AUDUSD Current Price: 0.6725 The US Dollar met demand amid a worsening market mood. Australia to report October employment data early on Thursday. AUDUSD could correct lower according to near-term technical readings. The AUDUSD pair trades around 0.6720, shedding some ground on Wednesday amid a worsening market mood. The US Dollar found modest demand, particularly in the American session, and as stock markets edged lower. Market participants turned risk-averse amid the latest development in the Russian-Ukraine war but also spooked by fears global inflation may continue to harm economic growth. Global stocks edged lower, dragging alongside the Australian Dollar. According to the Australian Bureau of Statistics, Australia published the Wage Price Index, which rose by 1% in the third quarter of the year. The annualized figure hit 3.1% in the three months to December, the highest in almost two decades. Nevertheless, it is still half the country’s inflation as the Consumer Price index stands at 7.3% YoY. Australia will publish October employment figures on Thursday. The country is expected to have added 15,000 new job positions in the month, while the unemployment rate is foreseen to tick higher, to 3.6% from the current 3.5%. AUDUSD short-term technical outlook The AUDUSD pair trades near its daily low ahead of the US close, which somehow skews the risk to the downside. In the daily chart, the pair is holding above a flat 100 SMA, providing support at around 0.6700, while the 20 SMA maintains its bullish slope well below the longer one. Technical indicators, in the meantime, eased from oversold readings but remain directionless well into positive territory. In the near term, and according to the 4-hour chart, chances are of a bearish correction. The pair is currently piercing a mildly bullish 20 SMA while technical indicators head south within positive levels. The longer moving averages maintain their bullish slopes far below the current level. Further declines could be expected on a break below the 0.6660/70 area, were the pair met buyers in mid-November. Support levels: 0.6700 0.6665 0.6620 Resistance levels: 0.6770 0.6805 0.8650 View Live Chart for the AUDUSD

Early European hours observed UK inflation data hit the wires. Inflation is now in excess of five times the Bank of England’s (BoE) target; the Office for National Statistics (ONS) revealed that the Consumer Prices Index (CPI) jumped 11.1%, clocking a 41-year pinnacle. This is up from the 10.1% increase in September. Month-on-month CPI inflation also increased by 2.0%, up from September’s 0.5% increase. In terms of the year-on-year core readings (excluding food, energy, alcohol and tobacco), the release recorded a 6.5% rise, identical to September’s increase. This hotter-than-expected inflation reading, of course, emphasises the possibility of further interest rate hikes by the BoE (next meeting is on 15th December). Note that the central bank raised the Bank Rate by 75 basis points on 3rd November to 3.0%. According to the futures markets, there is currently a 53.6% chance the BoE hikes by 50 basis points at the next meeting, with a 46.4% probability of another 75 basis-point hike. The ONS said: In October 2022, households are paying, on average, 88.9% more for their electricity, gas, and other fuels than they were paying a year ago. Domestic gas prices have seen the largest increase, with prices in October 2022 being more than double the price a year earlier. Today, markets are poised for UK Chancellor Jeremy Hunt to deliver the Autumn budget to Parliament at 12:30 pm GMT. The package is widely expected to reveal spending cuts and tax increases in an attempt to fill the £60bn fiscal black hole. (UK Annual Inflation Rate) Over in Canada, released by Statistics Canada at 1:30 pm GMT, consumer prices, according to the Consumer Prices Index (CPI), matched September’s increase of 6.9% in October, on a year-over-year basis. Core annual inflation for October increased 5.3% versus a rise of 5.4% in September. Finally, US retail sales, a measure used to gauge consumer spending, rose 1.3% on a month-over-month basis in October, and 8.3% year on year (versus 8.6% the prior year [October 2021]). GBP/USD Working with $1.19 Short-term price action on the GBP/USD currency pair shows $1.19 came under siege in London trading on Wednesday, drawing the unit to a session high of $1.1942 (and creating a bull trap). To the downside, $1.18 calls for attention, followed by Quasimodo support coming in at $1.1744, whereas north of yesterday’s session high casts light on H1 resistance from $1.2009. For those who read Wednesday’s report, you may recall the following text in regards to the weekly and daily timeframes (italics): Weekly resistance is a standout technical observation at $1.1990, sheltered just south of another weekly resistance base at $1.2263. You will also note on the weekly timeframe that despite the currency pair staging a rather impressive pullback of nearly 16% from the record low of $1.0357, a downside bias remains evident (since early 2021).    