AUDUSD Current Price: 0.6725 The US Dollar met demand amid a worsening market mood. Australia to report October employment data early on Thursday. AUDUSD could correct lower according to near-term technical readings. The AUDUSD pair trades around 0.6720, shedding some ground on Wednesday amid a worsening market mood. The US Dollar found modest demand, particularly in the American session, and as stock markets edged lower. Market participants turned risk-averse amid the latest development in the Russian-Ukraine war but also spooked by fears global inflation may continue to harm economic growth. Global stocks edged lower, dragging alongside the Australian Dollar. According to the Australian Bureau of Statistics, Australia published the Wage Price Index, which rose by 1% in the third quarter of the year. The annualized figure hit 3.1% in the three months to December, the highest in almost two decades. Nevertheless, it is still half the country’s inflation as the Consumer Price index stands at 7.3% YoY. Australia will publish October employment figures on Thursday. The country is expected to have added 15,000 new job positions in the month, while the unemployment rate is foreseen to tick higher, to 3.6% from the current 3.5%. AUDUSD short-term technical outlook The AUDUSD pair trades near its daily low ahead of the US close, which somehow skews the risk to the downside. In the daily chart, the pair is holding above a flat 100 SMA, providing support at around 0.6700, while the 20 SMA maintains its bullish slope well below the longer one. Technical indicators, in the meantime, eased from oversold readings but remain directionless well into positive territory. In the near term, and according to the 4-hour chart, chances are of a bearish correction. The pair is currently piercing a mildly bullish 20 SMA while technical indicators head south within positive levels. The longer moving averages maintain their bullish slopes far below the current level. Further declines could be expected on a break below the 0.6660/70 area, were the pair met buyers in mid-November. Support levels: 0.6700 0.6665 0.6620 Resistance levels: 0.6770 0.6805 0.8650 View Live Chart for the AUDUSD

Early European hours observed UK inflation data hit the wires. Inflation is now in excess of five times the Bank of England’s (BoE) target; the Office for National Statistics (ONS) revealed that the Consumer Prices Index (CPI) jumped 11.1%, clocking a 41-year pinnacle. This is up from the 10.1% increase in September. Month-on-month CPI inflation also increased by 2.0%, up from September’s 0.5% increase. In terms of the year-on-year core readings (excluding food, energy, alcohol and tobacco), the release recorded a 6.5% rise, identical to September’s increase. This hotter-than-expected inflation reading, of course, emphasises the possibility of further interest rate hikes by the BoE (next meeting is on 15th December). Note that the central bank raised the Bank Rate by 75 basis points on 3rd November to 3.0%. According to the futures markets, there is currently a 53.6% chance the BoE hikes by 50 basis points at the next meeting, with a 46.4% probability of another 75 basis-point hike. The ONS said: In October 2022, households are paying, on average, 88.9% more for their electricity, gas, and other fuels than they were paying a year ago. Domestic gas prices have seen the largest increase, with prices in October 2022 being more than double the price a year earlier. Today, markets are poised for UK Chancellor Jeremy Hunt to deliver the Autumn budget to Parliament at 12:30 pm GMT. The package is widely expected to reveal spending cuts and tax increases in an attempt to fill the £60bn fiscal black hole. (UK Annual Inflation Rate) Over in Canada, released by Statistics Canada at 1:30 pm GMT, consumer prices, according to the Consumer Prices Index (CPI), matched September’s increase of 6.9% in October, on a year-over-year basis. Core annual inflation for October increased 5.3% versus a rise of 5.4% in September. Finally, US retail sales, a measure used to gauge consumer spending, rose 1.3% on a month-over-month basis in October, and 8.3% year on year (versus 8.6% the prior year [October 2021]). GBP/USD Working with $1.19 Short-term price action on the GBP/USD currency pair shows $1.19 came under siege in London trading on Wednesday, drawing the unit to a session high of $1.1942 (and creating a bull trap). To the downside, $1.18 calls for attention, followed by Quasimodo support coming in at $1.1744, whereas north of yesterday’s session high casts light on H1 resistance from $1.2009. For those who read Wednesday’s report, you may recall the following text in regards to the weekly and daily timeframes (italics): Weekly resistance is a standout technical observation at $1.1990, sheltered just south of another weekly resistance base at $1.2263. You will also note on the weekly timeframe that despite the currency pair staging a rather impressive pullback of nearly 16% from the record low of $1.0357, a downside bias remains evident (since early 2021).    From the daily timeframe, additional resistance is seen nearby around $1.2052, made up of a 50% retracement from $1.2052, a 100% projection at $1.2073 and a 1.272% Fibonacci projection at $1.2078 (1.272 is derived from the square root of 1.618, which is the inverse of 0.618). You will also acknowledge that just north of the noted resistance structure, a 200-day simple moving average is seen at $1.2238. In terms of the daily chart’s relative strength index (RSI), we have seen the indicator’s value test the upper limit of resistance between 60.00 and 50.00. Venturing above here could lead to overbought conditions materialising. Given the current weekly resistance at $1.1990, chart studies suggest a strong ceiling around the $1.20 figure on the H1 timeframe should we break above $1.19 (holding at the time of writing). XAU/USD Gold Welcomes Resistance Following last week’s 5.4% run higher, the yellow metal has since crossed swords with resistance on the daily timeframe between $1,789 and $1,778 (composed of two Fibonacci ratios and a Quasimodo resistance at $1,788). Also demanding attention is the 200-day simple moving average ($1,802). I wrote about this in recent analysis and highlighted the fact that the yellow metal has traded beneath this dynamic average since June of this year. A rejection from the noted resistance turns the radar to support at $1,725, accompanied by a decision point at $1,701-1,722. I also underlined in recent analysis that although price has breached trendline resistance (etched from the high $2,070), I would want to see the unit close beyond 10th August high at $1,807 to validate a trend reversal in terms of price action. Aiding current resistance, nonetheless, the relative strength index (RSI) is showing signs of levelling off within overbought space, ahead of a channel resistance, taken from the high 59.51. The area made of price resistance between $1,789 and $1,778 and the 200-day simple moving average, helped by an RSI overbought signal and nearby RSI channel resistance, sellers may continue to reject...

We saw another decent session for markets in Europe yesterday, after US PPI followed CPI last week in coming in lower than expected, although the FTSE100 underperformed after the pound briefly surged to the 1.2000 level against the US dollar. US markets also underwent another solid session however the gains were tempered somewhat by reports that two Russian missiles had landed in Poland, killing two people in the process. Russia has denied the allegations; however, the incident has raised the temperature given Poland is a member of NATO, and a deliberate attack could prompt a counter-response from other NATO members under article 5 on mutual defence. As a result of this elevated uncertainty, and the ongoing investigation as to who might be responsible, European markets look set to open lower this morning While US inflation appears to be in decline the same can’t be said for inflation this side of the Atlantic, where it has continued to push higher, although inflation in the UK did get a bit of a respite in August, falling back to 9.9%, from 10.1% in July. This didn’t last long as prices edged back to 10.1% in September, with food prices continuing to act as a tailwind, rising from 13.1% to 14.6%. These increases in food prices look set to translate into an even higher October reading of 10.7% later today, with the raising of the energy price cap also expected to act as a tailwind. The rise in core prices is also starting to become a larger concern, despite the stabilisation being seen in energy prices in the last few months. Having raised interest rates by 75bps last month the Bank of England will be hoping that we don’t move too much higher than the 6.5%, we saw in September The government’s new fiscal plans that are due to be outlined tomorrow, could also play a part in slowing inflation with new tax rises and spending cuts due to be announced. There’s no better way to slow inflation than to kill demand which is what the government’s new plans look set to do. Wages are holding up reasonably well on a historical basis, but they remain well below headline inflation levels, helping to keep a lid on consumer spending. More encouragingly PPI inflation does appear to be showing signs of slowing, and is set to continue to do so, which could translate into lower inflation as we head into 2023. While retail sales in the UK have been uniformly dire this year, the consumer in the US has been much more resilient despite similar price pressures, although the spikes seen in natural gas prices in the US have been nothing compared to those being seen in the UK and Europe. This is due to the US having in its own source of natural gas in the form of shale which has kept prices reasonably low, and not impacted on consumer demand by