CFD Markets News and Forecasts — 19-11-2024

Ukraine used US ATACMS missiles to strike Russian territory on Tuesday, the Russian government said, marking a significant uptick in hostilities on the 1,000th day of the conflict, per Reuters. 

Russian President Vladimir Putin sent a message to Washington by signing a new nuclear doctrine on Tuesday. It lowers the threshold for Russia to use nuclear weapons, in addition to responding to attacks on its territorial integrity. The US said the update to the nuclear doctrine was no surprise and rejected "more of the same irresponsible rhetoric from Russia.” 

Market reaction 

At the time of writing, the gold price (XAU/USD) is trading 0.03% higher on the day to trade at $2,634. 

• GBP/USD spun in circles on Tuesday as BoE gets caught in headlights.
• UK CPI inflation print due on Wednesday alongside hefty data dump.
• US data remains thin, giving Cable traders brief time in the spotlight.

GBP/USD churned chart paper just south of 1.2700 on Tuesday as Cable traders brace for a decently-sized UK data dump due on Wednesday, headlined by UK Consumer Price Index (CPI) inflation figures for October. US economic data takes a reprieve on Wednesday, leaving Cable markets the floorspace to focus on data that might tilt the Bank of England (BoE) toward or away from further rate cuts this year.

The BoE put on a measured stance during its Monetary Policy Report Hearings on Tuesday, noting that interest rates are “moderately restrictive”, causing rate traders to price in less than 20% odds of another rate cut from the UK’s central bank this year.

Headline UK CPI inflation is expected to accelerate to 2.2% YoY in October from 1.7% the month before, while October’s MoM CPI figure is forecast to rise to 0.5% from a flat 0.0%. Core UK CPI inflation is still expected to chill further to 3.1% to 3.2% YoY.

UK Producer Price Index (PPI) business inflation figures are also due on Tuesday, alongside UK Retail Sales numbers, giving GBP traders plenty of data to chew on all at once. US economic data releases remain thin in the front half of the trading week. Mid-tier Initial Jobless Claims are due on Thursday, and expected to show a slight uptick in the number of new unemployment benefits seekers for the week ended November 15. US S&P Purchasing Managers Index (PMI) activity figures will be the number to watch this week, but won’t be dropping on investors until Friday.

GBP/USD price forecast

Despite finding a near-term floor in bids, GBP/USD is still leaning into the bearish camp with price action grappling with chart paper south of the 1.2700 handle, below the 50-day Exponential Moving Average (EMA) near 1.2850. The pair has lost 6.23% top-to-bottom from September’s pean of 1.3434.

GBP/USD daily chart

• USD/CAD trades with mild negative bias near 1.3955 in Wednesday’s early Asian session. 
• The geopolitical risks might boost the safe-have currency like the USD. 
• Canada's CPI inflation jumps to 2.0% in October from 1.6% in September. 

The USD/CAD pair trades with mild losses around 1.3955 during the early Asian session on Wednesday. The hotter-than-expected Canadian inflation report for October supports the Canadian Dollar (CAD) against the Greenback. However, the renewed geopolitical tensions between Russia and Ukraine might cap the pair’s downside.

Reuters reported late Tuesday that Ukraine used US ATACMS to strike Russian territory for the first time, marking a significant uptick in hostilities on the 1,000th day of the conflict. The immediate reaction in markets faded when Russian Foreign Minister Sergei Lavrov said that the government would "do everything possible" to avoid the onset of nuclear war. The US said that it had not adjusted its nuclear posture in response. Investors will closely monitor the developments surrounding the geopolitical risks. Any signs of escalation could boost the safe-haven flows, benefiting the Greenback. 

On the Loonie front, traders trim their bets on a jumbo rate cut by the Bank of Canada (BoC) in December after Canada's annual inflation rate rose more than expected in October. Data released by Statistics Canada on Tuesday showed that the country’s Consumer Price Index (CPI) rose by 2.0% YoY in October, compared to a 1.6% gain in September, hotter than the market expectations of a 1.9% increase. On a monthly basis, the CPI increased by 0.4% versus -0.4% prior and above the market consensus of 0.3%. 

The markets are now pricing in nearly 26% odds of a 50 basis point (bps) rate cut by the BoC next month, down from 37% before the CPI data release. Traders will take more cues from the Canadian Gross Domestic Product (GDP) data next week and employment data early next month, which might influence the BoC’s decision on the size of the rate reduction.

• EUR/AUD drops reacting to the latest insights from the Reserve Bank of Australia's policy discussions.
• Technical indicators show a downward trend with potential support tests at 1.6200 and October lows.
• Resistance lies at the 50-day SMA of 1.6296; a break above could challenge the 100-day and 200-day SMAs at 1.6368 and 1.6385, respectively.

On Tuesday, the EUR/AUD tumbled over 0.39% following the release of the last meeting minutes of the Reserve Bank of Australia (RBA). As Wednesday’s Asian session begins, the cross-pair trades at 1.6222, virtually unchanged.

EUR/AUD Price Forecast: Technical outlook

Technically speaking, the EUR/AUD shifted bearishly biased after clearing the 50, 100, and 200-day Simple Moving Averages (SMAs). Additionally, the successive series of lower highs and lower lows indicated the trend is downwards, and if sellers clear the November 19 low of 1.6211, a test of 1.6200 would be up next. A break below the latter will expose the October 18 low of 1.6134 before the pair drops to October’s low of 1.6005.

However, a decisive break above the 50-day SMA at 1.6296 will immediately expose 1.6300. If surpassed, buyers could regain control if they clear the 100 and 200-day SMAs, each at 1.6368 and 1.6385, respectively.

EUR/AUD Price Chart – Daily

• Gold prices rose as investors turned to safe havens due to escalating geopolitical risks.
• US Treasury yields declined, and a weaker US Dollar contributed to the rise in gold prices.
• Sentiment turned sour following Putin's nuclear doctrine approval and mixed signals from Russian officials.

Gold posted back-to-back positive days of gains, climbing some 0.70% on Tuesday due to risk aversion amid heightened tensions in the Russia-Ukraine conflict. Market players seeking safety flock to the golden metal, which has risen above $2,600 after dipping to a two-month low of $2,536.

The XAU/USD trades at $2,629 at the time of writing. Falling US Treasury yields, and a soft US Dollar lifted the golden metal amid a scarce economic docket. However, precious metals rose due to geopolitical risks following Russia’s massive attack on Ukraine, while US President Joe Biden authorized the use of America-made long-range missiles inside Russia.

According to TASS, Russia’s President Vladimir Putin approved the nuclear doctrine in retaliation. This triggered a risk-off sentiment, with global equities dropping while Greenback and Gold advanced.

Lately, Russian Foreign Minister Lavrov stated that his country believes nuclear war will not happen.

Aside from this, the US economic schedule revealed that US housing data for October missed the mark, while Kansas City Fed President Jeffrey Schmid crossed the wires.

Schmid said it remains uncertain how far rates would need to fall, but it is reassuring that the decisions were taken amid growing confidence that the Fed is on track to achieve its 2% goal.

The Fed is expected to lower borrowing costs for the third straight meeting in December. Nevertheless, recent data has witnessed investors trimming the odds from a 62% chance of an imminent cut of 25 basis points (bps) to 58%, according to CME FedWatch Tool data.

Ahead of this week, the US economic schedule will feature Initial Jobless Claims, S&P Global Flash PMIs, and the University of Michigan (UoM) final reading of Consumer Sentiment for November.

Gold shines despite a firm US Dollar

• Gold prices recover as US real yields, which inversely correlate with bullion, fall three basis points to 2.05%.
• The US Dollar Index (DXY), which tracks the buck's performance against a basket of six currencies, is flat at 106.17.
• Market players continued to digest Donald Trump’s victory in the US Presidential Election on fears that tariffs and lower taxes are potential drivers of inflation and might slow the Fed’s easing cycle.
• US Treasury bond yields were also pressured ahead of the weekend, with the 10-year benchmark rate down two basis points to 4.39%.
• US Building Permits in October improved compared to September but dropped -0.6%, from 1.425 million to 1.416 million.
• Housing Starts for the same period tumbled for the third consecutive month, contracted by 3.1%, from 1.353 million to 1.311 million.
• According to data from the Chicago Board of Trade via the December fed funds futures contract, investors are pricing in 24 basis points of Federal Reserve rate cuts by the end of 2024.
• On Monday, US President Joe Biden authorized Ukraine's use of long-range missiles inside Russia, CNN revealed. The decision comes as a reaction to thousands of North Korean troops being deployed in support of Moscow’s war effort.

Gold price recovers as buyers target 50-day SMA

Gold price uptrend remains intact, with buyers gathering steam as the golden metal approaches the 50-day Simple Moving Average (SMA) at $2,655. On further strength, XAU/USD could rise and challenge the November 7 high of $2,710, followed by the psychological $2,750 mark.

On the flip side, if Gold drops below the 100-day Simple Moving Average (SMA) at $2,550, sellers could target the November 14 swing low of $2,536. Once cleared, XAU/USD's next stop would be $2,500.

The Relative Strength Index (RSI) remains bearish, but it is closing into the neutral line, indicating that Gold buyers are gathering short-term momentum.

• NZD/USD gained further ground around 0.5900.
• Buyers gained further ground and pushed back the sellers’ attempts as indicators continue in recovery mode.
• The pair might continue to gain ground as it moves closer to its 20-day SMA at 0.5960.

The NZD/USD climbed by 0.31% to 0.5910 in Tuesday's session, continuing its recovery as buyers gained further ground and pushed back the sellers' attempts. Indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) continue to recover, signaling a mixed momentum.

From a technical perspective, the NZD/USD's outlook is mixed with signs of a bullish recovery. The RSI's rise to 43 with its sharp upward slope suggests increasing buying pressure in the negative area and a potential recovery in bullish momentum. Additionally, the MACD's decreasing red histogram indicates a loss of bearish momentum. These mixed signals suggest a potential shift in market sentiment from bearish to bullish.

The NZD/USD pair's recovery continues as buyers regain control and push back sellers. The pair seems to be on its way towards the the 20-day Simple Moving Average (SMA) at 0.5960. As the pair trades near key resistance levels, a breakout above this level could strengthen bullish momentum, while a drop below 0.5900 could indicate a bearish reversal.

NZD/USD daily chart

• The Canadian Dollar gained another 0.3% on Tuesday.
• Canada saw a higher-than-expected CPI inflation print for October.
• A reacceleration of inflation is sparking hopes for further BoC rate cuts.

The Canadian Dollar (CAD) caught a bid on Tuesday, rising for a second straight day against the Greenback after Canadian Consumer Price Index (CPI) inflation rose again in October. The CAD is burning rubber against the US Dollar, recovering a full percentage point with further gains in the scope as the Loonie claws back ground after hitting 54-month lows near 1.4100.

Canada’s entire basket of CPI inflation figures swept forecasts on Tuesday, printing higher across the board and set to test the Bank of Canada’s (BoC) resolve on interest rates. The figures are still on the low side of recent history; headline annualized CPI hit a three-year low just last month. However the rebound in figures will still serve as a shot across the bow of the BoC, which is already on a path of accelerating rate cuts as the Canadian economy waffles in the post-pandemic environment.

Daily digest market movers: Canadian Dollar scrambles back from the brink

• The Canadian Dollar added back another third of a percent on Tuesday, dragging bids decisively back below the 1.4000 handle on the USD/CAD chart.
• Headline Canadian CPI inflation accelerated to 2% YoY in October, accelerating from the previous three-year low of 1.6% and outpacing the forecast of 1.9%.
• The BoC’s core CPI inflation measure also accelerated on an annualized basis, coming in at 1.7% YoY versus the previous period’s 1.6%.
• Headline CPI inflation rose to 0.4% MoM in October after September’s -0.4% contraction. Median market forecasts called for a 0.3% print.
• Except for Retail Sales figures due on Friday, Canada is functionally done with impactful releases for this week.

Canadian Dollar price forecast

The Canadian Dollar (CAD) extended a near-term recovery into a second day, clawing back from the cliff edge after hitting 54-month lows late last week. The USD/CAD chart has slid back below the 1.4000 handle amid the Loonie’s rebound, easing back a full percent from nearly five-year highs just north of 1.4100.

Despite the near-term recovery, it’s still far too early to declare a turnaround underway. USD/CAD price action is still grinding out chart paper well above the 50-day Exponential Moving Average (EMA), though CAD bulls will be invigorated as the pair appears set to continue bouncing around a multi-year sideways trend on the higher timeframes.

USD/CAD daily chart

• AUD/USD rose by 0.15% to 0.6520 in Tuesday's session.
• Aussie climbed due to hawkish RBA Minutes, a weaker US Dollar, and hopes for Chinese economic stimulus.
• RBA Board members indicated no "immediate need" to adjust the cash rate, leaving the door open for future changes.

The AUD/USD climbed by 0.15% to 0.6520 in Tuesday's  trading, driven by several factors. The hawkish Reserve Bank of Australia (RBA) Minutes provided support to the Australian Dollar, as did a weaker US Dollar and hopes for Chinese economic stimulus. The market's attention will now shift to upcoming mid-tier US economic data and speeches by Federal Reserve (Fed) officials, which could further influence the pair's movement.

The AUD/USD has rebounded as the US Dollar weakened, potentially aided by hawkish RBA sentiment. However, the Aussie faces challenges due to weak domestic and Chinese economic data. 

Daily digest market movers: Australian Dollar gains ground aided by hawkish RBA and weaker USD

• The RBA Board remains vigilant to upside inflation risks and believes policy needs to remain restrictive.
• According to the Minutes, the Board sees no "immediate need" to change the cash rate, but nothing is ruled out regarding future changes.
• The Board discussed scenarios where policy would need to stay restrictive for longer or tighten further. 
• The report showed that the bank considers that rates might need to rise if the Board judged that policy was not as restrictive as assumed.

AUD/USD technical outlook: Indicators are in recovery mode but still in negative territory

Technical indicators for the AUD/USD pair continue to show signs of recovery, with both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) trending higher. However, they remain in negative territory, suggesting that the downtrend is not yet over. 

For a sustained recovery to be confirmed, buyers will need to push the indicators back into positive territory and hold them there. The conquering of the 0.6580 level near the 20-day Simple Moving Average (SMA), would be a strong sign that the pair has recovered.

The US Dollar navigated without a clear direction in a context dominated by the resurgence of Russia-Ukraine geopolitical concerns and the subsequent search for safe havens.

Here is what you need to know on Wednesday, November 20:

The US Dollar Index (DXY) maintained its trade in the low-106.00s amid further weakness in US yields across the curve. Second-tier releases will feature the usual MBA Mortgage Applications, and the EIA’s weekly report on US crude oil inventories.

