The NZD/USD saw a volatile session on Friday, initially soaring to a high around 0.5970 near the 20-day Simple Moving Average (SMA) before erasing all the gains towards 0.5850. The pair mildly rose to 0.5855, indicating that the bulls have limited power and that the bears continue in command but a correction is on the horizon as indicators are near oversold levels.
The technical indicators currently depict a mixed outlook for the NZD/USD pair. The Relative Strength Index (RSI) suggests that buying pressure is recovering as it is approaching the oversold area and its slope is rising sharply. Conversely, the Moving Average Convergence Divergence (MACD) indicates that selling pressure is flat, as evidenced by the flat and red histogram. Despite these conflicting signals, the overall outlook remains tilted in favor of the bears.
Support levels can be found at 0.5900, 0.5850, and 0.5800, while resistance levels lie at 0.5950, 0.6000, and 0.6050.
Silver's price fell over 0.70% beneath $30.30 after robust US Retail Sales data suggested the Federal Reserve could gradually ease policy. At the time of writing, the XAG/USD trades at $30.21 after hitting a daily peak of $30.81.
Silver price remains subdued at around the 100-day Simple Moving Average (SMA) at $30.34. Nevertheless, the mid-term bias is tilted to the downside, and once bears push prices below August’s 26 high turned support at $30.18, they will test the psychological $30.00 mark. A breach of the latter will expose the 200-day SMA at $28.63, followed by the September 6 swing low of $27.69.
If Silver moves back above $31.00, this could pave the way for challenging the 50-day SMA at $31.51. Once surpassed, XAG/USD's next resistance would be $32.00.
Oscillators like the Relative Strength Index (RSI) hint that further XAG/USD’s downside is seen, as RSI remains shy of being oversold.
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
Gold prices extended their losses for the sixth straight day, set to achieve weekly losses of over 4%, the largest since September 2023. Federal Reserve Chair Jerome Powell's slight “hawkish” rhetoric lifted the Greenback, denting appetite for the golden metal. At the time of writing, XAU/USD trades at $2,564, down by 0.17%.
On Thursday, Fed Chair Jerome Powell said the central bank is in no rush to lower borrowing costs amid an ongoing strong economy, a solid labor market, and inflation standing above the 2% goal.
Following Powell’s words, investors trimmed the chances of a 25 basis point (bps) rate cut by the Fed at the December meeting, with odds falling from 72% to 62%.
Earlier, US Retail Sales for October expanded monthly and annually, with the former dipping slightly compared to September numbers. Recently, the Fed announced that Industrial Production for the same period improved but remained in contractionary territory.
Although US data was positive, it undermined the buck as market participants booked profits ahead of the weekend. This capped Bullion’s losses after it hit a two-month low of $2,536.
The US Dollar Index (DXY), which measures Greenback’s performance against a basket of six currencies, lost 0.10%, at 106.76.
US Treasury bond yields were also pressured ahead of the weekend, with the 10-year benchmark rate virtually unchanged at 4.43%.
In addition to Powell’s words, Boston Fed Susan Collins said the US central bank does not urgently need to lower rates. Lastly, Chicago’s Fed Austan Goolsbee kept the central bank options regarding December’s meeting, adding, “The dispute on neutral rate could support slower cuts.”
Market participants seem worried about Donald Trump’s tariff plans, which are inflation-prone at a time when the Fed is trying to control higher prices without tapping a deeper economic slowdown.
Next week, Bullion traders will look for Fed-speaking housing data, Initial Jobless Claims, and the release of S&P Global Flash PMIs.
Gold recently dipped below the October 10 swing low of $2,603, intensifying losses past the $2,600 mark and briefly touching a two-month low of $2,536, just under the 100-day Simple Moving Average (SMA) at $2,545. Nevertheless, the inability of sellers to push prices toward $2,500 has allowed for a potential rebound.
The first resistance level is $2,600. If buyers reclaim this level, they may target the 50-day SMA at $2,651, with further resistance around $2,700. Exceeding this could pave the way to the November 7 high of $2,710.
The Relative Strength Index (RSI) has moved away from its neutral line, indicating bearish momentum that could lead to further declines in XAU/USD.
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
The Canadian Dollar (CAD) found fresh lows on Friday as broader markets continues to pivot into the safe haven Greenback. A slight miss in US Retail Sales was all it took to bolster the US Dollar and send USD/CAD into fresh multi-year highs.
Canada continues to remain absent from the economic calendar this week. A week of strictly low-tier, low-impact data has left the Canadian Dollar on the ropes, but next week’s Canadian Consumer Price Index (CPI) inflation print is unlikely to change matters much.
The sky’s the limit as the Canadian Dollar (CAD) continues to shed weight against the Greenback; USD/CAD’s fresh push into multi-year highs has the pair testing bids just shy of 1.4100. The pair is on pace to close in the green for a sixth consecutive trading day as the CAD recedes against the US Dollar.
The nearest technical floor sits at the last swing low, lined up nearly perfectly with the 50-day Exponential Moving Average (EMA) near 1.3780.
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
The AUD/USD pair rose by 0.20% to 0.6460 in Friday's session. The Australian Dollar staged a comeback as the US Dollar Index (DXY) pulled back from its yearly highs. However, the Aussie Dollar may face challenges due to recent weak domestic and Chinese economic data. On the bright side, Reserve Bank of Australia (RBA) Governor Bullock stated that current interest rates will remain unchanged until the bank gains confidence in the inflation outlook.
Weak Australian labor data, released on Friday, revealed a loss of 8,100 jobs during October, adding to concerns over the strength of the Australian economy. This, coupled with disappointing Chinese data, could cap the recovery of the Aussie Dollar in the near term. Despite these headwinds, the recent hawkish comments from RBA Governor Bullock, who hinted at the possibility of further rate hikes to tame inflation, could provide some support for the Australian Dollar.
While the brief recovery toward 0.6460 provided temporary respite, the AUD/USD pair remains firmly within a downtrend. Key technical indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) continue to reside deep within bearish territory, highlighting the dominance of selling pressure. This technical outlook implies that the corrective bounce is likely to be short-lived, with the path of least resistance remaining to the downside.
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
The Mexican Peso recovered some ground against the US Dollar during the North American session, shrugging off Moody’s adjustment on Mexico’s credit outlook and upbeat US Retail Sales data. At the time of writing, the USD/MXN trades at 20.34, down by 0.24%.
Due to recent constitutional changes, Moody’s Ratings changed the Mexico’s credit outlook from stable to negative.
“The constitutional overhaul risks eroding checks and balances of the country’s judiciary system, with potential negative impact to Mexico’s economic and fiscal strength,” Moody’s said in a statement Thursday.
Other ratings agencies, like Fitch and S&P Global, kept Mexico’s creditworthiness stable. Fitch Ratings assigns Mexico BBB-, the lowest level above junk, while S&P Global Ratings has it a notch higher.
In the meantime, the Minister of Finance, Rogelio Ramirez de la O, presented the 2025 economic package at the Chamber of Deputies. The package projections hint that the economy will grow by 2% to 3%, and the fiscal deficit will be 3.9% of the Gross Domestic Product (GDP) for 2025.
The Peso has extended its gains to three days even though the Bank of Mexico (Banxico) decided to lower borrowing costs to 10.25% as expected despite recognizing that inflation risks are tilted to the upside.
Banxico expects headline inflation to end 2024 at 4.7%, up from 4.3% in the previous forecasts and well above the 3% goal.
In addition, October’s US Retail Sales, revealed by the Bureau of Labor Statistics (BLS), crushed estimates. Other data revealed by the Federal Reserve (Fed) showed that Industrial Production for October improved but remained in contractionary territory.
Meanwhile, Fed officials continued to make news. The Boston Fed’s Susan Collins reiterated Fed Chair Jerome Powell’s words from Thursday about the Fed not needing to rush rate cuts. Collins said, “I don’t see a big urgency to lower rates, but I want to preserve a healthy economy.”
The USD/MXN upward bias remains, although the Peso has gained some ground. For a bearish continuation, sellers must push the exchange rate below 20.00. In that outcome, bears could challenge the 50-day Simple Moving Average (SMA) to 19.74, followed by the psychological 19.50.
Conversely, if USD/MXN resumes its uptrend and buyers regain 20.50, it will expose the current week’s peak at 20.69. Once surpassed, the year-to-date (YTD) high of 20.80 emerges as the next ceiling level before testing 21.00. A breach of the latter and the March 8, 2022, peak at 21.46 would emerge as the next resistance.
Oscillators like the Relative Strength Index (RSI) are bullish, suggesting that further upside in the USD/MXN is projected.
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
The Dow Jones Industrial Average (DJIA) trimmed it’s recent bull run, declining over 350 points and giving back roughly 0.85% as investors grapple with an increasingly uncertain future. US Retail Sales beat expectations but still eased back from previous figures, and Federal Reserve (Fed) Chair Jerome Powell splashed cold water on rate-cut-hungry investors this week when he reaffirmed that the Fed wasn’t “in a hurry” to cut interest rates further.
The post-election “Trump rally” is set to continue unwinding as the Trump campaign begins to leak potential candidates for key official positions that former President Donald Trump intends to install at the beginning of his second term in January. Pharmaceutical stocks took an unexpected hit on Friday after Trump’s team announced their plans to nominate vaccine skeptic Robert F. Kennedy Jr. to the head of the US Department of Health and Human Services. RFK Jr. has openly discussed his plans to ban several vaccines and other health products outright, a surprisingly hyper-regulatory move that flies in the face of the broader market’s initial exuberance at a Trump election win which was meant to carry further deregulation efforts to the public marketplace.
US Retail Sales grew by 0.4% MoM in October, slightly above the 0.3% forecast but still down from September’s revised print of 0.8%. Core Retail Sales, or Retail Sales excluding automobile purchases, failed to meet expectations, growing by a scant 0.1% compared to the expected 0.3% and even further below the previous month’s 1.0% revised print.
Despite steep headline losses in key equities, the Dow Jones is roughly on-balance on Friday, with about half of the major equity board’s listed stocks finding the green for the day. Disney (DIS) rose another 5.3% to $115 per share as the entertainment giant enjoys a firmer rebound in quarterly revenues than many investors anticipated. Meanwhile, Amazon (AMZN) and Amgen (AMGN) both fell around 4.5% on the day to $201 and $282 per share, respectively, as tech stocks and biomed stocks take an end-of-week hit.
Despite a bearish extension on Friday sending the Dow Jones deeper into the red for the week, there’s still plenty of room to run to the downside before technical warnings begin to emerge. Bullish pressure could also reappear in the charts at anytime as investors remain hopeful to keep a firm grasp on record high territory.
The Dow Jones is poised to end the week lower by 1.3% despite setting an other new all-time high bid earlier this week at 44,485. The nearest technical barrier sits at the 50-day Exponential Moving Average (EMA) near 42,430.
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee noted on Friday that markets tend to overreact to interest rate changes, and that the Fed should maintain a slow and steady approach to reaching the neutral rate.
(In regards to a December rate cut or pause) I don't like tying our hands, still more data to come.
Markets react immediately and in most extreme terms; that's not the Fed's timetable.
The Fed needs to focus on longer trends.
We are going to be looking at rate cuts along the lines of September Fed policymaker projections.
I am personally comfortable with not charging right towards neutral and slow down as we approach it.
Inflation numbers have to keep improving.
If we started to see reversal on inflation progress, we would have to figure out if it is a bump.
Not a lot has changed on that in last couple weeks.
