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Daily Pivots: (S1) 1.0359; (P) 1.0394; (R1) 1.0433; More...

EUR/USD's breach of 1.0481 resistance indicates resumption of rise from 0.9534. Intraday bias is back on the upside. Further rally should be seen to 1.0609 fibonacci level. For now, outlook will remain bullish as long as 1.0222 support holds, in case of retreat.

In the bigger picture, a medium term bottom was in place at 0.9534, on bullish convergence condition in daily MACD. Even as a corrective rise, rally from 0.9534 should target 38.2% retracement of 1.2348 (2021 high) to 0.9534 at 1.0609. Sustained trading above 55 week EMA (now at 1.0566) will raise the chance of trend reversal and target 61.8% retracement at 1.1273. This will now remain the favored case as long as 1.0092 resistance turned support holds.

Risk aversion is the theme of the day as protests in China spread to multiple cities. There might be talks that pressure is mounting on the government to exit zero-Covid policy early. Investors are clearly more pessimistic on guard of escalations, which could further disrupt the economy. Australian Dollar continues to lead commodity currencies as the worst performing ones. Dollar, Yen and Swiss Franc are firm. But Euro outshines on divergence of benchmark yields with the US and the UK.

Technically, EUR/CAD accelerates to as high as 1.4084 today and it's now pressing an important fibonacci level at 38.2% retracement of 1.5991 (2020 high) to 1.2867 at 1.4060. Sustained break there will add the chance of medium term bullish reversal, and target 61.8% retracement at 1.4798. In any case, near term outlook will stay bullish as long as 1.3694 resistance turned support holds. Also, if happens, further rally in EUR/CAD could help EUR/USD break through corresponding level at 1.0609.

In Europe, at the time of writing, FTSE is down -0.53%. DAX is down -0.97%. CAC is down -0.96%. Germany 10-year yield is up 0.0083 at 1.985. Earlier in Asia, Nikkei dropped -0.42%. Hong Kong HSI dropped -1.57%. China Shanghai SSE dropped -0.75%. Singapore Strait Times dropped -0.14%. Japan 10-year JGB yield dropped -0.0022 to 0.258.

ECB Knot: Risk of doing too little clearly more pronounced

ECB Governing Council member Klaas Knot said, "My worry is still inflation, inflation, inflation... As long as the risks to our inflation outlook are so clearly tilted to the upside, I think the risk of us doing too little is clearly more pronounced than us doing too much... We should not give up too early and not cry victory too early."

Knot also said a recession is "not a foregone conclusion". "If you look at Germany, where actually the economy is doing better than then was feared, it's not a foregone conclusion that we will get a recession", he said. "We will get weaker growth, that's for sure. But we also need weaker growth to bring inflation back to target."

Australia retail sales fell -0.2% mom in Oct, first decline this year

Australia retail sales turnover dropped -0.2% mom to AUD 35.02B in October, much worse than expectation of 0.5% mom rise. That's also the first monthly decline in 2022.

Ben Dorber, ABS head of retail statistics said: "The October fall in retail turnover ends a run of nine straight monthly rises and suggests increased cost of living pressures including interest rate rises have started to weigh on consumer spending."

"Turnover fell in all industries in October except for food retailing, which rose 0.4 per cent boosted by flood-related spending in parts of Australia and continued high food prices."

RBA Lowe: Best outcome is for wages to pick up but not too much further

RBA Governor Philip Lowe told a parliamentary committee that the central bank is keeping an eye on electricity prices and housing. "If we can address those two issues then that will make a substantial contribution in bringing inflation back down over the next couple of years," he said.

Also, he added that a massive spike in wages would make it harder to bring inflation down. "If wage growth was 7 or 8 per cent then inflation would be 6 or 7 per cent … we were in this world in the 1970s and it worked out very badly," Lowe said. "The best outcome for the country is for wages to pick up but to not go too much further."

RBNZ Silk: The persistence factor of inflation was most surprising

RBNZ Assistant Governor Karen Silk said in an interview, "What we have seen is actual inflation continue to surprise on the upside, but more importantly inflation expectations have moved higher as well... And it's the persistence factor that has probably been the most surprising."

On tightening, "obviously we started way earlier than other central banks, so other central banks had to move an awful lot faster basically to play catch up," she said. "So no, I don't believe that the MPC has dilly-dallied around on this at all."

"If the information shows that we've reached that peak (5.5% interest rate) and we see that turn and we're starting to see real impacts on inflation and inflation expectations, then that does offer us the opportunity to revisit," she said.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0359; (P) 1.0394; (R1) 1.0433; More...

EUR/USD's breach of 1.0481 resistance indicates resumption of rise from 0.9534. Intraday bias is back on the upside. Further rally should be seen to 1.0609 fibonacci level. For now, outlook will remain bullish as long as 1.0222 support holds, in case of retreat.

