CFD Markets News and Forecasts — 18-11-2021

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18.11.2021
23:56
GBP/JPY Price Analysis: An inverted hammer on top keeps GBP bulls at bay
  • In the FX market, the market sentiment favors risk-sensitive currencies, like the British pound.
  • GBP/JPY recovered from five-week lows, gaining almost 200 pips in the week.
  • GBP/JPY has an upward bias, but an inverted hammer at the end of an uptrend keeps buyers on the sidelines.

The British pound rebound from five-week lows around 152.00s, climbs during the day, trading at 154.28 at the time of writing. At press time, the market sentiment is mixed, though slightly improved. Asian equity futures advances firmly, except for Chinese ones. In the FX market, risk-sensitive currencies extend Thursday risk-on appetite with the AUD, the NZD, and the GBP, gaining. 

On Wednesday, the GBP/JPY pair remained subdued within the 153.70-154.00 range. Nevertheless, as the European session began, the cross-currency edged higher, as positive market sentiment surrounded the financial markets at that moment. In fact, risk-sensitive currencies appreciated the most against the greenback. The only safe-haven currency that printed gains was the Swiss franc.

GBP/JPY Price Forecast: Technical outlook

In the daily chart, the GBP/JPY has an upward bias, though it will find strong resistance at the 154.74 November 17 high that retreated toward current levels. Further, the price action of the abovementioned date depicted an inverted hammer, which usually is a bearish signal if it appears at the end of an uptrend. 

However, to confirm its validity, it needs a daily close, below the November 16 low at 154.17. In that outcome, it would expose crucial support levels. The first would be the 50-day moving average (DMA) at 153.39, followed by the 100-DMA at 152.57. A break of the latter would expose the 200-DMA at 152.24, the last line of defense for British pound bulls.

On the flip side, if GBP bulls accomplish a daily close above the high of the inverted hammer around 154.70s, that could open the door for further gains. The first resistance would be 155.00. An upside break would expose the November 4 high at 156.24.

 

23:55
Silver Price Analysis: XAG/USD drops below 10-DMA inside rising wedge
  • Silver extends pullback from 200-DMA inside two-month-old bearish chart pattern.
  • Momentum line’s retreat adds to the short-term bearish bias.
  • Bulls need daily closing beyond 61.8% Fibonacci retracement for conviction.

Silver (XAG/USD) remains pressured around $24.80, extending the previous day’s losses during Friday’s Asian session. In doing so, the bright metal drops below the 10-DMA for the first time in two weeks.

That said, the quote’s failures to cross the 200-DMA join the gradual run-up since late September to portray a rising wedge bearish chart pattern on the daily (D1) formation. That said, the Momentum line also seems to have run out of steam, which in turn signals the further weakness of the commodity prices.

With that in mind, July’s low near $24.50 gains the market’s attention as immediate support ahead of the 38.2% Fibonacci retracement (Fibo) of the May-September downside, around $24.20.

It should be noted, however, that the quote’s weakness past $24.20, will be challenged by the $24.00 threshold and the wedge’s support line near $23.75, a break of which will confirm the bearish chart pattern to trigger the theoretical fall targeting fresh yearly low.

Meanwhile, 10-DMA and 50% Fibo., respectively around $24.90 and $25.10, guard short-term advances of the silver prices.

Following that, 200-DMA and the wedge’s resistance will challenge the XAG/USD bulls around $25.30 and $25.50 in that order.

Even if the silver buyers manage to defy the bearish chart formation by crossing the $25.50 hurdle, a 61.8% Fibonacci retracement level of $26.00 will be the key to follow.

Silver: Daily chart

Trend: Further weakness expected

 

23:30
Japan National Consumer Price Index (YoY) registered at 0.1%, below expectations (0.5%) in October
23:29
EUR/USD grinds toward 1.1370 amid soft US dollar EURUSD
  • EUR/USD wants more, hovers around 1.1370, USD retreats from a 16-month high.
  • EUR/USD bulls remain subdued amid instability in the bond market.
  • Traders will look for comments from ECB's Lagarde beside Fed's Waler and Clarida speeches.

EUR/USD is grinding above the critical resistance level, 1.1360, amid broad US dollar weakness. At the press time, the currency pair is trading around 1.1370 during Friday's early Asian-pacific trading session.

In the past two days, the pair has kept the investors entertained as they continue to remain hopeful, despite the possibility of the pair moving southwards. However, the latest European Central Bank (ECB) Governing Council Member Isabel Schnabel's statement has slightly dampened the market sentiments.

On Tuesday, Schnabel had said that the increase in inflation is welcoming news. She also noted that the ECB has continued to buy bonds, which shows that a rate hike is not imminent.

On the other hand, the US dollar has retreated from its 16-month highs and is now trading around 95.50. The jobless claims have hit a new post-pandemic low at 269,000. It has paired with a better-than-expected jump in the November Philly Fed Manufacturing index and has failed to push the US dollar northwards.

Also, instability in the bond market is at par with equity prices on Wall Street. The best situation for the US dollar would be falling equity prices and higher yields. But the opposite should work for the euro. The 10-year US Treasury yield stands at 1.58% after testing the daily low at 1.05%, while the 30-year remains below 2%.

Traders will now eye for Germany's Producer Price Index (PPI) and speeches from European Central Bank (ECB) President Christine Lagarde and German Buba President Dr Jens Weidmann. Fed policymakers will speak in the next 24 hours; traders will gear up for vice Chairman Richard Clarida and Christopher Waller comments.

EUR/USD technical levels

23:24
GBP/USD awaits Brexit talks, UK Retail Sales as bulls battle 1.3500 hurdle GBPUSD
  • GBP/USD stays determined to snap three-week downtrend, grinds higher of late.
  • Upbeat jobs report, inflation highlight UK Retail Sales for October amid BOE rate hike concerns.
  • UK’s Frost, EU’s Sefcovic to jostle over Northern Ireland protocol.
  • Fedspeak, yields to also gain market’s attention amid a light calendar.

GBP/USD prints four-day uptrend, taking bids around 1.3500 amid early Asian session on Friday. Although broad US dollar weakness and the recently firmer hopes of the Bank of England’s (BOE) rate hike keep buyers hopeful, upcoming UK Retail Sales for October and the key Brexit talks warrant caution.

After witnessing a softened UK rhetoric of Brexit, the European Union (EU) cheered its tough negotiating stance. However, U.K. Brexit minister David Frost said in the House of Lords on Thursday, per Bloomberg, “I would suggest that our friends in the EU don’t interpret the reasonable tone that I usually use in my discussions with them as implying any softening in the substantive position.” The policymaker also added, “Whatever messages to the contrary the EU may think they’ve heard or read, our position has not changed.”

It’s worth noting that the two sides recently inched closer to amend a part of the Northern Ireland (NI) protocol change that hinted at easing the Brexit woes earlier in the week. However, recent comments from UK’s Frost suggest that nothing has changed. The same highlight today’s meeting between the UK Brexit Minister Frost and his EU counterpart Maros Sefcovic in Brussels.

Bloomberg updates the topic by saying that the EU has offered compromises that it says would reduce customs checks on goods arriving in Northern Ireland by half, and inspections on many food products by 80%. But the U.K. shot the proposal down, saying it “did not currently deal effectively with the fundamental difficulties.

Elsewhere, the coronavirus woes also challenge the GBP/USD bulls even as the early week prints of the UK employment report and inflation data keep them hopeful.

Following the firmer prints of the UK Consumer Price Index, the BOE rate hike odds jump to make it almost certain that the “Old Lady” will announce a rate lift in the next month. However, today’s UK Retail sales for October, expected to jump 0.5% MoM versus -0.2% prior, will be crucial for determining the BOE’s next move.

Read: Sterling eyes higher territory north of $1.35 ahead of retail sales

It’s worth noting that the reduction in the US Treasury yields weighs on the US dollar and also underpin the GBP/USD advances. Hence, Fedspeak should be added to the watcher’s list too.

Technical analysis

A clear upside break of the monthly resistance line, now support around 1.3370, directs GBP/USD bulls towards the 1.3570-80 hurdle comprising 21-DMA and early October lows. Also favoring the pair buyers are the MACD conditions on the daily chart that teases bullish cross.

 

22:35
NZD/JPY Price Forecast: A bullish-engulfing candle pattern prepare bulls attack towards 81.00
  • NZD/JPY bounced off monthly lows, reclaimed the 80.00 figure.
  • NZD/JPY extends its advance amid risk-off market sentiment that could cause NZD weakness.
  • NZD/JPY: Two-technical bullish signals open the door for further upside in the pair.

The NZD/JPY bounced off monthly lows around 79.70s, climb as the Asian Pacific session begins, is trading at 80.49 during the day at the time of writing. The market sentiment is mixed, as the S&P 500 and the Nasdaq rose to new all-time highs. However, Asian equity indices futures failed to gain traction, except for the Japanese Topix, the only advancing some 0.38%.

On Thursday, the NZD/JPY began the day near the monthly lows, but good macroeconomic data coming out of New Zealand spur an upward move, as the data released increased the odds of a 50 basis point rate hike by the Reserve Bank of New Zealand.

Nevertheless, the rally stalled around 80.40 in the New York session, as the pair dipped 30 pips without any known reason, which also caused a fall in US Treasury yields. However, towards the end of the New York session, the pair reclaimed the 80.40 area.

NZD/JPY Price Forecast: Technical outlook

The daily chart shows that the NZD/JPY is trading above the May 27 high at 80.17, previous resistance that turned support. Also, a bullish-engulfing candle pattern composed of two candles just formed, adding more fuel to the upward bias. Additionally, the daily moving averages (DMA’s) are below the spot price, so there are two technical bullish signals.

For NZD/JPY bulls to accelerate the uptrend, they would need a daily close above the November 16 high at 80.65. In that outcome, 81.33 would be the first resistance. A breach of the latter would expose 82.20, near the year-to-date high, which lies around 82.50.

 

22:34
WTI Price Analysis: Recovery remains elusive below $80.00
  • WTI keeps rebound from six-week low, sidelined of late.
  • 100-HMA, weekly resistance line guards immediate upside, 200-HMA, 50% Fibonacci retracement also challenge the bulls.
  • July’s peak, bullish MACD signals restrict immediate downside.

WTI holds onto the strongest daily performance in over a week, not to forget the bounce off 1.5-month low during early Friday morning in Asia. That said, the black gold seesaws around $78.25-20 by the press time.

While July’s top put a carpet under the commodity’s downturn and MACD signals helped buyers to return, strong resistance levels do challenge the quote to defy the four-week downtrend.

Among the key hurdles, the first one comprises the 100-HMA and a descending trend line from November 09, near $78.90. Following that, a convergence of the 200-HMA and 50% Fibonacci retracement (Fibo.) of November 09-18 fall, close to the $80.00 threshold, will be a tough nut to crack for the WTI bulls.

In a case where the energy benchmark rises past $80.00, the weekly top near $80.70 and November 11 peak of $81.13 will be in focus.

Alternatively, pullback moves need to conquer the July month’s top of $76.40 to convince WTI crude oil sellers and aim for the 100-DMA level near $73.90.

Overall, WTI bears seem to have run out of steam but the bulls aren’t fully ready.

WTI: Hourly chart

Trend: Further recovery expected

 

22:11
Wall Street Close: S&P 500, Nasdaq mark record closing, Dow eases
  • US stocks end mixed on Thursday as softer yields underpin cautious buying.
  • Firmer US data battles mixed Fedspeak amid a light calendar.
  • Nvidia, Macy’s please bulls, Cisco Systems probes advances.

US equity markets witnessed a mild improvement in trading sentiment, despite printing a mixed daily performance for Thursday. The reason could be linked to the strong US data and comments from the Fed policymakers, as well as a pullback in the US inflation expectations and the Treasury yields.

Amid these plays, Dow Jones Industrial Average (DJIA) dropped for the second consecutive day, down 0.17% or 60 points to 35,870. On the contrary, S&P 500 and Nasdaq refresh record close while flashing 4,706 and 15,993 respectively by the end of the day’s trading.

The US inflation expectations can be linked as the key catalysts. US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, drop for the second consecutive day for Wednesday.

Further, NY Fed President and FOMC Vice-Chair John Williams highlighted inflation fears and pushed for rate action but mixed comments from Chicago Fed President Charles Evans poured cold water on the face of policy hawks. Additionally, the favorable prints of the US weekly job numbers and monthly regional manufacturing data confused the equity bulls and so do the second day of downside by the 10-year Treasury yields.

Stock-specific details suggest that Macy’s surged over 20% and Kohl’s also rose 10% on firmer annual earnings guidances while Nvidia jumped around 8.2% after Q3 earnings rallied. On the contrary, Cisco Systems couldn’t cheer upbeat earnings as sales rose less than expected amid supply chain concerns.

Looking forward, a light calendar keeps focus on the Fed rate hike talks and inflation chatters as the key catalysts, not to forget the earnings.

Read: Forex Today: Dollar dips amid further profit-taking, lira beating continues

21:50
NZD/USD bulls seek acceptance near 0.7350 with eyes on RBNZ NZDUSD
  • NZD/USD keeps Thursday’s heavy gains to tease the first weekly gain in three.
  • RBNZ Inflation Expectations fuelled rate hike concerns ahead of next week’s meeting.
  • US Treasury yields, DXY extend previous pullback from multiday high despite firmer data, inflation chatters.
  • NZ Credit Card Spending, Fedspeak and China news to entertain traders.

NZD/USD reverses the early US session retreat to snap the two-week downtrend heading into Friday’s Asian session. That said, the Kiwi pair picks up bids to 0.7045, keeping the previous two-day rebound from the monthly low amid rising hopes of a rate hike during the next week’s Reserve Bank of New Zealand (RBNZ) monetary policy meeting on Wednesday.

A 10-year high print of the RBNZ Inflation Expectations for Q4, 2.96% versus 2.27%, propelled the 2-year swap rates to the yearly high and triggered the biggest daily jump of the NZD/USD previous day. The rate change hints at a faster pace of the RBNZ’s reversal to the pandemic-led rate cuts.

However, the same isn’t likely to help the NZD/USD for long as the Australia and New Zealand Banking Group (ANZ) said, “We expect the RBNZ to push on through next year, taking the OCR to 2%. In our view that’ll dent consumers’ enthusiasm to borrow and spend markedly, reducing inflation pressure. Importantly, we’re already very late in the housing and credit cycle, and it won’t take two years of hikes to rein it in.”

Also underpinning the NZD/USD upside was the softer US Dollar Index (DYX) that tracked Treasury yields to mark the second day of loss, extending pullback from the 16-month high after the bond coupons stretched U-turn from the three-week top. That said, the Wall Street benchmarks cheered pullback in the US 10-year Treasury yields as the S&P 500 and Nasdaq posted record closing by the end of Thursday’s North American trading session.

Behind the moves could be the receding US inflation expectations and the mixed comments from the Fed policymakers.

The US inflation expectations can be linked as the key catalysts. US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, drop for the second consecutive day for Wednesday. Further, NY Fed President and FOMC Vice-Chair John Williams highlighted inflation fears and pushed for rate action but mixed comments from Chicago Fed President Charles Evans poured cold water on the face of policy hawks.

It’s worth noting that the firmer prints of the US weekly job numbers and monthly regional manufacturing data couldn’t stop the NZD/USD bulls. On the same line was the downbeat performance of China markets due to the Evergrande saga.

Looking forward, New Zealand Credit Card Spending for October, prior -12.9% YoY, will offer immediate direction to the Kiwi pair traders while catalyst from China and Fedspeak may direct the pair moves afterward. Above all, hopes of the RBNZ will be the key to watch.

Technical analysis

NZD/USD rebound struggles to overcome the 50-DMA hurdle surrounding 0.7355, which in turn highlights bearish MACD signals and the softer RSI line to tease sellers. However, a horizontal area from late September restricts short-term downside around 0.6980. It’s worth noting that the 200-DMA level of 0.7095 adds to the upside filters while bears can aim for a three-month-old support line near 0.6925 on the clear break below 0.6980.

 

21:23
Fed’s Evans: We’re in a good place

Having recently teased rate hike in 2022, Chicago Fed President Charles Evans said on Thursday that we are in a good place (on policy concerns).

Additional comments

No rate hike before taper ends in June, and no change to taper timeline.

Still expect no rate increase until 2023, but may be 'flat out wrong'.

Not obvious to me that 2022 rate increase is necessary or called for, but it could be the case it's appropriate.

Market reaction

Given the mixed comments from the Fed policymaker, also contrasting the recent words, there is a little market reaction to the updates. Even so, back-up to the current policy and softer yields help S&P 500 and Nasdaq to close at an all-time high.

Read: Fed's Evans: Rate hikes could begin next year

21:03
Gold Price Analysis: XAU/USD pulls back slightly to $1860 as US inflation expectations ease
  • Spot gold prices moderated on Thursday back to the $1860 level, despite a softer dollar and yields.
  • Gold has been tracking US inflation expectations more closely recently, which fell back on Thursday.

Spot gold (XAU/USD) prices fell 0.5% on Thursday, despite a weaker dollar and softness in US bond yields. Prices topped out at $1870 during the Asia Pacific session and have been gradually easing ever since. At just below $1860, spot gold is only about 1.0% below the six-month highs at $1877 that it printed earlier in the week.

The move lower in gold prices came despite a pullback in the US dollar and further downside in US real and nominal yields. Starting with the former, after hitting 16-month highs earlier in the week above 96.00, the DXY has been pulling back amid broad USD profit-taking. Typically, a weaker dollar is a positive for dollar-denominated gold prices, as it makes it cheaper for purchase by the holders of non-dollar currencies.

US data continues to beat expectations, with Thursday’s initial jobless claims release showing claims dropping to a new post-pandemic low and the Philly Fed Manufacturing survey matching the NY Fed released earlier in the week for strength. Strong US data should keep the dollar underpinned in the months/weeks ahead.

Meanwhile, US bond yields have also been losing steam, with 10-year yields back under 1.60% having printed three-week highs at 1.65% earlier in the week. As with the dollar, this is partly profit-taking driven, though some also attributed the downside to lower inflation expectations in wake of the recent pullback in oil prices and a broader moderation in expectations for oil prices in 2022.

Indeed, gold seems to be trading more highly correlated to US inflation expectations right now than to the US dollar or US yields, as would more normally be the case. Since last week’s much hotter than expected US Consumer Price Inflation report, gold prices spiked amid demand for inflation protection. The move higher mirror a move higher in US 5-year break-even inflation expectations, which surged from close to 3.0% to record highs (going back to when the 5-year TIPS started trading in 2004) above 3.30% this week. That move above 3.30% no Tuesday coincided with gold’s highs of the week. Since then, 5-year break-even inflation expectations have moderated back to 3.20%, seemingly weighing on gold.

 

21:00
South Korea Producer Price Index Growth (YoY) above forecasts (7.3%) in October: Actual (8.9%)
21:00
South Korea Producer Price Index Growth (MoM) above forecasts (-0.1%) in October: Actual (0.8%)
20:54
AUD/USD pares some weekly losses, reclaims the 0.7250 amid US dollar weakness AUDUSD
  • AUD/USD edges higher as the New York session winds down, up 0.14%.
  • The market sentiment is a mixed bag, though risk-sensitive currencies like the AUD, NDZ, and GBP rallied.
  • AUD/USD: Despite the pair being up, the mid-term has a downward bias; traders beware of selling pressure around 0.7300.

The Australian dollar bounced off year-to-date lows around 0.7250s, up to 0.7290, then seesawed around the latter and 0.7270 during the New York session. At press time, the pair advances 0.14%, trading at 0.7276.

Sentiment during the American session is mixed, as the S&P 500 and the Nasdaq trade in the green, while the Dow Jones losses. In the FX market, risk-sensitive currencies advance, led by the NZD up 0.57%, while the AUD is up 0.14%. Safe-haven currencies fall except for the CHF, which advances 0.26%.

An absent economic docket in Australia was no excuse for AUD bulls to push the pair higher. It seems that closeness to New Zealand and kiwi strength lifted the aussie in confluence with mixed data from the US. The greenback weakened in a mild-worse than expected US Initial Jobless Claims report that showed that 268K citizens applied for unemployment support, more than the 260K foreseen by analysts.

Putting this aside, Australia’s positive news is that Covid-19 lockdowns in Victoria, one of its largest states, were lifted on Thursday. This is expected to provide a boost to the economy in the upcoming Q4.

