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Eurozone Sentix Investor Confidence rose from -38.3 to -30.9 in November, above expectation of -35. Current situation index rose from -35.5 to -29.5. Expectations index rose from -41.0 to -32.3, highest since June this year.

Sentix said: "At the beginning of November, the sentix economic indices in Euroland surprise on the positive side. The overall index rises by 7.4 points to -30.9, which is still not a trend reversal signal. But the rise in situation and expectation values shows how sensitively investors react in their economic expectations to signals from the energy market.

"For this is the cause of the hopeful changes. October showed higher temperatures than usual and this means that gas storage facilities in Germany, for example, are full to the brim, more than expected for November. Spot market gas prices collapsed in response. Concerns about a catastrophic gas shortage are fading."

Full released here.

Gold has been losing ground since early March, generating a profound structure of lower highs and lower lows within a descending channel. However, in the previous daily session, bullion managed to profoundly cross above its restrictive trendline before the 50-day simple moving average (SMA) capped its upside.

The momentum indicators currently suggest that bullish forces are strengthening. Specifically, the RSI has jumped above its 50-neutral mark, while the stochastic oscillator is ascending after bouncing at its 20-oversold level.

To the upside, bullish actions could propel the price towards 1,688, which has acted as both support and resistance in the past two months. Conquering this barricade, the bulls could aim for the October high of 1,730. Piercing through this region, gold may ascend towards 1,765 or higher to test the August high of 1,807.

Alternatively, if the positive momentum wanes, initial support could be met at the 1,653 level. A violation of this zone could open the door for the 30-month low of 1,614. Failing to halt there, the price could descend to form fresh multi-month lows, where the April 2020 support of 1,566 might provide downside protection.

In brief, gold appears to be in recovery mode after managing to break above its long-term descending channel. Nevertheless, if the price falls again below the latter, the precious metal will most likely extend its downtrend.

EURUSD experienced its fastest daily rally in two years on Friday, advancing by 2.0% to an intra-day high of 0.9965.

The swift bounce back took place at the bottom of a short-term ascending channel, adding credence to the series of higher highs and higher lows that emerged following the plunge to a 20-year low of 0.9535. The momentum signals are also sending some encouraging signals as the RSI has forcefully returned above its 50 neutral mark and the stochastics have resumed their positive trajectory. However, some caution is warranted as the MACD has yet to climb above its red signal line despite its latest upturn.

Besides, with the price being trapped below parity and the nearby 0.9965 resistance, downside corrections cannot be ruled out. Note that the 50% Fibonacci retracement of the 1.0367–0.9535 downleg is also within this neighborhood. Hence, a decisive close above this region is probably needed for the price to accelerate towards the upper surface of the channel seen around 1.0150, unless the previous high of 1.0092 halts the rally first. If the bulls manage to overcome September’s bar of 1.0917 too, the recovery could strengthen towards the 200-day exponential moving average (EMA) currently near the August top of 1.0367.

In the event sellers dominate, immediate support could again develop within the 0.9853–0.9785 region formed by the 38.2% Fibonacci and the channel’s lower band. If downside pressures press the price below the 23.6% Fibonacci of 0.9730 too, all eyes will turn to the crucial 0.9600–0.9535 floor. A violation of this base could bring the 0.9400 level next into focus.

In brief, EURUSD seems to have the bulls’ back, though some extra effort is needed above 0.9965–1.0000 to generate fresh buying interest.  

The Dax 40 rallies as mixed US jobs data lift risk appetite across asset classes. The index previously met stiff selling pressure near September’s high around 13450. A combination of profit-taking and fresh selling in this supply zone has weighed on the short-term price action. But the fallback has only shaken out weak hands and the swift recovery with a higher high indicates that the bulls are still in play. The bullish breakout could lift offers to the August high (13950). 13100 is the support should the Dax need some breathing room.

The Canadian dollar soared after solid jobs data raised bets for a large-sized rate hike by the BoC. The pair has been struggling to hold onto its gains above October’s lows (1.3500), which was a critical level to keep the rally relevant in the short-term. A previous rally came under pressure in the supply zone around 1.3800, then a fall below 1.3600 revealed that the bears have regained control. A dip below 1.3500 would extend losses towards 1.3400. An oversold RSI may cause a limited rebound with 1.3600 as the first hurdle.

The US dollar plunged after data showed a higher US unemployment rate in October. A break below 1.0000 could prolong the consolidation as the parity level has been acting like a magnet, pulling the price back and forth. With the RSI deeply in the oversold area. Trend followers may see the pullback as an opportunity to stake in. 0.9920 is the first support and 0.9840 a critical level to keep the price afloat. 1.0020 is a fresh resistance and a bounce above 1.0140 could pave the way for a rally to a six-year high at 1.0350.

