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The Week Ahead – Lingering optimism

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Key data release 10-11-2023
GBPUSD softens over weak outlook

GBPUSD- chart-2023-11-10

The pound stalls as traders fret about Britain’s economy flat-lining longer than its peers. A recent survey showed that consumer spending in the UK has slowed down leading up to the Christmas season, reflecting the cost of living and the impact of the Bank of England’s 14 consecutive rate hikes. The triple set of data of employment, inflation and retail sales will direct the price action, bar any surprise from the dollar side. A sustained cooldown in those numbers might cement the hope that the BoE would sit tight well into next year, raising the odds of rate cuts sooner. The price is hovering above 1.2000 and 1.2500 is the first hurdle.

USDJPY tests 12-month high on intervention worries

The Japanese yen weakens as the inflation trend gives the BoJ little incentive to act. In his recent comment, Bank of Japan Governor Kazuo Ueda stressed that ending ultra-loose policy will depend on the trend of real wages. However, inflation-adjusted wage growth is expected to remain feeble and imported inflation from previously soaring commodity prices is mostly noise for policymakers unless it implies an uptick in robust domestic demand. Low volatility near last year’s peak of 152.00 suggests that market participants are still wary of an intervention from the Japanese authorities. 147.50 is the closest support in case of pullback.

XAUUSD consolidates ahead of US inflation


Gold seeks to hold onto gains as US Treasury yields fall from their recent highs. Markets widely believe that the Fed will hold interest rates steady at its December meeting and officials’ remarks are merely a sideshow especially if they maintain the habitually balanced tone. A retreating long-term bond yield and US dollar tandem would sustain capital flows into the precious metal unless the upcoming US CPI offers an upside surprise. Meanwhile, the risk premium gold enjoyed at the start of the Israel-Hamas war is receding as traders price down an escalation in the conflict. The price is holding above 1900 and 2080 is a major ceiling.

NAS 100 bounces in hope of softer data


The Nasdaq 100 edges higher as the market wagers on softening economic fundamentals in the US. The price action has ebbed and flowed in the wake of Fed officials’ comments with Chair Jerome Powell lately insisting that interest rates may not be high enough to stifle inflation. It seems that policymakers are actively trying to deter rate cut expectations. However, equity investors have something else in mind and hope that a steady cooldown of the US economy, notably with the loosening of the labour market would gradually shift the tone in the Fed’s rhetoric. 15900 is a major ceiling ahead and 14650 the first support.

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