On Friday, an empty economic docket for Australia would leave the pair leaning on the dynamics of the greenback. Fedspeakers would continue its weekly parade on the US economic docket with Fed Governor Christopher Waller crossing the wires at 15:45GMT. Further, Vice-Chairman Richard Clarida will speak at 17:15GMT.

AUD/USD Price Forecast: Technical outlook

The AUD/USD pair is trading well below the daily moving averages (DMA’s), indicating the pair has a downward bias. Further, the price is finding strong resistance at the November 12 low at 0.7274, and failure to break above it would leave the AUD/USD exposed to an attack from USD bulls.

In that outcome, the first support level on its way south would be the upslope support trendline around the 0.7230-40 area. A breach of the latter could pave the way for further AUD weakness. The next pivot low would be the September 29 low at 0.7169, followed by the August 20 low at 0.7105.

 

20:53
USD/CAD bulls taken out by New York traders USDCAD
  • USD/CAD bears moving in ass US dollar fades away.
  • Fed speak underpins the hawkish bias as the Dec meeting draws closer. 

The Canadian dollar ended the North American day higher vs. the US dollar. However, it hit a six-week low due to weaker oil prices and prospects of a stronger US dollar as hawks circle over the Federal Reserve. Additionally, the loonie slumped on Tuesday after domestic data showed that inflation was rising at 4.7% in October, in line with market expectations.

Around the North American close, the price is flat near 1.2005. It had travelled between a low of 1.2592 and a high of 1.2647. Meanwhile, the greenback moved lower from a 16-month high on Thursday as investors gauged as to whether the greenback's rally was justified.

The currency hangs in the balance of diverging central bank expectations, stagflation risks and geopolitical standoffs between China and its competitors. The dollar index DXY, which measures the currency against a basket of six rivals, reached its highest since mid-July 2020 on Wednesday at 96.226, but was last down 0.28% at 95.541.

Fed speak underpins hawkish bias

Meanwhile, the analysts at ANZ Bank explained that the remarks from NY Fed President and FOMC Vice Chair John Williams that underlying inflation is broadening and picking up add weight to our assessment that the Fed is pivoting towards a more hawkish assessment of inflation.

''Transitory advocates, including Fed chair candidates Powell and Brainard, are becoming less common and it seems inevitable the December Summary of Economic Projections will see the majority of members pencil in rate rises next year.''

''The question is by how much, and also by how much the fed funds dot plot path can steepen. The December meeting will take place against a strong acceleration in activity. Manufacturing and private consumption activity bouncing back. The latest Atlanta Fed GDPNow index is signalling Q4 growth is running at 8.2%, up from 2.0% in Q2.''

 

 

 

20:41
Forex Today: Dollar dips amid further profit-taking, lira beating continues

What you need to know on Friday, November 19:

The Dollar Index’s pullback from the 16-month highs it printed earlier in the week continued on Thursday, with the index dropping back to the 95.50s ahead of the start of the Asia Pacific trading session. Further strong US data in the form of weekly initial jobless claims falling to a new post-pandemic low at 269K and a much larger than expected jump in the November Philly Fed Manufacturing index failed to ignite further dollar bullishness.

Traders cited profit-taking following the dollar’s recent impressive run higher as the main driver of the pullback. Indeed, while the DXY is set to end Thursday’s session 0.3% lower, it still trades more than 1.5% above its levels prior to the release of the much hotter than expected US inflation report last week. Further weakness in US bond yields also didn’t help, with the 10-year dropping under 1.59%. Some analysts expect the dollar to consolidate from here, if not continue to trade with a somewhat positive bias, as it awaits further fundamental catalysts.

Rhetoric from Fed policymakers broadly failed to spur the action, but for reference, NY Fed President John Williams noted broader-based increases in inflation and Chicago Fed President Charles Evans acknowledged that he was open to monetary tightening in 2022. The eurodollar futures curve (a proxy for Fed interest rate expectations) was broadly unchanged, with the December 2022 future still pricing about 70bps worth of tightening.

The oversold euro took advantage of the weaker dollar, with EUR/USD rallying nearly 0.5% to 1.1370. But it was the kiwi that was the best performing G10 currency, with NZD/USD posting a 0.6% gain to move towards 0.7050 after an RBNZ survey showed inflation expectations in New Zealand rising to 11-year highs in Q4. 19 out of 20 economists surveyed in a Reuters poll expect the bank to hike interest rates by 25bps to 0.75% next Wednesday, while one expected a 50bps hike to 1.00%.

Elsewhere in G10 FX markets, EUR/CHF printed its lowest level since 2015 on Thursday, dipping very briefly below the 1.0500 level that has in the past been vehemently defended by the SNB. Against the dollar, CHF strengthened by 0.3% on Thursday, also taking advantage of buck weakness. AUD/USD gained 0.2% and currently trades around 0.7275. GBP/USD gained 0.1% and continues to struggle to get above 1.3500 ahead of Friday’s UK October Retail Sales report. USD/JPY was a little stronger, having bounced at the 114.00 level, meaning the yen was the worst-performing G10 currency of the day.

Elsewhere, it was a poor day for major EM currencies. The lira led the declines, with USD/TRY surging another 3.5% on Thursday after the CBRT went ahead with a widely expected, but widely derided, 100bps rate cut, taking rates to 15.0% despite CPI nearing 20% in October. The rouble and South African rand both lost north of 1.0% amid unsurprising broader EM currency jitters, with ZAR failing to benefit after the SARB surprised markets with a 25bps rate hike to take its benchmark rate to 3.75%.

On Friday, the UK and Canada release October Retail Sales numbers, ECB President Christine Lagarde is scheduled to speak twice and Fed Governor Christopher Waller and Vice President Richard Clarida are slated to speak.

19:42
Fed's Evans: Rate hikes could begin next year

Chicago Fed President Charles Evans said on Thursday that rate hikes could begin next year, though they could also begin in 2023, depending on inflation. We may have to lean into slightly more restrictive than expected policies six months ago, he conceded. Nevertheless, policy adjustments can be relatively gradual, he added. 

Evans continued that the Fed's economic forecasts from September are now a little stale and that he was now more open to adjustments in monetary policy in 2022. 

Market Reaction

The comments from Evans about the possibility of monetary policy tightening in 2022 is a hawkish shift from his previous stance. However, his remarks will do little to spur fresh hawkish repricing in USD STIR markets that are already priced for a strong likelihood of a first 25bps rate hike in June. Hence, FX markets have not seen any noticeable reaction to the comments. 

19:29
Fed's Evans: Expects good momentum for the US economy well into 2022

Chicago Fed President Charles Evans said on Thursday that he expects good momentum for the US economy to continue well into 2022, according to Reuters. Moreover, the labour will continue to improve next year as people come back to into the labour force, he said, adding that he expected the unemployment rate to drop below 4.0% and maybe even go as low as 3.5%. Evans conceded that the US economy is currently looking at some pretty substantial increases in labour costs, and that supply chain issues will last longer into 2022 than he would like. Nonetheless, Evans said he remained optimistic for 2022.

Market Reaction

The dollar has not seen any reaction to these remarks from Fed's Evans, which don't add anything new to the Fed policy debate/outlook. 

19:24
USD/TRY consolidates above 11.00 as traders mull whats next for the battered lira
  • USD/TRY has pulled back from record highs near 11.30, but has consolidated above 11.00.
  • The CBRT triggered the crash in the lira’s value by pressing ahead with a 100bps rate cut.

USD/TRY surged to record highs on Thursday as the Turkish central bank pressed ahead with a widely anticipated, but also widely derided, 100bps rate cut that took the country’s benchmark interest rate to 15.0%. Turkish Consumer Price Inflation neared 20% in October, meaning that Turkey now has a real interest rate on bank deposits of about -5.0% (based on the current rate of CPI), on of the worst returns of any developed market.

USD/TRY surged from around 10.50 prior to the rate decision to print fresh record highs near 11.30. Over the last few hours, the pair has backed away from highs, though has broadly remained supported above 11.00, with a dip back to Wednesday’s highs at 10.95 aggressively bought. As things stand, the pair is set to post a 3.5% gain on the day.

Prior to the CBRT rate decision, the Turkish lira had already weakened by more than 5.0% versus the USD on the week and some had hoped this would deter the bank from going ahead with the 100bps hike. But it was not to be. The CBRT again buckled to pressure from President Recep Erdogan to lower interest rates. Erdogan holds the unorthodox belief that lowering interest rates bring down inflation as opposed to raising interest rates and now has a long track record of firing CBRT governors or policymakers who hike or don’t lower interest rates fast enough.

Since the CBRT started cutting interest rates back in September, the lira has lost more than a third of its value versus the US dollar. The escalating currency crisis reflects the market view that the CBRT, due to Erdogan’s interference, is not going to be able to get a grip on Turkish inflation, let alone get it back to the bank’s 5.0% target. Holders of Turkish denominated assets are rushing for the exit amid fears the country is headed for hyperinflation and economic ruin. The CBRT hinted that another rate cut be coming in December. The outlook for the lira remains dire.

 

19:18
AUD/JPY Price Aanalysis: Bears and bulls battle it out at critical hourly support
  • AUD/JPY bulls stepping in at a critical layer of hourly support.
  • Bears expect a break to test 82.50 for the closing sessions of the week. 

AUD/JPY bears are looking to fill in the imbalance between 83 the figure to at least 82.50 for the closing sessions ahead. However, there is the risk of an hourly reverse head and shoulders. This is threatening a meanwhile test of the upside and a deeper correction of the dominant bear trend. The following illustrates the daily, 4-hour and hourly time frame markets structure and price action analysis. 

AUD/JPY daily chart

The price has broken a key level of support as well as the 50-day EMA and there is still a massive imbalance in price between here and all the way into 82 the figure. However, the nearer term target is located around 82.50. The price action at this juncture is failing to break clear the old support around 83 the figure and while below 83.20, the focus remains on the downside. 

H4 chart

The price has printed a bearish engulfing candlestick in the European hours and we are seeing some meanwhile mitigation of the imbalance of that supply in New York. The expectations would be for Asia and Europe to step on the gas again which would ultimately flood the market with supply and equate to a downside extension of the dominant trend. The price would therefore be pressured on the way to the 82.50s for a fresh daily low. 

AUD/JPY H1 chart

The hourly chart shows that the price was unable to fully penetrate the W{formaiton's neckline which lead to a bid in New York:

However, the price has still remained within the day's range and bears are guarding the highs. With that being said, it is now critical that the bears keep in control at this juncture. The risk is that bulls protect the 83 figure which would result in a reverse bullish head and shoulders, as follows:

19:13
EUR/USD bounced off year-to-date lows in the last days, up around 1.1360s EURUSD
  • EUR/USD approaches the 1.1400 amid broad US dollar weakness.
  • US Initial Jobless Claims continue to fall, benefitting the labor market.
  • EUR/USD: Trading back below a 10-year old downslope resistance trendline.

At press time, the shared currency advances 0.41%, trading at 1.1368 during the New York session, amid broad US dollar weakness. In the overnight session, the EUR/USD was trapped within the 1.1320-40 range, though the US dollar weakened as the American session got underway, thus increasing the demand for the euro. 

Falling US T-bond yields undermine the greenback

The US Dollar Index, which tracks the greenback’s performance against a basket of six rivals, falls 0.25%, sitting at 95.55, undermined by falling US T-bond yields, with the 10-year note losing almost two basis points, down to 1.587%.

In the New York session, the US Bureau of Labor Statistics (BLS) revealed the Initial Jobless Claims for the week ending November 13. The number came at 268K, higher than expected, though a tad lower than the previous week’s reading, revised to the upside, to 269K. That said, it is the fifth consecutive drop in Jobless Claims, showing that the US labor market recovery is gaining traction. 

Moreover, the Continuing Jobless Claims fell by 200K, unexpectedly from 2.209M down to 2.080M in the week ending on November 6.

On Thursday, some ECB policymakers cross the wires. in an Austrian University speech, European Central Bank (ECB) policymaker Robert Holzmann said that Quantitative Easing (QE) has to stop, given that inflation is likely to stay high.  

Furthermore,  Philip Lane, Chief Economist of the ECB, said that bottlenecks are not expected to worsen and will ease from here. According to Reuters, he added that he does not see inflation expectations moving above the ECB’s target.

EUR/USD Price Forecast: Technical outlook

EUR/USD pair broke below a 10-year old downslope trendline on October 29, which confluences with the 50-day moving average at that time. From that point, the shared currency depreciated 3.33% against the greenback, printing a new year-to-date low at 1.1260.

Despite the abovementioned, EUR/USD buyers opened fresh bets against the buck amidst an undergoing Federal Reserve bond tapering that would end by the middle of 2022. However, cautions is warranted, as the daily moving averages (DMA’s) reside well above the spot price, close to the 10-year downslope trendline, around the 1.1600 area.

In the case of an upside move, the first resistance level would be the psychological 1.1400. A break above the latter would expose the November 15 high at 1.1464, followed by the 1.1500 figure.

On the flip side, if EUR/USD bears would like to resume the ongoing downtrend, they need to hold the spot price below 1.1400. in that outcome, the first support would be 1.1300, followed by the year-to-date low at 1.1264.

 

18:51
EUR/CHF briefly dips under 1.0500, hits lowest since July 2015, in test of SNB resolve
  • EUR/CHF briefly dipped below 1.0500 for the first time since July 2015, testing the SNB’s resolve for CHF strength.
  • The bank has defended the 1.05 level in the past.

EUR/CHG hit its lowest level since July 2015 on Thursday, surpassing the May 2020 low at 1.0535 to print a session low at 1.04978. That low was printed during the European morning and since the start of the US session, the pair has rallied back to the 1.0520s, where it currently trades with on-the-day gains of about 0.2%. There has been a lot of focus on rising Covid-19 infection rates in Europe and the associated reimposition of lockdown restrictions, a theme that has undoubtedly contributed to safe-haven CHF outperformance versus the euro.

The 1.05 level is seen as an important line in the sand for the SNB. The bank vigorously defended the level last April and May, with currency intervention a key tool employed by the SNB to figh deflation in Switzerland. By selling Swiss francs, the bank can weaken CHF (or at least prevent it from appreciating), thus preventing Swiss imports from becoming ever cheaper and pushing consumer prices lower.

Inflation differentials in 2021 have favoured the Swiss franc over the euro. According to the October Consumer Price Inflation report from the Swiss Federal Statistical Office, the YoY rate of CPI in Switzerland was 1.2%. That compares to a YoY CPI rate in the Eurozone of 4.1%. In other words, the purchasing power of each euro has dropped 2.9% more than the purchasing power of each Swiss franc over the last twelve months.

Eurozone inflation is set to remain elevated compared to Swiss in 2022. A 12 November Reuters poll showed that the median economist forecast was for Eurozone inflation to average 2.2% in 2022. That compares to the SNB’s forecast for 2022 inflation of 0.7%. This continued divergence in the purchasing power of the two currencies is one reason why EUR/CHF may well continue to broadly head lower over the medium term.

Some analysts are of the view that the SNB might be willing to let the pair fall sustainably below 1.05. According to Capital Economics, the “persistent weakness of Swiss inflation, and the resulting trend appreciation in the nominal exchange rate, presents the SNB with a moving target when assessing when it will intervene during bouts of upward pressure on the franc... Having defended the CHF 1.05 per euro mark in earnest last year, we suspect that the SNB’s “line in the sand” may now be closer to CHF 1.025, and that it could live with the franc rising to parity with the euro over the coming years.”

 

18:11
GBP/USD Price Analysis: Bulls face a wall of daily resistance GBPUSD
  • GBP/USD bears are seeking a test of the W-formation's neckline. 
  • The bulls are expecting a breaking of daily resistance. 

GBP/USD has caught a bid in the New York mid-day session while traders assessed whether or not recent gains linked to expectations of a central bank rate hike had gone too far. The sentiment has flipped risk-on, however, which has sunk the US dollar and given the point another boost. With that being said, the bulls are facing a wall of daily resistance and this leaves the W-formation a compelling scenario for the sessions ahead.

GBP/USD daily chart

The price is forming a doji topping candle on the day so far, meeting resistance. This could give rise to a move to the downside for the end of the week.

Meanwhile, this is occurring while a W-formation is taking shape as follows:

A W-formation is a reversion pattern and the price would be expected to retest the neckline. The neckline has a confluence with the 50% mean reversion level near 1.3455.

18:08
WTI probes $79.00 after bouncing at key $77.00 level support
  • WTI is probing $79.00, having bounced at key support in the $77.00 area.
  • Fundamental newsflow continues to err on the bearish/negative side.

Crude oil prices have been tentatively recovering ground after hitting six-week lows as the US session has gone by, following a sharp drop on Wednesday that carried all the way through into the early Thursday European session. Front-month futures contracts for the American benchmark for sweet light crude oil, West Texas Intermediary or WTI, has rallied back to prove the $79.00 level in recent trade, a decent recovery from earlier session lows just above $77.00. That still leaves WTI prices about $2.0 or 2.5% down on the week.

Technical buying after WTI bounced from a key area of support (the 6 July high at $77.00) appears to be the main driver of Thursday’s modest recovery. From a fundamental standpoint, recent updates remain mostly bearish and, as a result, any recovery back towards the $80 area might prove nothing more than a dead cat bounce. The US is gearing up for a crude oil reserve release and has pressing major Asian oil imports to join it, including China, Japan and South Korea. Chinese authorities have already said that they are preparing for a crude oil reserve release.

Meanwhile, the European demand outlook this winter is faltering as Covid-19 infections surge and government reinstates varied degrees of lockdown restrictions. In terms of the latest on that front, the European press is reporting that Austria could be about to reimpose full lockdown, the Netherlands has introduced a partial lockdown and now Germany is talking about a lockdown for the unvaccinated if hospitalisations cross above a certain threshold.

Elsewhere, and in terms of the broader supply/demand balance that is the most important long-term factor for crude oil markets, market participants are getting jittery about the 2022 outlook. Earlier in the week, the Secretary-General of OPEC+ said he expects oil markets to have returned to a surplus (i.e. more supply than demand) by December, while the oil minister from the UAE said he expected a surplus in Q1 2022. Output is expected to grow in the coming months in the US, as output returns back to pre-pandemic levels. Output is also expected to grow significantly from OPEC+, as the cartel continues to increase its production quotas each month and as OPEC+ nations who have involuntarily struggled to keep up with OPEC+ output hikes catch up. That crude oil prices will moderate in 2022 appears already to be a consensus view.

 

17:53
Silver Price Forecast: XAG/USD unable to break above the 200-DMA, retreats below $25.00
  • XAG/USD retreats from $25.15 tops, down to $24.90 amid falling US bond yields.
  • Risk-off market sentiment, weakens the greenback, boost silver prospects of higher prices.
  • XAG/USD: Failure to reclaim $25.00, opens the door for further downside, with $24.00 as the first target.

Silver (XAG/USD) slumps from $25.00 tops down to the $24.90 region, amid falling US bond yields, and broad US dollar weakness across the board. At press time, XAG/USD is trading at $24.91 down 0.60%, during the New York session. The market sentiment is downbeat, despite two of the largest US equity indices rising between 0.38% and  1.01%. All European equity indices finished in the red.

In the overnight session, XAG/USD remained subdued, around the $25.00-15 range, though it dipped down to $24.70, once the US Initial Jobless Claims for October were unveiled, figures that were mild-worse than foreseen though lower than the previous week reading. The Claims came at 268K, 8K over than expected, but 1K lower than the previous week, revised up to 269K. Continuing Jobless Claims unexpectedly fell by 200K, from 2.209M to 2.080M in the week ending on November 6.

According to sources cited by Bloomberg, Unemployment claims "have been declining on a sustained basis, and are moving to pre-pandemic levels." Further added, "layoffs are falling, reflective of companies holding on to workers amid a labor shortage.''

Further, US bond yields remain subdued in the New York session. The US 10-year benchmark note is down two basis points, at 1.584%, underpins the greenback with the US Dollar Index falling below the 95.80 level, down 0.28%, sitting at  95.56.

XAG/USD Price Forecast: Technical outlook

Silver failure at the 200-day moving average (DMA) at $25.32, spurred a downward move, below $25.00, but bounced off the September 3 hight support at $24.87, stabilizing around the $24.90 region. The 50 and the 100-DMA, are located below the spot price, supporting the upward bias, though the 100-DMA lies between the 200-DMA on the top, and the 50 on the bottom.

