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Daily Pivots: (S1) 0.6443; (P) 0.6463; (R1) 0.6482; More...

Intraday bias in AUD/USD is turned neutral first with 4H MACD crossed above signal line. Some consolidations would be seen but outlook will stay bearish as long as 0.6687 resistance holds. On the downside, decisive break of 61.8% projection of 0.6941 to 0.6511 from 0.6687 at 0.6421 will resume the fall from 0.6941 to 100% projection at 0.6257 next.

In the bigger picture, rise from 0.6269 (2023 low) should have completed with three waves up to 0.6941. Corrective pattern from 0.6169 (2022 low) is now extending with another falling leg. Deeper decline would be seen back to 0.6269 as sideway trading extends.

Daily Pivots: (S1) 1.4046; (P) 1.4075; (R1) 1.4118; More...

Intraday bias in USD/CAD remains on the upside at this point. Current rally should target 61.8% projection of 1.3418 to 1.3958 from 1.3841 at 1.4175. On the downside, below 1.4032 minor support will turn intraday bias neutral and bring consolidations first. But outlook will stay bullish as long as 1.3841 support holds, in case of retreat.

In the bigger picture, up trend from 1.2005 (2021) is resuming with break of 1.3976 key resistance (2022 high). Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3418 at 1.4391. Now, medium term outlook will remain bullish as long as 1.3418 support holds, even in case of deep pullback.

In focus today

Today, in China, PBOC will set the Medium Lending Facility rates, but they are widely expected to keep rates unchanged due to the recent sharp depreciation on the CNY, aiming to avoid to further downward pressure on the currency.

Today, in the euro area, we have a string of ECB speeches including Lagarde, Lane and Nagel. The market will be looking for comments on monetary policy.

This week is heavy on euro area releases. On Tuesday, we receive the final euro area October HICP inflation. Wednesday, we receive the ECB's indicator of negotiated wage growth in Q3. Thursday, data on euro area consumer confidence for November is released. Finally on Friday the data highlight of the week is released in form of the November euro area PMIs and US PMIs.

Economic and market news

What happened overnight

Russia-Ukraine, the Biden administration has permitted Ukraine to deploy US-made weapons to strike deep into Russa, escalating tensions. This comes following an air strike by Russia on Sunday where the target was Ukraine's energy infrastructure, which damaged power systems further ahead of winter. Subsequently, oil prices increased due to heightened tensions between Russia and Ukraine over the weekend.

What happened over the weekend

In the US, October retail sales released on Friday initially seemed weak, with control group sales declining by 0.1% m/m SA (cons. +0.3%). However, in non-seasonally adjusted terms, annual growth rate picked up with growth to a solid 5.2% y/y. This might have contributed to the dip in EUR/USD following the data release. Despite fluctuations in monthly data, it looks like the US consumer overall remains on a solid footing. Friday, we also received industrial production, which followed consensus of -0.3% m/m (prior: -0.3% m/m).

In the euro area, the EU commission published their new economic projections for 2025 and 2026. The commission expects GDP growth at 1.3% y/y in 2025 (prior: 1.4%) and 1.6% in 2026. Inflation is expected to decline to average of 2.1% y/y in 2025 and 1.9% in 2026. The projections for 2025 have been revised slightly down due to increased downside risks, while inflation remains unchanged. The Commission anticipates that growth next year will stem from domestic demand, with net trade expected to be unchanged.

In Japan, Comments from BoJ's Ueda over the weekend send the JPY modestly weaker against the USD and EUR this morning, as he stated that the next move in Japanese policy rate was dependent on the economic data such as inflation and did not give a clear signal that BoJ would raise rates at the next BoJ meeting in December 18-19.

Equities: Global equities were lower on Friday and for the week overall. The US led the decline, which should be viewed in the context of its significant outperformance in the days following the US election results. Additionally, when examining both Friday and the past week, it is difficult to attribute the negative equity markets to macroeconomic data. We received robust data, with economic surprise indices reaching new highs after the summer's decline.

In the technology sector, there was a notable downturn on Friday and throughout the week, whereas financials, energy, and utilities sectors all registered gains last week. Health care also saw a sharp decline last week, leading to defensive stocks underperforming cyclicals.

Friday indicated a bit more uncertainty coming into the markets, with the VIX index ticking higher. In the US on Friday, the Dow closed down by 0.7%, the S&P 500 by 1.3%, the Nasdaq by 2.2%, and the Russell 2000 by 1.4%.

