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.

U.S. Dollar Index (DX) Futures Technical Analysis – Rally Pauses Ahead of Fed Speakers, Meeting Minutes

The U.S. Dollar is edging lower against a basket of major currencies on Tuesday, following an overnight dip in U.S. Treasury yields. The move is taking place as investors looked to Federal Reserve speaker comments for hints about future interest rate policy and the central bank’s view on the state of the U.S. economy.

At 11:11 GMT, December U.S. Dollar Index futures are trading 107.270, down 0.462 or -0.43%. On Monday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP).

Greenback Traders Looking for Clarity from the Federal Reserve

Fed officials speaking the last several days have been emphasizing that interest rates will continue to rise. However, the key issues for traders is by how much and for how long.

On Monday, Cleveland Fed President Loretta Mester told CNBC’s Closing Bell” that the pace of rate hikes could be slowed, but inflation figures were not yet convincing enough to stop the hikes entirely. She also favored a series of smaller rate hikes.

Speaking at the Southern Economic Association over the weekend, Atlanta Fed President Raphael Bostic said rates would likely have to go higher still, but he was prepared to “move away” from implementing 75 basis point rate hikes in favor of smaller one.

Further Fed speakers are due to make remarks on Tuesday, before minutes from the central bank’s last meeting will be published on Wednesday at 19:00 GMT.

Daily December US Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 105.155 will signal a resumption of the downtrend. A move through 110.890 will change the main trend to up.

On the upside, resistance is a pair of Fibonacci levels at 107.780 and 108.197. This area stopped the rally on Monday.

The minor range is 105.155 to 107.895. Its pivot at 106.525 is the nearest support.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term Fibonacci level at 107.780 is likely to determine the direction of the December U.S. Dollar Index on Tuesday.

Bearish Scenario

A sustained move under 107.780 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the minor pivot at 106.525. Aggressive counter-trend buyers could return on a test of this level.

Bullish Scenario

A sustained move over 107.780 will signal the presence of buyers. This could trigger a surge into 108.197.

Look for sellers on the first test of 108.197 since the main trend is down. Overtaking it, however, could trigger an acceleration to the upside.

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

Is it Finally Time to Give Gold Another Look?

By Giles Coghlan, Chief Market Analyst, HYCM

It has been a difficult year for investors across the board, with all but the dollar and energy bulls seriously struggling in this higher rate and inflationary environment. Something investors often forget is the importance of defensive trades, and the fact that certain assets are there to balance your portfolio when everything else in the macro and geopolitical picture is otherwise looking grim.

It’s easy to overlook the value of portfolio protection during bull markets, especially when the price seems to go up every day and buying every dip becomes the top priority. But at HYCM, we’re always trying to educate our investors about the value of balance in a portfolio, as well as covering the various phases of subsequent bull and bear markets.

This is because when the tide turns, if your mentality doesn’t shift with it, and if you haven’t invested in anything other than risk, it can be catastrophic to your account balance.

Gold Protected Investors Throughout 2022

Year-to-date, the two big success stories of 2020 and 2021, US equities and crypto, are down 17% (S&P500) and 69% (Total crypto market cap), respectively. Meanwhile, gold is down less than 5%. This is despite higher rates, which tend to weigh on the price of gold since it bears no yield and so has an opportunity cost associated with holding it.

But also, the harmonisation of tighter monetary policy across almost all global central banks, which again is a headwind to gold as it’s usually looser policy and the fear of currency debasement that turns investors bullish on the yellow metal.

Furthermore, gold’s reputation as a safe haven has taken a hit in recent years. Back in 2019, what can only be described as a crypto PR campaign, had the narrative of bitcoin as the new digital gold spreading among both retail and institutional investors.

Then, when gold failed to hold the new highs it set after the worst of the March 2020 crash, and amidst governments running the largest deficits to fight the pandemic since WWII, many started believing that perhaps gold was an outdated safe haven. That’s certainly not proven to be the case, with it having performed better than most assets when it comes to preserving value throughout a very difficult year.

Gold Is Up YTD Against Other Majors

In fact, it’s US dollar strength (up 12% year-to-date) that’s really prevented gold from having been both defensive and profitable throughout 2022. Priced in euros, gold is up almost 5.5% year-to-date. Meanwhile, priced in pounds sterling gold is up 11.5%, and priced in Japanese yen it’s up almost 17%, which is easy to overlook since it’s the USD prices that are constantly quoted.

If the US dollar is set to continue cooling off for a while, this could give gold a further boost, and if, as many analysts are suggesting, the Fed will eventually be forced not to just pivot on rates, but also return to a much looser monetary policy, this could also benefit gold, especially if this occurs during a recession.

The FTX Collapse

However, the most unlikely boost for gold could come from the recent collapse of the FTX exchange in the world of crypto. If you haven’t been following the story, crypto’s second largest global exchange recently filed for bankruptcy. As the details of the collapse continue to emerge, it appears as though the exchange was rife with corruption, front-running, and self-dealing. The collapse follows the recent Terra/Luna stablecoin failure earlier this year, and takes the number one place as the biggest and most costly failure in crypto’s history.

Why is this good for gold? FTX was probably the highest profile crypto exchange in the industry, and, particularly in the US, was responsible for pushing crypto very much into the mainstream throughout the bull market of 2021. This collapse, and the details of how it actually occurred, has caused sentiment around crypto to turn as negative as it has ever been (even in the wake of the MTGox collapse of 2014).

This one event, beyond dispelling the notion that crypto is ready to be a global safe haven asset, has gone a long way to undermining all the other narratives that have been established around the asset class over the past decade or so.

FTX had more than a million users, many of whom have now lost everything. It will take a long time, even among the industry’s best and most reputable names, to build that trust, which leaves gold to reclaim that place in the minds of traders as the only true, tried and tested safe haven throughout the ages.

Gold CFD is available for trading at HYCM broker.

Trade with HYCM

About: HYCM is the global brand name of HYCM Capital Markets (UK) Limited, HYCM (Europe) Ltd, HYCM Capital Markets (DIFC) Ltd, HYCM Ltd, and HYCM Limited, all individual entities under HYCM Capital Markets Group, a global corporation operating in Asia, Europe, and the Middle East.

