• Silver price remains pressured after reversing from one-month high.
• Bearish candlestick formation, RSI’s nearness to overbought conditions favor short-term downside.
• Convergence of 200-DMA, three-month-old ascending trend line appears a tough nut to crack for bulls.

Silver price (XAGUSD) keeps the week-start losses around $20.75 during Tuesday’s Asian session. In doing so, the bright metal justifies the previous day’s bearish candlestick formation, namely the “hanging man”, at the one-month high.

Also supporting the short-term bearish bias is the RSI (14) which is near the overbought conditions.

It should be noted that the previous weekly top near $20.10 and the $20.00 could test the XAGUSD bears before directing them to the $19.45 support confluence including the 100-DMA and an upward-sloping trend line from October 14.

In a case where silver price remains bearish past $19.45, a gradual downturn towards the previous monthly low near $18.10 can’t be ruled out. During the fall, the $19.00 threshold may act as an intermediate halt.

On the flip side, a daily closing beyond October’s peak of $21.24 defies the bearish “hanging man,” candlestick.

Even so, a convergence of the 200-DMA and an ascending trend line from August, close to $21.50, will be a strong resistance for the XAGUSD bulls to cross.

Should the metal buyers manage to conquer the $21.50 hurdle, the odds of witnessing a run-up toward the mid-2022 peak surrounding $22.50 can’t be ruled out.

Silver price: Daily chart

Trend: Further weakness expected

• The cross is struggling to cross the 147.00 hurdle in the Asian session.
• An oscillation in the bullish range by the RSI (14) indicates that upside momentum is active.
• A golden cross, represented by the 50-and 200-EMAs at 145.90 indicates a bullish trend reversal.

The EURJPY pair is struggling to overstep the round-level resistance of 147.00 in the early Tokyo session. The asset has been advancing continuously for the past three trading sessions after sensing buying interest around 144.23.

Overall optimism in the risk sentiment is keeping the Shared Currency bulls in power. Apart from that, the sneaking intervention approach by the Bank of Japan (BOJ) in the currency market is failing to prevent the Japanese yen from further depreciation.

On an hourly scale, the cross has extended its recovery after overstepping the crucial resistance of 146.00. Going forward, a horizontal resistance placed from October 25 high at 147.73 will remain a key hurdle.

A golden cross, represented by the 50-and 200-period Exponential Moving Averages (EMAs) at 145.90, has underpinned the Eur bulls.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a bullish range of 60.00-80.00, which indicates the continuation of upside momentum.

Should the asset break above October 25 high at 147.73, the shared currency bulls will send the asset toward October 21 high at 148.40, followed by the psychological resistance at 150.00.

On the flip side, the cross will be dragged to near October 13 and October 10 lows at 141.76 and 140.90 respectively if it drops below Thursday’s low at 144.00.

EURJPY hourly chart

Richmond Federal Reserve President Thomas Barkin has crossed the wires. 

Key comments

• We will persist until inflation comes down.
• We are seeing promising signs of inflation.
• It would have made sense for the Fed to start tightening earlier

On Friday he said he is ready to act more "deliberatively" on consideration of the pace of Fed rate hikes going forward but said rates could continue rising for longer and to a higher end point than previously expected.

Speaking in a CNBC interview, Barkin said:

"When you get your foot on the brake, you think about steering in a very different way. You pump the brakes, and sometimes you act a little bit more deliberatively, and I'm ready to do that. And I think the implication of that is probably a slower rate of pace of rate increases, a longer pace of rate increases and potentially a higher endpoint."

Meanwhile, a bearish US Dollar sentiment emerged from last Friday's activity in the US session. There are signs of some easing of market conditions following last week's mixed Nonfarm Payrolls report that shows that the Unemployment Rate rose to 3.7%. Investors are hopeful that the much sought-after Federal Reserve pivot could be on the horizon that would give relief to global stock markets. Consequently, US yields and the greenback are stalling.

• AUDUSD bulls take a breather at one-week high, pauses two-day uptrend.
• Australia’s Westpac Consumer Confidence eased in November, inflation expectations rally.
• Markets turn dicey in search of fresh clues as previous risk-on mood fades.
• Aussie NAB data, headlines from China, US can entertain traders ahead of Thursday’s US CPI.

AUDUSD prints mild losses around 0.6470 as bulls take a breather around the weekly top following a two-day uptrend. In doing so, the Aussie pair takes clues from the downbeat data from home, as well as from the market’s cautious mood.

That said, Australia’s Westpac Consumer Confidence slumped to -6.9% in November versus -0.9% prior.

Earlier in the day, the weekly print of ANZ-Roy Morgan Consumer Confidence dropped to the lowest levels since April 2020, to 78.7 at the latest. The details of the report also mentioned that the inflation expectations were the highest since the data was first released in April 2010.

Elsewhere, optimism surrounding the US Federal Reserve’s (Fed) rate hikes faded after the policymakers suggest nearness to the pivot rate. Also weighing on the US dollar could be the recently mixed US jobs report and a Reuters report suggesting that four policymakers were favoring smaller rate hikes.

Against this backdrop, Wall Street closed with gains and the US Treasury yields were firmer too. However, the US Dollar Index (DXY) remained pressured. That said, S&P 500 Futures remain directionless at the latest.

Moving on, AUDUSD pair traders may await the National Australia Bank’s (NAB) Business Conditions and Business Confidence indices for October for immediate directions. However, major attention will be given to Thursday’s key US Consumer Price Index (CPI) for October.

To sum up, AUDUSD buyers need fresh catalysts to extend the latest run-up, in absence of which the bears are ready to retake control, at least ahead of Thursday’s US CPI.

Technical analysis

AUDUSD bears can remain hopeful unless the quote offers a daily closing beyond the 0.6410-15 resistance confluence including the 50-DMA and a one-month-old descending trend line.

 Reuters reports on an Ipsos poll that has the US President Joe Biden's public approval rating slipping to 39%. This comes ahead of this week's midterm elections, where control of both chambers of Congress and dozens of governorships are on the line.

The polls suggest a Republican majority in the House and Senate, which is in line with historical relationships as well as the low approval ratings of President Biden due to the economy, inflation, and crime.

• WTI stalls on the bid and slumps into the close of the day. 
• Bears take note of China's commitment to zero-Covid policy.

West Texas Intermediate, WTI, was lower at the start of the week with Officials at China’s National Health Commission saying the country will “unswervingly” adhere to current virus controls. At the time of writing, black gold is trading at $91.87 and down 0.67% falling from $93.73 to $90.45bbls. China said it remains committed to its zero-Covid policy that has lowered economic growth and oil demand.

In future, as a consequence, WTI crude for December delivery closed down US$0.82 to US$91.79 per barrel. The officials on the weekend said the country will continue with the mass quarantines of major centres and regions when outbreaks of Covid-19 occur, Reuters reported. The statements ended hopes the country would move away from the policy and focus on growth. This followed rumours that a committee had been set up to consider how to ease restrictions.

''Nevertheless, the near-term fundamentals remain bullish. Futures opened sharply lower on Monday but slowly gained over the course of the day as the focus returned to supply side issues,'' analysts at ANZ Bank said.

''OPEC has begun reducing output in line with the agreement to reduce quotas by 2mb/d at its last meeting. The market is also facing the deadline for European imports of Russian oil before sanctions kick in on 5 December. This has left fuel inventories tight, with Brent crude oil futures flirting with USD100/bbl during the session.''

• USDCAD is juggling below 1.3500 as investors have shifted their focus toward US mid-term elections.
• The risk profile is extremely solid and is keeping the DXY on the back foot.
• The speech from BOC Macklem will dictate the likely monetary policy action ahead.

The USDCAD pair is displaying back-and-forth moves in a narrow range below the psychological resistance of 1.3500 in the early Asian session. The asset has turned sideways as investors are awaiting the US mid-term elections, which will set the ground ahead of the US Consumer Price Index (CPI) data.

The risk profile is certainly solid as S&P500 displayed handsome returns on Monday while the US dollar index (DXY) was being punished as odds for the continuation of 75 basis points (bps) rate hike pace won’t sustain for longer. The DXY has dropped to near 110.00 and a majority win of the Democratic will strengthen the positive risk profile further.

Meanwhile, the returns on US government bonds have not faced any pressure and are continuing their gradual upside. The 10-year US Treasury yields have been recorded at 4.225, at the press time.

The contest among 435 seats of the House of Representatives and 34 seats of the Senate will determine the extent of the power of the Democratic party. A loss in mid-term elections for the Democratic party would cripple the power of US President Joe Biden as the passing of bills will also demand approval from Republicans. This could also bring a sense of political instability.

A note from ANZ Bank states that “We regard a Republican-controlled Congress as the most likely scenario (55%). Not far behind, at 41%, is a split Congress, with a Republican-led House and a Democrat Senate.”

On the Loonie front, investors are awaiting the speech from Bank of Canada (BOC) Governor Tiff Macklem, which will provide cues about the likely monetary policy action ahead. Meanwhile, the oil prices have corrected to near $91.00 after a smart recovery as a commitment to the no-tolerance Covid-19 approach by the Chinese authorities has raised concerns over oil demand ahead.

Research Analysts at Goldman Sachs (GS) cut down their EURUSD forecasts in the latest report, published late Monday. That said, the investment bank now expected the major currency pair to reach 0.9400 in the three months versus 0.9700 previous expectations.

While citing the reasons, GS said that for FX markets, the main takeaway from the FOMC meeting last week should be that the Fed acknowledged that "restrictive" is a moving target, and the balance of recent data suggests that the target is moving higher still. 

“This matters because policymakers in other jurisdictions have not come close to matching that tone. In recent weeks, we have argued that there is a building case for policy divergence in the Dollar's favor ahead,” adds Goldman.

Additionally, the US bank also mentions, “Following some pivotal policy decisions in recent weeks, we now think this has moved from a risk scenario to the most likely path, which is one reason why we downgraded the near-term outlook for EURUSD.”

Also read: EURUSD struggles to defend 1.0000 level ahead of Eurozone Retail Sales, US inflation

• USDCHF bears struggle to extend two-day downtrend near a one-week low.
• MACD signals further downside but RSI, key supports challenge bears.
• Buyers need validation from 21-DMA to retake control.

USDCHF bears take a breather around a one-week low as the quote seesaws near 0.9885 during Tuesday’s Asian session. In doing so, the Swiss Franc (CHF) pair struggles with the 50-day EMA and an upward-sloping support line from September 30.

It’s worth noting that the MACD signals are in favor of the bears targeting a clear downside break of the 0.9880-70 immediate support zone. However, the steady RSI (14) suggests further grinding of the USDCHF prices.

As a result, another support line from August 11, close to 0.9830 at the latest, gains major attention.

Should the quote drops below 0.9830, the odds of witnessing a slump toward the late September swing low near 0.9740 can’t be ruled out. That said, the 0.9800 threshold could act as a buffer during the fall.

Alternatively, recovery moves need to cross the 21-day EMA level surrounding 0.9950 to convince the USDCHF pair buyers.

Even so, the 1.0000 parity level could challenge the upside momentum.

Following that, multiple hurdles near 1.0070 might act as the last defense of the USDCHF bears, a break of which will highlight the yearly peak of 1.0147 for the bulls.

USDCHF: Daily chart

Trend: Recovery expected

• AUDJPY remains trapped in a 250 pip range amid the lack of conviction of AUD and JPY traders.
• From a daily chart perspective, the AUDJPY is range-bound.
• Short term, the AUDJPY might pull back before challenging the top of the range at 95.60.

The AUDJPY advances for two consecutive days as Wall Street finishes the Monday session with solid gains, reflecting an improvement in market sentiment, as US midterm elections loom as traders brace for US inflation figures late in the week. In the FX space, risk-perceived currencies like the Aussie Dollar got bolstered, while safe-havens are trading with losses. Therefore, the AUDJPY is trading at 94.95, up by 0.03% as the Asian session begins.

AUDJPY Price Analysis: Technical outlook

From a daily chart perspective, the AUDJPY is neutral biased, as shown by the 50 and 100-day Exponential Moving Averages (EMAs) trendless, trapped within the 94.22/57 range. Additionally, the AUDJPY is range-bound within 94.20-95.60. At the same time, the Relative Strength Index (RSI) at 54.91, in bullish territory, suggests the cross could be headed upwards. Still, RSI needs to clear the 60 figure, which would indicate to AUDJPY traders that buyers are gathering momentum.

The AUDJPY one-hour timeframe depicts price action cleared the 100 and 200-hour EMAs, which would open the door for further gains if their slopes were not flat. Unless the AUDJPY clears last Friday's daily high at 95.97, a pullback towards the 200-hour EMA as its first target, followed by additional downside, is on the cards.

Hence, the AUDJPY first support would be the 200-hour EMa at 94.50, followed by the confluence of the S1 daily pivot and the 50-hour EMA at 94.39, followed by the 100-hour EMA at 94.20, ahead of the S2 daily pivot at 93.90.

On the other hand, a resumption to the upside needs to clear 95.60. Once done, the next supply zone would be the November 1 swing high at 95.55, followed by the 96.00 figure.

AUDJPY Key Technical Levels

• GBPUSD seesaws near a one-week high while struggling to defend the previous two-day uptrend.
• UK PM Sunak to strike LNG deal with the US, Chancellor Hunt could announce tax raid on inheritance.
• Hopes of Fed’s pivot weighed on the US dollar ahead of the key inflation data.
• UK’s Q3 GDP, fiscal policy announcements will also be important for near-term directions.

GBPUSD struggles to extend the two-day uptrend during Tuesday’s Asian session, easing back to 1.1505, as bulls take a breather amid a light calendar. In doing so, the Cable pair fails to cheer the upbeat news from the UK while waiting for the week’s key events.

Rishi Sunak is poised to announce a major gas deal with America after the Cop27 climate change summit, The Telegraph can disclose. “Talks about the “energy security partnership” are in their final stages, with the US planning to sell billions of cubic meters of Liquefied Natural Gas (LNG) to Britain over the coming year,” the news adds.

The reason for the GBPUSD buyer’s retreat could be linked to another news suggesting that the UK Chancellor Jeremy Hunt is set to announce a new tax raid on inheritance, per the UK Telegraph. The news also mentioned that Chancellor Hunt and Prime Minister (PM) Rishi Sunak are understood to have agreed to freeze the threshold above which people must pay tax for another two years.

Elsewhere, recently mixed comments from the US Federal Reserve (Fed) policymakers, suggesting a halt in the strong rate hike trajectory, especially after Friday’s mixed US jobs report, appeared to have drowned the US dollar in the last two days. On the same line could be the expectations from the US Midterm Elections suggesting more support for easy policies as the latest polls hint at the Republican’s victory in at least one house.

Against this backdrop, Wall Street closed with gains and the US Treasury yields were firmer too. However, the US Dollar Index (DXY) remained pressured.

Looking forward, there are no major data from the UK and the US to be released before Thursday’s key US Consumer Price Index (CPI) for October and the British Gross Domestic Product (GDP) for the third quarter (Q3), up for publishing on Friday. While fears of the UK’s economic pain could keep the bears hopeful, downbeat US inflation numbers may help the DXY bears to extend their latest ruling, which in turn could favor the GBPUSD bulls. Additionally, the UK’s fiscal policy announcements, up for November 17, appear the key for the pair buyers to watch amid high hopes from the new government.

Technical analysis

GBPUSD bulls will have a tough time ahead as the three-month-old resistance line and the 100-DMA, respectively near 1.1555 and 1.1680, stand tall to challenge the Cable pair’s further upside.

• Kiwi bulls are eyeing a break above the immediate hurdle of 0.5950 for upside momentum.
• Sustainability above the 38.2% Fibo retracement has underpinned the Kiwi dollar against the Greenback.
• A golden cross, represented by the 50-and 200-EMAs adds to the upside filters.

The NZDUSD pair is struggling to cross the critical hurdle of 0.5940 in the Tokyo session. Odds are favoring an upside as the risk impulse is extremely positive. The S&P500 index continued its bullish performance on Monday after a positive Friday.

Meanwhile, the US dollar index (DXY) has witnessed a steep fall after failing to sustain above the crucial resistance of 111.00. Rising expectations of a slowdown in the pace of rate hikes by the Federal Reserve (Fed) have significantly trimmed the DXY’s appeal. Now, the focus has shifted to US mid-term elections, which will provide a decision price action ahead.

On a four-hour scale, the asset is hovering around the immediate hurdle of 0.5950. The sustainability of the asset above the 38.2% Fibonacci (Fibo) retracement (placed from August 12 high at 0.6470 to October 13 low of 0.5512) at 0.5880 has strengthened the antipodean against the Greenback.

A golden cross, represented by the 50-and 200-period Exponential Moving Averages (EMAs) at 0.5784, has underpinned the Kiwi dollar.

Meanwhile, the Relative Strength Index (RSI) (14) is focusing on keeping itself above 60.00 for bullish momentum.

Going forward, a break above the immediate hurdle of 0.5950 will send the asset toward the psychological resistance of 0.6000, followed by 61.8% Fibo at 0.6108.

Alternatively, a downside break below 23.6 Fibo at 0.5742 will drag the asset toward the round-level support at 0.5600. A slippage below the latter will drag the asset toward October 13 low of 0.5512.

NZDUSD four-hour chart

• EURUSD keeps two-day uptrend near a weekly high, sidelined of late.
• Risk-on mood, hawkish ECBspeak and firmer EU data underpin bullish bias amid a light calendar.
• Chatters surrounding US Mid-Term elections, nearness to Fed’s pivot also favored buyers.
• Eurozone Retail Sales for September will be important for the day, US inflation is the key.

EURUSD retreats to 1.0015 during Tuesday’s Asian session as bulls take a breather following a sharp run-up in the last two days. Even so, the bulls keep the reins ahead of Eurozone Retail Sales, as well as the US Consumer Price Index (CPI) for October.

Firmer sentiment joined upbeat EU data and hawkish comments from the European Central Bank (ECB) officials to favor the EURUSD buyers. On the same line were talks surrounding the Federal Reserve’s (Fed) pivot point and the Republicans’ victory in the US Midterm Elections.

Germany’s Industrial Production offered a positive surprise of 0.6% MoM during September versus -0.8% expected and downwardly revised prior of -1.2%. Further, the Eurozone Sentix Investor Confidence index improved to -30.9 in November from -38.3 in October versus -35.0 expected. The index rebounded from its lowest level since March 2020.

Elsewhere, “As long as underlying inflation has not peaked, we shouldn’t stop rate hikes,” the European Central Bank (ECB) Governing Council member and French central bank governor Francois Villeroy de Galhau said in an interview with the Irish Times on Monday. It should be noted that European Union (EU) economic commissioner Paolo Gentiloni mentioned that the bloc’s economy will shrink in the coming months due to the energy crisis and high inflation. Additionally, the EU Commission Executive and Vice President Valdis Dombrovskis signaled the updated economic forecasts for the EU would show a further weakening of the economy and high levels of inflation.

On the other hand, Friday’s mixed US employment data and recently downbeat comments from the Fed policymakers suggested that the US central bank is near the pivot and may ease on the rate hike trajectory.

Talking about the US Midterm Elections, the Australia and New Zealand Banking Group (ANZ) said, “Recent polling indicates that the Republicans will take control of the House of Representatives, with control of the Senate going down to the wire. Markets are expected to react positively to Republican control because even controlling one house would limit fiscal spending. Additional fiscal spending has the potential to undermine tighter monetary policy and therefore is considered a market risk.”

Amid these plays, Wall Street closed with gains and the US Treasury yields were firmer too. However, the US Dollar Index (DXY) remained pressured.

Moving on, the aforementioned risk catalysts could entertain the EURUSD traders and the covid fears, from China, might allow the bulls to take a breather. However, major attention will be given to the Eurozone Retail Sales, expected -1.3% YoY versus -2.0% prior. Should the scheduled data improve, the major currency pair can extend the latest rebound to cross the key 100-DMA hurdle. Following that, the US inflation data will be the key amid the downbeat Fedspeak.