In the bigger picture, a medium term bottom was in place at 0.9534, on bullish convergence condition in daily MACD. Even as a corrective rise, rally from 0.9534 should target 38.2% retracement of 1.2348 (2021 high) to 0.9534 at 1.0609. Sustained trading above 55 week EMA (now at 1.0566) will raise the chance of trend reversal and target 61.8% retracement at 1.1273. This will now remain the favored case as long as 1.0092 resistance turned support holds.

Economic Indicators Update

The dollar’s sentiment weakened on Monday, pushing the index lower and signaling possible bearish continuation after a double-Doji (Thu/Fri).

Fresh bears cracked pivotal 200DMA (105.25) the upper boundary of key support zone at 105.25/104.96, defined by 200DMA, Nov 15 spike low and Fibo 38.2% of 89.15/114.72 uptrend, with sustained break here to signal further weakness of the greenback, already on track for strong monthly fall in November.

Bearish daily techs contribute to dollar-negative fundamentals as signals that Fed would soften its aggressive approach to policy tightening, weigh strongly.

Res: 106.43; 107.11; 107.88; 108.06.
Sup: 105.15; 104.96; 104.49; 103.40.

Market picture

Bitcoin closed last week with a new formal decline, losing $100 to $16490. At the start of trading on Monday, it loses another $360 to $16150. The week starts with a subdued risk appetite on global markets due to China unrest. Ethereum is performing better, adding 3.3% over the week to $1170. Other leading altcoins in the top 10 are changing from -2.5% (Polkadot) to 22.2% (Dogecoin).

Total crypto market capitalisation, according to CoinMarketCap, was up 2% for the week, to $817bn. The cryptocurrency Fear & Greed Index rose to 28 by Monday, moving into “fear” versus “extreme fear” at 21 a week earlier.

Bitcoin has updated two-year lows below $15,500 in the past week on news of the possible bankruptcy of cryptocurrency lending service Genesis Global Capital. Bitcoin is under pressure from institutionalists whose risk appetite is firmly tied to stock markets. Bitcoin continues to look for a bottom from which it can push back, but the negative external backdrop is not yet conducive to buying.

News background

According to Barron’s, Genesis Global Capital has been the subject of an investigation by US regulators over the suspension of withdrawals and the company’s liquidity crisis. It is unclear whether US federal regulators are involved, but at the very least, Alabama state supervisory agencies are investigating.

The DeFi-project Ardana team from the Cardano blockchain ecosystem has said it has suspended its development due to “uncertainty over funding and the timing of the project”.

Bloomberg, a news agency, reports that Cryptocurrency lender Matrixport is seeking funding for $100 million. And while the company says the moves have nothing to do with a lack of liquidity, investors are little reassured.

Analysis of Bitcoin transactions helped British police arrest over 100 people in the biggest anti-fraud operation in UK history, led by Scotland Yard. The iSpoof website was taken down, and phone fraud suspects were caught.

Fresh bearish acceleration on Monday (down 1.1% since opening), broke clearly through pivotal Fibo support at 138.62 (61.8% of 130.39/151.94) which recently contained several attacks and cracked Nov 15 spike low at 137.67, hitting the lowest since late August.

This signals continuation of larger downtrend from multi-decade peak (151.94), which paused for consolidation in past two weeks after a massive losses in the first week of November.

Bears focus target at 135.47 (Fibo 76.4%) but see a minimum requirement on close below 138.62 (Fibo 61.8%) for confirmation.

Daily studies show strong negative momentum and MA’s in full bearish setup that reinforces bearish structure, along with a massive monthly bearish candle (USDJPY is on track for a drop of over 7% in November).

Res: 138.62; 139.50; 139.79; 140.00.
Sup: 137.49; 136.17; 135.81; 135.47. 

ECB Governing Council member Klaas Knot said, "My worry is still inflation, inflation, inflation... As long as the risks to our inflation outlook are so clearly tilted to the upside, I think the risk of us doing too little is clearly more pronounced than us doing too much... We should not give up too early and not cry victory too early."

Knot also said a recession is "not a foregone conclusion". "If you look at Germany, where actually the economy is doing better than then was feared, it's not a foregone conclusion that we will get a recession", he said. "We will get weaker growth, that's for sure. But we also need weaker growth to bring inflation back to target."

EURUSD opened with a slight negative gap on Monday after getting rejected around the 1.0400 psychological level for the second time last week.

The bulls are currently making another attempt to breach that wall and keep the bullish bias intact above the 200-day exponential moving average (EMA). But the momentum indicators are reflecting some cracks in buying interest. Specifically, the RSI has made a new lower high after peaking near its 70 overbought level, the stochastics are looking to change direction to the downside, while the MACD is flattening marginally below its red signal line, increasing the risk for a downside reversal.