High-Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.

*Any opinions made in this material are personal to the author and do not reflect the opinion of HYCM. This material is considered a marketing communication and should not be construed as containing investment advice or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. HYCM does not take into account your personal investment objectives or financial situation. HYCM makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast, or other information supplied by an employee of HYCM, a third party, or otherwise.

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.

 

EUR/USD Bears Target $1.0100 on Monetary Policy Divergence

It is a quiet day for the EUR/USD on the economic calendar. Flash Eurozone consumer confidence numbers for November will draw interest late in the European session. Economists forecast the Eurozone Consumer Confidence Index to rise from -27.6 to -26.0.

However, following the German wholesale inflation figures for October and some dovish ECB member chatter, Eurozone consumer confidence would need a sharp improvement to deliver EUR/USD support.

In October, Germany’s annual wholesale inflation rate softened from 45.8% to 34.5% versus a forecast of 41.5%.

Adding to the downside for the EUR/USD was divergent monetary policy chatter. On Monday, ECB Chief Economist Philip Lane suggested a smaller rate hike in December. Lane reportedly said,

“One platform for considering a very large hike, such as 75 basis points, is no longer there. The move you’ve already done on a cumulative basis, that changes the pros and cons of any given increment.”

Lane added that the ECB was not going to hit pause on rate hikes but consider smaller rate hikes at the right time.

Following Philip Lane’s comments on Monday, we expect increased EUR/USD sensitivity to ECB member chatter. While no ECB members are due to speak today, investors need to monitor comments to the media.

EUR/USD Price Action

At the time of writing, the EUR was up 0.04% to $1.02432. A mixed start to the day saw the EUR/USD fall to an early low of $1.02380 before rising to a high of $1.02466.

EUR/USD finds early support.
EURUSD 221122 Daily Chart

Technical Indicators

The EUR/USD needs to move through the $1.0265 pivot to target the First Major Resistance Level (R1) at $1.0308 and the Monday high of $1.03332. ECB member chatter needs to be hawkish, and consumer confidence would need to improve to support a breakout from $1.0300.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0376. The Third Major Resistance Level (R3) sits at $1.0487.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0197 in play. However, barring another sell-off, the EUR/USD pair should avoid sub-$1.010. The Second Major Support Level (S2) at $1.0154 should limit the downside.

However, dovish ECB and hawkish Fed chatter could deliver another sharp pullback.

The third Major Support Level (S3) sits at $1.0044.

EUR/USD support levels in play below the pivot.
EURUSD 221122 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 100-day EMA ($1.01596). The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA pulled away from the 200-day EMA, delivering mixed signals.

A hold above the S1 ($1.0197) and a move through the 50-day EMA ($1.02617) would support a breakout from R1 ($1.0308) to target R2 ($1.0376). However, a failure to move through the 50-day EMA ($1.02617) would leave sub-$1.0100 in play. The 200-day EMA sits at $1.00542.

EMAs bearish.
EURUSD 221122 4 Hourly Chart

The US Session

It is a quiet day ahead on the US economic calendar, with no US economic indicators to drive the EUR/USD. The lack of stats will leave the dollar in the hands of Fed chatter.

FOMC members Mester, George, and Bullard will deliver speeches today. Hawkish Fed chatter would put the EUR/USD under more pressure and bring sub-$1.01 into view.

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 stood at 19.4%, according to the FedWatch Tool.

 

Federal Reserve May Be Adopting a New ‘speed Vs. Destination’ Paradigm

Gold Market Awaits FOMC Minutes

The minutes will most likely be the most important financial report released during this shortened holiday week. The Thanksgiving holiday is celebrated in both the United States and Canada.

That being said, there has been a tremendous amount of speculation as to what information will be contained in the minutes that have not been discussed or commented on by analysts or economists.

There has also been a multitude of statements made by various Federal Reserve officials that have come out since the statement and press conference that occurred immediately following the conclusion of the November FOMC meeting.

During the post-meeting press conference by Chairman Jerome Powell, he said that his Colleagues including himself continue to believe that the Federal Reserve still has “some ways to go” to complete their initiative to reduce the current level of inflation. He also admitted that reducing inflation at its current levels has become more challenging.

“That means we have to have policy more restrictive, and that narrows the path to a soft landing,”

A very astute observation and analysis of the Federal Reserve’s current monetary policy was made by EY Parthenon Chief Economist Gregory Daco. In a note, he said, “Fed Chair Powell recalibrated monetary policy at the November FOMC meeting by adopting a new ‘speed vs. destination’ paradigm – indicating an intention to reach a higher terminal fed funds rate while doing so at a slower pace.” He also said that “Central banks’ determination in tightening monetary policy aggressively along with the lagged effects of monetary policy on the economy increases the odds of an overtightening.”

This is in line with a statement made by Federal Reserve Governor Christopher Waller told a conference in Sydney, Australia Sunday, November 13, “We’re not softening…Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a way out there.”

This differs greatly from the recent statements by James Bullard the St. Louis Federal Reserve President who said, “Thus far, the change in the monetary policy stance appears to have had only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023”.

Whereas multiple members of the Federal Reserve have postulated that they would need to raise their benchmark rate to around 5%, James Bullard said that 5% would be at the low end of the range for where Fed funds need to be and that the upper level is closer to 7%. The Federal Reserve raising their benchmark rate to this level has not been factored into current market pricing.

Gold and US Dollar Today

Gold futures daily chart

The anticipation of the November minutes along with statements made throughout last week has continued to pressure gold lower. As of 5:15 PM EST gold futures basis, the most active December contract is currently fixed at $1739.50 after factoring in today’s decline of $14.90 or 0.85%. Interestingly the percentage decline in gold today matches the percentage gain in dollar strength. The dollar is currently fixed at 107.705 which is a net gain of 0.82%.

US Dollar Index futures daily chart

For those who would like more information simply use this link.
Wishing you as always good trading,

Gary S. Wagner

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.

GBP/USD Bears Eye Sub-$1.18 on Fresh Wave of COVID-19 Cases in China

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.

