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Daily Pivots: (S1) 1.0258; (P) 1.0369; (R1) 1.0458; More...

A temporary top is formed at 1.0481 with current retreat. Intraday bias in EUR/USD is turned neutral for some consolidations. Downside should be contained by 1.0092 resistance turned support to bring another rally. Break of 1.0481 will resume the rise from 0.9534 and target 1.0609 fibonacci level.

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.

The selloff in Dollar overnight didn't last very long. The greenback is trying to recovery in Asian session, as traders turned cautious on news that Poland was struck by a Russia-made projectile. But overall trading is subdued so far. Aussie and Kiwi are the strongest ones for the week at this point, supported by optimism over China reopening. Yen and Swiss Franc are the weakest on positive risk sentiment. Dollar, Euro and Sterling are mixed. Focuses will now turn to inflation data from the UK and Canada.

Technically, some attention will stay on Gold to gauge whether Dollar is ready for recovery. Gold is clearly losing upside momentum as seen in 4 hour MACD, as it approaches 38.2% retracement of 2070.06 to 1614.60 at 1788.58. Break of 1753.09 minor support will indicate that a temporary top is at least in place. Deeper decline would then be seen back to 4 hours 55 EMA (now at 1726.20).

In Asia, at the time of writing, Nikkei is up 0.13%. Hong Kong HSI is down -1.14%. China Shanghai SSE is down -0.22%. Singapore Strait Times is down -0.05%. Japan 10-year JGB yield is up 0.0008 at 0.245. Overnight, DOW rose 0.17%. S&P 500 rose 0.87%. NASDAQ rose 1.45%. 10-year yield dropped -0.066 to 3.799.

GBP/CAD pressing key resistance ahead of UK and Canada CPI

GBP/CAD is a pair to watch today with inflation data from the UK and Canada featured. The cross tried to resume the rise from 1.4069 this week, and breached 1.5811 resistance. Yet, there is no clear follow through buying so far.

Looking at the bigger picture, it's now pressing an important resistance at 1.5875 (2019 low). 55 week EMA (now at 1.6012) is also in proximity. Rejection by this resistance zone, followed by break of 1.5167 support, will keep medium term outlook neutral-to-bearish.

However, sustained break of the resistance will solidify the case of bullish trend reversal. Further break of 61.8% projection of 1.4069 to 21.5811 from 1.5167 at 1.6244 will likely prompt upside acceleration to 100% projection at 1.6909.

Japan machine orders dropped -4.6% mom in Sep

Japan private-sector machine orders dropped sharply by -4.6% mom in September, much worse than expectation of 0.7% mom. That followed a -5.8% mom decline in August.

Nevertheless, for October-December period, manufacturers surveyed by the Cabinet Office are expecting core orders to rise 3.6%.

The government also downgraded its view on machinery orders to "recovery is stalling", from "economy was picking up".

Australia Westpac leading index signals sustained weak growth next year

Australia Westpac Leading Index dropped from -1.09% to -1.19% in October, a new post-pandemic low. Westpac said the is consistent with "sustained weak growth" in 2023. It expects GDP growth to slow from around 3.4% in 2022 to just 1% next year.

It added, "key drivers of the slowdown are: monetary policy tightening; falling commodity prices; and softness in jobs growth as capacity constraints bite."

Regarding RBA policy, Westpac expects another 25bps rate hike at the December 6 meeting. And, "a mooted pause in the tightening is unlikely to occur in 2022 or the early months of 2023 as the Bank continues to underperform its inflation objectives."

Looking ahead

Inflation data from the UK is the major focus in European session, with CPI and PPI featured. Later in the day, Canada will publish CPI and housing starts. US will release retail sales, import price, industrial production, business inventories and NAHB housing index.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.0258; (P) 1.0369; (R1) 1.0458; More...

A temporary top is formed at 1.0481 with current retreat. Intraday bias in EUR/USD is turned neutral for some consolidations. Downside should be contained by 1.0092 resistance turned support to bring another rally. Break of 1.0481 will resume the rise from 0.9534 and target 1.0609 fibonacci level.

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

GBP/CAD is a pair to watch today with inflation data from the UK and Canada featured. The cross tried to resume the rise from 1.4069 this week, and breached 1.5811 resistance. Yet, there is no clear follow through buying so far.

