Forex News
Societe Generale highlights AUD/USD rebounded from a seven-month low on dip buying near technically oversold levels. Support is seen at 0.6833 and resistance at 0.7039. The bank flags upcoming NAB business confidence and Westpac consumer confidence data, while EUR/AUD remains capped by its 100-day moving average.
Australian Dollar lifts off recent lows
"AUD/USD: 0.6856 - 0.6903 overnight range. Spot rebounds from 7m low on dip buying near technically oversold levels. Support 0.6833, resistance 0.7039."
"NAB biz confidence and Westpac consumer confidence tomorrow. EUR/AUD capped by 1.6240 (100dma)."
"China CPI slows more than expected to 0.7% yoy in October from 0.9%. PPI accelerates above forecast to 5.7% yoy from 5.0%."
"Decline in break-even inflation rates last week coincided with tighter financial conditions."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Brown Brothers Harriman’s (BBH) Elias Haddad notes that the US Dollar (USD) has given back part of its post-NFP gains, but still benefits from robust US economic activity, a firm labor market and sticky inflation that underpin the Federal Reserve’s (Fed) hawkish bias. Upcoming US October CPI and PPI releases are highlighted as key drivers for Fed funds rate expectations into the December policy meeting.
Fed data focus supports Dollar
"USD pared back some of Friday’s strong October non-farm payrolls gains. Going forward, robust US economic activity, favorable labor market conditions and sticky underlying inflation back the Fed’s hawkish bias, keeping rate differentials supportive of USD"
"The October New York Fed consumer survey is today’s data highlight (4:00pm London, 11:00am New York). But this week’s US October CPI (Tuesday) and PPI (Friday) prints will be the main drivers of Fed funds rate expectations. Fed funds futures imply 80% odds of a 25bps hike at the next December 9 policy decision."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold opens the week higher as the US Dollar gives back some of its post-NFP gains.
- US inflation data and Fed speeches could shift expectations for the December rate decision.
- XAU/USD shows improving bullish momentum, with the 21-day SMA offering immediate support.
Gold (XAU/USD) opens the week on a positive note as the US Dollar (USD) gives back some of the gains sparked by the upbeat US jobs report released on Friday. The metal, however, struggles to secure a decisive break above $4,100, with attention turning to this week’s US inflation data. At the time of writing, XAU/USD trades around $4,106, up 1% on the day after reaching an intraday high of $4,134.
The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 101.83, down from Friday’s high of 102.36.
US Nonfarm Payrolls (NFP) rose by 165K in October, more than double the 65K forecast, while September’s gain was revised up to 60K from 29K. The Unemployment Rate fell to 4.1% from 4.2%.
The figures suggest the labour market is holding up, giving the Federal Reserve (Fed) room to raise interest rates further to bring inflation back to its 2% target. Higher energy costs linked to the Middle East conflict leave inflation risks tilted to the upside.
However, oil prices have eased from recent highs as diplomatic efforts continue and traders bet that Democrats’ midterm victory will increase pressure on President Donald Trump to end the war with Iran.
In a CBS News interview that aired Sunday, Trump said there was “no reason” to escalate the conflict. Trump is also expected to meet Qatar’s prime minister at the White House on Monday.
The US Consumer Price Index (CPI) is due on Tuesday, followed by the Producer Price Index (PPI) on Friday. Both reports could shift expectations for the Fed’s final policy decision of the year.
Analysts at Commerzbank Research note that the Fed’s September projections already leaned decisively toward further tightening, pointing out that “of the 18 Fed officials who submitted projections for the appropriate path of interest rates in September, 16 anticipated at least one more rate hike this year.” They add that the economic releases since then, including strong October payrolls and still-elevated inflation, are “unlikely to have changed that assessment materially.”
Traders are pricing in an 80% chance of a December rate hike, according to the CME FedWatch Tool. The hawkish Fed outlook remains a headwind for Gold, as higher interest rates raise the opportunity cost of holding the non-yielding metal.
Alongside the inflation data, traders will also watch a busy slate of Fed speeches this week for clues on how policymakers are leaning ahead of the December meeting.
Technical Analysis: Bulls eye 50-day and 100-day SMAs near $4,200
On the daily chart, the upside in XAU/USD remains capped by the 50-day and 100-day Simple Moving Averages (SMAs), while the 200-day SMA sits higher still, reinforcing the broader bearish bias.
Still, the metal trades above the 21-day SMA at $4,068 while the Relative Strength Index (RSI) hovers just above the neutral 50 mark and the Moving Average Convergence Divergence (MACD) indicator advances in positive territory, hinting at improving short-term momentum within a still bearish structural backdrop.
On the topside, immediate resistance is seen at the 50-day SMA at $4,190, followed closely by the 100-day SMA at $4,201, while a more distant barrier emerges at the 200-day SMA at $4,457. On the downside, initial support appears at the 21-day SMA near $4,068, ahead of the psychological horizontal floor at $4,000 and the year-to-date low of $3,870.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- GBP/USD jumps to 1.3420, from lows below 1.3350 as risk appetite hits the US Dollar.
- Hopes of a negotiated end to Iran's war are keeping oil prices near two-month lows.
- Strong US macroeconomic data and Fed tightening expectations are likely to keep USD's weakness limited.
The British Pound (GBP) is taking back most of the previous two days’ losses on Monday, favoured by the US Dollar’s (USD) weakness amid positive market sentiment. The GBP/USD pair is trading at the 1.3420 area at the time of writing after bouncing from lows below 1.3350 on Friday and with last week’s highs, near 1.3500, on the bulls’ focus.
