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GBPUSD has been stuck in a prolonged downtrend since the beginning of the year, plummeting to an all-time low of 1.0324 in mid-September. Nevertheless, the pair has exhibited signs of recovery in  the short term, which has currently come to a halt near the 1.200 region.

The short-term oscillators are currently indicating a cautiously bullish near-term tone. Specifically, the RSI is hovering above its 50-neutral mark, while the MACD histogram is flat above both zero and its red signal line.

To the upside, bullish actions could propel the price towards the recent resistance of 1.2028. Piercing through this region, the price could challenge the July peak of 1.2290. Even higher, the 1.2400 hurdle could curb any further advances before the May high of 1.2666 comes under examination.

Alternatively, should the positive momentum fade and the price reverses downwards, initial support could be met at 1.1645. Sliding beneath that floor, the bears might target 1.1260 before the spotlight turns to the November low of 1.1144. A violation of the latter could open the door for the October resistance of 1.1060.

Overall, GBPUSD appears to be losing steam after managing to break above its long-term restrictive trendline. Nevertheless, a break above the 1.2028 ceiling would most likely signal the continuation of the short-term uptrend.

EURJPY is meeting the 20-day simple moving average (SMA) after several days of hovering within the short-term SMAs. In the broader outlook, the market is still moving above the long-term ascending trend line, endorsing the bullish picture.

However, the technical oscillators are showing some weakening bias. The flat move in the RSI and the slightly growing MACD are confirming the current neutral-to-bullish momentum in the price, though with the former nearing the neutral threshold of 50 and the MACD moving beneath its trigger line, the bears could be around the corner.

A decisive close above the 20-day SMA at 145.55 could reduce negative risks, producing another bullish extension towards the key 147.10 resistance. Beyond that, traders will target the eight-month high of 148.40, a break of which would re-activate March’s uptrend, shifting the near-term outlook from neutral to positive, though any steps higher could be limited if a new barrier pops up near the 150.00 psychological mark.

Otherwise, if sellers take the lead, the pair may pull back to test the nearby support of the 50-day SMA at 144.20 ahead of the 23.6% Fibonacci retracement level of the up leg from 124.40 to 148.80 at 142.72, which overlaps with the ascending trend line. A penetration of this line may attempt to add some footing around the 140.90 barrier, switching the long-term outlook to neutral. Falling lower, the 38.2% Fibonacci retracement at 139.20 and the 200-day SMA at 138.40 could block the negative wave.

In brief, EURJPY still needs some boost to strengthen its bullish trend in the long-term view as it is currently testing the crucial 20-day SMA.

Markets

The by far most eyepopping market move yesterday happened in oil. Prices whipsawed with swings of more than 6% on reports which were later denied that OPEC would consider a 500k production increase in December (see headline below). Other key markets were experiencing a mild risk-off session that spilled over from Asian/Chinese dealings. Stocks fell less than 0.5% in Europe and up to 1.1% in the US (Nasdaq). US Treasury yields rose 1-2 bps in the 2y-7y segment, underperforming the long end of the curve with supply (twin auction in the 2y, 5y) weighing. German yields fell up to 2 bps (10y, testing the 2%) but closed well above intraday lows. ECB’s Holzmann gave a small late-session push in the back. The Austrian governor said he’d back a 75 bps rate hike if things (on inflation) stay the same while only advocating a 50 bps move if CPI “shows a major reduction”. In an interview with the FT this morning, he elaborated further on his views, adding that a three-quarter bps move would show businesses and households the ECB is serious about taming surging price growth. His comments contrasted with those earlier from ECB chief economist Lane who sees a less strong case for such a big hike. The US dollar and to a lesser extend the Swiss franc enjoyed safe haven bids. The trade-weighted index rose from 106.97 to 107.99. USD/JPY rebounded from the low 140 area to 142.14. EUR/USD retreated from 1.0325 to 1.024. EUR/CHF eased to 0.9822, down from 0.986. Sterling held up well despite the risk climate. While still losing out against USD (GBP/USD 1.182), it held a small upper hand vs the euro (EUR/GBP closed at 0.866).

Asian trading is quiet this morning. Stocks mostly trade in the green with Japan outperforming peers. A moderately constructive risk context puts the greenback slightly in reverse vs G10 peers. China’s yuan stabilizes around USD/CNY 7.157. About half of the rally up to mid-November has been erased by now. That’s partially on a stronger US dollar. But fading hopes for a quick economic reopening as China enters the winter (sparking more Covid cases) weighs on the Chinese currency too. US cash yields drop between 5-7 bps at the front end.

There are again several Fed and ECB speeches due today. If anything, we expect members from the Fed to further side with a tightening slowdown to 50 bps, as did Mester and Daly yesterday. As Holzmann showed, the 50/75 bps debate within the ECB is much more alive. Other things to watch is the OECD’s updated economic outlook and the European Commission’s consumer confidence indicator (November). The Hungarian central bank holds a policy meeting. Markets today may nevertheless lack direction. Europe is counting down to tomorrow’s November PMIs while liquidity yesterday already started to ebb away in the US going into the Thanksgiving holidays.

News Headlines

The Wall Street Journal reported that OPEC is mulling a production increase at its December 4 meeting. Delegates told the WSJ that they could boost output by up to 500k barrels per day. The change of strategy (OPEC cut production by 2000k/day last month) would come one day ahead of the EU oil embargo against Russia and the G7’s aim to price cap Russian oil sales. This could strip (part of) Russian supply off the market. Oil prices slipped from $87/b to $82/b after the report, but completely reversed that move later on after Saudi Energy Minister Prince bin Salman said that it will stand by OPEC’s plan to cap oil output and that further cuts aren’t inconceivable.