That said, a potential downside correction may not discourage buyers unless the price flips back into the channel at 1.0270 and beneath the 20-day EMA. In this case, the 23.6% Fibonacci retracement of the 1.2348-0.9535 downleg at 1.0194 may immediately attract attention. The 50-day EMA could next come into the spotlight ahead of the 1.0010-0.9965 constraining area, while even lower, all eyes will turn to the channel’s lower band seen around 0.9900.

Alternatively, should the price successfully claim the 1.0400 bar, the recovery is expected to pick up steam towards the tentative long-term descending trendline from May 2021. Note that the 38.2% Fibonacci level of 1.0606 is positioned in the same location. Hence, another victory at this point could bolster buying appetite up to May’s bar of 1.0786. Running higher, the pair may give more credence to the uptrend, if it manages to overcome the 50% Fibonacci of 1.0938 too.

Summarizing, although buying appetite seems to be showing some weakness, traders may keep supporting EURUSD as long as the floor around 1.0270 stays valid. 

Gold has been losing ground since early March, generating a profound structure of lower highs and lower lows within a descending channel. Even though bullion recovered some ground after managing to cross above its restrictive trendline in early November, its rebound currently appears to be running out of steam.

The momentum indicators currently suggest that bullish forces are holding the upper hand. Specifically, the RSI has flatlined above its 50-neutral mark, while the stochastic oscillator is ascending near the 80-overbought zone.

To the upside, bullish actions could propel the price towards the recent rejection region of 1,787. Conquering this barricade, the bulls could aim for the August high of 1,807. Piercing through the latter, gold may ascend towards the June peak of 1,880 or higher to test the 1,920 barrier.

Alternatively, if the positive momentum wanes and the price reverses lower, initial support could be met at the recent low of 1,726. Failing to halt there, the commodity could test the 1,702 support before the spotlight turns to the 50-day simple moving average (SMA), currently at 1,688. Even lower, the 1,665 support might provide further downside protection.

Overall, gold’s recovery appears to be on hold for now, but near-term risks remain tilted to the upside. Hence, a break above the 1,787 ceiling is needed to validate the continuation of the short-term uptrend.

The Australian dollar has started the trading week with sharp losses. AUD/USD is down 0.70% in Europe, trading at 0.6704.

China jitters send Australian dollar tumbling

Covid cases continue to rise in China despite the government’s zero-Covid policy, and the mass lockdowns have triggered protests across China. The demonstrators have clashed with police and some have even called for Chinese President Xi to step down. The scale of the unrest has sent jitters through the global markets, which are expected to cause new supply-chain issues and chill domestic demand.

The unrest in China has put a damper on risk appetite and sent the US dollar higher. The Australian dollar is particularly sensitive to developments in China, as the Asian giant is Australia’s number one trading partner. The Australian dollar fell more than 1% earlier today but has pared some of those losses. Still, if there is further negative news out of China, the Aussie will likely lose more ground.

Adding to the Australian dollar’s woes was a soft retail sales report for October. Retail sales fell 0.2% MoM, down from 0.6% in September and below the consensus of 0.4%. It was the first decline since December 2021 and will renew concerns that the domestic economy is slowing down due to the Reserve Bank of Australia’s steep rate-hike cycle. The RBA has eased the pace of hikes but remains wary of a wage-price spiral, and  Governor Lowe has warned that the central bank will not hesitate to return to oversize rate hikes if needed.

After an abbreviated week due to the Thanksgiving holiday, it’s a busy week for US releases. CB Consumer Confidence will be released on Tuesday, with the November report expected to dip to 100.0, down from 102.5. The key release of the week is nonfarm payrolls on Friday, which could have a major impact on the Fed’s decision to raise rates by 50 or 75 basis points at the December 14^th meeting. Currently, the likelihood of a 50-bp hike is about 75%, versus 25% for a larger 75-bp increase.

AUD/USD Technical

• AUD/USD is testing support at 0.6706. Below, there is support at 0.6633
• There is resistance at 0.6820 and 0.6903

The Euro regained traction and jumped on Monday, generating signal that larger bulls are resuming after last Thu/Fri consolidation.

Fresh weakness of the US dollar lifts the single currency and bulls look for attack at key near-term barrier at 1.0481 (Nov 15 high), break of which would expose next key level at 1.0578 (Fibo 38.2% of 1.2266/0.9535 fall).

Repeated close above 200DMA (Thu/Fri) generated bullish signal, which is reinforced by 5/200DMA golden-cross, while 10 and 200DMA’s are converging and on track to form another bullish cross.

Bullish daily studies support the action, though overbought stochastic warns that bulls may face headwinds.

Dips should be limited (ideally to be contained by 200DMA at 1.0383) which guard 10DMA (1.0362) and daily Tenkan-sen (1.0339).

Res: 1.0481; 1.0578; 1.0620; 1.0700.
Sup: 1.0383; 1.0362; 1.0339; 1.0238.