Investors are selling the US Dollar on Monday, in favour of riskier-perceived currencies, like the British Pound, amid an improved risk mood. News of progress in the negotiations to reach a peace deal between the US and Iran has offset last week’s fears about an AI bubble, at least for now, and is keeping Oil prices steady at levels near two-month lows.
In the absence of key US or UK releases on Monday, the British Pound is drawing some support from a hawkishly tilted monetary policy statement by the Bank of England (BoE)last week. The BoE shifted interest rates by a quarter point to 4% last Thursday, with some policymakers calling for further rate hikes to bring inflation to target. Governor Bailey supported those views and left the doors open for further monetary tightening.
Strong US data and Fed hiking expectations to limit USD dips
US macroeconomic data, however, has been US Dollar-supportive. October’s Nonfarm Payrolls (NFP) data beat expectations, and the Unemployment Rate declined, setting the appropriate conditions for the Fed to tighten its monetary policy further. Fed policymakers warned about the high inflation pressures after the NFP release, which boosted hopes of a December rate hike
Against this background, the focus this week is on the US Consumer Price Index data (CPI), due on Tuesday, which is expected to show that prices accelerated further in October.
Strategists at ING observe thst “contagion from AI to defensive stocks in the US and worldwide allowed the Dollar to rally even before the strong US jobs market report.” However, they caution that the move may prove short-lived, arguing that “unless risk sentiment remains poor this week, lower front-end US rates should favour a weaker Dollar, even if inflation tomorrow comes in slightly hotter than expected.”
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
MUFG’s Lee Hardman highlights a sharp adjustment lower in energy markets, with Brent down about 16% and still weakening. Renewed investor optimism over a potential US-Iran deal and increased diplomatic activity across the Middle East are supporting lower Oil prices. MUFG cautions that further progress in talks is needed to sustain cheaper energy and limit upward pressure on the US Dollar.
Energy slide linked to diplomacy
"The other main development last week was the sharp adjustment lower for energy prices. The price of Brent fell by around 16% and has continued to weaken further at the start of this week. Lower energy prices have been encouraged by renewed investor optimism over the potential for a US-Iran deal."
"Investor optimism has been encouraged further over the weekend by comments from President Trump who told CNN that it is “highly unlikely” he will need to order fresh military strikes on Iran if talks show progress. He noted that “it depends on whether or not they sign a very strong agreement."
"However, US Secretary of State Macro Rubio sounded more cautious saying that “I wouldn’t say we’re on the verge of a breakthrough”. Further progress in talks will be required to sustain lower energy prices and help to ease upward pressure on the US dollar from a more protected energy price shock."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Brown Brothers Harriman (BBH) reports New Zealand Dollar (NZD) is leading G10 FX performance, helped by New Zealand’s preliminary election result that reduces the risk of the Reserve Bank of New Zealand (RBNZ) reverting to a dual inflation-employment mandate.
Mandate stability underpins New Zealand Dollar
"KRW is outperforming across the board on Korean exporters’ dollar selling. NZD tops the G10 FX leaderboard. New Zealand’s preliminary election result reduces the risk the RBNZ returns to a dual inflation-employment mandate which could have tilted policy in a more dovish direction given weak labor market condition."
"New Zealand's ruling center-right coalition holds a one seat majority following Sunday’s election, with final results due November 27. The incumbent coalition led by the National Party wants to stick to the RBNZ’s sole price stability mandate which has been in place since December 2023. The Labour Party, meanwhile, ran on a proposal to return to a dual inflation-employment mandate."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Societe Generale reports USD/JPY traded in a 157.97–158.53 range overnight, with consolidation intact below the 158.68 200-day moving average (dma) and implied volatility steady. The pair is framed by support at 156.96 and resistance at 159.04.
USD/JPY holds under key average
"USD/JPY: 157.97 - 158.53 overnight range. Consolidation intact below 158.68 (200dma), implied vol steady. Support 156.96, resistance 159.04."
"Bank of Japan Governor Ueda: upside risks to inflation, haven’t heard complains on higher rates. Current account data tonight."
"The 10y UST yield successfully defended the 100dma at 4.80% and the question for any tactician is whether this week’s CPI print will endorse or cut short the return of duration buyers."
"Last month, hot CPI was roundly ignored as stocks tumbled on October 14th."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Brown Brothers Harriman (BBH) reports EUR/USD has bounced toward 1.1200 resistance after briefly trading near 1.1130, helped by lower Oil prices easing the energy drag on Eurozone growth. However, the bank warns that France’s ongoing fiscal troubles could still push EUR/USD down to 1.1000, keeping the pair vulnerable despite improved risk sentiment and energy dynamics.
Energy support versus fiscal headwinds
"EUR/USD recovered towards resistance at 1.1200 after testing an intra-day low around 1.1130 on Friday. Lower crude oil prices ease the energy drag on Eurozone growth and offers EUR support. However, France’s ongoing fiscal troubles can still drive EUR/USD down to 1.1000."
"Both contenders for the ECB presidency struck a pragmatic tone in newspaper interviews. Netherlands’ Klaas Knot noted that further tightening should be limited if energy prices remained roughly where they were, while signaling readiness to tackle disorderly bond market moves. Spain’s Pablo Hernandez de Cos stressed the “need to remain vigilant about inflation risks” but noted that second-round effects have yet to emerge."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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