• AUD/JPY has picked bids around 94.20 as risky assets have defended the morning’s gap-down start.
• Weak Australian GDP projections and Retail Sales failed to bring volatility to Aussie.
• China’s Trade Balance data is seen higher at $95.95B vs. the former release of $84.74B.

The AUD/JPY pair has defended early Tokyo’s weakness in the risk appetite theme and is marching higher to recapture the critical hurdle of 95.00. The risk barometer fell into the grip of bears as risk-sensitive currencies witnessed a gap-down opening on Monday. The upside bias is favored as the market tone is extremely bullish as the Federal Reserve (Fed) is expected to trim the extent of rate hikes in its further monetary policy meetings.

On Friday, weak projections for Australian economic prospects dictated in the Reserve Bank of Australia (RBA)’s monetary policy statement failed to impact the Aussie bulls.

As per the monetary statement minutes, the Gross Domestic Product (GDP) projections for the first half of CY2023 have landed at 2.0% and 1.4% for the second half. Also, short-term inflation expectations have increased to 8.0% amid significant price growth in the service sector.

Also, weaker Retail Sales data didn’t dampen the Aussie investors’ mood. The Retail Sales for the third quarter slipped 0.2% vs. expectations of 0.4% despite mounting inflationary pressures in the Australian economy.

Going forward, investors will keep an eye on China’s Trade Balance data. The Trade Balance is seen higher at $95.95B vs. the former release of $84.74B. It is worth noting that Australia is a leading trading partner of China and China’s Trade Balance data will have a significant impact on Aussie.

On the Tokyo front, more developments on the Bank of Japan (BOJ)’s intervention will provide clarity to the market participants. The USDJPY pair is facing extreme selling pressure continuously around the 148.00 region, which might be an area of intervention activity by Japan’s policymakers. Contrary to that, Japanese Finance Minister Shunichi Suzuki said on Friday, they have “no intention of guiding fx to certain levels by intervening.”

• WTI pares the biggest daily gains in six months by retreating from a one-month high.
• Resistance-turned-support line from August restricts immediate declines, five-week-long ascending trend line adds to the downside filters.
• Oscillators suggest further weakness but bullish chart formation, key support line challenge bears.

WTI Crude Oil holds lower ground near $90.00, following a downside gap to begin the week’s trading. Even so, the black gold remains inside a short-term upward-sloping trend channel during the initial hours of trading on Monday.

It should be noted, however, that the retreat in RSI (14) from the overbought territory and the recently easing bullish MACD signals suggest the energy benchmark’s further weakness.

That said, the previous resistance line from August 30, around $88.60 by the press time, restricts the quote’s immediate downside.

Following that, the support line of the aforementioned bullish channel stretched from mid-October, around $86.80 at the latest, should lure the WTI bears.

It’s worth observing that an upward-sloping support line from September 28, close to $85.70, acts as an extra filter to the south before welcoming the oil sellers.

Alternatively, recovery moves may aim for the stated channel’s upper line, close to $92.00, but the buyers could wait for a clear upside break of the previous monthly peak of $92.63 to retake control.

In that case, a run-up towards the high marked in late August, around $97.30, might gain the market’s attention.

WTI: Four-hour chart

Trend: Limited downside expected

• USDCAD has jumped to near 1.3530, the pullback move lacks confidence amid an upbeat market mood.
• Fed’s less-hawkish commentary resulted in a sheer decline in DXY’s appeal.
• Upbeat Canada’s jobs data supports a 50 bps rate hike by the BOC ahead.

The USDCAD pair has kicked off the second week of November on a gap-up note as a sheer decline move has resulted in a short covering. The rebound is not likely to sustain as the risk appetite theme is intact in the entire market.

The US dollar index (DXY) is in a sideways profile in early Tokyo after bloodshed on Friday. All pullbacks in the mighty DXY were considered as selling opportunities by the market participants as chatters started over a possible slowdown in Federal Reserve (Fed)’s rate hike pace.

While the 10-year US Treasury yields are firmer above 4.16% despite falling odds for a 75 basis point (bps) rate hike in December.  The odds for a three-quarter to a percent rate hike have trimmed to 38.5% after a less-hawkish commentary from Chicago Fed President Charles L. Evans.

Fed Evans is of the view that smaller rate hikes will be announced ahead as front-loading by the US central bank is done as risk is becoming two-sided sooner. Fed policymaker further added that "There's ample capacity" to tighten monetary policy even at a slower pace, he said. "We have accomplished front-loading and now we are at the point where we are looking for the right level of restrictiveness and mindful of data dependency in a world where inflation just lags more than the real economy."