Recent inflation has been a little higher than the target, if that is extended, it's too high.
There's a lot of volatility on inflation data series.
Neutral is significantly lower than where the Fed policy rate is now.
If productivity growth stays higher than trend, need to be careful relying on GDP growth rate to check if economhy is overheating.
I am perfectly comfortable with disagreement within Fed over where the neutral rate is.
The dispute on neutral rate could support slower cuts.
The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, failed to secure a sixth consecutive day of gains in a volatile trading Friday. Federal Reserve (Fed) Chair Jerome Powell has instilled uncertainty in the markets by expressing reservations about a December interest rate cut, while markets assess fresh Retail Sales data.
The US Dollar Index retreated slightly after reaching its highest point of the year. However, DXY remains in an uptrend, bolstered by cautious Fed rhetoric and strong economic data, which gives the Greenback an advantage over its peers.
The DXY's rapid surge to yearly highs above 107.00 was met with swift profit-taking, indicating a potential shift in market sentiment. The retreat suggests that buyers may have been overextended and a pullback could be in order.
Indicators including the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) continue showing overbought conditions, so it is likely that the consolidation will continue.
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
The Pound Sterling extends its agony and printing losses for the sixth straight day against the Greenback. Soft UK GDP coupled with robust US Retail Sales figures boosted the US Dollar and weighed on GBP/USD, which trades at 1.2636, down 0.22%.
The GBP/USD is bearish-biased once it falls below the 200-day Simple Moving Average (SMA). A daily close below the latest intermediate support at 1.2664, the August 8 swing low, would pave the way for further downside. The following key support level would be the 1.2600 figure, followed by the latest cycle low at 1.2445 on May 9, followed by the year-to-date (YTD) low at 1.2299.
Conversely, if GBP/USD recovers and rises above 1.2700, the next resistance would be the 200-day SMA at 1.2817. Once surpassed, the next resistance would be the 1.2900 mark.
Oscillators, such as the Relative Strength Index (RSI), suggest the pair might consolidate. The RSI is nearby oversold conditions and has begun to shift flat.
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Canadian Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.25% | 0.16% | -0.98% | 0.11% | -0.22% | -0.35% | -0.35% | |
EUR | 0.25% | 0.40% | -0.75% | 0.36% | 0.03% | -0.10% | -0.10% | |
GBP | -0.16% | -0.40% | -1.15% | -0.03% | -0.37% | -0.50% | -0.50% | |
JPY | 0.98% | 0.75% | 1.15% | 1.10% | 0.75% | 0.61% | 0.62% | |
CAD | -0.11% | -0.36% | 0.03% | -1.10% | -0.35% | -0.47% | -0.47% | |
AUD | 0.22% | -0.03% | 0.37% | -0.75% | 0.35% | -0.14% | -0.15% | |
NZD | 0.35% | 0.10% | 0.50% | -0.61% | 0.47% | 0.14% | -0.01% | |
CHF | 0.35% | 0.10% | 0.50% | -0.62% | 0.47% | 0.15% | 0.00% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Federal Reserve (Fed) Bank of Boston President Susan Collins hit the wires on Friday, downplaying pressures for continued rate cuts in the near term, but also keeping a steady hand underneath market expectations of a rate trim in December.
There's no preset path for monetary policy.
The economy is in a very good place right now.
I won't take a December easing off the table.
I am not seeing evidence of new inflation pressures.
The job market looks like full employment conditions.
I don't see a big urgency to lower rates, but I want to preserve a healthy economy.
The EUR/JPY currency pair witnessed a significant decline on Friday, losing 0.72% to reach a low of 163.10. Prior to this drop, the pair faced resistance at the 164.00 Simple Moving Average (SMA), which contributed to its downward movement.
The technical indicators employed in this analysis, namely the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI), further underscore the bearish sentiment surrounding the EUR/JPY pair. The MACD histogram's red coloration and increasing size point to rising selling pressure, corroborated by the MACD line's position below the signal line. The RSI, with a value of 43, resides in negative territory and exhibits a sharply declining slope, indicating an increase in selling pressure.
The pair's probable continuation of its downward trajectory is suggested by its trading below the 163.50 resistance level. Furthermore, support levels at 163.00, 162.50, and 162.00 deserve attention, while resistance levels at 164.00, 164.50, and 165.00 warrant monitoring.
USD/CHF continues rising in its established uptrend but it has now reached overbought levels (above 70) according to the Relative Strength Index (RSI) momentum indicator. When this occurs it advises long-holders not to add to their positions because of the increased risk of a pullback developing.
According to technical analysis theory “the trend is your friend” which means it is better to trade in the direction of the dominant trend. As such, the odds favor more upside for USD/CHF. The RSI could continue to remain overbought or fall back into neutral territory first as the price pulls back.
The pair has now surpassed the target at 0.8873 (July 30 swing high) and is on its way to the next target at 0.9050 (July 2 swing high). Another possible target is 0.9000 due to its significance as a round-number and psychological level.
EUR/JPY is threatening to reverse its medium-term uptrend and begin a new downtrend. This is important since according to technical analysis theory “the trend is your friend” so if the medium-term trend reverses the odds will favor more downside to come.
A break below the 163.21 (November 8 low) would probably confirm a bearish reversal of the trend. The next target to the downside is likely to be support from the 50-day Simple Moving Average (SMA) at 162.17.
The Relative Strength Index (RSI) momentum indicator is plateauing around the 49 mark but looks vulnerable to extending another leg lower. This further reinforces the bearish trend reversal thesis.
The US Census Bureau reported that Retail Sales expanded by 0.4% in October vs. the previous month, surpassing expectations for a 0.3% gain and coming down from September’s 0.8% increase.
Additionally, the Retail Sales Control Group contracted at a monthly pace of 0.1%, from the previous 1.2% advance, and Retail Sales excluding Autos increased below consensus by 0.1% MoM.
This morning’s round of UK data was broadly weaker than forecast—Industrial Production fell 0.5% in September as manufacturing slumped, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“Services and construction output also fell, producing a 0.1% drop in monthly GDP (versus 0.2% forecast) and helping pull growth for Q3 overall down to 0.1% (versus 0.2% forecast). Sterling is up fractionally against a generally softer USD on the day but softer growth has helped limit gains to just over 0.1% intraday, the weakest gain of the major currencies.”
“Similar to the EUR chart, the GBP is showing signs of steadying after a bullish technical reaction to Thursday’s low point (1.2630) put in a short-term reversal on the intraday chart. Sterling has picked up a little support in European trade but needs to push on through 1.2710/20 for gains to develop more in the short run I think.”
“Gains are likely to be capped in in the low 1.28s for now—look for firm resistance at 1.2830.”
The Silver Institute, in cooperation with the precious metals research firm Metals Focus, published updated forecasts for the Silver market this week, Commerzbank’s commodity analyst Carsten Fritsch notes.
“According to the report, Silver demand should increase by 1% to 1.21 billion ounces, reaching the second-highest level since records began. However, in the spring, the Silver Institute and Metals Focus were still expecting somewhat stronger demand. Industrial demand is expected to increase by 7% to a record level, driven by electrical and electronic applications. Increases are also expected for jewellery and Silverware.”
“In contrast, physical investment demand is expected to fall by 15% to a four-year low. Silver supply is expected to increase by 2% to 1.03 billion ounces. The Silver Institute and Metals Focus had previously expected a decline here. Both rising mine production and a stronger supply of Silver scrap are contributing to the higher supply. The latter is expected to reach a 12-year high, reflecting the higher price level. This year, the Silver market is expected to show a supply deficit for the fourth year in a row, which at 182 million ounces is likely to be considerable again.”
“In spring, however, the Silver Institute and Metals Focus had expected an even larger deficit. If the ETF inflows of 100 million ounces assumed by the Silver Institute are included, the deficit is even larger. Nevertheless, Silver came under pressure this week and yesterday temporarily slid below the 30 USD per troy ounce mark for the first time in almost two months. Silver has lost almost 15% from its 12-year high in October. The most important reason is the simultaneous correction in the Gold price, which Silver was unable to escape.”
The European Commission’s economic outlook anticipates a pick up in the region’s economy this year and next as consumer demand and business investment pick up, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“Growth is expected to reach 1.3% in 2025 and 1.6% in 2026—a little better than recent assumptions. Growth in the core Eurozone economies may lag somewhat versus the larger, more peripheral countries, however. The report does not factor in risks emerging from the recent US election; trade frictions would be a significant impediment to the German economy especially.”
“Yield and fundamental headwinds for the EUR are poised to remain substantial for the foreseeable future. The short-term chart is showing some—mildly—positive signs for the EUR. A squeeze higher in the EUR in yesterday’s session from the 1.05 area (now support) may have put in a short-term low for spot via a bullish outside range signal on the 6-hour chart.”
“Oversold oscillators are trying to correct as well, which could help lift the EUR in the short run. A deeper rebound requires the EUR to push through 1.0585 resistance: above here targets 1.0650/60.”
GBP/CAD has broken out of a bearish Rising Wedge pattern and started to decline. Although it is pulling back at the moment, it is expected to eventually continue falling towards the pattern’s downside targets.
A break below the 1.7700 November 14 low would probably confirm further weakness to the next target at 1.7518, the 61.8% extrapolation of the width of the Rising Wedge at its widest part extrapolated lower. This is the usual technical method for forecasting breakouts.
Prior to the breakdown, GBP/CAD broke temporarily above the upper guardrail of the Rising Wedge pattern on several occasions (blue circles on chart) on September 20 and November 1. This is a sign of bullish exhaustion and an early warning of impending reversal.
The Canadian Dollar (CAD) has edged marginally higher versus a generally softer USD on the session. If markets are recalibrating the USD’s post-election gains, the CAD’s relatively limited rise on the session makes sense—because it has held up marginally better than its peers following the US vote, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“While commodities are a little firmer generally today, it has been a rough week for raw materials overall amid concerns about global growth and weak Chinese demand—as well as the stronger USD. The CAD’s principal headwind comes from spreads, however, with short-term cash and swaps spreads having widened significantly in the USD’s favour in the wake of US election.”
“The 2Y cash bond spread reached 117bps earlier this week (the widest since the late 1990s) before narrowing modestly. Short-term price action is reflecting a little softness in the USD since the start of trading in Asia and the USD’s persistent overbought status should keep markets on alert for a pullback in recent gains.”
“But there is nothing in price action to suggest a significant drop in the USD is likely. A short-term consolidation in the USD is possible but minor dips to the 1.3950/55 area are likely to prompt renewed buying. A weekly close above 1.4040 will support the outlook for more medium term gains in the USD towards the 2020 peak just under 1.47.”
The strong US Dollar (USD) continues to weigh on metal prices. Copper slipped below the $9,000 per ton mark this week, Commerzbank’s commodity analyst Volkmar Baur notes.
“According to a survey of participants at a major copper conference in Asia, the price could even fall to $8,500 per ton in the first quarter of 2025. However, there are also many critical voices pointing to the scarcity of copper concentrate, which is slowing down production. One analyst puts next year's deficit at over 1 million tons.”
“The capacities of Chinese copper smelters, which are expected to increase by a further 1 million tons next year, are likely to be utilized at only 75%. A slowdown in activity is also becoming apparent at the current margin. A company specializing in satellite observation reports that the proportion of inactive Chinese copper smelters has risen by almost 5 percentage points to 15.5%.”
“This means that capacity utilization is likely to be as low as in April, when smelting was restricted by maintenance work. Official data on Chinese copper production will probably be released in the next few days. The data published today on industrial production did not yet include these details.”
