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Daily Pivots: (S1) 1.2903; (P) 1.2956; (R1) 1.3040; More...

Range trading continues in GBP/USD and intraday bias stays neutral. With 1.3047 resistance intact, further decline is still expected. Firm break of 1.2842 will resume the fall from 1.3433 to 61.8% retracement of 1.2298 to 1.3433 at 1.2732. However, considering bullish convergence condition in 4H MACD, firm break of 1.3047 will indicate short term bottoming, and turn bias back to the upside.

In the bigger picture, considering mildly bearish divergence condition in D MACD, a medium term top is likely in place at 1.3433 already. Price actions from there are seen as correction to whole up trend from 1.0351 (2022 low). Deeper decline would be seen 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) 1.0736; (P) 1.0780; (R1) 1.0848; More...

EUR/USD retreats after initial rejection by 55 4H EMA. Intraday bias remains neutral and more consolidations could still be seen above 1..0681 temporary low. But further decline is expected as long as 1.0936 resistance holds. On the downside, sustained break of 61.8% projection of 1.1213 to 1.0760 from 1.0936 at 1.0656 will pave the way to 100% projection at 1.0483.

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.

Dollar regained some strength in early US session, after a volatile week marked by high-profile events, including the US presidential election and Fed’s rate decision. The greenback's pullback from its post-election spike now appears to be more of a consolidation rather than reversal of its bullish momentum. However, Dollar bulls may need to wait until next week’s US CPI report to see if inflation data can provide the next catalyst for a decisive move.

Commodity currencies continue to top the weekly performance charts for now. However, there is uncertainty about whether they can maintain these gains as the trading week concludes, as Aussie appears to be leading a reversal.

Euro is currently the weakest performer of the week, with Swiss Franc also under pressure while Sterling is mixed. Yen also positions in the middle with help from today's strong rebound.

In Europe, at the time of writing, FTSE is down -0.62%. DAX is down -0.66%. CAC Is down -0.81%. UK 10-year yield is down -0.0490 at 4.455. Germany 10-year yield is down -0.046 at 2.402. Earlier in Asia, Nikkei rose 0.30%. Hong Kong HSI fell -1.07%. China Shanghai SSE fell -0.53%. Singapore Strait Times rose 1.39%. Japan 10-year yield fell -0.0006 to 1.006.

Canada's unemployment rate unchanged at 6.5%, wages growth picks up

Canada’s employment data for October revealed modest job growth, with 15k increase in jobs, falling short of the anticipated 33k. Employment rate slipped by -0.1% to 60.6%, marking its sixth consecutive monthly decline, while the unemployment rate remained steady at 6.5%. Labor force participation also declined, slipping by -0.1% to 64.8%, indicating a contraction in the active workforce.

On the positive side, total hours worked rose by 0.3% over the month and were up 1.6% yoy. Additionally, wage growth picked up, with average hourly wages rising 4.9% yoy, increase from September’s 4.6% yoy rise. This uptick in wages could signal pickup pressure on labor costs, potentially impacting inflation.

BoE's Pill emphasizes focus on long-term inflation amid temporary budget impact

In a briefing today, BoE Chief Economist Huw Pill emphasized that while the recent budget is expected to give inflation a temporary boost, the primary focus will remain on underlying, longer-term inflationary pressures.

Pill is more more concerned with structural inflation trends than short-term fluctuations triggered by fiscal policies.

"To a large extent, we will have to look through and interpret in a way that allows us to have a good sight of these underlying and more persistent components of inflation that really have to be the focus of what's driving our policy decisions," Pill said

According to BoE estimates, the budget is expected to add about 0.5% to inflation at its peak, which is anticipated to occur within the next two years. Governor Andrew Bailey expressed that this increase is unlikely to significantly alter BoE’s anticipated path of interest rate cuts.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0736; (P) 1.0780; (R1) 1.0848; More...

EUR/USD retreats after initial rejection by 55 4H EMA. Intraday bias remains neutral and more consolidations could still be seen above 1..0681 temporary low. But further decline is expected as long as 1.0936 resistance holds. On the downside, sustained break of 61.8% projection of 1.1213 to 1.0760 from 1.0936 at 1.0656 will pave the way to 100% projection at 1.0483.

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.

In a briefing today, BoE Chief Economist Huw Pill emphasized that while the recent budget is expected to give inflation a temporary boost, the primary focus will remain on underlying, longer-term inflationary pressures.

Pill is more more concerned with structural inflation trends than short-term fluctuations triggered by fiscal policies.

"To a large extent, we will have to look through and interpret in a way that allows us to have a good sight of these underlying and more persistent components of inflation that really have to be the focus of what's driving our policy decisions," Pill said

According to BoE estimates, the budget is expected to add about 0.5% to inflation at its peak, which is anticipated to occur within the next two years. Governor Andrew Bailey expressed that this increase is unlikely to significantly alter BoE’s anticipated path of interest rate cuts.

