In the ever-evolving world of forex trading and commodities, staying informed is key to successful trading decisions. Vestrado is committed to providing in-depth technical and fundamental analyses to help you navigate the markets effectively.
This week’s analysis covers crucial currency pairs and gold, offering insights into potential market movements and economic factors influencing them.
Weekly Technical Analysis
1. USD/JPY H4 Analysis
Trend Channels
The USD/JPY pair exhibits a solid bullish trend in the H4 timeframe. To illustrate this upward momentum, a green ascending channel has been drawn.
The price movements respect this channel’s upper and lower bounds, indicating a consistent adherence to the bullish trajectory. Traders should note how the price bounces off these boundaries, reinforcing the channel’s validity.
Support and Resistance Levels
- Support at 154.400 (red line): This level is critical, and buyers are likely to step in during any pullbacks. It’s a significant price point that has historically provided a cushion.
- Resistance at 158.000 (green line): Identified as the upper limit, the price might encounter selling pressure at this resistance level. Breaking above this level could signal a continuation of the bullish trend, while a rejection could lead to a reversal.
Forecasted Price Movement
The black zigzag lines within the channel represent anticipated price fluctuations. The analysis suggests a bearish retracement towards the support at 154.400. This pullback is viewed as a healthy correction within the bullish trend.
After testing this support, the bullish momentum is expected to resume, potentially pushing the price upwards to challenge the resistance at 158.000.
2. EUR/USD H4 Analysis
Descending Channel
The EUR/USD pair moves within a red descending channel on the H4 chart, indicating a prevailing bearish trend. The consistent lower highs and lower lows confirm the downward momentum. The channel’s boundaries act as dynamic resistance and support levels, guiding the price action.
Support and Resistance Levels
- Resistance at 1.05800 (green line): This level is crucial during bullish retracements. If the price reaches this point, it may face significant selling pressure, reinforcing the bearish trend.
- Support at 1.04000 (red line): This support level serves as a target for the bearish continuation. At it, buyers might find value, potentially leading to a reversal or consolidation.
Forecasted Price Movement
The analysis indicates a potential short-term bullish retrace towards the resistance level at 1.05800. This movement allows traders to enter short positions at a higher price point. Following this retracement, the bearish trend is expected to resume, driving the price towards the support level at 1.04000.
3. XAU/USD H4 Analysis
Bearish Channel
Gold (XAU/USD) trades within a red descending channel on the H4 timeframe, highlighting a dominant bearish trend. The consistent rejection from the channel’s upper boundary underscores the strength of the downward pressure.
Support and Resistance Levels
- Resistance at 2580.00 (green line): This key level is where a potential bullish retracement could face selling pressure. It’s a crucial price point for traders looking to capitalize on short positions.
- Support at 2530.00 (red line): The bearish trend is expected to extend towards this level. Buying interest may emerge in a significant area, possibly leading to a bounce or reversal.
Forecasted Price Movement
The chart suggests a short-term upward retracement towards 2580.00, offering traders a potential opportunity to enter sell positions at a higher price. After this retracement, the bearish trend is anticipated to continue, aiming for the support level at 2530.00.
Weekly Fundamental Analysis
Understanding the fundamental factors driving the markets is essential for comprehensive analysis. This week’s focus spans several major economies, highlighting key events and economic indicators that could influence market movements.
Japan
- Political Landscape: Japan has formed its first minority government. Prime Minister Ishiba of the Liberal Democratic Party (LDP) remains in power. Still, neither the LDP alone nor its traditional coalition partner, the Komeito Party, holds a majority in the lower chamber of the Diet.
- Policy Implications: The opposition parties’ inability to present an alternative has kept the LDP in charge, albeit with limited power. The immediate focus is on the supplemental budget, expected to pass with minimal resistance.
- Economic Outlook: Elements of the LDP’s agenda, such as proposed tax increases for enhanced defense capabilities, may face significant controversy. The swaps market reflects uncertainty, with discounts ranging between 5 and 12 basis points for potential hikes in the next Bank of Japan (BOJ) meeting, possibly influenced by the yen’s weakness.
Australia
- Central Bank Minutes: Early Tuesday, the Reserve Bank of Australia (RBA) will release the minutes from its latest meeting. While these minutes typically aren’t market movers, they provide insights into the central bank’s outlook.
- Monetary Policy: The lingering threat of a rate hike has diminished, and officials have conveyed that policy will likely remain on hold for some time. The futures market indicates a 60% chance of a rate cut by April 2025, with the first cut fully priced in by May.
- Economic Indicators: The preliminary November PMI will be another highlight. The composite PMI has fluctuated around the 50 mark, indicating a balance between expansion and contraction. It stood at 50.2 in October.
Eurozone
- PMI Data: The preliminary November PMI is the economic highlight. After dipping below 50 in September, signaling contraction, the eurozone composite PMI returned to 50 in October, indicating stabilization.
- Monetary Policy: The market shows more confidence in a potential European Central Bank (ECB) rate cut next month than the Federal Reserve or the Bank of England. The swaps market is pricing a greater chance of a 50 basis point cut rather than maintaining current rates.
- Political Factors: Despite a lack of solid political leadership among major member countries, tensions reflected by interest rate differentials remain relatively subdued.
United Kingdom
- Inflation Outlook: Speculation about a December Bank of England (BOE) rate cut has been scaled back. Upcoming inflation reports are unlikely to shift this sentiment significantly.
- CPI Data: The UK’s CPI was flat in October and decreased by 0.2% in November 2023. By the time the BOE meets next month, the year-over-year rate could return to or slightly exceed 2%, compared with 1.7% in September. The core inflation rate stood at 3.2% in September, with consumer service prices up 4.9% year-over-year.
- Monetary Policy: These inflation dynamics suggest that the BOE may hold off on cutting rates in the near term, focusing instead on monitoring economic data.
Canada
- Inflation Trends: Canada’s CPI fell at an annualized rate of nearly 1% over the four months through September. October’s CPI, to be reported on November 19, will be closely watched.
- Monetary Policy: The Bank of Canada (BOC) has been on a rate-cutting path, reducing the overnight lending rate by 75 basis points between June and September and then 50 basis points in October. The target rate now stands at 3.75%.
- Economic Indicators: The gradual downward trend in core measures suggests that the BOC may continue its accommodative monetary policy, depending on incoming data.
United States
- Federal Reserve Outlook: Two main factors are shaping the investment climate. First is the trajectory of Federal Reserve policy. Upcoming data, primarily surveys and housing starts, may need to be more decisive but will contribute to the overall economic picture.
- Labor Market Data: The weekly jobless claims will cover the same period as the monthly employment survey and could have a more significant impact. The futures market currently discounts about a 62% chance of a quarter-point rate cut at the next FOMC meeting, slightly lower than a week ago.
- Policy Implications: The second factor is the speculation around potential appointments in the next administration, which could provide insights into future policy priorities. Pro-growth initiatives are anticipated, but measures like tariffs may pose near- to intermediate-term challenges.
Navigating the financial markets requires technical insight and awareness of fundamental economic factors. This week’s analysis highlights potential opportunities and risks across major currency pairs and commodities. Traders should consider both chart patterns and economic indicators when formulating their strategies.
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