BlockFi Files For Bankruptcy

Key Insights

  • Crypto lender BlockFi, which halted withdrawals after the collapse of the crypto exchange FTX, has finally filed for bankruptcy. 
  • At first glance, BlockFi has enough liquidity to ensure an orderly bankruptcy process. 
  • Crypto markets are under some pressure today, but there is no BlockFi-related sell-off. 

FTX’s Collapse Pushed Crypto Lender BlockFi Into Bankruptcy

Crypto lender BlockFi has just filed for bankruptcy as contagion from the collapse of the crypto exchange FTX continued to spread. Previously, BlockFi halted withdrawals after FTX problems emerged, so the filing is not a big surprise for those who follow crypto markets.

Back in June, BlockFi received emergency funding from FTX when it faced a liquidity crunch after the fall of Three Arrows Capital.

BlockFi noted that the Chapter 11 protection should help “stabilize its business and provide the company with the opportunity to consummate a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders.”

BlockFi also noted that it had $256.9 million of cash on hand, which should be enough to “provide sufficient liquidity to support certain operations during the restructuring process.”

Crypto Markets Stay Relatively Calm As Traders Were Prepared For Bad News

At this point, the reaction of the crypto market is relatively calm. Bitcoin is trading near the $16,300 level, while Ethereum  settled below the $1,200 level.

Solana, which is one of the main victims of the FTX collapse, has once again found itself under pressure and moved towards the $13.50 level.

The market reaction is limited as crypto traders were prepared for BlockFi’s filing after the company halted withdrawals. There are no big news in the initial filing, which is also good for crypto markets.

Anyway, traders will remain focused on finding weak players as the industry continues to deal with the consequences of FTX’s collapse. The general market sentiment remains bearish, so any negative surprise could trigger a strong sell-off in crypto markets.

For a look at all of today’s economic events, check out our economic calendar.

WTI Oil Gains Ground After Testing Yearly Lows

Key Insights

  • WTI oil received support near $73.60 and moved towards the $77 level. 
  • Gold pulled back below $1750.
  • Copper found itself under pressure as traders bet that protests in China would hurt the economy. 

WTI Oil Rebounds As Traders Bet On Aggressive Production Cuts From OPEC+

WTI oil  tested lows near the $73.60 level as traders reacted to the protests in China, which were driven by strict anti-coronavirus measures.

However, oil prices managed to gain upside momentum and moved back towards the $77 level amid rumors that OPEC+ may decide to cut production aggressively at the next meeting on December 4.

Meanwhile, EU countries failed to reach consensus on the Russian oil price cap deal. Negotiations continue, and it remains to be seen whether EU officials will be able to strike a deal before December 5, when the EU embargo on Russian oil would be implemented.

Natural Gas Continues To Trade Above The $7.00 Level

Natural gas  is trading above the $7.00 level as traders wait for additional catalysts. The weather forecast points to moderate natural gas consumption in the near term, but there is no sell-off in natural gas markets.

Some traders continue to exit their positions after the recent rally, but demand for natural gas remains strong. Most likely, the market will need significant catalysts to gain additional momentum and move out of the current trading range.

Silver Retreats As Dollar Rebounds

Silver found itself under strong pressure today and moved below the $21.00 level. The strong rebound of the U.S. dollar served as a bearish catalyst for silver markets.

Silver

If silver settles below the $21.00 level, it will get to the test of the next support at $20.80. A successful test of this level will open the way to the test of the support at $20.60. In case silver declines below $20.60, it will head towards the support at $20.40.

On the upside, silver needs to climb back above $21.00 to have a chance to gain upside momentum in the near term. The next resistance level for silver is located at $21.25. If silver moves above this level, it will head towards the resistance at $21.60.

Other precious metals are also moving lower today. Gold pulled back towards the $1745 level, while palladium declined towards $1825. Platinum is trading near the $1000 level.

Copper Is Under Pressure Amid Protests In China

Copper moved below the $3.60 level as traders reacted to the protests in China, which is the world’s main consumer of copper. If China maintains its zero-COVID policy or protests get out of control, its economy will get hurt and demand for copper will drop. The events in China will likely serve as the key catalyst for copper markets in the upcoming days.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Rebounds From Session Lows

Key Insights

  • U.S. dollar managed to gain upside momentum after testing new lows. 
  • Christine Lagarde said she believed that inflation had not peaked. 
  • USD/JPY moved back above the 138.50 level after testing new lows. 

U.S. Dollar Moves Away From Session Lows As Demand For Safe-Haven Assets Increases

U.S. dollar rebounded from session lows as traders were ready to buy the American currency near multi-month lows.

Currently, the U.S. Dollar Index is trying to settle above the 106 level. In case this attempt is successful, the U.S. Dollar Index will move towards the resistance at 106.40.

EUR/USD Pulls Back After An Unsuccessful Test Of The 1.0500 Level

EUR/USD faced resistance near the 1.0500 level and pulled back towards 1.0430. ECB President Christine Lagarde has recently said that she would be surprised if the Eurozone inflation peaked in October. This comment has not provided additional support to the European currency.

EUR/USD

The nearest resistance level for EUR/USD is located at 1.0440. In case EUR/USD manages to settle above this level, it will move towards the next resistance at 1.0480. A successful test of this level will open the way to the test of the resistance at 1.0500.

On the support side, EUR/USD needs to stay below 1.0440 to have a chance to gain downside momentum in the near term. The next support level for EUR/USD is located at 1.0400. In case EUR/USD declines below this level, it will move towards the support at 1.0360.

GBP/USD Faced Resistance Near 1.2100

GBP/USD  has recently made an attempt to settle above the 1.2100 level but lost momentum and pulled back towards the support at 1.2050.