EUR/USD faltered once again around the 1.0600 region against the backdrop of investors’ flight-to-safety stance. Markets’ attention will be on the publication of the ECB’s Negotiated Wage Growth, EMU’s Construction Output and Germany’s Producer Prices. In addition, the ECB’s Lagarde and De Guindos are due to speak.

GBP/USD failed to extend Monday’s strong advance, coming in short of another test of the 1.2700 barrier. The release of UK’s Inflation Rate will be at the centre of the debate across the Channel.

USD/JPY dropped to new lows on the back of safe haven demand, although it managed to recoup most of those losses as the NA session drew to a close. The October’s Balance of Trade results will be unveiled.

AUD/USD kept its weekly recovery intact, surpassing the 0.6500 hurdle, or four-day highs. The Leading Index tracked by Westpac will be the only data release in Oz.

Prices of WTI rose modestly and approached the key $70.00 mark per barrel as investors remained wary of geopolitical concerns.

Gold prices clinched their second consecutive daily advance and extended the breakout of the $2,600 mark per troy ounce. In the same line, Silver climbed to multi-day peaks further north of the $31.00 mark per ounce.

• The Dow Jones tripped on Tuesday, falling to 42,850 before stabilizing.
• Geopolitical tensions jilted equities as Russia bristles as Ukraine.
• Markets broadly recovered their footing, but the Dow Jones remains down on the day.

The Dow Jones Industrial Average (DJIA) took a knee early Tuesday, backsliding to 42,850 during the early US market session after Russia lowered its threshold for nuclear weapon use after Ukraine deployed US-provided weapons within Russia’s borders. Equity market broadly recovered their stance for the day, however the Dow Jones remains hobbled, stuck near the day’s opening bids.

Russian President Vladimir Putin warned global markets that Russia’s self-imposed threshold for the use of nuclear weapons has been lowered after Ukraine forces deployed US-provided weapons within Russia’s borders as the small European country continues to fight back against Russia’s invasion. Brandishing nuclear weapons spooked investors, sparking a brief risk-off bid before flows normalized once again. Russia’s planned three-day invasion of Ukraine that began late February of 2022 is about to enter its thousandth day. 

US economic data releases remain thin in the front half of the trading week. Mid-tier Initial Jobless Claims are due on Thursday, and expected to show a slight uptick in the number of new unemployment benefits seekers for the week ended November 15. US S&P Purchasing Managers Index (PMI) activity figures will be the number to watch this week, but won’t be dropping on investors until Friday.

Dow Jones news

A broad-market recovery in equities following geopolitical jitters didn’t quite penetrate the Dow Jones fully. A little under half of the major index’s listed securities are in the green for Tuesday, but most meaningful gains are contained within a few key companies. Walmart (WMT) jumped 4% to $87.50 per share after reporting a better-than-expected third-quarter performance and raising its annual earnings outlook. Nvidia (NVDA) also rose 3.8% to $145.50 per share ahead of its earnings call after market close on Wednesday; investors expect the chipmaker’s recent pivot further into AI-focused GPU chips known as Blackwell to help hoist the silicon stamping company to $33 billion in 3Q revenue, an 83% increase YoY.

Dow Jones price forecast

The Dow Jones explored further downside on Tuesday, dipping to an intraday low of 42,850 before recovering back into the day’s opening range just north of 43,200. The major equity index is poised to close lower for a fourth straight trading day as stocks continue to cool off from the post-election frenzy that sent bids into fresh record highs.

Dow Jones price action is still trading on the high side of the 50–day Exponential Moving Average (EMA) near 42,500, and it’s down to a coin toss on whether bearish momentum will continue to drag prices even lower or if bulls will gather their feet and send the DJIA into fresh highs above 44,400.

Dow Jones daily chart

Federal Reserve (Fed) Bank of Kansas President Jeffrey Schmid struck an overall positive tone on Tuesday, stating that he believes inflation and employment are both heading toward desired levels. However the Fed policymaker did caution investors that while the Fed isn't planning pre-emptive measures for government policies that may arise next year, the Fed has more than enough ammunition to head off inflationary pressures that could arise from spiraling government budgets and inflation-stoking immigration policies that loom over the US' next presidency.

Key highlights

• Mexican Peso stages a comeback, reversing earlier losses driven by brief escalation in Russia-Ukraine conflict.
• Banxico Governor Victoria Rodriguez Ceja indicates the potential for continued rate cuts.
• Mexico’s 2025 fiscal budget viewed as optimistic, based on growth targets of 2-3% amid concerns over public spending cuts.

The Mexican Peso advanced against the US Dollar during the North American session on Tuesday, yet it recovered some ground after the USD/MXN hit a daily high of 20.34 due to risk aversion. A brief escalation of the Russia-Ukraine conflict was the main reason that pushed the pair higher, yet the Mexican currency staged a comeback despite dovish rhetoric by Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja.

At the time of writing, the USD/MXN trades at 20.15, around seven-day lows. Earlier, headlines revealed that Russia had widened its doctrine for using nuclear weapons, though toned down its rhetoric as Foreign Minister Lavrov said, “Russia's position is that nuclear war won't happen.” This sparked the Peso’s rally, to the detriment of the Greenback, as traders seeking risk lifted US equities higher.

Banxico Governor Victoria Rodriguez Ceja told Reuters the central bank would continue to cut its benchmark rate. "Given the progress of disinflation, we believe that we can continue with the cuts to the reference rate, and in the following meetings, we will be assessing the inflationary outlook and making the corresponding decisions," said Rodriguez late on Monday.

On Friday, the Finance Ministry presented the 2025 fiscal budget. Regarding this, Gabriela Siller of Banco Base said, “It is extremely difficult to achieve GDP growth of between 2% and 3% in 2025, especially in the first year of administration and with cuts in public spending.”

The Ministry of Finance projects Gross Domestic Product (GDP) to reach 2% to 3%, though it has been qualified as optimistic by most analysts.

James Salazar, Deputy Director of Economic Analysis at CiBanco, said, “It is optimistic […] Is it feasible? It can be achieved with a combination of a change in perception. The problem is that it seems that everything is against the Mexican economy, and this will make it difficult to achieve this goal, so it seems complex.”

In an interview with El Financiero, Salazar questioned where the resources would come if the growth expectations were not met, as most income would be tax, of around 2.6%, up to 5.3 billion Pesos.

On the US front, the economic schedule revealed housing data slightly below estimates that failed to underpin the Greenback. Kansas City Fed President Jeffrey Schmid will give a speech on Tuesday. By Wednesday, speeches by Fed Governors Lisa Cook, Michelle Bowman and Boston Fed President Susan Collins will be scrutinized by market players in search of cues for the path of US interest rates.

Besides this, traders continued to assess US President-elect Donald Trump’s inflation-prone policies, which might deter the US Federal Reserve (Fed) from lowering rates.

Daily digest market movers: Mexican Peso climbs despite strong US Dollar

• The USD/MXN shrugs off a strong US Dollar. The US Dollar Index (DXY) is up 0.14% at 106.36.
• US Building Permits in October improved compared to September but dropped -0.6% from 1.425 million to 1.416 million.
• Housing Starts for the same period tumbled for the third consecutive month, contracting by -3.1% from 1.353 million to 1.311 million.
• Market participants trimmed estimates for a 25 bps cut by the Fed, with odds falling from 62% to 59%. The odds of keeping rates unchanged are up at 41%, as depicted by the CME FedWatch Tool.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 23 bps of Fed easing by the end of 2024.
• Last week, Moody’s changed Mexico’s credit outlook to negative, mentioning constitutional reforms that could negatively impact Mexico’s economic and fiscal strength.

USD/MXN technical outlook: Mexican Peso climbs as USD/MXN drops below 20.30

Although the USD/MXN posts five consecutive days of losses, the pair remains upwardly biased, unless sellers drive the exchange rate below the confluence of the 50-day Simple Moving Average (SMA) and the November 7 low around 19.75. But firstly, traders must clear the 20.00 psychological figure, followed by the latter, before challenging the 19.50 mark.

Conversely, buyers need to lift the exchange rate past 20.50, before challenging the November 12 peak at 20.69. Once those levels are taken out, the next resistance would be the year-to-date (YTD) high of 20.80.

Oscillators like the Relative Strength Index (RSI) remain bullish though short-term, suggesting some consolidation before buyers gather steam.

• The US Dollar Index trades with mild gains around 106.20.
• DXY is favored by a combination of factors, including Putin's threat on nuclear weapons usage.
• Fed officials have cooled on aggressive easing with Powell downplaying the need to be hasty.

The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, trades with mild gains around 106.20 on Tuesday, lifted by a combination of factors. The USD initially surged following Russian President Vladimir Putin's announcement that nuclear weapons could be used in conflicts with non-nuclear states supported by nuclear powers. 

However, the Greenback has eased somewhat as the release of Chinese economic data and details of the government's stimulus package have also contributed to the USD's mild retracement.

The US Dollar remains in an uptrend, supported by strong US economic data and market uncertainty regarding Federal Reserve (Fed) interest rate cuts. Despite a recent pullback due to profit-taking, DXY has sustained its momentum and reached yearly highs near 107.00. 

Daily digest market movers: US Dollar mixed, cooling dovish bets on the Fed favors the upside

• The US Dollar has eased from its recent highs as investors take profits after its recent rally against major currencies.
• Chinese economic data and details of the government's stimulus package contributed to the USD's mild pullback.
• Fed Chair Jerome Powell emphasized a cautious approach to rate cuts, highlighting the economy's strength.
• Other Fed officials, including Kugler, echoed Powell's message, stressing the need to monitor both inflation and unemployment.
• Market expectations for a December rate cut have declined in response to Powell's comments. 
• On the data front, Housing Starts in the US dropped by 3.1% in October, reaching 1.311 million units, according to Tuesday’s monthly report from the US Census Bureau. 
• Building Permits fell by 0.6% in October after a revised 3.1% decrease in September, which was initially reported as a 2.9% decline.

DXY technical outlook: Consolidation follows rise to annual high, overbought levels raise reversal concerns

The DXY has been in an uptrend of late, influenced by strong economic data and the Fed's cautious statements. Despite reaching a 52-week high, profit-taking has caused a slight pullback, suggesting the possibility of consolidation. 

Technical indicators, including the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), remain positive but are flat, indicating consolidation. Additionally, the index is overbought, raising concerns about a potential reversal.

USD/CAD has reached our end of year target of 1.40 and we fully expect the pair to reach the 1.42 level we highlighted for Q1, Rabobank’s FX analysts Molly Schwartz and Christian Lawrence note.

USD/CAD likely to reach 1.46 next year

“That said, given two main drivers we outline below, we now expect further extension to the upside with USD/CAD likely to reach 1.46 next year, just shy of the highs from 2016 and 2020.We have seen a decrease in USD/CAD correlations of late but fully expect a resumption of interest rate differential driven moves in 2025.”

“Our proprietary FX 1m vol index spiked on November 5th up to a high of 8.27%, and has since depressed to 6.92%. USD/CAD 1m implied volatility has moved in kind, spiking on November 5th, peaking at 6.22%. Vols have declined since that juncture, down to 5.81%.”

“We expect a further widening of US-CA rate differentials will be the primary driver of further upside for USD/CAD deep into 2025. Non-commercial speculators have been net short CAD since August of 2023. Net shorts are currently sitting at -182,389, 3.26 standard deviations below the 5yr average (-22,041).”

• EUR/JPY declined by 0.47% to 163.10 in Tuesday's session.
• Price rallied above 163.00 after buyers stepped in following a decline to 161.50, but indicators remain deeply negative.
• The pair might continue shedding ground as long as it remains below the 20-day SMA.

The EUR/JPY declined by 0.47% to 163.10 in Tuesday's session, dragged lower by the strength of the Japanese yen. However, after the pair fell to a low of 161.50, buyers stepped in and pushed it back above 163.00. Nevertheless, if the pair can sustain above the 20-day Simple Moving Average (SMA), it could potentially reverse its recent losses and resume its uptrend.

Technical indicators for the EUR/JPY currency pair point towards a negative outlook. The oscillator Relative Strength Index (RSI) has dipped to 46, implying growing selling pressure. Furthermore, the Moving Average Convergence Divergence (MACD) is considerably bearish, with its histogram trending downwards. Taken together, these indicators suggest a bearish sentiment for the EUR/JPY pair, potentially leading to continued declines.

The EUR/JPY pair slightly recovered on Tuesday, but technical indicators point to a negative outlook. Both the RSI and MACD are deeply negative, indicating further declines are likely as long as the pair remains below the 20-day SMA. Buyers intervened, lifting it above 163.00, but they may not be able to sustain this level as technical indicators suggest the pair is set to resume its downtrend and decline further in the near term.

EUR/JPY daily chart

• EUR/GBP rises past the 50-day SMA of 0.8359, setting sights on the 0.8400 resistance.
• If breached, next key levels include the 100-day SMA at 0.8413, October 31 high of 0.8448.
• Downside risks remain; a dip below 0.8359 could see consolidation or a retest of the 0.8260 level.

The EUR/GBP extended its gains for the fourth straight day, edged up above the 50-day Simpl Moving Average (SMA), and was exchanging hands at 0.8373 at the time of writing.

EUR/GBP Price Forecast: Technical outlook

After hitting a year-to-date (YTD) low of 0.8260, the EUR/GBP has climbed past the 0.8300 figure, cleared on its way the 50-day Simple Moving Average (SMA) of 0.8359 and paving the way for a test of 0.8400. A breach of the latter will expose the 100-day SMA at 0.8413, followed by the October 31 swing high of 0.8448.

Conversely, if EUR/GBP slips beneath the 50-day SMA at 0.8359, the pair might consolidate within the 0.8300-0.8359 area unless sellers drive the exchange rate below the bottom of the range, which would open the door to test 0.8260.

Indicators such as the Relative Strength Index (RSI) hint buyers are in charge after turning bullish once they clear the 50 neutral line.

EUR/GBP Price Chart – Daily

BoE MPC’s Greene sounded cautious on the near-term outlook for policy in remarks yesterday, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

BoE shows caution on rate outlook

“She noted that while inflationary pressures were moderating, the government’s recent budget would lift prices and that wage growth was still too high. She noted that the risk of cutting too early was greater than going slowly on policy accommodation.”

“Governor Bailey echoed the cautious stance today, stating that the UK government’s recently announced increase in employer National Insurance contributions could result in higher prices, lower employment or other outcomes. The governor said the BoE will have to move cautiously on policy as it monitors these impacts. Markets remain reluctant to price in more than a minimal chance of a rate cut at the Bank’s December policy meeting.”

“Moderate gains in the pound yesterday have not developed into a serious challenge of the broader downtrend in spot. Rather, price action appears to be a consolidation in recent weakness ahead of another push lower. Minor support is 1.26 ahead of long-term trend support at 1.2575. Resistance is 1.2680/90.”

