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Upside risks have been dominating the NZD/JPY currency pair since the beginning of October. The New Zealand Dollar has edged higher by 7.23% against the Japanese Yen during this period.

All things being equal, the exchange rate is likely to continue to trend higher during the following trading sessions. The potential target for buyers will be near the 84.00 level.

However, the currency exchange rate might make a brief retracement towards the 79.00 area in the short term.

The support zone of the last week's high and this week low levels kept the EUR/USD from declining. Namely, on Thursday, the rate found support in 1.1620 and started a recovery. By the middle of the day's European trading hours, the pair had recovered to the weekly R1 simple pivot point at 1.1644.

If the pair continues to recover, it would reach for the this week's high level zone just below the 1.1670 mark. Above the 1.1670 level, the weekly R2 simple pivot point might serve as a resistance level at 1.1685.

On the other hand, a potential decline might find support first in the 100-hour simple moving average at 1.1635 before approaching the 1.1620 level. Note that a passing of the 1.1620 mark could result in the pair looking for support in the 200-hour simple moving average at 1.1608.

As explained on Thursday, all triangle patterns are eventually broken. The ascending triangle of the GBP/USD was broken to the downside. However, the sharp break out was stopped by the 100-hour simple moving average at the 1.3780 level. Afterwards, the pair traded sideways between the resistance of the 55-hour SMA and the support of the 100-hour SMA.

The sideways trading ended, as the UK Purchasing Managers Indices were released at 08:30 GMT. The rate increased volatility. Namely, initially the pair declined below the 100-hour SMA, just before the data was released. The data released was better than forecast. Due to that reason a 30 pip jump occurred. Since then, the pair had been ignoring the SMAs, as it appears to be looking for direction.

In the case of a a surge, the GBP/USD might find resistance in the weekly R1 simple pivot point at 1.3830 and the this week's high levels at 1.3835. Above these levels, the weekly R2 at 1.3904 and the 1.3900 mark could provide resistance.

However, a decline might look for support first in the 1.3743 level, which is this week's low level. Below that, the 200-hour SMA at 1.3730 might serve as a support level.

The small channel down pattern of the USD/JPY was broken, as its upper trend line held for four hours before the USD/JPY passed it. The following surge eventually stopped at the combined resistance of the 55 and 100-hour simple moving averages. The SMAs forced the pair into a decline, which on Friday afternoon was heading to the weekly simple pivot point at 113.64.

If the rate once again finds support in the weekly simple pivot point at 113.64, a potential surge would highly likely encounter resistance in the 200-hour SMA at 113.95 and the 55 and 100-hour SMAs near 114.10/114.20. Above the SMAs, previous high levels might provide resistance at 114.40, 114.50 and 114.60.

Meanwhile, a passing of the support of the 113.64 level would have no technical support as low as the weekly S1 simple pivot point at 112.82. Due to that reason it is more likely that round exchange rate levels could provide support. For example, the 113.00 mark could provide support, as it managed to reverse a decline on October 12.

The channel up pattern of the yellow metal's price held, as its lower trend line together with the 55-hour SMA provided enough support to cause a surge. By the middle of Friday's European trading hours, the metal had reached the 1,795.00 level, which started to provide resistance.

In the near term future, the metal could trade sideways below the 1,795.00 mark until the 55-hour SMA catches up and provides the needed support for a surge. A surge would most likely immediately test the resistance of the 1,800.00 mark.

On the other hand, as the 55-hour SMA is lagging behind the price, a decline might occur. A decline might reach for the 55-hour SMA and the lower trend line of the channel up pattern near 1,785.00. In the case of the price passing the SMA and breaking the channel up pattern, the bullion might look for support in the 100 and 200-hour simple moving averages.

The WTI oil is consolidating under new seven-year high, as bulls slowed on cooling demand over easing gas and coal prices and a forecast for mild winter in the US but is on track for the seventh consecutive bullish weekly close. Dips off new high were so far shallow and contained by rising 10DMA, with long tails of daily candles of past three days, suggesting that demand is still strong and the downside so far remains protected.

Unexpected draw in US stocks this week, also supported the action.

Daily studies remain in full bullish setup but stochastic and momentum started to point lower, suggesting extended consolidation as bulls repeatedly failed to break above larger bull-channel, with stronger correction seen not likely unless global energy crisis recedes.

Ascending 10DMA ($81.52) tracks the action for past six weeks and marks solid support which should ideally contain dips and keep intact pivotal supports at $80 (psychological) and $79.01 (rising 20DMA).

