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.

GBP to USD Forecast – British Pound Chops Back and Forth to Kick Off the Week

GBP to USD Forecast Video for 29.11.22

British Pound vs US Dollar Technical Analysis

The British pound has gone back and forth during the course of trading on Monday, as we try to figure out what to do with the idea of the 200-Day EMA sitting right there. It is obviously an indicator that a lot of people pay attention to, so it’ll be interesting to see whether or not this is the end of the relief rally in the British pound, or if it’s going to end up being a more significant trend change. I think at this point a lot of people were going to be paying close attention to the 1.22 level, which is an area that is a large, round, psychologically significant figure, and also an area where we have seen a previous double top. In that scenario, things get quite interesting as we try to figure out what to do with ourselves.

If we break down below the 1.20 level, then I think it’s very likely that we pull back to the 1.18 level. The 1.18 level had seen a certain amount of support and resistance in the past, so I think that’s a little bit of a battleground setting up, although I don’t necessarily think that it is going to be a major one. Breaking down below there opens up the possibility of moving down to the 1.16 level, which is basically where the 50-Day EMA sets. After that, then you have the 1.15 level that obviously carries a lot of psychology attached to it.

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

UK Returns to Fiscal Orthodoxy, but Budget Discipline Tested by Difficult Economic Backdrop

Chancellor of the Exchequer Jeremy Hunt’s 17 November “Autumn Statement” confirmed a mixture of direct and indirect tax increases and sharp reductions in public spending amounting to the roughly GBP 55bn (approximately 2.5% of GDP) needed for the government to meet its budgetary targets. The budget reflects the unusually difficult choices the Rishi Sunak government faces, with limited options given the difficult macroeconomic context.

Investor confidence in the UK (rated by Scope Ratings AA/Stable) is particularly crucial at this juncture because any additional debt issuance the UK Treasury is planning comes on top of the approximately 30% of the UK’s total outstanding debt that will have to be refinanced over the next five years.

Chancellor Hunt set out a long-term strategy for balancing public finances supported by the forecasts from the independent Office for Budget Responsibility (OBR). Hunt has based budget plans on a growth forecast averaging 1.3% a year between 2023-26 compared with the Liz Truss government’s unrealistic target of 2.5% growth a year (Figure 1).

This new forecast is aligned with our estimate of the UK’s medium-term annual growth potential of around 1.5% as a result of now-envisaged large cuts to government expenditure through 2026 and the sharper-than-expected tightening in financial conditions.

Figure 1. UK real GDP growth

Q4 2019 = 100

Sources: Office for Budget Responsibility, Office for National Statistics

Hunt Relies on Backloaded Budgetary Tightening

The fiscal tightening announced in the Autumn Statement is backloaded, with a significant part of the spending cuts taking effect only from 2025. Debt-to-GDP is expected to increase in the medium term, peaking at 97.6% in 2025-26 and subsequently edging sideways to 97.3% in 2027-28, leaving much of the future debt consolidation to the next government given the next general election is due to take place in 2024. However, one of the biggest increases in taxation – freezing national-insurance thresholds for companies – will take effect from April 2023.

The fiscal framework is further diluted by the revision of two fiscal rules: net debt as a share of GDP set to fall by the fifth year of the rolling five-year forecast horizon rather than the previously-targeted third year, and public sector net borrowing targeted at less than 3% of GDP over the same period.

Since the targets within the fiscal framework are rolling targets, it offers a high degree of flexibility to adjust plans in future years. This makes it relatively easy for any ruling government to loosen fiscal policy to support the economy in the future if needed.

UK Loosens Fiscal Discipline; Fiscal Framework Less Tight Than Germany, Sweden

However, it also instils significantly less fiscal discipline in the medium term, aligning the UK’s framework more closely to France (rated AA/Stable)’s than those of higher, AAA-rated, countries in Europe. The fiscal frameworks of higher-rated sovereigns tend to have more binding targets such as Germany’s constitutionally-anchored debt brake or Sweden’s debt anchor, which keep debt levels close to 35% of GDP.

Higher borrowing costs for the government, businesses and households will curtail economic activity in the near to medium term and this is likely to result in a possibly severe correction in house prices. This comes on top of post-Brexit constraints on UK trade holding back future growth as the country’s dealings with its largest trading partner, the EU, become more difficult and costly.

A period of political and policy stability will be important for the UK to solidify its restored fiscal credibility and allow a more stable environment to support business investment, vital given the difficult economic context. Following the severe market reaction to the previous mini-budget, major political infighting within the ruling Conservative Party is likely to remain subdued in the near term.

Fundamental differences within the party remain. Political infighting may reignite in the future. Some of the planned spending cuts and tax rises are unpopular with influential wings of the ruling party – while many voters are struggling to cope with the rising cost of living, leading to opposition Labour Party’s large lead in opinion polls. Any future changes in Conservative leadership or the election of a Labour government would result in new shifts in fiscal policy.