The Loonie got strengthened on Friday after the release of the robust payroll data. The economy has added 108.3k jobs vs. the expectations of 10k. Analysts at CIDC point out the surge could simply be a sign that some of the declines seen over the summer were simply statistical noise. According to them, the data support their call for a further 50bp interest rate hike at that time, but they warn there is still one more employment report to come before the next Bank of Canada (BOC) meeting.

On the oil front, oil prices are holding themselves around $92.00 as expectations of a slowdown in the Fed’s rate hike have triggered chances of acceleration in oil demand’s prospects. Optimism is supported oil gathering pace and current upside momentum could send the oil prices further ahead.

• EURUSD grinds lower following a week-start gap to the south, pares the biggest daily gains since late 2015.
• Market sentiment sours amid weekend headlines surrounding Russia, coronavirus.
• US jobs report, China’s covid-control policy and hawkish ECBSpeak helped buyers previously.
• US inflation data will be the key but risk catalysts can entertain traders as G20 begins.

EURUSD bears retake control during early Monday, after posting the biggest daily jump since December 2015, as the risk profile deteriorates. That said, the major currency pair began the week’s trading with a downside gap before taking rounds to 0.9920-25 by the press time.

Global markets turned risk-averse as traders began the week’s work with fresh fears of China’s covid controls, as well as geopolitical fears surrounding Russia. Also likely to have tested the traders are mixed concerns over the Fed’s next move.

Reuters cited China National Health Commission as saying during the weekend that China will persevere with its "dynamic-clearing" approach to COVID-19 cases as soon as they emerge, health officials said on Saturday. The news also added that measures must be implemented more precisely and meet the needs of vulnerable people.

On the same line were chatters that China President Xi Jinping warned Russian President Vladimir Putin over the usage of nuclear technology in the war against Ukraine. Furthermore, the news from the Wall Street Journal (WSJ) suggesting that a senior White House Official is involved in undisclosed talks with top Putin aides also tried to please the EURUSD bears.

It should be noted that expectations of witnessing easy covid controls in China joined mixed US job numbers, Fedspeak and hawkish comments from the European Central Bank (ECB) officials favored the EURUSD bulls the previous day.

''An unverified social media post last week, and a report authorities were working on plans to scrap a system that penalizes airlines for bringing virus cases into the country, boosted investor hopes that China’s pandemic policy may soon be loosened,'' Bloomberg reported. 

The US Nonfarm Payrolls (NFP) for October arrived at 261K versus 200K expected and 315K upwardly revised prior. However, the Unemployment Rate surprised markets by rising to 3.7% compared to 3.5% previous readings and 3.6% market forecasts. Following the data, Richmond Fed President Thomas Barkin said that the US labor market was still tight while also mentioning, “Not sure I know what we'll do in December.” Boston Federal Reserve President Susan Collins said on Friday that it is time for the Fed to shift its focus from the size of rate hikes to the "ultimate "destination," as reported by Reuters.

On the other hand, European Central Bank (ECB) President Christine Lagarde reiterated on Friday, "We have to raise rates to levels that will deliver our 2% medium-term inflation target."

Against this backdrop, Wall Street benchmarks closed positive and so did the US Treasury yields. However, the US Dollar Index (DXY) was down and propelled prices of commodities and Antipodeans. It’s worth noting that S&P 500 Futures drop 0.75% intraday at the latest.

Looking forward, Fedspeak and the second-tier data from the US and Eurozone may entertain EURUSD traders ahead of Thursday’s US Consumer Price Index (CPI). Also important to watch will be the updates from the Group of 20 nations’ meeting in Bali, not to forget the risk catalysts mentioned above.

Overall, a shift in the market’s view over the Fed’s next move seemed to have teased the EURUSD bears but the bulls aren’t off the table.

Technical analysis

EURUSD bulls must provide a daily closing beyond the 100-DMA hurdle surrounding 1.0040 to retake control.

• NZDUSD pares the biggest daily gains in 11 years.
• 50-day EMA restricts immediate declines inside one-month-old rising wedge.
• Convergence of 21-day EMA, wedge’s support appears a tough nut to crack for the bears.
• Buyers need validation from the immediate resistance line to retake control.

