CFD Markets News and Forecasts — 15-11-2024

• Silver struggles to maintain momentum, hovering near the 100-day SMA at $30.34 with a downward bias.
• Potential further decline could see silver test key supports at $30.00 and the 200-day SMA at $28.63.
• A rebound above $31.00 could challenge higher resistances, targeting the 50-day SMA at $31.51 and beyond.

Silver's price fell over 0.70% beneath $30.30 after robust US Retail Sales data suggested the Federal Reserve could gradually ease policy. At the time of writing, the XAG/USD trades at $30.21 after hitting a daily peak of $30.81.

XAG/USD Price Forecast: Technical outlook

Silver price remains subdued at around the 100-day Simple Moving Average (SMA) at $30.34. Nevertheless, 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

• Gold price dips below $2,570 head for an over 4% weekly decline.
• Jerome Powell indicates the Fed is cautious about cutting rates despite positive US economic indicators.
• Investors adjust expectations for a December rate cut, with likelihood dropping to 62% after Powell's comments.
• US Retail Sales show growth while Industrial Production improved, despite remaining subdued.

Gold prices extended their losses for the sixth straight day, set to achieve weekly losses of over 4%, the largest since September 2023. Federal Reserve Chair Jerome Powell's slight “hawkish” rhetoric lifted the Greenback, denting appetite for the golden metal. At the time of writing, XAU/USD trades at $2,564, down by 0.17%.

On Thursday, Fed Chair Jerome Powell said the central bank is in no rush to lower borrowing costs amid an ongoing strong economy, a solid labor market, and inflation standing above the 2% goal.

Following Powell’s words, investors trimmed the chances of a 25 basis point (bps) rate cut by the Fed at the December meeting, with odds falling from 72% to 62%.

Earlier, US Retail Sales for October expanded monthly and annually, with the former dipping slightly compared to September numbers. Recently, the Fed announced that Industrial Production for the same period improved but remained in contractionary territory.

Although US data was positive, it undermined the buck as market participants booked profits ahead of the weekend. This capped Bullion’s losses after it hit a two-month low of $2,536.

The US Dollar Index (DXY), which measures Greenback’s performance against a basket of six currencies, lost 0.10%, at 106.76.

US Treasury bond yields were also pressured ahead of the weekend, with the 10-year benchmark rate virtually unchanged at 4.43%.

In addition to Powell’s words, Boston Fed Susan Collins said the US central bank does not urgently need to lower rates. Lastly, Chicago’s Fed Austan Goolsbee kept the central bank options regarding December’s meeting, adding, “The dispute on neutral rate could support slower cuts.”

Market participants seem worried about Donald Trump’s tariff plans, which are inflation-prone at a time when the Fed is trying to control higher prices without tapping a deeper economic slowdown.

Next week, Bullion traders will look for Fed-speaking housing data, Initial Jobless Claims, and the release of S&P Global Flash PMIs.

Daily digest market movers: Gold steadies alongside strong US Dollar

• Gold prices recover as US real yields, which inversely correlate against Bullion, fall three basis points to 2.107%.
• US Retail Sales in October increased by 0.4% month-over-month, slightly above the 0.3% forecast but lower than the 0.8% rise recorded in September. Yearly, sales grew by 2.8%, up from 2% previously.
• Industrial Production contracted by -0.3% in October, in line with expectations, but showed an improvement from the -0.5% decline seen in September.
• According to data from the Chicago Board of Trade via the December fed funds futures contract, investors are pricing in 24 basis points of Federal Reserve rate cuts by the end of 2024.

XAU/USD Technical Outlook: Gold price remains bearish; sellers target $2,550

Gold recently dipped below the October 10 swing low of $2,603, intensifying losses past the $2,600 mark and briefly touching a two-month low of $2,536, just under the 100-day Simple Moving Average (SMA) at $2,545. Nevertheless, the inability of sellers to push prices toward $2,500 has allowed for a potential rebound.

The first resistance level is $2,600. If buyers reclaim this level, they may target the 50-day SMA at $2,651, with further resistance around $2,700. Exceeding this could pave the way to the November 7 high of $2,710.

The Relative Strength Index (RSI) has moved away from its neutral line, indicating bearish momentum that could lead to further declines in XAU/USD.

• The Canadian Dollar continued its march lower on Friday.
• Canada remains inconsequential on the economic calendar.
• CAD traders to wait for next Tuesday’s Canadian CPI print.

The Canadian Dollar (CAD) found fresh lows on Friday as broader markets continues to pivot into the safe haven Greenback. A slight miss in US Retail Sales was all it took to bolster the US Dollar and send USD/CAD into fresh multi-year highs.

Canada continues to remain absent from the economic calendar this week. A week of strictly low-tier, low-impact data has left the Canadian Dollar on the ropes, but next week’s Canadian Consumer Price Index (CPI) inflation print is unlikely to change matters much.

Daily digest market movers: Canadian Dollar waffles to fresh 54-month low

• The Canadian Dollar found a new four and a half year low on Friday, pushing USD/CAD into 1.4090 for the first time since May of 2020.
• Meaningful Canadian economic data remains entirely absent from the economic calendar.
• CAD traders are unlikely to get much of a push from next Tuesday’s Canadian CPI inflation print as the Bank of Canada (BoC) is already accelerating the pace of interest rate cuts in the face of rapidly-cooling inflation and a lopsided economy.
• Canada’s economic metrics continue to rely too much on already-high housing and shelter prices continuing to rise into the stratosphere.
• US Retail Sales beat forecasts, but still eased in October. Headline US Retail Sales eased to 0.4% compared to the expected 0.3%, falling away from September’s revised print of 0.8%.

Canadian Dollar price forecast

The sky’s the limit as the Canadian Dollar (CAD) continues to shed weight against the Greenback; USD/CAD’s fresh push into multi-year highs has the pair testing bids just shy of 1.4100. The pair is on pace to close in the green for a sixth consecutive trading day as the CAD recedes against the US Dollar.

The nearest technical floor sits at the last swing low, lined up nearly perfectly with the 50-day Exponential Moving Average (EMA) near 1.3780.

USD/CAD daily chart

• The US Dollar Index has pulled back from its yearly high, helping to limit the decline of the Aussie Dollar.
• Weak Australian labor data pushes the pair downwards on Friday.
• Hawkish bets on the RBA might also help the Aussie.

The AUD/USD pair rose by 0.20% to 0.6460 in Friday's session. The Australian Dollar staged a comeback as the US Dollar Index (DXY) pulled back from its yearly highs. However, the Aussie Dollar may face challenges due to recent weak domestic and Chinese economic data. On the bright side, Reserve Bank of Australia (RBA) Governor Bullock stated that current interest rates will remain unchanged until the bank gains confidence in the inflation outlook.

Weak Australian labor data, released on Friday, revealed a loss of 8,100 jobs during October, adding to concerns over the strength of the Australian economy. This, coupled with disappointing Chinese data, could cap the recovery of the Aussie Dollar in the near term. Despite these headwinds, the recent hawkish comments from RBA Governor Bullock, who hinted at the possibility of further rate hikes to tame inflation, could provide some support for the Australian Dollar.

Daily digest market movers: Australian Dollar rebounds on weaker US Dollar Index after Retail Sales

• The AUD rebounds against the USD on Friday.
• The USD softens despite better-than-expected US Retail Sales data ahead of the crucial holiday shopping season.
• US Retail Sales expanded by 0.4% in October, exceeding expectations and surpassing September's growth.
• Retail Sales Control Group contracted by 0.1%, while excluding Autos sales grew 0.1% MoM, below consensus.
• Traders pare back bets on another Fed interest rate cut in December due to Powell's remarks.
• Markets price in a 25 bps RBA cut only in May 2025, which diverged with the markets’ bet on the Fed, which could eventually help the Aussie.

AUD/USD technical outlook: Pair sees some light, outlook still negative

While the brief recovery toward 0.6460 provided temporary respite, the AUD/USD pair remains firmly within a downtrend. Key technical indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) continue to reside deep within bearish territory, highlighting the dominance of selling pressure. This technical outlook implies that the corrective bounce is likely to be short-lived, with the path of least resistance remaining to the downside.

• Mexican Peso appreciates and shrugs off bad credit outlook review, strong US data.
• Moody's revises Mexico’s credit outlook to negative, citing concerns over judicial changes impacting economic stability.
• Peso strengthens in spite of Banxico’s rate cut with inflation expectations remaining above target.

The Mexican Peso recovered some ground against the US Dollar during the North American session, shrugging off Moody’s adjustment on Mexico’s credit outlook and upbeat US Retail Sales data. At the time of writing, the USD/MXN trades at 20.34, down by 0.24%.

Due to recent constitutional changes, Moody’s Ratings changed the Mexico’s credit outlook from stable to negative.

“The constitutional overhaul risks eroding checks and balances of the country’s judiciary system, with potential negative impact to Mexico’s economic and fiscal strength,” Moody’s said in a statement Thursday.

Other ratings agencies, like Fitch and S&P Global, kept Mexico’s creditworthiness stable. Fitch Ratings assigns Mexico BBB-, the lowest level above junk, while S&P Global Ratings has it a notch higher.

In the meantime, the Minister of Finance, Rogelio Ramirez de la O, presented the 2025 economic package at the Chamber of Deputies. The package projections hint that the economy will grow by 2% to 3%, and the fiscal deficit will be 3.9% of the Gross Domestic Product (GDP) for 2025.

The Peso has extended its gains to three days even though the Bank of Mexico (Banxico) decided to lower borrowing costs to 10.25% as expected despite recognizing that inflation risks are tilted to the upside.

Banxico expects headline inflation to end 2024 at 4.7%, up from 4.3% in the previous forecasts and well above the 3% goal.

In addition, October’s US Retail Sales, revealed by the Bureau of Labor Statistics (BLS), crushed estimates. Other data revealed by the Federal Reserve (Fed) showed that Industrial Production for October improved but remained in contractionary territory.

Meanwhile, Fed officials continued to make news. The Boston Fed’s Susan Collins reiterated Fed Chair Jerome Powell’s words from Thursday about the Fed not needing to rush rate cuts. Collins said, “I don’t see a big urgency to lower rates, but I want to preserve a healthy economy.”

Daily digest market movers: Mexican Peso bolstered by a soft US Dollar

• A soft US Dollar undermines the USD/MXN. The US Dollar Index (DXY), which tracks the performance of the Greenback against six currencies, dropped 0.24% to 106.61.
• Banxico’s Governing Council voted unanimously to lower borrowing costs from 10.50% to 10.25%, as expected. Governors added that although inflation remains high and requires a restrictive policy, the disinflation process “implies that it's adequate to reduce the level of monetary policy restriction.”
• Officials expect inflation to converge to the 3% goal by the last quarter of 2025.
• US Retail Sales for October rose by 0.4% MoM, exceeding forecasts of 0.3% but missing September’s 0.8% increase. Yearly, figures grew by 2.8%, up from 2%.
• Industrial Production for the same period, shrank -0.3% as foreseen, though improved from -0.5% in September.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 24 bps of Fed easing by the end of 2024.

USD/MXN technical outlook: Mexican Peso steadies as USD/MXN drops below 20.40

The USD/MXN upward bias remains, although the Peso has gained some ground. For a bearish continuation, sellers must push the exchange rate below 20.00. In that outcome, bears could challenge the 50-day Simple Moving Average (SMA) to 19.74, followed by the psychological 19.50.

Conversely, if USD/MXN resumes its uptrend and buyers regain 20.50, it will expose the current week’s peak at 20.69. Once surpassed, the year-to-date (YTD) high of 20.80 emerges as the next ceiling level before testing 21.00. A breach of the latter and the March 8, 2022, peak at 21.46 would emerge as the next resistance.

Oscillators like the Relative Strength Index (RSI) are bullish, suggesting that further upside in the USD/MXN is projected.

• The Dow Jones fell over three-quarters of a percent on Friday.
• Stocks are paring back recent election-fueled gains.
• US Retail Sales beat forecasts, but still grew by a smaller amount in October.

The Dow Jones Industrial Average (DJIA) trimmed it’s recent bull run, declining over 350 points and giving back roughly 0.85% as investors grapple with an increasingly uncertain future. US Retail Sales beat expectations but still eased back from previous figures, and Federal Reserve (Fed) Chair Jerome Powell splashed cold water on rate-cut-hungry investors this week when he reaffirmed that the Fed wasn’t “in a hurry” to cut interest rates further.

