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Sterling posted modest gains today after the UK reported stronger-than-expected rebound in headline inflation for October. More importantly, both core CPI and services price growth also increased, indicating that underlying inflation is gaining momentum.

This resurgence in inflation diminishes the likelihood of BoE implementing another rate cut in December. Market expectations have adjusted accordingly, with swaps markets now assigning only a 15% probability to a rate reduction next month. This shift aligns with BoE's recent emphasis on a measured and gradual approach to policy easing. The central bank has stressed the need for additional time to assess the impact of the Autumn Budget before making further monetary adjustments.

In contrast, Euro failed to gain traction despite robust wage growth data from the Eurozone. ECB reported that negotiated wages in the third quarter rose by 5.42% yoy, a significant jump from the 3.54% growth in the second quarter. This also marks the fastest wage growth since early 1993. However, Euro remained subdued as concerns over sluggish economic activity overshadowed the inflationary pressures from rising wages.

The ongoing weakness in the Eurozone's economic performance is expected to keep ECB on track for another 25b rate cut in December. While the central bank may proceed with this cut, the pace of easing next year is anticipated to slower as policymakers balance the need to support growth with the risks of fueling inflation.

Overall for the day, however, Dollar is the strongest one, followed by Sterling, and then Canadian. Yen is the worst, followed by Kiwi and then Aussie. Euro and Swiss Franc are mixed in the middle.

Technically, EUR/USD's recent decline from 1.1213 might be ready to resume through 1.0495 temporary low soon. But the main question is whether it could draw enough support from 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404 to bring near term bullish reversal. Decisive break of 1.0404, however, will raise the chance of reversal and target 61.8% retracement at 1.0199.

In Europe, at the time of writing, FTSE is up 0.17% DAX is up 0.44%. CAC is up 0.41%. UK 10-year yield is up 0.040 at 4.480. Germany 10-year yield is up 0.036 at 2.380. Earlier in Asia, Nikkei fell -0.16%. Hong Kong HSI rose 0.21%. China Shanghai SSE rose 0.66%. Singapore Strait Times fell -0.38%. Japan 10-year JGB yield rose 0.0044 to 1.069.

UK CPI jumps to 2.3% in Oct, core CPI rises to 3.3%

UK CPI reaccelerated from 1.7% yoy to 2.3% yoy, above expectation of 2.2% yoy. Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.3% yoy, ticked up from prior month's 3.2% yoy and above expectation of 3.1% yoy.

CPI goods annual rate rose from -1.4% yoy to -0.3% yoy, while the CPI services annual rate rose from 4.9% yoy to 5.0% yoy.

On a monthly basis, CPI rose by 0.6% mom, above expectation of 0.5% mom.

Japan's exports rebound by 3.1% yoy in Oct, but trade deficit persists

Japan's exports rose 3.1% yoy in October, reaching JPY 9,427B, a strong recovery from the -1.7% yoy decline in September, which marked a 43-month low.

This rebound was primarily driven by a 1.5% yoy increase in shipments to China, buoyed by strong demand for chipmaking equipment. However, exports to the US, Japan's largest trading partner, fell -6.2% yoy, reflecting weakness in auto shipments.

On the import side, growth remained modest at 0.4% yoy, totaling JPY 9,888B. This resulted in a trade deficit of JPY -461B for the month, the fourth straight month of shortfall.

Seasonally adjusted data showed exports declining -0.7% mom to JPY 8,882B, while imports ticked up 0.2% mom to JPY 9,239B, leading to a seasonally adjusted trade deficit of JPY -358B.

Australia Westpac leading index hits 0.26%, decisive breakaway from year-long sluggishness

Australia's Westpac Leading Index moved decisively into positive territory in October, rising from -0.20% in September to +0.26%.

This marks a significant shift, as the index had been hovering in slight negative territory, between -0.3% and flat, for most of the past year. The October reading is not only the first clear above-trend result since November 2023 (+0.16%) but also the strongest since July 2022 (+0.63%).

