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• Ethereum trades at a five-month high
• It has climbed above a key support level
• Momentum indicators remain bullish

Ethereum continues to rally, undeterred by the broader fragile market sentiment due to geopolitics and Trump’s second term, and thus playing catch-up with bitcoin. November could be the first month that ethereum outperforms the king of cryptos since May. Ethereum has managed to quickly climb above a key level, reaching a five-month high. With the markets preparing for customary Santa Claus rally, cryptocurrencies could get another boost and thus keep the current short-term bullish trend intact.

Meanwhile, the momentum indicators remain bullish. The RSI is trading sideways, a tad below its 70 threshold, and thus pointing to a strong bullish pressure in ethereum. Interestingly, the stochastic oscillator is hovering inside its overbought area (OB), and failing, up to now, to stage a good move below both its OB and moving average. Should the stochastic oscillator achieve a breakout, it would be seen as a strong bearish signal.

Should the bulls remain confident, they would try to keep ethereum above both the 23.6% Fibonacci retracement level of the October 13, 2023 – March 12, 2024 uptrend at 3,490, and the April 4, 2022 high at 3,582. They could then gradually push it towards the May 27, 2024 high at 3,974 and, if successful, prepare for a retest of the March 2024 all-time high at 4,098.

On the other hand, the bears will try to regain the upper hand and initially push ethereum below the 3,490 level. They could then stage a selloff towards the 38.2% Fibonacci retracement level at 3,115, with the path lower becoming more treacherous as the 50- and 100-day simple moving averages (SMAs) are positioning a tad below the 3,000 level.

To conclude, contrary to bitcoin’s recent correction and despite the broader mixed market sentiment, ethereum is performing well, reaching a five-month high.

In an interview with the Financial Times, ECB President Christine Lagarde proposed a measured approach to handling U.S. President-elect Donald Trump’s tariff threats, favoring a "cheque book strategy" over outright retaliation.

Trump has outlined plans for sweeping tariffs, including a 60% levy on Chinese goods and a 10-20% range on imports from other countries, including Europe. Lagarde interpreted the range as a negotiating tactic, suggesting Trump is “open to discussion.”

Lagarde expressed preference for a "cheque book strategy" over a "pure retaliation strategy." She explained that Europe could offer to purchase certain US goods and signal readiness for constructive dialogue.

“This is a better scenario than a pure retaliation strategy, which can lead to a tit-for-tat process where no one is really a winner,” she stated.

On the inflationary effects of tariffs, Lagarde admitted the outcome remains uncertain. She explained that the net impact on inflation would depend on various factors, including GDP shifts, currency movements, the specific goods targeted, and the duration of the tariffs.

“If anything, maybe it’s a little net inflationary in the short term,” she remarked, but emphasized the difficulty of forming a conclusive view without further details.

Full interview of ECB's Lagarde here.

• EURJPY in the fourth week of losses
• Short-term bias skewed to the downside
• Next stop could be near 158.00

EURJPY is set to post its fourth consecutive negative week, having retraced more than half of its September-October uptrend to reach the 159.00 level on Wednesday.

The 61.8% Fibonacci retracement level of 159.55 came to offer some support, but it seems the bears are not ready to give up control. The RSI and the Stochastic show no signs of a positive reversal despite hanging near their oversold levels, and the MACD has just started a new negative cycle below its red signal and zero lines, all suggesting downside risks could stay alive. Moreover, it’s worthy to note that the 20-day simple moving average (SMA) couldn’t cross above the 200-day SMA.

If the selling continues, traders could look for support within the 157.60-158.00 region, where the 78.6% Fibonacci mark and the ascending trendlines from 2022 are positioned. A violation there could send the price spiraling toward September’s low of 155.13, with a deeper dive to 154.20 on the cards. Additional declines from there could possibly pause near 153.00.

On the flip side, if the bulls manage to push the pair above 161.00, resistance could emerge near the 20- and 50-day SMAs currently within the 163.00-163.30 zone. The resistance trendline from July’s top could be a more important barrier at 164.00, whilst the 200-day SMA could give the green light for a rally to October’s high of 166.67.

In summary, bearish pressure is likely to persist, especially if EURJPY drops below 157.60-158.00.

