• EUR/JPY is under selling pressure this Friday.
  • The level to beat for bears is the 120.27 support.

EUR/JPY daily chart

EUR/JPY is trading in a downtrend below the 200-day simple moving average (DMA). However, last month the cross had a bull rally to the 121.00 figure. The market entered a consolidation there.

EUR/JPY four-hour chart

On the four-hour chart, the market is trading below its 50 and 100 SMAs near the November lows, suggesting a slowdown in bullish momentum. The market is confined in a range and the buyers would need to overcome the 121.28 and 121.53 resistances on a daily basis to resume the bull run.

EUR/JPY 30-minute chart

The market is trading near the daily lows just above 120.27 support level. A break below the level can lead to a drop to the 119.80 level, according to the Technical Confluences Indicator. Resistance is seen at the 120.45 and 120.70 levels.

Additional key levels

Previewing next week's macroeconomic data releases from the United States, "We look for retail sales to register a soft 0.1% gain for October as a decline in auto sales likely kept headline sales subdued," said TD Securities analysts.

Key quotes

"However, we expect a rebound in the control group to be the main driver of headline growth, reflecting still-solid consumer spending. Sales at gasoline stations should also boost growth on the back of a gain in gasoline prices in October."

"We look for headline inflation to remain unchanged at 1.7% y/y in October, partly aided by an increase in energy prices. Core inflation should decline a tenth to 2.3% y/y. We expect core goods inflation to recover m/m, but for core services inflation to slow to 0.2% m/m after four straight increases at 0.3%."

"Public appearances by the FOMC "core" (Powell, Clarida, and Williams) will drive Fed communication. We look for Chair Powell to reiterate the FOMC policy message that monetary policy and the economy remain "in a good place" during his two-day visit to the Hill. Vice-Chair Clarida could offer additional details about the ongoing Fed Framework Review at the Cato Conference."

  • US Pres. Trump says he is yet to decide on rolling back the accumulated tariffs.
  • US Dollar Index gains more than 1% this week.
  • RBA lowers GDP growth forecast for 2019 to 2.25%.

Despite the broad-based USD strength throughout the week, the AUD/USD pair didn't have a difficult time holding above the 0.6900 handle as the heightened hopes of the United States and China simultaneously reducing import tariffs as part of the phase-one of the trade deal helped antipodeans find demand.

US-China trade agreement not a done deal

However, with US President Donald Trump noting that he hasn't yet agreed to roll back tariffs on Friday, the AUD lost its traction and the pair slumped to its lowest level in more than a week. As of writing, the pair was trading at 0.6851, adding 0.65% on a daily basis.

Earlier in the day, the Reserve Bank of Australia (RBA) in its quarterly Statement on Monetary Policy (SoMP) reiterated that the board is prepared to ease the policy further if needed and lowered the 2019 growth forecast down to 2.25%.

On the other hand, the greenback continued to outperform its major rivals with the US Dollar Index climbing to its highest level since mid-October at 98.40. As of writing, the index was a tad below that level, adding 0.27% on the day and 1.3% on the week. The only data from the US on Friday showed that consumer confidence improved slightly in early November but was largely ignored by the market participants.

  • US: UoM Consumer Confidence Index edged up to 95.7 in November vs. 95.9 expected

There won't be any macroeconomic data releases from Australia on Monday and the US investors will be observing the Veterans Day, suggesting that the market action will likely remain subdued.

Technical levels to consider

  • USD/CAD is trading at levels not seen since mid-October.
  • The level to beat for bulls is the 1.3230 resistance.

USD/CAD daily chart

The Loonie on the daily chart is rising above the 1.3200 handle and the 50/100-day simple moving averages (DMAs). This Friday, the market spiked to its highest since mid-October.

USD/CAD four-hour chart

USD/CAD is trading above its main SMAs adding strength to the bull case. Buyers should break above the 1.3230 resistance to reach the 1.3280 level on the way up, according to the Technical Confluences Indicator.

USD/CAD 30-minute chart

USD/CAD is trading above its main SMAs, suggesting bullish momentum in the near term. Support is seen at the 1.3212 level followed by 1.3195 and 1.3170, according to the Technical Confluences Indicator.

Additional key levels

  • GBP/USD has held up better than the EUR against the USD this week.
  • There is a trendline on the weekly chart that it may come back to test.

GBP/USD has taken a fall like most others against the greenback this week.

The dollar has been moving higher against most of its counterparts after positive news on the trade war front.

