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• EUR/USD gave up another 0.6% as Greenback remains bid.
• The Euro is poised for further losses after falling to its lowest prices in over a year.
• Friday PMI releases to dominate the end of the week.

EUR/USD trimmed further into the low end on Thursday, continuing to shed weight in the near-term and falling to the lowest bids since November of 2023. All but one of the last eight trading weeks are in the red, and Fiber is set to continue declining unless the Euro finds a reason to materially appreciate.

Europe’s HCOB Purchasing Managers Index (PMI) numbers for November are due early in the European market window. Pan-EU Manufacturing PMI figures are expected to hold flat at a contractionary 46.0, with the European Services PMI component expected to tick up to 51.8 from 51.6.

Median market forecasts for the US side of Friday’s PMI release schedule call for a general upswing in activity expectations, with November’s US Manufacturing PMI expected to rise to 48.8 from 48.5. The Services PMI component is likewise forecast to increase to 55.3 from 55.0.

EUR/USD price forecast

The EUR/USD pair remains under sustained bearish pressure, trading near 1.0470 as sellers dominate. The price continues to trend below both the 50-day EMA at 1.0890 and the 200-day EMA at 1.0866, reinforcing the bearish outlook after a death cross formed in recent weeks. The downtrend has been unbroken since late October, with the pair hitting fresh multi-month lows. Immediate support lies at 1.0450, a psychological level that could attract buyers; a break below this area might expose 1.0400 as the next target.

The MACD indicator remains firmly bearish, with the MACD line staying below the signal line and the histogram deep in negative territory. Although the histogram shows subtle signs of easing, the overall momentum suggests limited prospects for a bullish reversal in the near term. Bulls need to reclaim the 50-day EMA to initiate a meaningful recovery, while bears will aim for further losses if the pair fails to hold above the 1.0450 threshold. Traders should watch for any significant price action around this support zone for clues about the pair's next move.

EUR/USD daily chart

Japan’s National Consumer Price Index (CPI) rose 2.3% YoY in October, compared to the previous reading of 2.5%, according to the latest data released by the Japan Statistics Bureau on Friday,

Further details unveil that the National CPI ex Fresh food arrived at 2.3% YoY in October versus 2.4% prior. The figure was above the market consensus of 2.2%. 

Market reaction to Japan’s National CPI data

Following Japan’s CPI inflation data, the USD/JPY pair is down 0.15% on the day at 154.27.

The preliminary reading of Australia's Judo Bank Manufacturing Purchasing Managers Index (PMI) improved to 49.4 in November from 47.3 in October, the latest data published by Judo Bank and S&P Global showed on Friday.

The Judo Bank Australian Services PMI eased to 49.6 in November from the previous reading of 51.0, while the Composite PMI declined to 49.4 in November versus 50.2 prior. 

Market reaction

At the press time, the AUD/USD pair was up 0.08% on the day to trade at 0.6509.

• USD/CAD edges higher to 1.3975 in Friday’s early Asian session.
• The cautious mood of the Fed officials and the Trump trade support the USD. 
• The markets reduced the odds of a 50 bps rate cut at the BoC’s December 11 policy meeting. 

The USD/CAD pair trades with mild gains around 1.3975 during the early Asian session on Friday. The strengthening of the US Dollar (USD) to new 2024 peaks provides some support to the pair. Investors brace for the flash S&P Global Manufacturing and Services Purchasing Managers Index (PMI), along with the final Michigan Consumer Sentiment, which is due later on Friday. 

Recent comments from the Federal Reserve (Fed) officials boost the USD broadly. Chicago Fed President Austan Goolsbee said on Thursday that it may make sense to the slow pace of Fed rate cuts as inflation is on its way down to 2%. Additionally, markets expect Trump's proposed policies including tax cuts, trade tariffs and deficit spending could trigger a fresh wave of inflation and could compel the US Fed to slow the pace of rate reductions. 

The rising expectation that the Fed may take a slower course in its rate cut path continues to underpin the Greenback. Meanwhile, the US Dollar Index (DXY), which measures the USD against a basket of currencies, currently trades near 107.00, the highest level since November 2023. Futures traders are now pricing in a 57.8% odds that the Fed will cut rates by a quarter point, down from around 72.2 % last week, according to data from the CME FedWatch Tool. 

On the other hand, the possibility that the Bank of Canada (BoC) would deliver a second oversized rate cut next month has diminished after the latest Canadian inflation report came in slightly hotter than expected. The markets have priced in a nearly  23% chance of a 50 basis-points (bps) rate cut by the BoC at the December meeting, down from nearly 40% before the inflation report. 

• GBP/USD shed 0.4% on Thursday, tapping a fresh half-year low.
• A thin calendar on the UK side saw the Pound Sterling give up ground.
• Cable traders are buckling in for Friday’s dense data schedule.

GBP/USD shed another four-tenths of a percent on Thursday, tapping the pair’s lowest bids in six months as the Pound Sterling’s underlying weakness drags the pair further into the low end against the Greenback. Market pressures are coiling ahead of Friday’s key prints that are due on both sides of the pond to wrap up an otherwise low-impact week.

Friday will kick off with an early print of UK Retail Sales figures for October. UK Retail Sales are expected to contract by 0.3% MoM compared to September’s 0.3%. On an annualized basis, UK Retail Sales growth is forecast to ease to 3.4% YoY from the previous 3.9%.

Global Purchasing Managers Index (PMI) business activity figures will release on Friday on a rolling schedule, with PMI figures due on both sides of the Atlantic. UK Manufacturing PMI survey results for November are expected to hold steady at 49.9, just beneath the contraction cutoff level, while UK Services PMI numbers are forecast to tick upwards to 52.1 from 52.0.

Median market forecasts for the US side of Friday’s PMI release schedule call for a general upswing in activity expectations, with November’s US Manufacturing PMI expected to rise to 48.8 from 48.5. The Services PMI component is likewise forecast to increase to 55.3 from 55.0.