While recent economic indicators have been bullish, the Pound has failed a return to $1.20. The latest OBR economic forecasts continue to mute the impact of positive stats on the Pound. With inflation hitting a 41-year high, BoE policy moves will likely deliver further economic woes.

Until the market sentiment toward the UK economic outlook improves, the GBP/USD will likely remain capped on the upside.

While there are no stats to consider, Bank of England chatter will draw interest. Monetary Policy Committee member Sir Jon Cunliffe speaks today. While the agenda relates to DeFi and digital currencies (cryptos), monetary policy forward guidance would influence the Pound.

GBP/USD Price Action

At the time of writing, the Pound was down 0.43% to $1.18360. A mixed start to the day saw the GBP/USD rise to an early high of $1.18968 before falling to a low of $1.18279.

The GBP/USD fell through the First Major Support Level (S1) at $1.1846. Risk-off sentiment weighed this morning on news of a wave of new COVID-19 cases in China.

GBP/USD under pressure.
GBPUSD 211122 Daily Chart

Technical Indicators

The Pound needs to move through S1 and the $1.1898 pivot to target the First Major Resistance Level (R1) at $1.1949 and the Friday high of $1.19508. Risk-on sentiment and hawkish MPC member chatter would support a return to $1.19.

In the case of an extended rally, the GBP/USD would likely take a run at the Second Major Resistance Level (R2) at $1.1992 and $1.20. The Third Major Resistance Level (R3) sits at $1.2086.

Failure to move through S1 and the pivot would bring the Second Major Support Level (S2) at $1.1805 into play. However, barring a UK data-fueled sell-off, the Pound would likely avoid sub-$1.18. The S2 should limit the downside.

The Third Major Support Level (S3) sits at $1.1711.

GBP/USD support levels in play.
GBPUSD 211122 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 $1.17638. 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 S2 and the 50-day EMA ($1.17638) would support a return to $1.19 to target R1 ($1.1949). However, a fall through S2 ($1.1805) would bring the 50-day EMA ($1.17638) into play. The 200-day EMA sits at $1.15306.

EMAs bearish.
GBPUSD 211122 4-Hourly Chart

The US Session

It is a quiet day ahead on the US economic calendar, with the Chicago Fed National Activity Index number the key stat of the day. However, the numbers are unlikely to influence the Fed or market risk sentiment.

Following last week’s hawkish Fed chatter, uncertainty over a December Fed pivot could deliver further dollar support.

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 stood at 19.4%.

While the US economic calendar shows no FOMC members speaking today, comments to the media need consideration. US unemployment and inflation support further front-loading. Hawkish Fed chatter would place further pressure on the GBP/USD.

EUR/USD Faces Risk of Sub-$1.03 on German Wholesale Inflation Numbers

It is a quiet day for the EUR/USD on the economic calendar. German wholesale inflation figures for October will draw attention.

With little else for the markets to consider and the continued focus on inflation, a pickup in wholesale inflationary pressure would deliver EUR/USD support.

However, hawkish ECB chatter has failed to send the EUR back toward $1.05. Economic growth forecasts and the war in Ukraine continue to question the ECB’s options to tackle inflation.

Today, ECB member Edouard Fernandez-Bollo will speak. On Friday, the ECB President stuck to the script, reassuring the markets that the ECB will,

“Raise rates further, and withdrawing accommodation may not be enough.”

However, there were conflicting messages on Friday, with ECB member Knot stating,

“As the stance of monetary policy tightens further, it will become more likely that the pace of increases will slow.”

EUR/USD Price Action

At the time of writing, the EUR was up 0.04% to $1.03277. A mixed start to the day saw the EUR/USD fall to an early low of $1.03218 before finding support.

EUR/USD finds early support.
EURUSD 211122 Daily Chart

Technical Indicators

The EUR/USD needs to move through the $1.0344 pivot to target the First Major Resistance Level (R1) at $1.0375 and the Friday high of $1.0396. German wholesale inflation and ECB member chatter need to support a breakout from $1.0350.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0427. The Third Major Resistance Level (R3) sits at $1.0509.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0292 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid the Second Major Support Level (S2) at $1.0262.

The third Major Support Level (S3) sits at $1.0179.

EUR/USD support levels in play below the pivot.
EURUSD 211122 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.02665). 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 S1 ($1.0292) and the 50-day EMA ($1.02665 would support a breakout from R1 ($1.0375) to bring $1.04 into play. However, a fall through S1 ($1.0292) would give the bears a run at the 50-day EMA ($1.02665) and S2 ($1.0262). The 200-day EMA sits at $1.00425.

EMAs bullish.
EURUSD 211122 4 Hourly Chart

The US Session

It is a quiet day ahead on the US economic calendar, with the Chicago Fed National Activity Index number the key stat of the day. However, the numbers are unlikely to influence the Fed or market risk sentiment.

Following last week’s hawkish Fed chatter, uncertainty over a December Fed pivot could deliver further dollar support.

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 stood at 24.2%, according to the FedWatch Tool.

While the US economic calendar shows no FOMC members speaking today, comments to the media need consideration. US unemployment and inflation support further front-loading. Hawkish Fed chatter would place further pressure on the EUR/USD.

USD/CAD Tests Resistance At 1.3400 As WTI Oil Remains Under Strong Pressure

Key Insights

  • The sell-off in oil markets put pressure on the Canadian dollar. 
  • GBP/USD gained upside momentum as UK Retail Sales exceeded expectations. 
  • USD/JPY pulled back as Japan’s Inflation Rate touched new highs. 

USD/CAD Rebounds As WTI Oil Settles Below The Key $80 Level

USD/CAD moved towards the 1.3400 level as the strong sell-off pushed WTI oil towards $78. Today, USD/CAD traders also had a chance to take a look at Producer Prices data from Canada. The reports indicated that PPI increased from 9.1% in September to 10.1% in October, compared to analyst consensus of 7.8%.

USD/CAD

Currently, USD/CAD is trying to settle above the resistance at 1.3400. In case this attempt is successful, it will move towards the 50 EMA at 1.3450. A move above the 50 EMA 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 settles back below this level, it will move towards the next support level, which is located near the recent lows at 1.3300.

