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• GBP/USD roiled on Wednesday before settling 0.2% lower.
• Despite an upbeat UK CPI inflation print, Cable knocked lower.
• Thin Thursday economic calendar gives way to global PMI prints.

GBP/USD struggled to find a direction on Wednesday, testing the bounds of the 1.2700 handle before facing a downside rejection and ending the midweek market session a fifth of a percent lower than it started. Despite an above-forecast print in UK Consumer Price Index (CPI) inflation figures, the Pound Sterling still waffled as the Bank of England (BoE) looks set to write off another rate cut in 2024 as the UK grapples with still-sticky inflation.

UK CPI came in broadly higher than markets expected, with headline UK CPI inflation rising to 2.3% YoY, over and above the forecast 2.2% and bouncing from the previous period’s print of 1.7%. Meanwhile, core CPI inflation rose to 3.3% on an annualized basis while investors were expecting a slight downtick to 3.1% from the previous 3.2%. With UK inflation still sparking fears of sticky price growth, the BoE is less likely to deliver another rate cut in 2024 despite a lopsided economy.

Thursday’s economic calendar is a thin showing, leaving Cable traders to sit on their hands until Friday’s doubleheader showing of Purchasing Managers Index (PMI) activity survey results due from both the UK and the US to wrap up the trading week. UK PMI figures are broadly expected to hold steady at previous figures, with the Manufacturing PMI component forecast to hold at 49.9 and the Services PMI component expected to print flat at 51.8.

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

GBP/USD price forecast

GBP/USD failed to extend into a bullish recovery this week after a flubbed pullback from 27-month lows near the 1.2600 handle. Technical action priced in a floor and looked set to kick off a bullish recovery run, but high side bids are fizzling out after running into friction near 1.2700.

GBP/USD daily chart

• NZD/USD gains ground to near 0.5875 in Thursday’s early Asian session.
• Fed’s Bowman said inflation is still elevated and has moved sideways in the last few months, so the Fed needs to be cautious.
• The RBNZ is anticipated to cut its interest rate next week. 

The NZD/USD pair posts modest gains to around 0.5875 during the early Asian session on Thursday. However, the upside for the pair might be limited as investors await Fedspeak for more cues about the Federal Reserve's interest rate outlook and US President-elect Donald Trump's proposed policies.

The US Dollar index (DXY), which measures the greenback against a basket of currencies, currently trades near 106.60 after retracing from a yearly high of 107.06 last week. The growing bets that the Fed may slow its path of interest-rate cuts on concerns Trump's policies could reignite inflation boost the US Dollar (USD) against the Kiwi. 

Economists expect the Fed to cut rates at its December meeting with shallower cuts in 2025 than expected a month ago due to the risk of higher inflation from Trump's policies, according to a Reuters poll. 

Federal Reserve Board of Governors member Michelle Bowman said on Wednesday that inflation is still elevated and moving sideways in the last few months and the US central bank should pursue a cautious approach to monetary policy.

On the Kiwi front, the growing expectations that the Reserve Bank of New Zealand (RBNZ) would cut its Official Cash Rate (OCR) next week might weigh on the New Zealand Dollar (NZD). Markets are fully pricing in a 50 bps reduction, with 12% odds of a larger 75 bps rate cut. ANZ chief economist Sharon Zollner expects the RBNZ to cut its OCR by 50 basis points (bps) next week, bringing the rate to 4.25%. “If there is going to be a surprise, a larger cut seems likelier than a smaller one,” added Zollner.  

• Silver retreats over 1.14% as traders shift focus to the Greenback, though remains up 1.90% for the week.
• Technicals indicate a bearish trend with potential support at $30.00 after breaking below the 100-day SMA.
• RSI trends suggest bearish momentum is increasing, indicating possible further declines in silver prices.

Silver's price retreats over 1.14% on Wednesday, yet it remains up 1.90% in the week as traders ditch the grey metal in favor of the Greenback. At the time of writing, XAG/USD trades at $30.82 a troy ounce, beneath the $31.00 psychological mark.

XAG/USD Price Forecast: Technical outlook

The non-yielding metal trades within the $30.38-$31.75 range, guarded by the 100- and 50-day Simple Moving Averages (SMAs), respectively. Despite being range-bound, the XAG/USD is downward biased in the short term as the precious metal achieves successive series of lower highs and lower lows.

Once sellers push XAG/USD below the 100-day SMA, a bearish resumption will occur. If cleared, the next support would be $30.00 a troy ounce, followed by the November 14 swing low of $29.68 and the 200-day SMA at $28.88.

If buyers moved in and pushed XAG/USD above $31.00, the 50-day SMA would be next, ahead of the $32.00 figure.

Indicators such as the Relative Strength Index (RSI) hint that bears continue to gather steam. Therefore, further XAG/USD downside is expected.

XAG/USD Price Chart – Daily

• The Canadian Dollar lost ground on Wednesday, snapping a bullish recovery attempt.
• Canada will be off the data docket until Friday’s Retail Sales print.
• After two days of gains, the CAD fell back 0.1% against the Greenback.

The Canadian Dollar (CAD) is back to its losing ways, backsliding 0.1% against the Greenback on Wednesday. The Loonie has ended it’s near-term bullish recovery against the safe haven US Dollar during the midweek market session as the economic calendar remains low-impact on both sides of the USD/CAD pair.

Canada saw an uptick in Consumer Price Index (CPI) inflation figures this week, but the wind died down quickly and the Canadian Dollar is stuck near multi-year lows after USD/CAD pinged a 54-month high above 1.4100 last week. Thursday will remain a muted affair with very little of note on the data docket except for weekly US jobless claims figures, with USD/CAD traders trapped in a waiting period before Friday’s Purchasing Managers Index (PMI) prints for the US, as well as Canadian Retail Sales figures for September.

Daily digest market movers: Canadian Dollar returns to tepid ways amid light Wednesday calendar

• The Canadian Dollar fell back a tenth of a percent against the Greenback at the trading week’s midpoint, keeping USD/CAD bolstered near multi-year highs.
• Canadian Consumer Price Index (CPI) inflation figures earlier this week helped to extend a near-term Loonie rally, but bullish momentum quickly fizzled.
• Data remains thin on Wednesday, with little on the radar for Thursday outside of US weekly Initial Jobless Claims. New benefits claimants are expected to rise slightly to 220K week-on-week for the week ended November 15 compared to the previous week’s 217K.
• Loonie markets will pivot into Canadian Retail Sales figures from September on Friday, with the headline figure expected to hold steady at 0.4% MoM while core Retail Sales excluding automotive purchases are expected to rebound to 0.5% MoM from the previous month’s -0.7% contraction.
• US PMIs will be the key figures of note on Friday, with both Manufacturing and Services components expected to climb slightly. Manufacturing PMI activity survey results are expected to rise to 48.8 in November from the previous month’s 48.5, while November’s Services component figures are forecast to rise to 55.3 from October’s flat 55.0.

Canadian Dollar price forecast

Despite holding onto bullish hope, the Canadian Dollar (CAD) still shed some ground against the Greenback on Wednesday, trimming a scant tenth of a percent and snapping a two-day win streak that saw the Loonie recover around nine-tenths of a percent from multi-year lows. USD/CAD cycled just below the 1.4000 handle during the midweek market session, testing the key psychological level but keeping price action hampered on the low side of the key price level.

With USD/CAD holding close to a 54-month high near 1.4100, bearish momentum in the chart has limited potential to drag bids back into the 50-day Exponential Moving Average (EMA) near 1.3800.

USD/CAD daily chart 

• Gold extends rally to $2,650, shrugging off a rising US Dollar amid demand for safe-haven assets.
• Escalation in Russia-Ukraine conflict and nuclear threats from Putin contribute to the surge in Gold.
• Fed Governors' comments provide mixed insights on the potential direction of US monetary policy in December.

Gold price climbs extending its gains for the third straight day, shrugs off a buoyant US Dollar as risk aversion boosts safe-haven assets. The golden metal has risen over 3.40% during the week, with buyers eyeing the $2,700 mark. The XAU/USD trades at $2,650, up 0.69%.

Bullion’s decline toward a two-month low of $2,536 can mainly be attributed to investors booking profits after President Donald Trump's victory in the US elections. Fears that some of his proposals could spark a reacceleration of inflation sent US Treasury yields soaring and underpinned the Greenback.

Nevertheless, Bullion prices had risen due to the escalation of the Russia-Ukraine conflict.

On Tuesday, Russian President Vladimir Putin authorized the use of nuclear weapons in retaliation to the West. Reports revealed the White House authorized Ukraine's use of American weapons inside Russia, according to officials.

In the meantime, the American currency advances 0.51% in the day, according to the US Dollar Index (DXY), which tracks the buck's performance against six other peers. The DXY is at 106.69 after sinking to a five-day low of 106.11.

Recently, Fed Board Governors Lisa Cook and Michelle Bowman failed to clarify the outcome of the December Federal Open Market Committee (FOMC) policy meeting.

Cook remains confident the Fed will lower inflation toward the 2% goal, but she didn’t reveal whether she will support a rate cut next month. Bowman added that despite seeing “considerable progress” on inflation, it seems to have “stalled in recent months,” meaning the Fed should be cautious. She commented that neutral rates could not be as low as expected, by some officials at the FOMC.

Traders trimmed the chances for a 25 basis points rate cut at the December meeting. The CME FedWatch Tool sees a 55% probability of lowering rates, down from a 58% chance a day ago.

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

Daily digest market movers: Gold price and the Greenback advance

• Gold prices recovered even though US real yields climbed one basis point to 2.07%.
• US Treasury bond yields are rising, with the 10-year benchmark rate up one basis points to 4.41%.
• On Thursday, US Initial Jobless Claims are expected to rise from 217K to 220K for the week ending November 16.
• US Existing Home Sales are projected to rise from 3.854 million to 3.93 million.
• According to data from the Chicago Board of Trade via the December fed funds futures contract, investors are pricing in 22 basis points of Federal Reserve rate cuts by the end of 2024.
• On Monday, US President Joe Biden authorized Ukraine's use of long-range missiles inside Russia, CNN revealed. The decision comes as a reaction to thousands of North Korean troops being deployed in support of Moscow’s war effort.
• Donald Trump’s policies of higher tariffs and lower taxes are potential drivers of inflation and might slow the Fed’s easing cycle.

Technical outlook: Gold buyers to challenge the 50-day SMA

Gold price is upward biased, yet buyers must clear key resistance levels ahead. If XAU/USD clears the 50-day Simple Moving Average (SMA) at $2,658, it could find acceptance at around $2,700. A breach of the latter will expose the November 7 high of $2,710 and the psychological $2,750 figure.

Conversely, sellers will have the upper hand if the non-yielding metal drops below $2,600. Further downside is seen, with the following support being the 100-day Simple Moving Average (SMA) at $2,550. Bears could target the November 14 swing low of $2,536, followed by XAU/USD diving to $2,500.

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

• AUD/USD declined by 0.64% to 0.6494 on Wednesday.
• The US Dollar strengthened due to geopolitical concerns and higher US yields.
• A hawkish RBA might limit the downside for the pair.

The AUD/USD declined by 0.64% to 0.6495 on Wednesday. The decline came after the pair touched a one-week high earlier in the session. The move lower was likely driven by a combination of factors, including a rebound in US bond yields that made the US Dollar Index (DXY) rise to yearly highs around 107.00.

That being said, the AUD/USD pair has a slight recovery, supported by hawkish Reserve Bank of Australia (RBA) Minutes and a consolidating US Dollar. The RBA indicated potential future rate adjustments, providing support to the Aussie. Despite these positive factors, AUD/USD faces challenges due to weak Australian and Chinese economic data.

Daily digest market movers: Australian Dollar tumbles as USD demand surges amid hawkish Federal Reserve bets.

• The RBA's hawkish stance may offer temporary support, but the bearish trend persists.
• The latest Minutes showed that the bank members are considering both rate hikes and rate cuts in the near term.
• The USD regained upside traction amid easing geopolitical concerns and mixed US yields.
• The Federal Reserve's reluctance to cut interest rates in December weakened the USD and weighed on equities globally.
• In that sense, the CME FedWatch Tool suggests a near 60% chance of a rate cut in the meeting next month after being nearly priced in, which helped the USD recover in the last few sessions.

AUD/USD technical outlook: Pair reversed Tuesday's gains, and the indicators fell deeper into negative territory

The AUD/USD pair resumed its decline on Wednesday, erasing most of Tuesday's gains as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicators remained firmly in negative territory.

The RSI is currently hovering around 40, well below the neutral 50 mark. The MACD line is below the signal line, and the histogram is printing red bars. These indicators suggest that the pair has further room to fall before finding support.

• The Dow Jones backslid another 150 points on Wednesday.
• Equity markets with little data to chew on are awaiting key earnings reports.
• Nvidia earnings are due after the closing bell, meaningful economic data starts Thursday.

The Dow Jones Industrial Average (DJIA) tested familiar lows on Wednesday, churning chart paper just north of the 43,000 handle. Markets are tepid as investors pull back slightly ahead of a key earnings report from major tech company Nvidia (NVDA) which is due after the bell, and a lack of meaningful economic figures throughout the front half of the trading week has left traders in the lurch.

Nvidia is expecting a bumper revenue posting late Wednesday after markets close. The company forecasts $32.5 billion in quarterly revenue thanks to a wide uptick in demand for its AI-focused Backwell GPU offerings. Nvidia has a tendency to outpace revenue expectations, with the chipmaker beating earnings calls ten out of the last 12 quarters.

The first half of the trading week was in a significant data drought with limited impactful US economic prints on the offering.Thursday will kick off the week’s useful, market-moving information with Initial Jobless Claims for the week ended November 15. Net new jobless benefits seekers are expected to number 220K on a weekly basis, up slightly from the previous week. The US Philadelphia Fed Manufacturing Survey is also due on Thursday, and is expected to ease back to 8.0 in November from the previous month’s 10.3.

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

Dow Jones news

The Dow Jones is roughly on-balance for the day as investors await a reason to move. About half of the major equity index is stuck in the red on Wednesday, though Nvidia’s pre-earnings action is dragging the tech darling down a little more than usual, sending the DJIA into a lopsided stance.

Unitedhealth Group (UNH) rallied over 3% during the midweek market session, climbing towards $600 per share. Health insurance remains a popular choice among investors as healthcare costs spiral out of control in the US. On the low end, Nvidia has backslid around 1.8% ahead of its post-bell earnings call, falling into $144 per share.

Dow Jones price forecast

The Dow Jones Industrial Average is holding onto 43,200 for dear life as investors reject the idea of allowing price action to fall back below the 43,000 handle without a fight. The DJIA is down nearly 3% from all-time highs posted a little over a week ago just above 44,400.

Despite a near-term backslide, the Dow Jones is sitting better than pretty; the major equity index is still trading well north of the 50-day Exponential Moving Average (EMA) near 42,500, and it’s been nearly 13 months since the Dow Jones last kissed the 200-day EMA which is now rising into 40,250.

Dow Jones daily chart

The US Dollar regained balance and rose to weekly highs on the back of the resurgence of the Trump-infused impulse, all prior to key data releases in the second half of the week as well as comments from Fed’s rate setters..

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

The US Dollar Index (DXY) reversed three daily drops in a row and approached the key 107.00 barrier amid higher yields. The usual Initial Jobless Claims are due seconded by the Philly Fed Manufacturing Index, Existing Home Sales, and the CB Leading Index. In addition, the Fed’s Hammack and Goolsbee are due to speak.

EUR/USD weakened further and came closer to the key 1.0500 support on the back of the stronger Greenback. The advanced Consumer Confidence gauge is next on tap seconded by speeches by the ECB’s Cipollone, Buch, Elderson, and Lane.

GBP/USD left behind a two-day recovery and faced renewed downside pressure, prompting it to revisit the 1.2630 zone. Public Sector Net Borrowing figures will be published along with the CBI Industrial Trends Orders, and the speech by the BoE’s Mann.

Rising yield and the bid tone in the US Dollar lifted USD/JPY to three-day highs just below the 156.00 barrier. The usual weekly Foreign Bond Investment figures will be unveiled prior to the speech by the BoJ’s Ueda.