The US Dollar’s (USD) sharp, post-election advance has moderated a little today, reflecting some drift in US short rates and perhaps some consolidation in USD-bullish positioning, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“The USD has come a long way in a short period of time following the US election and it was already looking very stretched in terms of gains against the majors before the vote. To a large extent, the dollar’s post-election rise appears to reflect the resulting shifts in interest rates and rate expectations—a resilient economy and assumptions of pro-growth strategies under president-elect Trump have curbed Fed rate cut bets while yields have retreated somewhat outside of the US.”
“The DXY is running a little ahead of estimated fair value based on weighted, short-term yield spreads but not by all that much. Perhaps most of the good (spread) news for the USD—for now—is priced in. The door remains open to further USD gains once the new administration lays out its policy priorities so scope for USD losses is likely to remain limited for now.”
“Regardless of the USD’s strong valuation at the moment, the prospect of a supportive US fiscal/monetary policy mix and the risk of tariffs will keep the USD outlook positive in the near-term at least. US data releases this morning include the November Empire Survey and October Retail Sales. There are a number of Fed speakers speaking over the course of the day. Among the Fed officials, only Barkin and Williams are voters, however.”
There are times when the development of the US Dollar (USD) is of secondary importance for commodity prices denominated in dollars, and there are times when the US dollar is the driving force, Commerzbank’s commodity analyst Barbara Lambrecht notes.
“The latter currently seems to be the case. The strong appreciation of the US dollar after Donald Trump's election victory has pushed the Gold price well below the $2,600 mark. It is now $250 below its record high at the end of October.”
“The price decline has been accompanied by significant outflows from Gold ETFs, totalling almost 22 tonnes since the beginning of the month, according to Bloomberg.”
This morning's monthly data from China offered both light and shade, with the hope of stabilisation at a low level following the stimulus measures of recent months perhaps slightly outweighing. On the positive side, property sales appear to have bottomed out in October. While they were still down by more than 10% year-on-year in September, the decline in October was only 1.6%. And the pace of house price declines also slowed from the previous month. In addition, the Chinese consumer seemed to be recovering somewhat. Retail sales rose 4.8% year-on-year, well above expectations (+3.8%) according to a Bloomberg survey, Commerzbank’s FX analyst Volkmar Baur notes.
“On the other hand, industrial production and fixed-asset investment were slightly below expectations, but not to the extent of causing concern. Two details were noteworthy however: First, the higher number of property sales has not yet had an impact on housing starts. On the contrary, they fell again slightly more than in the previous month and are now down almost 30% year-on-year. Second, retail sales show a certain anomaly.”
“Looking at the sub-categories, categories such as cosmetics, sports equipment and communication equipment show a very significant increase over the previous year. These categories are usually in high demand in June and November, when major shopping events take place on online platforms. Therefore, it remains to be seen whether the higher retail sales in October were simply purchases brought forward.”
“Either way, on balance, the slightly positive signs outweigh the negative ones, although this is not helping the CNY much this morning. In the coming weeks and months, the renminbi is more likely to react to the US dollar rather than develop much momentum of its own. In this sense, it is likely to react more strongly to tweets from the US president-elect than to fundamental developments in China itself.”
The European gas market is in turmoil: after an arbitration court awarded an Austrian energy company a large sum in compensation in a dispute with its Russian supplier, the former wants to offset the claim immediately, Commerzbank’s commodity analyst Barbara Lambrecht notes.
“According to media reports, the next payment date for gas deliveries is 20 November; however, there are concerns that deliveries may be interrupted before then. Yesterday, the European reference price TTF climbed to just under 46 EUR per mWh. However, there are also some facts that put this into perspective: Firstly, according to Eurostat, Austria only accounted for a good 3% of total EU gas imports in 2023.”
“Secondly, although the share of Russian supplies was over 80% of Austrian gas imports in recent months, it was significantly lower in 2023. And thirdly, the expiration of the transit agreement with Ukraine threatened to cut off gas supplies anyway. Not least for this reason, precautions were taken in advance. Since the storage tanks in Austria are over 90% full, there is no threat of supply bottlenecks in the short term.”
“Furthermore, according to the head of the Austrian energy company, there is no longer any dependence on the Russian gas supplier, as alternative sources have been found. Nevertheless, it cannot be denied that this makes the situation even more tense in an already nervous market environment.”
Although this morning's third quarter GDP figures came in a little better than analysts were expecting according to the Bloomberg survey, a closer look leaves something to be desired. The Japanese Yen (JPY) was hence unimpressed this morning, despite another attempt at verbal intervention from the Ministry of Finance, which warned against 'one-sided' movements in the exchange rate, Commerzbank’s FX analyst Volkmar Baur notes.
“The 0.9% quarter-on-quarter annualised increase was, as mentioned, slightly better than expected, but the previous quarter's growth was revised down, meaning that the overall growth trajectory appears weaker than previously thought. In addition, inventory accumulation appears to have made a small positive contribution to growth - a component that tends to balance out over time. The weakness came mainly from the external sector, where net exports made a significant negative contribution to growth.”
“Fixed capital formation was also down, while consumption supported growth. All in all, the GDP figures do not paint a picture of an economy gaining momentum or in danger of overheating, which would require a tightening of monetary policy. All eyes are therefore now on BoJ Governor Ueda's speech on Monday, one of the last opportunities before the blackout period to verbally prepare the markets for a possible rate hike in December.”
“I have long assumed that the BoJ will raise rates again in December, as it is unlikely to be any easier to find good reasons to do so next year. However, I now see a clear risk to this assumption. Political risk has not exactly diminished since the last BoJ meeting two weeks ago. A US trade war focused on China would not leave Japan unscathed, as it is an important trading partner of China. On the domestic front, it remains to be seen how the new minority government will handle its unfamiliar situation. If there is no rate hike in December, USD/JPY is likely to continue to be driven more by the USD side, which currently points to higher USD/JPY levels.”
GBP/JPY trades lower by about a third of a percent, in the 197.10s on Friday, after the release of weak UK economic growth data led to a depreciation of the Pound Sterling (GBP). The Japanese Yen (JPY) conversely was buoyed by better-than-expected Gross Domestic Product (GDP) and Industrial Production data which renewed hopes that the Bank of Japan (BoJ) will raise interest rates at its December policy meeting.
UK GDP data for the month of September actually fell 0.1% MoM and rose only 0.1% in the whole of the third quarter (QoQ). This was below estimates and prior readings. The quarterly data showed a marked decceleration from a growth rate of 0.5% in Q2.
In Japan, meanwhile, GDP grew at a slightly faster rate of 0.2% in Q3, in line with estimates of 0.2% but lower than the 0.5% of Q2.
On an annualized basis, Japanese GDP rose by 0.9% in Q3, beating expectations of 0.7% but below the revised-down 2.2% of Q2. Japanese Industrial Production rose by 1.6% MoM beating estimates and previous figures.
Although the data from Japan was higher than the UK data (0.2% vs. 0.1% in Q3) and beat estimates, whilst the UK figures undershot them, the difference may not be enough to be game-changing for either currency, according to institutional analysts.
Remarking on the UK GDP figures, advisory service Capital Economic’s Deputy Chief UK Economist Ruth Gregory said it did not change her expectations that the Bank of England (BoE) would keep interest rates unchanged at 4.75% in December. Since higher interest rates attract greater net capital inflows this is good news for the Pound.
The economy grew at “..a snail’s pace (in Q3),” said Gregory, “However, this doesn’t mean the UK is on the cusp of another recession. And while today’s data raises the chances the Bank (BoE) will cut rates again in December, we are sticking to our view that the Bank will keep rates unchanged at 4.75% in December before cutting rates by 25 basis points again in February.”
According to Comerzbank’s FX Analyst Volkmar Baur, the Japanese GDP data – though good – was not good enough to warrant an expectation that the Bank of Japan (BoJ) will raise its interest rate from 0.25%, the lowest in the developed world.
“All in all, the GDP figures do not paint a picture of an economy gaining momentum or in danger of overheating, which would require a tightening of monetary policy,” said Baur, adding that whilst he had previously assumed the BoJ would raise interest rates by 0.25% in December, he now saw “a clear risk to this assumption”.
Baur highlights several reasons why he was unimpressed by the Japanese GDP data. Firstly the previous quarter’s figures were revised down substantially – from 0.7% to 0.5% QoQ and from 2.9% to 2.2% on an annualized basis. Due to this downward revision the overall picture is one of a “growth trajectory” that “appears weaker than previously thought.”
Secondly, much of the growth came from “Inventory accumulation” which is a component that “tends to balance out over time,” adds Baur.
Thirdly, the weakness from the external sector was concerning and could be a source of more fragility to come: “A US trade war focused on China would not leave Japan unscathed, as it is an important trading partner of China,” says the analyst.
Much of the focus for the Yen will not be on Kazuo Ueda’s much-anticipated speech on Monday, when traders are hoping for a clearer sign the BoJ will be committing to an interest rate hike. In the meantime, the yawning gap between the interest rates in the two countries is expected to favor inflows into Sterling, giving GBP/JPY a positive upside bias overall.
The US Dollar (USD) declines on Friday, breaking a streak of five trading days of gains, as traders engage in profit-taking after the Trump-led rally pushed the Greenback to reach on Thursday its highest level this 2024.
The USD retreats even as traders are quickly paring back bets of another interest-rate cut by the US Federal Reserve (Fed) in December. The last blow came from Fed Chairman Jerome Powell, who in a speech on Thursday cast a shadow over the December rate cut odds by pointing out that the economy is doing great and the job market is looking healthy. Equities across the globe are not digesting this message too well, as this kills off the chances for a year-end Goldilocks scenario.
The US economic calendar is gearing up for the always-volatile US Retail Sales numbers. With the bigger sales season set to kick off with Black Friday and Christmas shopping, the healthiness of the US consumer preceding that season will be a driver for markets in the short term. The rule of thumb for Retail Sales remains that the revisions from previous months can be more impactful than the actual numbers.
The US Dollar Index (DXY) is undergoing a small fade this Friday, though warnings must be issued as comments from Powell are US Dollar positive. The Fed signals it will probably pause its cutting cycle, while for example the European Central Bank (ECB) will likely continue with still a string of rate cuts. This would widen the interest rate gap between the two nations, and will support the US Dollar as a high-yielding currency against other currencies.
From now on, the 107.00 round level remains in play going forward after the sharp rejection from Thursday. A fresh yearly high has already been printed at 107.07. A two-year high could be reached if 107.35 gets taken out.
On the downside, a fresh set of support is coming live. The first support is 105.93, the closing level on Tuesday. A touch lower, the pivotal 105.53 (April 11 high) should avoid any downturns towards 104.00.
US Dollar Index: Daily Chart
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
In the past few days, the US economy has soared to new heights of economic prosperity—in the reported perception of Republican voters. Meanwhile, economic prosperity has all but disappeared—in the reported perception of Democrats. The US election result triggered these swings. The reality of economic experience cannot justify such moves, UBS’ economist Paul Donovan notes.
“The US two-party system, coupled with voters openly registering their political interest (with a brazenness uncommon in other cultures), makes the political distortion in US sentiment surveys very transparent. But growing problems with survey reliability suggest that political bias is a problem across developed economies.”
“The fact that people seem inclined to answer questions about the real economy with the pre-determined views of their political tribe undermines the value of such survey-based evidence, by weakening the relationship between reported sentiment and the actual economic behavior of consumers and companies.”
