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Positive market sentiment boosts Kiwi, Aussie higher but Canadian is lagging far behind as dragged down by falling oil prices. Sterling is also firm after mixed retail sales data. On the other hand, Swiss Franc and Dollar are following Loonie as the next worst performer for the data. But after all, the greenback are still just engaging in consolidations. Euro and Yen are mixed for now. There shouldn't be any surprises in the final hours of the day, and the picture should pretty much be done.

Technically, NZD/USD is trying to extending the rise from 0.5511 and breached 0.6202 temporary top. Immediate focus is now on 38.2% retracement of 0.7463 (2021 high) to 0.5511 at 0.6257. Rejection by this fibonacci resistance will keep price actions from 0.5511 as a corrective move, and maintains medium term bearishness. However, sustained break of 0.6257 will add too the case of bullish trend reversal. We'd probably find out next week.

In Europe, at the time of writing, FTSE is up 0.87%. DAC is up 1.18%. CAC is up 1.27%. Germany 10-year yield is up 0.019 at 2.041. Earlier in Asia, Nikkei dropped -0.11%. Hong Kong HSI dropped -0.29%. China Shanghai SSE dropped -0.58%. Singapore Strait Times dropped -0.42%. Japan 10-year JGB yield rose 0.0050 to 0.254.

ECB Lagarde: We expect to raise rates further

ECB President Christine Lagarde said in a speech, "the ECB will ensure that a phase of high inflation does not feed into inflation expectations, allowing too-high inflation to become entrenched."

"We have acted decisively, raising rates by 200 basis points, and we expect to raise rates further to the levels needed to ensure that inflation returns to our 2% medium-term target in a timely manner," she said.

"But if we want to rebuild our supply capacity and strengthen domestic sources of growth, other policy areas need to refocus. Most importantly, they need to direct investment towards the transitions that will define our future – and the financial sector needs to be able to actively support these transitions," she added.

Bundesbank Nagel: We must resolutely raise key rates further

Bundesbank President Joachim Nagel said, "We must resolutely raise our key rates further and adopt a restrictive stance... We cannot stop here. Further decisive steps are necessary."

"We should start reducing the size of our bond holdings at the beginning of next year by no longer fully reinvesting all maturing bonds," Nagel added.

UK retail sales volume up 0.6% mom in Oct, sales value up 1.8% mom

UK retail sales volumes rose 0.6% mom in October, above expectation of 0.3% mom. Ex-fuel sales volume was up 0.3% mom, below expectation of 0.6% mom.

In the three months period to October, comparing with the previous three months, sales volume was down -2.4% while ex-fuel sales volume was also down -2.4%, continuing the down trend started since summer 2021.

In value term, headline sales was up 1.8% mom while ex-fuel sales was up 1.0% mom. Comparing the three month periods, headline sales value was down -0.7% while ex-fuel sales value was down -0.1%.

Japan CPI core hits 40-yr high, BoJ Kuroda rules out rate hike

Japan headline CPI rose from 3.0% to 3.7% yoy in October, above expectation of 2.7% yoy. CPI core (all item ex-fresh food) rose from 3.0% to 3.6% yoy, above expectation of 3.5% yoy. That's the highest level in 40 years since 1982. CPI core-core (all item ex-fresh food and energy) rose from 1.8% yoy to 2.5% yoy, above expectation of 1.9% yoy.

BoJ Governor Haruhiko Kuroda said that core inflation was rising "quite a bit" but he expects it to slow back to below 2% in the next fiscal year.

"Raising interest rates now could delay Japan's economic recovery," Kuroda told the parliament. "I'm not saying the BOJ cannot raise rates indefinitely. I'm saying that it's inappropriate to raise rates now, in light of current economic and price developments."

"It's difficult to sustainably achieve our 2% inflation target unless nominal wages rise steadily," Kuroda said. "We'll continue with our monetary easing to support the economy and achieve our 2% inflation target in a sustained, stable fashion backed by wage growth.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 139.15; (P) 139.95; (R1) 141.01; More...

Intraday bias in USD/JPY remains neutral as consolidation from 137.66 temporary low is still in progress. In case of stronger recovery, upside should be limited below 145.16 support turned resistance. 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.

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 130.58).

Economic Indicators Update

Bundesbank President Joachim Nagel said, "We must resolutely raise our key rates further and adopt a restrictive stance... We cannot stop here. Further decisive steps are necessary."

"We should start reducing the size of our bond holdings at the beginning of next year by no longer fully reinvesting all maturing bonds," Nagel added.

Usually, the Dollar and GOLD are negatively correlated. This means that the stronger the US-Dollar becomes, the lower Gold prices will be as many more investors will prefer liquid investments. Times of crisis and the need to safeguard funds are the major exceptions to this.

Judging from the background above, a bullish bias on the US Dollar could cause a bearish momentum on Gold. However, let's break down the bias a bit further.

