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The euro is up for a third straight day on Wednesday. In the European session, EUR/USD is trading at 1.0839 at the time of writing, up 0.20% on the day.

Germany’s GDP for the third quarter surprised on the upside with a modest 0.2% gain. This was above the -0.1% reading in the second quarter and the market estimate of -0.1%. The German economy managed to avoid a technical recession, which is defined as two consecutive quarters of negative growth.

On a yearly basis, GDP fell by 0.2%, compared to zero growth in Q2 and a market estimate of -0.3%. Germany’s economy, the largest in the eurozone, remains in trouble and is weighing on the bloc. Eurozone GDP will be released later today and is expected to show a gain of 0.2% q/q and 0.8% y/y in Q3 vs. 0.2% q/q and 0.6% y/y in the second quarter.

German, eurozone inflation expected to accelerate

The markets will be keeping an eye on German inflation, which is expected to rise to 1.8% y/y in October, compared to 1.6% in September. This will be followed on Thursday with eurozone CPI, which is projected to rise from 1.9%, up from 1.8% previously. Core inflation is expected to creep lower to 2.6%, down from 2.7% in September and above the European Central Bank’s 2% target.

The German and eurozone inflation releases will be significant factors in the ECB’s rate plans. The central bank holds its final meeting of the year in December and a rate cut seems likely, although there is dissension among ECB Governing Council members as to the extent of the hike. If October’s inflation data is weaker than expected, we are likely to see growing calls for a jumbo 50-basis point cut at the December meeting.

EUR/USD Technical

• EUR/USD is testing resistance at 1.0840. Above, there is resistance at 1.0861
• 1.0804 and 1.0783 are the next support levels

Eurozone GDP rose by 0.4% qoq in Q3, surpassing the anticipated 0.2% qoq growth. A notable surprise came from Germany, where GDP grew by 0.2% qoq against expectations of a -0.1% qoq contraction, allowing Europe’s largest economy to narrowly avoid a recession. France also outperformed, with GDP increase of 0.3% qoq for the quarter.

For the EU as a whole, GDP expanded by 0.3% qoq. Among member states, Ireland posted the strongest growth at 2.0% qoq, followed by Lithuania at 1.1% qoq and Spain at 0.8% qoq.

However, some economies faced contraction, with Hungary’s GDP declining by -0.7% qoq, Latvia’s by -0.4% qoq, and Sweden’s by -0.1% qoq.

Year-over-year growth was mixed across the EU, with positive annual growth rates reported in seven countries, while six saw negative growth.

Full Eurozone GDP release here.

The Australian dollar remains under significant pressure, with AUD/USD extending its downtrend mid-week to reach 0.6539, the lowest since August. The decline, which began on 1 October, has been relentless, with the pair experiencing little to no respite from its downward trajectory.

Recent data indicating that Australia's annual inflation cooled to 2.8% in Q3 from 3.8% in Q2, falling just below the expected 2.9%, has contributed to the accelerated sell-off. Although this brings inflation within the Reserve Bank of Australia's (RBA) target range of 2-3%, the core inflation gauge closely monitored by the RBA remains elevated at 3.5% year-on-year in Q3. Given the persistent core inflation, the RBA has no immediate impetus to lower interest rates.

The central bank maintains that inflation needs to stabilise before considering monetary easing. With the RBA's next meeting scheduled for next week, market consensus does not anticipate a change in the current interest rate of 4.35% per annum. Rate cuts are not expected until at least May 2025.

Technical analysis of AUD/USD

The AUD/USD is persisting in its downward wave, targeting 0.6533. If this level is reached, a corrective phase towards 0.6613 may follow, and the downward trend is expected to resume towards 0.6491. The MACD indicator supports this bearish outlook, as its signal line is well below zero, indicating a continuation of the downward momentum.

On the hourly chart, AUD/USD has established a consolidation range around 0.6570, breaking downwards to continue towards 0.6533. Once this level is achieved, a corrective move to 0.6613 may begin, with an intermediate target at 0.6570. This potential upward correction is confirmed by the Stochastic oscillator, whose signal line is below 20 but poised to rise towards 80, suggesting a brief respite from the selling pressure.