Technical analysis

Unless providing a daily closing below the 50-DMA support near 0.9880, EURUSD bulls are all set to cross the 100-DMA hurdle surrounding 1.0045.

• Gold price is oscillating in a $1,673.96-1,681.95 range ahead of US mid-term elections.
• Overall positive sentiment is continuously providing support to the gold bulls.
• The returns on US government bonds are still solid despite rising odds of a slowdown in Fed’s rate hike pace.

Gold price (XAUUSD) is declining gradually after multiple attempts of breaking above the critical hurdle of $1,680.00. Overall positive sentiment is providing support to the gold prices while anxiety ahead of the US Consumer Price Index (CPI) data has capped the upside.

The precious metal has remained in a narrow range of $1,673.96-1,681.95 on Monday despite back-to-back bearish trading sessions in the US dollar index (DXY)’s counter. The DXY dropped to near the psychological support of 110.00 as the market participants believe that a slowdown in the pace of rate hikes by the Federal Reserve (Fed) is certain.

S&P500 advanced by more than 1% as a gradual incline in critical rates won’t impact corporate earnings to a greater extent. While, the 10-year US Treasury yields have not been impacted and are scaling higher, recorded at 4.22% at the time of writing.

On Tuesday, the major trigger for the assets will be developments on US mid-term elections with voting for all 435 seats in Congress and 35 of the 100 seats in the Senate. As strategists at ANZ Bank note, the US Dollar and equity markets tend to finish the month higher after midterms.

Gold technical analysis

On an hourly scale, the gold prices are forming a Bullish Flag chart pattern that signals a continuation of the upside move after the breakout of the consolidation. The 20-period Exponential Moving Average (EMA) at $1,674.87 has acted as major support for the counter.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the 40.00-60.00 range but that doesn’t warrant a reversal in the trend.

Gold hourly chart

• AUDUSD bulls move in on last week's highs in a risk-on setting.
• A break of the highs will open risk to last month's highs, although trendline support could come undone.

AUDUSD has climbed at the start of the week, fididing demand due to a risk-on sentiment that emerged from last Friday's activity in the US session. There are signs of some easing of market conditions following last week's mixed Nonfarm Payrolls report that shows that the Unemployment Rate rose to 3.7%. Investors are hopeful that the much sought-after Federal Reserve pivot could be on the horizon that would give relief to global stock markets. Consequently, Us yields are stalling as the following technical analysis will show and AUDUSD is gathering pace on the bid into last week's highs:

AUDUSD H1 charts

The price is riding trendline support into last week's highs with the prior month's highs thereafter as targets for this week. However, there are a number of price imbalances that have been left behind for the start of the week's business ad the length of Friday's trade could be a target for the bears. If the bears commit at this juncture, then a break of 0.6450 could be significant and fuel interest from sellers. A move below the trendline support will be the first scenario to look out for in that regard. 

• GBPUSD bulls move in on Monday to cash in on weakness in the US dollar and yields. 
• Cable has reached close to last week's high but may be facing headwinds at resistance.

Cable (GBPUSD) rose on Monday, supported by a risk-on sentiment across markets. there are signs of some easing of market conditions following last week's mixed Nonfarm Payrolls report that shows that the Unemployment Rate rose to 3.7%. This has fuelled hopes that the much sought-after Federal Reserve pivot could be on the horizon. Consequently, Us yields are stalling as the following technical analysis will show and GBPUSD is gathering pace on the bid.

GBPUSD H1 chart

The hourly charts show the price firmly bid with eyes towards last week's highs and then last month's highs in the 1.1616 area and 1.1645s. 

GBPUSD M15 chart

Cable is stretched at this juncture into a resistance area on the 15-min charts. A move below the current micro trendline will set the stage for a move back onto to test structure at 1.1450. 

US 2-year yields

The daily chart shows that there could be some stalling to come from the 2-year yields given the recent wicks and lower highs. A break of the current support near 4.644% opens risk of a significant move lower to test the trendline supports. In turn, such a switch in yields would likely dent the greenback and support Cable higher. 

• The euro extends recovery from lows near 144.00 to the 147.00 area.
• The Japanese yen loses ground amid a positive market mood.
• Investors are pricing in easier COVID restrictions in China. 

The euro extended gains on Monday, following a sharp recovery from the 144.00 area on Friday, with the pair approaching 147.00 on Monday’s US afternoon trading session.

The yen dives in a risk-on session

In the absence of relevant macroeconomic releases, the positive market sentiment is driving currencies on Monday. Safe-haven assets like the US dollar or the Japanese are suffering, with investors' demand shifting towards riskier assets like the euro or the British pound.

Rumors that China is considering a certain relaxation in the Zero-COVID policy is feeding optimism on Monday. Equity markets have extended their rally, overlooking the denial from the Chinese authorities, that have warned about the possibility of severe restrictions ahead, as the winter flu season approaches.

In the European calendar, the Eurozone Sentix Survey has shown the first improvement in investor sentiment over the last three months. The warmer temperatures in Europe are easing previous fears about gas rationings and allowing moderate declines in energy prices.

Beyond that, the positive Non-Farm Payrolls data seen on Friday continues acting as a tailwind for risk appetite. The tight US labor market conditions add reasons to the Federal Reserve to maintain an aggressive tightening path and a positive policy differential with the Bank of Japan that has pulled the yen nearly 30% lower against the USD, and about 15% down against the euro so far this year.

Technical levels to watch

• GBPJPY registers gains of more than 1.30%, as buyers eye 170.00.
• The divergence between the GBPJPY price action and the RSI could exacerbate a correction before resuming the uptrend.
• Near term, if the GBPJPY fails to achieve a daily close above 168.90, it could open the door for further downside.

The GBPJPY stages a recovery trimming some of the last week’s losses as market sentiment improves during Monday’s Wall Street session. Factors like US midterm elections and also a mixed US jobs report opened the door for gradual tightening by the Federal Reserve, after hiking four times, 75 bps, for a total of 300 bps in the last meetings, in a period of stubbornly high inflation. At the time of writing, the GBPJPY is trading at 169.06.

GBPJPY Price Analysis: Technical outlook

The GBPJPY depicts the pair as upward biased, eyeing a test of the 170.00 figure, which could exacerbate a rally towards the YTD high reached on October 31 at 172.13. Nevertheless, GBP buyers should be aware that the Relative Strength Index (RSI) at 55.88, albeit in bullish territory, failed to clear the previous peaks as GBPJPY price action did. So a negative divergence could form if the GBPJPY breaks toward new YTD highs, suggesting a pullback is on the cards.

Short term, the GBPJPY hourly chart depicts the pair trades above the 200-hour EMA at 168.90, suggesting that buyers are gathering momentum. Still, unless they achieve a daily close above it, the cross-currency would be vulnerable to selling pressure. Of note, the Relative Strength Index (RSI) at 81.70 portrays the pair as overbought, which could exacerbate a correction lower.

Hence, the GBPJPY first support would be the R2 daily pivot at 168,15, followed by the confluence of the R1 daily pivot and the 100-hour EMA at 167.44 and 167.56, respectively, followed by the 167.00 figure.

GBPJPY Key Technical Levels

European Central Bank President Christine Lagarde has repeated that the cycle of interest-rate increases must ensure that inflation returns to the 2% target over the medium term.

''Must bring inflation back to 2%,'' she said in recent trade, adding again that inflation is ‘much too high’'. She said rates will rise more. 

Meanwhile, EURUSD is on the up and traders have been of the mind that the US economy is slowing enough to allow the Federal Reserve to ease its rate-hiking pace.

This is weighing on the greenback and the ongoing speculation that China may ease COVID restrictions is also playing a role in the downside at the start of the week.

EURUSD has been approaching last month's highs as the following hourly chart illustrates:

What you need to take care of on Tuesday, November 5:

The week started with the greenback trying to recover the ground lost on Friday, but the American currency ended up losing further ground against its major rivals. The dollar accelerated its decline late in the US session as Wall Street picked up momentum ahead of the close.

Different factors underpinned the market sentiment, one of which is renewed speculation the US Federal Reserve is near a pivot on monetary policy. The central bank is expected to ease the pace of quantitative tightening regardless of Chair Jerome Powell´s hawkish comments. Another factor is China. Despite the number of new coronavirus cases on the rise, investors are once again pricing in easing restrictive measures. Finally, there is some growing speculation Russia and Ukraine may de-escalate the ongoing conflict.

US Treasury yields, however, were also on the rise. The yield on the 10-year note settled at 4.20%, while the 2-year note yield hovers around 4.72%.

The week will be lighter in terms of first-tier events, with the focus on the US Consumer Price Index, foreseen at 8% YoY in October, slightly better than the previous 8.2%.

The EURUSD pair trades in the 1.0030 price zone, its highest in over two weeks. Better than anticipated German data helped the shared currency, with Industrial Production improving by more than anticipated in September.

The GBPUSD pair trades above the 1.1500 level, benefiting from the broad dollar’s weakness. Market participants anticipate UK Chancellor Jeremy Hunt will outline  £60 billion in tax increases and spending cuts.

USD/CAD trades right below the 1.3500 threshold, while AUD/USD hovers around 0.6470. Safe-haven currencies appreciated vs their US rival, with USD/CHF currently trading around 0.9880 and USD/JPY at  146.50.

Gold holds on to the previous weekly gains and stands at $1,676 a troy ounce, while crude oil prices ticked higher. WTI currently trades at $92.00 per barrel.

Polkadot price eyes bullish breakout to $10 as $355 million in trading volume comes in}

• USDCAD bulls were knocked back as the US Dollar slumps again.
• All eyes are on US CPI and Fed speakers this week. 

USDCAD is trading flat on the day following an initial surge in the early part of the New York session into shorts established at the start of the day in Asia and London. At the time of writing, the pair is trading at 1.3490 and has ranged between a high of 1.3553 and a low of 1.3465. The price is consolidating on coiled market conditions in the forex space as investors weigh the risks of this week's Consumer Price Index, (CPI), and midterm elections from the US vs. prospects of heightened risk appetite. 

The focus will also be on US inflation data, CPI, for October, due to be released on Thursday, for clues on whether the US Federal Reserve's rapid interest rate hikes are helping cool down the economy. Traders are now betting on 61% odds of a 50-basis point rate hike at the US central bank's meeting in December. 

Risk-on, risk-off

Meanwhile, investor sentiment recovered in Asia and London following an initial opening gap in the forex space. The Hang Seng China Enterprise index in Hong Kong rose 2.8%, taking its 5-day gain to 12.6% even as Reuters reported that new Covid cases in China rose to a six-month high of 5,496 on Monday as the nation continues to grapple with new outbreaks.

Nevertheless, Kinger Lau, chief China equity strategist at Goldman Sachs, wrote in a note that China may start to reopen in the second quarter of next year and that a full reopening may drive a 20% upside for the nation’s stocks. Such sentiment has been a weight on the US dollar and positive for high-beta currencies such as the Canadian dollar. Such speculation that China, the world's largest commodity consumer, might open its economy lifted copper by 7% on Friday in its biggest one-day rally since 2009, while oil rose by more than 4% from which the Canadian Dollar benefits. 

Additionally, four Federal Reserve policymakers on Friday indicated they would consider a smaller interest rate hike at their next policy meeting, sounding less hawkish than Chair Jerome Powell. There are several Fed officials that are scheduled to speak this week as well. Markets are now narrowly leaning toward a half-point rate hike next month to 4.25-4.5% which can support CAD vs. the US Dollar. Two-year Treasury yields, which are most sensitive to inflation and interest rate expectations are below the highs of the day but remain 1% higher at 4.711%, although now well below 4.88% and Friday's peak.

• The Silver price registers a minuscule loss of 0.02% late in the New York session.
• Last week’s US employment data was a headwind for the American Dollar, which tumbled the most since March 2020.
• Silver Price Analysis: Neutral-upwards, and if it pierces $21.00, a test of the YTD high is on the cards.

The Silver price fluctuates in the North American session due to risk appetite improvement after last Friday’s US employment data showed that the economy continues to add jobs, though the Unemployment Rate jumped, signs that the Federal Reserve’s policy is beginning to impact the “tight” labor market. That, alongside uncertainty on US midterm elections and inflation data to be released, keeps the American Dollar on the defensive. At the time of writing, the XAGUSD is trading at $20.82, below its opening price by 0.11%.

An improvement in risk appetite, a headwind for Silver

Wall Street continues to trade in the green, while the US Dollar drops to fresh two-week lows, as shown by the US Dollar Index (DXY). Last week US employment report showed that the economy added more jobs than estimated, meaning that the Fed would need to do more; however, the unemployment rate edged up and is closing to 4% as the labor market flashed signs of easing, meaning that the Fed, could keep tightening, but at a slower rhythm.

Meanwhile, Fed officials began to cross wires. Boston Fed President Susan Collins said it makes sense to slowly hike rates to balance growth and inflation risks as the US central bank tries to achieve a “soft landing.” Nonetheless, it reiterated that rates might be higher than September’s projections. Later, Richmond’s Fed President Thomas Barkin said that the Federal funds rate (FFR) would likely end above 5%, while he foresaw a “potential” higher peak.

That said, XAGUSD rallied since last Friday as speculation that the Fed would lift rates gradually surfaced. Nevertheless, US Treasury bond yields recovered some ground, with the 10-year hup four bps at 4.197%, a headwind for the precious metals. In the meantime, as of Friday, the 10-year US Treasury Real yields stay at 1.72%, providing support for the greenback.

What to watch

Late in the day, further Fed speakers will cross newswires, led by Cleveland’s Fed President Loretta Mester, alongside Boston’s Fed President Susan Collins.

Silver Price Analysis (XAGUSD): Technical outlook

The XAGUSD is neutral-biased, though it should be noted that price action is getting closer to the 200-day Exponential Moving Average (EMA) at $21.49, which could shift the white metal bias to neutral-upwards. If XAGUSD reclaims the latter and clears the June 6 swing high at $22.51, that would turn Silver bullish and pave the way towards the YTD high at $26.94.

Otherwise, the XAGUSD first support would be the $20.00 figure, which, once cleared, could open the door towards the 100-day EMA at $19.46.

• The euro fails to break resistance at 0.8785 and retreats to 0.8700.
• The pound remains bid with the US dollar losing ground.
• EURGBP is expected to depreciate in the longer-term – Danske Bank.

The euro is pulling back on Monday, giving away gains after a three-day rally last week. The pair was rejected at the 0.8785 resistance area during the early European session before pulling back to the 0.8700 area, against a stronger British pound.

The GBP appreciates amid broad-based USD dollar

The favorable market mood witnessed on Monday, which is weighing further on the safe-haven US dollar, has increased support for the GBP, with investors focusing on the British Government’s plans to tackle UK’s debt crisis.

Finance minister Jeremy Hunt is working on a plan to fill a 50 billion pound deficit in the country’s finances, which contemplates spending cuts between 30 and 35 billion and tax increases of between 20 and 25 billion, according to market sources.

The project will be presented on November 17 with the intention to restore investors’ confidence after the market turmoil triggered by Liz Truss’ tax-cutting program presented in late September.

EURGBP: Expected to move lower in the long term – Danske Bank

Currency analysts at Danske Bank expect the pair to appreciate in the short term and lose ground in the longer term: “We see a case for EURGBP to remain elevated in the near-term, but in the longer-term expect the cross to move lower as a global growth slowdown and the relative appeal of UK assets to investors are positive for GBP relative to EUR.”

Technical levels to watch

The European Central Bank's Martins Kazaks said ''there is no pivot, we still say that inflation is a problem, and we will keep raising rates.''

He was also recently quoted saying that the European Central Bank must raise interest rates much further, but that it is impossible to say how far because economic uncertainty is too high.

“Nobody at the moment can know with any precision where exactly the terminal rate will be,” Kazaks said in an interview in Riga. Borrowing costs “are still way below where they should be” and must move to levels that equate to monetary tightening, not just a withdrawal of stimulus, he said. 

Meanwhile, the euro is advancing on Monday. Investors have been of the mind that the US economy is slowing enough to allow the Federal Reserve to ease its rate-hiking pace and the ongoing speculation that China may ease COVID restrictions. The euro is approaching last month's highs as the following hourly chart illustrates:

• EURUSD will depend on the US yields following this week's CPI.
• For now, the Euro is breaking last week's structure with eyes on last month's highs. 

EURUSD has moved up in the New York session as the greenback sinks some more for the month to a fresh low at 110.14. This has sent the euro through last week's highs with last month's high, 1.0093, now on the radar as the following analysis will illustrate.

EURUSD H1 chart

However, given the steep rise in the euro and the number of imbalances of price left behind, there are prospects of a move to the backside of the trendline for the immediate future. A break below 0.9975 could set off a cascade of stops into 0.9925. This would be the last defence for a move all the way back towards 0.9800. 

Meanwhile, all will come down to this week's inflation data from the US. Currently, the markets are of the mind that the US economy is slowing enough to allow the Federal Reserve to ease its rate-hiking pace and the ongoing speculation that China may ease COVID restrictions.

In this regard, the US 10-year yields will be an important feature in markets for the week ahead:

A break back into the trendline would be expected to see the US dollar rise and weigh on the euro.

• New Zealand's dollar returns to the 0.5940 resistance area.
• Rumors of easier COVID-19 restrictions in China have boosted risk appetite.
• Investors' optimism is weighing on the safe-haven US dollar.

The New Zealand dollar has opened the week on the same positive tone that closed the last one. The pair bounced up at 0.5870 on Monday's early trade, to return towards the seven-week high at the 0.5940 area, which, so far, is holding upside attempts

Rumors of easier COVID-19 restrictions in China

With a considerably thinner economic calendar ahead this week, market rumors suggesting that Chinese authorities would be easing coronavirus restrictions have boosted optimism on Monday, supporting riskier assets to the detriment of the safe-haven USD.

European stock markets have witnessed a strong opening, although the enthusiasm has eased somewhat after the Chinese National Health Commission denied the rumors and warned about severe restrictions ahead as the winter flu season approaches. US stocks are moderately positive, with the Dow Jones Index advancing 0.84%, the S&P ticking up 0,35%, and the Nasdaq Index 0.70% above opening levels at the time of writing

Market sentiment, however, remains moderately positive, with the investors still assessing Friday’s strong US NoN-Farm Payrolls report. Private sector payrolls increased by 264,000 in October, beating expectations of a 200,000 increment, while September’s reading was revised up to 315,000 from the previous estimate of 264,000.

The market is at a crossroads amid the contradictory news from China, with major currency crosses at key levels. In this context, some hesitation should be contemplated, as the investors may seek further data before placing significant bets in either direction.

In that case, US Consumer Inflation figures could offer further insight into the US Federal Reserve’s next monetary policy decision and thus increase USD volatility.

Technical levels to watch

• The USDJPY is testing the drops for the second straight day and tests last Friday’s low.
• Elevated US Treasury yields, alongside a two-month-old upslope trendline, capped the USDJPY from falling below 145.00.
• USDJPY Price Analysis: A daily close below 146.50 exacerbates a fall to the 100-day EMA; otherwise, the pair could test 148.00.

The USDJPY consolidates above a two-month-old upslope trendline drawn from September 16 lows around 140.27, previously tested twice. Still, Japanese Yen buyers could not crack it following the two “known” Bank of Japan (BoJ) interventions, opening the door for further American Dollar upside. Also, the US Treasury yields rise, putting a lid on the USDJPY fall, and with further Federal Reserve’s tightening looming, the USDJPY might re-test the YTD highs. At the time of typing, the USDJPY is trading at 146.59, below its opening price.

USDJPY Price Analysis: Technical outlook

Given the previously mentioned scenario of the USDJPY consolidating, as shown by the daily chart, the upside scenario might be capped by a downslope trendline drawn after the USDJPY hits its 151.94 YTD high, keeping the USDJPY from testing the 150.00 figure. The Relative Strength Index (RSI), at 49.44, is in bearish territory and opens the door for a test of the 50-day Exponential Moving Average (EMA) at 145.10 before the September 16 swing low at 140.27.