The post-election “Trump rally” is set to continue unwinding as the Trump campaign begins to leak potential candidates for key official positions that former President Donald Trump intends to install at the beginning of his second term in January. Pharmaceutical stocks took an unexpected hit on Friday after Trump’s team announced their plans to nominate vaccine skeptic Robert F. Kennedy Jr. to the head of the US Department of Health and Human Services. RFK Jr. has openly discussed his plans to ban several vaccines and other health products outright, a surprisingly hyper-regulatory move that flies in the face of the broader market’s initial exuberance at a Trump election win which was meant to carry further deregulation efforts to the public marketplace.

US Retail Sales grew by 0.4% MoM in October, slightly above the 0.3% forecast but still down from September’s revised print of 0.8%. Core Retail Sales, or Retail Sales excluding automobile purchases, failed to meet expectations, growing by a scant 0.1% compared to the expected 0.3% and even further below the previous month’s 1.0% revised print.

Dow Jones news

Despite steep headline losses in key equities, the Dow Jones is roughly on-balance on Friday, with about half of the major equity board’s listed stocks finding the green for the day. Disney (DIS) rose another 5.3% to $115 per share as the entertainment giant enjoys a firmer rebound in quarterly revenues than many investors anticipated. Meanwhile, Amazon (AMZN) and Amgen (AMGN) both fell around 4.5% on the day to $201 and $282 per share, respectively, as tech stocks and biomed stocks take an end-of-week hit.

Dow Jones price forecast

Despite a bearish extension on Friday sending the Dow Jones deeper into the red for the week, there’s still plenty of room to run to the downside before technical warnings begin to emerge. Bullish pressure could also reappear in the charts at anytime as investors remain hopeful to keep a firm grasp on record high territory.

The Dow Jones is poised to end the week lower by 1.3% despite setting an other new all-time high bid earlier this week at 44,485. The nearest technical barrier sits at the 50-day Exponential Moving Average (EMA) near 42,430.

Dow Jones daily chart

Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee noted on Friday that markets tend to overreact to interest rate changes, and that the Fed should maintain a slow and steady approach to reaching the neutral rate.

Key highlights

• The USD retreated on Friday after hitting yearly highs near 106.60.
• The market has responded to Fed Chair Powell's comments with odds of a December cut falling to 60%.
• Retail Sales expanded by 0.4% in October vs. the previous month, surpassing expectations.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, failed to secure a sixth consecutive day of gains in a volatile trading Friday. Federal Reserve (Fed) Chair Jerome Powell has instilled uncertainty in the markets by expressing reservations about a December interest rate cut, while markets assess fresh Retail Sales data.

The US Dollar Index retreated slightly after reaching its highest point of the year. However, DXY remains in an uptrend, bolstered by cautious Fed rhetoric and strong economic data, which gives the Greenback an advantage over its peers. 

Daily digest market movers: US Dollar declines as markets assess Powell’s words and Retail Sales

• Fed Chair Powell downplayed the need for aggressive easing, citing economic strength.
• Fed officials, including Kugler, reiterated the need for caution in rate cuts.
• Market odds of a December cut have declined to 60% in fed funds futures and 45% in swaps markets.
• Swaps market anticipates a terminal rate above the Fed's long-term rate of 2.875%.
• US Retail Sales expanded by 0.4% in October, exceeding expectations and surpassing September's growth.
• Retail Sales Control Group contracted by 0.1%, while excluding Autos sales grew 0.1% MoM, below consensus.

DXY technical outlook:  Bulls retreat as investors book profits

The DXY's rapid surge to yearly highs above 107.00 was met with swift profit-taking, indicating a potential shift in market sentiment. The retreat suggests that buyers may have been overextended and a pullback could be in order. 

Indicators including the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) continue showing overbought conditions, so it is likely that the consolidation will continue.

• GBP/USD remains under pressure, testing significant support levels after crossing below the 200-day SMA.
• Further downside may see the pair target 1.2600 and potentially extend to May's low of 1.2445.
• Recovery above 1.2700 could challenge resistance at 1.2817, with RSI indicating potential consolidation ahead.

The Pound Sterling extends its agony and printing losses for the sixth straight day against the Greenback. Soft UK GDP coupled with robust US Retail Sales figures boosted the US Dollar and weighed on GBP/USD, which trades at 1.2636, down 0.22%.

GBP/USD Price Forecast: Technical outlook

The GBP/USD is bearish-biased once it falls below the 200-day Simple Moving Average (SMA). A daily close below the latest intermediate support at 1.2664, the August 8 swing low, would pave the way for further downside. The following key support level would be the 1.2600 figure, followed by the latest cycle low at 1.2445 on May 9, followed by the year-to-date (YTD) low at 1.2299.

Conversely, if GBP/USD recovers and rises above 1.2700, the next resistance would be the 200-day SMA at 1.2817. Once surpassed, the next resistance would be the 1.2900 mark.

Oscillators, such as the Relative Strength Index (RSI), suggest the pair might consolidate. The RSI is nearby oversold conditions and has begun to shift flat.

GBP/USD Price Chart – Daily

Federal Reserve (Fed) Bank of Boston President Susan Collins hit the wires on Friday, downplaying pressures for continued rate cuts in the near term, but also keeping a steady hand underneath market expectations of a rate trim in December.

Key highlights

• EUR/JPY sank on Friday to near 163.10 after a 0.72% decline on the day.
• Pair's price action plunged to 163.00 after facing rejection at the 164.00 SMA.
• The MACD and RSI technical indicators signaled increasing selling pressure, contributing to the pair's downtrend.

The EUR/JPY currency pair witnessed a significant decline on Friday, losing 0.72% to reach a low of 163.10. Prior to this drop, the pair faced resistance at the 164.00 Simple Moving Average (SMA), which contributed to its downward movement.

The technical indicators employed in this analysis, namely the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI), further underscore the bearish sentiment surrounding the EUR/JPY pair. The MACD histogram's red coloration and increasing size point to rising selling pressure, corroborated by the MACD line's position below the signal line. The RSI, with a value of 43, resides in negative territory and exhibits a sharply declining slope, indicating an increase in selling pressure.

The pair's probable continuation of its downward trajectory is suggested by its trading below the 163.50 resistance level. Furthermore, support levels at 163.00, 162.50, and 162.00 deserve attention, while resistance levels at 164.00, 164.50, and 165.00 warrant monitoring.

EUR/JPY daily chart

• USD/CHF is in a strong uptrend which keeps making higher highs. 
• However it has reached overbought levels according to the RSI momentum indicator 
• This means bulls should be aware of the increased risk of pullbacks. 

USD/CHF continues rising in its established uptrend but it has now reached overbought levels (above 70) according to the Relative Strength Index (RSI) momentum indicator. When this occurs it advises long-holders not to add to their positions because of the increased risk of a pullback developing.

USD/CHF Daily Chart 

According to technical analysis theory “the trend is your friend” which means it is better to trade in the direction of the dominant trend. As such, the odds favor more upside for USD/CHF. The RSI could continue to remain overbought or fall back into neutral territory first as the price pulls back. 

The pair has now surpassed the target at 0.8873 (July 30 swing high) and is on its way to the next target at 0.9050 (July 2 swing high). Another possible target is 0.9000 due to its significance as a round-number and psychological level.  

• EUR/JPY is approaching levels where it threatens to reverse the medium-term trend. 
• Further downside could see the pair fall to the 50-day SMA. 

EUR/JPY is threatening to reverse its medium-term uptrend and begin a new downtrend. This is important since according to technical analysis theory “the trend is your friend” so if the medium-term trend reverses the odds will favor more downside to come.

EUR/JPY Daily Chart 

A break below the 163.21 (November 8 low) would probably confirm a bearish reversal of the trend. The next target to the downside is likely to be support from the 50-day Simple Moving Average (SMA) at 162.17. 

The Relative Strength Index (RSI) momentum indicator is plateauing around the 49 mark but looks vulnerable to extending another leg lower. This further reinforces the bearish trend reversal thesis. 

• Retail Sales expanded more than estimated.
• Retail Sales Control Group contracted by 0.1% MoM.

The US Census Bureau reported that Retail Sales expanded by 0.4% in October vs. the previous month, surpassing expectations for a 0.3% gain and coming down from September’s 0.8% increase.

Additionally, the Retail Sales Control Group contracted at a monthly pace of 0.1%, from the previous 1.2% advance, and Retail Sales excluding Autos increased below consensus by 0.1% MoM.

This morning’s round of UK data was broadly weaker than forecast—Industrial Production fell 0.5% in September as manufacturing slumped, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP steadies near term

“Services and construction output also fell, producing a 0.1% drop in monthly GDP (versus 0.2% forecast) and helping pull growth for Q3 overall down to 0.1% (versus 0.2% forecast). Sterling is up fractionally against a generally softer USD on the day but softer growth has helped limit gains to just over 0.1% intraday, the weakest gain of the major currencies.”

“Similar to the EUR chart, the GBP is showing signs of steadying after a bullish technical reaction to Thursday’s low point (1.2630) put in a short-term reversal on the intraday chart. Sterling has picked up a little support in European trade but needs to push on through 1.2710/20 for gains to develop more in the short run I think.”

“Gains are likely to be capped in in the low 1.28s for now—look for firm resistance at 1.2830.”

The Silver Institute, in cooperation with the precious metals research firm Metals Focus, published updated forecasts for the Silver market this week, Commerzbank’s commodity analyst Carsten Fritsch notes.

Silver loses almost 15% from its 12-year high in October

“According to the report, Silver demand should increase by 1% to 1.21 billion ounces, reaching the second-highest level since records began. However, in the spring, the Silver Institute and Metals Focus were still expecting somewhat stronger demand. Industrial demand is expected to increase by 7% to a record level, driven by electrical and electronic applications. Increases are also expected for jewellery and Silverware.”

“In contrast, physical investment demand is expected to fall by 15% to a four-year low. Silver supply is expected to increase by 2% to 1.03 billion ounces. The Silver Institute and Metals Focus had previously expected a decline here. Both rising mine production and a stronger supply of Silver scrap are contributing to the higher supply. The latter is expected to reach a 12-year high, reflecting the higher price level. This year, the Silver market is expected to show a supply deficit for the fourth year in a row, which at 182 million ounces is likely to be considerable again.”

“In spring, however, the Silver Institute and Metals Focus had expected an even larger deficit. If the ETF inflows of 100 million ounces assumed by the Silver Institute are included, the deficit is even larger. Nevertheless, Silver came under pressure this week and yesterday temporarily slid below the 30 USD per troy ounce mark for the first time in almost two months. Silver has lost almost 15% from its 12-year high in October. The most important reason is the simultaneous correction in the Gold price, which Silver was unable to escape.”

The European Commission’s economic outlook anticipates a pick up in the region’s economy this year and next as consumer demand and business investment pick up, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR finds support near 1.05

“Growth is expected to reach 1.3% in 2025 and 1.6% in 2026—a little better than recent assumptions. Growth in the core Eurozone economies may lag somewhat versus the larger, more peripheral countries, however. The report does not factor in risks emerging from the recent US election; trade frictions would be a significant impediment to the German economy especially.”

“Yield and fundamental headwinds for the EUR are poised to remain substantial for the foreseeable future. The short-term chart is showing some—mildly—positive signs for the EUR. A squeeze higher in the EUR in yesterday’s session from the 1.05 area (now support) may have put in a short-term low for spot via a bullish outside range signal on the 6-hour chart.”

“Oversold oscillators are trying to correct as well, which could help lift the EUR in the short run. A deeper rebound requires the EUR to push through 1.0585 resistance: above here targets 1.0650/60.”

• GBP/CAD is pulling back in a short-term downtrend, however, it is likely to resume its bearish bias. 
• The pair recently broke down out of a bearish Rising Wedge but downside targets have yet to be hit. 

GBP/CAD has broken out of a bearish Rising Wedge pattern and started to decline. Although it is pulling back at the moment, it is expected to eventually continue falling towards the pattern’s downside targets. 

GBP/CAD Daily Chart 

A break below the 1.7700 November 14 low would probably confirm further weakness to the next target at 1.7518, the 61.8% extrapolation of the width of the Rising Wedge at its widest part extrapolated lower. This is the usual technical method for forecasting breakouts. 

Prior to the breakdown, GBP/CAD broke temporarily above the upper guardrail of the Rising Wedge pattern on several occasions (blue circles on chart) on September 20 and November 1. This is a sign of bullish exhaustion and an early warning of impending reversal. 

