US stocks rebounded sharply on Tuesday, regaining upside momentum and ending their previous slide as investors adjusted their expectations in response to Federal Reserve officials indicating that they’ll continue to raise interest rates but are open to slowing their tempo.

The market’s expectations of softer rate hikes from the Federal Reserve continued to provide support to the equity markets but activity was limited ahead of the FOMC Meeting Minutes and US Durable Goods Orders to be out on Wednesday. Market sentiment has improved despite the looming Covid woes from China and fears of economic slowdown in major economies challenge the energy demand. The focus now shifts to the FOMC Meeting Minutes, which may shed some light on whatever the Fed may do in December.

On the Eurozone front, most of the European Central Bank officials were paving the way for another 75 bps rate hike at the December meeting. ECB policymaker Robert Holzmann supported calls for a third straight 75 basis points (bps) rate increase.

The benchmarks, S&P 500 and Dow Jones Industrial Average both advanced higher on Tuesday as the S&P 500 closed at its highest level since Sept. 12 following upbeat earnings from a handful of retailers. The S&P 500 was up 1.4% daily and the Dow Jones Industrial Average climbed higher with a 1.2% gain for the day. All of the eleven sectors in the S&P 500 stayed in positive territory as the Energy sector and the Materials sector are the best performing among all groups, rising 3.18% and 2.23%, respectively. The Nasdaq 100 meanwhile advanced the most with a 1.5% gain on Tuesday and the MSCI World index was down 0.8% for the day.

Main Pairs Movement

The US dollar declined lower on Tuesday, remaining under pressure and extended its daily losses amid the better performance of global equities and weaker US Treasury yields. The greenback has marked broad losses ahead of crucial catalysts scheduled for publication today. Meanwhile, the Fed’s latest meeting minutes will be closely observed to confirm the chatters surrounding the economic transition and the 50 bps rate hike chatters.

GBP/USD climbed higher on Tuesday with a 0.53% gain as the cable regained upside traction and aimed to recapture the 1.1900 level during the US session as the market mood soars ahead of FOMC minutes. On the UK front, the release of the S&P PMI numbers will be significant for the market participants. Meanwhile, EUR/USD manages to regain some composure and rebounded towards the 1.0310 area amid a weaker US dollar across the board. The pair was up almost 0.60% for the day.

Gold advanced slightly with a 0.13% gain for the day after retreating from a daily high near the $1750 mark during the US trading session, as the expectations for Fed’s 50 bps rate hike keep acting as a tailwind for the precious metal. Meanwhile, WTI Oil picked up bids with a 1.14% gain for the day amid the headlines surrounding the G7 nations’ discussions on the oil price cap on Russian exports.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD pair recovered some ground on Tuesday after shedding over 100 pips at the beginning of the week. The advance, however, was modest, with the pair trading around the 1.0280 level as of writing. The equities market performed better, with most stock indices holding on to modest gains and putting pressure on the US dollar. Meanwhile, US Treasury yields remain subdued, giving up most of their Monday’s gains. In Eurozone, European Central Bank officials continue to favour a 75 bps rate hike, and the move would raise the deposit rate to 2.25%. Furthermore, Finnish ECB policymaker Olli Rehn said the ECB would continue to raise interest rates, and the pace of its hikes will be determined by the rate of inflation and the overall economic situation. Elsewhere, concerns about the coronavirus situation in China remain the same. The country reported another increase in national cases, and Beijing shut down public places such as parks and museums. The potential economy limits high-yielding assets’ gains.

From the technical perspective, the four-hour scale RSI indicator modestly climbed to 50 figures as of writing, suggesting the pair was amid recovery momentum. As for the Bollinger Bands, the pair was pricing in the lower area and challenging the 20-period moving average resistance, which indicates that the pair have no decisive tendency. As a result, we think the pair would hover in a range from 1.0200 to 1.0400 shortly.

Resistance: 1.0475, 1.0604

Support: 1.0298, 1.0167, 0.9953

GBPUSD (4-Hour Chart)

The GBPUSD has managed to stage a rebound after having dropped below 1.1800 on Monday but confronting some sellings during the US trading session. The pair was priced at the 1.1870 level as of writing. In the absence of high-impact macroeconomic data releases, the risk perception is likely to drive the pair’s action. China reported more than 28000 new local cases on Monday and the city of Beijing announced that it will be shutting down parks and museums from Tuesday. Markets remain worried about a global economic downturn with China possibly refraining from moving away from its zero Covid policy. In domestic, the cables draw support from expectations that the Bank of England will continue to combat stubbornly high inflation. Moreover, reports that the UK government privately discussed the possibility of a Swiss-style relationship with the European Union further boosting the British pound. However, a bleak outlook for the UK economy could cap any further gain for the pair. The Uk Office of Budget Responsibility last projected the UK GDP to slump by 1.4% next year as compared to a growth of 1.8% forecast in March.