Today, traders focused on the CBI Distributive Trades report, which declined from 18 in October to -19 in November, compared to analyst forecast of -7. The report highlighted the weakness in the retail sales segment.

USD/CAD Gains Ground As WTI Oil Tests New Lows

USD/CAD tried to settle above the resistance at 1.3470 as WTI oil tested new lows amid protests in China. The protests were triggered by strict COVID-related measures. Oil rebounded from session lows, and USD/CAD pulled back towards 1.3430.

Other commodity-related currencies have also found themselves under pressure today. AUD/USD declined towards the 0.6700, while NZD/USD pulled back towards 0.6200.

USD/JPY Moved Back Above The 138.50 Level

USD/JPY tested new lows at 137.50 but lost momentum and rebounded above the 138.50 level. The broad rebound of the U.S. dollar served as the key driver behind the move.

For a look at all of today’s economic events, check out our economic calendar.

Analysts Predict Cyber Monday Sales to Reach Record $11.2 Billion

The U.S. Christmas spending season opened with a bang on Black Friday with consumers spending a record $9.12 billion online shopping, according to Adobe, which track’s sales on retailers’ websites.

Adobe also reported that overall online sales last Friday were up 2.3% year over year, with toys leading the way with a surge of 285% over an average day in November. Electronics were also a major contributor, up 285%, as was exercise equipment, up 218%.

Black Friday shoppers also broke a record for mobile orders, as 48% of online sales were made on smartphones, and increase from 44% last year.

Sales on Thanksgiving also exceeded expectations with consumers shelling out an all-time high of $5.29 billion online, up 2.9% year-over-year. Typically, shoppers spend about $2 billion to $billion on line in a day, according to Adobe.

Rounding out the week, e-commerce activity was expected to remain strong on Saturday and Sunday with Adobe expecting consumers to spend $4.52 billion and $4.99 billion, respectively.

Record Spending Expected to Continue

With Black Friday in the books, consumers are now looking forward to spending even more on Cyber Monday, the biggest U.S. online shopping day. Adobe Analytics is expecting record spending of about $11.2 billion with consumers looking to take advantage of discounts.

Adobe predicts spending on Cyber Monday to rise 5.2% as inflation-weary consumers have been waiting for weeks in the hopes of taking advantage of deep post-Thanksgiving markdowns.

Retailers Hoping for Strong Numbers

Recently, retailers Target, Macy’s and Nordstrom reported a lull in sales in late October and early November as consumer sentiment weakened while inflation hovered near a 40-year high.

However, there seems to be a ray of optimism being fueled ahead of Monday’s big single day shopping event with Target, Macy’s and even Best Buy, now expecting a return to pre-pandemic shopping patterns.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Forecast XAU/USD – Higher on Lower Yields as Investors Seek Clarity on Fed’s Rate-Hike Path

Gold futures are spiking to the upside on Monday after shrugging off earlier weakness. The catalysts behind the rally is a drop in Treasury yields and a weaker U.S. Dollar.

Volatility is the theme today as investors return from last week’s extended U.S. Thanksgiving holiday. Early in the session, gold was pressured by a stronger dollar, which rose in response to safe-haven demand that was fueled by protests in China against the government’s anti-COVID policies.

However, gold rallied as the dollar fell from its intraday high as expectations of a slower pace of Federal Reserve interest rate hikes starting in December, offset worries over the protests in China.

At 11:17 GMT, February Comex gold is trading $1775.60, up $6.80 or +0.38%. On Friday, SPDR Gold Shares ETF (GLD) settled at $163.18, up $0.10 or +0.06%.

Chinese Protests Generate Early Pressure

Gold prices slipped early Monday, as the dollar strengthened on safe-haven demand triggered by protests in several Chinese cities over the country’s strict COVID-19 restrictions.

Gold traders were tracking the U.S. Dollar’s move closely amid the increasing uncertainty from the growing unrest in China that seemed to be underpinning the greenback.

The break in the dollar and the rally in gold was spurred by investors looking at the bigger picture, which is the aggressiveness of the Fed moving forward and its plan to fight inflation with rate hikes, while avoiding recession.

Volatility Highlighted as Treasury Yields Slip on Safe-Haven Buying Ahead of Key Economic Data

Treasury yields were under pressure ahead of today’s trading session after minutes from the Fed’s November meeting released last week indicated that the central bank would continue to hike interest rates in coming months, but at a slower pace. Concerns about the speed of rate hikes dragging the U.S. economy into a recession have spread among investors.

Today’s early retreat in yields was fueled by the turmoil in China that created enough concern about the global economy slipping into recession to encourage investors to seek protection in safe-haven U.S. Treasury bonds.

After an early reaction to a stronger dollar, gold investors took notice of the drop in yields and reversed prices higher.

Short-Term Outlook

I don’t see safe-haven demand for gold in the near-term picture but I could build a case for higher prices if U.S. Treasury yields continue to retreat. Driving the direction of yields this week will be several key economic reports that will provide insights into how the U.S. economy is faring as interest rates and inflation remain high.

A series of key labor market data is due this week, including ADP’s private business payroll figures and JOLTs job openings on Wednesday, as well as non-farm payroll and unemployment data on Friday.

Gold traders will also get the opportunity to react to data on personal spending and income figures, for hints about the impact of high inflation and interest rates on consumers.

Gold is likely to strengthen if Treasury yields continue to fall, but gains could be limited if safe-haven buying drives the U.S. Dollar higher.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – WTI Hits One-Year Low as China’s COVID Protests Spur Demand Worries

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply lower as massive protests in China over strict COVID-19 restrictions have raised concerns over a global recession and lower fuel demand.

At 09:53 GMT, January WTI crude oil futures are trading $73.97, down $2.31 or -3.03% and February Brent crude oil is at $81.34, down $2.37 or -2.83%. On Friday, the United States Oil Fund ETF (USO) settled at $66.66, down $0.75 or -1.11%.

