CFD Markets News and Forecasts — 22-11-2024

• Silver rebounds to reclaim the $31.00 mark, buoyed by a drop in US Treasury yields and ongoing market dynamics.
• Technical landscape shows resistance at the 50-day SMA of $31.75, with potential targets extending to $32.00 and $33.00.
• Key support levels identified at $31.00 and $30.00, with further downside protection near the November low of $29.68.

Silver price recovered some ground on Friday and reclaimed the $31.00 a troy ounce, boosted by falling US Treasury bond yields and despite a firm US Dollar. At the time of writing, the XAG/USD trades at $31.28, a gain of over 1.62%.

XAG/USD Price Forecast: Technical outlook

The grey metal has consolidated within the $30.50-$31.50 range for the last four days, capped on the upside by the 50-day Simple Moving Average (SMA) at $31.75. If Silver extends its rally above the latter, the $32.00 psychological figure would be up next. Once cleared, further upside is seen, with the $33.00 mark up next, ahead of the October 29 peak at $34.54.

For a bearish continuation, XAG/USD first support would be $31.00. Once surpassed, the next demand zone would be $30.00, followed by the November 14 low of $29.68. On further weakness, the next stop would be the 200-day Simple Moving Average (SMA) at $28.91.

Oscillators such as the Relative Strength Index (RSI) suggest buyers are gathering steam, yet the RSI is still below its neutral line. Hence, the bias is neutral-bullish.

XAG/USD Price Chart – Daily

• NZD/USD dipped by 0.54% on Friday, plunging to 0.5830.
• NZD/USD fell to the lowest level since early November as bears maintained control.
• While oversold conditions, as per indicators, could hint at a correction, the NZD/USD outlook remains negative towards the 0.5800-0.5900 range.

The NZD/USD pair extended its losses on Friday, declining by 0.54% to 0.5830, its lowest level since early November.

The technical indicators align with the bearish outlook, as the Relative Strength Index (RSI) has fallen sharply into the near oversold area at 33, indicating rising selling pressure. The RSI's decline is supported by the Moving Average Convergence Divergence (MACD), which is red and rising, and its histogram is negative, suggesting a bearish overall outlook. This bearish outlook is further supported by the pair's three-day losing streak and its trade below the 20-day Simple Moving Average (SMA) which is located at 0.5930.

While oversold conditions may lead to a correction, trades should eye the 0.5800-0.5900 range for sideways movements.

NZD/USD daily chart

• The Canadian Dollar treaded water to wrap up the trading week.
• Canada saw a slight decline in home prices, Retail Sales meet expectations.
• Broad-market sentiment supports the Greenback, limiting Loonie options.

The Canadian Dollar (CAD) waffled into the midrange on Friday, testing into the low side but ultimately getting hamstrung as Canadian data comes in mixed and gets overshadowed by sentiment-bolstering US data prints. 

Canada saw an unexpected contraction in its New Housing Price Index in October, a welcome sign for Canadians suffering under the weight of home prices that have outrun income for decades despite investors not being able to rely on forever-increasing home prices for investment returns. Headline Canadian Retail Sales came in at expectations, though core Retail Sales excluding automobile purchases accelerated in September.

Daily digest market movers: Canadian Dollar sticks to the midrange on mixed economic data

• Canada’s New Housing Price Index contracted by 0.4% MoM in October, down from the last print of a flat 0.0%, while investors were hoping for a 0.1% uptick. Despite the near-term downtick, Canada’s New Housing Price Index is still up 0.8% YoY.
• Canadian Retail Sales printed unchanged at 0.4% MoM in September, as markets expected.
• Core Canadian Retail Sales excluding automobile purchases lurched high to 0.9% MoM, walking back the previous month’s -0.8% contraction and stepping over the median market forecast of 0.5%.
• Market data reactions were fully absorbed by US Purchasing Managers Index (PMI) survey results that came in higher across the board, bolstering the US Dollar and limiting upside potential for the Loonie.
• It’s a quiet data docket on the cards for next week: Canada is almost entirely absent from the calendar schedule until next Friday’s Gross Domestic Product (GDP) update, with US GDP and Personal Consumption Expenditures Price Index (PCEPI) due on Wednesday.

Canadian Dollar price forecast

The Canadian Dollar (CAD) found a brief reprieve from Greenback strength this week, paring away recent losses and dragging the USD/CAD chart back below the 1.4000 handle. Despite a recovery in the Loonie’s stance, the pair remains close to recent highs as broad-market bids prop up the US Dollar.

USD/CAD is running the risk of rolling over into a fresh round of Canadian Dollar strength after bulls ran aground of a long-term sideways channel. However, near-term price action has yet to give up ground as bids battle it out well above the 50-day Exponential Moving Average (EMA) near 1.3830.

USD/CAD daily chart

• Aussie dropped 0.27% to 0.6495 in Friday's trading.
• Mixed Judo Bank PMI data impacted the AUD, with strong manufacturing but weak service sector activity.
• S&P PMI data from the US came in strong.

The AUD/USD declined just below 0.6500 as the market is focused on the US Dollar's strength. The US Dollar Index (DXY) index hit a two-year high above 108.00.

The AUD/USD pair exhibits a mixed outlook, influenced by the interplay of hawkish Reserve Bank of Australia (RBA) and mixed local economic data. However, the potential for future RBA rate hikes may limit the downside, though the overall trend remains bearish.

Daily digest market movers: Australian Dollar pares gains against US Ddollar as solid S&P PMI data lifts the Greenback

• The preliminary reading of Australia's Judo Bank Manufacturing PMI rose by 2.1% to 49.4 in November. The Services PMI declined by 1.4% to 49.6, while the Composite PMI fell by 0.8% to 49.4.
• In the United States, the Composite PMI rose by 1.2% to 55.3 in November. The Manufacturing PMI improved by 0.3% to 48.8, while the Services PMI rose by 2% to 57 in November.
• Business confidence in the US hit a two-and-a-half-year high in November, according to S&P Global.
• This week, the USD pared back losses as traders reduced bets of a December rate cut by the Fed after hawkish comments from Fed Chairman Jerome Powell.
• On the Aussie’s side, the RBA might bail the pair out as the bank is allegedly considering rate hikes.

AUD/USD technical outlook: Outlook remains bearish as indicators stay negative, and the pair struggles to recover

The AUD/USD pair struggles to recover, capped by negative technical indicators and the 20-day Simple Moving Average (SMA). The Relative Strength Index (RSI) remains deeply embedded in the bearish territory below 30, indicating persistent selling pressure. Similarly, the Moving Average Convergence Divergence (MACD) indicator prints red bars. These bearish signals suggest that the pair may continue to face difficulties sustaining any significant recovery in the near term.

• Gold prices rally 1.50% on Friday, boosted by a decrease in US 10-year Treasury yields to 4.40%.
• Escalating geopolitical concerns, including potential expansion of the Russia-Ukraine conflict, fuel demand for Bullion’s safe-haven status.
• US economic data shows mixed signals; Services and Composite PMIs outperform while Manufacturing PMI remains in contraction.

Gold price rallies to a new two-week high on Friday during the North American session as US Treasury bond yields drop. Geopolitics continued to play its part, keeping the golden metal bid, while US business activity improved, capping the non-yielding metal advance. The XAU/USD trades at $2,710, gaining 1.50%.

The yellow metal surged due to a slight fall in US Treasury yields. The US 10-year T-note dipped two basis points to 4.40%, a tailwind for Bullion prices, set to print gains of more than 5% on the week.

Risks that the Russia-Ukraine war might broaden and transform into a US-Russia conflict keep Bullion prices higher. This and uncertainty about the Middle East conflict involving Israel and Lebanon may pave the way for retesting the XAU/USD all-time high at $2,790.

Data-wise, the US economic docket featured the release of S&P Global Flash PMIs for November. The Services and Composite indices expanded, exceeding estimates and October’s figures. However, the Manufacturing PMI, despite improving above forecasts and the previous month’s release, remained below the 50 line, which divides expansion/contraction territories.

Recently, the University of Michigan (UoM) revealed that Consumer Sentiment among Americans improved compared to the preliminary reading, while inflation is expected to approach the Federal Reserve’s (Fed) 2% goal in the 12 months ahead.

In the meantime, some Fed officials who crossed the wires became slightly concerned about inflation progress stalling. Even though the majority advocate for a looser policy, they acknowledge the economy remains robust; and if inflation entrenches above the 2% goal, they could pause its easing cycle.

Traders trimmed the chances for a 25 bps rate cut at the December meeting. The CME FedWatch Tool sees a 56% probability of lowering rates, down from a 58% chance two days ago.

Daily digest market movers: Gold refreshes two-week peak on geopolitical jitters

• Gold prices recovered as US real yields retreated two basis points to 2.068%.
• The US Dollar Index (DXY), which tracks the buck's performance against six currencies, gains over 0.34%, up at 107.00 near weekly highs.
• US S&P Global PMIs for November showed growth, with the Services PMI rising to 57.0 and the Composite PMI to 55.3, both surpassing the prior month. The Manufacturing PMI edged up from 48.5 to 48.8, aligning with expectations.
• The University of Michigan Consumer Sentiment Index improved from 70.5 to 71.8 in November but fell short of projections. Meanwhile, as anticipated, one-year inflation expectations eased slightly from 2.7% to 2.6%.
• According to Chicago Board of Trade data via the December fed funds futures contract, investors are pricing in a 22 basis-point rate cut by the Federal Reserve by the end of 2024.

Technical outlook: Gold price buyers, set their sight around $2,800

Gold’s rally is set to continue with prices aiming to challenge the $2,750 figure once more. On Thursday, the yellow metal crossed above the 50-day Simple Moving Average (SMA) of $2,663, prompting buyers to push XAU/USD’s spot prices higher.

In that environment, if Bullion prices clear $2,750, the all-time high at $2,790 is next. A breach of the latter will expose the $2,800 figure and pave the way to test $3,000, which Goldman Sachs sees as the next major resistance.

On the other hand, if XAU/USD tumbles below $2,700, the non-yielding metal could begin to trade range-bound within the $2,650-$2,700 range unless bears clear the November 14 swing low of $2,536, followed by $2,500.

The Relative Strength Index (RSI) has shifted to a bullish bias, indicating buyers are in charge.

• The Dow Jones gained another 350 points on Friday.
• After a brief lull, the major index is back into its post-election rally.
• Investors are pivoting out of the usual tech rally into consumer goods.

The Dow Jones Industrial Average (DJIA) has snapped its recent soft patch, extending its midweek bullish pivot into a firm Friday performance. The Dow Jones is on its way to finishing another trading week on the firmly bullish side, up around 1.8% from Monday’s opening bids but still a little shy of last week’s record highs near 44,485.

A firm print in US Purchasing Managers Index (PMI) figures helped to bolster investor sentiment on Friday. November’s Manufacturing PMI exceeded expectations, printing at 48.8 compared to October’s 48.5. The Services PMI component handily outperformed forecasts, coming in at 57.0. Median market forecasts called for a more sedate uptick to 55.3 from the previous month’s 55.0.

Despite the upbeat print in PMI business activity expectations, consumer sentiment surveys threw up a warning flag: the University of Michigan’s (UoM) Consumer Sentiment Index for November declined to 71.8 from the previous month’s 73.0, entirely missing an expected step upwards to 73.7. UoM 5-year Consumer Inflation Expectations also accelerated in November, and surveyed consumers now expect 5-year inflation to reach 3.2%, climbing from the expected hold at 3.1%.

Dow Jones news

The Dow Jones is seeing a wide sweep of bullish momentum on Friday, with all but five of the securities listed on the major index testing higher on the last day of trading for the week. Across the sector space, telecoms and tech companies are on the soft side, with industrials, consumer discretionaries, and financials finding the high side of the boards.

Tech sector investors have decided that Nvidia’s (NVDA) 93% YoY earnings growth in the third quarter wasn’t enough to keep bids on the high end; NVDA is down over 3% on Friday and trading at $142 per share. Boeing rose over 4.5% on Friday, testing into $150 per share as investors pick up the airplane manufacturer and developer with eyes on the company’s backlog of customer orders worth an estimated $500 billion. The company’s ability to execute on those orders has apparently not factored into the equation, with at least two plane models under FAA review. Boeing also has plans on the books for the company to axe 17,000 workers or ten percent of its entire workforce.

Dow Jones price forecast

Dow Jones bulls continue to keep prices elevated and out of harm’s way of any meaningful bearish technical signals. The major equity index is up around 5.8% in November, the index’s best-performing month to-date, and has added a tidy 18% from 2024’s opening bids.

One-sided bullish price action is marching back toward the 44,400 level, with the index’s latest pullback pricing in a soft technical floor near 43,200. Near-term momentum has a hard barrier priced in at the 50-day Exponential Moving Average (EMA) near 42,650.

Dow Jones daily chart

• US Dollar Index declines below 108.00 on Friday, November 22.
• DXY retreats from 2-year high despite strong S&P PMI data; profit-taking and China's stimulus package contribute to pullback.
• Fed officials remain cautious with Barkin citing inflation risks and Williams indicating potential rate reduction.

In Friday's session, the US Dollar Index (DXY) declined slightly after reaching a new two-year high amidst geopolitical instability. However, strong S&P PMI data reinforced the US economy's relative resilience, supporting the DXY's gains. 

The US Dollar's pullback was attributed to profit-taking and positive economic indicators from China, including a rate reduction and a comprehensive stimulus package. Consequently, the DXY retraced from above 108.00, stabilizing around 107.50.

The DXY, which values the Greenback against a basket of major currencies, maintains a bullish bias, driven by solid economic data and a less dovish Federal Reserve (Fed) stance. Despite the retreat, the uptrend remains intact, with investors now expecting a gradual pace of rate cuts. Technical indicators suggest potential consolidation, but the overall bullish momentum remains strong. 

Daily digest market movers: US Dollar holds gains after PMI data, profit-taking

• The US Dollar Index dipped after reaching a new two-year high due to geopolitical instability and profit-taking.
• The DXY found support from strong S&P PMI data indicating the US economy's resilience.
• Positive economic news from China, such as a rate cut and stimulus package, contributed to the DXY's pullback.
• On the data front, the US S&P Global Composite PMI rose by 1.2 points to 55.3 in November's flash estimate.
• The S&P Global Manufacturing PMI improved marginally from 48.5 in October to 48.8 but remains in contraction.
• The S&P Global Services PMI rose notably from 55 to 57, indicating continued expansion.

DXY technical outlook: Index consolidates after reaching 108.00

The DXY has shown signs of easing after reaching 108.00 due to profit-taking by investors. Technical indicators, particularly the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), indicate overbought conditions, suggesting a possible slight correction in the index. Despite this, the index remains supported by strong economic data and hawkish Fed rhetoric, maintaining an overall bullish trend. The uptrend now faces resistance around 108.00 and support at 106.00-105.00, with profit-taking and risk-off sentiment potentially leading to a pullback or consolidation in the short term.

• Mexican Peso ignores upbeat growth data as inflation dip hints at lower interest rates.
• INEGI reports Q3 GDP growth exceeding expectations and a drop in mid-month November inflation, suggesting room for Banxico to ease policy further.
• US economic data, including better-than-expected S&P Global Flash PMIs and UoM Consumer Sentiment, bolstered the US Dollar.

The Mexican Peso retreats for the third straight day versus the US Dollar, although economic data suggests the country’s economy grew in the third quarter while inflation edged lower. However, upbear US data coupled with risk aversion boosted the USD/MXN higher, trading at 20.45, gaining 0.27%.

In Mexico, the Instituto Nacional de Estadistica Geografía e Informatica (INEGI) revealed the final Reading of the Gross Domestic Product (GDP) for Q3 2024, which exceeded estimates in quarterly and yearly numbers. At the same time, November’s Mid-month inflation was below the previous month’s reading and estimates in headline and core, hinting that the Bank of Mexico (Banxico) could continue to ease policy.