“Opposing political views might be thought to cancel each other out, but that does not seem to be the case. On the admittedly limited US evidence of the past eight years, Republican sentiment has swung more wildly than Democrat sentiment—perhaps Republicans are more passionately partisan. This suggests that aggregate US sentiment indicators may turn more positive following the election, for purely political reasons.”
EUR/USD slightly recovers on Friday after a brief test of the 1.0500 level the prior day. The pair has eased nearly 1.5% so far this week as markets have priced in more Trump trade effects. That move is now facing some profit-taking after a five-day losing streak for the Euro against the Greenback. All pieces of the puzzle are now in, with potentially EUR/USD starting to trade sideways in a range until President-elect Donald Trump takes office in January.
The EUR/USD recovery on Friday looks to be triggered by some profit-taking after the steep decline this week. Economic data from France released earlier in the day showed that inflation, as measured by the Harmonized Consumer Price Index (HCPI), came a touch higher than the preliminary reading for October. However, this may not change the dovish stance of the European Central Bank (ECB), which is set to cut its policy rate in its upcoming policy meeting in December.
On Thursday, Federal Reserve (Fed) Chairman Jerome Powell joined the camp of members within the Fed that deem another rate cut in December, however, it is not granted. Powell pointed out that the US economy and job markets are still doing very well. Meanwhile, several analysts and economists have warned of exponential inflation in the US should President-elect Donald Trump roll out all his fiscal stimulus packages for both US companies and households, alongside slapped tariffs on China and Europe.
EUR/USD slightly recovers on Friday, with some profit-taking during the European trading session after five consecutive trading days in the red. Pure fundamentally, much upside for EUR/USD is not expected after Fed Chairman Powell dampened hopes for an interest rate cut in December, while recent French inflation figures may not change the ECB’s dovish stance. The rate differential between the two contents will become wider if the Fed does not cut and the ECB does at their next meetings in December, which is oil on the fire in favour of more downside in EUR/USD by the end of the year.
On the upside, three firm lines in the sand can be seen. First up is the previous 2024 low, registered on April 16 at 1.0601. If that level breaks, the triple bottom from June at 1.0667 will be the next cap upwards. Further up, the 1.0800 round level, which roughly coincides with the green ascending trend line from the low of October 3, 2023, could deliver a harsh rejection before having more downside in EUR/USD.
Looking for support, the 2023 low at 1.0448 is the next technical candidate. That would mean that once tested, a fresh two-year low is in the cards. Further down, a wider area could open up with 1.0294 as the next level to consider.
EUR/USD: Daily Chart
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
UK GDP is a bit disappointing, owing to a surprise fall in activity during September. The 0.1% third-quarter figure is a far cry from the 0.7% and 0.5% in the first and second quarters. Does that show the economy has slowed? Yes, but not as much as the figures suggest, ING’s FX analyst Francesco Pesole notes.
“A lot of that strength seen in the first half of the year was in non-tradable and non-consumer sectors that have less to do with underlying economic fundamentals. The Bank of England has agreed that the true rate of growth was probably slower in the first half. However, we think the BoE/consensus forecast for the winter is a bit high, and while real wage growth should generate higher GDP, the pace is set to be fairly moderate in the near term before receiving a bit of a budget boost next year.
“GDP was a bit weaker than expected, but it's still not that surprising, particularly given the volatility in the recent data. The BoE is much more focused on the services inflation figures that we'll get next week. In the near-term, they're likely to remain sticky around 5%. Barring a downside surprise, we think a pause in December is the most likely outcome.”
“EUR/GBP has hovered just above 0.830 as a wide rate differential continues to put pressure on the pair. Given we see a low probability of the BoE cutting in December while our call is for a 50bp move by the ECB next month, we struggle to see much upside for EUR/GBP before year-end.”
The neutral (or natural) rate of interest is both one of the more fashionable and most frustrating ideas in central bank watching. The real rate of interest that keeps supply and demand of both consumer and capital goods in some kind of equilibrium is a lovely concept with a few problems1) it’s a real rate and requires an underlying assumption about inflation. 2) the real rate itself is hard to estimate and changes over time and 3) we live in an open global economy (for now) and different countries have different neutral/natural rates, Societe Generale’s FX analyst Kit Juckes notes.
“Ignoring the challenges posed by a neutral rate economists struggle to estimate with any confidence and which changes over time, international variability has implications, of which two are shown in the charts below. The first plots the Eurozone-US differential against EUR/USD. The second plots the relative neutral rate against the US-EU net international investment position. The conclusion is intuitive: Higher neutral rates cause persistent capital flows into the US and pushing the dollar higher. And since changes in neutral rates reflect long-term changes in economies, this isn’t a short-term phenomenon.”
“As long as this lasts, EUR/USD will make a series of lower highs and lower lows, getting further away from PPP (1.27. last seen briefly in 2020). Because the terms of trade and economic shock from the full-scale invasion of Ukraine in 2022 was so big, we’ve guessed that the 2022 EUR/USD low will last for a fair length of time and we have been forecasting that EUR/USD will rebound to somewhere in a 1.10-1.20 range, determined by the US rate cycle.”
“It's possible that the US neutral rate is even higher, implying that the Fed easing cycle is almost over and EUR/USD fair value range is even lower than we are assuming but for now, we’re going to resist jumping on that bandwagon. Our latest forecast reflects this but lowers the end-2025 forecast to 1.12.”
The US Dollar (USD) is likely to trade in a range, probably between 7.2350 and 7.2700. In the longer run, the level to monitor now is 7.2800; the next resistance above 7.2800 is at 7.3115, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “USD traded in a range on Wednesday and then closed largely unchanged. Yesterday (Thursday), we pointed out that ‘Despite trading in a range, there has been a slight increase in momentum.’ We expected USD to edge higher, but we noted that ‘as momentum is not strong, any advance is unlikely to break above 7.2600.’ Our view of a higher USD was correct, even though the advance surpassed 7.2600 (high has been 7.2700). Given the severely overbought conditions, USD is unlikely to advance further. Today, USD is more likely to trade in a range, probably between 7.2350 and 7.2700.”
1-3 WEEKS VIEW: “We have held a positive USD view since late last week. As we tracked the advance, we indicated two days ago (13 Nov, spot at 7.22470) that ‘The level to monitor is 7.2800 and the next resistance above 7.2800 is at 7.3115.’ Yesterday, USD rose to a high of 7.2700. There is no change in our view. Overall, only a breach of 7.2000 (no change in ‘strong resistance’ level) would mean that the upward pressure has faded.”
EUR/USD tested 1.050 yesterday and then briefly rebounded before coming under pressure again around the 1.0580 area. Intraday volatility will likely be the norm for coming days due to a stretched long US Dollar (USD) positioning, but it is clear that the momentum on EUR/USD remains bearish and investors will remain attracted to selling the rallies, ING’s FX analyst Francesco Pesole notes.
“The minutes of the October European Central Bank minutes showed an ongoing debate about the disinflationary trend, and some hawkish members were reluctant to go for a rate cut that was described as a “risk management” move. There is a clear shift from inflation to growth concerns in the Governing Council, but no indications of a strong consensus for an acceleration in easing.”
“Our view remains that a 50bp move in December remains very much possible, and we expect a bearish impact on the euro given markets are pricing in just over 30bp. Today, we’ll hear from Fabio Panetta, Philip Lane and Piero Cipollone, three dovish-leaning members. The 1.0500 level is a key one for the dollar and we can probably expect good support also considering the positioning picture. Still, our call for year-end remains 1.040.”
The US Dollar (USD) is likely to continue to rise; the levels to monitor are 157.00 and 157.50. Momentum remains strong; the next technical objective is at 158.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “Following the sharp rise in USD two days ago, we noted in early Asian trade yesterday that ‘momentum remains robust.’ We were of the view that ‘while USD could break above 156.00, it might not be able to maintain a foothold above this level.’ We underestimated the strength of the advance, as USD soared to 156.42, closing at 156.25 (+0.51%). The impulsive momentum is likely to continue to outweigh the overbought conditions. In other words, USD is likely to continue to rise. The levels to monitor are 157.00 and 157.50. To sustain the overbought momentum, USD must remain above 155.55 (minor support is at 156.05).”
1-3 WEEKS VIEW: “We turned positive in USD two ago (13 Nov), when it was at 154.70, indicating that ‘the increase in momentum suggests further USD strength towards 156.00.’ Yesterday, USD rose and surpassed 156.00. Momentum remains strong, and the next technical objective is at 158.00. To keep the momentum going, USD must remain above 154.95 (‘strong support’ level was at 154.00 yesterday).”
The US Dollar (USD) is testing the limit of stretched positioning, but macro developments have so far failed to offer any real catalyst for a substantial unwinding of the greenback’s longs. The set of inflation figures for October have kept markets somewhat reticent to fully price in a December cut from the Federal Reserve, as both CPI and PPI’s core measures have printed at 0.3% month-on-month. That is simply too hot for the Fed to turn the dial to a more dovish narrative, ING’s FX analyst Francesco Pesole notes.
“And indeed, the remarks by Fed Chair Jerome Powell in Dallas yesterday seemed to endorse markets’ cautious pricing on Fed easing, giving some support to the dollar towards the end of the New York session. Powell seemed to put greater emphasis on the strength of the economy and how that allows the central bank to approach the upcoming policy decisions “carefully”. Market expectations for a cut in December declined by around 5bp after his comments and are now at 15bp.”
“Today, there is another chance for a dollar positioning-led correction as retail sales for October are published. Consensus is for a marginal slowdown across all retail sales indices compared to September, while still remaining in positive MoM territory. It probably won’t take much to trigger a negative dollar reaction, but the recent momentum has been rather strong in US data.”
“Our short-term view remains that the USD is due a correction, and caution is warranted when chasing the current rally much further. However, when we look ahead and consider incoming US president Donald Trump’s policy mix, we remain of the view that markets will favour a structurally strong USD.”
Gold (XAU/USD) trades little changed on Friday, holding steady in the $2,560s after making a slight recovery from the two-month lows reached on the previous day.
A stronger US Dollar (USD) continues to put pressure on Gold since it is mainly priced and traded in the US currency. Sticky US inflation and positive labor market data, as well as upbeat comments from the Federal Reserve (Fed) Chairman Jerome Powell, led the US Dollar Index (DXY) to a new year-to-date high on Thursday, piling further pressure on the yellow metal.
Gold extended its decline, breaking below a major trendline and reaching new lows in the $2,530s on Thursday, after a combination of higher US factory-gate inflation data, lower US unemployment claims data and upbeat commentary from Fed Chairman Powell.
Powell said the Fed would not need to not take such an aggressive approach to cutting interest rates given the US economy was doing “remarkably well”. The comments were negative for Gold, which, as a non-interest-paying asset, tends to outperform when interest rates are lower.
US Retail Sales data, scheduled for release on Friday, could further stir the pot in terms of the outlook for the US economy, the US Dollar and Gold. If the data comes out higher than the 0.3% increase expected, it could lift the USD even higher, putting further downside pressure on the precious metal.
The news that the Republicans had crossed the threshold for gaining a majority in the US House of Representatives, and the fact they already control the US Senate and the White House, further weighed on Gold.
Control of the legislature will mean President-elect Donald Trump and his party will be able to push through their economic policies with less friction. These, whilst expected to be inflationary and therefore potentially positive for Gold – a traditional “goto” inflation hedge – could also be bearish for the precious metal because it could force the Fed to keep interest rates elevated.
