Euro resumes gains on European interest rate prospects
Euro rose in European trade today, resuming the gains against dollar after a two-day hiatus on profit-taking from five-month highs back then, with current gains coming amid estimates of a 0.75% rate hike by the ECB next month. The greenback fell amid improving risk appetite in the market while demand on safe havens slow down, with investors expecting China to control the ongoing protest in China quickly.
EURUSD rose over 0.5% to 1.0394, after falling 0.55% yesterday, the second loss in a row on profit-taking, after hitting five-month highs earlier at 1.0496.
European Rates
Now markets almost fully expect the ECB to increase interest rates by 75 basis points in December instead of 50 basis points, following bullish remarks by ECB President Christine Lagarde. Investors await important European inflation data tomorrow for November to gauge final chances for a 0.75% rate hike by the ECB.
The Dollar
The dollar index fell 0.5% on Tuesday, resuming losses after a two-day advance from three-month lows back then at 105.22 against a basket of major rivals. The greenback recouped recently following some bullish remarks by a few Fed officials that showed the Fed might still be aggressive in its policy tightening efforts. Fed Saint Louis President James Bullard said the ECB needs to raise interest rates by a bit more, while New York Fed President John Williams said the Fed needs to carry on its path of rate hikes.
The dollar fell today as risk appetite improved in the markets, while Asian stocks advanced, led by Chinese stocks, hurting demand on safe haven. Investors now mostly expect Chinese authorities to control ongoing protests and alleviate some of the strict Covid 19 restrictions.
EURUSD - Downside surprise in German inflation data Coming?
German CPI inflation data for November is a key European macro reading of the day. Data for the whole of Germany will be released at 1:00 pm GMT and median consensus point to headline price growth remaining unchanged at 10.4% YoY. However, those expectations may be outdated following the release of state-level CPI data from Europe’s largest economy. All 6 state-level readings that were already released showed a deceleration in consumer price growth in November. This is a strong hint that German reading at 1:00 pm GMT will not show inflation remaining unchanged and will instead surprise to the downside.
German state-level CPI readings for November
-
North Rhine Westphalia: 10.4% YoY vs 11.0% YoY previously
-
Hesse: 9.7% YoY vs 9.9% YoY previously
-
Baden Wuerttemberg: 9.6% YoY vs 9.8% YoY previously
-
Bavaria: 10.9% YoY vs 11.0% YoY previously
-
Brandenburg: 10.5% YoY vs 10.8% YoY previously
-
Saxony: 9.9% YoY vs 10.1% YoY previously
It should be also noted that Spain CPI reading for November, released today at 8:00 am GMT, also surprised to the downside and decelerated from 7.3% to 6.6% YoY (exp. 7.5% YoY). If inflation in Germany slows as well, ECB could have more reasons to slow the pace of tightening to 50 bp rate hike in December, down from 75 bp rate hikes delivered at two previous meetings.
EURUSD is rather unimpressed by deceleration in German state-level inflation data. The pair continues to trade in between 50- and 200-hour moving averages, awaiting a catalyst for a break.
USDCAD Begins Bearish Wave
The USDCAD pair touched the key resistance 1.3500 and consolidated below it, to start providing negative trades by today’s open, which encourages us to suggest building bearish wave on the intraday basis, targeting testing 1.3350 initially.
Therefore, the bearish bias will be suggested for today unless breaching 1.3500 and holding above it, noting that breaking the targeted level will extend the bearish wave to reach 1.3205 areas as a next main station.
The expected trading range for today is between 1.3360 support and 1.3500 resistance, and the expected trend for today is Bearish.
ETHUSD - the cryptocurrency quotes remain under pressure
The main pressure on ETH over the past few days has been an unsuccessful joke by one of the blockchain developers with the nickname Cygaar. In an effort to assess the impact of social media posts on the crypto community, he hinted on Twitter that the ETH token would soon become insolvent. This post was supported by the heads of Tron Justin Sun and of Ethereum Vitalik Buterin. Investors took Cygaar’s message as a warning, starting serious coin sales.
Technically, the pair continues to trade within the mid-term descending channel and now the price is at the middle line of the Bollinger Bands (1200). In case of a breakout of the level of 1250 (Murray [2/8]), the growth will be able to continue to the area of 1375 (Murray [3/8]) and 1500 (Murray [4/8]). The key mark for the “bears” is 1125 (Murray [1/8]), consolidation below which will allow the instrument to continue its decline to the levels of 1000 (Murray [0/8]), 875 (Murray [-1/8]).
