CFD Markets News and Forecasts —

• USD/JPY falls to near 154.00 despite the US Dollar remaining firm.
• Donald Trump’s policies are expected to boost US inflation and economic growth.
• BoJ Ueda didn’t commit to an interest rate hike move for December.

The USD/JPY pair slides to near 154.00 in Thursday’s European session. The asset weakens even though the US Dollar (USD) edges higher, with the US Dollar Index (DXY) rising to near 106.70. The USD Index strives to revisit the yearly high of 107.00 as investors expect that there will be fewer interest rate cuts from the Federal Reserve (Fed) in its current policy-easing cycle.

Fed’s data-dependent approach is expected to refrain it from cutting interest rates aggressively as market experts project a rebound in the United States (US) inflation and see economic growth accelerating, given that President-elected Donald Trump’s victory in both houses will allow him to implement his economic agenda smoothly.

Trump vowed to raise import tariffs universally by 10% and lower taxes, a move that would not allow the Fed to go for deeper rate cuts. For the December meeting, there is a 56% probability that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50%, which has been diminished from 72% a week ago, according to the CME FedWatch tool.

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.

Meanwhile, the Japanese Yen (JPY) performs strongly even though Bank of Japan (BoJ) Governor Kazuo Ueda refrained from committing to an interest rate hike in the December meeting but kept the option on the table in his commentary at a Europlace Financial Forum in Tokyo in early Thursday.

“We decide monetary policy meeting by meeting on basis of information that becomes available up to the meeting” Kazuo Ueda said and further added, “There's still a month to go till next policy meeting, there will be more information available by then.”

• Crude Oil edges higher as Russia responds to Ukraine’s missile attacks by launching an intercontinental ballistic missile for the first time in the war.  
• The Russian missile attack targeted critical infrastructure in the city of Dnipro.
• The US Dollar Index is being fueled by safe-haven inflows, though it faces resistance.

Crude Oil prices are trying to break above $70 for a second consecutive day, fueled by headlines that Russia has launched a ballistic missile into Ukraine for the first time in the war, Bloomberg reports. On Wednesday, Oil already tried to overcome the round $70 level, but failed to do so after headlines emerged that both Ukraine and Russia are willing to hold talks to resolve the current stalemate situation. Any headlines pointing to this possibility could trigger a knee-jerk reaction for Oil prices. 

Meanwhile, the US Dollar Index (DXY) is flat, supported by safe-haven inflows on the back the war between Ukraine and Russia. On the other hand, New York Fed President John Williams delivered dovish comments,  saying that inflation is set to decline further and interest rates should head lower as well. All this together, coupled with disappointing Nvidia earnings overnight, sees the DXY US Dollar Index not really going anywhere. 

At the time of writing, Crude Oil (WTI) trades at $69.48 and Brent Crude at $73.25.

Oil news and market movers: Biden makes his last moves

• Although Oil prices are rising, the options markets are not showing any concerns for the near future, which could mean that a further escalation is not foreseen. 
• The Biden administration has recognized opposition candidate Edmundo González as Venezuela’s president-elect, a move that may make it harder for the incoming Trump administration to cut a deal with Nicolás Maduro, Bloomberg reports. Venezuela is a key producer of Oil in Latin America and it has the world’s largest Oil reserves.
• US inventories of crude Oil rose for the third straight week as a rebound in Oil exports offset a massive inflow of imported supplies into the Gulf Coast, the weekly report from the Energy Information Administration (EIA) revealed on Wednesday.

Oil Technical Analysis: Limited potential forecasted

Crude Oil price might be ticking up, supported by the geopolitical tensions between Russia and Ukraine. Still, markets seem to be taking these moves with a pinch of salt as the actual Oil market is still very much flooded with more supply than demand. So, the overall longer term outlook has not changed. 

On the upside, the 55-day Simple Moving Average (SMA) at $70.08 is the first barrier to consider before the 100-day SMA steps in at $72.89. The 200-day SMA at $76.48 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

• EUR/GBP has returned to the range it has been trading in since the end of September. 
• It will probably continue oscillating there until it breaks out either higher or lower.
• The false downside break at the start of November, suggests the range floor may be vulnerable. 

EUR/GBP continues trading in a range. The pair is probably now in a sideways trend and given the principle of technical analysis that “the trend is your friend” it will probably continue oscillating until it makes a decisive breakout one way or another. 
 

EUR/GBP 4-hour Chart 

The pair made a false break on November 8 when it fell to a two-and-a-half year low of 0.8260. However, rather than continuing down to the target generated from the range, EUR/GBP recovered back inside where it now trades. 

Because it is in a sideways trend, however, the odds favor a continuation sideways, which suggests the possibility of a recovery from the current level near the range floor, and the unfolding of a leg up towards the ceiling at around 0.8450. 

It is too early to say with any confidence whether EUR/GBP will indeed rise up to the top of the range. Further, the false break may be a sign of weakness and be followed by another break lower, thus complicating the picture and adding a bearish tone to the chart. 

Assuming a break lower, it is possible the pair could fall to the target established by the range, at 0.8219 – the 61.8% Fibonacci extension.

• Gold rises for the fourth day in a row on Thursday as traders reach for safety. 
• Underwhelming Nvidia earnings, talks about cutting interest rates from Fed speakers and Russia-nuke risks all impact. 
• XAU/USD forms a bullish Three White Soldiers Japanese candlestick pattern.  

Gold (XAU/USD) extends its recovery into a fourth day on Thursday, rising up into the $2,670s during the European session. An overall risk-off tone to markets due to disappointment at Nvidia’s results is weaning investors off stocks and catalyzing safe-haven flows into Gold. 

Thursday’s mildly weaker US Dollar (USD) is a further tailwind for Gold since it is mostly priced and traded in USD. Continued haven flows from geopolitical fears relating to Russia’s lowering of the threshold for using nuclear weapons is another factor. 

Capping gains for the precious metal, however, is competition from Bitcoin (BTC).  According to Bloomberg News, a surge in Bitcoin Exchange Traded Fund (ETF) inflows in November – ETFs enable investors to own shares that track BTC’s price rather than owning the asset itself – has coincided with a similar surge in outflows from Gold ETFs. This suggests a direct pivot away from owning Gold and into Bitcoin.

Gold extends reversal after Nvidia earnings release

Gold is pushing higher on Thursday after the third quarter earnings release from Nvidia triggered a decline in stock markets. Although Nvidia’s Q3 earnings beat estimates and were initially met with euphoria, the stock itself slumped 3.0% following the release. 

The unintuitive response was put down to the results not quite being good enough to match “the sky-high expectations for the AI colossus,” according to Forbes. The overall risk-off tone left in the wake of the disappointment led to a broad decline in investor sentiment, which for Gold and other safe-haven assets was positive news.  

The US Dollar (USD), meanwhile, is edging slightly lower after surging on Wednesday. The Greenback appears to have been stopped in its tracks by commentary from Federal Reserve (Fed) speakers suggesting the Fed should push ahead with its plan to cut interest rates amid falling inflation. This goes surprisingly against the widespread view that inflation will rise under a Trump presidency.

Bank of New York President John Williams said he “sees inflation cooling and interest rates falling further,” in an interview with Barron's on Thursday. This followed similar comments from Federal Reserve Bank of Boston President Susan Collins, who said on Wednesday that more interest-rate cuts are needed, but policymakers should proceed carefully. 

Technical Analysis: XAU/USD paints three white soldiers marching higher

Gold rises for the fourth consecutive day and paints a bullish “Three White Soldiers” Japanese candlestick pattern (green rectangle on the chart below) from last week’s lows. 

XAU/USD Daily Chart

Gold has broken clearly back above a major long-term trendline and is attempting to break above the (red) 50-day Simple Moving Average (SMA) at $2,661. These are bullish signs.

The precious metal’s short-term trend is bullish, and given the maxim that “the trend is your friend,” the odds favor a continuation higher. The next target to the upside lies at $2,686, the September 26 high. 

That said, the precious metal is in a downtrend on a medium-term trend, raising risks for the outlook. It is in an uptrend on a long-term basis, however, which supports the bullish shorter-term view. 

Headline SMEI edged down 0.3pts to 50.4 in November; credit conditions continued to improve. Performance and expectations sub-indices both retreated into contractionary territory. Manufacturing remained stable; services SMEs reported further declines in sales, price and profitability. Bank credit remained favourable for SMEs; CNY depreciation expectations picked up, Standard Chartered’s economists Hunter Chan and Shuang Ding note.

A weak recovery       

“Our proprietary Small and Medium Enterprise Confidence Index (SMEI; Bloomberg: SCCNSMEI <Index>) moderated to 50.4 in November from 50.7 in October, staying in expansionary territory for a second straight month. That said, the performance and expectations sub-indices both fell below 50 to 49.6 and 49.8, respectively, suggesting a m/m softening after the October rebound.”

“Manufacturing performance remained relatively resilient; sales and production sub-indices rebounded to above 50 in November. Both domestic and external demand stayed solid ahead of the year-end holidays, supporting new orders. Cross-border e-commerce sales picked up again this month. Meanwhile, non-manufacturing SMEs continued to face headwinds, with the sales, investment and profitability sub-indices stayed in contractionary territory for a sixth straight month. Real estate, construction, and retail sales and wholesale remained key drags. Expectations among non-manufacturing SMEs deteriorated again after recovering in October.”

“The credit sub-index stayed at 51.7 in November as banks remained supportive to SME lending. SMEs’ cost of funding was relatively stable, and liquidity conditions were steady, with the cash surplus indicator no longer lingering below 50. More surveyed SMEs expect the CNY to depreciate against the USD in the coming three months compared to last month, while overall exchange rate expectations remained stable.”

AUD/USD has formed an interim trough near 0.6440 last week and has staged an initial bounce, BBH analyst note.

Recent pivot high at 0.6630/0.6685 is key resistance zone

“Daily MACD is attempting cross above its trigger line denoting receding downward momentum. Ongoing bounce could persist towards upper band of a steep descending channel at 0.6590.”

“The 200-DMA and recent pivot high at 0.6630/0.6685 is key resistance zone. In case the pair fails to hold 0.6440, the decline could extend towards ascending trend line drawn since October 2023 near 0.6360/0.6340.”

The Dollar Index (DXY) rose 0.7% to a high of 106.92 on geopolitical risks before better tech earnings fuelled a late US stock market rally and lowered the DXY to 106.65 overnight, DBS’ Senior FX Strategist Philip Wee notes.

Lacking direction on uncertainties

“The S&P 500 Index initially fell 1% but ended the overnight session unchanged at 5917. The US Treasury 2Y yield rose 3.4 bps to 4.31%, its highest level since November 12.”