From the daily timeframe, additional resistance is seen nearby around $1.2052, made up of a 50% retracement from $1.2052, a 100% projection at $1.2073 and a 1.272% Fibonacci projection at $1.2078 (1.272 is derived from the square root of 1.618, which is the inverse of 0.618). You will also acknowledge that just north of the noted resistance structure, a 200-day simple moving average is seen at $1.2238. In terms of the daily chart’s relative strength index (RSI), we have seen the indicator’s value test the upper limit of resistance between 60.00 and 50.00. Venturing above here could lead to overbought conditions materialising. Given the current weekly resistance at $1.1990, chart studies suggest a strong ceiling around the $1.20 figure on the H1 timeframe should we break above $1.19 (holding at the time of writing). XAU/USD Gold Welcomes Resistance Following last week’s 5.4% run higher, the yellow metal has since crossed swords with resistance on the daily timeframe between $1,789 and $1,778 (composed of two Fibonacci ratios and a Quasimodo resistance at $1,788). Also demanding attention is the 200-day simple moving average ($1,802). I wrote about this in recent analysis and highlighted the fact that the yellow metal has traded beneath this dynamic average since June of this year. A rejection from the noted resistance turns the radar to support at $1,725, accompanied by a decision point at $1,701-1,722. I also underlined in recent analysis that although price has breached trendline resistance (etched from the high $2,070), I would want to see the unit close beyond 10th August high at $1,807 to validate a trend reversal in terms of price action. Aiding current resistance, nonetheless, the relative strength index (RSI) is showing signs of levelling off within overbought space, ahead of a channel resistance, taken from the high 59.51. The area made of price resistance between $1,789 and $1,778 and the 200-day simple moving average, helped by an RSI overbought signal and nearby RSI channel resistance, sellers may continue to reject...

We saw another decent session for markets in Europe yesterday, after US PPI followed CPI last week in coming in lower than expected, although the FTSE100 underperformed after the pound briefly surged to the 1.2000 level against the US dollar. US markets also underwent another solid session however the gains were tempered somewhat by reports that two Russian missiles had landed in Poland, killing two people in the process. Russia has denied the allegations; however, the incident has raised the temperature given Poland is a member of NATO, and a deliberate attack could prompt a counter-response from other NATO members under article 5 on mutual defence. As a result of this elevated uncertainty, and the ongoing investigation as to who might be responsible, European markets look set to open lower this morning While US inflation appears to be in decline the same can’t be said for inflation this side of the Atlantic, where it has continued to push higher, although inflation in the UK did get a bit of a respite in August, falling back to 9.9%, from 10.1% in July. This didn’t last long as prices edged back to 10.1% in September, with food prices continuing to act as a tailwind, rising from 13.1% to 14.6%. These increases in food prices look set to translate into an even higher October reading of 10.7% later today, with the raising of the energy price cap also expected to act as a tailwind. The rise in core prices is also starting to become a larger concern, despite the stabilisation being seen in energy prices in the last few months. Having raised interest rates by 75bps last month the Bank of England will be hoping that we don’t move too much higher than the 6.5%, we saw in September The government’s new fiscal plans that are due to be outlined tomorrow, could also play a part in slowing inflation with new tax rises and spending cuts due to be announced. There’s no better way to slow inflation than to kill demand which is what the government’s new plans look set to do. Wages are holding up reasonably well on a historical basis, but they remain well below headline inflation levels, helping to keep a lid on consumer spending. More encouragingly PPI inflation does appear to be showing signs of slowing, and is set to continue to do so, which could translate into lower inflation as we head into 2023. While retail sales in the UK have been uniformly dire this year, the consumer in the US has been much more resilient despite similar price pressures, although the spikes seen in natural gas prices in the US have been nothing compared to those being seen in the UK and Europe. This is due to the US having in its own source of natural gas in the form of shale which has kept prices reasonably low, and not impacted on consumer demand by