Looking at the bigger picture, it's now pressing an important resistance at 1.5875 (2019 low). 55 week EMA (now at 1.6012) is also in proximity. Rejection by this resistance zone, followed by break of 1.5167 support, will keep medium term outlook neutral-to-bearish.

However, sustained break of the resistance will solidify the case of bullish trend reversal. Further break of 61.8% projection of 1.4069 to 21.5811 from 1.5167 at 1.6244 will likely prompt upside acceleration to 100% projection at 1.6909.

Japan private-sector machine orders dropped sharply by -4.6% mom in September, much worse than expectation of 0.7% mom. That followed a -5.8% mom decline in August.

Nevertheless, for October-December period, manufacturers surveyed by the Cabinet Office are expecting core orders to rise 3.6%.

The government also downgraded its view on machinery orders to "recovery is stalling", from "economy was picking up".

Australia Westpac Leading Index dropped from -1.09% to -1.19% in October, a new post-pandemic low. Westpac said the is consistent with "sustained weak growth" in 2023. It expects GDP growth to slow from around 3.4% in 2022 to just 1% next year.

It added, "key drivers of the slowdown are: monetary policy tightening; falling commodity prices; and softness in jobs growth as capacity constraints bite."

Regarding RBA policy, Westpac expects another 25bps rate hike at the December 6 meeting. And, "a mooted pause in the tightening is unlikely to occur in 2022 or the early months of 2023 as the Bank continues to underperform its inflation objectives."

Full release here.

Key Highlights

• Bitcoin price started an upside correction from the $15,540 zone.
• A key bearish trend line is forming with resistance near $17,320 on the 4-hours chart.
• The price could struggle to gain bullish momentum above $17,500 and $18,000.
• EUR/USD and GBP/USD extended gains above 1.0400 and 1.1950 respectively.

Bitcoin Price Technical Analysis

Bitcoin price declined heavily against the US dollar after the collapse of FTX exchange. BTC/USD broke the $20,000 support and even spiked below the $16,000 level.

Looking at the 4-hours chart, the pair settled below the $17,000 level, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).

It traded as low as $15,543 before the bulls took a stand. Bitcoin price started a recovery wave above the $16,500 resistance zone. There was a minor move above the 23.6% Fib retracement level of the main drop from the $22,286 swing high to $15,543 low.

On the upside, the price is facing a significant resistance at $17,350. There is also a key bearish trend line forming with resistance near $17,320 on the same chart.

The next resistance sits near the $18,000 zone. It is near the 50% Fib retracement level of the main drop from the $22,286 swing high to $15,543 low. A close above the $18,000 level may perhaps start another steady increase in the coming days.

In the stated case, the price could rise towards the $19,150 level. Any more gains could set the pace for a move towards the $20,000 level.

On the downside, an initial support sits near the $16,150 level. The main breakdown support sits near the $15,500 zone. If there is a downside break, bitcoin might decline towards the $13,800 support in the coming days.

Economic Releases

• UK Consumer Price Index for Oct 2022 (YoY) – Forecast +10.7%, versus +10.1% previous.
• UK Core Consumer Price Index for Oct 2022 (YoY) – Forecast +6.4%, versus +6.5% previous.
• US Retail Sales for Oct 2022 (MoM) – Forecast +1.0%, versus 0% previous.

• USDCHF reversed up from support level 0.9380
• Likely to rise to resistance level 0.9485

USDCHF recently reversed up from the support level 0.9380 (former multi-month low from the start of August) standing below the lower daily Bollinger Band.

The upward reversal from the support level 0.9380 stopped the earlier short-term impulse wave (iii) of the sharp C-sequence from the middle of October.

Given the oversold daily Stochastic, USDCHF can be expected to rise further toward the next resistance level 0.9485 (former monthly low from September).

Philadelphia Fed President Patrick Harker said, "in the upcoming months, in light of the cumulative tightening we have achieved, I expect we will slow the pace of our rate hikes as we approach a sufficiently restrictive stance." Next year, "I expect we will hold at a restrictive rate for a while to let monetary policy do its work," he added.

"As long as we are moving consistently and meaningfully to collapse inflation down, I think again we can continue to raise as we need to but also pause when it makes sense along that path," Harker explained. "I just don't think we need to go way up...and way down, that doesn't make sense to me, policy wise."