Other commodity-related currencies have shown mixed performance today. AUD/USD declined towards 0.6670, while NZD/USD managed to rebound towards the 0.6150 level.

U.S. Dollar Gains Some Ground Ahead Of The Weekend

U.S. dollar is gaining some ground against a broad basket of currencies today as Treasury yields continue to move higher.

Today, traders focused on the Existing Home Sales report for October, which indicated that Existing Home Sales declined by 5.9% on a month-over-month basis. The report is not surprising as high interest rates put significant pressure on the housing market.

EUR/USD Faced Strong Resistance At 1.0400

EUR/USD declined below the 1.0350 level after another unsuccessful attempt to settle above the resistance level at 1.0400.

Government bond yields in the Eurozone continue to move lower, which is a positive development. Back in October, a potential debt crisis was a real risk for the EU.

Meanwhile, traders are focused on general market sentiment towards the U.S. dollar. At this point, it looks that EUR/USD does not have enough catalysts to get above the 1.0400 level in the last trading session of the week.

GBP/USD Tries To Settle Above 1.1900 As Retail Sales Exceed Expectations

GBP/USD is currently trying to settle above the 1.1900 level as traders remain bullish on the pound ahead of the weekend.

Yesterday’s pullback was quickly bought, and it looks that recent economic reports from the UK provided some support to the pound.

Gfk Consumer Confidence improved from -47 in October to -44 in November, compared to analyst consensus of -51. Retail Sales increased by 0.6% month-over-month in October, while analysts expected that they would increase by 0.3%.

USD/JPY Pulls Back As Traders React To Japan’s Inflation Data

USD/JPY moved back below the 140 level as bulls failed to push it above the important resistance at 140.60.

Japan’s inflation reports provided additional support to the yen. Inflation Rate increased from 3% in September to 3.7% in October, while Core Inflation Rate grew from 3% to 3.6%. Both reports exceeded analyst estimates.

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

GBP/USD and a Return to $1.19 in the Hands of UK Stats and the BoE

It is a busy day for the GBP/USD, with UK retail sales figures for October in the spotlight. Following the disappointing numbers for September, economists forecast a 0.3% increase in retail sales in October. However, year-over-year, economists forecast retail sales to fall by 6.5% versus 6.9% in September.

Weak numbers would place the GBP/USD under more intense selling pressure after Thursday’s Autumn Statement-driven pullback.

Today’s numbers will need to impress to offset the effects of the OBR’s economic growth forecasts for 2023. High inflation and the Bank of England’s mandate suggest more rate hikes to come that would place the UK economy under more pressure.

In the wake of the Autumn Statement, the Bank of England is back in focus today. Monetary Policy Committee member Jonathan Haskel will also speak. References to Thursday’s Autumn Statement, OBR projections, and monetary policy would influence the Pound.

GBP/USD Price Action

At the time of writing, the Pound was up 0.02% to $1.18641. A mixed start to the day saw the GBP/USD fall to a low of $1.18578 before recovering.

GBP/USD finds early support.
GBPUSD 181122 Daily Chart

Technical Indicators

The Pound needs to avoid the $1.1861 pivot to target the First Major Resistance Level (R1) at $1.1959. Hawkish MPC member chatter and better-than-expected retail sales figures would support a return to $1.19.

In the case of an extended rally, the GBP/USD would likely take a run at $1.20 but fall short of the Second Major Resistance Level (R2) at $1.2056. The Third Major Resistance Level (R3) sits at $1.2251.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1763 into play. However, barring a UK data-fueled sell-off, the Pound would likely avoid sub-$1.17 and the Second Major Support Level (S2) at $1.1665. Thursday’s Autumn Statement and OBR growth forecasts remain bearish for the GBP/USD.

The Third Major Support Level (S3) sits at $1.1470.

GBP/USD resistance levels in play above the pivot.
GBPUSD 181122 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 $1.17244. 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 ($1.1763) and the 50-day EMA ($1.17244) would support a breakout from R1 ($1.1959) to target $1.20. However, a fall through S1 ($1.1763) and the 50-day EMA ($1.17244) would see the GBP/USD test buyers at $1.17. The 200-day EMA sits at $1.15047.

EMAs remain bullish.
GBPUSD 181122 4-Hourly Chart

The US Session

It is a quiet day ahead on the US economic calendar, with existing home sales the key stat of the day. However, the numbers are unlikely to influence market risk sentiment.

Following hawkish Fed chatter on Thursday, uncertainty over a December Fed pivot could deliver further dollar support.

The probability of a 75-basis point December rate hike had fallen to 14.6% before FOMC member Bullard’s comments on Thursday. This morning, the likelihood of a 75-basis point rate hike stood at 21.8%, despite the disappointing Philly Fed Manufacturing numbers.

While the US economic calendar shows no FOMC members speaking today, comments to the media need consideration. US unemployment and inflation support further front-loading. Hawkish Fed chatter would place further pressure on the GBP/USD.

EUR/USD in the Hands of ECB President Lagarde, with Sub-$1.03 in View

It is a quiet day for the EUR/USD on the economic calendar. There are no economic indicators from the euro area to provide direction today.

Early in the day, the EUR/USD will be in the hands of market risk sentiment. However, going into the European session, the lack of stats will leave ECB member commentary to influence.

ECB President Christine Lagarde will speak today. Lagarde has been vocal about the need for further rate hikes to tackle high inflation. Deviation from the script or a hint on the likely size of the next rate hike would influence the EUR/USD.

By contrast, hawkish Fed chatter from Thursday will likely resonate, with FOMC member Bullard taking a hawkish stance, driving up the probability of a 75-basis point December rate hike.

EUR/USD Price Action

At the time of writing, the EUR was flat at $1.03611. The EUR/USD fell to a low of $1.03583 before steadying.

EUR/USD finds early support.
EURUSD 181122 Daily Chart

Technical Indicators

The EUR/USD needs to move through the $1.0376 pivot to target the First Major Resistance Level (R1) at $1.0448. However, a lack of stats leaves ECB President Lagarde and market risk sentiment to support a return to $1.04.