anywhere near as much. In September retail sales came in unchanged, while the previous month was revised up to 0.4%. Today’s October numbers are expected to come in at 1%, which appears to show that despite rising prices, consumers still have the appetite to spend money. EUR/USD – Pushed above the August highs at 1.0370, and up to the 1.0480 area, briefly pushing above the 200-day SMA before slipping back. A close above 1.0430 is needed to push up towards the 1.0600 area. Support all the way back at the 1.0180 area. GBP/USD – Pushed up to the 1.2030 area before slipping back. This is likely to be a huge barrier for any further gains. Support remains all the way back at the 1.1640/50 area. EUR/GBP – Continues to chop between resistance at the 0.8820/30 area, with support still at or around the 0.8690 area. USD/JPY – Slid all the way back to cloud support below 138.00, rebounding from the 137.65 level yesterday, with resistance at the highs this week at 140.80. While below 141.00 the bias remains for a weaker US dollar. FTSE100 is expected to open 33 points lower at 7,336 DAX is expected to open 80 points lower at 14,298 CAC40 is expected to open 40 points lower at 6,601

Retail Sales in the US are expected to rise by 1% following a stagnant September. Risk perception is likely to continue to drive the US Dollar's (USD) valuation. Market participants will pay close attention to the Q3 earnings reports of big retailers.  Retail Sales in the United States (US) are forecast to rise by 1% in October after staying unchanged at $684 billion in September. The US Dollar (USD) has been struggling to find demand following the softer-than-expected Consumer Price Index (CPI) figures for October and the Retail Sales report is unlikely to impact the USD's valuation in a meaningful way. According to the CME Group FedWatch Tool, the probability of a smaller, 50 basis points (bps), Federal Reserve rate increase in December stands at 80%, up significantly from 50% before the October inflation report. Although some FOMC policymakers urged markets not to get ahead of themselves by pricing in a less aggressive tightening outlook, the sharp decline witnessed in the US Dollar Index showed that investors had been looking for an opportunity to unwind crowded Dollar longs. Market implications Since the US Census Bureau's Retail Sales data is not adjusted for price changes, it will not offer an accurate picture of consumer activity. Nevertheless, an unexpected decline in Retail Sales could trigger a "bad news is good news" reaction in financial markets as it would point to a slowdown in consumer demand, which the Fed has been trying hard to achieve by hiking rates. In that scenario, risk flows could continue to dominate the markets and make it difficult for the US Dollar (USD) to hold its ground against its risk-sensitive rivals, such as the Euro (EUR) and the Pound Sterling (GBP). On the other hand, better-than-expected growth in sales could help the USD stage a recovery. However, a USD-positive market reaction should remain short-lived unless there is a noticeable negative shift in risk sentiment. It's worth noting that several big retailers in the US are scheduled to report third-quarter earnings this week. Investors are likely to pay closer attention to these numbers rather than the Retail Sales report. At the time of press, Walmart's shares were up nearly 5% on the day after the retail giant announced that it expects sales in the US to increase by 5.5% in fiscal 2023, compared to 4.5% in the previous earning report. Lowe's, Target and TJX Companies will release earnings figures on Wednesday. Macy's, Kohls, Ross Stores and Gap will report on Thursday before Foot Locker and Buckle Inc. wrap up the week.  To summarize, October Retail Sales report should do little to nothing to influence the market pricing of the Fed's rate. Hence, overall risk perception should continue to drive the US Dollar's action in the short term. In case Wall Street's main indexes remain bullish in the second half of the week with big retailers reporting better-than-forecast earnings, the USD could have a hard time staging a rebound. US Dollar Index technical outlook US Dollar Index trades within a touching distance of 106.00. The 200-day Simple Moving Average (SMA) and the Fibonacci 50% retracement of the March-October uptrend reinforce that support. In case the index drops below that level and fails to reclaim it, it could target 105.00 (psychological level) and 104.00 (Fibonacci 61.8% retracement) next.  On the upside, interim resistance seems to have formed at 107.00 (static level) ahead of 108.00 (Fibonacci 38.2% retracement). With a daily close above the latter, the index could extend its recovery toward 109.00, where the 100-day SMA is located. In the meantime, the Relative Strength Index (RSI) indicator on the daily chart stays near 30, suggesting that there could be a technical correction before the next leg lower.