Final Eurozone CPI for October was confirmed at 0.3% M/M and 2.0% in the year. Core was also left unchanged at 2.7% Y/Y, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EURCHF losses on haven demand weigh on broader EUR tone

“The German central bank’s monthly report noted that Q3 wages were up by the most in 30 years while ECB Governor Muller commented that a 25bps cut was likely at the central bank’s policy decision next month.”

“The Euro (EUR) is a moderate underperformer among the majors on the session on EUR/CHF selling which has pulled the cross back to near its August low.”

“Moderate gains in the EUR yesterday stalled around the 1.06 area and renewed losses today keep the broader tone for the EUR weak. Minor support sits at 1.05, with key support at 1.0450, last year’s low.”

The Canadian Dollar (CAD) had a mildly better day yesterday to advance to the low 1.40s after peaking just above 1.41. Spot is little changed on the session so far today, despite the drop in global stocks, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD little changed on the day

“Spreads are narrowing somewhat from the early November peak, allowing for some consolidation in the CAD’s recent losses—and a moderate improvement in the CAD’s estimated fair value (1.4054 today). The CAD might be able to steady in the short run but the scope for significant gains remains limited. Canadian inflation data this morning is expected to reflect a pause in the recent trend of improvement in price data.”

“The street is looking for a 0.3% increase in the October month (Scotia anticipates slightly warmer price growth of 0.4%) and a 1.9% rise in the year (up from September’s 1.6%). Core prices are expected to come in at 2.4% for the Median and Trim measures (up a little and unchanged respectively from September). Slightly firmer inflation data may see Dec swaps pare back a little of the 35bps of easing priced in for next month’s BoC decision.”

“The CAD had a technically positive session overall yesterday, with funds forming a bearish engulfing line on the daily chart. With oscillators flashing “overbought” on a few fronts, price action would typically boost chances of a correction in USD strength. But the underlying trend higher in the USD remains strong and there has been no desire to push the USD any lower over the course of the session so far. I still rather think the USD is likely to find firm support on dips to the 1.3950/00 zone with a push under 1.3945/50 really needed to boost the CAD.”

The US Dollar (USD) drifted a little lower in quiet trade to start the week yesterday but scope for significant USD losses is limited currently, not least because the rise in US term rates remains hugely USD-supportive, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD mixed versus majors as havens outperform

“US bond yields have risen significantly since the Fed’s first rate cut in September—the worst response to the start of the Fed’s easing cycle in the last 30-35 years at least. The DXY is trading a little above estimated fair value, based solely on rate spreads. But the overvaluation is mild and the US election outcome has added to USD support as investors anticipate the potential impact of tariffs on exchange rates.”

“Still, the USD is trading a little more mixed today, with safe havens in demand around a pick-up in geo-political concerns. Ukraine wasted no time after the US permitted it to use US-supplied missile systems for attacks on Russian territory. Also, Putin approved an expanded nuclear doctrine that allows a nuclear response to a conventional attack. Stocks have fallen sharply in Europe, spilling over into US futures. Bonds are broadly higher.”

“The JPY and CHF are better supported among the major currencies, with the JPY getting the added support of warnings from the Japanese MoF that the authorities will act ‘appropriately’ against excessive moves. USD/JPY is down a little more than 0.5% on the day. With little data on tap from the US (Housing Starts and Building Permits), markets may continue to reflect the risk tone through the trading session today. The Fed’s Schmid (non-voter) speaks on the economic outlook just after 13ET.”

• USD/JPY falls to a six-day low, breaking through key support levels amidst heightened risk aversion.
• Technical indicators suggest potential further declines, with next targets set at Kijun-sen and 200-day SMA at 151.88.
• Immediate resistance for USD/JPY is located at the 154.00 level, with significant upper resistance at the recent peak of 156.75.

The Japanese Yen registered solid gains versus the US Dollar in early trading on Tuesday, exchanging hands at 153.83 at the time of writing. Risk aversion sponsored by the escalation of the Ukraine-Russia conflict keeps traders seeking the safety of haven currencies, like the Yen and the Swiss Franc.

USD/JPY Price Forecast: Technical outlook

The USD/JPY cleared support at the November 7 high at 154.71, opening the door for further losses. The pair achieved a lower low, falling to a six-day bottom of 153.28, which could pave the way to testing the 200-day Simple Moving Average (SMA) at 151.88.

On its way to the 200-day SMA, the USD/JPY must clear the Kijun-sen at 152.80, followed by the 152.00 mark. If cleared up, next would be the 200-day SMA, followed by the 100-day SMA at 151.94.

On the other hand, the USD/JPY first resistance would be the 154.00 figure. Once cleared, the next resistance would be the November 15 peak at 156.75.

USD/JPY Price Chart – Daily

• USD/CAD drops sharply below 1.4000 as Canadian inflation grew faster than expected in October.
• Higher-than-expected US inflation data might weigh on BoC large rate cuts prospects for December.
• The US Dollar falls back despite dismal market sentiment amid geopolitical tensions.

The USD/CAD pair falls sharply after the release of the hotter-than-expected Canadian Consumer Price Index (CPI) report for October. The CPI report showed that the headline inflation accelerated to 2%, faster than expectations of 1.9% and from 1.6% in September on year. Month-on-month headline inflation rose by 0.4%, the same pace at which price pressures decelerated in the previous month. Economists expected the monthly headline CPI to grow by 0.3%.

Faster-than-expected growth in inflationary pressures would weigh on market expectations for a second consecutive larger-than-usual interest rate cut of 50 basis points (bps) by the Bank of Canada (BoC) in the December meeting. However, the BoC might continue its policy-easing spell as the central bank is worried about a higher jobless rate. Canada’s Unemployment Rate was recorded at 6.5% in October, much higher than what is needed to maintain a full employment environment.

Meanwhile, dismal market sentiment due to a fresh escalation in the Russia-Ukraine war has strengthened the appeal of safe-haven assets. S&P 500 futures have posted significant losses in the North American session.

The war situation between Russia and Ukraine renewed after President Vladimir Putin’s approval of updating the nuclear doctrine, a move followed by the launch of United States (US) made and supplied ballistic missiles by Ukraine deep in their territory.

Moscow warned that the approval of US President Joe Biden for launching long-range missiles in the Russian region is unacceptable and could lead to a third world war.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls back after failing to extend recovery above the key resistance of 106.70. Going forward, the US Dollar (USD) will be influenced by market expectations for the Federal Reserve’s (Fed) monetary policy action in the December meeting. Trades are slightly confident that the Fed will cut interest rates by 25 bps to 4.25%-4.50% next month, according to the CME FedWatch tool.

• Housing Starts and Building Permits in the US declined further in October.
• The US Dollar Index stays in daily range above 106.00.

Housing Starts in the US declined 3.1% in October to 1.311 million units, the monthly data published by the US Census Bureau revealed on Tuesday. This reading followed the 1.9% decrease (revised from -0.5%) recorded in September. 

In the same period, Building Permits decreased 0.6% after falling 3.1% (revised from -2.9%) in September.

Market reaction

The US Dollar Index edged lower following these data and was last seen trading virtually unchanged on the day at around 106.20.

• Crude Oil edges lower due to concerns that the US Oil market might be glutted. 
• Headlines risk in Russia and Ukraine point to further escalation. 
• The US Dollar Index recovers from Monday’s low amid safe-haven inflows. 

Crude Oil price slides lower on Tuesday after a key gauge on the US Crude market signaling a substantial glut taking place for the first time in nine months. The spread in price between Oil futures contracts for immediate deliveries against those a month later is trading negatively for the first time since February and is an important sign of a bearish market outlook as it suggests sellers need to lower their prices in order to get rid of their inventory by the time the next supply comes in.  

The US Dollar Index (DXY) pares back Monday’s losses, driven by headlines of risk in Ukraine and Russia. Russian President Vladimir Putin has signed a decree approving changes to Moscow’s nuclear doctrine, allowing the usage of nuclear weapons in Ukraine should the country target Russian installations within Russian borders. Ukraine, meanwhile, has pressed ahead and has launched its first ATACMS (Army Tactical Missile System) missiles into Russia, Bloomberg reports, citing local sources. This triggered some safe-haven inflows into the US Dollar (USD) and the Japanese Yen (JPY). 

At the time of writing, Crude Oil (WTI) trades at $68.89 and Brent Crude at $72.87

Oil news and market movers: US market surplus

• The International Energy Agency (IEA) has warned that for 2025, a surplus of more than 1 million barrels per day will be taking place, Bloomberg reports. 
• Physical prices of WTI Midland at the Magellan East Houston rose to the highest since the end of September after Kazakhstan and Norway shut production for unplanned repairs, Bloomberg reports. 
• The American Petroleum Institute (API) is set to release its weekly Crude stockpile change numbers for the week ending November 15. The forecast is for a build of 0.8 million barrels against the drawdown of 0.777 million the previous week. 

Oil Technical Analysis: Stalling ahead of target

Crude Oil price is ticking lower on Tuesday, with the previous day’s brief spark stalling ahead of the first cap on the topside at $70.05. While concerns about China persist, threats on US supply arising now in the futures market just add to more bearish news. The risk of more downside is thus greater than the upside when looking at the fundamentals and ignoring the turn of events between Russia and Ukraine. 

On the upside, the 55-day Simple Moving Average (SMA) at $70.05 is the first barrier to consider before the hefty technical level at $73.17, which aligns with the 100-day SMA. The 200-day SMA at $76.56 is still quite far off, although it could be tested if tensions intensify further. 

On the other side, traders need to look towards $67.12 – a level that held the price in May and June 2023 – to find the first support. In case that breaks, the 2024 year-to-date low emerges at $64.75, followed by $64.38, the low from 2023.

US WTI Crude Oil: Daily Chart

• The US Dollar recovers slightly, driven by increased safe-haven flows on increasing concerns related to the war between Russia and Ukraine
• President Vladimir Putin has signed a decree that allows the usage of nuclear weapons against Ukraine. 
• The US Dollar index trades in the 106 area, in search of support. 

The US Dollar (USD) is entering a choppy trading pattern on the back of headlines around Russian President Vladimir Putin having signed a decree that allows the use of nuclear weapons against a non-nuclear state if it is supported by nuclear powers. The move is widely seen as a clear threat to Ukraine after the United States gave Kyiv permission to use long-range missiles to attack military targets inside Russia. 

As tensions escalate, US equities are turning red and safe havens such as the USD, the Swiss Frank (CHF) and the Japanese Yen (JPY) are seeing substantial inflows. The move is a knee-jerk reaction to the risk-on close that markets saw on Monday. 

The US economic calendar is all about US Housing data on Tuesday, with the  Building Permits and the Housing Starts data. Seeing the recent trend, expectations are that the numbers will point to a broad stabilization in the housing market.  

Daily digest market movers: Geopolitics pressure markets

• Headlines around Russia are delivering a knee-jerk reaction in markets. Russian President Vladimir Putin has signed a decree that allows the full deployment of nuclear weapons against any non-nuclear nation that strikes positions on Russian soil, Bloomberg reportsl. This basically means that once Ukraine deploys long-distance missiles from the US or the UK, Russia will be able to retaliate with the use of nuclear weapons. 
• Meanwhile Ukraine has launched its first ATACMS strike inside Russia, Bloomberg reports - citing local sources. 
• At 13:30 GMT, US Housing data for October will be released:
• Building Permits are expected to tick up to 1.43 million from 1.425 million previously. 
• Housing Starts are expected to decline to 1.34 million units against 1.354 million in September. 
• Federal Reserve Bank of Kansas City President Jeffrey Schmid delivers a speech about the US economic and monetary policy outlook at an event organized by The Greater Omaha Chamber in La Vista, Nebraska around 18:10 GMT. 
• Equities are diving lower after the comments came out around President Putin signing the nuclear weapons decree. European equities are giving up all gains and slide lower by near 0.50%. US equity futures are showing smaller losses. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 58.4%. A 41.6% chance is for rates to remain unchanged. While the rate-cut scenario is the most probable, traders have significantly pared back some of the rate-cut bets compared with a week ago.
• The US 10-year benchmark rate trades at 4.38%, sliding further away from the high printed on Friday at 4.50%

US Dollar Index Technical Analysis: Putin did what now?

The US Dollar Index (DXY) shakes up markets with geopolitical headlines taking control of markets. While the G20 group is meeting in Brazil, Russian President Putin signs an expanding decree for the use of nuclear weapons in Ukraine. It looks like markets are starting to doubt if this is still part of the normal “flexing the muscles” or this could turn into an actual threat. 

After a brief test and a firm rejection last Thursday, the 107.00 round level remains in play. A fresh yearly high has already been reached at 107.07, which is the static level to beat. Further up, a fresh two-year high could be reached if 107.35 gets taken out. 

On the downside, a fresh set of support is coming live. The first level is 105.93, the closing from November 12. A touch lower, the pivotal 105.53 (April 11 high) should avoid any downturns towards 104.00. 

US Dollar Index: Daily Chart

• Gold price recovers further to nearly $2,635 on the fresh escalation in the war between Russia and Ukraine.
• Vladimir Putin has signed a decree to update the country’s nuclear doctrine.
• Fed officials refrain from forecasting the impact of Trump’s policies on the economy.

Gold price (XAU/USD) extends its recovery for a second consecutive day, trading around $2,635 in European hours on Tuesday, as Ukraine has already launched US-made ATACMS ballistic missiles into Russia, according to reports from local media RBC citing a source from the Ukrainian Armed Forces. The move has escalated fears of a nuclear war, prompting investors to flee towards safe-haven assets such as Gold.

Fears of an escalation in geopolitical tensions were already high after Russian President Vladimir Putin’s approval of the country’s nuclear policy revision, which appeared to be an answer to the US for backing Ukraine’s military strength by allowing Kyiv to use Washington-supplied ATACMS missiles to attack Russia’s Kursk region.

The nuclear doctrine "concerns the fact that the Russian Federation reserves the right to use nuclear weapons in the event of aggression with the use of conventional weapons against it" where that is deemed to have created "a critical threat to sovereignty or territorial integrity,” Dmitry Peskov, Press Secretary of the President of the Russian Federation, told TASS on Tuesday.

Peskov also stated that Russia acknowledges US President Joe Biden’s approval of the supply of missiles to Ukraine as an intent to prolong the conflict.

Historically, the safe-haven appeal of precious metals such as Gold increases at times of uncertainty or heightened geopolitical risks.

Leading investment banking firm Goldman Sachs is bullish on the Gold price for a year-long horizon and sees it rising to $3,000 by 2025 on multiple tailwinds. “The structural driver of the forecast is higher demand from central banks, while a cyclical lift would come from flows to exchange-traded funds as the Federal Reserve cuts (interest rates).”