Canada’s employment data for October revealed modest job growth, with 15k increase in jobs, falling short of the anticipated 33k. Employment rate slipped by -0.1% to 60.6%, marking its sixth consecutive monthly decline, while the unemployment rate remained steady at 6.5%. Labor force participation also declined, slipping by -0.1% to 64.8%, indicating a contraction in the active workforce.

On the positive side, total hours worked rose by 0.3% over the month and were up 1.6% yoy. Additionally, wage growth picked up, with average hourly wages rising 4.9% yoy, increase from September’s 4.6% yoy rise. This uptick in wages could signal pickup pressure on labor costs, potentially impacting inflation.

Full Canada's employment release here.

EUR/USD is settling around 1.0785, assessing the market impact of this week's events. With Donald Trump’s return as US President, the market is recalibrating expectations around inflation and economic policies that his administration may reintroduce.

Trump’s protectionist stance could stir inflationary pressures, prompting the Federal Reserve to maintain higher interest rates than anticipated. This potential for elevated rates is boosting the dollar’s appeal.

Yesterday, the Federal Reserve cut interest rates by 25 basis points to 4.75% in line with market predictions. The Fed’s commentary suggested no deviations from its planned rate trajectory, hinting at continued easing.

Looking ahead, another rate reduction of 25 basis points is expected at the Fed’s December meeting, continuing its cautious but steady approach to monetary easing.

Technical analysis of EUR/USD

The EUR/USD pair has completed a bullish move towards 1.0820, as part of an ongoing upward impulse. Current market behaviour suggests a retracement to 1.0758 before resuming its ascent towards 1.0833. This outlook is supported by the MACD indicator, which, although below zero, is trending upwards, signalling a potential bullish continuation.

The hourly frame shows EUR/USD undergoing a corrective phase to 1.0758. Upon reaching this level, a rebound to 1.0833 is expected, followed by another potential pullback to 1.0758. The stochastic oscillator supports this outlook, with its signal line poised to rise towards 80, suggesting increasing bullish momentum.

• Cryptocurrencies benefit from Trump’s win
• Ethereum finds resistance at the 200-day SMA
• Momentum indicators confirm the bullish pressure

Ethereum has been benefiting from the outcome of the US presidential election by recording strong gains and returning above the 2,810 area for the first time since early August. It managed to overcome some key levels on its way higher, including the key May 27, 2024 descending trendline, with the rally pausing at the 200-day simple moving average (SMA). Contrary to bitcoin’s explosive rally in 2024, ethereum has yet to return to its March 2024 levels.

Meanwhile, the momentum indicators are bullish. The RSI has been climbing aggressively higher, thus confirming the strong bullish pressure in ethereum. Interestingly, the stochastic oscillator has returned to its overbought (OB) area and still maintains a good gap from its moving average. The stochastic oscillator could hover for a while in its OB region before signalling its readiness for a move lower, which would be a bearish signal.

Should the bulls remain confident, they would try to keep ethereum above the 50% Fibonacci retracement level of the October 13, 2023 – March 12, 2024 uptrend at 2,811, and then retest the resistance set by the 200-day SMA. If successful, the door would then be open for a move towards the 38.2% Fibonacci retracement level of 3,115, provided the bulls overcome the 3,000 level first.

On the other hand, the bears will try to regain the upper hand. A move below 2,811 could be the initial step for a more protracted move lower. Should they manage to push ethereum below the key May 27, 2024 trendline, the path could then be clear for a selloff towards the 2,500 area.

To conclude, ethereum has benefited from this week’s key events but it is now facing a key resistance level.

• GBPJPY retreats somewhat, but broader picture remains positive
• Momentum oscillators suggest declines

GBPJPY retreats after several attempts to touch the 200.00 round number, but the short-term bias remains positive.

From a technical perspective, there is a growing risk of a negative correction. The stochastic oscillator is pointing south, ready to post a bearish crossover, while the RSI is ticking down near the neutral threshold of 50.

If GBPUSD extends its rally above the 199.70 resistance, the 200.00 is the first point of call, after which attention would turn to the 202.00 handle.

However, should the price reverse, there could be some support at the 20-day simple moving average (SMA) of 197.20. Further down, the 195.40 mark could attempt to halt the decline ahead of the crucial support line of the 200-day SMA at 194.40. A breach of this line would shift the risks to the downside, meeting the 50-day SMA at 193.30 and the near-term uptrend line near 190.00.

In brief, there could be some further downside moves for GBPJPY in the short term before the rally continues to the upside. But the price needs to surpass the 200.00 key level to put the uptrend on a more sustainable footing, whereas a drop below the uptrend line would attract the bears.

• US President-elect Trump’s proposed policies may trigger a further upside movement on longer-term US Treasury yields.
• A break above the 4.49% on the US Treasury yield may see a further potential rally towards 5.20%.
• A further reduction of the 2-year and 10-year yield spread between the Australian government sovereign bonds and US Treasuries may put further downside pressure on the AUD/USD.

