trade repositions ahead of the US inflation data release on Wednesday.
• The US Consumer Price Index may report an increase of 2.6% YoY in October, with core CPI rising by 3.3%.
• Silver prices may struggle as the implementation of Trump’s proposed policies could delay further rate cuts by the Fed.

Silver prices (XAG/USD) extends gains for the second consecutive day, trading around $30.90 per troy ounce during the European session on Wednesday. Silver prices gain momentum as traders seem to adjust their positions ahead of a crucial US inflation report, which could shape expectations for potential Federal Reserve interest rate cuts.

Softer-than-expected US CPI data could strengthen expectations for steady rate reductions by the Fed, likely increasing demand for non-interest-bearing precious metals like silver. However, the headline Consumer Price Index (CPI) is projected to show a 2.6% year-over-year increase for October, compared to the previous 2.4% reading. Meanwhile, core CPI is expected to rise by 3.3%.

However, the price of the dollar-denominated Silver remains under pressure from a strengthening US Dollar (USD), fueled by expectations of fiscal expansion and inflationary policies under the potential Trump administration. A stronger USD makes Silver more expensive for buyers holding foreign currencies, which negatively impacts the commodity's demand.

The implementation of Trump’s proposed policies could lead to increased investment, spending, and labor demand, heightening inflation risks. This scenario may prompt the Federal Reserve (Fed) to adopt a more restrictive monetary policy stance.

Weak economic data from China, combined with the absence of direct economic stimulus, has heightened concerns about demand in the world’s largest manufacturing hub. Silver is also under pressure due to its significant use in electrification, especially in solar panels.

Meanwhile, Chinese-owned solar panel manufacturers are reducing production, partly due to fears that a potential victory by Trump in the upcoming US election could result in higher tariffs on the industry. Morgan Stanley has forecast that the Trump administration might impose immediate tariffs of up to 60% on Chinese imports.

The Australian Dollar (AUD) is under mild downward pressure; it could drift lower, but a sustained break below 0.6500 appears unlikely. In the longer run, there has been a tentative buildup in momentum; to decline in a sustained manner, AUD must break and remain below 0.6500, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

To decline further, AUD must break and remain below 0.6500

24-HOUR VIEW: “We expected AUD to trade in a 0.6555/0.6595 range yesterday. Our view was incorrect, as instead of trading in a range, AUD dropped to 0.6515, closing on a soft note at 0.6532 (-0.64%). Despite the decline, downward momentum has not increased much. However, provided that 0.6560 (minor resistance is at 0.6545) is not breached, AUD could drift lower to 0.6500. Due to the mild momentum, a sustained break below 0.6500 appears unlikely.”

1-3 WEEKS VIEW: “Our most recent narrative was from Monday (11 Nov, spot at 0.6585), wherein the recent pronounced but short-lived price movements have resulted in a mixed outlook. We indicated that AUD ‘could continue to trade in a choppy manner, likely between 0.6515 and 0.6690.’ Yesterday, AUD tested the lower end of our expected range, touching a low of 0.6515. There has been a tentative buildup in momentum, but it is too early to determine whether it is sufficient for a sustained decline. To decline in a decisive manner, AUD must break and remain below 0.6500. The likelihood of AUD breaking clearly below 0.6500 will increase in the coming few days, provided that 0.6600 is not breached. Looking ahead, the next support below 0.6500 is at 0.6460.”

EUR/USD has remained under intense pressure from a broad USD rally and may well make a move below 1.06 today if the US core CPI comes in at 0.3% MoM, ING’s FX analyst Francesco Pesole notes.

EUR to trade at 1.04 in the end of the year

“Despite the size of the recent EUR/USD drop, we must note that 1.060 is the short-term fair value level implied by short-term rate differentials. The USD:EUR two-year swap rate gap has continued to widen rapidly, and is currently around 185bp.”

“In other words, there is not much additional risk premium being added to EUR/USD compared to what rates are suggesting, as markets are doubling down on expectations that the ECB will slash rates more than the Fed ahead of the tariff impact on growth. We are, by all means, in the dovish camp with our ECB call, and actually think markets are still underpricing (30bp) the chances of a 50bp cut in December.”

“The eurozone calendar is quite quiet today and US news will drive EUR/USD. A stretched positioning argues for some short-term upward correction in the pair, but as per the USD section above, we don’t expect this to happen today given a still-hot US CPI. Regardless of short-term adjustments, the direction of travel is bearish for EUR/USD, in our view, and we target 1.04 for year-end.”

• EUR/JPY attracts buyers for the third straight day and climbs closer to the weekly top.
• The BoJ uncertainty continues to undermine the JPY and lends support to the cross.
• A neutral technical setup warrants caution for bulls amid the German political crisis. 

The EUR/JPY cross builds on the overnight bounce from the vicinity of the 163.25-163.20 horizontal support, or the weekly low and gains some follow-through traction on Wednesday. This marks the third day of a positive move and lifts spot prices to the top end of the weekly range, around the 164.60-164.65 region during the first half of the European session.

The uncertainty over the Bank of Japan's (BoJ) rate-hike plans is seen undermining the Japanese Yen (JPY) and turning out to be a key factor acting as a tailwind for the EUR/JPY cross. That said, speculations that Japanese authorities will intervene in the FX market to prop up the domestic currency, along with a weaker risk tone, should limit losses for the safe-haven JPY. Furthermore, a political crisis in Germany – the Eurozone's largest economy – continues to weigh on the shared currency and should cap gains for the currency pair. 

Moreover, neutral oscillators on the daily chart warrant some caution for bulls and suggest that any subsequent move up is more likely to face stiff resistance near the 165.00 psychological mark, or the 200-day Simple Moving Average (SMA). A sustained move beyond should lift the EUR/JPY cross towards the 165.45 hurdle en route to the 165.90-166.00 supply zone. This is followed by a multi-year peak, around the 166.65-166.70 area touched in October, which if cleared should pave the way for the resumption of a two-month-old uptrend. 

On the flip side, the 164.00 round figure now seems to protect the immediate downside ahead of the 163.25-163.20 horizontal support. A convincing break below the latter might prompt some technical selling and drag the EUR/JPY cross below the 163.00 mark, towards testing the next relevant support near the 162.50-162.45 region. The corrective decline could extend further towards the 50-day SMA, currently pegged near the 162.00-161.95 zone.

EUR/JPY daily chart

The Pound Sterling (GBP) is expected to continue to decline, but it remains to be seen if the major support at 1.2665 is within reach today. Un the longer run, downward momentum has surged; the next technical target is at 1.2665, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The next technical target is at 1.2665

24-HOUR VIEW: “GBP fell to a low of 1.2858 on Monday. When GBP was trading at 1.2870 yesterday, we pointed out that ‘there is scope for GBP to drop to 1.2835.’ We also pointed out that ‘the major support at 1.2800 is unlikely to come under threat.’ The sudden surge in downward momentum was surprising, as GBP broke below 1.2800 and plunged to 1.2719. GBP closed sharply lower by 0.96% at 1.2747. The impulsive downward momentum is likely to outweigh the deeply oversold conditions. In other words, GBP is expected to continue to decline, but it remains to be seen if the major support at 1.2665 (low in early August) is within reach today. On the upside, any rebound is likely to remain below 1.2810 with minor resistance at 1.2760.”