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

Eiko Sievert is a Director in Sovereign and Public Sector ratings at Scope Ratings GmbH.

Weekly Elliott Wave Analysis: EUR/USD, GBP/USD and Natural Gas

Our weekly Elliott Wave analysis reviews the EUR/USD daily chart, the GBP/USD daily chart, and the Natural Gas 1 hour chart.

EUR/USD Reaches Key 38.2-50% Fibonacci Resistance Zone

The EUR/USD is showing a short-term uptrend with higher highs and higher lows but what is the long-term picture? Let’s review:

  1. The EUR/USD made a bullish breakout above the resistance trend lines (dotted red).
  2. The EUR/USD is approaching a key resistance zone at the 38.2%-50% Fibonacci levels (red box) at the 1.05-1.0575 zone.
  3. A bullish breakout would indicate a larger bullish retracement such as a 12345 (green) pattern.
  4. A bearish bounce makes a different ABC (yellow) pattern possible within a complex WXY (pink) pattern of wave 4 (gray).
  5. The key pattern is the bull flag pattern after the bullish breakout, which makes a wave 4 (green) pattern likely.
Euro daily chart

GBP/USD Breaks Above Key 50% Fibonacci Level

The GBP/USD is breaking above the 50% Fibonacci resistance level, which is undermining the long-term bearish wave analysis:

  1. The GBP/USD bullish breakouts above the resistance trend lines (dotted red) indicate a large bullish retracement.
  2. A bullish continuation followed by a bull flag pattern indicates a wave 345 (orange) pattern.
  3. A strong bearish bounce, however, could still indicate an ABC (yellow) within a complex WXY (pink) of a larger wave 4 (gray).
  4. The GBP/USD is at a key critical zone where price action is testing a bull-bear line. A break or bounce is critical for the next price swing.
British Pound daily chart

Natural Gas Reaches Key -61.8% Fibonacci Target

Natural gas is back into a bearish mode after making a strong move up:

  1. The Natural Gas has completed a 5 wave pattern (green) in wave C (yellow) of a larger wave X (pink).
  2. Price action has reached the -61.8% Fibonacci target which is a key level.
  3. A bearish breakout below the support zone (blue box) could indicate a decline towards the Fibonacci targets.
  4. The bearish breakout could confirm a new bearish 5 wave pattern (green).
Natural Gas 1 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

GBP to USD Forecasts: Risk Aversion to Leave Sub-$1.20 in View

It is a quiet day for the GBP/USD. There are no UK economic indicators to influence the GBP/USD today.

Through the early part of the Monday session, risk aversion weighed on the Pound. News of protests across China over COVID-19 lockdown measures sent riskier assets into the red and drove demand for the Greenback.

Later today, a lack of stats will also leave the Pound in the hands of the BoE and government chatter. However, with no MPC members due to speak today, investors will need to monitor comments to the media.

GBP/USD Price Action

At the time of writing, the Pound was down 0.14% to $1.20693. A mixed morning saw the GBP/USD rise to an early high of $1.20822 before falling to a low of $1.20252.

The Pound fell through the First Major Support Level (S1) at $1.2054 before finding support.

GBP to USD under early pressure.
GBPUSD 281122 Daily Chart

Technical Indicators

The Pound needs to move through the $1.2091 pivot to target the First Major Resistance Level (R1) at $1.2123 and the Friday high of $1.21276. Risk-on sentiment and hawkish MPC member chatter would support a bullish session.

In the case of an extended rally, the GBP/USD would likely take a run at the Second Major Resistance Level (R2) at $1.2160 and $1.22. The Third Major Resistance Level (R3) sits at $1.2230.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.2054 in play. However, barring an extended risk-off-fueled pullback, the GBP/USD should avoid sub-$1.20. The Second Major Support Level (S2) at $1.2021 should limit the downside.

The Third Major Support Level (S3) sits at $1.1951.

GBP to USD support levels in play below the pivot.
GBPUSD 281122 1 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.19440. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the Major Support Levels and the 50-day EMA ($1.19440) would support a breakout from R1 ($1.2123) to target R2 ($1.2160) and $1.22. However, a fall through S1 ($1.2054) would bring S2 ($1.2021), S3 ($1.1951), and the 50-day EMA ($1.19440) into view.

EMAs remain bullish.
GBPUSD 281122 4-Hourly Chart

The US Session

There are no US economic indicators for the markets to consider, leaving FOMC member chatter to influence. FOMC member Williams will speak today.

However, investors will need to monitor FOMC member commentary with the media. Following last week’s FOMC meeting minutes, hawkish commentary would move the dial.

 

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.

GBP to USD Weekly Forecast – British Pound Continues to Drive Higher Against US Dollar

GBP to USD Forecast Video for 28.11.22

British Pound vs US Dollar Weekly Technical Analysis

The British pound has had a positive week after initially dropping a bit against the greenback. As a result, the market has broken above the 1.20 level, which of course is an area that a lot of people pay close attention to. It’s probably worth noting that there is an entire region of resistance built into the market to the 1.22 level, so now we have to begin to ask questions as to whether or not the market has the momentum to keep up this type of massive bear market rally. If we can break above the 50-Week EMA, which is just above that 1.22 level, then it will be a very impressive move and could send this market much higher.