The final trading week of November may prove to be the worst this month for the US dollar. Following the release of Chicago PMI data and the US Q3 GDP report, USD/JPY and USD/CAD have fallen to key support levels.

USD/JPY

A retest of the critical resistance level at 156.00 proved decisive for USD/JPY buyers. The rejection from this level confirmed the previously formed "bearish engulfing" pattern and led to losses exceeding 400 pips. Yesterday, the price fell below the 152.00–151.50 range, which had initiated the pair’s rally after Donald Trump's election victory. In upcoming trading sessions, this range may be retested, but now as resistance. If buyers fail to hold above 152.00, a further downtrend toward 150.00–149.00 is possible.

Key upcoming events that could shape USD/JPY’s trajectory include:

• Today at 17:00 (GMT +3): Dallas Fed Personal Consumption Expenditures (PCE) Index (US)
• Tomorrow at 02:50 (GMT +3): Japanese Industrial Production data
• Tomorrow at 17:45 (GMT +3): Chicago PMI report (US)

USD/CAD

At the start of the week, USD/CAD buyers pushed the pair sharply higher, breaking recent highs at 1.4100. However, a subsequent rise to 1.4180 was followed by a correction to 1.4000, forming a bearish "harami" candlestick pattern.
Technical analysis suggests a potential for a full-fledged downward correction if the 1.4060–1.4020 range confirms its role as resistance.

Several significant macroeconomic reports due by the end of the week may influence USD/CAD’s direction:

• Today at 16:00 (GMT +3): Canada’s Current Account Balance
• Tomorrow at 16:30 (GMT +3): Canada’s Q3 GDP report
• Tomorrow at 19:00 (GMT +3): Canada’s September Budget Balance

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Markets

Multiple US data, including the closely watched PCE deflators, yesterday didn’t stop the recent correction on the Trump-trade. The headline (0.2% M/M and 2.3% Y/Y from 2.2%,) and core PCE measures (0.3% M/M and 2.8% Y/Y from 2.7%) illustrated the bumpy path for inflation to return to 2.0%. Spending (0.4% M/M) and income (0.6% M/M) suggest that consumer spending can further support growth. US yields temporarily regained a few ticks after the release but still finished between 2.9 bps (2-y) and 5.3 bps (5-y) lower. The data support a call for gradualism, but markets still see a 25 bps December cut as the most likely scenario (70%). In Europe, ECB Board member Isabel Schnabel tried to mitigate expectations for too aggressive ECB easing. If the outlook materializes, the ECB can gradually reduce the policy rate toward a neutral level which she sees between 2% and 3%, a range not that far away from current 3.25%. In this process she doesn’t see room for 50 bps steps. Schnabel also pointed to the discrepancy between very negative surveys and less negative hard data, making her to conclude the EU isn’t heading for a recession. Schnabel’s comments caused an intraday uptick in EMU/German yields. The 2-y German yield added 1.6 bps. Longer maturities still lost up to 5.0 bps (30-y). Schnabel’s comments and the ongoing correction in US yields gave the EUR/USD pair some breathing space with the pair rebounding from 1.049 to 1.0566.

US markets are closed for the Thanksgiving Holiday today. The EMU calendar contains EC confidence data and national CPI data in Belgium, Spain and Germany. Even as the monthly inflation dynamics in individual countries might differ across countries, it’ll give a first indication on what to expect for the EMU flash estimate tomorrow. Despite an expected monthly decline (-0.5%), German Y/Y headline inflation is expected to reaccelerate from 2.4% to 2.6%. A similar pattern is expected for tomorrow’s EMU data (headline -0.2% M/M and +2.3% from 2.0%, core 2.8% from 2.7%). Yesterday’s comments from ECB’s Schnabel indicate that (underlying) inflation is still a reason for at least some ECB members not to reduce rates too quickly and avoid to make policy stimulative again. Markets until now were reluctant to pick up this message. We are keen to see the market reaction in case of higher than expected inflation data. The 2-y German yield and the EMU 2-y swap yield are testing/at risk of breaking important support areas respectively near 2.0% and 2.20%. Interesting to see whether this week’s EMU inflation data will provide some kind of ‘reflection point’ after the recent protracted yield decline. For the euro, we don’t draw any firm conclusions yet as interest rates (differentials) are only one element in a very diffuse, EU unfriendly (economic and geopolitical) environment. EUR/USD 1.0610 is first ST resistance on the charts.