From the technical perspective, the four-hour scale RSI indicator rebounded to 56 figures as of writing, suggesting that the pair was surrounded by positive traction. As for the Bollinger Bands, the pair was breaking through the 20-period moving average and was trading in the upper area, and drawing support from the lower band of 1.1780 level, which is a signal that the pair has not made a decisive move.

Resistance: 1.2028, 1.2145

Support: 1.1765, 1.1647, 1.1366

XAUUSD (4-Hour Chart)

The XAUUSD regains some positive traction on Tuesday and snaps a four-day losing streak, as benefiting from the fresh US dollar selling. The US dollar was under some selling pressure and halts the recent rebound from its lowest level since August 12, which, in turn, is seen as a tailwind for the Dollar-denominated gold. Investors seem convinced that the Federal Reserve (Fed) will slow the pace of its rate-hiking cycle and have been pricing in a greater chance of a relatively smaller 50 bps lift-off at the December meeting. This is evident from a modest downtick in the US Treasury bond yields and weighs on the USD. However, the recent hawkish signals from several Fed officials suggest that the US central bank will continue to tighten its monetary policy to tame stubbornly high inflation. This should boost the US Treasury bond yields and help limit losses for the US dollar. In the meantime, worries about economic headwinds stemming from a new COVID-19 outbreak in China and the imposition of fresh lockdowns could benefit the greenback’s status as the global reserve currency. In addition, signs of stability in the financial markets might also contribute to capping the upside for the safe-haven precious metal.

From the technical perspective, the four-hour scale RSI indicator was wandering in a range from 35 to 50 as of writing, suggesting that the investors stay cautious for the day and the pair witnessed some negative traction. As for the Bollinger Bands, the pair was capped by a 20-period moving average and pricing at the lower area. Therefore, we think gold was more favoured to the downside path in the near term.

Resistance: 1784, 1800

Support: 1748, 1704, 1670

Economic Data

US stocks dropped lower on Monday, witnessing some downside traction and dropped as investors parsed comments from Federal Reserve officials who broadly remained steadfast in their fight against inflation. Investors are closely watching what Fed speakers say about the outlook for interest rates, as several central bank officials in recent days have restated their intention to remain relentless until inflation is under control.

On top of that, risk aversion dominated financial markets after China’s National Health Commission reported two deaths of Covid-19 patients in Beijing, which in turn raised doubts about the Chinese government’s easing of activity controls. Therefore, the worsening Covid conditions in China and indecision over Fed’s next move weighed on the market sentiment. On the Eurozone front, the mixed signals from Eurozone data and the European Central Bank (ECB) policymakers are acting as a headwind for the Euro. ECB Chief Economist Philip Lane favoured further rate hikes and expected the likely recession to be short-lived.

The benchmarks, S&P 500 and Dow Jones Industrial Average both edged lower on Monday as the S&P 500 was dragged down by the Technology stocks that are typically more sensitive to interest rates. The S&P 500 was down 0.4% daily and the Dow Jones Industrial Average retreated slightly lower with a 0.1% loss for the day. Four out of eleven sectors in the S&P 500 stayed in negative territory as the Consumer Discretionary and Energy sectors are the worst performing among all groups, losing 1.41% and 1.39%, respectively. The Nasdaq 100 meanwhile dropped the most with a 1.1% loss on Monday and the MSCI World index was up 0.6% for the day.

Main Pairs Movement

The US dollar advanced higher on Monday, continuing to find demand and extended its intra-day rally towards the 108 level amid fears of an economic downturn. The greenback rose the most in November the previous day as the market’s sentiment soured amid fresh fears of the Coronavirus. The 10-year US Treasury yields have rebounded to 3.83% despite a less-hawkish commentary from Cleveland Fed President Loretta Mester.

GBP/USD dropped lower on Monday with a 0.56% loss as the cable strumbled sharply below the 1.1900 figure in the North American session amid risk aversion. On the UK front, the UK Office for Budget Responsibility’s projection overshadows expectations that the Bank of England will continue raising rates to combat stubbornly high inflation. Meanwhile, EUR/USD retreated lower and held lower ground near a one-week low in the 1.0240 price zone amid a stronger US dollar across the board. The pair was down almost 0.80% for the day.

