Analytics

The US dollar the fourth consecutive bullish session on Tuesday before losing the upside momentum today. The USD index bounced from fresh August lows seen around 105.30 to encounter a local barrier just below the 107.00 handle that represents the immediate hurdle for bulls at this stage. The greenback turned slightly negative on Wednesday, albeit preserving most of the recent gins so far.

The recent recovery was due to fresh hawkish comments from Fed officials including Brainard, Bullard, Barking and Williams. Still, investors continue to bet on a softening stance from the US central bank, suggesting the dollar’s upside potential remains limited, with recent recovery looking fragile and relatively modest. In a wider picture, the index is heading toward its worst performing month in more than twelve years.

Powell, NFP in focus

In the near term, the dollar could be affected by upcoming comments from Fed Chair Jerome Powell. It would be his first speech since the November meeting. Should the central bank head express a hawkish stance, the buck may see a more robust advance along with US Treasury yields. Of note, the yield on the 10-year Treasury rose 4.5 basis points to 3.746% on Tuesday to see the largest one-day gain since November 17.

Then, the market focus would shift to US Nonfarm Payrolls due on Friday. Consensus forecasts currently point to a 208,000-increase following a stronger-than-expected rise of 261,000 in October. The unemployment rate is expected to remain unchanged at 3.7%.

The USD index has settled above 106.50 in recent trading, refraining from another bullish attempt as the overall risk tone looks upbeat while traders express a cautious tone ahead of Powell’s speech and job market data. On the downside, the immediate support now arrives around 106.30, followed by the 106.00 mark.

The price of bitcoin fell to start another volatile week. On Monday, BTCUSD notched the fifth bearish session in a row as investor sentiment both in the crypto space and in the global financial markets remained downbeat. The largest cryptocurrency by market capitalization slipped back to the $16,000 handle to finish 1.32% lower on Monday.

The cryptocurrency industry continues to face headwinds after FTX’s collapse. In particular, crypto lender BlockFi filed for bankruptcy, citing FTX exposure. The liquidity crisis was due to the company’s exposure to FTX via loans to Alameda, a crypto trading firm affiliated with FTX, as well as cryptocurrencies held on FTX's platform that became trapped there. As a reminder, two of BlockFi's largest competitors, Celsius Network and Voyager Digital, filed for bankruptcy earlier this year.

Meanwhile, the US crypto exchange Bitfront said it will cease operations in a few months despite efforts to overcome challenges in the industry. The company noted that the move is unrelated to recent issues among certain crypto exchanges that have been accused of misconduct.

Signs of recovery

Now, sentiment in the digital asset space seems to be improving. Bitcoin bounced on Tuesday to settle around $16,500, with global stocks recovering as well. Asian equity markets rallied today amid speculations that the Chinese government was considering the scaling back of its anti-COVID policies. Adding to a more upbeat tone, Beijing rolled out more stimulus measures.

Against this backdrop, markets shrugged off recent concerns over anti-government protests in the country. Investors will continue to monitor developments in China. Also, a busy week for macroeconomic news suggests that both cryptos and traditional assets could see volatility in the days ahead.

The oil market has been dominated by selling pressure these days, with downside momentum persisting for the third week in a row. Brent crude failed to extend the recent bounce to come under intense downside pressure on Wednesday when the barrel lost over 3%, staying on the defensive today.

The recent slide in prices was amid reports that the Group of Seven nations considered a price cap a on Russian oil above the current market level. G7 nations are reportedly looking a cap in the range of $65-70 a barrel. At that, governments failed to reach a deal on Wednesday at what level to cap prices for Russian oil under and will resume talks today. Against the backdrop of negotiations, market volatility is likely to persist in the days to come.

Elsewhere, fresh industry data out of the United States showed a 3.7- million-barrel draw in crude inventories versus -1.1 million barrels expected. The Energy Information Administration also reported that US gasoline stocks rose by 3.1 million barrels, exceeding the expected build of 400,000.

Uncertainties persist

Given the multiple uncertainties regarding supply and demand, oil traders continue to hesitate, with “sell the rally” strategy persisting at this stage. Adding to demand concerns, the latest FOMC meeting minutes showed that the central bank members acknowledge the growing threat of a recession in the US. On the positive side, the Fed said it expects to switch to smaller interest rate increases soon.

Brent crude slipped to the $84 zone before bouncing marginally. The subsequent recovery attempt was capped by the $85.35 zone, however, as traders stay cautious ahead of fresh talks on price cap. The futures stay below the $85 handle on Thursday, shedding nearly 0.7% on the day. Should the pressure persist in the near term, Brent may retarget the $87 mark, followed by the $90 handle that capped recovery earlier in the week.

Gold prices have steadied these days after the recent sell-off. Earlier, the bullion peaked at $1,786 to notch mid-August highs before losing the upside momentum. The XAUUSD pair has settled below $1,750 since then, struggling to attract renewed demand even as the US dollar stays weak. Gold has been directionless for the second session in a row on Wednesday, with downside risks limited while above the 20- and 100-DMAs that converge around $1,710.

