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• GBPCAD broke support zone
• Likely to fall to support level 1.7500

GBPCAD currency pair today broke the support zone between the support level 1.7700 (which reversed the price in August and September) and the 38.2% Fibonacci correction of the upward price move from April.

The breakout of this support zone accelerated the active minor impulse wave C of the ABC correction 4 from May.

GBPCAD currency pair can be expected to fall further to the next support level 1.7500, target price for the completion of the active wave 4.

• EURCHF under bearish pressure
• Likely to fall to support level 0.9250

EURCHF under the bearish pressure after breaking the support zone between the support level 0.9335 (which has been reversing the price from September) and the 61.8% Fibonacci correction of the upward price move from August.

The breakout of this support zone accelerated the active minor impulse wave iii of the higher order impulse wave (3) from May.

EURCHF can be expected to fall further to the next support level 0.9250, former strong support from January and August.

Markets

With few data in Europe or the US, markets continued to be haunted by headlines on the war in Ukraine, even as the impact wasn’t unequivocal across markets. Ukraine reporting that Russia used an Intercontinental Ballistic missile for the first time only added to fears on a further escalation. European equites and yields nosedived. In this risk-off, the dollar gained against the euro, but declined further against the yen. Still, equities staged a (wobbling) comeback. The EuroStoxx 50 currently trades little changed. US stocks opened similarly. On interest rate markets, European yields failed to build on recent tentative bottoming. German yields currently decline 4.0/5.0 bps across the curve, with the very long end underperforming(-3.0 bp). Still recent lows survive. US Treasuries underperform. Weekly jobless claims declined further (213k) but was counterbalanced by a disappointing Philly Fed business outlook (-5.5 from 10.3 vs 8.3 expected). US yields currently decline about 2-3 bps. Money markets still see an almost even chance between a 25 bps Fed rate cut (55%) or a pauze at the December meeting. Next reality check comes with the November PMI’s, scheduled tomorrow. Oil gradually leaves recent lows behind with Brent back at $ 74 p/b.

On FX markets, the dollar looked like preparing an attack on recent highs (Ukraine) but momentum faded soon. DXY even trades marginally lower at 106.6. The euro is more vulnerable. At 1.0525, recent low at 1.0497 remains within striking distance. CEE currencies also stay in the defensive. The damage for the Czech koruna remains modest (EUR/CZK 25.33 from 25.28). The zloty trades at EUR/PLN 4.345 with multiple resistance just below/near EUR/PLN 4.40. The forint also trades off intraday lows, but struggles to sustainably return below EUR/HUF 410.

News & Views

Statistics Norway reported that mainland growth economy (excluding the offshore energy industry) accelerated to 0.5% Q/Q inn Q3 from 0.3% Q/Q in Q2. Total activity including the petroleum activities and ocean transport declined 1.8% in Q3, due maintenance operations. Value added in manufacturing and mining increased 2.3% with oil refining, chemical and pharmaceutical manufacturing contributing the most. Manufacturing has increased several quarters in a row, an accelerated further in Q3. Fishing and agriculture also increased 14% . Valued added in construction stays on a negative trajectory. Regarding final expenditure, financial consumption expenditure was almost unchanged from Q2, but Statistics Norway warns this was a complex story. Car purchases decreased, after an uptick in Q2, but service consumption and Norwegians’ consumption abroad increased. After a quick rise after the pandemic, employment growth slowed but the number of employed was still 0.2% higher compared to Q3 2023. Today’s data justify recent guidance from m the Norges Bank (NB) that a restrictive monetary policy is still needed at 4.5% this year. It only sees room for gradual easing in Q1 2025. Markets see that happen in March rather than in February. The krone extends its recent rebound currently testing first important near EUR/NOK 11.60..

The Central Bank of the Republic of Turkey (CBRT) as expected left its policy rate unchanged at 50.0%. Inflation in the country has eased over recent months (headline 48.58%, Core 47.75%). That path probably still develops slower than the CBRT hoped for as it recently raised its end of year inflation forecast to 44% (from 38%) and to 21 % eoy 2025. Still, the CBRT today sees progress as Q3 Indicators suggest domestic demand continues to slow down, reaching disinflationary levels. Core goods inflation remains low and signs for an improvement in services inflation are assessed to have become more apparent. Inflation expectations and pricing behavior tend to improve, but CBRT admits they pose risks to the disinflation process. Looking forward, CBRT assesses that a tight monetary stance will bring down the trend of monthly inflation through moderation in domestic demand, real appreciation in Turkish lira, and improvement in inflation expectations. Increased coordination of fiscal policy will also contribute to this process. CBRT concludes that a tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the forecast range. CBRT holds its final meeting of the year on December 26. Analysts remain divided whether a first limited cut will already be possible in December or whether the CBRT will (have to) wait until next year. The lira recently held near record low levels against the dollar (currently USD/TRY 34.48), but regained modest ground against the euro (EUR/TRY 36. 36).