Gold declined lower with a 0.72% loss for the day after dropping to a daily low around the $1733 mark during the US trading session, as the precious metal is declining gradually amid a global correction in risk-perceived assets. Meanwhile, WTI Oil dropped slightly with a 0.09% loss for the day after Saudi Arabia denied an oil-production increase for the OPEC+ meeting next month.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD managed to erase a small portion of its daily losses but lost recovery momentum around 1.0250, as Wall Street’s main indices trade in negative territory after the opening bell, allowing the US Dollar to preserve its strength and limiting the pair’s an upside. At the beginning of the week, the greenback extends the recent bounce backed by the recent hawkish message from some Fed speakers, which lent renewed oxygen to both the buck and yields. Apart from this, concerns arose during the Asian session, as China reported two new coronavirus deaths and a spike in cases as the outbreak extends in Beijing. Stay-home orders have been issued in different cities, and market players are concerned the situation can trigger fresh supply-chain issues, one of the main reasons global inflation soared earlier in the year. In the Eurozone, European Central Bank Executive Board member Philip Lane was on the wires and said that any recession in the Union would be mild and soft. He also noted that the ECB would make another hike in December, progressing towards the levels needed.

From the technical perspective, the four-hour scale RSI indicator dropped sharply below 40 figures as of writing, suggesting that the pair was confronting strong selling pressure. As for the Bollinger Bands, the euro was pricing around the lower band and the size between the upper and lower band became larger, indicating that the pair was surrounded by severe headwinds. As a result, we think the pair was more favoured to the downside path shortly.

Resistance: 1.0475, 1.0604

Support: 1.0298, 1.0167, 0.9953

GBPUSD (4-Hour Chart)

The GBPUSD stays on the back foot in the US trading session on Monday and trades at around the 1.1800 level as of writing. The negative shift witnessed in risk mood amid renewed China Covid worries helps the safe-haven US Dollar outperform its rivals and weighs heavily on the pair. China’s Covid-related news that three people died during the weekend sparked fears that authorities could reimpose strict measures to curb the outbreak. The economic docket in the United States (US) revealed the Chicago National Activity index fell into negative territory in October, to -0.05 from 0.17 in September. Aside from this, even though US October COI and PPI reports were softer-than-expected, a solid US Retail Sales report and hawkish Fed rhetoric increased the chances that the Fed will continue tightening monetary conditions. Besides, the British Pound remains undermined by the UK Autumn Budget, which failed to impress amid recession warnings.

From the technical perspective, the four-hour scale RSI indicator edged lower to 48 figures as of writing, suggesting that the pair was amid strong bearish momentum. As for the Bollinger Bands, the pair was underpinned by the lower band and hovering between the lower band and 20-period moving average, which is a signal that the pounds have no clear trading tendency. Hence, the pair need to find more clues about future movement.

Resistance: 1.2028, 1.2145

Support: 1.1748, 1.1640, 1.1366

XAUUSD (4-Hour Chart)

The XAUUSD dropped close to 0.8% on a strong US dollar and was trading at the $1739 mark as of writing. Gold price grinds lower amidst a risk-off impulse, which triggered a flight to safe-haven assets. The US Dollar (USD) remains underpinned by investors’ concerns that the recent Covid-19 outbreak in China could spur authorities to reimpose restrictions. Furthermore, sentiment remains negative, as shown by Wall Street posting losses between 0.32% and 1.08%. The financial markets’ narrative has not changed since both October’s Consumer Price Index (CPI) report and Producer Prices from the United States cooled down. However, last week’s solid US Retail Sales data increased the likelihood that the Fed would continue tightening conditions. Moreover, the US Federal Reserve officials continued to express their commitment to taming inflation toward the 2% goal, but the pace of rate hikes could moderate as soon as the December meeting. Elsewhere, US Treasury bond yields are extending their gains, particularly the 10-year benchmark note rate yielding 3.83%, drawing support for the greenback, which, in turn, hurts the non-yielding gold.

From the technical perspective, the four-hour scale RSI indicator further fell to 35 figures as of writing, suggesting that the gold was surrounded by selling transactions. As for the Bollinger Bands, the yellow metal was pricing along with the lower band, which indicates that the pair was more likely to move downward in the near term.

Resistance: 1784, 1800

Support: 1748, 1704, 1670

Economic Data

Fibonacci is one of the tools that Forex traders often use. Let’s figure out how the Fibonacci instrument works.

Leonardo Fibonacci, a mathematician from the 1300s, came up with a set of numbers (0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.), with every number in the list the sum of the two numbers that came before it. The relationship between these numbers is the same as in nature. For example, tree branches grow or split according to Fibo numbers, and the seed pods on a pinecone are arranged in a Fibonacci spiral pattern, etc.

Even in the financial markets, Fibonacci ratios are often used to explain how markets move.