The USDJPY one-hour chart shows the pair dived to its daily low at 146.08, shy of the S1 daily pivot, and is testing last Friday’s low at 146.55. So if the USDJPY achieves a daily close below the latter, that could lay the ground for further downside pressure. If that scenario plays out, the USDJPY’s first support would be the S1 daily pivot of 146.00. Once cleared, the pair might test key support levels, like the November 2 daily low at 145.66, followed by the S2 daily pivot at 145.35 and the 145.00 figure.

On the flip side, if the USDJPY surpasses 147.00, it could exacerbate a rally toward 148.00. Hence, the USDJPY first resistance would be the daily pivot level at 147.20, followed by the confluence of the 50, 100, and 200-hour EMAs around 147.38/50, followed by the R1 daily pivot and the 148.00 figure.

USDJPY Key Technical Levels

• Gold picks up again, but it remains unable to breach $1,680.
• The positive market mood is weighing on the safe-haven dollar.
• Rumors that Chima would be about to relax its Zero-COVID policy have boosted optimism.
•  

Gold futures have bounced up from $1,665 on Monday’s early European session appreciating on the back of US dollar weakness in a risk-on session, although it seems unable to find acceptance above $1,680 so far.

Precious metals appreciate as market sentiment improves

Precious metals have opened the week on a moderately bid tone, favored by a positive mood. Market rumors pointing out to a review of COVID-19 restrictions in China have improved investors’ sentiment on Monday, curbing demand for the safe-haven USD.

The comments by the Chinese National Health Commission, which has reiterated the Government’s commitment to the Zero-COVID policy and warned about the possibility of severe restrictions ahead, as the winter flu season approaches have tempered appetite for risk but have not altered the market mood, which remains moderately positive, with the greenback losing ground against a basket of the most traded currencies.

In absence of first-tier macroeconomic releases, the positive Friday’s Non-Farm Payrolls report is still driving market sentiment on Monday. Furthermore, the Eurozone Sentix survey has recorded an improvement in investors’ sentiment in November and has contributed to underpin appetite for risk.

Technical levels to watch

• The GBPUSD is trading solidly in the green, gaining 0.81% at the beginning of the week.
• Mixed US employment report and speculations for a softer Federal Reserve keep risk-perceived currencies underpinned.
• Last week’s BoE’s dovish 75 bps weighed on the GBP, but US midterm elections are a tailwind for the GBPUSD.

The British Pound extended its gains during the North American session due to upbeat market sentiment spurred by a seasonal US mid-term elections rally. At the same time, investors brace for there results of the latter, and the October US Consumer Price Index (CPI), which depending on its outcome, will add/ease pressure on the Federal Reserve. Even though the Bank of England (BoE), said that they would hike rates, but not at the level money market futures priced in, the GBPUSD is trading above its opening price by 0.73%.

The Pound Sterling climbs on a soft US Dollar

In the last week, the US Department of Labor reported October’s data that the labor market remains tight, adding 261K jobs to the economy, usually perceived as hawkish for the Federal Reserve. Still, the Average Hourly Earnings eased from 5% in September to 4.7%, aligned with estimations, while, the Unemployment Rate edged up from 3.5% to 3.7%, suggesting the effects of monetary policy began to affect the labor market.

Aside from this, some Fed officials during the last week, led by Susan Collins of the Boston Fed, said that rates need to go higher than expected in September, though she said that it makes sense to move slowly to balance inflation/growth risks. In the meantime, Richmond Fed President Thomas Barkin said it is “conceivable” that the Federal funds rate (FFR) will end above 5%, and he foresees a potentially higher peak.

Elsewhere, the US midterm elections are weighing on risk-off assets like the US Dollar.

On the UK side, last Thursday, the Bank of England lifted rates by 75 bps, its highest increase in 33 years, though in words from Governor Andrew Bailey clarified that the peak in rates will be “lower than priced into financial markets.” Once the headline crossed newswires, the GBPUSD tumbled from 1.1420s to 1.1150s.

Nevertheless, uncertainty in the US political scenario and the US Consumer Price Index (CPI) report looming, refrained investors from opening fresh bets in the USD, even though it is sought as a safe haven.

That said, the US Dollar Index, which tracks the greenback’s value against six currencies, falls by 0.37%., at 110.382, bolstering the GBP. It should be noted most G8 currencies are boosted by negative sentiment surrounding the American Dolla, even though fundamentals have not changed.

GBPUSD Price Analysis: Technical outlook

The GBPUSD daily chart suggests the pair remains neutral-to-downward biased, even though it cleared the 50-day Exponential Moving Average (EMA). Although the recovery is remarkable, it would need to clear the confluence of the 100-day EMA and the September 13 swing high at around 1.1683/1.1738, so the bias could shift to neutral, as that could open the door for a test of the 1.2000 figure. The Relative Strength Index (RSI), at bullish territory, suggests that buyers are gathering momentum, so a correction to the 100-day EMA is on the cards.

• Oil prices rally beyond $93 with the US dollar losing ground.
• Rumors of easier COVID restrictions in China have boosted market mood.

WTI prices have resumed the upward trend witnessed on Friday as the US oil benchmark bounced up from levels right above $90 on the early trade, to reach levels past $93 for the first time in the last four weeks.

Oil prices rally with the US dollar losing ground

Appetite for risk is prevailing on Monday as investors start pricing in a certain relaxation in the COVID-19 restrictions in China, which is easing fears about a new set of restrictions that would curb crude oil demand.

The denial of such rumors by the Chinese authorities has failed to kill market optimism which has weighed the safe-haven US dollar, providing additional support to crude prices.

In a rather thin macroeconomic docket, the Eurozone Sentix survey has shown that investors’ confidence improved in November for the first time in the last three months. This, and the positive Non-Farm employment levels seen on Friday have contributed to feeding investors’ optimism on Monday.

The US Dollar Index, which measures the value of the US dollar against a basket of the most traded currencies, drops 0.3% on the day, to reach session lows right above 110.00, after having peaked at 113.15 on Thursday.

Technical levels to watch

• USDMXN with bearish momentum while below 19.50.
• Recovery above 19.50 to alleviate bearish pressure.
• Dollar to strengthen with a break above 19.80.

The USDMXN is trading at 19.45, at the lowest intraday level since May 30 and is about to post the lowest daily close since March 2020. The Mexican Peso benefited from risk appetite and Banxico’s interest rate. On Thursday, the central bank of Mexico is expected to raise rates again by 75 bps to 10%.

Last week, USDMXN broke the 19.80 barrier and on Monday below 19.50, improving the outlook for the Mexican Peso. The technical bias favors more losses for the pair as long as it remains under the long-term area of 19.50. The next target is seen at 19.25.

The RSI is at oversold levels, normally after eight days of declines, still moving south. Despite the extreme readings, no signs of a correction are seen at the moment. A recovery above 19.50 would alleviate the bearish pressure, pointing to some consolidation, probably between 19.50 and 19.70. A recovery above 19.80 would favor the greenback, suggesting a return to the 19.80-20.00 range.  

Price action over the last sessions ended with many days of limited moves. Now volatility appears to be on course to remain elevated, supported also by general market conditions and ahead of US elections and key inflation data from the US and Mexican.

• US dollar remains weak after NFP, ahead of CPI.
• USDCHF extends its slide after finding resistance again at 1.0150.
• Next critical support is seen around 0.9850.

The USDCHF is falling on Monday for the second day in a row and it dropped to 0.9874, reaching the lowest level since October 27. It is hovering slightly below 0.9900, as the Swiss Franc holds to gains.

The key driver in the USDCHF slide continues to be a weaker US Dollar across the board. The greenback started to decline on Friday, after the US official employment report and amid risk appetite. Now, attention is set on the next inflation numbers due on Thursday with the Consumer Price Index for October that is expected to show a monthly increase of 0.7%.

But on Tuesday, the US holds its midterm elections. Analysts point out that the Republicans have the chance to regain control of Congress. “If Republicans retake one or both chambers of Congress, sweeping fiscal policy changes seem unlikely over the next two years, absent a crisis like the one that occurred in 2020. Under this election outcome scenario, we doubt we would make any major changes to our forecasts for GDP growth, inflation or the federal funds rate as a result of the election. Instead, status quo and political gridlock strike us as the most likely outcomes, with the possibility for some government shutdown/debt ceiling theatrics over the next two years”, said analysts at Wells Fargo.

Critical levels

The short-term bias points to the downside in USDCHF but it needs to break 0.9850 to signal further weakness ahead, targeting 0.9775. On the upside, above 1.0060 the greenback should recover momentum and could test again 1.0150. As long as it remains under 1.0150 gains seem limited.

This week's focus will be on the US mid-term elections on Tuesday. Economists at Société Générale expect equities to go up if the Republicans win control of both the Senate and the House.

Victory for the GOP could have negative ramifications for the Euro

“The US midterms could have an important say on equities and by extension high beta currencies. If history is a guide, US stocks tend to do well if the Republicans win control of both the Senate and the House.” 

“Victory for the GOP could have negative ramifications however for the Euro if Washington decides to whittle back financial/ military support for Ukraine.”

“If stocks can hold their ground/stretch gains on a Republican victory in Congress tomorrow with control of Senate and the House, then the Dollar may well have reached a turning point, with carry staging a tentative return.”

• The aussie appreciates to 0.6480 amid a positive risk sentiment.
• Rumors of more relaxed COVID-19 restrictions in China have boosted optimism
  AUD/USD facing an important resistance hurdle at 0.6480.

The Australian dollar has opened on the same positive tone that it closed the previous one, with the pair bouncing up from 0.6400 to launch another attack to the 0.6400 resistance area, which, so far, remains intact.

The dollar loses ground on a positive market mood

Investors' sentiment remains positive on Monday, fuelled by market speculation suggesting that Chinese authorities could be contemplating a certain relaxation of the COVID-19 restrictions.

The Chinese National Health Commission, however, has denied those rumors, confirming their commitment to the Zero-COVID policy and warned about the possibility of a severe situation ahead, as the country is entering the winter flu season.

Furthermore, the impact of the positive US Non-Farm Payrolls report on Friday and the mild temperatures in Europe, which have eased fears about a gas rationing this winter have triggered risk appetite. In this context, the safe-haven US dollar has been losing ground in favor of riskier assets like the Australian dollar.

AUDUSD: facing a significant resistance hurdle at 0.6480

A look at the four-hour chart shows that Friday’s sharp rally has pushed the pair to an important resistance area between 0.6470 and 0.6520.

The bullish cross seen between the 50 and the 200-period SMA anticipates the possibility of further appreciation, although, the pair is close to overbought levels in hourly charts, which anticipates the possibility of some hesitation before further appreciation occurs.

AUDUSD 4-hour chart

Technical levels to watch

Since late October, the Swedish Krona has been recovering some ground versus the Euro. However, economists at Rabobank expect the EURSEK to remain choppy around the 10.90 mark.

Limited scope for a strong uptrend in the value of SEK vs. the EUR

“While a 75 bps rate hike from the Riksbank could bring some additional near-term support, the possibility that the market will be unwinding some of its rate hike expectations for 2023 suggests limited scope for a strong uptrend in the value of SEK vs. the EUR.” 

“We expect to see some choppy activity around the 10.90 level on a one to three-month view.”

S&P 500 may see some near-term consolidation. Nonetheless, analysts at Credit Suisse remain of the view recent strength has been a bear market rally and look for a retest of key support from the 200-week average at 3620/19. 

Scope for a near-term bounce

“S&P 500 managed a small rebound on Friday but with the market having been capped at and having rejected our recovery target of the late September high, falling 63-day average and 50% retracement of the fall from September at 3902/07 our bias is to view this as a temporary bounce only.” 

“Resistance at 3796/3804 capping can keep the immediate risk lower for a fall back to 3698, then support next at the 3652/47 late October low ahead of a retest of the key 200-week average at 3620/19.”

“Above 3804 can see a deeper rebound to 3824 initially, then 3864, but with the 3890/3912 zone clearly expected to remain a major barrier.” 

• USDCAD dropped after hitting the 1.3800 weekly high last week, falling almost 2.50%.
• The Canadian employment data crushed estimates while adding to inflationary pressures due to wages reaching the 5.55% threshold.
• The US jobs data was mixed, though a higher unemployment rate could deter the Federal Reserve from hiking aggressively.

The USDCAD extends its losses to two-consecutive days, testing the 50-day Exponential Moving Average (EMA) amidst an upbeat market sentiment, as the United States mid-term elections and the US Consumer Price Index (CPI) grab the spotlight. Hence the American Dollar is falling, and the Loonie is capitalizing on it. At the time of writing, the USDCAD is trading at 1.3510, down by 0.22%.

US and Canadian job reports undermined the USD, boosted the CAD

The October US employment report was mixed, with investors focusing not on the headline figure, which showed that 261K new jobs were added to the economy, but on the Unemployment Rate, which edged higher, towards 3.7%, above the 3.6% estimates and also September’s 3.5%. Also, Average Hourly Earnings compared to the last month’s eased from 5% to 4.7% YoY, so the last couple of figures augmented investors’ speculation that the Federal Reserve would slow down its’s pace of tightening, as they expressed on its last monetary policy meeting, while also commenting that the peak of rates would be higher than September’s projections.

On the Canadian side, October’s data crushed expectations for a 10K print, with the economy adding a staggering 108K jobs. Meanwhile, the six-month trend for job creation sits at +9K, which according to TD Securities Analysts, “Is consistent with GDP growth in the mi-1s.” Regarding wages, the Average Hourly Wagest jumped by 5.5%, YoY, above 5.2% of the previous month, as it would add further pressure on the Bank of Canada (BoC) to keep tightening.

Elsewhere, the US Dollar Index, which tracks the buck’s value against six currencies, drops 0.34%., at 110.404, a headwind for the USDCAD. It should be noted that the Loonie is taking advantage of a weaker US Dollar, as oil prices are sliding as China’s backpedaled against easing Covid-19 restrictions, which would delay economic recovery and might affect the black gold prices.

What to watch

Later in the day, Fed speakers, with the Cleveland Fed President Loretta Mester and Boston’s Fed President Susan Collins, would cross newswires.

USDCAD Key Technical Levels

The USD is trading generally lower as the Q4 consolidation in the 2022 rally extends. Economists at Scotiabank believe that the greenback is set to suffer a sizeable corerction.

USD is poised to remain relatively firm in the short run

“Broadly, we think the USD is poised to remain relatively firm in the short run but we do think the long run USD rally is looking over-extended and prone to a sizeable correction.” 

“Seasonal pressures (USD-negative) are working as expected and should exert a little more negative influence on the broader trend in the next few weeks, assuming year-end liquidity pressures remain contained.”

“A sharper fall in the USD may have to wait until investors are more convinced the Fed tightening cycle is complete.” 

USDCAD looks as though it has confirmed a top. A break below 55-Day Moving Average (DMA) at 1.3455 would act as a leading signal for a broader turn, analysts at Credit Suisse report.

Bearish “head and shoulders” top

“USDCAD looks to have formed a bearish ‘head and shoulders’ top and with weekly MACD now also rolling over, a further decline looks to be an increasingly likely scenario. However, we keep our core bullish view intact for now and see the 55DMA at 1.3455 as the last line of defence to avoid a stronger shift lower.” 

“Back above 1.3625 and next above 1.3657/74 is needed to relieve some downside pressure and put the market back towards the middle of the recent range.” 

“A close below 1.3455 would confirm the turn lower and suggest further decline towards the 50% retracement of the rise form August and trendline support at 1.3351/3289 initially.”

• EURUSD extends the move higher just above parity.
• The dollar remains on the defensive amidst mixed US yields.
• EMU’s Sentix index improved to -30.9 in November.

The buying interest around the European currency remains well and sound and motivates EURUSD to revisit the parity zone at the beginning of the week.

EURUSD stronger on USD-selling

EURUSD advances for the second session in a row and gains more than two cents since last week’s lows around 0.9730, always against the backdrop of the persistent sell-off in the greenback.

Indeed, the dollar remains offered as market participants continue to gauge the mixed results from Friday’s US Payrolls as well as recent Fedspeak leaning towards an impasse in the Fed’s normalization process.

The continuation of the move higher in the pair so far comes in line with the mixed performance in US yields and some loss of momentum in the German 10-year bund yields after two daily advances in a row.

Earlier in the session, Germany’s Construction PMI rose to 43.8 in October and the Investor Confidence in the euro area improved to -30.9 for the current month according to the Sentix Index.

What to look for around EUR

EURUSD extends Friday’s recovery and confronts the initial target at the parity region so far on Monday.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair (if it was any at all).

Furthermore, the increasing speculation of a potential recession in the region - which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the fragile sentiment around the euro in the longer run.

Key events in the euro area this week: Eurogroup Meeting, Germany Construction PMI (Monday) – EMU Retail Sales (Tuesday) – Italy Industrial Production (Thursday) – Germany Final Inflation Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EURUSD levels to watch

So far, the pair is gaining 0.41% at 0.9998 and faces the next resistance at 1.0045 (100-day SMA) seconded by 1.0093 (monthly high October 27) and finally 1.0197 (monthly high September 12). On the other hand, a breach of 0.9730 (monthly low November 3) would target 0.9704 (weekly low October 21) en route to 0.9631 (monthly low October 13).

How much further will US 10-year yields rise? If a peak is close, the USDJPY pair is set to reverve back lower, in the view of Kit Juckes, Chief Global FX Strategist at Société Générale.

Short GBPJPY is an appealing trade

“In the US, tomorrow’s mid-term elections could gridlock the US Government, and Thursday’s CPI data should be well-behaved at the core level, which probably peaked in September. Maybe there’s enough there to limit how much further US yields rise, even against a backdrop of continued solid employment data. If US yields are close to their highs, then USDJPY probably is too.”

“The BOJ has intervened aggressively (and expensively) on the MOF’s behalf, and it’s easy enough to imagine that if USDJPY shows clear signs of having peaked, the Yen has plenty of room to rally before shorts are all squeezed out or before it could reasonable be called an ‘expensive’ currency.” 

“Shorting the Dollar against the Yen looks like a better trade than going long EURUSD. But maybe short GBPJPY is an even more appealing trade.”

EURUSD staged a strong recovery at the end of last week. The pair is expected to see further consolidation and potentially still, a deeper recovery with weekly MACD momentum having turned higher, analysts at Credit Suisse report.

Support is seen at 0.9886/83 initially with resistance seen at 0.9999

“With weekly MACD momentum having already crossed higher, this raises the prospect of further consolidation and indeed potentially a deeper recovery. Above 0.9999 would be seen to add weight to this view for strength back to the 1.0095 recent high.” 

“Beyond 1.0095 can see resistance next at the September high and 23.6% retracement of the 2021/2022 downtrend at 1.0198/1.0201, which we would look to cap at first.”

“Support is seen at 0.9898 initially, then the 13 and 55-day averages at 0.9886/83, which we look to try and hold. Below can see a fall back to 0.9840, then 0.9796.”

The USD extended its gains on a hawkish Fed but risk aversion has also supported the upward momentum. Economists at HSBC see a stronger USD, albeit on a data-dependent path.

USD to likely strengthen into year-end

“The Fed has lifted rates by 375 bps since March 2022 and signalled more rate hikes. We now expect two more 50 bps rate hikes, taking the federal funds target range up to 4.75-5.00%. We also acknowledge an upside risk to the policy rate amid the likely elevated US core inflation into next year, while the Fed is unlikely to deliver any rate cuts in 2023 or 2024.”

“We continue to believe the USD still has some upside into year-end, based on the three drivers of progressively hawkish Fed policy, slowing global growth, and risk aversion. Nonetheless, this path remains data-dependent and so this USD bounce will likely need inflation readings sufficient to warrant additional Fed hikes, while data that sustain concerns about recession risks may trigger risk aversion, benefitting the ‘safe haven’ USD.”