For XAG/USD bulls to regain control, they will need a daily close above the 200-DMA. In that outcome, the August 4 high at $26.00 would be the first resistance. A break of the latter would expose the July 6 high at $26.77, followed by the psychological $28.00, near the 2021 year-to-date highs.

On the flip side, a break of $24.87 support level, would expose the 100-DMA at $24.12, followed by the 50-DMA at $23.51.

 

17:47
United States 4-Week Bill Auction up to 0.11% from previous 0.05%
16:14
US 10-year Treasury yield falls from 1.60% amid risk-off sentiment in the financial markets
  • US 10-year T-bond yields fall to 1.582%, amid risk-off market mood.
  • JP Morgan expects a 0.25% rate hike by Q3 of 2022.

The US 10-year benchmark note falls 0.57% as the New York session begins, down two basis points sitting at 1.582% at press time. In the overnight session, US bond yields remained subdued, meandering around 1.60%. However, sudden changes in the market mood spurred a fall towards 1.573%, while some US equity indices fell between 0.14% and 0.52%.

The US 2-year T-bond yield gains one basis point, up to 0.504%, while the 20s and 30s follow the 10-year footsteps falling two and a half and one basis point respectively, sitting at 2.01% and 1.98%, each.

US Initial Jobless Claims extend its fall, showing the resilience of the US labor market

On the macroeconomic front, the US Bureau of Labor Statistics (BLS) reported that Initial Jobless Claims for the week ending on November 13 came at 268K, 8K higher than foreseen, though 1K lower than the previous week, which was revised up to 269K. That seemed to cause no reaction in yields and remained unchanged throughout the announcement. 

Further, at the time of writing, New York Fed President John Williams crossed the wires. He said that we are seeing broader-based increases in inflation, per Reuters. Further stated that we see a pick-up in underlying inflation in the US.

Despite the fall in yields, investors seem convinced that the Federal Reserve would need to pull the trigger to tackle inflation, hiking rates rather sooner than later, in line with market expectations. 

JP Morgan expects the Fed to raise rates by 25 basis points at the beginning of the Q3, a conservative call compared to Deutsche Bank, which anticipates the first hike in July 2022. They added that they expect a 25 basis point hike in each quarter until real yields reach zero. On Thursday, ten-year real yields were at -1.12%.

Looking ahead, bond traders would keep an eye for more Fed speakers in the day. Chicago Fed's President Charles Evans will cross the wires at 19:00 GMT

16:08
S&P 500 chops between gains and losses under 4700, broader equity sentiment remains well support
  • The S&P 500 has been choppy, swinging between gains and losses, though remaining close to record highs.
  • Strong US macro data and a solid finish to the Q3 earnings season is keeping sentiment underpinned for now.
  • The Nasdaq 100 index is in the green amid strength in chipmakers after Nvidia earnings.

US equities are seeing choppy trading conditions at the start of the US session. The S&P 500 index has already swung within a more than 30-point 4670-4700ish range and has traded with both on the day gains and losses. At present, the index is lower by about 0.1% in the mid-4680s, leaving less than 1.0% below record highs posted at the start of the month.

A much stronger than expected Q3 earnings season has helped to power the index more than 9.0% higher from its early October lows under the 4300 level. Earnings season is drawing to a close now and the highlight this week has been reporting from major US retailers, which for the most part have been strong, helping to keep broader markets underpinned. Walmart and Target reported earlier in the weeks and analysts interpreted their results as indicating that consumer spending remains strong despite rising inflation, with momentum good heading into the Q4 holiday shopping season.

Economic data out of the US is also helping to keep equity sentiment broadly underpinned. According to the October Retail Sales report, consumer spending grew at a healthy pace last month. According to the November NY and Philadelphia Fed manufacturing surveys, industrial activity is growing at a health pace this month. Labour market trends also look positive heading into November, with weekly jobless claims numbers released on Thursday showing the number of weekly initial claims falling to a new post-pandemic low at 269K, not far above pre-pandemic levels.

According to Peter Cardillo, chief market economist at Spartan Capital Securities in New York, “the stock market should resume its year-end rally based on the good earnings season and good macro news that's continuing to flow… Inflation has gone up but for now the consumer is not showing any signs of pulling back. And that's a key.”

Nasdaq 100

Turning to the other major US indices; the Nasdaq 100 index has also seen choppy trade but, for now, has managed to remain in positive territory above 16,300, having come within only about 20 points of the record highs posted at the start of November at 16,450. Strength in heavyweight chipmakers is supporting the index. Nvidia shares are up more than 9.0% following a strong Q3 earnings report that saw the company beat on top and bottom lines and delivered strong earnings guidance amid expected gains in its metaverse and data centre investments. This dragged other chip names higher in tandem and lifted the PHLX Semiconductor index by 1.0% and to a new record high.

Dow

Meanwhile, the Dow is down 0.4%, perhaps reflecting some concern about the newsflow surrounding the struggles the Biden Administration is having of pushing its “Build Back Better” social spending package through Congress. According to the US press, a vote on the $1.75T spending package could take place in the House of Representatives as soon as Friday, as soon as the US Congressional Budget Office releases its complete cost estimate for the plan. It is expected to pass in the House, but faces problems in the Senate.

But moderate Democrat Senator Joe Manchin is yet to indicate his support for the bill and continues to raise concern about the bill’s timing amid the current spike of US inflation. His vote will be needed so that the Democrats can pass the spending package in the Senate via the budget reconciliation process, which only requires a simple majority. Manchin, currently viewed as a thorn in the side of the Biden administration’s attempts to implement their legislative agenda, is enjoying a strong approval rating in his domestic state of West Virginia, bolstering his obstructionist resolve.

16:01
United States Kansas Fed Manufacturing Activity down to 17 in November from previous 25
15:30
United States EIA Natural Gas Storage Change above expectations (25B) in November 12: Actual (26B)
15:19
USD/CAD hits fresh monthly highs above 1.2640 USDCAD
  • Canadian dollar falls versus its main rivals on Thursday.
  • USD/CAD extends rally, firm above 1.2600, now looking at 1.2655.
  • Risk aversion boosts the greenback versus commodity and emerging market currencies.

The USD/CAD accelerated to the upside on the back of a stronger US dollar and climbed to 1.2645, reaching the highest level since October 6. The pair is rising for the third consecutive day.

Positive economic data and stocks in red

In Canada, the ADP report showed an increase in jobs of 65K in October, the best month since April. Also, employment insurance beneficiaries fell by 21.7% in September.

In the US, economic numbers came in better-than-expected. Jobless claims dropped to a fresh pandemic low, and the Philly Fed jumped from 23.8 to 39, surpassing the 24 of market consensus.

The figures boosted the greenback, particular against commodity and emerging market currencies. The decline in equity prices is also boosting the dollar. In Wall Street, the Dow Jones is falling by 0.70% and the Nasdaq by 0.32%

After the number, USD/CAD rose back above 1.2600 and during the American session continued with the move. A modest increase in crude oil prices is not helping the loonie that among G10 currencies is the worst performer.

Technical indicators favor the upside in USD/CAD, with key moving averages now turning north. A slide under 1.2580 would alleviate the bullish pressure. On the upside, the next resistance is seen at 1.2655, followed by 1.2695.

Technical levels

 

15:09
AUD/USD to edge lower towards 0.72 amid dovishness of the RBA – Rabobank AUDUSD

AUD/USD has been trending lower since the start of the month. As the Reserve Bank of Australia (RBA) is set to maintain a dovish stance, economists at Rabobank expect the aussie to tick down towards 0.72.

AUD/USD to struggle to recover the lost ground

“The RBA’s central forecast for the Wage Price Index is for an increase of just 2.5% in 2022 and 3% in 2023. Underlying inflation is expected at 2.25% in 2022 and 2.5% in 2023. The central message remains a dovish one.”

“Assuming the RBA reiterates a cautiously dovish message in its next policy meeting AUD/USD could struggle to win back ground.”

“We target a move to 0.72 on a three-month view.”

 

15:08
ECB's Lane: Not seeing inflation expectations moving above the ECB's target

European Central Bank Chief Economist Philip Lane said on Thursday that bottlenecks are not expected to get worse and, from here, will ease, according to Reuters. Lane added that he is not seeing inflation expectations moving above the ECB's target. For reference, the most commonly cited measure of Eurozone inflation expectations, the euro 5-year 5-year forward inflation-linked swap, is trading just to the south of the 2.0% level, which is the ECB's symmetric inflation target. Finally, Lane said he expects a pick-up in wage dynamics. 

Market Reaction

Nothing new from ECB's Lane. EUR/USD has not seen any reaction to the comments and continues to trade in the 1.1340 area, up by about 0.2% on the day as the broad dollar rally takes a breather. 

15:07
Fed's Williams: We are seeing a broader based increase in inflation

Federal Reserve Bank of New York President John Williams said we are seeing broader-based increases in inflation on Thursday, according to Reuters. Even after taking into account base effects, said Williams, we are seeing a pick up in underlying inflation in the US. Long-run inflation expectations reversed earlier declines, he continued, and are now at levels seen in 2013 and 2014. 

On the labour market, Williams said that supply constraints are a major factor. 

On the Fed's average inflation targeting framework announced in 2020, Williams said it was well suited for the current environment, as it starts from a point of making sure inflation expectations are anchored at 2.0%. 

Market Reaction

FX markets have not see any reaction to these comments, with the DXY still trading a tad weaker on the day to the south of the 95.80 level. 

15:02
USD/JPY nudging higher, eyeing 114.50, amid risk appetite, good US data, Japan stimulus news USDJPY
  • USD/JPY is seeing some strength again following Wednesday’s sharp decline.
  • After bouncing at 114.00, strong US data, risk appetite and Japan stimulus news supports the case for a higher USD/JPY.

After enjoying its largest one-day (%) decline since August on Wednesday, USD/JPY is trading a little firmer on Thursday. USD/JPY hit its highest levels since early 2017 just shy of the 115.00 level early on during Wednesday’s session, but then sharply reversed to end the session just above 114.00, a 0.64% drop. Having then continued to flirt with the 114.00 level during Thursday’s Asia Pacific trading hours, the pair has since picked up a little. It now trades around 114.40, up 0.3% on the day, with the bulls eyeing a test of the 114.50 level.

The main driver of the drop on Wednesday was a drop in US bond yields; the US 10-year pulled back from a three-week high at 1.65% to under 1.60%. The 10-year is trading flat at the start of the US trading session, thus not offering much impetus for the USD/JPY exchange rate. The reason for the rebound is likely due to dip-buying, which has been a profitable strategy for USD/JPY traders in 2021.

Fundamental developments also seemingly support the case for USD/JPY to continue recovering Wednesday’s lost ground. US economic data released on Thursday was upbeat, with weekly initial jobless claims falling to a fresh post-pandemic low at 269K and the Philadelphia Fed manufacturing survey showing an improvement in business conditions at the start of November.

Meanwhile, reports out of Japan last night showed the Japanese government decided on a much larger than expected JPY 55T fiscal spending package, which would be the largest ever of its kind. Analysts note that fiscal stimulus in Japan tends to boost equities but have a limited impact on Japanese government bond yields, thanks to the BoJ’s yield curve control policy. Analysts say that stronger Japanese equities increases hedging requirements, spurring outflows (and JPY selling).

Elsewhere, risk appetite is solid, with US equities back within striking distance of record levels, undermining demand for the safe-haven yen. More broadly, the main driver of the pair will likely continue to be US/Japan rate differentials. In a note released earlier in the week, Danske Bank said they “continue to expect two rate hikes from the Fed in 2022 (September and December) but also see upside risks to this forecast, with potentially earlier and more rate hikes than we are forecasting for 2022 and 2023”. As a result, think “10Y US Treasury yields set to hit 2% within the next 6-12 months.”

 

14:57
USD/TRY recedes from all-time highs past 11.0000
  • USD/TRY clinches new all-time high around 11.2800 on Thursday.
  • The lira reclaimed some ground lost soon after record low.
  • The CBRT could reduce rates further in December.

After hitting fresh all-time peak around 11.2800 earlier in the session, USD/TRY gave away part of those gains and now returns to the 11.0000 neighbourhood.

USD/TRY still poised for extra upside

USD/TRY remains on track to close the third consecutive week with gains along with eight sessions in a row closing in the positive territory. Actually, the lira is the worst performing EM currency, having shed already around 33% so far this year vs. the US dollar

The Turkish currency accelerated its losses to levels well north of the 11.0000 barrier after the Turkish central bank (CBRT) matched forecasts and reduced the One-Week Repo Rate by 100 bps at its meeting, taking the policy rate to 15.00%.

The outlook for the currency remains well on the negative side and further losses stay well on the cards, particularly considering that the CBRT suggested that another interest rate cut could be on the table as soon as in December.

USD/TRY key levels

So far, the pair is gaining 3.14% at 10.9447 and a drop below 10.0688 (high Oct.25) would expose 9.8219 (20-day SMA) and finally 9.4722 (monthly low Nov.2). On the other hand, the next up barrier lines up at 11.2792 (all-time high Nov.18) followed by 12.0000 (round level).

 

14:49
Gold Price Forecast: XAU/USD failure at $1,870 opens the door for a retest of $1,850
  • XAU/USD falls as the New York session begins, fails to break above $1,870.
  • US T-bond yields are flat, around 1.60%, as Wall Street opens.
  • XAU/USD Price Forecast: Failure to conquer $1,870 would expose $1,850 as strong support for the non-yielding metal.

Gold (XAU/USD) slides from $1,870s towards the $1,860 area, after a mild-weaker than expected US Initial Jobless Claims reported during the New York session. At press time, XAU/USD is trading at $1,865, down 0.08%.

The US Bureau of Labor Statistics, also known as BLS, reported the Initial Jobless Claims for the week ending on November 13. The figures came at 268K, 8K higher than estimations, but 1K lower than the previous week, revised up to 269K. Surprisingly Continuing Jobless Claims fell by 200K, from 2.209M to 2.080M in the week ending on November 6.

According to sources cited by Bloomberg, Unemployment claims "have been declining on a sustained basis, and are moving to pre-pandemic levels." Further added, "layoffs are falling, reflective of companies holding on to workers amid a labor shortage.''

Once the news crossed the wires, XAU/USD dipped to the daily S1 pivot at $1,858 but instantaneously recovered above the $1,860 region.

Further, as the Wall Street open approaches, US bond yields remain subdued as in the overnight session. The US 10-year benchmark note is flat at 1.60%, while the US Dollar Index took a breather after holding to the 95.80 level, down 0.02%, sitting at  95.76.

XAU/USD Price Forecast: Technical outlook

The daily chart shows that gold found strong resistance around the November 16 high at $1,877. Since then, it has failed to sustain a break above the $1,870 figure, and today Is not an exception.

However, the yellow metal still has an upward bias, as the 100-day moving average (DMA) is crossing over the 200-DMA. Nevertheless, the 50-DMA remains on the bottom of the pile, failing to gain traction, so it can give gold bulls another reason to open fresh bets against the greenback.

On the downside, the XAU/USD next support area would be, according to Dhwani Mehta, Analyst at FX Street, would be the "$1,857, the intersection of the Fibonacci 61.8% one-day and Fibonacci 23.6% one-week." Further, a break below the abovementioned level could send gold tumbling towards the confluence of the pivot point one-month R2 and the November 17 low around $1,849, which would be the last line of defense for gold buyers.

 

14:28
USD/CNY: Short-term strength, long-term weaker yuan – Danske Bank

The Chinese yuan has continued to strengthen throughout the year and is now up 10% from the bottom last year. Economists at Danske Bank highlight four reasons for the strength of the CNY. They look for continued CNY strength near-term as the four forces will probably continue to dominate. However, during 2022 they expect CNY to weaken.

CNY to weaken during 2022

“We highlight four reasons for the strength of the CNY: 1) Record trade surplus, 2) Strong net Foreign Direct Investment flows, 3) A smaller service deficit due to less outbound tourism and 4) speculation over US tariff cuts.”

“We expect the strong flows underpinning CNY to continue in the short term. US goods consumption will likely remain strong through the winter as a new Covid wave is likely. However, during 2022 we expect CNy to weaken as a) we look for the trade surplus to come down on the back of the US consumers eventually buying fewer goods from China and b) rate increases from the Fed amid moderate easing measures by PBoC reinforces the divergence in policy rates.”

“We look for USD/CNY to trade around 6.40 in the short-term, before starting a move higher towards 6.55 in 6M and 6.80 in 12M. This is higher than the forward market which trades at 6.56 in 12M.”

 

14:12
EUR/USD Price Analysis: Technical rebound could extend further EURUSD
  • EUR/USD finally reverses the recent weakness and regains 1.1350.
  • Immediately to the upside comes the 10-day SMA (1.1454).

EUR/USD manages to bounce off Wednesday’s new 2021 lows in the 1.1260 region.

Oversold conditions of the pair seem to have prompted the rebound in spot to levels back above the 1.1300 barrier. The continuation of the recovery could still have some legs to go with the next interim hurdle at the 10-day SMA at 1.1445 ahead of the 20-day SMA at 1.1524. Further up comes the weekly low at 1.1609 (November 9).

In the meantime, extra losses remain on the cards as long as the pair trades below the immediate resistance line (off September’s high) today just above 1.1600. In the longer run, the negative outlook persists while below the 200-day SMA, today at 1.1861.

EUR/USD daily chart

 

14:10
EUR/USD continues to trade slightly in the green as more strong US data fails to spur buck EURUSD
  • EUR/USD is trading slightly in the green in the 1.1330s, unmoved by more strong US data.
  • Analysts remain cautious on the euro, amid pandemic, dovish ECB and Turkey-related concerns.

Whilst strong, the latest US weekly jobless claims and regional Fed manufacturing survey data releases have so far failed to revive the kinds of broad USD strength seen in recent sessions. EUR/USD continues to trade with very modest on-the-day gains of about 0.1% or roughly 10 pips as the US dollar rally takes a breather. The pair is currently trading in the 1.1330s, about 0.6% above Wednesday’s lows in the 1.1260s.

Whilst the euro is enjoying some overdue respite versus the dollar, many analysts remain wary. Societe Generale points out that the ECB has thus far not said anything about the recent decline in the EUR/USD exchange rate. “This suggests that the central bank is comfortable with the new level of EUR/USD at 1.13 and the speed of the depreciation since last week”, the bank said. In other words, traders might view ECB silence as a green light for further euro depreciation. ING notes that the ongoing surge in Covid-19 infections in the Eurozone is another downside risk for the euro. Any associate lockdowns could “dent the recovery in the services sector just as the manufacturing sector is struggling with supply chain disruption”, they say.

Elsewhere, MUFG says that “recent market developments are making us more nervous over negative potential spill-over effects from Turkey”, before adding that “the most intense phase of the lira sell-off in the summer of 2018 did have a material impact on G10 FX performance… in August 2018, the EUR/USD rate temporarily dropped from around 1.1700 to a low of close to 1.130”. “The developments (in Turkey) could already be contributing to increasingly bearish euro sentiment in the near-term” the bank concludes.

Looking ahead to the rest of the session, central bank speakers populate an otherwise bare calendar. Fed Board of Governors member and NY Fed President John Williams and ECB Chief Economist Philip Lane are both slated to speak at 1430GMT. FOMC member Evans is then slated to speak at 1900GMT. Referring to the speech from ECB’s Lane, Credit Agricole notes that “by now the EUR should be used to his uber-dovish tone” and that “the oversold EUR could instead rely on technicals to eventually halt its longest streak of daily losses in over two years”.

 

13:45
GBP/USD surrenders modest intraday gains to over one-week highs GBPUSD
  • GBP/USD struggled to capitalize on its intraday gains beyond the 1.3500 mark.
  • Brexit woes turned out to be a key factor that acted as a headwind for the GBP.
  • Hawkish Fed expectations underpinned the USD and collaborated to the decline.

The GBP/USD pair extended its steady intraday descent through the early North American session and dropped to a fresh daily low, around the 1.3465 region in the last hour.

The pair struggled to find acceptance above the key 1.3500 psychological mark and witnessed an intraday turnaround from over a one-week high touched earlier this Thursday. Given that an imminent rate hike by the Bank of England is already priced in the markets, persistent Brexit-related uncertainties acted as a headwind for the British pound.

Investors remain worried about the possibility that the UK government would trigger Article 16 and suspend parts of the Northern Ireland Protocol. Apart from this, the impasse over the post-Brexit fishing rights held bullish traders from placing aggressive bets around the GBP/USD pair, rather prompted fresh selling at higher levels.