“After the FOMC meeting on November 6, the futures market has reduced the odds of another 25 bps cut in December from 80% to almost 50%. The US Treasury 10Y yield has risen 70-80 bps to early July levels despite two rate cuts totalling 75 bps in September and November.”
“The Fed and other central banks are still looking to reduce monetary policy restrictions but have turned cautious on growth/inflation uncertainties over Trump’s policy pledges and heightened geopolitical risks.”

Anyone who thought that the significant downward surprise in September's UK inflation figures would be repeated seamlessly in October was disappointed yesterday. Not only was the headline rate slightly higher than expected (which can still be explained by the one-off effects of household energy bills), but services inflation, and hence the core rate, also surprised on the upside, Commerzbank’s FX analyst Michael Pfister notes.

BoE pause is now almost a foregone conclusion

“Two facts are unlikely to please the Bank of England. On the one hand, the rather low figure for services inflation in September compared with the previous month appears to have been an outlier, distorted by volatile travel prices. In October, the components settled back into line at around their levels of previous months. On the other hand, goods prices rose again.”

“We have warned in the past that these should not be a permanent drag on core inflation to such an extent, and we therefore feel vindicated by the latest development. As for the Bank of England's upcoming meeting in December, the figures suggest that a pause is now almost a foregone conclusion. Even the rate cut in February is being called into question.”

“We still believe that the next rate cut will take place then. The argument in favour of this is that monetary policy is still likely to be seen as quite restrictive and policymakers will certainly want to avoid falling behind the curve. However, if the upcoming inflation figures also surprise on the upside, the discussions are likely to intensify.”

Turkey’s central bank (CBT) is scheduled to meet today for a rate decision: it is unanimously expected that the central bank will leave its key rate unchanged at 50%, Commerzbank’s FX analyst Tatha Ghose notes.

CBT rate decision will likely pass without event

“CBT’s language had to change decisively towards more hawkish after September and October inflation surprised by its stubbornness; inflation projections were revised up further in the latest Inflation Report. CBT’s commentary also confirms that the CB prefers to use liquidity sterilisation or other quantitative measures if necessary, but is unlikely to change the key rate – in either direction – within coming months.”

“President Tayyip Erdogan, however, has been making risky comments recently, which are unhelpful to the cause of inflation and could spook the FX market. Earlier this month, he re-stated his belief that interest rates and inflation could begin to decline together. On this occasion, he was probably not demanding that CBT cut rates to lower inflation. There will be no one to clarify finer points if and when the FX market or the media misinterpret Erdogan’s remarks – this is especially a risk because of the long history involved.”

“In a similar development yesterday, Erdogan stated that minimum wage hikes will outpace inflation during 2025. This was an unhelpful comment, which was repeated and debated by media outlets. Such messages are more capable than others of producing a self-defeating outcome if they were to trigger a lira rout. Today’s CBT rate decision will likely pass without event. But the same cannot be taken for granted, as far as the market’s perception of monetary policy over coming month is concerned.”

Oil prices have been somewhat insulated by the growing tension between Russia and Ukraine. However, natural gas prices have been more sensitive to these developments, while Gold, as one would expect, has benefitted from safe-haven demand, ING’s commodity analysts Warren Patterson and Ewa Manthey note.

Geopolitical risks build

“Oil prices edged lower yesterday despite growing geopolitical risks related to Russia and Ukraine. Having fired a US made missile into Russia earlier in the week, there are reports that Ukraine has now fired British made missiles into Russia. For oil, the risk is if Ukraine targets Russian energy infrastructure, while the other risk is uncertainty over how Russia responds to these attacks.”

“EIA weekly data yesterday showed that US commercial crude oil inventories increased by 545k barrels over the last week with stronger crude oil imports (+1.18m b/d WoW) almost offset by stronger crude exports (+938k b/d WoW). For refined products, gasoline stocks increased by 2.05m barrels, while distillate stocks fell by 114k barrels.”           

“European natural gas has been unable to escape the rising tension between Russia and Ukraine. TTF settled almost 2.5% higher yesterday on the back of this growing geopolitical risk, while the market is also keeping a close eye on Russian pipeline flows to Europe after Gazprom halted supplies to OMV. However, up until now Russian pipeline flows via Ukraine remain stable. Meanwhile, European gas storage has fallen below 90% and is also now just below the 5-year average of 91% for this time of year.”

Scope for the US Dollar (USD) to rise to 7.2630; the major resistance at 7.2800 is likely out of reach. 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.

Below 7.2000 the USD is not going to rise further

24-HOUR VIEW: “Yesterday, we indicated that USD could weaken further. We were incorrect. Instead of weakening, USD rose to 7.2556, closing at 7.2501 (+0.24%). Upward momentum has increased, albeit not much. Today, there is scope for USD to rise to 7.2630. The major resistance at 7.2800 is likely out of reach. The mild upward pressure is intact provided that 7.2370 is not breached (minor support is at 7.2440).”

1-3 WEEKS VIEW: “After expecting a higher USD for more than a week, we indicated on Monday (18 Nov, spot at 7.2350) that ‘momentum is beginning to slow, and if USD breaks below 7.2000 (‘strong support’ level) would mean that USD is not rising further.’ USD traded in a relatively quiet manner of the past few days, and our view remains unchanged.”

• USD/CHF trades in a tight range below 0.8850 as investors seek fresh Fed interest rate cues.
• Donald Trump’s economic agenda will be inflationary for the US economy.
• Investors await flash US S&P Global PMI for November and SNB Schlegel’s speech, which are scheduled for Friday.

The USD/CHF pair consolidates in a tight range below 0.8850 in European trading hours on Thursday. The Swiss Franc pair trades sideways as investors look for fresh cues about whether the Federal Reserve (Fed) will cut interest rates again in the monetary policy meeting in December. Meanwhile, the US Dollar (USD) holds its Wednesday’s recovery and aims to break above the fresh yearly high.

Traders doubt Fed rate cuts next month as market experts believe that price pressures in the United States (US) region could rebound amid expectations that President-elect Donald Trump will raise import tariffs and lower taxes, a move that will boost employment, economic growth, and consumer spending.

According to the CME FedWatch tool, the likelihood of the Fed cutting interest rates by 25 basis points (bps) to 4.25%-4.50% has diminished to 59% from 72% a week ago.

Going forward, investors will focus on the flash S&P Global PMI data for November, which will be released on Friday. The preliminary PMI data will help investors to project the next move in the US Dollar.

On the Swiss Franc (CHF) front, investors await Swiss National Bank (SNB) Vice Chairman Martin Schlegel’s speech, which is scheduled for Friday. In his last speech at an event organized by Raiffeisen Bank in Cham, Switzerland, on October 29, Schlegel emphasized the need for interest rate reductions to maintain price stability.

USD/CHF bounces back after a mild correction to a 50% Fibonacci retracement around 0.8800. The Fibo tool is plotted from a May high of 0.9225 to a September low of 0.8375. Upward-sloping 20-day Exponential Moving Average (EMA) near 0.8770 suggests that the near-term trend is bullish.

The 14-day Relative Strength Index (RSI) oscillates in the 60.00-80.00 range, indicating a strong bullish momentum.

The asset could rise to near the July 5 low of 0.8950 and the psychological resistance of 0.9000 after breaking above the November 14 high of 0.8918.

In an alternate scenario, a downside move below 38.2% Fibo retracement at 0.8700 could drag the asset towards the October 23 low of 0.8650, followed by the November low of 0.8616.

USD/CHF daily chart

Given South Africa's exposure to China, the rand has been hit hard by the US election result and what it will mean for the Chinese economy and world trade next year, ING’s Chris Turner notes.  

USD/ZAR is trading above the one-month 17.75 target

“Unlike some other EM economies, however, South Africa has less of an inflation problem with both headline and core inflation largely within the central bank's target range. This is allowing the South African Reserve Bank to ease interest rates in an orderly manner and the market is expecting another 25bp rate cut today. This would take the policy rate to 7.75%.”

“Were it not for the threat of Trump 2.0, we would be a little bullish on the rand. Relatively high real interest rates in South Africa and some improvements in the domestic economy – better electricity supply is helping business confidence – should be helping the rand.”

“Currently, USD/ZAR is trading above the one-month 17.75 target we outlined in our recent FX Talking publication. But we still have some hope for the rand.”

Last month (17 Oct), the European Central Bank (ECB) slashed interest rates, lowering policy rates by 25bps. While ECB President Christine Lagarde received several questions on the ECB’s path, she revealed little, emphasizing that the ECB will be completely data dependent and will remain on a meeting-to-meeting basis, UOB Group’s economist Lee Sue Ann notes.

ECB to go on a quarterly cadence towards neutral

“We now look for the European Central Bank (ECB) to cut rates by 25bps again when policymakers convene on 12 Dec for the final time this year. Thereafter, we look for the ECB to go on a quarterly cadence towards neutral.”

“Uncertainties stemming from a second Trump presidency regarding upcoming tariffs, and the US’ support for Ukraine might weigh on economic sentiment for Europe.”

“The broader inflationary outlook remains one of moderating cost pressures, although we think that ECB officials probably expect inflation to sustainably meet the central bank’s target only next year.”  

The US Dollar (USD) could pull back further; any decline is likely limited to a test of 154.35. In the longer run, USD is expected to trade in a range, likely between 153.30 and 156.50, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

USD is expected to trade in a range

24-HOUR VIEW: “We did not anticipate the sharp rise in USD that reached 155.88 (we were expecting range trading). USD pulled back from the high, closing at 155.43 (+0.50%). The pullback in deep overbought conditions suggests that USD is unlikely to rise further. Today, it could pull back further, but given that downward momentum is not strong, any decline is likely limited to a test of 154.35. The major support at 153.30 is not expected to come into view. On the upside, resistance levels are at 155.50 and 155.90.”

1-3 WEEKS VIEW: “On Monday (18 Nov, spot at 154.20), we highlighted that ‘The current price action is likely part of a pullback that could extend to 153.20.’ We also highlighted that ‘should USD break above 155.80 (‘strong resistance’ level), it would mean that the current downward pressure has eased.’ USD fell to a low of 153.28 on Tuesday. Yesterday, it rose to a high of 155.88. The breach of our ‘strong resistance’ level at 155.80 indicates downward momentum has eased. From here, we expect USD to trade in a broad range, likely between 153.30 and 156.50.”

European Central Bank (ECB) Governing Council member Yannis Stournaras said on Thursday that “trade tariffs are likely to provoke a response. And a 25 basis points (bps) rate cut in December is the right response.”

Additional quotes

Market reaction 

At the time of writing, EUR/USD is testing intraday lows at 1.0515, down 0.25% on the day.  

The Central Bank of Turkey (CBT) is expected to leave rates unchanged at 50% today. The main focus will be on the central bankers' tone and forward guidance for the first rate cut, ING’s Frantisek Taborsky notes.  

USD/TRY to trade at 35.000 at year-end

“In the latest inflation assessment, while acknowledging slower-than-expected disinflation so far, the CBT pointed out a deceleration in underlying inflation last month, driven by lower core goods inflation and a more pronounced loss of momentum in services excluding rent.”