Confusion over Group of Seven (G7) policy is also adding to the selling pressure as well as uncertainty ahead of the OPEC+ meeting on December 4. The turmoil in China is also driving up the safe-haven U.S. Dollar which is weighing on foreign demand for dollar-denominated crude.

Escalating Protests in China Raise Concerns over Fuel Demand

Protests in China against the government’s strict anti-COVID policies are raising enough uncertainty about the strength of its economy to drive investors away from riskier assets like crude oil.

China’s stringent COVID restrictions have taken a heavy toll on its economy, raising concerns about fuel demand. Authorities have implemented various measures to revive growth, but there is no evidence that anything is working at this time. On Friday, for example, the People’s Bank of China (PBOC), the nation’s central bank, said it would cut the reserve requirement ratio (RRR) for banks by 25 basis points (bps), effective from December 5.

Inability of G7 to Determine Russian Price Cap Adds to Bearish Outlook

Group of Seven (G7) and European Union diplomats have been discussing a price cap on Russian oil of between $65 and $70 a barrel, with the aim of limiting revenue to fund Moscow’s military offensive in Ukraine without disrupting global oil markets, according to Reuters.

For weeks, the anticipation of this plan has propped up prices, but all that fell apart when a meeting of European Union government representatives, scheduled for Nov. 25 evening to discuss the issue, was cancelled. Last Thursday, EU governments were split on the level at which to cap Russian oil prices.

The price cap is due to come into effect on Dec. 5 when an EU ban on Russian crude also takes effect.

Wildcard is OPEC+ Production Levels

The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, will meet on December 4.

In October, OPEC+ agreed to reduce its output target by 2 million barrels per day through 2023.

At this next meeting, OPEC+ will be focused on Western plans for a price cap on Russian oil as well as taking into account the condition and balance of the market.

OPEC+ is the wildcard. Oil prices are likely to head further lower until the group agrees on a further reduction of production quota.

Others are adding that the U.S. may save prices from falling fast if it moves to reload its strategic petroleum reserves (SPR). But this may be difficult since the Biden Administration is committed to driving down gasoline prices.

For a look at all of today’s economic events, check out our economic calendar.

USDJPY Fundamental Daily Forecast – Weaker as Safe-Haven Buying Drives Down Treasury Yields

The Dollar/Yen is easing on Monday as protests in China against the government’s anti-COVID policies are encouraging investors to shun riskier assets. The event is driving global investors into safe-haven assets like U.S. Treasurys and the Japanese Yen.

According to Reuters, the protests have flared across China and spread to several cities in the wake of an apartment fire that killed 10 people in Urumqi in the country’s far west. Hundreds of demonstrators and police clashed in Shanghai on Sunday night.

At 07:03 GMT, the USD/JPY is trading 138.040, down 1.110 or -0.80%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $67.06, up $0.11 or +0.16%.

China’s stringent COVID restrictions have taken a heavy toll on its economy, and authorities have implemented various measures to revive growth. On Friday, the People’s Bank of China (PBOC), the nation’s central bank, said it would cut the reserve requirement ratio (RRR) for banks by 25 basis points (bps), effective from Dec. 5.

Pressured by Falling Treasury Yields

Safe-haven buying tied to the latest developments in China, combined with hopes that the Federal Reserve would soon slow its pace of rate hikes have been putting pressure on the Dollar/Yen lately. This view was supported last week following the release of the Fed’s November meeting minutes.

A “substantial majority” of policymakers at the Federal Reserve’s meeting early this month agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes as debate broadened over the implications of the U.S. central bank’s rapid tightening of monetary policy, according to the minutes from the session.

Looking Ahead…

The protests in China are creating uncertainty because investors aren’t sure how China is going to respond to the unrest in the country. Leaders may even implement stronger restrictions to squash the demonstrations and the spread of COVID. This would put more pressure on the local economy, which would then spread to the global economy.

The Dollar/Yen is likely to feel more pressure if aggressive moves by China lead to an escalation in the shedding of riskier assets since this would drive investors into the safety of U.S. Treasury bonds, lowering yields.

Lower yields will tighten the spread between U.S. Government bonds and Japanese Government bonds, making the Japanese Yen a more attractive asset.

As far as U.S. Federal Reserve policy is concerned, the markets are expecting a less-hawkish Fed, which has helped the Japanese Yen gain some upside momentum. The current price action suggests traders are looking for the Fed to downshift to a 50-basis-point rate hike starting in December and perhaps going to a pause next year. That is likely to limit the upside in U.S. Treasury yields, making the Japanese Yen an attractive asset.

For a look at all of today’s economic events, check out our economic calendar.

Russian Oil May Be Selling At A Major Discount Ahead Of Price Cap

Key Insights

  • Bloomberg reports that Russia’s Urals price dropped to $52 per barrel ahead of the price cap. 
  • EU continues negotiations as Poland wants to set an aggressive price cap to cut Russia’s revenues. 
  • Oil traders do not believe that the price cap scheme will push too much oil out of the market. 

Does Bloomberg Russian Oil Price Data Reflect The Real Situation In The Market?

While EU continues negotiations on the Russian oil price cap, Russian oil may be selling well below the proposed $65 – $70 range.

According to Bloomberg, the price of Russia’s Urals fell to $52 per barrel at the country’s two western terminals. The price was based on the data provided by Argus Media Ltd. Bloomberg also added that Platts believed that Urals price stood at $52 on Thursday in Primorsk, a key Russian terminal in the Baltic sea.

Meanwhile, Neste estimates that Urals’ discount to Brent oil is $24.4, based on the five-days rolling average.