Resistance levels: 1250, 1375, 1500 | Support levels: 1125, 1000, 875
EURUSD - Downside surprise in German inflation data Coming?
German CPI inflation data for November is a key European macro reading of the day. Data for the whole of Germany will be released at 1:00 pm GMT and median consensus point to headline price growth remaining unchanged at 10.4% YoY. However, those expectations may be outdated following the release of state-level CPI data from Europe’s largest economy. All 6 state-level readings that were already released showed a deceleration in consumer price growth in November. This is a strong hint that German reading at 1:00 pm GMT will not show inflation remaining unchanged and will instead surprise to the downside.
German state-level CPI readings for November
- North Rhine Westphalia: 10.4% YoY vs 11.0% YoY previously
- Hesse: 9.7% YoY vs 9.9% YoY previously
- Baden Wuerttemberg: 9.6% YoY vs 9.8% YoY previously
- Bavaria: 10.9% YoY vs 11.0% YoY previously
- Brandenburg: 10.5% YoY vs 10.8% YoY previously
- Saxony: 9.9% YoY vs 10.1% YoY previously
It should be also noted that Spain CPI reading for November, released today at 8:00 am GMT, also surprised to the downside and decelerated from 7.3% to 6.6% YoY (exp. 7.5% YoY). If inflation in Germany slows as well, ECB could have more reasons to slow the pace of tightening to 50 bp rate hike in December, down from 75 bp rate hikes delivered at two previous meetings.
EURUSD is rather unimpressed by deceleration in German state-level inflation data. The pair continues to trade in between 50- and 200-hour moving averages, awaiting a catalyst for a break.
EURUSD needs strong positive motive
The EURUSD pair shows some slight bearish bias to test the EMA50, while stochastic continues to move within the oversold areas, waiting to motivate the price to resume the expected bullish trend for the upcoming period, which targets testing 1.0515 as a next main station. On the other hand, we should note that breaking 1.0285 and holding below it will stop the expected rise and press on the price to turn to decline and achieve negative targets that start at 1.02 and extend to 1.0.
The expected trading range for today is between 1.0285 support and 1.0450 resistance, and the expected trend for today is Bullish.
Economic Calendar: ADP Employment report, speech from Fed Chair Powell
European indices set for higher opening
Powell to speak on the economy and inflation in the evening
ADP report expected to show 200k jobs gain in November
Economic calendar for the day ahead is packed with interesting releases. While GDP data from Europe and US that is scheduled for release will be revisions, other reports may trigger some market moves. European CPI reading will be released at 10:00 am GMT and is expected to show deceleration. Note that major European economies saw price growth decelerate in November so there is a scope for a downside surprise. Apart from that, traders will closely watch ADP jobs report for November (1:15 pm GMT) as it will be a final hint ahead of Friday’s NFP release. Last but not least, Fed Chair Powell is scheduled to speak at 6:30 pm GMT today with the topic of a speech being “Economic Outlook, Inflation and the Labor Market”.
GBPUSD awaits the breach
The GBPUSD pair trades within minor bearish channel that appears on the chart, and we believe it forms bullish flag pattern, as the price needs to breach 1.1995 to activate the positive effect of this pattern followed by rallying to resume the main bullish trend, which targets 1.2080 followed by 1.2200 levels as next main stations. Therefore, we will continue to suggest the bullish trend for the upcoming period unless breaking 1.1950 and holding below it.
The expected trading range for today is between 1.1920 support and 1.2090 resistance, and the expected trend for today is Bullish.
Crude Oil - Trades near the year’s low
The key factor determining the direction of dynamics in the oil market remains the discussion of the maximum price level for Russian oil, which has not yet been agreed upon. Despite additional negotiations and consultations, the Baltic countries and Poland strongly oppose the introduction of a limit of 65.0–70.0 dollars per barrel, insisting on a range of 30.0–40.0 dollars per barrel. The desire of the leading European countries to set a limit is natural since, despite public statements about the refusal to purchase Russian energy resources, it is virtually impossible to do without them, and the high cost will allow them to hope that official Moscow will continue to supply energy resources further. However, yesterday, Deputy Prime Minister of the Russian Federation Alexander Novak denied this assumption, saying that the government would stop cooperating with countries that supported the new pricing mechanism and intended to work only on market conditions while not ruling out a possible reduction in oil production if the offer exceeded demand. The head of the International Energy Agency, Fatih Birol, also pointed to the fall in oil production in Russia and suggested that in the first quarter of 2023 it could reach –2.0M barrels per day.