XAUUSD

Gold on the Daily timeframe is casually approaching the 200-Day Moving Average after absorbing liquidity from the 1765 price area whilst clearly overbought on the Stochastics Oscillator. It is also important to point out that the Supply zone I have marked out for a possible entry is within the range of 1788 and 1816 price points with initial targets at 1722, 1705, and 1680.

CONCLUSION

It is important to understand that the trading of CFDs comes at a risk; if not properly managed, you may lose all of your trading capital. To avoid costly mistakes while you look to trade these opportunities, be sure to do your own due diligence and manage your risk appropriately.

As I earlier indicated in my article this week, I am expecting an upward push from the Dollar as a reaction from the Demand zone I have marked out. The PPI release earlier moved prices a bit, but lacked sufficient momentum to cause a significant break of structure - and thus, no change of trend. Even though my bias remains the same, however, now I expect the move to begin after price must have completed a divergent move inside the demand zone.

The strong numbers from the Retail Sales reports and the Philly Fed Manufacturing index also did its best to kick-start the expected movement. Let's take a look at a few analyses based on this bias.

EURUSD

The Hourly timeframe on EURUSD presents a clear selling opportunity from the retest of the Demand zone as a completion of the AMD pattern. The break of structure created by the impulse from the PPI figures yesterday is also a significant indication of a likely persistent bearish impulse.

GBPUSD

Daily timeframe on GBPUSD places price right next to a major supply zone that's resting within view of the 200-Day Moving Average. We have also seen the liquidity grab from the horizontal blue line; an added confirmation for a rejection and reversal.

AUDUSD

Even though price is currently trading at the 100-Day moving average, the momentum suggests a likely break above the MA in order to create divergence and also give room for price to recover the imbalance between the 76.4% and 88.2% of the Fibonacci retracement. Once this move has been completed, I will be looking for opportunities to short the market.

CONCLUSION

It is important to understand that the trading of CFDs comes at a risk; if not properly managed, you may lose all of your trading capital. To avoid costly mistakes while you look to trade these opportunities, be sure to do your own due diligence and manage your risk appropriately.

GBPJPY has experienced a steep uptrend since late September, with the price gaining almost 15% and posting a fresh 6½-year high of 172.10. Even though the pair declined moderately from its recent peak, it has been attempting a rebound in the last few daily sessions.

The short-term oscillators are indicating that bullish forces are strengthening. Specifically, the RSI has crossed above its 50-neutral mark, while the stochastic oscillator is ascending near the 80-overbought region.

In the positive scenario, should buying pressures persist, the price could challenge the October resistance of 167.50. Piercing through this region, further advances could come to a halt at the double-top region of 169.08. A break above the latter may then set the stage for the 6½-year high of 172.10.

On the flipside, bearish actions could send the price to test the 50-day simple moving average (SMA), currently at 165.00. Sliding beneath that floor, the bears could aim for the recent support of 163.04. Failing to halt there, the attention could shift to 162.30, which overlaps with the 200-day SMA.

Overall, GBPJPY has been gaining ground after its latest retreat came to a halt. However, a break below the 50-day SMA could spark another pullback

The Euro started a decent increase above the 1.0200 and 1.0280 resistance levels against the US Dollar. The EUR/USD pair gained pace above the 1.0420 level to move into a positive zone.

It tested the 1.0480 zone before there was a correction towards 1.0300. The pair is now rising and trading above the 1.0350 level. It seems to be facing resistance near the 1.0375 and the 50 hourly simple moving average.

The first major resistance is near the 1.0400 level. A break above the 1.0400 resistance level could start a fresh upward move. In the stated case, it could even surpass 1.0450 on FXOpen.

Conversely, the pair might start a fresh decline below 1.0350. The next key support is near 1.0320, below the pair could decline towards the 1.0300 level. Any more losses might send the pair towards the 1.0250 level in the coming sessions.

The British pound has pushed above the 1.19 line on Friday. GBP/USD is currently trading at 1.1924, up 0.49%.

Retail sales bounce back

Retail sales showed some life in October, posting a gain of 0.6% MoM. This was a strong rebound from the -1.5% reading in September and above the consensus of 0.0%. The gain is welcome news and has provided the pound with a boost today. Still, consumer spending has a long road to recovery, as retail sales came in at -6.1% YoY. This beat the September figure of -6.8% and the forecast of -6.5%, but the struggling UK economy will need a sharp turnaround in consumer spending, a key driver of economic growth. Consumer confidence remains in deep-freeze but improved slightly in October to -44, up from -49 in September.

With the UK economy in a recession, the government’s bleak Autumn Statement was no surprise. Finance Minister Hunt announced a mix of tax hikes and spending cuts. There wasn’t much for Britons to cheer about in the austerity budget, but perhaps there is a sense of relief that it is a step in the direction to restore fiscal responsibility, after the shenanigans of Liz Truss and her mini-budget caused a financial crisis.