GBP/USD price forecast

The GBP/USD daily chart reveals a bearish narrative as the pair continues its downward trajectory, trading around 1.2590. The price action has remained below the 50-day (blue) and 200-day (black) Exponential Moving Averages (EMAs), confirming a death cross pattern formed earlier, which signals prolonged downside momentum. The pair is testing a key support zone near 1.2590, a level that coincides with previous consolidation in May. A decisive breakdown below this region could open the door to further losses toward 1.2500, where psychological support might offer temporary respite.

The MACD indicator at the bottom underscores the bearish sentiment, with the MACD line extending below the signal line, maintaining a downward slope. Additionally, the histogram remains in negative territory, albeit showing minor signs of tapering momentum. This suggests potential consolidation in the near term before the next decisive move. On the flip side, for the bulls to regain control, a recovery above the 50-day EMA at 1.2925 would be critical, with further resistance seen near 1.3000. Traders should monitor developments around the support and EMA levels closely, as they could determine the pair's medium-term direction.

GBP/USD daily chart

• The Canadian Dollar tested higher on Thursday before falling back.
• Canada saw an upswing in manufacturing inflation, to little effect.
• Friday’s Canadian Retail Sales print to show a flat print.

The Canadian Dollar (CAD) drove into near-term highs early on Thursday before running out of gas and settling close to the day’s opening bids. A fresh acceleration in Canadian manufacturing inflation will add further pressure to the Bank of Canada (BoC) in the face of its acceleration of rate cuts throughout 2024, but immediate market reaction was limited.

Canada’s Industrial Product Prices and Raw Material Price Index both accelerated to the top end of their near-term ranges in October, kicking inflationary pressures on the high end at the manufacturing level of the Canadian economy. Despite the whipsaw in producer inflation pressures, The CAD saw little market impact from the low-tier figure as Loonie markets await Friday’s Canadian Retail Sales print.

Daily digest market movers: CAD churns back into the midrange on Thursday

• The Canadian Dollar tested higher early Thursday before settling back to the day’s opening bids and USD/CAD price action sticks tightly to the 1.4000 handle.
• Canadian Industrial Product Prices rose 1.2% MoM in October, well above the forecast 0.3% and entirely wiping out the previous month’s -0.8% contraction.
• Canada’s Raw Material Price Index also accelerated in October, climbing to 3.8% MoM, vaulting over both the -1.5% forecast and the previous month’s -3.2%.
• The US saw an unexpected contraction in weekly unemployment benefits seekers, with Initial Jobs Claims easing to 213K for the week ended November 15, down from the expected 220K and the previous week’s revised 219K.
• An upswing in US Existing Home Sales kept market sentiment bid into the high side.
• Loonie traders will be looking ahead to Friday’s Canadian Retails Sales for the month of September, which is forecast to hold steady at 0.4% MoM.

Canadian Dollar price forecast

The Canadian Dollar (CAD) tested a six-day low on Thursday, despite getting pushed back into the day’s opening bids. USD/CAD eased back below 1.3950 for the first time since November 13, but a lack of sustained momentum kept the pair pinned just below 1.4000.

The USD/CAD pair is stuck close to medium-tern highs with the US Dollar trading well north of the 200-day Exponential Moving Average (EMA) against the Loonie. A fresh round of CAD bidding will send the pair back into the 50-day EMA near 1.3825.

USD/CAD daily chart

• The cross saw a decline of 0.71% in Thursday’s session.
• NZD/JPY remains range-bound between 90.00 and 92.00, with selling pressure weighing.
• Until a decisive breakout occurs either way, the cross is set to continue sideways trading.

The NZD/JPY resumed losses on Thursday, declining by 0.71% to 90.60, but remains range-bound between 90.00 and 92.00.

The daily Relative Strength Index (RSI) stands bearish at 45, while the Moving Average Convergence Divergence (MACD) histogram remains red and flat, indicating a soft but steady selling pressure. Until a decisive breakout occurs, the cross is expected to continue its sideways trading pattern but with indicators showing that there is no clear dominant the outlook remains neutral.

The bulls task will be to conquer the 20 and 100-day Simple Moving Average convergence which stands within the defined range. A close above would improve the outlook.

NZD/JPY daily chart

• Euro experiences significant sell-off, dragging EUR/AUD below critical support levels to its lowest since October.
• Technical analysis indicates a confirmed head-and-shoulders pattern, suggesting extended downward momentum.
• Immediate supports are eyed at October's low of 1.6003 and June 2023's low of 1.5848, with a pattern target near 1.5750.
• Resistance levels to watch include 1.6200 and the 50-day SMA at 1.6283 if there is a reversal in bearish sentiment.

The Euro fell sharply against the Australian Dollar late in the North American session on Thursday. The single currency was the laggard of the FX space, with the EUR/USD pair falling to new yearly lows beneath 1.0500 and dragging the EUR/AUD pair below 1.6100 for the first time since early October. At the time of writing, the cross trades at 1.6087, down 0.70%.

EUR/AUD Price Forecast: Technical outlook

The EUR/AUD is biased downward. A head-and-shoulder pattern emerged, further confirmed by the exchange rate, diving below the neckline at around 1.6200 and opening the door for further downside. If the cross breaks below the October 2 swing low of 1.6003, the next support emerges at the June 15, 2023 low of 1.5848 before aiming for 1.5800. If surpassed, the next stop would be the minimum objective for the head-and-shoulders at around the 1.5750-75 range.

Conversely, if EUR/AUD climbs above 1.6200, the next resistance would be the neckline at around 1.6210. On further strength, the next resistance would be the 50-day Simple Moving Average (SMA) at 1.6283.

EUR/AUD Price Chart - Daily

• NZD/USD declined on Thursday by 0.26% to 0.5865.
• Pair resumes losses and hovers near lows since April as bears take control.
• Bears may face a period of consolidation as indicators near oversold levels, suggesting potential sideways movement.

The NZD/USD pair declined by 0.26% to 0.5865 on Thursday, continuing its downward trend. The pair has resumed its losses and is currently trading near lows not seen since April, as bears maintain control.