That being said, looking around the Forex world, you can see that a lot of these moves against the US dollar are starting to run out of momentum. So, at this point I have asked the question, “Is the US dollar done pulling back?” I think the next week or 2 is going to be very crucial for the Forex markets in general, because it could set us up for how the beginning of next year plays out.

I’ll be paying close attention to the 1.22 level, and whether or not we can stay above there on a daily close. On a weekly close, that would obviously be even more bullish, but at this point it looks like we are going to struggle. I think the next week could be very noisy, especially considering that the jobs number comes out of America on Friday. In other words, brace for volatility.

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

GBP to USD Forecast – The British Pound Has a Quiet Friday

GBP to USD Forecast Video for 28.11.22

British Pound vs US Dollar Technical Analysis

The British pound has fallen a bit during the session, only to turn around and bounce a bit. Ultimately, the market looks as if it has nowhere to be, and therefore you need to keep an eye on whether or not we start to break back down. After all, the question at this point is going to be whether or not we have run out of momentum? The British pound has gone straight up in the air, and a lot of traders out there are banking on the Federal Reserve making a lot of dovish moves.

If we break down below the 1.20 level, it’s possible that the British pound could go down to the 1.18 level, which is an area where I would anticipate seeing a lot of support. Anything below there then could throw the entire move higher into question. On the other hand, if we were to turn around and take out the highs of the last couple of days, then we will threaten the 1.22 level. Anything above the 1.22 level will more likely than not attract a lot of inflows, meaning that the market could continue to change the overall trend.

At this point, the market may have gotten a little bit ahead of itself, so at the very least we may need to pull back in order to build up momentum. Keep in mind that the end of the Friday session will have been very thin, as only limited US trading would have been part of the picture due to the fact that it is the day after Thanksgiving, which typically sees people avoiding work.

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

Week Ahead: How Likely Will EUR/USD Hit 1.05?

Economic Calendar for Next Week

Monday, November 28

  • AUD: Australia October retail sales
  • EUR: European Central Bank President Christine Lagarde speech
  • USD: Speeches by New York Fed President John Williams, St. Louis Fed President James Bullard

Tuesday, November 29

  • JPY: Japan October unemployment, retail sales
  • GBP: Bank of England’s Catherine Mann speech
  • EUR: Germany November inflation, Eurozone November economic confidence
  • CAD: Canada September GDP
  • USD: US November consumer confidence
  • Twitter to relaunch blue-tick verification

Wednesday, November 30

  • JPY: Japan October industrial production
  • CNY: China November PMIs
  • AUD: Australia October inflation
  • EUR: Eurozone November inflation, Germany November unemployment
  • GBP: Bank of England Chief Economist Huw Pill speech
  • USD: Fed Chair Jerome Powell speech, Fed Beige Book, US 3Q GDP (second estimate)
  • US crude: EIA weekly oil inventory report

Thursday, December 1

  • JPY: Bank of Japan Governor Haruhiko Kuroda speech
  • CNY: China November Caixin manufacturing PMI
  • EUR: Eurozone October unemployment, November manufacturing PMI, speech by ECB Chief Economist Philip Lane
  • GBP: UK November manufacturing PMI (final)
  • USD: US weekly initial jobless claims; October personal income/spending, PCE deflator; November manufacturing
  • USD: Speeches by Dallas Fed President Lorie Logan, Fed Governor Michelle Bowman

Friday, December 2

  • USD: US November jobs report, Chicago Fed President Charles Evans speech
  • CAD: Canada November unemployment

The coming week appears set up for a major move in EURUSD, as markets await key data out of the Eurozone and the US economies.

  • The Eurozone’s November consumer price index (CPI) is expected to remain at painful levels, with the CPI from the month prior hitting a record high of 10.7%.
  • The headline US November nonfarm payrolls figure is forecasted to come in at 200,000 (lower than October’s 261k), while the unemployment rate is set to hold at 3.7%.

Ultimately, such economic data will be filtered the global tightening lens.

That means that markets will interpret the data based on whether or not they allow either the European Central Bank of the US Federal Reserve to carry on with larger interest rate hikes.

Raising Interest Rates Has Been the Best Tool To Fight Against Inflation

Keep in mind that inflation has been enemy #1 for major central banks, and their primary weapon in fending off the inflation beast is by raising interest rates.

  • The stronger the inflationary pressures, the larger the rate hike (typically).
  • The larger the rate hike (relative to other economies), the stronger its currency.
  • However, aggressive hikes also carry the risk of triggering an economic recession.
  • Hence, central banks may start to ease up on their rate hikes (either by opting for smaller rate hikes, or pausing, or even making a u-turn with a rate cut instead) if they grow concerned about incurring too much economic damage.

