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The crude oil market began the week with a crash. A Brent barrel is falling to 86.75 USD and looks very week.

Curiously, nothing has changed on the hews horizon.

On the one hand, the market is reacting negatively to the news about the coronavirus spreading in China. The country remains the main importer of crude oil. Any COVID-19 bound limitations might shorten the industrial demand for energy carriers. On the other hand, investors are caring for the comments of the US Federal Reserve System about further interest rate strategy.

Moreover, information has spread about a surplus of crude oil at European oil plants.

All this taken together is dragging the barrel price down.

On H4, Brent corrected to 86.00 and started developing a consolidation range. At the moment, the quotes performed and corrected an impulse of growth. Practically, they have set the borders of the range. With an escape upwards, a new wave of growth to 94.75 may start. The goal is first. Technically, the scenario is confirmed by the MACD. Its signal line is at the lows, getting ready to start growing to zero.

On H1, with a breakaway of 91.41, oil declined and extended the wave to 86.00. At the moment, the market completed an impulse of growth to 87.90 and a correction to 86.55. Another wave of growth is going to develop to 88.66. With a breakaway of this level upwards, a pathway to 91.41 should open. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is under 50, aiming strictly upwards. Growth of the indicator to 80 is expected.

Oil prices tumble again today on news that Saudi Arabia is eyeing OPEC+ production increase, partially reversing the group's decision to cut supplies last month.

WSJ reports that OPEC is now in discussion of an increase of up to 500k barrels a day, for December 4 meeting. The move would come just a day before EU imposes an embargo on Russian oil, while G7 will launch a price cap.

Technically, WTI is now on track to retest 76.61 low. Decisive break there will resume larger down trend. Next target will be 61.8% projection of 124.12 to 76.61 from 94.25 at 64.88. Meanwhile, break of 82.03 minor resistance will delay the bearish case and bring recovery first.

Despite the latest efforts by several Fed officials to douse market speculation with regards to an imminent pivot, investors are still pricing in almost two quarter-point rate cuts by the end of 2023. With that in mind, they may dig into the minutes of the latest FOMC gathering for clues as to what policymakers discussed with regards to next year’s policy plans. The minutes will be released on Wednesday at 19:00 GMT, but beforehand, market participants may have the opportunity to adjust their positions based on the results of the preliminary Purchasing Managers’ Indices by S&P Global, due out at 14:45 GMT.

Market scales back hike bets after inflation slowdown

At the November gathering, Fed officials delivered their fourth consecutive 75bps rate hike, hinting that smaller rate increments may be on the cards for the months to come. That said, at the press conference, Fed Chair Jerome Powell said that it is very premature to be thinking about pausing, adding that the terminal level of interest rates may be higher than previously estimated. The outcome kept investors evenly split between 50 and 75 basis points with regards to the size of the December hike, but allowed them to lift their terminal rate to near 5.15%.

Nonetheless, the picture was altered again just after the US inflation data for October revealed a bigger than expected slowdown, almost fully convincing market participants that the size of the next rate increment will be 50bps. Currently, they are assigning an 80% probability for such a move, with the remaining 20% pointing to 75bps. They are also pricing in nearly two quarter-point rate cuts by the end of next year, despite several policymakers trying to push against bets of an imminent pivot.

Looking for hints on future course of action

Therefore, although the minutes could be considered as outdated given that they will reflect officials’ opinions before the inflation data was out, investors may still be interested in any conversation with regards to interest rates’ future course. After the latest gathering, several policymakers have clearly suggested that when interest rates hit their terminal level, they will stay there for some time. However, any hints in the minutes pointing to even the thought of a cut towards the end of 2023 could enhance speculation on that front, as such discussion would have taken place prior to the CPI data, meaning that if some of them thought about it then, the discussion may be more intense at the upcoming meeting. Something like that could hurt the dollar and encourage some stock buying.

On the other hand, anything strengthening the narrative of a higher terminal rate and a prolonged pause before they start considering a cut could have the opposite effect, especially if investors keep in mind the latest rebound in the 1-year inflation expectations. Treasury yields could drift higher, adding some fuel to the dollar’s engines, while Wall Street may come under some selling interest a day ahead of Thanksgiving Day.

However, market participants may have the opportunity to act on more up-to-date information before the minutes are released, as due to the holiday-shortened week, Wednesday will end up being a data-dump day for the US. Among the releases are the initial jobless claims for last week, the preliminary University of Michigan consumer sentiment index for November, which will be accompanied with updated 1- and 5-year inflation expectations, the new home sales for October, which are expected to have slid again, and the flash S&P Global PMIs for November. The services index, already within contractionary territory, is expected to have ticked down, and the manufacturing print is forecast to have just crossed below the boom-or-bust zone of 50. Such numbers may add to worries about a recession and perhaps result in the liquidation of some more long dollar positions ahead of the minutes.

