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Eurozone inflation was finalized at 2.0% yoy in October, a rise from September's 1.7% yoy. Core CPI, excluding volatile components such as energy, food, alcohol, and tobacco, held steady at 2.7% yoy. Among contributors, services had the largest impact, adding +1.77 percentage points to the overall rate, followed by food, alcohol, and tobacco (+0.56 pp) and non-energy industrial goods (+0.13 pp). Energy, on the other hand, exerted downward pressure, subtracting -0.45 pp from the headline figure.

Inflation across the broader EU came in at 2.3% yoy, up slightly from September's 2.1%. Member states showed a wide divergence in inflation rates. Slovenia recorded no inflation at 0.0%, while Lithuania and Ireland posted modest increases of 0.1%. At the other end of the spectrum, Romania led with the highest annual rate of 5.0%, followed by Belgium and Estonia at 4.5% each. Compared to September, inflation rose in 19 member states, remained stable in six, and declined in two.

Full Eurozone CPI final release here.

• GBPUSD bulls step in after six-month low near 1.2600
• Price near oversold area, but bullish area is above 1.3000

GBPUSD returned to gains after a six-day decline squeezed it to a six-month low of 1.2595. The pair rebounded near an important trendline from October 2023, and indicators like the RSI and stochastic oscillator suggest the price is likely set for an upward move from oversold territory.

Yet, buyers may not make additional moves until the price clearly crawls back above August’s base of 1.2663-1.2685. The 1.2730 bar, which overlaps with the 61.8% Fibonacci retracement of the April-September upleg, could be another hurdle before the 200-day simple moving average (SMA) and the 50% Fibonacci mark of 1.2865 come into view. If the tentative resistance line gives way at 1.2915, the bulls could accelerate toward the critical 1.3000-1.3040 constraining zone with scope to change the trend back to positive.

In the bearish scenario where the pair slips below the 1.2540-1.2580 floor, a sharp decline could occur toward 1.2400-1.2440. The 1.2300 round number, which almost triggered April’s rally, may resume its supportive role if selling pressure intensifies.

In summary, GBPUSD seems poised for a potential recovery, but a clear break above 1.2663-1.2685 is needed to confirm additional gains.

Forex options are an increasingly popular tool among traders looking to diversify their strategies and manage risk in the foreign exchange market. While trading forex in the spot market is common, understanding forex options opens up new possibilities for traders, particularly beginners. This article will walk you through the basics of forex options and outline strategies that are ideal for those just starting out.

What Are Forex Options?

Before exploring strategies, it’s crucial to grasp what forex options entail. These financial derivatives provide traders with the option to buy or sell a currency pair at a set price (the strike price) by or before a certain expiration date. Unlike spot forex trading, where transactions happen instantly, forex options enable traders to speculate on future price movements without needing to commit to a trade unless the conditions are favorable.

The two main types of forex options are:

• Call options: Give the holder the right to buy a currency pair.
• Put options: Give the holder the right to sell a currency pair.

The flexibility offered by these options is part of why they are popular among both experienced and novice traders.

Types of Forex Options

Forex options come in various forms, each offering different levels of complexity and flexibility for traders to explore in the currency markets.

Vanilla Options

Vanilla options are the most straightforward and commonly used type of forex option. These are standard call or put options with no additional complexities or conditions. For example, a vanilla call option on the EUR/USD pair allows the trader to buy the euro at a specific price on or before the option's expiration date.

Vanilla options are a great starting point for beginners due to their simplicity and ease of understanding.

Exotic Options

For those looking to explore more complex strategies, exotic options offer a wide array of choices, including binary options and barrier options. Exotic options are often used by advanced traders due to their unique features, such as conditions that need to be met before they can be exercised.

A common exotic option in the forex market is the binary option, where traders predict whether the price of a currency pair will end up above or below a set level.

How Forex Options Work

Understanding how to trade forex options requires familiarity with a few key concepts:

• Strike Price: This is the price at which the holder of the option can buy (call) or sell (put) the currency pair.
• Expiry Date: Forex options have a limited lifespan. The expiry date is the last day the option can be exercised.
• Premium: To buy an option, you pay a premium, which is the cost of having the flexibility that options provide. The premium is non-refundable and represents the potential risk in an option trade.