Hence, it’s the above narrative that will guide investors and traders, as they asses the EURUSD’s prospects over the week ahead, in light of the incoming data.

Potential Scenarios

  1. EURUSD may move higher if Eurozone’s November inflation punched its way to a fresh record high above 10.7% + a higher-than-expected US unemployment rate/lower-than-expected headline US NFP number (<200k)
  2. EURUSD may move lower if Eurozone inflation eases below October’s 10.7% + a lower-than-expected US unemployment rate/higher-than-expected headline US NFP (>200k)

Will EUR/USD Stay Above or Below its 200-day SMA?

EURUSD’s 200-day simple moving average (SMA) has exerted strong resistance over the world’s most popularly traded FX pair in recent sessions.

Note also that the 1.04 region was a key battleground between bulls and bears back in May/June, twice repelling euro bears (those who believe that EURUSD will fall).

Based on current levels, markets are forecasting a likelier-than-even chance (61%) that EURUSD would move northward and touch 1.05 by this time next week, as opposed to the 43% chance that EURUSD would moderate back down to 1.03 over the same period.

However, further gains may tip EURUSD over into ‘overbought’ territory, with its 14-day relative strength index now threatening to cross over the 70 threshold.

Such a technical event may signal an immediate pullback.

Ultimately, whether EURUSD can stay either above or below its 200-day SMA next week is set to depend on which central bank has been allowed to persist with supersized rate hikes.

For more information visit FXTM.

GBP to USD Forecasts: Bulls to Target $1.22 as Momentum Gathers Pace

It is a quiet day for the GBP/USD. There are no UK economic indicators to influence the GBP/USD today. The lack of stats should allow recent BoE member commentary to resonate.

Hawkish BoE Monetary Policy Committee member chatter continued to deliver Pound support on Thursday.

MPC members Dave Ramsden and Catherine Mann delivered speeches on Thursday. Ramsden said,

“Although my bias is towards further tightening, if the economy develops differently to my expectation and persistent inflation stops being a concern, then I would consider the case for reducing Bank Rate, as appropriate.”

In considering inflation levels, Ramsden’s comments favor another big move in December.

MPC member Catherine Mann also delivered a hawkish statement, reportedly stating that inflation was likely to bet at the upper end of the Bank’s forecasts.

Following Catherine Mann and Dave Ramsden’s comments, Bank of England chatter will remain in the spotlight. However, with no MPC members speaking today, investors will need to monitor comments to the media.

GBP/USD Price Action

At the time of writing, the Pound was up 0.09% to $1.21227. A mixed start to the day saw the GBP/USD fall to an early low of $1.20963 before rising to a high of $1.21276.

GBP/USD on the move.
GBPUSD 251122 Daily Chart

Technical Indicators

The Pound needs to avoid the $1.2104 pivot to target the First Major Resistance Level (R1) at $1.2161. Risk-on sentiment and hawkish MPC member chatter would support a bullish session.

In the case of another extended rally, the GBP/USD would likely take a run at the Second Major Resistance Level (R2) at $1.2211. The Third Major Resistance Level (R3) sits at $1.2319.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2054 into play. However, barring a risk-off-fueled pullback, the GBP/USD should avoid sub-$1.20 and the Second Major Support Level (S2) at $1.1996.

The Third Major Support Level (S3) sits at $1.1889.

GBP/USD resistance levels in play.
GBPUSD 251122 1 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.19040. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the Major Support Levels and the 50-day EMA ($1.19040) would support a breakout from R1 ($1.2161) to target R2 ($1.2211). However, a fall through S1 ($1.2054) would bring S2 ($1.1996) and the 50-day EMA ($1.19040) into view.

EMAs bullish.
GBPUSD 251122 4-Hourly Chart

The US Session

There are no US economic indicators for the markets to consider, with the US markets on a half day for Thanksgiving. The lack of stats may leave the dollar on the back foot, with recent central bank commentary shifting policy divergence in favor of the Pound.

 

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.

GBP to USD Forecast – Sterling Tests 200-Day EMA

GBP to USD Forecast Video for 25.11.22

British Pound vs US Dollar Technical Analysis

The British pound has rallied during trading on Thursday, in what would’ve been relatively light volume for most of the session. The 200-Day EMA has offered a bit of a target and has offered a little bit of resistance. It is at this point that we are starting to ask questions of the overall trend. Quite frankly, a lot of this comes down to whether or not you believe the Federal Reserve is going to slow down its pace of interest rate hikes, and of course whether or not the Bank of England can tighten into a 2 year recession.

At this point, it looks like we have a somewhat binary set up in the sense that if we can break above the 200-Day EMA convincingly, then a lot of traders will start to look at this as a potential uptrend. On the other hand, if we fall back below the 1.20 level, then it’s likely that we are at the very least going to have a correction, if not a continuation of the overall downtrend. Quite frankly, this is where “the rubber meets the road”, meaning that we are going to have to make some serious decisions rather soon.