Res: 83.91, 85.24, 85.90, 88.61.
Sup: 82.59, 81.52, 80.76, 80.00.

The Canadian dollar edged higher in Asia as it drives towards the 1.23 line. USD/CAD is currently trading at 1.2329, down 0.33% on the day.

Retail Sales expected to rebound

The Canadian dollar has taken advantage of US dollar weakness this week. On Thursday, USD/CAD fell to 1.2288, its lowest level since June 28th. The currency faces another important test later in the day, with the release of Canada retail sales reports for August.

Consumer spending disappointed in July, as headline retail sales fell 0.6% and core retail sales declined 1.0%. A strong turnaround is projected for July, with estimates of 2.0% for the headline read and 2.8% for the core release. Solid readings would point to renewed consumer spending and would likely give the Canadian dollar a boost. The currency has enjoyed a sparkling October, up 2.76%. An increase in risk appetite and a sharp increase in oil prices have boosted the Canadian dollar.

The Bank of Canada meets next week, and as is the case for many other central banks, inflation will be at the top of agenda. September CPI climbed 4.4% (Y0Y), above the 4.1% gain in August. The surge in inflation is a result of cost increases due to supply-chain disruptions and higher energy costs, and BoC policy makers are keen on containing inflation before it threatens to overheat the economy.

Still, a hike in interest rates appears a long way off, even with inflation heading higher. BoC Governor Tiff Macklem has acknowledged that inflation will persist longer than previously anticipated, but there are no indications that the bank has abandoned its view that the current bout of inflation to be transitory.

The BoC holds a policy meeting next week and the bank could scale back its bond purchase programme, which it has trimmed three times this year and now stands at C$2 billion/week. The September policy meeting took place around the national election and the bank refrained from any major moves at such a sensitive time. Next week’s meeting provides better timing for a taper, although the cautious BoC could decide to wait a bit longer. The bank has said that it will fully wind up the bond purchase scheme before raising interest rates, and a hike is not expected before 2023.

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USD/CAD Technical

• USD/CAD is putting pressure on support at 1.2300. Below, there is support at 1.2238
• There is resistance at 1.2462, followed by 1.2562

Gold technical analysis

• GOLD is breaking above the trend line.
• The price needs to break 1796 for more upside.
• Buying the dips is the scenario.
• 1820 zone is the final target.

1. Left shoulder.
2. Head.
3. Right shoulder.
4. Bouncing zone.
5. Target.

The price is bullish. Last week we witnessed buying the dips scenario. Bulls are trying to push the price further up and so far they have been successful. The potential move is higher but the price needs to break above 1796. M H3 and W H4 need to break and the price needs to close above it. Gold is supported by important weekly and monthly camarilla pivots. The final target is the 1820 zone but watches for potential profit-taking today as it is Friday. Buying the dips is the scenario.

USDCAD is consolidating across the 1.2300 handle after the price slipped back below the Ichimoku cloud and the simple moving averages (SMAs) over a period of one-month. The bullish bearing of the 50- and 100-day SMAs has softened, as has the negative tone of the 200-day SMA, overall signalling that the pair may adopt a more neutral form.

The Ichimoku lines are indicating a pause in downward forces, while the short-term oscillators are conveying conflicting signals in directional momentum. The MACD, some distance below zero, is edging towards its red trigger line, while the RSI’s recent rebound at the 30 level is struggling to make headways. On the other hand, the stochastic oscillator is promoting positive price action, as its bullish charge remains intact.

In the positive scenario, prompt upside constraints could commence from the resistance section of 1.2383-1.2425. Overstepping this barrier, the price may then encounter a zone of resistance between the 200- and 100-day SMA at 1.2488 and 1.2515 respectively. Successfully conquering this too, the bulls could then target the 50-day SMA at 1.2595 ahead of the 1.2647 high.

Alternatively, if negative pressures pick up again, initial support could transpire from the immediate 1.2251-1.2308 region. Diving beneath this zone, which was formed by the lows around the end of June until early July, the pair may meet the 1.2200 handle. Should the round number fail to dismiss further downward pressures, sellers could then turn their focus towards the 1.2127 and 1.2057 lows.

Summarizing, USDCAD’s price outlook remains skewed to the downside. Price action is currently confined between the 1.2251-1.2308 lower limit and the 1.2383-1.2425 upper limit. A clearer price direction could evolve should the pair break either below or above these limits.