Market Picture

Bitcoin came within a hair’s breadth of an all-time high on Tuesday night, but the overall crypto market is well off its peak. Total cryptocurrency capitalisation at the overnight peak was $2.46 trillion, down $2.48 trillion from the July peak, almost 12% below the March high of $2.77 trillion and around $400 billion below the all-time high reached in November 2021. While the big picture points to a series of lower peaks, the medium-term uptrend since early September still suggests that new highs are a matter of months away. And the acceleration we saw last week suggests it’s a matter of weeks, not months.

Bitcoin has been the main driver, gaining momentum since Saturday. Trading near $72.4K, Bitcoin does not appear to be extremely overheated, leaving room for further strength.

The market seems to be pricing in Trump’s victory and the easing of regulations on cryptocurrencies. The euphoria is particularly evident in Doge, which has gained another 6% in one day, 24% in seven days and over 41% in the last 30 days. The coin has no direct benefit from Trump’s rise to power, but speculators are warming to it because of frequent mentions of Musk, who may get a position in Trump’s government.

News Background

Bitget Research notes that several factors support BTC’s potential growth, including the expected Fed rate cut on 7 November. Market dynamics could also be influenced by the Microsoft board’s vote on the Bitcoin investment scheduled for 10 December.

According to former BitMEX CEO Arthur Hayes, demand for Bitcoin will rise sharply because of the Chinese stimulus. He believes that the injection of money into the economy and the threat of further inflation will lead to increased investment in risky assets.

The annualised yield on Steak, the second most capitalised cryptocurrency, has fallen to ~3%. Kaiko noted that Ether’s steak yield is now lower than that of other major tier 1 protocols, including Cosmos, Polkadot, Celestia, and Solana, which range from 7% to 21%.

Zeta Markets noted that Ethereum’s limitations are forcing users, applications, and capital to turn to L2 networks and competing blockchains such as Solana as demand for faster and more scalable solutions grows.

GBP/USD is attempting a recovery wave above the 1.2950 resistance. EUR/GBP declined steadily below the 0.8330 and 0.8325 support levels.

Important Takeaways for GBP/USD and EUR/GBP Analysis Today

• The British Pound is attempting a fresh increase above 1.2950.
• There is a key rising channel forming with support near 1.2980 on the hourly chart of GBP/USD at FXOpen.
• EUR/GBP is trading in a bearish zone below the 0.8350 pivot level.
• There is a connecting bearish trend line forming with resistance near 0.8330 on the hourly chart at FXOpen.

GBP/USD Technical Analysis

On the hourly chart of GBP/USD at FXOpen, the pair declined after it failed to clear the 1.3120 resistance. As mentioned in the previous analysis, the British Pound even traded below the 1.3000 support against the US Dollar.

Finally, the pair tested the 1.2910 zone and is currently attempting a fresh increase. The bulls were able to push the pair above the 50-hour simple moving average and 1.2950. The pair even climbed above the 50% Fib retracement level of the downward move from the 1.3071 swing high to the 1.2907 low.

On the upside, the GBP/USD chart indicates that the pair is facing resistance near 1.3015. It coincides with the 61.8% Fib retracement level of the downward move from the 1.3071 swing high to the 1.2907 low.

The next major resistance is near 1.3040. A close above the 1.3040 resistance zone could open the doors for a move toward 1.3070. Any more gains might send GBP/USD toward 1.3120.

On the downside, there is a key support forming near a rising channel at 1.2980. If there is a downside break below 1.2980, the pair could accelerate lower. The first major support is near the 1.2940 level.

The next key support is seen near 1.2910, below which the pair could test 1.2880. Any more losses could lead the pair toward the 1.2845 support.

EUR/GBP Technical Analysis

On the hourly chart of EUR/GBP at FXOpen, the pair started a fresh decline from well above 0.8400. The Euro traded below the 0.8350 and 0.8330 support levels against the British Pound.

The EUR/GBP chart suggests that the pair even declined below the 0.8310 level and tested 0.8300. It is now consolidating losses and trading below the 50-hour simple moving average. The pair is now facing resistance near the 61.8% Fib retracement level of the downward move from the 0.8350 swing high to the 0.8298 low.

The next major resistance could be 0.8300, a connecting bearish trend line, and the 50-hour simple moving average. It coincides with the 76.4% Fib retracement level of the downward move from the 0.8350 swing high to the 0.8298 low.