The Canadian Dollar (CAD) has edged marginally higher versus a generally softer USD on the session. If markets are recalibrating the USD’s post-election gains, the CAD’s relatively limited rise on the session makes sense—because it has held up marginally better than its peers following the US vote, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD steadies on the daily chart

“While commodities are a little firmer generally today, it has been a rough week for raw materials overall amid concerns about global growth and weak Chinese demand—as well as the stronger USD. The CAD’s principal headwind comes from spreads, however, with short-term cash and swaps spreads having widened significantly in the USD’s favour in the wake of US election.”

“The 2Y cash bond spread reached 117bps earlier this week (the widest since the late 1990s) before narrowing modestly. Short-term price action is reflecting a little softness in the USD since the start of trading in Asia and the USD’s persistent overbought status should keep markets on alert for a pullback in recent gains.”

“But there is nothing in price action to suggest a significant drop in the USD is likely. A short-term consolidation in the USD is possible but minor dips to the 1.3950/55 area are likely to prompt renewed buying. A weekly close above 1.4040 will support the outlook for more medium term gains in the USD towards the 2020 peak just under 1.47.”

The strong US Dollar (USD) continues to weigh on metal prices. Copper slipped below the $9,000 per ton mark this week, Commerzbank’s commodity analyst Volkmar Baur notes.

Copper price can fall towards $8,500

“According to a survey of participants at a major copper conference in Asia, the price could even fall to $8,500 per ton in the first quarter of 2025. However, there are also many critical voices pointing to the scarcity of copper concentrate, which is slowing down production. One analyst puts next year's deficit at over 1 million tons.”

“The capacities of Chinese copper smelters, which are expected to increase by a further 1 million tons next year, are likely to be utilized at only 75%. A slowdown in activity is also becoming apparent at the current margin. A company specializing in satellite observation reports that the proportion of inactive Chinese copper smelters has risen by almost 5 percentage points to 15.5%.”

“This means that capacity utilization is likely to be as low as in April, when smelting was restricted by maintenance work. Official data on Chinese copper production will probably be released in the next few days. The data published today on industrial production did not yet include these details.”

The US Dollar’s (USD) sharp, post-election advance has moderated a little today, reflecting some drift in US short rates and perhaps some consolidation in USD-bullish positioning, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD remains firm but consolidates

“The USD has come a long way in a short period of time following the US election and it was already looking very stretched in terms of gains against the majors before the vote. To a large extent, the dollar’s post-election rise appears to reflect the resulting shifts in interest rates and rate expectations—a resilient economy and assumptions of pro-growth strategies under president-elect Trump have curbed Fed rate cut bets while yields have retreated somewhat outside of the US.”

“The DXY is running a little ahead of estimated fair value based on weighted, short-term yield spreads but not by all that much. Perhaps most of the good (spread) news for the USD—for now—is priced in. The door remains open to further USD gains once the new administration lays out its policy priorities so scope for USD losses is likely to remain limited for now.”

“Regardless of the USD’s strong valuation at the moment, the prospect of a supportive US fiscal/monetary policy mix and the risk of tariffs will keep the USD outlook positive in the near-term at least. US data releases this morning include the November Empire Survey and October Retail Sales. There are a number of Fed speakers speaking over the course of the day. Among the Fed officials, only Barkin and Williams are voters, however.”

There are times when the development of the US Dollar (USD) is of secondary importance for commodity prices denominated in dollars, and there are times when the US dollar is the driving force, Commerzbank’s commodity analyst Barbara Lambrecht notes.

Gold falls below $2,600 on USD strength

“The latter currently seems to be the case. The strong appreciation of the US dollar after Donald Trump's election victory has pushed the Gold price well below the $2,600 mark. It is now $250 below its record high at the end of October.”

“The price decline has been accompanied by significant outflows from Gold ETFs, totalling almost 22 tonnes since the beginning of the month, according to Bloomberg.”

This morning's monthly data from China offered both light and shade, with the hope of stabilisation at a low level following the stimulus measures of recent months perhaps slightly outweighing. On the positive side, property sales appear to have bottomed out in October. While they were still down by more than 10% year-on-year in September, the decline in October was only 1.6%. And the pace of house price declines also slowed from the previous month. In addition, the Chinese consumer seemed to be recovering somewhat. Retail sales rose 4.8% year-on-year, well above expectations (+3.8%) according to a Bloomberg survey, Commerzbank’s FX analyst Volkmar Baur notes.

CNY to react more strongly to US president-elect’s tweets

“On the other hand, industrial production and fixed-asset investment were slightly below expectations, but not to the extent of causing concern. Two details were noteworthy however: First, the higher number of property sales has not yet had an impact on housing starts. On the contrary, they fell again slightly more than in the previous month and are now down almost 30% year-on-year. Second, retail sales show a certain anomaly.”

“Looking at the sub-categories, categories such as cosmetics, sports equipment and communication equipment show a very significant increase over the previous year. These categories are usually in high demand in June and November, when major shopping events take place on online platforms. Therefore, it remains to be seen whether the higher retail sales in October were simply purchases brought forward.”

“Either way, on balance, the slightly positive signs outweigh the negative ones, although this is not helping the CNY much this morning. In the coming weeks and months, the renminbi is more likely to react to the US dollar rather than develop much momentum of its own. In this sense, it is likely to react more strongly to tweets from the US president-elect than to fundamental developments in China itself.”

The European gas market is in turmoil: after an arbitration court awarded an Austrian energy company a large sum in compensation in a dispute with its Russian supplier, the former wants to offset the claim immediately, Commerzbank’s commodity analyst Barbara Lambrecht notes.

There is no longer any dependence on the Russian gas supplier

“According to media reports, the next payment date for gas deliveries is 20 November; however, there are concerns that deliveries may be interrupted before then. Yesterday, the European reference price TTF climbed to just under 46 EUR per mWh. However, there are also some facts that put this into perspective: Firstly, according to Eurostat, Austria only accounted for a good 3% of total EU gas imports in 2023.”

“Secondly, although the share of Russian supplies was over 80% of Austrian gas imports in recent months, it was significantly lower in 2023. And thirdly, the expiration of the transit agreement with Ukraine threatened to cut off gas supplies anyway. Not least for this reason, precautions were taken in advance. Since the storage tanks in Austria are over 90% full, there is no threat of supply bottlenecks in the short term.”

“Furthermore, according to the head of the Austrian energy company, there is no longer any dependence on the Russian gas supplier, as alternative sources have been found. Nevertheless, it cannot be denied that this makes the situation even more tense in an already nervous market environment.”

Although this morning's third quarter GDP figures came in a little better than analysts were expecting according to the Bloomberg survey, a closer look leaves something to be desired. The Japanese Yen (JPY) was hence unimpressed this morning, despite another attempt at verbal intervention from the Ministry of Finance, which warned against 'one-sided' movements in the exchange rate, Commerzbank’s FX analyst Volkmar Baur notes.

USD/JPY is likely to continue to be driven more by the USD

“The 0.9% quarter-on-quarter annualised increase was, as mentioned, slightly better than expected, but the previous quarter's growth was revised down, meaning that the overall growth trajectory appears weaker than previously thought. In addition, inventory accumulation appears to have made a small positive contribution to growth - a component that tends to balance out over time. The weakness came mainly from the external sector, where net exports made a significant negative contribution to growth.”

“Fixed capital formation was also down, while consumption supported growth. All in all, the GDP figures do not paint a picture of an economy gaining momentum or in danger of overheating, which would require a tightening of monetary policy. All eyes are therefore now on BoJ Governor Ueda's speech on Monday, one of the last opportunities before the blackout period to verbally prepare the markets for a possible rate hike in December.”

“I have long assumed that the BoJ will raise rates again in December, as it is unlikely to be any easier to find good reasons to do so next year. However, I now see a clear risk to this assumption. Political risk has not exactly diminished since the last BoJ meeting two weeks ago. A US trade war focused on China would not leave Japan unscathed, as it is an important trading partner of China. On the domestic front, it remains to be seen how the new minority government will handle its unfamiliar situation. If there is no rate hike in December, USD/JPY is likely to continue to be driven more by the USD side, which currently points to higher USD/JPY levels.”

• GBP/JPY trades lower on Friday after Japanese GDP data beats expectations and data for the same period from the UK. 
• Volatility is tempered by markets' view that the data is not sufficiently game-changing for either currency in the pair. 
• Much may hinge on BoJ Governor Ueda’s speech on Monday, the wide interest-rate differential supports GBP in the long run. 

GBP/JPY trades lower by about a third of a percent, in the 197.10s on Friday, after the release of weak UK economic growth data led to a depreciation of the Pound Sterling (GBP). The Japanese Yen (JPY) conversely was buoyed by better-than-expected Gross Domestic Product (GDP) and Industrial Production data which renewed hopes that the Bank of Japan (BoJ) will raise interest rates at its December policy meeting. 

UK GDP data for the month of September actually fell 0.1% MoM and rose only 0.1% in the whole of the third quarter (QoQ). This was below estimates and prior readings. The quarterly data showed a marked decceleration from a growth rate of 0.5% in Q2. 

In Japan, meanwhile, GDP grew at a slightly faster rate of 0.2% in Q3, in line with estimates of 0.2% but lower than the 0.5% of Q2. 

On an annualized basis, Japanese GDP rose by 0.9% in Q3, beating expectations of 0.7% but below the revised-down 2.2% of Q2. Japanese Industrial Production rose by 1.6% MoM beating estimates and previous figures. 

Although the data from Japan was higher than the UK data (0.2% vs. 0.1% in Q3) and beat estimates, whilst the UK figures undershot them, the difference may not be enough to be game-changing for either currency, according to institutional analysts. 

Remarking on the UK GDP figures, advisory service Capital Economic’s Deputy Chief UK Economist Ruth Gregory said it did not change her expectations that the Bank of England (BoE) would keep interest rates unchanged at 4.75% in December. Since higher interest rates attract greater net capital inflows this is good news for the  Pound. 

The economy grew at “..a snail’s pace (in Q3),” said Gregory, “However, this doesn’t mean the UK is on the cusp of another recession. And while today’s data raises the chances the Bank (BoE) will cut rates again in December, we are sticking to our view that the Bank will keep rates unchanged at 4.75% in December before cutting rates by 25 basis points again in February.” 

According to Comerzbank’s FX Analyst Volkmar Baur, the Japanese GDP data – though good – was not good enough to warrant an expectation that the Bank of Japan (BoJ) will raise its interest rate from 0.25%, the lowest in the developed world. 

“All in all, the GDP figures do not paint a picture of an economy gaining momentum or in danger of overheating, which would require a tightening of monetary policy,” said Baur, adding that whilst he had previously assumed the BoJ would raise interest rates by 0.25% in December, he now saw “a clear risk to this assumption”.

Baur highlights several reasons why he was unimpressed by the Japanese GDP data. Firstly the previous quarter’s figures were revised down substantially – from 0.7% to 0.5% QoQ and from 2.9% to 2.2% on an annualized basis. Due to this downward revision the overall picture is one of a “growth trajectory” that “appears weaker than previously thought.” 

Secondly, much of the growth came from “Inventory accumulation” which is a component that “tends to balance out over time,” adds Baur. 

Thirdly, the weakness from the external sector was concerning and could be a source of more fragility to come: “A US trade war focused on China would not leave Japan unscathed, as it is an important trading partner of China,” says the analyst. 

Much of the focus for the Yen will not be on Kazuo Ueda’s much-anticipated speech on Monday, when traders are hoping for a clearer sign the BoJ will be committing to an interest rate hike. In the meantime, the yawning gap between the interest rates in the two countries is expected to favor inflows into Sterling, giving GBP/JPY a positive upside bias overall.

• The Greenback trades on the back foot, giving back Thursday’s gains. 
• Fed Chairman Jerome Powell surprised markets by casting doubts over December’s interest-rate cut. 
• The US Dollar index falls back to the mid-106 level and could face further selling pressure. 

The US Dollar (USD) declines on Friday, breaking a streak of five trading days of gains, as traders engage in profit-taking after the Trump-led rally pushed the Greenback to reach on Thursday its highest level this 2024. 

The USD retreats even as traders are quickly paring back bets of another interest-rate cut by the US Federal Reserve (Fed) in December. The last blow came from Fed Chairman Jerome Powell, who in a speech on Thursday cast a shadow over the December rate cut odds by pointing out that the economy is doing great and the job market is looking healthy. Equities across the globe are not digesting this message too well, as this kills off the chances for a year-end Goldilocks scenario. 

