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The Canadian dollar has been quiet over the past two trading days but that could change today with the release of Canada’s GDP report. In the European session, USD/CAD is trading at 1.4005, down 0.27%. There are no US events today and US markets will be closing early for the Thanksgiving weekend.

Canada GDP expected to rise to 0.3%

It has been a quiet week on the data calendar for Canadian releases, as the sole tier-1 event is today’s GDP report. After posting no growth in August, the market estimate for September stands at 0.3% m/m.

The lack of growth in September was expected, as the economy ran into a brick wall due to the weight of high borrowing costs. Interest rates remain high at 3.75% and this has dampened business activity and consumer demand. Recent cuts by the Bank of Canada have yet to filter through the economy.

The Bank of Canada will be keeping a close eye on the GDP release. If GDP is short of expectations, there will be pressure on the central bank to respond with a second straight cut of 50 basis points. This is the second to last key event prior to the rate announcement on Dec. 11, with the employment report on Dec. 6.

Inflation and the health of the economy are not the only factors on the minds of BoC policymakers. The Canadian dollar has taken a beating and has declined over 4% since Oct. 1. The BoC doesn’t want to see the Canadian dollar continue to depreciate and a 50-bp cut could sent the currency sharply lower.

USD/CAD Technical

• USD/CAD is testing support at 1.3995. Below, there is support at 1.3976
• 1.4019 and 1.4038 are the next resistance lines

The euro is showing little movement on Friday. In the European session, EUR/USD is trading at 1.0564, up 0.09%. There are no US events today and US markets will close early for the Thanksgiving holiday weekend.

Eurozone inflation jumps to 2.3%

Today’s eurozone inflation report was a reminder that inflation may be largely contained but the battle is not yet over. In November, CPI climbed to 2.3% y/y, up from 2% in October and matching the market estimate. Core inflation, which excludes volatile food and energy prices and is a better gauge of inflation trends, was unchanged at 2.7% y/y, shy of the 2.8% market estimate. Services inflation, which has been persistently high, rose 3.9%.

On a monthly basis, inflation declined in November, which could signal that disinflation is continuing. Headline CPI declined 0.3%, core CPI dropped 0.4%, and services inflation fell 0.9%.
The European Central Bank has strongly hinted at a rate cut in December and the November inflation data is unlikely to change those plans. The ECB can point to the monthly decline in the core rate and services inflation and weak economic activity as support for a rate cut.

The most recent PMI report showed that the eurozone services sector contracted for the first time in 10 months. Today’s German retail sales report pointed to weak consumer spending in the eurozone’s largest economy. Retail sales were down 1.5% m/m in October, after a revised 1.6% gain in September and below the market estimate of -0.3%. Annually, retail sales gained 1%, compared to a revised 4.2% in September and well below the market estimate of 3.2%.

EUR/USD Technical

• EUR/USD pushed above resistance at 1.0575 and 1.0595 before retreating
• 1.0551 is under pressure as support. The next support line is 1.0531

Gold prices have risen for four consecutive days, reaching 2,660 USD per troy ounce by Friday. The upward movement in Gold prices is primarily driven by the weakening of the US dollar and heightened geopolitical tensions. The current state of the currency market, characterised by low liquidity due to the extended US holiday weekend starting with Thanksgiving, also contributes to Gold's price behaviour.

Despite this recent appreciation, Gold faces potential headwinds and could experience a 2% decline by the week's end as investors await further data from the US. The upcoming statistics are anticipated to provide additional insights into the Federal Reserve's monetary direction on monetary policy. While the Core PCE data suggests a rate cut in December is plausible, other economic indicators point to the continued robustness of the US economy. This may lead the Fed to maintain its cautious approach to interest rates in 2025.

The relationship between the US dollar and Gold is crucial, as they typically move inversely. Gold, which does not generate its yield, tends to perform well when the dollar and US Treasury bond yields are lower.

Technical analysis of XAU/USD

On the H4 chart, XAU/USD has completed a corrective wave at 2,605.55 and is now poised for further growth towards 2,715.00. When this level is reached, a consolidation phase around 2,715.00 may occur, potentially leading to a continued upward trajectory towards 2,818.55. The MACD indicator supports this bullish scenario, with its signal line below zero but rising sharply.

The H1 chart shows that Gold has completed an initial growth structure to 2,658.88 and a subsequent correction to 2,622.00. Currently, a new growth phase targeting 2,698.00 is underway. Upon reaching this target, a pullback to 2,658.88 may occur before the market attempts to achieve a higher level of 2,715.00. This outlook is corroborated by the Stochastic oscillator, whose signal line is above 50 and climbing towards 80, indicating the potential for further upward movement.

Eurozone CPI rebounded from 2.0% yoy to 2.3% yoy in November, matched expectations. CPI core (energy, food, alcohol & tobacco) was unchanged at 2.7% yoy, below expectation of 2.8% yoy.

Looking at the main components, services is expected to have the highest annual rate in November (3.9%, compared with 4.0% in October), followed by food, alcohol & tobacco (2.8%, compared with 2.9% in October), non-energy industrial goods (0.7%, compared with 0.5% in October) and energy (-1.9%, compared with -4.6% in October).

Full Eurozone CPI flash release here.

The Japanese yen has surged higher on Friday after a strong inflation release. In the European session, USD/JPY is trading at 150.19, down 0.87% on the day. Earlier, the yen has broken below the symbolic 150 level for the first time since Oct. 21.