There are a few constant ratios in the Fibonacci sequence. The Fibo ratios that matter the most are:

– 161.8%, the “golden ratio” (the ratio between the first number and the one before it, for example, 89/55 = 1.618).

– 61.8% (the ratio of the first number to the second number, like 55/89 = 0.618).

-38.2% (the ratio comes from a division jump of one order, like 55/144 = 0.382).

To put it on a chart in MetaTrader, click “Insert” and then “Fibonacci” from the menu. In your trading terminal, you can find the retracement, expansion, fan, arc, and time zone Fibonacci tools. All of these tools use Fibo ratios as their basis.

There are several Fibonacci tools, but Fibo retracement levels and Fibo expansion are used a lot.

Fibonacci retracement levels

Successful traders predict market price fluctuations using several approaches and tools, such as the Fibonacci retracement levels. The Fibonacci retracement lines represent price support and resistance on a price chart, helping traders determine when the price can retrace before continuing the trend.

Formulas for Fibonacci retracement levels

Math is the basis for the Fibonacci retracement tool. You need to use the following formula to find Fibonacci retracement levels:

For an uptrend, UR = H – ((H – L) x percentage); 

or

DR = L + ((H – L) x percentage) for a downtrend.

Where:

UR is a retracement of a trend going up, DR is a retracement of a trend going down, H is a high price, and L is a low price.

Even though most trading platforms can do these calculations for you, it’s good to know how to do it yourself.

How to calculate Fibonacci retracement levels

Now that you know the formula for calculating Fibonacci retracement levels, you can figure out how to do it.

First, look at the price chart and pick two price points—one high and one low. It is essential to make sure that there are no higher highs or lower lows. If you don’t find it right, your calculations won’t be correct, and you won’t find the right retracement level. Then, once you’ve found the high and low, you can use these two numbers in a formula to figure out the retracement levels for a specific area of price action.

What are the ratios of Fibonacci?

However, it’s not enough to know the highs and lows. You also need to know what percentage to put into the formula. Traders use Fibonacci ratios to figure out the levels of Fibonacci retracements.

The Fibonacci ratio is the percentage of the chosen price range that shows where the price movement will stop and start. Fibonacci ratios come from the Fibonacci numbers, a series of numbers where each is the sum of the two numbers before it. If you divide a Fibonacci number by the following number, you get 0.618, which is 61.8%. When you divide the same number by the following number to the right, you get 0.382 (38.2%) and then 0.236 (23.6%). This ratio and 50% are price support and resistance levels, so they are used to find Fibonacci retracement levels.

For instance, the price of an asset goes up from $15 to $18.43. Here’s how to find the Fibonacci retracement levels:

$18.43 – (($18.43 – $15) x percentage)

So, the retracement levels will be $17.62 (at 23.6%), $17.12 (at 38.2%), $16.71 (at 50%), and $16.31 (at 61.8%).

How can you use Fibonacci retracement levels in charts?

Fibonacci retracement levels can be used to find the best time to enter a trade by looking at charts. After a steady trade, the most common way to use this tool is to see if the price goes back to one of the Fibonacci levels. 

For example, if the cost of an asset drops 23.6% after a significant rise and then goes back up, it might be an excellent time to trade.

How to draw the retracements of Fibonacci?

Even though Fibonacci retracement levels are hard to explain, they are seen as a reliable way to predict how prices will move, primarily when used with other methods of technical analysis. 

However, some traders may find it hard to draw Fibonacci retracement lines because once done incorrectly, they can lead you to the wrong conclusions and mess up your whole trade. 

That is why it’s essential to know how to draw Fibonacci retracements correctly.

Most trading platforms already include the Fibonacci tool, so you don’t have to draw the lines and levels by hand. You must look at how prices have moved in the past and pick the swing highs and lows. 

Then, to draw a line, you need to move your cursor from low to high (for an uptrend) or high to low (for a downtrend).

What Is the Bollinger Band Indicator?

A Bollinger Band is a technical analysis tool consisting of a set of trendlines drawn to two standard deviations (up and down) from the simple moving average (SMA) of an instrument’s price. Traders can change these trendlines to suit their needs.

Bollinger Bands were made by the famous technical trader, John Bollinger, who owns their rights. The tool is intended to help investors identify market trends to determine when an asset has been oversold or overbought.

A Bollinger Band has three critical parts: 

• Middle Band – a simple moving average
• Lower Band – two standard deviations below the Middle Band
• Upper Band – two standard deviations above the Middle Band. 

Note that the standard deviation determines the market’s probable movement range.

How to read Bollinger Bands 

Since the middle band is the same as the simple moving average, we can tell where the trend is going by understanding the concept of Moving Average from the previous lessons.