The pair's downward trajectory is supported by the Relative Strength Index (RSI), which is situated in the negative territory below 37 and exhibiting a slight downward slope. This indicates an increase in selling pressure. The Moving Average Convergence Divergence (MACD) echoes this assessment, as its histogram remains flat and red, despite some early hints of a shift in direction today. This suggests that selling pressure is rising. At present, the 0.5850 level serves as a crucial support zone. If NZD/USD falls below it, it may face further declines towards the 0.5800 level. Conversely, if the pair can regain upward momentum, it will encounter resistance at 0.5900, with a breakout above this level opening up the possibility of a rally towards 0.6000.

NZD/USD daily chart

• Gold prices advance for the fourth day, surpassing the 50-day SMA of $2,660 amid global unrest.
• Market reacts to reports of a potential ICBM launch by Russia.
• US economic data hints at a strong jobs market.
• Investors adjust expectations for the Fed's December meeting with a decreased likelihood of a rate cut to 56%.

Gold price extended its gains for the fourth consecutive day, clearing on its way to the 50-day Simple Moving Average (SMA) as the escalation of the Russia-Ukraine conflict augments demand for the safe-haven metal. The XAU/USD trades at $2,672 at around weekly highs, gaining over 0.80%.

Fears that Russia launched an Inter-Continental Ballistic Missile (ICBM) on Ukraine heightened tensions in Eastern Europe. However, according to Reuters citing a Western official, they did not use an ICBM on Thursday.

Consequently, the golden metal rose above the 50-day SMA, which is at $2,660, amid firm US Treasury yields and a bid US Dollar.

On the data front, last week's US Initial Jobless Claims hinted that the labor market remains strong, suggesting the Federal Reserve (Fed) could achieve a soft landing. Other data was not encouraging, like the Philadelphia Fed Manufacturing Index, which plunged to -5.5 in November, beneath October’s 10.3 reading.

Aside from this, Fed speakers crossed the wires. The New York Fed’s John Williams commented that the disinflationary process continues and added that the fed funds rate will be lower by the end of 2025.

Chicago’s Fed Chairman Austan Goolsbee echoed some of his comments. He repeated what he has said lately, supporting lower interest rates, but he opened the door to slowing the pace of easing policy.

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.

Ahead this week, the economic docket will feature Fed speakers and the University of Michigan (UoM) Consumer Sentiment  data in the US.

Daily digest market movers: Gold reaches a new weekly high amid escalation of Russia-Ukraine conflict

• Gold prices recovered even though US real yields climbed two basis points to 2.084%.
• US Treasury bond yields are rising, with the 10-year benchmark rate up two basis points to 4.434%.
• 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 Initial Jobless Claims fell to 213K for the week ending November 16, down from 217K and below the forecast of 220K.
• US Existing Home Sales rose to 3.96 million, an increase from 3.854 million, reflecting a 3.4% growth rate.
• 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.

Technical outlook: Gold price clears the 50-day SMA

The uptrend in Gold prices is set to continue, with the non-yielding metal set to trade within the $2,660-$2,700 range. A breach of the latter will expose the November 7 high of $2,710, followed by the psychological $2,750 figure. Once those two levels are removed, up next lies the all-time peak at $2,790.

Conversely, sellers will have the upper hand if the non-yielding metal drops below the 50-day SMA at $2,658. Once surpassed, up next would be $2,600, followed by  the 100-day Simple Moving Average (SMA) at $2,550. Bears could target the November 14 swing low of $2,536, followed by XAU/USD diving to $2,500.

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

• Aussie bears lick their wounds after retreating due to soft US Dollar and broad risk-on mood.
• The hawkish RBA, less dovish Fed expectations and the US political transition continue to influence AUD/USD price action.
• Mixed US data seems to have weakened the Greenback on Thursday.

The AUD/USD regained positive traction on Thursday following the overnight pullback from a one-week top. A softer US Dollar and a positive risk tone benefited the Aussie, as well as the Reserve Bank of Australia’s (RBA) hawkish stance. Traders look forward to US macro data and Federal Reserve (Fed) speakers for some meaningful opportunities.

This week, the AUD/USD is facing a bearish trend due to a stronger US Dollar supported by geopolitical concerns and higher bond yields. The RBA's hawkish stance, indicating potential interest rate adjustments, provides temporary support for the Aussie. However, weak Australian and Chinese economic data, along with the Fed's reluctance to cut interest rates quickly, continues to weigh on the AUD/USD pair.

Daily digest market movers: Australian Dollar fluctuates around 0.6500 as markets assess mixed US data

• On the US front, Initial Jobless Claims for the week ending November 15 totaled 213,000, below expectations of 220,000.
• Concerningly, Continuing Claims surged to 1.908 million, up from 1.872 million the previous week.
• The Philadelphia Fed Manufacturing Survey plunged into contractionary territory with a reading of -5.5, down significantly from the positive 8 and 10.3 seen earlier.
• The probability of a Fed rate cut in December has decreased by 16.5% since last week, which seems to have pushed the USD into a slight consolidation.
• USD bulls also pause as they await clarity on President-elect Donald Trump's policies.

AUD/USD technical outlook: Despite a slight recovery, AUD/USD indicators remain bearish

Technical indicators for the AUD/USD pair display some renewed momentum but remain subdued in negative territory. The Relative Strength Index (RSI) lingers well below the 50 mid-point, signaling bearish sentiment. The Moving Average Convergence Divergence (MACD) also remains under its signal line, reinforcing the downtrend.The pair faces resistance at the 20-day Simple Moving Average (SMA), which has served as a significant barrier. Until this level is decisively breached, downside risks remain elevated, suggesting that the AUD/USD may continue to slide in the near term.

The US Dollar extended its march north and hit new 2024 peaks on the back of further weakness in the risk-associated universe and steady geopolitical concerns ahead of key data releases on Friday.

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

The US Dollar Index (DXY) rose further north of the 107.00 barrier to print fresh tops for the current year. The flash S&P Global Manufacturing and Services PMIs are next on tap, followed by the final Michigan Consumer Sentiment.

EUR/USD remained well on the defensive and slipped back to the 1.0460 zone to record new YTD lows. The final Q3 GDP Growth Rate in Germany is due, along with the flash HCOB Manufacturing and Services PMIs in Germany and the Euroland, and speeches by the ECB’s Lagarde, De Guindos, Nagel, Tuominen, and Schnabel.

