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Daily Pivots: (S1) 0.8610; (P) 0.8646; (R1) 0.8676; More…

USD/CHF's fall from 0.8710 short term top is in progress and deeper decline would be seen to 55 D EMA (now at 0.8614). Sustained break there will argue that the rebound from 0.8374 has completed, and bring deeper fall back to this low. On the upside, firm break of 0.8710 will resume the rebound from 0.8374 instead.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 151.59; (P) 152.08; (R1) 152.62; More...

USD/JPY is still bounded in consolidation below 153.87 and intraday bias stays neutral. Further rally is in favor with 151.44 support intact. Sustained trading above of 61.8% retracement of 161.94 to 139.57 at 153.39 will pave the way to retest 161.94 high. However, considering bearish divergence condition in 4H MACD, firm break of 151.44 will indicate short term topping, and turn bias back to the downside for 55 D EMA (now at 149.08).

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.

Global currency markets are treading water today, as all eyes turn to the US presidential election, where Kamala Harris and Donald Trump are in a dead heat. Adding to the suspense, the Congressional elections will determine the president’s ability to push policy forward effectively, making the stakes especially high. Given the close race and critical swing states, a definitive result on election night is unlikely, leaving markets in a state of “nervous calm” as they await clarity.

Australian and New Zealand Dollars stand out as the better performers today. Aussie, in particular, is supported by RBA's steady stance with no dovish shift, as well as positive sentiment from an Asian stock market rebound. On the other hand, Dollar, Yen, and Canadian dollar lag behind. European majors are mixed while Sterling has a slight edge over Euro and Swiss Franc.

Looking ahead, New Zealand’s employment report in the upcoming Asian session could bring some volatility for Kiwi. The market expects a -0.5% contraction in Q3 employment and a rise in the unemployment rate from 4.6% to 5.0%. Earlier today, RBNZ flagged persistent downside risks for the economy in the Financial Stability Report. With a 50bps rate cut widely anticipated for the final meeting of the year on November 27, any downside surprise in employment data could raise the possibility of a more aggressive 75bps cut.

New Zealand employment data could be a mover for Kiwi in the upcoming Asian session. Employment is expected to contract -0.5% qoq in Q3 while unemployment rate jumped from 4.6% to 5.0%. RBNZ warned in today's Financial Stability Report that households have reduced their discretionary spending and businesses have put investment plans on hold. While business confidence is recovering as inflation and interest rates fall, significant further weakening in the economy remains a risk. Markets are expecting another 50bps rate cut  at the final rate decision of the year on Nov. 27. But any downside surprise tomorrow could prompt RBNZ to rethink whether to cut deeper by 75bps.

Technically, NZD/USD turned into consolidation after falling to 0.5939 last week. While further recovery cannot be ruled out, outlook will stay bearish as long as 55 D EMA (now at 0.6091) holds. Break of 0.5939 will resume the fall form 0.6378 to 0.5849 support, or even further to 0.5771 (2023 low).

In Europe, at the time of writing, FTSE is down -0.16%. DAX is up 0.21%. CAC is up 0.20%. UK 10-year yield is up 0.0467 at 4.504. Germany 10-year yield is up 0.031 at 2.424. Earlier in Asia, Nikkei rose 1.11%. Hong Kong HSI rose 2.14%. China Shanghai SSE rose 2.32%. Singapore Strait Times rose 0.27%. Japan 10-year JGB yield fell -0.0162 to 0.929.

UK PMI services finalized at 52.0, sector slows on policy uncertainty

UK PMI Services as finalized at 52.0, down from September's 52.4 and marking the lowest level since November 2023. PMI Composite similarly slipped to 51.8, a decline from 52.6 the previous month, also the lowest since last November.

According to Tim Moore, Economics Director at S&P Global Market Intelligence, the delay in policy clarity ahead of the Autumn Budget created a “wait-and-see” atmosphere, dampening business confidence and spending. Added to this were broader geopolitical uncertainties and anticipation of the US election, both contributing to businesses holding back on investment decisions.

Higher wages contributed to another month of strong input cost inflation, which rose to a three-month high but remained lower than in early 2024. Nevertheless, Moore noted that output charge inflation stayed near the 43-month low observed in September, continuing the "longer-term trend of decelerating price pressures".