1-3 WEEKS VIEW: “Yesterday (12 Nov, spot at 1.2870), we highlighted that the ‘Slight buildup in momentum indicates GBP is likely to edge lower.’ We also highlighted that ‘the 1.2800 level is expected to provide significant support.’ The anticipated support at 1.2800 did not materialise as GBP plunged through this level and reached 1.2719. Downward momentum has surged as well. The next technical target is at 1.2665, the low in early August. We will continue to expect GBP to weaken as long as 1.2845 (‘strong resistance’ level was at 1.2975 yesterday) is not breached.”

• The Mexican Peso stabilizes after weakening for three days in a row. 
• Political changes across the border impacting Mexico have been the main driver of the Peso’s depreciation. 
• USD/MXN closes in on November high after bouncing from the base of a rising channel. 

The Mexican Peso (MXN) stabilizes on Wednesday after a three-day run of weakness spurred by a mixture of investor fears about the impact of President-elect Donald Trump’s trade and immigration agenda on Mexico, a generally risk-off tone to markets outside of the United States (US) (which tends to impact the risk-sensitive Peso disproportionately), and expectations that the Bank of Mexico (Banxico) will cut its main interest rate by 25 basis points (bps) (0.25%) at its up-and-coming meeting on Thursday. Lower interest rates are generally negative for a currency as they reduce foreign capital inflows. 

Mexican Peso weakens as headwinds gather across the border

The Mexican Peso has depreciated as markets price in the impact of Donald Trump’s proposed policy agenda on the Mexican economy. Trump is expected to implement high tariffs on Mexican goods entering the US, especially Chinese electric vehicles that are manufactured across the border in Mexico. The appointment of Mike Waltz as National Security Advisor and Marco Rubio as Secretary of State in the US are particularly bad signs from this perspective because of their known tough stance on China. Tariffs are expected to reduce demand for foreign imports, which in turn is likely to lower demand for the Mexican Peso too. 

The new Mexican government’s reforms to the judiciary also contravene the conditions of the existing free trade agreement between the US, Mexico and Canada, the USMCA. This could give Trump the opportunity to demand a renegotiation before the agreement officially expires in 2026, making the threat of tariffs more immediate. 

Trump’s plan to deport millions of illegal immigrants, many of whom are probably Mexican, is another potentially negative factor for the Peso since demand from workers in the US sending remittances home to Mexico is a key driver of the currency. 

The policy has also already drawn criticism from Mexico’s President Claudia Sheinbaum, who said the US needed immigrants for its economy and that “We will always defend Mexicans on the other side of the border.” 

The increasing likelihood that the Republican party will win a majority in the US Congress, allowing them free reign to implement Trump’s radical policies after winning the Senate, might also impact MXN. The final seats are still being called, but as things stand, the Republican party has won 216 to the Democratic party’s 207 seats, with only 12 outstanding, according to the Associated Press. The threshold for a majority is 218.

According to forecasts by El Financiero, a Republican majority in Congress with Trump as President could lead the Peso to weaken even further against the USD. In such a scenario, they estimate a band of between 21.14 and 22.26 for USD/MXN. 

Technical Analysis: USD/MXN closes in on November high

USD/MXN rallies for three consecutive days after finding a floor at the base of a rising channel. It appears to have renewed its short-term uptrend, and given the technical analysis saying that “the trend is your friend,” the odds favor a continuation higher. 

USD/MXN Daily Chart

Further, USD/MXN is also in an uptrend on a medium and long-term basis, adding weight to the move higher. A break above 20.80 (November 6 high) would confirm a higher high and an extension of the bullish trend. The next upside target lies at 21.00 (round number, psychological support), where buyers could start to meet resistance. 

The second round of post-election Trump trades has now taken the Dollar Index (DXY) to the 2022 highs as markets sink their teeth into the dual narrative of a wider rate and growth gap between the US and other developed countries. The latest news on the government appointment side is that Elon Musk and Vivek Ramaswamy will lead a ‘department of government efficiency’, which aims to slash bureaucracy and spending. It is too early to tell what this will effectively mean for public finances, but this confirms that Musk will play a key advisory role in the Trump administration, which likely fuels expectations for de-regulation and looser taxation, ING’s FX analyst Francesco Pesole notes.

DXY can consolidate above 106

“The strong USD is currently pricing in a good deal of Trump’s policy mix, and data releases/dovish Fed comments might offer good opportunities to take profit in bullish dollar positions. However, our house view for today’s US inflation report is that core CPI kept rising at a consensus 0.3% MoM in October, and headline CPI at 0.2%. This is above the 0.17%MoM rate that needs to be averaged over time to hit the 2% inflation target, and should keep markets on the dovish side of the pricing for the Fed.”

“Still, pricing is already quite cautious on further Fed easing, with only 15bp priced in for December and 23bp by January. This means there is probably an asymmetric downside risk for the dollar today in case of a slightly lower-than-expected core CPI print. There are also a few Fed speakers to monitor today: Kashkari, Williams, Musalem and Schmid.”

“If we are right with our CPI call, then the dollar rally could find a bit more steam and DXY consolidate above 106. Nevertheless, the recent bullish move is starting to look a bit stretched, and the risk of a positioning-led short-term USD correction similar to the 7 November one is quite high.”

Barring a break above 1.0660, EUR could decline further to 1.0585 before stabilisation can be expected. In the longer run, downward momentum remains strong; the focus is on 1.0555. The next technical objective below 1.0555 is at 1.0500, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The focus is on 1.0555

24-HOUR VIEW: “Yesterday, when EUR was at 1.0655, we highlighted that it ‘could decline further, but the major support at 1.0600 could be just out of reach.’ Our view of a lower EUR was correct, even though it fell more than expected to 1.0594, recovering to close at 1.0623 (-0.29%). Not surprisingly, after dropping sharply over the past few days, conditions are deeply oversold. However, the weakness has not stabilised. Today, barring a break above 1.0660 (minor resistance is at 1.0640), EUR could decline further to 1.0585 before stabilisation can be expected. This time around, the next major support at 1.0555 is likely out of reach.”

1-3 WEEKS VIEW: “Last Thursday (07 Nov, spot at 1.0730), we indicated that the steep selloff last Wednesday ‘suggests further EUR weakness’ and ‘the levels to watch are 1.0665 (low in Jun) and the year-to-date low of 1.0600 in April.’ Following a break below 1.0665 on Monday, we indicated yesterday (12 Nov, spot at 1.0655) that ‘We will continue to hold a negative EUR view as long as 1.0760 (‘strong resistance’ level) is not breached.’ We added, ‘if EUR breaks below 1.0600, the focus will shift to 1.0555.’ In NY trade, EUR broke below 1.0600 and reached 1.0594. While conditions are oversold, downward momentum remains strong. As indicated, the focus is now on 1.0555. On the upside, the ‘strong resistance’ level has moved lower to 1.0705 from 1.0760. Looking ahead, if EUR were to break below 1.0555, the next technical objective lies at 1.0500.”

• AUD/JPY gains ground as Yen buyers adopt caution due to political instability in Japan.
• Japan’s Producer Price Index increased by 3.4% YoY in October and rose by 0.2% MoM.
• Australian PM Anthony Albanese shared about trade discussions with US President-elect Donald Trump during a phone call last week.

AUD/JPY extends its gains for the third successive day, trading around 101.20 during European hours on Wednesday. The rise in the AUD/JPY pair is largely due to the weakened Japanese Yen (JPY), fueled by growing doubts over future rate hikes by the Bank of Japan (BoJ). Japan’s fragile minority government is expected to complicate any plans for tightening monetary policy.