It is not clear whether Bloomberg’s data reflects the real situation as potential buyers may be unwilling to get into deals before they learn the final decision on the price cap. In addition, some buyers may be willing to use “gray” schemes to purchase Russian oil, hiding its origin.

EU Officials Will Try To Reach Consensus On The Russian Oil Price Cap Deal Today

Yesterday, Russian oil price cap negotiations were postponed as Poland insisted on aggressive limits for the price of Russian oil. At the same time, countries like Greece, which profits from shipping services, wanted to set the cap at the $70 level to avoid losing business.

EU officials do not have much time to get the deal done as the European sanctions on Russian oil will be imposed on December 5.

Judging by the recent price action in the oil markets, traders do not believe that the price cap will be aggressive enough to push Russian oil out of the market.

It should be noted that China’s problems with coronavirus have also impacted the market mood in recent days. If China’s oil demand declines, Russia will be forced to offer its oil at a bigger discount to keep Asian buyers interested, which will be bearish for oil markets.

For a look at all of today’s economic events, check out our economic calendar.

WTI Oil Faced Strong Resistance Near The $80 Level

Key Insights

  • WTI oil tried to rebound but lost momentum and pulled back. 
  • Natural gas traders wait for additional catalysts. 
  • Copper remains stuck in the $3.60 – $3.65 range. 

WTI Oil Declined Below $78

WTI oil made an attempt to settle above the $80 level but lost momentum and pulled back below $78. Traders continue to wait for the news on the Russian oil price cap scheme. Yesterday, negotiations were postponed as Poland insisted on a $30 level, while other countries wanted to set the cap above the $65 level.

WTI Oil

In case WTI oil settles below the $78 level, it will move towards the support at $77.25. A successful test of this level will open the way to the test of the support at $76.75. In case WTI oil declines below $76.75, it will head towards the next support level at $76.30.

On the upside, WTI oil needs to settle back above $78 to have a chance to gain upside momentum in the near term. The next resistance level for WTI oil is located at $79.15. A move above $79.15 will push WTI oil towards the resistance at $80.00.

Natural Gas Is Mostly Flat

Natural gas markets are mostly flat as traders wait for additional catalysts. Trading activity will be low today as many traders have left for a long weekend and will get back to work on Monday.

In Europe, prices have started to move higher as traders expect that weather will become colder in early December. It remains to be seen whether the developments in the European markets will have any material impact on the U.S. markets in the near term as the restart of Freeport LNG has been delayed.

Gold Retreats As Dollar Rebounds

Gold pulled back towards the $1750 level as the U.S. dollar rebounded against a broad basket of currencies. Treasury yields moved higher, which was also bearish for gold.

Other precious metals have also found themselves under pressure in today’s trading session. Silver settled back below the $21.50 level. Platinum declined below $1000, while palladium moved towards the $1800 level.

Copper Needs Additional Catalysts To Move Higher

Copper  has recently made another attempt to settle above the $3.65 level but lost momentum and pulled back towards $3.62. Strict anti-coronavirus measures in China continue to serve as a significant negative catalyst for copper markets.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Gains Ground As Treasury Yields Rebound

Key Insights

  • U.S. dollar rebounds after the recent pullback. 
  • EUR/USD pulls back despite better-than-expected GDP report from Germany. 
  • USD/JPY managed to settle back above the 139 level.

U.S. Dollar Moves Higher Ahead Of The Weekend

U.S. Dollar Index managed to get back above the 106 level as traders rushed to buy the U.S. dollar after the recent pullback.

There are no important economic reports scheduled to be released in the U.S. today, so traders will focus on general market sentiment.

Treasury yields have moved higher today as the probability of a 50 bps rate hike at the next Fed meeting declined to 71.1%. This move served as a bullish catalyst for the U.S. dollar.

EUR/USD Settled Below 1.0400

EUR/USD declined below the 1.0400 level as traders took profits after the recent rally.

Today, traders focused on the economic data from Germany. The final reading of the third-quarter GDP Growth Rate report indicated that Germany’s GDP increased by 0.4% quarter-over-quarter, compared to analyst consensus of 0.3%.

Consumer Confidence improved from -41.9 in November to -40.2 in December, compared to analyst consensus of -39.6. The better-than-expected GDP Growth Rate report failed to provide enough support to the euro as traders focused on profit-taking ahead of the weekend.

GBP/USD Pulls Back As Traders Take Some Profits Off The Table

GBP/USD pulled back below the 1.2100 level as traders failed to find sufficient catalysts to continue the rebound.

From a big picture point of view, it looks that Rishi Sunak managed to calm markets. GBP/USD has already returned to August levels.

USD/CAD Rebounds After Pullback

USD/CAD managed to gain upside momentum as traders focused on the general strength of the U.S. dollar.

GBP/USD

Currently, USD/CAD is trying to settle above the 1.3400 level. In case this attempt is successful, USD/CAD will move towards the next resistance, which is located near the 50 EMA at 1.3450. A move above 1.3450 will open the way to the test of the resistance at 1.3470.

On the support side, the nearest support level for USD/CAD is located at 1.3360. If USD/CAD declines below this level, it will move towards the next support level at 1.3300. A successful test of the support at 1.3300 will open the way to the test of the support at 1.3230. No important levels have been formed between 1.3230 and 1.3300, so this move may be fast.

Other commodity-related currencies are also under pressure today. AUD/USD declined below 0.6750, while NZD/USD settled below 0.6250.

USD/JPY Settled Back Above The 139 Level

USD/JPY received support near the 138 level and rebounded towards 139.50. The broad rebound of the U.S. dollar served as the main catalyst for the move. In case USD/JPY manages to settle above 139.50, it will move towards the psychologically important 140 level.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Forecast XAU/USD – Uncertainty Over Inflation Could Create Rangebound Trade

Gold is trading lower on Friday as the U.S. Dollar strengthened as Treasury yields rose. Volume is extremely low due to Thursday’s U.S. holiday. The price action suggests investors are booking profits ahead of the weekend.