Another reason for Gold's relatively rapid decline in November are outflows from large hedge funds, who rode the bull wave higher in October as Gold peaked at a record high of $2,790. Many of these funds use trend-following techniques and Gold’s recent declines could be flashing warning lights about the sustainability of the hitherto rock-solid uptrend.
Gold Exchange Traded Funds (ETFs), which allow investors to purchase “stocks” in Gold – enabling them to hold the commodity without actually purchasing the physical commodity – have also seen outflows, according to the World Gold Council (WGC). Gold ETFs shed around $809 million (12 tonnes) net in early November, driven by North American outflows and partially offset by Asian inflows.
Meanwhile, geopolitical risks remain elevated, providing some underpinning support for Gold as a popular safe-haven asset. That said, US efforts at negotiating a ceasefire in Lebanon were said to be showing “tentative signs of progress,” according to a Reuters report on Friday.
Gold bounces off its (blue) 100-day Simple Moving Average (SMA) and attempts a recovery. Still, the precious metal is in a short and probably medium-term downtrend. This, given the principle of technical analysis that “the trend is your friend,” favors a continuation lower.
Gold formed a bullish Hammer Japanese candlestick pattern on Thursday after touching support at the 100 SMA. However, it will require confirmation from a green bullish candle on Friday to indicate a near-term reversal. Currently, the price is trading flat.
Given the overarching downtrend, a break below the $2,530 August highs would probably indicate an extension of the trend lower. The next downside target lies in around the $2,470s, followed by $2,400, where the (green) 200-day SMA is located.
The precious metal remains in an uptrend on a long-term basis, raising the risk of a reversal higher in line with its broader upcycle.
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
USD/SGD’s advancement came close to 1.3490 but eased this morning. Last seen at 1.3404 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“Daily momentum is mild bullish but rise in RSI moderated. Bearish divergence on MACD appears to be forming. We watch price action if USD/SGD trades lower, tactically.”
“Support at 1.3290 (61.8% fibo retracement of Jun high to Oct low). Resistance at 1.3490, 1.3520 levels. S$NEER was last at 1.30% above model-implied mid.”
The New Zealand Dollar (NZD) is expected to continue to weaken; given the deeply oversold conditions, it remains to be seen if 0.5815 will come into view. In the longer run, outlook for NZD remains negative; the technical target now is at last year’s low of 0.5775, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “After NZD fell and exceeded our expectations two days ago, we indicated yesterday that ‘Further weakness appears likely today, but oversold conditions suggest any decline may not reach the major support at 0.5850.’ The anticipated weakness once again exceeded our expectations, as NZD fell to a low of 0.5840. Although we continue to expect NZD to weaken today, given the deeply oversold conditions, it remains to be seen if the next support at 0.5815 will come into view. To keep the momentum going, NZD must remain below 0.5885, with minor resistance at 0.5865.”
1-3 WEEKS VIEW: “When we revised our NZD view from neutral to negative two days ago (13 Nov, spot at 0.5925), we indicated that ‘it is too early to tell if the major support at 0.5850 is within reach.’ Following the decline in NZD, we highlighted yesterday (14 Nov, spot at 0.5885) that ‘The increase in momentum indicates that the likelihood of NZD dropping to 0.5850 has also increased.’ In NY trade, NY dropped to 0.5840. Our negative outlook for NZD remains unchanged; the technical target is now at last year’s low of 0.5775. To maintain the buildup in momentum, NZD must remain below the ‘strong resistance’ at 0.5925 (level was at 0.5955 yesterday).”
The Euro (EUR) fell below 1.05 overnight but the dip was brief. Last seen at 1.0568 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“Daily momentum is bearish though RSI shows tentative signs of turning from near oversold conditions. Near term consolidation not ruled out but bias to sell rallies. Resistance at 1.06, 1.0740 (76.4% fibo fibo retracement of 2024 low to high), 1.0780 (21 DMA). Support at 1.05, 1.0450/1.05 levels.”
“Overall, EUR should continue to bear the brunt of the US election outcome. Trump presidency will result in shifts in US foreign, trade policies. The potential 20% tariff (if implemented) can hurt Europe where growth is already slowing, and that US is EU’s top export destination.”
“On German politics, the minority government faces economic and diplomatic challenges. PM Scholz is seeking confidence vote earlier on 16 Dec instead of 15 Jan – but is expected to lose. Snap elections likely planned for 23 Feb. Elsewhere wide EU-UST yield differentials continued to widen, validating EUR’s “fair value” relative to yield differentials.”
Provided that 0.6490 remains intact, the Australian Dollar (AUD) could decline further; the major support at 0.6400 is unlikely to come into view. In the longer run, further AUD weakness still appears likely; the next level to watch is 0.6400, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “Yesterday, when AUD was at 0.6495, we expected AUD to ‘edge lower, possibly reaching 0.6460.’ We were of the view that ‘the major support at 0.6440 is likely out of reach.’ Our view was validated, as AUD dropped to 0.6441, recovering slightly to close at 0.6454 (- 0.48%). Although there is no significant increase in momentum, the bias for AUD remains on the downside. Today, provided that 0.6490 remains intact (minor resistance is at 0.6470), AUD could decline further. However, the major support at 0.6400 is unlikely to come into view. Note that there is another support level at 0.6420.”
1-3 WEEKS VIEW: “We indicated yesterday that AUD ‘is likely to decline further, and the levels to monitor are 0.6460 and 0.6440.’ While our view of a weaker AUD was not wrong, we did not quite expect it to drop as quickly (low has been 0.6441). Further AUD weakness still appears likely. The next level to watch is 0.6400. On the upside, should AUD break above 0.6520 (‘strong resistance’ level was at 0.6550 yesterday), it would mean that the weakness has stabilised.”
The US Dollar (USD) continued to hover near recent highs amid Trump policy uncertainty, a possible return to US exceptionalism and less dovish Fedspeaks. DXY was last at 106.55 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“Overnight, Fed chair Powell said that the Fed does not need to be ‘in a hurry to lower rates’ and that the current strength of the economy allows it to approach decisions carefully. On labour market, he said ‘it is now by many metrics back to more normal levels that are consistent with employment mandate’.
“On inflation outlook, he spoke about near term fluctuation in recent range and to come down to 2% over time, albeit on a ‘sometimes bumpy path’. Markets have already scaled back probability of 25bp cut in Dec to 59% chance (vs 71% chance a week ago). Expectations will continue to adjust as US data comes. This puts focus on data tonight – empire manufacturing, retail sales, IP before next Fri’s prelim PMIs, Uni of Michigan sentiment data.”
“Firmer print will add to US exceptionalism narrative, keeping USD rates and USD elevated for longer, until data proves otherwise. Daily momentum is bullish while RSI shows tentative signs of slowing near overbought conditions. Near term, DXY may enter into consolidation. Resistance at 107, 107.40 (2023 high). Support at 106.50, 105.60 (76.4% fibo) and 104.50/60 levels (21DMA, 61.8% fibo retracement of 2023 high to 2024 low).”
Scope for the Pound Sterling (GBP) to retest the 1.2630 level; the major support at 1.2615 is unlikely to come under threat. In the longer run, GBP is expected to continue to weaken to 1.2615, possibly 1.2565, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “When GBP was at 1.2710 yesterday, we highlighted the following: ‘Although the weakness has not stabilised, downward momentum has slowed a tad. This, combined with oversold conditions, suggests 1.2665 may still be out of reach for now.’ While our view of a weaker GBP was correct, the lurch lower that sent it to a low of 1.2630 was unexpected. Downward momentum is showing tentative signs of slowing, but there is scope for GBP to retest the 1.2630 level before stabilisation is likely. The major support at 1.2615 is unlikely to come under threat. Resistance is at 1.2690; a breach of 1.2715 would mean that GBP is not weakening further.”
1-3 WEEKS VIEW: “In our latest narrative from two days ago (13 Nov, spot at 1.2735), we indicated that ‘Downward momentum has surged, and the next technical target is at 1.2665.’ Yesterday, GBP fell and exceeded the target, dropping to a low of 1.2630. We continue to expect GBP to weaken, eying a move to 1.2615, possibly 1.2565. We will maintain our view provided that 1.2770 (‘strong resistance’ level was at 1.2845 yesterday) is not breached.”
In its quarterly assessment published on Friday, the European Commission projects a bright Eurozone economic outlook for 2025 and 2026 but warned of overseas risks.
Sees Eurozone economic growth at 0.8% in 2024, 1.3% in 2025 and 1.6% in 2026.
Sees Eurozone inflation at 2.4% in 2024, 2.1% in 2025 and 1.9% in 2026.
Sees Eurozone budget deficit at 3.0% in 2024, 2.9% in 2025 and 2.8% in 2026.
Sees Eurozone public debt at 89.1% in 2024, 89.6% in 2025 and 90.0% in 2026.
Sees increased risks to the outlook from the war in Ukraine, conflict in the Middle East, and protectionism in trade.
German GDP will expand 0.7% in 2025 vs 1.0% growth in previous forecast.
German GDP growth expected to accelerate to 1.3% in 2026, but remain below Eurozone average of 1.6%.
German economy will contract 0.1% this year vs 0.1% growth in the Spring forecast.
EUR/USD holds the latest uptick near 1.0568, up 0.35% on the day, as of writing.
GBP/USD edges higher on Friday, reaching the 1.2680s, as traders reduce their short exposure before the weekend. GBP/USD claws its way up from intraday oversold levels reached on Thursday when it registered near 2.0% losses on the week. This came after the US Dollar (USD) outperformed due to positive US economic data, the residual effect of Trumponomics, and upbeat comments from the Federal Reserve (Fed) Chairman Jerome Powell.
By rights, the pair should still be falling after the release of weak UK growth on Friday. However, it is possible traders are now judging the US Dollar as overvalued. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, reached a new 2024 high on Thursday, which could be restraining Dollar-traders’ “irrational exuberance”.
Although it seems counter-intuitive, the Pound Sterling (GBP) is actually strengthening despite the release of negative UK Gross Domestic Product (GDP) growth data showing the economy shrank by 0.1% in September. This was lower than the 0.2% expected and 0.2% of the previous month.
What’s more, in Q3, UK preliminary GDP rose by 0.1% QoQ – decelerating from the 0.5% recorded in Q2 and undershooting the 0.2% estimate. Ordinarily, this would be expected to be accompanied by a sell-off in the Pound. However, due to an overbought Dollar trade and the market’s continued faith in the outlook for growth in the UK, it has not.
For advisory service Capital Economics, for example, the data has not materially changed its views on the outlook for Bank of England (BoE) policy or interest rates – a key driver of FX valuations. Lower interest rates are generally negative for Sterling as they reduce capital inflows and vice versa for higher rates. Yet, despite the poor economic data, they do not see the BoE cutting interest rates in December.
According to Capital’s Deputy Chief UK Economist Ruth Gregory, the GDP data means the economy grew at “..a snail’s pace (in Q3). However, this doesn’t mean the UK is on the cusp of another recession. And while today’s data raises the chances the Bank (BoE) will cut rates again in December, we are sticking to our view that the Bank will keep rates unchanged at 4.75% in December before cutting rates by 25 basis points again in February,”
GBP/USD is making a slow recovery from over four-month lows reached on Thursday after US data showed an above-expectations rise in factory-gate prices, as measured by the Producer Price Index (PPI), in October and US Jobless Claims falling below estimates in the week ending November 8, driving the Dollar higher and the Cable pair to a new low.
The two data points are particularly relevant to Fed policy given its dual mandate of keeping inflation under control and fostering full employment. Later in the day, Fed Chair Powell drove the USD to an even higher high after he said that the US economy was in relatively good shape and the Fed would not need to cut interest rates as aggressively as he had previously thought.