AUD/USD succumbed to the upside momentum in the US Dollar and broke below the 0.6500 support once again. The flash Judo Bank Manufacturing and Services PMIs are expected in Oz.

WTI prices gave away part of the weekly upside momentum, slipping back below the $69.00 mark per barrel despite persistent geopolitical effervescence.

The upside bias in Gold remained in place, sending the metal to multi-day highs north of the $2,650 mark per troy ounce. Silver prices saw their recent advance lose momentum, retreating to two-day lows in the sub-$31.00 zone per ounce.

• Mexican Peso erases previous gains on global geopolitical developments and dovish comments from Banxico’s Governor.
• Victoria Rodríguez Ceja’s dovish stance on continued rate cuts reflects efforts to manage inflation amidst economic challenges.
• Geopolitical risks remain heightened as military actions in Ukraine influence USD/MXN’s volatility.

The Mexican Peso erased some of Tuesday's gains versus the Greenback as geopolitical risks continued to drive the financial markets amid a possible escalation of the Russia-Ukraine conflict. Additionally, Bank of Mexico (Banxico) Governor Rodriguez's dovish remarks alongside the ongoing economic slowdown in Mexico hurt the prospects of the emerging market currency. At the time of writing, the USD/MXN trades at 20.30, up by 1%.

Bank of Mexico Governor Victoria Rodríguez Ceja indicated that the central bank plans to continue reducing its benchmark interest rate, citing progress in lowering inflation. Besides this, traders are eyeing the release of Mexican Retail Sales data for September on Thursday, followed by the release of the Gross Domestic Product (GDP) and mid-month inflation figures on Friday.

Meanwhile, some analysts hint that the Mexican economy will not grow within the 2% to 3% range in 2025 as expected by the Finance Ministry. Gabriela Siller of Banco Base said, “It is extremely difficult to achieve GDP growth […] especially in the first year of administration and with cuts in public spending.”

In geopolitics, rising tensions underpinned the USD/MXN as Ukraine fired long-range, British-made missiles into Russian territory. This followed the launch of US-made missiles into Russia on Tuesday.

Aside from this, Federal Reserve (Fed) speakers crossed the wires. First, Governor Lisa Cook said that if the labor market and inflation evolve as expected, it would be appropriate to continue lowering the policy rate toward neutral. She added that if progress on inflation stalls or slows, that would be a scenario for pausing.

Lately, noted hawk Governor Michelle Bowman said the Fed should pursue a cautious approach on monetary policy and added that neutral policy may be closer than most policymakers think.

Ahead this week, the US economic docket will feature the release of Initial Jobless Claims, housing data, and more Fed speakers on Thursday.

Daily digest market movers: Mexican Peso retraces on strong US Dollar

• The USD/MXN soars sharply, boosted by a strong US Dollar. The US Dollar Index (DXY) is up 0.54% at 106.72.
• Mexican Retail Sales for September are expected at 0.1% MoM, unchanged from the previous reading. On a yearly basis, sales are foreseen plunging from -0.8% to -1.2%.
• On Thursday, US Initial Jobless Claims are expected to rise from 217K to 220K for the week ending November 16.
• US Existing Home Sales are projected to rise from 3.854 million to 3.93 million.
• Market participants trimmed estimates for a 25 bps cut by the Fed, with odds falling from 62% to 59%. The odds of keeping rates unchanged are up at 41%, as depicted by the CME FedWatch Tool.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 23 bps of Fed easing by the end of 2024.
• Last week, Moody’s changed Mexico’s credit outlook to negative, mentioning constitutional reforms that could negatively impact Mexico’s economic and fiscal strength.

USD/MXN technical outlook: Mexican Peso slumps as USD/MXN climbs past 20.30

The USD/MXN uptrend remains intact with buyers stepping in near 20.07, the day’s low, lifting the pair toward the 20.30 mark. A daily close nearby the daily highs would form a “bullish Harami” candlestick pattern and pave the way for further upside.

The next resistance would be the 20.50 figure, followed by the November 12 peak at 20.69. Once those levels are removed, the next resistance would be the year-to-date (YTD) high of 20.80.

On the flip side, the USD/MXN first support would be the 20.00 figure. A breach of the latter will expose the 50-day Simple Moving Average (SMA) and the November 7 low around 19.75, followed by the 19.50 mark.

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

• Greenback extends its rebound to near 106.70.
• Fed’s hawkish stance, risk-off sentiment support Greenback demand.
• Fed officials emphasize caution in rate cuts due to economic data, inflation risks.

The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, has traded with solid gains, rising to 106.70. The DXY's upward trajectory is driven by factors such as recent strong economic data, rising yields, and a less dovish stance from the Federal Reserve (Fed). 

Factors driving its strength include geopolitical tensions, cautious Fed rhetoric on interest rates, and solid US economic data. The uptrend remains intact, supported by the economy's resilience and limited expectations of aggressive Fed easing. That being said, after the index reached yearly highs around 107.00, a pullback or a period of consolidation is possible. 

Daily digest market movers: US Dollar advances as markets adjust bets on Fed cuts

• The DXY's rise is driven by favorable data, rising yields, and the market's cooling dovish Fed bets.
• Last week, Powell downplayed the need for aggressive easing, emphasizing the economy's strength. He suggested slowing the pace of rate cuts to increase chances of achieving the right balance
• Other Fed officials align with Powell's cautious approach, highlighting the need to consider both inflation and employment. 
• Market odds of a December rate cut have fallen toward 58%, according to the CME FedWatch Tool, indicating a shift in expectations.
• For the rest of the week, markets will look upon weekly Initial Jobless Claims data, as well as S&P PMIs figures on Friday.

DXY technical outlook: Bulls resume momentum near overbought terrain

The US Dollar Index continues its bullish momentum on Wednesday, supported by positive technical indicators. The Relative Strength Index (RSI) is nearing overbought territory, indicating potential consolidation. However, the Moving Average Convergence Divergence (MACD) remains bullish, suggesting the uptrend could extend. 

The index faces resistance at 107.00, with a key support zone between 106.00 and 105.00.

Federal Reserve (Fed) Board of Governors member Michelle Bowman hit newswires on Wednesday, cautioning that it appears the Fed's progress on taming inflation may have hit a snag.

Key highlights

Bank of England (BoE) Deputy Governor Dave Ramsden spoke late in the London market session on Wednesday, highlighting the BoE dove's stance on rate cuts versus the UK's current inflation outlook. The BoE policymaker shrugged off October's upswing in UK inflation as an outlier, convinced that UK inflation will continue to fall fast enough to allow the BoE to continue trimming interest rates. 

Key highlights

Federal Reserve (Fed) Board of Governors member Lisa Cook noted on Wednesday that while she views the overall economic outlook within the US as fairly balanced, the Fed might get forced into a pause on rate cuts if inflation progress slows down while employment remains solid.

Key highlights

• EUR/CAD dropped 0.29% on Wednesday.
• The cross fell deeper, reaching lows last seen in July, with technical indicators remaining deeply negative.
• EUR/CAD might continue to shed more ground as it has room before oversold conditions.

The EUR/CAD fell by 0.29% on Wednesday, reaching a low of 1.4745, continuing its decline and reaching lows last seen in July. The bearish trend is supported by negative technical indicators, with the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicating selling pressure and bearish momentum.

The EUR/CAD is in a downtrend after touching a peak of 1.5170. Currently, the pair is approaching the level of 1.4740, where sellers are showing strength. The technical indicators point to heightened selling pressure, with the RSI at 31, near the oversold area, and the MACD red and rising.

The EUR/CAD pair continued its downtrend on Wednesday, reaching lows last seen in July. This move was supported by negative technical indicators, such as the RSI and MACD, indicating selling pressure and bearish momentum. The pair might continue to shed more ground as it has room before oversold conditions but bears might encounter a strong barrier at the 1.4700 area where the pair might encounter a rebound..

EUR/CAD daily chart

• GBP/NZD channels down during November and reaches support at the 50-day SMA. 
• This could be a turning point for the pair and lead to a breakout and continuation of the trend higher. 

GBP/NZD has been correcting back in a mini channel during November after peaking at the October 30 high. It has now reached support at the 50-day Simple Moving Average (SMA) at 2.1446 and made a strong recovery, evidenced by the long green candlestick so far, on Wednesday. 

GBP/NZD Daily Chart 

If GBP/NZD keeps rallying and breaks above the upper channel line of the channel it will probably continue rising towards a target at 2.1900, just below the July 29 high. 

A break above 2.1675 – the November 15 high – would probably confirm a breakout from the channel and follow-through towards the aforesaid upside target. 

• GBP/USD declines following a surge in UK inflation, raising prospects of a less accommodative Bank of England.
• Technicals indicate bearish momentum with the pair now targeting further support levels, including the May low of 1.2445.
• RSI trends toward oversold territory, suggesting continued downward pressure in the near term.

The Pound Sterling lost ground versus the US Dollar on Wednesday following a hot UK inflation report, which increased the chances that the Bank of England (BoE) would pause its easing cycle. The GBP/USD trades at 1.2643, down 0.30% after hitting a high of 1.2714.

GBP/USD Price Forecast: Technical outlook

After diving below the 200-day Simple Moving Average (SMA), the GBP/USD turned bearish, carving successive series of lower highs and lower lows and clearing intermediate support at 1.2664, the August 8 daily low. If sellers push the exchange rate below 1.2600, this will exacerbate a drop toward the May 9 swing low of 1.2445, ahead of the yearly low of 1.2299.

Conversely, if GBP/USD rises above 1.2700, this could pave the way for challenging the 200-day SMA at 1.2818. Once cleared, the next stop would be November’s 6 low turned resistance at 1.2833, ahead of 1.2850 and 1.2900.

Oscillators, such as the Relative Strength Index (RSI), suggest that sellers remain in charge. With the RSI still below its neutral line and aiming toward oversold conditions, the GBP/USD might extend its losses.

GBP/USD Price Chart – Daily

• EUR/CHF confirms its downside breakout from a Triangle pattern. 
• It is likely to continue lower, especially given the bearish market action prior to the Triangle’s formation. 

EUR/CHF cements its bearish breakout from a Triangle pattern and declines. 

It has now fallen below the confirmation level for the pattern at 0.9339, the November 13 low, and will thus probably confirm more weakness down to the next downside target at 0.9132, the 61.8% Fibonacci extrapolation of the height of the Triangle lower. 

EUR/CHF Daily Chart
 

EUR/CHF has found support at the 0.9307 September 11 lows (red dotted line). A break below the low of Tuesday at 0.9304 would confirm more downside to the aforementioned target (red dashed line). 

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

How much further can the bounce in Gold prices run? Any way you slice it, this is not the same set-up for flows as a few short months ago, TDS’ Senior Commodity Strategist Daniel Ghali notes.

Gold price may continue its downward movement

“Pent-up selling activity unleashed by the US elections, resulting in a massive shift from the liquidity vacuum that enabled a melt-up in prices. While macro funds have already liquidated nearly 60% of their extreme net length, they are now unlikely to rebuild an extreme position given a vastly different outlook for the Fed, with a discounted path that is no longer expected to lead to an 'overly easy' policy stance.”

“CTA liquidations have been modest thus far, which conversely suggests that a further uptape will only be supported by a modest reversal in CTA flows. ETF investors show little sign of reaccumulating thus far. Shanghai traders are undergoing their most significant round of liquidations in years. Overall, our flows-based analysis still doesn't suggest we've seen the lows in Gold prices thus far.”

• AUD/USD falls sharply to near 0.6500 due to a strong recovery in the US Dollar.
• Market expectations for Fed rate cuts in December have slightly eased.
• AUD/USD falls back after failing to climb above 38.2% Fibo retracement at 0.6535.

The AUD/USD pair drops sharply to near the psychological support of 0.6500 in the North American trading session on Wednesday. The Aussie pair weakens as the US Dollar (USD) bounces back strongly as traders doubt whether the Federal Reserve (Fed) will cut interest rates again in the December meeting. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rebounds to near 106.60.

The probability of the Fed cutting interest rates by 25 basis points (bps) to 4.25%-4.50% in December has diminished to 56% from 83% a week ago, according to the CME FedWatch tool.

Market speculation for Fed interest rate cuts in December has slightly diminished as investors expect President-elect Donald Trump’s economic agenda will boost United States (US) inflation and economic outlook.

The Australian Dollar (AUD) performs weakly even though the Reserve Bank of Australia (RBA) is expected to keep interest rates unchanged at 4.35% by the year-end. RBA Governor Michelle Bullock maintained hawkish guidance in her remarks in the press conference after the policy decision on November 5, remaining cautioned about upside risks to inflation.

AUD/USD retreats after failing to extend recovery above 38.2% Fibonacci retracement around 0.6535. The Fibo tool is plotted from the November 7 high of 0.6688 to the November 14 low of 0.6440 on an hourly timeframe. The asset wobbles around the 50-day Exponential Moving Average (EMA) near 0.6500.

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

A decisive recovery move above the intraday high of 0.6545 could push the asset towards the round-level resistance of 0.6600, followed by the November 5 high of 0.6645.

In an alternate scenario, the pair could witness a downside after sliding below the November 14 low of 0.6440, which would drag the asset toward the round-level support of 0.6400 and the August low of 0.6348

AUD/USD hourly chart

• GBP/CAD has broken below the confirmation level for the breakout from its Rising Wedge pattern. 
• It is likely to continue lower until it fulfills the minimum price objective for the pattern. 

GBP/CAD is extending its decline after breaking out of a bearish Rising Wedge pattern. 

The pair has already pierced below the October 3 lows (dashed red line), one of the confirmation levels for the pattern and is therefore likely to continue lower. 

GBP/CAD Daily Chart 

The next target to the downside is 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. 

• GBP/JPY rises as a result of a mixture of higher-than-expected UK data and lower safe-haven flows into JPY. 
• UK inflation data beat expectations, increasing bets the Bank of England will leave interest rates at relatively high levels. 
• The differential between the two country’s interest rates – 4.75% for the UK and 0.25% for Japan, lends a bullish bias to the pair. 
   

GBP/JPY trades higher by about two-thirds of a percent in the 197.30s on Wednesday, after the release of higher-than-expected UK inflation data cemented bets the Bank of England (BoE) will leave its key bank interest rate at a relatively high 4.75% at its December policy meeting, and take a gradual approach to cutting interest rates in the future. Since higher interest rates usually increase foreign capital inflows thereby strengthening a currency, the news helped lift the Pound Sterling (GBP), and has led to a rise in GBP/JPY.  

The UK Consumer Price Index (CPI) inflation gauge rose by 2.3% year-over-year in October, well above the 1.7% of September, and expectations of 2.2%. Core CPI inflation rose by 3.3% YoY from 3.2% prior and 3.1% expected. 

After the CPI release, the market implied trajectory for UK interest rates showed the BoE’s bank rate would likely fall 15 basis points (bps) (0.15%) over the next three months and 60 pbs over the next 12 months. This suggests the chances of the BoE cutting by 25 bps in December are slim, according to Rabobank.

The Japanese Yen (JPY) meanwhile loses ground on Wednesday due to a reduction in safe-haven flows on the back of an improvement in risk appetite. The Yen had temporarily strengthened on Tuesday due to a ratcheting up of geopolitical risks. The source for this was Russia’s announcement that it had lowered the bar for the deployment of nuclear weapons. The move was interpreted as a warning in response to the US agreeing to allow Ukraine to use US-made missiles to strike targets in Russia. 

Uncertainty over when the Bank of Japan (BoJ) will next raise its key interest rate from a comparatively low 0.25% is capping upside potential for the Yen, whilst providing a boost for the GBP/JPY pair given the large differential which favors inflows into the Pound. 

On Tuesday Japan’s Finance Minister Katsunobu Kato said he is “closely watching FX moves with the utmost sense of urgency.” This suggests a risk that the authorities are planning an intervention to help support the Yen. However, according to Bloomberg News, the Yen is actually still relatively strong on a trade-weighted basis compared to the levels it fell to in July 2024 when the Japanese authorities last made a direct market intervention to prop up their currency. 