In the case of an extended rally, the bulls will likely take a run at $1.05 but come up short of the Second Major Resistance Level (R2) at $1.0536. The Third Major Resistance Level (R3) sits at $1.0696.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0288 in play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.025 and Second Major Support Level (S2) at $1.0217.

The third Major Support Level (S3) sits at $1.0057.

EUR/USD support levels in play below the pivot.
EURUSD 181122 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.02439). 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 S1 ($1.0288) and the 50-day EMA ($1.02439) would support a breakout from R1 ($1.0448) to bring $1.05 into play. However, a fall through S1 ($1.0288) would give the bears a run at the 50-day EMA ($1.02439) and S2 ($1.0217). The 200-day EMA sits at $1.00234.

EMAs remain bullish
EURUSD 181122 4 Hourly Chart

The US Session

It is a quiet day ahead on the US economic calendar, with existing home sales the key stat of the day. However, the numbers are unlikely to influence market risk sentiment.

Following hawkish Fed chatter on Thursday, uncertainty over a December Fed pivot could deliver further dollar support.

The probability of a 75-basis point December rate hike had fallen to 14.6% before FOMC member Bullard’s comments on Thursday. This morning, the likelihood of a 75-basis point rate hike stood at 21.8%, despite the disappointing Philly Fed Manufacturing numbers.

While the US economic calendar shows no FOMC members speaking today, comments to the media need consideration. US unemployment and inflation support further front-loading. Hawkish Fed chatter would place further pressure on the EUR/USD.

U.S. Dollar Rebounds As Bullard Says Fed May Need To Raise Rates By 100 Bps

Key Insights

  • U.S. dollar rebounds after the recent sell-off. 
  • GBP/USD declines after Jeremy Hunt presents a new fiscal plan for the UK. 
  • AUD/USD is under strong pressure amid a broad pullback in commodity markets.

U.S. Dollar Rallies As Bullard’s Comments Show That Fed Remains Hawkish

U.S. Dollar Index rebounded towards the 107 level as traders reacted to hawkish comments from Fed’s Bullard. St. Louis Federal Reserve President Bullard said that the interest rate had not reached the sufficiently restrictive level. According to Bullard, the Fed may need to raise rates by at least another full percentage point.

Traders also focused on the economic data from the U.S. Housing Starts declined by 4.2% month-over-month in October, while Building Permits decreased by 2.4%. High interest rates continue to put pressure on the housing market.

Initial Jobless Claims report indicated that 222,000 Americans filed for unemployment benefits in a week, mostly in line with the analyst consensus. Philadelphia Fed Manufacturing Index declined from -8.7 in October to -19.4 in November.

Treasury yields rebounded after the recent sell-off, providing material support to the U.S. dollar. In case this rebound continues, the U.S. Dollar Index will have a good chance to settle above 107.

EUR/USD Failed To Settle Above 1.0400

EUR/USD pulled back towards 1.0340 as traders continued to take profits after the recent rally.

The final reading of the Euro Area Inflation Rate report indicated that Inflation Rate increased from 9.9% in September to 10.6% in October, compared to analyst consensus of 10.7%.

This minor adjustment does not change the big picture for the Eurozone, which is under significant pressure due to high energy prices.

GBP/USD Retreats As Traders Worry That New Fiscal Measures Would Hurt The Economy

It was a big day for GBP/USD traders as British finance minister Jeremy Hunt presented the new fiscal plan. Valued at 55 billion pounds, the plan includes tax hikes and spending cuts.

The market is worried that the new plan would put too much pressure on the British economy, which is already in recession that is set to continue in 2023.

GBP/USD

Currently, GBP/USD is trying to settle below the support at 1.1790. In case this attempt is successful, it will move towards the next support level at 1.1760. A successful test of the support at 1.1760 will push GBP/USD towards the support at 1.1730.

On the upside, the nearest resistance for GBP/USD is located at 1.1830. If GBP/USD manages to settle back above this level, it will move towards the resistance at 1.1855.

AUD/USD Is Under Strong Pressure

AUD/USD declined towards the 0.6650 level amid a broad sell-off in commodity markets.

Other commodity-related currencies have also found themselves under pressure. NZD/USD settled below the 0.6100 level, while USD/CAD made an attempt to settle above 1.3400.

USD/JPY Gets Back Above The Key 140 Level

USD/JPY settled above the 140 level and is trying to settle above the resistance at 140.60.

The hawkish comments from Fed’s Bullard reminded traders about the huge difference between the policies of BoJ and Fed. In case USD/JPY settles above 140.60, it will have a good chance to develop sustainable upside momentum.

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

Gold Jumped This Week to One Month Highs

Gold has been trading sideways or down for almost two years, while inflation is at multi-decade highs. Why are haven investments and so-called inflation hedging assets performing poorly while global inflation is reaching multi-decade highs?

Gold vs Strong US Dollar

Gold prices have continued to disappoint since the start of this year, when prices re-tested all-time highs of USD2’050. Haven demand driven by concerns over Ukraine and economic uncertainty has been countered by the strength of the US dollar.

The main driver of gold’s decline in recent months has been the US dollar, which has benefited from aggressive Federal Reserve monetary policies. This is in part because higher US interest rates increase the opportunity cost of holding the zero-yielding metal compared to other short term money instruments yielding above 4%. This relationship has been surprisingly consistent throughout history.

For gold prices, this suggests that we are not out of the woods, yet. Lasting high inflation in the US suggest that the Fed needs to keep policy restrictive. In its recent meeting, The US Federal Reserve raised its interest rate by 75 bps for a fourth consecutive time and said that it was very premature to consider pausing rate hikes, adding that officials are strongly resolved to bring down inflation even if this inflicts pain on the economy.

Very restrictive liquidity conditions imply more upside risks to US real yields in the mid-term and hence limited upside for gold prices, if not more room to the downside.

Demand Unaffected Despite Global Concerns

A positive factor for prices is a stronger than expected demand for the bullion. Central banks are hoarding gold reserves. The 400 tonnes of gold purchased by central banks in the third quarter is indeed a record.

