Daily Market Lookup

• The Bank of Japan, which widened the trading band for 10-year Japanese government bonds (JGBs) on Tuesday, may have inflicted damage on the dollar against the yen, but Goldman Sachs (NYSE:GS) analysts said there was further room for the greenback to rise. In Wednesday's research note, Goldman said the path for the yen depended on whether the BOJ move was a technical adjustment as the central bank had pointed out, or the start of a tighter monetary policy regime. Goldman assumed that, for now, the BOJ move was a technical adjustment and a "sign that policy rates could be adjusted further in coming month", although the basic BOJ framework remained unchanged. In the bank's baseline scenario, Treasury yields will continue to have "more degrees of freedom" than JGBs, noting that U.S. front-end rates "are overpricing recession odds, and underpricing the Fed cycle". This should drive dollar/yen higher over the coming months, Goldman noted. For now, however, Goldman is closing its long dollar/yen position as the market is likely to price in a more meaningful BOJ policy change, which the U.S. investment bank said is a real possibility.
• The yen fell in a choppy session on Wednesday, ceding some of the ground gained the previous day when a surprise policy tweak by the Bank of Japan lifted the Japanese currency by 4% against the dollar. The BOJ decided to change its "yield curve control" policy on Tuesday even as it kept broad policy settings unchanged. It is letting 10-year yields move 50 basis points either side of its 0% target, wider than the previous 25-basis-point band. On Wednesday, the dollar was 0.4% higher against the yen, having plunged 3.8% in the previous session, its largest one-day drop against the Japanese currency in 24 years. Given the size of Tuesday's move in dollar-yen, traders should expect the pair to be volatile, Doyle said Strategists attributed some of the move to poor liquidity ahead of the holidays. The story of 2022 has been the strength of the dollar, which has surged as the U.S. Federal Reserve hiked interest rates at a rapid clip, and as rising geopolitical tensions left investors seeking shelter in less risky currencies. The BOJ, long preoccupied with reviving price growth to avert a risk of deflation, has been an outlier among central banks this year. It has kept interest rates negative while other central banks have hiked hard to tame inflation and bolster domestic currencies against the U.S. dollar. Sterling slipped against the dollar and euro on Wednesday as British public borrowing hit a November record, underscoring the challenges for the UK economy. The British pound was down 0.8% at $1.2091. The Canadian dollar was little changed on the day at around 1.3595 to the greenback, as investors remained undecided as to whether the Bank of Canada would tighten further next month following mixed inflation data for November.
• Gold prices rose on Thursday as fears of a 2023 recession spurred some safe haven plays into the yellow metal, with focus now turning to key readings on U.S. economic growth and inflation due this week. Bullion prices rallied this week against a weaker dollar, which was in part dented by a less dovish than expected stance from the Bank of Japan. The greenback was also dented by growing bets that U.S. inflation has peaked, which could invite a slower pace of rate hikes by the Federal Reserve. Markets are now awaiting revised U.S. GDP data for the third quarter. A preliminary reading showed that the economy grew a better-than-expected 2.9% in the September quarter, with analysts forecasting the figure to remain the same in its first revision due later in the day. Focus this week is squarely on the U.S. Personal Consumption Expenditure price index, which is the Federal Reserve’s preferred inflation gauge. The core index is expected to have eased further in November from the prior month. But the index still remains well above the Fed’s annual target range, indicating that the central bank still needs to tighten policy further to curb inflation. The prospect of rising interest rates in developed markets is likely to keep gold prices subdued in the coming months, with the Bank of Japan, European Central Bank, and the Bank of England also sending hawkish messages. Other precious metals rose on Thursday, although their outlook also remains clouded. Focus this week is also on consumer inflation data from Japan, especially after the BOJ somewhat tightened policy after nearly a decade of accommodative measures. Among industrial metals, copper prices surged on more signs of an economic reopening in China, even as the country grapples with a massive spike in COVID-19 cases. But prices of the red metal are still trading lower for the year, with their outlook remaining uncertain in the face of rising interest rates and a potential recession.
• Oil prices extended gains into a fourth straight session on Thursday after inventory data showed that U.S. supplies remained tight ahead of a demand-heavy holiday season, although caution ahead of key economic readings kept gains limited. Data on Wednesday showed that U.S. crude inventories shrank far more than expected in the previous week, with decreases in heating oil and jet fuel stocks coming just ahead of an expected increase in travel demand and a potential cold snap at the end of the year. The inventory declines came even as the government drew down over 3 million barrels of crude from the Strategic Petroleum Reserve, indicating that demand remained robust. A weaker dollar also benefited crude prices, with the greenback coming under pressure from a spike in the yen this week. But the dollar steadied on Thursday ahead of key readings on inflation and economic growth. Focus is now squarely on revised U.S. GDP data and the personal consumption expenditures (PCE) price index due on Thursday and Friday, respectively. Third-quarter economic growth in the U.S. is forecast to remain steady at 2.9% in its second reading, as strong consumer spending and a robust labor market buoyed the world’s largest economy. More closely watched will be the PCE data, which is the Federal Reserve’s preferred inflation gauge. While the reading is forecast to have eased further in November from the prior month, it is still expected to remain well above the Fed’s target range. Fears of a potential recession, spurred by rising interest rates and high inflation, had battered oil prices last week, dragging them to a one-year low. A slew of hawkish signals from major central banks had also weighed on crude prices. But crude prices then bounced back from annual lows on weakness in the dollar. Optimism over a Chinese reopening also helped, as the government relaxed more anti-COVID measures. The near-term outlook for China remains uncertain, as the world’s largest crude importer also faces a massive spike in COVID-19 cases. But markets are positioning for an eventual recovery in Chinese demand, which some analysts say could push crude prices back above $100 in 2023.