EU Justice commissioner Reynders said that an agreement aimed at resolving the impasse over funding can be reached by end November if Hungary properly implements planned measures aimed at allaying the rule-of-law concerns of the EU. In other Hungarian news, the country’s central bank today is expected to keep its monthly base rate unchanged at 13%. The key rate remains the one day deposit facility which stands at 18%. The latter remains necessary as long as the forint is in the danger zone (> EUR/HUF 400). In this respect can unlocking EU funds relief some stress on the currency and in that way create some wiggle room for the MNB to make monetary policy slightly less restrictive.

Daily Pivots: (S1) 0.9795; (P) 0.9827; (R1) 0.9855; More....

Intraday bias in EUR/CHF remains neutral for the moment. On the upside, firm break of 0.9953 resistance will resume larger rally from 0.9407 to 1.0072 fibonacci level. However, break of 0.9779 will likely resume the fall from 0.9953 through 0.9720.

In the bigger picture, rejection by 0.9970 support turned resistance retains medium term bearishness. That is, while 0.9407 is a medium term bottom, price actions from there would develope into a corrective pattern rather than a reversal. Down trend resumption through 0.9407 is mildly favored at a later stage. This will remain the favored case now, as long 38.2% retracement of 1.1149 to 0.9407 at 1.0072 holds.

Daily Pivots: (S1) 0.8648; (P) 0.8673; (R1) 0.8687; More...

Intraday bias in EUR/GBP stays mildly on the downside at this point, for retesting 0.8570 support. Firm break there will resume whole decline from 0.9267. On the upside, above 0.8827 will resume the rebound from 0.8570 and flip bias back to the upside instead.

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. Nevertheless, firm break of 0.8869 resistance will turn favor to the case that such decline is merely a correction in the up trend from 0.8201. That is, further rally would be seen at a later stage through 0.9267.

Daily Pivots: (S1) 1.5450; (P) 1.5499; (R1) 1.5552; More...

Intraday bias in EUR/AUD remains neutral and outlook is unchanged. Consolidation from 1.5704 could extend and another fall cannot be ruled out. But downside should be contained by 55 day EMA (now at 1.5282) to bring rebound. On the upside, decisive break of 1.5704 will resume larger rise from 1.4281. However, sustained trading below 55 day EMA will bring deeper correction towards 1.4965 resistance turned support.

In the bigger picture, a medium term bottom should be in place at 1.4281, on bullish convergence condition in daily MACD. Further rise would be seen back to 1.6434 key resistance next. Break of 1.4965 resistance turned support is needed to indicate reversal. Otherwise, further rally will remain in favor.

Daily Pivots: (S1) 144.69; (P) 145.17; (R1) 146.00; More....

Intraday bias in EUR/JPY stays neutral and outlook is unchanged. Correction from 148.38 might have completed at 142.54. Break of 147.09 resistance will indicate that larger up trend is ready to resume through 148.38 high. However, on the downside, sustained break of 142.65 will bring deeper fall to 61.8% retracement at 139.11 and possibly below.

In the bigger picture, there is no clear sign of medium term topping yet. Up trend from 114.42 (2020 low) could still resume through 148.38 to 149.76 (2014 high). However, break of 137.32 support argue that a medium term correction has already started to correct the whole up trend from 114.42.

Daily Pivots: (S1) 166.73; (P) 167.38; (R1) 168.64; More...

GBP/JPY's rebound from 163.02 is still in progress and intraday bias stays on the upside. Correction from 172.11 might have completed at 163.20, after hitting 38.2% retracement of 148.93 to 172.11 at 163.25. Further rise would be seen to retest 172.11 high. On the downside, however, below 166.08 minor support will turn intraday bias neutral again first.

In the bigger picture, there is no clear sign of medium term topping yet. Up trend from 123.94 (2020 low) could still resume through 172.11 high at a later stage. However, firm break of 159.71 support will argue that it's already in correction to the up trend from 123.94, and deeper decline would be seen back towards 148.93 support.

Daily Pivots: (S1) 1.3385; (P) 1.3440; (R1) 1.3507; More....

USD/CAD is holding below 1.3494 support turned resistance and intraday bias stays neutral. On the upside, firm break of 1.3494 will indicate that correction from 1.3976 has completed at 1.3224, ahead of 1.3207 cluster support (61.8% retracement of 1.2726 to 1.3976 at 1.3204). Intraday bias will be turned back to the upside for 1.3807/3976 resistance zone. However, on the downside, sustained break of 1.3204/7 will carry larger bearish implication and target 1.2952 support next.

In the bigger picture, as long as 1.3222 cluster support (38.2% retracement of 1.2005 to 1.3976 at 1.3223) holds, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 high at a later stage. . However, firm break of 1.3222/3 will indicate that the trend might have reversed. Deeper fall would be seen to next cluster support at 1.2726 (61.8% retracement at 1.2758).

Daily Pivots: (S1) 0.6566; (P) 0.6625; (R1) 0.6664; More...

AUD/USD is holding above 0.6521 resistance turned support even as retreat from 0.6796 extends. Intraday bias remains neutral and further rally is in favor. On the upside, break of 0.6796 will resume the rise from 0.6169 to 0.6871 fibonacci level. However, sustained break of 0.6521 will argue that whole rebound from 0.6169 is over, and bring deeper fall to retest this low.

In the bigger picture, a medium term bottom is in place at 0.6160 already. But it's too early to call for trend reversal. Nevertheless, even as a corrective move, rise from 0.6169 should target 38.2% retracement of 0.8006 to 0.6169 at 0.6871. Sustained trading above 55 week EMA (now at 0.6923) will raise the chance of the start of a bullish up trend. This week now remain the favored case as long as 0.6521 resistance turned support holds.