GBP/USD traded on the back foot and broke below the key support at 1.2600, or multi-month lows. The release of Retail Sales will take centre stage seconded by the advanced S&P Global Manufacturing and Services PMIs, and GfK’s Consumer Confidence.

Hawkish remarks from the BoJ’s Ueda and geopolitical concerns lent support to the Japanese Yen, prompting a drop to two-day lows near 153.90 in USD/JPY. The Inflation Rate and preliminary Jibun Bank Manufacturing and Services PMIs will be published.

AUD/USD managed to offset Dollar’s gains and the generalised offered stance in the risk complex, reclaiming once again the 0.6500 hurdle and beyond. The flash Judo Bank Manufacturing and Services PMIs are expected in Oz.

Prices of WTI advanced further and surpassed the key $70.00 mark per barrel in response to supply concerns stemming from intense geopolitical jitters in the Russia-Ukraine conflict.

Gold prices rose for the fourth day in a row and revisited the $2,670 region per troy ounce. Silver prices navigated an inconclusive range below the $31.00 zone per ounce.

• US Dollar Index retreats to 106.50 and continues hitting a barrier near 107.00.
• Dollar weakens on Fed's Williams hinting at inflation cooling and rate reduction.
• Fed officials remain cautious amid persistent inflation concerns and uncertainty about future rate decisions.
• Mid-tier data from the US came in mixed on Thursday.

In Thursday's session, the US Dollar Index (DXY) flattens after Fed's Williams indicated a potential cooling of inflation and a subsequent decline in interest rates. On the data front, the data for Jobless Claims came in below expectations, while Manufacturing data raised concerns among investors. The DXY hovers around 106.50, indicating a possible move to find support for a rebound.

The DXY maintains an overall bullish momentum, supported by strong economic data and a less dovish Federal Reserve (Fed) stance. Its upward trajectory is driven by hawkish rhetoric, risk-off sentiment and geopolitical tensions. The uptrend is intact with limited expectations of aggressive Fed easing. 

Daily digest market movers: US soft as markets digest Fed words, mixed data

• Fed's Williams hinted at potential inflation cooldown and interest rate reduction, leading to DXY's flattening.
• Jobless Claims data fell below expectations, while Manufacturing data raised investor concerns.
• Initial Jobless Claims for the week ending November 15 decreased to 213,000, below expectations.
• Continuing claims unexpectedly surged to 1.908 million, rising by 36,000 from the previous week.
• Philadelphia Fed Manufacturing Survey plummeted to -5.5 in November, slipping into contraction from positive territory.
• According to the CME FedWatch Tool, markets now assign a 55.5% probability of a 25 bps rate cut by the Fed in December, down from 70% a week ago.
• The US 10-year benchmark yield declined to 4.39%, moving further away from its recent high of 4.50%.

DXY technical outlook: Bulls face resistance near 107.00 as indicators show potential consolidation

Technical indicators, including the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), remain positive but have flattened, suggesting consolidation due to near overbought conditions. Index holds above its 20, 100 and 200-day Simple Moving Averages (SMA), and this should provide support to the bullish rhetoric. For the short-term, bulls must hold the 106.00 level.

• The Dow Jones climbed more than one percent on Thursday.
• Investors have renewed their vigor after a brief pullback period.
• Markets shrug off decline in manufacturing surveys, bid up softer benefits claims.

The Dow Jones Industrial Average (DJIA) lurched higher on Thursday, climbing upwards of 550 points as investors stepped back into their bidding shoes. Weekly US Jobless Claims eased slightly on a weekly basis, while traders brushed off a contraction in the Philadelphia Fed Manufacturing Index. Markets also bid up an upswing in Existing Home Sales Change. Industrials and Financials are the strongest-performing sectors for the day.

US Initial Jobless Claims printed lower than expected on Thursday, showing 213K net new jobless benefits seekers for the week ended November 15, below the 220K expected and down from the previous revised weekly figure of 219K. Existing Home Sales Change also accelerated in October, rising to 3.4% after the previous month’s revised -1.3% contraction.

The Philadelphia Fed’s Manufacturing Survey for November threw up another warning sign, pulling back to -5.5 and falling sharply from the previous month’s 10.3 and tumbling past the median forecast of 8.0. The downside print in aggregated expectations did little to contain markets, which were determined to shake off near-term declines and push back toward record highs.

Dow Jones news

A broad uptick in sector-wide risk appetite on Thursday has bolstered the Dow Jones back into the bullish end, with all but five of the major index’s listed securities climbing from the day’s opening bids. Salesforce (CRM) rose nearly 5%, breaking above $341 per share as analysts raise their price forecasts for CRM ahead of the digital database management company’s third-quarter earnings reports due during the first week of December.

Elsewhere, Nvidia (NVDA) is having a whipsaw kind of day, surging to new record highs before slumping back as investors battle out conflicting opinions on the chipmaker's recent quarterly results.

Dow Jones price forecast

The Dow Jones is back into testing the 44,000 major handle on Thursday, rallying 600 points from the day’s lows near 43,200. After a brief backslide that saw the major equity index decline 3.7% from record highs near 44,485, bullish momentum has returned to the fold.

A consistent pattern of higher lows has kept the gas burning in a one-sided bull run that kicked off in November of 2023. Price action has entirely outrun the 200-day Exponential Moving Average (EMA) for 12 months straight, and timing short entries is proving to be a hazardous endeavor. Bidders still have to push prices above 44,400 before they can claim further record highs, and the 50-day EMA is keeping a tight technical floor under intraday momentum from 42,600.

Dow Jones daily chart

Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee hit newswires on Thursday, commenting on the future pace of Fed rate cuts in the face of inflation that is ostensibly on its way to the Fed's 2% target.

Key highlights

• Mexican Peso falls against the US Dollar amid continued geopolitical concerns and disappointing local data.
• US Dollar Index reaches a new year-to-date high of 107.06.
• Banxico Governor signals potential for further rate cuts, adding pressure on the Peso's short-term outlook.

