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Today’s PMI figures were released and came in worse than analysts’ expectations. The Flash Manufacturing PMI and Flash Services PMI for both Germany and France fell below the 50.0 threshold, indicating that Europe’s economy is slowing down.

This weakened the euro further and exacerbated the situation on the EUR/USD chart, which has been in a downtrend since early October (as indicated by the red channel):

→ Earlier, support near the 1.0800 level (drawn through the spring-summer lows) was breached.

→ Today, the pair fell below the psychological level of 1.0500 and beneath the 2023 low.

Bears appear to be in control, with EUR/USD trading near the lower boundary of the channel. Arrows on the chart highlight that both the channel median and the 1.0500 level are acting as resistance.

On the other hand, bulls might find hope in the long lower shadow on today’s candle, which could signal emerging demand capable of providing support for the weakened euro.

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The British pound is lower for a straight third trading day on Friday. In the North American session, GBP/USD is trading at 1.2543, down 0.36% on the day.

UK retail sales weaker than expected

UK retail sales disappointed in October, with a sharp decline of 0.7% m/m. This follows a downwardly revised 0.1% gain in September and missed than the market estimate of 0.3%. Annually, retail sales rose 2.4%, well below the market estimate of 3.2%. The September reading was revised downwards from 3.9% to 3.2%.

The sharp drop in retail sales can be attributed to low consumer confidence and the recent Budget. The GfK consumer confidence index showed an improvement, rising from -21 to -18, but this points to a very pessimistic British consumer who is thinking twice before making discretionary purchases.

The Reeves Budget on Oct. 31 dampened consumer spending, as the government had warned about “difficult decisions” and proceeded to deliver a Budget with some 40 billion pounds worth of tax increases. Understandably, consumers held back on spending in October and retail sales were down across most categories.

The economy has slowed since the July election and services and manufacturing activity have decelerated for three straight months. The UK releases the Services and Manufacturing PMIs later today. The Services PMI is expected to remain unchanged at 52.0, while the Manufacturing PMI if projected to inch up to 50.0, up from 49.9. If the PMIs are weaker than expected, the pound could respond with losses.

The US will also publish manufacturing and services PMIs on Friday, with little change expected. The Manufacturing PMI is expected to rise from 45.5 to 45.8, and the Services PMI, which has been showing solid growth, from 55 to 55.2.

GBP/USD Technical

• GBP/USD is testing support at 1.2557, followed by support at 1.2525
• There is resistance at 1.2609 and 1.2641

Market Picture

Crypto market capitalisation surpassed $3.3 trillion, up 3.8% in the last 24 hours. Ethereum (+7.4%), Solana (+7.5%), XRP (+24%), and Cardano (+9.6%) provided traction.

The price of Bitcoin broke through $99K on Friday morning, continuing its steady assault on all-time highs. A strong inflow of capital into spot BTC ETFs is fuelling the systematic uptrend, largely due to institutional clients and speculators. However, since the beginning of November, there have also been several news-driven rallies. The most recent was the resignation of SEC chief Henry Gensler. He had been actively trying to curb the spread of cryptocurrencies throughout the financial industry. Now, traders are betting on a U-turn in crypto policy, not just a more dovish regulation.

Bitcoin is rapidly approaching $100K, at which point we should expect a major shakeout at a major milestone, but we still see the end of this momentum around $110K.

XRP rose by almost a quarter in less than 24 hours on the news of the SEC chief’s departure. The price peaked at $1.43 early on Friday before pulling back to $1.37. This was the area of the 2021 highs when there was also a spike in hopes of a court victory against the SEC. The all-time high of 3.84 was set in early 2018, during the first altcoin mania.

News Background

According to Bloomberg, Trump and his transition team are discussing the possibility of creating a White House staff position focused on cryptocurrencies with industry leaders. The official is expected to play a liaison role between Congress, the White House, as well as the SEC and CFTC.

The Foundation for Research on Equal Opportunity questioned the possibility of solving the US national debt problem with a Bitcoin reserve. The initiative, which has been submitted to Congress for consideration, involves purchasing 1 million BTCs for five years at the expense of the Fed’s gold reserves.

Since the beginning of the year, MicroStrategy’s shares have risen 650%, outperforming bitcoin’s growth by a factor of five. The company’s market capitalisation has exceeded $96 billion. Previously, the company’s founder, Michael Saylor, announced his intention to turn MicroStrategy into a bitcoin bank with a capitalisation of $1 trillion.

UK economic activity weakened in November, with the Composite PMI falling from 51.8 to 49.9, its first contraction in 13 months. Manufacturing PMI declined to a 9-month low of 48.6, down from 49.9, while Services PMI hit a 13-month low at 50.0, down from 52.0.

Chris Williamson of S&P Global Market Intelligence noted that businesses are reporting falling output and employment cuts for the second consecutive month. Post-budget sentiment has deteriorated sharply, with optimism now at its lowest since late 2022. Companies have expressed significant concern over the announced increase in employers' National Insurance contributions.

The November data suggest the economy is contracting modestly, with GDP estimated to decline at a quarterly rate of -0.1%. Williamson warned of the potential for further job losses unless sentiment improves.

On the inflation front, selling price growth slowed to its lowest post-pandemic rate, but elevated wage pressures in services remain a challenge, likely tempering the case for aggressive rate cuts by BoE.

Full UK PMI flash release here.

The USD/JPY pair remains stable at approximately 154.30 amid global economic fluctuations and expectations of potential Japanese stimulus measures.

Japan's latest inflation data for October revealed a decline to 2.3%, marking the lowest level in nine months and potentially easing pressure on the Bank of Japan (BoJ) for immediate rate hikes. However, BoJ Governor Kazuo Ueda has hinted at a possible rate increase in December due to the yen's prolonged weakness.