Markets Just when headlines started to become less frequent and noisy, the situation in Eastern Europe escalated when reports of a Russian missile entered Poland and killed two people. Poland announced they were thinking about evoking article 4 of the NATO agreement, which means they want to talk about it formally and perceive it as the first escalation point. NATO must digest this grave situation before allies move into combat readiness. Even if the missiles that crossed the Polish border were indeed deemed Russian and not Ukrainian anti-missile interceptors, the case would fall short of triggering an escalation at this point; hence the markets are deferring to a wartime mistake believing this to be a case of misfire. The action kicked off the safe-haven trade, driving bond yields lower and firming the US dollar up as traders moved back into wartime headline watch. And US stocks closed off their highs after the report.  As headline cautious investors may be, the immediate follow-through does not suggest increasing market escalation expectations. Beyond a 1.4% rally in EURPLN, the cross-asset impact is not apparent. If traders were even contemplating a full-blown escalation, the landscape would be much more crater-like  While the market is not in full risk-off mode while deferring to a wartime mistake, the risk of a NATO -Russia clash is growing and real. So I suspect headline risk rather than wartime risk could be a more significant impediment over the near term. On the Fed front, Fed Harker also chimed in that he expects the central bank will slow the pace of rate increases in coming months, which only added to the optimism in the dove's camp.   Oil Oil is trading higher in Asia this morning. Despite demand clouds hovering over China, the softer US PPI data provided more signs of cooling inflation, hence a less hawkish Fed and improved chances of a soft landing.  But the uptick in geopolitical risk is driving oil prices more this morning. Brent and WTI climbed quickly following news of a stray Russian missile strike. With Crude Oil at the epicentre of Eastern European risk oil, traders have little choice but to graduate what-if scenarios hedging the potential risk to global oil supplies if this smouldering powder keg ignites.   Forex USD traded bid across the G10 landscape in Tuesday's New York session. After the PPI and manufacturing numbers were printed, the USD knee-jerked lower as it seemed like the numbers were positive for risk and clearer sided with the less hawkish Fed narrative the FX markets are running with. However, the street was quick to fade the move when Russian missile headlines hit. Traders will need to decide to fade or trade quickly, as we are unlikely to sit at these levels for a long time, especially when London walks in 

The Euro has lost some ground against the US dollar after reports that Russian missiles had struck inside the Polish border killing two polish citizens. The reason for the drop in the Euro is because Poland is a NATO member and the potential results of this, yet unverified report, is a retaliation from Polish and/ or NATO forces. Poland has previously noted that they are ready to defend their sovereignty in the face of accidental or purposeful attacks within its borders which could induce NATO forces to join in on the conflict too. NATO and US authorities are currently investigating the report before commenting publicly. It could be that markets wait for confirmation from these two authorities before considering their risk appetite for the Euro the rest of this week. EUR/USD 1H The Euro is still up against the greenback but was registering greater gains before the missile report hit the news flow. The reason for the strength in the Euro is due to the US Producer Price Index (PPI), a measure of wholesale inflation, coming in softer-than-expected. October’s PPI rose +0.2% month-over-month in October of 2022, below market forecasts of +0.4% adding fuel to the theory that inflation in the US has peaked and is now slowing. The EUR/USD was heading toward 1.0500 before investors were spooked by the missile report, sending it as low as 1.0280. It has since recovered to close to the 61.8% Fib level between this recent high and low Previously, the EUR/USD rallied after the release of the US consumer inflation data (on November 11th) which was the first indicator that US inflation has reached its peak. The EUR/USD is still up 2.7% over the week.