Dollar stays in corrective mood despite latest rebound

Euro/dollar has come under selling interest from near the 200-day exponential moving average following the latest attempts of some Fed officials to push against expectations of a pivot, but it remained above the 1.0200 zone, marked by the inside swing high of September 12, and well above the upside support line drawn from the low of September 28. This keeps the likelihood of a rebound well on the table.

Even if the price drops below 1.0200, the bulls could take charge from near the 1.0100 zone and aim for another test near the 1.0400 area and the 200-day EMA. Should they manage to overcome that hurdle, they may extend their advance towards the 1.0615 territory, defined as resistance by the high of June 27.

On the downside, a break below 0.9730 may be the move that would signal the resumption of the prior downtrend. The bears may get encouraged to dive towards the low of September 28 at 0.9535, the break of which would take them into territories last seen in 2002. The next territory to consider as support may be at around 0.9335, marked by the low of June 6 of that year.

The Australian dollar has posted losses over three straight days and is sharply lower on Monday. In the North American session, AUD/USD is trading at 0.6610, down 0.96%.

RBA shifts gears

The Reserve Bank of Australia has changed course and eased up the pace of hikes, but with inflation still accelerating, is it too soon? After a string of 50-bp increases, the RBA has slowed down and delivered two straight hikes of 25 bp. The RBA was the first major central bank to make the shift, and the Federal Reserve is widely expected to ease to a 50-bp increase at the December meeting.

The thinking behind smaller rate hikes is it will cause less of a shock to the economy and ease the pain that households and businesses are going through as rates go up and up. At the same time, the RBA has circled inflation as public enemy number one, and it will have to keep hiking until it detects a peak in inflation. The RBA may be easing up on the pace of rates, but Governor Lowe is using the jawbone tactic to dampen any expectations that the central bank is winding up its tightening.

To this end, Lowe has warned that the bank would not hesitate to return to oversize rate hikes if needed. The RBA is keeping a close eye on wage growth, which jumped to a nine-year high in Q3, gaining 3.1%. The RBA is wary of the spectre of a wage-price spiral if wages continue to accelerate, which would greatly complicate its efforts to curb inflation.

The steady stream of hawkish statements from Fed members has chilled risk appetite and dashed hopes of a Fed U-turn on rate policy. The US dollar has bounced back after taking a beating following the inflation report earlier this month. The Fed has long insisted that one or two reports showing weaker inflation does not make a trend, although risk sentiment has nonetheless when inflation drops. If November’s inflation data is lower than anticipated, we can expect risk appetite to rise again, at the expense of the US dollar. The markets have priced in a 50-bp hike next month, although some Fed members have stated that a 75-bp move remains on the table.

AUD/USD Technical

• AUD/USD is testing support at 0.6609. Below, there is support at 0.6541
• There is resistance at 0.6704 and 0.6772

An ending diagonal is a special type of pattern that occurs at the end of the trend. Normally it causes a sharp reversal as it happened recently on USDCHF . The question is where we go from here? Well, we have five waves down on Swissy which means more downside is possible after a three waves up. And if that would be the case then Gold can rally further based on strong correlation between CHF and GOLD .

https://www.youtube.com/watch?v=Bego0F-qMjA

Daily Pivots: (S1) 139.84; (P) 140.17; (R1) 140.70; More...

USD/JPY is staying below 142.45 minor resistance despite today's strong recovery. Intraday bias remains neutral for the moment, and further decline is in favor. On the downside, break of 137.66 will resume the decline from 151.93, to 133.07 fibonacci level, as a correction to the larger up trend. Nevertheless, firm break of 142.45 will turn bias back to the upside for stronger rebound to 55 day EMA (now at 143.44) and above.

In the bigger picture, a medium term top should be formed at 151.93. Fall from there is correcting larger up trend from 102.58. It's too early to call for bearish trend reversal. But even as a corrective move, such decline should target 38.2% retracement of 102.58 to 151.93 at 133.07, or further to 55 week EMA (now at 130.28).

Daily Pivots: (S1) 0.9514; (P) 0.9534; (R1) 0.9568; More...

Intraday bias in USD/CHF stays neutral for the moment as consolidation from 0.9355 is in progress. Further decline is expected as long as 0.9680 resistance holds. Break of 0.9355 will resume the fall from 1.0146 to 0.9287 fibonacci level. Nevertheless, firm break of 0.9680 will bring stronger rebound to 55 day EMA (now at 0.9767).