The Mexican Peso depreciated against the US Dollar on Thursday due to risk aversion as the Russia-Ukraine conflict escalates. Also,a soft Mexican Retail Sales report and solid US jobs data weighed on the emerging market currency, which is down 1.86% in the month. At the time of writing, the USD/MXN trades at 20.39, up 0.71%.

Geopolitics continued to drive price action. Consequently, the Greenback hit a new year-to-date (YTD) high against a basket of six currencies known as the US Dollar Index (DXY). The DXY is up 0.38% near 107.06.

Therefore, the USD/MXN is printing another leg-up after the Instituto Nacional de Estadistica Geografia e Informatica (INEGI) revealed that monthly Retail Sales came in as expected but missed the mark on an annual basis.

Meanwhile, Bank of Mexico Governor Victoria Rodriguez Ceja said in a Reuters interview that the central bank would likely continue to lower interest rates due to the progress made on bringing inflation down. Hence, the Peso will remain downwardly pressured in the near term.

A weekly report on jobless claims in the US revealed that the number of people filing for unemployment benefits fell unexpectedly last week, hinting at a rebound in the labor market.

Money market players had grown more cautious about the Federal Reserve (Fed) cutting rates. The CME FedWatch Tool suggests that investors see a 59% chance of a 25-basis-point rate cut at the December meeting, up from 55% a day ago.

Meanwhile, according to an interview with The Financial Times, Richmond Fed President Tom Barkin said the United States is more vulnerable to inflationary shocks than in the past.

This week, Mexico’s docket will reveal November's Gross Domestic Product (GDP) figures and mid-month inflation data. In the US, the schedule will feature Fed speakers and the University of Michigan (UoM) Consumer Sentiment.

Daily digest market movers: Mexican Peso on the defensive amid a firm US Dollar

• Mexican Retail Sales for September came at 0.1% MoM, as expected. On a yearly basis, sales plunged from -0.8% to -1.5%, more than the estimated -1.2% contraction.
• US Initial Jobless Claims dipped from 217K to 213K, below estimates of 220K for the week ending November 16.
• US Existing Home Sales increased by 3.96 million, up from 3.854 million for a 3.4% growth rate.
• 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 20.40

The exotic pair has extended its gains, with the USD/MXN hitting new weekly highs at 20.46, shy of the psychological 20.50 figure. A breach of the latter will expose the November 12 peak at 20.69. Once those levels are removed, 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.

• EUR/CAD fell 0.19% on Thursday, hitting 1.4700, the lowest since July 1st.
• With indicators in deeply oversold territory, the EUR/CAD might consolidate to the upside, but the overall outlook remains negative.

The EUR/CAD declined by 0.19% to 1.4700 in Thursday's session, reaching its lowest level since July 1st. The currency pair has been falling steadily since then, amid increasing selling pressure as indicated by the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD). The overall momentum appears to be bearish, with the pair likely to continue its downward trend in the near term, as per our previous technical analysis.

The technical indicators for the EUR/CAD pair suggest that the downtrend is likely to continue. The RSI is at 27, indicating oversold conditions, and is sloping down, suggesting that selling pressure is rising. The MACD is also suggesting that selling pressure is rising, as the histogram is red and rising. The overall outlook for the EUR/CAD is bearish, and the pair is likely to continue its decline in the near term but an upwards correction shouldn’t be taken off the table.

While deeply oversold conditions may lead to short-term consolidation, the outlook remains negative. Indicators such as the RSI and MACD suggest continued selling pressure, and the pair is likely to decline further.

EUR/CAD daily chart

• GBP/USD dips as market reacts to global tensions and hot UK inflation data.
• Technical indicators suggest further downside, with the pair now below the 200-day SMA.
• Key support levels to watch include 1.2600 and May's low at 1.2445, with potential for retesting annual lows.
• Recovery above 1.2665 and the 200-day SMA would be crucial for reversing current bearish momentum.

The Pound Sterling tumbled against the US Dollar early during the North American session as traders digested the escalation of the Russia-Ukraine conflict, the result of the US Presidential Elections, and hot UK inflation data. The GBP/USD trades at 1.2624, down 0.21%.

GBP/USD Price Forecast: Technical outlook

Further downside is seen after the GBP/USD pair dropped underneath the 200-day Simple Moving Average (SMA) at 1.2818. In addition, the major carved out a successive series of lower highs and lower lows, clearing on its way to intermediate support at 1.2665, the August 8 daily low. That and oscillators such as the Relative Strength Index (RSI), which indicate that sellers are in charge, confirm the pair’s bearish bias.

The next support level is seen at 1.2600, followed by the daily low of May 9 at 1.2445, before testing the year-to-date (YTD) low of 1.2299.

If buyers want to regain control, they need the GBP/USD to climb above 1.2665, followed by 1.2700 and the 200-day SMA.

GBP/USD Price Chart – Daily

• USD/JPY might have evolved a Broadening Formation price pattern. 
• If so it could have bearish reversal potential and see prices fall substantially lower. 

USD/JPY could still be in the process of forming a Broadening Formation pattern with bearish potential. If so, then it is likely to eventually decline towards the lower boundary line of the pattern at around 151.50. Following that, it could even break below that line and decline to the projected target for the Broadening Formation (BF), at around 148.54.

USD/JPY 4-hour Chart 

USD/JPY has overshot the upper boundary line of the BF and this could either be a sign of exhaustion of the uptrend or a sign of bullishness.

It is possible, the pattern could be false and in that case, USD/JPY would still be in a strong medium-term uptrend. If so, given the technical analysis principle that “the trend is your friend” the odds would favor more upside. 

In such a case, a break above 156.25 would likely confirm further gains towards a target at around 157.86 (July 19 high). 

• Silver price recovers mildly above $31.00 on heightened geopolitical tensions.
• Ukraine launched UK-supplied missiles in Russia, resulting in a fresh escalation in the war.
• Investors await the flash US S&P Global PMI for November.

Silver price (XAG/USD) bounces back slightly above $31.00 in Thursday’s North American session after a corrective to near $30.80 on Wednesday. The white metal rebounds on fresh escalation in the Russia-Ukraine war, which forced investors to flee to safe-haven assets, such as Silver.

