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Key Highlights

• Bitcoin price started a consolidation phase near the $90,000 zone.
• BTC is following a key bullish trend line with support at $90,300 on the 4-hour chart.
• Gold prices started a recovery wave above the $2,600 zone.
• GBP/USD is showing bearish signs below the 1.2700 resistance.

Bitcoin Price Technical Analysis

Bitcoin price remained in a strong uptrend above the $88,000 resistance zone. BTC/USD is consolidating gains and the bulls could soon aim for a move toward $100,000.

Looking at the 4-hour chart, the price climbed higher steadily above the $80,000 and $85,000 resistance levels. The price even settled above the $85,000 zone, the 200 simple moving average (green, 4 hours), and the 100 simple moving average (red, 4 hours).

A new all-time high was formed at $93,346 and the price is now consolidating gains. There was a minor pullback, and the price tested the 23.6% Fib retracement level of the upward move from the $66,780 swing low to the $93,346 high.

However, the bulls are active above the $88,000 level. There is also a key bullish trend line forming with support at $90,300 on the same chart.

On the upside, the price could face resistance near the $93,500 level. The next key resistance is $95,000. A successful close above $95,000 might start another steady increase. In the stated case, the price may perhaps rise toward the $98,800 level or even $100,000.

If not, there might be another downside correction. Immediate support is near the $90,000 level and the trend line. The next key support sits at $88,000.

A downside break below $88,000 might send Bitcoin toward the $85,000 support. Any more losses might send the price toward the $80,000 support zone or the 50% Fib retracement level of the upward move from the $66,780 swing low to the $93,346 high.

Looking at GBP/USD, the pair saw a lot of bearish moves and now struggles to recover above the 1.2700 resistance zone.

Today’s Economic Releases

• Fed's Cook speech.
• Fed's Bowman speech.

Australia's Westpac Leading Index moved decisively into positive territory in October, rising from -0.20% in September to +0.26%.

This marks a significant shift, as the index had been hovering in slight negative territory, between -0.3% and flat, for most of the past year. The October reading is not only the first clear above-trend result since November 2023 (+0.16%) but also the strongest since July 2022 (+0.63%).

The improvement in the index provides a "constructive signal" for the economy’s future momentum. Westpac’s outlook aligns with this shift, forecasting an acceleration in economic growth from a nadir of 1.0% in mid-2024 to 1.5% by year-end and 2.4% by the end of 2025.

Full Australia Westpac leading index release here.

Japan's exports rose 3.1% yoy in October, reaching JPY 9,427B, a strong recovery from the -1.7% yoy decline in September, which marked a 43-month low.

This rebound was primarily driven by a 1.5% yoy increase in shipments to China, buoyed by strong demand for chipmaking equipment. However, exports to the US, Japan's largest trading partner, fell -6.2% yoy, reflecting weakness in auto shipments.

On the import side, growth remained modest at 0.4% yoy, totaling JPY 9,888B. This resulted in a trade deficit of JPY -461B for the month, the fourth straight month of shortfall.

Seasonally adjusted data showed exports declining -0.7% mom to JPY 8,882B, while imports ticked up 0.2% mom to JPY 9,239B, leading to a seasonally adjusted trade deficit of JPY -358B.

Full Japan trade balance release here.

Kansas City Fed President Jeffrey Schmid highlighted in a speech overnight the decision to lower rates this year as a reflection of the "growing confidence" in inflation’s moderation.

This optimism, he explained, stems from signs that "both labor and product markets have come into better balance in recent months."

While acknowledging this progress, Schmid cautioned, “It still remains to be seen how much further interest rates will decline or where they might eventually settle.”

Schmid also addressed concerns about the implications of large fiscal deficits on monetary policy. He emphasized that such deficits are not inherently inflationary, as long as Fed maintains its commitment to the 2% inflation target.

However, he warned that this approach could necessitate "persistently higher interest rates," creating tensions with political authorities. He noted, “History has shown that efforts to avoid higher interest rates by accommodating deficits often result in higher inflation.”

• S&P 500 index reversed from support zone
• Likely to rise to resistance level 6000.00

S&P 500 index recently reversed up from the pivotal support level 5850.00 (former multi-day resistance from October).