Notes/Observations

• Bond yields moving higher as ‘transitory’ inflation still having markets believe central banks will enact earlier-than-anticipated interest rate hikes.
• Equity markets as higher corporate earnings recovery offset concerns about higher costs of borrowing and raw materials.
• Major European PMI data mixed in session; staying in expansion but at year lows: Manufacturing: Beats: Germany, Euro Zone, UK; Misses: France; Services: Beats: France, UK; Misses: Germany, Euro Zone).
• Weak Sept UK retail sales data spurred a dovish shift in BoE rate expectations (dampened the expectation of a Nov hike).
• Companies due to report during the NY morning include Autoliv, American Express, Cleveland-Cliffs, HCA, Honeywell, Regions Financial, Schlumberger, Seagate, VF Corp.

Asia

• China Property developer Evergrande said to have averted default with belated payment.
• Australia Oct Preliminary PMI Manufacturing: 57.3 v 56.8 prior (17th month of expansion).
• Japan Oct Preliminary PMI Manufacturing: 53.0 v 51.5 prior (9th month of expansion).
• Japan Sept National CPI data weak but moving in the right direction. Core registers its 1st positive reading since start of pandemic (YoY: +0.2%e v -0.4% prior; CPI ex-fresh food (core) Y/Y: 0.1% 0.1%e.
• RBA defended its bond target for 1st time in 8 months as it offered to buy A$1.0B of 2024 bonds. RBA trying to defend its 0.1% three-year yield target after the April 2024 security surged above 0.17% this week.
• President Biden vowed to protect Taiwan; US Would protect Taiwan and had commitment to do so.

Europe

• BOE's Pill (chief economist): November BOE meeting was live; UK inflation was likely to rise 'close to or even slightly above 5%.
• PM Johnson said to accept a limited role for the ECJ to interpret EU law in Northern Ireland in order to secure a deal with the EU.
• UK Oct GfK consumer Confidence: -17 v -16e as higher inflation and climbing Covid rates weighed on sentiment.
• German Chancellor Merkel said to have urged France President Macron and other EU leaders to drop threats to punish Poland amid fears the battle over rule of law could collapse the bloc.

Americas

• President Biden: Thinks close to deal [referring to economic agenda]; does not expect broad corporate tax rate hike to be in [reconciliation] bill.
• Fed's Williams (FOMC voter): Longer run inflation expectations in line with 2.0% goal.

Energy

• Russia President Putin stated that was possible for Russia to increase gas supplies to Europe and could quickly start gas supplies via Nord Stream 2 pipeline.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.55% at 472.26, FTSE +0.40% at 7,218.80, DAX +0.60% at 15,564.75 , CAC-40 +1.03% at 6,755.07, IBEX-35 -0.01% at 8,943.50 , FTSE MIB +0.47% at 26,650.00, SMI -0.04% at 12,034.67, S&P 500 Futures -0.03%].
• Market Focal Points/Key Themes: European indices open generally higher; sectors leading to the upside include technology and real estate; sectors starting the day in the red include energy and telecom; oil and gas subsector under pressure following reports from China on thermal coal pricing; Siltronic delays talks with GlobalWafers; JD Sports acquires majority stake in Cosmos; Sainsbury’s terminates discussion to sell its banking unit; earnings expected during the upcoming US session include American Express, Honeywell and Schlumberger.

Equities

• Consumer discretionary: L'Oreal [OR.FR] +6% (earnings), Remy Cointreau [RCO.FR] +2% (earnings), JD Sports Fashion [JD.UK] +3% (acquisition).
• Financials: London Stock Exchange [LSEG.UK] -4% (trading update).
• Industrials: Air Liquide [AI.FR] +1% (earnings), Renault [RNO.FR] -2% (earnings; production loss estimate), SAAB [SAABB.SE] -2.5% (earnings).
• Technology: Siltronic [WAF.DE] -1.5% (delays talks with GlobalWafers).

Speakers

• Sweden Central Bank (Riksbank) Dep Gov Ohlsson noted that temporary inflation couldn boost expectations thus expectations risks becoming self-fulfilling. Riksbank was fully focused on inflation going forward. Believed that higher inflation will last longer then previously thought.
• Sweden Central Bank (Riksbank) BusinessSurvey: Activity continued to strengthen for companies; supply shock to last into 2022.
• India PM Modi stated that all sectors in economy were optimistic and the festival season would boost activity.
• China President Xi stated that Oil Field construction was important to China; country's energy supply must be in its own hands.
• China Foreign Ministry spokesperson Wang Wenbin stated that Taiwan was an inalienable part of China; US should abide by the one-China principle.