The Canadian Dollar (CAD) has slipped back somewhat after gains met resistance in the mid-1.3950 area, as expected, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

CAD rebound stalls around 1.3950

“The marginally hotter than expected CPI data for Canada yesterday should tilt risks a bit more squarely towards a 25bps cut from the BoC next month. But rates traders are not easily persuaded. Swaps are little changed from pre-CPI indications, pricing in around 33bps of cuts for next month—about 30% risk of a 50bps move in effect.”

“Wide short-term spreads still represent a significant headwind for the CAD. Spot fair value is estimated at 1.4015 this morning. The USD’s positive reaction to the test of support at 1.3950 suggests a minor low at least is in for spot. Price action is mildly USD positive on the short-term charts on the session and the rebound sustains the broader uptrend in funds in place since late September.”

“The minor dip in the USD has relieved short-term overbought conditions a little—but just enough to facilitate a renewed push higher. Resistance is 1.4040 and 1.41.”

• USD/CHF recovers further above 0.8850 as the US Dollar bounces back strongly.
• Traders doubt whether the Fed will cut interest rates in December.
• USD/CHF finds a cushion near the 50% Fibo retracement around 0.8800.

The USD/CHF pair extends its recovery above 0.8850 in the North American trading session on Wednesday. The Swiss Franc pair rises as the US Dollar (USD) bounces back strongly amid doubts about whether the Federal Reserve (Fed) will continue its policy-easing cycle in the December meeting.

According to the CME FedWatch tool, trades see a 59% chance that there will be 25 basis points (bps) interest rate cut next month, which will push interest rates lower to 4.25%-4.50%. The probability of a Fed rate cut has diminished from 82.5% a week ago as investors expect President-elect Donald Trump’s economic agenda will boost inflation in the United States (US) along with its economic growth.

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

The Swiss Franc (CHF) witnessed buying interest on Tuesday as a fresh escalation in the Russia-Ukraine war improved its safe-haven bid. However, it turned out short-lived as Russian Foreign Minister Sergei Lavrov pushed back expectations of a nuclear attack.

USD/CHF bounces back after a mild correction to a 50% Fibonacci retracement around 0.8800. The Fibo tool is plotted from a May high of 0.9225 to a September low of 0.8375. Upward-sloping 20-day Exponential Moving Average (EMA) near 0.8765 suggests that the near-term trend is bullish.

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

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

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

USD/CHF daily chart

• Crude Oil edges higher for a third day in a row backed by geopolitical tensions. 
• Headlines risk in the Russia and Ukraine war points to further escalation ahead. 
• The US Dollar Index recovers with traders bracing for Nvidia earnings after the US closing bell. 

Crude Oil prices are ripping higher for a third day in a row on Wednesday, getting close to the $70 round level,  as geopolitical tensions – namely the escalation in the war between Russia and Ukraine – take over market sentiment to the detriment of stockpile data. 

That element became very clear after the release from the American Petroleum Institute (API) US stockpile data on Tuesday, which showed a big buildup of 4.753 million barrels. Such a big increase in inventories should weigh on Oil prices, but markets largely ignored the data due to headlines pointing to increased tensions between Ukraine and Russia.

Meanwhile, the US Dollar Index (DXY) is edging up slightly with all eyes towards Nvidia earnings later on Wednesday. Equities are on the front foot and the US Dollar is also supported. Traders will also hear comments from four Federal Reserve (Fed) officials. 

At the time of writing, Crude Oil (WTI) trades at $69.57 and Brent Crude at $73.36.

Oil news and market movers: API and EIA data ignored

• Near 15:30 GMT, the Energy Information Administration (EIA) will release its weekly Crude stockpile change numbers. The forecast is for a small build of 0.4 million barrels against the build of 2.089 million barrels reported last week.
• The American Petroleum Institute (API) released its weekly Crude stockpile change numbers for the week ending November 15 on Tuesday. A firm build of 4.753 million barrels was reported, well above the forecast of 0.8 million barrels and against the drawdown of 0.777 million the previous week. 
• Norway's Equinor said on Wednesday that it restored full output capacity at the Johan Sverdrup oilfield in the North Sea following a power outage, Reuters reports. 

Oil Technical Analysis: Limited potential for this rally

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

On the upside, the 55-day Simple Moving Average (SMA) at $70.07 is the first barrier to consider before the hefty technical level at $73.04, which aligns with the 100-day SMA. The 200-day SMA at $76.52 is still quite far off, although it could be tested if tensions intensify further. 

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

US WTI Crude Oil: Daily Chart

European Central Bank (ECB) data showed that negotiated wage growth picked up to 5.4% in Q3, from 3.5% in Q2, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

EUR overlooks sharp pick up in negotiated wages in Q3

“Elevated wage demand was a concern for ECB hawks earlier this year and the renewed pick up in pay will make for uncomfortable reading for hawks. Policymakers are still likely to press ahead with cautious easing steps, however, believing that looser labour market conditions ahead will curb wage demand and reduce secondround price risks in 2025.”

“Swaps pricing for the December ECB policy decision is unchanged, with 29bps of easing priced in. The EUR is softer but spot is still, just about, holding within its recent consolidation range—a potential bear flag.”

EUR/USD weakness should resume more obviously on a break under short-term support (flag base) at 1.0540. Resistance is 1.0600/10.

Steadier sentiment across risk assets prevails this morning, allowing gains in global stocks and a broader rebound in the US Dollar (USD) after a few days of mild losses, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

USD steadies after correction

“USD gains look quite solid and the DXY is attempting to break out of the recent consolidation pattern on the short-term chart. The DXY’s drift lower since late last week took the form of a bull flag pattern and a sustained push through 106.60/65—right about where the index is this morning—could trigger another leg up.”

“Rising US yields and still resilient growth prosects plus expectations of dollar-positive policies form the incoming administration are refreshing ‘US exceptionalism’ argument in favour of the USD. Beyond FX, risk assets may warrant some attention. Reuters noted yesterday that ‘the S&P 500 is having one of its best calendar years since 1928’. Auspicious. November returns of 3.8% (so far) for the S&P 500 are well ahead of the average of the past 35 years (2.3%). Investor sentiment is strongly bullish but market breadth is softening.”

“Strong gains in stocks, underpinned by the classic ‘FOMO’ mentality, could certainly extend but any significant correction in markets will quickly spillover (positively) into havens and (negatively) into high beta FX. Unusually, there are no major data releases scheduled for the session ahead. There is a 20Y auction, however, and several central bank policymakers are speaking—including the Fed’s Barr, Cook, Bowman and Collins (the latter being the only non-voter).”

• Gold pulls back on Wednesday as a result of a stronger US Dollar. 
• The Greenback is rising due to less dovish interest rate expectations in the US.
• XAU/USD starts a new short-term uptrend on the 4-hour chart. 

Gold (XAU/USD) pauses its recovery and pulls back into the $2,620s on Wednesday due mostly to the effect of a stronger US Dollar (USD). Since Gold is mainly priced and traded in USD, this automatically has the effect of lowering its price even though all other things being equal. 

Gold stalls in the middle of recovery 

Gold recovered from eight-week lows in the $2,530s at the beginning of the week as a result of increased safe-haven flows. This came on the back of a ratcheting up of geopolitical tensions after Russia amended its conditions for using its nuclear armaments. The move was interpreted as a warning to Ukraine and its allies following the decision of US President Joe Biden to allow Ukraine to use US-made long-range ATACMS (Army Tactical Missile System) missiles to strike targets in Russia. 

US Dollar on the rise 

Gold is in retreat on Wednesday from a strengthening US Dollar, which is seeing gains as markets price in a lower probability – of now around 60% – of the Federal Reserve (Fed) cutting interest rates in December. Previously, markets had been 100% sure the Fed would go ahead with at least a 25 basis point (bps) (0.25%) rate cut. However, since President-elect Donald Trump won the US presidential election – and due to recently robust US macroeconomic data – the probabilities have steadily fallen. The Fed keeping interest rates elevated is positive for the US Dollar since it increases foreign capital inflows.

The main cause of the strengthening Dollar is Trump’s proposed economic and trade policies. These include increasing or placing tariffs on imports, which will effectively push up their prices, causing inflation and keeping interest rates high; lower taxes, which will increase spending power, thereby also pushing up inflation; and a more relaxed regulatory environment. 

Technical Analysis: XAU/USD extends short-term uptrend 

Gold recovers above a major trendline on Wednesday as it extends its short-term trend higher. Given the principle of technical analysis that “the trend is your friend,” the odds favor more upside to come. 

XAU/USD 4-hour Chart

A break above the daily high at $2,642 will probably indicate an extension of the trend higher. The next target to the upside lies at $2,686, the September 26 high. 

The precious metal is in a downtrend on a medium-term but an uptrend on a long-term basis, raising risks of moves both higher or lower in line with these broader cycles. 

LME lead stockpiles surged to the highest level since 2013 yesterday after a second consecutive day of big inflows into the exchange’s sheds in Singapore, ING’s commodity analysts Warren Patterson and Ewa Manthey note.

Global lead market is set to see another surplus

“Singapore now accounts for 98% of LME lead inventories. Total LME inventories jumped by more than 49% in the last two days alone. Lead is one of the worst performers on the LME this year, with prices down around 3% year-to-date and weak auto sales weighing on demand for the battery metal.”

“The global lead market is set to see another surplus this year. The global supply of refined lead will exceed demand by 40,000 tonnes in 2024, according to the International Lead and Zinc Study Group (ILZSG).”

“The latest LME COTR report released yesterday shows that investors decreased their net bullish position in copper by 10,315 lots to 58,398 lots for the week ending 15 November. This is the lowest net long since 19 January 2024. Similarly, net bullish bets for zinc fell by 2,737 lots to 27,072 lots, the lowest since the week ending 6 September 2024.”

• The US Dollar recovers after after a volatile Tuesday. 
• Markets are favoring risk-on ahead of the much anticipated Nvidia earnings. 
• The US Dollar index trades up in the 106.50 area, still looking for support to bounce off from. 

The US Dollar (USD) recovers on Wednesday, with the DXY Index trading around 106.5, as market sentiment turns risk-on ahead of the Nvidia earnings release after the US closing bell. Overnight in the US session, markets reversed the initial concerns about the escalated situation between Russia and Ukraine after Russian President Vladimir Putin said he is open to a peace deal brokered by President-elect Donald Trump. 

The US economic calendar is still rather empty on Wednesday, except for the weekly Mortgage Applications data. The focus shifts to the Federal Reserve (Fed), with four Fed speakers set to release comments for the markets. That December interest-rate cut remains in limbo, with traders unsure whether the Fed will stick to its previous commitment to cutting rates in December again. 

Daily digest market movers: Calm down 

• Geopolitical headlines on Ukraine and Russia point to an easing of tensions after Russian President Vladimir Putin confirmed that he would be open to a ceasefire discussion with President-elect Donald Trump, Reuters reports.
• At 12:00 GMT, the Mortgage Bankers Association (MBA) released the weekly Mortgage Applications. This week’s number came in at 1.7% against last week’s numbers, which was an increase of 0.5%. 
• Near 15:00 GMT, Federal Reserve Vice Chair for Supervision Michael Barr testifies about the oversight of prudential regulators before the House Financial Services Committee in Washington DC.
• Federal Reserve Governor Lisa Cook delivers a speech about the US economic outlook and monetary policy at the University of Virginia Department of Economics in Charlottesville, Virginia at 16:00 GMT.
• Near 17:15 GMT, Federal Reserve Governor Michelle Bowman delivers a speech about "approach to agency policymaking" at the Forum Club of the Palm Beaches in West Palm Beach, Florida.
• Federal Reserve Bank of Boston President Susan Collins delivers remarks and participates in a conversation at an event organized by the Ford School in Ann Arbor, Michigan at 21:00 GMT.
• Equities have shrugged off the drag of the geopolitical headlines from Tuesday and are in positive spirits ahead of the Nvidia earnings release after the US closing bell. European stocks are up with US equity futures following suit. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 59.1%. A 40.9% chance is for rates to remain unchanged. While the rate-cut scenario is the most probable, traders have significantly pared back some of the rate-cut bets compared with a week ago.
• The US 10-year benchmark rate trades at 4.42%, sliding further away from the high printed on Friday at 4.50%.

US Dollar Index Technical Analysis: Easing down 

The US Dollar Index (DXY) edges up slightly in the mid-106.00 region on the daily chart. Markets have let the dust settle on the geopolitical headlines from Tuesday and are eagerly awaiting the Nvidia earnings later this Wednesday. As Trump trade is starting to unwind, the DXY might need to look for lower support in order to attract buyers. 

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

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

US Dollar Index: Daily Chart

Despite an escalation in the Russia-Ukraine war, there has been limited impact on oil prices. ICE Brent settled almost flat yesterday, even after Ukraine fired a US-made long-range missile into Russia for the first time. At the same time, Russia also updated its nuclear doctrine, widening the scope for the use of atomic weapons, ING’s commodity analysts Warren Patterson and Ewa Manthey note.

US crude oil inventories increase

“Eating into some of the geopolitical risks related to Russia-Ukraine were reports that Iran offered to stop increasing its stockpiles of uranium enriched up to 60%. The International Atomic Energy Agency has said Iran has taken the first steps to cap production. If this occurs, it removes some supply risks related to Iranian oil when President-elect Trump enters office.”

“In the North Sea, the Johan Sverdrup field has resumed operations after a power outage led to a halt in production on Monday. The field produces around 755k b/d but will take some time to return to full capacity.”

“Numbers from the API overnight show that US crude oil inventories increased by 4.8m barrels over the last week, compared to expectations for a marginal draw. For refined products, gasoline and distillate stocks fell by 2.5m barrels and 700k barrels respectively. The more widely followed EIA report will be released today.”

The growth story in Norway remains that of ‘muddling through’. Over the last two years we have had close to zero growth in the mainland economy and despite inflation – and presumably rates next year – coming lower the stabilisation in savings rates still seem to limit the potential for a sharp consumption driven rebound in mainland GDP. Also, the decline in new orders for the petroleum industries also suggest that one of the primary growth engines look set to lose steam in 2025, Danske Bank’s FX analysts note.

Downside pressure on NOK to strengthen in the coming years

“Norges Bank (NB) delivered a hawkish surprise at the September meeting by pushing back against market expectations of a 2024 rate cut. While we think it is fair for markets to price some probability of a 2024 rate cut, we think NB has revealed its preferences which suggest that continued downside surprises to inflation is unlikely to be enough to trigger rate cuts. Instead, we need to see capacity utilisation metrics turn over. We pencil in the first rate cut in March 2025 and eventually think NB will deliver more rate cuts than currently signalled in both 2025 and 2026.”

“Despite the NOK rallying since the US elections amid a very weak EUR performance and NOK rates following USD rates more closely, we remain medium- to long-term negative on NOK and see any further rally as temporary. Any announcement from NB to cap the size of the FX reserve seems like the most probable catalyst for driving more near-term NOK strength. We highlight how the combination of surging unit labour costs and falling unit profits is not sustainable over time without a rise in unemployment and/or a weaker exchange rate.”

“Given the fiscal setup in Norway we think the potential for much higher unemployment is capped which should add renewed downside pressure on NOK in the coming years. Risks are connected to the global investment environment, US monetary policy, possible NB announcement on FX intervention and the Middle East.”

• EUR/CAD seesaws near the intraday low of 1.4750 even though the Eurozone Negotiated Wages Rate accelerated in the third quarter.
• ECB officials worry about the impact of a trade war with the US on economic growth.
• Canada’s hotter-than-expected inflation data strengthens the Canadian Dollar.

The EUR/CAD pair stays under pressure near the intraday low of 1.4750 in the European trading session on Wednesday even though Eurozone Negotiated Wages Rate data accelerated in the third quarter of the year. The wage growth measure grew by 5.42%, faster than the Q2 release of 3.54%, prompting expectations of a recovery in consumer spending.

However, the cross showed a muted reaction to the wage growth measure, with European Central Bank (ECB) policymakers focusing more on reviving economic growth than controlling inflation. The European Union (EU) is expected to enter a trade war with the United States (US) as President-elect Donald Trump mentioned in its election campaign that the euro bloc will "pay a big price" for not buying enough American exports.