Geopolitical tensions renewed as Ukraine launched United Kingdom (UK)-supplied missiles into Russia, a day after it fired Army Tactical Missile System (ATACMS) provided by United States (US) President Joe Biden that fuelled risks of third world war.

Historically, the appeal of safe-haven assets, such as Silver, improves in times of uncertainty or heightened geopolitical risks.

The outlook of the Silver price remains uncertain as investors doubt whether the Federal Reserve (Fed) will cut interest rates again in the December meeting. The probability of the Fed to cut interest rates by 25 bps to 4.25%-4.50% in December has come down to 56% from 72% a week ago, according to the CME FedWatch tool.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, wobbles around 106.60. 10-year US Treasury yields hover around 4.40%.

Going forward, investors will focus on the preliminary S&P Global PMI data for November, which will be published on Friday. Economists expect the overall private sector activity to have improved.

Silver technical analysis

Silver price stays on track toward the upward-sloping trendline around $29.00, plotted from the February low of $22.30, which also coincides with the 200-day Exponential Moving Average (EMA). The white metal faces selling pressure near the 20-day EMA, which trades around $31.40.

The asset weakened after the breakdown of the horizontal support plotted from the May 21 high of $32.50.

The 14-day Relative Strength Index (RSI) slides to near 40.00. A bearish momentum will trigger if the RSI (14) sustains below the same.

Silver daily chart

• EUR/CHF declines to new lows after breaking out of a Triangle pattern. 
• It is likely to continue lower according to technical analysis theory. 

EUR/CHF falls lower after breaking out of a Triangle pattern. It will probably continue to decline until it reaches the next downside target, which has been revised up to 0.9145 - 0.9150. This is the 61.8% Fibonacci extrapolation of the height of the Triangle lower, the target generated using technical analysis theory.  

EUR/CHF Daily Chart

The bearish trend prior to the formation of the Triangle (Since May 27) further tips the odds in favor of a downside evolution. 

Another potential support level and more conservative target is the key August 5 low at 0.9210. 

UK government borrowing (GBP17.4bn) rose well ahead of expectations in October while the CBI’s latest industrial trends survey suggested some moderate improvement in orders for UK manufacturing, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP pressures base of recent consolidation range

“BoE MPC’s Mann speaks at 9.00ET and is likely to reinforce that cautious approach to policy easing outlined by her colleagues in recent days.”

“Cable is holding within the past week’s consolidation range still—but only just. Price action continues to respect the boundaries of a bear flag pattern but the base of the flag pattern at 1.2637 is under obvious pressure.”

“A clear break lower should see broader GBP losses resume to test 1.2550/60. Risks are tilted towards a fuller retracement of the Apr/Sep rally from 1.23.”

• GBP/NZD is consolidating after a strong rally on the previous day. 
• Acutely diverging interest rate expectations in the two countries is expected to support the Pound and GBP/NZD. 
• The RBNZ is expected to slash rates at Christmas, whilst the Bank of England is not expected to lower them at all. 

GBP/NZD is trading back to where it opened, in the 2.1520s on Thursday, after rising over a third of a percent on the previous day. The pair is channeling modestly lower in what looks like a correction of the October rally. 

GBP/NZD Daily Chart 

Widely diverging expectations of the trajectory of interest rates in the UK and New Zealand suggest the odds favor more upside for GBP/NZD. This is because in global capital markets the flow of money tends to go towards currencies with higher interest rates, all other things being equal. 

Although both the central banks of the UK and New Zealand have set base interest rates at the same level of 4.75%, the Reserve Bank of New Zealand (RBNZ) is expected to reduce its interest rate more quickly than the Bank of England (BoE). Overall, this should benefit the Pound Sterling (GBP) and give GBP/NZD a lift. 

The divergence in interest rate expectations is most acute when it comes to the two central bank’s policy meetings in December. The RBNZ is expected to slash its cash rate by a minimum of 50 basis points (bps) (0.50%) – possibly even 75 bps – whilst the Bank of England (BoE) is not expected to cut its bank rate at all. This could mean that at the end of 2024, the RBNZ will have an interest rate of 4.25% whilst BoE’s will still be at 4.75%. This ought to further support flows into Sterling. 

The more negative economic outlook in New Zealand is the reason for economists expecting the RBNZ to cut its interest rates so aggressively in December. Lower interest rates tend to lead to more credit and, in theory, spending on growth creation activities.  

“With the New Zealand economy in a tailspin and inflation well on its way to target, we expect the RBNZ to keep cutting rates by 50 bps at its next two meetings. We expect rates to fall to 2.25% by end-2025, far lower than most anticipate,” says Toh Au Yu, Assistant Economist at Capital Economics. 

In the UK the outlook for the economy is not as bad, and recent UK headline inflation data beat expectations, suggesting even less chance of the BoE cutting interest rates in December. 

“UK inflation surprised to the upside, but services (inflation), (which rose) back up to 5.0%, was in line with the BoE forecast. The forecast in the last inflation report is for CPI to increase from the 2% target in 3Q24…(..).. An 8-1 vote by the MPC for no change in December looks certain,” says Kenneth Broux, Senior Strategist at Societe Generale.

• USD/CAD sustains above 1.3950 as the near-term outlook of the US Dollar remains firm.
• US Initial Jobless Claims came in lower at 213K than estimates of 220K.
• Traders have trimmed BoC outsize interest rate cut bets for the December meeting.

The USD/CAD pair ticks down but holds the immediate support of 1.3950 in Thursday’s North American session. The Loonie pair strives to resume its upside journey on US Dollar’s (USD) firm near-term outlook backed by growing doubts over whether the Federal Reserve (Fed) will cut interest rates in the December meeting.

The Fed started its policy-easing cycle with a 50 basis points (bps) interest rate cut in September and took forward the process to this month with 25 bps interest rate reduction. However, traders seem to be indecisive about the continuation of the rate-cut cycle for next month on expectations that the implementation of President-elect Donald Trump’s agenda will boost United States (US) inflation and economic growth.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks down in the North American session to near 106.50 after the release of the Initial Jobless Claims data for the week ending November 15. The Greenback drops even though the Department of Labor reported that individuals claiming jobless benefits for the first time came in lower at 213K than estimates of 220K and the former release of 219K, upwardly revised from 217 K.

