Daily market report

22/11/2022
13:31

Following the recent drop in the U.S Dollar, the greenback managed to bounce by the end of last week, extending its move into yesterday trading. In the FX market, there are few important economic releases to focus on this week, however, on Wednesday, all eyes will be turned on the Reserve Bank of New Zealand rate decision, the central bank is expected to increase the main interest rate from 3.5% to 4.25%. This decision represents a continuity of the ongoing tightening of the monetary policy by the RBNZ. In the same day, during the US trading session, the FOMC is set to release its latest meeting minutes. In addition, Initial Jobless Claims are expected to rise to 225K up from 222K one month earlier.
On Thursday, the European Central Bank will publish the account of monetary policy meeting. Finally, the US market is expected to close earlier on Friday due to Thanksgiving day which can lead to low liquidity and false breakouts. Now let us have a look at the technical outlook.

EURUSD

The Euro showed some signs of weakness after strong sellers managed to defend 1.0480 resistance level successfully. In the near-term, we can see that the single currency is following a series of lower highs and lower lows, reinforcing the bearish view. Technically, the currency pair is likely to bounce in the next hours, and prices might extend higher towards the new resistance zone located between 1.0285-1.0310 levels. This is a key area for future price action, and new sellers are expected to show up again from there. In the opposite, a valid break below 1.0223 support level can trigger a new wave of weakness, and a re-test of 1.0170 level might occur.

GBPUSD

The British pound extended the decline yesterday, as bearish momentum increased after the pair reached the psychological barrier of 1.2000 during last week. Looking at the hourly chart, we can see that the trend has changed from positive to neutral, consequently, traders should wait for a clear exit outside of the current range located between 1.1950 and 1.1775 before to act accordingly. For the time being, the upside potential is likely to remain limited below 1.1900 handle, and any recovery in the future should see new sellers. To summarize, as mentioned in our previous market reports, a break below 1.1790/65 support zone is needed to confirm a short-term bearish reversal in this pair and should clear the path for a strong decline in the direction of 1.1700 handle. In the other side, only a daily close above 1.1950 resistance can strengthen the bullish outlook.

USDJPY

The currency pair traded in line with our previous expectations and prices rallied yesterday to reach as high as 142.25 level. After retracing 61.8% of the larger upside advance that started from 130.45 low, we noticed initially that the pair made a low at 138.40 followed by a lower low at 137.70. However, when looking at the RSI indicator, we witnessed a bullish divergence that signaled a potential recovery in the pair. As expected, the pair has confirmed that bullish divergence after breaking the hourly resistance zone located between 140.60/80 level which led to an acceleration in the direction of the next resistance at 141.50 and even beyond. As of now, the short-term trend has turned positive, in the meantime, it is important to note that prices might trade lower into a temporary correction before another push that can reach as high as 142.50. The nearest support to watch stands at 141.30 while the resistance is seen at 142.25 level.

USDCAD

After forming a double bottom at 1.3230 level, the currency pair extended higher and confirmed a shift in the near-term trend. Last week, prices retreated from 1.3400 psychological barrier during the first breakout attempt, but few time later, we saw an increase of the bullish momentum and the pair succeeded to break above 1.3400 handle and rally to reach as high as 1.3494 level. Currently, despite yesterday’s advance, the short-term trend is still bearish in this pair, and traders should wait for prices to stabilize again below 1.3400 handle to look for fresh selling opportunities. From a wider angle, only a daily close above 1.3570 high can change the current trend from down to up.

GOLD

Gold weakened in the last three days after reaching the hourly resistance of $1782 per ounce.
Prices went too far too fast in the recent days and a correction to the downside was due on the back of profit taking following the latest US CPI release move.
By now, the yellow metal has reached a critical support of $1733 which represents the 61.8% Fibonacci retracement from 1701 low to 1784 high, thus, demand is likely to increase in the coming hours which can lead to a short-term bounce.
Finally, the trend remains bullish, and it is expected to see a stabilization in gold, if bulls manage to protect yesterday’s low of 1732.

Economic Analyst
Amine Hiani