The US economic calendar is gearing up for the always-volatile US Retail Sales numbers. With the bigger sales season set to kick off with Black Friday and Christmas shopping, the healthiness of the US consumer preceding that season will be a driver for markets in the short term. The rule of thumb for Retail Sales remains that the revisions from previous months can be more impactful than the actual numbers. 

Daily digest market movers: Fed delivers its first blow

• Fed Chairman Jerome Powell’s speech on Thursday came as a surprise to markets. While the Fed is said to remain data-dependent, several traders and strategists are pointing out that the Fed might already be pricing in a Trump trade effect. 
• Boston Fed President Susan Collins told the Wall Street Journal in an interview that a December rate cut is not a done deal, while she does not see signs of price pressures. 
• At 13:30 GMT, US Retail Sales for October are due. Growth in headline sales is expected to soften a touch to 0.3% from 0.4%. Sales excluding cars should also increase by 0.3% from the 0.5% rise a month earlier.
• Also at 13:30 GMT, the New York Empire State Manufacturing for November will come in. The number should come just below the contraction barrier, with a -0.7 expected, against the previous bigger contraction.
• Industrial Production for October is expected to come in at 14:15 GMT. Another monthly contraction of 0.3% is expected. 
• Federal Reserve Bank of Boston President Susan Collins delivers welcome remarks at the 68th Economic Conference organized by the Boston Fed at 14:00 GMT. 
• Federal Reserve Bank of New York President John Williams delivers opening remarks at the New York Fed Alumni event in New York near 18:15 GMT. 
• Equities in Asia have closed off this Friday quite mixed. Japanese equities closed off on Friday on the front foot, while Chinese indices were on the back foot at the closing bell. US futures are sinking, with the Nasdaq flirting with a 1% loss early on the day. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 58.7%. A 41.3% chance is for rates to remain unchanged. While the rate-cut scenario is the most probable, traders have significantly pared back some of the rate-cut bets compared with a week ago.
• The US 10-year benchmark rate trades at 4.43%, just off the high printed on Thursday at 4.48%.

US Dollar Index Technical Analysis: The logic side

The US Dollar Index (DXY) is undergoing a small fade this Friday, though warnings must be issued as comments from Powell are US Dollar positive. The Fed signals it will probably pause its cutting cycle, while for example the European Central Bank (ECB) will likely continue with still a string of rate cuts. This would widen the interest rate gap between the two nations, and will support the US Dollar as a high-yielding currency against other currencies. 

From now on, the 107.00 round level remains in play going forward after the sharp rejection from Thursday. A fresh yearly high has already been printed at 107.07. A two-year high could be reached if 107.35 gets taken out. 

On the downside, a fresh set of support is coming live. The first support is 105.93, the closing level on Tuesday. A touch lower, the pivotal 105.53 (April 11 high) should avoid any downturns towards 104.00. 

US Dollar Index: Daily Chart

In the past few days, the US economy has soared to new heights of economic prosperity—in the reported perception of Republican voters. Meanwhile, economic prosperity has all but disappeared—in the reported perception of Democrats. The US election result triggered these swings. The reality of economic experience cannot justify such moves, UBS’ economist Paul Donovan notes.

Aggregate US sentiment indicators may turn more positive

“The US two-party system, coupled with voters openly registering their political interest (with a brazenness uncommon in other cultures), makes the political distortion in US sentiment surveys very transparent. But growing problems with survey reliability suggest that political bias is a problem across developed economies.”

“The fact that people seem inclined to answer questions about the real economy with the pre-determined views of their political tribe undermines the value of such survey-based evidence, by weakening the relationship between reported sentiment and the actual economic behavior of consumers and companies.”

“Opposing political views might be thought to cancel each other out, but that does not seem to be the case. On the admittedly limited US evidence of the past eight years, Republican sentiment has swung more wildly than Democrat sentiment—perhaps Republicans are more passionately partisan. This suggests that aggregate US sentiment indicators may turn more positive following the election, for purely political reasons.”

• EUR/USD bounces after a brief test of 1.0500 seen on Thursday, its lowest level in over a year. 
• EUR/USD recovers on Friday due to profit-taking after a five-day losing streak.
• Markets see the Fed putting the December rate cut in doubt, while the ECB is expected to continue easing, pointing to more downside for the EUR/USD. 

EUR/USD slightly recovers on Friday after a brief test of the 1.0500 level the prior day. The pair has eased nearly 1.5% so far this week as markets have priced in more Trump trade effects. That move is now facing some profit-taking after a five-day losing streak for the Euro against the Greenback. All pieces of the puzzle are now in, with potentially EUR/USD starting to trade sideways in a range until President-elect Donald Trump takes office in January. 

The EUR/USD recovery on Friday looks to be triggered by some profit-taking after the steep decline this week. Economic data from France released earlier in the day showed that inflation, as measured by the Harmonized Consumer Price Index (HCPI), came a touch higher than the preliminary reading for October. However, this may not change the dovish stance of the European Central Bank (ECB), which is set to cut its policy rate in its upcoming policy meeting in December. 

On Thursday, Federal Reserve (Fed) Chairman Jerome Powell joined the camp of members within the Fed that deem another rate cut in December, however, it is not granted. Powell pointed out that the US economy and job markets are still doing very well. Meanwhile, several analysts and economists have warned of exponential inflation in the US should President-elect Donald Trump roll out all his fiscal stimulus packages for both US companies and households, alongside slapped tariffs on China and Europe. 

Daily digest market movers: EUR/USD enjoying a breather

• Japanese indices closed off rather flat to positive on Friday, while Chinese equities faced weekly losses. 
• France’s final reading for the October inflation figures came in a touch higher than expected. The HCPI rose by 1.6% year-over-year (YoY), compared to the 1.5% previously reported and expected. The monthly HCPI came in at 0.3%, as expected.
• There is some good news on the economic data front from China, where Retail Sales surged 4.8% YoY in October, beating the lower expectation of 3.8%.
• All eyes will be on the US Retail Sales data for October on Friday, with the headline number expected to show 0.3% compared to 0.4% in September. As always, markets will move more on the revisions than on the actual number. 

Technical Analysis: EUR/USD in search of some support

EUR/USD slightly recovers on Friday, with some profit-taking during the European trading session after five consecutive trading days in the red. Pure fundamentally, much upside for EUR/USD is not expected after Fed Chairman Powell dampened hopes for an interest rate cut in December, while recent French inflation figures may not change the ECB’s dovish stance. The rate differential between the two contents will become wider if the Fed does not cut and the ECB does at their next meetings in December, which is oil on the fire in favour of more downside in EUR/USD by the end of the year.   

On the upside, three firm lines in the sand can be seen. First up is the previous 2024 low, registered on April 16 at 1.0601. If that level breaks, the triple bottom from June at 1.0667 will be the next cap upwards. Further up, the 1.0800 round level, which roughly coincides with the green ascending trend line from the low of October 3, 2023, could deliver a harsh rejection before having more downside in EUR/USD. 

Looking for support, the 2023 low at 1.0448 is the next technical candidate. That would mean that once tested, a fresh two-year low is in the cards. Further down, a wider area could open up with 1.0294 as the next level to consider. 

EUR/USD: Daily Chart

UK GDP is a bit disappointing, owing to a surprise fall in activity during September. The 0.1% third-quarter figure is a far cry from the 0.7% and 0.5% in the first and second quarters. Does that show the economy has slowed? Yes, but not as much as the figures suggest, ING’s FX analyst Francesco Pesole notes.

BoE pause in December is the most likely outcome

“A lot of that strength seen in the first half of the year was in non-tradable and non-consumer sectors that have less to do with underlying economic fundamentals. The Bank of England has agreed that the true rate of growth was probably slower in the first half. However, we think the BoE/consensus forecast for the winter is a bit high, and while real wage growth should generate higher GDP, the pace is set to be fairly moderate in the near term before receiving a bit of a budget boost next year.

“GDP was a bit weaker than expected, but it's still not that surprising, particularly given the volatility in the recent data. The BoE is much more focused on the services inflation figures that we'll get next week. In the near-term, they're likely to remain sticky around 5%. Barring a downside surprise, we think a pause in December is the most likely outcome.”

“EUR/GBP has hovered just above 0.830 as a wide rate differential continues to put pressure on the pair. Given we see a low probability of the BoE cutting in December while our call is for a 50bp move by the ECB next month, we struggle to see much upside for EUR/GBP before year-end.”

The neutral (or natural) rate of interest is both one of the more fashionable and most frustrating ideas in central bank watching. The real rate of interest that keeps supply and demand of both consumer and capital goods in some kind of equilibrium is a lovely concept with a few problems1) it’s a real rate and requires an underlying assumption about inflation. 2) the real rate itself is hard to estimate and changes over time and 3) we live in an open global economy (for now) and different countries have different neutral/natural rates, Societe Generale’s FX analyst Kit Juckes notes.

EUR/USD to trade at 1.12 in the end of 2025

“Ignoring the challenges posed by a neutral rate economists struggle to estimate with any confidence and which changes over time, international variability has implications, of which two are shown in the charts below. The first plots the Eurozone-US differential against EUR/USD. The second plots the relative neutral rate against the US-EU net international investment position. The conclusion is intuitive: Higher neutral rates cause persistent capital flows into the US and pushing the dollar higher. And since changes in neutral rates reflect long-term changes in economies, this isn’t a short-term phenomenon.”

“As long as this lasts, EUR/USD will make a series of lower highs and lower lows, getting further away from PPP (1.27. last seen briefly in 2020). Because the terms of trade and economic shock from the full-scale invasion of Ukraine in 2022 was so big, we’ve guessed that the 2022 EUR/USD low will last for a fair length of time and we have been forecasting that EUR/USD will rebound to somewhere in a 1.10-1.20 range, determined by the US rate cycle.”

“It's possible that the US neutral rate is even higher, implying that the Fed easing cycle is almost over and EUR/USD fair value range is even lower than we are assuming but for now, we’re going to resist jumping on that bandwagon. Our latest forecast reflects this but lowers the end-2025 forecast to 1.12.”

The US Dollar (USD) is likely to trade in a range, probably between 7.2350 and 7.2700. 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.

The level to monitor for USD/CNH is 7.2800

24-HOUR VIEW: “USD traded in a range on Wednesday and then closed largely unchanged. Yesterday (Thursday), we pointed out that ‘Despite trading in a range, there has been a slight increase in momentum.’ We expected USD to edge higher, but we noted that ‘as momentum is not strong, any advance is unlikely to break above 7.2600.’ Our view of a higher USD was correct, even though the advance surpassed 7.2600 (high has been 7.2700). Given the severely overbought conditions, USD is unlikely to advance further. Today, USD is more likely to trade in a range, probably between 7.2350 and 7.2700.”

1-3 WEEKS VIEW: “We have held a positive USD view since late last week. As we tracked the advance, we indicated two days ago (13 Nov, spot at 7.22470) that ‘The level to monitor is 7.2800 and the next resistance above 7.2800 is at 7.3115.’ Yesterday, USD rose to a high of 7.2700. There is no change in our view. Overall, only a breach of 7.2000 (no change in ‘strong resistance’ level) would mean that the upward pressure has faded.”

EUR/USD tested 1.050 yesterday and then briefly rebounded before coming under pressure again around the 1.0580 area. Intraday volatility will likely be the norm for coming days due to a stretched long US Dollar (USD) positioning, but it is clear that the momentum on EUR/USD remains bearish and investors will remain attracted to selling the rallies, ING’s FX analyst Francesco Pesole notes.

EUR/USD to trade at 1.040 in the end of the year

“The minutes of the October European Central Bank minutes showed an ongoing debate about the disinflationary trend, and some hawkish members were reluctant to go for a rate cut that was described as a “risk management” move. There is a clear shift from inflation to growth concerns in the Governing Council, but no indications of a strong consensus for an acceleration in easing.”

“Our view remains that a 50bp move in December remains very much possible, and we expect a bearish impact on the euro given markets are pricing in just over 30bp. Today, we’ll hear from Fabio Panetta, Philip Lane and Piero Cipollone, three dovish-leaning members. The 1.0500 level is a key one for the dollar and we can probably expect good support also considering the positioning picture. Still, our call for year-end remains 1.040.”

The US Dollar (USD) is likely to continue to rise; the levels to monitor are 157.00 and 157.50. Momentum remains strong; the next technical objective is at 158.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The next technical objective for USD/JPY is at 158.00

24-HOUR VIEW: “Following the sharp rise in USD two days ago, we noted in early Asian trade yesterday that ‘momentum remains robust.’ We were of the view that ‘while USD could break above 156.00, it might not be able to maintain a foothold above this level.’ We underestimated the strength of the advance, as USD soared to 156.42, closing at 156.25 (+0.51%). The impulsive momentum is likely to continue to outweigh the overbought conditions. In other words, USD is likely to continue to rise. The levels to monitor are 157.00 and 157.50. To sustain the overbought momentum, USD must remain above 155.55 (minor support is at 156.05).”