In this environment, it certainly was helped out by the idea that the Federal Reserve Meeting Minutes showed that some governors were starting to express opinions of slowing down rate hikes. The foreign exchange market is now trying to get in front of the next move, perhaps front running the Federal Reserve and any policy shift that it could end up having. In this environment, anything is possible but I’m going to wait and let the market tell me which direction to trade.

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

GBP to USD Forecasts: Hawkish BoE Chatter to Bring $1.22 into Play

It is a relatively quiet day for the GBP/USD, with CBI Industrial Trend Orders for November in the spotlight. Following Wednesday’s return to $1.20, we can expect Pound sensitivity to today’s numbers. However, we don’t expect a lasting impact, with the stats unlikely to influence the Bank of England’s monetary policy intentions.

Better-than-expected private sector PMI numbers for November and hawkish BoE chatter should continue to deliver GBP/USD ahead of today’s stats.

On Wednesday, Bank of England Chief Economist Huw Pill reiterated the need to do more to bring inflation to target. Speaking at a Beesley Lecture, Huw Pill said,

“In my judgment, there is still some more work to do with Bank Rate in order to address prevailing inflationary pressures and complete the necessary normalization of monetary policy following a decade or more of exceptional accommodation.”

Following Huw Pill’s comments, Bank of England chatter will remain in the spotlight.

Monetary Policy Committee members Dave Ramsden, Catherine Mann, and Chief Economist Huw Pill will speak today. The markets will be looking for Dave Ramsden and Catherine Mann to support further rate hikes to deliver GBP/USD support.

GBP/USD Price Action

At the time of writing, the Pound was up 0.16% to $1.20737. A bullish start to the day saw the GBP/USD rise from an early low of $1.20459 to a high of $1.20776.

GBP/USD on the move.
GBPUSD 241122 Daily Chart

Technical Indicators

The Pound needs to avoid the $1.2002 pivot to target the First Major Resistance Level (R1) at $1.2132. Risk-on sentiment and hawkish MPC member chatter would support a bullish session.

In the case of another extended rally, the GBP/USD would likely take a run at the Second Major Resistance Level (R2) at $1.2211. The Third Major Resistance Level (R3) sits at $1.2419.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1924 into play. However, barring a risk-off-fueled pullback, the GBP/USD should avoid sub-$1.1850 and the Second Major Support Level (S2) at $1.1794.

The Third Major Support Level (S3) sits at $1.1586.

GBP to USD resistance levels in play above the pivot.
GBPUSD 241122 1 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.18370. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.1924) and the 50-day EMA ($1.18370) would support a breakout from R1 ($1.2132) to target R2 ($1.2211). However, a fall through S1 and the 50-day EMA would give the bears a run at sub-$1.19. The 200-day EMA sits at $1.15884.

EMAs bullish.
GBPUSD 241122 4-Hourly Chart

The US Session

There are no US economic indicators for the markets to consider, with the US markets closed for Thanksgiving. The lack of stats will leave the FOMC meeting minutes to resonate.

 

GBP/USD Settled Above The Key 1.2000 Level

Key Insights

  • Better-than-expected PMI reports provided support to GBP/USD and EUR/USD. 
  • The disappointing PMI data put pressure on the American currency. 
  • Canadian dollar found itself under pressure amid a strong sell-off in the oil markets. 

U.S. Dollar Retreats After PMI Reports

The U.S. Dollar Index pulled back towards the 106.50 level as traders bet that FOMC Minutes, which will be released today, would show that some Fed members are worried about the negative impact of aggressive rate hikes.

The FedWatch Tool indicates that there is a 71.1% probability of a 50 bps rate hike at the next Fed meeting in December. Traders expect that it will be followed by another 50 bps rate hike in February, and the target rate would reach the 475 bps – 500 bps range.

Any material change in the interest rate expectations will have a significant impact on the U.S. dollar. If FOMC Minutes are somewhat dovish, the American currency will find itself under more pressure.

The recent PMI data has put additional pressure on the U.S. dollar. Manufacturing PMI declined from 50.4 in October to 47.6 in November, while Services PMI decreased from 47.8 to 46.1. Consumer Sentiment decreased from 59.9 in October to 56.8 in November. The weak PMI reports may force the Fed to be less hawkish at the next meeting.

EUR/USD Tests Resistance At 1.0350

EUR/USD gained upside momentum after the release of the Euro Area flash PMI data. Euro Area Manufacturing PMI improved from 46.4 in October to 47.3 in November, while analysts expected that it would decline to 46. Euro Area Services PMI remained unchanged at 48.6, compared to analyst consensus of 48.

Currently, EUR/USD is trying to settle above the 1.0350 level. In case this attempt is successful, EUR/USD will move towards the 1.0400 level.

GBP/USD Rallied Above The 1.2000 Level

GBP/USD enjoyed strong support after the release of better-than expected PMI reports. Manufacturing PMI remained unchanged at 46.2 in November, compared to analyst consensus of 45.8. Services PMI was also unchanged at 48.8, while analysts expected that it would decrease to 48.