The most attractive feature of forex options is that they come with limited risk. You can never lose more than the premium you pay upfront, making them appealing to beginners. You can view more about how to get started and how to make informed decisions.

Benefits of Trading Forex Options for Beginners

With forex options, your maximum loss is capped at the premium you pay for the option. This makes them an excellent tool for risk management, especially if you are not ready to take on the full risk of trading forex in the spot market.

Forex options allow for more flexible strategies. Unlike spot forex trading, where you are fully committed to the trade once it’s executed, with options, you can choose not to exercise them if market conditions don’t favor you. This makes them ideal for new traders still learning the market’s intricacies.

You can profit from both bullish and bearish market conditions. For instance, if you expect the euro to strengthen against the US dollar, you could buy a call option on the EUR/USD pair. On the other hand, if you expect the euro to weaken, you might buy a put option.

Key Strategies for Beginners

When starting with forex options, beginners need to use simple, risk-controlled strategies to build confidence and minimize potential losses.

• Protective Put Strategy: One of the simplest and most effective strategies for new traders is the protective put strategy. It involves holding a position in the spot forex market while buying a put option as a form of insurance. If the market moves against your spot position, the gains from the put option can help offset your losses.
• Covered Call Strategy: This strategy is another beginner-friendly option. It involves holding a currency position in the spot market and simultaneously selling a call option. This strategy allows traders to earn a premium while potentially profiting from modest price movements in the underlying currency.
• Long Straddle Strategy: This strategy involves buying both a call and a put option with identical strike prices and expiration dates. This method is useful when you expect significant price fluctuations in a currency pair but are unsure of the market’s direction.

Conclusion

Forex options provide a unique and flexible way to participate in the currency markets. For beginners, they offer a controlled risk environment with the potential for significant rewards. By starting with simple strategies like protective puts and covered calls, you can learn how to trade forex options effectively while managing your risk. As you gain more experience, more advanced strategies like long straddles can be introduced to your trading portfolio.

Gold prices rebounded, crossing 2,620 USD per troy ounce on Tuesday, as the US dollar weakened, and investors sought clarity on the Federal Reserve’s monetary policy direction. The likelihood of a Fed rate cut in December currently stands at 59%, reflecting a slight decline from previous days.

Market participants also closely monitor potential cabinet picks by US President-elect Donald Trump, whose protectionist policies could influence gold prices. Anticipating critical appointments that may shape Trump’s economic policies adds to market sensitivity.

Growing geopolitical tensions worldwide heighten demand for safe-haven assets, boosting gold’s appeal. After recent declines, the fundamental factors supporting gold’s longer-term ascent are prompting investors to engage at current levels they perceive as attractive.

Technical analysis of XAU/USD

H4 chart: The market has completed a correction to 2,537 on the H4 chart and is now poised for a growth wave aiming for 2,688. If this target is reached, a potential retracement to 2,610 may occur before a further push towards 2,790. This bullish scenario is supported by the MACD indicator, whose signal line is gearing upwards from below zero.

H1 chart: On the H1 chart, gold is progressing through the initial phase of a growth wave to 2,688. The price has currently stabilised around 2,609, forming a tight consolidation range. An upward break from this range is anticipated to target 2,660. Once this is achieved, a brief pullback to 2,609 might unfold before continuing the ascent towards 2,688. The Stochastic oscillator supports this view, indicating strong upward momentum with its signal line heading towards 80 from above 50.

According to the XNG/USD chart, natural gas prices have risen by approximately 13% since early November and this week hit a new 2024 high.

Factors Driving Bullish Sentiment (as reported by Reuters):

→ A sharp increase in global gas prices.

→ Forecasts of colder weather and higher heating demand in the United States.

Will Natural Gas Prices Continue to Rise?

From a fundamental perspective, the Energy Information Administration (EIA) forecast on 13 November predicts natural gas prices could peak in January 2025.

From a technical analysis standpoint of the XNG/USD chart, the $3.200 level is a critical resistance, having previously triggered price reversals in October (B) and June (not shown on the chart). Price movements since early August have formed a trend channel (shown in blue).