Daily Pivots: (S1) 1.6190; (P) 1.6214; (R1) 1.6230; More...

EUR/AUD's fall from 1.6598 resumed by breaking through 1.6161, and intraday bias is back on the downside. Deeper decline should be seen to 1.5996/6002 key support zone. Decisive break there will carry larger bearish implications. For now, risk will stay on the downside as long as 1.6359 resistance holds, in case of recovery.

In the bigger picture, as long as 1.5996 support holds, up trend from 1.4281 (2022 low) is still expected to resume through 1.7180 at a later stage. However decisive break of 1.5996 will argue that the medium term trend might have reversed. Deeper fall would be seen to 61.8% retracement of 1.4281 (2022 low) to 1.7180 at 1.5388, even as a correction.

Daily Pivots: (S1) 1.0497; (P) 1.0554; (R1) 1.0600; More...

EUR/USD is still extending consolidation above 1.0495 temporary low, and intraday bias stays neutral. Outlook remains bearish with 1.0760 support turned resistance intact. On the downside, firm break of 1.0495 will resume the fall from 1.1213 to 1.0447 support and then 1.0404 key fibonacci level next.

In the bigger picture, price actions from 1.1274 (2023 high) are seen as a consolidation pattern to up trend from 0.9534 (2022 low), with fall from 1.1213 as the third leg. Downside should be contained by 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404, to bring up trend resumption at a later stage. However, firm break of 1.0404 will raise the chance of reversal and target 61.8% retracement at 1.0199.

Daily Pivots: (S1) 1.2618; (P) 1.2666; (R1) 1.2702; More...

Intraday bias in GBP/USD remains neutral for the moment, as consolidation continues above 1.2596 temporary low. Outlook stays bearish with 1.2842 support turned resistance intact. On the downside, break of 1.2596 will resume the fall from 1.3433 to 100% projection of 1.3433 to 1.2842 to 1.3047 at 1.2456.

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 1.2977) 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.

Daily Pivots: (S1) 0.8817; (P) 0.8839; (R1) 0.8865; More…

No change in USD/CHF's outlook as consolidation continues below 0.8916. Intraday bias stays neutral at this point. Further rally is expected as long as 0.8773 resistance turned support holds. On the upside, break of 0.8916 and sustained trading above 61.8% retracement of 0.9223 to 0.8374 at 0.8899 will pave the way back to 0.9223 key resistance.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern. Rise from 0.8374 is seen as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes.

Daily Pivots: (S1) 154.68; (P) 155.28; (R1) 156.04; More...

USD/JPY dips notably today but stays in range of 153.27/156.74. Intraday bias remains neutral at this point. On the upside, break of 156.74 will resume the whole rally from 139.57 towards 161.94 high. On the downside, though, break of 153.27 will resume the correction towards 38.2% retracement of 139.57 to 156.74 at 150.18.

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.

Yen rebounded broadly today as market participants interpreted comments from BoJ Governor Kazuo Ueda as a potential signal for a rate hike in December. Ueda noted that there is still a month before the next policy meeting and that the central bank will have a substantial amount of data to consider by then. While he did not commit to any policy changes or express a clear intention to adjust interest rates, this "openness" was well-received by Yen bulls. The mere possibility of BoJ adopting a more hawkish stance provided enough impetus for Yen to strengthen against its peers.

In contrast, Euro declined broadly, breaking to the downside against both Aussie and Loonie, although it remained range-bound against Dollar. ECB attempted to downplay the significance of the previous day's stronger-than-expected wage growth data, which is a clear indication that they are prepared to deliver another rate cut in December. Notably, one of the known dovish members of ECB Governing Council suggested the idea of continuous rate cuts until the deposit rate reaches neutral level of 2%. While it may be premature to project policy that far ahead, it appears that some officials are already setting the stage to manage market expectations for the coming year.

Overall, for the week so far, Euro is the worst-performing major currency. Despite today's rebound, Yen remains the second weakest, followed by Dollar. Aussie is currently the strongest performer, followed by Loonie and Swiss Franc. Sterling and Kiwi continue to occupy middle positions in the performance rankings.

Technically, EUR/CAD's fall from 1.5225 resumed by breaking through 1.4710 temporary low. Near term outlook will now stay bearish as long as 1.4888 resistance holds, and deeper fall would be seen to 1.4592 support. Firm break there would argue that the decline from 1.5225 is at least correcting the whole uptrend from 1.2867 (2022 low). Deeper fall should then be seen to 38.2% retracement of 1.2867 to 1.5225 at 1.4324.