Among the developed nations’ central banks, the Australian central bank, RBA is the sole “lone ranger” (except Japan’s BoJ) that continued to defend its staunch “cautiously hawkish” guidance and kept its short-term policy interest rate unchanged at 4.35%, a 13-year high.

In the recent RBA monetary policy meeting that concluded on Tuesday, 5 November, RBA Governor Bullock reiterated that interest rates in Australia need to stay restrictive for the time being due to upside risks to services inflation.

Even though the labour market has softened, RBA does not see a massive sharp deterioration in underlying conditions. In addition, Australia’s core CPI has eased to 3.5% y/y in Q3 from its Q4 2022 peak print of 6.8%, but RBA’s latest forecast showed core inflation trend will likely only hit its 2-3% target by mid-to-late 2025.

Hence, market participants expect the RBA to only enact its first interest rate cut in either May or July next year, and based on the RBA Rate indicator as of 6 November that calculates a percentage probability of an RBA interest rate change based on the market-determined prices in the ASX 30-day interbank cash rate futures market suggests an implied interest rate cut of 47 basis points (bps) in total for 2025.

Relentless push-up in the 10-year US Treasury yield

Fig 1: Medium-term & major trends of 10-year US Treasury yield with yield spreads of AU sovereign bonds/US Treasuries

(Source: TradingView, click to enlarge chart)

US President-elect Trump’s proposed deep cut on the corporation tax rate from 21% to 15% is likely to further increase the US budget deficit. In addition, the proposed higher trade tariffs on Chinese and the rest of the world’s imports may also revive inflationary pressure in the US economy.

The net effect of Trump’s campaign trail proposed policies is higher longer-term US Treasury yields which the bond vigilantes have responded to in the past four weeks.

The start of the current US Federal Reserve interest rate cut cycle on 18 September saw a jumbo 50 basis points (bps) cut on the Fed funds rate. In contrast, the longer-term 10-year US Treasury yield traded higher and rallied by 88 bps from its 17 September low of 3.60% to print a recent high of 4.47% on US presidential election day, 5 November.

A bullish breakout with a daily close above 4.49% on the 10-year US Treasury yield may see further upside to revisit the 5% to 5.20% major resistance zone which in turn can potentially assert downside pressure on the 2-year and 10-year yield spreads between Australian government sovereign bonds and US Treasuries (see Fig 1).

A reduction in these yield spreads may trigger further downside pressure on the AUD/USD

AUD/USD at risk of revisiting 0.6400/6360

Fig 2: AUD/USD medium-term trend as of 8 Nov 2024 (Source: TradingView, click to enlarge chart)

The price actions of AUD/USD have continued to oscillate within a major complex sideways range configuration since its 13 October 2023 low of 0.6170.

After a test on the upper limit of the major range configuration at 0.6900 on 27 September, the AUD/USD started to decline toward the lower limit of the range, broke below its 50-day moving average, and traded below it since 14 October (see Fig 2).

Watch the 0.6720 key medium-term pivotal resistance. A break below the 0.6540 intermediate support may expose the medium-term pivotal support zone of 0.6400/6360 (also the major ascending trendline from the 13 October 2023 low).

On the other hand, a clearance above 0.6720 negates the bearish tone for a retest on the 0.6900 major resistance (also close to the long-term secular descending trendline from the 25 February 2021 high).

The Canadian dollar has steadied on Friday after a roller-coaster week. In the European session, USD/CAD is trading at 1.3889 at the time of writing, up 0.22% on the day.

Canada’s job growth expected to slow

With the tough battle against inflation largely won, the Bank of Canada has been a leader in the easing cycle among central banks, having cut rates three times this year. BoC policymakers are still keeping an eye on inflation but employment data is also in focus. The labor market has performed well despite high interest rates and a sluggish economy and the BoC needs the labor market to remain strong in order to ease the economy into a ‘soft landing’ and avoid a recession.

The September employment report was impressive as job growth jumped by 46.7 thousand, which was much higher than expectations. The October release is expected at 25 thousand and the unemployment rate is projected to creep up to 6.6% from 6.5%. If the forecasts prove accurate, it would point to a gradually weakening labor market, which would allow the BoC to continue cutting rates in modest increments of 25 basis points. The BoC holds its last rate meeting of the year on Dec. 11.

The Federal Reserve lowered the benchmark rate by 25-basis points on Wednesday. This is the second cut in the easing cycle after an oversized 50-bp chop in September. The move was widely expected and overshadowed by Donald Trump’s decisive and surprisingly easy win in the US election. The Fed plans to continue trimming rates but the size of the cuts will depend on the health of the economy, with employment and inflation data being the crucial factors which will determine the Fed’s rate path.

USD/CAD Technical

• USD/CAD is testing resistance at 1.3884. Above, there is resistance at 1.3925
• 1.3819 and 1.3778 are the next support levels