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Cable is holding within a narrow consolidation in early Wednesday’s trading as bears started to run out of steam after steep fall (down 1.85%) in past three days.

Tuesday’s break and close well below pivotal supports at 1.2846 (Fibo 76.4% of 1.2664/1.3434 / former base) and 1.2817 (200DMA) generated strong bearish signal.

Markets await release of US inflation data for October (due later today) for fresh signals that keeps the pair in a quiet mode this morning.

Broken 200DMA / Fibo reverted to resistances which should ideally cap upticks to keep larger bears intact and guard falling 10DMA (1.2894) and 20DMA (1.2938) violation of which would question bears and risk test of upper breakpoint at 1.3000 (psychological / 100DMA).

Res: 1.2776; 1.2817; 1.2846; 1.2894.
Sup: 1.2719; 1.2664; 1.2612; 1.2599.

The USD/JPY currency pair has climbed to a three-month high of 154.87, driven by the strengthening US dollar following Donald Trump’s election victory. Markets anticipate that Trump’s protectionist policies, which are expected to bolster the US economy, might also fuel inflation, prompting the Federal Reserve to maintain higher interest rates than previously anticipated.

In Japan, producer prices rose at their fastest pace in 14 months in October, signalling persistent inflation pressures. Attention is shifting towards Japan’s GDP data for Q3 2024, set to be released on Friday, which will provide further insight into the economic trends affecting the yen.

The Bank of Japan is under scrutiny as it contemplates an interest rate increase to 1% per annum during the first half of fiscal 2025. However, Japanese monetary authorities remain cautious, considering the external economic factors and the challenges posed by persistent inflation.

Technical analysis of USD/JPY

On the H4 USD/JPY chart, the market continues developing the third wave of growth to the level of 156.15. After reaching this level, we will consider the probability of the start of correction to the level of 154.15. Further, we expect the beginning of a new wave of growth to the level of 157.00. Technically, this scenario is confirmed by the MACD indicator. Its signal line is above the zero level and is directed upwards.

On the H1 USD/JPY chart, the market has formed a consolidation range around the 154.15 level and continues developing the wave to 156.15 with an upward exit. After reaching this level, we expect a correction towards 154.15, initially targeting 155.20. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is above the level of 50 and is directed upwards.

Looking at recent moves in major currency pairs, it’s clear that market participants have come to terms with Donald Trump's victory in the U.S. presidential election and are starting to prepare for changes to the global economic landscape. Among the new president’s campaign promises was the introduction of additional tariffs on imports to the U.S. For instance, Trump has proposed around a 25% tariff on Mexican imports and a range of 10% to 20% for goods from European nations. Unsurprisingly, the prospect of potential trade wars is impacting the pricing of pairs such as EUR/USD and GBP/USD.

EUR/USD

The Euro has been in decline for the second consecutive week. Yesterday, it hit a new yearly low near 1.0600 but found support at 1.0590, bouncing slightly. If the 1.0600-1.0580 range turns into resistance, the pair may test the lows seen in 2023, around 1.0520-1.0460. A sustained upward move is likely only if the pair firmly clears 1.0730-1.0680.

The following news could significantly influence EUR/USD pricing:

• Today at 11:00 (GMT +3), a European Central Bank meeting on non-monetary policy
• Today at 13:30 (GMT +3), Germany's 10-year treasury bond auction
• Today at 16:30 (GMT +3), release of the U.S. core consumer price index (CPI)

GBP/USD

Yesterday, GBP/USD sellers broke through a critical support range at 1.2830-1.2800, with the price declining to 1.2720 before correcting to 1.2760. The price’s behavior around the 1.2800-1.2760 range will be key for identifying the next trend. A rejection at this level may lead to further declines towards 1.2720-1.2700, while a break above 1.2800 could signal the start of an upward correction.