The support level 5850.00 was further strengthened by the lower daily Bollinger Band, support trendline from August and the 50% Fibonacci correction of the upward impulse from the start of November.

Given the clear daily uptrend, S&P 500 index can be expected to rise to the next round resistance level 6000.00.

• EURCAD reversed from resistance level 1.4885
• Likely to fall to support level 1.4750

EURCAD currency pair recently reversed down from the resistance level 1.4885 (which is the lower border of the wide sideways price range inside which the pair has been trading from July, acting as the resistance after it was broken earlier).

The downward reversal from the resistance level 1.4885 stopped the previous intermediate ABC correction (2) from the end of last week.

Given the strongly bearish euro sentiment seen today, EURCAD currency pair can be expected to fall to the next support level 1.4750.

The British pound is steady on Tuesday. In the North American session, GBP is trading at 1.2678 at the time of writing, unchanged on the day. On Monday, the pound ended a six-day slide, during which the currency lost 2.8%.

Markets brace for higher UK inflation

The Bank of England has done an excellent job slashing inflation, which was in double digits for much of 2023. The September inflation report was a milestone as inflation eased to 1.7%, the first time it was below the BoE target of 2% since April 2021.

Still, the BoE is under no illusions that the tenacious battle against inflation is over. Services inflation has fallen significantly but is running at 4.9%, more than double the target. The Trump election win has raised deep concerns that Trump’s trade policy promises, with threats of tariffs on US trading partners, could lead to higher global inflation.

The BoE lower rates by 25 basis points on Nov. 7, marking the second rate cut in the current easing cycle. The September inflation report contributed to the decision to lower rates at that meeting and Wednesday’s inflation release will be closely monitored by the BoE, with the following inflation report coming out on Dec. 18, just one day before the BOE’s next rate announcement.

BoE Governor Bailey said in a report to the House of Commons Treasury select committee that the BoE needed to keep a close eye on services inflation, which remained above a level that was compatible with “on target inflation”.

Bailey also stated that he favored a gradual approach to cutting rates in order for the central bank to assess the effects of the government’s recent budget on growth and inflation. The BoE’s November forecasts indicate that the budget will result in higher growth and inflation in the near term, which could slow the pace of rate cuts.

GBP/USD Technical

• There is resistance at 1.2707 and 1.2736
• 1.2629 and 1.2658 are the next support levels

The Dollar Index is retreating from Thursday’s highs, moving against the logic of fundamental forces. This behaviour begs the question: either the Dollar Index has reached the limits of its range, or this is an extended shake-out of positions after a prolonged rally.

The DXY rallied to 106.99 last Thursday, almost repeating the October 2023 highs of 107.04. The recent highs were slightly above the April peak this year, making 107 a serious resistance area. There is a significant battle going on here in the dollar between the bulls and bears, the outcome of which could determine the trend for weeks or months to come.

The resistance is so significant that it goes against the major trends of recent days. At the end of last week, Fed Chairman Powell said that the central bank was in no hurry to cut interest rates. As a result, interest rate futures are already pricing in more than a 40% chance of no change, whereas there was no doubt at the beginning of October. The pullback in equity indices also clearly showed how much the markets took the central bank chief’s words to heart.

The authorisation of US missile strikes deep into Russia, and the retaliatory escalation of rhetoric also led to a pullback in defensive assets, helping gold and the yen, but not the dollar, which has not fallen below 1.05 in EURUSD terms. However, in the current geopolitical environment and amid expectations of tariff wars with the US, it isn’t easy to see the euro as a safe-haven.

In our view, EURUSD holding above 1.05 looks like a technical correction and a liquidity pick-up after a 6% fall since early October. As the odds of no change in US interest rates continue to rise, the dollar can build up potential that is still constrained by the local overbought condition of the US currency.

However, the ball is now in Europe’s court. On Wednesday, it is worth listening to Lagarde and the ECB’s biannual assessment of financial stability. On Friday, it is also worth paying attention to another speech by Lagarde entitled ‘Out of the Comfort Zone…’ and the preliminary PMI estimates for November, which have often been the driving force behind the euro’s movement and could now indicate either a light at the end of the tunnel or a further plunge.

