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Key Highlights

• GBP/USD started an upside correction from the 1.2500 support.
• It cleared a key contracting triangle with resistance at 1.2600 on the 4-hour chart.
• Bitcoin tested the $91,000 zone before the bulls appeared.
• USD/JPY declined heavily below the 153.50 and 152.00 support levels.

GBP/USD Technical Analysis

The British Pound found support near 1.2500 against the US Dollar. GBP/USD formed a base and recently started a recovery wave above 1.2550.

Looking at the 4-hour chart, the pair cleared a key contracting triangle with resistance at 1.2600. The pair climbed above the 23.6% Fib retracement level of the downward move from the 1.3047 swing high to the 1.2487 low.

However, the pair is still well below the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour). On the upside, the pair could face resistance near the 1.2700 level.

The first major resistance is near the 1.2750 level or the 50% Fib retracement level of the downward move from the 1.3047 swing high to the 1.2487 low. A close above the 1.2750 level could set the tone for another increase.

The next major resistance could be 1.2835, above which the price could climb higher toward the 1.2950 resistance. Any more gains might send GBP/USD toward 1.3000.

On the downside, immediate support sits near the 1.2600 level. The next key support sits near the 1.2550 level. Any more losses could send the pair toward the 1.2500 level.

Looking at Bitcoin, the price extended its downside correction and tested the $91,000 zone where the bulls emerged.

Upcoming Economic Events:

• German Consumer Price Index for Nov 2024 (YoY) (Prelim) – Forecast +2.2%, versus +2.4% previous.
• German Consumer Price Index for Nov 2024 (MoM) (Prelim) – Forecast -0.2%, versus +0.4% previous.

Businesses remain very upbeat about the year ahead. There are also some signs that current conditions are gradually improving.

Key results (November 2024)

• Business confidence: 64.9 (Prev: 65.7)
• Expectations for own trading activity: 48.0 (Prev: 45.9)
• Activity vs same month one year ago: -9.7 (Prev: -10.5)
• Inflation expectations: 2.53% (Prev: 2.83%)
• Pricing intentions: 42.2 (Prev: 44.2)

Business confidence remained close a ten-year high in the November survey. General sentiment was slightly lower compared to October, but firms’ own activity expectations – which have tended to correspond more closely with GDP growth – rose another 2 points to 48.

Confidence was stronger this month in the agriculture, retailing and services sectors. This was partly offset by a drop in construction and manufacturing (though the latter was coming off a sharp rise in October).

The surge in confidence in recent months has followed the rapid turnaround in the Reserve Bank’s stance, from warning about the possibility of an interest rate hike in May, to delivering 75bp of OCR cuts (at the time of the survey) with the strong likelihood of more to come.

Firms’ growing confidence about the year ahead is now also being accompanied by signs of a gradual improvement in current conditions. A net 10% of firms reported that their activity was down on the same time last year – still soft, but the gap is closing compared to the net 24% who were behind the pace in July. The agriculture sector in particular is running well ahead of last year, which likely reflects the improvements in meat and dairy prices and the post-cyclone recovery in horticulture.

Meanwhile, the inflation indicators in this month’s survey were fairly benign overall. Expected inflation for the year ahead fell from 2.8% to 2.5% (this month will have captured the full response to the Q3 CPI figures, which were released mid-October). Firms’ own pricing intentions dipped slightly this month, although they remain above their long-run average. Firms continue to see a gradual easing in their own cost pressures, and wage growth expectations have settled at around 2.6% in recent months.

We’re forecasting a 0.2% fall in GDP for the September quarter, followed by a modest 0.3% increase in the December quarter. The RBNZ’s forecasts in yesterday's Monetary Policy Statement were identical to ours. While the business confidence survey has certainly been more ebullient than other high-frequency indicators, it generally supports our view of a return to modest growth in the economy.

New Zealand's ANZ Business Confidence dipped marginally in November, falling from 65.7 to 64.9, but it remains at what ANZ describes as an "impressive high" level. Own Activity Outlook, a key forward indicator, rose to a decade high of 48.0 from 45.9, reinforcing optimism about future economic conditions

Inflation related metrics also showed broad improvement, with cost expectations down from 64.2 to 62.9, wage expectations easing from 77.0 to 75.5, and pricing intentions falling from 44.2 to 42.2, marking the first decline in four months. Notably, inflation expectations dropped significantly from 2.83% to 2.53%.

ANZ attributed the robust activity outlook to the impact of interest rate cuts, which are "changing actual behavior, not just expectations." While the economy remains fragile, ANZ highlighted that "things are starting to turn higher," with improving activity suggesting early signs of recovery.

RBNZ is likely to take comfort in these trends, as "sufficient domestic disinflation pressure" appears to be in the pipeline, even if growth rebounds faster than expected. However, the survey tempered expectations for aggressive rate cuts, indicating that "large emergency cuts" may not be necessary.

Full NZ ANZ business confidence release here.

Summary

United States: Data Came in Like a Butterball

• Anyone who has ever gobbled until they wobbled can tell you it can be challenging to digest too much at one time. In the financial world, you know it's Thanksgiving when you get a full slate of economic data stuffed into one day. Nobody is relegated to the kids table as we break down what all this data mean for the outlook.
• Next week: ISM Manufacturing Index (Mon.), ISM Services Index (Wed.), Employment (Fri.)

International: Reserve Bank of New Zealand Eases Into Summer; German Business Sentiment Shivers

• It was a relatively light week for international economic data and events. The Reserve Bank of New Zealand delivered its second consecutive 50 bps rate cut to reach a policy rate of 4.25%, and Governor Adrian Orr signaled the possibility for another move of the same size in Q1 if the outlook evolves as expected. Australia monthly CPI data were somewhat mixed though showed stickiness in underlying price pressures, and German Business Sentiment data were somewhat disappointing.
• Next week: China PMIs (Sat.), Australia GDP (Wed.), Reserve Bank of India Policy Rate (Fri.)