• USDJPY turns lower for the second straight day amid sustained USD selling bias.
• Bears await a break below ascending trend-line support before placing fresh bets.
• Attempted recovery might continue to confront stiff resistance near the 147.55 area.

The USDJPY pair struggles to capitalize on its modest intraday gains to the 147.55 area and turns lower for the second successive day on Monday. The downward trajectory drags spot prices back below pivotal support near the 200-period SMA on the 4-hour chart, with bears now awaiting a break below the 146.00 mark before placing fresh bets.

The US Dollar adds to the post-NFP heavy losses and drops to over a one-week low amid speculations that the Federal Reserve will slow the pace of its rate-hiking cycle. Apart from this, expectations that Japanese authorities might intervene again to soften any steep fall in the domestic currency exert some downward pressure on the USDJPY pair.

That said, the risk-on impulse might keep a lid on any meaningful gains for the safe-haven JPY and help limit deeper losses. This, along with a big divergence in the monetary policy stance adopted by the Fed and the Bank of Japan, supports prospects for the emergence of some dip-buying around the USDJPY pair, warranting caution for bearish traders.

From a technical perspective, the 146.00 round figure coincides with a one-and-half-week-old ascending trend-line support. Some follow-through fall might prompt aggressive technical selling and make the USDJPY pair vulnerable. The subsequent fall has the potential to drag spot prices towards the late October low, around the 145.00 psychological mark.

On the flip side, the 146.80 region now seems to act as an immediate hurdle ahead of the 147.00 level. Any further move up might continue to confront stiff resistance near the daily top, around the 147.55 region. A sustained strength beyond the latter could allow the USDJPY pair to reclaim the 148.00 mark and test the 148.35-148.45 supply zone.

USDJPY 4-hour chart

Key levels to watch

• NZDUSD fills the weekly bearish gap opening amid the prevalent USD selling bias.
• Hope for less aggressive Fed rate hikes and the risk-on impulse weighs on the buck.
• Recession risks might keep a lid on any optimism and cap the risk-sensitive Kiwi.

The NZDUSD pair attracts fresh buying in the vicinity of mid-0.5800s on Monday and fills the weekly bearish gap opening heading into the North American session. The pair climbs to the 0.5940 region in the last hour, back closer to the multi-week high touched last Wednesday and remains supported by the prevalent US Dollar selling bias.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, drops to over a one-week low and is pressured by a combination of factors. The mixed results from the closely-watched US monthly jobs report on Friday fueled speculations that the Federal Reserve will slow the pace of its rate-hiking cycle. Apart from this, a positive turnaround in the global risk sentiment exerts additional pressure on the safe-haven buck and benefits the risk-sensitive Kiwi.

That said, growing market worries about the economic headwinds stemming from China's strict zero-COVID policy and the protracted Russia-Ukraine war seem to cap the optimism in the markets. Furthermore, the Fed is still expected to hike interest rates by at least 50 bps at its policy meeting in December. This remains supportive of elevated US Treasury bond yields and should act as a tailwind for the greenback, warranting some caution before placing aggressive bullish bets around the NZDUSD pair.

Traders might also prefer to wait for a fresh catalyst from the latest US consumer inflation figures, due for release on Thursday. Hence, it will be prudent to wait for some follow-through buying beyond the 0.5945-0.5950 resistance zone in order to confirm a near-term bullish breakout and positioning for a further appreciating move. In the absence of any relevant economic data, the US bond yields, along with the broader risk sentiment, will influence the USD and provide some impetus to the NZDUSD pair.

Technical levels to watch

Gold price ended up closing a volatile week in positive territory. Thursday’s Consumer Price Index (CPI) data could help Gold price to determine its next short-term direction, FXStreet’s Eren Sengezer reports. 

Bulls look to retain control ahead of key US data

“On Tuesday, the United States midterm elections will be held but it’s difficult to say what kind of an impact the outcome could have on the US Dollar performance against its rivals or the overall market mood.”

“The annual Core CPI is forecast to rise to 6.9% in October from 6.6% in September. A strong inflation print would remind investors of the Federal Reserve’s willingness to stay on an aggressive tightening path and cause Gold to come under renewed bearish pressure. On the other hand, a softer-than-projected Core CPI reading is likely to allow markets to scale back 75 bps December rate hike bets, providing a boost to XAUUSD in the near term.”

“On Friday, the US economic docket will feature the University of Michigan’s Consumer Sentiment Survey for November. Rather than the headline Consumer Confidence Index, markets will pay attention to the 5-year Consumer Inflation Expectations. A straightforward market reaction could be witnessed to this data with a reading at or above 3% weighing on XAUUSD and vice versa.”

• GBPUSD gains traction for the second successive day amid sustained USD selling.
• Hopes for less aggressive Fed rate hikes, the risk-on impulse weighs on the buck.
• The BoE's gloomy outlook might act as a headwind for the Sterling and cap gains.

The GBPUSD pair attracts some buying following an early dip to the 1.1290 area on Monday and is building on the previous session's goodish rebound from a two-week low. This marks the second successive day of a positive move and lifts spot prices to the 1.1475 region, or a three-day high during the mid-European session.

The US Dollar adds to the heavy losses suffered following the NonFarm Payrolls (NFP) release on Friday, and drops to over a one-week low, which, in turn, is seen as a key factor pushing the GBPUSD pair higher. The mixed results from Friday's NFP release fueled speculations that the Federal Reserve might slow the pace of its policy tightening. This, along with a generally positive tone around the equity markets, continues to weigh on the safe-haven greenback.

That said, worries about the headwinds stemming from China's commitment to maintaining its economically disruptive zero-COVID policy might keep a lid on the optimism. Moreover, the markets are still pricing in the possibility of at least a 50 bps Fed rate hike move in December. This remains supportive of elevated US Treasury bond yields, which should act as a tailwind for the buck and cap the upside for the GBPUSD pair.

Apart from this, the Bank of England's dovish rate hike last week warrants some caution for aggressive bullish traders. It is worth recalling that the UK central bank raised interest rates by 75 bps - its most forceful act to tame inflation since 1989 - but indicated a lower terminal peak than is currently priced into markets. Moreover, the BoE said that it expects a recession to last for all of 2023 and the first half of 2024.

This, in turn, suggests that any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. There isn't any major market-moving economic data due for release on Monday. Hence, the US bond yields, along with the broader market risk sentiment, will play a key role in influencing the USD price dynamics and produce short-term trading opportunities around the GBPUSD pair.

From a technical standpoint, the pair formed a two-bar reversal when it pivoted and rose prior to the weekend. Follow-through buying today is currently providing confirmation for this bullish pattern and suggests the pair may have higher to go, assuming the day ends on an equally strong note. Tough resistence can be seen at about 1.1510 provided by the trend line for the longer-term downtrend that has been playing out for most of 2022, and the Cable will need to break definatively above this level to solidify its advance and open up the ground above. 

Technical levels to watch

GBPUSD’s rebound from Friday extends but broader downtrend remains intact, economists at Scotiabank report.

Sterling still has its work cut out to stabilize and improve more materially

“Sequential higher highs and higher lows are a basic positive for GBPUSD but last week’s peak in the low 1.16s keeps the longer run downtrend intact.”

“The Pound still has its work cut out to stabilize and improve more materially. Strong gains Friday and additional gains today are a minor plus, keeping the focus on the topside.”

“Resistance is 1.1500/10 (minor) then 1.1560. Support is 1.1385/1.1415.”

• EURUSD picks up further pace and revisits the parity zone.
• Extra strength could see the October peak near 1.0100 retested.

EURUSD gathers steam and briefly surpasses the parity zone, where some initial resistance seems to have turned up so far.

If the pair leaves behind the parity area on a sustainable fashion, it could then challenge the temporary hurdle at the 100-day SMA, today at 1.0045. The surpass of the latter exposes a move to the October peak at 1.0093 (October 27).

While above the 9-month resistance line, today near 0.9860, extra gains look likely.

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0462.

EURUSD daily chart

EURUSD nears parity. Economists at Scotiabank believe that the pair could extend its race higher in the next few days.

Villeroy urges tighter policy

“ECB Governor Villeroy told the Irish Times that the ECB needed to keep raising rates until underlying inflation has ‘clearly peaked’. When even the more moderate voices among policymakers still rather see more upside risk for rates in the months ahead, the ECB clearly has more tightening to do, suggesting EUR gains may extend in the coming weeks.” 

“Gains may extend a little more still if spot can hold gains above the mid-0.99 zone in the next day or so.”

“Intraday resistance is 1.0010/20 and 1.0100.”

“Support is 0.09925/50.”

Economists at DBS Bank are vigilant on downside risks in the US Dollar. The US midterm elections on Tuesday could hit the greenback if the Democrats lose control of one or two houses of Congress.

US economy should languish in 2023

“The US mid-term elections on 8 November should be negative for the USD if the Democrats lose control of one or two houses of Congress. The Republicans will push for spending cuts in Social Security and Medicare in exchange for increasing or suspending the debt ceiling limit. The Biden administration warned that failure to do so would lead to a US debt default.”

“Although the US economy exited its technical recession in 3Q22, it should languish in 2023 on restrictive monetary policy with less support from fiscal spending. Against this background, the greenback is considered expensive on a real effective exchange rate basis, not just the spot.”

“We expect the US Dollar Index (DXY) and its components to struggle with their central banks between tightening too little to control inflation or overtightening that increases recession risks.

• DXY extends the pessimism at the beginning of the week.
• The next support of note comes at the 109.50 region.

DXY drops to multi-day lows and revisits the 110.30 zone amidst further improvement in the sentiment around the risk complex on Monday.

Further weakness in the dollar appears likely for the time being. Against that, the index is expected to face initial contention at the October low at 109.53 (October 27) prior to the 9-month support line near 108.90. The latter appears reinforced by the proximity of the 100-day SMA. Above this region, the dollar’s short-term stance should remain positive.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 104.52.

DXY daily chart

USDCAD could sustain losses in the near term, according to economists at Société Générale. The pair may test the 1.3370/1.3330 region.

Overcoming 1.3810 essential to affirm next leg of uptrend

“USDCAD faced interim resistance near 1.3980 last month and has evolved within a Head and Shoulders. This formation points towards possibility of a breather and short-term downside.”

“A dip towards the upper limit of the previous ascending channel and projections at 1.3370/1.3330 is not ruled out.”

“Overcoming right shoulder levels near 1.3810 would be essential to negate the pattern and affirm next leg of uptrend.”

• EURJPY adds to Friday’s strong advance and approaches 147.00.
• Further rebound is expected to target the YTD peak around 148.40.

EURJPY extends Friday’s marked bounce and pokes with the vicinity of the 147.00 region at the beginning of the week.

The continuation of the recovery looks favoured in the very near term and EURJPY could then retarget the 2022 top at 148.40 (October 21) ahead of the round level at 150.00.

In the short term the upside momentum is expected to persist while above the October lows near 141.00.

In the longer run, while above the key 200-day SMA at 137.78, the constructive outlook is expected to remain unchanged.

EURJPY daily chart

Retail investments in Gold are set to cushion the downside against ETF outflows in the last quarter of the year, strategists at ANZ Bank report. 

Strength in the USD continues to be a headwind 

“Lower Gold prices and intensifying economic and geopolitical risk are supporting retail investment against heavy outflows in ETF and futures outflows. We expect this trend to continue, though financial investment continues to drive the price direction.”

“Strong USD and rising yields are twin headwinds for financial investment in Gold.”

“Rising recession risk could provide haven flows, but rate guidance has to turn dovish.”

• AUDUSD reverses an early dip to the 0.6400 mark amid fresh USD selling.
• Friday’s mixed NFP report and the risk-on-impulse weigh on the buck.
• China’s zero-COVID policy, recession fears might cap gains for the pair.

The AUDUSD pair attracts some buying in the vicinity of the 0.6400 mark on Monday and fills the weekly bearish gap opening during the first half of the European session. The pair hits a fresh daily high in the last hour, albeit lacks follow-through and remains below the 0.6500 psychological level.

The US Dollar struggles to preserve its modest intraday gains and turns lower for the second successive day, which, in turn, is seen offering some support to the AUDUSD pair. The mixed results from the US monthly jobs report released on Friday fueled speculations that the Federal Reserve might slow the pace of its policy tightening. This, along with a positive turnaround in the global risk sentiment, weighs on the safe-haven greenback and benefits the risk-sensitive Aussie.

That said, growing market worries about the headwinds stemming from China's commitment to maintaining its economically disruptive zero-COVID policy might keep a lid on the optimistic move. Apart from this, elevated US Treasury bond yields should act as a tailwind for the greenback and contribute to capping the upside for the AUDUSD pair, at least for the time being. Traders might also prefer to wait for a fresh catalyst from the US consumer inflation figures on Thursday.

Even from a technical perspective, spot prices are yet to confirm a convincing breakout through a downward sloping trend-line extending from the August monthly swing high. In the absence of any major market-moving economic releases on Monday, the fundamental backdrop warrants some caution for aggressive bullish traders. Hence, it will be prudent to wait for strong follow-through buying before positioning for any meaningful appreciating move for the AUDUSD pair.

Technical levels to watch

The Yuan is seeing another leg of weakness against the US Dollar. Economists at UBS expect upward pressure on USDCNY to persist.

Pressure still up in USDCNY

“The Yuan is likely to stay weak in the near term, given macro headwinds and the large USD yield advantage.”

“The Chinese Yuan has been under pressure in part because of the disappointing pace of China’s recovery, as the government persists with its economically damaging zero-COVID policy. In addition, the continued divergence in US-China monetary policy and the subdued appetite for Chinese assets will see persistent, upward pressure on the USDCNY in the near term.” 

“Our guidance to hedge CNY long exposure into 1Q23 remains in place.”

• Gold attracts some dip-buying on Monday, though lacks bullish conviction.
• Renewed USD selling bias offers support to the dollar-denominated XAUUSD.
• Elevated US bond yields and the risk-on impulse caps the upside for the metal.

Gold reverses an early European session dip to the $1,667 area and climbs to a fresh daily top in the last hour, though lacks follow-through buying. The XAUUSD is currently placed around the $1,678-$1,680 region, just below a multi-week high touched in reaction to the mixed US monthly employment details on Friday.

The closely-watched US NFP report showed that the economy added 261K new jobs in October against the 200K anticipated. This, however, was well below the previous month's upwardly revised reading of 315K. Moreover, the unemployment rate rose to 3.7% from 3.5% in September and Average Hourly Earnings slowed to 4.7% YoY in October from 5% previous. The data fuels speculations that the Federal Reserve could slow the pace of future rate hikes and exerts some pressure on the US Dollar for the second straight day. This, in turn, offers some support to the dollar-denominated gold, though a combination of factors keeps a lid on any meaningful upside for spot prices.

The markets, meanwhile, are still pricing in the possibility of at least a 50 bps Fed rate hike move in December. This remains supportive of elevated US Treasury bond yields and acts as a headwind for the non-yielding gold. Apart from this, a goodish recovery in the US equity futures also contributes to keeping a lid on the safe-haven precious metal. Even from a technical perspective, spot prices, so far, have struggled to make it through a downward sloping trend-line resistance extending from the August swing high, warranting caution for aggressive bullish traders.

Hence, it will be prudent to wait for a sustained breakout through the aforementioned trend-line hurdle before positioning for any further appreciating move for gold. Traders also seem reluctant and might prefer to move to the sidelines ahead of the release of the latest US consumer inflation figures on Thursday. In the meantime, the US bond yields might influence the USD price dynamics in the absence of any relevant market-moving economic data. Apart from this, traders will take cues from the broader risk sentiment to grab short-term opportunities around gold.

Technical levels to watch

Macro factors continue to point to Dollar strength. But there are two key risk events for the USD this week: US Consumer Price Index (CPI) data and mid-term elections, economists at ING report.

Two big risk events this week

“Macro factors continue to favour dollar strength and the corrections are mostly related to position-squeezing events. We, therefore, expect a re-appreciation of the dollar in the near term, although there are two major risk events to watch this week in the US: the CPI report and mid-term elections.”

“Most of the focus will be on the monthly change in core CPI, which we expect to come in at 0.5%, in line with consensus. That would indicate further resilience in underlying price pressures and may prevent markets from completely discarding another 75 bps hike in December, ultimately offering the dollar a floor. Below-consensus readings may force a dovish re-pricing in rate expectations though.”

“When it comes to the US mid-term elections, the bigger downside risk for the dollar is that the Republicans secure control of both the House and the Senate, which would imply a hamstrung administration unable to deliver fiscal support in a downturn. A split Congress (House control going to the Republicans) may be mostly priced in, and the implications for the dollar could be relatively limited.”

“We expect more FX volatility this week, but retain a near-term bullish USD bias and expect DXY to climb back above 113.00 in the coming weeks.”

• USDCAD drops to its lowest level since September 22 amid the emergence of fresh USD selling.
• Diminishing odds for more aggressive Fed rate hikes, the risk-on impulse weighs on the buck.
• Softer crude oil prices might undermine the Loonie and could lend some support to the major.

The USDCAD pair struggles to capitalize on its intraday uptick and meets with a fresh supply near the 1.3555 region during the early European session on Monday. The downward trajectory drags spot prices to the 1.3465 area, or the lowest level since September 22 and is sponsored by the prevalent selling bias surrounding the US Dollar.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, adds to the post-NFP slump and turns negative for the second straight. The mixed results from the closely-watched US monthly jobs report fueled speculations that the Fed could slow the pace of future rate hikes. This, along with an intraday positive turnaround in the risk sentiment, is seen weighing on the safe-haven greenback.

The Canadian Dollar, on the other hand, might continue to draw support from the blockbuster domestic employment details. Apart from this, the emergence of some dip-buying around crude oil prices could underpin the commodity-linked Loonie and supports prospects for a further depreciating move for the USDCAD pair. Moreover, acceptance below the 50-day SMA, around the 1.3500 psychological mark adds credence to the negative outlook.

That said, China's commitment to maintaining its strict zero-COVID policy might have dashed hopes for an oil demand rebound at the world's top crude importer. This could act as a headwind for the black liquid and lend some support to the USDCAD pair, at least for the time being. In the absence of any major market-moving economic releases, the aforementioned fundamental factors will continue to play a key role in influencing the major.

Technical levels to watch

The Eurozone Sentix Investor Confidence index improved to -30.9  in November from -38.3 in October vs. -35.0 expected. The index rebounded from its lowest level since March 2020.

The current situation in the Eurozone increased to -29.5 points in November from -35.5 in October.

An expectations index jumped to -32.3 from -41.0, hitting its highest value since June 2022.

Key takeaways

The uptick is "not a trend reversal".

"The rise in situation and expectation values shows how sensitively investors react in their economic expectations to signals from the energy market.”

"Spot market gas prices collapsed in response. Concerns about a catastrophic gas shortage are fading.”

EUR/USD reaction 

The shared currency remains unimpressed by the upbeat Eurozone Sentix data. EUR/USD is trading at 0.9981, up 0.22% on the day, having faced rejection above parity.

The Pound fell 2% against the US Dollar after the Bank of England raised rates by 75 basis points on Thursday. Economists at UBS expect the GBPUSD to inch closer to 1.10 in the coming months.

The challenging UK economy casts a cloud over Sterling

“The Pound's fall partly reflected dovish aspects to the policy statement, which indicated that rates could ‘peak lower than priced into financial markets.’ In addition, two of the nine members of the Monetary Policy Committee favored smaller rate rises, with one wanting 50 bps and another 25 bps.” 

“The Pound's vulnerability also reflects the nation’s challenging macroeconomic environment. There is a high likelihood that the UK will enter a recession in the coming quarters while inflation stays elevated.”

“We think that GBPUSD is likely to swing around 1.10 in the coming months.”

UK Foreign Minister James Cleverly said in a statement on Monday, that the government will announce investments worth over 100 million Pound Sterling.