Gold futures are now trading lower for the week after expectations of less aggressive interest rate hikes from the Federal Reserve drove bullion prices sharply higher on Wednesday.

At 14:31 GMT, February Comex gold is trading $1766.50, down $3.30 or -0.19%. The SPDR Gold Shares ETF (GLD) is trading $162.93, down $0.15 or -0.09%.

Dollar Strengthens, but Headed Lower for Week

The U.S. Dollar is edging higher on Friday, but remained near a three-month low as it headed for a weekly loss, as the prospect of the Federal Reserve slowing monetary policy tightening as soon as December preoccupied investors.

Minutes from the Fed’s November meeting released earlier this week showed that a “substantial majority” of policymakers agreed it would soon be appropriate to slow the pace of interest rate rises.

Those remarks sent the dollar tumbling and gold price soaring as the Fed’s aggressive rate increases and market expectations of how high the central bank could take them has been a big driver of the currency’s 10% surge this year.

Treasury Yields Tick Higher as Investors Assess Fed Rate Policy Outlook

U.S. Treasury yields were slightly higher on Friday as investors digested the Federal Reserve’s November meeting minutes, which suggested that interest rate hikes would be slowed in the coming months.

The yield on the benchmark 10-year Treasury note was about 2 basis points higher at 3.726%. The 2-year Treasury yield was last trading at around 4.512%, up about 2 basis points.

As markets re-opened for a half-day of trading on Friday, after remaining closed for Thanksgiving on Thursday, they continued to absorb the Fed’s November meeting minutes published earlier in the week.

Short-Term Outlook

This week’s volatility suggests investors still aren’t sure about gold’s short-term direction. This is likely because they aren’t sure of the Fed’s next move at its December policy meeting. The lack of direction will probably be driven by the uncertainty surrounding the next U.S. consumer inflation report, which comes out shortly before the central bank’s mid-December meeting.

Until gold traders get some clarity on the direction of U.S. inflation, it’s going to be difficult to take a major position with any conviction.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Sluggish Trade as China Demand, EU Russian Oil Embargo Worries Weigh

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Friday as below-average post-holiday volatility kept a lid on prices. Nonetheless, the markets are poised to finish lower in the wake of lingering worries about Chinese demand and the inabilities by Western powers to reach a price cap agreement on Russian oil.

At 13:30 GMT, January WTI crude oil futures are trading $79.12, up $1.16 or +1.49% and January Brent crude oil is at $85.93, up $0.81 or +0.955. On Wednesday, the United States Oil Fund ETF (USO) settled at $67.42, down $2.56 or -3.66%.

More Demand Woes Expected as China Widens COVID-19 Curbs

China is implementing stricter demand curbs on Friday as the country reported another record high of daily infections just weeks after hopes had been raised of easing measures.

The resurgence of COVID cases in China, with 32,295 new local infections recorded for Thursday as numerous cities report outbreaks, has prompted widespread lockdowns and other curbs on movement and business, as well as pushback, according to Reuters.

China’s COVID response is taking a mounting toll on the world’s second-largest economy, and on Friday its central bank made a widely-anticipated move of support, cutting the amount of cash that banks must hold as reserves. This releases 500 billion Yuan ($69.8 billion) in long-term liquidity, Reuters wrote.

The aggressive lockdowns is starting to hit fuel demand, with traffic drifting down and implied oil demand around 1 million barrels per day lower than average, an ANZ note showed.

Disappointing G7 Oil Price Cap Proposal

The Group of Seven (G7) nations’ proposed price cap of $65-$70 a barrel on Russian oil would have little immediate impact on Moscow’s revenues, as it is broadly in line with what Asian buyers are already paying, five industry sources with direct knowledge of the purchases said on Wednesday, Reuters reported.

The goal of the price cap is to deprive Russian President Vladimir Putin of revenue to fund the military offensive in Ukraine, with causing major disruption to global oil markets that would drive energy prices higher, according to Reuters.

The G7, including the United States, as well as the whole of the European Union and Australia, are planning to implement the price cap on sea-borne exports of Russian oil on December 5.

Daily Forecast

Volume is currently light and expected to soften throughout the session due to an early close. Additionally, trading is expected to remain cautious ahead of an agreement on the price cap, due to come into effect on Dec. 5 when an EU ban on Russian crude kicks off, and ahead of the next meeting of the Organization of the Petroleum Exporting Countries and allies on December 4.

For a look at all of today’s economic events, check out our economic calendar.

German Consumer Sentiment Raises Red Flags for the ECB

It was a relatively busy start to the day for the EUR/USD on the economic calendar. The German economy was back in focus. Finalized Q3 GDP and GfK Consumer Climate figures for December drew interest.

Were revisions to German GDP Data Enough to Shift ECB Policy Sentiment?

According to Destatis, the German economy expanded by 0.4% in Q3 versus a prelim 0.3%. The German economy grew by 0.1% in Q2.

The upward revision supports the ECB’s plans to continue hiking interest rates to bring inflation to target.

Some key takeaways from today’s report included,

  • Household final consumption expenditure increased by 1.0%, while government final consumption expenditure was flat, quarter-on-quarter.
  • Improving supply chains supported a 2.0% increase in exports and a 2.4% rise in imports.
  • GDP in the Q3 was up 1.2% from Q3 2021. Notably, GDP exceeded pre-pandemic levels for the first time.
  • Year-over-year, employment increased by 490,000 (+1.1%) to another record high.
  • Increased spending led to a fall in the savings rate to 9.6%. In the previous year, the savings rate stood at 10.4%. The trend was in line with the ECB’s view on consumer confidence and saving.