The US economic docket revealed that business activity improved, according to S&P Global Flash PMIs for November. Meanwhile, the University of Michigan (UoM) Consumer Sentiment in November improved compared to its previous reading, while inflation expectations for one year dipped.

This and geopolitical jitters underpinned the USD/MXN toward new weekly highs of 20.55. It is worth noting that Mexico’s Chamber of Deputies approved the dissolution of autonomous bodies, which, according to experts, puts Mexico at risk of being taken out of the USMCA free trade agreement.

Bank of Mexico Governor Victoria Rodriguez Ceja said they’re ready to slash interest rates if inflation continues downward. This would exert downward pressure on the Peso, which has depreciated after former US President Donald Trump’s victory boosted the Greenback. Since then, the Federal Reserve (Fed) has adopted a cautious stance on easing policy, as some of Trump’s proposals exert upward inflation pressure.

Money market players had grown more cautious about the Fed cutting rates. The CME FedWatch Tool suggests that investors see a 56% chance of a 25-basis-point rate cut at the December meeting, down from 59% a day ago.

Daily digest market movers: Mexican Peso falls as bets for Banxico rate cuts increased

• Mexico’s mid-month inflation rate eased in early November, increasing bets that Banxico would ease policy.
• Headline inflation hit 4.56% YoY, down from 4.69% in the previous month, after rising in the previous pair of two-week periods. Economists expected inflation to remain unchanged, according to a Reuters poll.
• Core inflation, usually seen as a better gauge of price trends because it strips out volatile energy and food prices, came in below the forecast of 3.72% at 3.58% YoY.
• Mexico's GDP for the third quarter of 2024 expanded by 1.1% in the third quarter compared to Q2 and is almost in line with the 1.0% increase expected by economists.
• In annual terms, the economy expanded by 1.6% compared to a year earlier, slower than the previous reading and slightly above the 1.5% foreseen by economists.
• US S&P Global Services and Composite PMIs for November expanded by 57.0 and 55.3, exceeding the previous month's reading; the Manufacturing PMI improved from 48.5 to 48.8, as expected.
• The UoM Consumer Sentiment in November improved from 70.5 to 71.8 but missed the mark. Inflation expectations for one year dipped from 2.7% to 2.6% as projected.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 22 bps of Fed easing by the end of 2024.
• Last week, Moody’s changed Mexico’s credit outlook to negative, mentioning constitutional reforms that could negatively impact Mexico’s economic and fiscal strength.

USD/MXN technical outlook: Mexican Peso slumps as USD/MXN climbs past 20.45

The USD/MXN remains upwardly biased despite retreating below the psychological 20.50 figure. A breach of the latter will expose the current day high at 20.55, followed by the November 12 peak at 20.69. Once cleared, the next resistance would be the year-to-date (YTD) high of 20.80.

If sellers push the exchange rate below 20.00, they could test the 50-day Simple Moving Average (SMA) and the November 7 low around 19.75/78, followed by the 19.50 mark.

Indicators such as the Relative Strength Index (RSI) remain bullish in the short and medium term, hinting that further upside is available.

The downturn in Gold prices underscored by sharp liquidations from macro funds lined up exceptionally well with historical patterns surrounding drawdowns associated with macro fund liquidations from extreme levels, averaging between 7-10% over the last decade, TDS’ Senior Commodity Strategist Daniel Ghali notes.

Price action forces CTAs back into 'max long' position size

“However, the strong price action since was less typical — featuring a concurrent decline in open interest in Comex Gold, despite with few directional money manager shorts after accounting for EFPs, continued divestment from ETFs in the West and in China, alongside a notable change in trading behavior from Shanghai traders over the last weeks.”

“We now expect imminent buying exhaustion. Safe-haven demand associated with Russia's ballistic missile launch has hit the tapes supporting prices further than would otherwise be the case, but will likely have to reverse in the near-term. From a macro perspective, the Fed's discounted path is no longer likely to lead to an 'overly easy' policy stance, suggesting that macro fund interest is unlikely to return towards extreme levels.”

“Price action has finally been sufficiently strong to force CTAs back into an effective 'max long' position size, suggesting that every single trend signal on our radar is already pointing long, which will in turn will cap subsequent algo buying activity. And, the TINA trade is still reversing in China, suggesting that Asian demand won't save the day. The set-up for flows in Silver is notably superior.”

• EUR/CAD fell 0.56% on Friday to trade close to 1.4550.
• Pair extended losing streak to four sessions and fell to a low since February.
• Oversold indicators signal potential correction, but negative outlook remains.

The EUR/CAD extended its losing streak to four sessions, falling to a low since February on Friday. The pair declined by 0.56% to 1.4550.

Technical indicators on the EUR/CAD currency pair continue to paint a bearish picture, as evidenced by the pair's sharp decline in recent sessions and the ongoing four-day losing streak. The Relative Strength Index (RSI) has entered the oversold territory, with a current reading of 21, indicating that selling pressure is intensifying. The RSI's downward slope further suggests that the bearish momentum is gaining strength. The Moving Average Convergence Divergence (MACD) also supports this view, as it remains negative and is trending upwards, signaling a bearish outlook.

The oversold indicators seen in the RSI suggest a potential correction, but the overall sentiment remains bearish. Resistance levels at 1.4600, 1.4630, and 1.4650 will be crucial to watch for potential upside moves, while support levels at 1.4530, 1.4515, and 1.4500 may provide downside protection.

EUR/CAD daily chart

• GBP/USD sinks further following poor performances in key UK economic indicators and rising geopolitical concerns.
• Technical analysis highlights potential for the pair to test significant supports at 1.2445 and possibly the year-to-date low of 1.2299.
• RSI indicates oversold conditions, suggesting a heavy bearish pressure but not yet at extreme levels.

The Pound Sterling extends its losses against the Greenback for the third straight day, is down 0.47% after UK Flash PMIs and Retail Sales data disappointed investors. This and heightened geopolitical tensions due to Russia-Ukraine and Middle East conflicts, bolstered the American currency. At the time of writing, the GBP/USD trades at 1.2529 after hitting a daily high of 1.2594.

GBP/USD Price Forecast: Technical outlook

The GBP/USD is trending down, extending its bearish bias. Sellers are eyeing intermediate support at 1.2445, the May 9 swing low. If breached, the pair could refresh year-to-date (YTD) lows of 1.2299, which were hit on April 22.

Indicators like the Relative Strength Index (RSI) turned oversold beneath the 30 level. Nevertheless, it has not reached extreme levels, usually seen in solid trends. In the case of a downtrend, the 20 level would suggest the GBP/USD is oversold.

Conversely, if bulls move in and reclaim 1.2600, look for a test of November’s 20 peaks at 1.2714 as the next resistance. If surpassed, the next stop would be the 200-day Simple Moving Average (SMA) at 1.2818.

GBP/USD Price Chart – Daily

• GBP/ZAR is giving signs and omens of a possible change in the near-term trend. 
• These include a possible reversal pattern and the RSI moving out of oversold territory. 

GBP/ZAR has formed a temporary bottom after a steep sell-off. The pair has been steadily rising back up during the last 4-hour period (see chart below) and has now almost completely regained the lost ground from the previous, red down candle. 

GBP/ZAR 4-hour Chart 

Assuming the current period closes at the same or a higher level as it is now, it will have formed a bullish reversal pattern called a Two-Bar reversal (green rectangle on chart). 

Such a pattern suggests a possible reversal of the short-term trend. That said, it is still too early to be confident such a reversal will take place – it is merely a warning sign that the trend may be about to change. 

Accompanying the formation of the pattern is the Relative Strength Index (RSI) momentum indicator moving out of oversold levels (blue-shaded circle). This is a buy signal and could be another warning sign the downtrend is reaching a conclusion. 

• USD/CHF is resuming its dominant uptrend after a short correction. 
• The short and medium-term trends are bullish indicating odds favor a continuation higher. 

USD/CHF is striking higher again after a brief pullback from overbought levels. It is surging on Friday as it thrusts up towards the next key targets at 0.9000 – a whole-number psychological level – and 0.9050, the July 30 swing high. 

USD/CHF Daily Chart 

USD/CHF is in an established short-term uptrend which means the odds favor more upside. This is due to the theory in technical analysis that “the trend is your friend” which advocates trading in the direction of the dominant trend. 

The Relative Strength Index (RSI) has almost reached above 70 again, suggesting price is close to levels where it would be considered overbought. If the RSI closes above 70 traders are advised not to add to their long positions for risk of the price pulling back.  

• NZD/USD recovers mildly after refreshing the yearly low near 0.5820, however, the outlook remains bearish.
• The Fed is expected to take an “extended pause” after cutting interest rates next month.
• Investors expect the RBNZ to cut interest rates by 50 bps to 4.25% on Wednesday.

The NZD/USD pair rebounds slightly after posting a fresh yearly low near 0.5820 in the North American session on Friday. The Kiwi pair remains on the backfoot as the US Dollar (USD) performs strongly across the board on expectations that the Federal Reserve (Fed) will follow the interest rate cut path more gradually.

Analysts at Deutsche Bank expect that the Fed could take an “extended pause” that keeps Federal Fund rates above 4% through 2025. Their comments were backed by expectations that “The Republican sweep promises transformative changes,” policies such as higher import tariffs will likely boost growth to 2.5% next year and will also lead to inflation stalling at or above 2.5% through 2026.

For the December meeting, analysts expect the Fed to cut interest rates by 25 basis points (bps). According to the CME FedWatch tool, there is a 59% chance that the Fed will cut its key borrowing rates by 25 bps to 4.25%-4.50%.

On the New Zealand Dollar (NZD) front, investors will focus on the Reserve Bank of New Zealand (RBNZ) monetary policy, which will be announced on Wednesday. The RBNZ is expected to cut interest rates by 50 bps to 4.25%. This will be the third consecutive interest rate cut by the RBNZ and the second straight 50 bps reduction in a row.

NZD/USD extends its losing streak for the third trading day on Friday. The 20-day Exponential Moving Average (EMA) near 0.5930 continues to act as a major barricade for the NZD bulls. The 14-day Relative Strength Index (RSI) oscillates in the 20.00-40.00, suggesting that downside momentum is intact.

The Kiwi pair is expected to decline to near the October 2023 low at 0.5770 and the round-level support of 0.5700 after breaking below the intraday low of 0.5820.

On the contrary, an upside move above the November 15 high of 0.5970 will drive the asset toward the psychological figure of 0.6000 and the November 7 high of 0.6040.

NZD/USD daily chart

• USD/JPY falls as the Yen gains on expectations the BoJ will raise interest rates in December. 
• Bets are falling meanwhile for the Federal Reserve to cut interest rates, narrowing the differential. 
• This advantages the JPY, creating a headwind for USD/JPY going forward. 

USD/JPY is trading a touch lower in the 154.30s on Friday as the Japanese Yen (JPY) strengthens against the US Dollar (USD) due to the release of higher-than-expected Japanese macroeconomic data, and Tokyo’s announcement of a $250 billion economic stimulus package. 

The Yen’s gains are comparatively limited against the US Dollar, however, which is itself underpinned by a narrative of American exceptionalism, the anticipation of Dollar-positive policies under President elect Donald Trump, and a shallower downward trajectory for US interest rates which is different from the steeper fall expected last month. 

The expectation that interest rates will remain higher for longer in the US is positive for the Greenback because it attracts foreign capital inflows. 

Although Federal Reserve (Fed) officials, including Fed Bank of New York President John Williams and Fed Bank of Boston President Susan Collins, recently said they saw inflation cooling and interest rates falling further, market-based gauges have suggested a lower chance of the Fed reducing rates in December. 

According to the CME FedWatch tool the probability of the Fed making a 25 basis point (bps) (0.25%) rate cut in December has fallen to 59% from previously being 100%. 

In Japan, meanwhile, bets are increasing that the Bank of Japan (BoJ) will raise interest rates in December, when previously investors had not been so sure. 

Japanese Consumer Price Index (CPI) data for October, released overnight, came in broadly stronger, especially in the core measures. 

Japan CPI ex Food, Energy was 2.3% YoY from 2.1% in September, and in the case of CPI ex Fresh Food – which came in at 2.3% – the result was still above the expected 2.2%, although below the 2.5% previously.   

Further, employee pay is expected to improve, fueling growth and spending, according to advisory service Capital Economics, who expect the yearly Shunto pay negotiations to result in large raises and a series of interest rate hikes from the BoJ. 

“The stars are aligning for our long-held view that the Bank of Japan will hike rates again by year-end. And with a recent survey of Japanese firms pointing to even bigger pay hikes in next year's spring wage negotiations than the large one agreed this year, it looks increasingly likely that the Bank's tightening cycle has further to run,” says Marcel Thieliant, Head of Asia-Pacific at Capital Economics. 

Other data from Japan was moderately positive on Friday, with the Japanese Manufacturing Jibun Bank Purchasing Manager Index (PMI) coming in softer at 49.0 compared to the 49.5 forecast, but the Services PMI rising into expansion territory of 50.2 from 49.7 previously.  

• USD/CAD ticks down after the Canadian Retail Sales data came in line with expectations and the prior release.
• Steady Canadian Retail Sales growth would weigh on BoC's large rate-cut bets.
• Investors await the flash US S&P Global PMI data for November.

The USD/CAD pair surrenders its entire intraday gains and ticks down as the Canadian Retail Sales data grew steadily in September and the US Dollar (USD) gives up a majority of its intraday gains after refreshing a two-year high.

Statistics Canada showed that Retail Sales, a key measure of consumer spending that drives inflation, rose by 0.4%, in line with estimates for the month. Steady sales were driven by higher spending on food and beverages, while sales receipts at gasoline stations were lower. Steady growth in the consumer spending measure is expected to weigh on market expectations that the Bank of Canada (BoC) will cut interest rates consecutively for the second time by 50 basis points (bps).

Market speculation for BoC outsize interest rate cuts was already diminished slightly after the release of the Consumer Price Index (CPI) data for October, which showed that price pressures accelerated at a faster-than-expected pace.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops from 108.00 to near 107.50.

The outlook of the US Dollar remains firm as investors expect that the Federal Reserve (Fed) will be one of those central banks among Group of Seven (G7) nations, which will follow a more gradual approach. Market expectations for the Fed to cut interest rates slowly are strengthened on expectations that the United States (US) inflation and economic growth will accelerate after President-elect Donald Trump implements his trade and tax policies.

Going forward, investors will pay close attention to the US flash S&P Global Purchasing Managers’ Index (PMI) data for November, which will be published at 14:45 GMT.

UK data reports today were roundly disappointing, weighing on the Pound Sterling (GBP). Retail Sales fell a greater than expected 0.9% in the October month while November PMI data were generally weaker than expected, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP slides on weaker than expected Retail Sales and PMI reports

“Manufacturing and Service sector activity slowed sharply, in contrast to expectations of steady or slightly stronger growth signals. The Composite PMI fell nearly two full points from October’s 51.8 to 49.9, just into contraction territory. Markets continue to expect the BoE to hold policy in December but expectations for a February cut have improved. Swaps are pricing in 22bps of easing.”

“GBP has stabilized just above 1.25 after this morning’s sharp fall but weak price action and building bearish momentum on the short-, medium– and long-term oscillators suggest limited scope for corrective gains and more pressure for losses in the weeks ahead.”

“Expect firm resistance on minor gains to the 1.26 area now. Loss of support in the upper 1.25s leaves little obvious support for the pound on the charts until the mid-1.22s.”

• EUR/JPY is declining in a short-term downtrend which started in November. 
• The pair is likely to continue lower given technical analysis theory. 