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

Fears of a potential trade war could falter Eurozone economic growth and keep inflation well below the bank’s target of 2%. This has also prompted expectations of more interest rate cuts by the ECB. In the December meeting, the ECB is expected to cut its Deposit Facility Rate again by 25 basis points (bps) to 3%.

Meanwhile, the Canadian Dollar (CAD) performs strongly against a majority of its peers after the Canadian inflation data for October came in hotter than expected. Tuesday’s CPI data showed that the headline inflation accelerated at a faster-than-projected pace to 2% against 1.6% in September on year. Economists expected the headline inflation to have grown by 1.9%. Month-on-month headline inflation rose by 0.4%, the same pace at which price pressures decelerated in the previous month. Soft inflation data is expected to weigh on the Bank of Canada's (BoC) dovish bets for the December meeting.

• The Mexican Peso trades mixed in its key pairs as markets absorb heightened geopolitical tensions and idiosyncratic factors.
• The Peso has completed five up days in a row on a more optimistic outlook and the expectation of interest rates remaining elevated in Mexico. 
• USD/MXN trades sideways within a larger rising channel, falling closer to support at the channel’s base.

The Mexican Peso (MXN) whipsaws between tepid gains and losses in its key pairs – USD/MXN, EUR/MXN and GBP/MXN – during the European session on Wednesday. A sudden ramping up of geopolitical uncertainty is causing ripples in global financial markets, and idiosyncratic factors are also an ingredient to the mix. Markets are jittery after Russia’s announcement that it has lowered the bar for the deployment of nuclear weapons in response to the US agreeing to allow Ukraine to use US-made missiles to strike targets in Russia. 

This follows a five-day winning streak for the Mexican Peso built on the back of the waning effect of the Trump-trade on the US Dollar (USD), optimistic growth and deficit-reduction plans of the Mexican government, and a positive lift from the outcome of the Bank of Mexico’s (Banxico) November policy meeting. 

Mexican Peso trades mixed in volatile market environment

The Mexican Peso trades mixed on Wednesday amid heightened market volatility following Russian President Vladimir Putin’s announcement that Russia had amended its so-called Nuclear Doctrine – its conditions for using nuclear weapons – to include conventional attacks from non-nuclear nations if they are backed by a nuclear state. The revision was interpreted as a direct warning to the US after it allowed Ukraine to strike targets in Russia using US-made long-range ATACMS (Army Tactical Missile System) missiles. According to Russian state media, Ukraine fired six such missiles at a Russian military facility in the Kursk Oblast on Tuesday.  

According to the Associated Press, “Putin.. (..) emphasized that Russia could use nuclear weapons in response to a conventional attack posing a “critical threat to our sovereignty,” a vague formulation that leaves broad room for interpretation.” 

Mexican Peso recovers on Trump fade, however, risks remain 

The Mexican Peso has been in a steady uptrend over the last five days as the USD-bullish effect of the Trump-trade fades. The Peso could still face further headwinds, however, as the scope and size of the US’s intended trade tariffs clarify. 

US President-elect Donald Trump still has to name the US Trade Representative. However, rumors continue circulating that he may give the role to Robert Lighthizer, who has been described as an “arch hawk on trade” by ING bank. Such a move would probably end the Mexican Peso’s brief recovery.

Trump’s choice of Marco Rubio as Secretary of State suggests further risks for the Mexican economy and the Peso, as Rubio is known for his tough stance on left-wing Latin American governments. Apart from taking a harder line on obvious targets such as Venezuela, Cuba and Nicaragua, Rubio could also attack Mexican ties with Beijing.

“He is also likely to push governments in the region to clamp down on Chinese investment and influence in their countries,” writes Kimberley Sperrfechter, Emerging Markets Economist at Capital Economics. “Mexico is likely to bow to that pressure, whereas others’ willingness to comply with US demands will be influenced by the depth of their geopolitical ties with Beijing and their trade balances vis-à-vis China,” she adds. 

Banxico raises inflation forecast

The Peso has also seen gains after the Bank of Mexico revised up its forecast for inflation in 2024 to 4.7% from 4.3%. The change suggests the central bank will probably not cut interest rates as aggressively as previously expected – a positive for the Peso since maintaining elevated interest rates increases capital inflows into a country, supporting its currency. 

Moody’s downgrades Mexico before publication of 2025 Budget

The Mexican Peso successfully shrugged off Moody’s Ratings cut Mexico’s credit rating from Baa2 “Stable” to “Negative” last Thursday. The rating agency based its decision on expectations that the country will run a high budget deficit of 5.9% of Gross National Product (GDP) in 2024 (its highest since the 1980s). It also highlighted risks to the economy from the government’s judiciary reforms, which Moody’s views as threatening the rule of law and “eroding checks and balances” to the executive’s power. 

However, Mexican Finance Minister Rogelio Ramírez de la O quickly pushed back at the downgrade, saying that Moody’s had not taken into account his budget for 2025, which was published the following day, Friday. 

In the 2025 budget, Ramírez de la O forecast an increase in GDP of between 2% and 3% and a much lower budget deficit of 3.9% of Gross Domestic Product (GDP) (from a projected 5.9% in 2024). Large cost savings to the Departments of Security and Health, backed by robust growth, will lower the deficit. The Peso seems to have been buoyed by his optimism. 

Analysts' responses have been mixed, with Gabriela Siller, an analyst at Banco BASE, arguing that "The rosy estimates make it unlikely that the deficit and debt forecasts are reached,” according to Reuters.

However, others were more positive: “​​In general terms the budget proposal meets expectations: it shows a considerable reduction in the deficit without fueling concern of a potential economic recession," said analysts at CIBanco in a note. “The economic outlook is optimistic,” which "should be enough to remove one more fear from investors,” they added.

Technical Analysis: USD/MXN extends pullback towards support

USD/MXN continues pulling back within a rising channel. The short-term trend is unclear and possibly sideways – but the longer-term trend remains bullish. 

The pullback (wave “B” on the chart below) from the November 12 high (top of wave “A”) is still declining and could fall down to support at 19.78 (red dashed line) at the November 7 swing low, 50-period Simple Moving Average (SMA) and base of the channel. 

USD/MXN Daily Chart 

After that, however, USD/MXN will probably extend a new leg higher in line with its broader up cycles, and this could see prices return to the zone between 20.80 (November 6 high) in a wave “C?” (green dashed line) of a three-wave Measured Move pattern which might be currently evolving (waves A, B and C?). 

Further, a break above 20.80 would confirm a higher high and an extension of the medium and long-term bullish trend and unlock the next upside target at 21.00 (round number), where buyers could start to meet resistance. 

Swedish macro has disappointed recently, and the long-awaited cyclical rebound has yet to materialize. The weak growth prospects have evidently started to unnerve the Riksbank somewhat, as it was cited as the main reason for them to ‘go big’ by cutting 50bp at the November meeting. Despite recent macro disappointments, we continue to pencil in a substantial growth recovery in 2025, where we also see the Swedish economy outperforming the eurozone. However, this is probably not enough to turn into an outright SEK tailwind as the global cyclical outlook with a continued US outperformance tend to be SEK negative, Danske Bank’s FX analysts note.

Medium-term outlook for the SEK remains challenging

“Despite current and still fragile growth prospects, we see the November move as a ‘one-off’ and expect them to revert to 25bp increments for the coming meetings, with the next cut already in December. We are also looking forward to the Riksbank’s updated estimate of the Swedish neutral rate, which they have promised to discuss at the December meeting. This estimate will give further insights on what level the Riksbank sees for the terminal rate. In 2025, we pencil in three additional rate cuts (Jan, Mar & Jun), bringing the terminal rate to 1.75%.”

“We remain strategically bearish on the SEK. However, we argue that the recent broad SEK selloff has been exaggerated. Our relative rates model has fair value for EUR/SEK at 11.25. Hence, the cross has reached stretched overbought levels, where historically spot has been prone to a significant correction. Additionally, the SEK enters its most constructive period of the year, with multi-year seasonality indicating a substantial downside in most SEK crosses through year-end. As such, we keep our 1M forecast intact.”

“The medium-term outlook for the SEK remains challenging, though. US outperformance in terms of growth prospects and rates weigh on European currencies including the krona. Relative monetary policy is another headwind as the Riksbank front runs peers. A continued USD rally and/or a massive sell off in global equities account for the primary upside risks to our near-term forecast horizon.”

Recent US macro data suggests that the Fed can gradually normalize monetary policy toward a more neutral stance. In the euro area, recent data indicates clear signs of weaker growth momentum and moderating labour market dynamics. Coupled with easing inflation data, with headline inflation declining below 2% for the first time in three years, the pressure on the ECB to move more quickly toward a neutral policy stance has increased, Danske Bank’s FX analysts note.

USD rally can stall toward year-end

“We expect the Fed to deliver a 25bp cut at each meeting through June of next year. Similarly, we anticipate the ECB to implement back-to-back 25bp cuts until summer 2025. If our expectations – which are below consensus for both the Fed and ECB – are correct, monetary policy alone could help stabilize EUR/USD toward year-end but is unlikely to have a notable impact over the longer term.”

“We maintain a bearish medium-term view on EUR/USD, expecting the cross to gradually decline toward 1.01 over a 12M horizon. The US election outcome reinforces our bearish outlook, given anticipated pro-growth and inflationary policies in the US, along with our expectation of relatively stronger US growth dynamics compared to the euro area in the coming year.”

“In the near term, however, we believe markets may have become overly hawkish on Fed pricing, and with downside risks to the cyclical US growth outlook, the USD rally could stall toward year-end. Significant weakness in the US economy poses a risk to our forecast, as does a marked improvement in the euro area economy, potentially supported by a rebound in the fragile global manufacturing sector.”

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

Below 7.2000 USD is set to stop rising further

24-HOUR VIEW: “We noted yesterday that ‘there has been a slight increase in momentum.’ We were of the view that USD ‘could decline further, but any decline is unlikely to reach the strong support at 7.2000.’ Our view did not turn out, as USD traded in a sideways range of 7.2250/7.2488, closing at 7.2331 (+0.10%). We continue to detect a soft underlying tone, and we continue to hold the view that USD could weaken. However, the strong support at 7.2000 is still likely out of reach (there is another support level at 7.2180). Resistance levels are at 7.2400 and 7.2490.”

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

On Wednesday, the European Central Bank (ECB) released its indicator of the Euro area’s negotiated wages data for the third quarter of 2024.

Data showed that the Euro area negotiated wages accelerated at an annual pace of 5.42% in Q3 2024 after growing by a revised 3.54% in the second quarter of this year.

Market reaction to the EU negotiated wages data

The sudden pick up in the EU negotiated wage growth fails to offer any support the Euro, as EUR/USD flirts with intraday lows near 1.0550, as of writing.

About ECB indicator of negotiated wage growth

The ECB indicator of negotiated wage growth is computed for a subset of countries only. The euro area aggregate is based on nine countries: Germany, France, Italy, Spain, the Netherlands, Belgium, Finland, Austria and Portugal. The indicator relies on data for negotiated monthly earnings. The euro area indicator is based on a mixture of monthly and quarterly time series and is based on non-harmonised country data.

Canadian inflation figures for October, published yesterday, were slightly higher than expected. At a seasonally adjusted 0.3 percent, the month-on-month rate was at the upper end of the range in which inflation has fluctuated over the past 14 months, Commerzbank’s FX analyst Michael Pfister notes.

CAD can appreciate again from the spring onwards

“However, there is no reason to worry that inflation will now return to the fore. The 2% headline rate is right in the middle of the target range, and the Bank of Canada (BoC) is unlikely to react until we see several months of such high inflation rates.”

“One thing yesterday's figures did show, however, is that those who feared that inflation would soon undershoot the target by a significant margin were dealt a blow. There is therefore still a strong case for further rate cuts, especially in view of the weakening real economy, but even faster rate cuts are probably not appropriate (yet).”

“We continue to favour a 50bp cut in December, possibly coupled with first signs that the foot can be taken off the gas. Accordingly, we remain comfortable with our forecast that the CAD should appreciate again from the spring onwards.”

Pullback in the US Dollar (USD) could extend to 153.20, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

No change of the ‘strong resistance’ level at 155.80

24-HOUR VIEW: “Yesterday, when USD was at 154.65, we were of the view that USD ‘could trade in a choppy manner, likely between 153.80 and 155.10.’ However, USD plummeted to 153.28, rebounding sharply to end the day unchanged at 154.65. The price action provides no further clarity, and we continue to expect USD to trade in a range, probably between 154.20 and 155.30.”

1-3 WEEKS VIEW: “Two days ago (18 Nov, spot at 154.20), we highlighted that ‘The current price action is likely part of a pullback that could extend to 153.20.’ We also highlighted that ‘should USD break above 155.80 (‘strong resistance’ level), it would mean that the current downward pressure has eased.’ Yesterday, USD dropped to 153.28 before rebounding strongly. The underlying tone still appears to be soft, and there is a chance for a decisive test of 153.20. On the upside, there is no change of the ‘strong resistance’ level at 155.80.”

In the end, EUR/USD was virtually unchanged. At one point, the euro was down 0.7% against the USD. This was due to two successive pieces of news, both of which brought the geopolitical risks in Europe back into investors' focus, at least for a short time. The first was the news that Ukraine had used so-called ATACMS weapons against a target in Russia, having only recently been approved for this kind of use by the US. The second was the news that Putin had changed the Russian nuclear doctrine to allow Russia to respond to large-scale conventional attacks with a nuclear counterstrike. Particularly to the latter news European currencies reacted with significant losses, Commerzbank’s FX analyst Volkmar Baur notes.

The next Treasury Secretary can be interesting to look at  

“The market quickly realised that this was probably just another in an already long series of nuclear threats from Russia. A real deployment would be thin ice for a country that is now heavily dependent on Chinese imports and that has been explicitly warned against such a deployment by China. Moreover, it quickly became clear that Western intelligence services were unaware of any preparations in Russia for such an operation. As a result, European exchange rates recovered as the day went on.”

“ The appointment of the new US Treasury Secretary, the most important yet to be filled position in the new US administration, is still eagerly awaited. For a long time it seemed relatively clear that Wall Street veteran Scott Bessett would get the nod. However, rumours emerged last week that Howard Lutnick had also expressed an interest. Bessett is seen as Wall Street's favourite, but the Trump team recently seemed to have doubts about how much he would support the planned import tariffs. Lutnick's chances therefore seemed to be growing until yesterday, when he was appointed as head of the Commerce Department. As is so often the case, a third party now appears to be rejoicing as two sides squabble. Marc Rowan, another Wall Street veteran, is now the favourite.

“The market will be looking at the extent to which unconventional economic policies can be expected under the new Treasury Secretary. In the short term, the appointment of a Wall Street veteran is likely to reassure currency traders. In the medium term, however, it remains to be seen how much leeway even an experienced Treasury Secretary will have to push against unconventional ideas coming from a Trump 2.0 administration.”

• Silver price slides below $31.00 as its safe-haven demand fades.
• Higher bond yields also weighed on the Silver price.
• Investors expect the Fed to deliver fewer interest rate cuts in the current policy-easing cycle.

Silver price (XAG/USD) extends its correction below $31.00 in European trading hours on Wednesday after facing selling pressure near $31.50 on Tuesday. The white metal falls back as fresh escalation in the Russia-Ukraine war inspired by President Vladimir Putin’s approval to lowering the threshold for counter attack by nuclear weapons faded after Russian Foreign Minister Sergei Lavrov said the country will "do everything possible" to avoid the onset of nuclear war.

Putin cleared revision in the nuclear doctrine after US President Joe Biden provided the Army Tactical Missile System (ATACMS) to Ukraine and permitted them to launch deep into Russian territory. Historically, demand for safe-haven assets such as Silver, strengthens in times of uncertainty and heightened geopolitical risks.

A sharp recovery in the US Treasury yields has also weighed on the Silver price. 10-year US Treasury yields jump to near 4.42% on expectations of fewer interest rate cuts from the Federal Reserve (Fed) in its current policy-easing cycle. Higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets, such as Silver. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, bounces back strongly above 106.60.

Market participants expect the economic agenda of President-elected Donald Trump will boost the United States (US) inflation and economic growth, a scenario that will force the Fed to follow a gradual rate-cut approach.