On the data front, the BoJ’s preliminary report on Wednesday showed that Japan’s Producer Price Index (PPI) increased by 3.4% year-over-year in October, exceeding expected 3.0% and previous 3.1% readings. Meanwhile, the PPI rose by 0.2% month-over-month, surpassing the expected flat growth for the month.

Meanwhile, the BoJ’s Summary of Opinions from its October meeting highlighted division among policymakers regarding additional rate hikes. Nevertheless, the central bank maintained its outlook, suggesting it could raise its benchmark rate to 1% by the second half of fiscal 2025, amounting to a total policy tightening of 75 basis points from the current rate.

The Australian Dollar (AUD) gained support after a radio interview with Australia's Prime Minister (PM), Anthony Albanese. Albanese said that he discussed trade relations with US President-elect Donald Trump during a phone call last week. He informed Trump that the US has a trade surplus with Australia and stressed that it’s in Washington’s best interest to maintain "fair trade" with its ally.

On Wednesday, Australia’s Wage Price Index showed a 3.5% year-over-year rise in the third quarter, down from the 4.1% growth seen in the previous quarter and slightly below the anticipated 3.6% increase. This represents the slowest wage growth since Q4 2022. Meanwhile, the quarterly index remained steady at 0.8% in Q3, just under the expected 0.9%.

• The Pound Sterling trades back and forth near a three-month low of around 1.2750 against the US Dollar as investors brace for US inflation data for October.
• Market expectations for the Fed to cut interest rates in December have slightly diminished.
• Investors await BoE Mann’s speech and a slew of Fed speakers for fresh interest rate guidance.

The Pound Sterling (GBP) consolidates in a tight range near a fresh three-month low around 1.2750 against the US Dollar (USD) in Wednesday’s London session. The GBP/USD pair trades quietly as investors await the United States (US) Consumer Price Index (CPI) data for October, which will be published at 13:30 GMT. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, clings to gains at around 106.00, the highest level seen in more than six months.

Economists expect the headline inflation to accelerate to 2.6% from 2.4% in September, with the core CPI – which excludes volatile food and energy prices – rising steadily by 3.3% year-on-year. The monthly headline and core CPI are estimated to have risen steadily by 0.2% and 0.3%, respectively.

The inflation data isn’t expected to significantly impact market expectations for the Federal Reserve’s (Fed) likely monetary policy action in the December meeting unless there is a sharp divergence from consensus. Recent commentary from a majority of Fed officials indicated that they are confident about the disinflation trend remaining on track to the bank’s target of 2%.

Still, Minneapolis Federal Reserve Bank President Neel Kashkari struck a cautious note on Tuesday at a Yahoo! Finance event. "If inflation surprises to the upside before December, that might give us pause,” he said. Kashkari added that the monetary policy is "modestly restrictive right now," and he expects economic growth to persist. When asked about the impact of President-elect Donald Trump’s policies on the inflation outlook, Kashkari said: “The tariff is a one-time increase in prices, that's not inflationary in itself.”

President-elect Donald Trump has vowed to raise import tariffs by 10% and lower corporate taxes in his election campaign.

According to the CME FedWatch tool, the probability for the Fed to reduce interest rates by 25 basis points (bps) to 4.25%-4.50% in December is 62%, down from 70% a week ago. 

Daily digest market movers: Pound Sterling remains vulnerable against its major peers

• The Pound Sterling stays on backfoot in European trading hours on Wednesday after a sharp sell-off on Tuesday. The British currency tumbled after the United Kingdom (UK) labor market data for three months ending September showed that the Unemployment Rate rose more than expected to 4.3%. Fresh payrolls also came in lower at 219K against the 373K jobs added in three months ending August.
• "The higher (UK) unemployment rate could see the market start to price in a higher chance of a rate cut from the Bank of England (BoE) next month," according to analysts at XTB.
• However, not all components of the labor market data were unfavorable for the Pound Sterling as Average Earnings data, a key measure of wage growth that drives consumer spending, came in higher than expected. 
• After the employment data release, the comments from BoE Chief Economist Huw Pill at the conference of Swiss Bank UBS suggested that he is slightly concerned over inflationary pressures remaining persistent. "As we saw in the labour market data that was released this morning, pay growth remains quite sticky at elevated levels and levels that - given the outlook for productivity growth in the UK - are hard to reconcile with the UK inflation target,” Pill said, Reuters reported.
• In Wednesday’s session, investors will pay close attention to BoE external member Catherine Mann’s speech, which is scheduled at 09:45 GMT. Mann, an outspoken hawk, supported leaving interest rates unchanged at 5% in a policy meeting last week when all other eight Monetary Policy Committee (MPC) members voted for a 25 bps interest rate cut. In the US session, several Fed officials are also set to speak.

Technical Analysis: Pound Sterling stays below 200-day EMA

The Pound Sterling wobbles above the three-month low near 1.2700 against the US Dollar. The GBP/USD weakened sharply on Tuesday, breaking below the 200-day Exponential Moving Average (EMA), which trades around 1.2860. The overall trend of the Cable turned broadly negative after price action fell below the lower boundary of the rising channel, which set a bearish reversal.

A bearish momentum has kicked in with the 14-day Relative Strength Index (RSI) falling below 40.00.

Looking down, the August low at 1.2665 will be a major cushion for Pound Sterling bulls. On the upside, the Cable will face resistance near the psychological figure of 1.3000.

• NZD/USD may test the upper boundary of the descending channel near the nine-day EMA at 0.5961 level.
• The nine-day EMA staying below the 14-day EMA indicates persistent weakness in short-term price momentum.
• The pair may navigate the area around the lower boundary of the descending channel at 0.5860 level.

The NZD/USD pair holds ground after registering losses in the previous session, trading around 0.5920 during European hours on Wednesday. The daily chart analysis shows a strong bearish trend, with the NZD/USD pair moving downwards within a descending channel.

The nine-day Exponential Moving Average (EMA) remains below the 14-day EMA, indicating continued weakness in short-term price momentum. Additionally, the 14-day Relative Strength Index (RSI), a key momentum indicator, is below the 50 mark, reflecting sustained bearish momentum. A further decline toward the 30 level would amplify this downward trend for the NZD/USD pair.

On the downside, the NZD/USD pair may find support around the psychological level of 0.5900. A break below this level could increase selling pressure, pushing the pair toward the lower boundary of the descending channel at 0.5860, with further throwback support at the psychological level of 0.5850.

In terms of resistance, the pair faces an immediate hurdle at the upper boundary of the descending channel near the nine-day EMA at 0.5961, followed by the 14-day EMA at 0.5977. A break above the 14-day EMA would strengthen price momentum, potentially enabling the NZD/USD pair to approach the psychological level of 0.6100.

NZD/USD: Daily Chart

European Central Bank (ECB) Governing Council member and Bank of France President François Villeroy de Galhau shed light on the central bank’s policy move on Wednesday.

Additional comments

Market reaction

EUR/USD is trading 0.15% lower on the day at 1.0606, as of writing.

• USD/CAD strengthens as the US Dollar appreciates due to optimism surrounding the Trump trades.
• The implementation of US President-elect Donald Trump’s proposed fiscal policies could delay further rate cuts by the Fed.
• The commodity-linked CAD weakens as Oil prices decline following OPEC's lowered forecast for global Oil demand growth in 2024.