Harker also noted there are signs of deceleration in the economy. "Credit card purchase data indicate that consumer spending, which comprises around 70 per cent of economic activity in the United States, is slowing, with services and retail leading the decline," he said. "Investment in housing has weakened, and even the boom in manufacturing, which has buoyed the economy, is starting to wane."

Markets

And markets corrected further. Moves since the lower-than-expected US inflation print simply extended with economic data serving as an accelerator. European stocks add a meagre 0.6% but US indices open with very solid 0.9-2.5% gains. The US NY Empire manufacturing index surpassed the bar with ease, coming in at 4.5 vs a -6 consensus. But new orders turned negative again and the outlook for six months ahead turned deeper below zero from -1.8 to -6.1. Financial markets definitely also spotted the PPI easing by more than expected. Headline factory inflation for September was revised lower to 8.4% and slowed to 8% vs 8.3% expected. Core gauges retreated from 7.1% to 6.7% and 5.6% to 5.4%. All of them are still at elevated levels but similar to last Thursday’s CPI, that’s of no importance to markets who just want to see pressure decline, both on prices and on the Fed. US yields at some point shed between 4.2 and more than 9 bps at the front and 4.6-6 bps at the longer end of the curve before taking back some bps as the US session gets going. German yields dip 3.3 to 6 bps across the curve. The 10y yield yesterday didn’t confirm the break beneath its upward sloping trend channel but is attacking that support area again today (2.09%). The European swap counterpart is losing 6.6 bps and is closing in on the June interim high/October correction low 2.72/2.73%. Gilts underperform global peers with yields advancing 1.4 to 3.8 bps. We didn’t see a specific trigger but noted that UK yields bottomed around the time of a £2.25bn 2046 bond auction that tailed and had a lower bid-cover than previously. The UK labour market report was a mixed bag, unable to provide any guidance.

The dollar stayed in the defensive overall, unable to benefit from a potential flare-up in the Ukraine war after Russian missiles hit two residential buildings. The trade-weighted greenback (DXY) slipped from 107 to 105.94 at the time of writing. Intermediate support (June 2022 interim high) is being tested as we speak with the actual next reference already located at 105.01 (May 2022 interim high/38.2% retracement of the 2021-2022 rally). EUR/USD got an early morning technical boost as EUR/USD surpassed the 1.035/7 resistance area. The pair went as high as 1.048 before paring gains to just north of 1.04. The dollar extends declines against Asian currencies too. USD/JPY erases yesterday’s uptick to trade back below 139. At 7.04, USD/CNY is trading at the weakest since mid-September. Staying in Anglo-Saxo spheres, sterling is doing well. EUR/GBP dropped from 0.88 to 0.871 while GBP/USD with a little help from the dollar tested the 1.20 big figure.

News Headlines

Several Central European countries reported a first estimate of Q3 GDP growth today. However, most often only a global estimate was provided, without much details of on the composition/structure of demand. A positive surprise came from Poland showing growth of 0.9% Q/Q and 3.5Y/Y. As such the country avoided a technical recession after a quarterly decline of -2.1% in Q2. Romania also grew 1.3% Q/Q and 4.0% Q/Q. Central bank governor Mugur Isarescu earlier this week indicated that consumption and EU funds continue to support domestic demand. Growth in Slovakia eased from 1.3% Y/Y tot 1.2% Y/Y, but did beat expectations for a slowdown tot 0.9% Y/Y. Activity growth in Bulgaria printed at a solid 0.6% Q/Q resulting in 4.3M Y/Y growth (compared to 4.2% in Q2). The country today also published slightly softer than expected October CPI data at 0.9% M/M but with the Y/Y figure easing from 18.7% to 3.2%. Hungarian Q3 growth contracted (-0.4% Q/Q) slowing Y/Y growth to 4.0% from 6.5% in Q2.

According to Financial Times reporting, Russia and Ukraine are close reach a deal on the exports of grain from Ukraine. The current agreement expires on Saturday if one of the parties makes an objection to the prolongation. The FT says that the extension is being negotiated by the UN on the sidelines of the G20 meeting in Bali. In the compromise, amongst others, Russia is reported to be able to use the same route that was used for the Ukraine’s agricultural exports. It would also be allowed to use a pipeline for ammonia through Ukraine to the port of Odessa.  The agreement is also said to include a technical solution of the payments of Russian exports of grain and fertilizer.