Silver technical analysis

Silver price stays on track toward the upward-sloping trendline around $29.00, plotted from the February low of $22.30, which also coincides with the 200-day Exponential Moving Average (EMA). The white metal falls back after facing selling pressure near the 50-day EMA, which trades around $31.40.

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

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

Silver daily chart

• Fed Chairman Powell's cautious remarks on further policy easing lifted US yields.
• Markets await comments from Fed officials, while assessing the odds of a December rate cut.
• Fed Governor Cook and Governor Bowman are scheduled to delivers speeches on Wednesday.

Federal Reserve (Fed) Chairman Jerome Powell said in prepared remarks delivered at a Dallas event on November 14 that they don't need to be in a hurry to lower interest rates, citing ongoing economic growth, a solid job market and inflation that remains above the 2% target.

Powell further reiterated that the policy is still restrictive but argued that they need to move patiently and carefully to find the neutral rate. "If data let us go slower, that's a smart thing to do," he added. 

US Treasury bond yields pushed higher following Powell's remarks and the US Dollar (USD) outperformed its rivals in the second half of the previous week. According to the CME FedWatch Tool, markets are currently pricing in about a 40% probability of the Fed leaving the policy rate unchanged at 4.5%-4.7% at the December policy meeting, up from a 17.5% chance a week ago.

Earlier in the week, Kansas Fed President Jeffrey Schmid stated that he believes inflation and employment are both heading toward desired levels. "Now is the time to dial back restrictiveness of policy," Schmid noted. Commenting on Donald Trump's proposed policies, "tariff and immigration policies will be relevant to the Fed if they impact employment and inflation," he said.

Later in the day, Fed Governor Lisa Cook will speak about the US economic outlook and monetary policy at the University of Virginia Department of Economics in Charlottesville, Virginia. Additionally, Fed Governor Michelle Bowman will deliver a speech titled "Approach to Agency Policymaking" at the Forum Club of the Palm Beaches in West Palm Beach, Florida.

In its semi-annual Financial Stability Review published on Wednesday, the European Central Bank (ECB) warned that “economic growth remains fragile.”

Additional takeaways

Market reaction

EUR/USD holds lower ground near 1.0550 following the release of the ECB publication, down 0.40% on the day. The pair remains mainly undermined by resurgent US Dollar demand across the board.

Silver prices (XAG/USD) fell on Wednesday, according to FXStreet data. Silver trades at $30.94 per troy ounce, down 1.05% from the $31.27 it cost on Tuesday.

Silver prices have increased by 30.02% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 84.78 on Wednesday, up from 84.23 on Tuesday.

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

Upward momentum is building, albeit tentatively. The New Zealand Dollar (NZD) is likely to edge higher, but is unlikely to reach 0.5960 for now. In the longer run, provided that NZD remains above 0.5850, it could rise gradually to 0.5960, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD can rise gradually to 0.5960

24-HOUR VIEW: “Yesterday, we expected NZD to trade in a 0.5860/0.5910 range. It then traded between 0.5876 and 0.5913, closing on a firm note at 0.5911, higher by 0.29% for the day. Upward momentum appears to be building, albeit tentatively. Today, NZD is likely to edge higher. As momentum is not strong, any advance is unlikely to reach 0.5960 for now (there is another resistance level at 0.5940). Support is at 0.5895; a breach of 0.5875 would mean that the buildup in momentum has eased.”

1-3 WEEKS VIEW: “After holding a negative view in NZD since the middle of last week, we highlighted yesterday that ‘slowdown in momentum indicates that 0.5775 is probably out of reach.’ In NY trade, NZD rose to 0.5913. Downward momentum has faded. Upward momentum is beginning to build. From here, provided that NZD remains above 0.5850, it could rise gradually to 0.5960.”

• The USD/CAD faces an immediate barrier at the nine-day EMA of 1.3979 level.
• The nine-day EMA is above the 14-day EMA, signifying ongoing strength in short-term price momentum.
• The pair finds support around the 14-day EMA at the 1.3958 level, followed by the psychological 1.3950 level.

The USD/CAD pair holds ground after two days of losses, trading around 1.3970 during the European hours on Wednesday. The daily chart analysis indicates that the pair is trending upwards within an ascending channel pattern, suggesting a bullish bias.

The 14-day Relative Strength Index (RSI) is above the 50 level, confirming continued bullish momentum. Additionally, the nine-day Exponential Moving Average (EMA) is positioned above the 14-day EMA, indicating persistent strength in short-term price momentum.

On the upside, the USD/CAD pair faces an immediate resistance at the nine-day EMA of 1.3979 level. If the pair breaks above this level, it may move toward the region around the upper boundary of the ascending channel at the 1.4130 level. A breakout above this channel could reinforce the bullish bias and drive the pair toward the next key resistance level of 1.4173, last seen in May 2020.

Regarding support, the USD/CAD pair could test the immediate 14-day EMA at the 1.3957 level. A break below this level could weaken the bullish bias, putting downward pressure on the pair to test the lower boundary of the ascending channel at the 1.3920 level.

USD/CAD: Daily Chart

• EUR/USD faces pressure near 1.0600 as ECB policymakers seem more worried about the economic outlook than about controlling inflation.
• ECB’s Panetta emphasized an expansionary monetary policy stance to prevent inflation from remaining well below the bank’s target.
• Deutsche Bank sees the Fed cutting interest rates in December but expects it to be a close call.

EUR/USD continues to face pressure near 1.0600 in Wednesday’s European session, struggling to extend recovery since Friday. The major currency pair lacks adequate strength for further upside as the US Dollar (USD) remains broadly firm on expectations of fewer interest rate cuts from the Federal Reserve (Fed) in its currency policy-easing cycle.

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

Trump vowed to raise import tariffs universally by 10% and lower taxes, a move that would not allow the Fed to go for deeper rate cuts. For the December meeting, the Fed will likely cut its borrowing rates by 25 basis points (bps) to the 4.25%-4.50% range, but the decision remains a “close call,” according to analysts at Deutsche Bank.

At the time of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, bounces to near 106.30 from the immediate support of 106.10. The USD Index exhibited sheer volatility on Tuesday due to fresh escalation in the Russia-Ukraine war.

The Greenback gained in the European session on Tuesday as Russian President Vladimir Putin’s clearance to nuclear doctrine revision against Ukraine’s launch of long-range missiles, permitted and provided by the US on President Joe Biden’s approval, strengthened its safe-haven appeal. However, the safe-haven demand lost steam after Russian Foreign Minister Sergei Lavrov said the country would "do everything possible" to avoid the onset of nuclear war, Reuters reported.

Daily digest market movers: EUR/USD struggles to hold recovery 

• The recovery move in the EUR/USD pair has stalled due to negative sentiment towards the Eurozone due to lingering geopolitical tensions, weak economic outlook, and German political uncertainty.
• European Central Bank (ECB) officials are more concerned about preserving growth than taming price pressures, as Trump’s tariffs are expected to impact the overall output. ECB policymaker and the Governor of the Bank of Italy Fabio Panetta said in a speech at Milan's Bocconi University on Tuesday, "With inflation close to target and domestic demand stagnant, restrictive monetary conditions are no longer necessary.” Panetta added that price pressures could remain well below the bank’s target if the economy doesn’t recover.
• When asked about his outlook on interest rates, Panetta said that the central bank needs to "focus on the sluggishness of the real economy" and push key borrowing rates into "neutral, or even expansionary, territory", Reuters reported.
• In this year's last monetary policy meeting on December 12, the ECB is expected to cut its Deposit Facility Rate by 25 bps to 3%. This would be the fourth interest rate cut of the year and a third straight in a row.

Technical Analysis: EUR/USD sees more downside below 1.0500

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

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

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

• AUD/USD attracts some intraday sellers after touching a one-week high on Wednesday.
• Rebounding US bond yields revive USD demand and exert some pressure on the pair. 
• The RBA’s hawkish tilt and a positive risk tone could help limit losses for the Aussie.

The AUD/USD pair retreats from the vicinity of mid-0.6500s, or a one-week high touched earlier this Wednesday and extends its steady intraday descent through the first half of the European session. The downward trajectory drags spot prices to a fresh daily low, around the 0.6515 region in the last hour and is sponsored by the emergence of some US Dollar (USD) dip-buying.

The US Treasury bond yields rebound swiftly after the overnight sharp fall amid the growing conviction that US President-elect Donald Trump's expansionary policies will boost inflation and limit the scope for the Federal Reserve (Fed) to cut rates. Apart from this, the worsening Russia-Ukraine conflict turns out to be another factor underpinning the safe-haven buck, which, in turn, is seen exerting some downward pressure on the AUD/USD pair. 

Meanwhile, the initial market reaction to Russia's announcement that it would lower its threshold for a nuclear strike faded after comments from Russian and US officials eased concerns about the onset of a full-blown nuclear war. This is evident from a generally positive tone around the equity markets, which could act as a headwind for the safe-haven Greenback and help limit the downside for perceived riskier currencies, including the Aussie.

Furthermore, the Reserve Bank of Australia's (RBA) hawkish stance should offer some support to the AUD/USD pair. In fact, the RBA November meeting minutes released on Tuesday indicated that the board remains vigilant to upside inflation risks and believes that policy needs to remain restrictive. This might hold back traders from placing aggressive bearish bets around the Australian Dollar (AUD) and act as a tailwind for the currency pair. 

Moving ahead, investors now look forward to speeches from a slew of influential FOMC members, due later during the North American session, for cues about the future rate-cut path. This, along with the US bond yields and the broader risk sentiment, will drive the USD and produce short-term trading opportunities around the AUD/USD pair. The focus will then shit on RBA  Governor Michele Bullock's speech during the early Asian hours on Thursday.

As expected, yesterday's National Bank of Hungary meeting did not bring any changes. The central bank tried to send a hawkish signal but did not commit too much. Of course, the main reason is the EUR/HUF level and the volatility of the Hungarian market, ING’s FX analyst Frantisek Taborsky notes.

NBH to wait until next year for the first cut

“The initial market reaction suggested a stronger HUF, however the mention of one vote for a rate cut reversed the direction again and EUR/HUF ended the day higher above 408. As we've mentioned previously, much of the reason behind the FX weakness is not in the hands of NBH but is directed at the global story.”

“The pressure on FX, as in the rest of the Central and Eastern Europe (CEE) region, is here to stay for longer in our view. So NBH will just have to wait a longer. Rate cuts are of course postponed indefinitely regardless of dovish data from the economy. We believe EUR/HUF will be drawn further towards the 410 level and possibly move higher should global markets come under pressure.”

“Until then, we will likely see NBH wait until next year and do nothing. At the same time, yesterday's escalation of the Ukraine-Russia conflict shows the vulnerability of the situation and clearly the divergence between Europe and the US after the election shows nothing positive for the CEE region which increases the risks of further selling here.”

There has been a slight increase in momentum; the Australian Dollar (AUD) is expected to rise further to 0.6560. In the longer run, current price action is part of a rebound that could reach 0.6560, possibly 0.6600, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Current rebound can reach 0.6560

24-HOUR VIEW: “We expected AUD to trade in a range between 0.6470 and 0.6520 yesterday. Our view was incorrect as AUD rose to 0.6534. There has been a slight increase in momentum. Today, AUD is expected to rise further to 0.6560. The major resistance at 0.6600 is unlikely to come into view. To maintain the buildup in momentum, AUD must not break below 0.6500, with minor support at 0.6515.”

1-3 WEEKS VIEW: “Yesterday (19 Nov, spot at 0.6505), we noted that ‘downward momentum is slowing.’ We pointed out, ‘a break above 0.6520 would mean that instead of continuing to weaken, AUD is more likely to consolidate.’ AUD then broke above 0.6520, reaching a high of 0.6534. Not only has downward momentum faded, but upward momentum has also increased to an extent. We view the current price action as part of a rebound that could reach 0.6560, possibly 0.6600. We will maintain the same view as long as AUD remains above 0.6460.”

GBP/USD has broken past the 1.270 level this morning after a slightly hotter-than-expected UK CPI print for October, ING’s FX analyst Francesco Pesole notes.

Next BoE cut to commence in February

“We know that the Bank of England's focus is on services inflation, so the rise in headline and core CPI to 2.3% and 3.3% is not really relevant. CPI services did accelerate from 4.9% to 5.0%, which is in line with the BoE and our own forecast. A lot of that acceleration is, however, down to components such as airfares and rents that the BoE deems less indicative of persistent inflation. Our economist’s estimate of ‘core services’ inflation saw a deceleration from 4.8% to 4.5% in October.”

“That is, however, still insufficient to prompt a cut in December, in our view. Even if there is another inflation print before the next BoE meeting, we would probably need a sharp slowdown in services inflation to put a cut back on the table. Our house view is that services CPI will keep bouncing around 5% for the next four months and only turn decisively lower from 2Q25, when we expect the BoE to accelerate the pace of monetary easing.”

“We currently see the next BoE cut in February, which isn’t fully priced in (19bp). We think there will be room for a dovish repricing to negatively affect sterling next year, but the policy gap with a dovish ECB will hardly be closed and we remain generally negative on EUR/GBP. For the short term, we stick with our call that the pair will move back below 0.830.”

Price action still appears to be part of a range trading phase; the Pound Sterling (GBP) is likely to trade between 1.2630 and 1.2710. In the longer run, downward momentum is beginning to slow; a break above 1.2725 would mean that the major support at 1.2565 is out of reach, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Downward momentum is beginning to slow

24-HOUR VIEW: “GBP traded between 1.2615 and 1.2689 yesterday, closing little changed at 1.2682 (+0.02%). We were expecting it to trade in a 1.2625/1.2705 range. The price action still appears to be part of a range trading phase. Today, we expect GBP to trade between 1.2630 and 1.2710.”

1-3 WEEKS VIEW: “We turned negative in GBP about a week ago (12 Nov), when it was at 1.2875. As we tracked the decline, in our latest narrative from two days ago (18 Nov, spot at 1.2620), we highlighted that GBP ‘is likely to continue to weaken to 1.2565.’ After dropping to a low of 1.2598, GBP has not been able to make further headway on the downside. Downward momentum is beginning to slow, and should GBP break above 1.2725 (‘strong resistance’ level previously at 1.2745), it would mean that the major support at 1.2565 is out of reach this time around.”

ECB member Fabio Panetta made headlines yesterday with some dovish remarks. He is one if not the most vocal Governing Council doves, so no surprise there, although it’s significant how he explicitly laid out the role that the ECB should have in supporting eurozone growth, ING’s FX analyst Francesco Pesole notes.

Renewed downside risks for the EUR/USD

“We have a more dovish view on the ECB compared to market pricing exactly because we believe this shift in focus from inflation to growth will lead to faster easing in light of a stagnant activity picture.”

“Today, the ECB releases 3Q data for negotiated wages. This used to be a key input for policy decisions but has lost significance given the greater confidence in the disinflation path. A re-acceleration in wages from the 3.5% of 2Q can offer a counterargument for the hawks, but we suspect some pretty substantial surprise would be needed to heavily affect ECB pricing and the euro.”

“We had expected EUR/USD to find some short-term support, but we now see renewed downside risks given a still wide rate gap and geopolitical risks. Our expectation is that 1.050 can be tested again soon, and by the end of the year we can see a break lower.”

• NZD/USD depreciates toward throwback support at 0.5850 level within the descending channel pattern.
• The daily chart analysis indicates an increasing bearish bias, with the pair moving downwards within the descending channel pattern.
• Immediate resistance is found at the nine-day EMA of 0.5907, with the next level at the 14-day EMA of 0.5926.

The NZD/USD pair breaks its three-day winning streak, trading around 0.5890 during the European session on Wednesday. A review of the daily chart highlights a growing bearish bias, as the pair moves downwards within the descending channel pattern.

The nine-day Exponential Moving Average (EMA) remains below the 14-day EMA, signaling persistent weakness in short-term price momentum. Meanwhile, the 14-day Relative Strength Index (RSI) consolidates below 50 level, confirming the ongoing bearish sentiment.

Regarding the support, the NZD/USD pair could navigate the region around the “throwback support” at the psychological level of 0.5850, followed by the lower boundary of the descending channel at 0.5930 level.