Daily digest market movers: Gold price recovers sharply after plunging last fortnight

• Gold price has recovered almost 38% of the losses seen in the first half of November amid increasing geopolitical worries. The precious metal faced an intense sell-off as the US Dollar (USD) and bond yields strengthened on expectations that changes in fiscal and external policies promised by President-elected Donald Trump in his election campaign would be implemented smoothly, given his victory in both houses.
• Trump has vowed to raise import tariffs by 10% universally and lower taxes. This scenario is expected to boost inflation and economic growth, which could result in slower and fewer interest rate cuts by the Federal Reserve (Fed). However, Fed officials, including Chair Jerome Powell, have avoided commenting on the possible repercussions of Trump’s policies on the economy.
• The impact of Trump’s victory is visible in market expectations for the Fed's interest rate path. According to analysts at Nomura, the Fed is expected to leave interest rates unchanged in the December meeting. "We currently expect tariffs will drive realized inflation higher by the summer, and risks are skewed towards an earlier and more prolonged pause,” analysts at Nomura said.
• At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rebounds from 106.10 as a fresh escalation in the Russia-Ukraine war has dampened investors’ risk appetite. 

Technical Analysis: Gold price rebounds to near 50-day EMA

Gold price bounces back strongly after discovering support near the 100-day Exponential Moving Average around $2,535. The precious metal has recovered to near the 50-day Exponential Moving Average (EMA) around $2,635. 

The 14-day Relative Strength Index (RSI) has rebounded above 40.00, suggesting that the bearish momentum is over.

Going up, the 20-day EMA around $2,650 will be a key barrier to the Gold price bulls. On the downside, the 100-day EMA will be a major support.

European Central Bank (ECB) executive board member Fabio Panetta said on Tuesday that the central bank is “still a long way from the neutral rate.”

Additional comments

Market reaction

EUR/USD was last seen trading at 1.0566, losing 0.31% on the day.

Bank of England (BoE) policymaker Catherine Mann testifies on the November Monetary Policy Report (MPR) before the UK Parliament's Treasury Select Committee (TSC) on Tuesday. 

Key quotes

Today's meeting of the National Bank of Hungary should be a non-event in terms of a rate decision. Central bankers have made it clear that the cutting cycle is on hold for some time due to high financial instability, meaning too high a EUR/HUF. Numbers from the economy continue to surprise on the downside, with third-quarter GDP confirming a return to technical recession and headline inflation surprisingly holding close to the central bank's target. In fact, Hungarian headline inflation is the closest to the target among Central and Estern Europe (CEE) peers at the moment. However, the central bank's focus is on EUR/HUF which has repeatedly broken above 410, ING’s Frantisek Taborsky notes.

EUR/HUF has repeatedly broken above 410

“Although the market was still pricing in rate hikes in late October and early November, these expectations have calmed since the US election and the market has rebuilt some rate cuts into the longer horizon of the FRA curve. Still, the NBH does not appear to have won. While market positioning is less short on the HUF than before the US election, the market still sees EUR/HUF heading more to the upside.”

“So the NBH will have to show enough hawkish rhetoric today to be able to return EUR/HUF to more acceptable levels. At the same time, the NBH will want to avoid any hints of an additional rate hike or other stronger measures. EUR/HUF briefly returned to 410 yesterday but surprised with a reversal below 407 at the end of trading.”

“Visibly the market is looking for a way to go. However, we believe 410 will remain the point of gravity in the current global environment, which the NBH does not fully control – namely the negative for the entire CEE region led by EUR/USD pushing lower.”

Bank of England (BoE) policymaker Alan Taylor testifies on the November Monetary Policy Report (MPR) before the UK Parliament's Treasury Select Committee (TSC) on Tuesday. 

Key quotes

Disinflation is unfolding as we would expect.

developing story ...

Bank of England (BoE) Deputy Governor for Monetary Policy Clare Lombardellitestifies on the November Monetary Policy Report (MPR) before the UK Parliament's Treasury Select Committee (TSC) on Tuesday. 

Key quotes

more to come ...

 Bank of England (BoE) Governor Andrew Bailey testifies on the November Monetary Policy Report (MPR) before the UK Parliament's Treasury Select Committee (TSC) on Tuesday. 

Key quotes

developing story ....

Market reaction

At the time of writing, GBP/USD is trading at around 1.2630, down 0.30% on a daily basis.

Since late October, the HUF has been on a rollercoaster ride in anticipation of the momentous days of early November (US election, FOMC). After the US election, EUR/HUF rose to over 410. Last week, market concerns that the successor to central bank chief Gyorgy Matolcsy, whose term of office expires in March 2025, could seek a looser monetary policy in view of the weak fundamentals, also weighed on the forint. The current finance minister, Mihaly Varga, is being discussed as a possible new central bank chief. Last week, the government assured that monetary policy would not change much under the new central bank chief and that there was no risk of drastic interest rate cuts, Commerzbank’s FX analyst Antje Praefcke notes.

After the US election, EUR/HUF rises to over 410

“In this mixed environment, the central bank (MNB) now has to decide on its monetary policy today. Nobody expects the key interest rate to change; it is likely to remain unchanged at 6.50%. But we hope to hear decisive words from the MNB. The currency weakness and the volatility of the forint should be a cause for concern for the central bank.”

“The forint tends to be more volatile and prone to runaway in times of heightened risk aversion, which could require emergency measures by the central bank to prevent further currency weakness. In such scenarios, the exchange rate can become a dominant inflation driver, which is why the central bank would probably like to stop these developments early on.”

“Although the forint has recovered somewhat, the last two weeks have shown how vulnerable it is. In this respect, the MNB should show resolve today, even indicating raising interest rates again if necessary, in order to clearly signal to the market that it is prepared to stabilize the exchange rate. The focus of today's meeting is therefore less on current inflation trends and the key interest rate per se, but rather on demonstrating responsiveness and resolve in the face of deteriorating market conditions, and thus stabilizing the HUF.”

Canada releases inflation figures for October today. Expectations are for a rebound in headline CPI to 1.9% YoY while core measures are seen stabilising around 2.4%, ING’s FX analyst Francesco Pesole notes.

USD/CAD to end the year below 1.40

“This is the last CPI report the Bank of Canada will see before the 11 December meeting, meaning the release can have deep implications for market pricing, which currently embeds nearly even chances of a 25bp or 50bp cut.”

“The other two major inputs for the BoC will be GDP data on 29 November and the November jobs report on 6 December. We still see a 25bp move as more likely as both activity and inflation seem to be stabilising and markets have scaled back some Fed easing expectations.”

“We see a case for some modest tightening in the USD:CAD 2-year swap rate gap from the current 100bp level, which can put a cap on USD/CAD in the near term. We still expect the pair to end the year below 1.40.”  

Last night, the Reserve Bank of Australia released the minutes of its latest meeting, which took place on the day of the US presidential election, Commerzbank’s FX analyst Volkmar Baur notes.

RBA sees risks on both sides

“The minutes show that the central bank was aware of the uncertainties arising from international circumstances. Specifically, a sharp change in US economic policy and the size of the Chinese government's at that point yet-to-be-announced stimulus package were cited as sources of uncertainty. Risks have more or less materialized on both counts.”

“While the outcome of the US election and the US President-elect's nominations so far point to a rather unconventional economic policy, the Chinese stimulus package has been rather disappointing, especially with regard to the housing market. Despite the international headwinds, the Australian economy remains robust. Although growth has been somewhat disappointing of late, the labour market remains tight, employment growth remains strong and wage growth is correspondingly good.”

“All of this contributes to inflation continuing to move slowly towards the RBA's target. The RBA therefore reiterated that it is comfortable with the current level of interest rates and sees risks on both sides. I continue to expect that a weaker economy next year will prompt the RBA to move more quickly than it and the market currently expect, which should weigh on the AUD. The materialisation of risks in the international environment certainly supports this view.”

EUR/USD is enjoying a brief correction as some of the ECB hawks speculate over whether global fragmentation (i.e. shortening of supply chains and trade wars) will be inflationary and will call for higher interest rates, ING’s FX analyst Chris Turner notes.

EUR/USD to correct much higher

“These were the thoughts of ECB's Joachim Nagel yesterday – comments which helped narrow the two-year EUR:USD swap differential by around 10bp and saw EUR/USD correct to 1.06.”  

“On the subject of rate differentials, the market currently prices 10bp of Fed cuts in December (we look for 25bp) and 31bp of ECB cuts (we look for 50bp). Of course, if the Fed cuts 25bp and the ECB only cuts by 25bp, there could be a little upside for EUR/USD amid the seasonal dollar patterns we discuss above.”

“For the time being, however, we do not see a compelling case for EUR/USD to correct much higher and even a move to 1.0660/65 would still be in keeping with a bearish near-term trend. Expect another quiet day for EUR/USD with a focus on the US Treasury pick, as discussed above.”

Over the course of the week, there will be few data releases from the euro zone, except for the purchasing managers' indices on Friday. The market could primarily get information from the words of the many ECB members, who will be speaking in the coming days, Commerzbank’s FX analyst Antje Praefcke notes.

Too many ECB speakers to keep up with

“The ECB, like the Fed, will increasingly focus on the economic outlook thanks to the ongoing disinflation. And here the signals have not been very encouraging recently, with the economy remaining fragile. ECB officials therefore will likely be cautious about the growth outlook, but this is not a new insight. The market already prices in rate cuts down to 2% by mid-2025 and goes even a bit further until autumn. Therefore, ECB officials would have to sound much more concerned to further depress interest rate expectations, but there is currently no reason for this. So words are unlikely to be followed by action in the market.”

“Therefore, the euro is likely to be driven primarily by economic data. The leading indicators on Friday could provide an indication of how the economy will develop in the coming months. However, those hoping for strong impulses could be disappointed. The overall PMI is likely to remain at the 50 mark in November, just above the threshold between recession and slight growth. Industry continues to be a burden, as this sub-index is likely to stabilize at a very low level at best. In this respect, the familiar information is likely to remain: industry continues to weaken, so the winter half-year remains difficult and the economy is making only slow progress. Only an unexpected outlier in either direction in the PMI, which is highly unlikely, could therefore lead to a more pronounced movement in the euro before the weekend.”

“Although there is little data on the agenda in the US this week, the news flow on the plans of the new US president-elect is likely to continue to determine events in EUR/USD anyway. In this respect, it is also primarily words that count for the market on the US dollar side. And as in the past few weeks, the dollar is likely to continue to set the tone in EUR/USD. However, many of the new US administration's personnel decisions are now known. Furthermore, it is only when the new administration takes office that it becomes clear exactly which of Trump's plans will be implemented. Therefore, in the absence of any major surprises, I expect EUR/USD to trade sideways this week in the face of a lack of impetus.”

Speaking at a news briefing on Tuesday, Kremlin spokesperson Dmitry Peskov warned that the use of Western non-nuclear missiles by the Ukraine against the Russian Federation under the new doctrine could lead to a nuclear response.

His comment comes after Russian President Vladimir Putin approved changes to the country’s nuclear doctrine earlier on Tuesday, expanding conditions under which nuclear weapons could be used, including in cases of attacks by non-nuclear states supported by nuclear powers, per The Moscow Times.

Russia’s response follows US President Joe Biden’s authorization to Ukraine to use American Army Tactical Missile Systems (ATACMS) to strike inside Russia on Sunday, a move the Kremlin warned could lead to “a significant new round of escalation.”

Market reaction

Risk sentiment took a big hit on the above headlines, with the US S&P 500 futures, a risk barometer, down 0.50% on the day. The safe-haven US Dollar recaptured 106.50 against its major rivals while Gold price tested highs near the $2,635 level.

• EUR/USD faces resistance near 1.0600 on Tuesday as investors see more upside in the US Dollar.
• The focus of ECB officials turns toward preserving growth rather than taming price pressures.
• Trump’s policies are expected to boost US inflation and economic growth.

EUR/USD struggles to extend Monday’s recovery above the immediate resistance of 1.0600 and edges lower in Tuesday’s European session. It appears that the recovery from the yearly low around 1.0500 last week in the major currency pair losses steam as European Central Bank (ECB) policymakers have become more worried about the Eurozone economic growth due to firm expectations of a likely trade war with the United States (US) than getting inflation under control.

Market participants are worried that protectionist policies by President-elected Donald Trump could disrupt the Eurozone’s growth potential. Though the blanket of higher import tariffs by the US will have a negative impact on all economies, the effect will be worse on the European Union (EU) as Trump mentioned, in his election campaign, that the euro bloc will "pay a big price" for not buying enough American exports.

"Protectionist tendencies could disrupt the global supply chains that are essential to European industries, with a negative impact on firms’ growth potential, competitiveness, and financial resilience," Claudia Buch, head of ECB’s supervisory arm, told the European Parliament on Monday.

Fears of Trump’s external policies have deepened the debate over whether the European Central Bank will cut interest rates by 25 or 50 basis points (bps) in the December meeting. On Monday, ECB policymaker and Governor of the Central Bank of Ireland Gabriel Makhlouf said that it is a bit far to say that an interest rate cut in December is “in the bag” and the bank needs “pretty overwhelming” evidence for an interest rate reduction by 50 bps.

During the European session, Eurostat will release revisions to the October Harmonized Index of Consumer Prices (HICP). Inflation data is expected to remain unchanged, with the headline HIPC at 2% year-over-year (YoY) and the core HIPC at 2.7% YoY.

Daily digest market movers: EURUSD struggles to hold recovery as US Dollar’s broader outlook remains firm

• EUR/USD managed to get some demand near 1.0500 last week as the US Dollar (USD) faced a slight correction after posting a fresh yearly high, with the US Dollar Index (DXY) ticking down from 107.00. The outlook of the major currency pair remains downbeat as market participants see the Greenback having more room for growth on expectations that Trump’s policies will prompt inflation and economic growth.
• According to analysts at Capital Economics, "While a period of consolidation looks likely in the near term, we have revised up our forecasts for the US Dollar and now project a further 5% appreciation by the end of 2025." Economists added, "That is based primarily on a view that President-elected Donald Trump will push ahead with the core tariff policies he proposed on the campaign trail and that the US economy will continue to outperform its major peers."
• The scenario of high inflation and strong growth will result in fewer interest rate cuts by the Federal Reserve (Fed), which will result in a sharp policy divergence with the ECB. Meanwhile, traders have also pared some bets supporting interest rate cuts by the Fed in December. According to the CME FedWatch tool, there is a 62% chance that the central bank will cut its key borrowing rates by 25 bps to the 4.25%-4.50% range, down from 77% noted a month ago.
• This week, investors will pay close attention to the preliminary S&P Global Purchasing Managers Index (PMI) data for November, which will be released on Friday. The PMI report is expected to show that the overall private sector activity improved in the US while steadying in the Eurozone. Business sentiment is also expected to have improved as Trump is confirmed to return to administration.

Technical Analysis: EUR/USD sees resistance near 1.0600

EUR/USD bounced back from the key support of 1.0500 last week but struggles to extend recovery above 1.0600 on Tuesday. The outlook of the major currency pair remains bearish as all short- to long-term Exponential Moving Averages (EMAs) are declining. 