Markets

Geopolitics rattled markets otherwise on track for an uninspired trading session. Russian president Putin signed off a revised nuclear doctrine, expanding the conditions for the use of atomic weapons. Russia could now retaliate in case of a (conventional) attack on its soil. Making good on the pledge made by Putin back in September, Russia will view aggression against itself or its allies by a non-nuclear state backed by a nuclear power as a joint attack. The revision doesn’t come out of the blue: it follows the outgoing US Biden administration giving Ukraine green light for the limited use of American-made long-range ATACMS missiles. This was in turn a response to North Korea’s agreement to deploy its forces in support of Russia and to increased Russian missile and drone attacks on Ukraine. Less than an hour after the updated doctrine, reports rolled in of Ukraine conducting such a first ATACMS strike. Russian minister of foreign affairs called it “a signal of escalation”. Risk-off rolled over markets. Both US Treasuries and German bunds rallied, the former outperforming. Both trade well off the intraday highs, though. US yields drop between 3.4-4.7 bps. German yields lose 2.5-3.4 bps across the curve compared to initial losses of <10 bps. European stocks take a 1.7% hit (EuroStoxx50) while Wall Street opens about 0.50% lower. The Japanese yen and Swiss franc take the lead on the G10 currency scoreboard. USD/JPY fills bids around 153.6. JPY gains against the euro are slightly bigger, bringing down the EUR/JPY pair to its 50dMA around 162.4. EUR/CHF came close to the 0.93 but without really testing the big figure. It is nevertheless on track for the lowest close since the August market meltdown. Natural gas prices (Dutch TTF) temporarily jumped to a new one-year high before easing a bit later in the session. Gold prices printed the first back-to-back rise since end-October. The precious metal is currently being sold for over $2635 per ounce. While geopolitics usually have a limited shelf-life, the topic may continue to draw market attention during the economic, political and monetary vacuum the coming days/weeks. Bank of England governor Bailey during his testimony before the UK parliament stuck to a “gradual” approach to rate cuts. Inflation returned faster than expected to target (temporarily though, red.) and there’s evidence of a loosening in the labor market, Bailey said. But he also saw risks of “lingering persistence” of wage pressures. The latter take center stage in Europe tomorrow, with the negotiated wage indicator (Q3) due. The Bundesbank already today disclosed German wages in Q3 having grown at the fastest pace in more than three decades (8.8%).

News & Views

The Riksbank’s first deputy Governor Anna Breman in a speech said that ‘inflation has fallen, and that conditions are good for inflation to remain close to the target even in the medium term.’ At the same time, Breman assesses that economic activity is not yet showing clear signs of strengthening. This combination justified accelerating the pace of rate cuts to 50 bps bringing the policy rate to 2.75%. On the recent inflation development (CPIF 1.5%; CPIF ex energy 2.1%) Breman said that “Energy prices are still contributing to CPIF inflation being below two per cent. At the same time, food prices have risen in in recent months. This is important to monitor, not least when a weak krona risks pushing up the price of imported food.” Still, Breman assesses that recent inflation data don’t change the view that inflation will remain low and stable in the medium term. If the outlook for inflation and activity remains the same, she sees the policy rate being cut further in December and during the first half of 2025. Markets currently more or less discount a 25 bps step in December and a policy rate being reduced to 2.0% by Q1 2025. The Swedish krone recently stabilized at weak levels (EUR/SEK 11.58).

Inflation in Canada in October rebounded more than expected. Headline CPI printed at 0.3% M/M and 2.0% Y/Y, to be compared to -0.4% M/M and 1.6% Y/Y in September, as gasoline prices fell less in October compared to September. CPI ex-gasoline was unchanged at 2.2%. Price of goods rose 0.1% Y/Y up from -1.0% Y/Y in September. On the other hand, services inflation decelerated to 3.6%, the smallest yearly rise since January 2022. The Bank of Canada’s preferred core measures increased to 2.5% (from 2.3%) and 2.6% from 2.4%. Markets reduced the chance of an additional 50 bps rate cut to about 30% from +40% at the start of the session. The BoC meets December 11. Gains of the Loonie against the US dollar look unconvincing. USD/CAD is hovering near the 1.40 barrier.