1-3 WEEKS VIEW: “We turned positive in USD two ago (13 Nov), when it was at 154.70, indicating that ‘the increase in momentum suggests further USD strength towards 156.00.’ Yesterday, USD rose and surpassed 156.00. Momentum remains strong, and the next technical objective is at 158.00. To keep the momentum going, USD must remain above 154.95 (‘strong support’ level was at 154.00 yesterday).”

The US Dollar (USD) is testing the limit of stretched positioning, but macro developments have so far failed to offer any real catalyst for a substantial unwinding of the greenback’s longs. The set of inflation figures for October have kept markets somewhat reticent to fully price in a December cut from the Federal Reserve, as both CPI and PPI’s core measures have printed at 0.3% month-on-month. That is simply too hot for the Fed to turn the dial to a more dovish narrative, ING’s FX analyst Francesco Pesole notes.

USD is due a correction

“And indeed, the remarks by Fed Chair Jerome Powell in Dallas yesterday seemed to endorse markets’ cautious pricing on Fed easing, giving some support to the dollar towards the end of the New York session. Powell seemed to put greater emphasis on the strength of the economy and how that allows the central bank to approach the upcoming policy decisions “carefully”. Market expectations for a cut in December declined by around 5bp after his comments and are now at 15bp.”

“Today, there is another chance for a dollar positioning-led correction as retail sales for October are published. Consensus is for a marginal slowdown across all retail sales indices compared to September, while still remaining in positive MoM territory. It probably won’t take much to trigger a negative dollar reaction, but the recent momentum has been rather strong in US data.”

“Our short-term view remains that the USD is due a correction, and caution is warranted when chasing the current rally much further. However, when we look ahead and consider incoming US president Donald Trump’s policy mix, we remain of the view that markets will favour a structurally strong USD.”

• Gold bounces off technical support aided by the US Dollar, which peaks and rolls over. 
• The precious metal faces headwinds from the outlook for US interest rates and Trumponomics. 
• The US economy is in “remarkably good” shape, according to Fed Chair Powell, lifting the USD and weighing on Gold. 

Gold (XAU/USD) trades little changed on Friday, holding steady in the $2,560s after making a slight recovery from the two-month lows reached on the previous day. 

A stronger US Dollar (USD) continues to put pressure on Gold since it is mainly priced and traded in the US currency. Sticky US inflation and positive labor market data, as well as upbeat comments from the Federal Reserve (Fed) Chairman Jerome Powell, led the US Dollar Index (DXY) to a new year-to-date high on Thursday, piling further pressure on the yellow metal. 

Gold slumps on strong USD, Republican “clean-sweep”

Gold extended its decline, breaking below a major trendline and reaching new lows in the $2,530s on Thursday, after a combination of higher US factory-gate inflation data, lower US unemployment claims data and upbeat commentary from Fed Chairman Powell. 

Powell said the Fed would not need to not take such an aggressive approach to cutting interest rates given the US economy was doing “remarkably well”. The comments were negative for Gold, which, as a non-interest-paying asset, tends to outperform when interest rates are lower. 

US Retail Sales data, scheduled for release on Friday, could further stir the pot in terms of the outlook for the US economy, the US Dollar and Gold. If the data comes out higher than the 0.3% increase expected, it could lift the USD even higher, putting further downside pressure on the precious metal.

The news that the Republicans had crossed the threshold for gaining a majority in the US House of Representatives, and the fact they already control the US Senate and the White House, further weighed on Gold. 

Control of the legislature will mean President-elect Donald Trump and his party will be able to push through their economic policies with less friction. These, whilst expected to be inflationary and therefore potentially positive for Gold – a traditional “goto” inflation hedge – could also be bearish for the precious metal because it could force the Fed to keep interest rates elevated. 

Another reason for Gold's relatively rapid decline in November are outflows from large hedge funds, who rode the bull wave higher in October as Gold peaked at a record high of $2,790. Many of these funds use trend-following techniques and Gold’s recent declines could be flashing warning lights about the sustainability of the hitherto rock-solid uptrend.

Gold Exchange Traded Funds (ETFs), which allow investors to purchase “stocks” in Gold – enabling them to hold the commodity without actually purchasing the physical commodity – have also seen outflows, according to the World Gold Council (WGC). Gold ETFs shed around $809 million (12 tonnes) net in early November, driven by North American outflows and partially offset by Asian inflows. 

Meanwhile, geopolitical risks remain elevated, providing some underpinning support for Gold as a popular safe-haven asset. That said, US efforts at negotiating a ceasefire in Lebanon were said to be showing “tentative signs of progress,” according to a Reuters report on Friday. 

Technical Analysis: XAU/USD finds support at 100-day SMA

Gold bounces off its (blue) 100-day Simple Moving Average (SMA) and attempts a recovery. Still, the precious metal is in a short and probably medium-term downtrend. This, given the principle of technical analysis that “the trend is your friend,” favors a continuation lower. 

XAU/USD Daily Chart

Gold formed a bullish Hammer Japanese candlestick pattern on Thursday after touching support at the 100 SMA. However, it will require confirmation from a green bullish candle on Friday to indicate a near-term reversal. Currently, the price is trading flat.

Given the overarching downtrend, a break below the $2,530 August highs would probably indicate an extension of the trend lower. The next downside target lies in around the $2,470s, followed by $2,400, where the (green) 200-day SMA is located. 

The precious metal remains in an uptrend on a long-term basis, raising the risk of a reversal higher in line with its broader upcycle. 

USD/SGD’s advancement came close to 1.3490 but eased this morning. Last seen at 1.3404 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Bearish divergence on MACD appears to be forming

“Daily momentum is mild bullish but rise in RSI moderated. Bearish divergence on MACD appears to be forming. We watch price action if USD/SGD trades lower, tactically.”

“Support at 1.3290 (61.8% fibo retracement of Jun high to Oct low). Resistance at 1.3490, 1.3520 levels. S$NEER was last at 1.30% above model-implied mid.”

The New Zealand Dollar (NZD) is expected to continue to weaken; given the deeply oversold conditions, it remains to be seen if 0.5815 will come into view. In the longer run, outlook for NZD remains negative; the technical target now is at last year’s low of 0.5775, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD is expected to continue to weaken

24-HOUR VIEW: “After NZD fell and exceeded our expectations two days ago, we indicated yesterday that ‘Further weakness appears likely today, but oversold conditions suggest any decline may not reach the major support at 0.5850.’ The anticipated weakness once again exceeded our expectations, as NZD fell to a low of 0.5840. Although we continue to expect NZD to weaken today, given the deeply oversold conditions, it remains to be seen if the next support at 0.5815 will come into view. To keep the momentum going, NZD must remain below 0.5885, with minor resistance at 0.5865.”

1-3 WEEKS VIEW: “When we revised our NZD view from neutral to negative two days ago (13 Nov, spot at 0.5925), we indicated that ‘it is too early to tell if the major support at 0.5850 is within reach.’ Following the decline in NZD, we highlighted yesterday (14 Nov, spot at 0.5885) that ‘The increase in momentum indicates that the likelihood of NZD dropping to 0.5850 has also increased.’ In NY trade, NY dropped to 0.5840. Our negative outlook for NZD remains unchanged; the technical target is now at last year’s low of 0.5775. To maintain the buildup in momentum, NZD must remain below the ‘strong resistance’ at 0.5925 (level was at 0.5955 yesterday).”

The Euro (EUR) fell below 1.05 overnight but the dip was brief. Last seen at 1.0568 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

EUR to continue suffering from the US election outcome

“Daily momentum is bearish though RSI shows tentative signs of turning from near oversold conditions. Near term consolidation not ruled out but bias to sell rallies. Resistance at 1.06, 1.0740 (76.4% fibo fibo retracement of 2024 low to high), 1.0780 (21 DMA). Support at 1.05, 1.0450/1.05 levels.”

“Overall, EUR should continue 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.”

“On German politics, the minority government faces economic and diplomatic challenges. 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 wide EU-UST yield differentials continued to widen, validating EUR’s “fair value” relative to yield differentials.”

Provided that 0.6490 remains intact, the Australian Dollar (AUD) could decline further; the major support at 0.6400 is unlikely to come into view. In the longer run, further AUD weakness still appears likely; the next level to watch is 0.6400, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Further AUD weakness still appears likely

24-HOUR VIEW: “Yesterday, when AUD was at 0.6495, we expected AUD to ‘edge lower, possibly reaching 0.6460.’ We were of the view that ‘the major support at 0.6440 is likely out of reach.’ Our view was validated, as AUD dropped to 0.6441, recovering slightly to close at 0.6454 (- 0.48%). Although there is no significant increase in momentum, the bias for AUD remains on the downside. Today, provided that 0.6490 remains intact (minor resistance is at 0.6470), AUD could decline further. However, the major support at 0.6400 is unlikely to come into view. Note that there is another support level at 0.6420.”

1-3 WEEKS VIEW: “We indicated yesterday that AUD ‘is likely to decline further, and the levels to monitor are 0.6460 and 0.6440.’ While our view of a weaker AUD was not wrong, we did not quite expect it to drop as quickly (low has been 0.6441). Further AUD weakness still appears likely. The next level to watch is 0.6400. On the upside, should AUD break above 0.6520 (‘strong resistance’ level was at 0.6550 yesterday), it would mean that the weakness has stabilised.”

The US Dollar (USD) continued to hover near recent highs amid Trump policy uncertainty, a possible return to US exceptionalism and less dovish Fedspeaks. DXY was last at 106.55 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

DXY may enter into consolidation

“Overnight, Fed chair Powell said that the Fed does not need to be ‘in a hurry to lower rates’ and that the current strength of the economy allows it to approach decisions carefully. On labour market, he said ‘it is now by many metrics back to more normal levels that are consistent with employment mandate’.

“On inflation outlook, he spoke about near term fluctuation in recent range and to come down to 2% over time, albeit on a ‘sometimes bumpy path’. Markets have already scaled back probability of 25bp cut in Dec to 59% chance (vs 71% chance a week ago). Expectations will continue to adjust as US data comes. This puts focus on data tonight – empire manufacturing, retail sales, IP before next Fri’s prelim PMIs, Uni of Michigan sentiment data.”

“Firmer print will add to US exceptionalism narrative, keeping USD rates and USD elevated for longer, until data proves otherwise. Daily momentum is bullish while RSI shows tentative signs of slowing near overbought conditions. Near term, DXY may enter into consolidation. Resistance at 107, 107.40 (2023 high). Support at 106.50, 105.60 (76.4% fibo) and 104.50/60 levels (21DMA, 61.8% fibo retracement of 2023 high to 2024 low).”

Scope for the Pound Sterling (GBP) to retest the 1.2630 level; the major support at 1.2615 is unlikely to come under threat. In the longer run, GBP is expected to continue to weaken to 1.2615, possibly 1.2565, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

GBP is expected to continue to weaken to 1.2615

24-HOUR VIEW: “When GBP was at 1.2710 yesterday, we highlighted the following: ‘Although the weakness has not stabilised, downward momentum has slowed a tad. This, combined with oversold conditions, suggests 1.2665 may still be out of reach for now.’ While our view of a weaker GBP was correct, the lurch lower that sent it to a low of 1.2630 was unexpected. Downward momentum is showing tentative signs of slowing, but there is scope for GBP to retest the 1.2630 level before stabilisation is likely. The major support at 1.2615 is unlikely to come under threat. Resistance is at 1.2690; a breach of 1.2715 would mean that GBP is not weakening further.”

1-3 WEEKS VIEW: “In our latest narrative from two days ago (13 Nov, spot at 1.2735), we indicated that ‘Downward momentum has surged, and the next technical target is at 1.2665.’ Yesterday, GBP fell and exceeded the target, dropping to a low of 1.2630. We continue to expect GBP to weaken, eying a move to 1.2615, possibly 1.2565. We will maintain our view provided that 1.2770 (‘strong resistance’ level was at 1.2845 yesterday) is not breached.”

In its quarterly assessment published on Friday, the European Commission projects a bright Eurozone economic outlook for 2025 and 2026 but warned of overseas risks.

Additional takeaways

Market reaction

EUR/USD holds the latest uptick near 1.0568, up 0.35% on the day, as of writing.

