. Daily FX Analysis - Euro Yields Drop, Dollar Rebounds, Sterling Surges.

Daily FX Analysis – Euro Yields Drop, Dollar Rebounds, Sterling Surges.

Daily FX Analysis – Euro Yields Drop, Dollar Rebounds, Sterling Surges.

05 Dec 2023

Introduction

In today’s analysis, we delve into the intricate landscape of global financial markets, exploring recent shifts in Eurozone yields and the resurgence of the U.S. dollar. The Eurozone faces recalibrations as Germany’s 10-year bond yield hits a six-month low, prompting heightened expectations of European Central Bank (ECB) rate cuts. Concurrently, the U.S. dollar stages a rebound, influencing various currency pairs, including sterling’s ascent against the euro and potential bullish reversals in AUD/USD. Our analysis encompasses technical overviews, key market sentiments, and a focus on upcoming economic events, providing a comprehensive perspective for investors navigating the complex interplay of central bank policies and evolving market sentiment.

Markets In Focus Today – EUR/USD

“Eurozone Yields Retreat as Stock Rally Temporarily Halts: Market Dynamics in Focus”

“Germany’s 10-Year Bond Yield Hits Six-Month Low as Traders Anticipate ECB Rate Cuts” On Tuesday, Germany’s 10-year government bond yield reached its lowest point in six months, compelling traders to increase their bets on European Central Bank (ECB) rate cuts early in 2024. World shares also paused around four-month highs as market participants grappled with the Federal Reserve’s outlook. The 10-year Bund yield dropped by as much as 7 basis points to 2.28%, marking its lowest level since June 2. This decline followed remarks from ECB official Isabel Schnabel, who, in an interview with Reuters, stated that further interest rate hikes are “rather unlikely” after an unexpectedly significant drop in inflation. Bond yields, which move inversely to prices, had faced challenges globally in 2022 and earlier in the current year due to a rapid rise in central bank policy rates. Schnabel’s comments were described by Andrzej Szczepaniak, senior economist at Nomura, as the “final nail in the coffin for further rate hikes, even if no one was expecting any.” Traders have now almost fully priced in a 25 basis point rate cut from the European Central Bank at its March meeting, with expectations of nearly 150 basis points of cuts by the end of 2024. The euro initially dipped, experienced a recovery, and was last slightly down at $1.0829 (EURUSD)

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.09 | Negative Crossover | Bearish
  • MA 20 : 1.08 | Negative Crossover | Bearish
  • MA 50 : 1.08 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.09 | Negative Crossover | Bearish
  • MA 20 : 1.09 | Negative Crossover | Bearish
  • MA 50 : 1.07 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 51.48 | Neutral Zone | Neutral

Stochastic   Oscillator : 28.72 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 1.08460 R2 : 1.09668
  • S1 : 1.06 S2 : 1.05

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 1.08450 | Take Profit : 1.09668 | Stop Loss : 1.08350

USD/JPY

“Dollar Strengthens in Anticipation of Key Economic Data: Focus on Job Openings and Services PMI”

“Dollar Gains Ground as Traders Reevaluate Rate Cut Expectations” After spending much of November on the backfoot, the dollar has found some support as traders reevaluate expectations of larger rate cuts by the Federal Reserve in comparison to other major central banks. The shift in sentiment comes ahead of crucial data releases scheduled for this week, beginning with U.S. job openings and ISM services activity data, followed by the highly anticipated nonfarm payrolls report on Friday. Analysts at ING noted, “We suspect markets may be positioning ahead of next week’s Fed meeting, when Chair Jerome Powell may insist on his pushback against rate cut bets.” The analysts highlighted the significance of today’s data releases, particularly the JOLTS job openings, which could set the tone for a more substantial market reaction, especially given its proximity to the U.S. payrolls data. Market participants are keenly awaiting signs of a decisive shift in the job market, influencing their stance on bearish dollar positions.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 147.95 | Negative Crossover | Bearish
  • MA 20 : 148.65 | Negative Crossover | Bearish
  • MA 50 : 148.73 | Negative Crossover | Bearish

Simple :

  • MA 10 : 148.12 | Negative Crossover | Bearish
  • MA 20 : 149.26 | Negative Crossover | Bearish
  • MA 50 : 149.49 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 39.29 | Neutral Zone | Neutral

Stochastic   Oscillator : 12.74 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 150.93 R2 : 152.16
  • S1 : 146.302 S2 : 144.822

Overall Sentiment : Bearish Market Direction : Sell

GBP/USD

“Sterling Nears Three-Month High Against Euro Amid Anticipation of ECB Rate Cuts in the Market”