“We think that the CBT will wait to see further inflation data, however, given the dovish signals contained within the latest inflation report release. Yet chances of a December cut have increased, in our view. The lira saw a significant sell-off earlier in the week and a spike in the borrowing rate indicating some closing of carry trades and probably fears of an overly dovish CBT today.” “However, the market quickly returned to normal and after moving up to 34.600 USD/TRY the market returned to 34.455 yesterday. Even though the first rate cut is imminent, we believe the carry trade will remain a popular position here with us expecting 35.000 USD/TRY at year-end.”

The New Zealand Dollar (NZD) could retest the 0.5865 level before a rebound is likely; the strong support at 0.5850 is unlikely come under threat. In the longer run, provided that NZD remains above 0.5850, it could rise gradually to 0.5960, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD can rise gradually to 0.5960

24-HOUR VIEW: “Our view for NZD to edge higher yesterday was incorrect, as it dropped to a low of 0.5864, closing at 0.5877 (-0.58%). There has been a slight increase in momentum. Today, NZD could retest the 0.5865 level before a rebound is likely. The strong support at 0.5850 is unlikely to come under threat. Resistance is at 0.5895, followed by 0.5910.”

1-3 WEEKS VIEW: “We continue to hold the same view as yesterday (20 Nov, spot at 0.5910). As highlighted, upward momentum is beginning to build. From here, provided that NZD remains above 0.5850 (no change in ‘strong support’ level), it could rise gradually to 0.5960.”

• Silver price may appreciate as daily chart analysis suggests a possible momentum shift from bearish to bullish.
• The key resistance area appears at the descending channel’s upper boundary, aligned with the 14-day EMA at $31.27.
• The primary support would be found around its “throwback support” at the psychological level of $30.00.

Silver price (XAG/USD) appreciates to near $31.10 per troy ounce during the European hours on Thursday. The daily chart analysis suggests a possible shift in momentum from bearish to bullish as the pair attempts to break above the upper boundary of the descending channel pattern. 

Furthermore, the 14-day Relative Strength Index (RSI) is currently positioned just below the 50 level, indicating the potential for a momentum reversal. A decisive break above the 50 mark would confirm the development of a bullish bias.

In terms of the upside, the Silver price tests a key resistance zone near the upper boundary of the descending channel, which aligns with the 14-day Exponential Moving Average (EMA) at $31.27. A decisive break above this region could trigger the bullish bias, paving the way for a move toward the psychological resistance of $32.00.

On the downside, the Silver price may find support around its “throwback support” at the psychological level of $30.00. A break below this level could deepen bearish sentiment, potentially driving the price lower toward the descending channel's bottom boundary at $28.50.

XAG/USD: Daily Chart

Silver prices (XAG/USD) rose on Thursday, according to FXStreet data. Silver trades at $31.05 per troy ounce, up 0.67% from the $30.85 it cost on Wednesday.

Silver prices have increased by 30.50% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 85.87 on Thursday, broadly unchanged from 85.88 on Wednesday.

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

EUR/CHF remains on the low near 0.93, ING’s Chris Turner notes.  

EUR/CHF to grind towards 0.92

“In August we had felt that EUR/CHF would stay offered for the rest of the year and recent events only add to that conviction.”

“What interests us is whether the Swiss National Bank will take rates below 0.50% in this easing cycle (we think not). And spread compression should weigh on EUR/CHF as the ECB cuts rates 150bp into next summer.”

“Expect EUR/CHF to grind towards 0.92 – with the main risk now probably being an SNB official saying the policy rate could go negative again after all.”

The Australian Dollar (AUD) is expected to trade between 0.6485 and 0.6535. In the longer run, current price action is part of a rebound that could reach 0.6560, possibly 0.6600, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Current price action is part of a rebound

24-HOUR VIEW: “We expected AUD to ‘rise further to 0.6560’ yesterday. However, AUD pulled back sharply from a high of 0.6545 to 0.6485, before recovering to close at 0.6506 (-0.40%). The current price movements are likely part of a range trading phase. Today, we expect AUD to trade between 0.6485 and 0.6535.”

1-3 WEEKS VIEW: “Our update from yesterday (20 Nov, spot at 0.6530) remains valid. As highlighted, ‘the current price action is part of a rebound that could reach 0.6560, possibly 0.6600.’ We will maintain the same view as long as AUD remains above 0.6460 (no change in ‘strong support’ level).”

• EUR/USD sees more downside below 1.0500 as ECB policymakers are concerned about growing risks to Eurozone economic growth.
• ECB’s Villeroy supports more rate cuts as the balance of risks to inflation and growth is shifting to the downside.
• Investors will pay close attention to the flash Eurozone/US PMI data for November on Friday.

EUR/USD remains vulnerable above the psychological support of 1.0500 in European trading hours on Thursday. The major currency pair faces selling pressure due to the Euro’s weak performance on expectations that the European Central Bank (ECB) could accelerate its policy-easing cycle.

The ECB is widely anticipated to cut its Deposit Facility Rate again by 25 basis points (bps) to 3% in the December meeting and is expected to head towards the neutral range faster in 2025 as market participants worry about the Eurozone’s economic outlook.

Investors expect the European Union (EU) to go through a rough time when US President-elect Donald Trump takes office and implements his economic agenda, which would lead to a potential global trade war, especially with the Eurozone and China. In his election campaign, Trump mentioned that the euro bloc will "pay a big price" for not buying enough American exports. 

ECB officials are also worried about growing risks to Eurozone economic growth and want the central bank to continue reducing the degree of monetary policy tightness through interest rate cuts. ECB policymaker and the Governor of the Bank of France François Villeroy de Galhau said on Wednesday in a speech in Tokyo, “The balance of risks on growth and inflation is shifting to the downside.” Villeroy added that the pace of future ECB rate cuts should be guided by "agile pragmatism". However, he ruled out the significant impact of US tariffs on the Eurozone’s inflation outlook.

To know about the current status of economic health and forward demand, investors will focus on the flash HCOB Purchasing Managers Index (PMI) data for November for the Eurozone and its major nations, which will be released on Friday. Flash readings are expected to show that the overall private business activity remains at the expansionary borderline.

Daily digest market movers: EUR/USD weakens as US Dollar eyes more gains

• EUR/USD edges down as the US Dollar (USD) holds its Wednesday’s recovery and strives to refresh yearly highs. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, gathers strength to break above the immediate high of 107.00. The Greenback had been performing stronger on Donald Trump’s victory in both houses as he will be able to implement his trade and tax policies smoothly.
• The consequences of Trump’s policies will be inflationary for the United States (US) economy, restricting the Federal Reserve (Fed) from cutting interest rates deeply. The impact can be seen in market speculation for Fed interest rate cuts in December, which has been diminished significantly. Fed’s probability for lowering borrowing rates next month has eased to 56% from 73% a week ago, according to the CME FedWatch tool.
• Market experts have also upwardly revised the Federal Funds Rate target for 2025. Bank of America (BofA) has upped its terminal fed funds rate forecast to 3.75%-4.00% from 3.00%-3.25%.
• Going forward, the US Dollar will be guided by the preliminary S&P Global PMI data for November, which will be published on Friday. Economists expect the overall private sector activity to have improved. 

Technical Analysis: EUR/USD struggles above 1.0500

EUR/USD strives to hold the key support of 1.0500. 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, 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 Mexican Peso is consolidates before the release of Mexican Retail Sales data. 
• The MXN ended a five-day winning streak on Wednesday after the Mexican Congress voted through more controversial reforms. 
• USD/MXN could be unfolding an up leg within a range that is part of a larger Measured Move pattern.

The Mexican Peso (MXN) consolidates in its most-heavily traded pairs during the European session on Thursday. This follows the Peso’s average half-a-percent fall in its key pairs on Wednesday, which marked an end to a five-day winning streak. 

The factors leading to the Peso’s weakness on Wednesday include comments from the Governor of the Bank of Mexico (Banxico) Victoria Rodríguez Ceja, the voting through by the Mexican Congress of controversial reforms to autonomous bodies, and heightened geopolitical risk from Russia’s decision to lower the bar for its use of nuclear weapons. Higher geopolitical tensions tend to disproportionately disadvantage risk-sensitive emerging market currencies such as the MXN. 

Mexican Peso traders await key data 

The Mexican Peso consolidates on Thursday ahead of the release of key Mexican Retail Sales data for September. Economists expect the figures to show a 0.1% MoM rise, unchanged from the previous month. On a yearly basis, sales are foreseen plunging by 1.2% from the 0.8% decline previously. 

Although the data is lagging – it is for the month of September – a better-than-expected result could support MXN in its pairs whilst a lower-than-expected reading might result in further weakness. A lower figure could stoke concerns the Mexican economy is slowing down. 

In its accompanying statement to the last policy meeting, Banxico said it saw the balance of risks for economic growth as leaning to the downside, and weak Retail Sales data would fuel this conclusion, with negative implications for the Peso. 

Further, it would support comments from Banxico head Victoria Rodríguez Ceja that the central bank plans to continue reducing its benchmark interest rate, citing progress in lowering inflation. Lower interest rates are negative for a currency as they reduce foreign capital inflows.

Mexican Congress votes to scrap five autonomous and regulatory bodies

On Wednesday, the Mexican Congress voted through a controversial reform scrapping or replacing five of Mexico’s independent regulatory bodies, according to El Financiero. The move probably contributed to the Peso’s weakening on the day. 

It is one of a number of reforms, including a radical overhaul of the judiciary, that have raised concerns among investors, and were responsible for the MXN’s 10% decline following the election in June. Critics of the reforms say they will remove another important check and balance to the power of large organizations and the state, whilst proponents say the autonomous agencies are riddled with corruption and thus unnecessary. 

One of the most controversial bodies to be dissolved is The National Institute for Transparency, Access to Information, and Data Protection (INAI), which “has the authority to require government agencies, political parties, labor unions, or other public bodies to comply with freedom of information requests from individuals or organizations,” according to Human Rights Watch. The international NGO flagged concerns after previous President Andres Manuel Lopez Obrador decided to block the election of commissioners to fill vacant seats at INAI, disabling its ability to make decisions. INAI also gives Mexican citizens the right to safeguard their personal data. 

The move is likely to inflame relations with the US government,  which under Trump’s upcoming leadership is threatening to place tariffs on Mexican imports. This might be seen as another risk to investors because it will raise fears the government and other large organizations in Mexico may not be properly held accountable for their actions. 

Technical Analysis: USD/MXN begins possible “C” wave high

USD/MXN may be unfolding a possible “C” wave higher (see chart below) as it completes a Measured Move pattern. These patterns are composed of three waves, in which the first and the third are of a similar length.