GBP/USD retreats to support in the mid-1.2600s (red dashed line in the chart below) and makes a half-hearted stand.
However, the pair is in a downtrend on a short and medium-term trend basis, and given the technical principle that “the trend is your friend,” the odds favor bears pushing prices even lower.
Assuming a break below the 1.2630 Thursday low, GBP/USD will probably start descending to the next downside target at around 1.2613, the late June lows (red dashed line). Below that, the next target lies at 1.2500 (round number and psychological level), followed by 1.2452 (early May lows).
The Relative Strength Index (RSI) momentum indicator is nearly oversold but not quite. If it enters oversold territory, it will advise short-holders not to add to their positions.
The longer-term trend, it could be argued, is still bullish, indicating the risk and possibility of GBP/USD recovering if a longer-term upcycle kicks in.
Retail sales performance beats consensus again; production activity remained robust in October. We see upside risk to our annual growth forecast; official target of c.5% is likely to be achieved. We expect policy makers to shift focus to 2025 while ensuring implementation of existing policies, Standard Chartered’s economists Shuang Ding and Hunter Chan note.
“October data suggests that China’s domestic momentum improved after the introduction of additional stimulus in late September. Retail sales growth jumped 1.6ppt from September to 4.8% y/y in October, beating market expectations for two straight months, thanks to the consumer goods trade-in programme and the early start of the ’Double 11’ shopping festival, in our view. Services production index growth jumped to 6.3% y/y, the fastest pace this year. In addition, industrial production (IP) remained robust, growing 0.41% m/m, faster than the average of 0.35% in June-August. Monthly GDP growth accelerated to above 5% y/y, according to our estimate, versus 4.6% y/y in Q3.”
“Fixed asset investment (FAI) growth stayed at 3.4% y/y in 10M-2024, supported by resilient manufacturing and infrastructure investment. Meanwhile, YTD real estate investment contracted 10.3% y/y as new starts and construction declined further. That said, housing demand appears to have improved on policy support. The y/y decline in home floor space sold eased significantly in October.”
“Solid September and October real activity data suggests that the official growth target of around 5% is likely to be achieved. We see upside risk to our current 2024 growth forecast of 4.8%. We expect the central bank to lower the reserve requirement ratio (RRR) by 25bps this month to facilitate issuance of local government bonds. Fiscal spending may continue to accelerate, generating a positive fiscal impulse in Q4-2024.”
Momentum has slowed somewhat; any further decline is likely part of a lower trading range of 1.0490/1.0580. In the longer run, price action continues to suggest EUR weakness; the next support level is at last year’s low, near 1.0450, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “Following the drop in EUR to a low of 1.0555 two days ago, we highlighted yesterday that ‘Despite being deeply oversold, the weakness still has not stabilised.’ We held the view that EUR ‘could dip below 1.0555 but the next major support at 1.0500 is unlikely to come under threat.’ However, EUR broke below 1.0500, reached a low of 1.0496 and then rebounded to close at 1.0530. Conditions remain oversold, but the weakness still has not quite stabilised just yet. That said, as momentum has slowed somewhat, any further decline is likely part of a lower trading range of 1.0490/1.0580. In other words, EUR is unlikely to break clearly below 1.0490.”
1-3 WEEKS VIEW: “We have maintained a negative EUR view for more than a week now. Yesterday (14 Nov, spot at 1.0565), we indicated that EUR ‘is still expected to weaken.’ However, we indicated that given the oversold conditions, ‘the 1.0500 level may not come into view so soon.’ We also indicated that ‘only a breach of 1.0670 (‘strong resistance’ level) would mean that EUR is not weakening further.’ We underestimated the EUR weakness as it fell below 1.0500 (low has been 1.0496). The price action continues to suggest EUR weakness, even though caution is warranted given the deeply oversold conditions. The next support is at last year’s low, near 1.0450. On the upside, the ‘strong resistance’ level has moved lower to 1.0610 from 1.0670.”
Silver prices (XAG/USD) fell on Friday, according to FXStreet data. Silver trades at $30.41 per troy ounce, down 0.36% from the $30.52 it cost on Thursday.
Silver prices have increased by 27.78% since the beginning of the year.
Unit measure | Silver Price Today in USD |
---|---|
Troy Ounce | 30.41 |
1 Gram | 0.98 |
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 84.40 on Friday, up from 84.14 on Thursday.
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
(An automation tool was used in creating this post.)
GBP/USD breaks its five-day losing streak, trading around 1.2680 during the early European session on Friday. The pair remains steady after the release of mixed Gross Domestic Product (GDP) and Industrial data from the United Kingdom (UK).
The UK economy grew by 0.1% quarter-on-quarter in the three months ending September, following a 0.5% expansion in Q2. This growth fell short of market expectations for a 0.2% increase. On a year-on-year basis, UK GDP rose by 1.0% in Q3, matching forecasts but higher than the 0.7% growth recorded in Q2.
In September, monthly UK GDP shrank by 0.1%, reversing a 0.2% expansion in August and missing the expected 0.2% growth. The Index of Services for the three months ending in September held steady at 0.1% 3M/3M, unchanged from the prior reading. However, Industrial and Manufacturing Production both declined in September, falling by 0.5% and 1.0% month-on-month, respectively. These figures were weaker than anticipated.
The US Dollar (USD) edges lower due to remarks from Fed Chair Jerome Powell on Thursday. Fed’s Powell stated that the recent performance of the US economy has been "remarkably good," allowing the Federal Reserve the flexibility to gradually lower interest rates. Meanwhile, Richmond Fed President Thomas Barkin stated that while the Fed has made strong progress so far, there’s still more work to be done to keep the momentum going.
Additionally, the US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, increased by 3.1% YoY, slightly above the forecasted 3.0%.
The US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, trades around 106.70. after pulling back from its yearly high of 107.06 recorded on Thursday. This decline could be attributed to a slowdown in "Trump trades."
The Gross Domestic Product (GDP), released by the Office for National Statistics on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in the UK during a given period. The GDP is considered as the main measure of UK economic activity. The YoY reading compares economic activity in the reference quarter compared with the same quarter a year earlier. Generally speaking, a rise in this indicator is bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Last release: Fri Nov 15, 2024 07:00 (Prel)
Frequency: Quarterly
Actual: 1%
Consensus: 1%
Previous: 0.7%
Source: Office for National Statistics
The UK economy grew 0.1% QoQ in the three months to September 2024 after expanding 0.5% in the second quarter. The data missed the market forecast of +0.2% in the reported period.
The UK GDP climbed by 1.0% YoY in Q3 vs. 1.0% expected and 0.7% recorded in Q2.
The monthly UK GDP arrived at -0.1% in September, compared to a 0.2% increase in August, missing the expectations of +0.2%.
Meanwhile, the Index of services (December) came in at 0.1% 3M/3M vs. 0.1% prior.
Other data from the UK showed that Industrial Production and Manufacturing Production decreased by 0.5% and 1.0%, respectively, over the month in September. Both indicators underperformed the estimates.
The quarterly Total Business Investment increased by 1.2% through the June to September quarter.
Mixed UK GDP and industrial figures failed to dent the Pound Sterling recovery. At the time of press, GBP/USD is trading 0.12% higher on the day at 1.2680.
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the US Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.34% | -0.20% | -0.16% | -0.04% | -0.28% | -0.33% | -0.33% | |
EUR | 0.34% | 0.14% | 0.16% | 0.31% | 0.07% | 0.00% | 0.01% | |
GBP | 0.20% | -0.14% | 0.06% | 0.18% | -0.08% | -0.14% | -0.12% | |
JPY | 0.16% | -0.16% | -0.06% | 0.14% | -0.12% | -0.19% | -0.17% | |
CAD | 0.04% | -0.31% | -0.18% | -0.14% | -0.26% | -0.31% | -0.30% | |
AUD | 0.28% | -0.07% | 0.08% | 0.12% | 0.26% | -0.06% | -0.06% | |
NZD | 0.33% | -0.00% | 0.14% | 0.19% | 0.31% | 0.06% | 0.01% | |
CHF | 0.33% | -0.01% | 0.12% | 0.17% | 0.30% | 0.06% | -0.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The USD/CAD pair holds steady near 1.4065 during the early European session on Friday. However, the renewed US Dollar (USD) demand could provide some support to the pair for the time being. Additionally, the decline in crude oil prices might weigh on the Canadian Dollar (CAD) as Canada is the largest oil exporter to the United States (US).
According to the daily chart, the constructive outlook of the USD/CAD remains intact as the pair holds above the key 100-period Exponential Moving Averages (EMA). However, the 14-day Relative Strength Index (RSI) stands above the midline near 77.65, indicating the overbought RSI condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term USD/CAD appreciation.
The upper boundary of the Bollinger Band at 1.4070 acts as an immediate resistance level for the pair. A decisive break above this level could see a rally to the 1.4100 psychological level, en route to 1.4173 (the high of May 7, 2020).
On the flip side, the initial support level is located at 1.4000, the round mark. A breach of this level could expose 1.3969, the low of November 13. The crucial contention level to watch is the 1.3905-1.3900 zone, representing the confluence of the lower limit of the Bollinger Band and the 100-period EMA.
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
USD/CHF pauses its five-day winning streak, trading around 0.8900 during Friday’s Asian session after retreating from a four-month high of 0.8917 reached on Thursday. This pullback is likely due to a downward correction in the US Dollar (USD) following remarks from Federal Reserve (Fed) Chair Jerome Powell.
Fed’s Powell stated that the recent performance of the US economy has been "remarkably good," allowing the Federal Reserve the flexibility to gradually lower interest rates. Meanwhile, Richmond Fed President Thomas Barkin stated that while the Fed has made strong progress so far, there’s still more work to be done to keep the momentum going.
The US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, increased by 3.1% YoY, slightly above the forecasted 3.0%.
The downside for the USD/CHF pair may be limited, as the Swiss Franc (CHF) could weaken further with the increased likelihood of an interest rate cut by the Swiss National Bank (SNB) in December. This expectation follows Switzerland's inflation rate falling to 0.6% in October, the lowest in over three years, signaling inflation is under control.
SNB Vice Chairman Antoine Martin stated in an interview published on Monday that the SNB is not committed to additional interest rate cuts in December. This comes despite earlier comments suggesting potential reductions to address inflation.
At its September meeting, the Swiss National Bank (SNB) indicated readiness for further rate cuts, with both Chairman Martin Schlegel and Vice Chairman Antoine Martin suggesting the possibility of additional reductions, including a potential return to negative rates, according to Reuters.
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
FX option expiries for Nov 15 NY cut at 10:00 Eastern Time via DTCC can be found below.
EUR/USD: EUR amounts
USD/JPY: USD amounts
AUD/USD: AUD amounts
USD/CAD: USD amounts
NZD/USD: NZD amounts
Here is what you need to know on Friday, November 15:
Asian stocks remained a mixed bag, dragged by the mixed Chinese activity data and a pessimistic Wall Street close overnight. Despite a notable increase in China’s Retail Sales, the country’s disappointing Industrial Production and Fixed Asset Investment data amplify the economic concerns, keeping markets on edge.
An air of nervousness prevails amid a lack of certainty on the US Federal Reserve’s (Fed) future interest rates. Markets pared back expectations of a 25 basis points (bps) rate cut in December after Fed Chair Jerome Powell’s hawkish shift and the hot Producer Price Index (PPI) data released on Thursday.