NZDUSD bears attack 50-day EMA support around 0.5850 during the early hours of Monday, after posting the biggest daily jump since October 2011 the previous day. In doing so, the Kiwi pair stays inside a monthly rising wedge bearish chart pattern.

Given the retreat in the bullish MACD signals, the quote may pare the latest gains and can break the immediate EMA support near 0.5850.

However, the 21-day EMA and lower line of the stated wedge constitute a tough nut to crack for the NZDUSD bears around 0.5790-85.

Should the pair sellers manage to conquer the 0.5785 support confluence, the odds of witnessing a fresh yearly low, currently around 0.5510, can’t be ruled out.

Alternatively, recovery moves will need a clear break of a downward-slopping resistance line from the last Wednesday, near 0.5930 by the press time.

Following that, the stated wedge’s upper line could test the NZDUSD bulls around 0.5980. Also acting as an upside filter is the 0.6000 psychological magnet.

In a case where the Kiwi pair remains firmer past 0.6000, the odds of witnessing a run-up towards September’s peak of 0.6162 appear brighter.

NZDUSD: Daily chart

Trend: Limited upside expected

• GBPUSD has initiated Monday’s movement with a gap-down approach despite cheerful market mood.
• Less room for more Fed’s bigger rate hike has weakened the DXY’s appeal.
• Investors are awaiting more developments on tightening fiscal policy measures by UK’s novel leadership.

The GBPUSD pair has initiated the week on a gap-down note near the round-level support of 1.1300 in the early Tokyo session. This could be the result of long liquidation after a bullish Friday as the market mood is extremely cheerful on expectations of a slowdown in the pace of rate hikes by the Federal Reserve (Fed) ahead.

Solid improvement in investors’ risk appetite has capped the US dollar index (DXY)’s upside. The mighty DXY is oscillating below the critical hurdle of 111.00. However, the returns on US government bonds are still solid despite a decline in volatility. The 10-year US Treasury yields are hovering around 4.16%.

Chicago Fed President Charles L. Evans cited on Friday that the time is ripe for smaller rate hikes by the Fed to avoid tightening monetary policy more than needed and slow the pace further once risks become more "two-sided”, as reported by Reuters.

Last week, the Fed hiked interest rates by 75 bps consecutively for the fourth time to 3.75-4.00% to scale down mounting price pressures. The headline Consumer Price Index (CPI) has already depicted signs of exhaustion, however, the condition of making a peak in core inflation still seems far from over.

The deviation between current borrowing rates and the desired terminal rate is one big rate hike now, therefore less room for more rate hikes could compel Fed chair Jerome Powell to adopt the ‘baby steps’ approach ahead.

On the UK front, investors are awaiting more developments on tightening fiscal policy measures by novel leadership in Britain led by UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt that will aid in an enlarged debt crisis.

Spending cuts and tax appreciation have been announced by the UK administration to trim overall debt and inflation from the economy. The financial statement to be delivered on November 17 will provide clarity over the scale of tightening fiscal measures and may weigh on households' earnings further in already higher payout times due to double-digit inflation and subdued earnings.

UK Finance Minister (FinMin) Jeremy Hunt plans to set out on Nov. 17 up to 60 billion Pounds ($67.82 billion) of tax rises and spending cuts, including at least 35 billion pounds ($39.56 billion) in cuts, the Guardian reported on Sunday, per Reuters.

Key quotes

GBPUSD retreats

Following an upbeat end to the week, GBPUSD marked a downside gap to begin Monday’s trading amid a risk-off mood. The aforementioned news did little to placate bears. That said, the Cable pair remains pressured around 1.1320, down 0.48% intraday, by the press time.

• AUDUSD begins the week on a negative note, takes offers to reverse Friday’s heavy gains.
• China’s rejection to hopes of easing covid controls favor bears, Xi’s warning to Putin over nuclear usage strength risk-off mood.
• Mixed US jobs data, Fedspeak joined virus-linked expectations to tease buyers the previous day.
• China trade numbers, risk catalysts could entertain intraday traders but US/China inflation figures are the key to clear directions.

AUDUSD marks a downside gap as it kick-starts the week’s trading around 0.6420, following a solid Friday that helped it post a three-week uptrend. The Aussie pair’s latest drop could be linked to the dashed hopes of easing China’s covid controls, as well as geopolitical fears surrounding Russia. Also likely to have tested the traders are mixed concerns over the Fed’s next move.

China National Health Commission told a news conference during the weekend that China will persevere with its "dynamic-clearing" approach to COVID-19 cases as soon as they emerge, health officials said on Saturday. The news also added that measures must be implemented more precisely and meet the needs of vulnerable people.