Cleverly clarified that “investments will support developing economies to respond to climate-related disasters and adapt to the impacts of climate change.”

The US midterm elections will be held on Tuesday, November 8, with voting for all 435 seats in Congress and 35 of the 100 seats in the Senate. As strategists at ANZ Bank note, the US Dollar and equity markets tend to finish the month higher after midterms.

Markets appear to like a division between Congress and the president

“We regard a Republican-controlled Congress as the most likely scenario (55%). Not far behind, at 41%, is a split Congress, with a Republican-led House and a Democrat Senate.”

“The USD and equity markets tend to finish the month higher after midterms.” 

“Markets appear to like the checks and balances associated with a division between Congress and the president. This would be pertinent this time, given concerns of more policy-induced inflation pressures that would come from a Democrat-controlled Congress. On this basis, we also think the bond market would also welcome this division.”

• Silver meets with a fresh supply on Monday, though lacks any follow-through selling.
• Friday’s breakout through the $20.00 mark supports prospects for additional gains.
• Bulls await a sustained strength beyond the 200-day EMA before placing fresh bets.

Silver struggles to capitalize on Friday's bullish breakout momentum through the $20.00 psychological mark and attracts some sellers near the 200-period EMA on the first day of a new week. The white metal remains on the defensive through the early European session and is currently placed near the lower end of its daily range, just above the mid-$20.00s.

The aforementioned barrier, around the $20.85-$20.90 region, should now act as a pivotal point, which if cleared decisively will be seen as a fresh trigger for bullish traders. With technical indicators on the daily chart holding in the positive territory, the XAGUSD might then surpass the $21.00 mark and aim to test the October monthly swing high, around the $21.25 region.

Some follow-through buying will reaffirm the near-term constructive outlook and lift the XAGUSD further towards the $21.60 intermediate hurdle en route to the $22.00 round-figure mark. The momentum could get extended and allow spot prices to test the next relevant resistance near the $22.35-$22.45 horizontal zone.

On the flip side, any subsequent pullback might now be seen as a buying opportunity and remain limited near the $20.00 mark, which coincides with the 100-day EMA. A convincing break below will negate any near-term positive bias and shift the bias in favour of bearish traders. The XAGUSD will then slide to the $19.25 region en route to the $19.00-$18.90 pivotal support.

Some follow-through selling has the potential to drag spot prices to the $18.30-$18.25 support zone. This is closely followed by the $18.00 round-figure mark, below which the XAGUSD could aim back to challenge the YTD low, around the $17.55 zone touched in September.

Silver daily chart

Key levels to watch

• EURUSD meets support around the 0.9900 zone on Monday.
• German 10-year bund yields extend the move to multi-day highs.
• Germany Construction PMI improves to 43.8 in October.

EURUSD adds to Friday’s advance and flirts with the 0.9970 region at the beginning of the week.

EURUSD supported around 0.9900

The initial knee-jerk in EURUSD meets support in the 0.9900 region so far on Monday and manages to flirt with the area of recent tops around 0.9970/80 band amidst further loss of momentum in the greenback.

The appetite for the risk complex remains well in place so far as investors keep assessing the latest results from the US jobs report (Friday), while the greenback remains under pressure and motivates the USD Index (DXY) to give away further ground.

Data wise in the domestic calendar, Germany’s Construction PMI improved to 43.8 in October (from 41.8). Later, ECB’s Panetta is due to speak. Across the pond, Consumer Credit Change will be the sole release ahead of speeches by FOMC’s Collins and Mester.

What to look for around EUR

EURUSD extends Friday’s recovery and seems on its way to challenge the key parity zone sooner rather than later.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair (if it was any at all).

Furthermore, the increasing speculation of a potential recession in the region - which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the fragile sentiment around the euro in the longer run.

Key events in the euro area this week: Eurogroup Meeting, Germany Construction PMI (Monday) – EMU Retail Sales (Tuesday) – Italy Industrial Production (Thursday) – Germany Final Inflation Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EURUSD levels to watch

So far, the pair is gaining 0.18% at 0.9975 and faces the next resistance at 1.0000 (psychological level) seconded by 1.0093 (monthly high October 27) and finally 1.0197 (monthly high September 12). On the other hand, a breach of 0.9704 (weekly low October 21) would target 0.9631 (monthly low October 13) en route to 0.9535 (2022 low September 28).

EURUSD has gone into a consolidation phase near 0.9950. Economists at ING do not expect the pair to regain the 1.00 level.

ECB speakers unlikely to provide bullish momentum to the Euro

“In line with our view that the Dollar should recover in the near term, we don’t think EURUSD will be able to climb back above parity on a sustainable basis – even though the two risk events this week (US CPI and mid-term elections) could trigger another USD long squeeze.”

“There are not many key data releases in the eurozone this week, and most focus will be on European Central Bank speakers. But the direct impact of expected ECB policy on the euro looks set to remain rather contained.”

French Finance Minister Bruno Le Maire delivered some comments on the Euro inflation outlook during his appearance on Monday.

Key quotes

“It will take time to bring inflation down to more reasonable levels.”

“The best case scenario is for a progressive decline in inflation.”

Market reaction

At the time of writing, EURUSD is extending the renewed upside to near 0.9975,  adding 0.106% on the day.

Senior Economist at UOB Group Alvin Liew reviews the latest results from the manufacturing sector in Singapore.

Key Takeaways

“Singapore’s manufacturing Purchasing Managers’ Index (PMI) retreated further below 50.0, to 49.7 in Oct (from 49.9 in Sep), the second consecutive month of contraction in overall activity for the manufacturing sector after having expanded for 26 straight months between Jul 2020 and Aug 2022.”

“Unsurprisingly, the electronics sector PMI slipped further into contraction territory, by another 0.3 point to 49.1, the 3rd contraction in a row after two years of continuous expansion, and the lowest reading since Jun 2020 (at 47.6), cementing the view of an electronics downcycle underway.”

“Outlook – The further dip in Oct overall and electronics PMIs into sub-50 territory and the weaker set of Sep electronics NODX & IP data, confirmed that the electronics downcycle is underway. Today’s PMI also corroborates with the Oct PMIs from economies with significant exposure to electronics manufacturing such as South Korea (48.2), Taiwan (41.5). And even as we continue to be cautiously positive on the outlook for some manufacturing sectors in Singapore (such as transport engineering, general manufacturing, and precision engineering), we see the worsening electronics performance and increasingly weaker demand from North Asian economies, especially China, are clearly weighing negatively on export momentum and manufacturing demand. The slower Sep NODX growth to the G3 economies also affirmed that global demand is heading towards a downturn on the back of more aggressive monetary policy tightening. We expect further downside to the PMIs in the last two months of 2022 and the weakness to extend at least into 1H 2023.”

• The index recoups part of the ground lost on Friday.
• The bounce in the dollar looks propped up by higher yields.
• Consumer Credit Change, Fedspeak next on tap in the US docket.

The USD Index (DXY), which gauges the greenback vs. a bundle of its main competitors, manages to reverse part of the recent pessimism and regains the 111.00 barrier and above at the beginning of the week.

USD Index focuses on US CPI, risk

The index starts the week in a promising tone and retakes the area beyond the 111.00 barrier on Monday, as the recent sharp uptick in the risk-associated universe appears to be taking a breather.

The corrective upside in the dollar so far comes in tandem with a small recovery in US yields across the curve, as market participants continue to digest Friday’s release of the October’s Nonfarm Payrolls (+261K).

Moving forward and following the latest FOMC event, the week will be marked by the publication of the US inflation figures tracked by the CPI (Thursday) against the backdrop of a potential pivot in the Fed’s policy in in the next months.

In the docket, Consumer Credit Change figures for the month of September are due along with speeches by Boston Fed S.Collins (voter, centrist) and Cleveland Fed L.Mester (voter, hawkish).

What to look for around USD

The index looks to regain some poise following Friday’s collapse post-Nonfarm Payrolls to the area well south of the 111.00 yardstick.

In the meantime, the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market continues to prop up the underlying positive tone in the buck.

Looking at the more macro scenario, the greenback also appears bolstered by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: Consumer Credit Change (Monday) – Midterm Elections (Tuesday) – MBA Mortgage Applications, Wholesale Inventories (Wednesday) – Inflation Rate, Initial Jobless Claims, Monthly Budget Statement (Thursday) – Preliminary Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is gaining 0.06% at 110.86 and faces the initial resistance at 113.14 (monthly high November 3) followed by 113.88 (monthly high October 13) and then 114.76 (2022 high September 28). On the downside, the breakdown of 109.53 (monthly low October 27) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13).

Gold price traded back towards $1,680 at the end of last week. XAUUSD is staging a deep correction on Monday, in line with the view of strategists at TD Securities.

Specs to again grow the shorts covered at the end of last week

“Following Friday's massive gold and commodity rally, driven by speculation China will moderate COVID-19 restrictions and a somewhat mixed payrolls, we look for specs to again grow the shorts they covered at the end of last week.”

“At $1,680, the yellow metal is at a technical point that may easily see a sharp reversal. Indeed, with inflation still a big problem and the US economy running hot, rates on the front end will continue to rise, and the dollar will be firm, which prompts us to think that a correction is in the cards starting in the not too distant future.”

Despite the Dollar’s correction on Friday, the Pound still has to fully recover from the post-Bank of England blow. Economists at ING expect investors to continue refraining from placing bets on the GBP.

In an uneasy position

“The combination of a highly concerning economic outlook and a forced dovish repricing in rate expectations look set to keep the British Pound rather unattractive.”

“Cable may be primarily driven by dollar moves this week, but the EURGBP pair could extend gains to the 0.8850/70 area.”

• USDJPY regains positive traction on Monday amid the emergence of some USD buying.
• Elevated US bond yields, the Fed-BoJ policy divergence remains supportive of the move.
• Intervention fears could offer support to the JPY and keep a lid on any meaningful upside.

The USDJPY pair attracts some buying near the 146.70 region on the first day of a new week and recovers a major part of Friday's post-NFP losses. The pair maintains its bid tone through the early European session and is currently hovering near the daily top, around mid-147.00s.

The US Dollar regains positive traction and turns out to be a key factor lending some support to the USDJPY pair. Despite the mixed results from the US monthly jobs data on Friday, market participants remain convinced that the Federal Reserve will stick to its hawkish stance to combat stubbornly high inflation. In fact, the markets are still pricing in the possibility of at least a 50 bps Fed rate hike in December, which remains supportive of elevated US Treasury bond yields and acts as a tailwind for the greenback.

In contrast, the Bank of Japan, so far, has shown no inclination to hike interest rates and reiterated that it will continue to guide the 10-year bond yield at 0%. This marks a big divergence in the policy stance adopted by the two major central banks and supports prospects for a further appreciating move for the USDJPY pair. That said, speculations that Japanese authorities might intervene again to soften any steep fall in the domestic currency might keep a lid on any meaningful upside for spot prices amid a softer risk tone.

The market sentiment remains fragile amid concerns about headwinds stemming from China's commitment to maintaining its economically disruptive zero-COVID policy. Apart from this, the protracted Russia-Ukraine war has been fueling recession fears and tempering investors' appetite for riskier assets. This is evident from a generally negative mood around the equity markets, which tends to benefit the safe-haven JPY. This might further contribute to capping any further gains for the USDJPY pair in the absence of relevant economic data.

Even from a technical perspective, the recent range-bound price action points to indecision over the near-term trajectory for the USDJPY pair. Traders also seem reluctant to place aggressive bets and might prefer to wait for a fresh catalyst from the release of the latest US consumer inflation figures on Thursday. This makes it prudent to wait for strong follow-through buying before positioning for any further appreciating move.

Technical levels to watch

FX markets have entered a consolidative phase. That has allowed the Dollar to correct 3-4% lower. Yet, economists at ING still feel it is too soon to call a major turn in the Dollar.

When will asset markets turn?

“Over the next couple of months, the direction of travel for US real yields is higher still. A 2.00% level on the US 10-year real yield is entirely possible as the Fed takes the policy rate towards 5.00%, dragging long-end yields with it. That should keep the Dollar bid across the board.”

“The turn in global bond markets should provide the first real opportunity for money to be put back to work in asset markets – potentially at the expense of the Dollar. Our base case, however, is that this is not a story until early 2023. Before then, we see EUR/USD staying under pressure this winter. Sub-0.95 levels are possible.”

“Japan’s campaign to slow the USD/JPY advance should not prevent further forays over 150. And GBP/USD can easily trade at sub 1.10 levels as the tight fiscal and less hawkish monetary policy wins through in a still difficult external environment.”

UOB Group’s Senior Economist Alvin Liew and Rates Strategist Victor Yong comment on the latest FOMC event.

Key Takeaways

“The US Federal Reserve (Fed) in its 01/02 Nov 2022 FOMC, as widely expected, accelerated its rate hike cycle by lifting the policy Fed Funds Target rate (FFTR) by a fourth consecutive 75bps hike to 3.75-4.00% (unanimous decision).”

“FOMC Chair Powell signalled clearly that the Fed is far from done and there will be more rate hikes ahead (‘We still have some ways to go’). Powell continued to see risks to inflation as weighted to the upside and he stressed the Fed’s determination to bring inflation down to the Fed’s 2% objective, that ‘there is still a need for ongoing rate increases, ground left to cover, and cover it we will…We want to be sure we don't make mistake of not tightening enough or loosening too soon’. He warned that based on data, the terminal FFTR will be higher than previously expected but also said it could be appropriate to slow the pace of increase ‘as soon as the next meeting or the one after that’.”

FOMC Outlook – Chair Powell’s determination to rein in inflation remains undisputed but his latest comments gave us a combination of a more hawkish trajectory (in the form of a higher terminal rate) and the possibility of smaller rate hikes as soon as the Dec FOMC. As such, we keep our existing forecast for a 50bps hike in Dec. For 2023, we revise our forecast as we now expect two more 25bps rate hikes, one in Feb 2023 FOMC and another in Mar 2023 FOMC, bringing our terminal FFTR forecast higher to 4.75-5.00% by end 1Q-2023 (from previous forecast of 4.50-4.75%), and a pause to the current rate hike cycle until 1Q 2024.

The Kiwi ended the week higher, back above 0.59, but strength may fade as China ‘unswervingly’ doubles down on its zero-COVID policy, economists at ANZ Bank report.

NZD to continue dancing to a global vibe

“US jobs data on Friday was generally strong (jobs and wages beat expectations even if unemployment rose and participation fell) but it was growing expectations that China might soon begin to relax COVID restrictions that helped sentiment along. But China has since rejected the idea, saying that it will ‘unswervingly’ stick with restrictions for now. That of course brings with it the prospect of a potential re-adjustment as markets gradually re-open this week. Things are thus volatile, reactive and 'globally fluid'.” 

“NZ inflation expectations and food price data this week will be interesting, but it seems reasonable to expect the NZD to continue dancing to a global vibe.”

“Support 0.5510/0.5665 Resistance 0.5940/0.6000/0.6075”

Considering advanced prints from CME Group for natural gas futures markets, open interest reversed two consecutive daily drops and increased by around 5.5K contracts on Friday. In the same line, volume went up by nearly 105K contracts also following two daily pullbacks in a row.

Natural Gas: Next hurdle comes at the October high near $7.20

Prices of natural gas charted a strong advance on Friday against the backdrop of rising open interest and volume. That said, further upside now appears on the cards, with the next up barrier at the October high near the $7.20 mark per MMBtu (October 6).

Why is the Dollar easing? There are sufficient convincing arguments supporting USD strength, but their effect is reasonably weak if the Dollar is already “expensive” anyway, economists at Commerzbank report.

Fed will have to stifle the economy if inflation is due to shortages on the US labor market

“A strong labor market report should have a USD-positive effect in an environment where the Fed reacts very sensitively to inflation pressure as higher inflation levels would then correspond to a disproportionate rate hike. However, this consideration only applies if one assumes that inflation momentum will eventually be brought under control by rising interest rates.”

“If inflation pressure is due to actual shortages in the US labor market, the Fed will have to stifle the economy considerably if it wants to avoid remaining behind inflation developments forever. In this scenario USD real interest rates will remain negative for a long time, inflation and news that point towards even higher inflation levels are no longer USD-positive at that stage but turn into USD-negative factors.”

• NZDUSD opens with a modest weekly bearish gap amid the emergence of some USD buying.
• Elevated US bond yields and a weaker risk tone help revive demand for the safe-haven buck.
• Bulls might wait for a sustained move beyond the 0.5935-0.5940 area before placing fresh bets.

The NZDUSD pair attracts some buying following a modest bearish gap opening to the 0.5855-0.5850 area on Monday, albeit struggles to capitalize on the move. Spot prices retreat a few pips from the daily top and remain on the defensive below the 0.5900 mark through the early European session amid a modest US Dollar strength.

A combination of supporting factors assists the USD to regain some positive traction on the first day of a new week and recover a part of Friday's post-NFP slump. In fact, the mixed results from the closely-watched US monthly jobs report fueled speculations that the Federal Reserve could slow the pace of future rate hikes and weighed heavily on the greenback. That said, elevated US Treasury bond yields, along with a softer tone, helps limit any further losses for the safe-haven buck and act as a headwind for the NZDUSD pair.

The market sentiment remains fragile amid concerns about headwinds stemming from China's commitment to maintaining its economically disruptive zero-COVID policy. This comes amid the protracted Russia-Ukraine war and adds to growing worries about a deeper global economic downturn. Even from a technical perspective, the emergence of fresh selling ahead of the mid-0.5900s warrants caution for bullish traders. Hence, it will be prudent to wait for strong follow-through buying before positioning for any meaningful upside for the NZDUSD pair.

There isn't any major market-moving economic data due for release from the US, leaving the USD at the mercy of the US bond yields. Apart from this, traders will take cues from the broader market risk sentiment to grab short-term opportunities around the risk-sensitive Kiwi. That said, the mixed fundamental backdrop might force short-term traders to move to the sidelines ahead of the release of the latest US consumer inflation figures on Thursday.

Technical levels to watch

Here is what you need to know on Monday, November 7:

Markets stay relatively quiet at the beginning of the week as investors assess the latest developments. The disappointing trade figures from China and the waning optimism about China easing coronavirus-related restrictions force market participants to adopt a cautious stance. Later in the session, September Consumer Credit Change will be the only data featured in the US economic docket. November Sentix Investor Confidence for the eurozone will be looked upon for fresh impetus. Finally, investors will pay close attention to comments from central bank officials.

In October, China's trade surplus widened modestly to $85.15 billion from $84.74 billion, missing the market expectation of $95.95 billion by a wide margin. On a yearly basis, Exports grew by 7%, compared to analysts' forecast of 14.8%, while Imports increased by 6.8%, slightly better than the market consensus of 6%. Earlier in the day, China reported 5,496 new locally transmitted cases of COVID-19 on November 6. This number marks the highest one-day increase since May 2, when strict lockdown measures were introduced.

In the early European morning, US stock index futures trade modestly lower on the day and the US Dollar Index clings to small daily gains at around 111.00. The benchmark 10-year US Treasury bond yield continues to move sideways above 4.1%.

Following Friday's impressive rebound, EURUSD has gone into a consolidation phase near 0.9950 early Monday. European Central Bank (ECB) officials continue to share their differing opinions on the policy outlook, making it difficult for the shared currency to preserve its bullish momentum. ECB Governing Council member and French central bank governor Francois Villeroy de Galhau told the Irish Times that they were not far from the neutral rate, beyond which the pace of rate increases could be more flexible and slower. In the meantime, the data from Germany revealed that Industrial Production expanded by 0.6% on a monthly basis in September. This reading came in much stronger than the market expectation for a contraction of 0.8% but failed to help the Euro (EUR).

GBPUSD is having a difficult time building on last Friday's gains and trading in a narrow channel slightly above 1.1300. Over the weekend, The Guardian reported that British Finance Minister Jeremy Hunt was preparing to announce 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. This headline, however, doesn't seem to be having a noticeable impact on Pound Sterling's performance against its rivals.