The improvement in the index provides a "constructive signal" for the economy’s future momentum. Westpac’s outlook aligns with this shift, forecasting an acceleration in economic growth from a nadir of 1.0% in mid-2024 to 1.5% by year-end and 2.4% by the end of 2025.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2634; (P) 1.2662; (R1) 1.2711; More...

GBP/USD's recovery extended higher today but lost momentum well ahead of 55 4H EMA. Intraday bias remains neutral at this point. 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.

USDJPY bounced on Wednesday, gaining 0.7% in Asian / European trading as immediate threats of stronger escalation of the war in Ukraine started to fade, while Trump trade continues to underpin dollar.

Fresh rally retraced almost 76.4% of shallow pullback (156.74/153.28), signaling that correction from new multi-month peak (156.74) might be over).

The notion is supported by Tuesday’s strong downside rejection which left long-tailed daily Doji candle and formed a bear trap under daily Tenkan-sen (154.44) which proved to be a solid support.

Daily Tenkan/Kijun-sen remain in bullish configuration and positive momentum is strong, adding to bullish scenario, in which violation of 156.67/74 (Fibo 76.4% of 161.95/139.57 / / Nov 15 high) would open way for further gains and unmask psychological 160 barrier.

Near-term bias is expected to remain firmly with bulls while the price stays above daily Tenkan-sen, guarding Tuesday’s spike low (153.28) and daily Kijun-sen (152.80).

Res: 156.00; 156.74; 157.86; 158.86.
Sup: 155.42; 154.44; 154.00; 153.28.

The Australian dollar against the US dollar is currently experiencing a pause in its recent upward trajectory, stabilising around 0.6525 on the H4 chart. After three sessions of gains, the currency pair is undergoing a period of consolidation, likely preparing for a return to a stable ascending trend.

The slight retreat in the US dollar, driven by profit-taking after its rally and anticipation of new developments in the US Treasury under President Donald Trump, has influenced the performance of the AUD.

The minutes from the Reserve Bank of Australia's latest meeting highlight the bank's commitment to maintaining a restrictive monetary policy until inflation consistently approaches the target range. The RBA remains open to adjusting its policy stance in response to changing economic conditions, with market expectations leaning towards a potential rate cut in the coming months, with a 37% probability in February and 58% in April.

Technical analysis of AUD/USD

H4 chart: The AUD/USD pair is currently in a phase of correction following a downturn that saw the local decline target at 0.6440 reached. The market is forming a corrective wave towards 0.6543. If this correction is completed, a new downtrend towards 0.6380 is anticipated. The MACD indicator supports this bearish AUD/USD outlook, positioned below the zero line and poised to descend to new lows.

H1 chart: On the H1 chart, AUD/USD is approaching the correction target near 0.6543, forming a consolidation pattern just below this level. The breakout from this consolidation is expected to be downwards, initiating another phase of decline. The immediate target for this decline is set at 0.6464. The Stochastic oscillator reinforces this bearish forecast, with its signal line pointing downwards towards the 20 mark, indicating potential further declines.

• UK Inflation rises to a 6-month high of 2.3% in October, driven by services inflation.
• GBP/USD faces downside pressure but could rally if the daily candle closes above 1.2680.
• GBP/JPY shows mixed technical signals with a potential for upside in the short term.

The GBP received a shot in the arm this morning owing to an uptick in UK inflation data. Market participants immediately repricing their rate cut expectations down to around 59 bps through December 2025, from a previous 65bps.

The impact on the GBP was immediate with a 40-odd pip rally for GBP/USD and around 80 pips for GBP/JPY.

UK Inflation Challenge

The UK continues its battle with inflation, and more importantly services inflation which ticked up slightly from September with a print of 5% vs the prior month’s 4.9%. The increase in headline inflation might also be a concern now as the annual inflation rate rose to 2.3% in October 2024, the highest in six months, compared to 1.7% in September.