GBP/USD

Currently, GBP/USD is trying to settle above the 1.2000 level. In case this attempt is successful, it will move towards the next resistance level at 1.2050. A successful test of the resistance at 1.2050 will push GBP/USD towards the resistance at 1.2080.

On the support side, a move below 1.2000 will push GBP/USD towards the support level at 1.1950. In case GBP/USD settles back below this level, it will head towards the next support level at 1.1900.

USD/CAD Gains Ground Amid A Strong Sell-Off In The Oil Markets

USD/CAD made an attempt to settle above the 50 EMA near 1.3440 as WTI oil declined towards the $78 level.

Other commodity-related currencies managed to gain upside momentum in today’s trading session. AUD/USD moved towards the 0.6700 level, while NZD/USD settled above 0.6200.

USD/JPY Declined Towards The Key 140 Level

USD/JPY pulled back towards the 140 level as traders focused on the general weakness of the U.S. dollar. At this point, it looks that USD/JPY may be extremely sensitive to FOMC Minutes.

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

GBP to USD Forecast – British Pound Reaches Toward Resistance

GBP to USD Forecast Video for 24.11.22

British Pound vs US Dollar Technical Analysis

The British pound has rallied a bit during the trading session on Wednesday, to reach toward the 1.20 level. The 1.20 level has been resistance as of late, and obviously has a lot of psychology attached to it, as it is a large, round, psychologically significant figure. Ultimately, if we can break above here, then the market has to worry about the 200-Day EMA.

Anything above the 200-Day EMA could change the trend completely. That being said, the markets will continue to look and this pair through the prism of whether or not the United Kingdom will go through massive recession and have to loosen monetary policy, or if fighting inflation will be the biggest thing.

Ultimately, if we do break down below the 1.18 level, that question could be somewhat answered, as the market would drop down to the 1.15 level eventually. I think the only thing you can probably count on is a lot of volatility over the next week or 2, especially as the next couple of days are going to be thin in North America as it is Thanksgiving on Thursday.

That being said, at the end of the day on Wednesday we will get the FOMC Meeting Minutes, which could also be important as to the direction of the US dollar. In other words, I would expect a lot of noise, but I also expect to see some type of definitive answer as to the next move in this pair rather soon. Keep in mind that interest rates in America have cooled off a bit, but if they start to pick up again, that could send this pair lower.

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

GBP to USD Forecasts: UK Stats and BoE Policy Chatter to Test $1.175

It is a busy day for the GBP/USD, with prelim November private sector PMIs in focus this morning.

After the grim OBR growth forecasts for 2023, today’s PMIs will give the markets a sense of what’s to come at the turn of the year. Economists have forecast the all-important services PMI to fall from 48.8 to 48.0 and for the manufacturing PMI to decline from 46.2 to 45.8.

While the headline numbers will influence, the sub-components, including input and output price and new orders, will also draw interest. Weaker-than-expect numbers would support the OBR forecasts.

Following today’s stats, Bank of England chatter will draw interest. Bank of England Chief Economist Huw Pill will speak at the Beesley Lecture Series on returning inflation to target. In recent speeches, the Bank’s Chief Economist has stood his ground on the need to lift rates further to bring inflation to target.

Earlier this month, Huw Pill reiterated the need for the Bank to raise rates to tighten monetary policy. Previously, Huw Pill had also pointed out that ‘the slowdown in the economy is what we anticipate is required to contain domestic inflationary pressures to achieve our targets.’

GBP/USD Price Action

At the time of writing, the Pound was down 0.08% to $1.18744. A mixed start to the day saw the GBP/USD rise to an early high of $1.19094 before falling to a low of $1.18725.

GBP to USD under early pressure.
GBPUSD 231122 Daily Chart

Technical Indicators

The Pound needs to avoid the $1.1866 pivot to target the First Major Resistance Level (R1) at $1.1921. Risk-on sentiment and hawkish MPC member chatter would support a bullish session.

In the case of an extended rally, the GBP/USD would likely take a run at the Second Major Resistance Level (R2) at $1.1958 and resistance at $1.20. The Third Major Resistance Level (R3) sits at $1.2051.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1828 into play. However, barring a risk-off-fueled pullback, the GBP/USD should avoid sub-$1.1750. The Second Major Support Level (S2) at $1.1773 should limit the downside.

The Third Major Support Level (S3) sits at $1.1680.

GBP to USD resistance levels in play above the pivot.
GBPUSD 231122 1 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.17976. The 50-day EMA widened from the 100-day EMA, with the 100-day EMA pulling away from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.17976) would support a breakout from R1 ($1.1921) to target R2 ($1.1958) and $1.20. However, a fall through the 50-day EMA ($1.17976) would give the bears a run at sub-$1.18. The 200-day EMA sits at $1.15677.