The 14-day Relative Strength Index (RSI) oscillates in the bearish range of 20.00-40.00, adding to evidence of more weakness in the near term.

Looking down, below the year-to-date low at around 1.0500, the pair is expected to find a cushion near the October 2023 low at around 1.0450. On the flip side, the round-level resistance of 1.0600 will be the key barrier for the Euro bulls.

The US Dollar (USD) could weaken further; any decline is unlikely to reach the strong support at 7.2000. In the longer run, momentum is beginning to slow; a breach of 7.2000 would mean that USD is not rising further, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

A break below 7.2000 to stop USD gains

24-HOUR VIEW: “We held the view that USD ‘is likely to trade in a range of 7.2250/7.2500’ yesterday. USD then rose to 7.2529 before dropping sharply to a low of 7.2252. USD closed at 7.2260 (-0.23%). There has been a slight increase in momentum, and USD could weaken further. However, any decline is unlikely to reach the strong support at 7.2000 (there is another support level at 7.2180). On the upside, should USD break above 7.2460 (minor resistance is at 7.2390), it would mean that the current mild downward pressure has eased.”

1-3 WEEKS VIEW: “We have held a positive USD view for more than a week now. In our most recent narrative from last Wednesday (13 Nov, spot at 7.22470), we pointed out that ‘The level to monitor is 7.2800 and the next resistance above 7.2800 is at 7.3115.’ USD has not been able to make further headway since then, and momentum is beginning to slow. From here, if USD breaks below 7.2000 (no change in ‘strong support’ level) would mean that USD is not rising further.”

FX markets are seeing some well-deserved consolidation after a volatile few weeks. The near 7% DXY appreciation in just six weeks had been one of the sharpest adjustments in FX markets since the summer of 2022. Positioning is probably the biggest threat to the dollar right now, although we may also start to hear of dollar seasonality again where DXY has fallen in eight of the last 10 Decembers and for the last seven consecutive Decembers, ING’s FX analyst Chris Turner notes.

DXY is currently holding support above 106.00

“With the US data calendar quiet this week, attention remains on the make-up of President-elect Trump's cabinet. One of the most relevant positions for financial markets is the post of US Treasury Secretary. This has yet to be decided, but it seems there are at least four names in the running: Kevin Warsh (ex-Federal Reserve), Marc Rowan (Apollo Global Management), Howard Lutnick (CEO of Cantor Fitzgerald), and Scott Bessent (Key Square Group). Some reports even have Robert Lighthizer as still being in the mix for this position.”

“The relevance of the pick for financial markets will probably be how the US Treasury market reacts. A candidate with proven reliability will be well-received by the bond markets, while those with less experience – or perhaps a candidate that will offer less of a counterweight to some of President-elect Trump's plans – could see the long end of the US Treasury market sell-off and perhaps even soften the dollar too.”

“DXY is currently holding support just above 106.00 and even a correction back to 105.65 would still keep the near-term bullish trend intact. We see no reason for a large dollar correction at the moment, but equally not a clear catalyst for an advance.”

The US Dollar (USD) could trade in a choppy manner, likely between 153.80 and 155.10. In the longer run, pullback in USD could extend to 153.20, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

USD can lower down to 153.20

24-HOUR VIEW: “After USD plunged last Friday, we indicated yesterday that ‘While the sharp and swift sell-off appears to be overdone, there is a chance for USD to drop below 153.85 before stabilisation can be expected.’ USD dipped briefly to 153.84, rebounded strongly to 155.35, and then pulled back, closing at 154.65 (+0.20%). The price action has resulted in a mixed outlook. Today, USD could trade in a choppy manner, likely between 153.80 and 155.10.”

1-3 WEEKS VIEW: “Our update from yesterday (18 Nov, spot at 154.20) remains valid. As highlighted, ‘The current price action is likely part of a pullback that could extend to 153.20.’ On the upside, should USD break above 155.80 (no change in ‘strong resistance’ level), it would mean that the current downward pressure has eased.”

Silver prices (XAG/USD) rose on Tuesday, according to FXStreet data. Silver trades at $31.43 per troy ounce, up 0.97% from the $31.13 it cost on Monday.

Silver prices have increased by 32.10% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 83.65 on Tuesday, down from 83.85 on Monday.

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USD/SGD continued to trade lower, amid broad US Dollar (USD) pullback. Pair was last seen at 1.3407 levels.

Technical patterns point to signs of bearish pullback

“Daily momentum is mild bullish but shows signs of waning while RSI was flat. Bearish divergence on MACD and rising wedge pattern appear to be forming. Technical patterns point to signs of bearish pullback in the near term. Support at 1.3340 (200 DMA), 1.3290 (61.8% fibo retracement of Jun high to Oct low). Resistance at 1.3490, 1.3520 levels.”

“Policy uncertainties associated with Trump policies, swings in RMB and JPY should continue to drive USDSGD in the near term. S$NEER was last at 1.35% above model-implied mid.”

The New Zealand Dollar (NZD) is likely to trade in a 0.5860/0.5910 range. In the longer run, slowdown in downward momentum indicates that 0.5775 is probably out of reach, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD is likely to trade in a 0.5860/0.5910 range

24-HOUR VIEW: “Yesterday, we expected NZD to trade in a range between 0.5845 and 0.5885. NZD subsequently dipped to 0.5838 before rising strongly to 0.5898. Despite the advance, there has been no significant increase in momentum, and NZD is unlikely to advance much further. Today, NZD is more likely to trade in a 0.5860/0.5910 range.”

1-3 WEEKS VIEW: “We turned negative in NZD last Wednesday (13 Nov, spot at 0.5925), but we indicated that ‘it is too early to tell if the major support at 0.5850 is within reach.’ After NZD fell below 0.5850, we indicated last Friday (15 Nov, spot at 0.5845) that ‘the outlook for NZD remains negative, and the technical target now is at last year’s low of 0.5775.’ Yesterday, NZD rebounded to 0.5898. While our ‘strong resistance’ level at 0.5915 has not been breached yet, the slowdown in downward momentum indicates that 0.5775 is probably out of reach.”

• AUD/USD finds resistance at the psychological level of 0.6500 amid ongoing bearish bias.
• The pair may test support around the psychological level of 0.6400, followed by the descending channel’s lower boundary.
• Further resistance appears around the nine-day EMA at 0.6518.

AUD/USD halts two days of gains, trading around 0.6500 during the European hours on Tuesday. Technical analysis of the daily chart shows the pair moving downwards within a descending channel pattern, reinforcing an ongoing bearish bias.

The 14-day Relative Strength Index (RSI) is positioned below the 50 level, confirming the prevailing bearish sentiment. Additionally, the nine-day EMA remains below the 14-day EMA, which suggests a bearish price momentum for a short-term period.

In terms of support, the AUD/USD pair may approach the psychological level of 0.6400, followed by the lower boundary of the descending channel at 0.6390 level. A decisive break below the descending channel could amplify selling pressure, potentially driving the pair toward its yearly low of 0.6348, last recorded on August 5.

On the upside, the 0.6500 level serves as immediate resistance. A sustained move above this threshold might push the AUD/USD pair toward the nine-day EMA at 0.6518, followed by the 14-day EMA at 0.6541 level. Surpassing these levels could pave the way for a rally toward the three-week high of 0.6687.

AUD/USD: Daily Chart

The Euro (EUR) rebounded as US Dollar (USD) bulls paused. Pair was last at 1.0575 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

ECB speakers to take over the narrative this week

“Daily momentum remains bearish bias though there are signs of it waning while RSI shows tentative signs of turning higher from near oversold conditions. Falling wedge and inverted hanging man (last Fri) observed. Technical signs suggest EUR bears may be feeling the fatigue and risk of short squeeze/ bullish reversal is not ruled out in the near term. Resistance at 1.06, 1.0740 (21 DMA), 1.0860 (200 DMA). Support at 1.05, 1.0450 levels.”

“This week brings plenty of ECBspeaks (about 26 officials this week), including Lagarde in Frankfurt (Fri). Overnight, Lagarde urged Europe to pool its resources in areas like defence and climate as productivity growth falters and world fragments into rival blocs.”

“Stournaras said that ECB is almost certain to cut interest rates by a quarter point in Dec while Makhlouf said there is no rush to lower rates at a faster pace. Nagel warned that trade tensions can lead to greater inflationary pressures.”

• The Canadian Consumer Price Index is seen ticking higher by 1.9% YoY in October.
• The Bank of Canada has reduced its policy rate by 125 basis points so far this year.
• The Canadian Dollar navigates multi-year lows against its American counterpart.

Statistics Canada is gearing up to release its latest inflation report for October, tracked by the Consumer Price Index (CPI), on Tuesday. Expectations point to a potential 1.9% rise in headline inflation compared to the same month last year.

Alongside this, the Bank of Canada’s (BoC) core CPI figures, which strip out more volatile items like food and energy, will also be published. In September, core CPI came in flat compared with the previous month but was up 1.6% year-over-year. The headline CPI for September showed a modest 1.6% increase over the past 12 months – the lowest since February 2021 – and actually declined by 0.4% from a month earlier.

Investors and analysts are watching these inflation numbers closely, as they could sway the Canadian Dollar (CAD), especially given the BoC’s current stance on interest rates. It’s worth noting that the BoC has already lowered its policy rate by 125 basis points since it started its easing cycle in May, bringing it down to 3.75%.

On the currency front, the Canadian Dollar has had a rough ride. This depreciation of the Canadian currency has pushed USD/CAD to levels not seen since May 2020, north of the 1.4100 barrier.

What can we expect from Canada’s inflation rate?

Consensus among market participants appears to favour an uptick in Canadian inflation in October, although the metric should remain below the BoC’s 2.0% target. In the unlikely case that there’s an unexpected and substantial jump in prices, the underlying trend of easing inflation should keep the central bank on track with its rate-cutting strategy.

In the wake of the clear consensus that ensued the BoC’s 50-basis-point rate cut on October 23, Governor Tiff Macklem acknowledged that inflation “has come down a little faster than expected.”

In addition, Macklem noted that headline inflation has seen a significant drop recently, attributing part of this decline to falling global Oil prices, especially in gasoline. However, he pointed out that the improvement isn’t just about volatile energy costs. He explained that core inflation – which strips out those more unpredictable factors – has also been easing gradually, much as the bank had anticipated. He added that, while shelter price inflation remains high, it has started to come down, boosting the bank's confidence that this trend will continue in the months ahead.

Previewing the data release, Assistant Chief Economist Nathan Janzen at Royal Bank of Canada noted: “We expect some upward seasonal price moves in categories like clothing and footwear as well as travel tours. Another component to watch for is property taxes and other special charges, as this component is released only in October. The BoC‘s preferred median and trim core measures (for a better gauge of where inflation is going rather than where it’s been) both likely ticked higher in October on a three-month rolling average.”

When is the Canada CPI data due, and how could it affect USD/CAD?

Canada's inflation report for October is set to be released on Tuesday at 13:30 GMT, but the Canadian Dollar's reaction is likely to depend on whether the data delivers any big surprises. If the figures come in line with expectations, it’s unlikely to sway the Bank of Canada’s current rate outlook.

In the meantime, USD/CAD has been navigating a strong upward trend since October, hitting multi-year tops just beyond the 1.4100 hurdle at the end of last week. This rise has mainly been fuelled by a robust rebound in the US Dollar (USD), almost exclusively on the back of the so-called “Trump trade,"  keeping risk-sensitive currencies like the Canadian Dollar under heavy pressure.

Pablo Piovano, Senior Analyst at FXStreet, suggests that under the current scenario of persistent gains in the Greenback and heightened volatility in crude Oil prices, further weakness in the Canadian Dollar should well remain on the cards in the near to medium terms.

“If the rally continues, the next resistance level for USD/CAD emerges at the weekly peak of 1.4265 (April 21, 2020), ahead of the highest level reached that year at 1.4667 (March 19),” Piovano adds

On the downside, there is an initial contention zone at the November low of 1.3823 (November 6), prior to the provisional support zone in the 1.3710-1.3700 band, where converge both interim 55-day and 100-day Simple Moving Averages (SMAs), all prior to the more significant 200-day SMA at 1.3663. If USD/CAD breaks below the latter, it could spark an extra bout of selling pressure to, initially, the September low at 1.3418 (September 25), Piovano says.

The Australian Dollar (AUD) is expected to trade in a range between 0.6470 and 0.6520. In the longer run, downward momentum is slowing; a break of 0.6520 would mean that AUD is not weakening further, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

AUD is expected to trade between 0.6470 and 0.6520

24-HOUR VIEW: “Yesterday, we noted that ‘As momentum indicators are turning flat, further sideways trading appears likely, probably in a range of 0.6445/0.6485.’ The subsequent advance that sent AUD to a high of 0.6510 was unexpected. The advance did not result in any significant increase in momentum, and AUD is unlikely to rise much further. Today, AUD is expected to trade in a range between 0.6470 and 0.6520.”

1-3 WEEKS VIEW: “We revised our view to negative in the middle of last week. In our latest narrative from last Friday (15 Nov, spot at 0.6450), we highlighted that ‘further AUD weakness still appears likely.’ We also highlighted that ‘The next level to watch is 0.6400.’ Yesterday, AUD rebounded to a high of 0.6510, not far below our ‘strong resistance’ level of 0.6520. Downward momentum is slowing, a break above 0.6520 would mean that instead of continuing to weaken, AUD is more likely to consolidate.”

USD/JPY saw choppy trades over the last 24 hours. USD/JPY was last at 153.61, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

USD/JPY may break below the support at 153.30

“Markets were earlier hoping BoJ Governor Ueda dropped some hints or forward guidance on policy move at Dec MPC. But clearly those hopes were misplaced. He said that actual timing of adjustments will continue depending on developments in economic activity and prices as well as financial conditions – This is akin to policy decision being data dependent, which can justify policy action in Dec MPC.”

“Governor Ueda also spoke about focus on shunto wage negotiations going forward. Bit and pieces of news flow relating to shunto may come intermittently but typically, we may have to wait till Mar or Apr next year for confirmation of the quantum of wage increase.”

“Bullish momentum on daily chart faded while RSI fell. Potential bearish divergence on RSI observed. Further downside play likely. Support at 153.30 (21 DMA, 61.8% fibo retracement of Jul high to Sep low) needs to be broken for bears to gather further traction towards 150.70 (50% fibo). Resistance at 156.50 (76.4% fibo).”

• USD/CAD holds above 1.4000 and draws support from a combination of factors.
• Bearish Crude Oil prices undermine the Loonie and act as a tailwind for the pair.
• The emergence of fresh USD buying favors bulls ahead of the Canadian CPI print.

The USD/CAD pair finds some support near the 1.4000 psychological mark on Tuesday and for now, seems to have stalled its retracement slide from the highest level since May 2020. Traders, however, remain on the sidelines and keenly await the release of Canadian consumer inflation figures before placing fresh directional bets.