USDJPY has gathered bullish momentum early Monday and advanced toward the mid-147.00s. The Bank of Japan will release the Summary of Opinions in the early trading hours of the Asian session on Tuesday.

Gold is staging a deep correction early Monday and was last seen losing 0.85% on the day at $1,667. On Friday, XAUUSD rose over 3% and touched its highest level since mid-October at $1,682.

After having advanced to its strongest level in nearly two months at $21,500 on Saturday, Bitcoin lost nearly 2% on Sunday and continued to push lower early Monday. At the time of press, BTCUSD was down 0.5% on the day at $20,800. Ethereum stayed under modest bearish pressure over the weekend and erased all of its weekly gains. ETHUSD was last seen moving sideways slightly above $1,500.

Analysts at Natixis look at two examples of large countries whose exchange rates have depreciated drastically: Argentina and Turkey. They explore the various possible explanations for this exchange rate collapse.

An abnormally expansionary monetary policy  

“An abnormally expansionary monetary policy relative to the level of inflation or the trade balance may lead to a drastic depreciation of the exchange rate. This explanation applies to Turkey (rate cuts in a situation of hyperinflation, sharply rising trade deficit), but not to Argentina.”

An abnormally expansionary fiscal policy 

“The exchange rate may also collapse if fiscal policy is abnormally expansionary and leads in particular to large external deficits. We see significant and rising fiscal deficits in Argentina and Turkey and a huge external deficit in Turkey only.”

A wage-price growth spiral

“If wages and prices spiral upwards, the resulting very high inflation ends up leading to a very sharp depreciation of the exchange rate. We see spiralling wage increases and inflation in both countries.”

A loss of confidence in the currency 

“A loss of confidence in the currency may stem from the previous factors (overly expansionary monetary or fiscal policy, spiralling inflation and wages). It leads to capital outflows that cause the exchange rate to plummet. We see net portfolio investment outflows only in Turkey.” 

Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group assess the recent announcement by the BSP to hike rates by 75 bps at its November event.

Key Takeaways

“Bangko Sentral ng Pilipinas (BSP) joined US Fed’s hawkish camp again this morning (3 Nov), pre-announcing a 75bps rate hike ahead of its next Monetary Board (MB) meeting that is scheduled on 17 Nov as well as the release of the Oct inflation data (tomorrow, 4 Nov) and 3Q22 GDP numbers (on 10 Nov). This will bring the overnight reverse repurchase (RRP) rate to 5.00%, overnight deposit rate to 4.50% and overnight lending rate to 5.50%, effective from 17 Nov.”

“BSP Governor Felipe Medalla stressed that “it’s not an off-cycle move as the rate hike will take effect after 17 Nov”. He added that the pre-announcement is necessary to maintain interest rate differential with US rates in order to temper any impact on the country’ exchange rate (PHP) and at the same time, to fulfil its price stability mandate.”

“Recognising the BSP’s strong intention to keep pace with the US Fed’s actions and the US Fed’s crucial statement of a higher terminal FFTR this morning, we now expect the RRP rate to be raised by another 50bps at the final MB meeting next month (15 Dec), taking the RRP rate to end the year at 5.50%. BSP is likely to continue its rate hike path in 1Q23 to match the projected US Fed’s actions before taking a pause from 2Q23 onwards.”

Industrial Production in Germany unexpectedly increased in September, the official data showed on Monday, suggesting that the manufacturing sector is moving out of the woods.

Eurozone’s economic powerhouse’s Industrial Output jumped by 0.6% MoM, the federal statistics authority Destatis said in figures adjusted for seasonal and calendar effects, vs. a -0.8% expected and -1.2% prior.

On an annualized basis, German Industrial Production grew by 2.6% in September versus a 1.6% increase booked previously and 0.5% consensus forecasts.

FX implications

The shared currency remains unimpressed by the upbeat German industrial figures. At the time of writing, EUR/USD is trading at around 0.9945, down 0.20% on the day.

About German Industrial Production

The Industrial Production released by the Statistisches Bundesamt Deutschland measures the outputs of German factories and mines. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector. A high reading is seen as positive (or bullish) for the EUR, whereas a low reading is seen as negative (or bearish).

• Copper price grinds lower, pulls back from a 10-week high.
• China’s strict covid policy, downbeat export data weigh on metal prices.
• Global smelting activity of the Copper declines in October.
• US inflation, risk catalysts are the key to fresh impulse.

Copper price remains pressured around the intraday low, keeping the week-start pullback from a 2.5-month high, as China-inspired fears join downbeat smelting data for the industrial metal.

That said, the red metal drops 1.5% on the COMEX while printing the $3.68 mark whereas a three-month contract of the Copper on the London Metal Exchange (LME) fell 1.7% to $7,961.50 a tonne by 03:06 GMT per Reuters.

Weekend updates from China’s National Health Commission (NHC) suggested no change in the dragon nation’s zero covid policy, which in turn poured cold water on the face of Friday’s hopes that Beijing may ease its strict covid rules. On the same line were the recently higher virus numbers from the Asian major.

“China reported 5,643 new COVID-19 infections on Nov. 6, of which 569 were symptomatic and 5,074 were asymptomatic, the National Health Commission said on Monday,” per Reuters. The news also stated, “That is compared with 4,610 new cases a day earlier – 588 symptomatic and 4,022 asymptomatic infections - which China counts separately.”

Elsewhere, Reuters quotes a joint statement from commodities broker Marex and SAVANT, the satellite analytics service Marex launched with Earth-i in 2019 to mention that Smelting activity fell in all regions except North America.

Also weighing on the metal is China President Xi Jinping’s warning to Russian President Vladimir Putin over the usage of nuclear technology in the war. 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 pair buyers.

However, hopes of an increase in China’s private investments and easing fears of aggressive rate hikes from the Fed, especially after Friday’s mixed US jobs report, put a floor under the metal prices.

Moving on, risk catalysts will be crucial for the metal prices and the bears could tighten grips in case the covid woes and/or US inflation intensify.

Gold price is correcting from three-week highs of $1,682 at the start of the week this Monday. As FXStreet’s Dhwani Mehta notes, XAUUSD could retreat toward $1,650.

Any retracement in the price will likely be bought in

“Gold price confirmed a descending triangle formation after closing Friday above the falling trendline resistance at $1,650. XAUUSD price is challenging the %0-Daily Moving Averages (DMA) at $1,675 on its retreat, looking for a test of the 21DMA resistance-turned-support at $1,653, should the pullback extend.”

“The 14-day Relative Strength Index (RSI) has turned south but holds above the midline, suggesting that any retracement in the price will likely be bought in.”

“On the upside, buyers need to reclaim the previous day’s high at $1,682 in a bid to initiate a fresh rally towards the $1,700 mark.”

Economists at Goldman Sachs offer their outlook on the Reserve Bank of Australia's (RBA) monetary policy for the next two years.

Key quotes

"Against the backdrop of such a large and protracted inflation overshoot, we were surprised by the RBA's October decision to slow the pace of rate hikes - particularly before the policy rate had reached the lower bound of their 3.00-4.50% nominal 'neutral rate' estimate."

"Looking forward, the RBA's more frequent Board meetings (compared to peers) do provide it greater optionality, but we do not expect the RBA will risk falling too far behind a synchronized global tightening cycle."

"We also suspect that the Review of the RBA due in March 2023 will heighten pressure on the RBA to achieve its inflation mandate and make it uncomfortable for the RBA to stand pat on policy through H123 while inflation is likely be so far above-target."

“All considered, we now expect 25bp rate hikes each month to May 2023 (inclusive) - to a terminal rate of 4.10% (prior: 3.60%) - followed by 110bp of easing over 2024 to 3.0%."

• GBPUSD opens with a modest bearish gap, though lacks strong follow-through selling.
• Elevated US bond yields, a softer risk tone underpins the USD and acts as a headwind.
• Diminishing odds for a more aggressive Fed rate hikes caps the USD and lends support.

The GBPUSD pair struggles to capitalize on Friday's strong recovery from a two-week low and opens with a modest bearish gap at the start of a new week. Spot prices, however, manage to hold above the 1.1300 mark through the early North American session and remain at the mercy of the US Dollar price dynamics.

Investors turn cautious amid concerns about headwinds stemming from China's commitment to maintaining its economically disruptive zero-COVID policy. This, along with elevated US Treasury bond yields, helps revive the USD demand and exerts some downward pressure on the GBPUSD pair. That said, diminishing odds for another supersized 75 bps Fed rate hike in December keep a lid on any further gains for the buck and offer some support to the major.

The closely-watched NFP showed that the US economy added 261K jobs in October against expectations for 200K. This, however, was well below the previous month's upwardly revised reading of 315K. Furthermore, the unemployment rate rose to 3.7% from 3.5% in September and Average Hourly Earnings slowed to 4.7% YoY in October from 5% previous. The mixed results fueled speculations that the Fed could slow the pace of future rate hikes.

Adding to this, Chicago Fed President Charles Evans noted that it is time for the US central bank to shift to smaller rate hikes to avoid tightening policy more than needed. This, in turn, warrants some caution for the USD bulls and placing aggressive bearish bets around the GBPUSD pair. Meanwhile, the upside potential for spot prices remains limited, at least for the time being, in the wake of the Bank of England's dovish interest rate hike last Thursday.

It is worth recalling that the UK central bank decided to raise interest rates by 75 bps - its most forceful act to tame inflation since 1989. In the accompanying policy statement, the BoE said it expects a recession to last for all of 2023 and the first half of 2024, also indicating a lower terminal peak than is currently priced into markets. This might continue to undermine the Sterling and cap the GBPUSD pair amid absent relevant macroeconomic releases.

Technical levels to watch

CME Group’s flash data for crude oil futures markets noted open interest resumed the uptrend on Friday, this time rising by around 17.7K contracts. Volume followed suit and increased sharply by around 310.5K contracts, offsetting the previous drop.

WTI stays focused on $93.62

Prices of the WTI rose markedly at the end of last week on the back of rising open interest and volume, leaving the door open to the continuation of the rebound in the very near term. On the upside, the next hurdle remains at the October top at $93.62 per barrel (October 10).

• AUDUSD licks its wounds after a downbeat start to the week.
• Oscillators suggest further downside, weekly resistance line challenge buyers.
• Fortnight-old horizontal support region restrict short-term AUDUSD downside.
• Buyers need validation from October’s peak to retake control.

AUDUSD remains defensive around 0.6430 after reversing from the 200-HMA support heading into Monday’s European session.

Even so, the Aussie pair remains below a weekly resistance line amid bearish MACD and RSI signals.

As a result, the quote is likely to witness further downside, which in turn highlights the 200-HMA support near 0.6410.

Following that, the 50% and 61.8% Fibonacci retracement levels of the AUDUSD pair’s October 21-27 advances, respectively near 0.6370 and 0.6330, could probe the downside moves.

In a case where the AUDUSD prices remain weak past 0.6330, a two-week-old horizontal support zone near 0.6270 will be crucial for sellers to watch as a downside break of the same could probe the yearly low surrounding 0.6170.

Meanwhile, recovery moves need a successful break of the aforementioned weekly resistance line, close to 0.6475 at the latest.

Even if the AUDUSD price remains firmer past 0.6475, the pair buyers may wait for a clear upside break of the previous monthly top surrounding 0.6550 to please the buyers.

That said, the 0.6500 round figure may offer an intermediate halt during the run-up.

AUDUSD: Hourly chart

Trend: Further downside expected

FX option expiries for Nov 7 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 0.9880 470m
• 0.9855 994m
• 1.0000 442m

- GBP/USD: GBP amounts        

• 1.1100 353m
• 1.1460 346m

- USD/JPY: USD amounts                     

• 148.00 410m
• 148.50 650m

- AUD/USD: AUD amounts  

• 0.6430 890m
• 0.6450 650m

Economist at UOB Group Ho Woei Chen comments on the upcoming BoK meeting later this month.

Key Takeaways

“Both the headline and core (excluding agriculture and oil prices) inflation strengthened in Oct. The more worrying was core inflation which rose to a fresh high since Feb 2009.”

“We expect headline inflation to stay above 5% until Feb 2023 before a high base effect sets in and estimate inflation to average 5.2% for 2022 and 3.5% for 2023.”

“The stronger than expected advance GDP in 3Q22 has not changed our more pessimistic economic outlook for South Korea. High frequency data including the S&P Global South Korea manufacturing PMI and exports in Oct are in line with this outlook while there are also risks that the private consumption recovery could stall as domestic interest rates rise to a decade high.”

“The monetary policy decision on 24 Nov will be the last for the year and the next meeting is scheduled on 13 Jan 2023. We continue to see the “terminal” base rate at “around 3.50%” given higher Oct inflation and Fed indicating in Nov FOMC that the ultimate level of interest rates in the US will be higher than previously expected.”

“However, with a slowing economy and rising interest rate adding to strains in the credit market, the BOK might have to take smaller steps ahead. Thus, while we see another 50bps hike (similar to Oct) as imminent in Nov to bring the base rate to 3.50%, the BOK may decide to dial down the magnitude and hike in two steps instead, by 25bps each in Nov 2022 and Jan 2023.”

According to preliminary readings from CME Group for gold futures markets, open interest shrank by nearly 8K contracts on Friday, partially reversing the previous daily build. Volume, instead, rose for the 4^th consecutive session, this time by around 25.4K contracts.

Gold now looks to retake $1,700

Friday’s acute rebound in gold prices was accompanied by shrinking open interest, which hints at the likelihood that a potential corrective move lies ahead in the very near term. In case the yellow metal resumes the upside, the immediate hurdle should emerge at the $1,700 mark per ounce troy.

• Gold price treads water after a downside start to the key week.
• US dollar fails to cheer China-linked risk aversion amid indecision over Fed’s next move.
• US inflation data, Fedspeak will be crucial for near-term XAUUSD directions as pivot talks amplify.

Gold price (XAUUSD) clings to half a percent intraday loss while making rounds to $1,670 heading into Monday’s European session.

In doing so, the bright metal portrays the market’s indecision ahead of the key US Consumer Price Index (CPI) data for October, up for publishing on Friday, amid the recent talks of the Fed’s pivot and mixed US jobs report. It’s worth noting, however, that China-inspired risk-off mood exerts downside pressure on the XAUUSD.

That said, covid fears from China join the dragon nation’s downbeat trade numbers for October to keep the bears hopeful. However, the hopes of more private investment into the world’s second-largest economy and a reduction in the hawkish Fed bets, especially after Friday’s mixed US jobs report for October and mixed Fedspeak, puts a floor under the gold price.

While portraying the mood, the S&P 500 Futures print mild losses while fading the previous day’s rebound from the lowest level in two weeks. That said, the US Treasury yields remain sluggish around the multi-day highs printed the previous day.

It should be noted that the latest chatters surrounding a halt in the global central banks’ rate hike trajectory, backed by the recently easy rate increases from the Bank of Canada (BOC) and the Reserve Bank of Australia (RBA), highlight this week’s US inflation data. Should the actual prints meet the downbeat expectations, the XAUUSD may witness a bit of recovery. However, the virus woes and geopolitical concerns surrounding Russia and China may probe the optimism.

Technical analysis

Gold’s retreat from a three-week-old resistance line, backed by the RSI’s pullback from overbought territory, teases the XAUUSD bears of late.

However, a clear downside break of the 200-SMA, around $1,660 by the press time, appears necessary for the sellers to keep the reins.

Following that, multiple supports near $1,630 and $1,615 could test the metal’s downside move ahead of directing it to the $1,600 threshold.

Meanwhile, successful trading beyond the aforementioned trend line resistance, close to $1,682 at the latest, could aim for the $1,700 round figure ahead of challenging the previous monthly peak near $1,730.

Gold price: Four-hour chart

Trend: Further weakness expected

“As long as underlying inflation has not clearly peaked, we shouldn’t stop rate hikes,” the European Central Bank (ECB) Governing Council member and French central bank governor Francois Villeroy de Galhau said in an interview with the Irish Times on Monday.

Additional quotes

“We are not far from the neutral rate, beyond which our hiking pace could be more flexible and slower.”

"Inflation could peak in "first semester" of 2023, could take two to three years to return to target.”

Market reaction

EURUSD is consolidating its latest leg up at around 0.9950, at the time of writing, still down 0.15% on the day.

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the latest interest rate decision by the Bank Negara Malaysia (BNM).

Key Takeaways

“Bank Negara Malaysia (BNM) lifted the Overnight Policy Rate (OPR) for the fourth straight meeting by 25bps to 2.75% today (3 Nov), coming after the US Fed raised its Fed Funds Target Rate (FFTR) by a fourth consecutive 75bps to 3.75%-4.00% this morning. BNM’s decision matched Bloomberg consensus with 22 out of 24 economists/analysts polled calling for the hike while two (including us) projected a rate pause. To date, BNM has hiked 100bps, close to reversing the 125bps of rate cuts since the start of the pandemic in Jan 2020. This is the final meeting for the year, and the next monetary policy meeting is on 18-19 Jan 2023.”

“BNM judged this rate adjustment as necessary given that Malaysia’s economic growth prospects remain positive, with latest indicators showing robust domestic demand-led economic activities despite rising downside risks from the external front. Also, BNM needs to pre-emptively manage the risk of excessive demand on price pressures. Although headline inflation may have peaked in 3Q22, BNM expects inflation pressures (for headline and core) to remain elevated going into 2023 due to both demand and cost pressures as well as any potential changes to the subsidy policies.”

“We are revising our OPR outlook to factor in two more rate hikes (+25bps in Jan, +25bps in Mar 2023), to bring the projected terminal rate for OPR to 3.25% by end-1Q23. This is premised on: 1) BNM’s pre-emptive moves to manage elevated price pressures and anchor inflation expectations, and 2) further aggressive adjustments in US interest rates with potentially higher terminal FFTR that could push other central banks to lift rates higher over the coming months. As BNM kept its stance that there is no ‘pre-set course’ for OPR and any adjustments will be done in a ‘measured and gradual manner’, we expect BNM to maintain the pace of 25bps rate hikes in the first two meetings in 1Q23.”

• Oil prices have declined as China’s epidemic concerns have resurged.
• Weak China Trade Balance data have dented the sentiments of market participants.
• More optimism in Fed’s rate slowdown chatter may bring oil bulls back in power.

West Texas Intermediate (WTI), futures on NYMEX, dropped to near $90.20 in the Tokyo session. The oil prices have delivered a marginal rebound to $91.00, but still are prone to more downside as China has tightened its lockdown curbs further due to a resurgence in Covid-19 cases.

The Chinese economy has faced its worst outbreak in the past six months and the administration is committed to maintaining zero Covid-19 to bring prosperity. The continuation of restrictions on the movement of men, materials, and machines has raised concerns over the extent of manufacturing and related activities.

A decline in the scale of economic activities may trim the oil demand dramatically. Investors should be aware of the fact that China is a leading importer of oil and vulnerable oil demand in China will have a significant impact on oil prices.

In early Asia, weak China Trade Balance data has also raised demand concerns. The exports rose by 7.0% last month vs. 14.8% expected and 10.7% previous while, imports climbed by 6.8% vs. 6.0% expected and 5.2% the prior release.

Apart from that, chances of a slowdown in the current pace of rates hiking by the Federal Reserve (Fed) are buzzing now. An occurrence of the same could bring back optimism in oil prices as global demand would start railing on its track. Firms will focus on expansion plans and oil demand will eventually accelerate.

Meanwhile, chatters over further sanctions on Russia’s oil release are gaining heat. Rally in oil prices could resume as more sanctions on Russia will trigger the situation of a tight oil market.

• USDCAD licks its wounds after initially picking up the bids.
• Covid headlines, mixed US data weigh on sentiment and propel the pair.
• Retreat in the WTI Crude Oil prices adds strength to the pair’s recovery moves.
• Contradiction between the US and Canadian jobs report highlights a speech from BOC Governor Macklem, US CPI.