EUR/JPY staircases down from its Halloween peak as it unfolds in a short-term downtrend during November. The odds favor an extension lower given the technical analysis theory that “the trend is your friend”. 

EUR/JPY Daily Chart 

The next downside target is at the 158.11 September 30 swing low. A break below the 159.90

low of the day would provide confirmation. Alternatively traders might look at a lower timeframe chart such as the 1-hour for a pullback – perhaps a three-wave ABC – to provide a lower risk entry-point. 

The Relative Strength Index (RSI) momentum indicator is flirting with the oversold zone below 30. If it closes below 30 the pair will be considered oversold and short holders are advised not to add to their positions. 

A deeper sell-off could even take EUR/JPY down to 154.00 – 155.00 August-September lows. 

The Euro (EUR) plunged in response to poor macro data reports earlier. German and French PMI data for November nearly all disappointed expectations; only German Manufacturing bettered consensus estimates but the data here remained quite weak (43.2, from October’s 43.0).

EUR slumps to near two-year low

“Preliminary Eurozone data looked very poor as a result, with Services and the Composite reading dropping sharply on the month and falling back under 50 (to 49.2 and 48.1 respectively). Manufacturing also dropped to 45.2. Weakening growth momentum boosted expectations that the ECB will cut rates more aggressively next month.”

“Dec swaps added around 10bps of expected easing from yesterday and are pricing in 38bps of cuts following the data. The EUR is consolidating significant, intraday losses above the early European low around 1.0335 but the broader undertone in spot remains very soft.”

“EUR losses from the early week consolidation high near 1.06 do not look complete and a weekly close under the 2023 low (1.0447) would edge risks squarely towards more significant, medium-term losses for the EUR in the medium term. Minor EUR rebounds to the mid/upper 1.04s are likely to attract strong selling interest for now.

USD/CAD got caught in the crossfire of the hefty US Dollar (USD) advance against the European currencies earlier, rising quickly from the mid/upper 1.39s to an intraday high near 1.4020. The CAD was, however, able to add to this week’s gain on the EUR to test 1.45 (taking losses for EUR/CAD for the week to 2.7% from Monday’s peak), Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR/CAD plunge extends to 1.45

“While the CAD is one of the better performers on the day so far among the G10 pairs, it remains susceptible to broader USD strength. Retail Sales are expected to rise 0.4% in September, in line with the flash estimate released with August’s 0.4% M/M increase. Note Scotia is a bit above consensus at 0.5% M/M.”

“The Federal government announced a temporary sales tax holiday and one-time rebate for most Canadian households yesterday to prop up its support in parliament and among unenthusiastic voters. The breaks will provide a very marginal boost to consumption.”

“USD gains from the mid-1.39 support zone have stalled around 1.4015/20 minor resistance (Wednesday’s high). The rebound in price from yesterday's low is sufficient to signal a short-term low is in for funds at least, I think. The USD may consolidate around 1.40 ahead of the weekend but topside risks are building again and a push above 1.4020 in the next few sessions should prompt a further rise to retest the recent peaks around 1.41.”

The US Dollar (USD) is ending the week on a strong note. The DXY raced to a new, two-year high overnight in response to weak European data but has conceded a lot of those gains ahead of North American trading, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

DXY reaches highest in two years

“With the US Thanksgiving break coming up next week, some additional squaring up of USD longs would not surprise. But short-term losses in the USD broadly should not be confused with the USD plateauing. In contrast to Europe especially, US macro-economic data reports remain relatively firm—there has been no downturn in the positive run in the US data surprise index—and market expectations for Fed easing continue to get reined back whereas European policy easing bets have picked up.”

“Minor USD dips in the next few days are likely to remain well-supported, I believe and the USD is likely to remain firm into the FOMC decision on December 18th at least. The DXY’s push (and, so far, hold) above 107.35, the high reached last September is significant. The low 107 are is important technical resistance because last year’s high effectively represented a test (and rejection) of the 50% retracement (107.2) of the 2022/23 drop in the index.”

“A sustained push through the low 107 zone signifies a bullish break out of the sideways range the index has held since late 2002 and sets the index up for deeper retracement/ rebound towards 109/111 in Q1 and ultimately perhaps a retest of the 2022 peak in the index at 114.78.”

• Crude Oil flirts with a weekly gain of 5%, fueled by geopolitical news. 
• Russia has put a Polish military base on top of its target list for the next retaliation. 
• The US Dollar Index broke a fresh two-year high after preliminary European PMIs cast a recession shadow over Europe.

Crude Oil price steadies on Friday and tries to claim the $70 level after surging over 4.5% so far this week, fueled by fresh escalation between Russia and Ukraine. Both countries are rushing to get the tactical upper hand ahead of possible resolution talks once President-elect Donald Trump takes office in January 2025. One of the new elements in the escalation is that Russia apparently has put a Polish (Poland is a NATO member) military base at the top of its target list for any subsequent retaliation if Ukraine attacks again, Yahoo News reports. 

Meanwhile, the US Dollar Index (DXY) is firmly up after European preliminary Purchasing Managers Index (PMI) numbers came in substantially below estimates in November. The data suggests that business activity in the Eurozone Manufacturing and Services sectors contracted, fueling the US exceptionalism with an inflow in the US Dollar. Later on Friday, the US PMI numbers are going to be released and might fuel a second round of inflow in case of an upbeat surprise.

At the time of writing, Crude Oil (WTI) trades at $69.55 and Brent Crude at $73.32

Oil news and market movers: Weight added to geopolitics

• In the next step in the escalation between Russia and Ukraine, Yahoo News reports that Russia has added a Polish military base to its list of targets for when Ukraine fires missiles again into Russia. 
• Bloomberg reports that Russian President Vladimir Putin is set to have a security meeting later this Friday. The agenda is still yet to be confirmed. 
• OPEC+ delegates said they assume next month’s meeting on plans to restore Oil production will be held online rather than at their Vienna headquarters as originally planned, Reuters reports. The meeting is set to be held on December 1. 
• At 18:00 GMT, the weekly Baker Hughes US Oil Rig Count is to be released. The previous count showed 478 rigs operational. 

Oil Technical Analysis: Is it possible to scale up further?

Crude Oil price is set to close this week on a high note, booking nearly 5% of gains. However, traders have been asking themselves if there is more upside to this tension-fueled trade. Several analysts have pointed out that these recent moves might have been the last few steps towards any deal, with both countries just trying to pick up the best possible cards to be used during any negotiations. 

On the upside, the 55-day Simple Moving Average (SMA) at $70.13 was tested earlier on Friday, and we must see a daily close above it if Crude Oil prices want to head higher. Next up is the 100-day SMA at $72.77. The 200-day SMA at $76.45 is still far off, although it could be tested if tensions intensify further. 

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

US WTI Crude Oil: Daily Chart

The Gold price has also recovered more than half of its losses since the end of October and is once again trading at $2,700 per troy ounce, Commerzbank’s commodity analyst Barbara Lambrecht notes.

Platinum group metals are cheaper than at the start of the year

“In view of the threat of an escalation in the war in Ukraine, Gold is in demand as a safe haven. This is also shown by the inflows into ETFs in recent days. The Silver price has risen significantly this year in the wake of the Gold price and is also trading almost 30% higher than at the beginning of the year.”

“The picture is different for the Platinum group metals, which are cheaper than at the beginning of the year. This is another reason why they have catch-up potential for the coming year. In our view, the price of Platinum in particular should rise significantly, as the market is likely to be in deficit for the third year in a row in 2025.”

“This will probably be confirmed by the World Platinum Investment Council, which will present an initial forecast for 2025 in its quarterly report next Tuesday. In its medium-term five-year outlook from September, the WPIC had assumed that supply would increase after declining in the previous two years. However, the increase is not expected to be enough to close the gap, as demand will also rise slightly.”

The Swiss Federal Customs Authority published data on Gold exports in October this week, Commerzbank’s commodity analyst Carsten Fritsch notes.

Gold demand in Western countries is picking up

“These revealed very different trends. Deliveries to China were significantly weaker at just 5 tons. Virtually no Gold was exported to Hong Kong. On the other hand, there was an increase in exports to India. However, the level in October was still comparatively low at 11.7 tons. Slightly more Gold was delivered to the US than in the previous month.”

“However, the inflows of 30 tons into the US-listed Gold ETFs reported by the World Gold Council (WGC) in October would have suggested a higher figure than the reported 9.4 tons. Very surprising is the strong increase in Swiss Gold exports to the UK to 31.9 tons, although the Gold ETFs listed there recorded outflows in October according to the WGC.”

“All in all, the picture of subdued Gold demand in Asia is confirmed, while Gold demand in Western countries is picking up.”

Oil prices have risen noticeably over the past few days. Brent climbed to $74.8 per barrel in the morning, gaining almost 5% since the beginning of the week, Commerzbank’s commodity analyst Carsten Fritsch notes.

The conflict in Ukraine escalates

“This week's rise in oil prices was probably triggered by the latest escalation in the war in Ukraine, which has now been going on for more than 1,000 days. In recent days, Russia has carried out heavy attacks on the energy infrastructure and civilian infrastructure in Ukraine. Ukraine has responded by attacking targets in Russia with longer-range weapons systems provided by the West.”

“This raises concerns that energy supplies from Russia could be interrupted if Ukraine targets refineries or export terminals in Russia, which has already happened in the past. Three refineries in Russia recently had to suspend or reduce their processing, as Reuters reported, citing five industry sources. The reasons given included deteriorating margins as a result of higher local crude oil prices and more expensive financing conditions.”

“In addition, the three refineries mentioned have already been hit by Ukrainian drones this year, which has reduced their processing capacity. The prospect of lower Russian diesel exports also caused the gasoil crack spread to rise to just under $19 per barrel this week. The last time it was this high was at the beginning of August.”

The US Dollar (USD) could 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 strategists Quek Ser Leang and Lee Sue Ann note.

Momentum is beginning to slow

24-HOUR VIEW: “Yesterday, we were of the view that ‘there is scope for USD to rise to 7.2630’. However, USD rose less that expected to 7.2598, closing largely unchanged at 7.2559 (+0.08%). The underlying tone still seems firm, and we continue to hold the view that USD could 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. However, the ‘strong support’ level has edged higher to 7.2100 from 7.2000.”

The Turkish central bank (CBT) held rates unchanged yesterday, as had been unanimously expected, but turned somewhat dovish in its language, contrary to our expectation. CBT removed some language related to inflation uncertainty from its statement and seemed to emphasise disinflationary developments over and above other risks. Most central banks tend to state, generically, that they will maintain a tight monetary stance and ensure all other measures until inflation expectations had fully converged – CBT also conveys this, of course – but such a generic promise is not an assurance that the CB will not lower rates, Commerzbank’s FX analyst Tatha Ghose notes.

USD/TRY surpasses the 34.50 level earlier this week

“We can witness within regional examples, for example the Czech National Bank, that a CB can steadily cut rates but still call its policy restrictive. In this sense, if CBT were to cut the interest rate from 50% to 45%, it could possibly claim that 45% still makes for a very restrictive monetary policy. A play with words mostly.”

“In our view specifically, a rate cut already at the next meeting (26 December) would qualify as premature. This is because we have only had one month of underlying inflation moderation (October). We repeat on these pages that the fresh rate of price increase (month-on-month, seasonally-adjusted) is still far too rapid in Turkey – and the economy has barely begun to cool down. Some measured rate cuts would be justified as and when a clear disinflationary trend has been established at underlying level (not year-on-year rate of change).”

“The idea of immediate rate cuts may trigger speculation about whether or not there was pressure from President Tayyip Erdogan – which would be all negative for the lira. USD/TRY surpassed our 34.50 year-end forecast earlier this week, and we may have to revise our 2025 target higher in the event that CBT’s future actions appear ‘pre-ordained’ rather than data-dependent.”

The statistics on Japanese inflation have a peculiarity. In most countries, the categories of food and energy are excluded when calculating core inflation. This is because there is a general belief that monetary policy can have little influence on the demand for food and energy and that prices should therefore be looked at in isolation, where it is assumed that they can be influenced. In Japan, by contrast, only fresh food, i.e. milk, vegetables and fruit, is excluded from the comparable core rate. All other food remains in, Commerzbank’s FX analyst Volkmar Baur notes.

Rice prices in Japan are rising very sharply

“The difference is quite considerable. While fresh food only accounts for around 4% of the basket of goods used to calculate inflation, all other food accounts for a further 22.3%. Most of the time, however, the difference is not particularly large, because most of the fluctuations actually come from fresh food, so the core rate is not distorted too much by the other foods. But only most of the time.”

“Because right now, rice prices in Japan are rising very sharply. In October, the annual rate of change for rice was 58.9%, up from 44.7% the previous month. And such high rates of price increases do have the potential to distort the overall rate. While the overall rate of inflation in Japan fell from 2.5% to 2.3% in October, according to data published earlier today, it would have fallen by 0.3 percentage points (from 2.3% to 2.0%) without the rise in rice prices.”

“In the end, it remains: Inflation in Japan continues to be on a steady downward trend, which is repeatedly supported by special factors such as the current development of rice prices, but ultimately shows little sign of stabilising above 2%. So there are still few arguments from this side for the Bank of Japan to raise key rates over the next few months. This should become sufficiently clear by next year at the latest, and continue to weigh on the JPY.”

Bias for the US Dollar (USD) is tilted to the downside; any decline is unlikely to threaten the major support at 153.30. In the longer run, USD is expected to trade in a range, likely between 153.30 and 156.50, UOB Group’s FX strategists Quek Ser Leang and Lee Sue Ann note.

USD is expected to trade in a range

24-HOUR VIEW: “After USD rose to 155.88 on Wednesday and then pulled back, we indicated yesterday (Tuesday), when it was at 155.25, that it ‘could pull back further, but any decline is likely limited to a test of 154.35.’ Our view of a pullback was not wrong, even though USD declined more than expected to 153.90. Although downward momentum has not increased much, the bias for USD is still tilted to the downside. However, the major support at 153.30 is unlikely to come under threat (there is another support at 153.70). Resistance is at 154.70, followed by 155.00.”

1-3 WEEKS VIEW: “Yesterday (21 Nov, spot at 155.25), we indicated that USD ‘is expected to trade in a range, likely between 153.30 and 156.50.’ We continue to hold the same view. That said, downward momentum has increased somewhat, and the near-term bias is for USD to test the 153.30 support level.”

US OFAC announced additional sanctions on Russia yesterday, including on systemic banks which had hitherto been exempt because of the energy trade. The Ruble exchange rate depreciated noticeably in recent days. In total, around fifty Russian banks with connections to the global financial system, and fifteen officials were added to the sanctioned list, Commerzbank’s FX analyst Tatha Ghose notes.

Ruble exchange rate depreciates noticeably

“The move may be viewed as the combination of ‘outgoing’ acts by the Biden administration to secure policies in place which are closer to its own ideology (and could have become unlikely under the next administration) – and some practical escalation in view of the military escalation taking place on the battlefield (use of new missiles).”

“At this stage, the USD/RUB and EUR/RUB exchange rate fixes do not respond much to external sanctions news, nor to domestic news about central bank rate hikes. This is because capital flows cannot occur in hard currencies in response to such events. Nevertheless, to the extent that a weak fundamental link still exists via energy and commodity trade, the Ruble exchange rate depreciated noticeably over this past week as the situation escalated.”

“This would not be so obvious by looking at the US dollar cross alone, because the dollar itself has gained so strongly against EM currencies. But it becomes obvious by looking at EUR/RUB which also has been rising since mid-November.”

• AUD/USD rebounds to near 0.6500 but the outlook remains bearish.
• Trump’s economic agenda is expected to boost US inflation and economic growth.
• A fresh escalation in the Russia-Ukraine war has dampened the risk-appetite of investors.