• GBP/USD edges higher on Friday as US Dollar traders take profit following a strong rally for the Greenback to new 2024 highs. 
• The bounce remains strained because of the release of weak UK GDP growth data clouding the outlook. 
• Some analysts remain positive about the outlook for the UK despite the data, and this supports Sterling. 

GBP/USD edges higher on Friday, reaching the 1.2680s, as traders reduce their short exposure before the weekend. GBP/USD claws its way up from intraday oversold levels reached on Thursday when it registered near 2.0% losses on the week. This came after the US Dollar (USD) outperformed due to positive US economic data, the residual effect of Trumponomics, and upbeat comments from the Federal Reserve (Fed) Chairman Jerome Powell.

By rights, the pair should still be falling after the release of weak UK growth on Friday. However, it is possible traders are now judging the US Dollar as overvalued. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, reached a new 2024 high on Thursday, which could be restraining Dollar-traders’ “irrational exuberance”.  

Although it seems counter-intuitive, the Pound Sterling (GBP) is actually strengthening despite the release of negative UK Gross Domestic Product (GDP) growth data showing the economy shrank by 0.1% in September. This was lower than the 0.2% expected and 0.2% of the previous month. 

What’s more, in Q3, UK preliminary GDP rose by 0.1% QoQ – decelerating from the 0.5% recorded in Q2 and undershooting the 0.2% estimate. Ordinarily, this would be expected to be accompanied by a sell-off in the Pound. However, due to an overbought Dollar trade and the market’s continued faith in the outlook for growth in the UK, it has not. 

For advisory service Capital Economics, for example, the data has not materially changed its views on the outlook for Bank of England (BoE) policy or interest rates – a key driver of FX valuations. Lower interest rates are generally negative for Sterling as they reduce capital inflows and vice versa for higher rates. Yet, despite the poor economic data, they do not see the BoE cutting interest rates in December.

According to Capital’s Deputy Chief UK Economist Ruth Gregory, the GDP data means the economy grew at “..a snail’s pace (in Q3). However, this doesn’t mean the UK is on the cusp of another recession. And while today’s data raises the chances the Bank (BoE) will cut rates again in December, we are sticking to our view that the Bank will keep rates unchanged at 4.75% in December before cutting rates by 25 basis points again in February,” 

GBP/USD touches five-month lows after Chairman Powell remarks

GBP/USD is making a slow recovery from over four-month lows reached on Thursday after US data showed an above-expectations rise in factory-gate prices, as measured by the Producer Price Index (PPI), in October and US Jobless Claims falling below estimates in the week ending November 8, driving the Dollar higher and the Cable pair to a new low. 

The two data points are particularly relevant to Fed policy given its dual mandate of keeping inflation under control and fostering full employment. Later in the day, Fed Chair Powell drove the USD to an even higher high after he said that the US economy was in relatively good shape and the Fed would not need to cut interest rates as aggressively as he had previously thought. 

Technical Analysis: GBP/USD trends lower

GBP/USD retreats to support in the mid-1.2600s (red dashed line in the chart below) and makes a half-hearted stand. 

However, the pair is in a downtrend on a short and medium-term trend basis, and given the technical principle that “the trend is your friend,” the odds favor bears pushing prices even lower.

GBP/USD Daily Chart 

Assuming a break below the 1.2630 Thursday low, GBP/USD will probably start descending to the next downside target at around 1.2613, the late June lows (red dashed line). Below that, the next target lies at 1.2500 (round number and psychological level), followed by 1.2452 (early May lows).

The Relative Strength Index (RSI) momentum indicator is nearly oversold but not quite. If it enters oversold territory, it will advise short-holders not to add to their positions. 

The longer-term trend, it could be argued, is still bullish, indicating the risk and possibility of GBP/USD recovering if a longer-term upcycle kicks in.

Retail sales performance beats consensus again; production activity remained robust in October. We see upside risk to our annual growth forecast; official target of c.5% is likely to be achieved. We expect policy makers to shift focus to 2025 while ensuring implementation of existing policies, Standard Chartered’s economists Shuang Ding and Hunter Chan note.

Improving consumer sentiment

“October data suggests that China’s domestic momentum improved after the introduction of additional stimulus in late September. Retail sales growth jumped 1.6ppt from September to 4.8% y/y in October, beating market expectations for two straight months, thanks to the consumer goods trade-in programme and the early start of the ’Double 11’ shopping festival, in our view. Services production index growth jumped to 6.3% y/y, the fastest pace this year. In addition, industrial production (IP) remained robust, growing 0.41% m/m, faster than the average of 0.35% in June-August. Monthly GDP growth accelerated to above 5% y/y, according to our estimate, versus 4.6% y/y in Q3.”

“Fixed asset investment (FAI) growth stayed at 3.4% y/y in 10M-2024, supported by resilient manufacturing and infrastructure investment. Meanwhile, YTD real estate investment contracted 10.3% y/y as new starts and construction declined further. That said, housing demand appears to have improved on policy support. The y/y decline in home floor space sold eased significantly in October.”

“Solid September and October real activity data suggests that the official growth target of around 5% is likely to be achieved. We see upside risk to our current 2024 growth forecast of 4.8%. We expect the central bank to lower the reserve requirement ratio (RRR) by 25bps this month to facilitate issuance of local government bonds. Fiscal spending may continue to accelerate, generating a positive fiscal impulse in Q4-2024.”

Momentum has slowed somewhat; any further decline is likely part of a lower trading range of 1.0490/1.0580. In the longer run, price action continues to suggest EUR weakness; the next support level is at last year’s low, near 1.0450, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Next support level is at last year’s low at 1.0450

24-HOUR VIEW: “Following the drop in EUR to a low of 1.0555 two days ago, we highlighted yesterday that ‘Despite being deeply oversold, the weakness still has not stabilised.’ We held the view that EUR ‘could dip below 1.0555 but the next major support at 1.0500 is unlikely to come under threat.’ However, EUR broke below 1.0500, reached a low of 1.0496 and then rebounded to close at 1.0530. Conditions remain oversold, but the weakness still has not quite stabilised just yet. That said, as momentum has slowed somewhat, any further decline is likely part of a lower trading range of 1.0490/1.0580. In other words, EUR is unlikely to break clearly below 1.0490.”

1-3 WEEKS VIEW: “We have maintained a negative EUR view for more than a week now. Yesterday (14 Nov, spot at 1.0565), we indicated that EUR ‘is still expected to weaken.’ However, we indicated that given the oversold conditions, ‘the 1.0500 level may not come into view so soon.’ We also indicated that ‘only a breach of 1.0670 (‘strong resistance’ level) would mean that EUR is not weakening further.’ We underestimated the EUR weakness as it fell below 1.0500 (low has been 1.0496). The price action continues to suggest EUR weakness, even though caution is warranted given the deeply oversold conditions. The next support is at last year’s low, near 1.0450. On the upside, the ‘strong resistance’ level has moved lower to 1.0610 from 1.0670.”

Silver prices (XAG/USD) fell on Friday, according to FXStreet data. Silver trades at $30.41 per troy ounce, down 0.36% from the $30.52 it cost on Thursday.

Silver prices have increased by 27.78% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 84.40 on Friday, up from 84.14 on Thursday.

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

• GBP/USD remains steady after mixed GDP and industrial data released from the United Kingdom.
• UK GDP expanded by 1.0% in the third quarter, surpassing the 0.7% growth recorded in Q2.
• The monthly UK Industrial and Manufacturing Production both declined by 0.5% and 1.0%, respectively, in September.

GBP/USD breaks its five-day losing streak, trading around 1.2680 during the early European session on Friday. The pair remains steady after the release of mixed Gross Domestic Product (GDP) and Industrial data from the United Kingdom (UK).

The UK economy grew by 0.1% quarter-on-quarter in the three months ending September, following a 0.5% expansion in Q2. This growth fell short of market expectations for a 0.2% increase. On a year-on-year basis, UK GDP rose by 1.0% in Q3, matching forecasts but higher than the 0.7% growth recorded in Q2. 

In September, monthly UK GDP shrank by 0.1%, reversing a 0.2% expansion in August and missing the expected 0.2% growth. The Index of Services for the three months ending in September held steady at 0.1% 3M/3M, unchanged from the prior reading. However, Industrial and Manufacturing Production both declined in September, falling by 0.5% and 1.0% month-on-month, respectively. These figures were weaker than anticipated.

The US Dollar (USD) edges lower due to remarks from Fed Chair Jerome Powell on Thursday. Fed’s Powell stated that the recent performance of the US economy has been "remarkably good," allowing the Federal Reserve the flexibility to gradually lower interest rates. Meanwhile, Richmond Fed President Thomas Barkin stated that while the Fed has made strong progress so far, there’s still more work to be done to keep the momentum going.

Additionally, the US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, increased by 3.1% YoY, slightly above the forecasted 3.0%.

The US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, trades around 106.70. after pulling back from its yearly high of 107.06 recorded on Thursday. This decline could be attributed to a slowdown in "Trump trades."

• Quarterly GDP for the UK rose 0.1% in Q3 vs. 0.2% estimate.
• UK GDP came in at -0.1% MoM in September vs. 0.2% forecast.
• GBP/USD remains below 1.2700 after the UK GDP data.

The UK economy grew 0.1% QoQ in the three months to September 2024 after expanding 0.5% in the second quarter. The data missed the market forecast of +0.2% in the reported period.

The UK GDP climbed by 1.0% YoY in Q3 vs. 1.0% expected and 0.7% recorded in Q2.

The monthly UK GDP arrived at -0.1% in September, compared to a 0.2% increase in August, missing the expectations of +0.2%.

Meanwhile, the Index of services (December) came in at 0.1% 3M/3M vs. 0.1% prior.

Other data from the UK showed that Industrial Production and Manufacturing Production decreased by 0.5% and 1.0%, respectively, over the month in September. Both indicators underperformed the estimates.

The quarterly Total Business Investment increased by 1.2% through the June to September quarter.

Market reaction to the UK data

Mixed UK GDP and industrial figures failed to dent the Pound Sterling recovery. At the time of press, GBP/USD is trading 0.12% higher on the day at 1.2680. 

• USD/CAD trades flat around 1.4065 in Friday’s early European session. 
• The positive bias of the pair prevails above the 100-period EMA, but the overbought RSI condition might cap its upside. 
• The immediate resistance level emerges at 1.4070; the first downside target to watch is 1.4000.

The USD/CAD pair holds steady near 1.4065 during the early European session on Friday. However, the renewed US Dollar (USD) demand could provide some support to the pair for the time being. Additionally, the decline in crude oil prices might weigh on the Canadian Dollar (CAD) as Canada is the largest oil exporter to the United States (US).

According to the daily chart, the constructive outlook of the USD/CAD remains intact as the pair holds above the key 100-period Exponential Moving Averages (EMA). However, the 14-day Relative Strength Index (RSI) stands above the midline near 77.65, indicating the overbought RSI condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term USD/CAD appreciation.

The upper boundary of the Bollinger Band at 1.4070 acts as an immediate resistance level for the pair. A decisive break above this level could see a rally to the 1.4100 psychological level, en route to 1.4173 (the high of May 7, 2020). 

On the flip side, the initial support level is located at 1.4000, the round mark. A breach of this level could expose 1.3969, the low of November 13. The crucial contention level to watch is the 1.3905-1.3900 zone, representing the confluence of the lower limit of the Bollinger Band and the 100-period EMA.  

USD/CAD 4-hour chart

• USD/CHF retreats from a four-month high of 0.8917 recorded on Thursday.
• Fed’s Powell stated that US economic performance has been "remarkably good," allowing to lower rates gradually.
• The Swiss Franc could face challenges due to the increased odds of an SNB’s rate cut in December.

USD/CHF pauses its five-day winning streak, trading around 0.8900 during Friday’s Asian session after retreating from a four-month high of 0.8917 reached on Thursday. This pullback is likely due to a downward correction in the US Dollar (USD) following remarks from Federal Reserve (Fed) Chair Jerome Powell.

Fed’s Powell stated that the recent performance of the US economy has been "remarkably good," allowing the Federal Reserve the flexibility to gradually lower interest rates. Meanwhile, Richmond Fed President Thomas Barkin stated that while the Fed has made strong progress so far, there’s still more work to be done to keep the momentum going.

The US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, increased by 3.1% YoY, slightly above the forecasted 3.0%.

The downside for the USD/CHF pair may be limited, as the Swiss Franc (CHF) could weaken further with the increased likelihood of an interest rate cut by the Swiss National Bank (SNB) in December. This expectation follows Switzerland's inflation rate falling to 0.6% in October, the lowest in over three years, signaling inflation is under control.