USD/CAD moves upwards for the fourth successive session, trading around 1.3960 during the early European hours on Wednesday. The primary factor contributing to the recent weakness in EUR/USD is the strength of the US Dollar (USD) amid optimism surrounding the Trump trades.

The implementation of US President-elect Donald Trump’s proposed fiscal policies could stimulate investment, increase government spending, and bolster labor demand. However, this surge in economic activity could also fuel inflation risks.

On Tuesday, Minneapolis Fed President Neel Kashkari affirmed that the central bank remains confident in its ongoing battle against transitory inflation but cautioned that it is still too early to declare full victory. Kashkari also noted that the Fed would refrain from modeling the economic impact of Trump’s policies until there is greater clarity on the specifics of those policies.

The decline in crude Oil prices continues to weaken the commodity-linked Canadian Dollar (CAD). Notably, Canada remains the largest Oil exporter to the United States (US). As of this writing, West Texas Intermediate (WTI) Oil trades near $68.00. Crude Oil prices fell after the Organization of the Petroleum Exporting Countries (OPEC) reduced its forecast for global Oil demand growth in 2024.

With a quiet economic calendar in Canada this week, the Loonie Dollar is taking a backseat to the Greenback. Traders are now turning their attention to the upcoming US inflation data release on Wednesday, which could provide more insight into future US policy.

• USD/CHF extends its upside to near 0.8830 in Wednesday’s early European session. 
• The US October CPI inflation data will take center stage on Wednesday. 
• The uncertainty surrounding Trump’s policy and geopolitical risks might cap the pair’s upside.

The USD/CHF pair trades in positive territory for the fourth consecutive day around 0.8830 during the early European session on Wednesday. The rally in the US Dollar (USD) due to the Trump trades provides some support to the pair.

The Trump trades have underpinned the Greenback and US Treasury bond yields as markets expect the Federal Reserve (Fed) to slow the pace of future rate reduction. The markets have priced in nearly 62.4% of the 25 basis points (bps) rate cut by the Fed at the December meeting, down from 75% last week, according to the CME FedWatch Tool. 

Market players will keep an eye on the key US Consumer Price Index (CPI) inflation data for October, which is due later on Wednesday. The headline CPI is estimated to rise 2.6% YoY in October, faster than the previous reading of a 2.4% increase. The core CPI is expected to remain at 3.3% YoY in October. Meanwhile, the monthly CPI and the core CPI are expected to show an increase of 0.2% and 0.3%, respectively.

A downside surprise in the US annual CPI inflation might diminish the expectations of a December Fed rate cut and could exert some selling pressure on the USD. On the other hand, the markets could push back against expectations for a rate cut in December on hotter-than-expected CPI readings, lifting the Greenback. 

On the other hand, the safe-haven flows could boost the Swiss Franc (CHF) and might cap the upside for the pair. Traders will monitor the development surrounding increased uncertainty about the impact of likely tariffs in the upcoming Trump administration and the ongoing geopolitical tensions in the Middle East. 

Here is what you need to know on Wednesday, November 13:

The Trump trades-inspired broader market rally takes a breather early Wednesday as the focus shifts back toward the economic data, anticipating the all-important US Consumer Price Index (CPI) report slated for release in American trading.

The US Dollar (USD) pauses its ongoing upsurge alongside the US Treasury bond yields as traders book profits on their long USD positions in the lead-up to the US inflation showdown. The data is critical to gauging the Federal Reserve’s (Fed) easing trajectory.

Markets are pricing in about a 62% chance of another 25 basis points (bps) interest rate cut in for December, down from around 83% a month ago, according to the CME Group's FedWatch Tool.

US President-elect Trump’s hardline policies on trade and lower taxes are seen as inflationary, calling for higher interest rates while supporting the Greenback across its major rivals.

Additionally, lingering China’s economic concerns and pre-US CPI nervousness keep traders on the edge, leaving major currencies gyrating in a narrow range.  

USD/JPY is sitting at its highest level since July 30, near 155.00. The absence of Japanese verbal intervention and uncertainty over the Bank of Japan (BoJ) rate hikes amid the fragile minority government in Japan remains a drag on the domestic currency.

AUD/USD has entered a downside consolidation phase below 0.6550, with risk-off flows checking its recovery. NZD/USD struggles above 0.5900 as investors move away from risk assets. USD/CAD retakes 1.3950 amid subdued WTI oil prices.

EUR/USD falls back to test the 1.0600 support after hitting a yearly low at 1.0594 on Tuesday. German political uncertainty and policy divergence between the Fed and the European Central Bank (ECB) undermine the pair.

GBP/USD remains vulnerable near 1.2740, having stretched lower after the mixed UK labor data. BoE policymaker Catherine Mann’s speech is next in focus.  

Gold holds a tepid bounce just above $2,600, within a touching distance of two-month lows. US CPI data and a bunch of Fed speakers are eagerly awaited for the next big move in the bright metal.

• EUR/AUD edges lower to near 1.6250 in Wednesday’s Asian session. 
• The cross maintains the negative view below the 100-period EMA, with the bearish RSI indicator. 
• The initial support level is seen at 1.6183; the first upside barrier is located at 1.6293. 

The EUR/AUD cross struggles to gain ground around 1.6250 on Wednesday during the early European session. The US proposed tariff increases on Chinese goods by US President-Elect Donald Trump undermine the China-proxy Australian Dollar (AUD) as Australia is one of China’s largest exporters.

According to the 4-hour chart, the bearish outlook of EUR/AUD remains intact as the cross holds below the key 100-period Exponential Moving Average (EMA). Furthermore, the downward momentum is supported by the Relative Strength Index (RSI), which stands below the midline near 46.50, suggesting that there could still be room for further downside in the near term. 

The initial support level for the cross emerges near the lower limit of the Bollinger Band at 1.6183. Extended losses could see a drop to 1.6135, the low of October 18. The additional downside filter to watch is the 1.6100 psychological level. 

On the upside, the upper boundary of the Bollinger Band near 1.6293 acts as an immediate resistance level for the price. The next hurdle is seen at 1.6322, the 100-day EMA. Any follow-through buying see a rally to 1.6500, round number. 

EUR/AUD 4-hour chart

FX option expiries for Nov 13 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0580 745m
• 1.0600 2.1b
• 1.0625 889m
• 1.0650 1.4b
• 1.0700 1.3b
• 1.0750 959m
• 1.0775 525m

USD/JPY: USD amounts                     

• 152.00 708m
• 153.00 875m
• 155.00 926m

USD/CHF: USD amounts     

• 0.8650 841m
• 0.8700 424m

EUR/GBP: EUR amounts        

• 0.8305 830m

• Gold price stages a goodish recovery from a nearly two-month low touched on Tuesday.
• Elevated US bond yields and a bullish USD might cap gains for the non-yielding XAU/USD.
• Traders now look forward to the crucial US consumer inflation figures for a fresh impetus. 

Gold price (XAU/USD) attracts some buyers during the Asian session on Wednesday and for now, seems to have snapped a three-day losing streak to its lowest level since September 20, around the $2,590-$2,589 region touched the previous day. The uptick lacks any obvious fundamental catalyst and could be attributed to some repositioning trade ahead of the US consumer inflation figures. The crucial data might influence expectations about the Federal Reserve's (Fed) rate-cut path and provide a fresh directional impetus to the non-yielding yellow metal. 