USD/MXN 4-hour Chart 

USD/MXN appears range bound in the short term as it oscillates between the 19.70s and 20.80s. The extension of wave C would correspond to an up leg unfolding within this sideways consolidation towards its ceiling (green dashed line). 

The (blue) Moving Average Convergence Divergence (MACD) indicator has crossed above its red signal line, supporting evidence that the pair is unfolding higher. As yet, price action has not rallied sufficiently higher, however, to provide confirmation such a leg is unfolding.
 

EUR/USD looks to have been buffeted by events in Ukraine this week. The war is going through a period of escalation as both sides seek to gain ground ahead of potential ceasefire discussions early next year, ING’s Chris Turner notes.  

The full range of doves and hawks speaking today

“That the Biden administration is providing more support before year-end warns of a more aggressive Russian response – a development which is weighing on European currencies and starting to show up in higher natural gas prices. Europe's gas inventories are now fractionally below their five-year average for this time of year. We all recall the spike in gas prices in 2022 and the damage they did to European currencies.”

“At the same time, we have the ECB publicly debating the potential inflationary impact of Trump's impending tariffs and what they mean to the easing cycle. Hawks think the tariff effects could be meaningful, but the doves disagree.”

“On today's agenda, we have the full range of doves and hawks speaking and collectively they perhaps will not move the needle on the 30bp of easing priced for the December ECB meeting. This leaves EUR:USD swap differentials very wide in the dollar's favour, and combined with the threat of some soft flash November PMI numbers across Europe, tomorrow should keep EUR/USD subdued in its 1.05-1.06 range today.” 

• AUD/USD regains positive traction following the overnight pullback from a one-week top. 
• A softer USD and a positive risk tone benefit the Aussie amid the RBA’s hawkish stance.
• Traders look to the US macro data and the Fed speaks for some meaningful opportunities. 

The AUD/USD pair attracts some dip-buyers on Thursday and sticks to its modest intraday gains, around the 0.6520 area during the first half of the European session. The uptick is sponsored by a softer tone surrounding the US Dollar (USD), though lacks bullish conviction and warrants some caution before positioning for an extension of the recent bounce from a three-month low touched last week. 

The USD bulls opt to move to the sidelines and look for more clarity on US President-elect Donald Trump's proposed policies before placing fresh. Moreover, the initial reaction to Russian President Vladimir Putin's approval to lower the threshold for nuclear strikes on Tuesday turned out to be short-lived after comments from Russian and US officials eased concerns about a nuclear war. This, in turn, remains supportive of the upbeat market mood, which further seems to undermine the safe-haven buck and benefits the risk-sensitive Aussie. 

Furthermore, the Reserve Bank of Australia's (RBA) hawkish stance offers additional support to the Australian Dollar (AUD). In fact, the minutes of the November RBA meeting released earlier this week indicated that the board members remained vigilant to upside inflation risks and stressed the importance of maintaining a restrictive monetary policy. Meanwhile, expectations for a less dovish Federal Reserve (Fed) should continue to act as a tailwind for the USD and hold back traders from placing aggressive bullish bets around the AUD/USD pair. 

In fact, the markets are now pricing in just over a 50% chance that the US central bank will lower borrowing costs by 25 basis points in December amid expectations that Trump's taunted tariffs and tax cuts could reignite inflation. The outlook remains supportive of elevated US Treasury bond yields and supports prospects for the emergence of some USD dip-buying. This, in turn, should contribute to capping the upside for the AUD/USD pair. Traders now look to the US macro data and speeches by influential FOMC members for a fresh impetus.

Further range trading appears likely; soft underlying tone suggests a lower range of 1.2615/1.2685. In the longer run, downward momentum is beginning to slow; a break above 1.2725 would mean that the major support at 1.2565 is out of reach, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Above 1.2725 the major support at 1.2565 is out of reach

24-HOUR VIEW: “We noted yesterday that ‘The price action still appears to be part of a range trading phase.’ We expected GBP to ‘trade between 1.2630 and 1.2710.’ GBP then traded in a 1.2631/1.2713 range, closing at 1.2647, lower by 0.27% for the day. Further range trading appears likely, even though the softened underlying tone suggests a lower range of 1.2615/1.2685.”

1-3 WEEKS VIEW: “We have held a negative view in GBP since early last week. Yesterday (20 Nov), when GBP was at 1.2685, we pointed out that ‘downward momentum is beginning to slow.’ We added, ‘a break above 1.2725 would mean that the major support at 1.2565 is out of reach.’ In London trade, GBP rose briefly to 1.2713, and then pulled back. There has been no increase in momentum, and we continue to hold the same view as yesterday.”

The DXY dollar index is holding gains and it is not hard to see why. US rates are being repriced modestly higher as the market shifts away from pricing a December Fed rate cut, ING’s Chris Turner notes.  

DXY to remain bid in its new 106-107 range

“Just 8bp of easing is now priced. At the same time, the market is bracing for Trump 2.0 and developments in overseas economies are far from encouraging. Equally, one-week USD deposits now pay 4.61% annually, second only to GBP (4.74%) in the G10 space. It is not a surprise then to see investors and corporates holding onto their USD investments.”

“On Monday we mentioned that the choice of the next US Treasury Secretary could prove a banana skin for US asset markets. However, it now looks (according to betting markets) that ex-Fed member Kevin Warsh is the front-runner for this role. He would be seen as a safe pair of hands given his experience at the Fed and liaison role with Wall Street after the 2008-09 financial crisis.”

“For today, we doubt US data will move markets although investors will again be watching whether any rise in the weekly jobless claims numbers portends a weaker November NFP report (released 6 December). Expect DXY to remain bid in its new 106-107 range with continued focus on developments in Ukraine and European speakers today.”

• USD/CAD depreciates as the commodity-linked CAD receives support from improved Oil prices.
• Ukraine has launched British Storm Shadow cruise missiles into Russia on Wednesday.
• Boston Fed President Susan Collins emphasized the importance of a cautious approach in making policy decisions.

USD/CAD retraces its recent gains from the previous day as the commodity-linked Canadian Dollar (CAD) receives support from the improved crude Oil prices amid rising fears of supply disruption amid geopolitical tensions. The pair trades around 1.3960 during the European session on Thursday.

West Texas Intermediate (WTI) crude Oil price recovers recent losses registered in the previous session, trading around $69.50 per barrel at the time of writing. Oil prices found support after Ukraine launched British Storm Shadow cruise missiles into Russia on Wednesday, marking another deployment of Western weaponry against Russian targets. This followed Ukraine's use of U.S. ATACMS missiles the day before. 

Meanwhile, the Canadian Dollar may gain support as expectations for a deeper-than-usual interest rate cut by the Bank of Canada (BoC) in December have diminished. Following hotter-than-expected inflation data on Tuesday, markets are now pricing a nearly 26% probability of a 50-basis-point (bps) rate cut by the BoC in December, down from 37% before the CPI release.

The US Dollar (USD) remains steady due to cautious remarks by Federal Reserve (Fed) officials. Boston Fed President Susan Collins stated on Wednesday that while more interest rate cuts are necessary, policymakers should proceed cautiously to avoid moving too quickly or too slowly, according to Bloomberg. Meanwhile, Fed Governor Michelle Bowman highlighted that inflation remains elevated over the past few months and stressed the need for the Fed to proceed cautiously with rate cuts.

A Reuters poll indicated that nearly 90% of economists (94 out of 106) anticipate a 25bps cut in December, lowering the fed funds rate to 4.25%-4.50%. Economists predict shallower rate cuts in 2025 due to the risk of higher inflation from President-elect Trump's policies. The fed funds rate is forecasted to be 3.50%-3.75% by the end of 2025, which is 50bps higher than last month’s projection.

The Euro (EUR) is likely to trade in a range between 1.0505 and 1.0575. In the longer run, recent downtrend in EUR is likely to resume if it breaks and stays below 1.0490, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR is likely to trade in a range between 1.0505 and 1.0575

24-HOUR VIEW: “EUR dropped sharply but briefly, to 1.0523 on Tuesday. Yesterday (Wednesday), we noted that ‘The brief decline did not result in any increase in momentum.’ We expected EUR to ‘trade in a range, likely between 1.0550 and 1.0620.’ Our view turned out to be incorrect, as EUR plummeted to 1.0507, rebounding to close at 1.0543 (-0.49%). The sharp drop appears to be overdone, and EUR is unlikely to weaken much further. Today, it is more likely to trade in a range between 1.0505 and 1.0575.”

1-3 WEEKS VIEW: “After holding a negative EUR view for two weeks, we revised the outlook to neutral yesterday (20 Nov, spot at 1.0590), indicating that ‘the weakness in EUR has stabilised.’ We held the view that EUR ‘is expected to consolidate between 1.0520 and 1.0685.’ Although EUR subsequently dropped below the bottom of our expected range (low of 1.0507), there has been no significant increase in momentum. The recent downtrend in EUR is likely to resume if it breaks and stays below 1.0490. The likelihood of EUR breaking clearly below 1.0490 will remain intact as long as 1.0600 is not breached.”

• NZD/USD loses ground due to rising expectations of a larger 75 bps rate cut by the RBNZ next week.
• The US Dollar received support from cautious comments by the Fed officials.
• Boston Fed President Susan Collins emphasized the importance of a cautious approach in making policy decisions.

NZD/USD extends its losses for the second consecutive day, trading around 0.5860 during the European hours on Thursday. The New Zealand Dollar (NZD) faces challenges due to growing expectations that the Reserve Bank of New Zealand (RBNZ) could deliver a bumper interest rate cut next week.

On Thursday, New Zealand's Treasury Chief Economic Adviser, Dominick Stephens, said it would likely revise down its economic and fiscal forecasts due to a prolonged slowdown in productivity. This led investors to fully anticipate a 50 basis point (bps) rate cut, with a 12% chance of a larger 75 bps reduction in November’s policy meeting.

UOB Group FX analysts Quek Ser Leang and Lee Sue Ann noted that while the New Zealand Dollar (NZD) may see some upward movement, it is unlikely to reach 0.5960 in the near term. However, as long as the NZD stays above 0.5850, it could gradually rise to 0.5960 over time.

The US Dollar may appreciate further due to the cautious remarks from Federal Reserve (Fed) officials. Additionally, market expectations suggest that the incoming Donald Trump administration will spur inflation, thereby slowing the rate cut trajectory from the Fed, lending support to the Greenback.

Boston Fed President Susan Collins stated on Wednesday that while more interest rate cuts are necessary, policymakers should proceed cautiously to avoid moving too quickly or too slowly, according to Bloomberg. Meanwhile, Fed Governor Michelle Bowman highlighted that inflation remains elevated over the past few months and stressed the need for the Fed to proceed cautiously with rate cuts.

Traders will be closely monitoring the US weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, and Existing Home Sales, all of which are scheduled for release later on Thursday.