Knowing how to read the upper and lower bands is essential. Traders usually look at the upper band to see if the market is too high. 

Most of the time, if a price touches the Bollinger Bands, the price may be overbought. In the same way, the lower band shows a possible overbought level.

However, many new traders make the mistake of thinking that when they hear the words “overbought” or “oversold,” they must enter a reversal position immediately. Even though this isn’t always the case since overbought levels are estimates based on the past, there is a chance that more people will buy, and the trend will continue.

The image shows an oversold condition that doesn’t change immediately and keeps going lower before going up. This is because sellers keep coming in even though the lower band has already been hit.

It is crucial to confirm whether they are at overbought or oversold levels. In this case, we can use other indicators like the Stochastic or RSI, the price action, or the Bollinger Bands themselves.

Confirmation with Stochastic / RSI Oscillator

When a price moves from below the middle band to above the middle band, we can look at the Stochastic or RSI to see if it is in the middle or lower than level 50. If so, we can state that the increasing trend has been confirmed.

When the price reaches the top band, we may check the Stochastic or RSI to see if it is also in the overbought zone. If so, we can confirm that the price is indeed in the overbought zone.

Looking at the image above, we can see that both the Bollinger and the Stochastic Indicator show that the price is overbought, indicating that the Gold price might be slowing down from the upward movement.

However, we recommend that you wait to enter a reverse position.

Confirmation within the Bollinger Band

The Bollinger Bands can be confirmed by observing whether the band is widening or narrowing. If the price is above the upper Bollinger Band and the two bands are expanding, this indicates that the price will continue to rise. However, when we observe that the Bollinger band has begun to narrow, although the price is at the upper Bollinger, this is confirmation that the price will reverse lower.

Similarly, a further decrease will occur if the price is at the lower Bollinger with the extended band. However, a price reversal to the upside is highly probable when the band has begun to narrow.

Combining the Bollinger Band with trendline

In this strategy, we use Bollinger Bands and trendlines.

The image shows that the trendline is formed from the highest point and the next lower high but is controlled by the middle band.

The trading strategy is straightforward. If we observe that the price is in the upper band but below the trendline, indicating that the price is no longer able to rise and that it is time for the decrease to continue, there may be a few breaks as long as the price remains in the upper band and is not too far from the trendline. The potential will, after that, continue to decrease.

When the price breaks above the trendline near the middle band, the price begins to change the trend.

We may expect another movement. If the middle band crosses above the trendline, the downtrend is considered to have ended.

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The Reserve Bank of New Zealand (RBNZ) raised its official cash rate in October by 50bps, its fifth increase since late last year. It follows a string of robust economic reports showing that domestic activities have strengthened. Will the central bank raise rates by another 75bps as forecasted?

Here is a roundup of the latest financial news for this week:

RBNZ Rate Statement (23 November)

In October, the Reserve Bank of New Zealand increased its official cash rate to 3.5%, the first raise since April 2015.

Inflation has been low in recent years, but domestic economic activities may have picked up in Q3 2022 as employment continues to rise. However, the value of purchases of durable goods such as consumer electronics and vehicles has decreased in recent years.

Analysts predict RBNZ will add another 75bps to the rate at this month’s meeting.

French Flash Services PMI (23 November)

The French Services Purchasing Managers’ Index dropped to 51.7 in October from a flash reading of 51.3 but down from 52.9 in September.

The business confidence index fell to its lowest level in almost two years, reflecting concerns over persistently high inflation and a drop in investment appetite.

German Flash Manufacturing and Services PMI (23 November)

In October, Germany’s Manufacturing Purchasing Managers’ Index declined to 45.1 from a preliminary estimate of 45.7, indicating the fourth consecutive month of falling factory activity and the most significant contraction since May 2020.

The Services PMI increased to 46.5 in October, compared to the previous month’s 28-month low of 45.0.

Analysts predict the Flash Manufacturing PMI to climb to 45.9 and the Services PMI to increase to 47.5.

UK Flash Manufacturing and Services PMI (23 November)

October’s UK Manufacturing Purchasing Managers Index increased to 46.2 and points to the steepest pace of contraction since May 2020.

UK Services PMI also climbed to 48.8, from a preliminary reading of 47.5 and the first overall decline in output since February 2021.

Analysts forecast both Flash Manufacturing and Services PMIs to be 47.2.

US Flash Services PMI (23 November)

The October US Flash Services PMI rose to 47.8, compared with 49.3 in the previous month. The reading was better than the preliminary estimate of 46.6.

We expect the next Flash Services reading to be 49.3.