Markets

On Friday, the US October payrolls was the first reality check after Fed Chair Powell’s hawkish post-FOMC press conference. The report in globo was stronger than expected with job gains at 265k (vs 193k expected) and a substantial upward revision to the September gain. Wage growth (AHE) also remained solid, gaining 0.4% M/M to be 4.7% higher Y/Y. This for sure isn’t the substantial cooling in labour market conditions that Powell and co deem necessary to slow aggregate demand and finally break the inflationary dynamics. Admittedly, the data from the consumer survey were weaker with the unemployment rate rising from 3.5% to 3.7% and the participation rate easing to 62.2% (from 62.3%), but this for sure isn’t enough to change the Fed call’s for a 5%+ peak policy rate next year. Still the market reaction was a bit counter-intuitive. After a brief moment of hesitation, especially US short-term yields turned south in a remarkable steepening move. Fed’s Barkin in an interview reconfirming the case for a slower pace of rate hikes and leaving open the debate on the peak rate level maybe supported the move. At the end of the day, the US 2-yield eased 5.5 bps while the 30-y still gained 6.5 bps. The US 10-y real yield reversed most of its post-Fed gain (currently 1.67%). German bunds underperformed US Treasuries in a bear steeping moves with yields rising between 4.3 bps (2-y) and 6.4 bps (30-y). The move probably was supported by comments from ECB’s Lagarde as she said that just a removal of policy accommodation won’t be enough bring inflation back to 2.0%.

The constructive bond market reaction to what still is to be considered a solid labour market report also filtered through in other markets. US equity indices gained 1.2%/1.3%. The Eurostoxx50 even closed 2.65% higher. Declining short-term interest rates/differentials and a risk-on sentiment also pushed the dollar off a cliff. The DXY TW index dropped from an open just below 113 to close at 110.87. EUR/USD traded near 0.9750 at the open but finished about 2% higher at 0.9957. Sterling gained against the dollar (cable close 1.1379) but still lost against the euro (EUR/GBP close 0.876) after a soft BoE narrative post Thursday’s BoE decision.

This morning, Asian equity markets show gains of up to 2.8% on the WS performance on Friday and as the debate/speculation on China potentially easing its COVID strategy continues. US Treasuries show no clear trend. The dollar regains modest ground after Friday’s battering. Today, the eco calendar in Europe and the US is almost empty. Later this week, the US mid-term elections and the US October CPI release (Thursday) will take center stage. The US Treasury will sell 3-y, 10-y and 30-y notes. Evidently, MPC members from the ECB, the Fed and the BoE are now again free to give their give after recent policy decisions. Friday’s market reaction suggests that markets might be a bit cautious to already fully embrace the consequences of the Fed 5% message ahead of Thursday’s CPI release. Even so, the downside in yields (both in the US and Europe) should be well protected. Friday’s USD correction - EUR/USD rebound was remarkable. Still we expected the 1.00/1.0095 area to remain tough resistance. EUR/GBP sustainably trading above the 0.8781 neckline would be a positive for the cross rate/further negative for sterling.

News Headlines

The EU says the US is breaking WTO rules with its Inflation Reduction Act and warned it could lead to retaliatory measures from Brussels and other US allies. The IRA contains a $369bn package of subsidies and tax credits for green investments and products made in the US. The EU wants to change nine provisions that contain incentives that affect the manufacturing of products including solar panels, wind turbines and clean hydrogen. It said that if the Act gets implemented, it may result in inefficiencies and market distortions and possibly “trigger a harmful global subsidy race to the bottom on key technologies and inputs for the green transition”.

German finance minister Lindner has budgeted more than €83bn to finance energy price caps for gas (€40bn earmarked) and electricity (€43bn) in 2023, Reuters reported citing documents sent to budget committee lawmakers yesterday. It is part of the €200bn package to help households and businesses with their energy bills unveiled by German chancellor Scholz back in September. The plans are scheduled to run until spring 2024 and the total amount will be borrowed this year as Berlin makes use of the current suspension of the debt limit.

Daily Pivots: (S1) 165.63; (P) 166.31; (R1) 167.47; More...

Intraday bias in GBP/JPY remains neutral for the moment, and further rally is mildly in favor with 164.95 support intact. On the upside, break of 172.11 will resume larger up trend. However, break of 164.95 will bring deeper pull back to 159.71 support and below.

In the bigger picture, up trend from 123.94 (2020 low), as part of the trend from 122.75 (2016 low) is still in progress. Further rise would be seen to 161.8% projection of 122.75 to 156.59 (2018 high) from 123.94 at 178.69. This will now remain the favored case as long as 148.93 support holds.

Daily Pivots: (S1) 144.82; (P) 145.48; (R1) 146.72; More....

Intraday bias in EUR/JPY stays neutral first and consolidation from 148.38 could extend. In case of deeper fall, downside should be contained by 55 day EMA (now at 143.27) to bring rise resumption. On the upside, break of 148.38 will resume larger up trend to 149.76 long term resistance next.

In the bigger picture, the up trend from 114.42 (2020 low) is still in progress for 149.76 (2014 high). Decisive break there will pave the way to 161.8% projection of 114.42 to 134.11 from 124.37 at 156.22. This will now remain the favored case as long as 137.32 support holds.

Daily Pivots: (S1) 0.8710; (P) 0.8747; (R1) 0.8795; More...

Immediate focus is now on 0.8779 resistance in EUR/GBP. Firm break there argue that corrective fall from 0.9267 has completed at 0.8570. Intraday bias will be back on the upside for 0.8869 first. Break there will bring retest of 0.9267 high. On the downside, break of 0.8570 will resume the fall from 0.9267 and target 0.8201/8388 support zone.

In the bigger picture, current development suggests that fall from 0.9267 is a down leg inside long term range pattern. Deeper fall could be seen towards 0.8201/8338 support zone. But strong support should be seen there to bring reversal.