This morning in Asia, performance is mixed, with most indices lower, while South Korea is up almost 2%. European futures are marginally higher this morning, while US futures are mixed, with the technology-heavy indices outperforming.

FI: Friday's price action was without a clear catalyst resulting in the tight trading range through the day in the 10y point. The front end, ended marginally higher, thus leading to a bearish flattening of the curves. On Friday Ireland was placed on positive outlook by S&P bringing them closer to regaining AAA-status.

FX: JPY rallied on Friday followed by CHF and NOK, while GBP, CAD and SEK lost ground. The intraday move in EUR/USD was relatively large, but the pair remained below the 1.06 level. The rally in USD/JPY came to an end and the pair dropped to 154. EUR/SEK held steady just below the 11.60 level, while EUR/NOK dropped 11.70.

US Retail Sales and the inflation data came in higher than expected last week, and the Federal Reserve (Fed) Chair Jerome Powell said that the US economy is strong enough and that there is no urge for rushing to rate cuts. The US 2-year yield consolidated between the 4.30 and 4.40% level, the 10-year yield shortly spiked to 4.50% and the US dollar index traded at the highest levels in more than a year. The US yields and the dollar are softer this morning. Yet activity on Fed funds futures still gives around 65% chance for a 25bp cut in December, hinting that there is room for a further hawkish adjustment for December bets. Even if the next jobs data disappoints, rising US inflation expectations will likely tame the expectation of further rate cuts. This is especially true with Trump’s pro-growth policies and hefty tariffs threatening to give an additional boost to inflationary pressures.

The week’s economic data is light, investors will find a window to digest and breath after hectic weeks since the US election. We could see consolidation and correction in both US treasuries and the dollar. The EURUSD, which tested the 1.05 psychological support last week, could recover from the oversold territory, and the USDJPY could form resistance near the 155 level, but the rising risk for US inflation will remain the key market narrative and should limit the appreciation potential of major peers against the US dollar.

In energy, investors repeatedly knock crude oil back down each time it tries to recover. The barrel of US crude tumbled more than 2% on Friday and tipped a toe below the $67pb level. Higher global supply versus weak demand outlook keeps the bears in charge of the market. The price rallies serve to strengthen the bearish positions in expectation of a deeper selloff to $65pb. A solid support is seen for Brent crude approaching the $70pb level. Unless the macroeconomic narrative changes to stronger China, and lower oil output (in case the geopolitical tensions escalate), the bears will likely dominate the field.

In equities, last week ended on a sour note. The European equities were already bearing the brunt of US tariff threats and the Stoxx 600 remained downbeat despite the rising dovish expectations for the ECB. But the major US indices were also hit by a selloff last week on the back of a hawkish shift in Fed expectations. The Dow Jones retreated 1.24% last week, the S&P500 slipped more than 2%, Nasdaq 100 dropped around 3.40% while Russell 2000 lost 4%.

This week, attention shifts from politics and economic data to earnings. Big names like Walmart, Target and, yes, Nvidia will be reporting their Q3 earnings this week. The big retailers will shed light on the health of U.S. consumers, while Nvidia is expected to deliver a strong beat and an upbeat outlook, fueled by ‘insane demand’ for its Blackwell chips. That said, with such high expectations already baked into its stock, surprising Nvidia investors is becoming increasingly challenging with each passing quarter.

Daily Pivots: (S1) 0.9339; (P) 0.9367; (R1) 0.9388; More....

Intraday bias in EUR/CHF remains neutral as it's still bounded in converging triangle. On the downside, break of 0.9331 will target 0.9305 support first. Firm break there will bring retest of 0.9209 low. On the upside, break of 0.9444 will bring stronger rally to 0.9506 resistance next.

In the bigger picture, fall from 0.9928 is seen as part of the long term down trend. Repeated rejection by 55 D EMA (now at 0.9410) keeps outlook bearish for breaking through 0.9209 low at a later stage. Nevertheless, sustained trading above 55 D EMA will confirm medium term bottoming at 0.9209 and bring stronger rebound back towards 0.9928 key resistance.

Daily Pivots: (S1) 0.8322; (P) 0.8341; (R1) 0.8371; More...

Intraday bias in EUR/GBP stays neutral for the moment and outlook remains bearish 0.8446 resistance holds. On the downside, below 0.8306 minor support will turn bias back to the downside for 0.8259 first, and then 0.8201 key support. Nevertheless, firm break of 0.8446 will confirm short term bottoming.