In Europe, at the time of writing, FTSE is up 0.32%. DAX is up 0.23%. CAC is down -0.29%. UK 10-year yield is down -0.0357 at 4.438. Germany 10-year yield is down -0.035 at 2.318. Earlier in Asia, Nikkei fell -0.85%. Hong Kong HSI fell -0.53%. China Shanghai SSE rose 0.07%. Singapore Strait Times fell -0.12%. Japan 10-year yield rose 0.0269 to 1.096.

US initial jobless claims falls to 213k, vs exp 220k

US initial jobless claims fell -6k to 213k in the week ending November 16, below expectation of 220k. Four-week moving average of initial claims fell -4k to 218k.

Continuing claims rose 36k to 1908k in the week ending November 9, highest since November 13, 2021. Four-week moving average of continuing claims rose 5k to 1879k, highest since November 27, 2021.

Fed's Barkin avoids prejudging December decision, cites vulnerability to cost shocks

Richmond Fed President Tom Barkin told the Financial Times he would not “prejudge" the rate decision at the December meeting. He acknowledged the dual challenges of elevated inflation and labor market strains.

“If you’ve got inflation staying above our target, that makes the case to be careful about reducing rates,” he said. "If you’ve got unemployment accelerating, that makes the case to be more forward-leaning.”

Barkin emphasized growing vulnerability to cost shocks which he said was higher than it might have been five years ago. He also pointed to business concerns over potential inflationary pressures stemming from President-elect Donald Trump’s proposed tariffs and deportation policies

However, he added that Trump’s plans to boost domestic energy production could have a counteracting "disinflationary" effect.

While businesses are apprehensive about economic policy changes under the new administration, Barkin underscored that the Fed would not preemptively adjust its policy.

“We shouldn’t try to solve it before it happens,” he remarked.

ECB's Stournaras supports continuous rate cuts until neutral level reached

Greek ECB Governing Council member Yannis Stournaras expressed strong support for further monetary easing, suggesting a rate cut at every meeting moving forward until the policy rate reaches the "neutral rate," estimated at around 2%.

Speaking with Bloomberg TV, Stournaras described the proposed quarter-point reduction in December, which would bring the deposit rate to 3%, as the “right response” to current economic and inflation conditions.

He refrained from ruling out a larger 50 basis-point cut, and emphasized that external factors, including market reactions and the Fed's actions, remain uncertain.

Stournaras also downplayed concerns over the sharp third-quarter rise in negotiated wages, the highest since the euro's inception in 1999, stating, “We expect that to fall in the months to come. We thought it’s one blip but not a permanent increase.”

ECB’s Villeroy: Wage data backward-looking, advocates agile pragmatism

French ECB Governing Council member François Villeroy de Galhau, speaking at a conference today, emphasized a cautious and pragmatic stance on monetary policy, downplaying the significance of recent stronger-than-expected wage data.

He described the Q3 surge in negotiated wages as a “backward-looking” indicator, primarily reflecting the “lagged effects” of earlier negotiations in Germany, which were already factored into the ECB’s September projections.

Villeroy highlighted a shift in risks, stating that the balance for both growth and inflation now tilts to the downside. He also noted that potential US tariffs are "not expected to alter significantly the inflation outlook in Europe".

Against this backdrop, Villeroy reaffirmed the ECB's commitment to "continue to reduce the degree of monetary policy restriction," while underscoring that the pace must be guided by "agile pragmatism" and "full optionality" in future decisions.

BoJ's Ueda: FX impact on economy and prices taken 'seriously' in policy decisions

At a forum today, BoJ Governor Kazuo Ueda admitted that the central bank takes exchange rate movements "seriously" when forming its economic and inflation outlook. He also stressed the importance of understanding the factors driving current exchange rate changes and their broader implications.

On monetary policy, Ueda reiterated that decisions would be made "meeting by meeting," based on the most up-to-date information. With a month remaining until December meeting, Ueda noted that additional data would provide greater clarity for the central bank’s deliberations.

Commenting on potential impacts from the policies of US President-elect Donald Trump, Ueda admitted that it was too hard to predict. He affirmed that "as soon as the new administration announces new set of policies, we would like to incorporate into our economic outlook."

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 154.68; (P) 155.28; (R1) 156.04; More...

USD/JPY dips notably today but stays in range of 153.27/156.74. Intraday bias remains neutral at this point. On the upside, break of 156.74 will resume the whole rally from 139.57 towards 161.94 high. On the downside, though, break of 153.27 will resume the correction towards 38.2% retracement of 139.57 to 156.74 at 150.18.

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.