Japan's manufacturing sector contracted more than anticipated in November, while the service sector showed expansion, highlighting a mixed economic outlook.

Reports suggest the Japanese government may introduce a significant stimulus package worth 90 billion USD to mitigate the impact of inflation on households. While details remain undisclosed, the possibility of such measures has generated some optimism around the yen.

Technical analysis of USD/JPY

H4 Chart: the USD/JPY is forming a consolidation pattern around 154.45. A downward breakout could lead to further movement towards 153.00, while an upward breakout might pave the way to 156.20, potentially extending to 157.60. The MACD indicator supports this outlook, with its signal line positioned above zero but trending downwards, suggesting the USD/JPY pair is approaching a critical decision point.

H1 Chart: a consolidation around 154.45, potentially extending to 154.88, sets the stage for possible corrective movements towards 153.00. A subsequent recovery could push the pair to 156.20, marking a new growth phase. The Stochastic oscillator, currently above 80, indicates overbought conditions, signalling a likely retraction to lower levels, aligning with the potential for a near-term correction.

•  AUDUSD holds steady within 0.6500 zone
• Technical picture remains gloomy below 0.6630

AUDUSD has largely ignored the swings in the US dollar this week, staying relatively stable within the 0.6500 area and slightly above its recent three-month low of 0.6439.

There is not much evidence of strong buying appetite at the moment as the RSI is pointing down in the bearish area below 50 and the stochastic oscillator is set for a negative reversal. Moreover, the short-term trend is clearly developing within a bearish channel and below the simple moving averages (SMAs), reflecting downbeat sentiment.

A move above the 20-day SMA and the former support trendline at 0.6555 could find immediate resistance at the upper band of the channel and the 38.2% Fibonacci retracement of the ongoing bearish trend, which also lines up with the flattening 200-day SMA. Even higher, the bulls may attempt to violate the negative trend above the previous high and the 50% Fibonacci of 0.6690.

Should sellers breach the 0.6440 base, the decline could stretch toward the critical support trendline which connects the lows from 2022 to 2024 seen at 0.6380. A close lower could spark an aggressive downfall toward the 0.6270-0.6300 base. If the bears claim that floor too, the focus will turn to the 2022 bottom of 0.6169.

In brief, AUDUSD is not in great shape despite staying resilient above its recent lows. A rebound above 0.6630 could help avoid a bearish continuation, whilst a break below 0.6380 could signal further downside in the long-term picture.

Eurozone economic activity weakened sharply in November, with PMI Manufacturing falling to 45.2 from 46.0 and PMI Services dropping to 49.2 from 51.6, pushing Composite PMI to a 10-month low of 48.1, down from 50.0. For the first time since January, both sectors recorded output declines, reflecting broader economic struggles.

Country-level data painted a bleak picture. France saw its Composite PMI drop to 44.8, with Manufacturing PMI at 43.2 and Services PMI at 45.7—both hitting 10-month lows. Germany's Composite PMI fell to 47.3, a 9-month low, with Services PMI sliding into contraction at 49.4 despite a slight improvement in Manufacturing PMI, which edged up to 43.2.

Cyrus de la Rubia of Hamburg Commercial Bank highlighted "stagflationary" conditions, with falling activity alongside rising input and output prices driven by service sector costs and wage growth. He pointed to political instability in France and Germany and global uncertainties, including potential US tariffs, as key contributors.

Full Eurozone PMI flash release here.

Short Term Elliott Wave View in GBPUSD suggests decline from 9.26.2024 high is in progress as a zigzag structure. Down from 9.26.2024 high, wave A ended at 1.284. Wave B bounce ended at 1.3047 as the 1 hour chart below shows. Wave C lower is now in progress with internal subdivision as a 5 waves impulse Elliott Wave structure. Down from wave B, wave ((i)) ended at 1.283 and wave ((ii)) ended at 1.3. Pair then resumed lower in wave ((iii)). Down from wave ((ii)), wave (i) ended at 1.294 and rally in wave (ii) ended at 1.3.

Pair resumed lower in wave (iii) towards 1.2627 and wave (iv) rally ended at 1.272. Wave (v) lower ended at 1.2594 which completed wave ((iii)) in higher degree. Rally in wave ((iv)) unfolded as a zigzag structure. Up from wave ((iii)), wave (a) ended at 1.2689 and pullback in wave (b) ended at 1.261. Wave (c) higher ended at 1.2715 which completed wave ((iv)) in higher degree. Wave ((v)) of C lower is now in progress with potential target 100% – 161.8% of wave A. This area comes at 1.208 – 1.245 where buyers can appear for 3 waves rally at least.

GBPUSD 60 Minutes Elliott Wave Chart

GBPUSD Elliott Wave Video

https://www.youtube.com/watch?v=Tq-QXQEYs_s

Daily Pivots: (S1) 193.72; (P) 195.23; (R1) 196.09; More...

Intraday bias in GBP/JPY remains neutral at this point. On the upside, break of 199.79 will resume whole rebound from 180.00. However, firm break of 193.54 will extend the fall from 199.79 to 183.70 support instead.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Daily Pivots: (S1) 163.11; (P) 163.93; (R1) 164.71; More....

EUR/JPY's fall from 166.67 is resuming by breaching 161.48 temporary low. Intraday bias is back on the downside for 155.14 support. Corrective rebound from For now, risk will stay on the downside as long as 154.40 could have completed with three waves up to 166.67 already. Risk will now stay on the downside as long as 164.74 resistance holds, in case of recovery.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.