The headline Canadian Consumer Price Index (CPI) is estimated to rise by 0.3% in October and the yearly rate is anticipated to have increased from 1.6% in September to 1.9%. A softer-than-expected reading will reinforce market bets for another jumbo interest rate cut by the Bank of Canada (BoC) in December. This, in turn, might continue to weigh on the Canadian Dollar (CAD) and assist the USD/CAD pair to resume its recent well-established uptrend witnessed over the past two months or so.

Heading into the key data risk, signs that supply tightness was easing keep a lid on the overnight recovery in Crude Oil prices from over a two-month low and undermine the commodity-linked Loonie. Furthermore, expectations that US President-elect Donald Trump's policies will boost inflation and limit the scope for further interest rate cuts by the Federal Reserve (Fed) revive the US Dollar (USD) demand. These turn out to be key factors acting as a tailwind for the USD/CAD pair. 

Meanwhile, the aforementioned fundamental backdrop favors the USD bulls and suggests that the path of least resistance for the currency pair remains to the upside. Hence, any immediate market reaction to strong Canadian CPI print might still be seen as a buying opportunity and is more likely to be short-lived. Bullish traders, however, need to wait for sustained strength and acceptance above the 1.4100 mark before placing fresh bets and positioning for any further appreciating move.

The Pound Sterling (GBP) is expected to trade in a 1.2625/1.2705 range. In the longer run, GBP is likely to continue to weaken to 1.2565, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann notes.

GBP is expected to trade in a 1.2625/1.2705 range

24-HOUR VIEW: “Last Friday, GBP dropped sharply to 1.2598. Yesterday (Monday), we indicated that ‘there is scope for GBP to edge lower to 1.2590.’ Our view turned out to be incorrect, as GBP rebounded from 1.2614 to 1.2686. GBP then closed at 1.2679 (+0.48%). The price action is likely part of a range trading phase. Today, we expect GBP to trade in a 1.2625/1.2705 range.”

1-3 WEEKS VIEW: “Yesterday (18 Nov, spot at 1.2620), we highlighted, GBP is likely to continue to weaken to 1.2565. Although the subsequent rebound has slowed the momentum somewhat, only a breach of 1.2745 (no change in ‘strong resistance’ level) would mean that the weakness that started early last week has stabilised.”

The US Dollar (USD) eased overnight in line with our earlier caution for risks of technical pullback. DXY was last at 106.26 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Near term risks remain skewed lower

“Bullish momentum on daily chart eased while rise fell from near overbought conditions. Potential bearish divergence may be forming on daily MACD. Near term risks remain skewed towards a technical retracement lower. Support at 105.60 (76.4% fibo) and 104.50/60 levels (21DMA, 61.8% fibo retracement of 2023 high to 2024 low). Resistance at 107, 107.40 (2023 high).”

“Near term, economic calendar is quiet for US. Prelim PMIs, Uni of Michigan sentiment data are out on Fri before core PCE (next Wed). Softer print can add to USD correction while a firmer print should see USD dips finding support. Elsewhere, markets may also pay attention to Trump nomination, with special focus on who takes the Treasury.”

Instead of continuing to rise, the Euro (EUR) is likely to trade in a 1.0560/1.0610 range. In the longer run, Downward momentum is beginning to fade; a break of 1.0610 would indicate that EUR has entered a consolidation phase, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Downward momentum is beginning to fade

24-HOUR VIEW: “After EUR traded in a range last Friday, we indicated yesterday (Monday) that ‘There has been no increase in either downward or upward momentum, and we continue to expect EUR to trade in a range, probably between 1.0505 and 1.0585.’ We did not anticipate the rebound that sent EUR to a high of 1.0607. EUR closed on a firm note at 1.0599 (+0.55%). The rebound appears to be running ahead of itself, and instead of continuing to rise, EUR is likely to trade in a 1.0560/1.0610 range today.”

1-3 WEEKS VIEW: “We turned negative in EUR on 07 Nov, when EUR was at 1.0730. After EUR fell below our technical target of 1.0500, we indicated last Friday (15 Nov, spot at 1.0525) that ‘The price action continues to suggest EUR weakness, even though caution is warranted given the deeply oversold conditions.’ We added, ‘The next support is at last year’s low, near 1.0450.’ Yesterday, EUR rebounded strongly, reaching a high of 1.0607. Downward momentum is beginning to fade, and a clear break of 1.0610 (no change in ‘strong resistance’ level) would indicate that EUR has entered a consolidation phase.”

• GBP/JPY loses ground as traders adopt caution ahead of BoE Monetary Policy Report Hearings on Tuesday.
• The British Pound may depreciate as markets price in an 80% probability of another BoE rate cut in December.
• The Japanese Yen receives downward pressure from uncertainty over the timing of the next BoJ’s rate hike.

The GBP/JPY cross retraces its recent gains, trading near 195.50 during European hours. Traders exercise caution ahead of the Bank of England’s (BoE) Monetary Policy Report Hearings on Tuesday. During these hearings, BoE officials, including Governor Andrew Bailey, will address questions from the Treasury Committee of the House of Commons regarding recent interest rate decisions.

The British Pound (GBP) may face headwinds, with markets pricing in an 80% probability of another BoE rate cut next month, potentially bringing rates to just above 4% by the end of 2025. Investors are also closely watching the UK’s October inflation data, forecasted at 2.2%.

The Japanese Yen (JPY) faces pressure amid uncertainty surrounding the timing of the next interest rate hike by the Bank of Japan (BoJ). On Monday, BoJ Governor Kazuo Ueda emphasized that rate hikes would proceed gradually, depending on economic performance, but refrained from providing a specific timeline for future adjustments.

On Tuesday, Japan’s Economy Minister Ryosei Akazawa highlighted the importance of “boosting pay for all generations” as part of the country’s economic package, adding that the government is targeting swift cabinet approval for the plan. 

Additionally, Japan’s Finance Minister Katsunobu Kato expressed heightened vigilance over foreign exchange movements, stressing the importance of stable currency behavior aligned with economic fundamentals. Kato reaffirmed that the ministry would take appropriate measures to address excessive forex fluctuations.

• The Pound Sterling trades back and forth ahead of several BoE members’ hearings before the Treasury Committee.
• Traders expect that the BoE will cut interest rates by 25 bps in December.
• Nomura expects the Fed to leave interest rates unchanged in December.

The Pound Sterling (GBP) trades sideways against its major peers on Tuesday with investors focusing on the Monetary Policy Hearings, in which several Bank of England (BoE) policymakers – including Governor Andrew Bailey – will respond to questions before the Treasury Committee regarding the latest decisions on interest rates.

The hearings, which will start at around 10:00 GMT, could provide clues over the interest-rate outlook, a key driver for the Pound Sterling. Apart from Bailey, Deputy Governor Clare Lombardelli and Monetary Policy Committee (MPC) external members Alan Taylor and Catherine Mann will also participate in the hearings. 

Beyond the hearings, investors brace for another key event: the Consumer Price Index (CPI) data for October, which will be published on Wednesday. The inflation data will significantly influence market expectations for the BoE interest rate decision in the December meeting. 

Traders see a roughly 80% that the BoE will cut interest rates again by 25 basis points (bps) to 4.50%, according to Reuters. This would be the second interest rate cut by the BoE in a row and the third in this year.

The headline CPI is expected to rise by 0.5% after remaining flat in September on month. Annual headline inflation is estimated to have accelerated to 2.2% from the prior release of 1.7%. Economists expect the core CPI – which excludes volatile food and energy prices – to grow steadily by 3.2%.

Investors will also pay close attention to the service inflation data, a measure closely tracked by BoE officials when deciding on interest rates.  

Daily digest market movers: Pound Sterling clings to Monday’s recovery against US Dollar

• The Pound Sterling holds onto Monday’s recovery against the US Dollar (USD) near 1.2680 in London trading hours on Tuesday. The GBP/USD pair bounced back after posting a fresh six-month low near 1.2600 as the US Dollar’s rally appears to have stalled after posting a fresh year-to-date high. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, corrects from 107.00.
• The near-term outlook of the US Dollar remains firm as market participants expect the economic agenda of President-elected Donald Trump to boost inflationary pressures and prompt economic growth, a scenario that will lead the Federal Reserve (Fed) to deliver fewer interest rate cuts.
• Trump’s victory in both US houses (the Senate and the House and Representatives) and better-than-expected monthly Retail Sales data for October have led traders to pare back bets of an interest rate cut in the December meeting. The probability for the Fed to reduce interest rates by 25 bps to 4.25%-4.50% has diminished to 58.4% from 77% a month ago.
• Global brokerage firm Nomura expects the Fed to pause the policy-easing cycle in December. "We currently expect tariffs will drive realized inflation higher by the summer, and risks are skewed towards an earlier and more prolonged pause,” analysts at Nomura said. Nomura expects the Fed to cut interest rates by 25 bps in March and June meetings next year.

Technical Analysis: Pound Sterling gains firm footing near 1.2600

The Pound Sterling gains ground near 1.2600 against the US Dollar after discovering some buying interest. However, more broadly, the GBP/USD pair remains under pressure as it trades well below the 200-day Exponential Moving Average (EMA) at around 1.2850.

The 14-day Relative Strength Index (RSI) stays near 30.00, suggesting a strong bearish momentum.

Looking down, the psychological support of 1.2500 will be a major cushion for Pound Sterling bulls. On the upside, the Cable will face resistance near the 200-day EMA.

• NZD/USD may face challenges as traders expect the RBNZ to deliver a substantial rate cut next week.
• The US Dollar gains ground due to dampened odds of an imminent Fed rate cut.
• Fed’s Powell stated, "The economy is not sending any signals that we need to be in a hurry to lower rates."

The NZD/USD pair trades near 0.5890 during the early European session on Tuesday, maintaining its stance amid a softer US Dollar (USD) as profit-taking tempers its recent gains. However, the pair’s upside remains capped due to growing expectations of a bumper interest rate cut by the Reserve Bank of New Zealand (RBNZ) next week.

Meanwhile, traders are keeping a close watch on the upcoming Loan Prime Rate (LPR) decision from China, a key trading partner of New Zealand. Market participants anticipate potential additional stimulus measures to bolster economic growth, following the recent 10 trillion Yuan debt package that lacked direct economic stimulus, further intensifying market concerns.

The US Dollar (USD) may appreciate as the Federal Reserve (Fed) Chair Jerome Powell tempered expectations for immediate rate cuts. Powell highlighted the economy's resilience, a strong labor market, and persistent inflationary pressures, stating, "The economy is not sending any signals that we need to be in a hurry to lower rates." Investors are now looking for further guidance from Fed officials later this week on the future path of US interest rates.

Moreover, traders anticipate that the incoming Trump administration will prioritize tax cuts and impose higher tariffs. These measures could fuel inflation, potentially slowing the pace of Fed rate cuts and supporting the US Dollar. Traders are now focused on the upcoming October US Building Permits and Housing Starts data, which is set to be released on Tuesday.

Here is what you need to know on Tuesday, November 19:

In the absence of high-tier data releases, the US Dollar (USD) corrected lower to start the week. The action in financial markets remain choppy early Tuesday as investors await Bank of England's (BoE) Monetary Policy Hearings. Later in the day, Consumer Price Index (CPI) data from Canada will be watched closely by market participants. The US economic docket will feature Building Permits and Housing Starts figures for October.

Following the impressive rally seen in the previous week, the USD Index turned south on Monday and closed the day in negative territory. In the European morning on Tuesday, the index fluctuates in a tight range above 106.00. Meanwhile, US stock index futures trade marginally higher after Wall Street's main indexes closed the first day of the week mixed.

The Reserve Bank of Australia (RBA) published the Minutes of its November monetary policy meeting in the Asian session on Tuesday. "It is not possible to rule anything in or out regarding future changes in the cash rate," the RBA reiterated in its publication and said that the board would need more than one good quarterly inflation report to justify a rate cut. After gaining 0.7% on Monday, AUD/USD continues to edge higher and was last seen trading in positive territory above 0.6500.

The broad-based USD weakness and rising crude oil prices weighed heavily on USD/CAD on Monday and the pair lost over 0.5%. In the European morning, the pair moves sideways slightly above 1.4000. Annual inflation in Canada, as measured by the change in the CPI, is forecast to rise to 1.9% in October from 1.6% in September.

Japan’s Finance Minister Katsunobu Kato repeated on Tuesday that they are “closely watching FX moves with the utmost sense of urgency,” adding that they will continue to take appropriate action against excessive moves. USD/JPY closed marginally higher on Monday before retreating to the 154.50 area early Tuesday.

BoE Governor Bailey and other members of the Monetary Policy Committee will respond to questions before the Treasury Committee starting at 10:15 GMT. GBP/USD snapped a six-day losing streak on Monday but lost its bullish momentum before reaching 1.2700.

EUR/USD gained more than 0.5% on Monday before going into a consolidation phase at around 1.0600 early Tuesday. Eurostat will release revisions to October Harmonized Index of Consumer Prices readings in the European session.

Gold gathered bullish momentum and rose nearly 2% on Monday. XAU/USD continues to stretch higher in the European morning and was last seen trading above $2,620.

• EUR/GBP flat lines around 0.8355 in Tuesday’s early European session. 
• ECB’s Vujcic said the risk of undershooting the inflation goal has risen. 
• The UK GDP fell by 0.1% MoM in September, weaker than expected. 

The EUR/GBP cross trades on a flat note near 0.8355 during the early European session on Tuesday. The rising bets for more aggressive rate cuts by the European Central Bank (ECB) might drag the Euro (EUR) lower against the Pound Sterling (GBP). Investors brace for the Eurozone October Harmonized Index of Consumer Prices (HICP) data, which is due later on Tuesday.

The ECB Governing Council member Boris Vujcic said on Monday that the danger that the ECB will fall short of its 2% inflation goal has risen, per Bloomberg. Meanwhile, the ECB policymaker Yannis Stournaras noted that the bank is almost certain to cut interest rates by a quarter point in December. 

The ECB has cut its key interest rate by 25 basis points to 3.25% last month and is anticipated to reduce rates further again in December at its final decision of the year. However, investors await the Eurozone HICP data for fresh impetus about the inflation outlook. If the report shows the hotter-than-expected outcome, this could dampen the hope for the ECB jumbo rate cut, which might lift the shared currency. 

On the other hand, a surprise contraction in UK Gross Domestic Product (GDP) for September could weigh on the GBP. The UK economy shrank by 0.1% MoM in September, following growth of just 0.2% the previous month, according to the Office for National Statistics on Friday. This figure came in weaker than the 0.2% expansion expected. 

However, Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said a rate reduction at the Bank of England’s (BOE) meeting in December now looks “improbable” as inflation concerns and rising global headwinds would likely prevent policymakers from pursuing back-to-back rate cuts. The release of UK Consumer Price Index (CPI) data for October on Wednesday could offer some hints about the rate cuts path for the December meeting.