Key events that could affect GBP/USD today:

• 12:45 (GMT +3) – Speech by Bank of England Monetary Policy Committee member Catherine Mann
• 13:00 (GMT +3) – Release of data on the sale of 4-year treasury securities in the UK
• 21:30 (GMT +3) – Speech by Federal Reserve official Jeffrey Schmid

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Short Term Elliott Wave View in DAX suggests rally to 19670 ended wave ((3)). Wave ((4)) pullback is currently in progress as a double three Elliott Wave structure. Down from wave ((3)), wave (i) ended at 19451.7 and rally in wave (ii) ended at 19591.5. Wave (iii) lower ended at 19368.69 and wave (iv) rally ended at 19468.6. Final wave (v) lower ended at 19330.1 which completed wave ((a)). Rally in wave ((b)) ended at 19643.12 with internal subdivision as a zigzag. Up from wave ((a)), wave (a) ended at 19555.45 and wave (b) ended at 19399.16. Wave (c) higher ended at 19643.12 which completed wave ((b)) in higher degree.

Wave ((c)) lower ended at 19004.97 which completed wave W in higher degree. Up from wave W, wave ((a)) rally ended at 19297.6 and wave ((b)) ended at 19104.59. Wave ((c)) higher ended at 19563.97 which completed wave X in higher degree. Index has turned lower in wave Y with internal subdivision as a zigzag structure. Down from wave X, wave ((a)) ended at 19007.88. Wave ((b)) rally ended at 19456.9 and Index has turned lower. Near term, as far as pivot at 19669.9 high stays intact, expect Index to extend lower.

DAX 60 Minutes Elliott Wave Chart

DAX Elliott Wave Video

https://www.youtube.com/watch?v=rclDuhY9QCs

Daily Pivots: (S1) 196.64; (P) 197.36; (R1) 197.82; More...

GBP/JPY continues to trade sideway and intraday bias remains neutral. Further rally is expected as long as 55 D EMA (now at 195.05) holds. Above 199.79 will resume the rebound from 180.00 to retest 208.09 high. However, sustained break of 55 D EMA will argue that the corrective rise has completed already, and turn near term outlook bearish for 180.00/183.70 support zone.

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) 163.56; (P) 163.95; (R1) 164.64; More....

EUR/JPY turned sideway after drawing support from 55 D EMA (now at 163.34), and intraday bias is turned neutral first. On the downside, sustained trading below 55 D EMA will argue that whole corrective rise from 154.40 has completed with three waves up to 166.67. Deeper decline should then be seen back to 154.40/155.14 support zone. On the upside, break of 166.67 will target 61.8% retracement of 175.41 to 154.40 at 167.38 instead.

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.

Daily Pivots: (S1) 0.8294; (P) 0.8315; (R1) 0.8354; More...

Intraday bias in EUR/GBP is turned neutral again with break of 0.8324 minor resistance. Some consolidations could be seen but further decline is expected as long as 0.8446 resistance holds. Break of 0.8259 will resume larger down trend to 0.8201 key support.

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) 1.6211; (P) 1.6245; (R1) 1.6293; More...

Intraday bias in EUR/AUD remains neutral, and risk will stay mildly on the downside as long as 1.6598 holds, in case of stronger rebound. On the downside, break of 1.6161 will resume the decline from 1.6590 to target a test on 1.5996/6002 key support zone.

In the bigger picture, as long as 1.5996 cluster support , 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) 0.9346; (P) 0.9368; (R1) 0.9389; More....

No change in EUR/CHF's outlook as range trading continues inside converging triangle. On the downside, break of 0.9331 will target 0.9305 support first. Firm break there will bring retest of 0.9209 low. On the upside, break of 0.9444 will bring stronger rally to 0.9506 resistance next.

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 0.9419) 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.