Markets were expecting an uptick in headline inflation to around 2.2% while the MoM inflation number came in at 0.6% above the estimated 0.5% as well. The concern however remains with the service inflation number which is keeping headline inflation elevated.

Looking more closely at the data and a lot of the stickiness in the October number comes from categories that the Bank considers less important or less likely to show lasting inflation. This would include things like rent, airfares and package holidays which could in part explain the uptick in services inflation.

A good example of this is when looking at the core services inflation which strips out the data of rent and airfare and we have an entirely different narrative. Given there is no single definition for this, however it has been aptly broken down by ING Think which showed the ‘core services number’ had actually dropped from 4.8% to 4.5% in October.

Source: ING Think

This does not change a thing for the BoE when it comes to the upcoming December policy meeting. I still expect a 25bs cut following the recently released GDP numbers from the UK. Growth is beginning to turn sour, much like the European Union. This is something the BoE would like to avoid and in my opinion may factor heavily at the December meeting.

Based on probabilities, market participants are now pricing in around an 85% chance of a hold at the December 19 meeting with a possible rate cut in February given a 50% chance. This should in theory lend some support to the GBP as the US is expected to cut in December and the Bank of Japan is likely to continue hiking rates in 2025. Will such a move and a GBP recovery come to fruition?

Technical Analysis

GBP/USD

From a technical standpoint, GBP/USD rose in the early part of the week but failed to hold onto any material gains. The weakness in the US Dollar Index did not yield any significant gains for the GBP and with the DXY looking at a recovery today, Cable may face further downside pressure.

At present the key level around the 1.2680 handle is proving a tough nut to crack with UK inflation data helping the GBP/USD to break above this level but failing to find acceptance. If a daily candle close above this handle occurs, bulls may be emboldened which could push cable higher.

A move above the 1.2680 handle may face resistance at 1.2750 and 1.28200 (which is where the 200-day MA rests). The next key hurdle for bulls will be the 1.3000 psychological level which may prove to be a hurdle too far.

Looking at the potential for a break to the downside and the most recent swing low at 1.2600 will be the first area of support before the 1.2500 and 1.2450 handles come into focus.

The driving force behind any move is likely to come from the US Dollar Index (DXY) and its performance in the coming days. Further US Dollar strength could facilitate a retest of the 1.2500 handle.

GBP/USD Daily Chart, November 20, 2024

Source: TradingView.com (click to enlarge)

Support

• 1.2600
• 1.2500
• 1.2450

Resistance

• 1.2680
• 1.2750
• 1.2820

GBP/JPY

GBP/JPY has been inching its way lower since topping out just shy of the psychological 200.00 handle. A pullback helped yesterday by renewed safe haven flow also helped GBP/JPY push further away from the 200.00 handle.

Looking at the technicals and we have some mixed signals. We have a death cross formation as the 100-day MA crossed below the 200-day MA hinting at downside momentum. The candlesticks on the other hand show a sharp rejection following the brief stint below the MAs yesterday with the daily candle finishing as a hammer candlestick hinting at further upside.

The mixed signals do not make it easier, however when combining this with the fundamentals, further upside seems more likely in the short-term. The question is will the 200.00 handle prove a step too far for bulls?

A move higher from current prices for GBP/JPY could face resistance at 198 and 199.30 respectively.

A move lower will first require a daily candlestick close below the two MAs resting around the 194.30-194.60 range. A break of this zone could push GBP/JPY toward the 192.50 and 190.00 handles respectively.

GBP/JPY Daily Chart, November 20, 2024

Source: TradingView.com (click to enlarge)

Support

• 194.30 (200-day MA)
• 192.50
• 190.00

Resistance

• 198.00
• 199.30
• 200.00

UK inflation beat expectations and accelerated markedly, but this only temporarily boosted the Pound. GBPUSD came under further selling when it broke above 1.2700.

CPI rose 0.6% in October, and annual inflation accelerated from 1.7% to 2.3%, the highest since March. These fluctuations around the target do not yet look like a significant threat of a second wave of inflation. Therefore, they are unlikely to force the Bank of England to revise its monetary easing plans significantly.