Gold – XAU

Gold on Wednesday made its intraday high of US$1823.74/oz and low of $1811.78/oz. Gold is down by 0.201% at US$1814.09/oz.

Technicals in Focus:

In daily charts, prices are above 200DMA (1809) and breakage below will call for 1790. MACD is above the zero line and histograms are a2lso increasing trend and it will bring an upward stance in the upcoming sessions. RSI is in the overbought region and more upside is expected before it gets stretched. The Stochastic Oscillator is in neutral territory and giving a negative crossover to a bearish stance for intraday trade.

Trading Strategy: Sell on Strength

Sell below 1824-1879 keeping stop loss closing above 1879, targeting 1808-1790-1774 and 1759-1750-1736. Buy in between 1808-1768 with risk below 1750, targeting 1814 and 1826-1834-1847.

Silver - XAG

Silver on Wednesday made its intraday high of US$24.29/oz and low of US23.82/oz settled down by 0.729% at US$23.95/oz.

Technicals in Focus:

On daily charts, silver is sustaining below 100DMA (21.00), breakage above will lead to 21.60. MACD is below the zero line and histograms are decreasing trend and it will bring a bearish stance in the upcoming sessions. RSI is approaching the neutral region, indicating a buy signal for now. The Stochastic Oscillator is in the oversold region and gives a positive crossover to show an upside move for the intraday trade.

Trading Strategy: Buy on Dips

Buy in between 23.60-20.30, targeting 23.30-23.60 and 24.00-24.40-25.00 with stop loss should be placed on the breakage below 20.00. Sell in between 24.00-25.00 with stop loss above 25.00; targeting 22.10-21.70 and 21.30-20.70-20.10.

Oil - WTI

Crude Oil on Wednesday made an intra‐day high of US$78.57/bbl, an intraday low of US$75.77/bbl, and settled up by 3.173% to close at US$75.37/bbl.

Technicals in Focus:

On daily charts, oil is sustaining above its 20DMA i.e. 68.50 which is a support level and breakage below will call for 65.40. MACD is above the zero line and histograms are in increasing mode will bring a bullish stance in the upcoming sessions. The Stochastic Oscillator is in the neutral region, giving a positive crossover for confirmation of a bullish stance; while the RSI is in the neutral region and more upside can be expected to reach the overbought region, which is highly probable.

Trading Strategy: Neutral to Sell

Sell in between 78.60-81.40 with stop loss at 81.60; targeting 77.00-76.10-75.25 and 74.10-73.30-72.60. Buy above 77.00-71.70 with risk daily closing below 71.00; targeting 78.60 and 79.70-80.50-81.40.

EUR/USD

EUR/USD on Wednesday made an intraday low of US$1.0589/EUR, a high of US$1.0645/EUR, and settled the day down by 0.188% to close at US$1.0603/EUR.

Technicals in Focus:

On daily charts, prices are sustaining above 50DMA (1.0736), which becomes immediate support, a break below will target 1.0647. MACD is above the zero line and histograms are increasing mode which will bring a bullish view. Stochastic is in overbought territory and giving positive crossovers to the bullish outlook for intraday. 14D RSI is currently in a neutral region and giving no directions to consider right now.

Trading Strategy: Neutral to Sell

Sell below 1.0650-1.0930, targeting 1.0610-1.0580-1.0520 and 1.0490-1.0450-1.0390 with stop-loss at daily closing above 1.0940. Buy above 1.0610-1.0390 with risk below 1.0390 targeting 1.0650-1.0720-1.0790 and 1.0830-1.0900-1.0940.

GBP/USD

GBP/USD on Wednesday made an intra‐day low of US$1.2084/GBP, a high of US$1.2222/GBP, and settled the day up 0.282% to close at US$1.2077/GBP.

Technicals in Focus:

On daily charts, prices are sustaining below 20DMA (1.2113) is becoming a resistance level. 14-D RSI is currently in a neutral region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in overbought territory and gives a positive crossover to confirm bullish a stance. MACD is above the zero line but histograms are increasing leading to movement.

Trading Strategy: Neutral to Buy

Based on the charts and explanations above; buy in between 1.2200-1.1950 with a target of 1.2280-1.2350-1.2410 and 1.2490-1.2250-1.2630 with a stop loss closing below 1.1950. Sell in between 1.2280-1.2630 with targets at 1.2200-1.2190-1.2090 and 1.2030-1.1950-1.1870 with stop loss should be 1.2630.

USD/JPY

USD/JPY on Wednesday made an intra‐day low of JPY131.48/USD and made an intraday high of JPY135.52/USD and settled the day up by 0.582% at JPY132.46/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 200DMA (108.30), which is initial support on the daily chart. 14-D RSI is currently in the overbought region and chances of downward are expected based on RSI. MACD is above the zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is in neutral territory and signaling to sell as it has given a negative crossover to confirm a bearish stance.

Trading Strategy: Neutral to Sell

Sell below 132.90-136.00 with risk above 136.00 targeting 131.90-131.10-130.40 and 129.50-129.00. Long positions above 131.90-129.00 with targets of 132.90-134.10-134.90 and 135.40-136.00-137.70 with stops below 129.00.