A decisive break below this channel would reinforce the bearish outlook, increasing downward pressure and potentially driving the Kiwi pair toward its two-year low of 0.5772, last seen in November 2023.

On the upside, immediate resistance lies at the nine-day EMA at 0.5907, followed by the 14-day EMA at 0.5926, which coincides with the upper boundary of the descending channel. A breakout above this channel would weaken the bearish momentum, paving the way for the NZD/USD pair to target the psychological level of 0.6000.

NZD/USD: Daily Chart

Global markets have been shaken by a sudden escalation in the Russia-Ukraine conflict after Ukraine used US-supplied long-range missiles for a strike in Russian territory and Moscow lowered the threshold for response using nuclear weapons. So far, this has translated to some noise in the FX market, but no big moves. We suspect the dynamics in US Dollar (USD) crosses were partly still affected by the USD’s overbought positioning status, which may have contributed to curbing geopolitics-related gains, ING’s FX analyst Francesco Pesole notes.

Less resistance to a fresh leg higher in the Greenback

“In other words, markets seem to be cautiously leaning towards a sanguine view on Ukraine, meaning any further escalations should have a much deeper impact on FX. European currencies (excluding CHF) are inevitably the most vulnerable, whereas high-beta currencies that are geographically far from the conflict (like CAD or AUD) should only be affected indirectly through risk-off. The oversold JPY probably has the highest upside potential from an escalation.”

“The US calendar is still quiet and the only focus today will be on a few Fed speakers, including the dovish-leaning Barr and Cook and the more neutral Williams and Collins. An interesting development on the macro side, however, was yesterday’s release of state payrolls, which allows us to calculate the actual impact of the hurricane on the soft October country-wide print (12k). Our US economist crunched the numbers and estimates that the payroll figure would have been around 121k without the hurricane and strike activities.”

“We expect at least 100k of ‘technical’ rebound in the November payroll print, which raises the bar for a hawkish surprise from the Fed.  We recently highlighted the potential for a positioning-driven USD correction. With the recent increase in geopolitical risk, it appears that the risks for the USD are now more balanced, and we may see less resistance to a fresh leg higher in the greenback.”

Brief decline did not result in any increase in momentum; the Euro (EUR) is expected to trade in a range between 1.0550 and 1.0620. In the longer run, weakness in EUR has stabilised; it is expected to consolidate between 1.0520 and 1.0685, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR to consolidate between 1.0520 and 1.0685

24-HOUR VIEW: “Following EUR rise to 1.0607 on Monday, we indicated yesterday that ‘instead of continuing to rise, EUR is likely to trade in a 1.0560/1.0610 range today.’ Although EUR subsequently plummeted to 1.0523, it rebounded quickly to close largely unchanged at 1.0595 (-0.04%). The brief decline did not result in any increase in momentum. We continue to expect EUR to trade in a range, likely between 1.0550 and 1.0620.”

1-3 WEEKS VIEW: “We have held a negative view in EUR for about two weeks. Yesterday (19 Nov, spot at 1.0590), we noted that ‘downward momentum is beginning to fade.’ We stated, ‘A clear break of 1.0610 (‘strong resistance’ level) would mean that EUR has entered a consolidation phase.’ EUR then dropped to 1.0523, rebounded quickly to 1.0600, closing at 1.0595. While our ‘strong resistance’ level at 1.0610 has not been breached yet, downward momentum has eased considerably. To put it another way, the EUR weakness has stabilised. From here, EUR is likely to consolidate, expected to be between 1.0520 and 1.0685.”

• EUR/GBP falls after the release of higher-than-expected UK Consumer Price Index data.
• The UK CPI inflation climbed to 2.3% YoY in October, the highest in six months, up from 1.7% in September.
• German Producer Price Index fell by 1.1% YoY in October, marking the 16th consecutive period of producer deflation.

EUR/GBP loses ground to near 0.8330 during the early European hours. The Pound Sterling (GBP) appreciates following the stronger Consumer Price Index (CPI) data from the United Kingdom (UK) released on Wednesday.

The UK CPI inflation climbed to 2.3% year-over-year in October, the highest in six months, up from 1.7% in September and surpassing forecasts of 2.2%. On a monthly basis, the CPI increased by 0.6% after remaining unchanged in September. Meanwhile, the annual Core CPI, which excludes volatile food and energy prices, rose to 3.3% during the same period, exceeding market expectations of 3.1%. Additionally, the Retail Price Index increased by 3.4% year-over-year, compared to 2.7% in September.

In Germany, the Producer Price Index (PPI) fell by 1.1% year-on-year in October, following a 1.4% decline the previous month, in line with market expectations. This marks the 16th consecutive period of producer deflation. On a monthly basis, producer prices rose by 0.2%, rebounding from a 0.5% drop in September, also matching market estimates.

Since June, the ECB has reduced rates three times as inflation approaches its 2% target, although growth forecasts have been downgraded twice. Markets largely anticipate a 25-basis-point rate cut next month, with a smaller chance of a more significant reduction.

On Wednesday, ECB President Christine Lagarde is set to deliver the opening remarks at the ECB’s Conference on Financial Stability and Macroprudential Policy in Frankfurt. Investors will also be closely watching the preliminary Purchasing Managers’ Index (PMI) figures from the Eurozone and Germany, which are scheduled for release on Friday.

• The Pound Sterling rises sharply after the UK inflation data for October came in hotter than expected.
• Hot UK inflation data could diminish the odds of the BoE delivering another interest-rate cut in December.
• Several Bank of England policymakers have warned about price pressures remaining persistent.

The Pound Sterling (GBP) gains sharply against its all major peers on Wednesday as data from the United Kingdom (UK) Office for National Statistics (ONS) showed inflation accelerated more than expected in October. The Consumer Price Index (CPI) report showed that the annual headline inflation quickened to 2.3% YoY, higher than estimates of 2.2% and the September reading of 1.7%.

Compared with the previous month, headline inflation rose sharply by 0.6%, higher than expectations of 0.5% and after remaining flat in September.

The core CPI – which excludes volatile items such as food, energy, oil, and tobacco – grew by 3.3%, higher than the former reading of 3.2%. Economists had expected core inflation to fall to 3.1%.

Services inflation, a closely watched indicator by Bank of England (BoE) officials, accelerated to 5% from the prior release of 4.9%. Signs of further acceleration in price pressures could force traders to pare bets supporting interest rate cuts in the BoE December policy meeting.

On Tuesday, traders priced a roughly 80% chance that the BoE will cut interest rates by 25 basis points (bps) in the December meeting, according to Reuters.

Several Bank of England (BoE) policymakers – including Governor Andrew Bailey – also warned about price pressures remaining persistent in the monetary policy hearings before the Treasury Select Committee (TSC) on Tuesday. "Services inflation is still above a level that's compatible with on-target inflation," Andrew Bailey said. BoE external member Catherine Mann, an outspoken hawk, said: "Financial markets' inflation expectations suggest the BoE will not get to sustainable 2% inflation in the forecast horizon."

Daily digest market movers: Pound Sterling outperforms its all major peers

• The Pound Sterling jumps above 1.2700 against the US Dollar (USD) in Wednesday’s London session after the UK CPI report for October showed that inflation came in higher than expected.
• The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, steadies above the immediate support of 106.10, with investors looking for fresh cues about the Federal Reserve (Fed) interest rate path in 2025.
• Given the fact that President-elected Donald Trump’s victory in both United States (US) will allow him to execute his economic agenda smoothly, market participants expect the Fed to follow a more gradual policy-easing cycle. US inflation and economic growth are expected to revamp when Trump takes office as policies such as higher import tariffs and lower taxes are expected to boost demand for domestic products and employment.
• Fed officials have refrained from providing projections about the likely impact of Trump’s policies on the economy. Also, they are confident about inflation remaining on a sustainable track towards the bank’s target of 2%.
• For the December meeting, the probability for the Fed to reduce interest rates by 25 basis points (bps) to 4.25%-4.50% has diminished to 59% from more than 82% a week ago, according to the CME FedWatch tool. Market expectations for Fed interest rate cuts diminished after Fed Chair Jerome Powell said last Thursday that the economy "is not sending signals that US central bank needs to be in a hurry to lower interest rates.”
• Going forward, investors will focus on the flash S&P Global Purchasing Managers’ Index (PMI) data for November, which will be published on Friday. The agency is expected to show that overall private sector activity expanded in the US but remained steady in the UK.

Technical Analysis: Pound Sterling extends recovery to near 1.2700

The Pound Sterling climbs above the round-level resistance of 1.2700 against the US Dollar. The GBP/USD pair gains after a breakout of the three-day trading range of 1.2600-1.2700. The Cable could extend its upside move to 1.2800 if it manages to hold the recovery. On the downside, the six-month low of 1.2600 will act as a major support area.

The 14-day Relative Strength Index (RSI) rebounds after turning oversold below 30.00. However, the overall momentum is likely to remain bearish until it breaks above 40.00 decisively.

The overall trend remains negative as the pair trades below the 200-day Exponential Moving Average (EMA), which hovers around 1.2850.

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

Pound Sterling gathers strength against its peers early Wednesday, supported by the stronger-than-forecast inflation readings for October. Later in the day, investors will pay close attention to comments from Federal Reserve (Fed) and Bank of England (BoE) policymakers. 

The UK's Office for National Statistics announced on Wednesday that annual inflation in the UK, as measured by the change in the Consumer Price Index (CPI), climbed to 2.3% in October from 1.7% in September. The Core CPI, which excludes volatile food and energy prices, rose 3.3% in the same period, coming in above the market expectation of 3.1%. On a monthly basis, the CPI increased 0.6% after staying unchanged in September. Finally, the Retail Price Index was up 3.4% on a yearly basis, compared to 2.7% in September. GBP/USD edged higher with the immediate reaction to these figures and was last seen trading in positive territory slightly above 1.2700.

Escalating geopolitical tensions caused investors to seek refuge on Tuesday, allowing the US Dollar (USD) to stay resilient against its major rivals following Monday's decline. The USD Index closed the day virtually unchanged and started to edge slightly higher early Wednesday. Reuters reported that Ukraine has struck an arms depot about 100 km inside Russia, near the town of Karaches, using US ATACMS missiles. Wall Street's main indexes closed mixed for the second consecutive day on Tuesday. In the European morning on Wednesday, US stock index futures trade modestly higher.

Gold benefited from the risk-averse market atmosphere and rose nearly 0.8% on Tuesday. After reaching its highest level in a week above $2,640 in the early Asian session on Wednesday, XAU/USD retreated to the $2,630 area.

During the Asian trading hours on Wednesday, the People’s Bank of China (PBoC), China's central bank, announced that it left the one-year and five-year Loan Prime Rates (LPRs) unchanged at 3.10% and 3.60%, respectively. This decision came in line with the market expectation. After ending the third consecutive day in positive territory, AUD/USD inched higher earlier in the day but declined below 0.6530 by the European morning.

EUR/USD recovered late Tuesday after falling toward 1.0520 and closed the day virtually unchanged. The pair trades in a tight range below 1.0600 to start the European session. The European Central Bank will release Negotiated Wage Rates data for the third quarter on Wednesday. Later in the day, ECB President Christine Lagarde will deliver a welcome address at the ECB conference on financial stability and macroprudential policy in Frankfurt, Germany.

USD/JPY gathers bullish momentum and trades near 155.50 in the European morning following Tuesday's choppy action. Bank of Japan Governor Kazuo Ueda is scheduled to deliver a speech in the Asian session on Thursday.

• EUR/JPY attracts some buyers to around 164.30 in Wednesday’s early European session, adding 0.43% on the day. 
• The cross resumes the upside above the 100-period EMA with the bullish RSI indicator. 
• The first upside barrier is seen at 164.55; the initial support level is located at 164.17.

The EUR/JPY cross resumes the upside to near 164.30 during the early European session on Wednesday. The lack of clear guidance on the next rate hike timing by the Bank of Japan (BoJ) weighs on the Japanese Yen (JPY) and acts as a tailwind for the cross. However, the escalating tensions of the Russia-Ukraine war could boost the safe-haven flows, benefiting the JPY. 

According to the 4-hour chart, EUR/JPY resumes the bullish trends as the cross climbs above the key 100-period Exponential Moving Average (EMA). Furthermore, the 14-day Relative Strength Index (RSI) is located above the midline near 57.30, indicating that further upside looks favorable in the near term. 

The upper boundary of the descending trend channel of 164.55 acts as an immediate resistance level for the cross. A sustained move above this level could see a rally to the 165.00-165.05 zone, representing the psychological level and the high of November 15. The next hurdle to watch is 166.10, the high of November 6. 

On the flip side, the initial support level for EUR/JPY emerges near the 100-period EMA at 164.17. A breach of the mentioned level could pave the way to 163.21, the low of November 8. The additional downside filter to watch is 162.35, the low of November 16. Extended losses could expose 162.15, the lower limit of the trend channel.  

EUR/JPY 4-hour chart

• AUD/JPY gains ground due to increased uncertainty surrounding the BoJ policy outlook.
• The AUD appreciated as the RBA Meeting Minutes emphasized the importance of maintaining a restrictive monetary policy.
• The risk-sensitive AUD could have faced challenges due to the escalating Russia-Ukraine conflict.

AUD/JPY extends its winning streak for the third successive session, trading around 101.20 during the Asian hours on Wednesday. This upside of the AUD/JPY cross is attributed to the tepid Japanese Yen (JPY) amid uncertainty surrounding the timing of the next interest rate hike by the Bank of Japan (BoJ).

On Tuesday, Japan’s Finance Minister Katsunobu Kato emphasized the need for stable currency behavior in line with economic fundamentals, expressing increased vigilance over foreign exchange movements. Kato reiterated that the ministry would take necessary actions to manage excessive forex fluctuations.

The Australian Dollar (AUD) remains stable following the interest rate decision by China, Australia's close trading partner. The People's Bank of China (PBoC) Monetary Policy Committee (MPC) decided to keep the benchmark interest rate unchanged at 3.1% for November.

Australian Treasurer Jim Chalmers stated that "tumbling iron ore prices and a softening labor market have impacted government revenue." following his Ministerial Statement on the economy on Wednesday. Chalmers outlined Australia's tough fiscal outlook, citing the weakening of China, a key trading partner, and the slowdown in the job market as contributing factors.

The upside of the AUD/JPY cross could be limited as the risk-sensitive AUD could have faced challenges as Ukraine deployed US-supplied ATACMS missiles to strike Russian territory for the first time, signaling a significant escalation on the 1,000th day of the conflict. However, market anxieties lessened somewhat when Russian Foreign Minister Sergei Lavrov reassured that the government would take all necessary measures to avert a nuclear war.

FX option expiries for Nov 20 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0500 1b
• 1.0540 1.6b
• 1.0585 814m
• 1.0620 1.1b
• 1.0625 958m
• 1.0705 625m

USD/JPY: USD amounts                     

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

AUD/USD: AUD amounts

• 0.6455 403m

USD/CAD: USD amounts       

• 1.3860 1b
• 1.4000 616m
• 1.4315 628m

• USD/CAD consolidates in a range near a one-week low amid mixed fundamental cues.
• Hotter Canadian CPI tempers bets for a bigger BoC rate cut and underpins the CAD.
• Rebounding US bond yields revive USD demand and offer some support to the pair.

The USD/CAD pair finds some support near the mid-1.3900s, or a one-week low touched during the Asian session on Wednesday and for now, seems to have stalled this week's retracement slide from the highest level since May 2020. Spot prices, however, struggle to gain any meaningful traction, warranting some caution for bullish traders amid mixed fundamental cues.

Data published on Tuesday showed that Canada's annual inflation rate rose more than expected, to 2.0% in October and forced investors to scale back their bets for a big rate cut by the Bank of Canada (BoC) in December. This, in turn, is seen offering some support to the Canadian Dollar (CAD) and acting as a headwind for the USD/CAD pair. That said, subdued Crude Oil prices keep a lid on any meaningful appreciation for the commodity-linked Loonie.