SNB Vice Chairman Antoine Martin stated in an interview published on Monday that the SNB is not committed to additional interest rate cuts in December. This comes despite earlier comments suggesting potential reductions to address inflation.

At its September meeting, the Swiss National Bank (SNB) indicated readiness for further rate cuts, with both Chairman Martin Schlegel and Vice Chairman Antoine Martin suggesting the possibility of additional reductions, including a potential return to negative rates, according to Reuters.

FX option expiries for Nov 15 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0500 3.2b
• 1.0550 990m
• 1.0575 801m
• 1.0600 2.6b
• 1.0650 1.1b
• 1.0700 4b
• 1.0750 805m
• 1.0800 3.5b

USD/JPY: USD amounts                     

• 154.00 691m

AUD/USD: AUD amounts

• 0.6530 1.2b

USD/CAD: USD amounts       

• 1.3850 597m
• 1.4000 705m
• 1.4065 758m

NZD/USD: NZD amounts

• 0.6000 582m

Here is what you need to know on Friday, November 15:

Asian stocks remained a mixed bag, dragged by the mixed Chinese activity data and a pessimistic Wall Street close overnight. Despite a notable increase in China’s Retail Sales, the country’s disappointing Industrial Production and Fixed Asset Investment data amplify the economic concerns, keeping markets on edge.

An air of nervousness prevails amid a lack of certainty on the US Federal Reserve’s (Fed) future interest rates. Markets pared back expectations of a 25 basis points (bps) rate cut in December after Fed Chair Jerome Powell’s hawkish shift and the hot Producer Price Index (PPI) data released on Thursday.

Powell noted that the central bank does not need to rush to reduce rates, citing ongoing economic growth, a solid job market and sticky inflation as reasons for caution against easing policy too quickly. Meanwhile, annual headline PPI increased by 2.4% in October after rising by 1.9% in September and following Wednesday’s sticky US CPI inflation figures.

The market pricing for a 25 bps rate cut next month has dropped to about 69% from 83% a day ago, the CME Group’s FedWatch tool shows.

Increased expectations of fewer Fed rate cuts have provided extra legs to the Trump trades-driven rally in the US Dollar (USD)  and the US Treasury bond yields. Traders now look forward to the US Retail Sales and Industrial Production data for fresh cues on the health of the economy, which could alter Fed easing expectations. A couple of Fed policymakers are scheduled to speak later in American trading.

Across the Atlantic, the UK is due to report the preliminary third-quarter Gross Domestic Product (GDP) data alongside the Manufacturing Production data. Meanwhile, European Central Bank (ECB) officials are on the radar as markets are pricing in aggressive policy easing in the face of a worsening economic outlook.

Across the FX board, USD/JPY refreshed four-month highs at 156.75 before retracing gains to trade near 156.50. Japanese verbal intervention warnings rescued Japanese Yen buyers from the unimpressive Q3 GDP-induced pain.

Antipodeans shrug off the tepid risk tone and mixed Chinese data, continuing their recovery from multi-month troughs. AUD/USD is back above 0.6450 while NZD/USD regains 0.5850.

USD/CAD is trading sideways above 1.4050 amid a 1% sell-off in WTI Oil and ahead of the Canadian data set. The US oil is back in the red after giving up the $68 threshold again.

EUR/USD holds the rebound above 1.0500, awaiting ECB-speak and US data for further trading incentives.

GBP/USD remains capped below 1.2700, with traders refraining from placing fresh bets on the Pound Sterling ahead of the top-tier UK and US data releases. On Thursday, BoE policymaker Catherine Mann argued that the central bank should maintain rates at their current level until the upside risks to inflation.

Gold challenges the critical daily support at $2,545 as sellers fight back control amid sustained US Dollar demand.

• Silver price remains under pressure near $30.35 in Friday’s early European session. 
• Trump trades are likely to support the Greenback and undermine the USD-denominated Silver price. 
• Global silver demand in 2024 could help limit the XAG/USD’s losses. 

Silver price (XAG/USD) trades in negative territory around $30.35 on Friday during the early European session. The white metal remains vulnerable amid the stronger US Dollar (USD). Traders await the release of the US October Retail Sales report on Friday for fresh impetus. The Fedspeak will be closely monitored as it might offer some hints about the US interest rate outlook. 

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. Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD against a basket of six currencies, currently trades near 106.80 after hitting a fresh year-to-date high near 107.05 in the previous session. The 10-year US Treasury bond hit the highest since start of July at 4.48%. The renewed USD demand could undermine the USD-denominated Silver as it makes the white metal more expensive in other currencies, dampening demand. 

China's National People's Congress (NPC) meeting last week failed to deliver the immediate fiscal stimulus that investors were expecting. The concerns about sluggish demand could weigh on the Silver price as China is the world's major importer of silver. 

On the other hand, record-high industrial demand for silver might support the white metal in the near term. According to the Silver Institute and consultancy Metals Focus, demand for silver across industrial applications is expected to increase 7% YoY in 2024, reaching 700 million ounces (Moz). Additionally, analysts expect the global silver market to show a physical deficit of around 182 million ounces in 2024, marking the fourth consecutive year of shortfall.

• EUR/USD gains ground as the US Dollar Index pulls back from a yearly high of 107.06.
• Fed’s Powell stated that US economic performance has been "remarkably good," allowing lowering rates gradually.
• The ECB’s October Monetary Policy Meeting Accounts indicated increasing consideration of rate cuts with caution about domestic inflationary pressures.

EUR/USD breaks its five-day losing streak, trading around 1.0540 during the Asian session on Friday. This rebound is likely due to a downward correction in the US Dollar (USD) following comments from Fed Chair Jerome Powell. Powell stated that the recent performance of the US economy has been "remarkably good," allowing the Federal Reserve the flexibility to gradually lower interest rates.

Additionally, the US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, increased by 3.1% YoY, slightly above the forecasted 3.0%.

The US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, has pulled back from its yearly high of 107.06 recorded on Thursday. This decline is attributed to a slowdown in "Trump trades." At the time of writing, the DXY trades near 106.80.

European Central Bank (ECB) board member Isabel Schnabel stated on Thursday that interest rate changes should remain the ECB's primary policy tool, while bond purchases and forward guidance should be used more sparingly.

The ECB’s October Monetary Policy Meeting Accounts indicated increasing consideration of rate cuts. However, ECB officials remain cautious about domestic inflationary pressures, citing strong wage growth and sluggish labor productivity. The ECB emphasized the need to gather more data before implementing any policy changes.

• The Japanese Yen depreciates due to a slowdown in domestic economic activities.
• Japan’s annualized GDP growth for Q3 was 0.9%, slowing down from the 2.2% growth recorded in Q2.
• Japan’s Kato stated that he would take appropriate action to address excessive fluctuations in foreign exchange rates.

The Japanese Yen (JPY) extends its losing streak against the US Dollar (USD) for the fifth consecutive session, following the release of Japan’s Q3 Gross Domestic Product (GDP) data on Friday. The upside potential of the USD/JPY pair is supported by the strength of the US Dollar (USD). Traders are also preparing for the release of the US October Retail Sales data, due later on Friday.

Japan's preliminary Gross Domestic Product (GDP) grew by 0.2% quarter-on-quarter in the third quarter, down from 0.5% in the previous quarter, matching market expectations. The country's annualized GDP growth for Q3 was 0.9%, surpassing the market consensus of 0.7%, but showing a sharp slowdown from the 2.2% growth recorded in Q2.

Japan’s Finance Minister, Katsunobu Kato, stated on Friday that he will take appropriate action against excessive fluctuations in foreign exchange (FX) rates. Kato emphasized the importance of stable FX movements that reflect economic fundamentals and expressed concern over one-sided, sharp shifts in the market.

Meanwhile, Japan's Economy Minister, Ryosei Akazawa, said that he expects a modest economic recovery to continue, fueled by improvements in employment and wages. However, Akazawa also emphasized the need to carefully monitor potential downside risks from global economies and volatility in financial and capital markets.

Japanese Yen remains under pressure as the US Dollar hovers near yearly highs

• The US Dollar Index (DXY), which tracks the US Dollar’s performance against six major currencies, hovers around 107.06, marking its highest level since November 2023.
• On Thursday, Fed Chair Jerome Powell noted that the recent performance of the US economy has been "remarkably good," allowing the Fed room to gradually lower interest rates. Meanwhile, Richmond Fed President Thomas Barkin stated that while the Fed has made strong progress so far, there’s still more work to be done to keep the momentum going.
• The US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, climbed 3.1% YoY, slightly above the anticipated 3.0%.
• BoJ Deputy Governor Shinichi Uchida highlighted on Thursday the need for financial institutions and authorities to be prepared for sudden deposit outflows due to digitalization and technological advances. Uchida also noted the relationship between non-bank financial institutions and the banking sector has strengthened, any deterioration in the non-bank sector could ripple through the entire financial system via market channels.
• Japan’s Producer Price Index (PPI) increased by 3.4% year-over-year in October, exceeding the 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.
• 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.
• US Consumer Price Index (CPI) rose by 2.6% year-over-year in October, as expected. Meanwhile, the core CPI, which excludes the more volatile food and energy components, rose by 3.3% in line with market forecasts.

Technical Analysis: USD/JPY rises to near 156.50 as bullish bias prevails

USD/JPY trades around 156.50 on Friday. Daily chart analysis shows a continued bullish bias, with the pair moving upwards within an ascending channel pattern. The 14-day Relative Strength Index (RSI) is just below the 70 level, supporting the bullish outlook. A breakout above the 70 mark would indicate an overbought condition, potentially leading to a downward correction for the pair.

The USD/JPY pair could target the upper boundary of the ascending channel near the 159.70 level. A breakout above this level would reinforce the bullish sentiment and potentially push the pair toward its four-month high of 161.69, recorded on July 11.

On the downside, the USD/JPY pair could find support at the nine-day Exponential Moving Average (EMA) around 154.65, followed by the lower boundary of the ascending channel at 153.90.

USD/JPY: Daily Chart

Gold prices remained broadly unchanged in India on Friday, according to data compiled by FXStreet.

The price for Gold stood at 6,975.33 Indian Rupees (INR) per gram, broadly stable compared with the INR 6,971.36 it cost on Thursday.

The price for Gold was broadly steady at INR 81,358.84 per tola from INR 81,312.59 per tola a day earlier.

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

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

• GBP/USD remains on the defensive around 1.2675 in Friday’s Asian session. 
• The negative outlook of the pair prevails below the 100-period EMA, with the bearish RSI. 
• The first upside barrier is seen at 1.2720; the first downside target is located at 1.2618. 

The GBP/USD pair edges lower to near 1.2675, the lowest level since August during the Asian trading hours on Friday. The cautious remarks from the Federal Reserve (Fed) Chair Jerome Powell on Thursday and stronger US economic data boost the US Dollar (USD) broadly and weigh on the major pair. Traders brace for the preliminary UK Gross Domestic Product (GDP) for the third quarter (Q3), which is due later in the day. 

Technically, GBP/USD maintains a bearish outlook on the daily chart, with the major pair holding below the key 100-period Exponential Moving Average (EMA). The path of least resistance is to the downside as the Relative Strength Index (RSI) is located below the midline around 33.50. 

Sustained bearish momentum could drag the major pair to the lower limit of the Bollinger Band at 1.2618. A break below this level could push prices lower toward the 1.2500 psychological level, followed by 1.2467, the low of May 8. 

On the bright side, the first key resistance level to watch if buyers step in here would be 1.2720, the high of November 14. A break above these barriers could pave the way for a test of 1.2873, the high of November 12. Any follow-through buying above the mentioned level potentially opens the door to 1.2955, the 100-period EMA.  

GBP/USD 4-hour chart

• NZD/USD remains stable following the release of mixed economic data from China.
• Business NZ PMI fell to 45.8 in October, down from a revised 47.0 in September.
• The US Dollar remains steady near its fresh 2024 highs, despite signs of slowing in "Trump trades."

The NZD/USD halts its three-day losing streak, trading around 0.5850 during the Asian session on Friday. The New Zealand Dollar (NZD) might have received downward pressure as the Business NZ Performance of Manufacturing Index (PMI) fell to 45.8 in October, down from a revised 47.0 in September, reaching its lowest level since July 2024.