Ahead of the key data risk, the US Dollar (USD) enters a bullish consolidation phase following the recent upsurge in its highest level since early May. This, along with fears that US President-elect Donald Trump’s protectionist tariffs will impact the global economy and a generally weaker tone around the equity markets, offers some support to the safe-haven Gold price. The upside for the XAU/USD, however, seems limited amid expectations that Trump's expansionary policies could boost inflation and restrict the Fed from easing its monetary policy aggressively.

Gold price might struggle to capitalize on recovery amid optimism over Trump’s proposed expansionary policies

• The US Dollar climbed to its highest level since early May on Tuesday amid optimism over US President-elect Donald Trump’s proposed expansionary policies and dragged the Gold price below the $2,600 mark for the first time since September.
• Furthermore, the likelihood of Trump's protectionist tariffs being implemented should put upward pressure on inflation and limit the scope for the Federal Reserve to cut interest rates, which remain supportive of elevated US bond yields.
• Richmond Fed President Tom Barkin said Tuesday that inflation might be coming under control, though the path remains uncertain and that the core gauge might give a signal that it risks getting stuck above the central bank's 2% target. 
• Separately, Minneapolis Fed President Neel Kashkari noted that any upside surprise in inflation in the weeks leading up to the December FOMC monetary policy meeting could encourage the central bank to pause interest rate cuts. 
• The yield on the benchmark 10-year US government bond remains close to a multi-month peak touched after Trump's victory in the US presidential election amid reduced bets for aggressive interest rate cuts by the Fed going forward.
• The USD bulls take a brief pause for a breather and look to the release of the latest US consumer inflation figures, which will play a key role in influencing market expectations about the Fed's rate-cut path and provide a fresh impetus.
• The headline Consumer Price Index (CPI) is expected to have risen by 0.2% in October and by 2.6% over the past 12 months, up from 2.4% in the prior month, fueling doubts over how much headroom the Fed has to keep cutting rates.

Gold price needs to find acceptance below the $2,600 mark and 38.2% Fibo. level for bears to retain near-term control

From a technical perspective, the overnight resilience below the 38.2% Fibonacci retracement level of the June-October rally and the subsequent move-up warrants caution for bearish traders. That said, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This, in turn, suggests that the path of least resistance for the Gold price is to the downside. 

Hence, any subsequent move up could be seen as a selling opportunity and remain capped near the $2,630-2,632 resistance. That said, some follow-through buying could lift the Gold price to the next relevant hurdle near the $2,650-2,655 region, en route to the $2,670 level. This is followed by the $2,700 mark, which if cleared decisively will suggest that the recent corrective fall from the all-time peak has run its course. 

On the flip side, bearish traders need to wait for acceptance below the $2,600 mark and the 38.2% Fibo. level before placing fresh bets. The subsequent fall might then drag the Gold price to the $2,540 confluence – comprising the 100-day Simple Moving Average (SMA) and the 50% Fibo. level. This could act as a strong near-term base for the XAU/USD, which if broken will be seen as a fresh trigger for bearish traders.

• GBP/JPY regains positive traction on Wednesday amid a modest JPY weakness.
• The BoJ rate-hike uncertainty, domestic political uncertainty undermine the JPY.
• Intervention fears help limit JPY losses and cap the cross ahead of BoE’s Mann.

The GBP/JPY cross attracts some dip-buying in the vicinity of the weekly low, around the 196.85-196.80 region, and reverses a part of the previous day's losses. Spot prices, however, remain confined in a familiar range and currently trade around the 197.30-197.35 area, up less than 0.15% for the day.

The Japanese Yen (JPY) continues with its relative underperformance amid the uncertainty about the Bank of Japan's (BoJ) rate-hike plans and turns out to be a key factor acting as a tailwind for the GBP/JPY cross. Investors now seem convinced that Japan's political landscape could make it difficult for the BoJ to tighten its monetary policy further. This, to a larger extent, overshadows a rise in Japan's Producer Price Index (PPI) by the highest annual rate since July 2023, reflecting sustained inflationary pressure. 

However, speculations that Japanese authorities might intervene in the FX market to prop up the domestic currency and a softer risk tone help limit losses for the safe-haven JPY. The British Pound (GBP), on the other hand, struggles to gain any meaningful traction on the back of mixed UK employment details on Tuesday. This, in turn, might hold back traders from placing aggressive directional bets around the GBP/JPY cross, warranting some caution before positioning for any further appreciating move. 

Market players now look forward to a scheduled speech from the Bank of England’s (BoE) Monetary Policy Committee external member Catherine Mann for some impetus. Apart from this, the broader risk sentiment might influence demand for the safe-haven JPY and contribute to producing short-term trading opportunities. Nevertheless, the mixed fundamental backdrop makes it prudent to wait for a sustained move in either direction to confirm the near-term trajectory for the GBP/JPY cross.

• EUR/USD may depreciate further as Trump’s potential fiscal policies could delay further Fed rate cuts.
• The US Consumer Price Index is expected to show a 2.6% YoY increase for October.
• Traders await Thursday’s release of pan-EU Gross Domestic Product data for the third quarter.

The EUR/USD pair remains under pressure on Wednesday, holding steady just above the 1.0600 level during Asian trading hours. This would mark the fourth consecutive day of losses for the Euro, as the pair continues to face downward momentum.

The primary factor contributing to the recent weakness in EUR/USD is the strength of the US Dollar (USD). The implementation of US President-elect Donald Trump’s proposed fiscal policies could stimulate investment, increase government spending, and bolster labor demand. However, this surge in economic activity could also fuel inflation risks.

On Tuesday, Minneapolis Fed President Neel Kashkari affirmed that the central bank remains confident in its ongoing battle against transitory inflation but cautioned that it is still too early to declare full victory. Kashkari also noted that the Fed would refrain from modeling the economic impact of Trump’s policies until there is greater clarity on the specifics of those policies.

Traders are now focused on the upcoming US inflation data release on Wednesday for further guidance on future US policy. The headline Consumer Price Index (CPI) is expected to show a 2.6% year-over-year increase for October, with the core CPI anticipated to rise by 3.3%.

The focus will shift toward Thursday’s pan-EU Gross Domestic Product (GDP) update, where the third-quarter GDP figure is expected to confirm the preliminary growth estimate of 0.4% QoQ. Meanwhile, the GDP is forecast to show a modest 0.9% growth year-over-year for Q3, signaling a lackluster economic performance in the region.

According to a recent paper from the London School of Economics and Political Science, implementing a 10% tariff on all imported goods, as advocated by Trump, could have a negative impact of 0.1% on the European Union's (EU) Gross Domestic Product (GDP). This potential economic slowdown in Europe could further dampen the Euro's performance against the US Dollar.

• NZD/USD holds steady around in Wednesday’s Asian session. 
• The US October CPI inflation report will be closely watched on Wednesday.
• Trump’s tariff plans might cap the upside for the Kiwi in the near term. 

The NZD/USD pair trades flat near 0.5930 during the Asian trading hours on Wednesday. However, the upside of the pair might be limited amid a strengthening of the US Dollar (USD). Traders brace for the US October Consumer Price Index (CPI) and Fedspeak later on Wednesday. 