RBA stands pat, still not ruling anything in or out

RBA maintained its cash rate at 4.35% today, as expected, while underscoring that inflation risks remain a concern. In its statement, RBA noted that although headline inflation has declined and is projected to stay lower in the short term, it considers underlying inflation as "more indicative" of inflation trends, and this measure remains "too high."

In line with this cautious approach, the emphasized the need to remain “vigilant to upside risks to inflation,” signaling flexibility by reiterating that it is "not ruling anything in or out." The ’s latest economic projections offer a more tempered outlook, with slight downward adjustments to growth and inflation forecasts, pointing to persistent caution amid moderated expectations.

Key revisions in the RBA’s projections include:

• Year-average GDP growth: 2024 unchanged at 1.2%, but lowered for 2025 from 2.5% to 2.2% and for 2026 from 2.4% to 2.3%.
• Year-ended CPI: Forecast for December 2024 is revised down from 3.0% to 2.6%, with December 2025 held steady at 3.7%, and December 2026 slightly reduced from 2.6% to 2.5%.
• Trimmed mean inflation: Forecast for December 2024 lowered from 3.5% to 3.4%, with additional downgrade for December 2025 from 2.9% to 2.8%, and December 2026 from 2.6% to 2.5%.

These adjustments reflect an outlook of moderated economic growth and slightly eased inflation pressures. However, RBA’s flexible stance indicates it is prepared to act if inflation risks become more pronounced, balancing economic stability with its inflation objectives.

China's Caixin PMI composite rises to 51.9, policy impact begins to show

China's Caixin Services PMI rose to 52.0 in October, surpassing expectations of 50.5 and marking the highest rate of growth in three months. The services sector continues its expansionary streak that began in January 2023. PMI Composite also increased from 50.3 to 51.9, its highest level in four months, maintaining expansion for the 12th consecutive month, driven largely by service-sector resilience.

Wang Zhe, Senior Economist at Caixin Insight Group noted that challenges noted that a range of supportive policies has since been introduced by the Politburo since September. The recent Caixin PMI readings for both manufacturing and services suggest that “market demand stabilized and optimism improved,” signaling early effects of the new policies.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 151.59; (P) 152.08; (R1) 152.62; More...

USD/JPY is still bounded in consolidation below 153.87 and intraday bias stays neutral. Further rally is in favor with 151.44 support intact. Sustained trading above of 61.8% retracement of 161.94 to 139.57 at 153.39 will pave the way to retest 161.94 high. However, considering bearish divergence condition in 4H MACD, firm break of 151.44 will indicate short term topping, and turn bias back to the downside for 55 D EMA (now at 149.08).

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.

• Silver has outperformed gold year-to-date, driven by increasing demand.
• The fundamental picture for silver is positive, with demand expected to continue outpacing supply.
• Short-term volatility is possible due to the US election and Federal Reserve meeting.
• Technically, silver is at a key support level; a close above 32.60 could signal renewed upward momentum.

Silver prices have continued to rally for the majority of this year. The metal has been overshadowed by Gold this year but has actually outperformed the precious metal. Silver’s YTD return sits at around 36%, while the precious metal is up around 32% over the same period.

There has been growing interest in silver over the last few years as its use in technology production, EVs and renewable power solutions has driven up demand. This has resulted in tremendous gains for silver, with returns ranging from a low 4.68% in 2022 and a high of 46.86% in 2020. The losses in between saw a high print of -14.65% in 2021. Over the period between 2019 to date, Silver has risen 89% since 2019.

Silver (XAG/USD) Performance 2019-2024 YTD

Source: TradingView (click to enlarge)

The fundamental picture is a positive one for silver with the gap between global supply and physical demand remaining wide. If demand continues to outpace supply as is expected, Silver should continue to rise.

Looking at the chart below, you can see the huge discrepancy between demand (blue line) and supply (white line) which I expect will underpin prices moving forward.

Source: LSEG

Silver prices could face some short-term volatility over the next couple of days. The US election is underway which could have implications on the US Dollar, while the Federal Reserve meeting tomorrow could lead to US Dollar weakness as market participants are pricing in a 25 bps cut from the Federal Reserve.