According to the World Gold Council, these figures represent more than four times the 90 tons of the third quarter of 2021 and almost double the previous record of 241 tons acquired by these institutions in the third quarter of 2018. Among those that may have increased their reserves are Russia, China, and India.

Jewellery demand has also been more robust than previously thought with added support from solid demand in India and other South-East Asian countries. And despite lockdowns and other headwinds, Chinese demand has held up.

gold2

So far, central banks have been decidedly hawkish, and in the absence of a U-turn to a dovish tilt, this has clearly increased the risk of moving the global economy toward a mild, if not a deep recession. As a result, we may observe a shift toward safe-haven assets, which would be advantageous for the price of gold.

Technical Analysis

A detailed examination of the 2022 chart reveals that, as of November 16th, the price of gold has gained 0% year-to-date. While this displeases investors searching for protection, it is important to highlight that gold prices just followed the trend in financial markets. In relative terms, it is still outperforming the S&P500 by more than 15%.

Technically speaking, the price of gold has risen sharply since the beginning of the month, wiping out all of the year’s losses. The yellow metal gained 9% this month after US October CPI data surprised markets.

A softer inflation reading led to a sharp fall in US Treasury yields, which decreased the appetite for the greenback. The dollar gauge (DXY) is down more than 3% since then, and with some Fed officials suggesting moving rates more slowly to balance risks, increasing the likelihood that real yields are nearing, if not already at, a top.

As a result, gold bulls have been buying every dip, pushing prices to levels that are barely below the August highs (USD 1’800). We’ll be keeping an eye on if the impressive gain could attract more buyers.

Conclusion

The recent underperformance of gold highlights its limitations as an inflation hedge. This year dollar’s strength and interest rate increases have put a lot of pressure on the price of the yellow metal. Nonetheless, despite these liquidity constraints and other headwinds, demand for the bullion has surprised to the upside, driven by strong purchases from central bankers and consumers in the South-East Asian countries, a positive trend that is likely to support future prices. While the recent rebound is impressive, a retest of the 1’700 support level is necessary to confirm a change in this year’s bearish trend.

U.S. Dollar Index (DX) Futures Technical Analysis – Treading Water Ahead of Philly Fed, Jobless Claims Data

The U.S. Dollar is trading steady against a basket of major currencies on Thursday, shortly before the release of key reports on manufacturing, the labor market and the housing sector. Traders will also get the opportunity to respond to comments from several Fed member speeches.

At 10:12 GMT, December U.S. Dollar Index futures are trading 106.425, up 0.273 or +0.26%. On Wednesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $28.62, down $0.06 or -0.21%.

The media is trying to convince traders that yesterday’s strong U.S. retail data may be enough to encourage the Fed to keep raising rates aggressively. Furthermore, they are trying to convince us that the hawkish Fed speakers are supporting the U.S. Dollar, but that is not being reflected in the FedWatch Tool which is now showing an 85% chance of a 50-basis point rate hike in December.

In my opinion, the Forex markets including the dollar haven’t moved much this week because the steep drop in Treasury yields since last week Thursday was too much, too fast. Professional traders need time to adjust their models to a possible pivot by the Fed and they don’t want to move to fast on the basis of one CPI report.

Looking Ahead…

Today’s Philly Fed Manufacturing Index, due to be released at 13:30 GMT, is expected to improve slightly from -8.7 to -6.0. The Weekly Jobless Claims report is expected to rise slightly from 225K to 228K. Building Permits and Housing Starts are expected to dip.

Essentially, the Fed wants to see easing in manufacturing and housing and a rise in unemployment claims.

The Fed speakers including Bullard, Bowman and Mester, are expected to make hawkish remarks by reminding traders that the Fed is still likely to raise rates. Bullard could be a market mover if he comes out excessively hawkish or excessive dovish.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 105.155 will signal a resumption of the downtrend. A move through 110.890 will change the main trend to up.

On the upside, the major resistance is a pair of Fibonacci levels at 107.780 and 108.197. On the downside, the key support is the August 10, 2022 main bottom at 104.150.

Daily Swing Chart Technical Forecast

Trader reaction to 105.910 is likely to determine the direction of the December U.S. Dollar Index on Thursday.

Bullish Scenario

A sustained move over 105.910 will indicate the presence of buyers. Taking out 106.995 will indicate the buying is getting stronger. This could trigger a surge into 107.780 – 108.197, where the index is likely to be met by fresh selling pressure.

Bearish Scenario

A sustained move under 105.910 will signal the presence of sellers. This could lead to a retest of this week’s low at 105.155. If this level fails as support then look for the selling to possibly extend into 104.150.

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

GBP/USD and a Look at $1.21 in the Hands of the Autumn Statement

It is a big day for the GBP/USD. The UK Chancellor of the Exchequer, Jeremy Hunt, will deliver the heavily anticipated Autumn Statement.

There has been plenty of hype surrounding the Autumn Statement. It will also be the first litmus test. Former Prime Minister Liz Truss and Chancellor Kwasi Kwarteng left UK politics in tatters after the release of the mini-budget.

Jeremy Hunt will look to plug the hole by delivering a combination of tax hikes and spending cuts. The UK Chancellor warned of ‘difficult announcements,’ with the UK electorate likely to feel the impact of today’s measures.

For the UK Government, there is the risk of lawmakers and the electorate likening the Autumn Statement to the 2010 austerity measures. Prime Minister Rishi Sunak will need to manage in-party fighting, with some Tory MPs against raising taxes.

Delivering a workable budget and reuniting the Tory Party are big asks, and the markets will react to today’s budget.

With the Bank of England forecasting a grim economic outlook and inflation at the highest level in 41 years, it could boil down to when the government introduces the measures. Softer-than-expected measures and a window to allow the UK economy to shoulder the worst of the economic slowdown would likely be GBP positive.

While the Autumn Statement is the main event, Bank of England Chief Economist Huw Pill will also speak today. This week, wage growth and inflation figures have placed more pressure on the Bank of England to take a more aggressive path to bring inflation to target. However, Pill will likely play second fiddle to Jeremy Hunt and the Tory Party.