Tokyo Core CPI beats expectations

Tokyo Core CPI, a key inflation indicator which excludes fresh food and energy, rose 2.2% in November, above market expectations of 2.1% and above the October gain of 1.8%. Tokyo CPI jumped 2.6% in November, blowing past the October reading of 1.8% and the forecast of 1.9%.

The robust inflation data has sent the yen sharply higher as expectations for a December rate hike have climbed. The markets still aren’t sure which way the wind is blowing and have priced a December cut at around 60%. The Bank of Japan won’t win any points for transparency about its rate plans but the BoJ has hinted that its plans to continue raising rates and moving towards normalization. If the BoJ stays on the sidelines next month, it is expected to trim rates in early 2025.

The BoJ has more on its mind than inflation when it comes to rate policy. The yen has been on a miserable slide since early October, although it has shown some strength this week. The BoJ is under pressure to raise rates in order to support the yen, although a quarter-point rate may not provide much of a boost.

If the yen continues to lose ground and moves back towards the 155-160 level, we can expect the Ministry of Finance and the BoJ to warn about a possible currency intervention. This would be a last resort but Tokyo has carried through with interventions when it felt the yen was depreciating too quickly.

USD/JPY Technical

• USD/JPY has pushed below several support lines today. Currently, there is weak support at 149.89, followed closely by 149.63
• 152.05 and 152.54 are the next resistance lines

• EURGBP gets rejected near SMAs; technical signals are negative
• There might be an opportunity for a rebound near 0.8300
• Eurozone publishes CPI inflation data at 10:00 GMT

EURGBP experienced another failure near its 20- and 50-day simple moving averages (SMAs) earlier this week, increasing concerns that the bad days are not over yet.

With the price resuming its negative momentum and the technical indicators reflecting a neutral-to-bearish bias, there might be a decisive moment near the 0.8300 number. The area has been a key battleground for the bulls and the bears since the end of September and the outcome there could set the tone for the coming sessions.  

If the pair holds its footing near 0.8300, it could spark a resurgence back to the 20- and 50-day SMAs seen within the 0.8330-0.8345 region. A success there could target the tentative short-term resistance line at 0.8380 and the 0.8400 round level, a break of which could see an extension toward the 200-day SMA at 0.8440 or even up to the long-term trendline near 0.8470.

Otherwise, if the 0.8300 floor cracks, the sell-off could expand toward the key support trendline, where the price posted a 2½-year low of 0.8259 earlier this month. Additional declines from there could pause somewhere between 0.8200 and 0.8170. If not, the bears could next reach the 0.8115 barrier taken from 2016.

All in all, the situation in the EURGBP market is still daunting, but the price may not enter a new bearish phase unless the 0.8300 base collapses.  

• USDCAD posts losses after 4½-year high
• RSI and stochastics confirm negative move

USDCAD is moving lower after the bullish spike to the fresh four-and-a-half-year high of 1.4176, falling beneath the 1.4000 round number.

The market remains in a positive territory; however, the technical oscillators are indicating further decreases. The RSI is pointing down slightly above the neutral threshold of 50, while the stochastic posted a bearish crossover within its %K and %D lines, heading towards the oversold area.

Immediate support could come from the 20-day simple moving average (SMA) at 1.3970 before testing the previous bottoms at 1.3925. A slide lower could open the door for a retest of the 50-day SMA at 1.3815.

Alternatively, a potential bounce off the 20-day SMA could send the bulls higher toward the 1.4100 round number and the multi-year high of 1.4176.

Summarizing, USDCAD has been in a bullish tendency since September 25 and only a decisive closing session below the 200-day SMA at 1.3690 may change this view.

Swiss KOF Economic Barometer climbed from 99.7 to 101.8 in November, surpassing expectations of 100.1 and returning above the key 100 mark. . KOF remarked, "The Swiss economy develops steadily albeit without strong dynamics."

The improvement was broad-based across production-side sectors, with positive contributions from manufacturing, financial and insurance services, hospitality, other services, and construction.

On the demand side, consumer indicators remained largely unchanged but continued to reflect favorable trends. However, the outlook for foreign demand remains subdued, tempering some of the optimism.

Full Swiss KOF release here.

Switzerland's real GDP grew by 0.4% qoq in Q3, slowing from 0.6% growth recorded in Q2 and in line with expectations. Adjusted for the impact of sporting events, growth was even more subdued, at 0.2% qoq compared to the prior quarter's 0.4% qoq.

According to SECO, growth was supported by parts of the services sector, construction, and consumer spending. However, exports of goods and manufacturing output dragged on the economy. Notably, the chemical and pharmaceutical sector, a key pillar of Swiss manufacturing, showed minimal growth after a strong Q2, while other manufacturing sectors posted significant declines.

Full Swiss GDP release here.

Daily Pivots: (S1) 1.0531; (P) 1.0551; (R1) 1.0575; More...

Intraday bias in EUR/USD remains neutral and further decline is still in favor with 1.0609 resistance intact. On the downside, break of 1.0330 will resume the fall from 1.1213. Also, sustained trading below 1.0404 key fibonacci level will carry larger bearish implication. Nevertheless, firm break of 1.0609 will confirm short term bottoming, and turn bias back to the upside for 1.0760 support turned resistance first.

In the bigger picture, immediate focus is now on 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404. Strong rebound from this level will keep price actions from 1.1273 (2023 high) as a medium term consolidation pattern only. However, sustained break of 1.0404 will raise the chance that whole up trend from 0.9534 has reversed. That would pave the way to 61.8% retracement at 1.0199 first. Firm break there will target 0.9534 low again.