Technical Analysis Silver (XAG/USD)

From a technical analysis standpoint, Silver had a significant pullback last week as the USD index rose further. Since peaking around the 34.80 handle on October 22, silver has continued to print lower highs and lower lows, breaking below the 100-day MA and touching the the long term ascending trendline and 200-day MA.

This area around 32.20 is a key area of support and could see Silver push higher once more. On the H4 timeframe, Silver does need a four hour candle close above the 32.60 handle. A close above 32.60 will result in a change of structure with the previous highs being taken out, a sign that momentum may be shifting once more.

Above the 32.60 handle there is further area of resistance at 33.01, before a bit of freedom which could see silver prices make a swift run toward the 34.00 handle.

Alternatively, a break below the ascending trendline and 200-day MA could see a retest of the 31.34 support handle and potentially the 30.65 mark if a deeper pullback gains momentum.

Silver (XAG/USD) Four-Hour (H4) Chart, November 5, 2024

Source: TradingView (click to enlarge)

Support

• 31.34
• 30.65
• 30.00

Resistance

• 32.60
• 33.01
• 34.00

The Australian dollar has posted strong gains on Tuesday. In the European session, AUD/USD is trading at 0.6624, up 0.59% on the day.

RBA holds rates, stays hawkish

Nobody should have been surprised that the Reserve Bank of Australia maintained interest rates on Tuesday. The hold was widely priced in by the markets and marked the eighth straight meeting that the central bank has maintained rates. The RBA has turned into an outlier among major central banks, most of which have responded to lower inflation by trimming rates.

Australia’s inflation rates has also been on a downswing and headline CPI fell to 2.8% y/y in Q3 2024, within the RBA’s target of 2%-3%. Still, core CPI remains higher and services inflation has been sticky and is running at 4.6%.

The RBA had a hawkish message for the markets at today’s meeting. The rate statement said that the Bank was “not ruling anything in or out”. Governor Bullock added at her press conference that there were “still some risks on the upside” and singled out services inflation as evidence that there was “still a significant amount of inflation in the system”.

What can we expect from the RBA? The December meeting will probably see the central bank remain on the sidelines and an initial rate cut is not likely before February 2025. The rate path will depend greatly on inflation – if it continues to weaken, that would bolster the case for a rate cut. Another key factor will be the labor market, which has remained relatively strong despite a sluggish economy. If cracks appears in the labor market in the coming months, expectations for a rate cut will increase.

AUD/USD Technical

• AUD/USD has pushed above resistance at 0.6595 and is testing resistance at 0.6611. Above, there is resistance at 0.6635
• There is support at 0.6571 and 0.6555

• The VIX (the implied volatility of the S&P 500) has inched higher above the 20 level in the pastour sessions.
• The VVIX/VIX ratio has moved lower since 16 September, and past data suggests a potential short to medium-term corrective decline in the S&P 500.
• Watch the key intermediate support of 5,675 on the S&P 500.

Since our last publication, the S&P 500 has continued to languish as it failed to recapture its gapped down formed last Thursday, 31 October, and its 20-day moving average, both acting as an intermediate resistance at 5,810.

The movement of the S&P 500 is now being bombarded with macro factors (the upcoming FOMC meeting on 7 November), firm-based risks (ongoing US Q3 earnings session), and political events (the outcome of the US presidential election and the balance of power status in Congress).

Hence, market participants are cautiously hedging on potential negative tail-risk scenarios that could occur in the US stock market, triggered by these factors; either individually or by a concoction of it.

These downside tail-risk protection strategies can be structured via options and or futures markets on stock market implied volatility instruments such as the VIX or the VVIX (implied volatility on the VIX aka VIX of the VIX).

Also, such hedging activities are likely to create a potential reflexive feedback loop into the US stock market which in turn may impact the price actions of the major US stock indices negatively.

