. Daily FX Analysis - Global Currency Trends, Central Banks, Fed Surprises

Daily FX Analysis – Global Currency Trends, Central Banks, Fed Surprises

Daily FX Analysis – Global Currency Trends, Central Banks, Fed Surprises

01 Dec 2023

Introduction:

In currency markets, GBP/USD is on an upward trajectory, bolstered by a hawkish Bank of England and a weakened U.S. Dollar. Meanwhile, EUR/USD hovers near 1.0900, influenced by falling inflation and anticipation of potential interest rate cuts following ECB Chair Christine Lagarde’s speech. NZD/USD maintains positivity driven by Chinese PMI data. USD/CAD faces persistent selling pressure, declining further below mid-1.3500s amidst a softer U.S. Dollar and heightened market caution.

GBP/USD:

The GBP/USD is trading upwards near 1.2650, buoyed by a hawkish Bank of England (BoE) stance and a softer U.S. Dollar.

Recovering from losses in the previous session, GBP/USD trades higher around 1.2650 in the Asian session on Friday. The pair gains strength due to a weaker U.S. Dollar, influenced by subdued U.S. Treasury yields.

After a significant decline in the US Dollar on Tuesday, the GBP/USD pair reached as high as 1.2732, marking its peak since late August. The Greenback’s decline was triggered by unexpectedly dovish remarks from Federal Reserve (Fed) officials, reinforcing the market’s perception that the central bank is unlikely to pursue further rate hikes.

The U.S. is set to unveil the second estimate of Q3 Gross Domestic Product (GDP), projected to affirm the annual growth rate at 5%, a slight improvement from the earlier figure of 4.9%.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 1.2643 | Negative Crossover | Bearish
  • MA 20: 1.2615 | Positive Crossover | Bullish
  • MA 50: 1.2511 | Positive Crossover | Bullish

Simple:

  • MA 5: 1.2644 | Negative Crossover | Bearish
  • MA 20: 1.2621 | Positive Crossover | Bullish
  • MA 50: 1.2484| Positive Crossover | Bullish

RSI (Relative Strength Index): 59.00| Buy Zone | Bullish

Stochastic Oscillator: 5.88| Selling Zone | Negative

Resistance And Support Levels:

  • R1: 1.2652| R2: 1.2844
  • S1: 1.2526| S2: 1.2381

Overall Sentiment: Bullish | Market Direction: Buy

Trade Suggestion: Stop Buy: 1.2694 | Take Profit: 1.2845 | Stop Loss: 1.2614

EUR/USD:

EUR/USD pair is trading around 1.0900, with falling inflation and focus on ECB Chairwoman Christine Lagarde’s speech.

The EUR/USD pair lingers near the psychological level of 1.0900, having pulled back from the early Asian trading hours’ multi-month high of 1.1017 on Friday. Declining inflation and a stagnant Eurozone economy raise expectations of potential interest rate cuts.

Experiencing its most notable drop in more than a month, the EUR/USD continues its correction from the recent three-month highs above 1.1000. The pair reached a low of 1.0883 and seems set for consolidation with a downside risk in the short term.

The market witnessed a strengthening of the US Dollar, gradually bolstered by a recovery in US Treasury yields, despite prevailing risk appetite.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 1.0919| Negative Crossover | Bearish
  • MA 20: 1.0929| Negative Crossover | Bearish
  • MA 50: 1.0868 | Positive Crossover | Bullish

Simple:

  • MA 5: 1.0918 | Negative Crossover | Bearish
  • MA 20: 1.0938 | Negative Crossover | Bearish
  • MA 50: 1.0867 | Positive Crossover | Bullish

RSI (Relative Strength Index): 47.92| Buy Zone | Bullish

Stochastic Oscillator: 10.61| Sell zone | Negative

Resistance And Support Levels:

  • R1: 1.0931| R2: 1.1017
  • S1: 1.0877| S2: 1.0754

Overall Sentiment: Bearish | Market Direction: Sell

Trade Suggestion: Stop Sell: 1.0846| Take Profit: 1.0754 | Stop Loss: 1.0909

NZD/USD:

NZD/USD continues to rise below 0.6200 in response to Chinese PMI data.