USDCAD treads water around 1.3530, after a gap-up opening, as bulls seek fresh clues heading into Monday’s European session. The Loonie pair’s latest rebound could be linked to the retreat in Canada’s main export item, the WTI Crude Oil, as well as the risk-off mood. However, a reassessment of the recently flashed catalysts from Canada and the US challenged the pair buyers of late.

The market’s latest risk-aversion could be linked to the fresh fears of China’s covid controls, as well as geopolitical fears surrounding Russia. On the same line are the mixed concerns over the US Federal Reserve’s (Fed) next move, mainly due to the recently mixed US jobs report.

China’s rejection of the hopes of dumping zero-covid policy joined an uptick in the virus numbers from the dragon nation to offer a negative start to the week. Even so, hopes of an increase in private investments in the world’s second-largest economy keep the buyers hopeful.

That said, the WTI Crude Oil prints mild losses around $91.00, after refreshing the monthly high the previous day, as fears of less demand joined hopes that the US may broker an agreement with Russia to ease the supply crunch.

It should be noted that the contrast between US and Canadian jobs reports drowned the USDCAD prices the previous day.

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.

On the other hand, the Canadian jobs report for October printed good numbers as the Net Change in Employment rose by 108.3K versus 10K expected and 21.1K prior. Further, the Unemployment Rate reprinted 5.2% figures versus 5.3% forecasts whereas the Participation Rate increased to 64.9% versus expectations of being unchanged at 64.7%.

“Four Federal Reserve policymakers on Friday indicated they would still consider a smaller interest rate hike at their next policy meeting despite strong jobs data,” mentioned Reuters.

Amid these plays, the S&P 500 Futures print mild losses while fading the previous day’s rebound from the lowest level in two weeks. That said, the US Treasury yields remain sluggish around the multi-day highs printed the previous day.

Looking forward, Thursday appears to be the key data for the USDCAD pair traders as it offers the US Consumer Price Index (CPI) and a speech from the Bank of Canada (BOC) Governor Tiff Macklem. Given the recent talks of the Fed’s pivot and strong Canada jobs report, both these events may convince bears should they match market forecasts.

Technical analysis

A sustained daily closing below the 50-DMA, around 1.3500 by the press time, becomes necessary for the USDCAD bears.

• Asian stocks have advanced following the footprints of the S&P500.
• Rising odds for a decline in Fed’s rate hike pace have impacted the DXY.
• Oil prices have corrected amid rising fears of a slowdown in China’s oil demand.

Markets in the Asian domain are enjoying interest from investors amid optimism in global markets. Indices in Asia are following the footprints of the upbeat S&P500 witnessed on Friday. US 500-stock basket received an overwhelming response from the market participants after Chicago Fed Federal Reserve (Fed) President Charles L. Evans provided a less-hawkish commentary on interest rate guidance.

At the press time, Japan’s Nikkei225 jumped 1.27%, ChinaA50 gained 0.38%, Hang Seng soared 3.81% and Nifty50 gained marginally by 0.17%.

Fed policymaker advocated for smaller rate hikes ahead as more policy tightening measures ahead could impact heavily on growth rates. The deviation between the required interest rate and the current one is extremely lower, therefore a slowdown in the pace of rate hikes looks imminent. The commentary has impacted the US dollar index (DXY) severely. The mighty DXY is hovering marginally above 111.00, at the time of writing.

Meanwhile, Chinese equities are less performing against other Asian indices on weaker Trade Balance data. The exports rose by 7.0% last month vs. 14.8% expected and 10.7% previous while, imports climbed by 6.8% vs. 6.0% expected and 5.2% the prior release. Activities in the Chinese economy have dropped leading to strict Covid-19 measures. Restrictions on the movement of men, materials, and machines to contain the pandemic mess have trimmed the extent of economic activities.

On the oil front, oil prices have dropped to near the psychological support of $90.00 as rising Covid-19 curbs by China have accelerated fears of a decline in oil demand. It is worth noting that China is a leading importer of oil and a decline in China’s oil demand could bring vulnerability to oil prices.

• USDJPY seesaws inside a two-week-old symmetrical triangle, recently bounced off 200-SMA support.
• Oscillators suggest further grinding inside the key SMA envelope.
• Ascending trend line from early October adds to the downside filters.

USDJPY stays defensive around 147.20, mildly bid to consolidate the previous day’s losses ahead of Monday’s European session.

In doing so, the Yen pair keeps the bounce off the 200-SMA while staying inside a one-month-old symmetrical triangle.

Given the quote’s latest rebound from the key moving average, coupled with sluggish oscillators, the USDJPY prices are likely to grind higher.

However, a convergence of the 100-SMA and upper line of the stated triangle, close to 148.20 by the press time, appears a tough nut to crack for the USDJPY bulls.

Even if the quote rises past 148.20, the October 23 swing high near 149.70 precedes the 150.00 round figure to challenge the USDJPY bulls.

Following that, a run-up towards refreshing the yearly top, currently around 152.00, can’t be ruled out.

Meanwhile, a downside break of the 200-SMA, around 146.50, isn’t an open invitation to the USDJPY bears as the lower line of the aforementioned triangle, close to 146.00 will challenge the sellers.

Also acting as an additional downside filter is the ascending support line from October 05, near 145.80 by the press time.

USDJPY: Four-hour chart

Trend: Sidelined

• EURUSD is aiming to kiss the 0.9950 hurdle amid lackluster DXY.
• Mixed responses from the risk profile have shifted investors to the sidelines.
• For further action, Eurozone Retail Sales will be keenly watched.

The EURUSD pair is marching gradually toward the immediate hurdle of 0.9950 in the Tokyo session. The asset is mostly trading sideways amid mixed responses from the risk profile. Meanwhile, the US dollar index (DXY) is trading lackluster above 111.00. The DXY has witnessed a minor pullback to 111.10 after a nose-diving price action on Friday.

 S&P500 futures are displaying a subdued performance amid a quiet market mood while 10-year US Treasury yields are hovering around 4.16%.

Bloody Friday for the mighty DXY was led by accelerating odds for a slowdown in the pace of hiking interest rates adopted by the Federal Reserve (Fed) earlier. The US central bank has been hiking rates by 75 basis points (bps) and now critical rates are one bigger hike far from the proposed terminal rates.

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.

Party for risk-sensitive assets could be spoiled if Thursday’s Consumer Price Index (CPI) data remained higher than projections. This may compel Fed chair Jerome Powell to ditch prior projections and come forward with newer ones as the fight with inflation will become dirty.

On the Eurozone front, investors will keep an eye on Tuesday’s Retail Sales data. The economic data may remain in a negative trajectory at -1.3% but will improve against the prior figure of -2.0%.

Apart from that, European Central Bank (ECB) policy rates are expected to accelerate further after hawkish commentary from ECB President Christine Lagarde. ECB President reiterated on Friday that the central bank will continue to raise rates to bring the inflation rate down to 2%.

• USDIDR clings to mild gains while defending the week-start gap to the north.
• Indonesia’s Q3 GDP rose past previous readings but missed market forecasts on YoY.
• Covid woes from China, mixed concerns over the Fed also underpin the upside moves.
• US inflation data will be crucial for near-term trade directions.

USDIDR remains sidelined, after a gap-up opening, amid mixed numbers of Indonesia's Gross Domestic Product (GDP). That said, the risk-off mood also favors the Indonesian Rupiah (IDR) sellers around $15,680 by the press time of early Monday morning in Europe.

Indonesia's annual economic growth accelerated in the third quarter to 5.72%, the fastest in more than a year but below market expectation, official data showed on Monday, reported Reuters. The news also mentioned that the second-quarter growth rate was 5.44% on a yearly basis. Economists in a poll had expected gross domestic product in the July-September quarter to be 5.89% bigger than the same period last year.

Finance Minister Sri Mulyani Indrawati has said the government would work to maintain Indonesia's position as a relative "bright spot", but warned that domestic economic activities could be affected by a potential global recession, per Reuters.

Elsewhere, China’s rejection of the hopes of dumping zero-covid policy joined an uptick in the virus numbers from the dragon nation to offer a negative start to the week. Even so, hopes of an increase in private investments in the world’s second-largest economy joined mixed concerns surrounding the US Federal Reserve’s (Fed) next move to keep the buyers hopeful.

Amid these plays, the US dollar struggles for clear directions and the stock futures are down while the Treasury yields are sluggish, grinding lower of late.

Looking forward, US Consumer Price Index (CPI) for October will be crucial amid talks of Fed’s pivot. Should the inflation data eases, the US dollar may have some room to pare the latest gains.

Technical analysis

Unless breaking a two-month-old ascending trend line, around $15,580 by the press time, the USDIDR buyers remain hopeful of reaching the $16,000 threshold.

• USDINR picks up bids to snap two-day losing streak.
• China’s defense of zero covid policy weighs on market sentiment.
• WTI Crude Oil prices jumped the most in six months before the bulls took a breather around the key resistance.
• Risk-off mood, and fears of high US inflation can keep buyers hopeful.

USDINR prints mild gains around 82.20 as risk-aversion weighs on the Indian rupee (INR) during Monday’s early European session. Also keeping the pair buyers hopeful are the firmer prices of WTI crude oil, as well as mixed concerns over the Fed’s next move.

That said, WTI Crude Oil pares the latest gains around $90.70, mildly offered while poking a three-month-old descending resistance line.

Elsewhere, China’s rejection of the hopes of dumping zero-covid policy joined an uptick in the virus numbers from the dragon nation to offer a negative start to the week. Even so, hopes of an increase in private investments in the world’s second-largest economy joined mixed concerns surrounding the US Federal Reserve’s (Fed) next move to keep the buyers hopeful.

On the same line could be China’s downbeat trade numbers and comments from Barclays suggesting a downward revision to India’s Financial Year 2023 (FY23) Gross Domestic Product (GDP) forecast to 5.1% from earlier expectations of 7.4%. Reuters said that the Reserve Bank of India (RBI) projects GDP growth for 2022-23 at 7%.

At home, India's foreign exchange reserves rose to $531.08 billion in the week through Oct. 28, marking their biggest weekly gain since September 2021, the Reserve Bank of India's (RBI) weekly statistical supplement showed on Friday, per Reuters.

It should be noted that the risk-aversion wave and higher oil prices can keep the USDINR buyers hopeful unless the US Consumer Price Index (CPI) data for October surprises the Fed hawks. “Despite the gain, the rupee closed flat last week. Traders were not very hopeful that Friday's rally would extend this week given the lack of cues, except for the U.S. inflation report that traders say is not expected to surprise much,” said Reuters.

Technical analysis

USDINR bears remain hopeful unless witnessing a daily closing beyond the 21-day EMA hurdle surrounding 82.30.

• AUDUSD is marching towards 0.6500 amid a risk-on market impulse.
• Weaker China’s Trade Balance data have not brought volatility for the Aussie bulls.
• The extent of change in price growth will determine whether Fed will hike its proposed terminal rates.

The AUDUSD pair has resurfaced after dropping to near 0.6408 in Asia. The Aussie bulls have got strengthened despite weaker China’s Trade Balance data. The exports rose by 7.0% last month vs. 14.8% expected and 10.7% previous while, imports climbed by 6.8% vs. 6.0% expected and 5.2% the prior release.

Activities in the Chinese economy have dropped leading to strict Covid-19 measures. Restrictions on the movement of men, materials, and machines to contain the pandemic mess have trimmed the extent of economic activities. It is worth noting that Australia is a leading trading partner of China and Chinese Trade activities have a significant impact on the Aussie dollar.

The market sentiment is displaying signs of recovery as the US dollar index (DXY) is displaying a subdued performance. The DXY is trading lackluster above 111.00 as investors have shifted their focus to the inflation data, which will release on Thursday.

Apart from that, a significant decline in odds for a fifth consecutive 75 basis points (bps) rate hike by the Federal Reserve (Fed) has restricted the DXY’s upside. As per the CME FedWatch tool, the odds favoring a continuation of a bigger rate hike stand at 38.5%.

As a deviation in current borrowing rates and Fed’s proposed terminal rates have declined significantly, the extent of change in Consumer Price Index (CPI) data will determine whether the Fed will increase the peak for terminal rates or will leave them unchanged. As per the preliminary estimates, the headline CPI is seen lower at 8.0% vs. the prior release of 8.2%. While the core CPI that excludes oil and food prices is seen lower at 6.5% against 6.6% recorded earlier.

• GBPUSD consolidates the biggest daily gains in a month.
• UK FinMin Hunt eyes 60 billion British Pound worth tax hike, spending cuts for the much-awaited budget.
• Mixed US data, Fedspeak allowed buyers to sneak in before the covid woes restricted upside momentum.

GBPUSD picks up bids to pare intraday losses around 1.1340 during early Monday morning in Europe. Even so, the Cable pair remains on the dicey floor as it tries to reverse the previous day’s gains, the biggest in a month, amid the risk-averse markets.

China’s rejection to the hopes of dumping zero-covid policy joined an uptick in the virus numbers from the dragon nation to offer a negative start to the week. Even so, hopes of an increase in private investments in the world’s second largest economy joined mixed concerns surrounding the US Federal Reserve’s (Fed) next move to keep the buyers hopeful.

At home, chatters over UK Finance Minister (FinMin) Jeremy Hunt’s preparations for the fiscal budget release, up for publishing on November 17, seems to probe the GBPUSD traders. “Early drafts of the statement to be delivered on Nov. 17 contain plans for up to 35 billion pounds of spending cuts and up to 25 billion pounds of tax rises, likely to include freezing income tax thresholds and targeting dividend tax relief, the Guardian report said,” said Reuters.

It’s worth noting that that the hawkish comments from Bank of England (BoE) Chief Economist Huw Pill, published on Friday, Also favor the GBPUSD bulls. “We still think there is more to do on inflation pressures,” said BOE’s Pill.

It’s worth noting, however, that the anxiety ahead of the US Consumer Price Index (CPI) for October, especially after Friday’s mixed jobs data, challenge the quote’s upside momentum. Also important to watch will be the Preliminary readings of the UK Gross Domestic Product (GDP) for the third quarter (Q3).

Against this backdrop, the S&P 500 Futures retreat to 3,750, fading the previous day’s rebound from the lowest level in two weeks whereas the US Treasury yields remain sluggish around the multi-day highs printed the previous day.

Moving ahead, the UK Q3 GDP and the US CPI for October will be crucial amid the recently hawkish BOESpeak and the talks over the Fed’s pivot. While a likely easing in the British GDP could probe the GBPUSD buyers, softer US inflation may allow the quote to remain firmer.

Also read: GBPUSD Weekly Forecast: Risks skewed to the downside in US inflation week

Technical analysis

A one-month-old bullish channel, currently between 1.1160 and 1.1710, keeps the GBPUSD buyers hopeful even as MACD teases bears.

• Gold price has declined to near $1,670.00 marginally, downside seems restricted amid upbeat risk profile.
• Trimmed chances of the Fed’s fifth consecutive 75 bps rate hike could weigh on US Treasury yields.
• The absence of exhaustion signs in core CPI could bring volatility in the global market.

Gold price (XAUUSD) has corrected to near $1,670.00 in the Asian session after failing to sustain above the critical hurdle of $1,680.00. The precious metal has sensed a light selling pressure as the juggernaut gold rally has met with a long liquidation program. The upside potential in the gold price is still solid as the overall market sentiment is extremely cheerful.

Meanwhile, the US dollar index (DXY) is holding its Tokyo gains and is displaying a rangebound structure above 111.00. The 10-year US Treasury yields have suffered a minor decline to nearly 4.15% as the chances of 75 basis points (bps) rate hike by the Federal Reserve (Fed) have trimmed. As per the CME FedWatch tool, the odds favoring a continuation of a bigger rate hike stand at 38.5%.

After the robust payroll data by the US agency, investors are awaiting the release of the Consumer Price Index (CPI) data. As per the preliminary estimates, the headline CPI is seen lower at 8.0% vs. the prior release of 8.2%. While the core CPI that excludes oil and food prices is seen lower at 6.5% against 6.6% recorded earlier.

It is worth noting that the core inflation rate has not displayed signs of serious exhaustion yet, therefore, no meaningful change in core CPI numbers could trigger volatility in the markets.

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 200-period Exponential Moving Average (EMA) at $1,664.20 acted as a barricade earlier but will not act as support ahead.

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

China's Trade Balance for October, in Chinese Yuan terms, came in at CNY586.81 billion versus CNY565.34 expected and CNY573.57 billion last.

The exports rose by 7.0% last month vs. 14.8% expected and 10.7% previous.

The country’s Imports climbed by 6.8% vs. 6.0% expected and 5.2% prior.

In US Dollar terms,

China reported a marginal increase in the trade surplus, as exports and imports showed an unexpected drop.

Trade Balance came in at +85.15B versus +95.95B expected and +84.74B previous.

Exports (YoY): -0.3% vs. +4.3% exp. and +5.7% prior.

Imports (YoY): -0.7% vs. +0.1% exp. and +0.3% last.

• USDCNH licks its wounds after printing the biggest daily loss in decades.
• Fears of extended covid-led lockdowns, higher virus numbers propel USDCNH price.
• Hopes of more investment from China, mixed Fedspeak keep a tab on upside.

USDCNH grinds higher around the intraday top, making rounds to 7.2300 by the press time, as it pares the biggest daily loss in decades during Monday’s Asian session.

The offshore Chinese Yuan’s (CNH) latest losses could be linked to the covid fears. However, expectations of more private investment to defend the world’s second-largest economy and mixed concerns over the US Federal Reserve’s (Fed) next move seem to challenge the pair buyers of late.

Comments from China’s National Health Commission (NHC) officials turned down the previous hopes of witnessing easy covid control and propelled the USDCNH prices of late. The officials said, per Reuters, that China will persevere with its "dynamic-clearing" approach to COVID-19 cases as soon as they emerge.

“China reported 5,643 new COVID-19 infections on Nov. 6, of which 569 were symptomatic and 5,074 were asymptomatic, the National Health Commission said on Monday,” per Reuters. The news also stated, “That is compared with 4,610 new cases a day earlier – 588 symptomatic and 4,022 asymptomatic infections - which China counts separately.”

On the same line was China President Xi Jinping’s warning to Russian President Vladimir Putin over the usage of nuclear technology in the war. 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 pair buyers.

Alternatively, Reuters quotes updates from the website of the National Development and Reform Commission (NDRC) as saying that private enterprises will be incentivized to invest in 102 major projects in areas such as transportation, water conservation and carbon reduction.

It should be noted that Friday’s mixed US jobs report, with a jump in the headlines Nonfarm Payrolls (NFP) and an increase in the Unemployment Rate, joined fears of policy pivot to weigh on the US dollar and triggered the market’s risk-on mood. Additionally, the hopes of easing China’s covid-led activity control offered extra strength to the risk-on mood 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. 

Amid these plays, the S&P 500 Futures retreat to 3,750, fading the previous day’s rebound from the lowest level in two weeks whereas the US Treasury yields remain sluggish around the multi-day highs printed the previous day.

Moving on, China’s trade numbers for October will act as an immediate catalyst but major attention will be given to the virus updates and inflation data from Beijing, as well as Washington. Above all, the monetary policy divergence between the US Federal Reserve (Fed) and the People’s Bank of China (PBOC) keeps the USDCNH bulls hopeful.

Technical analysis

A three-month-old ascending trend line restricts the short-term USDCNH downside near 7.1800.

Analysts at Goldman Sachs, in their latest client note, revised the EURUSD price forecast lower for the next three months, in the face of divergent US and Euro area monetary policy outlooks.

Key quotes

"The Euro area current account has deteriorated significantly in recent months. Digging into the details, higher energy prices account for about two-thirds of the decline in the trade balance, while the higher cost of manufactured goods from Asia is responsible for most of the rest."

"If this is sustained, it could have a material impact on the currency, both on a cyclical basis and a more structurally."

