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

GBP/USD recovers further today but stays well below 1.2842 support turned resistance. Intraday bias remains neutral and outlook stays bearish. 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) 0.8789; (P) 0.8836; (R1) 0.8870; More…

Intraday bias in USD/CHF remains neutral for more consolidations. 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.

Markets

Markets were on an emotional rollercoaster yesterday. The first Ukrainian use of US-made long range ATACMS missiles pushed Russian President Putin into signing off a revised nuclear doctrine. It now includes a possibility of a nuclear response to aggression by non-nuclear states that are supported by other nuclear powers. European stocks lost around 1.5% and hit an intraday bottom (-2%) after Russian minister of foreign affairs Lavrov called it a “signal of escalation”. European stock markets eventually recovered to closing losses of somewhat less than 1% after that same minister tried to calm worries over a nuclear escalation. “We are strongly in favor of doing everything not to allow nuclear war to happen. A nuclear weapon is first and foremost a weapon to prevent any nuclear war.” Haven assets mirrored the intraday sell-off/recovery from equities. German yields ended around 3.5 bps lower across the curve but traded with losses of up to 10 bps. US yields lost up to 2.8 bps in a bull flattening move. EUR/USD closed unchanged just below 1.06, but set an intraday bottom around 1.0530. US stock markets turned starting losses into closing gains (S&P & Nasdaq), mainly thanks to a near 5% increase in Nvidia shares going into tonight earnings from the company. The outcome will influence general market/risk sentiment and could set the tone going into year-end.

EMU Q3 negotiated wage data are today’s economic highlight. Annualized wage growth remained between 4.3% and 4.7% from Q1 2023 to Q1 2024. Last quarter’s decline to 3.5% was welcomed by the ECB in its inflation fight, but remains way above the central bank’s 2% inflation target. ECB Lagarde indicated that forward-looking wage trackers point to a an easing of pay growth in 2025 which she hopes to see reflected in today’s numbers. While a further deceleration is likely, we don’t think they will give sufficient confidence for the ECB to accelerate from 25 bps rate cuts to a 50 bps move in December. It could extend the short term bottoming-out process in EUR rates given that EMU money market still attach a small probability to such a scenario.

UK headline inflation accelerated slightly more than expected in October, by 0.6% M/M to 2.3% Y/Y. Core CPI remained stronger as well, rising by 0.4% M/M to 3.3% Y/Y (from 3.2%). Services CPI ticked up from 4.9% Y/Y to 5%. Today’s figures add strength to the Bank of England’s “not too many, not too much” rhetoric. Sterling strengthens marginally in a first reaction, from EUR/GBP 0.8350 to 0.8330.

News & Views

Hungary’s central bank (MNB) kept the policy rate unchanged at 6.5% yesterday. One dissenter voted for a rate decrease, potentially inspired by disappointing Q3 growth and the recent sharper-than-expected inflation decline. The MNB noted that this indicates lower inflation in the short term. But the “exchange rate depreciation seen in the past months as well as changes to the system of excise duties are likely to have inflationary effects in the next year.” The Monetary Council said the increase in risk aversion towards emerging markets was driven by geopolitics and changing growth and central bank expectations of developed economies. The MNB said these developments pose an upside risk to domestic inflation and considered a pause in the cutting cycle appropriate. “Looking ahead, a careful and patient approach to monetary policy is still warranted.”, the statement still says. Its deputy governor in the press conference afterwards stressed the importance of anchoring inflation expectations, which for households are “significantly” above the central bank’s 3% target range. He stuck to earlier guidance of maintaining the current policy rate for a “sustained period”. The Hungarian forint ended yesterday lower against the euro. EUR/HUF closed at 408.3. Hungarian swap yields dropped some 5 bps across the curve, be it in a pre-meeting move.