Credit Market Insights: Credit Demand Rises Alongside Application Rejection Rates

• Consumer credit demand broadly rose compared to the start of 2024. At the same time, rejection rates for applicants across consumer credit products have remained elevated, demonstrating that consumers cannot rely on credit to sustain their spending patterns to the same degree they have been able to in prior cycles.

Topic of the Week: And So It Begins

• President-elect Donald Trump proposed a 25% tariff on all imported goods from Mexico and Canada and an additional 10% levy on all products from China this week. President Claudia Sheinbaum has signaled that Mexico is prepared to respond with retaliatory tariffs. How important are Canada and Mexico to U.S. imports?

Full report here.

• Bitcoin rebounds after hitting support near 90,600
• This could mean that the bearish correction is over
•  A break above 100,000 could signal uptrend continuation
• For the picture to turn bearish, a dip below 66,700 may be needed

BTCUSD rebounded on Wednesday, after hitting support near the 90,600 zone on Tuesday. Although the crypto king corrected lower after nearly touching the psychological round figure of 100,000, the broader picture continues to point to a healthy longer-term uptrend, and today’s rebound may be the beginning of the next impulsive wave.

The RSI exited its above-70 zone, but it turned north again today, suggesting that it could re-enter that extreme zone and perhaps stay there for a while longer. This would indicate extremely bullish momentum rather than overbought conditions. The MACD, although below its trigger line, remains at extremely positive levels and has started showing signs of bottoming.

If the bulls are strong enough to stay in charge, they may decide to retest the 100,000 zone, the break of which would confirm a higher high and perhaps set the stage for a new record around the next psychological zone of 105,000.

On the downside, a dip below 90,600 could signal a deeper bearish correction, perhaps towards the 84,500 area, but the uptrend would still be intact, supported by the trendline drawn from the low of September 7, as well as the 100- and 200-day EMAs. For a bearish reversal to start being discussed, a dip below the key pivot zone of 66,700 may be needed.

To sum up, Bitcoin rebounded today, suggesting that the bulls may be in the mood to extend the prevailing uptrend. A breach of the 100,000 figure will take the price into uncharted territory and corroborate the bullish case.

The Reserve Bank of New Zealand (RBNZ) cut its key interest rate by 50 basis points to 4.25%, bringing the total number of cuts in this cycle to 125. The move was in line with average market forecasts, although it represents a higher rate of normalisation than the G10 club of major developed market currencies.

The RBNZ attributed the move to inflation slowing towards the middle of its target range of 1-3% p.a. and inflation expectations stabilising around that level for the next two years. The central bank also indicated its willingness to cut rates next year if there are no inflation surprises.

Fundamentally, the increased pace of rate cuts is negative for the currency, but markets have priced it in since early October. In that time, the NZDUSD has lost over 9%.

This has not only been a result of the Kiwi’s weakness but also the dollar’s strength.

However, the currency market’s reaction has been remarkable. The NZDUSD jumped over 1% in response to the release of the rate decision. So far, this looks like a corrective bounce caused by profit-taking after a strong move. The rally could extend to 0.5940, which is 50 pips above the current price. However, a stronger move to just above 0.6000 cannot be ruled out.

On the other hand, in the minutes of its November meeting released on Tuesday evening, the Fed allowed for a pause in the rate cuts and provided a firmer tone than previously expected.

The tone of monetary policy between the Fed and the RBNZ is diverging in favour of the former. Therefore, it is still difficult to see the NZDUSD’s rise from the lower boundary of the 2-year range as the start of a trend reversal but rather as a temporary bounce unless the fundamental picture changes.

• GBPAUD broke daily down channel
• Likely to rise to resistance level 1.9600

GBPAUD currency pair today broke the resistance trendline of the daily down channel from the end of October (which encloses the earlier downward ABC correction (2) – which stopped earlier at the support level 1.9275).

The breakout of this down channel should accelerate the active impulse wave (3) – which belongs to the higher order impulse wave 3 from October.

GBPAUD currency pair can be expected to rise to the next resistance level 1.9600 (former top of wave B of the previous ABC correction (2)).

• EURUSD reversed from support area
• Likely to rise to resistance level 1.0620

EURUSD currency pair recently reversed up from support area located at the intersection of the long-term support level 1.0455 (previous yearly low from 2023) and the lower weekly Bollinger Band.

The upward reversal from the support level 1.0455 will form the weekly Bullish Engulfing if the pair closes this week near the current levels.

Given the oversold weekly Stochastic and the strength of the support level 1.0455, EURUSD currency pair can be expected to rise to the next resistance level 1.0620 (former support from May).

U.S. personal income grew by 0.6% mom in October, exceeding market expectations of a 0.3% mom rise, with a total increase of USD 147.4B. Personal spending also climbed, rising 0.4% mom or USD 72.3B, aligning with forecasts. The robust income growth outpacing spending suggests an improved capacity for household savings or future consumption, adding resilience to the economy.

Inflation metrics, reflected in the PCE price indices, showed modest increases. Headline PCE price index rose 0.2% mom, while the core PCE price index, which excludes food and energy, rose 0.3% mom, both in line with expectations. Year-over-year, the headline PCE rose to 2.3% from 2.1%, and the core PCE increased to 2.8% from 2.7%, also meeting expectations.

Goods prices fell by -1.0% yoy, while services prices rose by 3.9% yoy, highlighting inflationary pressures concentrated in the services sector. Food prices saw a slight increase of 1.0% yoy, while energy prices dropped by -5.9% yoy, easing some cost pressures for consumers.

Full US Personal Income and Outlays release here.