• AUD/JPY may appreciate as daily chart analysis indicates a potential shift in price momentum from bearish to bullish.
• A bullish reversal could be possible if the nine-day EMA breaks above the 14-day EMA.
• A break above nine- and 14-day EMAs could cause the emergence of a bullish bias.

The AUD/JPY cross remains relatively flat around 100.50 during the Asian trading session on Tuesday, following a nearly 1% gain in the previous session. An analysis of the daily chart suggests a potential shift in momentum from bearish to bullish as the pair seeks to break above the nine-day Exponential Moving Average (EMA).

Additionally, the nine-day EMA is currently just below the 14-day EMA. An upward crossover would signal a shift in the short-term price momentum from bearish to bullish, as it indicates that recent prices are gaining strength and pushing higher compared to the longer-term trend.

Additionally, the 14-day Relative Strength Index (RSI) is at the 50 level, signaling a neutral market condition. Any further movement in the AUD/JPY cross will likely determine the next clear directional trend.

To the upside, the AUD/JPY cross is testing immediate resistance at the nine-day EMA around the 100.58 level, followed by the 100.61 level. A break above these levels could trigger a bullish bias, potentially pushing the currency cross toward the four-month high of 102.41, reached on November 7.

On the downside, the primary support for the AUD/JPY cross is located around the recent low of 99.42. A break below this level would strengthen the bearish outlook and could drive the cross toward the psychological support level of 99.00.

AUD/JPY: Daily Chart

• USD/CHF trades stronger to near 0.8835 in Tuesday’s early European session. 
• Fed easing bets pared on Trump policy outlook, and strong US economic data. 
• Geopolitical risks might boost the Swiss Franc and create a headwind for the pair. 

The USD/CHF pair edges higher to around 0.8835 during the early European session on Tuesday, bolstered by the firmer Greenback. Switzerland’s October Trade Balance will be released later on Tuesday. Also, the Federal Reserve’s (Fed) Jeffrey Schmid is set to speak. 

The strong US economic data and potential inflation from proposed tariffs have fuelled speculation that the Fed would slow the path of rate reductions, supporting the US Dollar (USD). Additionally, the cautious remarks from Fed Chair Jerome Powell contribute to the USD’s upside. Powell emphasized that the robust economic growth, solid job market, and inflation that remains above its 2% target mean the US central bank does not need to rush to lower interest rates.

Investors await comments from the Fed officials for further cues about the US interest rate trajectory. Markets have pared bets for a 25 basis points (bps) interest-rate cut at the December meeting to less than 59%, down from 62% a day earlier, according to CME FedWatch.

Nonetheless, heightened concerns about the Russia-Ukraine conflict and the ongoing geopolitical tensions in the Middle East could boost the safe-haven flows, benefiting the Swiss Franc. Joe Biden has allowed Ukraine to strike inside Russia with long-range US missiles for the first time, according to CNN News on Sunday. US sources said that Ukraine plans to conduct its first long-range attacks in the coming days, while Russia vowed to retaliate to what it called a "radical change" in the war. 

• EUR/USD maintains its position as the US Dollar continues its downward correction.
• The US Dollar’s downside appears restrained due to dampened odds of an imminent Fed rate cut.
• ECB President Lagarde stated that Europe should pool its resources in areas such as defense and climate.

EUR/USD remains steady with a positive bias, hovering around 1.0600 during Tuesday's Asian trading hours. The upbeat sentiment surrounding the pair is likely driven by a softer US Dollar (USD), as profit-taking follows its recent rally.

However, the downside risk for the US Dollar appears limited as Federal Reserve (Fed) Chair Jerome Powell tempered expectations for immediate rate cuts. Powell highlighted the economy's resilience, a strong labor market, and persistent inflationary pressures, stating, "The economy is not sending any signals that we need to be in a hurry to lower rates." Investors are now looking for further guidance from Fed officials later this week on the future path of US interest rates.

Additionally, the Greenback may further appreciate as investors anticipate that the incoming Trump administration will prioritize tax cuts and impose higher tariffs. These measures could fuel inflation, potentially slowing the pace of Fed rate cuts.

European Central Bank (ECB) President Christine Lagarde stated on Monday that Europe should consolidate its resources in areas such as defense and climate, as its productivity growth stagnates and the world becomes increasingly fragmented into competing blocs.

ECB President Lagarde highlighted that Europe is falling behind in innovation and productivity compared to the US and China. According to Bloomberg, the lack of a unified digital market and insufficient venture capital investment are significant barriers to technological advancement in the region.

Traders are now focused on the upcoming October Harmonized Index of Consumer Prices (HICP) data for the Euro area, set to be released on Tuesday. Attention will then shift to US Building Permits and Housing Starts data later in the North American session.

Gold prices rose in India on Tuesday, according to data compiled by FXStreet.

The price for Gold stood at 7,115.92 Indian Rupees (INR) per gram, up compared with the INR 7,084.22 it cost on Monday.

The price for Gold increased to INR 82,998.67 per tola from INR 82,628.95 per tola a day earlier.

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

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

• EUR/JPY struggles to capitalize on Monday’s recovery from a nearly one-month low.
• Intervention fears and geopolitical risks revive demand for the JPY and exert pressure.
• The BoJ rate-hike uncertainty cap gains for the JPY and helps limit losses for the cross.

The EUR/JPY cross meets with a fresh supply during the Asian session on Tuesday and reverses a part of the previous day's recovery move from the 50-day Simple Moving Average (SMA), around the 162.25 region, or a nearly one-month low. The intraday slide is sponsored by the emergence of fresh buying around the Japanese Yen (JPY) and drags spot prices back closer to the 163.00 mark in the last hour, though lacks follow-through.

Geopolitical tensions escalated after the Biden administration approved Ukraine’s use of long-range US weapons deeper inside Russia, which has deployed North Korean troops to reinforce its war. This, along with speculations that Japanese authorities will intervene in the FX market to prop up the domestic currency, turn out to be key factors undermining the safe-haven JPY and exerting some downward pressure on the EUR/JPY cross.

The shared currency, on the other hand, struggles to lure buyers amid bets for more aggressive rate cuts by the European Central Bank (ECB) on the black of a bleak Eurozone economic outlook. Adding to this, US President-elect Donald Trump's protectionist policies pose additional threats to the Eurozone economy. This might continue to weigh on the Euro and suggests that the path of least resistance for the EUR/JPY cross is to the downside. 

That said,  the uncertainty over the timing of another interest rate hike by the Bank of Japan (BoJ) could act as a headwind for the JPY amid a generally positive risk tone. This, in turn, could assist the EUR/JPY cross to attract some dip-buyers and help limit the downside near the 50-day SMA. The said support should act as a key pivotal point, which if broken should pave the way for the resumption of the recent corrective slide from a multi-year top.

FX option expiries for Nov 19 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0545 877m
• 1.0590 810m
• 1.0600 1b
• 1.0650 2.4b

USD/CHF: USD amounts     

• 0.8800 422m

AUD/USD: AUD amounts

• 0.6600 2b

• GBP/USD continues to draw support from some follow-through USD profit-taking.
• Reduced bets for aggressive Fed rate cuts and BoE uncertainty might cap the upside.
• Traders also seem reluctant ahead of the BoE’s Monetary Policy Report Hearings.

The GBP/USD pair attracts buyers for the second straight day on Tuesday amid a modest US Dollar (USD) downtick and climbs back closer to the 1.2700 mark during the Asian session. Spot prices, however, lack bullish conviction as investors opt to wait for the Bank of England's (BoE) Monetary Policy Report Hearings before placing aggressive directional bets. 

BoE Governor Andrew Bailey and several MPC members will testify on inflation and the economic outlook before Parliament's Treasury Committee. This will play a key role in influencing market expectations about potential interest rate adjustments going forward, which, in turn, will drive the British Pound (GBP) and provide some meaningful impetus to the GBP/USD pair. 

The focus will then shift to the latest UK consumer inflation figures on Wednesday. In the meantime, softening US Treasury bond yields prompts some follow-through US Dollar (USD) profit-taking and drags it away from the year-to-date (YTD) top set last week. This, along with a positive risk tone, undermines the safe-haven buck and acts as a tailwind for the GBP/USD pair.

Any meaningful USD depreciation, however, seems elusive in the wake of expectations that US President-elect Donald Trump's policies will likely rekindle inflationary pressures and limit the scope for further rate cuts by the Federal Reserve (Fed). This should keep the US bond yields elevated and favors the USD bulls, which, in turn, might cap gains for the GBP/USD pair. 

Moreover, the uncertainty concerning the BoE's path forward on interest rates might contribute to keeping a lid on spot prices. Hence, it will be prudent to wait for strong follow-through buying before confirming that the GBP/USD pair has bottomed out and positioning for any meaningful recovery from sub-1.2600 levels, or a multi-month trough touched last week.

• Silver prices advance as dollar-denominated metals become more affordable, supported by a weaker US Dollar.
• The grey metal finds support from safe-haven inflows as tensions in the Russia-Ukraine conflict escalate.
• Non-interest-bearing assets encountered headwinds after Fed Chair Jerome Powell dampened expectations of imminent rate cuts.

Silver price (XAG/USD) continues to gain ground for the second consecutive day, trading around $31.40 per troy ounce during the Asian session on Tuesday. The prices of the dollar-denominated Silver recover from two-month lows as the US Dollar (USD) experiences profit-taking selling after a recent rally. This rally was fueled by expectations of fewer Federal Reserve (Fed) rate cuts and optimism about US economic outperformance under the incoming Trump administration.

Meanwhile, safe-haven Silver is gaining traction amid rising geopolitical tensions. US President Joe Biden authorized Ukraine to use US-made weapons for strikes deep within Russia, a move that escalated concerns in the region. In response, the Kremlin issued a warning on Monday, vowing to retaliate against what it called a reckless decision by the Biden administration. Russia had earlier cautioned that such actions could significantly increase the risk of confrontation with NATO.

Non-yielding assets like Silver faced headwinds after Fed Chair Jerome Powell tempered expectations of immediate rate cuts. Powell emphasized the economy's strength, a robust labor market, and ongoing inflationary pressures. He stated, "The economy is not sending any signals that we need to be in a hurry to lower rates." Investors now await additional remarks from Fed officials this week for further insight into the trajectory of US interest rates.

Markets are closely monitoring China's upcoming Loan Prime Rate (LPR) decision, anticipating potential additional stimulus measures to support economic growth. This follows the recent 10 trillion Yuan debt package, which did not include direct economic stimulus, heightening market concerns. As one of the world's largest manufacturing hubs for electronics, solar panels, and automotive components, China's industrial demand for Silver remains a key factor influencing its prices.

• Gold price gains follow-through with a positive traction for the second consecutive day on Tuesday.
• Geopolitical risks, softening of US bond yields and subdued USD demand benefit the XAU/USD.
• Bets for less aggressive Fed rate cuts favor the USD bulls and might cap the precious metal.

Gold price (XAU/USD) attracted some haven flows after posting its steepest weekly drop in more than three years last week and snapped a six-day losing streak on Monday amid heightened geopolitical tensions. Adding to this, softening US Treasury bond yields prompted some US Dollar (USD) profit-taking following the post-US election rally to a fresh year-to-date and turned out to be another factor that benefited the non-yielding yellow metal.

The USD bulls remain on the defensive during the Asian session on Tuesday and assist the Gold price in recovering further from a two-month low touched last Thursday. Meanwhile, expectations are that US President-elect Donald Trump's policies will rekindle inflationary pressures and limit the scope for further rate cuts by the Federal Reserve (Fed). This should keep the US bond yields elevated and favors the USD bulls, which might cap the XAU/USD. 

Gold price continues to attract haven flows amid geopolitical risks stemming from Russia-Ukraine conflict

• US President Joe Biden's decision to authorize Ukraine to use long-range American missiles against military targets inside Russia prompted some haven flows and benefited the Gold price on Monday. 
• The US Dollar extended its profit-taking slide from the year-to-date high touched last week on the back of retreating US Treasury bond yields and provided an additional boost to the XAU/USD. 
• The precious metal attracts some follow-through buying for the second straight day on Tuesday, though reduced bets for more aggressive rate cuts by the Federal Reserve might cap the upside. 
• US President-elect Donald Trump's incoming administration is expected to focus on lowering taxes and raising tariffs, which could stoke inflation and limit the Fed's ability to ease monetary policy. 
• A slew of influential FOMC members, including Fed Chair Jerome Powell, recently suggested caution in cutting rates, which, in turn, favors the USD bulls and should cap the non-yielding yellow metal.
• Tuesday's US economic docket features the release of Building Permits and Housing Starts. Adding to this, a speech by Kansas Fed President Jeffrey Schmid will drive the USD later during the US session. 
• The focus, however, will remain glued to manufacturing and service sector PMI data on Friday, which could offer early cues on how companies are reacting to the threat of Trump's proposed trade tariffs.

Gold price might confront stiff resistance near 38.2% Fibo. level; the $2,600 support  is key for bulls

The overnight strong move up comes on the back of last week's resilience below the 100-day Simple Moving Average (SMA). Moreover, the momentum pushed the Gold price beyond the 23.6% Fibonacci retracement level of the recent corrective decline from the all-time peak and underpins prospects for additional intraday gains. That said, oscillators on the daily chart – though they have been recovering from lower levels – are yet to confirm a positive bias. Hence, any subsequent strength is more likely to face stiff resistance near the $2,634-2,635 region or the 38.2% Fibo. level. Some follow-through buying, however, could trigger a short-covering rally towards the $2,655-2,657 congestion zone en route to the $2,664-2,665 area. 

On the flip side, the $2,600 mark, which coincided with the 23.6% Fibo. level, now seems to protect the immediate downside. A convincing break might expose the next relevant support near the $2,569-2,568 region and eventually drag the Gold price to the 100-day SMA, currently pegged near the $2,551-2,550 area. Some follow-through selling below last week's swing low, around the $2,536 zone, will be seen as a fresh trigger for bearish traders and pave the way for a fall towards the $2,500 psychological mark.

• The Indian Rupee gains momentum in Tuesday’s Asian session. 
• The routine interventions by the RBI support the INR; portfolio outflows and a stronger USD might cap its upside. 
• Kansas City Fed President Jeffrey Schmid is set to speak later on Tuesday. 

The Indian Rupee (INR) extends the rally on Tuesday, bolstered by the intervention by the Reserve Bank of India (RBI) to prevent the local currency from significant depreciation. Furthermore, the recovery in crude oil prices provides some support to the INR as India is the world's third-largest oil consumer. 

Nonetheless, the sustained outflow of foreign funds and the renewed US Dollar (USD) demand might exert some selling pressure on the Indian Rupee. A decline in most Asian currencies also weighs on the local currency for the time being. In the absence of top-tier US economic data releases on Tuesday, the attention will be on risk sentiment and the US Federal Reserve’s (Fed) Jeffrey Schmid speech. 