The leading indicator of inflation – producer prices – also came in above expectations. Most importantly, they stay below last year’s levels. The Input Producer Price Index fell 2.3% year-on-year in October, compared with 1.9% in the previous month. The Output PPI accelerated its decline to -0.8% from -0.6%. Although both indices are well above estimates (-3.0% and -1.0% respectively), they are still disinflationary.

The jump in the overall price is due to the largest annual rate increase in owner-occupiers’ housing costs since 1992. Technically, this is not a one-off factor that promises to spread through the economy in the coming months. It is not the result of an overheating economy, so it makes no sense to talk about the formation of a sustained inflationary spiral.

Technical analysis

The British Pound surged impulsively on the better-than-expected news, but the rally lost steam after touching the 1.2700 level. The pair’s rally at the end of last week came to a halt at this level, making it a short-term resistance. This failure to leap forward after the positive news could signal the end of the corrective consolidation. Confirmation of this bearish outlook will come with a fresh failure below 1.26 and a potential target near 1.23, which coincides with this year’s lows.

AUD/USD is attempting a recovery wave from 0.6440. NZD/USD is also correcting losses and might recover if there is a clear move above the 0.5950 resistance.

Important Takeaways for AUD/USD and NZD/USD Analysis Today

• The Aussie Dollar found support near 0.6440 and is now recovering against the US Dollar.
• There was a break above a key bearish trend line with resistance at 0.6480 on the hourly chart of AUD/USD at FXOpen.
•  NZD/USD is attempting a recovery wave above the 0.5880 resistance.
•  There was a break above a major bearish trend line with resistance near 0.5860 on the hourly chart of NZD/USD at FXOpen.

AUD/USD Technical Analysis

On the hourly chart of AUD/USD at FXOpen, the pair dipped from the 0.6685 resistance zone. The Aussie Dollar declined below 0.6500, but the bulls were active near 0.6440 against the US Dollar.

A low was formed near 0.6439 and the pair is now correcting losses. There was a move above the 23.6% Fib retracement level of the downward wave from the 0.6685 swing high to the 0.6439 low. There was also a break above a key bearish trend line with resistance at 0.6480.

The pair is now above 0.6500 and the 50-hour simple moving average. On the upside, immediate resistance is near the 50% Fib retracement level of the downward wave from the 0.6685 swing high to the 0.6439 low at 0.6560.

The first major resistance is near 0.6630. A clear upside break above 0.6630 could send the pair toward 0.6685. The next major resistance on the AUD/USD chart is near 0.6720, above which the price could rise toward 0.6750. Any more gains might send the pair toward 0.6800.

On the downside, initial support is near 0.6500 or the 50-hour simple moving average. The next support could be the 0.6480 zone. Any more losses might send the pair toward the 0.6440 support.

NZD/USD Technical Analysis

On the hourly chart of NZD/USD on FXOpen, the pair also followed a similar pattern and declined from the 0.6040 zone. The New Zealand Dollar gained bearish momentum and traded below 0.5950 against the US Dollar.

The pair even dropped below the 50-hour simple moving average and tested 0.5835. A low was formed near 0.5836 and the pair is now attempting a fresh increase. It is back above the 0.5880 level and the 50-hour simple moving average.

Besides, there was a break above a major bearish trend line with resistance near 0.5860. The pair surpassed the 23.6% Fib retracement level of the downward wave from the 0.6037 swing high to the 0.5836 low.

On the upside, the pair is facing resistance near the 0.5920 level. The next major resistance is near the 61.8% Fib retracement level of the downward wave from the 0.6037 swing high to the 0.5836 low at 0.5960.

If there is a move above 0.5960, the pair could rise toward the 0.5985 resistance. Any more gains might open the doors for a move toward the 0.6040 resistance zone.