EMAs bullish.
GBPUSD 231122 4-Hourly Chart

The US Session

It is a busy day ahead on the US economic calendar. Prelim November private sector PMIs, consumer sentiment, jobless claims, and core durable goods will be in focus. Barring a spike in jobless claims, expect the services PMI and consumer sentiment to have the most impact on the dollar.

Late in the session, the FOMC meeting minutes will also draw attention. FOMC members have delivered mixed signals, leaving the markets uncertain about the December move. While the minutes will provide some guidance, the latest stats continue supporting another 75-basis point rate hike.

Today’s economic indicators and FOMC member chatter could provide more clarity. According to the FedWatch Tool, the probability of a December 75-basis point rate hike stood at 24.2% this morning.

 

USD/CAD Pulls Back As WTI Oil Rebounds

Key Insights

  • The continuation of WTI oil’s rebound provided material support to the Canadian dollar and other commodity-related currencies. 
  • EUR/USD managed to settle above the 1.0250 level. 
  • USD/JPY found itself under pressure after the strong rally. 

U.S. Dollar Pulls Back After Yesterday’s Rally

The U.S. Dollar Index is trying to settle below the 107.50 level as traders take some profits off the table after yesterday’s rally.

Treasury yields are moving lower, and the yield of 10-year Treasuries has recently managed to settle back below the 50 EMA at 3.80%.

If the yield of 10-year Treasuries declines below 3.75%, it will head towards the support level at 3.67%, which will be bearish for the American currency.

EUR/USD Gains Ground As Euro Area Consumer Confidence Exceeds Expectations

EUR/USD settled above the 1.0250 level and is trying to develop additional upside momentum after the release of the Euro Area Consumer Confidence report.

The report indicated that Consumer Confidence improved from -27.6 in October to -23.9 in November, compared to analyst consensus of -26.

While Consumer Confidence remains at low levels, the better-than-expected report may provide some support to the European currency.

GBP/USD Moves Towards The 1.1900 Level

GBP/USD has recently made an attempt to settle above the 1.1900 level as traders rushed to buy the pound after yesterday’s pullback.

GBP/USD

If GBP/USD manages to settle above 1.1900, it will head towards the next resistance level, which is located near the recent highs at 1.1950. A successful test of this level will open the way to the test of the resistance at 1.2000.

On the support side, the nearest support level for GBP/USD is located at 1.1855. In case GBP/USD declines below this level, it will head towards the next support level at 1.1830. A move below 1.1830 will push GBP/USD towards the support at 1.1790.

USD/CAD Retreats As Oil Markets Continue To Rebound

USD/CAD declined below the 1.3400 level as WTI oil continued to rebound after yesterday’s sell-off, which was caused by reports about a potential production increase from Saudi Arabia. These reports were refuted by Saudi Energy Minister Prince Abdulaziz bin Salman.

Today, USD/CAD traders also focused on the economic data from Canada. Retail Sales declined by 0.5% month-over-month in September, while Wholesale Sales increased by 1.3% in October. New Housing Price Index declined by 0.2% month-over-month in October.

Other commodity-related currencies have also moved higher today. NZD/USD rebounded towards the 0.6150 level, while AUD/USD settled back above 0.6620.

USD/JPY Declined Below 141.50

USD/JPY faced resistance near 142.25 and pulled back below the 141.50 level. There were no important economic reports in Japan today, and it looks that profit-taking was the main driver behind the strong pullback.

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

GBP to USD Forecast – British Pound Continues to Consolidate Against the Greenback

GBP to USD Forecast Video for 23.11.22

British Pound vs US Dollar Technical Analysis

The British pound has rallied a bit during the session on Tuesday, as we continue to see a bit of consolidation in this pair. Ultimately, it looks as if the 1.20 level above is a significant barrier that’s going to take a lot of work to get above. That makes a lot of sense because the Bank of England has already stated that the British economy is going to go into a two-year recession.

On the other side of the Atlantic, you have the United States which has a central bank that’s in tightening mode, but even after it slows down or even stops, it plans on being tight for quite some time. In other words, the US dollar will be much more attractive than the British pound over the longer term.

Above the 1.20 level you also have the 200-Day EMA, which of course is a technical indicator that a lot of people will pay attention to determine the trend. As long as we stay underneath there, a certain large portion of the trading public will think of this as being in a downtrend. In fact, I really don’t think it’s until we break above the 1.21 level that you can start to argue that the trend has changed.

Keep in mind that we had recently seen a lot of drama coming out of the UK due to budgetary concerns and had gotten far too oversold as we pierced the 1.05 level. We have raised the value of Sterling by 10 full handle since then, so the question now is whether or not it is a correction, or if it is the start of something more important. I believe 1.21 has the answer.

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

GBP to USD Forecast: FOMC Members to Bring Sub-$1.17 into View

It is a quiet day for the GBP/USD, with no economic indicators from the UK for the markets to consider.

The lack of stats leaves the Pound in the hands of market risk sentiment through the early part of the day. A pickup in market risk appetite provided support this morning.