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) 1.6283; (P) 1.6319; (R1) 1.6342; More...

Intraday bias in EUR/AUD remains neutral as consolidations continue above 1.6161. Further fall is expected with 1.6598 resistance intact. On the downside, below 1.6161 will target a test on 1.5996/6002 key support zone.

In the bigger picture, as long as 1.5996 support holds, up trend from 1.4281 (2022 low) is still expected to resume through 1.7180 at a later stage. However decisive break of 1.5996 will argue that the medium term trend might have reversed. Deeper fall would be seen to 61.8% retracement of 1.4281 (2022 low) to 1.7180 at 1.5388, even as a correction.

Daily Pivots: (S1) 161.65; (P) 163.34; (R1) 164.37; More....

Intraday bias in EUR/JPY stays on the downside despite today's weak recovery. Prior break of 55 D EMA (now at 163.39) argues that corrective rebound from 154.40 has completed with three waves up to 166.67, ahead of61.8% retracement of 175.41 to 154.40 at 167.38. Further decline should be seen to 155.14 support next. For now, risk will stay on the downside as long as 165.02 resistance holds, in case of recovery.

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) 193.21; (P) 195.83; (R1) 197.37; More...

Intraday bias in GBP/JPY stays on the downside despite today's weak recovery. Prior break of 55 D EMA (now at 195.23) argues that corrective rise from 180.00 has completed with three waves up to 199.79, after hitting rising channel resistance. Further decline would be seen to 193.45 resistance turned support. Decisive break there will target 183.70 next. For now, risk will stay on the downside as long as 198.43 resistance holds, in case of recovery.

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.

Yen weakened broadly during the Asian session today, as traders expressed disappointment with BoJ Governor Kazuo Ueda’s remarks. Ueda repeated familiar stances on monetary policy but refrained from offering any signals regarding a December rate hike. This lack of clarity left markets unimpressed. However, the currency’s losses have been modest so far, with its direction remains closely tied to overall risk sentiment. Yen showed strength late last week, buoyed by the sharp selloff in US equity markets, where island reversal patterns emerged in S&P 500 and NASDAQ. Should this negative stock market sentiment persist, it could provide a fresh catalyst for Yen appreciation in the near term.

Meanwhile, Kiwi is facing selling pressure, ranking among the weakest performer today so far. The disappointing services index reading from New Zealand added to the currency’s challenges. Expectations are firm for RBNZ to deliver another 50pbps rate cut next week. A significant factor influencing this expectation is RBNZ’s meeting calendar, as it will not convene again until mid-February 2025. This December/January gap could prompt the central bank to frontload further easing.

As for the month so far, Dollar is sitting at the top of the performance table, followed by Canadian Dollar, and then Yen. Euro is the worst performer, followed by Swiss Franc and then Sterling. Aussie and Kiwi are mixed in the middle. The Pound and Loonie will look into this week's CPI data for the next month. Meanwhile, Euro would hope to have some help from Eurozone PMI data.

Technically, NZD/USD is now pressing 0.5849 structural support as fall from 0.6378 extended last week. Decisive break there will likely resume the whole down trend from 0.6537 (2023 high) through 0.5771 support to 100% projection of 0.6537 to 0.5771 from 0.6378 at 0.5612. In any case, near term outlook will stay bearish as long as 0.6039 resistance holds.

In Asia, at the time of writing, Nikkei is down -1.04%. Hong Kong HSI is up 0.84%. China Shanghai SSE is up 0.27%. Singapore Strait Times is down -0.05%. Japan 10-year JGB yield is down -0.0019 at 1.073.

BoJ's Ueda Highlights wages as key inflation driver, reaffirms tightening path

BoJ Governor Kazuo Ueda reiterated in a speech today that the central bank remains committed to its gradual policy tightening path, conditional on the realization of its economic and price outlook. However, the timing of adjustments will depend on evolving "economic activity and prices" as well as "financial conditions."

Ueda stated that monetary policy decisions would hinge on assessments at each Monetary Policy Meeting, taking into account the latest data and projections. Key considerations include underlying inflation trends and financial conditions, with a focus on balancing risks to economic activity.

On inflation, Ueda highlighted that the effects of previous cost pass-throughs from higher import prices are waning. However, he noted that "inflationary pressure stemming from wage increases is projected to strengthen" as economic activity and wage growth remain robust.