Commodity prices across the board have made an explosive start to the month – registering their biggest back-to-back weekly gains on record since 1960. So far this quarter, a total 27 Commodities ranging from the metals, energies to agriculture have tallied up astronomical double-digit single day gains – not once, not twice, but on multiple occasions – outperforming every other asset class out there. Just take last week for example – every possible commodity imaginable from Aluminium, Copper, Palladium, Platinum, Gold, Silver, Lumber, Zinc, Crude Oil to Natural Gas prices surged following Thursday's U.S Consumer Price Inflation data – with a long-list chalking up spectacular gains of 10% or higher – literally in a single day! The exact same thing happened in the previous week, following the U.S employment report. And yes, you guessed it – the week before that too following the Bank of Japan's currency intervention. As a result, there's really nothing historical you can point to for what's going on in markets today. We are routinely seeing Commodities across the sector whip up spectacular back to back gains of 10% or higher, almost on a weekly basis – fuelling an era of enormous wealth creation like we have never seen before. Looking ahead, more big moves could be on the horizon as traders shift their attention to U.S Producer Price Inflation data and the UK Autumn Statement. Last week's cooler-than-expected Consumer Price Inflation data offered some relief to the Fed, potentially indicating that October could be the start of a disinflationary trend that lasts through next year. The headline Consumer Price Index rose less than expected – boosting expectations that supersize rate hikes are likely now in the rear view mirror. This week's hotly anticipated U.S Producer Price Inflation reading will either boost or dampen expectations of a possible Fed "pivot" away from an aggressive interest rate hikes. Elsewhere, this week all eyes will be on the UK Autumn Statement. After the disastrous "mini-budget" in September, which subsequently forced The Bank of England to revert back to unprecedented "Quantitative Easing" measures – this week's Autumn Statement is already gearing up to be a major market-moving event, that traders will not want to miss. Despite short-term UK borrowing costs stabilising since the market meltdown seen in late September, the Chancellor will need to present plans to address the 55 billion pound "black hole" in Government finances. Should the Chancellor's fiscal plan fail to instil confidence, then we could be on for a repeat of September announcement, which sent a long-list of commodities surging to multi-month highs – registering their biggest one-day move this year. Extraordinary times create extraordinary opportunities and right now, as traders we are amidst "one of the greatest eras of wealth creation the world has seen". My advice to you is, do not waste this opportunity! Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

This week, Cable traders will have a lot to look at. Of course the big event later in the week is the long anticipated Autumn Budget that is expected to be released on Thursday. It's not expected to be such a controversial affair this time around, but there are still some pending issues that could shake up the markets. And pending nervousness after what happened last time a new Chancellor announced a spending plan. The main issue is how will Chancellor Hunt balance the books over an expected shortfall of £60B due to slower economic outlook and increasing costs. What has been leaked so far suggests that it will be a combination of higher taxes and spending cuts. While these measures are generally understood to weigh on economic growth, they are also expected to help with the inflation situation. It's stagflation now What happens with the budget is particularly relevant for the BOE, since it is facing something of a crossroads. After UK GDP came in negative for the third quarter, it's expected to show the beginning of the prolonged recession the BOE anticipated. The BOE is also forecasting that inflation will remain in the double digits for a couple of months, and won't start trending lower definitively until the middle of next year. In other words, stagflation. The question is how will the BOE choose to deal with this situation. One way is to raise rates aggressively to kill off inflation, provoking a hard landing for the economy. Another is to try to rescue the economy and let inflation run hot until productivity can increase and stabilize the currency. Both are politically difficult solutions. Since the BOE and the new Chancellor are on the same wavelength, that could work with the Autumn Budget. An "austerity" budget would work with crushing inflation sooner, and shoring up the government's finances for an expected growth strategy later. Though, all of that is in theory; practice might be an entirely different matter. But it's useful to have some insight into how officials are thinking. The data that could shake things up The first bit of important information comes out tomorrow, which are labor figures. Here the market's focus is likely to be on the claimant count numbers, since the employment change and unemployment rates are from previous months. October claimant count is expected to continue its rise and reach 27K, up from 25.5K previously. That would be the largest number of people going on unemployment since March of last year. Wednesday has what could be the market mover in cable this week, which is the release of October inflation, which is expected to move up to 10.6%, and another multi-decade high. That's above the previous 10.1%. The BOE doesn't expect inflation to peak until next year. To tighten or not to tighten Where the BOE could see some relief is in the core inflation rate, which is expected to tick lower to 6.4% from 6.5% prior, the first drop in months. This is likely to have more of an impact on monetary policy, since the BOE appears to be worried about tightening too much, which could impact liquidity in the financial sector. With the government looking to cut spending, liquidity could be even tighter. So, if core inflation starts to move lower (or moves down faster than the market anticipates, like it did in the US), then that opens the very real possibility the BOE could let up on the tightening. That would weaken the pound, and push cable lower.