"The ECB has flagged that looming recession risks could lead to a smaller hiking cycle, and recent forward-looking data paint a bleak picture, particularly on the manufacturing side."

"If energy costs prove to be persistently higher and more volatile, it would require a weaker currency to compensate."

"As a result, if the current account stays around current levels, our estimate of Euro fair value would fall substantially. We therefore expect that recent EUR depreciation has further room to run, and have downgraded our 3-month forecast for EUR/USD from $0.97 to $0.94 (while maintaining our 6-and 12-month forecasts at $0.97 and $1.05), mostly due to the diverging cyclical and policy outlook between the US and Euro area."

• Silver price pares the biggest daily gains in a month, holds lower ground of late.
• Convergence of 200-day EMA, five-month-old descending trend line appears a tough nut to crack for the bulls.
• Two-month-old horizontal support, 100-day EMA restricts short-term downside.
• Oscillators remain favorable to bulls despite the latest retreat.

Silver price (XAGUSD) drops from the one-month high, flashed the previous day, during Monday’s Asian session. That said, the bright metal prints a 1.80% intraday loss as sellers attack the $20.50 level by the press time.

In doing so, the bullion traders pare the biggest daily gains in a month as the price reversed from a convergence of the 200-day EMA and a downward-sloping resistance line from early June, around $20.90.

It’s worth noting, however, that a one-month-old horizontal support region around the $20.00 threshold restricts the quote’s immediate downside ahead of the 100-day EMA level surrounding $19.90.

However, the quote’s further weakness appears elusive as the MACD signals are bullish and the RSI (14) remains firmer, despite the latest pullback.

Even if the XAGUSD drops below $19.90, a 12-day-long support line near $19.00 appears the latest defense of the metal buyers.

Alternatively, a daily closing beyond the $20.90 resistance confluence needs validation from the $21.00 threshold, as well as October’s peak of $21.24, before convincing buyers.

Silver price: Daily chart

Trend: Limited downside expected

Japan's Ministry of Finance (MOF) is considering increasing two-year government bond issuance by 100 billion Japanese Yen (JPY) for Fiscal Year (FY) 2022/23, as well as increasing six-month Treasury discount bills, to fund economic stimulus, Reuters reported on Monday, reviewing a government draft document.

The draft document showed that the planned increment will bring the annual issuance of the 2-year bonds to JPY33.9 trillion for the current fiscal year ending next March, Reuters noted.

Market reaction

USDJPY seems to have picked up fresh bids on the above report, now trading back above 147.00, adding 0.39% on the day.

• Global markets turn risk-averse as China defends zero-covid policy.
• Fedspeak, mixed US employment data also strengthen the cautious mood.
• S&P 500 Futures fades the bounce off fortnight low, struggle for clear directions around multi-day high.
• China trade numbers, Fedspeak could entertain traders but US inflation data is the key to clear directions.

The fresh week fails to extend the previous day’s risk-on mood amid fears surrounding China’s covid policy, as well as indecision over the US Federal Reserve’s (Fed) next move. That said, the recent headlines suggesting China’s readiness to implement policies to boost private investments seem to restrict the bearish play amid Monday’s Asian session.

While portraying the mood, the S&P 500 Futures retreat to 3,750, fading the previous day’s rebound from the lowest level in two weeks. On the same line, the US Treasury yields remain sluggish around the multi-day highs printed the previous day. That said, the US 10-year Treasury yields seesaw around 4.15% whereas the two-year counterpart takes rounds to 4.68% at the latest. It should be noted that Wall Street marked gains amid the market’s hopes of witnessing easy covid-led restrictions from China, as well as mixed US data and downbeat Fedspeak.

During the weekend, China’s National Health Commission (NHC) told, per Reuters, that the nation will persevere with its "dynamic-clearing" approach to COVID-19 cases as soon as they emerge. 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. 

Furthermore, 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. On the same line was the news from the Wall Street Journal (WSJ) suggesting that a senior White House Official is involved in undisclosed talks with top Putin aides.

On the positive side, updates from China's state planner, suggesting further improvement in the nation's policy environment to encourage the development of private investments, should have restricted the market’s pessimism.

On Friday, hopes that China will ease the virus-led activity restriction joined the mixed US employment data and Fedspeak to improve the mood. ''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. 

That said, 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. “Four Federal Reserve policymakers on Friday indicated they would still consider a smaller interest rate hike at their next policy meeting despite strong jobs data,” mentioned Reuters.

To sum up, the market’s latest sentiment should help the traditional risk-safe assets and highlight updates from China and the Fed policymakers as the key catalysts. However, this week’s US Consumer Price Index (CPI) for October appears more important than ever amid pivot talks.

• USDCAD bulls are starting to move in outside of a ket resistance. 
• The daily chart is stacking up for a move to break key structure. 

USDCAD is consolidating the recent volatility with the US Dollar finding its feet again after being sold off on Friday surrounding risk sentiment. The greenback has found a bid at the open on the back of China rebutting sentiment that the nation will reign in its zero approach to COVID. The Loonie strengthen on Friday and remains in the hands of the bears but from a near-term outlook, the bulls are moving in and there could be a meanwhile correction which the following analysis will illustrate. 

USDCAD daily chart

USDCAD has been testing support and a key structure as shown above. If the bears can get below here, then the floodgates could open for a sizeable correction to the downside. With that being said, there are prospects of a bullish correction as follows:

USDCAD H1 & M15 charts

The price is accumulating outside of the trendline resistance on the lower time frames. 

A move in to test the breakout levels, if supported, could result in a bullish impulse into the price imbalance on the 15-min chart that guards the resistance area above. 

• EURGBP is looking to recapture the weekly high at around 0.8744 as focus has shifted to Euro Retail Sales data.
• UK officials are chalking out minutes for the autumn budget to curtail a potential debt crisis.
• ECB President is dedicated to bringing down the inflation rate to 2% by raising critical rates.

The EURGBP pair has rebounded after dropping to near 0.8744 in the early Tokyo session. The mild correction in the cross seems over as the Pound bulls have retreated. The asset is expected to recapture the weekly high at 0.8788 as investors are shifting their focus towards fiscal policy measures from the UK government to curtail the debt crisis.

UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are putting ‘blood and sweat’ into preparing a roadmap of tightening fiscal policy measures to hunt down already higher debt levels. Plans of spending cuts and rising tax collections are under discussion along with their extent to bring financial stability.

UK Finance Minister is setting out plans of 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 for Nov. 17, a report from Guardians. Liquidity reduction will also be supportive of the Bank of England (BOE) amid the highly inflated environment.

Going forward, investors will focus on British Retail Consortium (BRC) Like-for-Like Retail Sales, which are seen lower at 1.5% vs. the prior release of 1.8%. The Retail Sales data is seen lower despite mounting price pressures, which indicates that the retail demand is extremely lower.

On the Eurozone front, European Central Bank (ECB) President Christine Lagarde reiterated on Friday that the central bank will continue to raise rates to bring the inflation rate down to 2%. ECB President didn’t provide any meaningful guidance about the peak of the terminal rate and short-term inflation expectations, however, concerns over rising inflation indicate that the rate hike will be bigger again ahead.

This week, Eurozone Retail Sales data will be keenly watched. The economic data may remain in a negative trajectory at -1.3% but will improve against a prior figure of -2.0%.

• EURUSD remains pressured around intraday low, sidelined of late.
• Oscillators back the U-turn from short-term key resistance line.
• 200-SMA, short-term ascending trend line restrict downside moves.
• Bulls need validation from October’s peak for conviction.

EURUSD holds lower ground near 0.9920-30, after posting the intraday low of 0.9903, as traders catch a breather while paring the biggest daily fall since 2015 on early Monday.

In doing so, the EURUSD pair defends the week-start U-turn from a one-week-old descending resistance line. Also portraying the bearish play are the recently stalled bullish MACD signals and the RSI (14) retreat.

Additionally favoring the pair sellers is the latest downside break of the 61.8% Fibonacci retracement level of the September 12-28 downturn, around 0.9945 at the latest.

With this, the quote is likely to decline to a 50% Fibonacci retracement level near 0.9865 before poking the 200-SMA support of 0.9815.

However, an upward-sloping support line from September 28, near 0.9760 by the press time, appears the key for the EURUSD pair buyers as a break of which will convince bears to take control.

Alternatively, the aforementioned 61.8% Fibonacci retracement level near 0.9945 and the weekly resistance line near 0.9965 restrict short-term EURUSD upside before the 1.0000 psychological magnet.

Also acting as an upside filter is the previous monthly peak of 1.0093 and the 1.0100 round figure.

To sum up, EURUSD is likely to remain bearish for a while but the room towards the south appears limited.

EURUSD: Four-hour chart

Trend: Further weakness expected

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.2292 vs. the estimated 7.2289 and the previous 7.2555.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

• GBPJPY is gradually marching towards 167.00 amid a risk appetite theme.
• Investors seek more development on UK’s fiscal tightening measures for making informed decisions.
• Tokyo’s Household Spending data is seen lower at 2.7% vs. the prior release of 5.1%.

The GBPJPY pair has picked strength around 166.00 after a mild gap-down open in most risk-sensitive currencies. The cross has sensed buying interest as the overall sentiment in the market is extremely bullish amid accelerating chatters over a slowdown in the Federal Reserve (Fed)’s pace of pushing interest rates higher.

The asset is marching towards the round-level hurdle of 167.00 ahead and further price action will be guided by developments over fiscal tightening by the UK administration to trim the debt crisis. As debt levels have already piled up in the UK economy, the duo of UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt is drafting ways to contain the debt crisis impact.

A report from Guardian on Sunday dictated that UK FM is setting out plans of 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 for Nov. 17. In times, when the UK economy is going through rough times of weaker economic prospects, and negative Gross Domestic Product (GDP) projections, liquidity reduction from the economy would make UK officials’ job more tedious.

On the Tokyo front, investors are awaiting overall Household spending data, which is a key indicator that determines retail demand. For September’s month, the economic catalyst is expected to display a steep fall to 2.7% vs. the prior release of 5.1%. This may bring volatility in the Japanese yen as lower spending by households indicates a decline in retail demand. Also, it would impact inflationary levels.

NZDUSD seesaws around the intraday high near 0.5910 while paring the daily loss during the mid-Asian session on Monday.

The kiwi pair’s latest gains could be linked to the upbeat signals from the options market, via the risk reversal (RR), spread between the call options and the put options.

That said, the NZDUSD pair’s daily RR printed the strongest figure since early May 2022 while flashing 0.395 for Friday, per data source Reuters.

On the same line, the weekly RR figure also printed the five-week uptrend with the latest figures being 0.250.

It’s worth noting that the market’s risk-off mood, mainly due to China’s covid conditions and anxiety over the US Federal Reserve’s next move keeps the NZDUSD traders on the edge.

Also read: NZDUSD Price Analysis: Bulls remain hopeful above 0.5785-90 support confluence

• GBPUSD has seen some volatility in the open following Friday's correction.
• Bears eye a move to test 1.1150 for the days ahead. 

Risk-off markets have kicked off a bout of demand for the greenback that is rising across the board. As per the prior analysis, GBPUSD Price Analysis: Bears move in on a fresh layer of support, where it was explained that the ''price might be expected to correct at this juncture,'' the bulls indeed moved in as follows:

GBPUSD prior analysis

GBPUSD update

It has been a very solid move that could see a move lower out of the coil on the daily chart as follows: 

The resistance around 1.1430/50 will be key in this regard. Pressures in a recovery in the greenback could see the support of 1.1150 give out. 

• AUDUSD retreats from a one-week-old resistance line, jostles with a two-day-old support trend line.
• MACD conditions suggest further grinding of prices towards the south.
• Key SMAs, one-month-old ascending trend line restrict short-term downside.
• Bulls need validation from October’s peak to retake control.

AUDUSD holds lower ground near the intraday bottom surrounding 0.6430, after reversing from a one-week high the previous day. In doing so, the Aussie pair sellers struggle to keep the reins between the key weekly resistance line and a two-day-old support trend line.

Although the aforementioned trend lines restrict short-term AUDUSD Moves, the bearish run appears to have a short journey as the key SMAs and an upward-sloping support line from early October challenge the Aussie pair sellers.

That said, the pair’s immediate upside needs to cross the aforementioned resistance line, at 0.6475 by the press time.

Even so, the 0.6500 threshold and the previous monthly high near 0.6550 could challenge the AUDUSD bulls.

Should the quote remains firmer past 0.6550, the odds of witnessing a run-up towards the late September swing high near 0.6750 can’t be ruled out.

On the flip side, the adjacent support line restricts the quote’s immediate declines near 0.6425.

Following that, the 200-SMA and 100-SMA could challenge the AUDUSD bears around 0.6395 and 0.6355 in that order.

It’s worth noting that the AUDUSD sellers should remain cautious unless the quote breaks an upward-sloping support line from October 13, close to 0.6280 at the latest.

AUDUSD: Four-hour chart

Trend: Limited downside expected

• The DXY is hovering above 111.00 after a gap-up start but may lose strength amid the soaring market mood.
• Fed Evans has advocated for smaller rate hikes ahead as front-loading by US central bank has done.
• The US CPI will be a key trigger ahead this week.

The US dollar index (DXY) has initiated the week on a gap-up note after bloodshed on Friday. The DXY is hovering marginally above 111.00, at the time of writing. However, bears could join the DXY’s counter and the mighty DXY may carry forward its Friday’s downside journey.

A sense of sheer optimism in the overall market amid less-hawkish guidance from the Federal Reserve (Fed) has trimmed DXY’s appeal. Also, lower chances for 75 basis points (bps) rate hike by the Fed mere at 38.5%, as per the CME FedWatch tool, have weakened DXY’s demand. While the 10-year US Treasury yields are solid above 4.16% despite the aforementioned headwinds.

Fed Evans advocated for smaller rate hikes ahead

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.

He further added that front-loading by the Fed is almost done. The deviation between current borrowing rates at 3.75-4.00% 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.

US CPI- A key trigger ahead

This week, the show-stopper event will be the US Consumer Price Index (CPI) data, which will release on Thursday. As per the preliminary estimates, the headline CPI is seen lower at 8.0% vs. the prior release of 8.2%. While the core CPI that excludes oil and food prices is seen lower at 6.5% against 6.6% recorded earlier.

It is worth noting that the core inflation rate has not displayed signs of serious exhaustion yet, therefore, no meaningful change in core CPI numbers could trigger volatility in the markets.

• Gold price retreat from monthly high, pares the biggest daily jump since March 2020.
• Headlines surrounding China, Russia weigh on sentiment following a risk-on day.
• Mixed US jobs report, Fedspeak highlights this week US CPI as central bankers discuss neutral rates.
• Sour sentiment can favor XAUUSD bears but softer US dollar could restrict the downside.

Gold price (XAUUSD) slides from a one-month high, flashed the previous day, amid sour sentiment. That said, the bullion refreshes an intraday low near $1,673 by the press time.

The market’s latest risk-aversion could be linked to the fresh fears of China’s covid controls, as well as geopolitical fears surrounding Russia. On the same line are the mixed concerns over the US Federal Reserve’s (Fed) next move, mainly due to the recently mixed US jobs report.

China’s National Health Commission (NHC) officials turned down the previous hopes of witnessing easy covid control as they said, per Reuters, that China will persevere with its "dynamic-clearing" approach to COVID-19 cases as soon as they emerge. The news also added that measures must be implemented more precisely and meet the needs of vulnerable people.

Additionally, China President Xi Jinping’s warning to Russian President Vladimir Putin over the usage of nuclear technology in the war against Ukraine also weighed on the sentiment and the XAUUSD prices. 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 pair buyers.

The expectations of witnessing China’s retreat from the zero-covid policy joined mixed US job numbers and Fedspeak to drown the USDCHF prices 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. 

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. “Four Federal Reserve policymakers on Friday indicated they would still consider a smaller interest rate hike at their next policy meeting despite strong jobs data,” mentioned Reuters.

While portraying the mood, 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 0.55% intraday at the latest.

Looking forward, headlines surrounding China’s covid restrictions and the US Consumer Price Index (CPI) for October will be crucial to watch for clear directions.

Technical analysis

Gold price pulls back from a three-month-old descending resistance line as sellers attach the 50-DMA support near $1,675, a break of which could quickly direct the bears towards the 21-DMA level of $1,653.

However, a five-week-old horizontal support zone near $1,615-17 appears the key for the XAUUSD bears to track past $1,653 to aim for further downside.

Alternatively, a clear upside break of the aforementioned resistance line, near $1,681 at the latest, could target the $1,700 threshold before challenging the previous monthly peak near $1,730.

Overall, the latest pullback in the metal prices can keep the bears hopeful for another attempt to refresh the yearly low.

Gold price: Daily chart

Trend: Further downside expected

• USDJPY bulls move in as US Dollar picks up a safe haven bid.
• US CPI and midterms are on tap for the week ahead.

USDJPY is up on the day as the US dollar rallies to the start of the week following last Friday's dismal performance. Risk-off markets have kicked off a bout of demand for the greenback that is rising across the board. At the time of writing, USDJPY is higher by some 0.18% at 146.90 and between 146.75 and 147.17.

The major news causing volatility is from Beijing which has denied it was considering easing its zero COVID-19 policy, helping the greenback to recover some ground that was lost on Friday due to a conflicting report that they were. At the same time, the US data on Friday was mixed.  

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.

Eyes on midterms and CPI

For the week ahead, US inflation data and mid-term elections will be key. ''Core prices likely slowed modestly in Oct, but to a still strong 0.4% MoM pace. Shelter inflation likely remained the key wildcard, though we look for used vehicle prices to retreat sharply,'' analysts at TD Securities explained. 

As for the midterms, America goes to the polls on November 8th where control of both chambers of Congress and dozens of governorships are on the line. ''Polls suggest a Republican majority in the House and Senate, which is in line with historical relationships as well as the low approval ratings of President Biden due to the economy, inflation, and crime,'' the analysts at TD Securities said. 

USDJPY H1 chart

A break of the trendline resistance will be a bullish development for the week ahead although pressures below spot opens risk of a significant downside continuation. 

• USDCHF consolidates the biggest daily loss in five months, prints mild gains of late.
• Risk-aversion helps US dollar to pare recent losses but indecision over Fed’s next move tests greenback bulls.
• SNB’s Jordan will be eyed for hawkish speech after upbeat Swiss inflation.
• US CPI for October will be crucial amid mixed jobs report, Fedspeak.

USDCHF picks up bids to 0.9970 during Monday’s Asian session, paring the biggest daily loss since June amid the risk-off mood. Even so, the Swiss currency (CHF) pair buyers appear cautious ahead of this week’s key data/events.

Fears of China’s covid controls, as well as geopolitical fears surrounding Russia, triggered the risk-aversion wave at the week’s start. Also likely to have tested the traders are mixed concerns over the Fed’s next move.

Officials from China National Health Commission turned down the previous hopes of witnessing easy covid control as they said, per Reuters, that China will persevere with its "dynamic-clearing" approach to COVID-19 cases as soon as they emerge. The news also added that measures must be implemented more precisely and meet the needs of vulnerable people.

China President Xi Jinping’s warning to Russian President Vladimir Putin over the usage of nuclear technology in the war against Ukraine also weighed on the sentiment and propelled the USDCHF prices. 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 pair buyers.

The expectations of witnessing easy covid controls in China joined mixed US job numbers and Fedspeak to drown the USDCHF prices 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. 

On Friday, 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.

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. It’s worth noting that S&P 500 Futures drop 0.75% intraday at the latest.

Moving on, the economic calendar is a bit light during this week but comments from Swiss National Bank (SNB) Governor Thomas Jordan and the US Consumer Price Index (CPI) for October will be crucial to watch going forward. The reason could be linked to the recently firmer Swiss inflation data and the mixed US job numbers.

Technical analysis

USDCHF grinds higher between a two-month-old ascending support line and the 21-DMA, respectively near 0.9930 and 0.9990.