The expectation that inflationary import tariffs from Republican President-elect Donald Trump would push up prices and leave the Federal Reserve's (Fed) less scope to cut interest rates boosts the USD broadly. However, the attention will shift to the CPI inflation report. The core gauge is expected to rise 0.3% MoM in October. Any signs of hotter inflation could further reduce the chance of a December easing, lifting the Greenback. On the other hand, the softer outcome could prompt traders to raise their bets on Fed rate reductions in December. 

"Focus is likely to shift back to inflation and Fed policy in the latter part of the week, but whether that brings an unwinding of Trump trades remains to be seen," noted Charu Chanana, chief investment strategist at Saxo.

The New Zealand Dollar (NZD) remains vulnerable as US President Donald Trump's trade policies, especially the specter of higher tariffs on China could weigh on the China-proxy NZD against the USD as China is a major trading partner for New Zealand. 

• GBP/USD depreciates as Trump’s potential fiscal policies could delay further Fed rate cuts.
• The US Consumer Price Index data release will be eyed in the North American session.
• The British Pound weakened as mixed UK employment figures indicated a softening labor market for three months ending in September.

GBP/USD extends its losing streak for the fourth successive session, trading around 1.2740 during the Asian hours on Wednesday. This downside of the pair is attributed to a stronger US Dollar (USD) amid optimism around the Trump trades.

The US Dollar strengthens as analysts pointed out that if Trump’s fiscal policies are implemented, they could boost investment, spending, and labor demand, potentially increasing inflation risks. This scenario could prompt the Federal Reserve (Fed) to adopt a more restrictive monetary policy stance.

Traders are now focused on the upcoming US inflation data release on Wednesday for further guidance on future US policy. The headline Consumer Price Index (CPI) is expected to show a 2.6% year-over-year increase for October, with the core CPI anticipated to rise by 3.3%.

The Pound Sterling (GBP) weakened following mixed UK labor market data. On Tuesday, employment figures indicated a softening labor market for the three months ending in September. The ILO Unemployment Rate increased to 4.3% from 4.0% in the previous period, surpassing the expected 4.1%. During the same period, Employment Change showed that UK employers added 219K new jobs, significantly lower than the previous release of 373K.

The Bank of England’s (BoE) latest Monetary Policy Report is set to be released on Wednesday, with investors keen to assess potential insights into how the BoE plans to navigate the UK's imbalanced economy amid ongoing inflation concerns.

• EUR/CAD may find immediate support at the psychological level of 1.4800.
• The 14-day RSI signals sustained bearish momentum as it remains slightly above the 30 level.
• The pair may explore the area around a “pullback resistance” at the 1.4870 level.

The EUR/CAD cross struggles to rebound from three consecutive days of losses, trading around the 1.4810 mark during the Asian hours on Wednesday. A technical analysis of a daily chart indicates a strong bearish momentum, with indicators suggesting that sellers are still firmly in control of the market. However, oversold conditions may be approaching, hinting at the possibility of a short-term correction.

On the daily chart, EUR/CAD is trading below the nine-day Exponential Moving Average (EMA), which has been serving as a dynamic resistance line over recent sessions. The nine-day EMA has also diverged below the 14-day EMA, creating a "bearish crossover" that reflects weakening short-term momentum and solidifying the pair’s downward trajectory.

The 14-day RSI, a popular tool for identifying overbought or oversold conditions, currently sits slightly above the 30 level. This placement signals sustained bearish momentum without fully confirming an oversold condition. Should the RSI drop below the critical 30 mark, traders may look for signs of an upward correction. A bounce from oversold conditions could bring the pair back toward the 1.4850-1.4900 range, where sellers may once again test the resilience of any recovery attempt.

On the downside, the 1.4800 mark is acting as a psychological level and could be the first line of defense if selling pressure continues. This level is often pivotal, as psychological levels can attract buying interest from traders hoping for a potential rebound.

If the EUR/CAD cross breaks below 1.4800, the next critical support lies at 1.4700. This level holds significant importance for technical traders, as it could either slow the decline or reinforce the bearish trend if broken decisively. A drop below this level could set the stage for EUR/CAD to approach its seven-month low at 1.4587.

On the upside, the EUR/CAD pair encounters its first hurdle around 1.4870, a level that previously served as support but has now turned into “pullback resistance.” A move above this “throwback” level could indicate that bullish sentiment is emerging, albeit cautiously, among market participants.

Should the EUR/CAD break above 1.4870, attention will shift to the nine-day EMA at 1.4918 and the 14-day EMA at 1.4949. Both levels represent dynamic resistance points and would need to be overcome for any meaningful bullish momentum to develop.

EUR/CAD: Daily Chart

• The US Consumer Price Index is set to rise 2.6% YoY in October, faster than September’s 2.4% increase.
• Annual core CPI inflation is expected to remain at 3.3% in October.
• The inflation data could significantly impact the market’s pricing of the Fed’s interest rate outlook and the US Dollar value.

The Consumer Price Index (CPI) inflation data from the United States (US) for October, published by the Bureau of Labor Statistics (BLS), is highly anticipated and slated for release on Wednesday at 13:30 GMT.

The US Dollar (USD) is set to rock on intense volatility likely to be spurred by the US inflation report, which could significantly impact the market’s pricing of the Federal Reserve (Fed) interest rate outlook for the coming months.

What to expect in the next CPI data report?

As measured by the CPI, inflation in the US is expected to increase at an annual rate of 2.6% in October, a tad higher than the 2.4% growth reported in September. The core annual CPI inflation, excluding volatile food and energy prices, will likely remain at 3.3% in the same period.

Meanwhile, the monthly CPI and the core CPI are forecast to rise 0.2% and 0.3%, respectively.

Previewing the October inflation report, TD Securities analysts said: “Inflation readings should remain somewhat firmer than the Fed would prefer in the near-term, reversing some recent improvement in the pace of price changes.”

“We look for headline CPI to rise 0.29% MoM while core inflation rises at a firmer 0.32% MoM pace. This will leave the annual pace of CPI edging up to 2.6% YoY for the headline and remaining steady at 3.3% YoY for core,” they added.

Following the November policy meeting, Fed Chairman Powell maintained that the central bank remains committed to its gradual easing path, adding that the outcome of the US presidential election won’t affect policy decisions in the near term. The Bank seemed determined to defend its independence from newly elected US President Donald Trump, as Powell clearly stated that he would not resign if asked to do so.

How could the US Consumer Price Index report affect EUR/USD?

Trump’s policies on immigration, tax cuts and tariffs could put upward pressure on inflation, calling for higher interest rates and supporting the US Dollar. However, the impact of these policies on the economy and inflation are likely to be felt only in the medium to long term.

Thus, amidst softening labor market conditions and the progress in disinflation, the October inflation report will play a pivotal role in offering fresh hints on the Fed’s next policy move. Markets are pricing in a 67% probability that the Fed will lower rates by 25 bps in December, according to the CME Group’s FedWatch Tool, down from about 80% seen at the start of this month.

The labor data published by the BLS on November 1 showed that Nonfarm Payrolls (NFP) increased by 12,000 last month, following a downward revision to the prior two months. The Unemployment Rate held steady at 4.1% in October. Meanwhile, wage inflation, as measured by the change in the Average Hourly Earnings, rose to 4% over the year in October from 3.9% in September.

A big downside surprise in the US annual headline and core inflation prints could cement expectations of a December Fed rate cut. If the monthly core CPI comes in at 0% or enters negative territory, markets will likely double down bets for an aggressive Fed easing cycle and trigger a USD sell-off. On the other hand, Fed hawks would return and push back against expectations for a rate cut in December on hotter-than-expected CPI readings.