In the bigger picture, rise from 0.8756 (2021 low) has completed at 1.0146, well ahead of 1.0342 long term resistance (2016 high). Based on current downside momentum, fall from 1.0146 might be a medium term down trend itself. Break of 61.8% retracement of 0.8756 to 1.0146 at 0.9287 will pave the way to 0.8756. In any case, risk will stay on the downside as long as 55 day EMA (now at 0.9767) holds.

Daily Pivots: (S1) 1.1766; (P) 1.1862; (R1) 1.1961; More...

Intraday bias in GBP/USD remains neutral as consolidation from 1.2028 is extending. Further rise is expected as long as 1.1644 resistance turned support holds. On the upside, break of 1.2028 will resume whole rise from 1.0351 to 100% projection of 1.0351 to 1.1494 from 1.1145 at 1.2288. However, sustained break of 1.1644 will bring deeper fall to 1.1145 support instead.

In the bigger picture, rise from 1.0351 medium term bottom is at least correcting whole down trend from 1.4248 (2021 high). Further rise is expected as long as 1.1145 support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759.

Daily Pivots: (S1) 1.0311; (P) 1.0359; (R1) 1.0412; More...

EUR/USD dips further today as retreat from 1.0481 extends but stays well above 1.0092 resistance turned support. Intraday bias remains neutral first. Further rally is expected as long as 1.0092 holds. On the upside, break of 1.0481 will resume the rise from 0.9534 and target 1.0609 fibonacci level. However, sustained break of 1.0092 will turn bias to the downside for 55 day EMA (now at 1.0034) and below.

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.

Dollar's broad based rebound continues into early US session, as support by recovery in yields. While overall markets are trading in mild risk-off mode, there isn't much follow through selling in European stocks and US futures. The greenback's rally could be killed off quickly if risk sentiment turns. But for now, Dollar is the strongest one for today,, followed by Canadian and Swiss. Yen is the worst, followed by Euro and then Aussie.

Technically, judging from momentum, if Dollar's rally is going to sustain, USD/JPY would likely be the first one to break through 142.45 minor resistance. Ideally, other pairs should follow, with EUR/USD breaking through 1.0092 support, GBP/USD through 1.1644 support, AUD/USD through 0.65231 support, USD/CHF through 0.9680- resistance and USD/CAD through 1.3494 resistance. Let's see if Dollar could do that.

In Europe, at the time of writing, FTSE is up 0.02%. DAX is down -0.53%. CAC is down -0.25%. Germany 10-year yield is down -0.011 at 2.006. Earlier in Asia, Nikkei rose 0.16%. Hong Kong HSI dropped -1.87%. China Shanghai SSE dropped -0.39%. Singapore Strait Times dropped -0.66%. Japan 10-year JGB yield dropped -0.0078 to 0.246.

ECB: Lane: One platform for 75bps hike is no longer there

ECB Chief Economist Philip Lane said in an interview that "we expect to raise rates further". But "each meeting is different" and "one platform for considering a very large hike, such as 75 basis points, is no longer there."

"When we were at zero, that did not correspond to anyone's idea of the interest rate level necessary. Going to 1.5 per cent is still below where we need to go," he said. "But the more you've already done on a cumulative basis, that changes the pros and cons of any given increment."

"I don't think December is going to be the last rate hike" he said. "Trying to jump forward to February, to March, to May or June next year, I think it's too early to have very strong views at this point... The more relevant argument than whether to pause is to move at the appropriate time to smaller increments."

CAD/JPY and AUD/JPY recover as Yen weakens

Yen trades broadly lower today following rebound in benchmark US and European yields. CAD/JPY is one of the top movers for the day. It's possible that whole corrective pattern from 110.87 has completed with three waves down to 104.06. Break of 106.70 resistance, and sustained trading above 55 day EMA will affirm this case, and bring further rise to retest 110.33/110.87 resistance zone.

AUD/JPY also rises mildly today but stays well below 95.73 resistance. Firm break there will affirm the case that pull back from 99.32 has completed at 90.81. Rise form 90.81 should then resume and target a test on 99.32 high.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0311; (P) 1.0359; (R1) 1.0412; More...

EUR/USD dips further today as retreat from 1.0481 extends but stays well above 1.0092 resistance turned support. Intraday bias remains neutral first. Further rally is expected as long as 1.0092 holds. On the upside, break of 1.0481 will resume the rise from 0.9534 and target 1.0609 fibonacci level. However, sustained break of 1.0092 will turn bias to the downside for 55 day EMA (now at 1.0034) and below.

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