The AUD/USD pair recovers more than half of its intraday losses and rebounds to near the psychological figure of 0.6500 in Friday’s European session. The Aussie pair bounces back as the US Dollar (USD) surrenders a majority of its intraday gains after refreshing two-year high. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, gives up gains after facing selling pressure near 108.00 but still holds higher.

The bullish trend in the US Dollar remains intact as investors expect the current policy-easing cycle of the Federal Reserve (Fed) will be shallower than what market participants had anticipated earlier. Market experts believe that price pressures and economic growth in the United States (US) economy could accelerate when President-elect Donald Trump will take the office. Trump mentioned, in his election campaign, that he will raise import tariffs and lower taxes.

In Friday’s session, investors will focus on the flash S&P Global Purchasing Managers’ Index (PMI) data for November, which will be published at 14:45 GMT. The report is expected to show that the overall business activity expanded at a faster pace. Investors will also pay close attention to how businesses are reacting to rate cuts and Trump’s victory.

Meanwhile, a fresh escalation in Russia-Ukraine war has also improved the US Dollar’s appeal as safe-haven. Russia launched intercontinental ballistic missiles on Ukraine in response to their attack over the week by the United Kingdom (UK) and the US-supplied missiles. This has dampened market sentiment significantly.

In the Australian region, flash JUDO Bank Composite PMI surprisingly contracted in November. The index showing overall private business activity declined to 49.4 from 50.2 in October due to weakness in the services sector. A figure below the 50.0 threshold is considered as contraction in economic activities.

The New Zealand Dollar (NZD) is under mild downward pressure; it is likely to edge lower, possibly testing 0.5835 before the risk of a rebound increases. In the longer run, the underlying tone has softened, but any decline is likely part of a lower trading range of 0.5815/0.5905, UOB Group’s FX strategists Quek Ser Leang and Lee Sue Ann note.

NZD to test 0.5835 before the risk of a rebound increases

24-HOUR VIEW: “On Wednesday, NZD dropped to 0.5865. Yesterday, when NZD was at 0.5880, we were of the view that it ‘could retest 0.5865 before a rebound is likely.’ We indicated that ‘the strong support at 0.5850 is unlikely to come under threat.’ NZD weakened more than expected as it tested the 0.5850 support (low has been 0.5850). As downward momentum is increasing, NZD is unlikely to rebound. Instead, it is likely to edge lower, possibly testing 0.5835 before the risk of a rebound increases again. The next support at 0.5815 is unlikely to come under threat. Resistance is at 0.5875; a breach of 0.5885 would mean that the mild downward pressure has eased.”

1-3 WEEKS VIEW: “We highlighted two days (20 Nov, spot at 0.5910) that ‘upward momentum is beginning to build.’ We added, ‘Provided that NZD remains above 0.5850 (‘strong support’ level), it could rise gradually to 0.5960.’ Yesterday, NZD dropped to 0.5850. The buildup in momentum has dissipated. While the underlying tone has softened, any decline is likely part of a lower trading range of 0.5815/0.5905. In other words, NZD is unlikely to break clearly below 0.5815.”

USD/SGD rebounded as markets continue to trade 2-way, caught between the forces of heightened geopolitical tensions and policy uncertainties associated with Trump presidency. Swings in RMB, JPY continued to drive USDSGD in the near term. Pair was last seen at 1.3472, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Technical patterns suggest signs of bearish pullback

“Daily momentum is mild bullish, but RSI continues to show some signs of turning lower. Bearish divergence on MACD appears to be playing out. Technical patterns suggest signs of bearish pullback in the near term. Support at 1.3340 (200 DMA), 1.3290 (61.8% fibo retracement of Jun high to Oct low). Resistance at 1.3490, 1.3520 levels.”

“MTI revised 2024 growth forecast higher to around 3.5%, up from 2 – 3% previously. For 2025, MTI looks for growth at 1 – 3%. MTI expects growth in Spore’s key trading partners to ease slightly from 2024 levels, especially for the US and China, and flagged that global economic uncertainties have risen, including uncertainty over the policies of the incoming US administration, with the risks tilted to the downside.”

“The downside risks cited included 1/ a further escalation of geopolitical risks (including in the Middle East as well as trade tensions among major economies could lead to higher prices and production costs, as well as greater policy uncertainty, which in turn could weigh on global investment, trade and growth, and 2/ disruptions to the global disinflation process could prompt tighter financial conditions for longer and the desynchronisation of monetary policies could trigger latent vulnerabilities in financial systems.”

• Silver price soars to near $31.40 on heightened geopolitical tensions.
• Russia warned the UK to strike with intercontinental ballistic missiles that have a range of several thousand kilometers.
• Traders lean towards the option of an interest rate cut by the Fed in December.

Silver price (XAG/USD) strives to establish above $31.00 in Friday’s European session. The white metal surges to near $31.40 as demand for safe-haven bets has strengthened after Russia launched intercontinental ballistic missiles with a range of several thousand kilometers on Ukraine’s defense facilities in Dnipro.

The move appeared as retaliation given that Ukraine used United States (US) supplied ATACMS weapons and the United Kingdom (UK) provided storm shadow missiles to attack deep in Russia over the week.

Russian President Vladimir Putin has also warned the UK to strike with the same ballistic missile that their defense facility used against Ukraine, PA Media reported. Putin stated that their nation is entitled to use weapons against those nations who supplies weapons to Ukraine.

In response to that, the spokesperson of UK Prime Minister Keir Starmer said, “Only serves to strengthen our resolve and to ensure that Ukraine has what it needs to act in self-defense against Russia’s reckless and illegal invasion.”

The scenario of heightened geopolitical uncertainty improves the demand for safe-haven assets, such as Silver.

Apart from Silver, the safe-haven appeal of the US Dollar (USD) has also strengthened. The US Dollar Index (DXY), which gauges Greenback's value against six major currencies, posts a fresh two-year high at 108.00.

Meanwhile, investors look for fresh cues about the Federal Reserve’s (Fed) likely interest rate action in the December meeting. According to the CME FedWatch tool, there is a 56% chance that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50%.

Silver technical analysis

Silver price delivers a mean-reversion move to near the 20-day Exponential Moving Average (EMA) around $31.40 after declining to near $29.70. The white metal weakened after the breakdown of the horizontal support plotted from the May 21 high of $32.50.

The upward-sloping trendline from the February 29 low of $22.30 will act as key support for the Silver price around $29.50.

The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend.

Silver daily chart

The Australian Dollar (AUD) is expected to trade in a range of 0.6490/0.6535. In the longer run, if AUD breaks below 0.6470, it would mean it is not rebounding further, UOB Group’s FX strategists Quek Ser Leang and Lee Sue Ann note.

AUD has a chance of breaking below 0.6470

24-HOUR VIEW: “Yesterday, we expected AUD to trade between 0.6485 and 0.6535. AUD subsequently traded in a narrower range than expected (0.6498/0.6532), closing largely unchanged at 0.6511 (+0.09%). The price action still appears to be part of a range trading phase. Today, we expect a range of 0.6490/0.6535.”

1-3 WEEKS VIEW: “In our most recent narrative from two days ago (20 Nov, spot at 0.6530), we highlighted that ‘the current price action is part of a rebound that could reach 0.6560, possibly 0.6600.’ AUD has not been able to make any headway on the upside. From here, if AUD breaks below 0.6470 (‘strong support’ level previously at 0.6460), it would indicate that it is not rebounding further.”

• Gold rallies for the fifth day in a row on Friday on the back of increased safe-haven demand due to Russia threats. 
• Headwinds for the precious metal may come from shifting US interest rate expectations and the strong performance of the US Dollar.
• Technically, XAU/USD extends giants, fulfilling the promise of the bullish Three White Soldiers Japanese candlestick pattern.  

Gold (XAU/USD) rallies for the fifth day in a row, making it a clean-sweep of green daily candlesticks for the week so far. The precious metal rises back above $2,700 during the European session on Friday as inflaming Russia-Ukraine tensions drive renewed safe-haven flows into Gold. 

That said, the yellow metal may see gains capped by a stronger US Dollar (USD), which continues to rise on the back of elevated US inflation expectations, the anticipation of the Trump government implementing Dollar-positive policies in January, and a robust US labor market.

Gold rises as Russia threatens United Kingdom

Gold is rallying on the back of increased haven flows after the Russian Ambassador for the UK, Andrey Kelin, told Sky News that the UK was now a legitimate target for Russian missile strikes after permitting Ukraine to use its British-made Storm Shadow missiles on Russian territory. 

The comments mark an escalation in the conflict and come after Russia used intercontinental ballistic missiles in a strike on the Ukrainian city of Dnipro. This was a reprisal for an attack by Ukraine on Russian targets in the Kursk region, using British-made long-range missiles. This follows US President Biden’s decision to allow Ukraine to use its US-made ATACMS (Army Tactical Missile System) missiles against targets on Russian soil.

Gold faces headwinds from USD and Fed

Gold could face headwinds as the US Dollar rises on Friday, given the precious metal is mainly priced and traded in USD, so a strengthening Greenback tends to lower Gold’s price. 

The move comes as US interest rate expectations continue to smooth. Although interest rates were previously expected to fall dramatically into year-end, the forecast downward trajectory is now shallower. The prospect of interest rates remaining relatively elevated is negative for Gold because it increases the opportunity cost of holding the precious metal. 

The change comes in part after US Initial Jobless Claims data on Thursday revealed that a lower-than-expected 213,000 people claimed unemployment benefits in the US in the week ending November 15, compared to the 220,000 expected. 

Given one of the Fed’s twin mandates is fostering full employment, the data suggests less urgency to lower interest rates to spur job creation. 

Still, the claims data was not all rosy, with Continuing Claims in the week ending November 8 rising to 1,908 million, above the 1,870 million expected and the previous figure.  

Also sapping demand for Gold is competition from Bitcoin (BTC), which is surging to just below the $100,000 mark. 

A rise 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, according to Bloomberg News. This suggests Gold is suffering as a consequence of Bitcoin’s outperformance. 

Technical Analysis: XAU/USD marches higher 

Gold extends its march higher on Friday, fulfilling the promise of the bullish “Three White Soldiers” Japanese candlestick pattern (green rectangle on the chart below) it formed whilst rebounding from last week’s lows. 

XAU/USD Daily Chart

The up move is backed by the (blue) Moving Average Convergence Divergence (MACD) indicator crossing above its red signal line on an intraday basis. However, to give a proper signal, the crossover must endure until the day’s close.

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. Gold has already punched through the first target to the upside at $2,686, the September 26 high, and now prepares to meet resistance at the next key level of $2,710 at the November 8 swing high. 

A break above $2,710 would be a very bullish sign as it would potentially cement the medium-term trend as bullish. This would mean all three major trends – the short, medium and long-term – were in the ascent, giving a green light to a continuation higher.

Until the level is broken, however, the precious metal could still arguably be in a downtrend on a medium-term basis, keeping alive downside risks to the outlook. 

The US Dollar (USD) remains better bid overnight. DXY was last above 107, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Mild bullish momentum on daily chart intact

“Escalation of geopolitical tensions between Russia and Ukraine was one of the major drivers. Elsewhere, US data was mixed as existing home sales and jobless claims came in better than expected while Philly Fed business outlook slumped. On Fedpseaks, Goolsbee said he sees interest rates moving ‘a fair bit lower’ over next year.”

“Mild bullish momentum on daily chart intact while RSI rose. Bearish divergence on daily MACD observed. We are still not ruling out the risk of technical retracement lower. Resistance at 107.40 (2023 high). Support at 106.20, 105.60 (76.4% fibo) and 104.50/60 levels (21DMA, 61.8% fibo retracement of 2023 high to 2024 low).”

Day ahead watch Prelim PMIs, Uni of Michigan sentiment data (tomorrow) before core PCE (next Wed). Firmer prints may add to USD strength while softer print should keep a leash on USD bulls.”

A break of 1.2565 will not be surprising; the next significant support at 1.2490 is not expected to come into view for now. In the longer run, momentum received a boost; GBP is likely to break below 1.2565. The next level to monitor is 1.2490, UOB Group’s FX strategists Quek Ser Leang and Lee Sue Ann note.

The next level to monitor is 1.2490

24-HOUR VIEW: “We highlighted yesterday that ‘further range trading appears likely, even though the softened underlying tone suggests a lower range of 1.2615/1.2685.’ The sudden plunge that sent GBP to a low of 1.2577 was surprising. Given the rapid increase in momentum, a break of 1.2565 will not be surprising. However, deeply oversold conditions could indicate that the next significant support at 1.2490 is not expected to come into view for now. To sustain the momentum, USD must remain below 1.2640 (minor resistance is at 1.2615).”

1-3 WEEKS VIEW: “We have held a negative view in GBP since early last week. On Wednesday (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.’ GBP subsequently rose briefly to 1.2713, and then pulled back. Yesterday, in a sudden move, GBP plunged to a low of 1.2577. Not surprisingly, downward momentum received a boost. From here, GBP is likely to break below 1.2565. The next level to monitor is 1.2490. On the upside, the ‘strong resistance’ level has moved lower to 1.2665 from 1.2725.”

• The US Dollar Index (DXY) rallied to a fresh two-year high after Eurozone PMI data suggested the region’s economy is contracting.
• The US Dollar is also supported by safe-haven flows amid escalating geopolitical risks in the Russia-Ukraine war.
• The US Dollar Index pops above 108.00 and eases slightly afterward. 

The US Dollar (USD) jumps on Friday to its highest level in two years, with the DXY US Dollar Index popping above 108.00, as Purchasing Managers Index (PMI) data for the Eurozone signaled that the region’s economy fell back into contraction in November. The data weighed heavily on the Euro (EUR) – the main foreign currency forming the DXY – as it could mean more interest rate cuts ahead by the European Central Bank (ECB) in order to support growth. 

Earlier on Friday, the final reading for the German Gross Domestic Product (GDP) was downwardly revised to 0.1%, which means that the Eurozone’s largest economy barely grew in the third quarter.

Adding to the Euro weakness, the US Dollar keeps getting support from safe-haven flows due to the escalating war between Russia and Ukraine. According to Yahoo News, Russia has put a US military base in Poland at the top of its priority list of targets for the next retaliations.

The US economic calendar features the preliminary S&P Global PMI readings for November as well. After the big miss from the European PMI numbers, robust figures for the US could fuel further US Dollar strength. Apart from that, the final reading for the University of Michigan Consumer Sentiment survey will also be released. 

Daily digest market movers: It could turn ugly this Friday

• European PMI data presented a bleak picture for the Eurozone and its main economies. The Eurozone Composite PMI fell to 48.1 from 50, missing expectations and signaling that the region’s economy is contracting.  The data suggested that the services sector fell into contraction, while the downturn in the manufacturing sector gained traction. 
• Individual PMI data for both France and Germany also broadly missed expectations. For Germany, the data suggests that economic activity contracted at the quickest rate in nine months, while in France the contraction was the steepest since January.
• Germany’s Gross Domestic Product (GDP) reading for the third quarter came in at 0.1%, downwardly revised from 0.2% in the preliminary reading.
• At 14:45 GMT, S&P Global will release the preliminary Purchasing Managers Index (PMI) reading for the US:
• The Manufacturing component is expected to edge up to 48.8 from 48.5 previously, remaining in contraction.
• The Services PMI is expected to increase to 55.3 from 55.0 previously. 
• The University of Michigan survey will publish its final November reading at 15:00:
• Consumer Sentiment is expected to come in a bit better at 73.7 against the preliminary reading of 73.0.
• The Inflation expectations are expected to remain at 3.1%.
• Equities are again looking for direction, with Chinese equities being slaughtered this Friday. The main losses are in the Shanghai Composite Index, which fell over 3% at its closing bell. European equity indices fall, while US equity futures post minor gains. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 55.9%. A 44.1% chance is for rates to remain unchanged. While the interest-rate cut scenario is still the most probable, traders have pared back some of the rate-cut bets compared with a week ago, when a rate-cut possibility was at 62%.
• The US 10-year benchmark rate trades at 4.40%, sliding further away from the high printed on Friday at 4.50%.