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD and explains: “EUR/USD’s near-term technical picture points to a likely buyer exhaustion as the Relative Strength Index (RSI) indicator on the daily chart prods the oversold territory at 30.”

“EUR/USD could meet the initial demand area at the 1.0550 psychological level,  below which the November 1, 2023, low of 1.0517 will be challenged. Additional declines will target the 1.0500 round figure. Conversely, interim resistance aligns at the November 11, 2024, high of 1.0728. If buyers recapture the latter sustainably, the next resistance at the 21-day Simple Moving Average (SMA) at 1.0810 will be tested.”

• Silver moves further away from over a one-month trough touched on Tuesday.
• The technical setup warrants some caution before positioning for further gains.
• Any further move up could be seen as a selling opportunity and remain capped.

Silver (XAG/USD) builds on the previous day's bounce from the $30.20-$30.15 area, or its lowest level since October 8 and gains some follow-through positive traction during the Asian session on Wednesday. The momentum lifts the white metal back closer to the $31.00 mark in the last hour, though the technical setup warrants some caution before positioning for any further gains.

Given that the XAG/USD showed resilience below the 100-day Simple Moving Average (SMA) on Tuesday, the recovery could be attributed to short-covering amid some repositioning ahead of the US inflation figures. That said, oscillators on the daily chart have been gaining negative traction and are still away from being in the oversold zone. This, in turn, suggests that any further move up could be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

The momentum, however, could extend further towards the next relevant hurdle near the $31.60-$31.65 region, though is more likely to remain capped near the $32.00 round figure. The latter should act as a key pivotal point, which if cleared decisively will indicate that the recent corrective slide from the vicinity of the $35.00 psychological mark, or a 12-year high touched in October has run its course. This would shift the bias in favor of bulls and pave the way for additional gains.

On the flip side, the $30.60 area, or the 50% Fibonacci retracement level of the August-October rally, now seems to protect the immediate downside. This is followed by over a one-month low, around the $30.20-$30.15 region touched on Tuesday and the $30.00 psychological mark. Acceptance below the latter will confirm a near-term breakdown below the 100-day SMA and make the XAG/USD vulnerable to accelerate the fall further towards the 61.8% Fibo. level, near the $29.65-$29.60 region. 

The downward trajectory could extend further towards the $29.00 mark before the XAG/USD eventually drops to the next relevant support near the $28.75 region en route to the mid-$28.00s.

Silver daily chart

• The Japanese Yen drops to a fresh multi-month low on Wednesday and remains vulnerable. 
• The BoJ rate-hike uncertainty overshadows a stronger Japanese PPI and undermines the JPY.
• Elevated US bond yields weigh on the JPY further amid a bullish USD, and ahead of the US CPI.

The Japanese Yen (JPY) has hit a fresh low since July 30 against its American counterpart during the Asian session on Wednesday, albeit it managed to defend the 155.00 psychological mark. Despite a rise in Japanese producer prices in October, investors seem convinced that a fragile minority government in Japan could make it difficult for the Bank of Japan (BoJ) to hike interest rates again. Adding to this, worries that US President-elect Donald Trump's promised tariffs could significantly impact Japanese exports turn out to be a key factor undermining the JPY.

Furthermore, expectations that Trump's inflationary import tariffs could limit the scope for the Federal Reserve (Fed) to cut interest rates remain supportive of elevated US bond yields. This further seems to weigh on the lower-yielding JPY, which, along with a bullish US Dollar (USD) act as a tailwind for the USD/JPY pair. Meanwhile, the recent JPY fall raises the possibility of an intervention by Japanese authorities. This might hold back the JPY bears from placing fresh bets ahead of the release of the US consumer inflation figures later this Wednesday. 

Japanese Yen continues to be undermined by a combination of factors

• The Bank of Japan's preliminary report released this Wednesday revealed that Japan's Producer Price Index (PPI) rose by 3.4% in October compared to the same time period last year and increased by 0.2% on a monthly basis.
• The higher-than-estimated readings could possibly lead to an uptick in demand-driven inflation, though they were offset by worries that higher producer prices stemming from a weaker Japanese Yen could impact household spending. 
• This comes on top of the political uncertainty in Japan and further raises doubts about the Bank of Japan's ability to tighten its monetary policy, which continues to undermine the JPY and acts as a tailwind for the USD/JPY pair. 
• Earlier this week, the BoJ Summary of Opinions from the October meeting showed that policymakers were divided on rate hike timing, adding a layer of uncertainty amid US President-elect Donald Trump's expected protectionist tariffs.
• The US Dollar consolidates its recent gains to the highest level since April amid hopes that Trump's expansionary policies will boost inflation and limit the scope for the Federal Reserve to ease its monetary policy more aggressively. 
• Richmond Fed President Tom Barkin noted on Tuesday that while inflation appears to be coming down, it might still get stuck above the central bank's target and that the labor market might be fine or might continue to weaken from here.
• Separately, Minneapolis Fed President Neel Kashkari said that while the US central bank has many reasons to feel confident about its long-running battle with transitory inflation, it still may be too soon to declare outright victory.
• According to the CME Group's FedWatch Tool, traders are currently pricing in a less than 60% chance of a 25-basis-points rate cut and see around a 40% probability for an on-hold decision at the next FOMC meeting in December. 
• The yield on the benchmark 10-year US government bond remains close to a multi-month peak touched after Trump's victory in the US presidential election, offering support to the USD and undermining the lower-yielding JPY. 
• The USD bulls, however, take a pause for a breather and keenly await the release of the US inflation report, which is expected to show that the headline Consumer Price Index (CPI) rose by 2.6% over the 12 months to October. 

USD/JPY needs to find acceptance above 155.00 for bulls to retain near-term control

From a technical perspective, the USD/JPY pair continues with its struggle to make it through the 155.00 round figure. The said handle should now act as a key pivotal point, which if cleared decisively should pave the way for additional gains. Given that oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone, spot prices might then surpass the July swing high, around the 155.20 area, and aim to reclaim the 156.00 mark. The momentum could extend further towards the 156.60 intermediate hurdle en route to the 156.90-157.00 region.

On the flip side, any meaningful corrective pullback now seems to find decent support near the 154.00 round figure ahead of the overnight swing low, around the 153.40 area. Any further decline could be seen as a buying opportunity near the 153.00 mark, which, in turn, should help limit losses for the USD/JPY pair near the 152.65-152.60 horizontal support. A convincing break below the latter could drag spot prices below the 152.00 mark and expose the very important 200-day Simple Moving Average (SMA) resistance breakpoint, around the 151.60-151.55 region. The latter should act as a strong near-term base, which if broken decisively might shift the bias in favor of bearish traders.

• The Indian Rupee softens in Wednesday’s Asian session. 
• Strong USD demand and considerable foreign institutional outflows weigh on the INR. 
• Traders await the US October CPI inflation data on Wednesday for fresh impetus. 

The Indian Rupee (INR) trades in negative territory on Wednesday after reaching a fresh all-time low in the previous session. The local currency is under pressure due to substantial foreign institutional outflows and heightened US Dollar (USD) demand. 

Despite a strengthening Greenback and outflows from local stocks, the downside for the INR might be limited amid routine interventions from the Reserve Bank of India (RBI) to sell the USD to stabilize the currency. Later on Wednesday, traders will closely monitor the US October Consumer Price Index (CPI), along with the speeches from John Williams, Lorie Logan, Jeffrey Schmid and Alberto Musalem. 