''An unverified social media post last week, and a report authorities were working on plans to scrap a system that penalizes airlines for bringing virus cases into the country, boosted investor hopes that China’s pandemic policy may soon be loosened,'' Bloomberg reported.

Additionally, chatters that China President Xi Jinping warned Russian President Vladimir Putin over the usage of nuclear technology in the war against Ukraine also weigh on the sentiment and the AUDUSD prices. On the same line was the news from the Wall Street Journal (WSJ) suggesting that senior White House Official is involved in undisclosed talks with top Putin aides.

Elsewhere, mixed US employment data, Fedspeak and the Fed’s next move also contributed to weighing the US Dollar.

On Friday, the US employment report for October flashed mixed results. That said, the headline Nonfarm Payrolls (NFP) arrived at 261K versus 200K expected and 315K upwardly revised prior. However, the Unemployment Rate surprised markets by rising to 3.7% compared to 3.5% previous readings and 3.6% market forecasts.

Following the data, Richmond Fed President Thomas Barkin said that the US labor market was still tight while also mentioning, “Not sure I know what we'll do in December.” Boston Federal Reserve President Susan Collins said on Friday that it is time for the Fed to shift its focus from the size of rate hikes to the "ultimate "destination," as reported by Reuters.

Amid these plays, Wall Street benchmarks closed positive and so did the US Treasury yields. However, the US Dollar Index (DXY) was down and propelled prices of commodities and Antipodeans.

Moving on, monthly prints of China’s trade numbers and the aforementioned risk catalysts could entertain short-term AUDUSD traders. Following that, the Consumer Price Index (CPI) figures for the US and China will be important to forecast the moves.

Technical analysis

AUDUSD remains on the bear’s radar unless providing a daily closing beyond the 0.6510-15 resistance confluence, including a 50-day EMA and a one-month-old descending trend line.

• The US dollar could be on the verge of a significant break to the downside.
• Risk-off start to the week, however, should offer immediate support.

The US Dollar fell on Friday on the back of the US jobs report that had something for everyone. US Nonfarm Payrolls increased 261,000 last month, data showed, also offering a revision show 315,000 jobs added instead of 263,000 as previously reported. Economists polled by Reuters had forecast 200,000 jobs, with estimates ranging from 120,000 to 300,000. However, the Unemployment Rate rose to 3.7% from September's 3.5%. Average hourly earnings increased 0.4% after rising 0.3% in September, but the rise in wages slowed to 4.7% year-on-year in October after advancing 5.0% in September.

DXY, an index that measures the greenback vs. a basket of currencies dropped to 110.72 from a high of 112.993. It did so despite the fed funds futures on Friday pricing in a 52.5% chance of a 75-basis-point interest rate hike next month and a 47.5% probability of a 50-basis-point increase. Reuters reported that the odds of a 75-basis-point rise went as high as 64% immediately after the payrolls data. The Fed's terminal rate, or the level at which rates would peak, slipped to 5.09% late on Friday, from about 5.2% just before the data.

China and CPi are the drivers

However, it was a risk-on mood that also helped to sink the greenback with speculation that Chinese authorities were working on plans to scrap a system that penalizes airlines for bringing virus cases into the country. This boosted investor hopes that China’s pandemic policy may soon be loosened. Nevertheless, there is a weekend report that rebuttals such news which is a positive for the greenback at the start of the week when investors will be quickly turning their attention to the US inflation data.

''Core prices likely slowed modestly in Oct, but to a still strong 0.4% MoM pace,'' analysts at TD Securities said. ''Shelter inflation likely remained the key wildcard, though we look for used vehicle prices to retreat sharply. Importantly, gas prices likely shifted from offering relief to the Consumer Price Index in recent months to contributing to it in Oct. All told, our m/m forecasts imply 7.9%/6.5% YoY for total/core prices.''

DXY technical analysis

The price is testing a key area of support but is on the backside of the micro trendline which could be bearish for the week ahead. A move below 110.80 then 109.63 and 107.80, would be significant for the outlook for forex in the final weeks of the year.

• Gold price is advancing towards $1,700.00 amid a significant improvement in the risk appetite of investors.
• A robust US payroll data failed to support the DXY as a slowdown in the rate hike pace looks certain.
• Broader markets could turn volatile ahead of US CPI data.