Bullish Arguments:

→ The $2.7 level serves as support, aligned with Fibonacci retracement levels, as the B→C pullback is at 50% of the A→B rise.

→ The $2.93 level has flipped from resistance to support (indicated by arrows).

Bearish Arguments:

→ Prices reversed sharply downward earlier this week from the $3.200 level, showing seller activity.

→ Reports indicate utilities are injecting gas into storage at faster-than-expected rates, suggesting stockpiles could meet increased cold-weather demand.

Bulls may attempt to keep prices within the blue channel and make further attempts to breach the $3.200 level. However, XNG/USD signals show that bears are ready to push back.

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• EURJPY is hovering around the 100-day SMA
• EURJPY bears have probably regained the upper hand
• Momentum indicators are mostly mixed at this stage

EURJPY is edging lower today, testing the support set by the 100-day simple moving average (SMA) and the 163.37-163.49 area. The rally from the mid-September low stopped at the March 7, 2022 upward trendline, with the 200-day SMA also proving strong resistance. A plethora of verbal interventions from Japanese government officials, which were triggered by the recent robust rally in EURJPY, and the strong details of the preliminary GDP report for the third quarter of 2024 have allowed EURJPY bears to reclaim the upper hand.

Meanwhile, momentum indicators are mostly directionless at this stage. Specifically, the RSI is hovering around its midpoint, without showing any appetite for a forceful move. Similarly, the Average Directional Movement Index (ADX) is trading lower, signaling the absence of a clear trend in EURJPY. On the flip side, the stochastic oscillator continues its downward trend, parallel to its moving average (MA), and thus revealing decent bearish pressure. A possible move above its MA could potentially signal the end of the current bearish move in EURJPY.

Should the bears remain confident, they would try to push EURJPY below the 163.37-163.49 area, which is populated by the 23.6% Fibonacci retracement level of March 7, 2022 – July 11, 2024 downtrend and 100-day SMA. The 50-day SMA is probably the last obstacle ahead of a more protracted selloff towards the February 22, 2007 high at 159.64.

On the other hand, the bulls could make another effort to retake the market reins and keep EURJPY above the 163.37-163.49 region. If successful, they could test the resistance set by the 164.91-164.94 area, which is defined by the April 23, 2008 and November 16, 2023 highs, and the 200-day SMA. Then, the March 7, 2022 trendline could be the most crucial test of the bulls' drive on their way higher.

To sum up, EURJPY bears have regained the upper hand, but they must overcome some key support levels in order to feel comfortably in control.

Markets

US Treasuries followed last week’s recipe. Testing the recent low (area; depending on the maturity), but eventually rebounding higher. This time without strong trigger though like Thursday’s Powell speech or Friday’s retail sales. The move seemed more erratic in nature. Timing didn’t fit with the release of second-tier, but consensus-beating US figures. NY Fed services business activity rose from -2.2 to -0.5 in November, with details showing strength in business activity and employment. Both in the current and 6-month forward looking subindex. The NAHB housing index recorded a third consecutive increases to a 7-month high, from 43 to 46. The 6-monht sales outlook reached the highest level since April 2022 on hope on looser regulation and more construction during president Trump’s second tenure. Yesterday’s price action strengthens our short term consolidation call as dust settles over the US presidential elections, in absence of important eco data and with the Fed not in a hurry. Intraday changes on the US yield curve ranged between -0.7 bps and -3.3 bps with the belly of the curve outperforming the wings. German Bunds underperformed US Treasuries (GE 2y: +5.4 bps) in what could be the start of an opposite (to US Treasuries) consolidation phase. EUR/USD profited from relative yield dynamics with the pair being squeezed from 1.0531 to 1.0598. Dovish Greek ECB member Stournaras labelled a December 25 bps rate cut a done deal and added that it’s an optimal reduction. That way, he dented more aggressive market bets calling on a 50 bps move (25% probability). This week’s eco data have the potential to completely close the door obviously depending on their outcome. The ECB built her recent reaction function on what her president Lagarde calls “the three criteria”: the inflation outlook, the dynamics of underlying inflation and the strength of monetary transmission. Tomorrow, we receive important info on the second pillar via Q3 negotiated wage data. 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 tomorrow’s numbers. On Friday, EMU November PMI’s are expected to paint a similar, dire, picture as in October (50 for composite). Recall though that there was a serious discrepancy between weak Q3 soft data and hard data (+0.4 Q/Q EMU GDP growth).