• The Pound Sterling faces pressure against its major peers despite a faster-than-expected increase in UK inflation weighs on BoE rate cut bets for December.
• BoE’s Ramsden supports a less gradual easing approach as he is confident that the disinflation trend is intact.
• The Fed is expected to deliver fewer interest rate cuts ahead due to expectations of a high inflation outlook.

The Pound Sterling (GBP) weakens against most of its peers on Thursday even though traders doubt whether the Bank of England (BoE) will cut interest rates again in the December meeting. Market speculation for BoE rate cuts next month diminished after the release of the United Kingdom (UK) Consumer Price Index (CPI) data for October on Wednesday showed that price pressures accelerated faster than expected.

UK’s headline inflation came in higher than the bank’s target of 2%, the core CPI,  which excludes volatile items, accelerated unexpectedly, and the service inflation, which BoE officials closely track, grew at a faster pace of 5%. It seems the headline inflation is on track to where the Monetary Policy Committee (MPC) projected at the start of the month. The MPC forecasted inflation at 2.4% and 2.5% in November and December, respectively.

The inflation data underscores BoE Governor Andrew Bailey’s advice of adopting a gradual policy-easing approach in his commentary at the press conference after the policy decision of cutting interest rates by 25 basis points (bps) to 4.75% on November 7.

On the contrary, BoE Deputy Governor Dave Ramsden said after the inflation data release on Wednesday that he expects the economy to “continue to normalize” with an ongoing trend toward “low and relatively stable inflation,” Bloomberg reported. The comments from Ramsden appeared to be dovish as he said that he would consider a less gradual rate-cut approach if the evidence starts to “point more clearly to further disinflationary pressures.”

Going forward, investors will pay close attention to the Retail Sales data for October and flash S&P Global/CIPS Purchasing Managers Index (PMI) data for November, which will be published on Friday.

Daily digest marker movers: Pound Sterling tracks US Dollar’s muted action

• The Pound Sterling trades in a tight range near 1.2650 against the US Dollar (USD) in Thursday’s London session. The GBP/USD pair consolidates, tracking the US Dollar Index’s (DXY) performance, which trades mutely despite a strong recovery on Wednesday, as investors look for fresh cues about the Federal Reserve (Fed) interest rate path.
• Recently, traders pared Fed rate cut bets for December as investors expect President-elect Donald Trump’s policies on trade and taxes will be inflationary and growth-oriented, a scenario that would force the Fed to follow a more gradual policy-easing approach.
• The Fed's probability of cutting interest rates by 25 bps to the 4.25%-4.50% range in December has come down to 52% from 72% a week ago, according to the CME FedWatch tool. Meanwhile, Fed policymakers have contradictory opinions about the likely Fed interest rate path.
• On Wednesday, Boston Fed Bank President Susan Collins emphasized the need to push the monetary policy gradually towards a neutral range from its current restrictive state as she is confident about inflation remaining on track to the bank’s target of 2%. Meanwhile, Fed Governor Michelle Bowman said, "It's concerning to me that we're recalibrating policy, but we haven't yet achieved our inflation goal."

Technical Analysis: Pound Sterling consolidates around 1.2650

The Pound Sterling trades sideways at around 1.2650 against the US Dollar on Thursday. The GBP/USD pair hovers inside the prior day’s trading range, signalling a volatility squeeze. Broadly, the Cable remains vulnerable above the six-month low near 1.2600 reached last Friday as it doesn’t show any sign of reversal.

The establishment of the pair below the 200-day Exponential Moving Average (EMA) near 1.2850 suggests that the overall trend is bearish.

The 14-day Relative Strength Index (RSI) remains within the 20.00-40.00 level, indicating 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 200-day EMA.

• GBP/JPY may depreciate further as daily chart analysis suggests a bearish bias.
• The nine-day EMA sits below the 14-day EMA, signaling continued weakness in short-term price momentum.
• The immediate support appears at the lower boundary of the descending channel at 193.50 level.

The GBP/JPY cross pares its recent gains, trading around 195.80 during the early European hours on Thursday. The daily chart analysis indicates that the pair is positioned within the descending channel pattern, suggesting a bearish bias.

The 14-day Relative Strength Index (RSI) is slightly below the 50 level, confirming bearish momentum. Additionally, the nine-day Exponential Moving Average (EMA) is positioned below the 14-day EMA, indicating persistent weakness in short-term price momentum.

On the downside, the GBP/JPY cross may navigate the region around the lower boundary of the descending channel at the 193.50 level. A break below this level would reinforce the bearish bias and put downward pressure on the currency cross to revisit the two-month low at the 189.56 level, which was recorded on September 30.

Regarding the upside, the immediate barrier appears at the nine-day EMA at 196.46 level, followed by the 14-day EMA at 196.63 level. Further resistance appears at the upper boundary of the descending channel at 197.70 level. A successful breach above this channel could cause the emergence of the bullish bias and support the GBP/JPY cross to test the four-month high at 199.81 level, reached on October 30.

GBP/JPY: Daily Chart

Here is what you need to know on Thursday, November 21:

The US Dollar (USD) Index stays in a consolidation phase near 106.50 after closing in positive territory on Wednesday. The US economic calendar will feature weekly Initial Jobless Claims data alongside Existing Home Sales figures for October. Additionally, the Federal Reserve (Fed) Bank of Philadelphia and Kansas City will release regional manufacturing surveys for November.

The cautious market mood and the modest increase seen in US Treasury bond yields helped the USD stay resilient against its major rivals on Wednesday. Early Thursday, the benchmark 10-year US Treasury bond yield holds steady at around 4.4% and US stock index futures trade mixed. In addition to macroeconomic data releases from the US, comments from Fed policymakers will be watched closely by market participants. Cleveland Fed President Beth Hammack, Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid will be delivering speeches during the American trading hours.

Bank of Japan Governor Kazuo Ueda reiterated on Thursday that they will decide on the monetary policy on a meeting-by-meeting basis. "We do seriously take into account exchange-rate movements in forming our economic and inflation outlook, including the question of what's causing the exchange-rate changes that are taking place at the moment," Ueda further explained. After rising 0.5% on Wednesday, USD/JPY stays under bearish pressure early Thursday and was last seen trading below 155.00.

EUR/USD seems to have entered a consolidation phase at around 1.0550 after closing in negative territory on Wednesday. The European Commission will publish preliminary Consumer Confidence data for November later in the session.

Gold posted gains on Wednesday and extended its winning streak into a third consecutive day. XAU/USD continues to edge higher in the European morning on Thursday and was last seen trading slightly above $2,660.

After declining sharply on Monday and Tuesday, USD/CAD found a foothold and posted small gains on Wednesday. The pair fluctuates in a narrow range above 1.3950 to start the European session. Statistics Canada will publish New Housing Price Index data for October later in the day.

GBP/USD failed to benefit from strong inflation readings from the UK and posted small losses on Wednesday. The pair stays relatively quiet and moves up and down in a narrow channel near 1.2650 early Thursday.

• The US Dollar Index drifts lower to near 106.50 in Thursday’s early European session.
• The index keeps a positive view with the bullish RSI indicator.
• The immediate resistance level emerges at 107.45; the first downside target to watch is 106.00.

The US Dollar Index (DXY) trades with mild losses around 106.50 during the early European session on Thursday. The downside for the index might be limited as markets expect that Donald Trump’s administration will reignite inflation and slow the path of rate cuts from the Federal Reserve (Fed), supporting the Greenback. 

Technically, the bullish trend of the DXY remains intact as the index is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) stands above the midline near 66.40, indicating that the path of least resistance is to the upside. 

The first upside target for the DXY emerges near the upper boundary of the Bollinger Band at 107.45. Any follow-through buying above this level could pave the way to 108.00, the high of November 21, 2022. Further north, the next hurdle to watch is the 110.25, the high of September 8, 2022. 

In the bearish event, sustained trading below 106.00, the round mark, could see a drop to 104.19, the low of November 7. The key support level is seen at 103.71, the 100-day EMA. A breach of the mentioned level could expose 102.95, the lower limit of the Bollinger Band.  

US Dollar Index (DXY) Daily Chart

In a Barron’s interview published on Thursday, New York Federal Reserve Bank (Fed) President John Williams said that he “sees inflation cooling and interest rates falling further.”

He further noted that “2% is the rate that can best balance the central bank’s employment and price stability goals.”

Additional comments

More comments flowing in from Bank of Japan (BoJ) Governor Kazuo Ueda, as he now speaks on the monetary policy and the exchange rate value.

Speaking at a conference in Tokyo on Thursday, European Central Bank (ECB) policymaker Francois Villeroy de Galhau said that “the balance of risks on growth and inflation is shifting to the downside.”

Additional comments

• EUR/GBP may depreciate as a recent UK inflation report has strengthened the BoE’s caution regarding rate cuts.
• ECB member Yannis Stournaras remarked that the Eurozone is nearing a sustainable attainment of its 2% inflation target.
• The Euro may face challenges as traders expect the ECB to deliver a 25 basis point rate cut in December.

EUR/GBP appreciates after two days of losses, trading around 0.8340 during the Asian hours on Thursday. However, the upside of the EUR/GBP cross could be limited as Wednesday’s stronger-than-anticipated UK inflation report has bolstered the Bank of England's (BoE) cautious approach toward future interest rate reductions.

UK CPI inflation surged to 2.3% year-over-year in October, marking a six-month high, up from 1.7% in September and beating forecasts of 2.2%. The monthly CPI increased by 0.6% after remaining unchanged in September. Meanwhile, Core CPI, which excludes the more volatile food and energy prices, climbed to 3.3% over the same period, outpacing market predictions of 3.1%.

Additionally, Services inflation rose to 5%, up from 4.9% in the previous report. If price pressures continue to build, traders may reconsider expectations for interest rate cuts at the BoE's December policy meeting.

On Wednesday, European Central Bank (ECB) Governing Council member Yannis Stournaras stated that the Eurozone is close to sustainably achieving its 2% inflation target. Stournaras emphasized the responsibility of policymakers to ensure they do not fall short of this goal, according to Bloomberg.

Meanwhile, the EU Financial Stability Review noted that escalating geopolitical tensions and policy uncertainties are intensifying sovereign vulnerabilities while growing global trade disputes heighten the risk of economic shocks. 

Since June, the ECB has implemented three rate cuts as inflation edges closer to the 2% target. However, growth forecasts have been revised downward twice. Markets widely expect a 25 basis point rate cut next month, with a smaller probability of a more substantial reduction.