News & Views

The Bank of Korea unexpectedly lowered its base rate for a second consecutive meeting by 25 bps to 3% to mitigate downside risks to the economy. Growth has weakened due to a slowdown in export growth, amid a moderate recovery in domestic demand. The BoK downgraded this and next year’s growth forecasts from 2.4% and 2.1% to 2.2% and 1.9% respectively. The future path of economic growth is subject to high uncertainties related to changes in the trade environment, trends in IT exports, and the pace of recovery in domestic demand. Inflation has stabilized despite upward pressure from a weakening FX rate. CPI is forecast to average 2.3% this year and 1.9% next year (vs August prognosis of 2.5% and 2.1%). Regarding financial stability, the slowing trend in household debt is expected to persist for some time but it is important to stay cautious concerning the potential for high FX volatility. The BoK dropped the word “carefully” with regard to the pace of further cuts, but governor Rhee indicated that cutting below neutral is not yet on the table. USD/KRW (1395) remains close to weakest levels since mid-2022.

Coffee futures tracking arabica beans rose to their highest level since 1977 ($3.23/pound) as coffee roasters try to get their hands on as much as possible beans ahead of possible shortages. Weather events in Brazil (hot and dry August-September months followed by heavy rains in October) and Vietnam could result in a supply deficit next year with EU legislation and the US tariff treat causing additional uncertainty. EU authorities are due to apply a 12-month delay to legislation (which normally comes into effect Jan 1st) which requires importers to prove the coffee beans they bought wasn’t grown on deforested land.

In focus today

In the euro area, focus turns to inflation data for Germany and Spain which we receive ahead of the euro area data tomorrow. We expect euro area headline inflation to rise to 2.3% y/y from 2.0% y/y in October. The increase is expected mainly due to base effects on core inflation and especially energy inflation, while the monthly price increases are expected to show a continuation of the disinflationary process. We expect core inflation to increase to 2.8% y/y from 2.7% y/y. However, the monthly price increases are projected to continue below what is compatible with the 2% target annualized.

ECB's Chief Economist Lane will be speaking today.

Overnight we will receive Tokyo CPI out of Japan. Consensus expects inflation to have picked up from 1.8% in October to 2.1% in November.

Economic and market news

What happened overnight

In the US, sources in the US government said that President Biden are readying a 725m USD military aid package for Ukraine, as he seeks to bolster Ukraine before leaving office in January.

In Mexico, President Sheinbaum and Economy minister Ebrard said that Mexico would retaliate if US President-elect Trump followed through with his proposed 25% cross border tariffs. According to calculations from the Mexican government this could lead to the end of 400,000 jobs in the US and push to inflation, they warned. For example, 88% of pick-up trucks sold in the US are made in Mexico and the estimate from the Mexican government is that a tariff would push up the prices of these vehicles by 3,000 USD on average.

What happened yesterday

In the US, October Core PCE inflation was slightly below expectations at 2.1% (Consensus: 2.2%), while core services inflation remained unchanged (2.6%). Q3 GDP remained unchanged in the second release (2.8%). The market reaction was rather muted after the release.

In the euro area, ECB's Schnabel, spoke about monetary policy and sounded quite hawkish stating that the ECB should cut interest rates only gradually, and not lower rates to a level that stimulates growth. Schnabel said that she does not see a significant risk of undershooting inflation adding to the debate that has been a theme from several ECB members recently. These comments are more hawkish than we have heard from several ECB members in recent weeks, however, it is classic Schnabel to position herself in that way.

In France, the French government continues to be in risk of collapse as the negotiations about a new budget continues. French Prime Minister Barnier will lose a non-confidence vote if the budget is not passed in government. The government is negotiating with Marine Le Pen's right-wing party Rassemblement National. The budget is presented to lower France's public debt problems by increasing taxes and lowering government spending, which the French left- and right wing are opposed to. The French government has said that France will meet significant market turmoil if the budget is not passed and the government falls. The spread between German and French government bonds has widened to 0.9 percentage points, the widest since 2012, while the major French stock index Cac 40 is nearing all-time lows for 2024.