On the daily chart of the asset, the instrument is moving around the year’s low of 76.00, slightly correcting upwards, and the technical indicators confirm the likelihood of a local correction, weakening the sell signal.
Resistance levels: 81, 86.6 | Support levels: 77.35, 73.65
Nasdaq 100 - The US stock market is correcting down again
At the beginning of the week, the US market traded with low volatility, but the situation began to change after a number of officials from the regional Federal Reserve Banks (FRB) spoke about the current monetary policy. Thus, the Chair of the St. Louis Fed, James Bullard, noted that the US Federal Reserve needs to keep the interest rate above 5.0% throughout the next year, and possibly even several quarters of 2024, in order to have a significant impact on inflation. This opinion was shared by the Chair of the Fed of New York, John Williams, who noted that the regulator will continue the policy of aggressively increasing the indicator and will keep it at a high level throughout the next year.
On the daily chart, the index quotes continue to trade within the local rising channel, and the technical indicators are about to reverse and give a sell signal.
Support levels: 11330, 10665 | Resistance levels: 11900, 12553
Gold price surpasses the first target
Gold price succeeded to surpass our first positive target at 1765 to confirm the continuation of the bullish wave on the intraday and short term basis, and the way is open to achieve our next target at 1786.5, and we suggest the continuation of the bullish bias to breach this level and achieve additional gains that reach 1812 areas.
Therefore, the bullish trend will remain valid for the upcoming period, supported by the EMA50 that carries the price from below, noting that the continuation of the bullish wave requires holding above 1765 and the most important above 1746.4.
The expected trading range for today is between 1760 support and 1795 resistance, and the expected trend for today is Bullish.
NZDUSD Surpasses the Target
The NZDUSD pair rallied upwards strongly to succeed breaching 0.6240 and achieve our waited positive target at 0.6300, waiting for more expected rise in the upcoming period, and the way is open to head towards 0.6400 barrier as a next positive station. Therefore, the bullish wave will remain dominant in the upcoming sessions unless breaking 0.6240 and holding below it.
The expected trading range for today is between 0.6280 support and 0.6400 resistance, and the expected trend for today is Bullish.
Chart of the Day - US30 - 01.12.2022
Fed Chair Jerome Powell said yesterday that it would make sense to moderate the pace of policy tightening in the light of recent macroeconomic data. He said that economic momentum has decelerated below trend but such a situation would need to last for inflation to come down. As price growth in the US economy remains elevated, Powell sees need for further rate hikes but his comment on moderation of the pace made markets believe that 50 bp rate hike is now the base case scenario for December meeting (December 14, 2022). Money markets now price in less around 2% chance of a rate hike bigger than 50 bp rate hike, down from 15% prior to Powell’s speech.
Stock markets rallied as Powell hit the dovish note, pushing Nasdaq-100 (US100) over 4% higher yesterday. While the tech index saw the biggest reaction to Powell’s speech, it should be noted that it is Dow Jones that has been the top performing Wall Street index as of late. Dow Jones (US30) jumped 20% off the October low, compared to an around-15% rebound for other three major indices (Nasdaq, S&P 500 and Russell 2000).
Taking a look at US30 chart at D1 interval, we can see that the index jumped above recent local high and reached the highest level since late-April 2022, a 7-month high! A small pullback can be observed today. Should bulls regain control and push the index higher again, the first major resistance zone to watch can be found in the ranging around 78.6% retracement of the downward move started in January 2022 (35,100 pts area).
DAX 40 - Correction in the bond market supports the index
After the release of extremely weak statistics on the labor market, corporate news receded into the background. The number of unemployed in Germany in November increased by 17.0 thousand after an increase of 9.0 thousand in the previous month, while analysts expected an increase of 13.0 thousand. In turn, the overall Unemployment Rate in the country corrected to 5.6% from 5.5% a month earlier. The constant increase in the number of unemployed citizens has been going on since May, which is an extremely negative signal for the country’s economy.