While underlying inflation currently lags the 2% target, it is expected to rise moderately and align with the price stability target in the second half of the projection period through fiscal 2026.

NZ BNZ services rises to 46, still extremely challenging conditions

New Zealand’s BusinessNZ Performance of Services Index rose slightly from 45.7 to 46.0 in October. Despite the marginal improvement, the index stayed well below the 50 threshold, indicating ongoing contraction in the sector for a fourth consecutive month. The result also falls significantly short of the long-term average of 53.1.

The proportion of respondents reporting negative sentiment increased from 58.5% to 59.1%. Concerns about the cost of living and broader economic challenges continued to dominate.

BNZ Senior Economist Doug Steel emphasized the sector's struggles, stating that “although it is contracting at a much slower pace than it was in June (when the PSI was 41.1), the PSI has been hovering between 45 and 46 over the last four months.” He noted that while some business surveys indicate an improving outlook, current conditions remain "extremely challenging”.

Inflation Data and PMIs in Focus

This week, market focus shifts to inflation data from the UK, Canada, and Japan, alongside key PMI releases from major economies. Central banks’ paths remain under scrutiny, with inflation trends and economic activity offering crucial insights.

In the UK, the unexpected September GDP contraction and rise in unemployment rate may embolden dovish voices within BoE. However, a departure from the current "gradual approach" to policy adjustments appears unlikely at this juncture give the inflation risks

UK headline CPI is expected to jump from 1.7% to 2.2% in October, surpassing 2% target again, while core CPI is likely to remain elevated above 3%. BoE Governor Andrew Bailey previously noted that services inflation is declining only gradually, with substantial relief not expected until 2025. Adding complexity, uncertainties linked to measures in the Autumn Budget reinforce the central bank's cautious stance.

In Canada, October’s inflation data is expected to show headline CPI rising from 1.6% to 1.9%, while core measures may hold steady or edge lower. These dynamics provide BoC ample room to proceed further with its easing cycle. Markets anticipate another 50bps rate cut in December, bringing the policy rate closer to a neutral level from its current 3.75%.

Japan’s inflation data presents a contrasting narrative. CPI core inflation is projected to decline for the second consecutive month, from 2.4% to 2.2%, reflecting the waning effects of prior cost-push pressures. While BoJ Governor Kazuo Ueda has reaffirmed the central bank’s commitment to gradual tightening, he remains non-committal about the timing of further rate hikes. Wage growth in 2025 will be critical to shaping BoJ’s future policy, but for now, attention remains on trends in services and core-core inflation as indicators of underlying price stability.

PMI data from Australia, Japan, the Eurozone, the UK, and the US will also draw significant attention. The Eurozone, in particular, is under scrutiny after recent ECB meeting accounts highlighted downside risks to inflation stemming from sluggish economic activity. Failure of PMI figures to signal an economic rebound could solidify expectations for another ECB rate cut in December.

On the central bank front, RBA minutes could offer insights into the board’s decision to maintain its vigilance on inflation risks. Speculation is mounting that RBA may delay its first rate cut from February to May 2025. The minutes will likely provide clarity on whether this stance is gaining broader support within the board.

Here are some highlights for the week:

• Monday: New Zealand BNZ services, PPI; Japan machine orders; Eurozone trade balance; Canada housing starts; US NAHB housing index.
• Tuesday: RBA minutes; Swiss Trade balance; Eurozone current account, CPI final; Canada CPI; US housing starts and building permits.
• Wednesday: Japan trade balance; Germany PPI; UK CPI, PPI.
• Thursday: UK public sector net borrowing; Canada IPPI, RMPI; US jobless claims, Philly Fed survey, existing home sales, leading indicators.
• Friday: Australia PMIs; Japan CPI, PMI manufacturing flash; Germany GDP final; UK retail sales, PMI flash; Eurozone PMI flash; Canada retail sales; US PMI flash.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 193.21; (P) 195.83; (R1) 197.37; More...

Intraday bias in GBP/JPY stays on the downside despite today's weak recovery. Prior break of 55 D EMA (now at 195.23) argues that corrective rise from 180.00 has completed with three waves up to 199.79, after hitting rising channel resistance. Further decline would be seen to 193.45 resistance turned support. Decisive break there will target 183.70 next. For now, risk will stay on the downside as long as 198.43 resistance holds, in case of recovery.

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.