Currencies/Fixed income

• Some safe-haven flows unwound after reports that China Property developer Evergrande had averted default with belated payment.
• EUR/USD steady in the session at 1.1640 area as the various major European PMI data was mixed but remaining in expansion territory.
• GBP/USD hovering around the 1.38 area as negative UK retail sales data spurred a dovish shift in BoE rate expectations.
• Focus remained on bond yields which have continued to rise and appear moving towards a self-fulfilling prophecy. Markets continue to bet that central banks would enact earlier-than-anticipated interest rate hikes. German 10-year Bund yield at -0.07 for its highest level since May 2019.

Economic data

• (NO) Norway Q3 Industrial Confidence: 8.8 v 11.0 prior.
• (UK) Sept Retail Sales (ex-auto/fuel) M/M: -0.6% v +0.3%e; Y/Y: -2.6% v -1.6%e (5th month of declines).
• (UK) Sept Retail Sales (including auto/fuel) M/M: -0.2% v +0.6%e; Y/Y: -1.3% v -0.4%e.
• (FR) France Oct Preliminary PMI Manufacturing: 53.5 v 54.0e (11th month of expansion and lowest reading since Jan 2021); PMI Services: 56.6 v 55.5e; PMI Composite: 54.7 v 54.7e.
• (DE) Germany Oct Preliminary PMI Manufacturing: 58.2 v 56.6e (16th month of expansion and lowest reading Jan 2021); PMI Services: 52.4 v 55.2e; PMI Composite: 52.0 v 54.3e.
• (CN) Weekly Shanghai copper inventories (SHFE): 39.8 v 41.7K tons prior.
• (EU) Euro Zone Oct Preliminary PMI Manufacturing: 58.5 v 57.1e (16th month of expansion); PMI Services: 54.7 v 55.4e; PMI Composite: 54.3 v 55.2e.
• (RU) Russia Narrow Money Supply w/e Oct 15th (RUB): 14.42T v 14.39T prior.
• (TW) Taiwan Sept Unemployment Rate: 3.9% v 4.0%e.
• (UK) Oct Preliminary PMI Manufacturing: 57.7 v 56.0e (17th straight expansion); PMI Services: 58.0 v 54.5e; PMI Composite: 56.8 v 54.0e.
• (HK) Hong Kong Sept CPI Composite Y/Y: 1.4% v 3.0%e.
• (IS) Iceland Sept Wage Index M/M: 0.7% v 0.3% prior; Y/Y: 7.7% v 7.9% prior.

Fixed income issuance

• (IN) India sold total INR240B vs. INR240B indicated in 2023, 2026, 2035 and 2050 bonds.

Looking ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2033, 2046 and 2050 Bonds.
• 06:00 (IE) Ireland Sept PPI M/M: No est v -0.8% prior; Y/Y: No est v -1.4% prior.
• 06:00 (UK) DMO to sell £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively).
• 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to raise Key 1-Week Auction Rate by 50bps to 7.25%.
• 06:45 (US) Daily Libor Fixing.
• 07:30 (IN) India Weekly Forex Reserve w/e Oct 15th: No est v $639.5B prior.
• 07:30 (IN) India announces upcoming bill issuance (held on Wed.
• 07:30 (IS) Iceland to sell 2025 and 2026 Bonds.
• 08:00 (PL) Poland Sept M3 Money Supply M/M: 0.6%e v 0.4% prior; Y/Y: 8.6%e v 9.1% prior.
• 08:00 (CL) Chile Sept PPI M/M: No est v 2.7% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (CA) Canada Aug Retail Sales M/M: +2.0%e v -0.6% prior; Retail Sales (ex-auto) M/M: +2.6%e v -1.0% prior.
• 08:30 (BR) Brazil Sept Current Account Balance: -$1.5Be v +$1.7B prior; Foreign Direct Investment (FDI): $5.0Be v $4.5B prior.
• 09:00 (IT) Bank of Italy (BOI) Quarterly Economic Bulletin.
• 09:45 (US) Oct Preliminary Markit PMI Manufacturing: 60.5e v 60.7 prior; PMI Services: 55.2e v 54.9 prior; PMI Composite: No est v 55.0 prior.
• 10:00 (US) Fed’s Daly.
• 11:00 (EU) Potential sovereign ratings after European close (S&P on UK, Greece and EFSF; Fitch on Netherlands, Austria and Finland sovereign ratings).
• 11:00 (US) Fed Chair Powell participates on panel.
• (CO) Colombia Sept Industrial Confidence: No est v 15.6 prior; Retail Confidence: No est v 43.5 prior.
• 13:00 (US) Weekly Baker Hughes Rig Count.
• 14:00 (US) Sept Monthly Budget Statement: -$59.0Be v -$124.6B prior.