News & Views

ECB chair Lagarde in yesterday’s “The economic and human challenges of a transforming era” speech again called for a(n effective) single market for both goods and capital in order to reverse progressively slowing productivity. “By acting as a union to raise our productivity growth, and by pooling our resources in areas where we have a tight convergence of priorities – like defense and the green transition – we can both deliver the outcomes we want and be efficient in our management of public spending.” Lagarde stressed the need for such changes given the two megatrends that are challenging the bloc’s economic model. The first is a new geopolitical landscape. An increasingly inward-looking global environment is a hazard to the open European economy. The second is Europe falling behind in emerging technologies, specializing mostly in technology developed the last century. Lagarde said the innovation and financing ecosystems are not suited to develop new advanced technologies, noting that about a third of EU savings sit in cash and bank deposits compared to around one-tenth in the US. She floated an amount of up to €8tn that could be redirected into long-term investments if EU households were given better opportunities to invest their savings. The still-existing trade barriers within the EU’s single market for goods and capital are estimated to represent a shortfall of around 10% of the EU’s economic potential.

San Francisco Fed economists in research published yesterday said that the US labor market is still adding to inflationary pressures, be it less than in 2022 and 2023. "Declines in excess demand pushed inflation down almost three-quarters of a percentage point over the past two years. However, elevated demand continued to contribute 0.3 to 0.4 percentage point to inflation as of September 2024." The findings offer some counterweight to Fed chair Powell’s observation back in the summer, when he said that the job market is no longer a source of significant inflationary pressures.

The week kicked off on a bullish note, as the recovery in US treasuries, and the retreat in US yields help boost appetite in major US indices. The S&P500 rebounded 0.39%, while Nasdaq added 0.71%, supported by a more than 5.5% jump in Tesla shares on rumours that Trump administration wants to make a federal framework for fully self-driving vehicles one of the Department of Transport’s priorities. And remember, Elon Musk’s robotaxis is one of the company’s priorities for the future development and had helped – earlier this year – revive appetite for Tesla despite the slowing sales of EV sales. So yes, the news couldn’t come at a better time for Tesla. News were not as good on the Nvidia front though, as Nvidia’s Blackwell chips – you know the next generation chips that see an insane demand according to the CEO Jensen Huang – reportedly overheat, requiring redesign and delay for deliveries. Of course, you can argue that this type of adjustments are standard for such large-scale tech releases, and they should not have a material impact in the long run, but the delay in the short run mean that the big customers like Meta, Google and Microsoft won’t have their chips on time, the latter will extend the payoff period on their investments at a time investors can’t wait to see these investments bear fruit. Nvidia retreated 1.30% yesterday, as the news that the company is now working with Google to design its next generation quantum computing devices helped countering the negative vibes of the overheating Blackwell chips. The Blackwell news triggered a 3% rally in AMD that also sells high capacity chips for AI applications. ‘The MI325X is expected to begin production by late 2024, while the MI350 series aims for up to 35 times better inference performance compared to its predecessors and is set to launch in 2025’​, according to ChatGPT. Any misstep from Nvidia could help AMD gain market share. For now, investors are focused on the next earnings report from Nvidia that will land on Wednesday, after the closing bell, and will hopefully put a number on how insane the demand for these Blackwell chips, whether they are overheating or not.

Beyond tech, the Dow Jones index was not cheery, yesterday, the index closed the session slightly lower, while small caps were slightly up on lower yields, but the direction of the yields are not encouraging the small cap investors given that these companies have smaller margin to deal with higher borrowing costs. As such, the buyers are seen more crowded in big caps, and even the most bearish of the bears on the Wall Street are busy lifting up their PT for the S&P500. The 6500 is increasingly pronounced for the S&P500, while gold is also among the top picks at Goldman Sachs, apparently, which sees the precious metal top the $3000 per ounce next year. In the short-run, the retreat in the US yields helped throw a floor under the gold’s retreat. We see a beautiful support forming near the minor 23.6% Fibonacci retracement and the 100-DMA – that’s around $2550 level.