FOMC Meeting Minutes (24 November)

In November, the Fed raised its target for the federal funds rate by 75bps to 3.75%-4%, making its highest level since 2008. The board aims to achieve a stance of monetary policy consistent with 2% inflation and maximum employment.

US stocks advanced higher on Friday, regaining upside momentum and ended with a slight gain for the day after shrugging off Federal Reserve warnings that there was more policy tightening to come. Treasury yields rose again after hawkish comments from Fed policymakers as they reiterated their commitment to taming inflation down.

St. Louis Fed President James Bullard said that interest rates are not sufficiently restrictive and needed to rise at least 5%-5.25% to curb inflation. On the economic data front, the US Existing Home Sales for October plunged 5.9%, which came below a 4.17% increase estimated by analysts and was mainly caused by the Federal Reserve’s tightening monetary conditions as they try to curb stubbornly high inflation. However, market sentiment remains positive throughout the session on the back of soft CPI, and PPI October reports.

On the Eurozone front, European Central Bank (ECB) President Christine Lagarde said that the central bank is committed to bringing down medium-term inflation to 2% by escalating interest rates.

The benchmarks, S&P 500 and Dow Jones Industrial Average both edged higher on Friday as the S&P 500 posted decent gains amid falling chances for a consecutive 75 basis point (bps) rate hike by the Federal Reserve. The S&P 500 was up 0.5% daily and the Dow Jones Industrial Average climbed slightly higher with a 0.6% loss for the day. Nine out of eleven sectors in the S&P 500 stayed in positive territory as the Utility sector and the Real Estate sector is the best performing among all groups, rising 2.00% and 1.29%, respectively. The Nasdaq 100 meanwhile was little changed with a 0.3% loss on Thursday and the MSCI World index was down 0.6% for the day.

Main Pairs Movement

The US dollar advanced higher on Friday, preserving its upside momentum and extended its daily gains towards the 107 level amid a deterioration in market sentiment that did not last much. The greenback is posting modest weekly gains after more signs of a slowdown in inflation and better-than-expected retail sales numbers. The market focus now shifts to the release of the US Durable Goods Orders data on Wednesday and the FOMC meeting minutes on Thursday.

GBP/USD climbed higher on Friday with a 0.22% gain as the cable flirted with the 1.1880~1.1900 area amidst a risk-on impulse. On the UK front, the UK Retail Sales for October, rose by 0.6% MoM, coming in better than expected despite the Bank of England (BoE) acknowledging the UK economy entered a recession. Meanwhile, EUR/USD retreated slightly from a daily high and finished the day in the 1.0320 price zone amid a stronger US dollar across the board. The pair was down almost 0.36% for the day.

Gold declined lower with a 0.55% loss for the day after retreating from a daily high towards the $1750 mark during the late US trading session, as additional Fed officials emphasized the need for higher interest rates after two soft October inflation reports. Meanwhile, WTI Oil dropped sharply with a 2.04% loss for the day.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD was wandering around the 1.0350 level during the US trading session as the US dollar regather strength and climbed above 106.68 as of writing. The pair was struggling to make a decisive move in either direction and fluctuating in its weekly range above 1.0300. While speaking at the Frankfurt Financial Conference, European Central Bank President (ECB) Christine Lagarde reiterated that they expect to raise rates further to levels needed to ensure that inflation returns to the 2% medium-term target. However, Lagarde’s hawkish comments failed to provide support for the Euro. The October Existing Home Sales data, which measures the change in the annualized number of existing residential buildings that were sold during the previous month, printed 4.43M compared to the market expectations of 4.38M and the previous 4.71M, with a -5.9% change. The pessimistic figures reminded investors of the downturn in the housing market, weighing on the US Dollar after a few minutes of the report release and limiting the pair’s losses.

From the technical perspective, the four-hour scale RSI indicator further traced back to 50 figures, suggesting the pair failed to find a clear direction to move. As for the Bollinger Bands, the EURUSD was pricing below the 20-period moving average and the size between upper and low bands remained small, which is a signal that the pair was amid a consolidation phase. Hence, our view is that the euro would wander between the 1.0300 to 1.0475 area shortly.

Resistance: 1.0475, 1.0604

Support: 1.0298, 1.0167, 0.9953

GBPUSD (4-Hour Chart)

The GBPUSD regained upside traction and climbed above 1.1900 following a sharp decline with the initial reaction to the UK’s Autumn Budget. On Thursday, British Chancellor Jeremy Hunt announced that they will be introducing a total of £55 billion in tax rises and spending cuts in the Autumn Budget. “Today’s statement delivers a consolidation of £55 billion and means inflation and interest rates end up significantly lower,” Hunt added. Which triggered heavy selling on the British Pound and the pair tumbled by more than 1% on Thursday. Apart from this, it’s also worth noting whether the UK’s fiscal policy will allow the Bank of England (BoE) to adopt a less-aggressive policy-tightening approach. Nevertheless, the negative impact of the budget on the cables faded away quickly, suggesting that investors are yet to decide how the fiscal policy will influence the monetary policy. Moreover, the Retail Sales released earlier in the day were surprisingly above forecasts, even though the Bank of England acknowledged the UK economy entered a recession. Retail sales for October rose by 0.6% MoM against 0.3% estimates.