anywhere near as much. In September retail sales came in unchanged, while the previous month was revised up to 0.4%. Today’s October numbers are expected to come in at 1%, which appears to show that despite rising prices, consumers still have the appetite to spend money. EUR/USD – Pushed above the August highs at 1.0370, and up to the 1.0480 area, briefly pushing above the 200-day SMA before slipping back. A close above 1.0430 is needed to push up towards the 1.0600 area. Support all the way back at the 1.0180 area. GBP/USD – Pushed up to the 1.2030 area before slipping back. This is likely to be a huge barrier for any further gains. Support remains all the way back at the 1.1640/50 area. EUR/GBP – Continues to chop between resistance at the 0.8820/30 area, with support still at or around the 0.8690 area. USD/JPY – Slid all the way back to cloud support below 138.00, rebounding from the 137.65 level yesterday, with resistance at the highs this week at 140.80. While below 141.00 the bias remains for a weaker US dollar. FTSE100 is expected to open 33 points lower at 7,336 DAX is expected to open 80 points lower at 14,298 CAC40 is expected to open 40 points lower at 6,601

Retail Sales in the US are expected to rise by 1% following a stagnant September. Risk perception is likely to continue to drive the US Dollar's (USD) valuation. Market participants will pay close attention to the Q3 earnings reports of big retailers.  Retail Sales in the United States (US) are forecast to rise by 1% in October after staying unchanged at $684 billion in September. The US Dollar (USD) has been struggling to find demand following the softer-than-expected Consumer Price Index (CPI) figures for October and the Retail Sales report is unlikely to impact the USD's valuation in a meaningful way. According to the CME Group FedWatch Tool, the probability of a smaller, 50 basis points (bps), Federal Reserve rate increase in December stands at 80%, up significantly from 50% before the October inflation report. Although some FOMC policymakers urged markets not to get ahead of themselves by pricing in a less aggressive tightening outlook, the sharp decline witnessed in the US Dollar Index showed that investors had been looking for an opportunity to unwind crowded Dollar longs. Market implications Since the US Census Bureau's Retail Sales data is not adjusted for price changes, it will not offer an accurate picture of consumer activity. Nevertheless, an unexpected decline in Retail Sales could trigger a "bad news is good news" reaction in financial markets as it would point to a slowdown in consumer demand, which the Fed has been trying hard to achieve by hiking rates. In that scenario, risk flows could continue to dominate the markets and make it difficult for the US Dollar (USD) to hold its ground against its risk-sensitive rivals, such as the Euro (EUR) and the Pound Sterling (GBP). On the other hand, better-than-expected growth in sales could help the USD stage a recovery. However, a USD-positive market reaction should remain short-lived unless there is a noticeable negative shift in risk sentiment. It's worth noting that several big retailers in the US are scheduled to report third-quarter earnings this week. Investors are likely to pay closer attention to these numbers rather than the Retail Sales report. At the time of press, Walmart's shares were up nearly 5% on the day after the retail giant announced that it expects sales in the US to increase by 5.5% in fiscal 2023, compared to 4.5% in the previous earning report. Lowe's, Target and TJX Companies will release earnings figures on Wednesday. Macy's, Kohls, Ross Stores and Gap will report on Thursday before Foot Locker and Buckle Inc. wrap up the week.  To summarize, October Retail Sales report should do little to nothing to influence the market pricing of the Fed's rate. Hence, overall risk perception should continue to drive the US Dollar's action in the short term. In case Wall Street's main indexes remain bullish in the second half of the week with big retailers reporting better-than-forecast earnings, the USD could have a hard time staging a rebound. US Dollar Index technical outlook US Dollar Index trades within a touching distance of 106.00. The 200-day Simple Moving Average (SMA) and the Fibonacci 50% retracement of the March-October uptrend reinforce that support. In case the index drops below that level and fails to reclaim it, it could target 105.00 (psychological level) and 104.00 (Fibonacci 61.8% retracement) next.  On the upside, interim resistance seems to have formed at 107.00 (static level) ahead of 108.00 (Fibonacci 38.2% retracement). With a daily close above the latter, the index could extend its recovery toward 109.00, where the 100-day SMA is located. In the meantime, the Relative Strength Index (RSI) indicator on the daily chart stays near 30, suggesting that there could be a technical correction before the next leg lower.