The main resistance is near the 0.8350 zone. A close above the 0.8350 level might accelerate gains. In the stated case, the bulls may perhaps aim for a test of 0.8400. Any more gains might send the pair toward the 0.8420 level.

Immediate support sits near 0.8310. The next major support is near 0.8300. A downside break below the 0.8265 support might call for more downsides. In the stated case, the pair could drop toward the 0.8220 support level.

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• Gold is trading higher again today
• Volatility is high ahead of key US data prints
• Momentum indicators remain bullish

Gold is trading higher again today, recording a new all-time high, following a very strong performance on Tuesday. This move could be attributed to the dollar being slightly on the back foot today, but, most likely, the incoming key US data releases and the market’s angst regarding next week’s events are the main reasons for the latest upleg. In addition, with the developments in the Middle East generating headlines, volatility in gold is expected to remain elevated.

In the meantime, the momentum indicators are bullish. The RSI is trading comfortably above its midpoint and is trying to record a higher high. Similarly, the Average Directional Movement Index (ADX) is edging higher, well above its 25 midpoint, confirming the bullish trend dictating gold’s price action. More importantly, the stochastic oscillator is hovering inside its overbought territory (OB) and showing little appetite, at this stage, for a downside move. Should it eventually manage to break below its OB, it could be seen as a strong bearish signal.

If the bulls remain confident, they could keep pushing gold higher, recording new all-time highs on a daily basis. The next target level is at 2,800, but, considering the current demand for this precious metal, next week’s events could allow the bulls to record an even more forceful rally.

On the flip side, the bears are keen for an overdue correction. They could lead gold lower towards the October 23, 2024 high at 2,758 with the first key support area coming at 2,685, where the September 26, 2024 high and the August 5, 2024 ascending trendline currently cross. Even lower, the 50-day SMA at 2,626 could be the last obstacle before the bears are able test the support set by the 261.8% Fibonacci extension of March 8, 2022 – September 28, 2022 downtrend at 2,601.

To sum up, gold is recording another upleg as market angst about the next big US events is keeping demand strong for this safe haven asset.

Swiss KOF Economic Barometer declined sharply from 104.5 to 99.5 in October, missing the expected 105.0 and falling below the 100-point threshold for the first time since January. This shift suggests a weakening outlook for the Swiss economy, with the KOF describing the recovery as “very hesitant.”

In October, indicators across all production-related sectors, including manufacturing, financial and insurance services, hospitality, and construction, showed declines.

Demand-side indicators, such as those for foreign and consumer demand, remained stable but showed little promise of stimulating stronger economic momentum.

Full Swiss KOF release here.

• USDJPY tests 3-month high again and again
• Remains well above 200-day SMA
• Stochastic and RSI look overbought

USDJPY is failing to have a closing session beyond the 61.8% Fibonacci retracement level of the down leg from 161.94 to 139.56 at 153.40 but is creating bullish spikes towards the three-month high of 153.90.

The pair remains well above the 200-day simple moving average (SMA), but the momentum seems to be weak. The RSI is moving horizontally near the 70 level, while the stochastic created a bearish crossover between its %K and %D lines in the overbought area. Both indicate a potential end to the bullish mode in the short term.

If there is an attempt above the three-month high of 153.90, then the next hurdle to look for would be the 155.20 resistance ahead of the 158.85 and 160.20 restrictive lines.

If the bears manage to push the market below the 200-day SMA, their initial target would be the 50.0% Fibonacci of 150.75, which is in close proximity to the 20-day SMA. Diving further, the 38.2% Fibonacci of 148.10 may pause the negative movements.

To sum up, USDJPY has added more than 10% over the last one-and-a-half months, switching the near-term view to bullish. However, a move back below the 146.50-147.15 support zone could endorse the medium-term bearish bias.