Powell noted that the central bank does not need to rush to reduce rates, citing ongoing economic growth, a solid job market and sticky inflation as reasons for caution against easing policy too quickly. Meanwhile, annual headline PPI increased by 2.4% in October after rising by 1.9% in September and following Wednesday’s sticky US CPI inflation figures.
The market pricing for a 25 bps rate cut next month has dropped to about 69% from 83% a day ago, the CME Group’s FedWatch tool shows.
Increased expectations of fewer Fed rate cuts have provided extra legs to the Trump trades-driven rally in the US Dollar (USD) and the US Treasury bond yields. Traders now look forward to the US Retail Sales and Industrial Production data for fresh cues on the health of the economy, which could alter Fed easing expectations. A couple of Fed policymakers are scheduled to speak later in American trading.
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.14% | -0.09% | 0.11% | 0.05% | -0.13% | -0.16% | -0.18% | |
EUR | 0.14% | 0.05% | 0.23% | 0.20% | 0.00% | -0.02% | -0.03% | |
GBP | 0.09% | -0.05% | 0.18% | 0.15% | -0.04% | -0.07% | -0.09% | |
JPY | -0.11% | -0.23% | -0.18% | -0.02% | -0.23% | -0.27% | -0.28% | |
CAD | -0.05% | -0.20% | -0.15% | 0.02% | -0.20% | -0.21% | -0.23% | |
AUD | 0.13% | -0.01% | 0.04% | 0.23% | 0.20% | -0.03% | -0.07% | |
NZD | 0.16% | 0.02% | 0.07% | 0.27% | 0.21% | 0.03% | -0.02% | |
CHF | 0.18% | 0.03% | 0.09% | 0.28% | 0.23% | 0.07% | 0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Across the Atlantic, the UK is due to report the preliminary third-quarter Gross Domestic Product (GDP) data alongside the Manufacturing Production data. Meanwhile, European Central Bank (ECB) officials are on the radar as markets are pricing in aggressive policy easing in the face of a worsening economic outlook.
Across the FX board, USD/JPY refreshed four-month highs at 156.75 before retracing gains to trade near 156.50. Japanese verbal intervention warnings rescued Japanese Yen buyers from the unimpressive Q3 GDP-induced pain.
Antipodeans shrug off the tepid risk tone and mixed Chinese data, continuing their recovery from multi-month troughs. AUD/USD is back above 0.6450 while NZD/USD regains 0.5850.
USD/CAD is trading sideways above 1.4050 amid a 1% sell-off in WTI Oil and ahead of the Canadian data set. The US oil is back in the red after giving up the $68 threshold again.
EUR/USD holds the rebound above 1.0500, awaiting ECB-speak and US data for further trading incentives.
GBP/USD remains capped below 1.2700, with traders refraining from placing fresh bets on the Pound Sterling ahead of the top-tier UK and US data releases. On Thursday, BoE policymaker Catherine Mann argued that the central bank should maintain rates at their current level until the upside risks to inflation.
Gold challenges the critical daily support at $2,545 as sellers fight back control amid sustained US Dollar demand.
Silver price (XAG/USD) trades in negative territory around $30.35 on Friday during the early European session. The white metal remains vulnerable amid the stronger US Dollar (USD). Traders await the release of the US October Retail Sales report on Friday for fresh impetus. The Fedspeak will be closely monitored as it might offer some hints about the US interest rate outlook.
Donald Trump's victory in last week's US presidential election sparked expectations of potentially inflationary tariffs and other measures by his incoming administration, boosting the Greenback. Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD against a basket of six currencies, currently trades near 106.80 after hitting a fresh year-to-date high near 107.05 in the previous session. The 10-year US Treasury bond hit the highest since start of July at 4.48%. The renewed USD demand could undermine the USD-denominated Silver as it makes the white metal more expensive in other currencies, dampening demand.
China's National People's Congress (NPC) meeting last week failed to deliver the immediate fiscal stimulus that investors were expecting. The concerns about sluggish demand could weigh on the Silver price as China is the world's major importer of silver.
On the other hand, record-high industrial demand for silver might support the white metal in the near term. According to the Silver Institute and consultancy Metals Focus, demand for silver across industrial applications is expected to increase 7% YoY in 2024, reaching 700 million ounces (Moz). Additionally, analysts expect the global silver market to show a physical deficit of around 182 million ounces in 2024, marking the fourth consecutive year of shortfall.
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
EUR/USD breaks its five-day losing streak, trading around 1.0540 during the Asian session on Friday. This rebound is likely due to a downward correction in the US Dollar (USD) following comments from Fed Chair Jerome Powell. Powell stated that the recent performance of the US economy has been "remarkably good," allowing the Federal Reserve the flexibility to gradually lower interest rates.
Additionally, the US Producer Price Index (PPI) rose by 2.4% year-over-year in October, up from a revised 1.9% increase in September (previously 1.8%) and surpassing market expectations of 2.3%. Meanwhile, the Core PPI, which excludes food and energy, increased by 3.1% YoY, slightly above the forecasted 3.0%.
The US Dollar Index (DXY), which tracks the US Dollar's performance against six major currencies, has pulled back from its yearly high of 107.06 recorded on Thursday. This decline is attributed to a slowdown in "Trump trades." At the time of writing, the DXY trades near 106.80.
European Central Bank (ECB) board member Isabel Schnabel stated on Thursday that interest rate changes should remain the ECB's primary policy tool, while bond purchases and forward guidance should be used more sparingly.
The ECB’s October Monetary Policy Meeting Accounts indicated increasing consideration of rate cuts. However, ECB officials remain cautious about domestic inflationary pressures, citing strong wage growth and sluggish labor productivity. The ECB emphasized the need to gather more data before implementing any policy changes.
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The Japanese Yen (JPY) extends its losing streak against the US Dollar (USD) for the fifth consecutive session, following the release of Japan’s Q3 Gross Domestic Product (GDP) data on Friday. The upside potential of the USD/JPY pair is supported by the strength of the US Dollar (USD). Traders are also preparing for the release of the US October Retail Sales data, due later on Friday.
Japan's preliminary Gross Domestic Product (GDP) grew by 0.2% quarter-on-quarter in the third quarter, down from 0.5% in the previous quarter, matching market expectations. The country's annualized GDP growth for Q3 was 0.9%, surpassing the market consensus of 0.7%, but showing a sharp slowdown from the 2.2% growth recorded in Q2.
Japan’s Finance Minister, Katsunobu Kato, stated on Friday that he will take appropriate action against excessive fluctuations in foreign exchange (FX) rates. Kato emphasized the importance of stable FX movements that reflect economic fundamentals and expressed concern over one-sided, sharp shifts in the market.
Meanwhile, Japan's Economy Minister, Ryosei Akazawa, said that he expects a modest economic recovery to continue, fueled by improvements in employment and wages. However, Akazawa also emphasized the need to carefully monitor potential downside risks from global economies and volatility in financial and capital markets.
USD/JPY trades around 156.50 on Friday. Daily chart analysis shows a continued bullish bias, with the pair moving upwards within an ascending channel pattern. The 14-day Relative Strength Index (RSI) is just below the 70 level, supporting the bullish outlook. A breakout above the 70 mark would indicate an overbought condition, potentially leading to a downward correction for the pair.
The USD/JPY pair could target the upper boundary of the ascending channel near the 159.70 level. A breakout above this level would reinforce the bullish sentiment and potentially push the pair toward its four-month high of 161.69, recorded on July 11.
On the downside, the USD/JPY pair could find support at the nine-day Exponential Moving Average (EMA) around 154.65, followed by the lower boundary of the ascending channel at 153.90.
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the New Zealand Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.21% | -0.15% | 0.02% | -0.00% | -0.27% | -0.27% | -0.21% | |
EUR | 0.21% | 0.05% | 0.21% | 0.22% | -0.05% | -0.07% | 0.00% | |
GBP | 0.15% | -0.05% | 0.16% | 0.17% | -0.11% | -0.10% | -0.05% | |
JPY | -0.02% | -0.21% | -0.16% | -0.00% | -0.29% | -0.30% | -0.23% | |
CAD | 0.00% | -0.22% | -0.17% | 0.00% | -0.29% | -0.29% | -0.21% | |
AUD | 0.27% | 0.05% | 0.11% | 0.29% | 0.29% | -0.00% | 0.05% | |
NZD | 0.27% | 0.07% | 0.10% | 0.30% | 0.29% | 0.00% | 0.07% | |
CHF | 0.21% | -0.00% | 0.05% | 0.23% | 0.21% | -0.05% | -0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Gold prices remained broadly unchanged in India on Friday, according to data compiled by FXStreet.
The price for Gold stood at 6,975.33 Indian Rupees (INR) per gram, broadly stable compared with the INR 6,971.36 it cost on Thursday.
The price for Gold was broadly steady at INR 81,358.84 per tola from INR 81,312.59 per tola a day earlier.
Unit measure | Gold Price in INR |
---|---|
1 Gram | 6,975.33 |
10 Grams | 69,753.27 |
Tola | 81,358.84 |
Troy Ounce | 216,957.10 |
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.
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
(An automation tool was used in creating this post.)
The GBP/USD pair edges lower to near 1.2675, the lowest level since August during the Asian trading hours on Friday. The cautious remarks from the Federal Reserve (Fed) Chair Jerome Powell on Thursday and stronger US economic data boost the US Dollar (USD) broadly and weigh on the major pair. Traders brace for the preliminary UK Gross Domestic Product (GDP) for the third quarter (Q3), which is due later in the day.
Technically, GBP/USD maintains a bearish outlook on the daily chart, with the major pair holding below the key 100-period Exponential Moving Average (EMA). The path of least resistance is to the downside as the Relative Strength Index (RSI) is located below the midline around 33.50.
Sustained bearish momentum could drag the major pair to the lower limit of the Bollinger Band at 1.2618. A break below this level could push prices lower toward the 1.2500 psychological level, followed by 1.2467, the low of May 8.
On the bright side, the first key resistance level to watch if buyers step in here would be 1.2720, the high of November 14. A break above these barriers could pave the way for a test of 1.2873, the high of November 12. Any follow-through buying above the mentioned level potentially opens the door to 1.2955, the 100-period EMA.
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The NZD/USD halts its three-day losing streak, trading around 0.5850 during the Asian session on Friday. The New Zealand Dollar (NZD) might have received downward pressure as the Business NZ Performance of Manufacturing Index (PMI) fell to 45.8 in October, down from a revised 47.0 in September, reaching its lowest level since July 2024.
The NZD/USD pair holds gains after mixed key data was released from its close trading partner China. Retail Sales rose 4.8% year-over-year in October, surpassing the expected 3.8% and the 3.2% increase seen in September. Meanwhile, the country’s Industrial Production grew by 5.3% YoY, slightly below the forecasted 5.6% but higher than the 5.4% growth recorded in the previous period.
During its press conference on Friday, the National Bureau of Statistics (NBS) shared its economic outlook, noting an improvement in China's consumer expectations in October. The bureau plans to intensify policy adjustments and boost domestic demand, highlighting that recent policies have had a positive impact on the economy.
The US Dollar (USD) remains stable near its fresh 2024 highs, despite indications of slowing in "Trump trades." The US Dollar Index (DXY), which measures the dollar's performance against six major currencies, hovers around 107.00, near its highest level since November 2023.
Market attention is now shifting to the release of US October Retail Sales data on Friday, along with remarks from Federal Reserve officials. On Thursday, Fed Chair Jerome Powell commented that the recent performance of the US economy has been "remarkably good," providing the Fed with the flexibility to gradually lower interest rates.