On the other hand, the US dollar reversed an intraday dip and continued drawing some support from the prospects for an early policy tightening by the Fed amid rising inflationary pressures. That said, sofer tone around the US Treasury bond yields kept a lid on any meaningful gains for the greenback and could lend some support to the GBP/USD pair.

On the US economic data front, the Philly Fed Manufacturing Index jumped to 39 in November as against consensus estimates pointing to an uptick to 24 from 23.8 in the previous month. This, to a larger extent, was offset by higher Weekly Jobless Claims, coming in at 268K during the week ended November 12, and did little to provide any impetus.

Hence, it will be prudent to wait for a strong follow-through selling before confirming that the recent recovery from the lowest level since December 2020 has run out of steam. Meanwhile, bulls are likely to wait for a sustained strength beyond the 1.3500 mark before positioning for any further appreciating move for the GBP/USD pair.

Technical levels to watch

 

13:36
Canada ADP Employment Change up to 65.8K in October from previous 9.6K
13:34
US: Philadelphia Fed Manufacturing Index rises to 39 in November vs. 24 expected

According to a report from the Federal Reserve Bank of Philadelphia released on Thursday, the headline Manufacturing Activity Index of the Manufacturing Business Outlook Survey rose sharply to 39.0 from 23.8 in November. That was much bigger than the expected rise to 24.0. 

The New Order subindex rose to 47.4 from 30.8, reaching its highest level since March 1973. The Price Paid subindex rose to 80.0 from 70.3, while the Employment subindex fell to 27.2 from 30.7.   

Market Reaction

The latest batch of US data has not had any discernible impact on FX markets and the DXY continues to trade within recent intra-day ranges in the 95.65-95.80 area. 

The strong manufacturing survey from the Philly Fed comes on the heels of an equally strong manufacturing survey released by the NY Fed earlier in the week. They both suggest that US November manufacturing PMI surveys should be strong. 

13:33
United States Philadelphia Fed Manufacturing Survey came in at 39, above forecasts (24) in November
13:32
US: Weekly Initial Jobless Claims decline to 268K vs. 260K expected

According to the latest report from the US Department of Labor (DoL), there were 268,000 initial claims for US unemployment benefits in the week ending on the 13th of November. That was 8,000 more than expected, but down 2,000 from the week prior and, according to the DoL, "is the lowest level for initial claims since March 14, 2020 when it was 256,000". Last week's initial jobless claims number was revised higher to 269,000 from 267,000. 

Continuing Jobless Claims unexpectedly fell to 2.08M from 2.209M in the week ending on 6 November, versus expectations for a fall to 2.12M. The four-week average initial jobless claims number fell to 272,500 from 278,000 the week prior. The insured unemployment rate fell to 1.5% as of the week ending on 6 November.  

Market Reaction

The latest batch of US data has not had any discernible impact on FX markets and the DXY continues to trade within recent intra-day ranges in the 95.65-95.80 area. 

13:31
Canada Employment Insurance Beneficiaries Change (MoM): -12.7% (September) vs previous -4.3%
13:30
Canada Canadian Portfolio Investment in Foreign Securities up to $17.19B in September from previous $15.17B
13:30
Canada Foreign Portfolio Investment in Canadian Securities down to $20.02B in September from previous $26.3B
13:30
United States Continuing Jobless Claims came in at 2.08M below forecasts (2.12M) in November 5
13:30
United States Initial Jobless Claims came in at 268K, above expectations (260K) in November 12
13:30
United States Initial Jobless Claims 4-week average declined to 272.75K in November 12 from previous 278K
13:23
USD/TRY to head back lower below 10.00 as CBRT will have to reverse gear – TDS

The Central Bank of the Republic of Turkey (CBRT) cuts policy rate by 100 basis points to 15.00%. USD/TRY has jumped to close to 11. Economists at TD Securities think that things will get worse before they get better but as policy is eventually tightened, USD/TRY can fall and settle in the low 10s/high 9s. 

Rate cuts continue, the lira slide too

“The CBRT has cut the repo rate by 100bps to 15%, in line with consensus, but more aggressively than we had expected.”

“We still forecast USDTRY at 9.35 by year-end and 10.90 by end-2022. The short-term forecasts seem beyond what is reachable as moves occurred much faster than we had thought. But our forecast for the pair at 11.00 in Q2 2023, 12.90 by end-Q3 and then higher at 14.50 in 2024 and 17.00 in 2025 do justice to our long-held bearish view on the Turkish lira.”

“For the time being, we think USD/TRY will very soon break above the 11.00 handle and continue pressuring higher. This will give little options to the CBRT but to reverse monetary loosening. We think the Bank has no more than 4 weeks at its disposal.” 

“When rate hikes kick in, USD/TRY can finally stabilize and start falling. This could still help TRY to settle in the low 10s or high 9s sometimes over the coming three months, under the premise that rates will have to be brought back up above the 20% mark.”

 

13:15
SARB hikes repo rate by 25bps to 3.75% versus expected hold at 3.5%

The South African Reserve Bank (SARB) opted on Thursday to hike their benchmark interest rate by 25bps to 3.75%, marking the bank's first rate hike since the onset of the pandemic. Economists had been split over whether the central bank would hike rates by 25bps or hold them at 3.50%, though a small majority favoured them holding. 

The SARB's Monetary Policy Committee (MPC), which dictates the bank's monetary policy, voted three in favour of the hike to two against. The bank's governor Lesetja Kganyago said that while the Committee expects inflation to stay close to the midpoint of the bank's 3.0-6.0% inflation target, inflation risks had increased. For reference, the YoY rate of South African Consumer Price Inflation (CPI) was at 5.0% in October, data on Wednesday showed. Kaganyago said that future policy decisions would continue to be data-dependent. 

Market Reaction

In the lead-up to the meeting, USD/ZAR was pushing higher and that trend has accelerated in recent trade, despite the unexpected hike from the SARB. USD/ZAR is now above 15.70 and up over 1.7% on the day. 

13:12
South Africa SARB Interest Rate Decision above forecasts (3.5%): Actual (3.75%)
13:00
Russia Central Bank Reserves $: $626.2B vs $622.1B
12:58
Silver Price Analysis: XAG/USD consolidates around $25.00, bullish bias remains
  • Silver lacked any firm direction and remained confined in a range around the $25.00 mark.
  • The set-up favours bullish traders and supports prospects for a further appreciating move.
  • Sustained weakness below the trend-channel support is needed to negate the positive bias.

Silver struggled to capitalize on the previous day's positive move and seesawed between tepid gains/minor losses heading into the North American session. The white metal was last seen trading flat, around the key $25.00 psychological mark.

Looking at the broader technical picture, the recent strong recovery from the YTD low touched in September has been along an ascending channel. This, along with last week's breakthrough the 100-day SMA/38.2% Fibo. confluence barrier favours bullish traders.

The positive bias is reinforced by the emergence of fresh buying on Wednesday and bullish oscillators on the daily chart, which are still away from being in the overbought territory. The set-up supports prospects for a further near-term appreciating move.

That said, the metal's inability to find acceptance above the 50% Fibonacci level of the $28.75-$21.42 slide warrants caution. Nevertheless, the stage seems all set for a move towards testing the next relevant hurdle near the $25.55-60 region.

Some follow-through buying has the potential to lift the XAG/USD towards the 61.8% Fibo. level, around the $26.00 round-figure mark. This coincides with the top boundary of the mentioned ascending channel and should cap any further gains. 

On the flip side, any pullback might still be seen as a buying opportunity and remain limited near the $24.50 resistance breakpoint. This is followed by the $24.10-$24.00 confluence (100-DMA and the 38.2% Fibo. level, ahead of the trend-channel support near the $23.85-80 region.

A convincing break below the latter will negate the constructive outlook, rather shift the bias back in favour of bearish traders and prompt aggressive technical selling. The XAG/USD might then accelerate the slide towards the $23.00 mark, or the 23.6% Fibo. level.

Silver daily chart

fxsoriginal

Technical levels to watch

 

12:46
AUD/USD posts tentative recovery, but rallies back above 0.7300 remain subject to being sold AUDUSD
  • AUD/USD has rebounded slightly on Thursday after hitting six-week lows on Wednesday just above 0.7250.
  • Profit-taking on recent shorts, positive reopening news and NZD strength are all likely helping.
  • The pair’s near-term technical bias continues to look bearish and rallies above 0.7300 remain subject to being sold.

Technical buying followings it's run of recent losses, as well some positive Australian economic reopening headlines, have helped AUD/USD post a decent rebound thus far this Thursday. The pair hit six-week lows just above 0.7250 late on Wednesday but has since recovered back to the 0.7280s. That means AUD is currently trading with gains of about 0.2% on the day versus the US dollar. The head of Australian state Victoria announced on Thursday that most Covid-19 related restrictions would be lifted from midnight. Over the last few weeks, restrictions, which were the toughest in Australia’s most populous states New South Wales and Victoria, have been eased. This is expected to provide the economy with a boost in Q4.

AUD/USD may also be getting a boost from strength in its antipodean cousin the kiwi. NZD is the best performing G10 currency on the day, up 0.6% versus the buck, after a quarterly survey of business managers one-year inflation expectations rose to an 11-year high at 3.7% from 3.02% in Q3. Traders said the data boosts the odds that the RBNZ opts to go with a 50bps rate hike at its policy meeting next week. AUD and NZD are typically closely correlated.

But zooming out to look at AUD/USD’s short/medium-term prospects, the technicals continue to look bearish. AUD/USD has been falling within a descending trend channel since the end of October. At the start of the week, the pair tested and rejected resistance in the form of the top of the descending trend channel. Any recovery back to the north of the 0.7300 level remains subject to being sold. To the downside, bears will be targetting the September lows just under 0.7200.

12:26
EUR/GBP recovers further from 21-month low, retakes 0.8400 mark EURGBP
  • EUR/GBP witnessed some short-covering from YTD lows touched earlier this Thursday.
  • The USD profit-taking slide benefitted the euro and remained supportive of the move.
  • BoE rate hike bets underpinned the GBP, though Brexit woes kept bulls on the defensive.

The EUR/GBP cross built on its intraday recovery move from YTD lows and climbed back above the 0.8400 mark during the mid-European session.

The cross staged a goodish rebound from the 0.8385-80 area, or the lowest level since February 2020 and has now recovered a major part of the previous day's heavy losses. This marked the first day of a positive move in the previous five and could be solely attributed to short-covering following the recent slump of nearly 200 pips from the very important 200-day SMA.

The possibility of the UK government suspending a part of the Brexit settlement over Northern Ireland, along with the impasse over the post-Brexit fishing rights acted as a headwind for the sterling. Apart from this, the ongoing US dollar profit-taking slide benefitted the shared currency, which further contributed to the EUR/GBP pair's intraday recovery move.

That said, the divergent bank of England and the European Central Bank monetary policy outlooks could hold back bullish traders from placing aggressive bets. This week's upbeat UK employment details and hotter-than-expected CPI print reassured an imminent BoE rate hike in December. Conversely, the ECB has been pushing back on market bets for tighter policy.

This, in turn, warrants some caution before confirming that the EUR/GBP cross has bottomed out in the near term and positioning for any further appreciating move. Hence, any subsequent move up is more likely to meet with a fresh supply and run out of the steam near the 0.8420 region, or the previous YTD daily closing lows set on October 26.

Technical levels to watch

 

12:19
US Dollar Index Price Analysis: Correction lower could visit the 95.00 zone
  • DXY adds to the rejection from recent new cycle tops.
  • The 95.00 neighbourhood seen holding the downside.

DXY retreats for the second session in a row and returns to the sub-96.00 area on Thursday.

A deeper knee-jerk looks plausible in light of the recent strong advance. There is a temporary support at the 10-day SMA at 95.03 which reinforces the weekly low at 94.96 (November 15). This area is forecast to initially hold further bearish attempts in the near term.

Looking at the broader picture, the constructive stance on the index is seen intact above the 200-day SMA at 92.24.

DXY daily chart

 

12:09
EUR/JPY Price Analysis: Recovery now targets the 200-day SMA EURJPY
  • EUR/JPY bounces off lows near 129.00 on Thursday.
  • The upside momentum looks to retests the 200-day SMA.

The intense multi-session pullback in EUR/JPY seems to have met a firm contention in the 129.00 neighbourhood so far.

The ongoing recovery initially targets the minor hurdle at the 100-day SMA at 130.14 ahead of the Fibo level (of the October rally) at 130.29. If this zone is cleared, then bulls are expected to shift the focus to the more significant 200-day SMA, today at 130.50.

Below the 200-day SMA, today at 130.50, the outlook for the cross is seen as negative.

EUR/JPY daily chart

 

11:40
NZD/USD moves back above 100-day SMA, around mid-0.7000s NZDUSD
  • A combination of factors assisted NZD/USD to gain strong positive traction on Thursday.
  • Retreating US bond yields prompted USD long-unwinding for the second successive day.
  • Rising bets for another RNBZ rate hike remained supportive of the intraday positive move.
  • Hawkish Fed expectations could limit the USD pullback and cap further gains for the pair.

The NZD/USD pair continued gaining traction through the mid-European session and touched a fresh daily high, around mid-0.7000s in the last hour.

Following the previous day's two-way price moves, the NZD/USD pair caught some fresh bids on Thursday and jumped back above the 100-day SMA amid some follow-through US dollar profit-taking. Retreating US Treasury bond yields turned out to be a key factor that prompted some USD long-unwinding for the second successive day.

This, along with a generally positive tone around the equity markets, further drove flows towards the perceived riskier kiwi. Apart from this, rising bets for yet another rate hike by the Reserve Bank of New Zealand (RBNZ) later this month acted as a tailwind and remained supportive of the strong bid tone around the NZD/USD pair.

Meanwhile, the prospects for an early policy tightening by the Fed should help limit any meaningful USD pullback. In fact, the markets have started pricing in the possibility for a rate hike by July 2022 and the Fed funds futures indicate a high likelihood of another raise by November amid worries about rising inflationary pressures.

This, in turn, might keep a lid on any further gains for the NZD/USD pair, at least for the time being, warranting some caution before placing aggressive bullish bets. Market participants now look forward to the US economic docket, featuring the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims.

Traders will further take cues from the US bond yields and a scheduled speech by New York Fed President John Williams, which might influence the USD and provide some impetus to the NZD/USD pair. Apart from this, the broader market risk sentiment could further produce some meaningful trading opportunities around the NZD/USD pair.

Technical levels to watch

 

11:39
Chile Gross Domestic Product (YoY) below forecasts (17.6%) in 3Q: Actual (17.2%)
11:34
USD/TRY approaches 11.0000 post-CBRT, new all-time highs
  • USD/TRY jumps to new record tops near the 11.0000 level.
  • As expected, the CBRT reduced rates by 100 bps.
  • The central bank said a further cut is likely in December.

The Turkish lira fell off the cliff and pushed USD/TRY to new all-time peaks in levels just shy of the 11.0000 mark on Thursday.

USD/TRY in fresh tops on CBRT

The lira depreciated to the boundaries of 11.0000 the figure vs. the greenback after the Turkish central Bank (CBRT) cut the One -Week Repo Rate by 100 bps to 15.00% at Thursday’s meeting, matching the broad consensus.

In its statement, the central bank noted that the firm external demand collaborated with the strong recovery in the domestic economy, adding that the vaccination campaign helped the recovery in the services sector and tourism.

The bank blamed the supply disruptions and higher energy and import prices when it comes to justify the elevated inflation and expects these factors to persist at least through the first half of 2022.

In addition, the CBRT suggested it might reduce the policy rate further at the December meeting.

USD/TRY key levels

So far, the pair is gaining 1.90% at 10.8319 and a drop below 9.8485 (high Oct.25) would expose 9.8286 (20-day SMA) and finally 9.4722 (monthly low Nov.2). On the other hand, the next up barrier lines up at 10.9808 (all-time high Nov.18) followed by 12.0000 (round level).

 

11:06
Breaking: CBRT cuts policy rate by 100 basis points, USD/TRY fluctuates wildly

The Central Bank of the Republic of Turkey (CBRT) announced on Thursday that it lowered its policy (one-week repo) rate by 100 basis points to 15% as expected.

Market reaction

The USD/TRY pair, which reached an all-time high of 10.9667 earlier in the day, fell to 10.4500 area minutes before the rate decision but rose sharply following the announcements. As of writing, the pair was up 0.8% on the dy at 10.7000.

Key takeaways from policy statement as summarized by Reuters

"Decided to cut rates after evaluating areas that monetary policy can impact."

"Positive impact of policy on commercial loans being seen."

"Evaluated temporary impacts on inflation will have influence in the first half of 2022."

"Might ease policy again in December."

"Will continue to use all policy tools until 5% inflation target achieved."

"Stability in the general price level will foster macroeconomic stability and financial stability through the fall in country risk premium."

"Stability in general price level would create a viable foundation for investment, production and employment to continue growing in a healthy and sustainable way."

"Improvement in annualized current account is expected to continue in the rest of the year due to the strong upward trend in exports."

11:06
Turkey CBRT Interest Rate Decision meets forecasts (15%) in November
10:59
EUR/GBP to move downward over 2022 as central banks and politics favour sterling – ING EURGBP

Economists at ING doubt the noise regarding the unravelling of EU-UK trade negotiations has to hit GBP as hard as it did in 2019. Hence, they expect EUR/GBP spikes to be capped as the 0.8560/8700 area.

ECB-BoE divergence

“We doubt EUR/GBP has to spike 5-7 big figures on any substantial deterioration in cross-channel relations. Based on how GBP has traded so far this year, we believe Brexit fatigue can keep the risk premium more to the 1-2% region. 0.8650/8700 could then remain at the top of the EUR/GBP trading range.”

“Despite market pricing to the contrary, an ECB hike looks highly unlikely next. In the UK, we are faced with the intriguing prospect of the BoE allowing its Gilt holdings to roll off once the policy rate hits 0.50%. The improvement in relative government bond yields should favour GBP.”

“President Macron looks comfortably ahead in the polls at present with around 25% of the vote, though plenty can change over the next six months. In the UK, the Johnson government seems to survive most missteps and the opposition Labour party are yet to mount a serious challenge. And we suspect Chancellor Rishi Sunak is keeping his powder dry for a pre-election tax give-away potentially in early 2023.  Arguably, therefore, political risks are greater for the eurozone in 2022.”

 

10:17
USD/CHF remains on the defensive, around 0.9270-75 area USDCHF
  • USD/CHF quickly reversed an intraday dip to levels below mid-0.9200s.
  • Retreating US bond yields weighed on the USD and capped the upside.
  • Hawkish Fed expectations should limit the USD losses and favours bulls.

The USD/CHF pair struggled to capitalize on its intraday bounce from a two-day through and remained on the defensive around the 0.9270-75 region through the first half of the European session.

The pair extended the overnight retracement slide from the 0.9330 area, or the highest level since October 1 and witnessed some selling during the early part of the trading action on Thursday. Retreating US Treasury bond yields dragged the US dollar away from a 16-month peak touched in the previous session, which, in turn, exerted some pressure on the USD/CHF pair.

That said, a combination of factors helped limit any meaningful downfall, rather assisted the pair to quickly reverse a dip below mid-0.9200s. Stable performance around the equity markets undermined the safe-haven Swiss franc and extended some support to the USD/CHF pair. Apart from this, hawkish Fed expectations acted as a tailwind for the greenback and further helped limit losses.

In fact, the markets have started pricing in the possibility for an eventual rate hike move by July 2022. Moreover, the Fed funds futures indicate a high likelihood of another raise by November amid worries about the continuous rise in inflationary pressures. This, in turn, supports prospects for the emergence of some USD dip-buying and a further appreciating move for the USD/CHF pair.

Market participants now look forward to the US economic docket, featuring the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims. Apart from this, the US bond yields and a scheduled speech by New York Fed President John Williams will influence the USD and provide a fresh impetus to the USD/CHF pair later during the early North American session.

Technical levels to watch

 

09:48
Gold Price Forecast: Acceptance above $1,870 is critical for XAU/USD bulls – Confluence Detector
  • Gold price consolidates the upside, with stiff resistance seen at $1,870.
  • Weaker Treasury yields underpin but global tightening bets limit gold bulls.
  • Gold capitalizes on inflation fears, buyers look to retain control.