From the technical perspective, the four-hour scale RSI indicator remained the 54 figures as of writing, suggesting that the pair is amid mild upside traction. As for the Bollinger Bands, the pair was trading around a 20-period moving average with small volatile, which is a signal that the pair would put into sideway and hover in a narrow range from 1.1800 to 1.1950 shortly.

Resistance: 1.2028, 1.2145

Support: 1.1742, 1.1633, 1.1365

XAUUSD (4-Hour Chart)

The XAUUSD remained on the back foot and was set to finish the week with 1% losses, as the US Existing Home Sales plunged severely under the continuously hawkish comments by Federal Reserve. The US National Association of Realtors reported that Existing Home Sales for October plunged a staggering 5.9%, below a 4.17% increase estimated by analysts. Home sales have fallen since February of 2022 due to the Federal Reserve’s tightening monetary conditions as they try to curb stubbornly high inflation, which peaked around 9%. However, market sentiment remains positive throughout the session on the back of soft CPI, and PPI October reports. In the meantime, Fed policymakers reiterated their commitment to taming inflation down. On Thursday, Minnesota’s Fed President Neil Kashkari commented that one-month data can’t over-persuade the Fed, as it needs to keep at it until they’re sure that inflation has stopped climbing. Besides, the US Treasury bond yields, namely the 10-year benchmark note rate, rise two bps, yielding 3.795%, putting a lid on the non-yielding yellow metal.

From the technical perspective, the four-hour scale RSI indicator dropped deeper to 42 figures as of writing, suggesting that the gold was amid severely negative momentum. As for the Bollinger Bands, the yellow metal was pricing around the lower band with low volatility, which indicates the pair was struggling to make a decisive move in either direction. As a result, we think gold would get into a consolidation phase in the near term.

Resistance: 1784, 1800

Support: 1748, 1704, 1670

Economic Data

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US stocks declined lower on Thursday, continuing their downside momentum and dropping for a second day as Federal Reserve officials are likely to remain persistent in their fight against inflation and warned of more pain to come. Fed speakers in recent days have emphasized that they need to go further to extinguish price pressures.

Moreover, the renewed concerns related to the Ukraine-Russia war and the worsening coronavirus outbreak in China both weighed on investors’ moods. The country reports increased cases daily, which raised potential supply-chain issues for the global economy.

On the economic data, the US Weekly Initial Jobless Claims declined to 222K, which came in slightly better than the market expectation of 225K.

On the Eurozone side, the negative sentiment could be due to recent events in Polonia, as NATO believes Russia was responsible for the missile strike that targeted a Polish city, despite the missile presumably originating from Ukraine’s defence.

The benchmarks, S&P 500 and Dow Jones Industrial Average both edged lower on Thursday as the S&P 500 declined for the second straight session amid the souring market mood. The S&P 500 was down 0.3% daily and the Dow Jones Industrial Average was little changed with a 0.1% loss for the day. Eight out of eleven sectors in the S&P 500 stayed in negative territory as the Utility sector and the Consumer Discretionary sector are the worst performing among all groups, losing 1.79% and 1.27%, respectively. The Nasdaq 100 meanwhile retreated slightly with a 0.2% loss on Thursday and the MSCI World index was down 0.8% for the day.

Main Pairs Movement

The US dollar advanced higher on Thursday, regaining some upside traction and recovering some of the ground lost earlier in the week in the late US trading session as the market mood remained sour. Despite the latest second-tier data from the United States coming in mixed, the Federal Reserve policymakers’ resistance to reiterate the statements favouring the 50 bps rate hike in December helped the US Dollar to find demand.

GBP/USD declined lower on Thursday with a 0.42% loss as the cable witnessed fresh selling and retreated towards the 1.1780 mark after the UK budget and US data. On the UK front, the UK government presented a fiscal plan, which presented an increase in taxes of £55 billion and spending cuts to restore the UK’s fiscal reputation. Meanwhile, EUR/USD retreated slightly from a daily high and finished the day in the 1.0360 price zone amid a stronger US dollar across the board. The pair was down almost 0.32% for the day.

