Sample Category Title

• EURUSD adds 200 pips and tries to reach 1.0900
• Trades well above moving average lines
• RSI suggests negative correction

EURUSD skyrocketed yesterday after the US CPI release and added almost 200 pips, recording a new two-and-a-half-month high of 1.0886, but its rally seems to have temporarily paused.

Approaching the 1.0900 area, it seems to be a real struggle to surpass this round number according to the RSI. The RSI is losing momentum after it touched the overbought region; however, the MACD oscillator is still strengthening its bullish movement, suggesting that the bulls may not give the battle yet. Also, the pair climbed well above the 200-day exponential moving average (EMA) and the 200-day simple moving average (SMA), which were acting as strong resistance levels in the past and the 20- and 50-day SMAs printed a bullish crossover.

In the event the pair re-activates its uptrend above Tuesday’s top of 1.0886, the next target will be the 1.0945 resistance. Even higher, the bulls might head for the 1.1065 barricade, which was a key resistance zone during August.

On the downside, the 200-day SMA at 1.0800 is the first stop to have in mind ahead of the 1.0755 support and the 200-day EMA at 1.0733. Hence, a step beneath that line, the 1.0655 line, which overlaps with the 20-day SMA might produce negative volatility.

Summarizing, EURUSD is sustaining an upward trend above the moving average lines and well above the short-term uptrend line. To attract new buyers, the pair will need to pierce through the 1.0900 psychological mark.

• USDJPY in the green today after a strong red candle
• Bears took advantage of USD weakness in the market
• Momentum indicators have reached a crucial stage

USDJPY is higher today, bouncing off the lower boundary of the ascending trending channel that has been in place since mid-March. Today’s reaction is partly the response from the USDJPY bulls to yesterday’s sizeable red candle. With Japanese authorities sticking to verbal intervention and the BoJ disappointing, market participants are fighting for the upper hand in USDJPY, resulting in an impulsive market.

In the meantime, the momentum indicators have reached a critical stage. The Average Directional Movement Index (ADX) is stuck below its 25-threshold and thus signals a trendless market. On the flip side, the RSI continues to hover above its 50-midpoint for the fourth consecutive month, revealing persistent bullish pressure. Crucially, the stochastic oscillator is gradually moving lower and preparing to test the resistance set by its moving average (MA). A break below the MA would be seen as a strong bearish signal.

Should the bulls remain hungry, they could try to confidently keep USDJPY above the 150.15 level. They could then have the chance to break the October 21, 2022 high at 151.94 and record a new 2023 high.

On the flip side, USDJPY bears are probably keen on finally breaking the lower boundary of the trending channel and the October 3, 2023 high at 150.15. If they are successful, they could have a go at pushing USDJPY below both the 50-day simple moving average at 149.35 and the August 11, 1998 high at 147.71 respectively. Even lower, the path appears to be clear until the 144.99-146.65 area.

To sum up, USDJPY bears have finally shown some signs of life, but the battle goes on as the bulls remain committed to breaking the 151.94 level and recording a new 2023 high.

EUR/USD started a fresh increase above the 1.0775 resistance. USD/JPY is declining and showing bearish signs below the 151.00 level.

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

• The Euro is rising and trading well above the 1.0835 resistance zone.
• There is a key bullish trend line forming with support near 1.0775 on the hourly chart of EUR/USD at FXOpen.
• USD/JPY is trading in a bearish zone below the 151.00 and 150.70 levels.
• There was a break below a major bullish trend line with support at 151.65 on the hourly chart at FXOpen.

EUR/USD Technical Analysis

On the hourly chart of EUR/USD at FXOpen, the pair started a fresh increase from the 1.0660 zone. The Euro climbed above the 1.0750 resistance zone against the US Dollar.

The pair even settled above the 1.0775 resistance and the 50-hour simple moving average. Finally, it tested the 1.0885 resistance. A high is formed near 1.0887 and the pair is now consolidating gains.

If there is a downside correction, the pair might test the 23.6% Fib retracement level of the upward move from the 1.0665 swing low to the 1.0886 high at 1.0835. The next major support is forming near a key bullish trend line at 1.0775.

The trend line is close to the 50% Fib retracement level of the upward move from the 1.0665 swing low to the 1.0886 high. The next key support is near the 50-hour simple moving average at 1.0750. If there is a downside break below 1.0750, the pair could drop toward the 1.0705 support. The main support on the EUR/USD chart is near 1.0660, below which the pair could start a major decline.