Bond market returns for 2022 have been horrific, right along the credit curve. For 2023, returns will be helped by a higher starting running yield, and subsequent falls in market rates. Bonds will be a good place to be, especially higher on the credit spectrum. Brace for a reduction in liquidity and more available collateral as key themes, too. The energy crisis this year saw us drawing parallels to the 1970s and 80s. Dollar strength was a net outcome as the Volcker years generated high real rates to kill inflation. The collapse in tech stocks, meanwhile, has struck a similar chord to the dot com boom and bust of 1999/2000. That period also saw the dollar in vogue. And as we pick through the bones of the 2019/20 pandemic fallout, we're reminded of the great financial crisis in 2007/08, as housing markets suffer intense pressure. So many parallels, but none are perfect. Our story for 2023 draws on these, with a modern twist. As we know, history doesn't repeat itself but it often rhymes. Inflation and the Fed funds rate back to the 1970s (%) Source:  Refinitiv, ING So what do we see? The Federal Reserve, the European Central Bank and the Bank of England will all undershoot the current market discount for terminal rates, but we should get quite close to the tops that the market expects. For market rates, we need to see those peaks before we can conclusively declare the top. That implies that market rates should remain under upward pressure at least through the turn of the year, and likely into the early part of the first quarter of 2023. After that, it's all about market rates concluding that if indeed we have peaked, the next move must be down. Actual Fed rate cuts in the second half will solidify this move, even if the ECB decides to stand still. Overall, market rates in the 10yr are projected to fall by some 100bp in 2023 (US by a bit more and eurozone by half that), and the US 2yr should fall by more still if we are right and the Fed does cut in the second half. The US curve should steepen by more than the eurozone curve, as the ECB steers clear from actually cutting rates in 2023. The peak in the Fed funds rate should act to ease the US dollar premium, and we'll see that in an easing in the US dollar cross-currency basis. The second half of 2023 should see some meaningful convergence of eurozone to US market rates. All-in spreads, especially those comprising the Japanese yen basis, should narrow significantly. All-in spreads to dollars, especially those comprising the Japanese yen basis, should narrow significantly The energy crisis in Europe adds to bond supply pressure as economies struggle to deal with recessions while at the same time buffering their economies from higher energy costs. This increase in supply is a driver for a widening in swap spreads, as government bonds at the same time unwind some of the quantitative easing-induced price premiums. Quantitative tightening is also humming in the background but is a much bigger deal in the US relative to the eurozone or the UK. Tighter conditions also contribute to vulnerabilities in the system, a system that is already being stressed by gaps in prices, wider bid/offer spreads and higher bank funding costs. In the US, repo should be pressured higher. While a repeat of the great financial crisis is not anticipated, housing market pressure, resulting in system pressure and decent falls in inflation will ultimately allow the Fed to cut in a dot com bust style, by enough to avert a significant US recession. But recession there will be, with a bigger one in Europe, likely in play before we get to 2023. This all gels with room for decent falls in market rates through 2023. We're not coming off 1970s-style starting points in terms of the level of rates, but we are coming off peaks in market rates that have not been seen since the noughties. The lows won't be as extreme either; we're not heading back down to zero this time. We should stop to the downside with handles of 2% and 3% rather than 0% (or close to) for market rates in the US and eurozone, and with steeper curves to boot. More supply (especially in Europe) and balance sheet roll-off (especially in the US) should allow curves to steepen out Even if inflation gets tamed in 2023, as we expect it will, we now know that an inflation vulnerability is back. That, plus more supply (especially in Europe) and balance sheet roll-off (especially in the US), should allow curves to steepen out, and actual US rate cuts will push in the same direction. While the act...