Gold price is struggling to extend the upside beyond the critical $1,870 supply zone, despite the extended weakness in the US Treasury yields and the dollar. Increased calls for the global central banks to act to tackle inflation are limiting gold’s bullish momentum. Although, gold bulls continue to benefit from the persistent worries and the recent retreat in the US rates from three-week highs. Fed speculation and inflation concerns will continue to drive the sentiment around the yields and gold price.

Read: Gold Price Forecast: Falling yields could fuel a sustained break above $1,878 in XAU/USD

Gold Price: Key levels to watch

The Technical Confluences Detector shows that gold price is wavering below the critical topside hurdle of $1,870, which is the meeting point of the previous week’s high and the previous day’s high.

Acceptance above the latter will kick start a fresh advance towards $1,880, where the pivot point one-day R2 lies.

Ahead of that the confluence of the pivot point one-day R1 and Bollinger Band four-hour Upper at $1,873 will guard the upside.

If the bulls flex their muscles, then the pivot point one-month R3 at $1,884 will get tested.

Alternatively, sellers need a strong foothold below $1,862, the convergence of the Fibonacci 38.2% one-day and SMA5 one-day, to take over complete control.

The next critical cushion is seen at $1,857, the intersection of the Fibonacci 61.8% one-day and Fibonacci 23.6% one-week.

The pivot point one-month R2 at $1,850 is the last line of defense for gold optimists.

Here is how it looks on the tool

fxsoriginal

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

09:25
GBP/USD sits near one-week high, looks to build on momentum beyond 1.3500 GBPUSD
  • GBP/USD edged higher on Thursday, albeit lacked follow-through beyond the 1.3500 mark.
  • Rising bets for an imminent BoE rate hike underpinned the sterling and remained supportive.
  • Hawkish Fed expectations acted as a tailwind for the USD and capped gains amid Brexit woes.

The GBP/USD pair traded with a positive bias through the first half of the European session, with bulls making a fresh attempt to build on the momentum beyond the key 1.3500 psychological mark.

The pair built on the previous day's hotter-than-expected UK CPI-inspired rally of around 100 pips from sub-1.3400 levels and gained some follow-through traction on Thursday. This marked the third successive day of a positive move – also the fourth in the previous five – and was supported by rising bets for an imminent interest rate hike by the Bank of England in December.

On the other hand, retreating US Treasury bond yields dragged the US dollar further away from a 16-month peak touched in the previous session. This was seen as another factor that acted as a tailwind for the GBP/USD pair. That said, the possibility of the UK government suspending a part of the Brexit settlement over Northern Ireland held back bulls from placing aggressive bets.

Apart from this, the impasse over the post-Brexit fishing rights further collaborated to cap gains for the GBP/USD pair, at least for the time being. This further makes it prudent to wait for a sustained strength beyond the 1.3500 mark before traders start positioning for an extension of the recent recovery move from YTD lows, around mid-1.3300s touched last Friday.

In the absence of any major market-moving economic releases from the UK, the incoming Brexit-related headlines will play a key role in influencing the sentiment surrounding the British pound. Later during the early North American session, traders will take cues from the US macro releases – the Philly Fed Manufacturing Index and Weekly Initial Jobless Claims.

Apart from this, the US bond yields, the broader market risk sentiment and a scheduled speech by New York Fed President John Williams will drive the USD demand. This, in turn, should provide some impetus to the GBP/USD pair and produce some trading opportunities.

Technical levels to watch

 

09:25
USD/CAD: Temporary reverse for the loonie as BoC telegraphes a first hike in Q2 2022 – MUFG USDCAD

USD/CAD has climbed back above 1.2600 after hitting a low last month of 1.2288. But as economists at MUFG Bank expect the Bank of Canada (BoC) to begin to ease off the monetary-policy accelerator to hike rates in the second quarter of next year, the loonie’s sell-off should be short-lived.

A temporary setback for the Canadian dollar

“The correction lower for the price of oil has had only a modest dampening impact on G10 oil-related currency performance so far. The hawkish repricing of Fed tightening expectations and broad-based US dollar strength have been the main drivers of those currency moves rather than the correction lower in the price of oil.”

“The CAD took a hit on Wednesday after the release of slighter softer than expected inflation data from Canada. The average of the BoC’s core inflation measures were unchanged at 2.7%. It prompted some scaling back of BoC rate hike expectations. Nevertheless, headline inflation did still accelerate to 4.7%. It keeps pressure on the BoC to continue normalizing policy after bringing QE to an end last month. The BoC has brought forward plans for the first-rate hike to Q2 2022, and risks are skewed in favour of an even earlier hike next year.” 

“We expect recent Canadian dollar weakness to prove short-lived.”

 

09:21
EUR/USD regains traction and advances to the 1.1340 area, focus on ECB-speak EURUSD
  • EUR/USD extends further the bounce off YTD lows near 1.1260.
  • The broad-based risk-on mood sustains the upside in spot.
  • ECB-speak, US Initial Claims, Philly Fed Index next of note.

The single currency started the second half of the week on a positive note and pushes EUR/USD to 2-day highs around 1.1340 on Thursday.

EUR/USD up on risk appetite

EUR/USD finally manages to post decent gains beyond 1.1300 the figure, leaving behind at the same time six consecutive daily pullbacks on Thursday.

The better note in the risk-associated galaxy coupled with the ongoing corrective downside in the dollar helps the pair to extend the rebound from Wednesday’s 16-month lows near 1.1260, always amidst declining yields on both sides of the Atlantic.

Absent releases in the euro docket, the focus of attention is expected to gyrate around speeches by ECB Board members F.Panetta, E.Fernandez-Bollo and P.Lane.

Across the ocean, the usual Initial Claims are due seconded by the always relevant Philly Fed Index as well as speeches by FOMC’s Williams, Evans and Daly.

What to look for around EUR

EUR/USD comes to life after bottoming out in new lows near 1.1260 on Wednesday amidst some corrective decline in the dollar and lower yields. As usual, the pair’s price action is predicted to mainly track the dynamics around the buck, while bouts of intermittent strength are expected to come from the improvement in the risk complex. On the more macro view, the loss of momentum in the economic recovery in the region - as per some weakness observed in key fundamentals – coupled with rising cases of COVID-19 is also seen pouring cold water over investors’ optimism. Further out, the euro should remain under scrutiny amidst the implicit debate between investors’ speculations of a probable lift-off sooner than anticipated and the ECB’s so far steady hand, all amidst the tenacious elevated inflation in the bloc and increasing conviction that it could last longer than previously anticipated.

Key events in the euro area this week: ECB’s Panetta, Fernandez-Bollo, Lane (Thursday) - ECB Lagarde (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the region. Sustainability of the pick-up in inflation figures. Pick-up in the political effervescence around the EU Recovery Fund in light of the rising conflict between the EU, Poland and Hungary on the rule of law. ECB tapering speculations.

EUR/USD levels to watch

So far, spot is gaining 0.10% at 1.1330 and faces the next up barrier at 1.1445 (10-day SMA) followed by 1.1524 (20-day SMA) and finally 1.1609 (weekly high Nov.9). On the other hand, a break below 1.1263 (2021 low Nov.17) would target 1.1185 (monthly low Jul.1 2020) en route to 1.1168 (low Jun.19 2020).

09:11
USD/KRW to push above 1,200 by 2Q22 even as BoK hikes – ING

The Korean won has been one of the region's worst-performing currencies in 2021. Economists at ING expect the USD/KRW pair to surpass the 1,200 level by the second quarter of the next year before KRW gradually recovering throughout 2023. 

KRW is facing weakness even as BoK hikes

“Softer than expected 3Q21 GDP growth of just 0.3% illustrates how indirect supply constraints are weighing on growth and we anticipate growth moderating to just 2.6% in 2022.” 

“South Korean inflation has spiked higher on base effects – reaching 3.2% in October and will likely not peak until the November figures are released, though it should ease back towards the mid-to-high 2’s in 2022 depending on how persistent current energy price inflation is.”

“We see a further 25bp before year-end and more in 2022, with policy rates ending the year at 1.25% and expectations for a further 25bp of hikes in 2023. The BoK has demonstrated that it does not need to wait for the Fed to move and is also motivated to tighten by high household debt ratios, and a frothy housing market.”

“The risk environment may be even more challenged in the face of rates actually starting to go up in the UK and some other G-7 economies, and we see KRW pushing above the 1,200 level by 2Q22 before slowly recovering in 2023.”

 

09:07
S&P: We still believe Evergrande default is highly likely

S&P Global Ratings are out with their take on China’s Evergrande Group, noting that they are confident of default in troubled property development giant.

Key takeaways

“We still believe Evergrande default is highly likely.”

“The government wants to unwind Evergrande in a controlled fashion.”

“Or at least let an orderly debt restructuring take place.”

“A big test for Evergrande will be in March and April when large repayments are due.”

“Evergrande has lost the capacity to sell new homes, which means its main business model is effectively defunct.”

Related reads

  • China Evergrande plans to sell entire stake in HengTen to meet mounting liabilities
  • Ex-PBOC Adviser: Evergrande problem is manageable
09:03
USD/ZAR: Scope for substantial gains towards 17.30 on a break above 15.70 – SocGen

USD/ZAR broke above a multi-month descending channel in July which has resulted in a steady rebound. Economists at Société Générale note that the pair has room to rise as high as 17.30 on a break of the 15.70 resistance.

Initial support seen at 14.85

“USD/ZAR has formed an Inverted Head and Shoulders which points towards potential upside.”

“The pair is now inching closer to interim resistance of 15.70 representing the 38.2% retracement of the decline since 2020 and high of January. Once this hurdle is overcome, the bounce would extend towards 16.10/16.30 and even towards the target for the pattern near 17.30.”

“First layer of support is at 14.85.”

 

09:03
Long bets on yuan hit five-month high despite Chinese property sector woes – Reuters poll

The latest Reuters poll of analysts and fund managers showed Thursday, investors remained unfazed by the Chinese troubled property sector concerns, as they ramp up bullish bets on the yuan.

Key findings

“Long positions in the yuan consolidated and were at their highest since early June. Traders said the meeting had raised the chances of partial tariff removals, following which the yuan climbed to a 5-1/2-month high.”

“Short positions in the Indian rupee, Philippine peso and South Korean won eased further, while market participants turned bearish on the Singapore dollar.”

“Short bets on the baht, among the region's worst performing currencies this year, fell back to their lowest since Sept. 9.”

“Investors slightly raised long positions in Indonesia's rupiah.”

Read: USD/INR to advance nicely towards 76.80 by end-2022 – ING

08:51
USD/TRY points to new all-time highs towards the 11.60 level – SocGen

The Turkish lira slumped to a fresh all-time low of 10.9680 against the US dollar before the CBRT decision. Economists at Société Générale expect USD/TRY to continue its march forward to the 11.60 mark.

Turkey CB forecast to cut policy rate by 100bp to 15%

“We are aligned with the consensus for a 100bp cut in the one-week repo rate to 15.0%. The bank is ignoring the challenging inflation backdrop, putting into practice the demand from Erdogan for cheaper borrowing costs.”

“Daily MACD histogram is recording multi-month high which denotes the up move is a bit overstretched. This is not a reversal signal, however, an initial pullback can’t be ruled out.”

“Next projections are located at 11.35 and 11.60. Achievement of these objectives could lead to a pause; 10.22, the 50% retracement of the last bout of rise is near-term support.”

 

08:47
ECB’s Holzmann: With inflation likely to stay high, QE has to stop

Quantitative easing (QE) has to stop, given that inflation is likely to stay high, the European Central Bank (ECB) policymaker Robert Holzmann said during his speech at an Austrian University on Wednesday.

Key quotes

“Quantitative easing was probably an important addition to the traditional instruments in the view of lower bound on conventional policy but it has the problem of associated side effects.”

“Therefore, I would say, well, for me that already means … certainly letting the PEPP be discontinued at the end of March because it has done its duty and can expire. “

Market reaction

EUR/USD was last seen trading at 1.1331, adding 0.12% on the day.

08:45
US Dollar Index extends the decline to 95.70 ahead of data
  • The index adds to Wednesday’s losses around 95.70.
  • US 10y yields drop further and trade near 1.58%.
  • Initial Claims, Philly Fed Index, Fedspeak next on tap.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main rival currencies, extends the corrective downside and revisits the 95.70 region on Thursday.

US Dollar Index looks to data

The index loses ground for the second consecutive session and slips back to the 95.70 region on Thursday against the backdrop of steady US yields and a generalized optimism in the risk complex.

Indeed, yields in the front end of the curve gyrate around the 0.50% region while the 10y note navigate the sub-1.60% zone so far.

In the US data space, the usual weekly Claims are due followed by the Philly Fed Index and the CB Leading Index. In addition, NY Fed J.Williams (permanent voter, centrist), Chicago Fed C.Evans (voter, centrist) and San Francisco Fed M.Daly (voter, centrist) are all due to speak later in the NA session.

What to look for around USD

The index came under selling pressure after hitting new cycle highs further north of the 96.00 barrier on Wednesday. The intense move higher in the buck remains well underpinned by the “higher-for-longer” narrative around current elevated inflation, which in turn lend wings to US yields and bolster speculations of a sooner-than-estimated move on interest rates by the Federal Reserve, probably at some point in H2 2022. Further support for the dollar comes in the form of the solid recovery in the labour market, Biden’s infrastructure bill and positive results in US fundamentals.

Key events in the US this week: Initial Claims, Philly Fed Index (Thursday).

Eminent issues on the back boiler: US-China trade conflict under the Biden’s administration. Debt ceiling issue. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is losing 0.05% at 95.76 and a break above 96.24 (2021 high Nov.17) would open the door to 97.00 (round level) and then 97.80 (high Jun.30 2020). On the flip side, the next down barrier emerges at 95.04 (10-day SMA) followed by 94.56 (monthly high Oct.12) and finally 93.87 (weekly low November 9).

08:44
AUD/USD clings to modest recovery gains, remains below 0.7300 mark AUDUSD
  • AUD/USD staged a goodish intraday recovery from six-week lows touched earlier this Thursday.
  • Retreating US bond yields led to some follow-through USD profit-taking and extended support.
  • Hawkish Fed expectations should act as a tailwind for the USD and cap the upside for the major.

The AUD/USD pair built on its recovery move from six-week lows and climbed to the 0.7300 neighbourhood during the early European session, though lacked follow-through.

The pair found some support near the lower end of a near three-month-old ascending channel and staged a modest rebound from mid-0.7200s, or the lowest level since October 6 touched earlier this Thursday. The uptick allowed the AUD/USD pair to stall this week's rejection slide from 100-day SMA and was sponsored by some follow-through US dollar profit-taking slide.

Given the recent strong runup to a 16-month peak, retreating US Treasury bond yields turned out to be a key factor that prompted some USD long-unwinding trade for the second successive day. Apart from this, stable performance in the equity markets acted as a tailwind for the perceived riskier aussie and contributed to the AUD/USD pair's bounce of around 45-50 pips.

That said, any meaningful recovery still seems elusive amid growing acceptance that the Fed would be forced to tighten its monetary policy sooner rather than later to contain stubbornly high inflation. The markets have priced in the possibility of an eventual Fed rate hike move by July 2022 and the Fed funds futures indicate a high likelihood of another raise by November.

On the other hand, the RBA has maintained its dovish stance in an attempt to push back expectations for a rate hike next year. The divergence in monetary policy stance between the RBA and the Fed should hold back bullish traders from placing aggressive bets. This might further collaborate to keep a lid on any strong positive move for the AUD/USD pair, at least for the time being.

Hence, any subsequent strength might still be seen as a selling opportunity and the attempted recovery runs the risk of fizzling out rather quickly. Market participants now look forward to the US economic docket, featuring the releases of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims later during the early North American session.

This, along with the US bond yields and a scheduled speech by New York Fed President John Williams, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities around the major.

Technical levels to watch

 

08:35
AUD/USD eyes a recovery towards 0.75 from the 0.7220 support – Westpac AUDUSD

AUD/USD has printed fresh lows since 6 October, around 0.7250. While economists at Westpac expect the pair to drop to the 0.7220 in the near-term, this would be view as an opportunity to buy as they forecast the aussie around 0.75 by the end of the year.

Australia private wages growth picks up from historical lows 

“The aussie is likely to remain constrained by the RBA’s insistence that 2022 hikes are implausible. Governor Lowe’s arguments were backed by this week’s key data – wages growth has risen from 50+ year lows but is well short of the 3% handle that is consistent with sustainably on-target inflation.”

“Commodity price support is a little shaky near-term, with China steel production plunging and a risk that iron ore extends its four-month slide.”

“Near-term scope for a test of 0.7220 but this could be appealing for longs eyeing recovery to 0.75+ into year-end as Australia’s domestic recovery roars.”

 

08:30
Sweden Unemployment Rate fell from previous 8.2% to 7.6% in October
08:25
GBP/USD to find solid support in the 1.3250-1.3300 region – Westpac GBPUSD

Despite the Bank of England’s surprise dovishness, sharper inflation rises, labour stability post furlough and reduced tensions with the EU are supporting recently vulnerable GBP/USD. Economists at Westpac expect cable to hold above the 1.3250-1.3300 support area.

Hot inflation data from the UK seems to be supporting the British pound

“Firmer UK data has led to an unwinding of much of the moves seen in UK short rates after the BoE’s surprising lack of policy action in October. This week’s October inflation data provided another surprise for markets with a sharper lift in both PPI and CPI than anticipated. Critical will be how consumers react and whether recently disappointing retail sales pick up into the festive season.”

“The UK had been experiencing higher covid cases than Europe, but UK cases appear to have plateaued. At the same time, EU/UK discussions appear to be in a less precarious state. Both factors should allow GBP to carve out support against USD while it pushes into new ranges against EUR.” 

“Though GBP/USD may struggle to regain levels above 1.3550, it should now find solid support in the 1.3250-1.3300 area.”

 

08:17
USD/IDR: Rupiah to trend gradually lower over 2022 – ING

Bank Indonesia (BI) is set to hold rates steady again next year even though the economic recovery is gathering pace. Subsequently, economists at ING expect the Indonesian rupiah to come under slightly downside pressure throughout the next year. 

Bank Indonesia to keep IDR volatility low

“Growth is expected to pick up further in the coming quarters as long as the pandemic remains subdued. Efforts to accelerate the vaccination rollout remain very important given that only 29% of the population is fully vaccinated.”

“BI has kept policy rates untouched in 2021 and will likely retain this accommodative stance well into next year. With inflation below the central bank target, we expect BI to keep rates at 3.50% well into next year and will only consider adjusting rates when the Fed begins its rate hike cycle.”

“We do expect the trade surplus to remain in place in the near term, we also expect some volatility ahead for the IDR, especially as we edge closer to the Fed lift off next year. This development, alongside a dovish Bank Indonesia, suggests at least some modest depreciation for the IDR as we head into 2022.”

 

08:13
EUR/USD to plummet towards 1.10 on a break below 1.1275/50 support zone – Westpac EURUSD

Ahead of the European Central Bank’s December meeting, key officials continue to stress patience and no 2022 rate moves. What’s more, COVID-19 case increases and restrictions are adding to the weight on EUR. Therefore, economists at Westpac notes that the EUR/USD pair is at risk of falling below the 1.1275 support.

EUR/USD rebounds to be capped around 1.14 

“Post-summer reopening, new variant spreading and considerable resistance to vaccinations, with some 30% of the adult population unvaccinated in Germany and Austria, has led to a recent surge in case counts. This is now impacting EUR after a series of disappointing hard and survey activity reports.” 

“The ECB’s meeting and projection updates are still four weeks away. Meanwhile, Lagarde has voiced concern over rising Covid cases while affirming ECB’s policy patience and that current inflationary pressures remain transitory, despite being more persistent.” 

“Next week’s consumer, flash PMI and IFO surveys will be of increased interest. If there are any signs of Covid cases impacting the surveys, EUR will be under increasing pressure despite recently holding 1.1275 support.” 

“EUR/USD rebounds are likely to be capped around 1.14 unless surveys prove to be notably strong. A break below 1.1250-75 could trigger another 2 figure decline.”

 

08:10
USD/CAD eases from multi-week highs, downside remains cushioned USDCAD
  • Some follow-through USD profit-taking capped the upside for USD/CAD on Thursday.
  • Sliding US bond yields undermined the loonie and helped limit any meaningful slide.
  • Hawkish Fed expectations should act as a tailwind for the USD and also lend support.

The USD/CAD pair edged lower through the early European session and was last seen flirting with daily lows, around the 1.2600 round-figure mark.

