GBP/USD trades with modest gains around mid-1.3200s, lacks bullish conviction

December 8, 2021 15:02   FXStreet   Market News  

  • GBP/USD gained some positive traction on Wednesday amid a modest USD weakness.
  • The prevalent risk-on mood, retreating US bond yields weighed on the safe-haven USD.
  • Hawkish Fed expectations should help limit the USD fall and cap the upside for the pair.

The GBP/USD pair traded with a mild positive bias heading into the European session and was last seen hovering around mid-1.3200s, up only 0.10% for the day.

Having found some support ahead of the 1.3200 mark on Tuesday, the GBP/USD pair managed to regain some positive traction on Tuesday and was supported by a modest US dollar weakness. Against the backdrop of the upbeat market mood, retreating US Treasury bond yields acted as a headwind for the safe-haven greenback and extended some support to the major.

The global risk sentiment remained well supported by easing concerns about the negative impact of the new coronavirus variant on the economic recovery. This comes on the back of reports, indicating that indicated that Omicron patients had only shown mild symptoms. This led to a strong rally in the global equity markets over the past two trading sessions.

That said, rising geopolitical tensions kept a lid on the recent optimistic moves, which along with the prospects for a faster policy tightening by the Fed should help limit the USD losses. Apart from this, the UK-EU impasse over the Northern Ireland Protocol held back traders from placing aggressive bullish bets and capped gains for the GBP/USD pair.

Investors seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Hence, the market focus will remain glued to the release of the latest US CPI report on Friday, which will influence the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair.

In the meantime, the broader market risk sentiment and the USD price dynamics would play a key role in driving the USD and provide some trading opportunities around the GBP/USD pair. In the absence of any relevant market-moving economic releases, it will be prudent to wait for a strong follow-through buying before positioning for any further gains.

Technical levels to watch

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FX option expiries for December 8 NY cut

December 8, 2021 14:56   FXStreet   Market News  

FX option expiries for December 8 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts        

  • 1.1305 345m
  • 1.1350 423m

– USD/JPY: USD amounts                     

  • 112.30 477m
  • 113.00 723m
  • 113.80 524m
  • 114.00 535m

– AUD/USD: AUD amounts

  • 0.6900 742m

– USD/CAD: USD amounts       

  • 1.2670 463m

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USD/ZAR: South African growth, political concerns test bears below $16.00

December 8, 2021 14:56   FXStreet   Market News  

  • USD/ZAR seesaws around weekly bottom, pauses two-day declines.
  • South African GDP snapped four-quarter advances with -1.5% figures for Q3 2021.
  • Risk-on mood, softer yields and receding fears of Omicron keep sellers hopeful.

USD/ZAR takes rounds to $15.85-80, down 0.05% while challenging the previous two-day downtrend during early Wednesday morning in Europe. The South African currency (ZAR) pair struggles to cheer the broad US dollar weakness as the national GDP flashed negative surprise the previous day.

That said, South African GDP for Q3 2021 dropped for the first time in four quarters, down -1.5% QoQ versus -1.2% expected and +1.2% prior, as bearing the double whammy of coronavirus and political trauma in the nation. “South Africa’s economy contracted 1.5% in the third quarter compared with the previous three months, as some of the worst unrest of the post-apartheid era in July hurt sectors like agriculture, manufacturing and trade,” said Reuters.

On the other hand, diplomats from Cape Town recently rejected the proposal to change the national constitution to explicitly allow the expropriation of land with no compensation. “Redressing them has been a flagship promise of the ruling African National Congress (ANC) but little progress has been made on it nearly three decades since the end of apartheid,” per Reuters.

Alternatively, receding fears of the South African covid variant, dubbed as Omicron, joins hopes of more stimulus from China and Japan to favor risk-on mood and weigh on the US dollar. Though, geopolitical and financial headlines concerning Russia and China keep traders cautious amid a lackluster day.