In the Canadian region, traders have reduced some bets supporting a second consecutive larger-than-usual interest rate cut of 50 basis points (bps) by the Bank of Canada (BoC) in the December meeting. Market speculation for the BoC 50 bps interest rate cut diminished slightly after the faster-than-expected growth in the Canadian Consumer Price Index (CPI) data for October. The CPI report showed that the headline inflation rose by 2%, faster than estimates of 1.9% and the former release of 1.6% on year.

For more cues about the likely interest rate action in the December meeting, investors will pay close attention to the monthly Canadian Retail Sales for September, which will be published on Friday. Economists expect Retail Sales to have grown steadily by 0.4%.

• Initial Jobless Claims bettered consensus and climbed to 213K.
• Continuing Jobless Claims rose to 1.908M in the week ending November 8.

US citizens filing new applications for unemployment insurance rose to 213K for the week ending November 15, as reported by the US Department of Labor (DoL) on Thursday. This print came in above initial estimates (220K) and was lower than the previous week's tally of 219K (revised from 217K).

The report also highlighted a seasonally adjusted insured unemployment rate of 1.2%, while the four-week moving average retreated to 217.75K, marking a decrease of 3.750K from the prior week’s revised average.

Moreover, Continuing Jobless Claims went up by 36K to reach 1.908M for the week ending November 8.

Market reaction

The Greenback maintains its recovery for the second day in a row, always well north of the 106.00 barrier when tracked by the US Dollar Index (DXY) amid renewed upside traction and the pick-up in geopolitical tensions.

The Euro (EUR) is trading softly on the session, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

EUR is trading weak on the day

“Dovish comments from ECB Governor Villeroy earlier appear to be driving spot. He remarked that victory against inflation was in sight, economic risks were tilting to the downside and that the ECB should continue to ease restrictive policy. He also suggested a new round of tariffs might not have as big impact on Eurozone inflation.”

“Note that several other ECB speakers are tap today, including Chief Economist Lane (10.30ET).

Bearish price signals around the early week highs near 1.06 leave the EUR looking prone to further softness in the short– and medium term.”

“Short-term price patterns suggest a minor double top developed around the 1.0605 peaks earlier this week and a clearer break under the low between those tops (1.0524) implies a downside move to 1.0440—effectively a test of key support at 1.0450— in the next few days.”

The Canadian Dollar (CAD) is little changed on the session. Soft stocks contrast with generally firm commodities on the session while short-term cash bond spreads are narrowing somewhat, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD drifts back to the mid-1.39

“Mixed short-term impulses for the CAD and limited domestic data releases (Industrial Product Prices this morning) leave markets with little to go on in terms of the CAD’s direction. Cross flows (EUR/CAD below 1.47 for the first time since July) may be giving the CAD a little support but even mild USD/CAD losses leave spot straying a bit more conspicuously from estimate fair value (1.4032 today)”.

“Short-term trend momentum has weakened to near neutral levels following the USD’s drift back from its early week peak. Spot continues to find support around 1.3950/60 but there are some tentative, CAD-positive signs on the weekly chart, with the USD failing to hold last week’s break above 1.4040 resistance (at this point).”

“USD weakness below 1.3950 could see spot ease back to the mid/upper 1.38s. Resistance is 1.4000/10.”

The US Dollar (USD) is mixed to somewhat firmer on the day. Soft (but off earlier lows) stocks and renewed focus on Ukraine after Russia launched an attack using an ICBM are supporting JPY outperformance, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD mixed versus majors

“Firm price action in the USD overall yesterday keeps the focus on scope for more gains in the near-term as the DXY continues to closely track the pattern of trade that followed President Trump’s first win. A minor dip in the USD is a risk around the turn of the month before renewed gains into December, if the pattern continues to repeat.”

“Note that Fed rate cut expectations for the December FOMC are slowly receding, with just 13bps priced in now—effectively a 50/50 call—despite a lack of major data points this week. Pricing was closer to 20bps a week ago. The Fed’s Bowman (a voter) said yesterday that the Fed should move cautiously on policy and that the neutral rate may be ‘much higher’ than pre-pandemic levels. There is data to work through this morning after yesterday’s calendar lull.”

“The Philly Fed Business Outlook survey and weekly claims data are released at 8.30ET. US Leading Indicators and Existing Home Sales are out at 10ET while the KC Fed Manufacturing Index drops at 10.30ET. The Fed’s Hammack, Goolsbee (non-voter) and Barr are speaking later. Japan releases October CPI data this evening.”

• The US Dollar flattens on Thursday after Fed’s Williams said he sees inflation cooling and interest rates falling.
• Investors will look at Jobless Claims data and further comments from Fed officials. 
• The US Dollar Index trades flat around 106.50, still looking for support to bounce off from. 

The US Dollar (USD) is trading flat on Thursday at around 106.50 when tracked by the DXY US Dollar Index, afterNew York Fed President John Williams said that inflation continues to cool down, opening the door for a further drop in interest rates. The US Dollar has traded broadly sideways in recent days, influenced by swings coming from the war between Russia and Ukraine and, more recently,  disappointing earnings from Nvidia.

The US economic calendar features on Thursday the weekly Jobless Claims data and the Philadelphia Fed Manufacturing Survey for November, which will be a good leading indicator of how the sector is responding to President-elect Donald Trump’s victory. Moreover, four other Fed speakers are set to make comments today. 