However, the UK economic outlook and sentiment towards the Bank of England monetary policy remain central themes. Despite recent economic indicators, the markets are expecting economic conditions to deteriorate. Weaker UK economic conditions could impact the Bank of England’s policy goals to tackle inflation.

With no stats to consider, Bank of England chatter will draw interest. While no Monetary Policy Committee members are due to speak until tomorrow, investors will need to monitor any comments to the media.

GBP/USD Price Action

At the time of writing, the Pound was up 0.25% to $1.18504. A mixed start to the day saw the GBP/USD fall to an early low of $1.18103 before rising to a high of $1.18636.

GBP/USD finds early support.
GBPUSD 221122 Daily Chart

Technical Indicators

The Pound needs to avoid the $1.1832 pivot to target the First Major Resistance Level (R1) at $1.1886 and the Monday high of $1.18968. Risk-on sentiment and hawkish MPC member chatter would support a bullish session.

In the case of an extended rally, the GBP/USD would likely take a run at the Second Major Resistance Level (R2) at $1.1951. The Third Major Resistance Level (R3) sits at $1.2069.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1767 into play. However, barring a risk-off-fueled pullback, the GBP/USD should avoid sub-$1.17. The Second Major Support Level (S2) at $1.1714 should limit the downside.

The Third Major Support Level (S3) sits at $1.1595.

GBP/USD resistance levels in play above the pivot.
GBPUSD 221122 1 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.17763. The 50-day EMA widened from the 100-day EMA, with the 100-day EMA pulling away from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.17763) would support a breakout from R1 ($1.1886) to target R2 ($1.1951). However, a fall through the 50-day EMA ($1.17763) would give the bears a run at sub-$1.17. The 200-day EMA sits at $1.15475.

EMAs remain bullish.
GBPUSD 221122 4-Hourly Chart

The US Session

It is a quiet day ahead on the US economic calendar. There are no US economic indicators for the markets to consider. However, Fed chatter will draw interest throughout the US session.

FOMC members Mester, George, and Bullard will deliver speeches later today. Hawkish Fed chatter could send the GBP/USD to sub-$1.17. However, FOMC members have given mixed signals, raising doubts over a 75-basis point hike in December.

The probability of a 75-basis point December rate hike had fallen to 14.6% before rising to 24.2% over the weekend. This morning, the likelihood of a 75-basis point rate hike eased back to sub-20% before returning to 24.2%, according to the FedWatch Tool.

 

U.S. Dollar Rallies As Demand For Safe-Haven Assets Grows

Key Insights

  • U.S. dollar continues to rebound against a broad basket of currencies as traders focus on the problems with coronavirus in China.
  • EUR/USD pulled back towards the 1.0250 level. 
  • Commodity-related currencies have found themselves under strong pressure amid a broad sell-off in commodity markets. 

U.S. Dollar Starts The Week On A Strong Note

U.S. Dollar Index gained upside momentum and moved above the 107.50 level as traders reacted to the return of strict COVID curbs in China.

Previously, markets hoped that China would slowly relax its anti-coronavirus policy, boosting growth and providing support to riskier assets.

However, the rapid increase in the number of coronavirus cases in China leaves little hope for any relaxation of the curbs anytime soon, which is bullish for the U.S. dollar.

EUR/USD Declined Towards 1.0250

EUR/USD is currently trying to settle below the 1.0250 level as traders continue to move out of the European currency after the recent rally.

EUR/USD

If EUR/USD manages to settle below 1.0250, it will head towards the next support level, which is located at 1.0220. A successful test of the support at 1.0220 will open the way to the test of the support level at 1.0190.

On the upside, the nearest resistance level for EUR/USD is located at 1.0275. In case EUR/USD manages to settle above 1.0275, it will head towards the next resistance at 1.0300. A move above 1.0300 will push EUR/USD towards the resistance at 1.0325.

GBP/USD Is Losing Ground At The Start Of The Week

GBP/USD pulled back towards the 1.1800 level as traders focused on the general strength of the U.S. dollar.

Treasury yields have been moving lower today, but traders ignored this move and remained focused on the situation in China.

The nearest support level for GBP/USD is located at 1.1790. In case GBP/USD declines below this level, it will move towards the next support level at 1.1760.

AUD/USD Retreats Amid A Strong Sell-Off In Commodity Markets

AUD/USD is testing the 0.6600 level as commodity markets pull back at the start of the week. The strong sell-offs in the oil and palladium markets have hurt the commodity market sentiment.

Other commodity-related currencies are also moving lower. NZD/USD is currently trying to settle below the 0.6100 level. USD/CAD has recently managed to get above the 50 EMA at 1.3450.

USD/JPY Tested The 142 Level

USD/JPY managed to get above the key resistance at 140.60 and made an attempt to settle above the 142 level.

The yen remains fundamentally weak due to the ultra-dovish policy of the BoJ, so it’s not surprising to see that USD/JPY rallied when the U.S. dollar started to rebound against a broad basket of currencies.

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