The latest is that although progress has been made, Trump himself has not confirmed that he will pullback the previous tariffs in order to get a deal.

This goes against reports earlier in the week which suggested both sides will pull back on their tariffs against one another.

Looking at the chart now and you can see the current weekly candle is very bearish.

The fact that it has broken the low point of the two previous candles indicates that a retest of the trendline could occur.

The low of 1.2789 was the consolidation low and today the price has just printed below the support level.

GBP/USD Weekly Chart

GBP/USD analysis

Additional Levels

Analysts at MUFG Bank point out that risk will continue to be the key driver of the Japanese yen. They argue USD/JPY has closed above its 200-day moving for the first time since the end of April, opening the door to further gains towards 110.00.

Key Quotes:

“We assume risk-on type trading conditions will persist. That points to further yen depreciation. Since 8th October, the yen has weakened by around 2.0% versus the dollar and even more versus many non-dollar currencies but we see scope for this to be maintained into next week. There certainly looks to be scope for increased speculative yen selling. The leveraged yen positioning to Tuesday of last week was still modestly long yen – while yen depreciation since suggests yen short positions now, the scale of positioning remains modest. Secondly, weekly flow data from Japan indicates a notable pickup in Japan equity purchases by foreign investors. Purchases have totalled JPY 2,100bn in the last four weeks – down from JPY 2,752bn last week, the largest since April, which coincided with USD/JPY highs for 2019. If risk-on persists through next week, we see scope for a retest of the 110.00 level, especially given the breach of 109.32 – the Aug high.”

“The key for determining near-term direction of the yen is of course whether the risk on rally extends into next week. Good news over a possible trade deal is certainly now in the price but we don’t see disappointment coming and momentum points to some further yen selling ahead. Our USD/JPY yield based regression model suggests to us that yield is not a reliable influence in determining short-term direction.”

“A yield influence event next week for USD/JPY would be the testimony by Fed Chair Powell to the Joint Economic Committee but we doubt this testimony will be a notable market mover given it is unlikely to differ hugely from Powell’s recent FOMC press conference on 30th October. Hence, broader risk appetite and financial market conditions will be the key near-term influence.”

  • Mexican peso ends week little change versus US dollar around 19.10.
  • Next week: Banxico meeting, Fed talk and US retail sales.

The USD/MXN is hovering around 19.10, around the same level it had a week ago. The pair continues to move sideways, consolidating after the bearish run from above 20.00 toward a long term trendline, around 19.00.

The improvement in risk sentiment helped limit the upside over the week in the USD/MXN while on the downside, a stronger US dollar amid higher US yields, added support. The tone around US/China trade talks and expectations regarding US monetary policy continue to be a relevant driver. The Mexican peso was unaffected by the current turmoil in several Latin American countries.

Next week, several FOMC officials are scheduled to speak. Those speeches could have an impact on Fed rate expectations. Data to be released in the US includes the retail sales report. In Mexico, the critical event is the Board meeting of the central bank. Banxico is likely to cut rates again. If delivers a 25bps cut, the focus will be on the statement and the votes, looking at hints for the future.

Technical outlook

The USD/MXN continues to trade in a range, with a strong support around 19.00, a confluence of a horizontal level, recent lows and a long-term uptrend line. A consolidation below would likely clear the way for a test of the 2019 low at 18.74.

On the upside, the key resistance lies at 19.20/25 that capped the upside over the last few days; also the 20-day moving average stands there. A daily close above 19.25 would strengthen the outlook of the US dollar.

According to the latest GDPNow report published by the Federal Reserve Bank of Atlanta, the real gross domestic product (GDP) in the United States (US) following today's macroeconomic data releases expected to expand by 1% in the last quarter of the year.

"The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2019 is 1.0% on November 8, unchanged from November 5 after rounding," Atlanta Fed said in its publication. "Following this morning's wholesale trade report from the U.S. Census Bureau, the nowcast of the contribution of inventory investment to fourth-quarter real GDP growth increased from -0.59 percentage points to -0.53 percentage points."

According to the Federal Reserve Bank of New York's latest Nowcasting Report published on Friday, the United States' (US) economy is expected to expand by 0.7% in the last quarter of the year.

"News from this week's data releases decreased the nowcast for 2019:Q4 by 0.1 percentage point," the NY Fed said in its publication. "Negative surprises from lower than expected exports and imports data accounted for most of the decrease."

The US Dollar Index paid no mind to this publication and was last up 0.25% and 1.3% on a daily and weekly basis, respectively.