Despite the prospect of supply disruptions from an escalation in the Russia-Ukraine conflict, signs of a build in US stockpiles fail to assist Crude Oil prices to build on a two-day-old recovery from over a two-month low touched on Monday. In fact, the American Petroleum Institute (API) reported that US inventories grew much more than expected, by 4.75 million barrels in the week to November 15, pointing to increased supply in the world’s biggest oil producer.

Apart from this, the emergence of some US Dollar (USD) dip-buying should limit any meaningful downside for the USD/CAD pair. Investors now seem convinced that US President-elect Donald Trump's policies will spur economic growth and rekindle inflationary pressures. This could restrict the Federal Reserve (Fed) from cutting interest rates, which, in turn, triggers a fresh leg up in the US Treasury bond yields and helps revive the USD demand. 

Moving ahead, investors now look forward to speeches by influential FOMC members for cues about the future rate-cut path. This will play a key role in driving the US bond yields and the USD later during the North American session. Furthermore, traders will take cues from the official US Oil inventory data, which should influence the black liquid and contribute to producing short-term trading opportunities around the USD/CAD pair.

• USD/CHF rebounds to near 0.8835 in Wednesday’s early European session. 
• Markets have pared bets for a 25 bp) interest-rate cut at the December meeting. 
• Any signs of escalating tensions between Russia and Ukraine could boost the CHF, a safe-haven currency.

The USD/CHF pair recovers some lost ground to around 0.8835, snapping the three-day losing streak during the early European session on Wednesday. The growing expectations for a less aggressive policy easing by the Federal Reserve (Fed) provide some support to the pair. Later on Wednesday, the Fed Lisa Cook and Michelle Bowman are set to speak. 

The hawkish remarks from Fed Chair Jerome Powell lifts the USD broadly. Powell said that he wasn’t 'in a hurry' to lower interest rates, which reduced the possibility of rate cuts in December to less than 60%, down from 82% earlier in the week. Kansas City Fed President Jeffrey Schmid said it remains uncertain how far interest rates can fall, but the recent cuts by the Fed indicate confidence that inflation is heading toward its 2% target.

On the Swiss front, heightened tensions between Russia and Ukraine, and its allies in the West might boost the safe-haven flows, benefiting the Swiss Franc CHF). Russia’s Defense Ministry said on Tuesday that Ukraine fired six ballistic missiles at a facility in Bryansk and that ATACMS missiles had been used in the attack.

• EUR/USD faces challenges due to safe-haven flows amid escalating Russia-Ukraine conflict.
• Traders anticipate that the incoming Trump administration's pro-inflationary policies could support the US Dollar.
• The Euro weakened due to fears over potential US trade tariffs' impact on Eurozone growth.

EUR/USD remains subdued as the US Dollar (USD) appreciates, possibly driven by the safe-haven flows amid escalating tensions in the Russia-Ukraine conflict. According to a Reuters report late Tuesday, Ukraine deployed US-supplied ATACMS missiles to strike Russian territory for the first time, signaling a significant escalation on the 1,000th day of the conflict. The EUR/USD pair trades around 1.0590 during the Asian trading hours on Wednesday.

In response, Russian President Vladimir Putin broadened Russia’s nuclear policy to include the possibility of nuclear retaliation in response to significant conventional assaults. However, market anxieties lessened somewhat when Russian Foreign Minister Sergei Lavrov reassured that the government would take all necessary measures to avert a nuclear war.

The EUR/USD received downward pressure as the Euro weakened to an over-one-year low of $1.0496 hit last week, as concerns over potential US trade tariffs' impact on Eurozone growth. Additionally, the US Dollar (USD) receives support from investors’ expectations of pro-inflationary policies from the incoming Trump administration. These policies could drive up inflation, potentially prompting the Federal Reserve to slow the pace of rate cuts.

On Wednesday, European Central Bank (ECB) President Christine Lagarde is scheduled to deliver the opening remarks at the ECB’s Conference on Financial Stability and Macroprudential Policy in Frankfurt. The ECB faces a challenging situation as European inflation remains more persistent than initially anticipated by policymakers, while the broader European economy continues to show signs of imbalance.

Gold prices remained broadly unchanged in India on Wednesday, according to data compiled by FXStreet.

The price for Gold stood at 7,153.49 Indian Rupees (INR) per gram, broadly stable compared with the INR 7,146.54 it cost on Tuesday.

The price for Gold was broadly steady at INR 83,435.26 per tola from INR 83,355.83 per tola a day earlier.

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

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

• GBP/JPY recovers further from over a one-month low set on Tuesday amid renewed JPY selling.
• Receding safe-haven demand, along with the BoJ uncertainty, undermines the safe-haven JPY. 
• The technical setup warrants caution for bulls ahead of the crucial UK consumer inflation data. 

The GBP/JPY cross is seen building on the previous day's strong rebound from the 193.60-193.55 area, or its lowest level since October 8 and gaining positive traction for the third consecutive day on Wednesday. The momentum lifts spot prices beyond the mid-196.00s during the Asian session and is sponsored by the emergence of fresh selling around the Japanese Yen (JPY).

Comments from Russian and US officials helped ease market concerns about the onset of a full-blown nuclear war. This, along with the uncertainty over the timing of further monetary policy tightening by the Bank of Japan (BoJ), undermines the safe-haven JPY. Meanwhile, hopes that the UK government’s fiscal stimulus to bolster domestic demand will lead to inflationary pressures and delay the Bank of England's (BoE) rate-cutting cycle offer some support to the British Pound (GBP). This further seems to act as a tailwind for the GBP/JPY cross.

That said, speculations that Japanese authorities might intervene in the FX market to prop up the domestic currency, coupled with geopolitical uncertainties, might hold back the JPY bears from placing aggressive bets. Investors might also refrain from placing aggressive directional bets around the GBP/JPY cross and opt to wait for the release of the latest UK consumer inflation figures. The crucial data will play a key role in influencing the broader sentiment surrounding the GBP and provide some meaningful impetus to the currency pair. 

From a technical perspective, the GBP/JPY cross showed some resilience below the 200-day Simple Moving Average (SMA) on Tuesday and the subsequent strength favors bullish traders. Moreover, oscillators on the daily chart have recovered from lower levels, though they are yet to confirm a positive bias. Hence, any further move beyond the 197.00 mark is more likely to confront stiff resistance near the 197.70-197.80 supply zone. Some follow-through buying beyond the 198.00 round figure, however, will set the stage for additional near-term gains.

On the flip side, the 196.00 mark now seems to protect the immediate downside, below which the GBP/JPY cross could slide to the 195.40-195.35 support en route to sub-195.00 levels. The latter represents the very important 200-day SMA, which if broken could drag spot prices back towards the overnight swing low, around the 193.60-193.55 zone, with some intermediate support near the 194.00 round figure.

GBP/JPY daily chart

• GBP/USD appreciates due to reduced expectations of another rate cut by the Bank of England this year.
• The UK’s CPI inflation is projected to increase 2.2% YoY and 0.5% MoM in October.
• The US Dollar may appreciate as traders expect pro-inflationary policies from the incoming Trump administration.

GBP/USD continues to gain ground for the third successive session, trading around 1.2690 during the Asian hours on Wednesday. The Pound Sterling (GBP) strengthens as markets price in less than a 20% chance of another rate cut from the Bank of England (BoE) this year, following the BoE Monetary Policy Report Hearings on Tuesday, where the central bank described interest rates as "moderately restrictive."

On Wednesday, traders await key UK data, including the Consumer Price Index (CPI) inflation and Retail Price Index (RPI) figures for October. These numbers could influence the Bank of England's (BoE) decision on whether to pursue additional rate cuts this year.

The UK’s CPI inflation is projected to rise to 2.2% year-on-year in October, up from 1.7% the previous month. The monthly CPI for October is expected to increase by 0.5%, compared to a flat 0.0% in September. Additionally, the Retail Price Index (RPI) is likely to have grown by 3.4%, up from 2.7% previously.

The US Dollar (USD) remained steady on Wednesday after three days of losses, weighed down by weaker-than-expected economic data released on Tuesday. However, the downside for the Greenback may be limited as investors expect pro-inflationary policies from the incoming Trump administration, such as tax cuts and higher tariffs. These measures could drive up inflation, potentially prompting the Federal Reserve to slow the pace of rate cuts.

Kansas City Fed President Jeffrey Schmid stated on Tuesday that he anticipates both inflation and employment will move closer to the Fed's targets. Schmid explained that rate cuts reflect the central bank's confidence in inflation heading toward its 2% goal. He also noted that while large fiscal deficits might not directly cause inflation, the Fed may need to respond to any emerging inflationary pressures by raising interest rates.

• Gold price scales higher for the third straight day as Russia-Ukraine tensions continue to drive haven flows. 
• Rebounding US bond yields offer some support to the US Dollar and might cap further gains for the XAU/USD.
• Traders look to speeches from influential FOMC members for rate-cut cues.

Gold price (XAU/USD) attracts some follow-through buying for the third consecutive day on Wednesday and climbs to a one-and-half-week high, around the $2,641-2,642 region during the Asian session. Mounting Russia-Ukraine tensions continue to boost demand for traditional safe-haven assets, which, along with subdued US Dollar (USD) price action, act as a tailwind for the precious metal. 

That said, the overnight comments from Russian and US officials helped ease market concerns about the onset of a full-blown nuclear war, which is evident from a generally positive tone around the equity markets. Apart from this, a goodish pickup in the US Treasury bond yields favors the USD bulls and warrants some caution before positioning for any further appreciating move for the Gold price. 

Gold price continues to benefit from haven flows amid escalating geopolitical tensions

• Investors remain concerned about the risk of a further escalation of geopolitical tensions between Russia and Ukraine, which drives haven flows towards the Gold price for the third straight day.
• Russian President Vladimir Putin upped the ante on Tuesday and signed a decree approving its updated nuclear doctrine, which shifts the parameters on when Russia can use nuclear weapons.
• Ukraine acted on the go-ahead from the US to use American-made missiles for strikes within Russia and launched ATACMS missiles to attack a Russian military facility in the Bryansk border region.
• Russian Foreign Minister Sergei Lavrov said the country will do everything possible to avoid a nuclear war. The White House confirmed that the US does not plan to adjust its nuclear posture. 
• Markets have been positioning for potential tariffs and tax cuts by the incoming Trump administration, which could lead to higher inflation and fewer interest rate cuts by the Federal Reserve.
• Kansas Fed President Jeffrey Schmid said on Tuesday that large fiscal deficits will not cause inflationary pressures because the central bank will prevent it, though that could mean higher interest rates.
• According to the CME Group's FedWatch Tool, traders are currently pricing in a less than 60% chance for a 25-basis-points rate cut by the Fed at the upcoming monetary policy meeting in December. 
• The US Treasury bond yields resume their uptrend following the previous day's sharp slide and assist the US Dollar in stalling its pullback from the year-to-date peak, which might cap the XAU/USD.
• A slew of influential FOMC members are due to speak later today and influence expectations about the Fed's rate-cut path, providing some meaningful impetus to the non-yielding yellow metal. 

Gold price could climb further toward $2,660; technical setup warrants caution for bulls

The recovery momentum from a two-month low touched last week lifts the Gold price beyond the 38.2% Fibonacci retracement level of the recent sharp retracement slide from the all-time peak, favoring bullish traders. Adding to this, bullish oscillators on hourly charts support prospects for a further intraday appreciating move towards the $2,658-2,660 region en route to the $2,670-2,672 congestion zone. Some follow-through buying could allow the XAU/USD to aim back towards reclaiming the $2,700 round figure. 

On the flip side, the $2,622-2,620 area now seems to protect the immediate downside ahead of the $2,600 mark. A convincing break below the latter could make the Gold price vulnerable to accelerate the fall to the 100-day Simple Moving Average (SMA), around the $2,555 region, with some intermediate support near the $2,570 zone. This is followed by last week’s swing low, around the $2,537-2,536 area, which if broken decisively will be seen as a fresh trigger for bearish traders and set the stage for deeper losses. 

• United Kingdom’s Office for National Statistics is set to publish the CPI report on Wednesday.
• The annual UK headline CPI inflation is expected to rise in October, with the core figure easing slightly.
• The UK CPI data could signal a BoE December interest-rate cut pause, fuelling a Pound Sterling sell-off.

The United Kingdom’s (UK) Consumer Price Index (CPI) data for October will be published by the Office for National Statistics (ONS) on Wednesday at 07:00 GMT.

The UK CPI inflation report could provide fresh cues on the Bank of England’s (BoE) path forward on interest rates, which will likely have a strong bearing on the Pound Sterling.

What to expect from the next UK inflation report?

The UK Consumer Price Index is set to rise at an annual pace of 2.2% in October after increasing by 1.7% in September, moving back above the BoE’s 2.0% target.

The core CPI inflation is expected to ease slightly to 3.1% YoY in October, compared with a 3.2% reading reported in September.

According to a Bloomberg survey of economists, official data is expected to show that service inflation eased slightly to 4.8% in October from 4.9% in the prior month.

The BoE projected the annual headline CPI to be 2.2% and the services CPI to be 5.0% in October.

Meanwhile, the British monthly CPI is seen rising 0.5% in the same period, compared to the previous reading of 0%.

Previewing the UK inflation data, Societe Generale analysts noted: “We expect base effects and higher utility prices to push headline inflation back above its 2.0% target in October to 2.2% year-over-year (YoY), up from 1.7% YoY in September. More importantly, we see services inflation rising by 0.1 percentage point (pp) to 5% YoY, although the risks are tilted to the downside.” 

How will the UK Consumer Price Index report affect GBP/USD?

Following the November 7 decision to cut rates by 25 basis points (bps) to 4.75%, the BoE retained its cautious language on future interest rate cuts. In its policy statement, the central bank reiterated that it would need to stay "restrictive for sufficiently long" to return inflation sustainably to the 2.0% target.

The BoE predicted that the UK Finance Minister Rachel Reeves' Autumn Budget 2024 will increase the GDP size while adding to the inflationary pressures.  

Testifying before the UK Parliament’s Treasury Select Committee (TSC) on Tuesday, Governor Andrew Bailey said that reiterated that the Labour government's tax rises reinforce the central bank’s gradual approach to easing interest rates,

Against this backdrop, the UK CPI data holds the key to gauging whether the BoE will pause its easing trajectory following its second rate cut since 2020 earlier this month.

A hotter-than-expected headline and core inflation data would ramp up bets for a BoE pause, lifting the Pound Sterling. In this case, GBP/USD could initiate a sustained recovery from six-week troughs. On the other hand, softer-than-expected inflation readings could exacerbate the pain in the Pound Sterling, smashing the GBP/USD toward 1.2500.

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “GBP/USD holds its recovery mode in the UK CPI data release countdown. However, the 14-day Relative Strength Index (RSI) stays below 50, suggesting that downside risks remain intact. Further, the 21-day Simple Moving Average (SMA) looks to cut the 200-day SMA from above, representing an impending Death Cross on the daily time frame and adding credence to the bearish potential.”

Dhwani adds: “The pair could extend the recovery toward 1.2750 psychological resistance, above which the 200-day SMA at 1.2820 will be challenged. The next upside target is seen at the  21-day SMA at 1.2858. Conversely, the immediate support is seen at the multi-month lows of 1.2597, below which the 1.2500 round level could be tested.”

• Silver price remains subdued as PBoC maintained the benchmark interest rate at 3.1% for November.
• The demand for safe-haven silver could increase due to heightened tensions in the Russia-Ukraine conflict.
• The dollar-denominated Silver gained demand as the US Dollar experienced profit-taking selling after a recent rally.

Silver price (XAG/USD) retraces its recent gains, trading around $31.20 per troy ounce during the Asian session on Wednesday. The price of Silver might have faced downward pressure after the People’s Bank of China (PBoC) Monetary Policy Committee (MPC) decided to maintain the benchmark interest rate at 3.1% for November. Higher interest rates in China, a key global manufacturing hub for electronics, solar panels, and automotive components, would likely reduce industrial demand for Silver.

The price of the safe-haven bullion gained ground amid escalating tensions in the Russia-Ukraine conflict. According to a Reuters report late Tuesday, Ukraine deployed US-supplied ATACMS missiles to strike Russian territory for the first time, signaling a significant escalation on the 1,000th day of the conflict. However, market concerns eased slightly after Russian Foreign Minister Sergei Lavrov stated that the government would "do everything possible" to prevent the outbreak of nuclear war.