However, disappointing consumer sentiment figures overshadowed the Q3 GDP numbers.

How Did Consumer Confidence Fare Ahead of the Holiday Season?

The GfK German Consumer Climate rose from -41.9 to -40.2 for December. Economists forecast an increase to -39.6.

In November, the propensity to buy fell by 1.1 points to -18.6, leaving it down 28.3 points compared to November 2021. However, the income expectations indicator increased by 6.2 points to -54.3. Despite the rise, income expectations are still down more than 67 points year-over-year.

The economic prospects indicator increased by 4.3 points to -17.9 points. While the economic prospects and income expectations indicators rose, consumers expect hefty energy bills in the coming months that could see consumers tighten their purse strings, a negative for the growth in Q4 and early 2023.

A sharp decline in spending could question the ECB’s growth and policy outlook.

How Did the EUR Respond to Today’s Stats?

In response to today’s numbers, the EUR/USD rose to a post-stat high of $1.04226 before falling to a post-stat low of $1.04111.

However, despite concerns over consumer confidence and consumption, the EUR held onto early gains.

At the time of writing, the EUR/USD was up 0.06% to $1.04181, down from a current-day high of $1.04293.

EUR/USD tested by German consumer confidence numbers.
251122 EURUSD Hourly Chart

What Else Do Investors Need to Consider Today?

Following today’s stats, ECB member commentary will also need consideration. ECB members Luis de Guindos will speak today. On Thursday, ECB hawk Isabel Schnabel reportedly favored further aggressive policy moves to target inflation. According to Reuters, Schnabel said,

“Incoming data so far suggest that the room for slowing down the pace of interest rate adjustments remains limited, even as we are approaching estimates of the ‘neutral’ rate.”

Aligned with the ECB minutes, Schnabel noted that policy should remain data-dependent.

 

S&P 500 Looks Ready To Settle Above The 4040 Level

Key Insights

  • U.S. markets are closed, but traders will return tomorrow for a short trading session. 
  • From a big picture point of view, S&P 500 continues to rebound after an unsuccessful test of the 3500 level, which marked the yearly bottom. 
  • A move above the 4040 level will provide S&P 500 with an opportunity to gain additional upside momentum. 

S&P 500 Will Remain Extremely Sensitive To The Interest Rate Outlook

U.S. markets are closed today for the Thanksgiving holiday. Traders will return tomorrow to focus on the first results of Black Friday in the short trading session.

Traders will also stay focused on the interest rate outlook, which has changed after the release of dovish FOMC Minutes. Currently, the FedWatch Tool indicates that there is a 75.8% probability of a 50 bps rate hike at the next Fed meeting in December.

Markets expect that the target rate would peak at 500 – 525 bps in summer 2023, and that the Fed would begin to cut interest rates from September 2023. Any changes in the “peak rate” outlook will have a significant impact on S&P 500.

Tomorrow, traders will focus on retailer stocks. Trading in this market segment will likely be volatile in the first hours of the trading session. Traders should keep in mind that trading volume will remain low as many market participants have left for a long weekend and will get back to their desks on Monday.

S&P 500 Must Settle Above 4040 To Continue Its Rebound

S&P 500

Taking a look at the weekly chart, S&P 500 continues to rebound after an unsuccessful test of the 3500 level. S&P 500 has already gained more than 15% from October lows, so some traders may want to take profits off the table.

At the same time, S&P 500 looks ready to settle above the nearest resistance level at 4040 and continue the rebound. If Treasury yields move lower and the U.S. dollar continues to lose ground against a broad basket of currencies, S&P 500 will have a good chance to develop additional upside momentum.

For a look at all of today’s economic events, check out our economic calendar.

Russian Oil Price Cap Negotiations Are Postponed

Key Insights

  • Recent reports indicate that EU countries are stuck in negotiations over the Russian oil price cap. 
  • Poland wants to cut Moscow’s revenues and set the price cap at $30 per barrel. 
  • Most other EU countries want to ensure that Russian oil does not go away from the market. 

Why Russian Oil Price Cap Negotiations Are Stuck?

Oil traders continue to wait for the news about the Russian oil price cap. Yesterday, WTI oil found itself under significant pressure as reports indicated that the price cap would be set in the $65 – $70 range.

Today’s reports show that EU countries failed to reach consensus on the oil price cap scheme, and negotiations were delayed until Friday.

While the majority of the European countries would be happy with the price cap of $65 per barrel, Poland believes that this cap is too generous to Moscow. According to recent reports, Poland should have the support of Estonia, Latvia, and Lithuania.

Meanwhile, Greece wants to set the price cap at $70 or higher as it wants to protect its oil shipping industry. Cyprus and Malta may also support Greece.

Currently, Russia’s Urals oil is sold at a $25 discount to Brent oil. If the price cap is set at $70, Russia may continue to sell its oil as usual, which will be bearish for oil markets.

When Will The Price Cap Be Announced?

At this point, it looks that negotiations will continue on Friday. As Poland reportedly wants to set the price cap at just $30 per barrel, reaching consensus on the deal may take more than one day.

The $30 price cap, which has not been discussed by most countries, will certainly push a significant amount of Russian oil out of the market, as Russia would not supply oil at this price.

It remains to be seen whether Poland will try to defend its proposal as other countries are trying to keep Russian oil flowing, which means that the price cap must be set at a “reasonable” level.

Russia said that it would not supply oil to countries that participate in the price cap scheme, but a “generous” price cap will provide all market participants with an opportunity to strike deals while maintaining their harsh public rhetoric.

It should be noted that EU countries do not have too much time for negotiations as the price cap mechanism should be announced before December 5.

For a look at all of today’s economic events, check out our economic calendar.