Indian Rupee seems vulnerable ahead of key US CPI inflation data

• India's retail inflation, based on the Consumer Price Index (CPI), rose to a 14-month high at 6.21% YoY in October versus 5.49% prior, higher than the 5.81% expected. 
• India’s food inflation jumped to 10.87% from 9.24% in September 2024 and 6.61% in October 2023, according to the latest official data released on Tuesday. 
• Indian Industrial Production grew by 3.1% YoY in September from a decline of 0.1% in August. This figure came in better than the estimation of 2.5%. 
• Foreign investors withdrew nearly $3 billion from local stocks in November, adding to the $11 billion of outflows in October.
• Minneapolis Fed President Neel Kashkari said on Tuesday that the Fed feels confident about its long-running battle with transitory inflation, but it’s premature to declare outright victory. Kashkari further stated that the US central bank won't model Trump policies' effect on the economy until they become clear.
• Richmond Fed President Tom Barkin noted on Tuesday that while inflation appears to be coming down, it might still get stuck above the Fed's target levels.

USD/INR’s positive outlook remains in play in the longer term

The Indian Rupee softens on the day. The constructive view of the USD/INR pair remains unchanged on the daily chart, with the price holding above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) exceeds 70, indicating an overbought condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation. 

The immediate resistance level for USD/INR emerges at 84.50. A break above this level could draw in enough bullish pressure to the 85.00 psychological level.

In the bearish event, sustained trading below the resistance-turned-support level at 84.30 could expose the 84.05-84.10 region, representing the lower limit of the trend channel and the high of October 11. The next downside filter to watch is 83.85, the 100-day EMA.

• The Australian Dollar depreciates following the Wage Price Index data released on Wednesday.
• Australia's Wage Price Index increased by 3.5% YoY in Q3, down from a 4.1% rise in Q2.
• The US Consumer Price Index data release will be eyed in the North American session.

The Australian Dollar (AUD) extends its losses against the US Dollar (USD) for the fourth successive day on Wednesday. The AUD/USD pair remains subdued after the release of the weaker-than-expected Australia’s Wage Price Index data. Additionally, the downward movement of the pair is bolstered by the optimism around the Trump trades.

The Reserve Bank of Australia (RBA) Governor Michele Bullock reaffirmed a hawkish stance after the interest rate hold last week, emphasizing the need for restrictive monetary policy amid ongoing inflation risks and a strong labor market. The hawkish sentiment surrounding the RBA might have restrained the downside of the Australian Dollar.

The US Dollar strengthened as analysts noted that if Trump’s fiscal policies are enacted, they could increase investment, spending, and labor demand, potentially heightening inflation risks. This scenario might lead the Federal Reserve (Fed) to consider a more restrictive monetary policy stance.

Traders are now focused on the upcoming US inflation data release on Wednesday for further guidance on future US policy. The headline Consumer Price Index (CPI) is expected to show a 2.6% year-over-year increase for October, with the core CPI anticipated to rise by 3.3%.

Australian Dollar extends losses following Wage Price Index

• Australia's Wage Price Index rose by 3.5% year-over-year in the third quarter, down from a 4.1% increase in the previous quarter and below expectations of a 3.6% gain. This marks the slowest wage growth since Q4 2022.
• Minneapolis Fed President Neel Kashkari stated on Tuesday that the central bank remains confident in its prolonged fight against transitory inflation but noted that it’s too early to declare complete victory. Kashkari also mentioned that the Fed would hold off on modeling the economic impact of Trump’s policies until there is more clarity on their specifics.
• Australia's Westpac Consumer Confidence index rose by 5.3% to reach 94.6 points in November, marking its second consecutive month of improvement and the highest level in two and a half years. However, the index has remained below 100 for nearly three years, reflecting that pessimists still outnumber optimists.
• Matthew Hassan, Senior Economist at Westpac, noted "Consumers are feeling less pressure on their family finances, are no longer worried about further interest rate rises, and are increasingly confident in the economic outlook."
• Bloomberg News reported early Tuesday that Chinese regulators are planning to cut taxes on home purchases. According to the report, authorities are working on a proposal that would allow major cities to lower the deed tax for buyers to as low as 1%, down from the current maximum rate of 3%.
• China's latest stimulus measures fell short of investor expectations, further dampening demand prospects for Australia’s largest trading partner and weighing on the Australian Dollar. China announced a 10 trillion Yuan debt package on Friday designed to alleviate local government financing pressures and support struggling economic growth. However, the package stopped short of implementing direct economic stimulus measures.
• Morgan Stanley divides the Trump administration's macroeconomic policies into three key areas: tariffs, immigration, and fiscal measures. The report predicts that tariff policies will be prioritized, with an anticipated immediate imposition of 10% tariffs globally and 60% tariffs specifically on China.
• On Thursday, Federal Reserve Chair Jerome Powell stated he doesn’t anticipate Trump’s potential return to the White House impacting the Fed’s near-term policy decisions. “We don’t guess, speculate, and we don’t assume what future government policy choices will be,” Powell noted after the bank decided to lower interest rates by 25 basis points to a range of 4.50%-4.75%, as expected.

Australian Dollar falls toward three-month lows near 0.6500

AUD/USD trades near 0.6530 on Wednesday. The daily chart analysis indicates short-term downward pressure, as the pair stays below the nine-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) remains under the 50 level, further supporting a bearish outlook.

In terms of support, the AUD/USD pair is testing its three-month low of 0.6512, reached on November 6, with further psychological support at 0.6500.

On the upside, resistance appears at the nine-day EMA at 0.6576, followed by the 14-day EMA at 0.6593. A break above these EMAs could propel the AUD/USD pair toward its three-week high of 0.6687, with the next psychological target at 0.6700.

AUD/USD: Daily Chart

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Wednesday at 7.1991, as compared to the previous day's fix of 7.1927 and 7.2305 Reuters estimates.

• EUR/JPY gains momentum to near 164.35 in Wednesday’s Asian session.
• The Japanese Yen softens as the BoJ undecided on a rate hike.
• ECB’s Kazaks said the central bank should go on cutting interest rates gradually.

The EUR/JPY cross edges higher to around 164.35 on Wednesday during the early Asian trading hours. The Japanese Yen (JPY) weakens against the Euro (EUR) amid the Bank of Japan (BoJ) rate hike uncertainty. The flash Eurozone Gross Domestic Product (GDP) data for the third quarter (Q3) will be the highlight on Thursday. 

The BoJ summary of opinions suggested a lack of clear direction regarding the timing of a rate hike as policymakers were split on whether to raise interest rates. Additionally, the political uncertainty in Japan has raised doubts over the Japanese central bank’s ability to tighten its monetary policy further. This, in turn, weighs on the JPY and acts as a tailwind for EUR/JPY. 

On the Euro front, European Central Bank (ECB) Governing Council member Martins Kazaks said on Tuesday that the central bank should go on cutting interest rates gradually. Meanwhile, ECB policymaker Olli Rehn stated that further easing next month looks likely as disinflation in the euro area is “well on track” and the growth outlook “seems to be weakening. However, officials should remain cautious and move step by step. 

The markets have fully priced another 25 basis points (bps) rate cut from the ECB in its last meeting of the year in December. The ECB’s deposit facility is currently at 3.25%.