Markets Just when headlines started to become less frequent and noisy, the situation in Eastern Europe escalated when reports of a Russian missile entered Poland and killed two people. Poland announced they were thinking about evoking article 4 of the NATO agreement, which means they want to talk about it formally and perceive it as the first escalation point. NATO must digest this grave situation before allies move into combat readiness. Even if the missiles that crossed the Polish border were indeed deemed Russian and not Ukrainian anti-missile interceptors, the case would fall short of triggering an escalation at this point; hence the markets are deferring to a wartime mistake believing this to be a case of misfire. The action kicked off the safe-haven trade, driving bond yields lower and firming the US dollar up as traders moved back into wartime headline watch. And US stocks closed off their highs after the report.  As headline cautious investors may be, the immediate follow-through does not suggest increasing market escalation expectations. Beyond a 1.4% rally in EURPLN, the cross-asset impact is not apparent. If traders were even contemplating a full-blown escalation, the landscape would be much more crater-like  While the market is not in full risk-off mode while deferring to a wartime mistake, the risk of a NATO -Russia clash is growing and real. So I suspect headline risk rather than wartime risk could be a more significant impediment over the near term. On the Fed front, Fed Harker also chimed in that he expects the central bank will slow the pace of rate increases in coming months, which only added to the optimism in the dove's camp.   Oil Oil is trading higher in Asia this morning. Despite demand clouds hovering over China, the softer US PPI data provided more signs of cooling inflation, hence a less hawkish Fed and improved chances of a soft landing.  But the uptick in geopolitical risk is driving oil prices more this morning. Brent and WTI climbed quickly following news of a stray Russian missile strike. With Crude Oil at the epicentre of Eastern European risk oil, traders have little choice but to graduate what-if scenarios hedging the potential risk to global oil supplies if this smouldering powder keg ignites.   Forex USD traded bid across the G10 landscape in Tuesday's New York session. After the PPI and manufacturing numbers were printed, the USD knee-jerked lower as it seemed like the numbers were positive for risk and clearer sided with the less hawkish Fed narrative the FX markets are running with. However, the street was quick to fade the move when Russian missile headlines hit. Traders will need to decide to fade or trade quickly, as we are unlikely to sit at these levels for a long time, especially when London walks in 

The Euro has lost some ground against the US dollar after reports that Russian missiles had struck inside the Polish border killing two polish citizens. The reason for the drop in the Euro is because Poland is a NATO member and the potential results of this, yet unverified report, is a retaliation from Polish and/ or NATO forces. Poland has previously noted that they are ready to defend their sovereignty in the face of accidental or purposeful attacks within its borders which could induce NATO forces to join in on the conflict too. NATO and US authorities are currently investigating the report before commenting publicly. It could be that markets wait for confirmation from these two authorities before considering their risk appetite for the Euro the rest of this week. EUR/USD 1H The Euro is still up against the greenback but was registering greater gains before the missile report hit the news flow. The reason for the strength in the Euro is due to the US Producer Price Index (PPI), a measure of wholesale inflation, coming in softer-than-expected. October’s PPI rose +0.2% month-over-month in October of 2022, below market forecasts of +0.4% adding fuel to the theory that inflation in the US has peaked and is now slowing. The EUR/USD was heading toward 1.0500 before investors were spooked by the missile report, sending it as low as 1.0280. It has since recovered to close to the 61.8% Fib level between this recent high and low Previously, the EUR/USD rallied after the release of the US consumer inflation data (on November 11th) which was the first indicator that US inflation has reached its peak. The EUR/USD is still up 2.7% over the week.