That said, the US 10-year Treasury yields drop 1.5 basis points (bps) to 1.465% while the stock futures remain mildly bid at the latest.

Looking forward, market sentiment remains as the key catalyst for USD/ZAR traders ahead of Friday’s US Consumer Price Index (CPI).

Technical analysis

While a clear downside below 10-DMA and weekly resistance line, around $16.00, direct USD/ZAR to the south, an ascending trend line from October 20, close to $15.65 at the latest, becomes key for the pair sellers to watch before taking fresh entries.

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France Nonfarm Payrolls (QoQ) came in at 0.4%, below expectations (0.5%) in 3Q

December 8, 2021 14:35   FXStreet   Market News  

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Forex Today: Dollar wilts, Gold shines amid Omicron covid optimism, BOC in focus

December 8, 2021 14:35   FXStreet   Market News  

Here is what you need to know on Wednesday, December 8:

Increasing scientific evidence that the new Omicron covid variant is less aggressive and, therefore, could pose limited risk to the global economic recovery continues to underpin the market mood. The Asian stocks tracked the rally in Wall Street overnight while the S&P 500 futures advanced 0.40% so far.

South African hospitals continue to hint that Omicron has milder symptoms. Additionally, a South African Study showed that the Pfizer vaccine provides partial protection against the new strain. The scientist noted, “study shows a 40-fold reduction in neutralization capacity of Pfizer vaccines vs. Omicron.

China’s policy support to boost economic growth and help the country’s distressed property sector also keep the upbeat tone intact for the third day in a row.

The risk-on flows dulled the US dollar’s appeal as a safe haven, fuelling a relief rally across the fx board. The US Treasury yields softened amid pre-inflation data anxiety, adding to the weight on the buck.

Against this backdrop, EUR/USD outperformed and almost tested 1.1300, as the rebound extends despite the mixed German ZEW data and ECB-speak.

GBP/USD is consolidating its bounce around 1.3250, as bulls remain cautious amid rising Omicron cases in the UK. The Kingdom reported 101 new cases of the Omicron variant, taking the total cases to 437, as of Tuesday. Additionally, the Brexit stalemate will likely cap the further upside in cable.

AUD/USD is holding onto the latest upside but remains capped below 0.7150 despite the yuan hitting three-year highs against the greenback.

USD/JPY is battling 113.50 amid softer yields and the dollar. USD/CAD is posting small gains around 1.2650 amid a pullback in WTI prices, ahead of the key Bank of Canada (BOC) decision. The BOC is expected to keep the key rate unchanged at 0.25% amid rising inflation.

The US oil fails to take advantage of the US-Russia geological tensions, especially after President Joe Biden warned his Russian counterpart of ‘strong measures’ amid Ukraine invasion fears.

Gold is testing the critical $1,792 barrier, at fresh weekly highs.  

Bitcoin is battling $50,000, as bulls contemplate the next move amid news that Google disrupted a massive botnet used by hackers to mine crypto using the Bitcoin blockchain.

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EUR/GBP Price Analysis: Extends bounce off 50-DMA above 0.8500

December 8, 2021 14:29   FXStreet   Market News  

  • EUR/GBP pokes intraday high, snaps two-day downtrend.
  • Steady RSI line favor recovery moves towards 10-week-old resistance line.
  • Key Fibonacci retracement levels, 200-DMA act as additional resistances.

EUR/GBP prints the biggest daily gains of the week, up 0.14% intraday around 0.8525 heading into Wednesday’s London open.

The cross-currency pair dropped to a one-week low the previous day before bouncing off 50-DMA and 38.2% Fibonacci retracement (Fibo.) of September-November declines.

Although the firmer RSI line favors the latest recovery, a clear break of the 50% Fibo. level near 0.8520 becomes necessary for the bulls to keep reins.

Following that, a descending trend line from late October and 61.8% Fibonacci retracement level, respectively around 0.8545 and 0.8555, will challenge the EUR/GBP buyers.

It should be noted, however, that the pair’s run-up beyond 0.8555 will need validation from the 200-DMA level of 0.8560.

Alternatively, a daily closing below the 50-DMA level around 0.8480 will highlight multiple supports around 0.8460 and 0.8420 for EUR/GBP sellers.

However, the pair’s weakness past-0.8420 will be challenged by November’s low of 0.8380, which is also the lowest level since early 2020.

EUR/GBP: Daily chart

Trend: Further recovery expected

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USD/IDR Price News: Rupiah bulls cheer upbeat Indonesia Consumer Confidence above $14,300

December 8, 2021 14:21   FXStreet   Market News  

  • USD/IDR prints three-day downtrend, remains pressured around intraday low.
  • Indonesia Consumer Confidence jumps to highest since early 2020.
  • Softer yields, risk-on mood also exert downside pressure.

USD/IDR stays depressed near $14,330 while declining for the third consecutive day, down 0.14% intraday, ahead of Wednesday’s European session.

Although broad US dollar weakness could be linked to the Indonesian rupiah (IDR) pair’s declines, firmer consumer sentiment data from Indonesia also favored the pair sellers of late.

That said, the nation’s Consumer Confidence Index jumped to 118.5 during November, versus October 113.4, to print the highest level since January 2020. The sentiment gauge portrays “improving perception of economic conditions amid a rise in incomes and job opportunities, the central bank said in a report on Wednesday,” per Reuters.

On the other hand, receding fears of the South African coronavirus variant, dubbed as Omicron, join Japan and China’s readiness to safeguard respective economies to favor risk appetite. It’s worth noting that geopolitical tensions between the Washington and Kremlin, as well as the US-China tussles, join fears of Chinese real-estate companies’ default to probe the optimists and challenge USD/IDR bears.

Against this backdrop, the US 10-year Treasury yields drop 1.7 basis points (bps) to 1.463% at the latest while S&P 500 Futures and Asia-Pacific stocks remain positive by the press time.

Moving on, risk catalysts are the key for intraday traders of the USD/IDR pair while inflation data from China and the US, scheduled for release on Thursday and Friday respectively, will be important to watch afterward.

Technical analysis

A clear downside break of the 200-DMA, around $14,365 at the latest, keeps USD/IDR sellers hopeful to aim for the late November’s swing low surrounding $14,170.

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Gold Price Forecast: XAU/USD bulls flirt with 100/200-DMA confluence hurdle, around $1,790

December 8, 2021 14:17   FXStreet   Market News  

  • Gold gained traction for the second successive day and shot to a one-week high on Wednesday.
  • Retreating US bond yields weighed on the USD and drove flows towards the non-yielding metal.
  • Rising geopolitical tensions further benefitted the safe-haven metal and contributed to the uptick.
  • The market focus now shifts to the release of the latest US consumer inflation figures on Friday.

Gold edged higher for the second successive day and climbed to a one-week high, around the $1,790 region during the early part of the trading action on Tuesday. Retreating US Treasury bond yields undermined the US dollar and turned out to be a key factor that benefitted the dollar-denominated commodity. Apart from this, rising geopolitical tensions further underpinned the safe-haven precious metal and contributed to the uptick.

The US recently announced that it would boycott the Winter Olympics in Beijing in protest of China’s alleged violations of human rights and actions against Muslims in Uyghur. Similarly, relations between the US and Russia took a turn for the worse after US President Joe Biden threatened to impose strong economic and other measures on Russia if it invades Ukraine. This kept a lid on the recent optimistic moves in the financial markets.

Investors abandoned all concerns about the impact of the new coronavirus variant on economic recovery after reports indicated that Omicron patients had only shown mild symptoms. This was evident from a strong two-day rally in the equity markets, which tends to drive flows away from traditional safe-haven assets. Nevertheless, gold, so far, has managed to hold in the positive territory, with bulls awaiting a sustained move beyond the 200-day SMA.

The focus now shifts to the latest US consumer inflation figures, due for release on Friday. The data would influence the Fed’s decision to taper its stimulus at a faster pace and set the stage for an eventual interest rate hike in 2022. It is worth mentioning that the money markets have been pricing in the possibility of liftoff in May. Hence, the US CPI report will play a key role in influencing the near-term trajectory for the non-yielding gold.

In the meantime, developments surrounding the coronavirus saga would be looked upon for some impetus. Apart from this, traders will take cues from the US bond yields, which will drive the USD demand and produce short-term opportunities around gold amid absent relevant market-moving economic releases from the US.

Technical outlook

From a technical perspective, bulls might wait for a sustained move beyond a technically significant 200-day SMA before positioning for any further appreciating move. The mentioned barrier coincides with 100-day SMA. A convincing breakthrough the mentioned confluence hurdle should push spot prices beyond the $1,800 mark, towards the next relevant resistance near the $1,810-15 supply zone. The momentum could further get extended towards the $1,832-34 strong horizontal barrier, which should act as a key pivotal point for short-term traders.

On the flip side, the $1,783 area now seems to protect the immediate downside ahead of the overnight swing low, around the $1,772 region. This is followed by support near the $1,762 zone (monthly low), below which the XAU/USD could accelerate the fall towards the $1,752-51 support.

Gold daily chart


Key levels to watch

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BOJ’s Amamiya: Must be flexible on timing for deciding on fate of BOJ’s pandemic-relief programmes

December 8, 2021 14:17   FXStreet   Market News  

The Bank of Japan (BOJ) Deputy Governor Masayoshi Amamiya is back on the wires, via Reuters, commenting on the central bank’s pandemic emergency stimulus and the new Omicron covid variant.

Key quotes

Must be flexible on timing for deciding on fate of BOJ’s pandemic-relief programmes.

BOJ will decide either in Dec or January on whether to extend deadline for pandemic-relief programmes.

Omicron variant heightening uncertainty for Japan’s economic outlook.

Our baseline view is that Japan’s economy will show clearer recovery in first half of next year.

Undecided on whether to end or expand pandemic-relief programmes upon march deadline, will closely watch BOJ tankan, other data on corporate funding.

Japan’s base money growth may slow if at some point BOJ ends pandemic-relief loan programmes.

Reviewing, ramping up BOJ’s pandemic-relief progammes is a possibility depending on financial conditions at the time.

Market reaction

USD/JPY was last seen trading at 113.45, down 0.07% so far.

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USD/CHF bears targeting lower levels in the 0.92 area

December 8, 2021 13:40   FXStreet   Market News  

  • USD/CHF is losing grip of the mid point of the 0.92 area. 
  • USD is on the backfoot, but markets are keeping an eye on the SNB.
  • Markets will be looking to the US JOLTS and then Consumer Price Index as another potential catalyst. 

USD/CHF is a touch lower in Asia, trading down 0.1% at the time of writing, after travelling between a low of 0.9237 and a high of 0.9250 so far on the day. There is scope for further downside to test the 0.9220 support area with the US dollar under some pressure ahead of key US data later in the week. 

Meanwhile, the broader theme is risk-on with investors cheering comments from the weekend that cases in South Africa, where the Omicron variant was expected to have originated, showed milder symptoms. The top US infectious disease official, Anthony Fauci, said “it does not look like there’s a great degree of severity” so far. This has been supporting risk appetite which led to an unwind in the Swiss franc at the start of the week. The US dollar caught a bid as well which propelled USD/CHF to 0.9275. 

However, the heat in the dollar has cooled in recent trade and it is treading water in the middle of its range over the past 2-1/2 weeks near 96.20. as measured by six currencies in the dollar index, DXY. There is scope for lower levels, however, as the euro, the component of the index with the largest share, is on a tear higher. EUR/USD has rallied from a New York session low of 1.1227 to a high of 1.1283 in Asia. 

Eyes on SNB

Meanwhile, the Swiss National Bank (SNB) is following the Swiss franc’s exchange rate “very closely” to monitor its impact on the economy. Markets are hesitant to chase the strength in the swiss franc due to the prospects of the central bank intervening.  Governing board member Andrea Maechler told recently stated that the SNB remains ready to intervene when necessary,

“At the SNB, we’re always ready to intervene in foreign exchange markets if needed,” Maechler said during the interview with RTS’ TV programme Forum. “We don’t target a specific exchange rate, neither a specific level nor a specific rate versus the euro or the dollar, but we follow it very closely to see the impact on the economy.”

The Swiss franc hit its highest level against the euro six years earlier this week, albeit without signs of the currency interventions the SNB has often undertaken at such moments in the past. Maechler said it was difficult for the economy to deal with sudden changes in the exchange rate, while gradual adjustments were easier to handle. “An exchange rate is a value versus a foreign currency so it also depends on the inflation we have here in Switzerland versus the inflation abroad,” she said.

“Inflation signals that the economy is on the path towards recovery. From that point of view, we see it with great optimism,” she said. “The question is how fast it goes up and currently we see a certain inflationary pressure. The question is whether this is temporary or the beginning of a big upwards movement.”

It was not the central bank’s role to react to “each and every shock”, she added. She explained it is there to maintain inflation within the SNB’s 0% to 2% target range over a mid-term horizon of two to three years.

Looking ahead for the week, the JOLTS report on US job openings is due later Wednesday and this should provide further evidence of a tightening labour market, potentially adding fodder for bets on earlier Fed tightening, which could boost the dollar. Money markets are currently fully priced for a quarter-point rate increase by June. On December 10, markets will be looking to the US Consumer Price Index as another potential catalyst. 

”We expect inflation to slow significantly as fiscal stimulus fades and supply constraints ease, but we don’t expect the data to be validating in the near term”, analysts at TD Securities said. ”The CPI likely surged in Nov, with a drop in oil coming too late to avert another large gain in gasoline and core prices boosted by rapidly rising used vehicle prices and post-Delta strengthening in airfares and lodging.”

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USD/TRY Price Analysis: Rising wedge teases sellers, $13.25 in focus

December 8, 2021 13:35   FXStreet   Market News  

  • USD/TRY consolidates recent losses inside bearish chart pattern.
  • Receding bullish bias of MACD, downside break of 5-DMA suggest pullback.
  • 10-DMA adds strength to $13.25 support level, weekly resistance line offers extra hurdle to the north.

USD/TRY hovers around $13.55, up 0.55% intraday during early Wednesday morning in Europe.

The Turkish lira (TRY) pair dropped the most in a week the previous day while breaking the 5-DMA support. That said, the quote remains inside a two-week-old rising wedge bearish formation.

Also keeping the pair sellers hopeful is the receding bullish bias of the MACD and overbought RSI conditions.

Even so, the 10-DMA toughens the $13.25 support and challenge short-term sellers, a break of which will confirm the bearish chart pattern suggesting a slump towards sub $11.00 region.

During the fall, a November 24 low of $11.57 may offer an intermediate halt whereas October’s peak surrounding $9.40 will lure the USD/TRY bears afterward.

On the contrary, a clear upside break of 5-DMA, around $13.65 at the latest, will push the pair towards a one-week-old descending trend line near $13.90.

In a case where the USD/TRY rises beyond $13.90, the $14.00 round figure and the upper line of the stated wedge close to $14.50, will be in focus.

USD/TRY: Daily chart

Trend: Pullback expected

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Gold Price Forecast: XAU/USD prints fresh hourly highs, $1,790 guards risk to $1,800 psy’ level

December 8, 2021 13:29   FXStreet   Market News  

Update: Gold (XAU/USD) is printing fresh hourly highs in Asia as the US dollar and Treasury yields slide to new lows for the day.  