Silver Tests Resistance At $21.60

Key Insights

  • Weaker dollar provided some support to precious metals in today’s trading session. 
  • WTI oil continued to trade near the $77.50 level as traders waited for the news on the Russian oil price cap. 
  • Natural gas made an attempt to settle below the support at $7.20.

Silver Tries To Continue Its Rebound

Silver  has recently made an attempt to settle above $21.60 but lost momentum and pulled back towards the $21.50 level. Weaker dollar provided support to silver in today’s trading session, but it looks that some traders decided to take profits off the table after the recent rebound.

Silver

The nearest resistance level for silver is located at $21.60. In case silver settles above this level, it will move towards the next resistance level at $21.80. A successful test of the resistance at $21.80 will open the way to the test of the resistance at $22.00.

On the support side, the nearest support for silver is located at $21.25. In case silver declines below this level, it will head towards the next support at $21.00. A move below the support at $21.00 will push silver towards the support level near the 20 EMA at $20.80.

Meanwhile, gold managed to gain some upside momentum and moved closer to the $1760 level. Platinum pulled back towards $1000, while palladium made an attempt to settle above $1900.

WTI Oil Is Mostly Flat As Traders Wait For News

WTI oil remains stuck near the $77.50 level as traders are waiting for the news about the Russian oil price cap.

Interestingly, rising coronavirus cases in China did not put additional pressure on the oil markets. In the near term, the Russian oil price cap story will remain the key driver for oil prices.

Natural Gas Tested Support At $7.20

Natural gas has recently made an attempt to settle below the support at $7.20 as traders took profits after the recent rally.

However, natural gas markets failed to develop additional downside momentum as rail strike fears provided some support to natural gas prices.

Most likely, natural gas markets will remain volatile in the upcoming trading sessions as traders will react to the developments in the rail strike story.

Copper Tried To Settle Above $3.65

Copper made an attempt to settle above the $3.65 level despite worries about the situation with coronavirus in China. Traders should keep in mind that trading volume will be low due to the holiday in the U.S., so it remains to be seen whether copper markets will be able to gain sufficient upside momentum to move above the $3.65 level.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Tests New Highs As Rally Continues

Key Insights

  • U.S. dollar continues to move lower as traders believe that the Fed would slow the pace of rate hikes. 
  • USD/JPY gained strong downside momentum and moved towards the 138 level. 
  • Commodity-related currencies enjoy support in today’s trading session. 

U.S. Dollar Remains Under Pressure

U.S. Dollar Index  remains under pressure as traders stay focused on the recent FOMC Minutes, which indicated that the Fed is leaning towards a “moderate” 50 bps rate hike at the next Fed meeting.

There are no economic reports scheduled to be released in the U.S. today, so traders will focus on general market sentiment. Currently, the U.S. Dollar Index is trying to settle below the 105.70 level. In case this attempt is successful, the U.S. Dollar Index will gain additional downside momentum and move towards the 105.50 level.

EUR/USD Settled Above The 1.0400 Level

EUR/USD managed to get above the 1.0400 level and is trying to gain additional upside momentum.

Today, EUR/USD traders focused on the Ifo Business Climate report from Germany. The report indicated that Germany’s Business Climate improved from 84.5 in October to 86.3 in November, compared to analyst consensus of 85.

It should be noted that Germany’s business sentiment remains at extremely low levels, but the market is ready to interpret any improvement as a bullish catalyst for the European currency.

GBP/USD Tested New Highs

GBP/USD continues to move higher as traders react to the dovish FOMC Minutes.

GBP/USD

Currently, GBP/USD is trying to settle above the resistance at 1.2130. RSI is close to the overbought territory, but there is enough room to gain additional upside momentum in case the right catalysts emerge. If GBP/USD settles above 1.2130, it will move towards the next resistance level at 1.2150. A successful test of this level will push GBP/USD towards the resistance at 1.2185.

On the support side, the nearest support level for GBP/USD is located at 1.2100. A move below this level will open the way to the test of the support at 1.2080. If GBP/USD declines below 1.2080, it will head towards the next support at 1.2050.

Commodity-Related Currencies Continue To Rebound

FOMC Minutes provided material support to commodity-related currencies, which continued to move higher.

AUD/USD managed to settle above the 0.6750 level, while NZD/USD moved above 0.6250. USD/CAD declined towards 1.3325.

USD/JPY Retreats Despite Disappointing PMI Data From Japan

USD/JPY declined towards 138.20 as the strong pullback continued. Today, USD/JPY traders had a chance to take a look at the flash Manufacturing PMI report from Japan.

The report indicated that Japan’s Manufacturing PMI declined from 50.7 in October to 49.4 in November, compared to analyst consensus of 50.8. Numbers below 50 show contraction.

While the report indicated that Japan’s economy was slowing down, the Japanese yen gained ground against the U.S. dollar as traders focused on the potential shift in Fed’s rhetoric after the release of the FOMC Minutes.

For a look at all of today’s economic events, check out our economic calendar.

ECB Monetary Policy Meeting Minutes Deliver No Surprises

It was a relatively quiet day on the Eurozone economic calendar. On the data front, the German Ifo Business Climate Index drew interest ahead of the ECB monetary policy meeting minutes.

What Did ECB Monetary Policy Meeting Minutes Reveal?

There were no surprises today. ECB members view inflation as too high and see inflation staying above target for an extended time.

However, the ECB also noted that there were no visible signs of widespread second-round effects, and longer-term inflation expectations remained broader aligned with the 2% target.

Nonetheless, risks to the inflation outlook were on the upside; Inflation could see a further pickup over the medium term.

Amidst persistent inflation, economic activity likely slowed in Q3, and the ECB expects economic conditions to deteriorate further over the remainder of 2022 and early 2023. There are clear downside risks to growth in Q4 2022 and Q1 2023, compared with September 2022 projections.