On the upside, the pair is now facing resistance near 1.0885. The next major resistance is near the 1.0920 level. An upside break above 1.0920 could set the pace for another increase. In the stated case, the pair might rise toward 1.0980.

USD/JPY Technical Analysis

On the hourly chart of USD/JPY at FXOpen, the pair started a strong decline well above the 151.80 zone. The US Dollar gained bearish momentum below the 151.50 support against the Japanese Yen.

There was a break below a major bullish trend line with support at 151.65. The pair even settled below the 151.00 level and the 50-hour simple moving average. Finally, it broke the 150.70 pivot level. A low is formed near 150.15 and the pair is now showing a lot of bearish signs.

It is trading near the 23.6% Fib retracement level of the downward move from the 151.90 swing high to the 150.15 low. Immediate resistance on the USD/JPY chart is near 150.70.

The first major resistance is near the 50% Fib retracement level of the downward move from the 151.90 swing high to the 150.15 low at 151.00. The main resistance is near the 50-hour simple moving average at 151.30.

If there is a close above the 151.30 level and the hourly RSI moves above 50, the pair could rise toward 151.90. The next major resistance is near 152.50, above which the pair could test 154.00 in the coming days.

On the downside, the first major support is near 150.40. The next major support is near the 150.15 level. If there is a close below 150.15, the pair could decline steadily. In the stated case, the pair might drop toward the 148.50 support.

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Markets

The Fed is done hiking and readying a full percentage rate cut by end next year. That’s what markets concluded from yesterday’s <0.1% ppt lower than expected CPI numbers. It triggered a mindboggling repositioning across the curve. It’s as if markets were waiting for one/any number to scoop up battered Treasuries. Yields fell 20-22.4 bps in the 2-7y bucket and 13.4-19.3 bps further out. The 2-y yield tested the recent November correction low at 4.80% while the 10-y hit lost support around 4.50% to finish at a two-month low of 4.44%. The rally in Treasuries caught German Bunds in their slipstream, pushing yields in the country between 9.3-11.3 bps lower across the curve. The 2-y over there lost the 3% mark, the 10-y tenor closed near the lower bound of the Oct-Nov downward trend channel at 2.6%. This level also coincides with the 38.2% retracement on the 2023 yield rally. The massive interest rate support loss and the equity rally it triggered (US stocks 1.4-2.4% higher) tackled the US dollar. DXY opened at 105.65 to close just north of 104 and in the process lost support at 105.51 and 104.38 (23.6% and 38.2% retracement on the 2023H2 DXY recovery). EUR/USD added almost two big figures into a close of 1.0879. Resistance areas at 1.0756, 1.0764 and 1.0862 posed no problems whatsoever. Dollar weakness even gave the ailing JPY a breather. USD/JPY fell to 150.37 (from 151.78). Compare this to EUR/JPY, which surged to a new 15-year high of 163.60.

Asian-Pacific equities keenly jump on the WS train. Stocks add up to 3% and more in China, with some good news in the country helping the move higher (see below). The yuan appreciated further to a three-month high of USD/CNY 7.24 with USD weakness helping at least as much. JPY pares some of yesterday’s gains amid poor Japanese Q3 growth and risk on. US Treasuries more or less stabilize. The economic calendar today contains US PPI and retail sales. Yesterday’s price action revealed a clear dovish skew towards data. Any downside miss is likely to extend the correction in US yields whereas a significant surprise to the upside is needed for a rebound worth the name. US 10-y yield support kicks in at 4.33% (Oct 22 interim high)/4.34% (38.2% retracement on the 2023 yield rise)/4.36% (Aug 23 interim high). Next resistance EUR/USD at 1.0945/1.0965 should hold as US bond sentiment will probably spill over to Europe as well. UK inflation numbers this morning printed a downside surprise similar to the US (0% m/m, 4.6% y/y and 5.7% for the core). The numbers, as in the US, cement market thinking of the BoE being done with hiking and instead preparing rate cuts mid-2024. Sterling losses are contained for now though. EUR/GBP rises towards 0.871.