US Dollar Index Technical Analysis: Headline risks with data releases

The US Dollar Index (DXY) is edging up, sparked by those European PMI numbers that reveal the whole Eurozone is in contraction. Pending US PMI data to be released later today, it looks like the performance gap between Europe and the US just got bigger in favor of the United States. Look out for some profit-taking ahead of the weekend, which might trigger a fade by the US closing bell on Friday evening. 

With the fresh breakout, a daily close above 107.00 will be key now before heading into the weekend.  A fresh two-year high is now seen at 108.07, which is the statistical level to beat next. Further up, the 109.00 big figure level is the next one in line to look at. 

The first level on the downside is 105.89, the pivotal level since May 2. A touch lower, the pivotal 105.53 (April 11 high) should avoid any downturns towards 104.00. Should the DXY fall all the way towards 104.00, the big figure and the 200-day Simple Moving Average at 103.95 should catch any falling knife formation. 

US Dollar Index: Daily Chart

Yesterday’s US Dollar (USD) rally led to a break below the key psychological 1.05 EUR/USD support and an exploration above 107.0 in DXY. There’s no one single driver of the USD move, as that was probably a combination of multiple factors, ING’s FX analyst Francesco Pesole notes.

DXY looks more likely to consolidate above 107.0

“Markets are clearly taking the escalation in the Russia-Ukraine war more seriously, which is favouring a broader rotation to haven assets like the dollar. On the macro side, jobless claims unexpectedly slowed, although continuing claims accelerated and both the Leading Index and the Philadelphia Fed Business Outlook disappointed. It was, however, some Fedspeak that likely encouraged USD buying as New York Fed President John Williams – not usually a hawk – said the US is ‘not quite there yet’ on inflation and that the jobs market needs to cool further for easing.”

“Today, PMIs across developed markets can set the direction and determine whether the dollar can extend the rally. There has been a clear divergence in activity surveys between the US and eurozone as of late which has underpinned the wide USD:EUR rate differential. Expectations for S&P Global PMIs in the US are for another strong composite read around 54.”

We don’t think there is much value in overthinking dollar strength at this stage, DXY looks more likely to consolidate above 107.0 rather than correcting lower in the short term.

USD/JPY fell overnight as the pair traded sideways this week. Pair was last at 154.30 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is turning mild bearish

“Geopolitical concerns, Ueda’s comments/ market positioning were some of the factors driving 2-way moves in USDJPY this week. Daily momentum is turning mild bearish while RSI fell. Risks skewed to the downside. Support at 153.80 (21DMA), 153.30 (61.8% fibo retracement of 2024 high to low) and 152 (200 DMA). Resistance at 155.70, 156.60 (76.4% fibo).”

“We still look for USD/JPY to trend lower, premised on Fed cut cycle while the BoJ has room to further pursue policy normalisation. On the data front Japan core core CPI rose this morning, alongside services PMI, reinforcing our view that BoJ should proceed with another hike next month. Divergence in Fed-BoJ policies should bring about further narrowing of UST-JGB yield differentials and this should underpin the broader direction of travel for USD/JPY to the downside.”

“Elsewhere, escalation in geopolitical tensions may also support safe-haven demand (positive JPY). That said, any slowdown in pace of policy normalisation - be it the Fed or BoJ - would mean that USD/JPY’s direction of travel may be bumpy or face intermittent upward pressure.”

• EUR/USD falls sharply as the US Dollar extends its rally and the Eurozone Composite PMI surprisingly contracts.
• Eurozone Service PMI surprisingly decreased to 49.2, suggesting that business activity contracted in November for the first time since January.
• The US Dollar strengthens as traders doubt over Fed rate cuts in December.

EUR/USD sinks to near two-year lows below 1.0400 in European trading hours on Friday after the release of the preliminary HCOB Eurozone Purchasing Managers Index (PMI) report for November, which showed that the overall business activity surprisingly contracted. The Eurozone Composite PMI declined to 48.1 while economists expected the economic data to manage to remain near the borderline at 50.0. A figure below the 50.0 threshold is considered a contraction in economic activities

A major decline in the overall private business activity came from weakness in the Services PMI, which also contracted unexpectedly. The Services PMI, which gauges activity in the service sector, declined to 49.2 against estimates of 51.8 and the prior release of 51.6. The service sector output contracted for the first time since January.

The Manufacturing PMI continued to contract at a faster-than-expected pace. The index declined sharply to 45.2 against the estimates and the prior release of 46.0

A majority of European Central Bank (ECB) officials are already worried about weak growth and potential economic risks due to expectations of a trade war with the United States (US). On Thursday, ECB chief economist Philip Lane warned that a global trade war due to the likely implementation of President-elect Donald Trump’s higher tariffs would result in a “sizeable” loss in global economic output. "Trade fragmentation entails sizeable output losses,” Lane said.

Meanwhile, Governor of the Central Bank of Cyprus Christodoulos Patsalides said, "If trade restrictions materialize, the outcome may be inflationary, recessionary or worse, stagflationary," Reuters reported.

Daily digest market movers: EUR/USD weakens amid US Dollar’s strength

• EUR/USD faces an intense sell-off as the US Dollar (USD) extends bullish momentum near a two-year high, with the US Dollar Index (DXY) trading above 107.50.
• The outlook of the US Dollar is upbeat on expectations that there will be fewer interest rate cuts from the Federal Reserve (Fed) in its current policy-easing cycle than what market participants had anticipated earlier.
• Market participants expect that United States (US) inflation and economic growth will accelerate when President-elect Donald Trump takes office as his economic agenda includes lower taxes and raising import tariffs by 10% universally, except the Eurozone and China, which are expected to face even higher duties.
• Higher import tariffs and lower taxes will boost business investment, as well as the demand for labor and domestically produced goods and services. A scenario that will be inflationary and force the Fed to remain cautious on interest rate cuts.
• The impact of the hot inflation outlook is visible in market speculation for the Fed interest rate policy for the December meeting. Fed’s probability of reducing interest rates by 25 basis points (bps) to the 4.25%-4.50% range has eased to 56% from 70% a month ago, according to the CME FedWatch tool.
• Going forward, investors will focus on the flash US S&P Global PMI data for November, which will be published at 14:45 GMT. The PMI report is expected to show that the overall business activity expanded at a faster pace due to an improvement in the output of manufacturing as well as the service sector.

Technical Analysis: EUR/USD under pressure below 1.0450

EUR/USD extends downside and reaches a fresh two-year low below 1.0400 on Friday after sliding below the psychological support of 1.0500 the prior day. The pair could witness more downside 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, EUR/USD bottomed at 1.0332 on Friday. Should that level fail to hold, the pair could find a cushion near the round-level support of 1.0300. On the flip side, the psychological level of 1.0500 and the November 20 high round 1.0600 will be the key barriers for the Euro bulls.

(This story was corrected on November 22 at 09:55 GMT to add "falls sharply" at the first bullet point.)

• Business activity in the UK private sector contracted slightly in early November.
• GBP/USD trades at its weakest level since May below 1.2550.

Business activity in the UK private sector contracted in early November, with the preliminary S&P Global/CIPS Composite Purchasing Managers Index (PMI) falling to 49.9 from 51.8 in October. This reading came in below the market expectation of 51.8.

In the same period, the Manufacturing PMI slumped to 48.6 from 49.9, showing an acceleration in the contraction rate of the manufacturing sector's economic activity. Additionally, the Services PMI declined to 50 from 52.

Assessing the survey's findings, "Businesses have reported falling output for the first time in just over a year while employment has now been cut for two consecutive months," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said and added:

"Although only marginal, the downturns in output and hiring represent marked contrasts to the robust growth rates seen back in the summer and are accompanied by deepening concern about prospects for the year ahead."

Market reaction

GBP/USD stays on the back foot following the PMI report and was last seen losing 0.5% on the day at 1.2528.

Silver prices (XAG/USD) rose on Friday, according to FXStreet data. Silver trades at $31.17 per troy ounce, up 1.22% from the $30.79 it cost on Thursday.

Silver prices have increased by 30.99% 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 86.48 on Friday, down from 86.76 on Thursday.

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

The Euro (EUR) could break the significant support at 1.0450; the next technical target at 1.0400 is likely out of reach for the time being. In the longer run, EUR weakness has resumed; the levels to monitor are 1.0450 and 1.0400, UOB Group’s FX strategists Quek Ser Leang and Lee Sue Ann note.

EUR weakness has resumed

24-HOUR VIEW: “Our view for EUR to trade in a range yesterday was incorrect, as it plummeted to a low of 1.0461, closing on a weak note at 1.0473 (- 0.66%). The strong momentum is likely to outweigh the oversold conditions. Today, EUR could break the significant support at 1.0450. The next technical target at 1.0400 is likely out of reach for the time being. On the upside, any recovery is expected to remain below 1.0530, with minor resistance at 1.0505.”

1-3 WEEKS VIEW: “Two days ago (20 Nov, spot at 1.0590), we indicated that ‘the weakness in EUR has stabilised.’ We expected EUR to ‘consolidate between 1.0520 and 1.0685.’ After EUR dropped to a low of 1.0507, we pointed out yesterday (20 Nov, spot at 1.0545) that ‘the recent downtrend is likely to resume if it breaks and stays below 1.0490.’ We did not anticipate EUR to break below 1.0490 as quickly, as it plummeted to 1.0461. To look at it another way, the recent EUR weakness has resumed earlier than expected. The levels to monitor are 1.0450 and 1.0400. We will maintain our view provided that 1.0560 (‘strong resistance’ level was at 1.0600 yesterday) is not breached.”

• The Mexican Peso consolidates ahead of the publication of key economic data for Mexico. 
• The MXN faces headwinds from slowing growth, central bank dovishness and US politics. 
• Technically, USD/MXN is unfolding an up leg within a range that is part of a larger Measured Move pattern.

The Mexican Peso (MXN) trades mild and mixed in its most-traded pairs as the week draws to a close, with idiosyncratic factors impacting each one – the US Dollar (USD), Euro (EUR) and Pound Sterling (GBP) – differently. This may change later on Friday, when Mexico releases Gross Domestic Product (GDP) data for Q3 and mid-month inflation readings for November.

The Peso faces headwinds overall. These include recent weak Retail Sales data – albeit for September sales increased 0.1% on month – and comments from Governor of the Bank of Mexico (Banxico) Victoria Rodríguez Ceja, who said she expects more cuts to interest rates (thereby reducing foreign capital inflows).  In addition, policies from US President-elect Donald Trump also weigh, particularly the threat of tariffs and the possibility of a mass repatriation of Mexican immigrants whose remittances pump regular demand for MXN. 

The Mexican Peso weakens against the US Dollar

The Mexican Peso has depreciated overall this week versus the US Dollar (USD) as higher US inflation expectations, the anticipation of the Trump government implementing Dollar-positive policies in January and a stronger US labor market, all conspire to underpin the USD.

Economists believe these factors taken together will lead to a shallower downward trajectory for US interest rates, which, in turn, is likely to keep the Greenback supported, since higher interest rates attract more foreign capital inflows.

Market gauges of the probability of the Federal Reserve (Fed) cutting interest rates by 25 basis points (bps) (0.25%) at their December meeting stand at 56%, with the chances of the Fed leaving rates unchanged at 44%, according to the CME FedWatch tool. This is slightly lower than the probability on Thursday. It probably reflects the more robust Initial Jobless Claims data released on the day, which showed a lower-than-expected 213,000 people claimed unemployment benefits in the US in the week ending November 15, compared to the 220,000 expected. 

The USD is also gaining strength from safe-haven demand as geopolitical tensions ratchet up between Russia and NATO following the news that Russia might have used a long-range ballistic missile to bomb the Ukrainian city of Dnipro. The move may have been a counter-punch to Ukraine using UK Storm Shadow missiles to attack targets in Russia after the US gave Kyiv the green light to deploy its own ATACMS missiles on Russian territory.

The Mexican Peso strengthens versus Euro, matches GBP

The Mexican Peso is overall appreciating against the Euro (EUR), which is falling after several European Central Bank (ECB) policymakers said that interest rates in Europe needed to be slashed more rapidly in order to counteract stalling economic growth. 

Europe’s economic engine, Germany, has been flashing warning signs for some time – both economically and politically – and its latest Q3 GDP growth data missed expectations, showing the Eurozone’s largest economy grew by a meager 0.1%, less than previously estimated

The Mexican Peso versus the Pound Sterling (GBP) has traded range-bound since August on the back of expectations UK interest rates will remain relatively stable – and high at 4.75% – compared to most other major economies, thus supporting the Sterling. 

This comes on the back of an improved outlook for UK economic growth. However, GBP is falling against the MXN today after the release of weak UK Retail Sales data, which widely undershot expectations and previous readings.  

Sheinbaum argues INAI reform was necessary 

The Mexican Peso has been dogged by the controversial reform agenda of the new Morena-led government led by President Claudia Sheinbaum. Indeed, this was one of the factors stated by Moody’s Ratings as the reason for its recent downgrade of Mexico’s credit rating from Baa2 “Stable” to “Negative”. On Wednesday, the Mexican congress passed more contentious reforms, this time to scrap or replace five of Mexico’s independent regulatory bodies, according to El Financiero. 

One of the most controversial bodies to be dissolved was The National Institute for Transparency, Access to Information, and Data Protection (INAI), which, according to Human Rights Watch “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.” INAI also gives Mexican citizens the right to safeguard their personal data. 

In a press conference on Thursday, Claudia Sheinbaum was asked about the controversial move. “Those who defend INAI to the hilt forgot about the corruption,” she said.

According to Mexico News Daily, “The president proceeded to cite examples of corruption and nepotism within INAI that were uncovered by the Federal Auditor’s Office (ASF).” 

Sheinbaum said high-ranking INAI managers asked for bribes of between 10%-60% of candidates’ salaries to get them jobs in the agency, and INAI was subject to widespread nepotism.

The role of the INAI would be taken over by the Ministry of Anti-Corruption and Good Governance, the President said.

“There will be more transparency … [and] there won’t be corruption. … Personal data will be protected,” Sheinbaum added.

Technical Analysis: USD/MXN extends wave “C” higher

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

The (blue) Moving Average Convergence Divergence (MACD) indicator crossed above its red signal line on Wednesday and is now also above the zero line, adding supporting evidence the pair could unfold higher. 

A break above the 20.40 November 21 high would confirm wave C extending to at least the same level as the top of wave A at 20.69, possibly even to 20.80 and the range ceiling.

• Business activity in the Eurozone private sector contracted in early November.
• EUR/USD trades at its weakest level in nearly two years below 1.0450.

Business activity in the Eurozone private sector contracted in early November, with the preliminary HCOB Composite Purchasing Managers Index (PMI) falling to 48.1 from 50 in October. This reading came in below the market expectation of 50.

In the same period, the HCOB Manufacturing PMI edged lower to 45.2 from 46, while the Services PMI dropped into the contraction territory at 49.2 from 51.6.

Assessing the report's findings, "the Eurozone's manufacturing sector is sinking deeper into recession, and now the services sector is starting to struggle after two months of marginal growth," noted Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. "It is no surprise really, given the political mess in the biggest Eurozone economies lately – France's government is on shaky ground, and Germany's heading for early elections. Throw in the election of Donald Trump as US president, and it is no wonder the economy is facing challenges. Businesses are just navigating by sight."