GBP/USD Price Action

At the time of writing, the Pound was down 0.33% to $1.18732. A mixed start to the day saw the GBP/USD rise to an early high of $1.19205 before falling to a low of $1.18661.

GBP/USD on the back foot.
GBPUSD 171122 Daily Chart

Technical Indicators

The Pound needs to move through the $1.1895 pivot to target the First Major Resistance Level (R1) at $1.1959. Uncertainty over the Autumn Statement could test GBP/USD support ahead of the announcement.

In the case of an extended rally, the GBP/USD would likely take a run at the Second Major Resistance Level (R2) at $1.2006. The Third Major Resistance Level (R3) sits at $1.2117.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1848 in play. However, barring a risk off-fueled sell-off, the Pound would likely avoid sub-$1.1750. The Second Major Support Level (S2) at $1.1784 should limit the downside.

The Third Major Support Level (S3) sits at $1.1673.

GBP/USD support levels in play below the pivot.
GBPUSD 171122 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 $1.16971. 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 ($1.1848) would support a breakout from R1 ($1.1959) to target $1.20 and R2 ($1.2006). However, a fall through S1 ($1.1848) would bring S2 ($1.1784) and the 50-day EMA ($1.16971) into view. The 200-day EMA sits at $1.14871.

EMAs remain bullish.
GBPUSD 171122 4-Hourly Chart

The US Session

It is a busy day ahead on the US economic calendar, with the weekly jobless claims and Philly Fed Manufacturing numbers due.

Barring an unexpected jump in jobless claims, the Philly Fed figures will likely have more influence. We expect the markets to look beyond the headline figure, with sub-components, including the Employment Index, to provide direction.

With the probability of a 75-basis point December rate hike sitting at 14.6% despite the upbeat consumption numbers, FOMC members will also need monitoring. FOMC members Bowman, Bullard, and Mester will speak later today.

EUR/USD Target Remains $1.05 with Inflation and Lagarde in Focus

It is a busy day for the EUR/USD on the economic calendar. Car registration numbers will draw interest going into the European session.

While the numbers for September were impressive, the ongoing energy crisis and economic uncertainty remain headwinds for registrations. Today’s figures will likely influence the EUR/USD more than usual.

Later in the session, finalized October inflation figures for the Eurozone will also influence. We expect upward revisions to have more impact on the EUR/USD.

Following today’s stats, ECB President Christine Lagarde will also speak. However, barring a deviation from recently hawkish commentary, the impact on the EUR/USD will likely be muted.

EUR/USD Price Action

At the time of writing, the EUR was up 0.01% to $1.03943. The EUR/USD fell to a low of $1.03882 before steadying.

EUR/USD holds steady.
EURUSD 171122 Daily Chart

Technical Indicators

The EUR/USD needs to avoid the $1.0388 pivot to target the First Major Resistance Level (R1) at $1.0445. Upbeat car registration numbers and an upward revision to inflation figures would support a bullish session.

In the case of an extended rally, the bulls will likely take a run at the Second Major Resistance Level (R2) at $1.0495. The Third Major Resistance Level (R3) sits at $1.0603.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0337 into play. However, barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.03 and Second Major Support Level (S2) at $1.0280.

The third Major Support Level (S3) sits at $1.0172.

EUR/USD resistance levels in play above the pivot.
EURUSD 171122 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.02146). 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 ($1.02146) would support a breakout from R1 ($1.0445) to bring $1.05 into play. However, a fall through S1 ($1.0337) would bring S2 ($1.0280) and the 50-day EMA ($1.02146) into view. The 200-day EMA sits at $1.00031.

EMAs bullish.
EURUSD 171122 4 Hourly Chart

The US Session

It is a busy day ahead on the US economic calendar, with the weekly jobless claims and Philly Fed Manufacturing numbers due.

Barring an unexpected jump in jobless claims, the Philly Fed figures will likely have more influence. We expect the markets to look beyond the headline figure, with sub-components, including the Employment Index, to provide direction.

With the probability of a 75-basis point December rate hike sitting at 14.6% despite the upbeat consumption numbers, FOMC members will also need monitoring. FOMC members Bowman, Bullard, and Mester will speak later today.

Mid-Week Technical Outlook: USD Majors & Commodities

Renewed fears of further escalation in geopolitical tensions dragged European markets lower with the risk-off sentiment hitting US equity futures. In the currency space, the dollar got no love which offered an opportunity for G10 currencies to fight back. While gold found comfort above $1780 as market players rushed to safe-haven destinations.

Looking at the economic calendar, dollar volatility could be around the corner as investors closely scrutinize speeches from numerous Fed officials and US economic data. Just this afternoon US retail sales surged 1.3% month-over-month in October after the flat reading in September.

Although this report beat market expectations, buying sentiment towards the dollar remained muted. As the week progresses, the developments surrounding the missile blast in Poland are likely to influence sentiment, especially if investors remain jittery about the prospects of further escalation.

With dollar bears marking their territory and the fundamentals pointing to further weakness down the road, G10 currencies could strike back hard.

EUR/USD Hits 200-day SMA

A broadly weaker dollar has inspired EURUSD bulls to rally over the last few days. The currency pair has turned bullish on the daily charts with the MACD trading above zero. The 1.0427 level could be a tough nut to crack but a strong breakout above this point may open a path toward 1.0530. If prices are capped below 1.0427, the next key point of interest can be found at 1.0280.

GBP/USD Breaks Above 1.1850

Sterling pushed higher on Wednesday after the latest UK inflation figures jumped to a 41-year high of 11.1% in October, exceeding market expectations. This development may re-kindle expectations around the Bank of England raising interest rates aggressively to combat soaring prices.

A weaker dollar has also played a role in the GBPUSD’s rally as prices approach levels not seen since mid-August. Looking at the technicals, another solid daily close above 1.1850 could trigger an incline toward 1.2050. Alternatively, a move back under 1.1850 may see a sell-off towards 1.1750 and 1.1500, respectively.

AUD/USD to Challenge 200-day SMA?