FX option expiries for Nov 21 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0470 1.1b
• 1.0500 2.8b
• 1.0515 1.9b
• 1.0540 907m
• 1.0550 1.4b
• 1.0600 1.8b
• 1.0610 813m
• 1.0650 1.7b
• 1.0690 2.3b
• 1.0695 960m
• 1.0700 2.8b

USD/JPY: USD amounts                     

• 154.80 793m
• 155.00 993m
• 156.00 997m

USD/CHF: USD amounts     

• 0.8485 530m
• 0.8625 856m

AUD/USD: AUD amounts

• 0.6450 2b
• 0.6500 592m
• 0.6640 560m
• 0.6700 916m

USD/CAD: USD amounts       

• 1.4000 616m
• 1.4025 825m
• 1.4175 1.1b

NZD/USD: NZD amounts

• 0.5875 528m
• 0.6030 466m

Bank of Japan (BoJ) Governor Kazuo Ueda doesn’t touch upon monetary policy and economic outlook during his scheduled appearance on Thursday.

Key quotes

Market reaction

USD/JPY holds its position above 155.00, at the time of writing, still down 0.22% on the day. 

• AUD/JPY edges lower to around 101.05 in Thursday’s early European session. 
• Further consolidation cannot be ruled out as the RSI emerges in the neutral zone. 
• The first upside barrier emerges at 101.80; the key support level is seen at 100.00.

The AUD/JPY cross trades in a narrow range near 101.05 during the early European session on Thursday. Traders will monitor the speeches from the Bank of Japan (BoJ) Governor Kazuo Ueda and the Reserve Bank of Australia (RBA) Governor Michele Bullock later on Thursday, which might offer some insights on inflation and rate hike expectations.

According to the daily chart, the cross remains above the key 100-day Exponential Moving Average (EMA), suggesting the support level is likely to hold rather than break in the near term. However, further consolidation cannot be ruled out as the 14-day Relative Strength Index (RSI) hovers around the midline, indicating the neutral momentum of the cross. 

The upper boundary of the Bollinger Band near 101.80 acts as an immediate resistance level for AUD/JPY. Extended gains above this level could see a rally to 102.40, the high of November 7. The additional upside filter to watch is 103.36, the low of July 23. 

On the flip side, the key support level is seen at the 100.00 psychological level. A breach of this level could pave the way to 99.42, the low of November 15. Further north, the next downside target emerges at 98.03, the low of September 27. 

AUD/JPY 4-hour chart

• USD/CHF meets with a fresh supply on Thursday, though the downside seems limited.
• Expectations for a less dovish Fed and elevated US bond yields could support the USD.
• The risk-on mood could undermine the safe-haven CHF and lend support to the major.

The USD/CHF pair struggles to capitalize on the previous day's recovery from the vicinity of the 0.8800 mark or a one-week low and attracts fresh sellers during the Asian session on Thursday. Spot prices currently trade around the 0.8825 region, down just over 0.2% for the day, though any meaningful downside seems elusive in the wake of a bullish US Dollar (USD) sentiment. 

Investors now seem convinced that US President-elect Donald Trump's expansionary policies will likely boost inflation and limit the scope for the Federal Reserve (Fed) to ease its monetary policy aggressively. Moreover, Fed policymakers' recent cautious remarks on further policy easing remain supportive of rising US Treasury bond yields. This, in turn, assists the USD Index (DXY), which tracks the Greenback against a basket of currencies, to hold steady near the year-to-date touched last week and should act as a tailwind for the USD/CHF pair. 

Meanwhile, the initial market reaction to Russian President Vladimir Putin's approval to change the country's nuclear doctrine turned out to be short-lived as comments from Russian and US officials eased concerns about the onset of a nuclear war. This remains supportive of a generally positive tone across the global equity markets and undermines demand for the safe-haven Swiss Franc (CHF). The prevalent risk-on mood might further contribute to limiting the downside for the USD/CHF pair and warrants some caution for aggressive bearish traders.

Market participants now look forward to the US economic docket – featuring the release of the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data. This, along with the speeches from a slew of influential FOMC members, will drive the US bond yields and the USD. Apart from this, geopolitical developments should produce short-term trading opportunities around the USD/CHF pair. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the upside.

• EUR/USD may depreciate due to safe-haven flows amid the escalated Russia-Ukraine conflict.
• ECB member Yannis Stournaras remarked that the Eurozone is nearing a sustainable attainment of its 2% inflation target.
• The US Dollar appreciated due to cautious remarks from Fed officials.

EUR/USD appreciates slightly after registering losses in the previous session, trading around 1.0550 during the Asian hours on Thursday. However, the upside of the pair could be restrained due to safe-haven flows amid rising geopolitical conflict between Russia and Ukraine.

Reuters reported that Ukraine launched a volley of British Storm Shadow cruise missiles into Russia on Wednesday, marking the latest deployment of Western weaponry against Russian targets. Moscow has stated that the use of Western weapons to strike Russian territory far from the border would significantly escalate the conflict.

European Central Bank (ECB) Governing Council member Yannis Stournaras stated on Wednesday that the Eurozone is close to sustainably achieving its 2% inflation target. Stournaras emphasized the responsibility of policymakers to ensure they do not fall short of this goal, according to Bloomberg.

Meanwhile, the EU Financial Stability Review noted that escalating geopolitical tensions and policy uncertainties are intensifying sovereign vulnerabilities while growing global trade disputes heighten the risk of economic shocks. 

Since June, the ECB has implemented three rate cuts as inflation edges closer to the 2% target. However, growth forecasts have been revised downward twice. Markets widely expect a 25-basis-point rate cut next month, with a smaller probability of a more substantial reduction.

The US Dollar (USD) gained support from cautious remarks by Federal Reserve (Fed) officials. Boston Fed President Susan Collins stated on Wednesday that while more interest rate cuts are necessary, policymakers should proceed cautiously to avoid moving too quickly or too slowly, according to Bloomberg.

Meanwhile, Fed Governor Michelle Bowman highlighted that inflation remains elevated over the past few months and stressed the need for the Fed to proceed cautiously with rate cuts.

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

The price for Gold stood at 7,214.82 Indian Rupees (INR) per gram, up compared with the INR 7,190.72 it cost on Wednesday.

The price for Gold increased to INR 84,152.27 per tola from INR 83,871.11 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.)

Four Chinese government advisers advocated for a 2025 growth target of around 5%, similar to this year, Reuters reported on Thursday.  

One Chinese government adviser pressed for a growth target of 'above 4%' while another recommended a 4.5%-5% range.

They said “a higher budget deficit could mitigate the impact of expected US tariffs.”

"It's entirely possible to offset the impact of Trump’s tariffs on China’s exports by further expanding domestic demand," said Yu Yongding, one of the advisers and a government economist who advocates for a roughly 5% goal.

"We should adopt stronger fiscal policy next year," said Yu, adding the budget deficit "should definitely exceed" this year's planned level of 3% of gross domestic product (GDP).

• EUR/JPY once again faces rejection near the 200-period SMA on the 4-hour chart.
• A combination of factors underpins the JPY and exerts some pressure on the cross.
• Bears might still wait for a break below the 163.00 mark before placing fresh bets.

The EUR/JPY cross meets with a fresh supply following the previous day's good two-way price swings and trades around the mid-163.00s during the Asian session on Thursday, down 0.20% for the day.

Against the backdrop of intervention fears and geopolitical uncertainties, hopes that Bank of Japan (BoJ) Governor Kazuo Ueda might signal another interest rate hike as early as next month underpin the safe-haven Japanese Yen (JPY). This, in turn, is seen as a key factor exerting some pressure on the EUR/JPY cross. That said, an uptick in the shared currency, bolstered by subdued US Dollar (USD) price action, limits losses for the currency pair. 

From a technical perspective, the recent repeated failures near the 200-period Simple Moving Average (SMA) on the 4-hour chart favor bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the EUR/JPY cross is to the downside. That said, any further slide might continue to find support ahead of the 163.00 mark and the 162.50-162.40 horizontal zone.

Some follow-through selling might expose the weekly trough, around the 161.50-161.45 region, or the lowest level since October 4 touched on Tuesday, with some intermediate support near the 162.00 round figure. The downward trajectory could extend further and drag the EUR/JPY cross to the 161.00 round figure en route to intermediate support near the 160.55 area and the 160.00 psychological mark.

On the flip side, the 164.00 mark now seems to act as an immediate hurdle ahead of the 200-period SMA, currently pegged near the 164.70 region. A convincing breakout through the said barrier, leading to a subsequent move beyond the 165.00 psychological mark, will be seen as a key trigger for bullish traders. The EUR/JPY cross might then accelerate the positive momentum towards the 165.40 area and then aim to reclaim the 166.00 round figure.

EUR/JPY 4-hour chart

• GBP/USD holds thin gains as the US Dollar corrects downwards despite cautious Fed officials.
• The upside of the pair could be restrained due to safe-haven flows amid the escalated Russia-Ukraine war.
• A hotter UK inflation report has bolstered the BoE caution toward future interest rate reductions.

GBP/USD edges higher to near 1.2650 during the Asian trading hours on Thursday. This downside could be attributed to the softer US Dollar (USD). The US Dollar Index (DXY), which measures the value of the USD against its six major peers, holds ground near 106.50 at the time of writing.

However, the downside risk for the US Dollar may be constrained due to the cautious remarks from Federal Reserve (Fed) officials. Boston Fed President Susan Collins stated on Wednesday that while more interest rate cuts are necessary, policymakers should proceed cautiously to avoid moving too quickly or too slowly, according to Bloomberg.

Meanwhile, Fed Governor Michelle Bowman highlighted that inflation remains elevated over the past few months and stressed the need for the Fed to proceed cautiously with rate cuts.

A Reuters poll indicated that nearly 90% of economists (94 out of 106) anticipate a 25bps cut in December, lowering the fed funds rate to 4.25%-4.50%. Economists predict shallower rate cuts in 2025 due to the risk of higher inflation from President-elect Trump's policies. The fed funds rate is forecasted to be 3.50%-3.75% by the end of 2025, which is 50bps higher than last month’s projection.

The upside potential for the GBP/USD pair seems restrained due to safe-haven flows amid the escalated Russia-Ukraine conflict. On Wednesday, Ukraine launched a volley of British Storm Shadow cruise missiles into Russia, marking the latest deployment of Western weaponry against Russian targets. This follows Ukraine's use of US ATACMS missiles the previous day.

On Wednesday, a stronger-than-anticipated UK inflation report bolstered the Bank of England's (BoE) cautious approach toward future interest rate reductions. UK CPI inflation surged to 2.3% year-over-year in October, marking a six-month high, up from 1.7% in September and beating forecasts of 2.2%. Meanwhile, Core CPI, which excludes the more volatile food and energy prices, climbed to 3.3% over the same period, outpacing market predictions of 3.1%.

• Gold price attracts buyers for the fourth consecutive day and climbs to over a one-week high.
• Geopolitical risks stemming from the Russia-Ukraine conflict benefit the safe-haven XAU/USD.
• Elevated US bond yields underpin the US Dollar and might cap the non-yielding yellow metal.