Market reaction

The Euro came under renewed selling pressure after this report. At the time of press, EUR/USD was trading at its weakest level in nearly two years below 1.0450.

• The S&P Global preliminary PMIs for November are likely to show little variation from the October final readings.
• Markets are undecided on whether the Federal Reserve will lower the policy rate again in December. 
• EUR/USD remains technically bearish ahead of the PMI data. 

S&P Global will publish the preliminary estimates of the United States (US) Purchasing Managers Indexes (PMIs) for November on Friday. The indexes result from surveys of the senior executives in the private sector. They are meant to indicate the overall health of the economy, providing insights into key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories.

S&P Global releases three indexes: the Manufacturing PMI, the Services PMI the Composite PMI, which is a weighted average of the two sectors. Readings above 50 indicate that economic activity in the private sector is expanding, while figures below 50 represent contraction. These indexes are released every month in advance of other official figures, becoming a key leading indicator of the status of the economy.

In October, the S&P Global Composite PMI arrived at 54.1, suggesting that the private sector continued to grow at a healthy pace. “October’s flash US PMI survey signaled a further solid rise in business activity to mark a robust start to the fourth quarter,” S&P Global said in the press release. “Growth was driven solely by the service sector, however, as manufacturing output contracted for a third month running. Meanwhile, employment fell slightly for a third successive month amid uncertainty ahead of the presidential election."

What can we expect from the next S&P Global PMI report?

Investors foresee the flash Manufacturing PMI improving slightly to 48.8 in November from 48.5 and expect the Services PMI to edge higher to 55.3 from 55. 

A poor performance of the manufacturing sector would come as no surprise, and the expected uptick would likely neutralize concerns, particularly if the Services PMI keeps indicating a solid expansion in the sector.

Market participants will scrutinize comments about inflation and employment in the surveys. Following Federal Reserve (Fed) Chairman Jerome Powell’s cautious remarks about further policy easing, markets dialed down expectations for another rate reduction in December. According to the CME FedWatch Tool, the probability of a 25 basis points cut at the last policy meeting of the year currently stands at about 55%, down from above70% early last week.

Powell argued that they don't need to be in a hurry to lower interest rates, citing ongoing economic growth, a solid job market and inflation that remains above the 2% target. "If data let us go slower, that's a smart thing to do," he added. 

In case the Services PMI unexpectedly comes in below 50, the immediate reaction is likely to trigger a US Dollar (USD) selloff. On the other hand, the USD could gather strength against its rivals if the Services PMI remains near the market consensus and the Manufacturing PMI rises into the expansion territory above 50.

Investors could see a stronger chance for a Fed policy hold in December if PMI surveys highlight rising input inflation in the service sector, alongside favorable conditions in the labor market. Conversely, softer price pressures and a lack of growth in private sector payrolls could revive optimism about further policy easing and weigh on the USD.

When will the October flash US S&P Global PMIs be released, and how could they affect EUR/USD?

The S&P Global Manufacturing, Services and Composite PMIs report will be released on Friday at 14:45 GMT and is expected to show manufacturing output is still in trouble while the service sector remains the strongest.

Ahead of the release, Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief technical overview of EUR/USD:

“The near-term technical outlook for EUR/USD remains bearish. The Relative Strength Index (RSI) indicator on the daily chart stays well below 40, while holding slightly above 30, suggesting that the pair has more room on the downside before turning technically oversold.”

“If EUR/USD closes the week below 1.0500 (round level) and confirms that level as resistance, technical sellers could remain interested. In this case, 1.0450 (October 2023 low) could be seen as the next support before 1.0350 (May 2022 low). Looking north, first resistance could be spotted at 1.0600 (static level, round level) before the 20-day Simple Moving Average (SMA) at 1.0700.”

• HCOB Composite PMI in Germany declined in November's flash estimate.
• EUR/USD trades in daily range below 1.0500 after the data.

Business activity in Germany's private sector contracted at an accelerating pace in early November, with the preliminary HCOB Composite Purchasing Managers Index (PMI) dropping to 47.3 from 48.6 in October. This reading came in below the market expectation of 48.6.

In the same period, the HCOB Manufacturing PMI edged slightly higher to 43.2 from 43, while the Services PMI declined to 49.4 from 51.6.

Commenting on the survey's findings, "overall, business activity in Germany has decreased for the fifth month in a row. The political uncertainty, which has increased since Donald Trump's election as US president and the announcement of snap elections in Germany on February 23, isn't helping," said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. "However, the modest increase in the future output index might reflect some hope that the next German government will manage to turn the economy around with bold measures, for example by reforming the debt break."

Market reaction

EUR/USD showed no immediate reaction to this report and was last seen trading virtually unchanged on the day at 1.0475.

• The Pound Sterling faces a sharp sell-off as UK Retail Sales declined at a faster-than-projected pace in October.
• Weak UK Retail Sales data could boost BoE dovish bets for December.
• Investors await the flash S&P Global PMI data for both the UK and the US.

The Pound Sterling (GBP) weakens against a majority of its peers, except Asia-Pacific currencies, as the United Kingdom (UK) Retail Sales data for October contracted at a faster-than-expected pace. The British currency trades near 1.2550 against the US Dollar (USD) in Friday’s London session, a six-month low.

Retail Sales, a key measure of consumer spending, declined by 0.7% compared with the previous month. In September, sales increased by a marginal 0.1%, downwardly revised from the 0.3% previously reported. Year-on-year, Retail Sales grew by 2.4%, less than the estimates of 3.4% and the former release of 3.2% (downwardly revised from 3.9%).

Weak Retail Sales data is expected to boost expectations of interest-rate cuts by the Bank of England (BoE) in the December meeting as they highlight weakness in consumer spending, a key growth factor for the UK economy.

Still, for now, traders expect the BoE to leave interest rates unchanged at 4.75% not only in the December meeting but also in the one to be held in February. This is because UK inflation data came in hotter than expected in October, with services inflation – a closely watched inflation indicator by BoE officials for decision-making on interest rates – rising to 5%. 

Investors should brace for more volatility in the British currency as the flash S&P Global/CIPS Purchasing Managers’ Index (PMI) data is scheduled to be published at 09:30 GMT. The Composite PMI is expected to come in at 51.8, unchanged from the previous month, suggesting that the country's private-sector activity continued to expand. Investors will also focus on the impact of the Labour Party’s first budget on business sentiment.

Daily digest market movers: Pound Sterling refreshes six-month low against US Dollar

• The Pound Sterling posts a fresh six-month low near 1.2550 against the US Dollar (USD) in Friday’s London session. The GBP/USD pair extends its downfall after weak UK Retail Sales data. However, the Cable was already under pressure as the US Dollar (USD) strengthened due to lower-than-expected United States (US) Initial Jobless Claims for the week ending November 15.
• Individuals claiming jobless benefits for the first time surprisingly came in at 213K, lower than estimates of 220K. Lower jobless claims help to ease concerns about the labor market. However, the report also showed that individuals were taking longer-than-usual to find new jobs.
• The outlook of the US Dollar has remained firm on expectations that there will be fewer interest rate cuts from the Federal Reserve (Fed) in the current policy-easing cycle. Market expectations for the Fed to adopt a more gradual policy-easing approach have strengthened as investors believe that the economic agenda of President-elect Donald Trump will boost inflationary pressures and economic growth, a scenario that will force the Fed to remain cautious on interest rates.
• On Thursday, Richmond Fed Bank President Thomas Barkin said in an interview with the Financial Times (FT) that the economy is more vulnerable to inflationary shocks as producers are passing on costs to customers more than in the past, Reuters reported. "We're somewhat more vulnerable to cost shocks on the inflation side than we might have been five years ago,” Barkin said.
• In Friday’s US session, investors will focus on the preliminary S&P Global PMI data for November, which will be published at 14:45 GMT. Investors will pay close attention to the PMI data to get fresh cues about the current status of economic health, and the impact of recent Fed rate cuts and Donald Trump’s victory on business sentiment.

Technical Analysis: Pound Sterling sees more downside near 1.2550

The Pound Sterling slides to near 1.2550 against the US Dollar on Friday, extending losses for a third consecutive trading day. The GBP/USD pair's outlook has turned bearish given that all short-to-long term Exponential Moving Averages (EMA) are sloping down.

The 14-day Relative Strength Index (RSI) remains in the 20.00-40.00 range, suggesting that a strong bearish momentum is intact.

Looking down, the pair is expected to find a cushion near May’s low of 1.2446. On the upside, the November 20 high around 1.2720 will act as key resistance.

• NZD/USD receives downward pressure as the RBNZ is highly expected to deliver a 50 basis point rate cut in November.
• The US Dollar Index rose to a fresh yearly high of 107.20 during the European session on Friday.
• Traders await the US S&P Global PMI data scheduled to be released in the North American session.

NZD/USD extends its losing streak for the third consecutive day, trading around 0.5830 during the European hours on Friday. This downside of the NZD/USD pair is attributed to growing expectations that the Reserve Bank of New Zealand (RBNZ) could deliver a bumper interest rate cut next week.

Markets are fully anticipating a 50 basis point cut in the RBNZ's cash rate to 4.25% at next week's monetary policy meeting, aligning with the reduction seen in October. Additionally, there is a 25% probability priced in for a more aggressive 75-basis-point cut.

On Thursday, New Zealand's Treasury Chief Economic Adviser, Dominick Stephens, indicated that economic and fiscal forecasts are likely to be revised downward, citing a prolonged slowdown in productivity.

Traders await the US S&P Global PMI data, set to be released later in the North American session. The US Manufacturing PMI for November is forecast to increase to 48.8 from 48.5, while the Services PMI is expected to rise to 55.3 from 55.0.

The US Dollar Index (DXY), which measures the USD against a basket of major currencies, rises to a fresh yearly high of 107.20 during the European session on Friday. The US Dollar gains strength following the release of last week's Initial Jobless Claims data.

US Jobless Claims dropped to 213,000 for the week ending November 15, down from a revised 219,000 (previously 217,000) in the prior week and below the forecast of 220,000. This development has sparked speculation that the pace of Federal Reserve rate cuts could slow.

• EUR/GBP strengthens to around 0.8330 in Friday’s early European session, up 0.17% on the day.
• The UK Retail Sales came in at -0.7% MoM in October vs. 0.1% prior. 
• Expectations for more aggressive rate cuts by the ECB might cap the Euro's upside.

The EUR/GBP cross gains momentum to near 0.8330 during the early European session on Friday. The Pound Sterling (GBP) weakens after the release of UK Retail Sales data for October. Later on Friday, traders await the preliminary Eurozone HCOB Purchasing Managers Index (PMI) and the European Central Bank's (ECB) President Lagarde speech for fresh impetus. 

Data released by the Office for National Statistics (ONS) on Friday showed that UK Retail Sales declined 0.7% MoM in October versus a 0.1% increase (revised from 0.3%) in September. This figure came in below the market consensus of -0.3%. Meanwhile, Retail Sales, stripping the auto motor fuel sales, fell by 0.9% MoM in October, compared to a 0.1% rise (revised from 0.3%) in the previous reading, missing the estimation of a 0.4% decline. 

The GBP attracts some sellers in an immediate reaction to the downbeat UK Retail Sales and acts as a tailwind for the EUR/GBP cross. The attention will shift to the preliminary UK S&P Global/CIPS PMI data, which is due later on Friday. 

On the other hand, the rising speculation for more aggressive interest rate cuts by the European Central Bank (ECB) weighs on the shared currency. The ECB policymaker Yannis Stournaras said earlier this week that the central bank will reduce interest rates by 0.25% in December, with further cuts possible in 2025. Additionally, Bank of Italy governor Fabio Panetta said the ECB must commit to faster interest rate cuts in a bid to lift the Eurozone economy. However, Panetta also called on the ECB to ditch its current “meeting-by-meeting” guidance that avoids a longer-term commitment to its monetary policy. 

• GBP/JPY may depreciate as UK Retail Sales fell 0.7% MoM in October, exceeding the expected 0.3% decline.
• Reuters survey indicated that 56% of economists anticipate a BoJ rate hike in December.
• Governor Kazuo Ueda mentioned the possibility of further rate hikes, highlighting the Yen's impact on economic and price stability.

GBP/JPY remains steady around 194.50 during the early European hours, following the lower-than-expected UK Retail Sales figures for October released on Friday. Traders now focus on S&P Global UK Purchasing Managers’ Index (PMI) figures due later in the day.

UK Retail Sales dropped by 0.7% month-over-month in October, significantly exceeding the expected 0.3% decline and reversing the previous 0.1% increase. On an annual basis, Retail Sales grew by 2.4%, falling short of the anticipated 3.4% rise and the prior reading of 3.2%.

The GBP/JPY cross faced challenges during the Asian session as the Japanese Yen (JPY) gained ground following insights from a Reuters survey on expectations for the Bank of Japan (BoJ). According to the survey, 56% of economists anticipate the BoJ will raise interest rates at its December meeting, driven by the JPY’s depreciation and improving economic conditions.

Additionally, Governor Kazuo Ueda stressed the need to address Yen's impact on economic and price stability, suggesting the possibility of further rate hikes. Additionally, Prime Minister Shigeru Ishiba’s administration is considering a $90 billion stimulus package aimed at alleviating the burden of rising prices on households.

Recent data indicated that Japan’s National Consumer Price Index (CPI) slowed to a nine-month low of 2.3% year-over-year in October. Similarly, the annual core CPI, which excludes fresh food, also dropped to 2.3%, a six-month low, slightly above the forecast of 2.2%.

Additionally, the Jibun Bank Japan Services Purchasing Managers’ Index (PMI) increased to 50.2 in November, up from 49.7 in October, which had marked the lowest level in four months. However, the Manufacturing PMI unexpectedly fell to 49.0 in November, the lowest reading since March, down from 49.2 in October, missing market expectations of 49.5.

• Retail Sales in the UK declined at a faster pace than expected in October.
• GBP/USD trades at fresh multi-month lows near 1.2550 after the data.

The UK's Office for National Statistics (ONS) reported on Friday that Retail Sales declined 0.7% on a monthly basis in October. This reading followed the 0.1% increase recorded in September and came in worse than the market expectation for a decline of 0.3%. On a yearly basis, Retail Sales rose 2.4%, compared to the market expectation of 3.4%.

In the same period, Retail Sales ex-Fuel fell 0.9% on a monthly basis, while increasing 2% annually.

Market reaction

GBP/USD stays under bearish pressure following these figures and was last seen trading at its lowest level since May near 1.2550, losing 0.3% on the day.

Here is what you need to know on Friday, November 22:

Following a quiet European session, the US Dollar (USD) regathered its strength in the second half of the day on Thursday and continued to push higher early Friday, reaching its highest level since October 2023 above 107.00. S&P Global will release preliminary November Manufacturing and Services Purchasing Managers Index (PMI) data for Germany, the Eurozone and the UK.

The data from the US showed on Thursday that the weekly Initial Jobless Claims declined to 213,000 from 219,000. In the meantime, Existing Home Sales increased by 3.4% on a monthly basis in October. In addition to these upbeat data releases, hawkish comments from Federal Reserve (Fed) officials further supported the USD during the American trading hours. In the European morning on Friday, US stock index futures trade marginally lower, while the benchmark 10-year US Treasury bond yield holds steady at around 4.4%.

In the Asian session on Friday, Statistics Bureau of Japan announced that the National Consumer Price Index (CPI) rose 2.3% on a yearly basis in October, down from 2.5% in September. Meanwhile, Reuters reported that Japan is preparing a fresh stimulus package valued at 13.9 trillion yen ($89.7 billion), aiming to mitigate the financial strain on households caused by rising prices. After losing more than 0.5% on Thursday, USD/JPY edges higher early Friday and was last seen trading near 155.00.

