FOREX: Buoyant Equity Sentiment Unable to Dent Dollar Optimism
Nov-24 17:49
- The positive impulse for the major equity benchmarks on Monday has had very little effect on the dollar, as the USD index remains close to unchanged levels on the session. This keeps the DXY within close range of the recovery highs.
- Additionally, the uncertainty surrounding the Fed’s December decision in the absence of fresh data also provides a moderately supportive dollar tone. A break above 100.48 (May 29 high) would be a broader bullish development for the index.
- These dynamics have allowed USDJPY (0.30%) to extend its impressive post-election surge to around 6.3%, while positioning dynamics have also played their part, as the likes of USDZAR and USDBRL were among the best performing pairs last week.
- Geopolitics remain in focus for the Euro as European officials managed to push for some amendments on the Russia / Ukraine ceasefire deal proposed by the US. This initially provided a moderate boost for the single currency, with EURUSD rising to 1.1550 before reversing around 30 pips to current levels as we approach the APAC crossover.
- Overall, EURUSD continues to threaten a more meaningful break below the 1.15 handle and sights remain on key support at 1.1469, the Nov 5 low and a bear trigger.
- Amid the supportive tone for the greenback, USDCAD has spent the majority of Monday’s session consolidating back above 1.41, which keeps a bullish theme intact. Sights are on 1.4140, the Nov 5 high as the next important resistance. Note too that the top of the bull channel, drawn from the Jul 23 low, has moved up to 1.4185 and also represents a key resistance.
- For GBPUSD, spot has consolidated its bounce back to 1.31, leaving the pair around 90 pips above the cycle lows ahead of this week’s UK budget. Key short-term resistance is at the 20-day EMA, at 1.3167.
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FED: MNI Fed Preview - October 2025: QT, Or Not QT
Oct-24 21:06
MNI's preview of the October FOMC has been published - Download Full Report Here
- The Federal Reserve is overwhelmingly expected to cut the funds rate by 25bp for a 2nd consecutive meeting on October 29, bringing the target range to 3.75-4.00%.
- This will again be framed as a risk management cut, with the limited data available since the September meeting not disconfirming that the shift in the balance of risks had tilted toward labor market downside.
- Dissent to this decision should once again be limited to Gov Miran in favor of a 50bp cut.
- With limited new developments and official data to opine on, Chair Powell’s press conference will be eyed for affirmation that a December cut remains on track, as signalled by the most recent Dot Plot.
- He’s unlikely to give much away, but it would be surprise given the lack of data and relevant developments if he suggested that a further 2025 cut was in any greater doubt than it was 6 weeks earlier.
- Instead, we think focus in terms of action at this meeting will be on the balance sheet, with the Fed likely to announce an end to quantitative tightening amid diminishing reserve levels and nascent evidence of funding market pressures.
- We will also be watching for any news on the Fed’s communications framework, with an updated “Dot Plot” potentially unveiled at some point by year-end.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Oct 27
RATINGS: Moody's Lowers France's Outlook To Negative, Maintains Aa3 Rating
Oct-24 20:55
Moody's has lowered its outlook on France to negative from stable.
- Moody's was expected to at least lower the outlook, so this is not a surprise - there had been some risks perceived of a downgrade to A1 (from Aa3) in the domestic and foreign currency long-term issuer and domestic-currency senior unsecured ratings.
- Per the Moody's release: "The decision to change the outlook to negative reflects the increased risk that the fragmentation of the country's political landscape will continue to impair the functioning of France's legislative institutions. This political instability risks hampering the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs, thus leading to a more rapid weakening in France's key fiscal metrics than we currently expect."
- Both S&P and Fitch have already downgraded France’s sovereign rating to the single-A bucket this year.
USDCAD TECHS: Corrective Pullback
Oct-24 20:00
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4167 50.0% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.4111 High Apr 10
- RES 1: 1.4080 High Oct 16 and the bull trigger
- PRICE: 1.4016 @ 16:33 BST Oct 24
- SUP 1: 1.3979/3907 20- and 50-day EMA values
- SUP 2: 1.3829 Bull channel base drawn from the Jul 23 low
- SUP 3: 1.3769 Low Sep 19
- SUP 4: 1.3727 Low Aug 29 and a bear trigger
USDCAD has pulled back from its recent highs. The trend condition is bullish and a move lower is considered corrective. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4111, the Apr 10 high, and further out, scope is seen for an extension towards 1.4167, a Fibonacci retracement. First key support lies at 1.3907, the 50-day EMA. Support at the 20-day EMA lies at 1.3979.