News & Views

The Japanese economy  contracted more than expected in Q3. After an 1.1% growth spurt in Q2, activity in Q3 contracted by 0.5% Q/Q (-0.1% expected). The decrease was mainly due to poor domestic demand (-0.4%), especially corporate investment. Private consumption stagnated after a substantial decline in Q2, underscoring sluggish underlying consumer demand. Government consumption was a supportive (0.3% Q/Q). Net exports shaved off -0.1 ppt as a modest rise in exports (0.5%) was offset by a 1.0% rise in imports. The BoJ may consider the poor performance of private consumption a sign that a sustained, demand driven inflation rise remains uncertain. In this respect, the BoJ probably won’t be in a hurry to exit stimulative policy. Even so, after a sharp decline at the open (mirroring the global market), the Japanese 10-y yield holds in the 0.80% area. USD/JPY this morning trades in the 150.65 area compared to levels of 151.5+ yesterday but this was due to USD weakness. The yen remains weak with the likes of EUR/JPY (163.9) touching multi-year peak levels.

Chinese October retail sales rebounded more than expected at 7.6% Y/Y from 5.5% Y/Y in September and 7.0% expected. YTD retail sales now are 6.9% higher compared to the same period last year. October industrial production data also showed a small beat (4.6% Y/Y vs 4.5% expected). At the same time, property investment (YTD -9.3%) remains a huge negative for the economy being a major drag on the fixed investment performance. The PBOC this morning offered much more cash (CNH 1450 bln) than expected (and what matured) via its 1-year Medium Term Lending facility. The cash injection suggests that the bank still sees the need for ongoing policy stimulation. The yuan this morning strengthened to USD/CNY 7.24, but this is mainly USD softness.

Daily Pivots: (S1) 186.54; (P) 187.41; (R1) 188.84; More...

GBP/JPY's rally is in progress and intraday bias stays on the upside. Next target is 161.8% projection of 178.02 to 183.79 from 180.74 at 190.07. On the downside, below 187.26 minor support will turn intraday bias neutral and bring consolidations first, before staging another rise.

In the bigger picture, as long as 178.02 support holds, larger up trend from 123.94 (202 low) should still be in progress, next target is 195.86 (2015 high). For now, outlook will stay bullish as long as 183.79 resistance turned support holds, in case of deep pullback.

Daily Pivots: (S1) 162.60; (P) 163.21; (R1) 164.21; More....

Intraday bias in EUR/JPY remains on the upside as recent rally is still in progress. Next near term target is 61.8% projection of 139.05 to 159.75 from 154.32 at 167.11. On the downside, below 163.23 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, rise from 114.42 (2020 low) is in progress. Next target is 169.96 (2008 high). On the downside, break of 159.75 resistance turned support is needed to be the first sign of medium term topping. Otherwise, outlook will remain bullish even in case of deep pullback.

Daily Pivots: (S1) 0.8685; (P) 0.8708; (R1) 0.8727; More....

EUR/GBP is extending the consolidation pattern from 0.8752, with fall from 0.8754 as the third leg. Deeper decline could still be seen to 0.8648 support. But strong support should be seen around there to complete the consolidation and bring rebound. On the upside, decisive break of 0.8752/4 will resume whole rise from 0.8491 to 0.8874 resistance next.

In the bigger picture, current development suggests that whole down trend from 0.9267 (2022 high) has completed with three down to to 0.8491. Rise from 0.8491 is seen as another leg inside that pattern from 0.9499 (2020 high). Further rally should be seen to 0.8977 resistance and above. This will remain the favored case as long as 0.8614 support holds.

Daily Pivots: (S1) 1.6672; (P) 1.6756; (R1) 1.6802; More...

EUR/AUD fails to break through 1.6843 resistance decisively and retreated. Intraday bias is turned neutral first. On the upside, sustained break of 1.6843 will resume the rebound from 1.6319 for retesting 1.7062 high next. On the downside, however, below 1.6666 minor support will turn bias back to the downside for 1.6449 support instead.

In the bigger picture, while 1.7062 is a medium term top, there is no clear sign of trend reversal as EUR/AUD continues to draw strong support from the medium term trend line. Break of 1.7062 will resume the larger up trend from 1.4281 (2022 low) to 1.7691 fibonacci level. Nevertheless, break of 1.6449 support will argue that deeper correction is underway to 38.2% retracement of 1.4281 to 1.7062 at 1.6000.

Daily Pivots: (S1) 0.9652; (P) 0.9666; (R1) 0.9688; More...