EUR/USD turned south in the American session on Thursday and broke below 1.0500. The pair struggles to stage a rebound early Friday and trades at around 1.0470.

GBP/USD lost 0.5% on Thursday and extended its slide during the Asian trading hours on Friday. At the time of press, the pair was trading at its weakest level since May below 1.2600.

The data from Australia showed that the Judo Bank Composite PMI declined to 49.4 in November's flash estimate from 50.2 in October. AUD/USD came under modest bearish pressure after this data and was last seen trading slightly below 0.6500, where it was down 0.3% on the day.

Gold extended its weekly rally and closed the fourth consecutive day in positive territory on Thursday. XAU/USD preserves its bullish momentum in the European morning on Friday and continues to advance toward $2,700.

• AUD/JPY depreciates as a Reuters survey indicated 56% of economists anticipating a BoJ rate hike in December.
• Governor Kazuo Ueda indicated the possibility of further rate hikes, highlighting the Yen's impact on economic and price stability.
• The Australian Dollar loses ground following the release of mixed domestic Judo Bank PMI data on Friday.

AUD/JPY continues its decline, nearing 100.30 during the Asian trading hours on Friday. This drop is likely due to a stronger Japanese Yen (JPY), following insights from a Reuters survey on expectations for the Bank of Japan (BoJ). According to the survey, 56% of economists anticipate the BoJ will raise interest rates at its December meeting, driven by the JPY’s depreciation and improving economic conditions.

Additionally, 90% of economists expect the BoJ to increase rates to 0.50% by the end of March 2025. The median forecast for the terminal rate is 1.00%, with estimates ranging from 0.50% to 2.50%. Furthermore, 96% of economists believe that a potential return of Donald Trump to the US presidency could prompt the BoJ to hike rates further, as his policies are expected to increase global inflation.

Governor Kazuo Ueda stressed the need to address the Yen's impact on economic and price stability, suggesting the possibility of further rate hikes. Additionally, Prime Minister Shigeru Ishiba’s administration is considering a $90 billion stimulus package aimed at alleviating the burden of rising prices on households.

Recent data indicated that Japan’s National Consumer Price Index (CPI) slowed to a nine-month low of 2.3% year-over-year in October. Similarly, the annual core CPI, which excludes fresh food, also dropped to 2.3%, a six-month low, slightly above the forecast of 2.2%.

Additionally, the Jibun Bank Japan Services Purchasing Managers’ Index (PMI) increased to 50.2 in November, up from 49.7 in October, which had marked the lowest level in four months. However, the Manufacturing PMI unexpectedly fell to 49.0 in November, the lowest reading since March, down from 49.2 in October, missing market expectations of 49.5.

The Australian Dollar (AUD) weakens following the release of mixed Judo Bank PMI data from Australia on Friday. However, the AUD received support from a hawkish outlook from the Reserve Bank of Australia (RBA) regarding future interest rate decisions, which could help limit the downside for the AUD/JPY cross.

The Judo Bank Australia Manufacturing PMI rose to 49.4 in November from 47.3 in October, marking its 10th consecutive month of contraction, though the decline slowed to its weakest pace in six months. Meanwhile, the Services PMI fell to 49.6 from 51.0, signaling the first contraction in services activity in ten months.

• USD/CAD oscillates in a narrow band and is influenced by a combination of diverging forces.
• Reduced bets for a jumbo BoC rate cut and an uptick in Crude Oil prices underpin the Loonie.
• The USD holds steady near the YTD peak and offers support amid a bullish technical setup.

The USD/CAD pair edges higher during the Asian session on Friday, albeit it lacks follow-through buying and remains below the 1.4000 psychological mark amid mixed cues. 

Hotter Canadian CPI print on Tuesday forced investors to scale back their bets for a big rate cut by the Bank of Canada (BoC) in December. Apart from this, this week's goodish recovery in Crude Oil prices, from over a two-month low touched on Monday, underpins the commodity-linked Loonie and acts as a headwind for the USD/CAD pair. The downside, however, remains cushioned on the back of a strong bullish sentiment surrounding the US Dollar (USD), which continues to draw support from bets for a less dovish Federal Reserve (Fed).

From a technical perspective, the USD/CAD pair showed some resilience below the 100-period Simple Moving Average (SMA) on the 4-hour chart. The subsequent uptick, along with positive oscillators on the daily chart, suggests that the path of least resistance for spot prices is to the downside. That said, the lack of any meaningful buying interest warrants some caution before confirming that the recent pullback from the 1.4100 mark, or the highest level since May 2020 has run its course and positioning for any further appreciating move.

Meanwhile, the 100-period SMA on the 4-hour chart, currently pegged around mid-1.3900s, and the overnight swing low, near the 1.3930 area, now seems to protect the immediate downside ahead of the 1.3900 mark. A convincing break below the latter could be seen as a fresh trigger for bearish traders and accelerate the fall towards the 1.3860-1.3855 intermediate support en route to the monthly low, around the 1.3820-1.3815 region. This is closely followed by the 1.3800 round figure, which if broken decisively will set the stage for deeper losses. 

On the flip side, sustained strength and acceptance above the 1.4000 psychological mark will be seen as a key trigger for bullish traders. The subsequent move-up should allow the USD/CAD pair to surpass the weekly top high, around the 1.4035 area, and aim to conquer the 1.4100 round figure. The move up could extend further towards the 1.4170 area en route to the 1.4200 mark, mid-1.4200s, the 1.4300 round figure and the 1.4340 supply zone.

USD/CAD 4-hour chart

• USD/CHF softens to near 0.8860 in Friday’s early European session. 
• The escalation in the Russia-Ukraine war might support the Swiss Franc.
• Bets for a less dovish Fed might help limit the USD’s losses. 

The USD/CHF pair trades with mild losses around 0.8860 during the early European session on Friday. The fears of a potential escalation in the Russia-Ukraine conflict boost the safe-haven flows, benefiting the Swiss Franc (CHF) against the Greenback. Traders await the flash US S&P Global Purchasing Managers Index (PMI) data and the final Michigan Consumer Sentiment on Friday for fresh impetus. 

Russian President Vladimir Putin said on Thursday that Russia carried out a strike with a “ballistic missile with a non-nuclear hypersonic warhead” with a medium range on the Ukrainian city of Dnipro, per CNN. Putin also warned the West that Moscow could attack any country's military facilities that utilised weapons against Russia. The development surrounding the Russia-Ukraine war will be closely watched, and any signs of rising geopolitical risks could lift the safe-haven currency like the CHF in the near term. 

On the other hand, the rising expectation of less aggressive monetary policy easing by the US Federal Reserve (Fed) might support the US Dollar (USD). On Thursday, Chicago Fed President Austan Goolsbee reiterated his support for another interest rate cut and his openness to doing them more slowly. Goolsbee added that inflation over the last year and a half has eased and is on its way to the Fed's 2% target. 

• EUR/USD continues to lose ground as the US Dollar appreciates due to the increasing likelihood of slower Fed rate cuts.
• The Euro weakens as the ECB is anticipated to reduce Deposit Facility Rate by 25 basis points in December.
• The US Dollar Index hovers near its recent yearly high of 107.15, which was recorded on Thursday.

EUR/USD remains on a downward trend for the third consecutive session, hovering around 1.0470 during the Asian trading hours on Friday. The pair dropped to a low of 1.0462 on Thursday, a level not seen since October 2023. This decline is driven by the Euro's weakness, fueled by expectations that the European Central Bank (ECB) may speed up its policy easing.

The ECB is broadly expected to reduce its Deposit Facility Rate by 25 basis points (bps) to 3% during its December meeting. Market participants also anticipate that the ECB will move toward a neutral policy stance more rapidly in 2025, amid growing concerns about the Eurozone’s economic outlook.

Traders are awaiting the release of the Eurozone HCOB Purchasing Managers Index (PMI) data for November on Friday. The Pan-EU Manufacturing PMI is expected to remain flat at a contractionary 46.0, while the Services PMI is projected to rise slightly to 51.8 from 51.6.

Attention will then shift to the US S&P Global PMI data, set to be released later in the North American session. The US Manufacturing PMI for November is forecast to increase to 48.8 from 48.5, while the Services PMI is expected to rise to 55.3 from 55.0.

The US Dollar Index (DXY), which measures the USD against a basket of major currencies, trades near 107.00, just below its recent yearly high of 107.15 reached on Thursday. The US Dollar gained strength following the release of last week's Initial Jobless Claims data.

US Jobless Claims dropped to 213,000 for the week ending November 15, down from a revised 219,000 (previously 217,000) in the prior week and below the forecast of 220,000. This development has sparked speculation that the pace of Federal Reserve rate cuts could slow.

• EUR/JPY drops to its lowest level since October in reaction to stronger Japan’s CPI on Friday.
• Reviving December BoJ rate hike bets and geopolitical tensions benefit the safe-haven JPY.
• Expectations for more aggressive rate cuts by the ECB undermine the Euro and the cross. 

The EUR/JPY cross attracts some follow-through selling for the second straight day and drops to its lowest level since October 4 during the Asian session on Friday, albeit it managed to rebound a few pips thereafter. Spot prices currently trade around 161.65-161.70 region, still down for the second straight day amid a stronger Japanese Yen (JPY).

The Bank of Japan Governor Kazuo Ueda said on Thursday that the central bank will seriously take into account the impact of the recent foreign exchange-rate movements could have on the economic and price outlook. Adding to this, data released this Friday showed that all three measures of the Consumer Price Index (CPI) in Japan remain above the BoJ's 2% target. This keeps the door open for another BoJ interest rate-hike move in December, which, along with geopolitical tensions stemming from the worsening Russia-Ukraine war, turns out to be a key factor underpinning the safe-haven JPY. 

The shared currency, on the other hand, continues with its relative underperformance in the wake of bets for more aggressive interest rate cuts by the European Central Bank (ECB) amid a bleak Eurozone economic outlook. In fact, the ECB is anticipated to cut its Deposit Facility Rate again by 25 basis points (bps) in December and lower rates by a cumulative of 100 bps in 2025. Adding to this, concerns that US President-elect Donald Trump's taunted tariffs could have a significant impact on the region's economic growth further undermine the Euro and exert some pressure on the EUR/JPY cross. 

That said, speculations that increased political uncertainty in Japan could delay the BoJ’s plans to raise interest rates further and hold back the JPY bulls from placing aggressive bets. Adding to this, the prevalent risk-on mood caps gains for the safe-haven JPY and helps limit the downside for the EUR/JPY cross. Next on tap is the release of the flash Eurozone PMI prints, which will provide a fresh insight into the region's economic health and influence the common currency. Apart from this, geopolitical development will drive demand for the safe-haven JPY and provide some impetus to the currency pair.

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

The price for Gold stood at 7,293.89 Indian Rupees (INR) per gram, up compared with the INR 7,257.32 it cost on Thursday.

The price for Gold increased to INR 85,074.45 per tola from INR 84,647.97 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.)

• Gold price scales higher for the fifth straight day and touches a nearly two-week high on Friday.
• The worsening Russia-Ukraine conflict continues to drive haven flows toward the XAU/USD.
• Bets for a less dovish Fed, elevated US bond yields, bullish USD does little to hinder the move up.

Gold price (XAU/USD) prolongs its uptrend for the fifth consecutive day on Friday and climbs to a nearly two-week top, around the $2,690-2,691 area during the Asian session. Intensifying Russia-Ukraine tensions force investors to take refuge in traditional safe-haven assets and turn out to be a key factor underpinning the precious metal. The commodity, which is considered a hedge against inflation, draws additional support from expectations that US President-elect Donald Trump's policies could reignite inflationary pressures. 

The XAU/USD bulls, meanwhile, seem rather unaffected by an extension of the post-US election US Dollar (USD) rally to its highest level since October 2023. Meanwhile, speculations that persistent higher inflation could limit the scope for the Federal Reserve (Fed) to ease monetary policy remain supportive of elevated US Treasury bond yields, albeit do little to hinder the Gold price's ongoing positive momentum. This, in turn, supports prospects for a further near-term appreciating move for the commodity, which remains on track to register strong weekly gains and snap a three-week losing streak. 

Gold price continues to attract haven flows for the fifth straight day on rising geopolitical risks

• Mounting Russia-Ukraine tensions continue to drive haven flows and assist the Gold price to scale higher for the fifth straight day on Friday, despite a bullish US Dollar.
• The USD Index, which tracks the Greenback against a basket of currencies, advanced to its highest level since October 2023 amid bets for a less dovish Federal Reserve. 
• Investors remain concerned that US President-elect Donald Trump's policies could reignite inflation and force the Fed to take a slower course in its rate-cut path.
• A slew of influential FOMC members, including Fed Chair Jerome Powell, recently warned about inflationary shocks and cautioned on further policy easing.
• According to the CME Group's FedWatch Tool, traders are pricing around a 55% chance that the Fed will lower borrowing costs by 25 basis points in December. 
• Meanwhile, Chicago Fed President Austan Goolsbee said that the inflation is on its way down to 2% and that it may make sense to slow the pace of interest rate cuts.
• Adding to this, New York Fed President John Williams noted that the labor market is in balance and not providing any upward pressure on inflation.
• On the economic data front, US Weekly initial jobless claims dropped by 6K last week, to 213K, or a seven-month low against expectations for a reading of 220 K.
• US Existing Home Sales rebounded sharply after September's slump to the lowest since October 2010 and posted the first annual gain since mid-2021 in October.
• The Philly Fed Manufacturing Index indicated that manufacturing activity in the Philadelphia region unexpectedly contracted in November and fell to -5.5 from +10.3.
• Friday's release of flash PMIs will be looked for a fresh insight into the health of the global economy, which, in turn, should provide a fresh impetus to the XAU/USD. 

Gold price seems poised to climb further, Thursday’s breakout above $2,665 confluence in play

The overnight breakout above the $2,665 confluence – comprising the 50% retracement level of the recent pullback from the all-time peak and the 100-period Simple Moving Average (SMA) on the 4-hour chart – was seen as a key trigger for bulls. Adding to this, technical indicators on the daily chart have again started gaining positive traction and support prospects for a further appreciating move for the Gold price. Hence, some follow-through strength beyond the $2,700 mark, towards the $2,710-2,711 supply zone, looks like a distinct possibility. Acceptance above the said barriers will reaffirm the positive bias and lift the XAU/USD towards the next relevant hurdle near the $2,736-2,737 region.

On the flip side, the $2,665 confluence hurdle breakpoint might now protect the immediate downside ahead of the $2,635-2,634 area, or the 38.2% Fibonacci retracement level. This is followed by the $2,622-2,620 intermediate support and the $2,600 round figure. A convincing break below the latter could make the Gold price vulnerable to accelerate the fall towards the 100-day SMA, around the $2,560 region, en route to last week’s swing low, around the $2,537-2,536 area. Failure to defend the said support levels will shift the bias back in favor of bearish traders and set the stage for deeper losses.

• GBP/USD continues to lose ground as the US Dollar appreciates ahead of the PMI release on Friday.
• The unexpected drop in US Initial Jobless Claims has fueled the expectations of slower Fed rate cuts.
• The UK GfK Consumer Confidence Index increased by 3 points to -18, representing its first improvement in three months.

GBP/USD extends its losses for the third successive session, trading around 1.2580 during the Asian hours on Friday. This downside is attributed to the stronger US Dollar (USD) as traders continued to evaluate the Federal Reserve's (Fed) monetary policy outlook following the unexpected drop in US Initial Jobless Claims.

The US Dollar Index (DXY), which tracks the USD against a basket of major currencies, trades near 107.00, just below its fresh yearly high of 107.15 recorded on Thursday. The US Dollar strengthened after the release of the previous week's US Initial Jobless Claims data.