Gold price (XAU/USD) prolongs its weekly uptrend for the fourth straight day and climbs to the $2,660 area, or a fresh one-and-half-week high during the Asian session on Thursday. Mounting geopolitical uncertainties, fueled by escalating Russia-Ukraine tensions, continue to drive haven flows towards traditional safe-haven assets and assist the precious metal to recover further from a two-month low touched last week. Bullion, which is considered a hedge against inflation, further seems to benefit from expectations that US President-elect Donald Trump's proposed tariffs could spur inflationary pressures.

That said, high inflation could limit the scope of the Federal Reserve (Fed) to ease monetary policy. Furthermore, worries that Trump's debt-funded tax cuts would lead to larger budget deficits remain supportive of elevated US Treasury bond yields. This, in turn, assists the US Dollar (USD) to hold steady just below the year-to-date (YTD) peak touched last week and might act as a headwind for the non-yielding Gold price. Apart from this, the prevalent risk-on mood – as depicted by a generally positive tone around the equity markets – warrants caution before placing aggressive bullish bets around the XAU/USD. 

Gold price continues to attract haven flows amid worsening Russia-Ukraine tensions

• Geopolitical tensions intensified after Russian President Vladimir Putin lowered the threshold for nuclear strikes and underpinned the safe-haven Gold price for the fourth straight day on Thursday.
• Investors seem convinced that US President-elect Donald Trump's proposed expansionary policies could accelerate inflation and force the Federal Reserve to slow the pace of its rate-cutting cycle. 
• Moreover, a slew of influential Fed officials recently cautioned on further policy easing, which remains supportive of elevated US Treasury bond yields and keeps the US Dollar near the YTD high.
• Lisa Cook, a member of the Federal Reserve Board of Governors, noted on Wednesday that the central bank might get forced into a pause on interest rate cuts if inflation progress slows down.
• Separately, Fed Governor Michelle Bowman said that the progress on inflation appears to have stalled and that the US central bank should pursue a cautious approach to monetary policy.
• Meanwhile, Boston Fed President Susan Collins said that more interest rate cuts are needed, but policymakers should proceed carefully to avoid moving too quickly or too slowly.
• According to the CME Group's FedWatch Tool, traders are currently pricing in just over a 50% chance that the Fed will lower borrowing costs at its December monetary policy meeting. 
• The yield on the benchmark 10-year US government advanced by the most in a week on Wednesday, which, along with a positive risk tone, might cap the safe-haven precious metal.
• Thursday's US economic docket features the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data later during the North American session.
• Investors will also scrutinize speeches from Fed policymakers for cues about the future rate-cut path, which will drive the USD and provide some impetus to the non-yielding XAU/USD. 

Gold price bulls might now wait for a sustained move beyond the $2,660 immediate hurdle

From a technical perspective, the intraday move-up faces some resistance near the 50% retracement level of the recent pullback from the all-time peak touched in October. The said barrier is pegged near the $2,660 area, above which the Gold price could accelerate the momentum towards the $2,670-2,672 congestion zone. Some follow-through buying could allow the XAU/USD to aim at reclaiming the $2,700 round figure. 

On the flip side, the $2,635-2,634 area, or the 38.2% Fibonacci retracement level, now seems to protect the immediate downside ahead of the $2,622-2,620 region and the $2,600 round figure. A convincing break below the latter could make the Gold price vulnerable and expose the 100-day Simple Moving Average (SMA), around the $2,557 region, with some intermediate support near the $2,570 zone. This is followed by last week’s swing low, around the $2,537-2,536 area, which if broken decisively will be seen as a fresh trigger for bearish traders and set the stage for deeper losses.

• The Indian Rupee extends its downside in Thursday’s Asian session.
• Rising geopolitical tensions, Trump trades, and sustained portfolio outflows weigh on the INR. 
• Traders brace for the US data and Fedspeak later on Thursday. 

The Indian Rupee (INR) extends its decline on Thursday. The heightened geopolitical tensions and market reactions due to Donald Trump’s victory in the US presidential elections drag the local currency lower. Additionally, continuous foreign portfolio outflows might continue to undermine the INR in the near term.

Nonetheless, the Reserve Bank of India (RBI) is likely to intervene in the foreign exchange to mitigate further depreciation of the local currency, with state-run banks offering USD in the market. Later on Thursday, traders will monitor the US weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, Existing Home Sales, and the CB Leading Index, which are due later on Thursday. Also, the Federal Reserve’s (Fed) Beth Hammack and Austan Goolsbee are scheduled to speak.

Indian Rupee weakens amid sustained portfolio outflows and geopolitical risks

• India's economic growth is expected to pick up in the current quarter after a slowdown in July-September, the RBI said in its monthly bulletin on Wednesday. 
• The Indian central bank projected third-quarter Gross Domestic Product (GDP) growth at 7.6%, faster than an estimated 6.7% in the second quarter.
• Indian Rupee fell by 7.8% during FY23 and by 1.4% in FY24. It has depreciated by 1.5% so far in FY25, according to the RBI. 
• Federal Reserve Board of Governors member Michelle Bowman said on Wednesday that inflation is still elevated and moving sideways in the last few months and the US central bank should pursue a cautious approach to monetary policy.
• Futures traders are now pricing in a 54% chance that the Fed will cut rates by a quarter point, down from around 80% last week, according to data from the CME FedWatch Tool. 

USD/INR’s broader trend remains constructive

The Indian Rupee softens on the day. The USD/INR pair keeps the bullish vibe as the price holds above the ascending channel throwback support on the daily time frame. The 14-day Relative Strength Index (RSI) is located above the midline around 66.70, suggesting that the further upside looks favorable.

The all-time high of 84.45 appears to be a tough nut to crack for the bulls. A decisive break above this level could still take the pair up to the 85.00 psychological level.

On the other hand, sustained bearish momentum below the resistance-turned-support level at 84.35 could pave the way to the 84.00-83.90 zone, representing the round mark and the 100-day EMA. 

• Silver prices have appreciated following Ukraine's launch of British Storm Shadow cruise missiles into Russia.
• Moscow has warned that using Western weapons to strike Russian territory far from the border would significantly escalate the conflict.
• Silver prices could face challenges due to a bleak outlook for the metal's industrial use.

Silver price (XAG/USD) retraces its recent losses from the previous session, trading around $31.00 during the Asian hours on Thursday. The rise in precious metal prices is attributed to safe-haven flows amid escalating tensions in the Russia-Ukraine war.

On Wednesday, Ukraine launched a volley of British Storm Shadow cruise missiles into Russia, marking the latest deployment of Western weaponry against Russian targets. This follows Ukraine's use of US ATACMS missiles the previous day.

According to a Reuters report, video footage posted by Russian war correspondents on Telegram showed black smoke rising in a residential area of the Kursk region, which borders northeastern Ukraine.

At least 14 large explosions were heard, most preceded by the sharp whistle of what sounded like incoming missiles. Moscow has stated that the use of Western weapons to strike Russian territory far from the border would significantly escalate the conflict.

However, Silver prices have been under pressure due to a bleak outlook for the metal's industrial use. On Wednesday, the People's Bank of China (PBoC) Monetary Policy Committee (MPC) decided to keep the benchmark interest rate at 3.1% for November. Higher interest rates in China, a major global manufacturing hub for electronics, solar panels, and automotive components, are expected to dampen industrial demand for Silver.

Furthermore, market expectations indicate that the incoming Donald Trump administration will spur inflation, which could slow down the Federal Reserve’s rate cut trajectory, thus exerting downward pressure on non-interest-bearing assets like Silver.

• The Japanese Yen strengthens against the USD, though it lacks bullish conviction amid BoJ uncertainty.
• The upbeat market mood and elevated US bond yield might contribute to capping the lower-yielding JPY.
• Traders look at Thursday's US macro data and the Fed speaks ahead of Japan’s National CPI on Friday.

The Japanese Yen (JPY) edges higher against its American counterpart during the Asian session on Thursday and drags the USD/JPY pair away from the weekly top touched the previous day. Any meaningful JPY appreciation, however, seems elusive in the wake of the uncertainty tied to the Bank of Japan’s (BoJ) pace and the timing of further interest rate hikes. Adding to this, a generally positive risk tone should contribute to capping gains for the safe-haven JPY.

Meanwhile, expectations that the Federal Reserve (Fed) may slow its path of rate cuts, amid concerns that US President-elect Trump's proposed policies could reignite inflation, remain supportive of elevated US Treasury bond yields. This assists the US Dollar (USD) to stand firm near the year-to-date peak and should limit losses for the USD/JPY pair. Traders might also opt to wait for the release of Japan's National Core Consumer Price Index (CPI) on Friday. 

Japanese Yen might struggle to gain any meaningful traction amid a bearish fundamental backdrop

• Bank of Japan Governor Kazuo Ueda earlier this week left markets guessing as to how soon and at what pace could the central bank tighten its monetary policy.
• Investors are pricing in an even chance of a 25-basis-point rate hike and an on-hold decision at the final BoJ policy meeting of this year on December 18-19.
• According to mediate reports, the economic package proposed by Japanese Economic Revitalisation Minister Akazawa is expected to be around ¥21.9 trillion. 
• Comments from Russian and US officials eased market concerns about the onset of a nuclear war, denting demand for traditional safe-haven currencies. 
• US President-elect Donald Trump's proposed policies could potentially stoke inflation and slow the path of interest rate cuts from the Federal Reserve.
• Furthermore, Fed policymakers' cautious remarks on further policy easing remain supportive of rising US Treasury bond yields and a bullish US Dollar. 
• Fed Governors member Lisa Cook noted on Wednesday that the central bank might get forced into a pause on interest rate cuts if inflation progress slows down.
• Separately, Fed Governor Michelle Bowman said that the progress on inflation appears to have stalled and that the central bank should pursue a cautious approach.
• Boston Fed President Susan Collins said that more rate cuts are needed, but policymakers should proceed carefully to avoid moving too quickly or too slowly.
• Traders now look to BoJ Governor Kazuo Ueda's appearance for some impetus ahead of speeches from a slew of influential FOMC members later this Thursday. 
• Meanwhile, the US economic docket features the release of Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data.
• The focus, however, remains on Japan's National Core Consumer Price Index (CPI), which will be among the factors that the BOJ will scrutinize at its next meeting. 

USD/JPY technical setup supports prospects for the emergence of dip-buying at lower levels

From a technical perspective, the USD/JPY pair has been showing some resilience below the 100-period Simple Moving Average (SMA) on the 4-hour chart. Moreover, oscillators on the daily chart are holding comfortably in positive territory, suggesting that any subsequent slide might still be seen as a buying opportunity near the 154.65-154.60 region. This should help limit the downside near the 154.00 mark (200-period SMA). The said support should act as a key pivotal point, which if broken might expose the weekly swing low, around the 153.25 area. 