Indian Rupee rebounds as RBI Intervention caps decline

• The Indian equity benchmark indices, the Sensex, declined 0.31% to 77,339.01 points on Monday, closing 10.05% below its record high level hit on September 27. The Nifty fell 0.34%, its longest falling streak in more than 20 months.
• India's foreign exchange reserves fell to $675.65 billion for the sixth week in a row, from a record high of $704 billion in late September.
• DBS Bank estimated India's economic growth will moderate to 6.0% in 2025 and 2026, down from 8.2% in 2024. 
• Moody's Ratings projected the Indian economy to grow by 7.2% in 2024, driven by a gradual recovery in household spending and easing inflation pressures. 
• The National Association of Home Builders (NAHB) Housing Market Index climbed to 46.0 in November, the highest since April, from 43.0 in October, beating the estimate of 44.0. 

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

The Indian Rupee trades on a stronger note on the day. The bullish outlook of the USD/INR pair prevails as the pair remains above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) is located above its midline near 67.00, suggesting that the support is likely to hold rather than break. 

The first upside barrier to watch is the all-time high of 84.45. A decisive break above this level could clear the way for a move to the 85.00 psychological level.

On the flip side, the resistance-turned-support level at 84.35 acts as an initial support level for USD/INR. A move below the mentioned level could expose 84.00, the round mark. Extended losses could see a drop to 83.89, the 100-day EMA.

• WTI price receives support from growing supply concerns due to rising geopolitical tensions.
• Kremlin warned to retaliate if Ukraine use Army Tactical Missile Systems (ATACMS).
• Norway’s Equinor announced a production halt at its Johan Sverdrup Oilfield due to an onshore power outage.

West Texas Intermediate (WTI) Oil price extends its gains for the second successive session, trading around $69.20 per barrel during Asian hours on Tuesday. Crude Oil prices have gained support amid growing supply concerns over a potential escalation in the Russia-Ukraine conflict. On Sunday, Russia launched its largest airstrike on Ukraine in nearly three months, inflicting significant damage on the country's power infrastructure. 

On Sunday, US President Joe Biden authorized Ukraine to use Army Tactical Missile Systems (ATACMS), advanced long-range American weapons, to conduct strikes within Russia. CNN cited two US officials.

In response, the Kremlin warned on Monday that it would retaliate against what it described as a reckless move by the Biden administration. Russia had previously cautioned that such actions could heighten the risk of confrontation with NATO.

Crude Oil prices found support after Norway’s Equinor announced a production halt at its Johan Sverdrup Oilfield, the largest in Western Europe, due to an onshore power outage. According to the company on Monday, efforts to restore production are underway, but a timeline for resumption remains uncertain, as reported by Reuters.

Last week, crude Oil prices faced downward pressure after Federal Reserve Chair Jerome Powell tempered expectations for near-term rate cuts, emphasizing the economy’s resilience, a robust labor market, and persistent inflationary challenges. Adding to the bearish sentiment, concerns about weakening demand in China, the world’s largest Oil importer, have further weighed on the Oil prices.

An official at the National Development and Reform Commission (NDRC), China’s state planner, said on Tuesday that “China has ample policy room and tools to support economic recovery.”

The NDRC official said he “expects China's economy to sustain recovery momentum in November and December.”

Market reaction

At the time of writing, AUD/USD is trading modestly flat on the day near 0.6505. 

Japan’s Finance Minister Katsunobu Kato on Tuesday that he is “closely watching FX moves with the utmost sense of urgency.”

Additional quotes

• USD/CAD gains ground to around 1.4020 in Tuesday’s Asian session.
• The rising geopolitical risks support the USD. 
• The Canadian CPI inflation report will be in the spotlight on Tuesday. 

The USD/CAD pair trades in positive territory near 1.4020 on Tuesday during the Asian trading hours. The resurgence of geopolitical tensions in the Middle East and in the Russia-Ukraine front boost the safe-haven currency like the Greenback. Investors will closely watch Canada’s Consumer Price Index (CPI) inflation data, which is due later on Tuesday.

Citing two US officials familiar with the decision, CNN News reported on Sunday that US President Joe Biden's administration has authorized Ukraine to use US arms to strike inside Russia in a significant reversal of Washington's policy in the Ukraine-Russia conflict. Investors will monitor the development surrounding geopolitical risks. Any signs of escalation could lift the US Dollar (USD) against the Loonie. 

Additionally, markets expect that Donald Trump’s administration will reignite inflation and slow the path of rate cuts from the Federal Reserve (Fed). This, in turn, contributes to the USD’s upside. Futures markets hint at 58.7% odds of a Fed rate cut in December, though expectations for rate cuts through 2025 have moderated to 77 basis points (bps).

On the Loonie front, the Canadian CPI inflation is expected to rise to 1.9% YoY in October from 1.6% in the previous reading, while the monthly CPI is estimated to show an increase of 0.3%. Any signs of hotter inflation in the Canadian economy could lift the Canadian Dollar (CAD) and act as a headwind for USD/CAD. 

Japan's Economy Minister Ryosei Akazawa noted on Tuesday that it is “crucial to boost pay for all generations with the economic package.”

He further noted that he is “aiming for cabinet approval of the economic package soon.”

Market reaction

At the time of writing, USD/JPY is consolidating the latest leg down just above the 154.00 level, shedding 0.36% on the day.

• The Australian Dollar holds losses despite the RBA Minutes highlighting the need for restrictive monetary policy.
• RBA Board members also emphasized that "nothing can be ruled in or out" regarding future monetary policy adjustments.
• The US Dollar may appreciate as the incoming Trump administration is expected to prioritize tax cuts and higher tariffs.

The Australian Dollar (AUD) remains under pressure following Tuesday's release of the Reserve Bank of Australia's (RBA) November Meeting Minutes. The minutes indicate that the RBA board remains cautious about the potential for inflation to rise further, emphasizing the need for restrictive monetary policy.

RBA Board members also indicate no "immediate need" to adjust the cash rate, though they left the door open for future changes, noting that nothing can be ruled in or out. Current forecasts are based on the technical assumption that the cash rate will remain unchanged until mid-2025.

The Australian Dollar gained support following hawkish remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock last week. Bullock emphasized that current interest rates are sufficiently restrictive and will remain unchanged until the central bank is confident about the inflation outlook.

The US Dollar (USD) remains in a downward correction despite recent hawkish remarks from Federal Reserve (Fed) officials. However, the Greenback's downside may be limited as investors anticipate that the incoming Trump administration will prioritize tax cuts and higher tariffs. These measures could fuel inflation, potentially slowing the pace of Fed rate cuts.

Traders are now focused on the upcoming October US Building Permits and Housing Starts data, which is set to be released on Tuesday.

Australian Dollar remains under pressure due to risk-off sentiment

• Fed Chair Jerome Powell downplayed the likelihood of imminent rate cuts, highlighting the economy's resilience, robust labor market, and persistent inflationary pressures. Powell remarked, "The economy is not sending any signals that we need to be in a hurry to lower rates."
• On Friday, Chicago Fed President Austan Goolsbee stated that markets often overreact to changes in interest rates. Goolsbee emphasized the importance of the Fed adopting a cautious, gradual approach in moving toward the neutral rate.
• Meanwhile, Boston Fed President Susan Collins tempered expectations for continued rate cuts in the near term while maintaining market confidence in a potential rate reduction in December. Collins stated, "I don't see a big urgency to lower rates, but I want to preserve a healthy economy."
• US Retail Sales increased by 0.4% month-over-month in October, exceeding the market consensus of 0.3%. Additionally, the NY Empire State Manufacturing Index for November posted an unexpected surge, coming in at 31.2 compared to the anticipated 0.7 decline, signaling robust manufacturing activity.
• China’s Retail Sales rose 4.8% year-over-year in October, surpassing the expected 3.8% and the 3.2% increase seen in September. Meanwhile, Industrial Production grew by 5.3% YoY, below the forecasted 5.6% and the 5.4% growth recorded in the previous period.
• The seasonally adjusted unemployment rate in Australia held steady at 4.1% in October for the third month in a row, matching market expectations. However, employment change data revealed only 15.9K new jobs added in October, which fell short of the anticipated 25.0K.
• Australia's Consumer Inflation Expectations dropped to 3.8% in November, down from 4.0% in the previous month, reaching the lowest level since October 2021.

Australian Dollar tests 0.6500, with the next key resistance located at the nine-day EMA

The AUD/USD pair hovers near 0.6500 on Tuesday, signaling short-term bearish momentum on the daily chart as it remains below the nine-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) sits below the 50 mark, reaffirming the bearish trend.

On the downside, the AUD/USD pair faces significant support around the 0.6400 level. A decisive break below this psychological barrier could amplify selling pressure, potentially driving the pair toward its yearly low of 0.6348, last recorded on August 5.

The 0.6500 level serves as immediate resistance. A sustained move above this threshold might push the AUD/USD pair toward the nine-day EMA at 0.6517, followed by the 14-day EMA at 0.6541. Surpassing these levels could pave the way for a rally toward the three-week high of 0.6687. 

AUD/USD: Daily Chart

• The Japanese Yen strengthens amid intervention fears and retreating US bond yields. 
• The USD remains on the defensive below the YTD peak and also weighs on USD/JPY.
• The BoJ rate-hike uncertainty might cap the JPY gains and offer support to the pair.

The Japanese Yen (JPY) ticks higher against its American counterpart during the Asian session on Tuesday, albeit it lacked bullish conviction in the wake of the uncertainty over the timing of another interest rate hike by the Bank of Japan (BoJ). Apart from this, the risk-on mood – as depicted by a generally positive tone around the equity markets – might contribute to capping the safe-haven JPY. 

That said, geopolitical risks and softening US Treasury bond yields could prevent a significant downside for the lower-yielding JPY. Furthermore, speculations that Japanese authorities could intervene to prop up the domestic currency might hold back the JPY bears from placing aggressive bets. The focus now shifts to the consumer inflation data from Japan and the global PMI prints, due later this week. 

The Japanese Yen draws support from a combination of factors; upside seems limited amid BoJ uncertainty

• Bank of Japan Governor Kazuo Ueda said on Monday that the economy was progressing towards sustained wages-driven inflation, leaving the door open for further monetary policy tightening. 
• Ueda, however, provided few clues on whether the BoJ would raise rates in December and said that the gradual approach to adjusting policy is contingent on economic activity and price trends.
• Geopolitical uncertainties stemming from the protracted Russia-Ukraine war and the ongoing conflicts in the Middle East offer some support to the safe-haven Japanese Yen amid intervention fears. 
• Japan's Finance Minister Katsunobu Kato warned last Friday that the government will scrutinize the FX market with very high vigilance and take appropriate action against excessive moves.
• A modest pullback in the US Treasury bond yields prompted some follow-through US Dollar profit-taking, after the post-US election blowout rally to a fresh year-to-date peak set last week. 
• US President-elect Donald Trump's incoming administration is expected to focus on lowering taxes and raising tariffs, which could stoke inflation and limit the Federal Reserve's ability to cut rates.
• A slew of influential FOMC members, including Fed Chair Jerome Powell, recently suggested caution in cutting rates, which, in turn, favors the USD bulls and should cap the lower-yielding JPY. 
• Japan's National Consumer Price Index (CPI) is due for release on Friday and will influence the JPY price dynamics ahead of the global manufacturing and service sector PMI prints.

USD/JPY might continue to attract dip-buyers near 153.85 pivotal support, bullish potential seems intact

From a technical perspective, the USD/JPY pair's failure to find acceptance above the 155.00 psychological mark on Monday and the subsequent pullback warrants caution for bullish traders. Spot prices, however, might continue to find support near the 153.85 region on the back of positive oscillators on the daily chart. Some follow-through selling should pave the way for additional losses towards the 153.25 region en route to the 153.00 mark and the next relevant support near the 152.70-152.65 area. A convincing break below the latter might expose the very important 200-day Simple Moving Average (SMA) resistance breakpoint, now turned support, currently pegged near the 151.90-151.85 region.

On the flip side, the 155.00 mark, followed by the overnight swing high, around the 155.35 region. A sustained strength beyond the latter will reaffirm the near-term positive outlook, which should allow the USD/JPY pair to surpass the 155.70 intermediate hurdle and aim towards reclaiming the 156.00 round figure. The momentum could extend further towards retesting the multi-month top, around the 156.75 region touched last Friday.

The People's Bank of China set the onshore Yuan (CNY) reference rate for the trading session ahead on Tuesday at 7.1911 as compared to the previous day's fix of 7.1907 and 7.2305 Reuters estimate. 

The Reserve Bank of Australia (RBA) published the Minutes of its November monetary policy meeting on Tuesday, highlighting that the board remains vigilant to upside inflation risks and believes policy needs to remain restrictive.

Key quotes

Market reaction to the RBA Meeting Minutes

At the time of writing, AUD/USD is trading 0.10% lower on the day to trade at 0.6500.

European Central Bank (ECB) President Christine Lagarde said on Monday that Europe should pool its resources in areas like defense and climate as its productivity growth falters and the world fragments into rival blocs, per Bloomberg.

Key quotes

Market reaction

At the time of writing, EUR/USD is trading 0.01% lower on the day to trade at 1.0590.

• NZD/USD trades with a bearish bias near 0.5890 in Tuesday’s early Asian session. 
• Markets pared expectations of future rate cuts by the US Fed. 
• ANZ analysts forecast a 50 bps rate cut from the RBNZ at its November meeting next week. 

The NZD/USD pair trades with mild losses around 0.5890 during the early Asian session on Tuesday. The pair edges lower amid the consolidation of the Greenback. Later on Tuesday, investors will keep an eye on the US Building Permits and Housing Starts for October. 

The US Dollar Index (DXY), which measures the USD against a basket of currencies, retraces from a one-year high above 107.00 to near 106.20. However, the downside of the Greenback might be capped as investors expect that the incoming Trump administration would focus on lowering taxes and raising tariffs, which could stoke inflation and slow the path of rate cuts from the Federal Reserve (Fed). 

Boston Fed president Susan Collins said on Friday that rate reductions could be paused as soon as the December meeting, but it depends on upcoming data on jobs and inflation. According to the CME FedWatch Tool, the markets have priced in nearly 58.7% of the 25 basis points (bps) rate cut by the Fed at the December meeting. 

On the Kiwi front, the rising expectation of jumbo interest rate cuts by the Reserve Bank of New Zealand (RBNZ) next week weighs on the New Zealand Dollar (NZD). ANZ analysts forecast a 50 basis points (bps) reduction from the RBNZ on November 27. “We expect a 50bp cut to 4.25% next week. That would be consistent with RBNZ's October messaging, economists’ forecasts, and market pricing. Data since the October Monetary Policy Review has been mixed, but no data looks likely to upset the apple cart,” noted ANZ analysts.