Daily digest market movers: Walking through a pothole-filled Thursday

• New York Fed President John Willams delivered some dovish comments.Williams said that inflation is heading lower and interest rates should fall further. 
• Fed’s Williams meanwhile received additional support from Richmond Fed President Tom Barkin who said in an interview on Thursday with the Financial Times that inflation will continue to drop, Bloomberg reports. 
• On the geopolitical front, Ukraine reports that Russia has launched a ballistic missile, Bloomberg reports. 
• At 13:30 GMT, the Weekly Jobless Claims for the week ending November 15 are due. Expectations are for a small uptick to 220,000 against the 217,000 from the week before.
• The Philadelphia Fed Manufacturing Survey for November is expected to decline to 8 coming from 10.3.
• Existing Home Sales data for October are due at 15:00 GMT. Economists expect sales to jump higher to 3.93 million from 3.84 million in September. 
• A batch of Fed speakers are due this Thursday:
  • Near 13:45 GMT, Federal Reserve Bank of Cleveland President Beth Hammack delivers welcome remarks at the 2024 Financial Stability Conference organized by the Cleveland Fed. Hammack will speak again at 17:30 GMT at the same event.
  • At 17:25 GMT, Federal Reserve Bank of Chicago President Austan Goolsbee participates in a moderated Q&A session at an event organized by the Central Indiana Corporate Partnership in Indianapolis.
  • Federal Reserve Bank of Kansas City President Jeffrey Schmid delivers a speech about economic growth and monetary policy at an event organized by the Fairfax Industrial Association in Kansas City at 17:40 GMT. 
  • Federal Reserve Vice Chair for Supervision Michael Barr closes off at 21:40 GMT, participating in a discussion about banks and artificial intelligence at the 2024 FinRegLab AI Symposium in Washington DC.
• Equities are torn between the dovish comments from Fed’s Williams, while the ballistic missile launch from Russia to Ukraine is triggering safe-haven flows. In this context, equities are looking for direction. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 55.5%. A 44.5% chance is for rates to remain unchanged. While the interest-rate cut scenario is still the most probable, traders have significantly pared back some of the rate-cut bets compared with a week ago, when a rate-cut possibility was still at 72%.
• 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: Risks at hand

The US Dollar Index (DXY) is supported by the constant safe-haven inflow on the geopolitical tensions escalating between Russia and Ukraine. Traders should keep in mind that if the recent escalation eases and both parties head into any kind of ceasefire talks, the Greenback could retreat.

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

The first level on the downside is 105.93, the closing from November 12. A touch lower, the pivotal 105.53 (April 11 high) should avoid any downturns towards 104.00. 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 knive formation. 

US Dollar Index: Daily Chart

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

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

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

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

Global brokerage firm Nomura expects the Fed to pause the policy-easing cycle in December. "We currently expect tariffs will drive realized inflation higher by the summer, and risks are skewed towards an earlier and more prolonged pause,” analysts at Nomura said.

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

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

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

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

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

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

Oil news and market movers: Biden makes his last moves

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

Oil Technical Analysis: Limited potential forecasted

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

On the upside, the 55-day Simple Moving Average (SMA) at $70.08 is the first barrier to consider before the 100-day SMA steps in at $72.89. The 200-day SMA at $76.48 is still quite far off, although it could be tested if tensions intensify further. 

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

US WTI Crude Oil: Daily Chart

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

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

EUR/GBP 4-hour Chart 

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

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

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

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

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

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

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

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

Gold extends reversal after Nvidia earnings release

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

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

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

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

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

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

XAU/USD Daily Chart

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

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

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

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

A weak recovery       

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

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

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

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

Recent pivot high at 0.6630/0.6685 is key resistance zone

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

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

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

Lacking direction on uncertainties

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

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

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

BoE pause is now almost a foregone conclusion

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

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

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

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

CBT rate decision will likely pass without event

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

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

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

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

Geopolitical risks build

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

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

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

Scope for the US Dollar (USD) to rise to 7.2630; the major resistance at 7.2800 is likely out of reach. In the longer run, momentum is beginning to slow; a breach of 7.2000 would mean that USD is not rising further, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Below 7.2000 the USD is not going to rise further

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

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

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

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

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

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

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

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

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

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

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

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

USD/CHF daily chart

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

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

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

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

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

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

ECB to go on a quarterly cadence towards neutral

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

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

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

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

USD is expected to trade in a range

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

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

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

Additional quotes

Market reaction 

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

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

USD/TRY to trade at 35.000 at year-end

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

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

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

NZD can rise gradually to 0.5960

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

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

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

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

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

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

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

XAG/USD: Daily Chart

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

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

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

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

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

EUR/CHF to grind towards 0.92

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

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

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

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

Current price action is part of a rebound

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

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

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

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

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

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

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

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

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

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

Technical Analysis: EUR/USD struggles above 1.0500

EUR/USD strives to hold the key support of 1.0500. The outlook of the major currency pair remains bearish as all short- to long-term Exponential Moving Averages (EMAs) are declining. 

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

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

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

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

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

Mexican Peso traders await key data 

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

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

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

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

Mexican Congress votes to scrap five autonomous and regulatory bodies

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

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

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

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

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

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

USD/MXN 4-hour Chart 

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

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

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

The full range of doves and hawks speaking today

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

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

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

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

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

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

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

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

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

Above 1.2725 the major support at 1.2565 is out of reach

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

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

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

DXY to remain bid in its new 106-107 range

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Technical Analysis: Pound Sterling consolidates around 1.2650

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

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

The 14-day Relative Strength Index (RSI) remains within the 20.00-40.00 level, indicating a strong bearish momentum.

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

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

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

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

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

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

GBP/JPY: Daily Chart

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

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

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

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

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

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

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

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

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

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

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

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

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

US Dollar Index (DXY) Daily Chart

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

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

Additional comments

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

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

Additional comments

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

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

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

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

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

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

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

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

EUR/USD: EUR amounts

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

USD/JPY: USD amounts                     

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

USD/CHF: USD amounts     

• 0.8485 530m
• 0.8625 856m

AUD/USD: AUD amounts

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

USD/CAD: USD amounts       

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

NZD/USD: NZD amounts

• 0.5875 528m
• 0.6030 466m

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

Key quotes

Market reaction

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

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

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

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

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

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

AUD/JPY 4-hour chart

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EUR/JPY 4-hour chart

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Indian Rupee weakens amid sustained portfolio outflows and geopolitical risks

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

USD/INR’s broader trend remains constructive

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

AUD/USD: Daily Chart

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

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

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

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

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

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

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

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

Key quotes

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

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

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

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

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

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

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

Market reaction 

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

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

Key quotes

Market reaction

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

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

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

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

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

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

EUR/USD price forecast

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

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

EUR/USD daily chart

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

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

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

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

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

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