The dollar-denominated Silver strengthens its demand as the US Dollar (USD) experienced profit-taking selling after a recent rally. This rally was fueled by expectations of fewer Federal Reserve (Fed) rate cuts and optimism about US economic outperformance under the incoming Trump administration. A lower US Dollar makes the precious metals cheaper for buyers with foreign currencies, which increases the Silver demand.

Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, stated on Tuesday that he expects both inflation and employment to move closer to the Fed's targets. Schmid explained that rate cuts signal the Fed's confidence in inflation trending toward its 2% goal. He also noted that while large fiscal deficits won't necessarily drive inflation, the Fed may need to counteract potential pressures with higher interest rates.

• The Indian Rupee softens in Wednesday’s Asian session. 
• Sustained portfolio outflows and geopolitical risks could weigh on the INR, but RBI interventions might cap its downside. 
• Investors await the speeches from the Fed’s Cook and Bowman on Wednesday. 

The Indian Rupee (INR) loses traction on Wednesday. The local currency remains under some selling pressure due to the renewed US Dollar (USD) demand from importers and rising geopolitical tensions after Russian officials said that Ukraine used US ATACMS missiles to strike Russian territory for the first time, while Russian President Vladimir Putin approved an updated nuclear doctrine. 

Furthermore, sustained portfolio outflows contribute to the INR’s downside. However, any significant depreciation of the Indian Rupee might be limited as the Reserve Bank of India (RBI) is likely to sell the USD to support the INR.

In the absence of top-tier economic data released from the US and India, the USD price dynamics will continue to play a key role in influencing the pair. The Federal Reserve (Fed) Lisa Cook and Michelle Bowman are scheduled to speak later on Wednesday. 

Indian Rupee remains weak amid mounting geopolitical tensions

• "Mild weakness in the dollar will not lead to any major appreciation in the rupee because the RBI will look to replenish its foreign exchange reserves, but if the dollar index moves 2-3% lower, we may see half a per cent of move (in the rupee)," noted Nitin Agarwal, head of treasury at ANZ India.
• Foreign Portfolio Investment (FPI) inflows into India are estimated to remain positive in FY25, with an expected inflow of USD 20-25 billion, according to the Bank of Baroda.
• Markets have pared bets for a 25 basis points (bps) interest-rate cut at the December meeting to less than 59%, down from 76.8% a month ago, according to the CME FedWatch Tool.
• The US Building Permits declined by 0.6% from 1.425 million to 1.416 million in October. Meanwhile, Housing Starts fell by 3.1% from 1.353 million to 1.311 million during the same period. 
• Kansas City Fed President Jeffrey Schmid said it remains uncertain how far interest rates can fall, but the recent cuts by the Fed indicate confidence that inflation is heading toward its 2% target.

USD/INR’s bullish outlook remains in play

The Indian Rupee weakens on the day. However, the constructive view of the USD/INR pair remains intact, with the price holding above the ascending channel throwback support on the daily chart. The upward momentum of the pair is reinforced by the 14-day Relative Strength Index (RSI), which stands above the midline near 65.55, suggesting that the path of least resistance remains to the upside. 

The all-time high of 84.45 acts as an immediate resistance level for USD/INR. A break above this level could pave the way to the 85.00 psychological level.

In the bearish case, any follow-through selling below the resistance-turned-support level at 84.35 could be enough to attract some sellers and take the pair back down to the 84.00-83.90 region, representing the round mark and the 100-day EMA. 

After presenting his Ministerial Statement on the economy on Wednesday, Australian Treasurer Jim Chalmers said, "tumbling iron ore prices and a softening labor market have hit government revenue.”

He discussed Australia's tough fiscal outlook due to weakened trading partner China and a softening job market.

Additional quotes

Market reaction

AUD/USD is unaffected by these comments, keeping its range play intact near 0.6530, as of writing.

• The USD/JPY pair extends the overnight turnaround from over a one-week low. 
• Fading safe-haven demand, along with the BoJ uncertainty, undermines the JPY. 
• Bets for a less aggressive Fed easing lend some support to the USD and the pair.

The Japanese Yen (JPY) witnessed good two-way price moves on Tuesday and ended the day nearly unchanged against its American counterpart. Russia's announcement that it would lower its threshold for a nuclear strike drove some haven flows towards the JPY. The global flight to safety triggered a sharp fall in the US Treasury bond yields and further benefited the lower-yielding JPY, dragging the USD/JPY pair to over a one-week low, around the 153.30-153.25 region. The initial market reaction, however, faded rather quickly after comments from Russian and US officials helped ease market concerns about the onset of a full-blown nuclear war. 

Adding to this, the uncertainty over the timing of further monetary policy tightening by the Bank of Japan (BoJ) continued to undermine the JPY and, to a larger extent, overshadowed a modest US Dollar (USD) weakness. The JPY remains depressed following the release of Trade Balance data from Japan and assists the USD/JPY pair to build on the overnight solid intraday recovery of over 150 pips. That said, speculations that Japanese authorities might intervene in the FX market to prop up the domestic currency, coupled with geopolitical uncertainties, might hold back the JPY bears from placing aggressive bets and act as a headwind for the pair. 

Japanese Yen bears look to seize back control amid fading safe-haven demand, BoJ uncertainty

• Russian President Vladimir Putin approved the change to the country's nuclear doctrine on Tuesday, days after US President Joe Biden authorized Ukraine to use long-range American missiles against military targets inside Russia.
• Russian Foreign Minister Sergei Lavrov said the country would do everything possible to avoid the onset of a nuclear war and called Germany's decision on Monday not to provide long-range missiles to Ukraine a responsible position.
• Meanwhile, the White House said that the United States (US) does not plan to adjust its own nuclear posture in response to Russia's move, which, in turn, tempered safe-haven demand and weighed on the Japanese Yen. 
• Bank of Japan Governor Kazuo Ueda earlier this week warned against keeping borrowing costs too low and signaled another interest rate increase, was vague on the timing and offered no hints about a hike in December.
• A report published by the Ministry of Finance earlier this Wednesday showed that Japan's total exports increased by 3.1% and imports grew by 0.4% from a year earlier in October, resulting in a trade deficit of ¥461.2 billion.
• Market participants have been anticipating slightly higher inflation after former President Donald Trump’s election victory, which was seen as a key trigger behind the recent sharp move up in the US Treasury bond yields. 
• Federal Reserve Bank of Kansas President Jeffrey Schmid noted on Tuesday that large fiscal deficits will not cause inflationary pressures because the central bank will prevent it, though that could mean higher interest rates.
• The US Dollar consolidates its recent pullback from the year-to-date high and languishes near the weekly low, albeit, the downside remains cushioned in the wake of expectations of a less aggressive easing by the Fed. 
• Scheduled speeches by a slew of influential FOMC members later this Wednesday will influence the USD price dynamics and provide some impetus to the USD/JPY pair in the absence of any relevant US macro data.

USD/JPY needs to find acceptance above 155.00 to support prospects for further appreciation

From a technical perspective, the USD/JPY pair's overnight strong rebound suggests that the recent corrective slide from a multi-month high has run its course. The subsequent move up, along with the positive oscillators on the daily chart, supports prospects for a further appreciating move for spot prices. Bulls, however, need to wait for a sustained strength above the 155.00 mark before placing fresh bets. 

Some follow-through buying beyond the weekly top, around the 155.35 area, will reaffirm the positive outlook and lift the USD/JPY pair to the 155.70 intermediate hurdle en route to the 156.00 round-figure mark. The momentum could extend further towards retesting the multi-month top, around the 156.75 region touched last Friday.

On the flip side, the 154.40-154.35 area now seems to protect the immediate downside ahead of the 154.00 mark. Any further decline might continue to find decent support near the 153.30-153.25 region, or the overnight swing low. This is followed by the 153.00 round figure and the next relevant support near the 152.70-152.65 area, below which the USD/JPY pair could drop to the very important 200-day Simple Moving Average (SMA), around the 151.90-151.85 region.

• The Australian Dollar appreciated as the RBA Meeting Minutes emphasized the importance of maintaining a restrictive monetary policy.
• The PBoC's Monetary Policy Committee (MPC) decided to maintain the current interest rate at 3.1% for November.
• The US Dollar steadies as investors anticipate pro-inflationary policies from the incoming Trump administration.

The Australian Dollar (AUD) attempts to extend its gains for the fourth consecutive day on Wednesday, following the People’s Bank of China’s (PBoC) interest rate decision. The PBoC's Monetary Policy Committee (MPC) opted to keep the benchmark interest rate unchanged at 3.1% for November.

The AUD/USD pair may face downward pressure as the US Dollar (USD) gains ground on safe-haven flows amid escalating tensions in the Russia-Ukraine conflict. According to a Reuters report late Tuesday, Ukraine deployed US-supplied ATACMS missiles to strike Russian territory for the first time, signaling a significant escalation on the 1,000th day of the conflict. However, market concerns eased slightly after Russian Foreign Minister Sergei Lavrov stated that the government would "do everything possible" to prevent the outbreak of nuclear war.

The Reserve Bank of Australia's (RBA) November Meeting Minutes indicated that the central bank’s board remains cautious about the potential for inflation to rise further, emphasizing the need for restrictive monetary policy. Board members also indicate no "immediate need" to adjust the cash rate, though they left the door open for future changes, noting that nothing can be ruled in or out.

The US Dollar (USD) steadies on Wednesday after three consecutive days of losses, pressured by weaker-than-expected economic data released on Tuesday. However, the downside for the Greenback may be capped as investors anticipate pro-inflationary policies from the incoming Trump administration, including tax cuts and higher tariffs. These measures could elevate inflation, possibly influencing the Federal Reserve to slow the pace of rate cuts.

The Australian Dollar receives support from hawkish sentiment surrounding RBA

• Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, stated on Tuesday that he expects both inflation and employment to move closer to the Fed's targets. Schmid explained that rate cuts signal the Fed's confidence in inflation trending toward its 2% goal. He also noted that while large fiscal deficits won't necessarily drive inflation, the Fed may need to counteract potential pressures with higher interest rates.
• An official from China’s National Development and Reform Commission (NDRC) stated on Tuesday that the country has "ample policy room and tools to support economic recovery." The official expressed confidence in China's economic trajectory, anticipating that the recovery momentum will persist through November and December. Any change in the Chinese economy could impact the Australian markets as both nations are close trade partners.
• Fed Chair Jerome Powell downplayed the likelihood of imminent rate cuts, highlighting the economy's resilience, robust labor market, and persistent inflationary pressures. Powell remarked, "The economy is not sending any signals that we need to be in a hurry to lower rates."
• On Friday, Chicago Fed President Austan Goolsbee stated that markets often overreact to changes in interest rates. Goolsbee emphasized the importance of the Fed adopting a cautious, gradual approach in moving toward the neutral rate.
• Meanwhile, Boston Fed President Susan Collins tempered expectations for continued rate cuts in the near term while maintaining market confidence in a potential rate reduction in December. Collins stated, "I don't see a big urgency to lower rates, but I want to preserve a healthy economy."
• Last week, RBA Governor Michele Bullock emphasized that current interest rates are sufficiently restrictive and will remain unchanged until the central bank is confident about the inflation outlook.
• US Retail Sales increased by 0.4% month-over-month in October, exceeding the market consensus of 0.3%. Additionally, the NY Empire State Manufacturing Index for November posted an unexpected surge, coming in at 31.2 compared to the anticipated 0.7 decline, signaling robust manufacturing activity.
• China’s Retail Sales rose by 4.8% year-over-year in October, surpassing the expected 3.8% and the 3.2% increase seen in September. Meanwhile, Industrial Production grew by 5.3% YoY, below the forecasted 5.6% and the 5.4% growth recorded in the previous period.

Technical Analysis: Australian Dollar surpasses nine-day EMA to approach 0.6550

AUD/USD traded near 0.6530 on Wednesday. Technical analysis of the daily chart indicates a continued decline within a descending channel pattern, underscoring a bearish outlook. The 14-day Relative Strength Index (RSI) is below the 50 mark, further validating the prevailing bearish sentiment.

In terms of support, the AUD/USD pair may approach the lower boundary of the descending channel at the 0.6380 level. A decisive break below the descending channel could amplify selling pressure, potentially driving the pair toward its yearly low of 0.6348, last recorded on August 5.

On the upside, a breach above the nine-day EMA at 0.6525 weakens the bearish bias and supports the AUD/USD pair to test the 14-day EMA at 0.6543 level further. Surpassing this level could pave the way for a rally toward the four-week high of 0.6687 level.

AUD/USD: Daily Chart

• NZD/USD edges lower to around 0.5910 in Wednesday’s Asian session. 
• The RBNZ is anticipated to cut its OCR by 50 bps next week.
• Geopolitical risks could boost the USD and create a headwind for NZD/USD. 

The NZD/USD pair trades in negative territory near 0.5910 during the Asian session on Wednesday. The rising expectations of interest rate cut by the Reserve Bank of New Zealand (RBNZ) next week and geopolitical risks weigh on the riskier asset like the Kiwi.  

ANZ chief economist Sharon Zollner expects the RBNZ to cut its Official Cash Rate (OCR) by 50 basis points (bps) next week, bringing the rate to 4.25%. “If there is going to be a surprise, a larger cut seems likelier than a smaller one,” added Zollner. Markets are fully pricing in a 50 bps reduction, with 12% odds of a larger 75 bps rate cut. The rising bets of the RBNZ are likely to weigh on the Kiwi in the near term. 

Elsewhere, the People’s Bank of China (PBOC) announced to leave its Loan Prime Rates (LPRs) unchanged on Wednesday. The one-year and five-year LPRs were at 3.10% and 3.60%, respectively. 

On the other hand, analysts expect incoming US President Donald Trump's policies could reignite inflation and might slow the path of interest rate cuts. This, in turn, could lift the USD against the New Zealand Dollar (NZD). Markets have pared bets for a 25 basis points (bps) interest-rate cut at the December meeting to less than 59%, down from 76.8% a month ago, according to the CME FedWatch Tool.

Additionally, Ukraine used US ATACMS missiles to strike Russian territory for the first time, Moscow said. Meanwhile, Russian President Vladimir Putin lowered the threshold for a possible nuclear strike, per Reuters. The rising geopolitical risks between Russia and Ukraine could boost the safe-haven demand, supporting the Greenback. 

On Wednesday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1935, as compared to the previous day's fix of 7.1911 and 7.2386 Reuters estimates.

The People’s Bank of China (PBOC), China's central bank, announced to leave its Loan Prime Rates (LPRs) unchanged on Wednesday. The one-year and five-year LPRs were at 3.10% and 3.60%, respectively.   

Market reaction

At the time of writing, AUD/USD is holding lower ground near 0.6535, up 0.05% on the day.

• WTI price steadies near $69.30 in Wednesday’s early Asian session. 
• Russia’s defence ministry said Ukraine used US ATACMS missiles to strike Russian territory. 
• Weaker Chinese demand could weigh on the WTI price.

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $69.30 on Wednesday. The WTI price trades flat after Ukraine used US ATACMS missiles to strike Russian territory for the first time. 

On Tuesday, Russia’s defense ministry said that Ukraine hit a facility in the Bryansk region with six ATACAMS missiles. In response, Russian President Vladimir Putin lowered the threshold for a possible nuclear strike. The rising geopolitical tensions could boost the WTI price for the time being. "This marks a renewed build up in tensions in the Russia-Ukraine war and brings back into focus the risk of supply disruptions in the oil market," ANZ Bank analyst Daniel Hynes said.

Additionally, Iranian supreme leader Ayatollah Ali Khamenei warned of a "crushing response" to Israel's recent air strikes on Iran, which raise concerns about the region's crude supply disruption. This, in turn, might contribute to the WTI’s upside. 

On the other hand, China's demand for oil slowed dramatically this year. China's crude oil demand fell -5.4% YoY in October, which might exert some selling pressure on the black gold as China is the world's second-largest crude consumer. Chinese demand growth is set to reach just 140,000 bpd this year, a tenth of the 1.4 million bpd demand growth of 2023, according to the IEA.