Gold price (XAUUSD) snapped 15-day topsy-turvy moves in a single trading session after gaining more than 3.20% on Friday. The precious metal remained the show-stopper after the market started discounting the fact that the Federal Reserve (Fed) will slow down its pace of hiking interest rates as the terminal rate is merely one bigger rate far from the current borrowing rates.

In the early Tokyo session, the asset is holding its prior week’s gains and the current momentum is expected to approach the psychological resistance of $1,700.00 amid a risk-on market mood. S&P500 settled the week on a positive note as a slowdown in the rate hike extent won’t upset the earnings guidance further.

The US dollar index (DXY) plunged below 111.00 despite the robust US Nonfarm Payrolls (NFP) data. The US economy has added 261k in October vs. the projections of 200k. Going forward, investors will shift their focus toward Thursday’s inflation data. The headline Consumer Price Index (CPI) is seen lower at 8.0% vs. the prior release of 8.2%. While, the core CPI may decline marginally to 6.5%, 10 basis points (bps) lower than the former release.

Gold technical analysis

Gold price has witnessed a stellar buying response after testing the demand zone placed in a narrow range of $1,615.70-1,618.64 on a four-hour scale. The precious metal is auctioning above the 200-period Exponential Moving Average (EMA) at $1,664.20, which adds to the upside filters.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted to the bullish range of 60.00-80.00, which indicates the upside momentum has been triggered.

Gold four-hour chart

The Wall Street Journal has written that US President Joe Biden’s ''top national-security adviser has engaged in recent months in confidential conversations with top aides to Russian President Vladimir Putin in an effort to reduce the risk of a broader conflict over Ukraine and warn Moscow against using nuclear or other weapons of mass destruction, US and allied officials said.'' 

''Sullivan has also spoken with his direct counterpart in the Russian government, Nikolai Patrushev, the officials added.''

Bloomberg has reported that the Australian dollar has slumped early Monday as traders sought haven assets after Chinese authorities vowed to stick to their strict Covid-zero stance. 

''The Aussie fell as much as 1.1% to 64.02 US cents with the Kiwi trailing close behind, to lead major currencies including the euro and pound lower. The greenback climbed against its Group-of-10 peers as traders sought haven assets.''

The US Dollar tumbled on Friday on a risk-on day on the news that China would relax such measures and after signs of a slowdown with a higher US Unemployment Rate and lower wage inflation. 

The Greenback initially rose immediately after the data, but fell as market participants digested the jobs report, noting the data was not all positive and supports the view the Federal Reserve could slow the pace of future rate hikes.

''An unverified social media post last week, and a report authorities were working on plans to scrap a system that penalizes airlines for bringing virus cases into the country, boosted investor hopes that China’s pandemic policy may soon be loosened,'' Bloomberg reported. 
 

• EURUSD bulls have moved in on a key area of resistance. 
• Bears are lurking on the backside of a key hourly trendline. 

The US Dollar collapsed on Friday after the US Nonfarm Payrolls report for October showed the world's largest economy created more new jobs than expected, but also flashed signs of a slowdown with a higher Unemployment Rate and lower wage inflation. This enabled the euro to shoot higher as the following technical analysis will show. 

EURUSD daily chart

EURUSD is coiled on the daily chart having spiked into a 3key area of resistance below parity that bears will be looking to hold at the start of the week. A move into the impulse could be on the cards as the following hourly chart shows. 

EURUSD H1 chart

The price left behind a number of price imbalances on the impulse and would be expected to return into the move over the forthcoming sessions. 0.9880 will be a key support for the immediate future in that respect. 

• AUDUSD bulls taking control and eye higher still.
• US Dollar pressured and at risk of deeper to 109.50s.

AUDUSD bulls moved in for the low-hanging fruit at the end of the week, taking out the shorts that had been building up since mid-prior week from 0.6500. The high recorded on the day was 0.6482. For the open, should the US dollar manage to find a bid, 0.6425 could be an attractive downside target where the bulls would be expected to reemerge from.

AUDUSD daily chart

The price remains within a broader bearish trend, although the bulls have made a move and broken the micro trendline which gives rise to a follow-through for the week ahead.

AUDUSD H1 charts

The bulls are on the other side of the bearish channel which gives rise to the prospects of a move towards 0.6550 in the immediate future so long as 0.6425 holds.

DXY pressured

With that being said, the US Dollar, as measured by the DXY index, will need to decline below 110.40 to keep risk currencies bid. A break of 109.53 would seal the deal as per the following daily chart: