Dollar Index:
As of November 20, 2023, several key events and news are impacting the price of the US dollar (USD):
Federal Reserve’s Rate Hike Cycle: The USD has been losing ground on speculation that the Fed is nearing the end of the rate-hike cycle. The speculation is based on a three week stock rally. The dollar dropped for the third day to its lowest level since August.
- Federal Reserve’s Monetary Policy: Effective exchange rate of the US dollar has increased more than 8% against other major currencies due to the decision of the Federal Reserve to increase interest rates since March 2022. This could act as a dampener on US tradable-goods prices.
- Global Commodity Prices: During the period from March 2022 to October 2023, the global all commodities price index in US dollar terms fell over 30%. This is because high interest rates lead to low prices of these commodities that would affect the USD.
- Inflation Figures: US CPI report revealed that inflation was back on a declining path towards normal rates. As a result, the market confirmed the conviction that the Federal Reserve had finished adjusting the interest rates and the USD kept on dropping.
- Consumer Spending: Nearly a quarter of holiday spending by US consumers in November and December will be spent on immersive experiences in an effort to offset the shift in spending from goods to services in a post-pandemic economy. However, this shift in consumer spending might hit the USD.
Such events and news indicate a very interwoven scenario of what is currently moving the price of the USD. Note, that several variables affect the prices of currencies and they change rapidly when economic indicators, the market mood, and world events shift.
Upcoming Events for the week:
As we move into the week of November 21, 2023, the currency markets are bracing for a series of high-impact economic data releases. On Tuesday, November 21, traders will scrutinize the Existing Home Sales figures in the US, with the previous month-on-month (MoM) figure at -2% and the consensus expecting a slight contraction to -1.3%. Should the actual data outperform the consensus, indicating a resilient housing market, we might see a bullish reaction for the USD. Conversely, a sharper decline could exacerbate concerns about a cooling economy, potentially leading to USD weakness.
The minutes from the Federal Open Market Committee (FOMC) meeting are due on the same day and are always eagerly anticipated for hints on future monetary policy. The previous dovish stance has kept interest rates lower, but any hawkish shift, suggesting rate hikes, could propel the USD upward. On Wednesday, November 22, the UK will release its Autumn Statement; a reassuring fiscal outlook could strengthen the GBP, especially if combined with positive Durable Goods Orders from the US, where a significant increase from the previous -0.7% to 5.8% (ex-Defense) is anticipated. If these numbers are realized or exceeded, the GBP/USD pair could experience increased volatility, with a stronger GBP against the USD. Throughout the week, the focus will also be on the job market with the US Jobless Claims and Continuing Claims reported on November 22.
The Jobless Claims are expected to be 220,250, slightly less than the previous 223,750, and Continuing Claims are projected to be 1865K, a marginal change from 1875K. These numbers will provide insights into the labor market’s health; lower-than-expected claims might suggest economic strength and bolster USD, whereas higher figures could raise concerns about economic recovery, potentially leading to USD selling pressure. For the EUR pairs, the PMI data scheduled for release on Thursday, November 23, will be critical. The Manufacturing PMI is expected to be slightly higher at 43.4 compared to the previous 43.1, and Services PMI is forecasted to be stable at 48.1. Should these figures come in above the forecast, it could be a boon for the EUR, especially against the USD, which will also be weighed by its own domestic data. However, if the PMIs falter, the EUR could lose ground, particularly against the traditionally safe-haven JPY, ahead of Japan’s Inflation Rate Year on Year (YoY) data set to be released on Friday, November 24, with an expectation of a 3% increase, up from the previous 3.2%.
EUR USD Outlook:
The EUR/USD currency pair will be impacted by several important economic events and data releases scheduled for the upcoming week. These events can influence the exchange rate between the Euro (EUR) and the US Dollar (USD). Let’s analyze how each of these events may affect the currency pair:
Firstly, the High Impact on EUR/USD:
1. HCOB Services PMI and HCOB Manufacturing PMI (Nov) in the Eurozone (11/23/2023): These Purchasing Managers’ Index (PMI) reports indicate the health of the services and manufacturing sectors in the Eurozone. Any deviation from expectations can lead to volatility in EUR/USD. If the numbers come in better than expected, the Euro may strengthen against the US Dollar, and vice versa.
2. ECB Guindos Speech (11/24/2023): Speeches by European Central Bank (ECB) officials can provide insights into monetary policy and economic conditions in the Eurozone. Traders will closely watch for any hints about future policy decisions. Positive or hawkish remarks from Guindos may boost the Euro’s value.
Secondly, the High Impact on EUR/USD from the US:
1. Initial Jobless Claims (Nov/18) (11/22/2023): The number of initial jobless claims in the US reflects the labor market’s health. A lower number indicates a stronger job market, potentially strengthening the USD. Conversely, higher-than-expected claims could weaken the USD and push EUR/USD higher.
2. S&P Global Manufacturing PMI and S&P Global Services PMI (Nov) (11/24/2023): These PMI reports measure the health of the US manufacturing and services sectors. Better-than-expected figures may lead to USD strength and a decrease in EUR/USD, while weaker data could weaken the USD and support EUR/USD.
Lastly, the Moderate Impact on EUR/USD:
1. Existing Home Sales MoM and Existing Home Sales (Oct) (11/21/2023): These reports provide insights into the US housing market. A positive surprise in home sales data could boost confidence in the US economy, potentially strengthening the USD against the Euro.
In summary, EUR/USD is likely to be most influenced by Eurozone PMI reports, ECB speeches, and US jobless claims and PMI data. Traders will closely monitor these releases for any deviations from consensus estimates, as these deviations can lead to significant price movements in the currency pair. Positive surprises for the Eurozone and negative surprises for the US can be expected to strengthen the Euro against the US Dollar, while the opposite holds true as well.
EUR/USD Technical Snapshot:
Scenario 1: Bullish Movement
- Potential upward movement to test levels from 1.09829 to 1.10529 and further up to 1.11191.
Scenario 2: Bearish Movement
- Possibility of a decline to test levels 1.08850.
- If bearishness continues, further tests expected at 1.08393, followed by a significant support at 1.07708.
Market Momentum & RSI
- Short-term momentum: bullish range, with an increasing momentum observed on the weekly timeframe.
- RSI is in the increasing zone, indicating potential short-term bullishness.
- Possible trading range could be anticipated based on current market conditions and technical indicators.
GBP USD Outlook:
The GBP/USD currency pair will be influenced by several key economic events and data releases during the upcoming week.
Firstly, the High Impact on GBP/USD:
UK Autumn Statement (11/22/2023): The UK Autumn Statement is a crucial fiscal event where the government outlines its economic plans and budget. Any announcements regarding fiscal policies, spending, or economic projections can affect investor sentiment towards the British Pound. Positive fiscal measures may strengthen GBP/USD, while concerns over economic stability can lead to weakness.
S&P Global/CIPS Manufacturing PMI and S&P Global/CIPS Services PMI (Nov) in the UK (11/23/2023): These PMI reports gauge the health of the UK’s manufacturing and services sectors. A higher-than-expected PMI reading can indicate economic growth, potentially boosting the Pound. Conversely, weaker-than-expected data can weigh on GBP/USD.
In the context of the US economy, the Consumer Price Index (CPI) and Inflation Rate data, scheduled for release on November 14, are crucial. These are key measures of inflation and significantly influence the Federal Reserve’s monetary policy. An increase in CPI or a higher than expected inflation rate could lead to expectations of more aggressive interest rate hikes by the Fed, which would typically strengthen the USD. If the inflation data comes in below expectations, it could lead to a weaker Dollar, as it may suggest a more dovish approach by the Fed.
Secondly, the Moderate Impact on GBP/USD:
- HCOB Manufacturing PMI and HCOB Services PMI (Nov) in the Eurozone (11/23/2023): Although these reports pertain to the Eurozone, they can indirectly impact GBP/USD as the Euro and the Pound are closely related currencies. Any significant surprises in Eurozone PMIs may affect overall market sentiment and influence GBP/USD.