On the flip side, the Asian session peak, around the 155.40 area, now seems to act as an immediate hurdle, above which the USD/JPY pair could make a fresh attempt to reclaim the 156.00 mark. Some follow-through buying could lift spot prices towards retesting the multi-month top, around the 156.75 region touched last Friday.

• The Australian Dollar rises as the RBA intends to maintain a restrictive monetary policy.
• The RBA Meeting Minutes indicated that the board remains vigilant about the potential for further inflation.
• The US Dollar may appreciate due to cautious remarks from Fed officials.

The Australian Dollar (AUD) retraces its recent losses on Thursday, buoyed by a hawkish outlook from the Reserve Bank of Australia (RBA) concerning interest rates. Despite this, the AUD/USD pair could still face downward pressure as the US Dollar (USD) might strengthen due to safe-haven flows amid the escalating Russia-Ukraine conflict.

The Reserve Bank of Australia's November Meeting Minutes indicated that the central bank’s board remains vigilant about the potential for further inflation, stressing the importance of maintaining a restrictive monetary policy. Although board members noted no "immediate need" to alter the cash rate, they kept options open for future adjustments, emphasizing that all possibilities remain on the table.

The downside risk for the US Dollar may be constrained due to the cautious remarks from Federal Reserve (Fed) officials. Additionally, market expectations suggest that the incoming Donald Trump administration will spur inflation, thereby slowing the rate cut trajectory from the Fed, lending support to the Greenback.

Traders will be closely monitoring the US weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, and Existing Home Sales, all of which are scheduled for release later on Thursday.

Daily Digest Market Movers: Australian Dollar recovers recent losses amid hawkish RBA

• Federal Reserve Bank of Boston President Susan Collins stated on Wednesday that while more interest-rate cuts are necessary, policymakers should proceed cautiously to avoid moving too quickly or too slowly, according to Bloomberg.
• On Wednesday, Fed Governor Michelle Bowman highlighted that inflation remains elevated over the past few months, and stressed the need for the Fed to proceed cautiously with rate cuts.
• Australian Treasurer Jim Chalmers stated that "tumbling iron ore prices and a softening labor market have impacted government revenue." following his Ministerial Statement on the economy on Wednesday. Chalmers outlined Australia's tough fiscal outlook, citing the weakening of China, a key trading partner, and the slowdown in the job market as contributing factors.
• Kansas City Fed President Jeffrey Schmid stated on Tuesday that he expects both inflation and employment to move closer to the Fed's targets. Schmid explained that rate cuts signal the Fed's confidence in inflation trending toward its 2% goal. He also noted that while large fiscal deficits won't necessarily drive inflation, the Fed may need to counteract potential pressures with higher interest rates.
• According to a Reuters report late Tuesday, Ukraine deployed US-supplied ATACMS missiles to strike Russian territory for the first time, signaling a significant escalation on the 1,000th day of the conflict. However, market concerns eased slightly after Russian Foreign Minister Sergei Lavrov stated that the government would "do everything possible" to prevent the outbreak of nuclear war.
• On Tuesday, an official from China’s National Development and Reform Commission (NDRC) stated that the country has "ample policy room and tools to support economic recovery." The official expressed confidence in China's economic trajectory, anticipating the recovery momentum will persist through November and December. Any change in the Chinese economy could impact the Australian markets as both nations are close trade partners.
• 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 hurry to lower rates."
• Chicago Fed President Austan Goolsbee stated on Friday 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.
• 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."

Technical Analysis: Australian Dollar remains above 0.6500 near nine-day EMA

The AUD/USD pair trades near 0.6510 on Thursday. Technical analysis of the daily chart indicates a continued decline within a descending channel pattern, signaling a bearish outlook. The 14-day Relative Strength Index (RSI) is below 50, further supporting the prevailing bearish sentiment.

For support, the AUD/USD pair may approach the lower boundary of the descending channel at 0.6370, followed by its yearly low of 0.6348, recorded on August 5.

On the upside, the AUD/USD pair tests the nine-day EMA at 0.6519, followed by the 14-day EMA at 0.6536. Surpassing these levels could weaken the bearish bias and set the stage for a rally toward the four-week high of 0.6687.

AUD/USD: Daily Chart

• WTI price holds steady near $68.95 in Thursday’s Asian session. 
• US crude stocks rose by more than expected last week, according to the EIA. 
• The conflict between Russia-Ukraine and concern around future oil supply disruptions might help limit the WTI’s losses. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.95 on Thursday. The WTI price trades flat as small US crude oil inventories built last week offset the escalating war between major oil producers Russia and Ukraine.

The Energy Information Administration's (EIA) weekly report showed crude stocks rose last week, which weighs on the black gold price. Crude oil stockpiles in the United States for the week ending November 15 increased by 0.545 million barrels, compared to a rise of 2.089 million barrels in the previous week. The market consensus estimated that stocks would increase by 0.400 million barrels. 

Weak Chinese demand contributes to the WTI’s downside as China is the world's largest crude importer. Data released earlier this week showed that China's crude oil demand fell -5.4% YoY in October. Chinese demand growth is set to reach just 140,000 bpd this year, a tenth of the 1.4 million bpd demand growth of 2023, according to the IEA. 

On the other hand, the worries about the intensifying war between major oil producers Russia and Ukraine, and subsequent concern around potential oil supply disruption might boost the WTI price. On Tuesday, Russia’s defense ministry said that Ukraine hit a facility in the Bryansk region with six ATACAMS missiles. In response, Russian President Vladimir Putin lowered the threshold for a possible nuclear strike.

"These risks to supply are definitely keeping the support here and offsetting to a degree concerns around the global demand outlook," said John Kilduff, partner at Again Capital in New York.

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Thursday at 7.1934, as compared to the previous day's fix of 7.1935 and 7.2482 Reuters estimates.

The European Central Bank (ECB) Governing Council member Yannis Stournaras said on Wednesday that the Eurozone is on the cusp of sustainably reaching 2% inflation, putting the onus on officials to avoid undershooting that goal, per Bloomberg. 

Key quotes

“Inflation is now more likely to converge sustainably to the target sooner than earlier expectations — by the beginning of 2025 instead of the last quarter, as was anticipated in the most recent ECB projections.”

“Our policy focus may have to increasingly take account of economic conditions so that we don’t undershoot our inflation objective.”

“Although we have not had any indications of a hard landing, the markets are extremely sensitive to disappointing growth readings.” 

“If negative surprises for growth come in and we fail to unwind our restrictive monetary-policy stance at the appropriate pace, unnecessary market turbulence could be induced, negatively impacting economic and financial stability.”

“The September reading of inflation at 1.7 percent should be viewed as both a success and a wake-up call.”

“A policy-rate path that remains too restrictive for too long could induce an undershooting of our inflation target over the medium term and impede growth. Should that occur, we would risk damaging our credibility.”

“An escalation in trade tensions between major economies through tariffs and retaliation could create chaos in international trade and weigh on confidence and economic activity at the global level.” 

Market reaction 

At the time of writing, EUR/USD is trading 0.04% higher on the day to trade at 1.0545. 

Federal Reserve Bank of Boston President Susan Collins said on Wednesday that more interest-rate cuts are needed, but policymakers should proceed carefully to avoid moving too quickly or too slowly, per Bloomberg.  

Key quotes

Market reaction

The US Dollar Index (DXY) is trading 0.04% lower on the day at 106.60, as of writing.

• EUR/USD gave back nearly half of a percent on Wednesday.
• A muted release calendar to bolster the Euro in the midweek.
• Fiber traders waiting for Friday’s PMI business activity prints.

EUR/USD bulls frayed at their ends during the midweek hump session, giving back nearly half of a percent and keeping Fiber price action hamstrung just north of the 1.0500 major handle. Thursday is a quiet showing on the economic calendar for both the Euro and the Greenback, leaving markets to sit and twiddle their thumbs until Friday’s Purchasing Managers Index (PMI) figures get released at the tail-end of the trading week.

European Central Bank (ECB) President Christine Lagarde will be making an appearance on Friday at the 34th annual European Banking Conference in Frankfurt. The ECB head is expected to hit familiar notes while discussing the state of EU monetary policy and how it impacts the banking sector, though traders will be keeping an ear out for any tidbits about the possible direction the ECB is leaning as it pertains to rate cuts in the near term.

European HCOB Purchasing Managers Index (PMI) survey results will drop on markets while ECB President Lagarde is delivering prepared notes. Pan-EU business activity survey figures are expected to hold flat in November, with the Composite PMI headliner forecast to print at a steady 50.0

The key data print this week will be S&P Purchasing Managers Index (PMI) survey results, which are due on Friday. Markets are anticipating a slight increase in Manufacturing PMI figures, expected to rise to 48.8 from the previous 48.5, while the Services component is expected to rise by a similar amount, to 55.3 from 55.0.

EUR/USD price forecast

EUR/USD is trapped near its lowest bids in over a year after tapping a 54-week low last Wednesday. A near-term bullish recovery sputtered out almost as quickly as it began, with bidders running into the much near 1.0600 and failing to capture higher ground. 

Fiber is down around 6% from September’s peaks above 1.1200, and the Euro’s technical picture has changed significantly in a short amount of time. EUR/USD is still trapped on the south end of the 50-day Exponential Moving Average (EMA), which is accelerating into the low side and poised to pass through 1.0800 in short order.

EUR/USD daily chart

• USD/CAD softens to near 1.3970 in Thursday’s early Asian session. 
• Futures traders dialed back their expectations of a Fed rate cut at the December meeting.
• Lower crude oil prices undermine the commodity-linked Loonie.

The USD/CAD pair trades on a softer note around 1.3970 amid the modest decline in the Greenback during the early Asian session on Thursday. Traders will keep an eye on the US weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, Existing Home Sales, and the CB Leading Index, which are due later on Thursday. Also, the Federal Reserve’s (Fed) Hammack and Goolsbee are due to speak.

The recent strong US economic data, sticky inflation and Donald Trump's victory in the US presidential election have underpinned the US Dollar (USD) against the Loonie for the time being. Markets expect that Donald Trump’s administration will reignite inflation and slow the path of rate cuts from the Fed.

Additionally, the cautious tone from the Fed officials might cap the downside for the USD. On Wednesday, Fed governor Michelle Bowman emphasized that inflation still elevated in the last few months and the Fed needed to be cautious on rate cuts. 

Futures traders have dialed back their expectations of a rate reduction at the December Fed meeting, according to data from the CME FedWatch Tool. They are now pricing in around 54% possibility that the Fed will cut rates by a quarter point, down from around 80% last week.

On the Loonie front, the fall in crude oil prices weighs on the commodity-linked Canadian Dollar (CAD). Nonetheless, the lower expectation that the Bank of Canada (BoC) will cut a deeper-than-usual interest rate in December might help limit the CAD’s losses. The markets are now pricing in nearly a 26% chance of a 50 basis point (bps) rate cut by the BoC next month, down from 37% before the CPI data release.