The NZD/USD pair holds gains after mixed key data was released from its close trading partner China. Retail Sales rose 4.8% year-over-year in October, surpassing the expected 3.8% and the 3.2% increase seen in September. Meanwhile, the country’s Industrial Production grew by 5.3% YoY, slightly below the forecasted 5.6% but higher than the 5.4% growth recorded in the previous period.

During its press conference on Friday, the National Bureau of Statistics (NBS) shared its economic outlook, noting an improvement in China's consumer expectations in October. The bureau plans to intensify policy adjustments and boost domestic demand, highlighting that recent policies have had a positive impact on the economy.

The US Dollar (USD) remains stable near its fresh 2024 highs, despite indications of slowing in "Trump trades." The US Dollar Index (DXY), which measures the dollar's performance against six major currencies, hovers around 107.00, near its highest level since November 2023.

Market attention is now shifting to the release of US October Retail Sales data on Friday, along with remarks from Federal Reserve officials. On Thursday, Fed Chair Jerome Powell commented that the recent performance of the US economy has been "remarkably good," providing the Fed with the flexibility to gradually lower interest rates.

Following the publication of the high-impact China’s activity data for October, the National Bureau of Statistics (NBS) expressed its outlook on the economy during its press conference on Friday.

Key quotes (via Reuters)

more to come ...

Market reaction

AUD/USD is extending gains above 0.6450, up 0.18% on the day, at the press time.

• The gold price trades with a negative bias in Friday’s Asian session. 
• The firmer USD, expectation of a slower pace of Fed rate cuts, exert selling pressure on the Gold price. 
• The US Retail Sales report for October will take center stage later on Friday. 

The Gold price (XAU/USD) struggles to gain ground around $2,570 on Friday after bouncing off a two-month low in the previous session. The precious metal remains under selling pressure amid the strong US Dollar (USD) and the rising uncertainty surrounding the Federal Reserve's (Fed) pace of interest rate reductions. The expectations of higher inflation next year due to Donald Trump’s policies have led to fewer expected rate cuts, weighing on the yellow metal as higher interest rates make holding non-yielding assets like gold less appealing.

However, the escalating tensions in the Middle East and the ongoing conflict between Ukraine and Russia could boost the Gold price, a traditional safe-haven asset. Looking ahead, investors will monitor the US Retail Sales for October, which are due later on Friday. Also, the NY Empire State Manufacturing Index and Industrial Production data will be published. The Fed’s Susan Collins and John Williams are set to speak later in the same day. 

Gold price extends losses amid US Dollar rally

• Fed Chair Jerome Powell said on Thursday that the recent performance of the US economy has been “remarkably good,” giving the Fed room to lower interest rates at a careful pace, per Bloomberg. 
• Richmond Fed President Thomas Barkin stated on Thursday that while the Fed has made strong progress so far, there’s still more work to be done to keep the momentum going. 
• The US Producer Price Index (PPI) rose 2.4% YoY in October, compared to a 1.9% rise recorded in September (revised from 1.8%), according to the US Bureau of Labor Statistics onThursday.  This figure came in above the market expectation of 2.3%.
• The US weekly Initial Jobless Claims for the week ending November 9 increased to 217K from the previous week of 221K, below estimates of 223K.
• According to the CME FedWatch Tool, the markets have priced in nearly 59.1% of the 25 basis points (bps) rate cut by the Fed at the December meeting, down from 75% last week.  

Gold price looks to resume the bearish trend

The Gold price edges lower on the day. The positive outlook of the precious metal seems vulnerable on the daily timeframe as the price hovers around the key 100-day Exponential Moving Average (EMA). The yellow metal could resume the downside if it can break below the 100-day EMA. The downward momentum cannot be ruled out as the 14-day Relative Strength Index (RSI) stands below the 50-midline near 33.60. 

Consistent trading below the 100-day EMA could pave the way to $2,485, the low of September 8. The additional downside filter to watch is $2,353, the low of July 25. Extended losses could see a drop to the $2,300 psychological mark. 

On the upside, the immediate resistance level for XAU/USD emerges near the support-turned-resistance level at $2,665. A decisive break above this level could result in a rally to $2,750, the high of November 6. 

Japan’s Finance Minister Katsunobu Kato on Friday that he “will take appropriate action vs. excessive FX moves.”

Additional quotes

Market reaction

USD/JPY is paring back gains to trade near 156.50 following these above comments, still up 0.18% on the day.

China’s October Retail Sales increased 4.8% YoY vs. 3.8% expected and 3.2% in September, while the country’s Industrial Production rose 5.3% YoY in the same period vs. 5.6% estimated and 5.4% registered previously.

Meanwhile, the Fixed Asset Investment came in at 3.4% YTD YoY in October, matching the expected 3.5% print. The September reading was 3.4%.

Additional details of the report showed that the dragon nation’s Unemployment Rate arrived at 5.0% in the reported period.

China’s National Bureau of Statistics (NBS) released the official data on Friday.

AUD/USD reaction to Chinese data

The mixed Chinese data dump fails to deter the Australian Dollar, with AUD/USD holding higher ground near 0.6460. The pair is up 0.09% on the day, as of writing.

• The Australian Dollar remains under downward pressure due to recent weak economic data.
• RBA Governor Bullock stated that current interest rates will remain unchanged until the bank gains confidence in the inflation outlook.
• Fed Chair Powell noted that US economy performance has been "remarkably good," providing flexibility to ease interest rates gradually.

The Australian Dollar (AUD) continues its decline for the sixth consecutive session on Friday, hovering near three-month lows against the US Dollar (USD). The recent downward trend in the AUD/USD pair is largely due to key economic data from Australia.

However, the decline of the Aussie Dollar may be limited due to less dovish remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock on Thursday. Bullock stated that current interest rates are sufficiently restrictive and will stay at this level until the central bank gains confidence in the inflation outlook.

The US Dollar remains steady near its fresh 2024 highs, despite signs of slowing in "Trump trades." The US Dollar Index (DXY), which tracks the US Dollar’s performance against six major currencies, hovers around 107.06, marking its highest level since November 2023.

Markets are now focused on US October Retail Sales data, set to be released on Friday, along with comments from Federal Reserve officials. On Thursday, Fed Chair Jerome Powell noted that the recent performance of the US economy has been "remarkably good," allowing the Fed room to gradually lower interest rates.

Australian Dollar extends its losing streak as US Dollar surges to fresh 2024 highs

• The US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, climbed 3.1% YoY, slightly above the anticipated 3.0%.
• Australia’s seasonally adjusted unemployment rate held steady at 4.1% in October for the third month in a row, matching market expectations. However, employment change data revealed only 15.9K new jobs added in October, which fell short of the anticipated 25.0K.
• Australia's Consumer Inflation Expectations dropped to 3.8% in November, down from 4.0% in the previous month, reaching the lowest level since October 2021.
• Federal Reserve (Fed) Bank of St. Louis President Alberto Musalem commented on Wednesday that persistent inflation challenges make it difficult for the Fed to continue easing rates. Musalem redirected attention to the overall strength of the US labor market, seeking to alleviate concerns about inflation's resistance to the Fed's downward pressure efforts.
• Federal Reserve Bank of Kansas City President Jeffrey Schmid highlighted potential challenges in lowering interest rates. Schmid also criticized market participants who continue to hold out hope for a return to near-zero rates, calling their expectations unrealistic.
• US Consumer Price Index (CPI) increased by 2.6% year-over-year in October, in line with market forecasts. Meanwhile, the core CPI, which excludes the more volatile food and energy components, rose by 3.3% as expected.
• Australia's Prime Minister Anthony Albanese shared in a radio interview on Wednesday that he discussed trade with US President-elect Donald Trump during a phone call last week. Albanese informed Trump that the United States holds a trade surplus with Australia and emphasized that it is in Washington's best interest to "trade fairly" with its ally. Meanwhile, the defense minister underscored Australia's significant investment in security.
• Last week, 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 to alleviate local government financing pressures and support struggling economic growth. However, the package stopped short of implementing direct economic stimulus measures.

Technical Analysis: Australian Dollar falls to near 0.6500, oversold levels

AUD/USD trades near 0.6460 on Friday. An analysis of the daily chart shows short-term downward pressure, as the pair remains below the nine-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) is slightly above 30, indicating potential oversold conditions. If the RSI dips below 30, it could signal an oversold situation, suggesting a possible upward correction.

The AUD/USD pair may find a key level near 0.6400 for support. A break below this psychological threshold could amplify downward pressure, potentially driving the pair toward the yearly low of 0.6348, last touched on August 5.

The immediate resistance lies at the psychological level of 0.6500. A break above this could lift the pair toward the nine-day EMA at 0.6525, followed by the 14-day EMA at 0.6553. Surpassing these EMAs may pave the way for a move toward the three-week high of 0.6687.

AUD/USD: Daily Chart

Japan's Economy Minister Ryosei Akazawa said on Friday that he “expects modest economic recovery to continue, driven by improving employment and wage environment.”

He further noted that there is a “need to carefully monitor downside risks from overseas economies and volatility in financial, capital markets.”

Additional comments

Market reaction

At the time of writing, USD/JPY is strongly bid near 156.60, up 0.20% on the day.

On Friday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1992, as compared to the previous day's fix of 7.1966 and 7.1966 Reuters estimates.

• USD/JPY trades in positive territory for the fifth straight day near 156.60 in Friday’s early Asian session. 
• Japan’s GDP rose 0.2% QoQ in Q3, as expected.
• Fed’s Powell said strong US economic growth will allow the Fed to take its time on rate cuts. 

The USD/JPY pair extends the rally to around 156.60, the highest level since July 23 during the early Asian session on Friday. The upward movement of the pair is bolstered by the firmer US Dollar (USD) broadly. Traders brace for the US October Retail Sales, which is due later on Friday. 

The preliminary Japan’s Gross Domestic Product (GDP) expanded by 0.2% QoQ in the third quarter (Q3) versus 0.5% prior, in line with the market consensus. The country’s GDP Annualized grew 0.9% in Q3, above the market consensus of 0.7%, and slowed sharply from the 2.2% growth seen in Q2. The Japanese Yen remains weak in an immediate reaction to the GDP report. 

The Bank of Japan (BoJ) Governor Kazuo Ueda warned during the October monetary policy decision that the central bank would scrutinize income data for future policy decisions. The uncertainty surrounding the BoJ rate-hike plans is likely to weigh on the JPY against the Greenback in the near term.  However, the verbal intervention from Japanese authorities might help limit the JPY's losses. 

On the USD’s front, Federal Reserve (Fed) Chair Jerome Powell noted on Thursday that strong US economic growth will allow policymakers to take their time in deciding about the size and the pace to cut interest rates. “The economy is not sending any signals that we need to be in a hurry to lower rates,” said Powell. The cautious stance of Powell prompted traders to lower their expectations for a December rate cut, lifting the Greenback. 

Meanwhile, Richmond Fed President Thomas Barkin stated on Thursday that while the Fed has made strong progress so far, there’s still more work to be done to keep the momentum going. The markets have priced in nearly 59.1% 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. 

• WTI price flat lines near $68.40 in Friday’s early Asian session. 
• US crude stocks increased by 2.1 million barrels last week, according to the EIA. 
• A stronger USD and demand worries might drag the WTI price lower. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.40 on Friday. The WTI price remains steady as a steep draw in US fuel stocks offset oversupply fears. 

The Energy Information Administration (EIA) weekly report showed crude stocks increased last week. Crude oil stockpiles in the United States for the week ending November 8 rose by 2.089 million barrels, compared to a rise of 2.149 million barrels in the previous week. The market consensus estimated that stocks would increase by 1.85 million barrels. Meanwhile, US gasoline inventories hit a two-year low, falling by 4.4 million barrels last week, compared with analysts' expectations of a 600,000-barrel build. 

A stronger US Dollar (USD) might cap the upside for the USD-denominated oil as it makes oil more expensive for holders of other currencies, which can reduce demand. The US Dollar Index (DXY), a measure of the value of the USD against a basket of six currencies, currently trades near 106.90 after hitting a fresh year-to-date high near 107.05.

"Crude futures are trying to establish equilibrium pricing as a rising U.S. dollar index is creating a further headwind, along with a Trump administration that will now have control of Congress, which is likely to roll back most of the Biden administration's energy policies," Dennis Kissler, senior vice president of trading at BOK Financial, said in a note.

Furthermore, the Organisation of Petroleum Exporting Countries (OPEC) latest downward revision for demand growth earlier this week might weigh on the WTI. OPEC lowered its global oil demand growth predictions for 2024 and 2025, claiming sluggish demand in China, India, and other areas, marking the producer group's fourth straight downward revision.