However, the minutes made no reference to another 75-basis point rate hike in December. The minutes showed that the future path should be based on the ‘evolving outlook for inflation and the economy, following a meeting-by-meeting approach.’

Members argued that the Governing Council should continue normalizing and tightening monetary policy in the case of a shallow recession but pause in the event of a prolonged and deep recession.

The minutes reflected the ECB’s stance on tackling inflation, saying,

“The ECB now needed to show equal determination when inflation was above the target, countering far too high inflation and preventing it from becoming entrenched, irrespective of a deteriorating outlook for economic activity.”

Concerning the December meeting, the minutes noted that the Governing Council would have more information available, with projections extending to 2025.

In the October ECB Press Conference, ECB President Christine Lagarde noted that the ECB would be able to look ahead once the staff projections were available in December.

How Did the EUR Respond to the Minutes?

The EUR/USD responded positively to the minutes, recovering from a pre-release low of $1.03818 to a post-release high of $1.04144. A willingness to stomach a shallow recession and determination to push ahead with normalization and tightening delivered support.

At the time of writing, the EUR/USD was up 0.13% to $1.04084.

EUR/USD responds to ECB minutes.
241122 EURUSD 30 Minute Chart

Earlier in the day, German business sentiment figures surprised to the upside.

How Did the Ifo Business Climate Index Compare with the PMI Survey?

Germany’s Ifo Business Climate Index increased from 84.5 to 86.3 in November. Economists forecast a more modest rise to 85.0.

According to the November survey,

  • Pessimism regarding the coming months reduced markedly, suggesting that the German recession could be less severe.
  • On Wednesday, the prelim November Composite PMI survey revealed a similar trend. The level of pessimism continued to improve from a September low.

As with the Markit survey, sentiment towards current conditions was dire. The Ifo Current Assessment Sub-Index fell from 94.2 to 93.1. The Markit survey highlighted widespread concern about the effects of high inflation, rising interest rates, and heightened levels of uncertainty on investments and economic conditions.

The pickup in business sentiment could incentivize the ECB to continue hiking rates to bring inflation to target. The EUR/USD responded positively to the numbers.

Natural Gas Pulls Back As Traders Take Profits After The Recent Rally

Key Insights

  • Traders decided to take some profits off the table after the recent rally.
  • The recent EIA report served as an additional negative catalyst for natural gas markets.  
  • In case natural gas settles below the support at $7.20, it will move towards the next support level at $6.90.

Natural Gas Retreats Amid Profit-Taking

Natural gas is losing ground as traders take profits after the recent rally, which was driven by fears of the U.S. rail strike.

The recent EIA Weekly Natural Gas Storage Report indicated that working gas in storage declined by 80 Bcf from the previous week. Analysts expected that it would decrease by 87 Bcf. Currently, total working gas is within the five-year historical range.

The weather forecast is not favorable for high natural gas consumption, but the market will likely stay focused on the potential rail strike, which may disrupt coal shipments and boost demand for natural gas.

Traders will also keep an eye on the fate of the Freeport LNG restart. Previously, Freeport LNG was expected to restart operations in late November. However, the restart was postponed to mid-December. The restart of Freeport LNG will be bullish for the U.S. natural gas markets.

Natural Gas Tests Support At $7.20

Natural Gas

Currently, natural gas is trying to settle below the support level at $7.20. In case this attempt is successful, natural gas will move towards the next support, which is located at $6.90. A move below $6.90 will open the way to the test of the support at $6.75. If natural gas manages to settle below $6.75, it will head towards the next support level at $6.40.

On the upside, natural gas needs to settle back above $7.20 to have a chance to gain upside momentum in the near term. The next resistance level for natural gas is located near the recent highs at $7.55. If natural gas manages to settle above this level, it will move towards the resistance at $7.80. A successful test of the resistance at $7.80 will open the way to the test of the next resistance level at $8.10.

For a look at all of today’s economic events, check out our economic calendar.

Gold Moves Above $1750 As Dollar Pulls Back

Key Insights

  • Gold continues to rebound as the U.S. dollar remains under pressure against a broad basket of currencies. 
  • Yesterday’s FOMC Minutes signaled that the Fed would slow the pace of rate hikes, which was bullish for precious metals. 
  • A successful test of the resistance at $1750 will open the way to the test of the next resistance level at $1765.

Weaker Dollar Provides Support To Gold Markets

Gold is currently trying to settle above the resistance at $1750 as the U.S. dollar remains under pressure.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, settled below the 106 level and moved towards 105.70 as traders reacted to the dovish FOMC Minutes.

The FedWatch Tool indicates that there is a 75.8% probability of a 50 bps rate hike at the next meeting. The market prepares for a slowdown in the pace of rate hikes, which is bearish for dollar and bullish for precious metals.

In the near term, gold traders will stay focused on the dynamics of the American currency. The U.S. Dollar Index is currently moving towards multi-month lows at 105.35. In case the U.S. Dollar Index settles below this level, it will gain additional downside momentum, which will provide more support to gold prices.

Gold Tries To Settle Above The $1750 Level

Gold

Gold has recently managed to get above the resistance at $1750 and is trying to gain additional upside momentum. RSI is in the moderate territory, and there is plenty of room to gain momentum in case the right catalysts emerge.

The nearest resistance level for gold is located at $1765. If gold settles above this level, it will head towards the next resistance, which is located at $1775. A successful test of the resistance at $1775 will open the way to the test of the next resistance at $1785.

On the support side, the previous resistance at $1750 will likely serve as the first support level for gold. If gold declines below this level, it will move towards the next support near the 20 EMA at $1730. A move below $1730 will push gold towards the support level at $1715.

For a look at all of today’s economic events, check out our economic calendar.