NZD/USD maintains a positive stance around 0.6185, marking a 0.44% increase for the day. The Core PCE, the Federal Reserve’s inflation indicator, has dropped to its lowest level since the spring of 2021.

In the early Asian session on Friday, the NZD/USD pair rises to 0.6185. Marking its third consecutive week in positive territory, the pair is supported by a weaker US Dollar (USD) and robust Chinese PMI data.

Looking ahead, market participants will turn their attention to the US ISM Manufacturing PMI for November. Projections suggest an increase to 47.6 from the previous 46.7. Furthermore, speeches from Fed Chair Jerome Powell and Fed’s Goolsbee are anticipated, potentially providing insights into future monetary policy directions.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 0.6154 | Negative Crossover | Bearish
  • MA 20: 0.6115| Positive Crossover | Bullish
  • MA 50: 0.6048 | Positive Crossover | Bullish

Simple:

  • MA 5: 0.6156 | Negative Crossover | Bearish
  • MA 20: 0.6111 | Positive Crossover | Bullish
  • MA 50: 0.6027| Positive Crossover | Bullish

RSI (Relative Strength Index): 62.27| Buying Zone| Bullish

Stochastic Oscillator: 17.23 |Selling Zone | Neutral

Resistance And Support Levels:

  • R1: 0.6163| R2: 0.6267
  • S1: 0.6095 | S2: 0.6025

Overall Sentiment: Bullish | Market Direction: Buy

Trade Suggestion: Stop Buy: 0.6181 | Take Profit: 0.6267 | Stop Loss: 0.6133

USD/CAD:

Amidst further USD selling, USD/CAD drops further below the mid-1.3500s, to its lowest level since September 29.

For the second consecutive day, the USD/CAD descends, hitting a two-month low on Friday. Diminished expectations of a Fed rate cut, and an overall risk-on sentiment weigh on the US Dollar, exerting pressure on the pair. Investors are now turning their attention to Canadian jobs data, US ISM PMI, and a speech from Fed Chair Jerome Powell.

The USD/CAD pair faces continued selling pressure for the second consecutive day on Friday, reaching a two-month low during the Asian session.

Traders may opt for a cautious approach, avoiding aggressive bets leading up to the release of Canadian monthly employment data and the US ISM Manufacturing PMI on Friday.

Technical Overview:

Moving Averages:

Exponential:

  • MA 5: 1.3559 | Negative Crossover | Bearish
  • MA 20: 1.3608| Negative Crossover | Bearish
  • MA 50: 1.3663| Negative Crossover | Bearish

Simple:

  • MA 5: 1.3567 | Negative Crossover | Bearish
  • MA 20: 1.3615| Negative Crossover | Bearish
  • MA 50: 1.3692| Negative Crossover | Bearish

RSI (Relative Strength Index): 35.51| Selling Zone | Bearish

Stochastic Oscillator: 49.97| Buy Zone | Negative

Resistance And Support Levels:

  • R1: 1.3625 | R2: 1.3741
  • S1: 1.3533 | S2: 1.3397

Overall Sentiment: Bearish | Market Direction: Sell

Trade Suggestion: Stop Sell: 1.3491| Take Profit: 1.3397 | Stop Loss: 1.3558.

Elsewhere in the Forex Market

EUR/GBP up 0.04% to 0.8627. The AUD/USD up 0.09% to 1.3578. The USD/CHF down 0.14% at 1.3541. USD/JPY down 0.08% at 148.05, EUR/JPY up 0.01% at 161.49, The USD/CNY up 0.06% at 7.1406, AUD/SEK down 0.21% at 6.9214, at the time of writing.

 Key Economic Events & Data Release Today:

(CNY) Caixin Manufacturing PMI (Nov) Actual 50.7, Forecast 49.3, Previous 49.5 at 07:15.

(EUR) Spanish Manufacturing PMI (Nov) Forecast 42.3, Previous 45.1 at 14:25.

(GBP) Manufacturing PMI (Nov) Forecast 46.7, Previous 44.8 at 15:00.

(EUR) ECB President Lagarde Speaks at 17:00.

(CAD) Employment Change (Nov) Forecast 15.0K, Previous 17.5K at 19:00.

(USD) ISM Manufacturing PMI (Nov) Forecast 47.6, Previous 46.7 at 20:30.

(USD) Fed Chair Powell Speaks at 21:30.