EUR/CHF's rally from 0.9416 is still in progress and intraday bias stays on the upside for 0.9691 resistance. Firm break there will argue that whole decline from 1.0095 has completed, just ahead of 0.9407 support (2022 low). Nevertheless, break of 0.9595 support will indicate short term topping, and turn bias back to the downside for deeper pull back.

In the bigger picture, fall from 1.0095 (2023 high) might have completed at 0.9416, just ahead of 0.9407 support (2022 low). Sustained break of 0.9691 cluster resistance (38.2% retracement of 1.0095 to 0.9416 at 0.9675) will pave the way to 61.8% retracement at 0.9836 and above. However, rejection by 0.9691 will maintain medium term bearishness for another test on 0.9407 at least.

The Federal Reserve (Fed) doves got a big energy boost yesterday by a slightly lower-than-expected inflation report. The headline inflation fell to 3.2% in October from 3.7% printed a month earlier, and core inflation eased to 4% from 4.1% printed a month earlier. Services excluding housing and energy costs – the so-called super core figure closely watched by the Fed - rose only 0.2% and shelter costs rose only 0.3%, down from a 0.6% advance printed a month earlier. The soft set of inflation print cemented the expectation that the Fed is done hiking the interest rates. The US 2-year yield – which best captures the rate bets – tanked 24bp to 4.81%. The 10-year slipped below 4.50% and activity on Fed funds futures gives around 95% chance for a no rate hike in December. That probability stood at around 85% before yesterday’s US CPI data.

In equities, the S&P500 jumped past its 100-DMA, spiked above the 4500 mark, and closed the session a few points below this level. Nasdaq 100 extended its gain to 15850. In the FX, the US dollar took a severe hit. The index fell 1.50% on Tuesday, pulled out a major Fibonacci support and sank into the medium-term bearish consolidation zone. The EURUSD jumped to almost the 1.09 level. Yes, there is no mistake – to nearly 1.09 level, and Cable flirted with the 1.25 resistance. What a day!

A small parenthesis on UK inflation

Good news came from Britain this morning, as well. Inflation in the UK fell 6.7% to 4.6% in October, lower than the 4.7% penciled in by analysts. Core inflation also eased more than expected to 5.7%. There is growing evidence that the major central banks’ efforts are bearing fruit. Cable is sold after the CPI data, but the pullback will likely remain short-lived if the USD appetite continues to wane globally.

Back to US: Retail sales, big retail earnings & US political jitter

Yesterday’s rush to open fresh long US Treasury positions was likely intensified by a hurry to cover short positions. We shall see a correction in the US yields, as the Fed members still maintain their position for ‘higher for longer’ interest rates. But the market position is clear. The pricing now suggests a 50bp cut from the Fed by July next year; the sweet and sour cocktail of softening jobs market and easing inflation suggests that the Fed’s next move will probably be a rate cut, rather than a rate hike.

So yes, ladies and gentlemen, the way is being paved for a potential Santa rally this year. But the Fed will continue to calm down the game, and any strength in the US economic data should reinforce the ‘high for long’ rhetoric and tame appetite.

Investors will watch the US retail sales data today. A strong figure could pour cold water on heated Fed cut bets. A soft figure, on the other hand, could bring in more buyers to US bond markets.

On the individual front, Home Depot shares rallied more than 5% yesterday. Earnings and revenue narrowed and the company released a cautious year-end guidance, but the results were better than expected. Target is due to report today, and Walmart on Thursday.

To add another layer of complexity – on top of the economic data and corporate earnings – the US political scene will impact bond pricing in the next few days. The US politicians try to avoid a government shutdown by Friday. The latest news suggests that the odds of shutdown diminished yesterday as House Speaker Mike Johnson gained more Democratic support for his interim funding plan. The interim plan however excludes aid for Ukraine, aid for Israel and could lead to a two-step shutdown at the start of next year. And it does not include the steep spending cuts that the hardcore Republicans are looking for. In summary, the political mess continues.

In the best-case scenario, the US politicians will agree on another short-term relief package and avoid a government shutdown, push away the threat of another rating cut – from Moody’s this time. The latter would maintain appetite in US bonds and support a further rally in the US stocks. In the worst-case scenario, the US government will stop its operations by the end of this week and the political chaos will lead to a bounce in US yields and stall the equity rally.