Markets

UK gilts underperformed yesterday. Yields with maturities ranging from the 2-yr (+5.1 bps) to the 10-yr (+6.1 bps) all hit five month and post-election highs. The spring Budget, due to be presented later today, is a key moment for the new Labour government and for markets. UK debt sales are expected to rise to the second-highest on record (£300bn) this year, trumped only by the pandemic-stricken years. This time, however, there’s no central bank buying bonds en masse, on the contrary. Labour needs to plug a £40bn hole and wants to invest in infrastructure and public services. With taxes already headed to their highest in decades, cutting expenditures (which usually enjoys little political appetite) and borrowing are the remaining options. By broadening the definition of “debt”, Chancellor Reeves created some £50bn additional borrowing room for future years without breaching the long-term debt reduction targets. Markets are on edge and rightly so. Expansionary fiscal policy may limit the central bank’s ability to cut rates. Sterling welcomes the (front end) interest rate support for now but we doubt whether that’s also going to be the case if rising (credit) risk premia take over at the long end of the curve. EUR/GBP tested 0.83 support yesterday; GBP/USD settled back above 1.30. German rates rose a couple of basis points too, from 3.4-5.7 bps. UST’s parted ways. Yields whipsawed on weaker JOLTS and stronger US consumer confidence before a smooth $44bn 7-yr auction (contrasting with the 2-yr and 5-yr one) settled the debate. Net daily changes varied between -2.8 bps to -4.3 bps. EUR/USD 1.076-1.0778 support lived to fight another day. Strong after-market results from Alphabet and reports of additional Chinese stimulus – likely to be announced at a top meeting next week – failed to inspire Asian trading this morning. Japan is an outlier with recent JPY weakness (USD/JPY 153.4) being the driver of current stock outperformance (+0.5-1%). Q3 GDP growth and inflation features the agenda today. The amount of data may trigger intraday FI and FX volatility but makes directional calls tricky. We expect in any case to see ongoing divergence between the US and Europe with the former growing triple the speed of the latter (2.9% q/q annualized vs 0.2% q/q). The split within the euro area between the ailing core (Germany) and outperforming periphery (Italy, Spain) will most likely deepen. First national CPI prints are due in Germany, Belgium and Spain while the US publishes Q3 PCE deflators. The ADP job report serves as an appetizer for Friday’s payrolls. Both are expected to reflect a significant hurricane-related impact. More tech giants including Microsoft and Meta Platforms report after market.

News & Views

Headline Australian inflation rose by 0.2% Q/Q in the July-September quarter, down from a 1% Q/Q pace in Q2 and printing slightly below consensus (0.3%). Inflation slowed from 3.8% to 2.8% in Y/Y-terms, moving within the Reserve Bank of Australia’s 2-3% inflation target band for the first time since Q1 2021. While prices continued to rise for most goods and services, these increases were offset by large falls for electricity (-17.3%) and automotive fuel prices. (-6.7%). Without rebates (2024-2025 Commonwealth Energy Bill Relief Fund & state-specific discounts) electricity prices would have increased by 0.7% Q/Q. The decline in annual goods inflation from 3.2% Y/Y to 1.4% Y/Y was also down to electricity and gas prices. Annual services inflation rose from 4.5% Y/Y in Q2 to 4.6% Y/Y. Higher prices for rents, insurance and child care were the main contributors. Underlying core measures, like the trimmed mean which filters for the biggest price swings, also point to more stubborn price pressures, keeping the Q2 pace of 0.8% Q/Q in Q3 and only slowing from 3.9% Y/Y to 3.5% Y/Y. Today’s numbers warrant the RBA’s current higher-for-longer approach, suggesting that a first rate cut will effectively only be for Q2 2025. AUD/USD abides by the rules of USD-strength this month, dropping back from 0.69+ end Q3 to 0.6550 currently.

The EU is walking the tariff talk against Chinese electric vehicles. Brussels yesterday announced levies that will come into force today and last for five years. The new duties come on top of an existing 10% tariff on Chinese car imports to the EU. Extra tariffs depend on the manufacturer and range from 7.8% to 35.3%. Earlier this year, the US raised tariffs on Chinese EV’s to more than 100% citing extensive government subsidies. The EU’s decision risks triggering retaliation on goods ranging from dairy over pork and brandy to cars with large engines. The latter could be increased from the current 15% to 25%.