Equities: Global equities were lower yesterday, with relatively broad-based declines across regions and defensive sectors outperformed. Despite this, the VIX remained very stable, and small caps outperformed. Looking at the massive amount of US macro data out yesterday, we argue that it was a mix of good and bad news, it makes it difficult to attribute the risk-off tone in equities solely to macro. In the US yesterday: Dow -0.3%, S&P 500 -0.4%, Nasdaq -0.6%, and Russell 2000 +0.1%. Asian markets are mixed this morning, with the Japanese market leading advances and Chinese markets leading declines. European and US futures are higher, led by core Europe.

FI: Markets pared ECB expectations following a string of hawkish comments by ECB's Schnabel yesterday. The pricing of cuts at the December meeting declined from 32bp to 28bp, marking a full reversal of last week's move following November PMIs. Long-end yields drifted lower across regions, with peripherals such as Italy and Spain outperforming core Europe. The US Treasury curve bull flattened with the back of the curve down some 4bp by the close. Throughout this week, markets have added a bit to expectations for the December FOMC meeting with 17bp worth of cuts currently being discounted. Next week's NFP report could be the deciding factor.

FX: The USD came under pressure during yesterday's session in a move sending EUR/USD a full figure higher - although this morning the cross has erased part of yesterday's gains now trading around the 1.0560 level. Both EUR/NOK and EUR/SEK have been fairly rangebound over the last 24 hours while USD/JPY managed to set new lows yesterday before rebounding slightly overnight.

Appetite on Wednesday was limited on both sides of the Atlantic Ocean. In the US, the crowded economic data came in mostly in line with expectations, confirming that the US economy grew 2.8% in Q3 – mostly explained by a robust 3% growth in sales, price pressures were slightly higher than expected but remained below 2%, as core PCE prices for last quarter decelerated faster than expected. Core PCE prices for October, however, posted a small uptick from 2.7% to 2.8%, parallel to market expectations and the initial jobless claims came in softer than pencilled in. Overall, there was no big surprise in yesterday’s data. And the latter gave comfort to investors that the Federal Reserve (Fed) will cut its rates by another 25bp when it meets in December. That probability advanced from around 65% to 68% and the US 2-year yield tipped a toe below the 4.20% level.

But the lower yields, and the first day of ceasefire between Israel and Hezbollah, couldn’t convince investors to buy more US equities into the Thanksgiving holiday. The aggressive reaction from both Mexico and Canada to Trump’s latest tariff threats certainly revived worries of higher business costs and lower profits. As such, the S&P500 closed Wednesday’s session a few points below the 6000 mark, Nasdaq 100 retreated 0.85% as Dow Jones closed in the negative after hitting a fresh record. Microsoft dropped more than 1% on fresh news that the FTC opened a fresh antitrust investigation into the company ‘drilling into everything’ – yes everything they do – while Apple resisted to the news that its iPhone sales barely grew this year as Android-based rivals gained ground in China and in other emerging markets.

Meme news. A drone company called Unusual Machines rallied 110% on news that Donald Trump Jr. - yes Trumps’s eldest son — has joined the company’s advisory board reminding ‘the need for drones is obvious’ and that they must ‘stop buying Chinese drones and Chinese drone parts’. Interestingly, the company warned in a regulatory file that Trump's proposed tariffs on China could affect its ability to source drones critical to its B2C business. Welcome to meme trading 2.0 and Happy Thanksgiving.

Le drame

In Europe, things were much less fun – as it is usually the case. The Stoxx 600 extended losses, and not only because of Trump’s tariff threats, but also on the rising unease in French politics, where Marine Le Pen, the far-right leader - who gained ground in the latest elections, remember? – threatened Michel Barnier’s administration – that’s doing its best to control the country’s deteriorating finances and deficit – that she would bring his government down with a no-confidence vote if he doesn’t respect their budget demands.

Needless to say that the spread between the French and German 10-year yields is rising again, even though Germany has its own political problems – mind you - and is preparing to hold a snap election because people, there, are not happy with Scholz’s government either.