The U.S. dollar rebounded on Tuesday, nearing a one-week high against a basket of currencies, as investors prepared for a series of crucial employment data releases that could impact interest rate expectations. The euro faced early pressure following remarks by European Central Bank member Isabel Schnabel, who ruled out interest rate hikes due to a significant decline in inflation. Bitcoin held steady around $42,000, maintaining its highest level since April last year, driven by a recent decline in the dollar that redirected capital into riskier assets. Investors are eagerly awaiting the U.S. non-farm payrolls report for November, with the monthly JOLTS report and the private-sector ADP survey expected to influence expectations ahead of Friday’s release. Market focus remains on central bank policies, with a notable dovish repricing of rate expectations for both the Federal Reserve and the ECB. The dollar index edged up 0.1%, reaching one-week highs, partly due to a reversal of its recent heavy selloff in November, marking its steepest monthly decline in a year. Traders have priced in at least 125 basis points of rate cuts from the Federal Reserve next year, while the probability of 50 bps by June is high. On the other hand, the ECB could deliver its first rate cut by March, as suggested by futures pricing. The euro has weakened by 1.34% following last week’s consumer price data, prompting ECB member Schnabel to shift her stance on rate cuts. In the cryptocurrency market, bitcoin was slightly down at $41,504, close to its recent peak, fueled by optimism around the potential approval of exchange-traded spot bitcoin funds (ETFs) by U.S. regulators. Overall, the currency and cryptocurrency markets are experiencing shifts influenced by central bank policies, economic data releases, and the ongoing evolution of market sentiment.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.26 | Positive Crossover | Bullish
  • MA 20 : 1.25 | Positive Crossover | Bullish
  • MA 50 : 1.24 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.26 | Positive Crossover | Bullish
  • MA 20 : 1.25 | Positive Crossover | Bullish
  • MA 50 : 1.23 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 61.65 | Neutral Zone | Neutral

Stochastic   Oscillator : 80.14 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 1.27 R2 : 1.29
  • S1 : 1.22 S2 : 1.21

Overall Sentiment : Bullish Market Direction : Buy

Trade Suggestion : Limit Buy : 1.27 | Take Profit : 1.29 | Stop Loss : 1.26

AUD/USD

“AUD/USD Technical Analysis Points to Potential Bullish Reversal Amid Recent Decline”

AUD/USD may undergo a possible bullish reversal from its latest fall, based on technical analysis, says Kelvin Wong, senior market analyst at Oanda, in an email. The daily relative strength index momentum indicator hasn’t reached overbought territory and stays above ascending support at 55, Wong says. Also, the short-term hourly RSI momentum indicator has dipped down to oversold level of 24.40, which suggests the minor drop from Monday’s intraday high of 0.6690 is overextended, Wong says. Pivotal support is at 0.6570, while any break above near-term resistance at 0.6635 could reinstate the currency pair’s bullish tone, Wong adds. AUD/USD is down 0.5% at 0.6584.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.66 | Negative Crossover | Bearish
  • MA 20 : 0.65 | Positive Crossover | Bullish
  • MA 50 : 0.65 | Positive Crossover | Bullish

Simple :

  • MA 10 : 0.66 | Negative Crossover | Bearish
  • MA 20 : 0.65 | Positive Crossover | Bullish
  • MA 50 : 0.64 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 55.69 | Neutral Zone | Neutral

Stochastic   Oscillator : 73.88 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 0.67 R2 : 0.68
  • S1 : 0.65750 S2 : 0.63492

Overall Sentiment : Bullish Market Direction : Sell

Trade Suggestion : Limit Buy : 0.65750 | Take Profit : 0.63492 | Stop Loss : 0.66254

Elsewhere In The Forex Market

The U.S. dollar has experienced a resurgence, approaching one-week highs against a basket of currencies, as traders brace for impactful employment data that could reshape interest rate expectations. The euro faced early pressure following comments from European Central Bank member Isabel Schnabel, who, in an interview with Reuters, ruled out interest rate hikes due to a “remarkable” fall in inflation. Bitcoin maintained its position close to $42,000, reflecting the recent decline in the U.S. dollar, diverting funds into riskier assets. Investors eagerly await Friday’s U.S. non-farm payrolls report for November. Before that, the monthly JOLTS report and the private-sector ADP survey are set to influence expectations and potentially induce volatile trading. The market’s primary focus remains on central bank policies, with a noticeable dovish repricing of rate expectations for both the Federal Reserve and the ECB in recent weeks. The dollar index edged up 0.1%, partially attributed to a reversal of its substantial selloff in November, marking its steepest monthly decline in a year. Traders have priced in at least 125 basis points of rate cuts from the Federal Reserve next year, with a significant chance of 50 bps by June. In contrast, futures indicate an 82% likelihood that the ECB could deliver its first rate cut by next March, as inflation across the euro zone has fallen more rapidly than anticipated. The euro has lost 1.34% since the release of last week’s consumer price data, prompting ECB board member Schnabel to shift her stance on rate cuts. The yuan remained steady despite Moody’s decision to cut China’s credit outlook to “negative.” In cryptocurrencies, bitcoin hovered around $41,504, slightly below its recent peak. Market participants are optimistic about potential approval of exchange-traded spot bitcoin funds (ETFs) by U.S. regulators, anticipating broader market access. Overall, global currencies and cryptocurrencies are navigating a complex landscape shaped by central bank policies, economic data releases, and evolving market sentiment.

Key Economic Events & Data Release Today:

8:30PM(IST)-USD-JOLTS Job Openings, ISM Services PMI