In summary, the most critical events for GBP/USD are the UK Autumn Statement and the UK PMI reports. Traders and investors will closely monitor these releases for any deviations from consensus forecasts. Positive economic data or favorable fiscal measures from the UK government can strengthen the British Pound against the US Dollar, while weaker data or concerns over the UK’s economic outlook can lead to GBP/USD depreciation. Additionally, events in the Eurozone, such as the Eurozone PMIs, can indirectly impact GBP/USD due to their interconnectedness in the foreign exchange market.
GBP/USD Technical Snapshot:
Scenario 1: Bullish Movement
– Possible upward retest at 1.2541, aiming for resistance at 1.2600, 1.2640, with a critical point at 1.2700.
Scenario 2: Bearish Movement
– Downward trend could test support at 1.2437.
– A breach of this level may lead to further decline towards 1.2383.
– Continuation of bearish momentum might drop prices into the range of 1.2340.
– Major support levels span from 1.2287
Market Conditions and Indicators
– Currently, the pair is above both the 50-day and 200-day moving averages, signaling a bullish but range bound trend.
– The market is strongly above to the 50-day MA, hinting at a possible shift in direction.
– RSI is trending towards the decreasing region, indicating potential downard pressure.
– Despite the downtrend in momentum, traders should remain cautious of a potential bullish short term reversal.
USD/JPY Outlook:
The USD/JPY currency pair will be influenced by several significant economic events and data releases in the upcoming week. These events can have a notable impact on the exchange rate between the US Dollar (USD) and the Japanese Yen (JPY). Let’s analyze the most important events and their potential effects:
Firstly, the High Impact on USD/JPY:
Inflation Rate YoY (Oct) in Japan (11/24/2023): The inflation rate measures the change in consumer prices over a year. A higher-than-expected inflation rate can suggest rising prices and may lead to speculation about potential changes in the Bank of Japan’s monetary policy. Higher inflation could support the Japanese Yen against the US Dollar, while lower inflation may weaken it.
FOMC Minutes (11/21/2023): The release of the Federal Open Market Committee (FOMC) meeting minutes provides insights into the US Federal Reserve’s monetary policy discussions. Any hints or surprises related to interest rates, tapering of asset purchases, or economic outlook can significantly impact USD/JPY. Hawkish comments or indications of tighter monetary policy can strengthen the USD, while dovish remarks may weaken it.
S&P Global Manufacturing PMI and S&P Global Services PMI (Nov) in the US (11/24/2023): These PMI reports measure the health of the US manufacturing and services sectors. Better-than-expected PMI readings may indicate economic growth, potentially boosting the US Dollar against the Japanese Yen. Conversely, weaker data can lead to JPY strength against the USD.
Secondly, the Moderate Impact on USD/JPY:
- Jobless Claims (Nov/18) and Continuing Jobless Claims (Nov/11) in the US (11/22/2023): These reports provide insights into the US labor market. Lower jobless claims and continuing claims suggest a healthy job market, potentially strengthening the USD. Conversely, higher claims can weaken the USD.
In summary, the most critical events for USD/JPY are the Inflation Rate in Japan, FOMC Minutes, and US PMI reports. Traders and investors will closely monitor these releases for any deviations from consensus forecasts. Positive inflation data in Japan or hawkish signals from the FOMC may support the Japanese Yen against the US Dollar, while strong US PMI data can lead to USD strength. Conversely, weaker-than-expected data or dovish comments can weaken the USD and favor JPY strength. Additionally, jobless claims data can provide further insights into the USD/JPY pair’s performance.
USD/JPY Technical Snapshot
Scenario 1: Bearish Movement
– Potential decline towards 147.500, with additional tests at 147.684.
– Further decrease might target ranges between 147.617 to 147.256.
– Critical support found at 147.010, and major support level established at 146.945.
Scenario 2: Bullish Movement
– Possibility of an upswing to retest 148.753.
– Success here could propel prices towards 149.213 and then 149.990.
– Surpassing these levels might result in a test of the 150.256 benchmark.
Market Conditions and Indicators
– The pair is navigating strongly below the 50 and 200-day moving averages, indicating a bearish range momentum.
– RSI is currently in the decreasing , hinting at potential bearish range-bound movements.