The pair witnessed a modest pullback from six-week tops touched earlier this Thursday and was weighed down by some follow-through US dollar profit-taking slide. Given the recent strong runup to a 16-month peak, retreating US Treasury bond yields turned out to be a key factor that prompted some USD long-unwinding trade.

That said, the prospects for an early policy tightening by the Fed should continue to act as a tailwind for the greenback. In fact, the markets have been pricing in the possibility of an eventual Fed rate hike move by July 2022 and the Fed funds futures indicate a high likelihood of another raise by November.

This, along with the prevalent cautious market mood, might assist the safe-haven USD to attract some dip-buying at lower levels. Apart from this, a further decline in crude oil prices could undermine the commodity-linked loonie and limit any meaningful slide for the USD/CAD pair, warranting caution for bearish traders.

Increasing pressure on US President Joe Biden to release supplies from the Strategic Petroleum Reserve (SPR) continued weighing on crude oil prices. Adding to this, a statement by China's state reserve bureau, saying that it was working on a release of crude oil reserves, dragged WTI crude oil to a six-week low.

The fundamental backdrop seems tilted firmly in favour of bullish traders and any subsequent fall might still be seen as a buying opportunity. Market participants now look forward to the US economic docket, featuring the releases of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims.

This, along with the US bond yields and a scheduled speech by New York Fed President John Williams, will influence the USD and provide some impetus to the USD/CAD pair. Traders will further take cues from the broader market risk sentiment and oil price dynamics to grab some short-term opportunities around the major.

Technical levels to watch

 

08:07
USD/JPY to simmer a race higher towards the downtrend from 1975 at 119.41 – Commerzbank USDJPY

USD/JPY has so far paused at psychological resistance at 115.00. The pair is currently trading just above 114.00 but it is set to resume its surge higher towards 119.41, the downtrend from 1975, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, reports.

USD/JPY is correcting lower

“USD/JPY has so far paused at psychological resistance at 115.00. The divergence of the RSI and yesterday's price action point to further near-term consolidation.”

“ Above 115.00, we have 115.60, the 61.8% retracement of the move down from 2015 and then the 117.56 the 1998-2021 resistance line and the 119.41, the downtrend from 1975.” 

“Nearby support lies 112.73/112.56 then the 111.66 July high, which should hold the downside.”

 

08:02
Indonesia Bank Indonesia Rate in line with expectations (3.5%)
08:00
NZD/USD to lurch higher towards the 0.74 mark in 2022 – ING NZDUSD

Economists at ING believe that the New Zealand dollar is set to enjoy a successful year in 2022. They forecast the NZD/USD rising gradually towards the 0.74 level throughout next year.

Counting on a strong domestic story

“We think markets will have to scale down tightening expectations for 2022, but signs of persistent inflation throughout the year should fuel speculation that the tightening cycle will have to continue in 2023-24, and put a floor below NZD. The currency should have the most attractive carry in G10 in the year ahead and should therefore benefit more than others from periods of low volatility a supported risk sentiment.”

“The RBNZ tightening should be supported by the strong domestic economy story. A rebound in tourism and education are set to give an extra boost to the economy.”

“Milk and forestry prices (the two main exports) are still considerably higher than in the last five years, and even in case of a correction in 2022, the exporting industry should continue to underpin the recovery. A big downside risk for NZD in 2022 is, however, China-related sentiment, which remains quite uncertain amid government crackdowns on some sectors and a potential economic slowdown.”

“We expect NZD/USD to rise gradually to 0.74 in 2022.”

 

07:55
USD/INR to advance nicely towards 76.80 by end-2022 – ING

The Indian rupee has lost about 1.8% versus the US dollar year-to-date in 2021. Economists at ING expect the INR to continue weakening next year and forecast USD/INR at 76.80 by end-2022.

At risk if the hot money turns cold

“Current inflation spikes are concentrated in seasonal foods and should pass but inflation will end the year pushing into the top half of the Reserve Bank of India's 2-6% target range and high energy prices could further worsen India’s current account and fiscal balance in 2022.”

“The economy has sufficiently improved such that we anticipate some reduction in accommodation beginning 1Q22, with the repo rate ending 2022 50bp higher at 4.50%.”

“Some have suggested that the successful IPOs of companies like Zomato in 2021 will open the floodgates to an even stronger pipeline next year, which would provide further INR support. But with the Fed possibly tightening as early as next year, the equity and IPO environment is likely to be much more challenged and we see the INR losing ground with USD/INR rising to 76.80 by end-2022.”

 

07:50
GBP/USD: Rebound to run out of steam at the 1.3599/1.3607 resistance zone – Commerzbank GBPUSD

GBP/USD has climbed above 1.3500 and looks to extend its rebound. However, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, expects sterling’s strength to fade at the 1.3599/1.3607 resistance area.

Cable sees a minor bounce higher

“GBP/USD is slowly correcting higher. The market last week sold off into new lows for the year, these were not confirmed by the daily RSI.”

“We are only looking for a minor corrective bounce and suspect it will not make much impact beyond 1.3599/1.3607.”

“Interim resistance lies at 1.3607. The market stays offered while capped by the 55-day ma at 1.3654.” 

“Beyond a minor bounce, it is likely to remain under pressure and on course for the 200-week ma at 1.3162.”

 

07:47
AUD/USD: A return to the 2021 0.80 highs seems quite unlikely in 2022 – ING AUDUSD

While the Australian dollar may benefit from being undervalued and oversold, positioning for recovery here remains a high-risk proposition, in the opinion of economists at ING.

Room to rise, but big downside risk

“We expect a solid rebound in unemployment and while a sharp rise in wage growth is not guaranteed, inflation should remain within the 2-3% RBA target in 2022. The growth outlook is blurrier as many headwinds may come from China.” 

“We think the RBA will taper asset purchases and end QE before the end of 2022. The first hike may only come in early 2023, although risks are skewed towards an earlier move. Still, the market pricing (75bp of tightening in the next 12 months) is too hawkish in our view.”

“We expect a moderate net-negative impact of commodities on AUD in 2022.”

“AUD is the most undervalued (-11%) G10 currency against the USD, according to our medium-term BEER model. AUD is also the most oversold currency in G10 and has the widest room to benefit from short squeezes in risk-on periods. A return to the 2021 0.80 highs in AUD/USD seems quite unlikely in the next year.”

 

07:42
USD/CHF to see a correction lower towards the 0.9103 mark – Commerzbank USDCHF

USD/CHF is hovering around 0.9270. Attention is on the 2021 downtrend at 0.9340 as Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, expects the pair to correct lower from here.

USD/CHF stays bid above the 2020-2021 uptrend at 0.9103

“USD/CHF is approaching 0.9340, the 2021 downtrend and 0.9357/69 (the recent high). We would allow for some profit-taking in this vicinity and a slide lower.”

“Initial support is the 0.9227, the 26th October high and 0.9150, 25th October low ahead of the 0.9103 uptrend.”

“The downside should be contained by the 2020-2021 uptrend at 0.9103.”

 

07:36
USD/JPY: Potential to soar towards 120 as the Fed embarks on its tightening cycle – ING USDJPY

Japan has seen negative output gaps since 2008 and probably again in 2022 – justifying the more entrenched dovish positions of the Bank of Japan (BoJ). Economists at ING do favour largely dollar strength n during the Fed lift-off against the Japanese yen which will be more tolerant of higher inflation.

Mind the output gap

“While we do see energy correcting lower into next year (Brent to $75), US rates look firmly set to go higher and equities may well stay supported, if not repeating the strong gains of this year. This should keep USD/JPY supported near 115.00, with scope for a break towards 120 as the Fed embarks on its tightening cycle – potentially next summer.”

“USD/JPY is certainly a tale of two output gaps. The US economy is expected to run a 2% of GDP positive output gap next year. That means that the Fed may push to the front of the queue when it comes to tightening in the major economies. Despite recent growth, Japan’s economy is still expected to run a 1% negative output gap in 2022 – in other words pricing power is weak.”

“We suspect Japanese officials will not want to see USD/JPY trading sharply through 115 for the time being, but the combination of a turn in energy lower next spring and the Fed preparing for lift-off suggests 2Q22 could be the topside break-out period for USD/JPY.”  

07:31
USD/JPY holds steady above 114.00 mark, lacks bullish conviction USDJPY
  • Hawkish Fed expectations underpinned the USD and helped USD/JPY to gain some traction.
  • Sliding US bond yields held back the USD bulls from placing fresh bets and capped the upside.
  • The cautious market mood underpinned the safe-haven JPY and also warrants caution for bulls.

The USD/JPY pair traded with a mild positive bias, around the 114.10 region heading into the European session, albeit lacked any follow-through buying.

Having shown resilience below the 114.00 mark, the USD/JPY pair gained some positive traction on Thursday and reversed a part of the previous day's retracement slide from multi-year highs. The prospects for an early policy tightening by the Fed acted as a tailwind for the US dollar, which, in turn, was seen as a key factor that extended some support to the major.

That said, the cautious market mood – amid persistent worries about stubbornly high inflation – benefitted the Japanese yen's relative safe-haven status. Apart from this, retreating US Treasury bond yields held back the USD bulls from placing fresh bets and kept a lid on any meaningful upside for the USD/JPY pair, warranting caution for bullish traders.

Even from a technical perspective, the negative RSI divergence on the daily chart makes it prudent to wait for a strong follow-through buying before positioning for any further appreciating move. Market participants now look forward to the US economic docket, featuring the releases of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims.

This, along with the US bond yields and a scheduled speech by New York Fed President John Williams, will influence the USD and provide some impetus later during the early North American session. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities around the USD/JPY pair.

Technical levels to watch

 

07:30
Switzerland Industrial Production (YoY) dipped from previous 15.7% to 8.3% in 3Q
07:30
EUR/USD: Scope for a substantial drop to 1.10 on a break below 1.1248 – Commerzbank EURUSD

EUR/USD managed to close above 1.1300 on Wednesday. The pair is currently holding the 1.1290/48 support zone, but a break below here would clear the way for a slump to the 1.10 level, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, reports.

Holding support 1.1290/48

“EUR/USD has recently sold off to 1.1290 61.8% retracement of the move seen 2020-2021. We note the 13 count on the daily chart and TD support at 1.1248 and together these levels are holding so far.” 

“Any bounces will find tough resistance at the 1.1635 five-month downtrend and while capped here, the overall bias is negative.”

“Initial resistance is the 1.1513/22 October low and the 5th November low and the 20-day ma at 1.1525.” 

“Below 1.1248 would target 1.10, the 78.6% retracement of the move seen in 2020.”

See: EUR/USD to suffer a substantial drop to 1.1020/00 – Credit Suisse

 

07:01
Switzerland Exports (MoM) climbed from previous 22102M to 22309M in October
07:01
Gold Price Forecast: XAU/USD gathers strength to break higher towards the $1,900 mark

Gold staged an impressive comeback on Wednesday and reversed 75% of Tuesday's sell-off. As FXStreet’ Dhwani Mehta notes, falling yields could fuel a sustained break above $1,878 in XAU/USD.

XAU/USD yearns for a daily closing above the key $1,900 barrier

“The weakness in the US dollar alongside the yields continues to underpin gold price. The risk-off trading in the Asian equities amid looming China’s property sector concerns and global inflation risks continue to boost’s gold appeal as a safe-haven as well as an inflation hedge.”

“Gold is likely to trade in a familiar range between $1,850 and $1,878 in the day, until the bulls find a strong foothold above the June 14 tops of $1,878. A daily closing above the latter will trigger a fresh advance towards the $1,900 psychological level, above which the horizontal trendline resistance around $1,904 will challenge the bearish commitments.”

“On the downside, a breach of the $1,850 demand area could expose the November 11 lows of $1,843. Further south, the previous critical resistance now support at $1,834 will be the level to beat for gold bears.”

See – Gold Price Forecast: XAU/USD to suffer a near-term slippage ahead of further gains – Commerzbank

 

07:01
Switzerland Imports (MoM) declined to 16658M in October from previous 17050M
07:00
Switzerland Trade Balance rose from previous 5052M to 5651M in October
06:51
Gold Price Forecast: XAU/USD bulls struggle to find acceptance above descending trend-line
  • Gold struggled to preserve its modest intraday gains amid some USD buying interest.
  • Retreating US bond yields might help limit losses amid the prevalent cautious mood.
  • Hawkish central bank outlooks should continue to keep a lid on any meaningful gains.
  • Gold Price Forecast: Falling yields could fuel a sustained break above $1,878 in XAU/USD

Gold edged higher during the early part of the trading action on Thursday, albeit struggled to capitalise on the move beyond the $1,870 level. The XAU/USD pair was last seen trading with modest intraday losses, around the $1,865-64 region heading into the European session.

Following an early dip, the US dollar attracted some buying and stalled the previous day's retracement slide from a 16-month peak. This, in turn, was seen as a key factor that undermined demand for dollar-denominated gold. That said, retreating US Treasury bond yields held back the USD bulls from placing aggressive bets.

Apart from this, a softer risk tone – as depicted by the prevalent cautious mood around the equity markets – could lend some support to the safe-haven gold. Moreover, persistent concerns about rising consumer prices might continue to benefit the precious metal's appeal as a hedge against inflation and limit any meaningful slide.

Meanwhile, the upside seems limited amid expectations that stubbornly high inflation would force major central banks to tighten their monetary policies. The markets have been betting on yet another rate hike by the Reserve Bank of New Zealand later this month, while the Bank of England is anticipated to raise interest rates in December.

Separately, the Fed funds futures indicate the possibility for an eventual Fed rate hike move by July 2022 and a high likelihood of another raise by November. This, in turn, should act as a headwind for the non-yielding gold. The mixed fundamental backdrop suggests that the commodity is more likely to consolidate its recent gains to multi-month highs.

Gold daily chart

fxsoriginal

Technical outlook

From a technical perspective, gold, so far, hasn't been able to find acceptance above a resistance marked by a downward sloping trend-line extending from August 2020. A sustained break through the mentioned barrier, leading to a subsequent move beyond the weekly swing highs, around the $1,877 level, will be seen as a fresh trigger for bulls. The XAU/SUD might then accelerate the positive move and aim to reclaim the $1,900 mark for the first time since June. The momentum could further get extended towards the next relevant hurdle near the $1,910-12 supply zone.

On the flip side, any meaningful pullback might continue to find decent support near the $1,850-48 region. Some follow-through selling has the potential to drag gold prices back towards the $1,834-32 strong resistance breakpoint, now turned support, which should now act as a strong base for the XAU/USD. A convincing break below the said support is needed to confirm that the recent appreciating move has run out of steam.

Levels to watch

 

06:43
EUR/USD Price Analysis: Looks south towards 1.1250 amid a potential bear flag EURUSD
  • EUR/USD resumes declines towards 16-month lows of 1.1264.
  • Bear flag spotted on the 4H chart, awaits confirmation for further downside.
  • RSI has recovered from the oversold region, backs the negative bias.

EUR/USD is testing daily lows above 1.1300, having faltered its recovery from 16-month lows of 1.1264, as the recovery in the Treasury yields is lifting the demand for the greenback across the board.

The tepid market mood, in the face of persisting inflation concerns and global economic prospects, dent the sentiment around the euro while lending some support to the safe-haven US dollar.

Meanwhile, the dovish comments from the European Central Bank (ECB) policymakers continue to remain a weight on the euro, as it brings the monetary policy divergence between the Fed and the ECB back to the fore.

Attention now turns towards the ECB-speak and the US weekly Jobless Claims data for fresh trading impetus on the major.

From a short-term technical perspective, the recent sell-off that followed a brief recovery stint carved out a bear flag formation on the four-hour chart.

A four-hourly candlestick closing below the rising trendline support at 1.1308 will confirm the bearish continuation pattern, opening floors for a retest of the yearly lows.

A breach of the latter will accelerate the downside towards 1.1200.

The Relative Strength Index (RSI) has recovered from the oversold territory but remains well below the midline, suggesting that there is room for another leg lower.

EUR/USD: Four-hour chart

On the flip side, the recovery will gain momentum only on a firm break above the rising trendline resistance at 1.1348.

The next critical upside barrier is seen at the bearish 21-Simple Moving Average (SMA) at 1.1361.

Recapturing 21-SMA is critical to negate the bearish bias in the near term.

EUR/USD: Additional levels to consider

 

06:35
Natural Gas Futures: Rebound seems likely near term

Considering advanced prints from CME Group for natural gas futures markets, open interest resumed the downside and shrank by around 4.4K contracts on Wednesday. On the flip side, volume increased for the second session in row, this time by around 10.2K contracts.

Natural Gas remains supported near $4.70

Wednesday’s moderate drop in prices of the natural gas once again met contention around the $4.70 mark per MMBtu. The move was in tandem with shrinking open interest, which could now allow for a near term rebound to, initially, the weekly top around $5.40 (November 16).

06:25
EUR/GBP continues negative streak below 0.8400 EURGBP
  • EUR/GBP stays under 21-month lows in recent trade around 0.8390.
  • Robust UK CPI data weighed on the pair's health.
  • The euro area fresh COVID-19 spread keeps investors on their toes. 

The EUR/GBP pair returns below the 0.8400 level, extending the long negative streak and printing new 21-month lows around 0.8390.

The cross-currency pair is trading under pressure on the back of recently announced UK inflation data, paired with strong jobs report. Such improved data has sealed the deal for the Bank of England (BoE) to move ahead and implement a rate hike, diverting investors' attention back to the cable pair. It is worth mentioning the pound is among the best performers in G10 this week, and here it is seen weighing on the cross.

Experts broadly agreed that the inflation data supported the case for a BoE rate hike in December. According to Lloyds, though Consumer Price Index (CPI) "is still generally expected to start to ease back from H2 2022 onwards... an extended period of above-target inflation and indications that the labour market remained strong after the furlough scheme ended means that a Bank of England interest rate rise next month remains in play."

On the other hand, expectations remain that the European Central Bank (ECB) would stick to its dovish policy settings in the near term, keeping the sentiment around the euro undermined. The ECB's dovish stance cones in light of a slowing economy and as COVID-19 cases resurge throughout the continent.

Earlier on, ECB President Christine Lagarde said that tightening monetary policy to curb inflation could choke off the Eurozone's recovery. She further iterated factors pushing prices higher would fade next year, increasing contrast from hawkish hints from other central banks.

Investors also digest Eurozone inflation for October, which rose by 4.1% YoY, in line with expectations. The MoM figure is at 0.8%, also in line with estimations and failed to trigger any reaction in the EUR/USD. Additionally, both Austria and the Netherlands announced lockdown measures. Germany is also due to meet next week to discuss tightening standards as infections start to peak.

Looking ahead, traders will find impetus from Friday's UK Retail Sales data. In the meantime, ECB's Fabio Panettaa and Philip Richard Lane speeches will be closely watched for further motivation. 

EUR/GBP technical levels

 

06:18
Crude Oil Futures: A deeper retracement appears not favoured

Traders trimmed their open interest positions in crude oil futures markets for the fourth consecutive session on Wednesday, now by more than 16K contracts according to flash data from CME Group. On the other hand, volume went up for the second straight day, this time by around 394.5K contracts.

WTI faces support around $75.00

Prices of the WTI retreated markedly on Wednesday. The downtick was accompanied by shrinking open interest, hinting at the idea that further decline could be losing momentum in the very near term. The next support of note, in the meantime, appears around the $75.00 mark per barrel (Octobeer 7).

06:09
Forex Today: Dollar retreats alongside yields, risk mood to drive markets

Here is what you need to know on Thursday, November 18:

Following its impressive rally to a fresh 2021 high above 96.00, the US Dollar Index edged lower on Wednesday as the retreating US Treasury bond yields made it difficult for the greenback to continue to outperform its rivals. The trading action remains subdued early Thursday and the risk sentiment could drive the markets in the absence of high-tier macroeconomic data releases.

The US Department of Labor's weekly Initial Jobless Claims will be the only data featured in the US economic docket. New York Federal Reserve President John Williams and Chicago Federal Reserve Bank President Charles Evans are scheduled to speak later in the day as well. Market participants will also keep a close eye on the Central Bank of the Republic of Turkey's policy announcements after USD/TRY reached a new all-time high near 11.00.

The benchmark 10-year US Treasury bond yield lost nearly 3% on Wednesday and stays relatively calm below 1.6% on Thursday. Wall Street's main indexes finished the day in the negative territory but US stock index futures are edging higher in the early European session, pointing to an improving market mood.