AUDUSD Current Price: 0.6719 Chinese news keep investors on their toes at the beginning of the week. US Dollar on the back foot amid speculation the US Federal Reserve will pivot. AUDUSD´s bullish potential intact, with near-term support in the 0.6660 price zone. The AUDUSD pair is ending Monday with modest gains in the 0.6710 price zone, pressuring a fresh November monthly high. The pair slid throughout the first half of the day amid US Dollar near-term oversold conditions. Nevertheless, speculative interest saw it as a chance to short further the greenback, which somehow anticipates how things will go, at least until the next US Federal Reserve (Fed) meeting in a month. Hawkish comments from Fed officials may be ignored by market players unless Chief Jerome Powell explicitly says that December will bring a 75 bps rate hike. The focus at the beginning of the day was on China, as the country keeps reporting record coronavirus contagions in Bejing and other big cities. The country has a zero-covid policy, which may lead to stricter lockdowns and the interruption of global shipments. The country reported the October Producer Price Index, which printed at 4.9% YoY, easing from the previous 5.4%. The Australian macroeconomic calendar had nothing to offer, although the Reserve Bank of Australia (RBA) will publish the Minutes of its latest meeting on Tuesday. China will release October Industrial Production and Retail Sales. AUDUSD short-term technical outlook The daily chart for the AUDUSD pair shows that it is battling to extend its rally beyond a mildly bearish 100 SMA while the 20 SMA gains upward traction well below the current level. Technical indicators have lost their bullish strength but hold near overbought readings, in line with another leg higher. The near-term picture shows some divergences, but nothing that could confirm the bullish potential has come to an end. The 4-hour chart shows that the pair is developing well above bullish moving averages,  with the 20 SMA currently at around 0.6600. The Momentum indicator retreats sharply but holds within positive levels, while the RSI indicator remains flat at around 71. Buyers defend the downside at around 0.6660, with more chances of a corrective decline if the pair breaks below it. Support levels: 0.6705 0.6660 0.6615 Resistance levels: 0.6745 0.6780 0.6825 View Live Chart for the AUDUSD  

All eyes on Westminster as we wait to see if Hunt will quell market concerns on the UK's fiscal outlook  As FX trading gets underway in Asia late on Sunday, the dollar has slipped yet again, which is a continuation of the move from last week, when the dollar fell 3.5% on a broad-basis and US stocks surged 6%. The market mood appears upbeat as we start another week, as expectations of a Fed pivot, China dropping its zero covid policy and the Russian withdrawal from the strategically important Ukranian city of Kherson all helping to boost sentiment. The key driver for risk sentiment remains weaker US inflation data, which focussed minds on the longed-for pivot from the Fed to smaller rate increases. This narrative was given a boost on Friday when the University of Michigan consumer confidence indicator for the US came in lower than expected across all measures for November. Right now, weaker data is good news for the market as a slowing economy also builds the case for a Fed pivot. As we start a new week, the UK Chancellor’s Autumn Statement (and UK Budget version 2) is scheduled for Thursday, UK inflation is released, along with a raft of Chinese data, US retail sales and US producer prices. To add a political twist to the mix, the Democrats have won the Senate race in the Midterms after they won Senate seats in Arizona and Nevada, and a Republican victory in House of Representatives has not yet been called.    Democrats hold onto power: the market impact  Looking ahead, the market had been expecting a Republican win in the Midterms, yet that has failed to materialise. For outsiders, this highlights how the Trump brand is now toxic for the Republican party, and with heavy losses dealt to his favoured candidates this has reduced the likelihood that he will run in the 2024 Presidential race. While a divided Washington is usually good news for financial markets, right now the Democrats continue to hold the sway of power, controlling both the White House and the Senate. On the surface, this could be bad news for stocks, however, there are three reasons why this is not such a bad result for US asset prices:  1.   If this causes Trump to step aside from the 2024 Presidential race, then it could signal a return to a more convential and centrist political style in the US. This is good news for financial markets as it makes the future of US politics and policy-making more certain and less wayward, which is surely a good development after the turmoil thrown at financial markets in 2022.  