– Overall, the market maintains bearish short-term momentum
XAU/USD Outlook:
Firstly, the High Impact on XAU/USD:
FOMC Minutes (11/21/2023): The Federal Open Market Committee (FOMC) meeting minutes can have a substantial impact on gold prices. Any indications of dovishness or concerns about economic stability from the Federal Reserve may weaken the US Dollar (USD) and boost the appeal of gold as a safe-haven asset. This can lead to an increase in the price of XAU/USD.
ECB Guindos Speech (11/24/2023): Speeches by European Central Bank (ECB) officials can influence market sentiment. If ECB Vice President Luis de Guindos makes hawkish remarks or discusses potential changes in monetary policy that strengthen the Euro (EUR), it could put downward pressure on the price of gold, as gold is denominated in USD and a stronger EUR tends to weaken the USD.
Additionally, the U.S. Initial Jobless Claims data for the week ending November 11, to be released on November 16, can influence gold prices. Higher than expected jobless claims can indicate weakness in the labor market, potentially leading to a weaker USD and higher gold prices. Lower jobless claims, indicating a strong labor market, could strengthen the USD, applying downward pressure on gold prices.
Lastly, the Eurozone CPI for October, due on November 17, while not directly impacting the XAU/USD pair, can influence global market sentiment. Higher inflation in the Eurozone could increase gold’s appeal as a global inflation hedge, potentially raising its price. Conversely, lower inflation could reduce the need for an inflation hedge, potentially lowering gold prices.
In conclusion, these events offer critical insights into the economic conditions of the U.S. and globally. Any significant deviations from the expected data can result in volatility in the XAU/USD pair. Investors and traders in gold should closely monitor these events as they can provide opportunities for strategic decision-making based on their implications on inflation, economic health, and market sentiment.
Gold Price Technical Snapshot:
Scenario 1: Bullish Continuation
– Initial upward movement towards 1977.
– Further progression might aim for 1989.
– Persistent bullish momentum could lead to tests of 1991, with significant level at 2003 to watch.
Scenario 2: Bearish Reversal
– Potential decline to 1970.
– Continued bearish pressure might target 1963.50, a crucial support level.
– Further downside could find support in the range of 1953.50 to 1946.50
Market Conditions and Indicators
– Price is trending above both the 200-day and 50-day moving averages, suggesting a bullish market sentiment within a bearish trend.
– The long-term trend remains bullish range bound
Volatility Considerations:
Federal Reserve’s Monetary Policy Decisions (FOMC Minutes Release)
- The release of the FOMC minutes is a primary driver of volatility, especially for the USD. These minutes offer critical insights into the Federal Reserve’s perspective on the economy, inflation, and future interest rate decisions. Any unexpected hawkish or dovish tones can lead to significant market reactions, impacting not only the USD but also correlated markets. For instance, a more hawkish than anticipated stance could boost the USD, while a dovish tone might weaken it.
Eurozone PMI Reports and ECB Speeches
- The Purchasing Managers’ Index (PMI) reports from the Eurozone and speeches by European Central Bank (ECB) officials hold substantial sway over the EUR/USD pair. Positive or higher-than-expected PMI numbers or hawkish comments from ECB officials could lead to a strengthening of the Euro against the USD, introducing volatility in the EUR/USD pair. Conversely, weaker PMI data or dovish ECB remarks could result in the Euro losing ground.
UK Economic Announcements (UK Autumn Statement and PMI Reports)
- For the GBP/USD pair, the UK Autumn Statement and PMI reports are critical. These events provide insights into the UK’s fiscal and economic health. Positive fiscal measures or higher-than-expected PMI readings can boost the Pound, while negative fiscal news or disappointing PMI data can lead to a weaker GBP. Such announcements can induce notable fluctuations in the GBP/USD exchange rate.
Global Commodity Prices and Inflation Data
- The global commodity prices, influenced by the USD’s strength, and inflation data from major economies, play a crucial role in market volatility. For example, a decrease in global commodity prices can affect the USD. Simultaneously, inflation figures, such as the US CPI, can influence the Federal Reserve’s rate decisions, thereby impacting currency valuations and introducing volatility across various currency pairs and the commodities market.
Disclaimer: This is not an Investment Advice. Investing and trading in currencies involve inherent risks. It’s essential to conduct thorough research and consider your risk tolerance before engaging in any financial activities.