Despite the recent rally, there is still scope for extra losses in the near term, especially amidst shrinking open interest and volume, suggesting that further recovery is not favoured at this stage. Also, the greenback looks relatively resilient after the recent bounce amid the buildup of relatively hawkish comments from Fed speakers.

Gold hinges on Fed

Later in the day, the US Federal Reserve will publish the minutes of the October policy meeting ahead of the Thanksgiving holiday. The minutes could affect gold prices through dollar’s reaction to the event. Should the central bank refrain from a more dovish tone, the dollar may rally across the market, thus pressuring the precious metal in the near term.

In a wider picture, gold prices are anticipated to be under pressure as the Fed is anticipated to raise interest rates by 50 bps at its forthcoming meeting in December as consumer price inflation unexpectedly fell below 8% last month. At the same time, the bank may indicate that it is not time yet to consider an imminent pause in the Fed's tightening campaign.

Technically, the XAUUSD pair could threaten the $1,730 support zone if dollar demand reemerges due to a combination of risk aversion and a hawkish tone from the Fed. On the upside, the nearest target arrives at $1,750, followed by the mentioned multi-week high and the $1,800 psychological level last seen more than three months ago.

Bitcoin is back on the defensive after another failed recovery attempt seen earlier in the week. The largest cryptocurrency by market capitalization briefly exceeded the $17,000 handle to come under renewed selling pressure. Still, the coin holds above $16,000 so far, refraining from plunging to fresh two-year lows registered earlier this month around $15,600.

The overall tone in the digital space remains bearish, with FTX-related uncertainty persisting. As a reminder, one of the largest crypto exchanges filed for bankruptcy while its CEO resigned after facing a severe liquidity crisis. Of note, FTX Digital Markets, the Bahamas-based unit of FTX, has filed for bankruptcy protection in the United States this week.

Also, cryptos keep following the direction of the stock market. Wall Street stocks finished lower on Wednesday, trading mostly on the defensive this week as the recent rally ebbs. The Nasdaq Composite shed more than 1.5% while the S&P 500 ended the day down 0.83%.

Technicals bearish as well

The BTCUSD pair has settled around $16,500 on Thursday, shedding nearly 2% on the day. The immediate support now arrives around $16,200, followed by the $16,000 figure and the $15,800-$15,600 key zone that should cap the potential pressure so that to prevent the coin from refreshing multi-year lows in the coming weeks.

On the upside, a decisive break above $17,000 is needed for some more or less sustainable recovery in the near term. Then, the focus would shift back towards the $18,500 region and the $20,000 handle last seen on November 8th. However, the path of least resistance remains to the downside for the time being, with both fundamentals and technical looking bearish. In the longer term, bitcoin is yet to find a bottom to stage a solid reversal and attract demand from institutional investors.

The US dollar has bounced slightly off three-month lows seen last week to steady below 107.00 on Tuesday. The USD index lacks the recovery momentum to challenge the initial barrier as traders turned cautious after the recent sell-off.

The greenback managed to regain some ground as traders have already digested last week’s cooler US inflation data. Weaker-than-expected readings prompted bets the Fed would scale back its aggressive interest rate hikes. Of note, the USD saw its biggest weekly drop since March 2020, when the pandemic began.

On the other hand, some ECB officials are now warning against overtightening, as doing so could and deepen an economic downturn in the Eurozone. Against this backdrop, the dollar’s downside potential against the euro persists in the longer term despite some rethink on the price action.

Retail sales in focus

Now, the USD index needs to overcome the 107.00 immediate resistance in order to see a more sustained bounce off recent lows. Then, the 108.25 intermediate barrier will come back into the market focus. However, traders could stay in a wait-and-seу mode ahead of the US retail sales report due on Thursday to cause some volatility and set fresh direction for the USD pairs.

The data is expected to show that retail sales fell to 6.9% y/y from 8.2% prior. Month over month, retail sales are expected to rise to 0.8% from 0% in September. A surprise to the downside or the upside could result in a large market move within a knee-jerk reaction to the release.

The figures could also affect Fed rate hike expectations, so the greenback should be highly sensitive to the data. If the figures come in better than expected, the buck may rise across the board, but a decisive recovery above the 110.00 looks unlikely at this stage as short-term interest rate markets now price in over 80% chance of a 50bps rate hike in December instead of a 75 bps rate hike earlier.

The shared currency faded the latest corrective bounce off local lows around 0.9730 as risk demand waned across the financial markets. Investor sentiment was dented by the turmoil in the crypto space where FTX is on the verge of collapse as Binance is backing out of its plans to acquire the beleaguered crypto exchange.

Against this backdrop, stocks and other high-yielding assets dropped on Wednesday while the safe-haven dollar bounced off local lows. Today, however, the USD index struggles to extend recovery as traders keep a more cautious tone ahead of the US CPI report.

The upcoming data could be the key for the buck and markets in general as it could affect Fed rate hike expectations. Headline month-on-month CPI for October is forecast to come in at 0.6% against 0.4% for September and 7.9% year-on-year versus 8.2% in the previous month. Should ex-food and energy CPI show some easing, the US dollar may see another retreat to finish the week on a downbeat note.

