FOREX: Dollar Downside Momentum Stalls, USDJPY Extends Post-NFP Bounce
- The US dollar trades with a much more constructive tone on Wednesday, prompting a near 0.8% recovery for the DYX from the post-NFP lows. It appears the limited market shift in rates expectations has frustrated the weakening dollar trend into the release, with short-term positions potentially getting squeezed ahead of tomorrow’s CPI release. There was not enough in yesterday’s data to move the dial for the Fed, understandable given the very weak NFP print for October (-105k) was entirely down to the government job losses released to voluntary resignations.
- Additionally, greenback relief may have been boosted by next Fed Chair dynamics - given Hassett no longer remains the clear favourite to take the helm next year. Warsh and Waller are both seen as equally likely candidates, providing a degree of renewed optimism, however short-lived that may be.
- Finally, while U.S. President Trump ordering a "blockade" of all sanctioned oil tankers entering and leaving Venezuela has not impacted risk sentiment through an equity lens, risk off reverberations could be providing an additional positive dollar impulse on Wednesday.
- USDJPY stands a notable 110 pips above yesterday’s lows at 155.50. Spot traded to within 5 pips of the Dec 05 lows of 154.35 yesterday, bolstering the significance of this area of support ahead of the US data and the BOJ on Friday.
- Furthermore, the 50-day EMA has also held, intersecting just above the 154.00 handle. A clear breach of this average is required to undermine the bull theme and signal scope for a deeper corrective pullback.
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MACRO OUTLOOK: EC Autumn Forecasts: Inflation Revision Excludes ETS2 Delay
The European Commission's Autumn economic projections see the inflation outlook up slightly from its earlier forecasts in the Spring.
- Headline euro area inflation is now projected to decline from 2.1% in 2025 to 1.9% in 2026 and edge up again to 2.0% in 2027 (Spring forecast: 2.1% 2025, 1.7% 2026), although "on a quarterly basis, inflation is set to hover around the ECB’s 2% target throughout the forecast horizon," the Commission said.
- The forecasts assume that ETS2 will come into force in 2027, despite the Nov 5 decision of EU states to suspend the trading scheme for a year to 2028, a decision which the European Parliament has subsequently approved. ETS2 is estimated to lift consumer energy prices over the course of 2027 by around 3% in the euro area, with the ECB expecting it to add about 0.3pp to headline inflation in 2027 under actual current legislation.
- Driven by stronger-than-expected growth over recent quarters, the Commission also expects GDP growth of 1.3% in 2025, 1.2% in 2026, and 1.4% in 2027 (Spring forecast: 0.9% 2025, 1.4% 2026), noting that growth has proved resilient even after front-loading effects ahead of US tariffs effects have been taken into account.
- The forecasts have a cut-off date on all assumptions of October 27.
- Full forecast table below (source: EC)
COMMODITIES: Sell-Off in WTI on Nov 12 Strengthened a Bearish Theme
A sell-off in WTI futures on Nov 12 strengthens a bearish theme. A continuation lower would pave the way for a move towards key support and the bear trigger at $55.96, the Oct 20 low. Clearance of this level would confirm a resumption of the downtrend. Note that it is still possible a bullish corrective cycle remains in play. Resistance to watch is $62.59, the Oct 24 high. Clearance of this hurdle would signal scope for a stronger correction. Gold is trading below last week’s high. The downleg between Oct 20 and 28, appears to have been a correction and has allowed an overbought condition to unwind. Recent gains suggest that correction is over. Key support lies at the 50-day EMA, at $3927.5. Clearance of this EMA would signal scope for a deeper retracement. For bulls, a resumption of gains would pave the way for a test of $4381.5, the Oct 20 high and bull trigger.
- WTI Crude down $0.43 or -0.72% at $59.67
- Natural Gas down $0.08 or -1.71% at $4.49
- Gold spot down $0.54 or -0.01% at $4083.58
- Copper down $2.05 or -0.4% at $504.1
- Silver up $0.47 or +0.93% at $51.0467
- Platinum up $5.44 or +0.35% at $1550.71
EQUITIES: Eurostoxx Futures Trend Bullish Despite Latest Pullback
A medium-term bull trend in Eurostoxx 50 futures remains intact and last week’s gains reinforce bullish conditions. However, the latest pullback suggests the start of a corrective phase. Price has traded through the 20-day EMA. Attention is on support at the 50-day EMA, at 5604.85, and 5599.00, the base of a bull channel drawn from the Aug 1 low. These two price points represent key support. A break would highlight a stronger reversal. The trend condition in S&P E-Minis remains bullish and the latest selloff appears corrective - for now. Support at the 50-day EMA, at 6730.32, has been pierced, however, price is once again trading above the average. The next key support to watch is 6655.50, the Nov 7 low. Friday’s price pattern is a doji candle - a reversal signal. Initial firm resistance to watch is 6900.50, the Nov 12 high. A breach of this level would be bullish.
- Japan's NIKKEI closed lower by 52.62 pts or -0.1% at 50323.91 and the TOPIX ended 12.28 pts lower or -0.37% at 3347.53.
- Elsewhere, in China the SHANGHAI closed lower by 18.457 pts or -0.46% at 3972.035 and the HANG SENG ended 188.18 pts lower or -0.71% at 26384.28.
- Across Europe, Germany's DAX trades lower by 30.1 pts or -0.13% at 23846.65, FTSE 100 lower by 8.55 pts or -0.09% at 9689.9, CAC 40 down 7.69 pts or -0.09% at 8162.4 and Euro Stoxx 50 down 16.99 pts or -0.3% at 5676.78.
- Dow Jones mini up 63 pts or +0.13% at 47289, S&P 500 mini up 33 pts or +0.49% at 6787.75, NASDAQ mini up 192.5 pts or +0.77% at 25285.5.