On the daily chart of the asset, the price is trading well above the descending channel resistance line, reaching highs in the late spring of this year, and the technical indicators maintain a steady buy signal.
Support levels: 14260, 13430 | Resistance levels: 14830, 15540
USDJPY - the US dollar continues to lose ground
Japan’s industrial output lost 2.6% in October after falling 1.7% a month earlier, but the Economy Ministry forecasted an upward correction of 3.3% in November and a slowdown to 2.4% in December. Against this background, Manufacturing PMI also showed a negative trend to 49.0 points from 49.4 points earlier. Tomorrow, the national currency may receive the necessary support, as the speech of the Bank of Japan Governor Haruhiko Kuroda is expected, within the framework of which the next plans to support the yen exchange rate may be announced.
On the daily chart of the asset, the trading instrument is moving below the global ascending corridor, dropping to the lows of July, and the technical indicators maintain a stable sell signal.
Resistance levels: 138.7, 142.1 | Support levels: 135.5, 130.8
AUDUSD - Key parameters of the Australian economy are declining
Thus, the index of manufacturing activity from AIG in November fell to 44.7 points from 49.6 points earlier, and the Manufacturing PMI amounted to 51.3 points, which is lower than 52.7 points earlier. The volume of investments also continues to decline: investments in production equipment in the third quarter lost 1.6%, and capital investments of individuals decreased by 0.6%. Even more critical is the 0.2% decline in retail sales in November after a positive 0.6% trend in October, which reflects a drop in buying activity due to rising prices.
On the daily chart of the asset, the trading instrument is moving within a downward channel and is preparing to break the range resistance line, and the technical indicators keep a buy signal.
Resistance levels: 0.6855, 0.705 | Support levels: 0.671, 0.653
USDCHF - Dollar weakness does not allow the pair to recover
Yesterday in Switzerland, the Federal Statistical Office (FSO) published data on the volume of retail sales, which for the first time since the beginning of the summer, fell by 2.5% after rising by 2.6% in September. Inflation remained at 3.0% YoY, and there was no monthly change in the indicator, although analysts predicted its increase by 0.1%. The information portal procure.ch published a monthly index of business activity, which fell to 53.9 points in November from 54.9 points a month earlier, thus continuing the negative dynamics that began in April.
On the daily chart of the asset, the trading instrument has slowed down the decline and is gaining new strength to continue the trend, and the technical indicators maintain a sell signal.
Resistance levels: 0.943, 0.959 | Support levels: 0.934, 0.919
CAC 40 - Decline in the bond market supports the position of the index
One of the leading indexes of the European economy, CAC 40, is trading at 6727, continuing the upward correction, which is supported by macroeconomic statistics and the situation on the bond market.
In November, inflation in France was fixed at 0.4%, which had almost no effect on the dynamics of the annual rate, which remained at the level of 6.2%. The Harmonized Consumer Price Index was 7.1%, which also coincides with the data of the previous month. The economic growth, which, contrary to expectations, has not yet slowed down, amounting to 0.2%, as in the previous assessment, and the Manufacturing PMI, which rose to 48.3 points from 47.2 points a month earlier for the first time since the beginning of autumn, should also be noted.
On the daily chart of the asset, quotes are trading above the resistance line of the descending corridor, and the technical indicators hold the buy signal.
Support levels: 6620, 6340 | Resistance levels: 6820, 7020
Euro widens gains to six-month highs ahead of US jobs data
Euro rose in European trade against dollar for third straight session, hitting six-month highs and on track for the second weekly profit in a row as concerns about the widening policy gap between Europe and the US fades away. Dollar is extending its heavy losses against a basket of major rivals following recent remarks by Fed Chair Jerome Powell, at which he hinted strongly at only a 0.5% rate hike in December.
Investors await important official US payrolls data later today for November, which will provide fresh clues on growth. EURUSD rose over 0.2% to 1.0542, the highest since June, with a session-low at 1.0504, and the largest profit since November 11.
EURCHF attempts to resume the rise
The EURCHF pair succeeded to provide new positive close above the moving average 55 at 0.9845, to confirm its surrender to the domination of the suggested bullish bias and approach the first target at 0.99. Note that stochastic continuous positive momentum will provide additional chance to record additional gains that might extend towards 0.9935 followed by 1.0 in the medium term period.
The expected trading range for today is between 0.9865 and 0.9935, and the expected trend for today is Bullish.