Thank God, the growing French headache remains localized, for now. The French CAC40 underperformed its European peers as French bank stocks took a hit on the political chaos, but the EURUSD rebounded well past the 1.05 level – and even advanced near 1.0590 yesterday, following the other majors up against a broadly weakened US dollar. The worsening political scene in France and the widening yield gap between France and Germany, could however limit the single currency’s upside potential along with clashing opinions from the European Central Bank (ECB) members about how fast the bank should cut rates. Yesterday, ECB’s Schnabel said that the borrowing costs are no longer at a level that retrains the economy, while Luis de Guindos said – a day earlier – that more rate cuts were on their way. One thing is clear, though: while German representatives often sound more hawkish than their southern counterparts, Germany’s economy arguably relies on ECB support more than any other in the union at this point.

For now, the EURUSD has potential to extend a recovery following an aggressive selloff in November. Today, Germany and Spain will reveal their November early CPI figures. The figures are expected to print an uptick in price pressures this month. If that’s the case, the ECB doves could lose ground and let the euro bulls gain field. Also note that, the latest rise in European nat gas prices will somehow impact the inflation numbers in the coming months, and Europe is said to be facing the coldest winter since Russia invaded Ukraine and since the continent gave up on Russian energy supplies. The latter means that the gas reserves will decline faster than otherwise, adding a renewed pressure on gas and broader consumer prices. Such situation would limiting ECB’s rate cutting plans and throw a floor under the euro’s weakness. The next important target for the EURUSD recovery stands at 1.0672 – the minor 23.6% Fibonacci retracement on September to now selloff.

Elsewhere, the USDJPY benefited grandly from a broad-based dollar weakness to extend its retreat to 150 level yesterday. However, note that, released earlier this week, the Bank of Japan’s (BoJ) core CPI measures eased unexpectedly to 1.5%, a number that doesn’t necessarily back the BoJ normalization bets. Japan will release its latest inflation figures while we will be sleeping tonight. If the figures don’t meet the market expectations, if inflation in Japan remains softer-than-expected, the yen bears have room to rebound. The JPY yen bulls need a concrete hawkish sign from the BoJ to send the USDJPY below the 150 psychological level.

Daily Pivots: (S1) 1.0498; (P) 1.0543; (R1) 1.0612; More...

Intraday bias in EUR/USD remains neutral and further decline is expected with 1.0609 resistance intact. On the downside, break of 1.0330 will resume the fall from 1.1213. Also, sustained trading below 1.0404 key fibonacci level will carry larger bearish implication. Nevertheless, firm break of 1.0609 will confirm short term bottoming, and turn bias back to the upside for 1.0760 support turned resistance first.

In the bigger picture, immediate focus is now on 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404. Strong rebound from this level will keep price actions from 1.1273 (2023 high) as a medium term consolidation pattern only. However, sustained break of 1.0404 will raise the chance that whole up trend from 0.9534 has reversed. That would pave the way to 61.8% retracement at 1.0199 first. Firm break there will target 0.9534 low again.

Daily Pivots: (S1) 149.97; (P) 151.60; (R1) 152.75; More...

While USD/JPY's corrective fall from 156.74 might extend lower, strong support could be seen from 38.2% retracement of 139.57 to 156.74 at 150.18 to bring rebound. ON the upside, break of 153.23 support turned resistance will turn intraday bias back to the upside for retesting 156.74. However, decisive break of 150.18 will argue that whole rise from 139.57 could have completed, and bring deeper fall to 61.8% retracement at 146.12 next.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.2600; (P) 1.2647; (R1) 1.2728; More...

Intraday bias in GBP/USD remains neutral at this point, and further decline is still expected as long as 1.2713 resistance holds. On the downside, break of 1.2486 will resume the fall from 1.3433 to 1.2298 cluster support zone. However, firm break of 1.2713 will indicate short term bottoming, and turn bias back to the upside for 55 D EMA (now at 1.2882).

In the bigger picture, a medium term top should be in place at 1.3433, and price actions from there are correcting whole up trend from 1.0351 (2022 low). Deeper decline is now expected as long as 55 D EMA (now at 1.2893) holds, to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. Strong support should be seen there to bring rebound.