Austria is expected to give Romania and Bulgaria full accession to Europe’s Schengen zone, the FT reported. Air and maritime checks were already abandoned since end-March but Austria insisted on land border controls because of concerns over irregular migration. It is now ready to drop its veto after Romania and Bulgaria increased security checks, resulting in lower asylum applications and irregular migration. Barring a change-of-mind of the Dutch government, which gave green light in 2023 but now has the far-right Freedom party in the coalition, the matter can be formalized at the next EU home affairs meeting Dec 12. All restrictions may then be lifted at the start of 2025.

Daily Pivots: (S1) 0.6498; (P) 0.6516; (R1) 0.6551; More...

AUD/USD is extending consolidations from 0.6440 and intraday bias remains neutral. Outlook will stay bearish as long as 0.6687 resistance holds. On the downside, decisive break of 61.8% projection of 0.6941 to 0.6511 from 0.6687 at 0.6421 will resume the fall from 0.6941 to 100% projection at 0.6257 next.

In the bigger picture, rise from 0.6269 (2023 low) should have completed with three waves up to 0.6941. Corrective pattern from 0.6169 (2022 low) is now extending with another falling leg. Deeper decline would be seen back to 0.6269 as sideway trading extends.

Daily Pivots: (S1) 1.3929; (P) 1.3983; (R1) 1.4010; More...

Intraday bias in USD/CAD remains neutral for the moment. Consolidations from 1.4104 should be brief as long as 1.3958 resistance turned support holds. Above 1.4104 will resume larger up trend to 61.8% projection of 1.3418 to 1.3958 from 1.3841 at 1.4175. Nevertheless, break of 1.3958 will bring lengthier consolidations, and risk deeper pull back to 1.3841 cluster support (38.2% retracement of 1.3418 to 1.4104 at 1.3842).

In the bigger picture, up trend from 1.2005 (2021) is resuming with break of 1.3976 key resistance (2022 high). Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3418 at 1.4391. Now, medium term outlook will remain bullish as long as 1.3418 support holds, even in case of deep pullback.

Daily Pivots: (S1) 0.9314; (P) 0.9341; (R1) 0.9376; More....

EUR/CHF rebounded after breaching 0.9305 support briefly and the development dampened the original bearish view. Intraday bias is turned neutral again. But still, risk will stay on the downside as long as 0.9444 resistance holds. Below 0.9303 will target a retest on 0.9209 low.

In the bigger picture, fall from 0.9928 is seen as part of the long term down trend. Repeated rejection by 55 D EMA (now at 0.9408) keeps outlook bearish for breaking through 0.9209 low at a later stage. Nevertheless, sustained trading above 55 D EMA will confirm medium term bottoming at 0.9209 and bring stronger rebound back towards 0.9928 key resistance.

Daily Pivots: (S1) 0.8333; (P) 0.8354; (R1) 0.8377; More...

Intraday bias in EUR/GBP remains neutral and outlook stays bearish with 0.8446 resistance intact. On the downside, below 0.8306 minor support will turn bias back to the downside for 0.8259 first, and then 0.8201 key support. Nevertheless, firm break of 0.8446 will confirm short term bottoming.

In the bigger picture, down trend from 0.9267 (2022 high) is in progress. Next target is 0.8201 (2022 low), but strong support should be seen there to bring rebound. However, outlook will remain bearish as long as 0.8624 resistance holds even in case of strong rebound. Decisive break of 0.8201 will indicate long term bearish reversal.

Daily Pivots: (S1) 1.6189; (P) 1.6245; (R1) 1.6278; More...

Intraday bias in EUR/AUD remains neutral and further decline is expected Break of 1.6161 will resume the fall from 1.6598 for retesting 1.5996/6002 key support zone. Nevertheless, break of 1.6359 will turn bias to the upside for stronger rebound towards 1.6598 resistance instead.

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) 162.25; (P) 163.12; (R1) 164.75; More....

EUR/JPY's strong rebound from 161.48 and break of 163.96 minor resistance suggests that pullback from 166.67 has completed. The development also revives near term bullishness. Intraday bias is back on the upside for 166.67 resistance first. Firm break there will resume whole rebound from 154.40.

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.

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.

Full UK CPI release here.