VIX has remained above 20 and the VIX/MOVE ratio is still above support

Fig 1: Major trends of MOVE Index, VIX & VIX/MOVE ratio as of 5 Nov 2024 (Source: TradingView, click to enlarge chart)

Since the week of 16 September 2024, the leading Merrill Lynch Option Volatility Estimate (MOVE) Index that reflects the level of volatility in U.S. Treasury futures has surged upwards significantly and cleared above a key medium-term resistance of 112.80.

The VIX (the implied volatility of the S&P 500) has lagged but still tagged along the movement of the MOVE Index and in the past four sessions inched higher above 20 where it recorded a closing level of 21.95 as of Monday, 4 November (see Fig 1).

In addition, the VIX/MOVE ratio has continued to print a series of “higher lows” and remained supported by an ascending trendline since July 2024 which suggests a potential looming outperformance of the lagging VIX over the MOVE Index.

Hence, a breakout above VIX key intermediate resistance of 23.38 may trigger a negative feedback loop into the S&P 500 at least on a short to medium-term time horizon.

The current VVIX value suggests a potential higher VIX

Fig 2: Medium-term trends of S&P 500 & VVIX/VIX ratio as of 5 Nov 2024 (Source: TradingView, click to enlarge chart)

The VIX is calculated from S&P 500 options, and the VVIX is calculated from VIX options. Therefore, a higher movement of VVIX suggests the VIX might be more volatile in the future, which in turn can indicate a market belief that the S&P 500 might also be more volatile.

If we take the relative movement of the VVIX against the VIX by plotting the ratio of VVIX/VIX along the movement of the S&P 500, we can see there are several past occasions since July 2023 that when the ratio of VVIX/VIX inched downwards (VVIX has a relatively higher value than the VIX), the S&P 500 staged a corrective decline of at least 6% thereafter during the periods of 27 July 2023 to 27 October 2023, 1 April 2024 to 19 April 2024, and 16 July 2024 to 5 August 2024.

Also, after these prior three periods of corrective decline sequences occurred on the S&P 500, it managed to stage bullish reversals when the VVIX/VIX ratio declined further to hit a level of 4.83 (see Fig 2).

In recent weeks, the VVIX/VIX ratio has steadily inched downwards since 16 September 2024 and as of 4 November, it has a value of 5.56 (still has room before hitting 4.83) which suggests the S&P 500 may stage a corrective decline towards the medium-term support of 5,390 (also the 200-day moving average) if the key intermediate support of 5,675 (also the 50-day moving average) is broken down.

Daily Pivots: (S1) 196.45; (P) 197.17; (R1) 197.85; More...

Intraday bias in GBP/JPY stays neutral as consolidating from 199.79 is extending. Further rally is expected as long as 55 D EMA (now at 194.48) 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) 165.14; (P) 165.55; (R1) 165.89; More....

EUR/JPY is staying in consolidations below 166.67 and intraday bias remains neutral. Further rally is expected as long as 164.25 minor support holds. Sustained break of 61.8% retracement of 175.41 to 154.40 at 167.38 will pave the way to retest 175.41 high. However, considering bearish divergence condition in 4H MACD, firm break of 164.25 will indicate short term topping, and turn bias to the downside for 55 D EMA (now at 163.15).

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) 0.8378; (P) 0.8399; (R1) 0.8415; More...

Intraday bias in EUR/GBP stays neutral first and consolidations from 0.8294 could extend further. On the downside, break of 0.8294 low will resume larger down trend to 0.8201 key support next. On the upside, break of 0.8446 will resume the rebound from 0.8294 short term bottom towards 0.8624 resistance instead.

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) 1.6462; (P) 1.6503; (R1) 1.6559; More...

EUR/AUD is staying in consolidations below 1.6598 and intraday bias stays neutral for now. Further rally is expected as long as 1.6351 resistance turned support holds. On the upside, above 1.6598 will resume the rise from 1.6002 short term bottom to 61.8% retracement of 1.7180 to 1.6002 at 1.6730 next. Sustained trading above there will pave the way to retest 1.7180 high.

In the bigger picture, as long as 1.5996 cluster support holds (38.2% retracement of 1.4281 to 1.7062 (2023 high) at 1.6000), up trend from 1.4281 (2022 low) is still expected to resume at a later stage. However, decisive break of 1.5996 will argue that the medium term trend has reversed and turn outlook bearish.