Markets

US bond yields surged after having had the day off on Monday for Veteran’s Day. Net daily changes varied between 8.7 and 13.1 bps across the curve spectrum as President-elect Trump’s reflationary politics continue to reverberate. Expectations for a (much) looser fiscal policy lift those for US growth at a time when CPI inflation has yet to hit the 2% central bank target. With Germany now having set the election date at February 23, we’ll be looking for the fiscal narrative to gain traction in the country and more broadly in Europe as well. US CPI not being at target will still have been the case in October. Numbers are released later today. Headline inflation is seen to accelerate from 2.4% to 2.6% y/y. Core inflation would match September’s 3.3%. Any beat, however small, would cast further doubt on another December 25 bps rate cut. Markets already pared the odds sharply to about 60%. Minneapolis Fed Kashkari yesterday said that “if we saw inflation surprises to the upside between now and then, that might give us pause” when asked what could cause the Fed not to cut rates next month, deviating from the September dot plot. Kashkari is live commenting at Bloomberg when the CPI numbers come out. Stock markets succumbed to the yield pressure. Wall Street eased off the record highs, the Dow Jones underperforming. Europe’s Stoxx50 slipped 2.25%. A technical acceleration kicked in after the index lost support around 4800. Widening interest rate differentials (European swap rates rose between 0.7-4.6 bps) and the risk-off created the perfect environment for the USD. The greenback strengthened once more against all major peers. EUR/USD tested the 1.06 big figure. It avoided a break yesterday (1.062) but continues to trade on the backfoot this morning (1.061), suggesting ongoing, by default dollar strength. USD/JPY extends its meteoric rise that’s been going on since mid-September to beyond 155 currently. We expect to see some Japanese government and central bank officials to become increasingly vocal about the matter. Gilts underperformed Bunds on “sticky” (BoE chief economist Pill) wage growth but sterling couldn’t benefit. Perhaps the UK currency is eying other important data that’s upcoming, including Friday’s GDP numbers and next week’s CPI. EUR/GBP jumped back above 0.83 but the technical picture remains a fragile one.

News & Views

The Federal Reserve Bank of New York consumer survey showed households’ inflation expectations declined slightly across the whole spectrum of horizons in October. One-year ahead inflation expectations eased 0.1%pt to 2.9%, three-year ahead expectations declined 0.2%pt to 2.5% and the 5-y gauge softened to 2.8%. Home price growth expectations (3.0%) were unchanged and stayed in a tight band since August 2023. Labor market expectations improved with households reporting a lower likelihood of higher unemployment (-1.7%pt to 34.5%, the lowest since Feb 2022) and personal job loss (-0.3%pt to 13.0%). Consumers see a higher likelihood of finding a job if they were laid off. Median expected household income growth as unchanged at 3.0%. That was also the case for spending growth 4.9%, but this parameter stays well above pre-pandemic levels. Perceptions of credit access compared to a year ago improved in October. The average perceived probability of missing a minimum debt payment over the next three months decreased by 0.3%pt to 13.9%, the first decrease since May 2024. Perceptions about households’ current financial situations compared to a year ago improved.

Australian quarterly wage growth figures for Q3 for the third consecutive quarter printed at 0.8% Q/Q. The Y/Y measure eased to 4.1% to 3.5%. The rise was slightly more modest than expected. Annual growth in the private sector was 3.5% in the September quarter 2024. This is the lowest private sector annual growth since the September quarter 2022. Public sector annual growth (+3.7%) was higher than in the same quarter last year (+3.5%), but lower than the recent peak (+4.2%) seen in December quarter 2023. The Reserve bank of Australia expects wage growth to ease to 3.4% at the end of the 2024 and 3.2% end 2025. However, for these kinds of wage growth levels to be compatible with inflation sustainably returning to 2-3% a further rise in productivity is probably needed. Money markets currently still only fully discount a first RBA rate cut in the summer of next year. The Aussie dollar remains under pressure from USD strength (AUD/USD 0.6525) but in this move recently outperformed the likes of the euro (EUR/AUD 1.626).