Gold declined lower with a 0.76% loss for the day after extending the intra-day slide towards a daily low around the $1758 area during the US trading session, as Federal Reserve talks, Russia-Ukraine tussles and Covid woes both favoured the greenback. Meanwhile, WTI Oil dropped sharply with a 4.62% loss for the day.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD continued to edge lower and traded deep in negative territory slightly above the 1.0300 level as of writing. As the market sentiment keeps undermining, helping the safe-haven greenback gather strength on Thursday and weighing on the euro. Geopolitical tensions and concerns about global economic setbacks came back to fashion this week, and weight on stock markets. The US Dollar is showing signs of responding to risk-off flows, although its gains are limited, as US Treasury yields are seeing limited activity. The 10-year Treasury yields note hovers around 3.73%, roughly 50 bps below its year’s peak, while that on the 2-year note stands at 4.38%. In data-wise, the European Area released September Construction Output, which rose 0.1% MoM as anticipated. The Union’s Consumer Price Index was revised to 10.6% YoY in October, slightly below the preliminary estimate of 10.7%. The United States Initial Jobless Claims for the week printed 222K, a little lower than the estimate of 225K, and Building Permits in October reads 1.526M, compared to the consensus of 1.512M, which provides some support for the US Dollar.

From the technical perspective, the four-hour scale RSI indicator further declined to 54 figures as of writing, suggesting that the pair was confronting a corrective pullback. As for the Bollinger Bands, the EURUSD was pricing below the 20-period moving average and the size between upper and lower got closer, which is a signal that the pair move with small volatility. As a result, we think the pair would be put into sideway shortly.

Resistance: 1.0475, 1.0604

Support: 1.0298, 1.0167, 0.9953

GBPUSD (4-Hour Chart)

The GBPUSD stayed deep in red and traded below the 1.1780 level as of writing, as investors assess the UK’s Autumn Budget and the US Dollar managed to regather strength from the deteriorated market mood. While testifying before the UK Treasury Select Committee, Bank of England Governor Andrew Bailey said that they are likely to raise interest rates further. However, this comment failed to provide a boost to the Pound Sterling as Bailey also acknowledged they were seeing signs that the supply chain shock was starting to fade. Also, the Chancellor of the Exchequer, Jeremy Hunt presented the Autumn Statement, the budget of Prime Minister Rishi Sunak on Thursday. The budget was large as expected by analysts. Hunt presented an increase in taxes of £55 billion and spending cuts to restore the UK’s fiscal reputation after a chaotic September and October. On the data side, economic data from the US showed an unexpected decline in the Philly Fed to -19.4 in November from -8.7. Continuing Jobless Claims rose to the highest level since April. The US dollar initially dropped after the reports, but immediately rebounded sharply and reached a fresh daily high.

From the technical perspective, the four-hour scale RSI indicator retreated further to 53 figures as of writing, suggesting that the short-term upside traction faded. As for the Bollinger Bands, the price was priced in the lower area and close to the 20-period moving average, indicating that the price now has no clear direction. Hence, we think the cables were likely getting into the consolidation phase in the near term.

Resistance: 1.2028, 1.2145

Support: 1.1742, 1.1633, 1.1365

XAUUSD (4-Hour Chart)

The XAUUSD extended its losses and eyeing a test of the weekly lows around $1753 marks, following hawkish Federal Reserve (Fed) commentary and a tranche of United States economic data released that underpinned the US Dollar. The risk sentiment shifted sour as Fed policymakers emphasized the need to tackle inflation, led by the St. Louis Fed President James Bullard. Bullar said that rates might be “sufficiently restrictive” at around 5% to 7% and called his colleagues to raise rates further if they’re to achieve the Fed’s 2% goal. On the data side, a busy economic calendar in the United States would entertain Gold traders, led by unemployment claims and housing data. Initial Jobless Claims for the week dropped to 222K, below estimates of 225K and the previous week’s 226K. Contrarily Continuing Claims rose 13K, to 1.51 million, increasing for the fifth straight week, an uptrend signing that Americans are out of work for longer. Furthermore, a jump in US Treasury bond yields weighed on the yellow metal. The US 10-year Treasury bond yield jumps 9 bps to 3.781%, acting as a headwind for the non-yielding yellow metal.

From the technical perspective, the four-hour scale RSI indicator dropped deeper to 50 figures as of writing, suggesting that the gold was confronting a corrective pullback. As for the Bollinger Bands, XAUUSD was pricing below the 20-period moving average with low volatility. As a result, we think the pullback is to store the strength for the next rally, and the pair was more favoured to move with low volatility in the near term.

Resistance: 1800

Support: 1748, 1704, 1670

Economic Data

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