US Jobless Claims fell to 213,000 for the week ending November 15, down from a revised 219,000 (previously 217,000) in the prior week and below the forecast of 220,000. This development has fueled speculation about a slower pace of Fed rate cuts.

Futures traders now see a 57.8% chance of the Federal Reserve cutting rates by a quarter point, down from around 72.2% last week, according to data from the CME FedWatch Tool.

In November, the GfK Consumer Confidence Index in the United Kingdom (UK) rose by 3 points to -18, up from the previous reading of -21, marking its first improvement in three months. This increase comes as a result of lower interest rates, rising wages, and reduced concerns over tax hikes.

On Friday, traders will be looking ahead to the S&P Global Purchasing Managers’ Index (PMI) data for both countries. Additionally, UK Retail Sales figures for October and the final Michigan Consumer Sentiment report will also be closely monitored.

• Silver price gains ground due to safe-haven flows amid the rising Russia-Ukraine conflict.
• Russian President Vladimir Putin warned that the Ukraine conflict is escalating into a global confrontation.
• The non-interest-bearing Silver may find challenges due to the higher opportunity cost associated with higher interest rates.

Silver price (XAG/USD) retraces its recent losses, trading around $31.00 per troy ounce during the Asian hours on Friday. The prices of safe-haven assets like Silver gained ground due to the escalated situation in the Russia-Ukraine war.

Russian President Vladimir Putin warned on Thursday that the Ukraine conflict is escalating toward a global confrontation, citing the use of US and British-supplied weapons by Ukraine to target Russia, according to Reuters.

Putin stated that Russia had retaliated by deploying a new hypersonic medium-range ballistic missile against a Ukrainian military facility, with further strikes possible. He added that civilians would receive warnings ahead of any future attacks involving these weapons.

Meanwhile, commodity traders continued to evaluate the Federal Reserve's (Fed) monetary policy outlook following the unexpected drop in US Initial Jobless Claims. Claims fell to 213,000 for the week ending November 15, down from a revised 219,000 (previously 217,000) in the prior week and below the forecast of 220,000. This development has fueled speculation about a slower pace of Fed rate cuts.

Futures traders now see a 57.8% chance of the Federal Reserve cutting rates by a quarter point, down from around 72.2% last week, according to data from the CME FedWatch Tool. Non-interest-bearing Silver may face challenges due to the higher opportunity cost associated with higher interest rates.

However, Federal Reserve Bank of Chicago President Austan Goolsbee commented on Thursday that inflation is on track to reach 2%. Goolsbee noted that over the next year, interest rates are likely to be significantly lower than their current levels. He also suggested that it might be prudent to slow the pace of rate cuts as the Fed approaches a neutral rate level.

• The Indian Rupee steadies in Friday’s Asian session.
• Continued outflow of foreign funds and higher crude oil prices might weigh on the INR.
• Investors will monitor the preliminary HSBC India PMI, which is due on Friday.

The Indian Rupee (INR) trades flat on Friday after hitting an all-time low of 84.50 against the US Dollar (USD) in the previous session. The significant sell-off in domestic equity markets and the rebound in crude oil prices amid the escalating geopolitical tensions between Russia and Ukraine exert some selling pressure on the local currency. 

However, the routine intervention from the Reserve Bank of India (RBI), with state-run banks offering USD in the market, might help limit the INR’s losses. Looking ahead, traders will keep an eye on the preliminary HSBC India Manufacturing Purchasing Managers Index (PMI) and Services PMI for November. On the US docket, the flash US S&P Global PMI data and the final Michigan Consumer Sentiment will be released.

Indian Rupee remains vulnerable due to persistent outflows

• RBI Governor Shaktikanta Das noted on Thursday that robust growth in the Indian economy has provided the Indian central bank with the flexibility to focus on inflation, aiming for a sustainable decline toward the target of 4%.
• Portfolio outflows, persistent USD demand, and some concerns about a slowdown in the Indian economy are likely to keep the INR on a path of gradual depreciation, said Dilip Parmar, a foreign exchange research analyst at HDFC Securities. 
• The US Initial Jobless Claims fell to 213K for the week ending November 16, down from 219K (revised from 217K) in the previous week, according to the US Department of Labor on Thursday. This figure came in below the market consensus of 220K.
• The US Existing Home Sales climbed 3.4% in October to a seasonally adjusted annual rate of 3.93 million units from an increase of 3.83 million in September.
• Chicago Fed President Austan Goolsbee said on Thursday that it may make sense to slow the pace of Fed rate cuts as inflation is on its way down to 2%. 

USD/INR’s positive picture remains intact, but bearish RSI divergence teases sellers

The Indian Rupee trades on a flat note on the day. The USD/INR pair remains capped under an ascending trend channel. However, the bullish outlook of the pair prevails as the price holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. Meanwhile, a correction or a further consolidation cannot be ruled out as USD/INR made a new high but the 14-day Relative Strength Index (RSI) did not make a corresponding new high, as indicated by the bearish RSI divergence. 

The first upside barrier emerges at the all-time high and the upper boundary of the trend channel of 84.50. Any follow-through buying above this level could pave the way to the 85.00 psychological level.

On the flip side, extended losses below the lower limit of the trend channel of 84.36 could expose the 84.00-83.90 zone, representing the round mark and the 100-day EMA. 

• The Australian Dollar remains solid as the PMI indicates a mixed economic picture.
• Judo Bank Australian manufacturing activity improved in November but remained in contraction, while services activity slipped into negative territory.
• The US Dollar Index reached its fresh yearly high of 107.15 after the US Initial Jobless Claims released on Thursday.

The Australian Dollar (AUD) continues to strengthen against the US Dollar (USD) following the release of mixed Judo Bank Purchasing Managers' Index (PMI) data from Australia on Friday. The AUD also benefits from a hawkish outlook by the Reserve Bank of Australia (RBA) regarding future interest rate decisions. 

The Judo Bank Australia Manufacturing PMI rose to 49.4 in November from 47.3 in October, marking its 10th consecutive month of contraction, though the decline slowed to its weakest pace in six months. Meanwhile, the Services PMI fell to 49.6 from 51.0, signaling the first contraction in services activity in ten months.

The US Dollar Index (DXY), which tracks the USD against a basket of major currencies, trades near 107.00, just below its fresh yearly high of 107.15 recorded on Thursday. The US Dollar strengthened after the release of the previous week's Initial Jobless Claims data.

Futures traders now assign a 57.8% probability to the Federal Reserve cutting rates by a quarter point, a decrease from approximately 72.2% last week, according to data from the CME FedWatch Tool.

Daily Digest Market Movers: Australian Dollar appreciates due to hawkish RBA

• Traders await the flash US S&P Global Purchasing Managers’ Index (PMI) data and the final Michigan Consumer Sentiment report scheduled to be released on Friday.
• The Judo Bank PMI Composite Output Index dropped to 49.4 in November from 50.2 in October, indicating a modest contraction in private sector output for the second time in three months.
• US Initial Jobless Claims dropped to 213,000 for the week ending November 15, down from a revised 219,000 (previously 217,000) in the prior week and below the expected 220,000.
• The US Dollar gained ground 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.
• 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 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.
• 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. Meanwhile, Fed Governor Michelle Bowman highlighted that inflation remained 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.
• 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."

Technical Analysis: Australian Dollar tests nine-day EMA above 0.6500

AUD/USD hovers near 0.6510 on Friday, with technical analysis of the daily chart pointing to a bearish outlook. The pair remains within a descending channel, and the 14-day Relative Strength Index (RSI) sits below 50, reinforcing the negative sentiment.

On the downside, the AUD/USD pair may target the lower boundary of the descending channel at 0.6360, followed by its yearly low of 0.6348, which reached August 5.

On the upside, the AUD/USD pair faces resistance at the nine-day EMA of 0.6518 and the 14-day EMA of 0.6533. A break above these levels could diminish the bearish bias and pave the way for a rally toward the four-week high of 0.6687.

AUD/USD: Daily Chart

• The Japanese Yen ticks higher as stronger domestic inflation revives bets for more BoJ rate hikes.
• The upbeat market mood and elevated US bond yields cap the upside for the lower-yielding JPY.
• The USD stands firm near its highest level in over a year and offers support to the USD/JPY pair. 

The Japanese Yen (JPY) attracted some follow-through buying for the second successive day following the release of slightly higher-than-expected consumer inflation figures from Japan. This comes on top of Thursday's hawkish remarks from BoJ Governor Kazuo Ueda, which keeps expectations for a December interest rate hike in play. Adding to this, Japan's Prime Minister Shigeru Ishiba’s economic stimulus package worth ¥39 trillion boosts the JPY and exerts some pressure on the USD/JPY pair. 

That said, the prevalent risk-on environment and elevated US Treasury bond yields hold back traders from placing aggressive bullish bets around the lower-yielding JPY. Investors remain concerned that US President Donald Trump's policies could reignite inflation and force the Federal Reserve (Fed) to cut interest rates slowly. This has been a key factor behind the recent surge in the US bond yields, which keeps the US Dollar (USD) near the year-to-date peak and lends support to the USD/JPY pair. 

Japanese Yen struggles to gain any meaningful traction despite stronger CPI print from Japan

• The Japan Statistics Bureau reported this Friday that the National Consumer Price Index (CPI) eased from 2.5% to the 2.3% YoY rate in October, while the core CPI, which excludes volatile fresh food items, grew 2.3%. 
• Additional details revealed that a core inflation reading that excludes both energy and fresh food costs remained above the Bank of Japan's 2% annual target and rose to 2.3% in October from 2.1% in the prior month.
• The Bank of Japan Governor Kazuo Ueda said on Thursday that the central bank will seriously take into account the impact the recent foreign exchange-rate movements could have on the economic and price outlook.
• This keeps the door open for another BoJ interest rate-hike move in December, which, along with geopolitical risks from the worsening Russia-Ukraine war, boosts the Japanese Yen during the Asian session on Friday. 
• Meanwhile, US data released on Thursday showed that Weekly initial jobless claims dropped by 6,000 to 213,000, or a seven-month low last week as compared to consensus estimates for a reading of 220,000.
• US Existing Home Sales rebounded sharply after September's slump to the lowest since October 2010 and rose to an annual rate of 3.96 million units in October, posting the first annual gain since mid-2021.
• A survey showed that manufacturing activity in the Philadelphia region unexpectedly contracted in November. The Federal Reserve (Fed) Bank of Philadelphia's Manufacturing Index dropped to -5.5 from +10.3.
• Chicago Fed President Austan Goolsbee said that the inflation is on its way down to 2% and that it may make sense to slow the pace of interest rate cuts as the US central bank gets close to where rates will settle.
• Separately, New York Fed President John Williams noted that he sees inflation cooling and interest rates falling further as the labor market is now in balance and not providing any upward pressure on inflation.
• The US Dollar shot to its highest level since October 4, 2023, amid expectations that US President-elect Donald Trump's policies could reignite inflation and limit the scope for the Fed to cut interest rates further.
• Furthermore, persistent concerns about inflation and potential fiscal expansion keep the US Treasury bond yields elevated, which, along with the upbeat market mood, caps the upside for the safe-haven JPY. 
• Traders now look forward to the release of the flash US Manufacturing and Services PMI prints, and the revised Michigan Consumer Sentiment Index for short-term opportunities heading into the weekend. 

USD/JPY technical setup supports prospects for the emergence of dip-buying near weekly low

From a technical perspective, the USD/JPY pair has been showing some resilience below the 154.00 mark. Adding to this, oscillators on the daily chart are holding in positive territory, suggesting that any subsequent slide towards the 153.30-153.25 area, or the weekly low, could be seen as a buying opportunity. Some follow-through selling below the 153.00 mark, however, could drag spot prices to the next relevant support near mid-152.00s en route to the 152.00 round figure. The said handle coincides with the 200-day Simple Moving Average (SMA) and should act as a key pivotal point for short-term traders. 

On the flip side, immediate support is pegged near the 155.00 psychological mark, above which the USD/JPY pair could climb to the 155.40 supply zone. A sustained strength beyond the latter could lift spot prices beyond the 156.00 round figure, towards the 156.25-156.30 intermediate hurdle en route to the multi-month peak, around the 156.75 region touched last week.

• WTI price gains momentum to near 70.25 in Friday’s Asian session. 
• The supply worries due to the escalation of the Russia-Ukraine war lift the WTI price. 
• US crude oil inventories built and a stronger USD might cap the WTI’s upside. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $70.25 on Friday. The WTI price edges higher as an escalation in the Russia-Ukraine conflict raises the fear of crude supply disruption. 

The fears of a potential escalation in the Russia-Ukraine conflict fuelled the WTI price this week after Ukraine used missiles supplied by the US and UK into Russian territory. On Thursday, Russian President Vladimir Putin announced the launch of a hypersonic medium-range ballistic missile attack on a Ukrainian military facility. Putin also warned the West that Moscow could attack any country's military installations that utilised weapons against Russia, per Reuters. "The market's focus has now shifted to heightened concerns about an escalation in the war in Ukraine," said Ole Hvalbye, commodities analyst at SEB.

On the other hand, a rise in US crude inventories last week might weigh on the black gold. The Energy Information Administration's (EIA) weekly report showed 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. 

Furthermore, the renewed US Dollar (USD) demand might cap the upside for the USD-denominated oil for the time being as it makes oil more expensive for holders of other currencies, which can reduce demand. The US Dollar Index (DXY), a measure of the value of the USD against a basket of six currencies, currently trades near 107.05 after hitting a fresh year-to-date high of around 107.15.

On Friday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1942, as compared to the previous day's fix of 7.1934 and 7.2502 Reuters estimates.

Japan is preparing a fresh stimulus package valued at 13.9 trillion yen ($89.7 billion), aiming to mitigate the financial strain on households caused by rising prices, per Reuters. 

This new stimulus package will surpass last year’s 13.2 trillion yen plan as the country’s debt now exceeds twice the size of its economy. 

Market reaction  

At the time of writing, USD/JPY is trading 0.18% lower on the day to trade at 154.22.

• NZD/USD weakens to around 0.5855 in Friday’s early Asian session, down 0.18% on the day. 
• The US weekly jobless claims declined to a seven-month low.
• The RBNZ is expected to cut its interest rates by 50 bps next week. 

The NZD/USD pair trades in negative territory for the third consecutive day near 0.5855 during the early Asian session on Friday. The firmer US Dollar (USD) to the fresh 2024 tops drags the pair lower. Later on Friday, the flash US S&P Global Purchasing Managers Index (PMI) data and the final Michigan Consumer Sentiment will be released. 

Data released by the US Department of Labor on Thursday showed that the Initial Jobless Claims fell to 213,000 for the week ending November 16, down from 219,000 (revised from 217,000) in the previous week and below the forecast of 220,000. This upbeat data suggested that the labor market remains strong and the Federal Reserve (Fed) could achieve a soft landing. 

Fed Chair Jerome Powell signaled last week that the Fed isn’t necessarily inclined to cut rates at the next upcoming meetings. “The economy is not sending any signals that we need to be in a hurry to lower rates,” said Powell. Meanwhile, Chicago Fed President Austan Goolsbee said on Thursday that it may make sense to slow the pace of Fed rate cuts as inflation is on its way down to 2%. The cautious stance from the Fed continues to underpin the Greenback and acts as a headwind for NZD/USD. 

On the Kiwi front, the rising bets that the Reserve Bank of New Zealand (RBNZ) will lower interest rates by 50 basis points (bps) next week might exert some selling pressure on the New Zealand Dollar (NZD). "The economy is growing sluggishly at best, and the labor market is pretty weak. So that sets up the RBNZ next week to deliver another 50 basis point cut, the same as we saw in October," said Shannon Nicoll, associate economist at Moody's Analytics.