Big Tech investors weren’t disappointed on Tuesday, as Alphabet announced better than expected results after the bell. The Google’s parent Alphabet saw its revenue rise 15% from the same time last year, ad revenue grew more than anticipated and more importantly, Google Cloud printed a solid 35% growth compared to the same time last year. The division earned $11.4 billion last quarter, comfortably above the $10.5bn revenue pencilled in by analysts. Google was up by around 1.66% yesterday before the earnings and rallied nearly 6% after the bell. It could have performed better if not for the serious regulatory issues it’s facing, including an antitrust trial questioning its monopolistic position. The trial could require the company to divest major assets like Android, Google Play, or Chrome. Rough. But anyhow, Alphabet’s latest beat serves as a fresh rebuttal to investors who fear a slowdown in AI demand.

And indeed, news at AMD were not enchanting. One of Nvidia’s biggest rivals gave a lacklustre revenue forecast for the current quarter, a message that raised worries about potentially slowing AI sales. Today, it’s Microsoft and Meta’s turn to reveal how well they did last quarter. The earnings announcements will continue with Apple and Amazon on Thursday – and Exxon and Chevron on Friday.

But the latter may be less enthusiastic than the tech peers. BP announced its quarterly results yesterday and they were mixed. The company reported the slowest profit growth in nearly four years due to weak oil prices. That was better than expected and topped with a $1.75billion buyback program. Alas, the company warned that it could change their strategy of buying back $1.75bn worth of shares every three months due to weak oil and gas prices. The shares slumped 5%.

Speaking of oil prices, the barrel of US crude remained under a selling pressure yesterday, and is slightly better bid this morning on the back of a small decline in US oil inventories (API) but trend and momentum indicators remain tilted to the downside and strong resistance is eyed near the $70pb psychological level, which also matches the minor 23.6% Fibonacci retracement on July to September selloff. The fading geopolitical tensions that were supportive of the bulls until this week have left their place to Chinese growth worries and supply/demand discussions – which both are negative for oil prices. In fact, World Bank thinks that global oil supply will exceed demand by 1.2mbpd next year. That makes me wonder whether OPEC might step in to put a floor under a more severe selloff.

Data

On the data front, the first glimpse at the US jobs numbers were soothing for the Federal Reserve (Fed) doves. The JOLTS data released yesterday showed that job openings in the US fell to their lowest levels since 2021, and Atlanta Fed’s GDP Now forecast dived below 3%. As such, the US 2-year yield is now testing the 4% level to the downside, and the US 10-year yield consolidated near 4.25%. The US dollar index eased after hitting a fresh high since summer.

Today, all eyes are on the ADP report. Analysts expect that the US economy may have added around 110K new private jobs in October. A softer-than-expected data could further back the Fed doves and weigh on the US dollar, whereas a strong-looking data will probably do little to erode the rate cut bets until we have more clarity from Thursday’s GDP and core PCE figures and Friday’s official jobs report.

But before, we have a mountain of figures to digest from elsewhere. Earlier today, Australia revealed higher-than-expected inflation in the Q3. But the September figure was lower than pencilled in by analysts and kept the Aussie bears in charge of the market. The AUDUSD continued to advance toward the 65 cents level, pressured by a broadly stronger US dollar and softer iron ore prices on worries that the Chinese stimulus measures won’t be enough to stimulate desired growth and support iron ore prices.

Here in Europe, the major Eurozone countries will be revealing their October preliminary CPI numbers today – expected to show an uptick in headline figures for October. If that’s the case, we could see the euro bears give back field and let the EURUSD rebound after a 4 figure selloff since the end of September. First resistance is eyed at 1.0870, near the minor 23.6% Fibonacci retracement on that selloff and the 200-DMA, and the key resistance sits at 1.0935, the major 38.2% Fibonacci retracement. These resistances could be seriously challenged in case of surprisingly weak jobs data from the US this week.

Elsewhere, Cable is testing the 1.30 level ahead of today’s budget announcement, amid hopes that Rachel Reeves will handle the announcement of the largest tax increase in recent times with enough tact, and the USDJPY is consolidating above 153 ahead of tomorrow’s Bank of Japan (BoJ) decision, which is expected to bring nothing new to the table, if not a pledge of more support for the economy amid rising political uncertainties.

Bitcoin reached the highest levels since March on the back of rising odds for a Trump win – which is also sending Trump’s Media and Technology Group shares skyrocketing since five weeks. The prediction markets assess more than 60% chance for a Trump win at next week’s presidential election, while the latest CNN poll gives 47% chance of winning to both candidates, making the Trump-friendly assets’ gains vulnerable.