The BoE is projecting that unemployment will rise to 6.5% and the country will experience negative growth in the second half of this year, throughout 2023 and into the first half of 2024. GDP declined by 0.2% in the third quarter, and the headwinds look formidable for the UK economy and the British pound.

The Federal Reserve has kept up its hawkish talk in an effort to dampen investor exuberance after the last inflation report fueled speculation that the Fed planned a pivot in policy. Fed member Bullard weighed in this week, urging the Fed to raise rates to at least 5%-5.25%. Bullard went even further, presenting a scenario in which the funds rate would climb as high as 7%. The message helped dampen risk appetite, sending equity markets lower and the US dollar higher.

GBP/USD Technical

• There is resistance at 1.1961 and 1.2030
• GBP/USD has broken below support at 1.1896 and 1.1786. Below, there is support at 1.1660

The USDJPY is holding in extended directionless mode, consolidating around 140 handle after last week’s heavy losses (the pair was down 5.7% for the week).

Sharp fall found firm ground at 138.62/14 zone (base of ascending thick daily cloud / Fibo 61.8% of 130.39/151.94 upleg).

Failure to register close below these levels generated initial signal of a bear trap, which would offer stronger support if the action managed to break above current range, capped by 100DMA (140.95).

Also, rising cloud base continues to contain and underpin the action, providing solid support and so far keeping the downside protected.

However, daily studies remain in bearish mode that keeps the downside vulnerable, especially while the action stays capped by 100DMA, keeping in play risk for renewed attack at pivotal supports (138.62/14) clear break of which would signal bearish continuation and expose target at 135.47 (Fibo 76.4%).

Alternative scenario sees sustained break of 100DMA as initial bullish signal for stronger recovery, though bulls would require more evidence (lift through 10DMA at 141.73 and daily Tenkan-sen at 142.30) for confirmation.

Res: 140.95; 141.16; 141.72; 142.30.
Sup: 139.70; 138.62; 137.67; 135.81.

The Japanese yen is unchanged on Friday and is trading at 14.017 in the European session.

Japan’s Core CPI beats forecast

Inflation continues to creep up in Japan. Core CPI accelerated to 3.6% in October, up from 3.0% in September and edging above the consensus of 3.5%. These levels pale in comparison to what we’re seeing in the US, the UK and elsewhere, but Japan hasn’t seen these levels of inflation in 40 years. The country has a deflationary mindset, which leads firms to absorb higher costs for fear of losing customers. However, as inflation continues to move higher, that trend is changing and consumers are feeling the pain of higher prices.

Despite rising inflation and a weak yen, the Bank of Japan is resolute in maintaining its ultra-loose policy in order to support the weak economy. The BoJ has been an outlier as it has capped interest rates while the global trend has been to raise rates, arguing that cost-push inflation is only temporary. BoJ Governor Kuroda has said that inflation should peak after hitting 3%. Kuroda might want to consult with Jerome Powell or Christine Lagarde about making assumptions about inflation peaks, as they found out to their chagrin that inflation was much stickier than they had anticipated.

Fed continues tightening talk

Ever since the last US inflation report sent the equity markets soaring and the US dollar sliding, the Fed has circled the wagons and telegraphed a hawkish message to the markets. The latest salvo came from Fed member Bullard, who urged the Fed to raise rates to 5%-5.25% at a minimum. Bullard also presented a hawkish scenario in which the funds rate would climb all the way to 7%, a message investors clearly didn’t want to hear. Retail sales and unemployment claims were better than expected, another indication that the US economy remains resilient handle further rate hikes. The Fed’s coordinated message and the solid data have quelled the stock market rally and boosted the US dollar.

USD/JPY Technical

• USD/JPY is testing support at 139.95. Below, there is support at 138.09
• There is resistance at 141.01 and 142.87

EURGBP has been in a consolidation phase over the past two weeks, maintaining a foothold above the 0.8700 level and the support trendline drawn from the August low of 0.8338.

The momentum indicators currently reflect a neutral-to-bearish bias. The RSI and the MACD have been gradually diminishing over the past week, with the former looking for a break below its 50 neutral mark and the latter flirting with its red signal line. Meanwhile, the falling stochastics have yet to enter the oversold territory below 20, suggesting that bearish pressures may persist in the short term.

Still, as long as the price keeps trading within the bullish upper Bollinger area, there is potential for an upside reversal to test the nearby 0.8820 resistance territory. A decisive close above October’s high of 0.8860 could produce another leg up to 0.8925. Even higher, the pair will attempt to re-enter the 0.9000 territory with scope to reach the March ascending trendline currently seen near 0.9150.

On the downside, a step below 0.8700 could confirm additional losses towards the lower ascending trendline at 0.8630. If that floor cracks too, the pair may revisit October’s low of 0.8570 before meeting the 200-day simple moving average (SMA) at 0.8530. Moving lower, the focus will turn to the long-term 0.8470 familiar constraining zone.

In brief, EURGBP is showing no appetite for improvement, though it may postpone selling activities if it stands firm above 0.8700.