EUR/USD managed to close above 1.1300 on Wednesday but seems to be having a difficult time gathering bullish momentum. European Central Bank (ECB) Governing Council Member Isabel Schnabel said that the rise in inflation was a welcome development. She further noted that the fact that the ECB continued to buy bonds was a sign that a rate hike was not imminent.

GBP/USD climbed to a fresh weekly high near 1.3500 and looks to extend its rebound. Hot inflation data from the UK seems to be supporting the British pound as investors eye fresh Brexit headlines.

USD/JPY erased its weekly gains on Wednesday pressured by the falling US Treasury bond yields. The pair is currently trading in a narrow band above 114.00.

Gold capitalized on the broad dollar weakness and snapped a two-day losing streak. As of writing, XAU/USD was moving sideways below $1,870. On Tuesday, the pair touched a multi-week high of $1,877.

USD/CAD advanced to its strongest level in more than a month on Wednesday and seems to have gone into a consolidation phase above 1.2600. Falling crude oil prices are making it difficult for the commodity-sensitive CAD to find demand. The barrel of West Texas Intermediate is currently trading at its lowest level in nearly six weeks at $77.75.

Cryptocurrencies: The selling pressure surrounding Bitcoin weakened on Wednesday but BTC/USD continues to trade below the key $60,000 mark. Ethereum managed to register modest gains on Wednesday and stays afloat above $4,000.

06:08
FX option expiries for November 18 NY cut

FX option expiries for November 18 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

  • 1.1290 552m
  • 1.1330 461m
  • 1.1400 415m
  • 1.1450 488m

- GBP/USD: GBP amounts        

  • 1.3400 916m
  • 1.3500 527m
  • 1.3550 604m

- USD/JPY: USD amounts                     

  • 113.90-114.00 1.3b
  • 114.20-25 1.4b
  • 114.50 531m
  • 115.00 510m

- USD/CHF: USD amounts        

  • 0.9335 430m

- AUD/USD: AUD amounts

  • 0.7250 636m
  • 0.7310 340m
  • 0.7385 434m
  • 0.7430 895m

- USD/CAD: USD amounts       

  • 1.2330 1.3b
  • 1.2380 770m
  • 1.2500 1.1b

- NZD/USD: NZD amounts

  • 0.6910 605m

- EUR/GBP: EUR amounts

  • 0.8400 1.1b
  • 0.8450 1.1b
05:59
GBP/USD Price Analysis: Retreats inside weekly ascending channel, 1.3410 eyed GBPUSD
  • GBP/USD consolidates gains following the monthly resistance breakout.
  • Channel’s support, previous resistance offer tough nut to crack for the bears.
  • 12-day-old horizontal hurdle on the bull’s radar, bears aim for fresh multi-month low.

GBP/USD eases to 1.3485, down 0.06% intraday heading into Thursday’s London open. The cable pair crossed the monthly hurdle the previous day but couldn’t overcome a one-week-old rising channel despite bullish MACD signals backing the upside momentum.

Hence, the latest pullback move may extend towards a convergence of the previous resistance line and lower line of the stated channel, around 1.3410. Though, any further weakness becomes less likely.

Should the GBP/USD bears dominate past 1.3410 support, the yearly low of 1.3353 and tops marked during late December 2019 near 1.3285 will gain the market’s attention.

On the contrary, recovery moves need validation from the 1.3500 threshold, also the upper line of the channel, to aim for the 50% Fibonacci retracement (Fibo.) level of late October to early November lows, near 1.3585.

Even so, a horizontal area comprising levels marked since November 02, around 1.3610, will challenge the GBP/USD buyers.

Overall, the cable is ready to consolidate the recent losses but await a trigger to recall the bulls.

GBP/USD: Four-hour chart

Trend: Further upside expected

 

05:54
Gold Futures: Room for further gains

CME Group’s preliminary readings for gold futures markets noted open interest rose for the second session in a row on Wednesday, this time by around 7.5K contracts. Volume, instead, went down for the second straight session, now by around 39.5K contracts.

Gold: Immediate target aligns at $1,877

Wednesday’s strong advance in prices of the ounce troy of the precious metal was amidst rising open interest and opens the door to further upside in the very near term. Against that, the monthly peak at $1,877 (November 16) now emerges as the next hurdle of note for gold bulls.

05:33
Asian Stock Market: Bears keeping reins on Evergrande, growth chatters
  • Asian markets print losses led by China, Hong Kong on Evergrande woes.
  • Fears of untimely rate hikes to weigh on the nascent growth exert additional downside pressure.
  • Bonds, gold price gain but DXY fails to cheer the safe-haven status.

Asian shares remain on the back foot, with China and Hong Kong dropping the most, heading into Thursday’s European session. While portraying the mood, MSCI’s index of Asia-Pacific shares outside Japan drops 0.60% whereas Japan’s Nikkei 225 stays depressed around 29,689 by the press time.

Evergrande’s decision to sell its entire stake in HengTen Networks Group Ltd, that too at a hefty loss, propel the bearish bias as this becomes the first time the China-based company marked panic. Adding to the woes was losses of Chinese tech giants backed by the news that another firm from Beijing, namely Yango, struggles to pay a bond coupon.

Amid these plays, stocks in China and Hong Kong are down over 1.0% while Japan’s Nikkei can’t cheer the stimulus news. Japan's economic stimulus package will likely require fiscal spending of around 55.7 trillion yen ($488 billion) due to huge amounts of cash payouts, the Nikkei newspaper reported on Thursday.

Elsewhere, New Zealand’s NZX 50 follows the suit with the strong RBNZ Inflation Expectations data for Q4. However, Australia bucks the trend amid optimism towards economic growth following the latest unlocks. On the same line was Indonesia’s IDX Composite as investors brace for another dovish halt by the Bank Indonesia.

India’s BSE Sensex drops near 0.75% at the latest amid growth fears as Fedspeak can’t tame reflation woes and hints at the tighter monetary policies going forward. The conditions, if witnessed, could be severe as the global economy isn’t yet out of the woods and the COVID-19 cases jump back in certain areas of Europe.

On a broader front, US 10-year Treasury yields and the US Dollar Index (DXY) extend the previous day’s pullback from the multi-day peak whereas gold prices fade the latest gains. It should be noted, however, that the S&P 500 Futures print mild gains by the press time.

Looking forward, central bankers and chatters concerning China, as well as Evergrande and stimulus, will be the key to follow for fresh impulse.

05:32
Netherlands, The Unemployment Rate s.a (3M) dipped from previous 3.1% to 2.9% in October
05:22
NZD/USD hovers around 0.7030 amid RBNZ rate hike expectations NZDUSD
  • NZD/USD has recaptured 0.7000 amid a revival of the RBNZ rate hike calls. 
  • The RBNZ has posted the country's inflation expectations to 3.7%, the highest since 2010.
  • The kiwi's resilience will be put to the test amidst an aggressive rate hike cycle. 

NZD/USD is trading around 0.7030, as investors seek fresh rate hike cues after the Reserve Bank of New Zealand (RBNZ) posted sharp inflation expectations numbers on Thursday. At the time of writing, the currency pair is trading at 0.7024, up 0.41%. 

On a weekly basis, the pair has been deteriorating for three consecutive weeks due to a broadly firmer US dollar and contributions made by the slipping EUR/USD, which is expected to continue its southward trend.

The RBNZ earlier in the day said that the country's inflation expectations for the fourth quarter rose sharply to 3.7%, the highest since 2010. Some interest rate increase is likely to follow up next week to curb the inflated numbers. The RBNZ is aiming to keep New Zealand's inflation between 1% to 3%, with a central target of 2%.

Recently, the New Zealand dollar has had a good thing going with rising rate hike probabilities from the RBNZ. But experts believe, it can be a source of weakness for the pair's price action. Rates markets are pricing in a 25-bps rate hike at each RBNZ meeting could lead to the most aggressive rate hike cycle by any major central bank since the post-global Financial Crisis era.

Goldman Sachs analysts say Antipodeans are likely to remain weaker against the US dollar, but the kiwi's resilience will thrive. It further said, "Our views on the RBA are fairly dovish, as the economy faces softer wage and inflation dynamics and risks from a potential slowdown in Chinese growth. Our forecasts for AUD, as a result, are fairly negative versus USD over a 12-month horizon."

"In contrast, our forecasts for the RBNZ are far less dovish, though our projections of the terminal rate are lower than market expectations, and we expect NZD to be dragged down vs USD along with AUD," it added.

On the other side, the mighty US dollar that ran out of impetus, stayed below a 16-month high, with DXY falling back to the 95.80s on Thursday. However, with a high probability of a Fed rate increase in June, followed by another in November, it is expected to stay elevated.

With the absence of domestic drivers this week, the kiwi traders will now look for broader risk sentiment to play a key role. The US Initial Jobless Claims data and ISM Philadelphia Fed Manufacturing Survey for November will also be eyed for some trading incentives.

NZD/USD technical levels

 

04:52
GBP/JPY Price Analysis: Stays pressured below monthly resistance, 200-SMA
  • GBP/JPY remains depressed, extends previous day’s pullback from two-week top.
  • Seven-week-old support line, 61.8% Fibonacci retracement on bear’s radar.
  • Buyers need validation from 38.2% Fibo. level to retake controls.

GBP/JPY extends the previous day’s bearish bias towards breaking the 154.00 round figure heading into Thursday’s London open.

In doing so, the cross-currency pair tests 50.0% Fibonacci retracement (Fibo.) of October’s advances amid descending, but not oversold, RSI line.

Keeping the GBP/JPY bears hopeful is the pair’s pullback from the 200-SMA and a descending trend line from October 20.

That said, the current weakness eyes an upward sloping support line from early October, near 152.80. Though, a clear break of the 50% Fibo. the level near 153.70 becomes necessary for the same.

Also acting as a downside filter is the 61.8% Fibonacci retracement level close to 152.65 and September-end peak of 152.57.

Meanwhile, GBP/JPY rebound needs to cross the 200-SMA level of 154.70, not to forget the monthly resistance line near 154.55, to recall the buyers.

Even so, early November’s swing low and 38.2% Fibo. challenge the quote’s further upside around 154.80, a break of which will direct the pair towards crossing the 155.00 and 156.00 thresholds while aiming for the 156.25 resistance.

GBP/JPY: Four-hour chart

Trend: Further weakness expected

 

04:35
WTI: Supply concerns pressure oil prices at six-week low under $77.00
  • WTI remains on the back foot around multi-day low, sidelined of late.
  • US pushes allies towards releasing strategic oil reserves, China responds the first.
  • EIA, API inventories couldn’t please bulls, neither the USD pullback.
  • Demand-supply concerns, Fedspeak and greenback moves in focus.

WTI bears the burden of the US-led push for the SPR (Strategic Petroleum Reserve) release during early Thursday. That said, the oil benchmark drops over 1.0% to refresh 1.5 month low while taking rounds to $76.85 ahead of the European session.

Earlier in Asia, Reuters came out with the news saying, “The Biden administration has asked some of the world's largest oil-consuming nations to consider releasing some of their crude reserves in a coordinated effort to lower prices and stimulate the economic recovery.”

Following that, China National Food and Strategic Reserves Administration announced to have carried out the work of releasing crude oil reserves. On the same line was Japan’s Chief Cabinet Secretary Hirokazu Matsuno who urged oil-producing countries to increase output.

In addition to the supply push, an absence of any geopolitical concerns in the Permian basin that previously propelled the black gold also weigh on the WTI crude oil prices. It’s worth mentioning that the fresh covid woes in Europe and fears of the tighter monetary policy exert additional downside pressure on the commodity prices.

On the contrary, surprise draws in the weekly official oil inventory data from the US Energy Information Administration (EIA), -2. 101M versus expected +1.398M. Earlier in the week, oil stocks change figures from the American Petroleum Institute (API) also eased to 0.655M versus an expected addition of 1.55M.

Other than the inventories, the US dollar pullback should have also favored the WTI bulls but haven’t. Hence, the commodity traders await clarity over near-term moves, which in turn highlights more chatters over the supply increase and rate hikes for fresh impulse.

Technical analysis

Given the clear downside break of the 50-DMA level of $78.10 amid bearish MACD signals, WT remains directed towards July’s peak of $76.40 before challenging the 100-DMA surrounding $73.80.

 

03:59
USD/INR Price News: Indian rupee bulls march towards 73.85
  • USD/INR takes offers to refresh weekly low during two-day downtrend.
  • 100-SMA, five-week-old resistance line guards immediate upside.
  • Descending RSI line, not oversold, adds to the bearish bias.
  • 200-SMA adds to the upside filters, multiple tops of September strengthen 73.85 support.

USD/INR stands on slippery grounds towards 74.00, down 0.15% intraday to form weekly bottom around 74.16. In doing so, the Indian rupee pair (INR) drops for the second consecutive day heading into Thursday’s European session.

The pair’s pullback on Wednesday could be linked to the failures to cross a convergence of the 100-SMA and a descending trend line from October 12, near 74.50. Also exerting downside pressure on the quote is the descending RSI line, not oversold.

Hence, USD/INR bears are all set to retest the monthly low of 73.85. However, any further weakness will be challenged as the bulls couldn’t cross the 73.85 level multiple times in September.

Should the quote drops below 73.85 on a daily closing basis, the mid-September’s swing low near 73.35 will be in focus ahead of the key 72.90 support level.

On the flip side, recovery moves need to cross the 74.50 level to convince USD/INR buyers.

Even so, a confluence of the 200-SMA and 50% Fibonacci retracement level of October-November drop, close 74.75, will be a tough nut to crack for the pair bulls, a break of which won’t hesitate to cross the 75.00 threshold.

USD/INR: Four-hour chart

Trend: Further weakness expected

 

03:01
EUR/USD: More downside in the offing below 1.1270 – Scotiabank EURUSD

In the view of the analysts at Scotiabank, EUR/USD is expected to extend its downtrend below the 16-month lows of 1.1264 reached in Wednesday’s Asian trading. 

Key quotes

“See the current level as resistance at around 1.1325, followed by 1.1350/60.”

“The 1.1270 level will stand as support through the session - while oversold conditions possibly limit downside.”

“EUR/USD may see some buying interest on dips below the figure, but strong downward momentum should see the pair close under the level soon and there are no notable support markers except for the big figure areas.”

02:52
EUR/USD pares weekly loss above 1.1300 as yields weigh on USD EURUSD
  • EUR/USD keeps bounce off 16-month low, grinds higher of late.
  • Inflation expectations, US housing numbers weigh on US Treasury yields amid sluggish session.
  • ECB policymakers praise economic activities, tame reflation fears.
  • Speeches from Fed, ECB members will join US data to entertain intraday traders.

EUR/USD licks its wounds around 1.1335, up 0.08% intraday during early Thursday. The major currency pair dropped to the fresh low since July 2020 the previous day before bouncing off 1.1263 to close the session with mild gains. That said, a pullback in the US Treasury yields weigh on the US dollar and challenge the buyers amid a sluggish session with a light calendar.

The US Dollar Index (DXY) marks a second consecutive daily loss, down 0.09% intraday around 95.70 while tracking the two basis points (bps) of a downside by the US 10-year Treasury yields. It’s worth noting that the DXY jumped to a fresh 16-month high and the US bond yields refreshed three-week tops the previous day but closed in negative territory for the first time in the week.

While checking the moves, soft US Housing Start and a two-day decline of the US inflation expectations can be linked as the key catalysts. US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, drop for the second consecutive day on Wednesday, per the data source Reuters.

Additionally, ECB policymakers’ rejections to the reflation fears and hopes of moderate economic growth going forward also favored the EUR/USD buyers the previous day. On the contrary, Charles L. Evans, the Chief Executive Officer of the Federal Reserve Bank of Chicago said, “It will take until the middle of next year to complete the Fed's wind-down of its bond-buying program, even as the central bank remains 'mindful' of inflation.”

Recently favoring the EUR/USD prices could be cautious optimism in the market as the US lauds supply chain improvements and China’s Evergrande proposes to sell 1.662 billion shares in Hengten Networks at HK$1.28.

Moving on, US Jobless Claims, expected to ease from 267K to 260K, will join the Philadelphia Fed Manufacturing Survey for November, likely 24 versus 23.8 prior, to entertain the EUR/USD pair traders. However, major attention will be given to the ECB and Fed policymakers’ comments as the divergence between the two central bank’s next moves amplify of late.

Technical analysis

Corrective pullback remains elusive until crossing the previous support line from August near 1.1400. Alternatively, the recent multi-month low of 1.1260 will precede late 2019 peaks surrounding 1.1240 to challenge EUR/USD bears.

 

02:42
USD/CHF remains pressured towards 0.9250 amid cautious mood USDCHF
  • Rising inflation concerns continue to stress the swissie traders.  
  • The cautious market mood aided the Swiss franc's safe-haven appeal, contributed to the drop.
  • USD/CHF struggles around 0.9270, investors eye Swiss macro data.

The USD/CHF pair is dropping towards 0.9250, moving further away from the last October 12 high of 0.9300 level. The cross-country pair is trading around 0.9272, down 0.12%, during the Asian trading session on Thursday. It appears that the latest trend in the currency pair is led by marginal ease in the value of the US dollar. Also, the pullback in the US treasury yield is giving a much-needed boost to the USD/CHF bears. 

Like its peers, Switzerland is also not cushioned enough to side-line the effects of inflation. Hence, the Swiss National Bank (SNB) is putting efforts to curb the rising inflation. It is worth mentioning that the inflation rate rose by 0.3% to 0.2% in October, the highest since August 2018. Now, as the Swiss economy regains its momentum, prices are beginning to catch up.

Despite the vaccination campaign in process, the uncertainty led by the variants of the COVID-19 virus continues to stress the policymakers and market participants. In addition to this, with European Central Bank (ECB), maintaining its transitory stance on the pandemic-led inflation will keep the pair under pressure.

The rate markets have been estimating the likelihood of a rate hike from the Fed by July 2022 amid worries of rising inflation. The US dollar's recent journey has halted on Wednesday, with the DXY falling back to the 95.80s. 

In the meantime, concerns about surging consumers have provided a headwind dampened investors' appetite for perceived riskier assets. The dilly-dally mood of investors around equity markets further solidifies concern. It has propelled the Swiss franc's safe-haven demand and further contributed to the USD/CHF pair's intraday downfall.

The broader market risk sentiment would play a key role for USD/CHF traders. Investors will also eye for Switzerland Industrial production YoY data, Import/Export MoM numbers and Trade balance figure for the month of October. Also, US Initial Jobless Claims data and ISM Philadelphia Fed Manufacturing Survey for November to find impetus.

USD/CHF technical levels

 

02:31
Japan’s Matsuno: Will continue to urge oil-producing countries to increase output

Japan’s Chief Cabinet Secretary Hirokazu Matsuno acknowledges the report on oil reserve release requests from the US.

Additional quotes

“Refrain from commenting on specific talks between the US and Japan.”

“Will continue to watch the effect of soaring oil prices on Japan’s economy and urge oil-producing countries to increase output.”

“No comment on current forex levels, continue to pay attention to the forex market as currency stability is important.”

Related reads

  • China: Working on release of crude oil reserves
  • WTI Price Analysis: Bears flirt with six-week low around $77.50

 

02:30
Commodities. Daily history for Wednesday, November 17, 2021
Raw materials Closed Change, %
Brent 80.19 -2.49
Silver 25.046 1.02
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02:27
USD/TRY: All eyes on CBRT Interest Rate Decision as lira pokes record low near $11.00
  • USD/TRY remains on the front foot around all-time high during the eight-day uptrend.
  • Turkish President Erdogan pushes for low interest rates.
  • CBRT is expected to cut 100 bps off the benchmark rate but bears may not be welcomed.
  • Options market suggests receding bullish bias ahead of the key event.

USD/TRY grinds higher around $10.90 after refreshing the all-time peak with $10.98 level during early Thursday. In doing so, the Turkish lira (TRY) pair portrays the cautious sentiment ahead of the key interest rate decision from the Central Bank of the Republic of Turkey (CBRT).

Ahead of the CBRT decision, Turkish President Recep Tayyip Erdoğan marked a push towards a rate hike while terming higher interest rates as the cause of the inflation. “Erdogan said he would lift the interest rate burden from people and urged businesses to take advantage of aggressive monetary easing since September to invest, hire and export goods,” per Reuters.

The Turkish leader has already pushed the CBRT towards 300 basis points (bps) of rate cuts since September and is up for more. However, markets seem to have tired of hearing rate cuts from the Turkish central bank and hence have recently portrayed easy bullish bias, as per the options market data.