If the dollar continues its slippery decline, this could push the AUDUSD toward 0.6850. A strong breakout and daily close above 0.6850 has the potential to encourage a move higher toward 0.6950. Should bulls run out of steam before hitting 0.6850, bears could target the 0.6700 level.

USD/JPY Lingers Around 139.50

The trend is bearish on the USDJPY as there have been consistently lower lows and lower highs. Sustained weakness below 139.50 could trigger a selloff towards 137.50 and lower. Should prices stage a rebound back above 139.50, prices could challenge 142.00

Commodity Spotlight – Gold

Gold seems to be on standby as investors digest the latest US retail sales data and developments revolving around Poland. However, the precious metal may resume drawing strength from a weaker dollar and subdued Treasury yields as the trading week progresses. Given how the dollar may be influenced by the numerous speeches from Fed members and US economic data, this could find its way back to gold which is trading below $1780 as of writing.

Gold remains bullish on the daily charts as there have been consistently higher highs and higher lows. A solid move above $1780 could encourage an incline towards the psychological $1800 resistance level – where the 200-day SMA resides. Should this resistance prove to be a tough nut to crack, prices could descend back below $1780 with the next key level of interest found at $1750 and $1715 – just above the 100-day SMA.

For more information visit FXTM.

U.S. Dollar Rebounds From Session Lows As Retail Sales Exceed Expectations

Key Insights

  • The better-than-expected Retail Sales report provided some support to the U.S. dollar. 
  • GBP/USD pulled back towards 1.1850 as traders took profits after the recent rally. 
  • USD/JPY made another attempt to settle above the 140 level.

U.S. Dollar Index Failed To Settle Below 106

U.S. Dollar Index made an attempt to settle below the 106 level but lost momentum and moved back towards 106.40.

Today, traders focused on the Retail Sales report, which indicated that Retail Sales increased by 1.3% month-over-month in October, compared to analyst consensus of 1%.

Traders also had a chance to take a look at Industrial Production and Manufacturing Production reports. Industrial Production declined by 0.1% month-over-month in October, while Manufacturing Production increased by 0.1%. Both reports missed analyst estimates.

Meanwhile, Treasury yields continue to move lower as bond traders bet on a less hawkish Fed, which is bearish for the American currency.

EUR/USD Tries To Get Above 1.0400

EUR/USD continues its attempts to settle above the 1.0400 level. There are no important economic reports scheduled to be released in the EU today, so traders will stay focused on general market sentiment.

EUR/USD enjoyed strong support in November, and RSI is close to the overbought territory. However, the recent shift in Fed’s tone may push the U.S. dollar to lower levels, which will be bullish for EUR/USD.

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

GBP/USD is losing some ground today as traders continue to take profits after the recent rally.

UK inflation reports indicated that Inflation Rate increased from 10.1% in September to 11.1% in October, compared to analyst consensus of 10.7%. Core Inflation Rate remained unchanged at 6.5%.

The BoE Governor Bailey noted that inflation reflected a series of supply shocks and added that supply chain shocks started to fade.

GBP/USD

Currently, GBP/USD is trying to settle below the support at 1.1855. In case this attempt is successful, GBP/USD will move towards the next support level at 1.1830. A move below this level will open the way to the test of the support at 1.1790. If GBP/USD manages to settle below 1.1790, it will head towards the support at 1.1760.

On the upside, GBP/USD needs to stay above 1.1855 to have a chance to gain upside momentum in the near term. The next resistance level is located at 1.1900. If GBP/USD climbs back above this level, it will move towards the next resistance at 1.1925.

AUD/USD Declines Amid Weakness In Commodity Markets

AUD/USD faced resistance near the 0.6800 level and pulled back towards 0.6750 as traders took some profits off the table near multi-month highs. The pullback in commodity markets also served as a negative catalyst for AUD/USD.

USD/CAD  moved above the 1.3300 level after Canada reported that Inflation Rate remained unchanged at 6.9% in October. NZD/USD was mostly flat near 0.6150.

USD/JPY Faced Resistance Near The Key 140 Level

USD/JPY has recently made another attempt to settle back above the important 140 level.

The general weakness of the U.S. dollar serves as a bearish catalyst for USD/JPY. However, some traders are ready to bet that the ultra-dovish policy of the BoJ will ultimately push USD/JPY back above the 140 level.

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

Retail Sales Beat Forecasts but S&P 500 Index Slides as Target Drags Retail Sector Lower

October U.S. retail sales beat the forecasts on Wednesday, supporting the idea of a strong economy. However, traders are paying more attention to a warning from Target that has sent the retailer’s stock about 15% lower during the pre-market session.

U.S. retail sales increased more than expected in October, boosted by purchases of motor vehicles and a range of other goods, suggesting that consumer spending could help to underpin the economy in the fourth quarter.

The Commerce Depart said on Wednesday that retail sales rose 1.3% last month. Data for September was unrevised to show sales unchanged. Economists polled by Reuters had forecast sales accelerating 1.0%, with estimates ranging from as low as a 0.1% drop to as high as a 2.0% jump. Retail sales are mostly goods and are not adjusted for inflation.

Target Warns of Weak Holiday Quarter

Ahead of the U.S. Retail Sales report and the stock market opening, retailer Target reported a drop in profits of around 50% in its fiscal third quarter as it cleared through unwanted inventory and sales slowed heading into the holidays, prompting the company to lower its expectations for retailers’ most important time of year.

The company also said Wednesday it plans to cut up to $3 billion in total costs over the next three years, citing the need to become more efficient after two years of dramatic sales gains. The retailer’s revenue has grown by about 40% during the COVID pandemic.

Target did not specify how it will reach its savings goal, but said it does not have plans for layoffs or a hiring freeze.

Lowe’s Sees Revenue Increase, Beating Wall Street’s Expectations

In other retail sales news, Lowe’s reported third-quarter earnings on Wednesday that beat analysts’ expectations, with revenue up compared to the same period last year.

The home improvement retailer also updated its guidance, lowering the top end of its revenue outlook to approximately $97 to $98 billion for the full year. The previous top end was $99 billion. Lowe’s also cut guidance for comparable sales to be flat or down 1%, compared with earlier this year when it expected it to be down 1% to up 1%.

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