EURUSD remains vulnerable

In this scenario, the EURUSD pair could further advance beyond parity to settle above the 100-DMA. On the upside, the nearest resistance now arrives around 1.0070, followed by the 1.0100 mark last seen two months ago. In order to tighten the grips, euro bulls need validation from this level after the recent reversing from a two-month-old resistance line.

In a wider picture, the near-term outlook for the European currency looks cautiously bullish, with recovery momentum fragile, especially as risk demand continues to ebb across the globe. Following negative trading in Asia, European equities opened lower today as investors digest results from the US midterm elections as Republicans are set to gain fewer seats in the House than initially thought.

Bitcoin started a downside correction after a failure to overcome the $21,500 zone over the weekend. BTCUSD came under aggressive selling pressure, continuing to lose ground since then. On Tuesday, the coin slipped to two-week lows around $19,400, losing more than 5% on the day. In the process, the digital currency derailed the $20,000 mark for the first time since October 256 adding to a more downbeat technical picture.

Interestingly, the largest cryptocurrency by market capitalization plunged despite an upbeat tone in the global financial markets. Wall Street indices advanced on Monday, with Asian equities following suit today as investors express hopes that China would eventually relax its strict pandemic curbs. Also, market participants expect the upcoming report to reflect some moderation in the US CPI.

BTC needs to regain $20,000

As the main cryptocurrencies have been on a strong negative run these days, the global crypto market capitalization has plummeted back below $1 trillion. In part, the sell-off was due to FTX insolvency fears. Worries intensified after Changpeng Zhao, the founder and CEO of Binance, announced that his trading platform is about to sell its stake in FTT. The decision may have been affected by Alameda's link to the FTX coin.

In the near term, bitcoin could stay on the defensive while holding below the $20,000 figure. The coin has bounced from recent lows to trim intraday losses, but the market needs a more sustained recovery in order to get back above the psychological level on a daily closing basis. The immediate support now arrives around $19,400, followed by $19,000 and the $18,700 zone that capped the downside momentum on October 21.

Gold prices fell on Wednesday as the Federal Reserve signaled that it could be slowing down the pace of its aggressive rate hike cycle. At the same time, Powell came along with hawkish guidance to note that it was "very premature to be thinking about pausing." Against this backdrop, the greenback rallied across the board to put the precious metal back under selling pressure.

The XAUUSD pair briefly jumped to the $1,670 zone before reversing to finish around $1,635. On Thursday, the bullion struggles for direction, trading unchanged as market participants keep digesting the Fed’s message.

Bearish outlook persists

Now, investors are shifting their focus toward the US employment data due on Friday. The consensus for NFP indicates that the economy added 200,000 jobs versus the prior release of 263,000. On Wednesday, the US ADP reported that the US economy has added 239,000 fresh jobs in the labor market.

Should the key release signal the continued strength in the labor market, the dollar may regain the upside momentum, this pressuring the yellow metal ahead of the weekend. The immediate support now arrives at $1,630. A failure to hold above this zone would pave the way towards October lows seen around $1,617.

In the longer-term, the outlook for gold remains sluggish. The metal has been hammered this year by Fed’s hawkishness. The bullion is down 10% this year, with downside risks persisting while the US central bank keeps raising rates in an aggressive manner. The XAUUSD pair dipped to April 2020 lows around $1,614 in September. Should the buck stay elevated in the coming weeks, the precious metal may challenge the mentioned long-term lows to target the $1,600 handle.

Oil prices slipped on Monday to briefly derail the $91.50 intermediate support as the pressure persisted since late last week. Still, Brent crude finished just below the $93 figure to regain the upside momentum on Tuesday. Oil futures bounced back towards $94 a barrel, adding 1.25% on the day so far.

The lates bounce was due to a weaker dollar as the USD demand has eased ahead of the Fed’s two-day meeting. The USD index came under renewed pressure following four bullish sessions in a row. Still, the greenback remains within a broader uptrend that is likely to remain intact at least in the near term.

Elsewhere, oil traders were spooked by widening Covid-19 curbs in China that increased worries about slowing demand in the world's top crude oil importer as it persists with its zero-COVID policy. Of note, the data showed that China's factory activity fell in October amid strict pandemic restrictions.

Industry updates, Fed in focus

Adding to the earlier pressure, the industry data showed that US oil output climbed to nearly 12 million barrels per day in August, highest since the start of the pandemic. Next, inventory data from American Petroleum Institute and the Energy Information Administration could affect the market sentiment.

However, the oil market along with other asset classes could be more affected by the upcoming Fed meeting as the central bank is expected to signal a slower pace of interest rate increases in the near future. Should the Fed deliver a so-called dovish hike, the US dollar may fall across the board, thus adding to recovery momentum in the oil market.

Technically, Brent crude could regain the $95 figure in the coming days if industry data surprises on the upside and the dollar edges lower from the current levels. On the downside, the immediate support now arrives at $92, followed by the $91.50 zone.