In Europe, the Stoxx 600 index was flat, the Chinese stocks are lower as the Chinese authorities gather in Hong Kong to discuss the latest developments in China’s financial sector, while the Japanese Nikkei is under the pressure of a rebound in the Japanese yen against the US dollar, on the back of a broadly softer US dollar – a move that I believe is just a correction of the past few week’s rally on political developments and the hawkish shift in Federal Reserve (Fed) expectations.

The EURUSD tested the 1.06 psychological resistance yesterday, supported by the weak dollar and also the news that Greece will repay 5 billion euros of long-term debt before time. But outlook for the EURUSD remains negative on divergence between the European Central Bank (ECB) and the Fed, Hence, price rallies in the EURUSD will soon create interesting opportunities for the euro bears to come back in and give an other try to breaking the 1.05 offers’ back.

In energy, US crude posted a 3% rally yesterday, but the bulls could find the $70pb offers hard to clear, as the amply global supply / weak global demand outlook remains supportive of the bears. The short-end of the market shifted into contango, another signal that investors price in an oversupplied oil market, which could cap the upside potential of short-term price rallies. Solid resistance is seen between $70/72pb range. The key resistance to the actual negative trend – that has been building since summer – stands at the $72.85pb level – which is the major 38.2% Fibonacci retracement on summer decline.

In focus today

Today, in euro area we receive final October HICP inflation data. This will show drivers of inflation and allow us to calculate the "LIMI" indicator of domestic inflation, which has received great attention from the ECB lately.

In Sweden, the day begins with a speech from Riksbank's Anna Breman at 8.15 CET, focusing on "Current monetary policy and the economic situation". This follows several notable events since the 6 November decision, such as US election, higher-than-expected inflation for October, and significantly higher electricity prices, presenting various discussion points. At 10.00 CET, the Swedish National Financial Management Authority will present new forecasts on the economy and public finances.

Today, we also have a few ECB speeches as well as some BoE speeches including BoE Governor Baily.

Economic and market news

What happened yesterday

In the euro area, ECBs Lagarde highlighted the critical need for Europe to reverse declining growth to sustain its welfare provisions, increase defence spending and address climate change. Lagarde emphasized the necessity for bold economic policies to generate the required wealth for these purposes. She also focused on the urgency of adapting to a changing geopolitical landscape and regaining competitiveness and innovation. Lagarde also pointed out Europe's vulnerability to trade wars due to its heavy reliance on trade, which makes up more than half of its economic output.

Equities: Global equities were higher yesterday, with European markets lagging behind the rest. We observed some elements of the Trump trade, though not nearly to the extent we witnessed in the immediate aftermath of the elections. Health care continued to underperform, while the materials sector experienced a slight recovery after several challenging weeks for the China-linked sector.

The VIX was marginally lower and appears to have stabilised around the 15 level, aligning with expectations given the current macroeconomic backdrop.

In the US yesterday, Dow -0.1%, S&P 500 +0.4%, Nasdaq +0.6%, and Russell 2000 +0.1%.

Asian markets were broadly higher, while South Korea underperformed for the second consecutive day. US and European futures are higher this morning.

FI: The EUR swap curve saw some bearish flattening through the Monday session, which was characterized by being very limited on market moving news. The 2Y tenor was up some 5bp throughout the session, while the 10Y point rose 3bp. The Bund ASW-spread at -2.5bp was roughly unchanged, similar to peripheral and EUR credit spreads.

FX: USD sold off against all currencies but the JPY to start the week. Commodity currencies, NOK, AUD and CAD gained the most on Monday. EUR/USD rose towards 1.06, EUR/SEK traded around 11.60 and EUR/NOK around 11.70.

Daily Pivots: (S1) 1.0550; (P) 1.0578; (R1) 1.0627; More...

Intraday bias in EUR/USD remains neutral as consolidations continue above 1.0495 temporary low. 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.