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Raw materials | Closed | Change, % |
---|---|---|
Silver | 30.438 | 0.35 |
Gold | 256.555 | -0.33 |
Palladium | 941.45 | 0.9 |
Following the publication of the high-impact China’s activity data for October, the National Bureau of Statistics (NBS) expressed its outlook on the economy during its press conference on Friday.
China's consumer expectations improved in October.
Will step up policy adjustments, expand domestic demand.
Will consolidate trend in economic recovery.
Recent policies have showed positive effects on the economy.
more to come ...
AUD/USD is extending gains above 0.6450, up 0.18% on the day, at the press time.
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.20% | -0.14% | 0.03% | -0.02% | -0.22% | -0.25% | -0.19% | |
EUR | 0.20% | 0.07% | 0.21% | 0.19% | -0.02% | -0.05% | 0.01% | |
GBP | 0.14% | -0.07% | 0.16% | 0.14% | -0.08% | -0.11% | -0.05% | |
JPY | -0.03% | -0.21% | -0.16% | -0.04% | -0.27% | -0.30% | -0.23% | |
CAD | 0.02% | -0.19% | -0.14% | 0.04% | -0.22% | -0.24% | -0.18% | |
AUD | 0.22% | 0.02% | 0.08% | 0.27% | 0.22% | -0.03% | 0.02% | |
NZD | 0.25% | 0.05% | 0.11% | 0.30% | 0.24% | 0.03% | 0.06% | |
CHF | 0.19% | -0.01% | 0.05% | 0.23% | 0.18% | -0.02% | -0.06% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
The Gold price (XAU/USD) struggles to gain ground around $2,570 on Friday after bouncing off a two-month low in the previous session. The precious metal remains under selling pressure amid the strong US Dollar (USD) and the rising uncertainty surrounding the Federal Reserve's (Fed) pace of interest rate reductions. The expectations of higher inflation next year due to Donald Trump’s policies have led to fewer expected rate cuts, weighing on the yellow metal as higher interest rates make holding non-yielding assets like gold less appealing.
However, the escalating tensions in the Middle East and the ongoing conflict between Ukraine and Russia could boost the Gold price, a traditional safe-haven asset. Looking ahead, investors will monitor the US Retail Sales for October, which are due later on Friday. Also, the NY Empire State Manufacturing Index and Industrial Production data will be published. The Fed’s Susan Collins and John Williams are set to speak later in the same day.
The Gold price edges lower on the day. The positive outlook of the precious metal seems vulnerable on the daily timeframe as the price hovers around the key 100-day Exponential Moving Average (EMA). The yellow metal could resume the downside if it can break below the 100-day EMA. The downward momentum cannot be ruled out as the 14-day Relative Strength Index (RSI) stands below the 50-midline near 33.60.
Consistent trading below the 100-day EMA could pave the way to $2,485, the low of September 8. The additional downside filter to watch is $2,353, the low of July 25. Extended losses could see a drop to the $2,300 psychological mark.
On the upside, the immediate resistance level for XAU/USD emerges near the support-turned-resistance level at $2,665. A decisive break above this level could result in a rally to $2,750, the high of November 6.
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Japan’s Finance Minister Katsunobu Kato on Friday that he “will take appropriate action vs. excessive FX moves.”
One-sided, sharp moves seen in the FX market.
It is important for FX rates to move stably, reflecting fundamentals.
Govt will scrutinise the FX market with very high vigilance, including speculative moves.
USD/JPY is paring back gains to trade near 156.50 following these above comments, still up 0.18% on the day.
China’s October Retail Sales increased 4.8% YoY vs. 3.8% expected and 3.2% in September, while the country’s Industrial Production rose 5.3% YoY in the same period vs. 5.6% estimated and 5.4% registered previously.
Meanwhile, the Fixed Asset Investment came in at 3.4% YTD YoY in October, matching the expected 3.5% print. The September reading was 3.4%.
Additional details of the report showed that the dragon nation’s Unemployment Rate arrived at 5.0% in the reported period.
China’s National Bureau of Statistics (NBS) released the official data on Friday.
The mixed Chinese data dump fails to deter the Australian Dollar, with AUD/USD holding higher ground near 0.6460. The pair is up 0.09% on the day, as of writing.
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
The Australian Dollar (AUD) continues its decline for the sixth consecutive session on Friday, hovering near three-month lows against the US Dollar (USD). The recent downward trend in the AUD/USD pair is largely due to key economic data from Australia.
However, the decline of the Aussie Dollar may be limited due to less dovish remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock on Thursday. Bullock stated that current interest rates are sufficiently restrictive and will stay at this level until the central bank gains confidence in the inflation outlook.
The US Dollar remains steady near its fresh 2024 highs, despite signs of slowing in "Trump trades." The US Dollar Index (DXY), which tracks the US Dollar’s performance against six major currencies, hovers around 107.06, marking its highest level since November 2023.
Markets are now focused on US October Retail Sales data, set to be released on Friday, along with comments from Federal Reserve officials. On Thursday, Fed Chair Jerome Powell noted that the recent performance of the US economy has been "remarkably good," allowing the Fed room to gradually lower interest rates.
AUD/USD trades near 0.6460 on Friday. An analysis of the daily chart shows short-term downward pressure, as the pair remains below the nine-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) is slightly above 30, indicating potential oversold conditions. If the RSI dips below 30, it could signal an oversold situation, suggesting a possible upward correction.
The AUD/USD pair may find a key level near 0.6400 for support. A break below this psychological threshold could amplify downward pressure, potentially driving the pair toward the yearly low of 0.6348, last touched on August 5.
The immediate resistance lies at the psychological level of 0.6500. A break above this could lift the pair toward the nine-day EMA at 0.6525, followed by the 14-day EMA at 0.6553. Surpassing these EMAs may pave the way for a move toward the three-week high of 0.6687.
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Euro.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.13% | -0.07% | 0.17% | 0.00% | -0.08% | -0.07% | -0.12% | |
EUR | 0.13% | 0.06% | 0.28% | 0.15% | 0.05% | 0.05% | 0.02% | |
GBP | 0.07% | -0.06% | 0.22% | 0.09% | -0.01% | -0.01% | -0.05% | |
JPY | -0.17% | -0.28% | -0.22% | -0.13% | -0.25% | -0.25% | -0.27% | |
CAD | -0.01% | -0.15% | -0.09% | 0.13% | -0.11% | -0.09% | -0.13% | |
AUD | 0.08% | -0.05% | 0.01% | 0.25% | 0.11% | 0.00% | -0.04% | |
NZD | 0.07% | -0.05% | 0.00% | 0.25% | 0.09% | -0.01% | -0.04% | |
CHF | 0.12% | -0.02% | 0.05% | 0.27% | 0.13% | 0.04% | 0.04% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Japan's Economy Minister Ryosei Akazawa said on Friday that he “expects modest economic recovery to continue, driven by improving employment and wage environment.”
He further noted that there is a “need to carefully monitor downside risks from overseas economies and volatility in financial, capital markets.”
It’s up to the BoJ to decide on monetary policy.
Expect the BoJ to share a basic stance on economic policies with the government.
At the time of writing, USD/JPY is strongly bid near 156.60, up 0.20% on the day.
On Friday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1992, as compared to the previous day's fix of 7.1966 and 7.1966 Reuters estimates.
The USD/JPY pair extends the rally to around 156.60, the highest level since July 23 during the early Asian session on Friday. The upward movement of the pair is bolstered by the firmer US Dollar (USD) broadly. Traders brace for the US October Retail Sales, which is due later on Friday.
The preliminary Japan’s Gross Domestic Product (GDP) expanded by 0.2% QoQ in the third quarter (Q3) versus 0.5% prior, in line with the market consensus. The country’s GDP Annualized grew 0.9% in Q3, above the market consensus of 0.7%, and slowed sharply from the 2.2% growth seen in Q2. The Japanese Yen remains weak in an immediate reaction to the GDP report.
The Bank of Japan (BoJ) Governor Kazuo Ueda warned during the October monetary policy decision that the central bank would scrutinize income data for future policy decisions. The uncertainty surrounding the BoJ rate-hike plans is likely to weigh on the JPY against the Greenback in the near term. However, the verbal intervention from Japanese authorities might help limit the JPY's losses.
On the USD’s front, Federal Reserve (Fed) Chair Jerome Powell noted on Thursday that strong US economic growth will allow policymakers to take their time in deciding about the size and the pace to cut interest rates. “The economy is not sending any signals that we need to be in a hurry to lower rates,” said Powell. The cautious stance of Powell prompted traders to lower their expectations for a December rate cut, lifting the Greenback.
Meanwhile, Richmond Fed President Thomas Barkin stated on Thursday that while the Fed has made strong progress so far, there’s still more work to be done to keep the momentum going. The markets have priced in nearly 59.1% of the 25 basis points (bps) rate cut by the Fed at the December meeting, down from 75% last week, according to the CME FedWatch Tool.
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Index | Change, points | Closed | Change, % |
---|---|---|---|
NIKKEI 225 | -185.96 | 38535.7 | -0.48 |
Hang Seng | -387.64 | 19435.81 | -1.96 |
KOSPI | 1.78 | 2418.86 | 0.07 |
ASX 200 | 30.6 | 8224 | 0.37 |
DAX | 260.59 | 19263.7 | 1.37 |
CAC 40 | 94.97 | 7311.8 | 1.32 |
Dow Jones | -207.33 | 43750.86 | -0.47 |
S&P 500 | -36.21 | 5949.17 | -0.6 |
NASDAQ Composite | -123.07 | 19107.65 | -0.64 |
Pare | Closed | Change, % |
---|---|---|
AUDUSD | 0.64546 | -0.47 |
EURJPY | 164.574 | 0.29 |
EURUSD | 1.05286 | -0.32 |
GBPJPY | 197.994 | 0.32 |
GBPUSD | 1.26665 | -0.27 |
NZDUSD | 0.58491 | -0.51 |
USDCAD | 1.40557 | 0.44 |
USDCHF | 0.8904 | 0.65 |
USDJPY | 156.306 | 0.57 |
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.40 on Friday. The WTI price remains steady as a steep draw in US fuel stocks offset oversupply fears.
The Energy Information Administration (EIA) weekly report showed crude stocks increased last week. Crude oil stockpiles in the United States for the week ending November 8 rose by 2.089 million barrels, compared to a rise of 2.149 million barrels in the previous week. The market consensus estimated that stocks would increase by 1.85 million barrels. Meanwhile, US gasoline inventories hit a two-year low, falling by 4.4 million barrels last week, compared with analysts' expectations of a 600,000-barrel build.
A stronger US Dollar (USD) might cap the upside for the USD-denominated oil as it makes oil more expensive for holders of other currencies, which can reduce demand. The US Dollar Index (DXY), a measure of the value of the USD against a basket of six currencies, currently trades near 106.90 after hitting a fresh year-to-date high near 107.05.
"Crude futures are trying to establish equilibrium pricing as a rising U.S. dollar index is creating a further headwind, along with a Trump administration that will now have control of Congress, which is likely to roll back most of the Biden administration's energy policies," Dennis Kissler, senior vice president of trading at BOK Financial, said in a note.
Furthermore, the Organisation of Petroleum Exporting Countries (OPEC) latest downward revision for demand growth earlier this week might weigh on the WTI. OPEC lowered its global oil demand growth predictions for 2024 and 2025, claiming sluggish demand in China, India, and other areas, marking the producer group's fourth straight downward revision.
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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