Spot gold, XAU, rose 0.35% to $1,790.47 per ounce by 030 GMT while the Benchmark 10-year and 30-year US Treasury yields continued to pull back from their one-week highs hit on Tuesday. The 10’s are down some 1.3% to trade at a fresh low of the session in 1.458%. 

The big event of the month will be the Federal Reserve meeting, but before then, on December 10, we have the crucial US Consumer Price Index for November, MoM. ”We expect inflation to slow significantly as fiscal stimulus fades and supply constraints ease, but we don’t expect the data to be validating in the near term,” analysts at TD Securities said. ”The CPI likely surged in Nov, with a drop in oil coming too late to avert another large gain in gasoline and core prices boosted by rapidly rising used vehicle prices and post-Delta strengthening in airfares and lodging.”

meanwhile, traders will be looking to see whether inflation prints are expected to remain elevated in the early months of the year by the Fed. The markets are already pricing for Fed hikes that could still become more aggressive, but analysts at TD Securities said that they ”expect that it will ultimately prove to be far too hawkish.”

”In fact, with both an accelerated taper and more than three rate hikes already priced in for 2022, the balance of risks for gold positioning is shifting to the upside. The threshold for CTA short covering is razor-thin, which could ultimately catalyze higher gold prices.”

End of update

Gold (XAU/USD) picks up bids around $1,787 during early Wednesday, after refreshing the weekly high the previous day.

The yellow metal previously cheered the risk-on mood but the latest challenges to sentiment confront US Dollar Index (DXY) pullback to test the gold traders. That said, the yellow metal remains on the way to snap a three-week downtrend while keeping the previous week’s bounce off the monthly bottom.

DXY drops 0.08%, the first daily loss in six days while tracking the softer US bond coupons. The US 10-year Treasury yields decline two basis points (bps) to 1.47% at the latest while retreating from a weekly high. However, the S&P 500 Futures print mild gains and the stocks in Asia-Pacific are also trading mixed as traders jostle with contrasting news.

The receding fears of the South African coronavirus variant, dubbed as Omicron, joined policymakers’ readiness to safeguard respective economies of China and Japan to favor risk appetite previously. However, geopolitical tensions between the Washington and Kremlin, as well as the US-China tussles, joins fears of Chinese real-estate companies’ default to recently weighing on risk appetite.

That said, the US marks its dissent over the Russia-Ukraine tension by warning the Kremlin of sanctions, in addition to backing Ukraine with military power, if the two countries indulge in a war. “The Biden administration is in ‘intensive consultations’ with the new German government over its response if Russia invades Ukraine and believes Germany would be ready to take significant action if Russia launches an attack, a senior U.S. State Department official said on Tuesday,” said Reuters.

On a different page, China hints at consequences for the US, per local media, after Washington boycotts the 2022 Beijing Olympics. It’s worth noting that the reports of partial payment to Evergrande bondholders and looming payment for Kaisa raise fears in the Chinese markets, challenging global sentiment as well.

While challenges to risk appetite tests gold buyers, in contrast to the softer yields favoring prices, a lack of major data/events keeps the commodity traders looking for more macros for clear direction ahead of Friday’s US Consumer Price Index (CPI).

Technical analysis

In contrast to the latest performance, technical patterns challenge gold buyers as it remains below the previous support line from September 30 amid bearish MACD signals.

Also favoring gold sellers is the bearish play of the moving average crossover, popularly known as the bear cross, portrayed by the 50-day EMA’s piercing off 200-day EMA.

That said, gold’s fresh declines may initially look to a seven-week-old horizontal area surrounding $1,762-60. Though, the $1,750 round figure and September’s low near $1,721 will question the metal’s further downside.

Alternatively, recovery moves will initially aim for the weekly top near $1,787 but the support-turned-resistance will challenge the gold buyers around $1,795.

Even if the bullion manages to cross the $1,795 hurdle, the stated EMA’s will act like a tough nut to crack for the gold bulls near the $1,800 threshold.

Gold: Daily chart

Trend: Further weakness expected

Full Article