That said, One-month risk reversal (RR) of USD/TRY, a gauge of calls to puts, retreats to 0.075 after jumping the most since March 23 on Tuesday with 1.175 figures, per the latest data from Reuters.

Moving on, the CBRT is expected to cut the benchmark policy rate from 16% to 15% after announcing a 200 bps of rate cut in the last meeting. Even so, major analysts remain indifferent to the USD/TRY upside. Ahead of the event, TD Securities highlight Turkish President Erdogan’s comments to extend their previous call of a 50 bps rate cut while saying, “Erdogan's comment, however, is reversing this expectation, and so we now see risks towards a larger than 50bp cut. With this in mind, the lira will remain under significant pressure and we don't think the CBRT can endure this stress for much longer, suggesting rate hikes and other emergency currency-support measures are becoming more and more likely in the coming few weeks.”

It should be noted that the Fedspeak and US Jobless Claims, as well as Philadelphia Fed Manufacturing Survey for November, are extra catalysts to watch.

Technical analysis

Although overbought RSI conditions do suggest the pair’s pullback towards the $10.00 threshold, USD/TRY bears will remain cautious until the quote stays beyond an ascending trend line from August 2018, near $9.25 at the latest. That said, October’s top near $9.85 may act as an additional downside filter.

02:20
China Evergrande plans to sell entire stake in HengTen to meet mounting liabilities

China’s indebted real-estate giant, Evergrande Group, plans to sell the rest of its stake in HengTen Networks Group Ltd. for HK$2.13 billion ($273 million), in order to raise cash to meet its mounting liabilities, per Bloomberg.

Key takeaways

“The developer agreed to sell its 18% holding in the internet services firm to Hong Kong-based Allied Resources Investment Holdings Ltd. at HK$1.28 apiece.”

“Evergrande said it expects to incur a loss of HK$8.5 billion from the sale, which comes as it tries to raise cash and make good on more than $300 billion in liabilities.”

Market reaction

The above piece of news offers little respite to the markets, as the mood remains damp amid persistent inflation concerns.

The Asian markets are trading lower, led by the 1% drop in the Japanese Nikkei 225 index. Meanwhile, the S&P 500 futures are almost unchanged on the day.

AUD/USD is at multi-week lows just above 0.7250, losing 0.08% so far.

02:03
RBNZ Survey: NZ inflation expectations leap in Q4, Kiwi jumps

New Zealand's (NZ) inflation expectations are seen accelerating across the time curve in the fourth quarter of 2021, the latest monetary conditions survey conducted by the Reserve Bank of New Zealand (RBNZ) showed on Thursday.

Two-year inflation expectations, seen as the time frame when RBNZ policy action will filter through to prices, rose to 2.96% from 2.27% last.

NZ Q4 average 1-yr inflation expectations rose to 3.70% vs. 3.02% seen in the third quarter.

The RBNZ said that the Official Cash Rate (OCR) expectations continue to rise in the short and medium term.

Kiwi jumps above 0.7000

A sharp rise in the NZ inflation expectations for Q4 offered the much-needed impetus to the NZD bulls, driving NZD/USD back above 0.7000.

At the time of writing, the kiwi is trading at daily highs near 0.7015, up 0.24% on the day.

02:02
New Zealand RBNZ Inflation Expectations (QoQ) increased to 2.96% in 4Q from previous 2.27%
01:52
China: Working on release of crude oil reserves

China National Food and Strategic Reserves Administration announced on Thursday, it is working on the release of crude oil reserves.

 

developing story ...

01:51
AUD/USD Price Analysis: Bears attack three-month-old support near 0.7250 AUDUSD
  • AUD/USD prints three-day downtrend to refresh six-week low.
  • Bearish MACD signals, sustained trading below short-term resistance line keep sellers hopeful.
  • Convergence of 50-DMA, 100-DMA adds to the upside filters, September’s low will lure bears below 0.7250.

AUD/USD takes offers to refresh multi-day low around 0.7250, down for the third consecutive day during early Thursday. In doing so, the quote extends the previous day’s fall past 61.8% Fibonacci retracement (Fibo.) of August-October uptrend to test an ascending support line from August.

Given the bearish MACD signals and sustained trading below the two-week-old descending trend line, as well as the confluence of the 100-DMA and 50-DMA, AUD/USD bears are likely to keep reins.

However, a daily closing below the 0.7250 mark, comprising the stated trend line support, becomes necessary for the sellers to aim for September’s low of 0.7169. During the fall, 0.7220 and the 0.7200 round-figure may offer intermediate halts.

Should the quote remains weak past 0.7169, the yearly bottom marked in August near 0.7100 will be in the spotlight.

Alternatively, 61.8% Fibo. and short-term descending trend line, respectively around 0.7280 and 0.7295, will precede the 0.7300 round figure to restrict short-term AUD/USD rebound.

Even if the quote manages to cross the 0.7300 mark, the aforementioned DMA confluence near 0.7355-60 will be a tough nut to crack for the bulls.

AUD/USD: Daily chart

Trend: Further weakness expected

 

01:38
US Treasury yields keep pullback from three-week top amid sluggish session
  • US 10-year Treasury yields remain pressured after dropping from multi-day high.
  • Stock futures struggle to remain positive, DXY tracks yields.
  • US data, inflation expectations and Fedspeak probe bulls amid a light calendar.

Market players seem divided amid indecision on the Fed’s next moves, following the recently easing US data and inflation expectations, during early Thursday. Also challenging the sentiment is the light calendar and mixed macros of late.

US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, drop for the second consecutive day on Wednesday, per the data source Reuters.

The same weighed on the US Treasury yields and US Dollar Index (DXY) but couldn’t help the equities. US 10-year Treasury yields stepped back from the highest levels since October 26 to post the heaviest daily fall in a week on Wednesday, down 1.3 basis points (bps) to 1.59% at the latest. Further, DXY tracked bond yields and marks a first negative daily closing in three after refreshing the 16-month top, indecisive around 95.80 by the press time.

It’s worth noting that news that China’s Evergrande is up for selling 1.662 billion shares in Hengten Networks at HK$1.28 joins the US optimism over the supply chain issues to keep buyers hopeful. Also on the positive side is the recently subdued US housing market data.

However, US-China tussles and the Fedspeak chatters remain on the table to weigh on the risk appetite and hence restrict S&P 500 Futures from making gains around 4.690. It’s worth observing that Japan backs the US to stop China from taking more control of Taiwan whereas the Dragon nation has indirectly warned America to not interfere in the issues. Furthermore, Recently, Charles L. Evans, the Chief Executive Officer of the Federal Reserve Bank of Chicago said, “It will take until the middle of next year to complete the Fed's wind-down of its bond-buying program, even as the central bank remains 'mindful' of inflation.”

Given the mixed concerns and a lack of major data/events, weekly prints of the US Jobless Claims, expected to ease from 267K to 260K, will join the Philadelphia Fed Manufacturing Survey for November, likely 24 versus 23.8 prior, to entertain traders.

Above all, Fedspeak and inflation chatters will be important to watch for a clearer direction.

Read: Forex Today: Yen and pound the winners as dollar takes a breather, lira gets smoked again

01:30
Schedule for today, Thursday, November 18, 2021
Time Country Event Period Previous value Forecast
02:00 (GMT) New Zealand Expected Annual Inflation 2y from now Quarter IV 2.27%  
05:35 (GMT) Australia RBA Assist Gov Ellis Speaks    
07:00 (GMT) Switzerland Trade Balance October 4.4  
07:30 (GMT) Switzerland Industrial Production (YoY) Quarter III 15.7%  
12:30 (GMT) U.S. FOMC Member Bostic Speaks    
13:30 (GMT) Canada Foreign Securities Purchases September 26.3  
13:30 (GMT) U.S. Continuing Jobless Claims November 2160 2120
13:30 (GMT) U.S. Initial Jobless Claims November 267 260
13:30 (GMT) U.S. Philadelphia Fed Manufacturing Survey November 23.8 24
14:30 (GMT) U.S. FOMC Member Williams Speaks    
15:00 (GMT) U.S. Leading Indicators October 0.2% 0.8%
19:00 (GMT) U.S. FOMC Member Charles Evans Speaks    
20:30 (GMT) U.S. FOMC Member Daly Speaks    
23:30 (GMT) Japan National CPI Ex-Fresh Food, y/y October 0.1% 0.1%
23:30 (GMT) Japan National Consumer Price Index, y/y October 0.2%  
01:17
GBP/USD hovers around 1.3500 on Brexit, BOE rate hike concerns GBPUSD
  • GBP/USD steps back after refreshing weekly top on BOE rate hike chatters.
  • UK inflation jumped to over a decade high following upbeat jobs report.
  • EU warned to not start trade war if UK PM Johnson suspends part of Brexit deal.
  • Fedspeak, US data to entertain pair traders amid light British calendar ahead of Friday’s key Brexit talks.

GBP/USD eases from weekly top to 1.3485, stays within immediate 20-pip range during early Thursday. In doing so, the cable pair consolidates the biggest daily gain in over a week amid cautious sentiment on Brexit concerns and a sluggish Asian session.

The quote’s run-up on Wednesday could be linked to the strong prints of the UK Consumer Price Index (CPI) data and the chatters that the London and Brussels may agree on some parts of the Northern Ireland (NI) border protocol during Friday’s key talks. That said, the UK CPI not only doubled from the Bank of England’s (BOE) inflation target of 2.0% but also jumped to a more than 10-year high while flashing 4.2% YoY prints for October. Earlier in the week Britain’s employment data flashed positive numbers and fuelled the BOE’s rate hike concerns.

It’s worth noting that a pullback in the US Dollar Index (DXY) from the 16-month high and softer Treasury yields could also be linked to the previous day’s heavy run-up by the GBP/USD pair. US 10-year Treasury yields stepped back from the highest levels since October 26 to post the heaviest daily fall in a week on Wednesday, down 1.3 basis points (bps) to 1.59% at the latest. Further, DXY tracked bond yields and marks a first negative daily closing in three after refreshing the 16-month top, indecisive around 95.80 at the latest. It’s worth noting that S&P 500 Futures print mild gains while stocks in Asia-Pacific trade mixed by the press time.

While tracking the US Treasury yields and DXY moves, a pullback in the US inflation expectations and mixed concerns over the Fed rate hike could be found as the key catalysts. Also, the easy figures of US Housing Starts can be related to the GBP/USD pair’s earlier run-up.

However, the latest headlines from Bloomberg suggest a rift between the UK and European Union (EU) and weigh on the GBP/USD prices. “The UK warned the European Union not to start a trade war if Boris Johnson’s government suspends part of the Brexit settlement over Northern Ireland, saying a strong retaliation would exacerbate problems,” said Bloomberg. On a different page, the UK’s covid concerns and chatters that supply chain issues may stop the BOE from rate hike also probe the pair bulls.

That said, a lack of major data/events will keep the Fedspeak and Treasury moves in the driver’s seat whereas the US Weekly Jobless Claims and Brexit news could entertain the GBP/USD traders going forward.

Technical analysis

GBP/USD stays directed towards the 20-DMA level of 1.3580 until it stays beyond the previous resistance line from October 28, around 1.3425 by the press time.

 

01:12
NZD/USD Price Analysis: Key levels to watch into the RBNZ's Survey of Expectations NZDUSD
  • NZD/USD is trying to correct the bearish impulse. 
  • NZD/USD traders start to roll up their sleeves for RBNZ's Survey of Expectations
  • Bears are looking for a downside extension while bulls are banking on a hawkish RBNZ hike. 

NZD/USD is in a precarious position on the charts as we head into the key event today, RBNZ's Survey of Expectations and before the forthcoming interest rate meeting. Today's event is watched closely for signs that expectations are drifting away from the 2% target.

''Market pricing is sitting at roughly 60/40 in favour of a 25bp hike vs 50bp, and we’re expecting a 25bp hike as well. We can’t rule out a 50bp move,'' analysts at ANZ Bank explained.

''But risks to employment and growth are at best balanced and at worst to the downside, and the construction sector is facing a lot of headwinds. Moving in well-signalled 25bp increments can achieve a similar tightening in financial conditions compared with a 50bp hike, but without jolting the economy as much.''

The following is a breakdown of the market structure ahead of these events. 

NZD/USD daily chart

NZD/USD is on the verge of a deeper correction to test the 38.2% Fibonacci retracement level near 0.7020 which could be the last stop ahead of a downside continuation. A break of the current lows opens risk to the 0.6950's at least:

However, should there be renewed speculation that the RBNZ is about to hike by 50bps, then the upside will most definitely be to play for in the kiwi. With that being said there could be better places to go and trade the kiwi against, such as AUD for the divergence of central banks. 

In such a scenario, 0.7100 will be eyed vs the greenback:

For the upcoming event, we have two areas of resistance at 0.7040 and 0.7020:

01:09
AUD/JPY defies previous day’s losses, trades around 83.00 level
  • AUD/JPY trades at 83.00 level, BoJ’s fiddle with short-term borrowing scheme.
  • The latest pullback in the US treasury yields has resulted in an improvement in Yen.
  • AUD/JPY will closely monitor RBA Ellis speech and Japan’s National CPI data.

AUD/JPY defies the previous day's losses and continues to trade positively around the 83.00 level on Thursday as investors put their hopes on the safe-haven, Yen. The pair is trading at 82.94 during early Asian hours.

On Wednesday, the pair suffered a blow after the Reserve Bank of Australia (RBA) warned of margin hit from a low-interest-rate environment and mortgage competition. However, market participants' reaction was not strong enough as it somewhat gets affected with wages data supported by Reserve Bank Governor Philip Lowe's dovish stance.

In the latest news, the Bank of Japan's (BoJ's) short-term borrowing scheme to support smaller lenders, affected by ultra-low interest rates, damaged term borrowing costs. It further complicated the central bank's plans to eventually ditch the easy monetary policy. So much so, Tokyo's currency market is squeezed due to this fiddly balancing act.

As per a Reuters report, "the core of the BoJ's monetary policy seems to be wavering. The central bank must decide what it's going to prioritise."

Stakeholders of the safe-haven, Yen, will be hopeful towards Japan's COVID-19 fiscal stimulus package. The aid worth 40 trillion yen ($350 billion) is expected to revive the pandemic and oil price-hit economy. Investors will note that Japan's has overcome previous vaccine hesitancy and has achieved the highest inoculation rate in the Group of Seven (G7) without any mandates.

It is worth mentioning that the latest pullback in the US treasury yields has pushed the USD/JPY southwards, resulting in an improvement in the local currency Yen. The USD/JPY is reeling under pressure caused by declining US inflation pressures and rising rate hike expectations.

The risk-barometer pair is likely to witness some movements post multiple announcements coming from Japan and Australia. These announcements include a speech by Reserve Bank of Australia (RBA) Assistant Governor Luci Ellis and Japan's National Consumer price release.

AUD/JPY technical levels

 

00:46
US Dollar Index Price Analysis: DXY bulls lurk around 95.70
  • DXY struggles to extend pullback from 16-month high, sidelined of late.
  • 50-HMA, one-week-old support line restricts immediate downside.
  • Steady RSI hints at smooth sailing for the bulls.

US Dollar Index (DXY) remains indecisive around 95.78 during early Thursday, following the pullback from a 16-month high to post the heaviest daily loss in over a week.

Although overbought RSI conditions dragged the greenback gauge from a multi-day high, a convergence of the 50-HMA and an ascending trend line from November 09 offers a tough nut to crack to the intraday bears. Also rejecting the bearish bias is the recently steady RSI line.

Should the DXY sellers ignore the aforementioned catalysts and break the 95.70 support convergence, a fall to Friday’s top surrounding 95.25 becomes imminent.

Following that November 11 swing low near 94.85 will be crucial to open gates for the US Dollar Index south run.

Meanwhile, recent highs near the 96.00 threshold precede the multi-day peak of 96.24 to limit the DXY’s short-term upside.

Should the quote manage to jump past 96.25, lows marked during late 2019 around 96.35 will be in focus.

DXY: Hourly chart

Trend: Bullish

 

00:23
USD/JPY pares biggest daily loss in three months near 114.00 amid sluggish yields USDJPY
  • USD/JPY licks its wounds after declining from the four-year high.
  • Receding US inflation expectations dragged Treasury yields, DXY in absence of major catalysts.
  • Japan eases coronavirus-led activity restrictions, eyes closer ties with the US.
  • Fedspeak, US Jobless Claims eyed amid light calendar.

USD/JPY refreshes intraday high around 114.25, before stepping back to 114.15, as Tokyo opens for Thursday’s trading. In doing so, the yen pair consolidates the previous day’s losses after dropping the most since August. It should be noted that the quote poked March 2017 high before activating the stated fall on Wednesday.

A notable pullback in the US Treasury yields and the US Dollar Index (DXY) could be traced to the latest weakness in the USD/JPY prices. Behind the moves are the receding US inflation expectations and the latest Fedspeak pushing for rate hikes.

That said, the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, drop for the second consecutive day by the end of Wednesday’s North American session, per the data source Reuters.

On the other hand, US 10-year Treasury yields retreat from the highest levels since October 26 to post the heaviest daily fall in a week whereas DXY tracks bond yields and marks a first negative daily closing in three after refreshing the 16-month top. It’s worth noting that S&P 500 Futures print mild gains while Japan’s Nikkei 225 drop 0.40% by the press time.

Recently, Charles L. Evans, the Chief Executive Officer of the Federal Reserve Bank of Chicago said, “It will take until the middle of next year to complete the Fed's wind-down of its bond-buying program, even as the central bank remains 'mindful' of inflation.” Also noteworthy are the US efforts to increase oil supply and the White House comments suggesting receding supply chain issues, not to forget Japan’s unlock and aim for stronger ties with the US to stop China from Taiwan. ALso favoring the Japanese yen are the talks that the Asian nation has been able to achieve the highest inoculation rate in the Group of Seven (G7) without any mandates.

Looking forward, a lack of major data/events will keep the Fedspeak and Treasury moves in the driver’s seat whereas the US Weekly Jobless Claims may add to the watcher’s list.

Technical analysis

Unless dropping back below a two-month-old support line, around 113.40, USD/JPY remains capable of challenging March 2017 high near 115.50.

 

00:15
Currencies. Daily history for Wednesday, November 17, 2021
Pare Closed Change, %
AUDUSD 0.72651 -0.42
EURJPY 129.177 -0.56
EURUSD 1.13218 0.01
GBPJPY 153.939 -0.09
GBPUSD 1.34917 0.52
NZDUSD 0.69982 0.18
USDCAD 1.26054 0.48
USDCHF 0.92794 -0.24
USDJPY 114.087 -0.59
00:05
AUD/NZD trades around 1.0400 level, the kiwi may prove resilience
  • The Antipodeans remain relatively weaker against the US dollar, the kiwi less so.
  • AUD/NZD awaits RBNZ Inflation Expectations data, Luci Ellis speech.
  • The kiwi is resilient amidst the most aggressive rate hike cycle. 

AUD/NZD is trading at 1.0383, up 0.06%, rebounding after Wednesday FX action. The spot may be reacting hot and cold in line with the Reserve Bank of Australia's (RBAs) latest announcement for borrowers with jobs. RBA governor Philip Lowe iterated an official interest rate hike is very unlikely in 2022 and may still not happen until 2024.

Recently, the kiwi dollar has had too much of a good thing. Rising rate hike probabilities from the Reserve Bank of New Zealand (RBNZ) is one of them, but it can be a source of weakness for the pair's health. Rates markets are pricing in a 25-bps rate hike at each RBNZ meeting through the end of 2022. Many experts say it would be the most aggressive rate hike cycle by any major central bank since the post-global Financial Crisis era.

Analysts at Goldman Sachs feel the Antipodeans are likely to remain weaker against the US dollar, but the kiwi's resilience will prosper. 

The investment bank said, "Our views on the RBA are fairly dovish, as the economy faces softer wage and inflation dynamics and risks from a potential slowdown in Chinese growth. Our forecasts for AUD, as a result, are fairly negative versus USD over a 12-month horizon."

"In contrast, our forecasts for the RBNZ are far less dovish, though our projections of the terminal rate are lower than market expectations, and we expect NZD to be dragged down vs USD along with AUD," it added.

AUD/NZD traders will now look ahead to RBNZ Inflation Expectations for the fourth quarter and RBA Assistant Governor Luci Ellis' speech for further incentive. 

AUD/NZD technical levels

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