2.   Nancy Pelosi, the Democratic speaker of the House of Representatives, is calling for a vote this year on the US debt ceiling before the new Congress is sworn in. US Treasury Secretary, Janet Yellen, has also said that it would be “great” to get this done this year. No wonder these two key Democratic figures are calling for the vote on the debt ceiling to take place ASAP, the Midterm results mean that the Republicans are not as emboldened as some expect, thus raising the debt ceiling without a standoff or potential tough spending cuts is possible. This eradicates the prospect of a debt ceiling wrangle and a potential US default, which is a good thing for global financial markets.  3.   The prospect of a Fed pivot is still the key driver of markets right now, and that supersedes politics at this stage of the financial cycle. Could weak US retail sales also push the Fed to slow down plans to shrink its balance sheet? We think yes, thus the ‘bad data is good for financial markets’ theme may have some way to go this month.  Overall, political developments in the US also support a continuation of the stock market rally that we saw last week, although we may not get such large moves to the upside as issues remain: weak Q3 earnings  and a weak Q4 outlook, a dreadful outlook for key lead economic indicators such as the semi-conductor industry and the prospect of a weak economic outlook in 2023, which could temper market exuberance in the coming days and weeks.    The Autumn statement: what to expect  The UK is also in focus this week, with the Chancellor’s Autumn Statement due on Thursday. As we mention above, this is the UK’s second attempt at a Budget in just shy of two months after the disastrous mini budget back in September. The mood music is very different this time around, with the Chancellor expected to cut spending and raise taxes for nearly every tax-paying cohort. Accompanying this statement will be the Office for Budget Responsibility’s forecasts for the UK economy, with all eyes on the OBR’s projections for UK debt to GDP...

GBPUSD awaits budget catalyst The pound edges higher as Britain may look to restore markets' confidence with a new budget. Sterling has recouped losses from the September budget firesale. Traders are awaiting a new announcement while riding on the dollar's softness. Heightened volatility could be expected this week as British finance minister Jeremy Hunt presents his plan to fill a £50 billion fiscal hole. After the market sanctioned Mr Kwarteng's unfunded tax cuts, fiscal discipline with a mix of public spending cuts and tax rises would alleviate worries about Britain's finances. 1.2300 is the next hurdle as the recovery goes on. 1.1150 is the closest support. USDJPY tumbles on lower inflation The Japanese yen soared over the prospect of a narrowing interest differential with the US counterpart. Following months of parabolic ride, a weaker US CPI finally gave traders an excuse to exit an overcrowded trade. The market has been watching Japan's falling foreign reserves and pondering whether Tokyo would commit more of its war chest to prop up its currency. But now a greater fall than the one from Japanese authorities' intervention indicates that prolonged weakness has released the reversal tension, making the yen the main beneficiary of the dollar's retreat. 137.00 is the first support and 144.00 a fresh resistance. UK Oil struggles as China's demand worries Oil markets cheered after China announced an easing of some of its COVID curbs. Brent crude has been going sideways over demand concerns. China's zero-COVID policy and a resurgence in infections in major cities remain a thorny problem. Now that the manufacturing centre of Guangzhou has become ground zero, expectations of a slowdown in China's activities and its appetite for the commodity put the buy side on the defensive. Meanwhile, global supply has kept up with US crude stocks surprisingly rising to a 16-month high. The supply demand imbalance may cap the price under 105.00. 84.00 is a key support to monitor. Nasdaq 100 recovers on renewed Fed pivot hopes The Nasdaq 100 bounced back as hopes of peaking inflation took a foothold. With US CPI coming in below 8% for the first time in eight months, investors have regained faith in a policy U-turn by the Fed sooner than later. Plunging Treasury yields suggests that the central bank could live with a 50bp rate hike in December, rather than a 75bp one. However, the bounce could be opportunistic as it might take multiple sets of data over the next few months to make the Fed change its mind. The pivot may only happen when there is a consistent deceleration in inflation. The index is heading towards 12800 with 10500 as a fresh support.