On the downside, immediate support on the NZD/USD chart is near 0.5880. The next major support is near the 0.5835 zone. If there is a downside break below 0.5835, the pair could extend the decline toward the 0.5800 level. The next key support is near 0.5765.

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Market Picture

The cryptocurrency market cap is up 0.3% in 24 hours to $ 3.09 trillion. This slight increase masks an impressive altcoin pullback that failed to cap the 1% rise in BTC. However, sentiment indicators remain in extreme greed territory. Solana is down 3% overnight and around 6% from Tuesday’s high. Litecoin has pulled back 14% from Saturday’s high and is a few steps away from $100.

Bitcoin climbed close to $94K on Tuesday night, updating all-time highs. Unlike last week’s attack, the new highs were not followed by stop orders and margin calls from shorts. Instead, they moved into the $100K-plus area.

Like Litecoin, Ethereum is becoming a boring story. The rally in early November stopped just short of an overbought level, with profit taking at 61.8% of the initial momentum—significantly deeper than Bitcoin and the broader crypto market. Such an adherence to classic technical analysis may be convenient for traders, but it is hardly to the liking of enthusiasts, who have probably moved on to other altcoins.

News Background

In another recalculation, the difficulty of mining Bitcoin exceeded 102T for the first time in history. The average hash rate for the two-week calculation period rose to 755.3 EH/s.

According to JPMorgan, the hash price, a measure of Bitcoin mining profitability, rose 29% in the first half of November. The rally in BTC ahead of the hash rate increase and the increase in transaction fees as a percentage of block reward contributed to the significant improvement in mining economics.

MicroStrategy plans to issue a $1.75 billion five-year bond to be used for BTC acquisitions and general corporate purposes. The company’s reserves have reached 331,200 BTCs, on which it has spent ~$16.5 billion at an average purchase price of $49,874 per coin.

QCP Capital believes the ‘real altcoin season’ will begin after the bitcoin dominance index falls to 58% vs 59.4% now. Before that, by the end of the year, BTC could break through the psychologically important $100K mark.

According to the Financial Times, the Donald Trump-linked Trump Media and Technology Group (DJT) is in the advanced stages of a deal to buy struggling platform Bakkt.

• GBPJPY gains ground after upbeat UK CPI data
• Technical signals endorse bullish efforts
• Buyers need confirmation above 197.35

GBPJPY advanced to an intra-day high of 197.77 after hotter-than-expected UK CPI inflation data gave traders confidence that the Bank of England might hold interest rates steady in December.

Earlier, the pair had built a solid base around 194.70, supported by its 50- and 200-day simple moving averages. This suggests the upward pattern that started in August is still in play, despite November’s bearish tendencies.

Looking at the technical indicators, the RSI and stochastic oscillator are endorsing the current euphoria in the market, but downside risks could remain in play if the price fails to close above the nearby resistance of 197.35, where the 20-day SMA and the 61.8% Fibonacci retracement level of the July-August downtrend are positioned. If the bulls can push past that border, they could next target October’s bar of 199.70, and beyond that, the 202.00-202.80 range.

On the flip side, if the price steps below the 194.70 floor, the tentative falling line from October could halt selling forces near 193.20. If not, the decline could stretch toward the 38.2% Fibonacci mark of 190.70, and potentially reach the August support line at 189.90. Additional losses from there would violate the short-term uptrend, prompting a new decline toward the 186.65-187.50 zone.

Overall, GBPJPY looks like it’s setting up a potential new bullish move, but traders will likely wait for a confirmation above 197.35 before jumping in.

Daily Pivots: (S1) 1.0545; (P) 1.0574; (R1) 1.0625; More...

Intraday bias in EUR/USD remains neutral and more consolidations could be seen above 1.0495. Outlook will stay bearish as long as 1.0760 support turned resistance holds. 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) 153.70; (P) 154.25; (R1) 155.21; More...

USD/JPY rebounded after dipping to 153.27 and the break of 155.35 minor resistance suggests that pull back from 156.74 has completed. Intraday bias is back 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.