AUD/USD gains momentum on Tuesday as new USD selling materializes. The Dollar is affected by bets on less aggressive Fed rate rises and a rebound in risk sentiment. The COVID-19 problems in China should stop the positive developments and hinder Australian efforts.
On Tuesday, there is some dip buying in the AUD/USD pair at the 0.6640 level, which stays in a purchasing mood into the early European session. Spot prices are back above the 0.6700 level thanks to the upward intraday movement, aided by the resurgence of new US Dollar selling.
The AUD/USD pair is given some support due to several variables hindering Greenback’s ability to profit from the goodish overnight recovery from the crucial 200-day Simple Moving Average (SMA). Market expectations for a modest 50 basis point rate increase in December were reinforced by a dovish evaluation of the November FOMC meeting minutes published last week. This weakens the safe-haven USD and helps the risk-averse Aussie, combined with a minor improvement in the global risk mood.
However, the deteriorating COVID-19 scenario in China should temper any bullish market movement and act as a drag on the Australian Dollar, which serves as a proxy for China. In reality, China recorded a record-breaking number of COVID-19 infections on Monday, and the enactment of additional restrictions sparked a wave of unrest in several places. This intensifies concerns about a further downturn in economic activity and might affect market sentiment in the future.
Furthermore, the overnight hawkish remarks from significant FOMC members should restrict the Dollar’s fall and further limit the AUD/USD pair’s gain. It is important to remember that James Bullard, the president of the St. Louis Federal Reserve, John Williams, and Lael Brainard, the vice chair of the Fed, all reaffirmed that there would be more rate increases. Thus, bold bullish traders should be cautious and take positions for future profits.
However, the AUD/USD pair seems to have ended a two-day losing trend and is still at the whim of USD price movements. The publication of the US Consumer Confidence Index by the Conference Board is currently anticipated by market players as a potential catalyst later in the early North American session. However, attention will continue to be on Wednesday’s speech by Fed Chair Jerome Powell and this week’s important US economic data, such as the NFP report on Friday.
In this article, we have covered the highlights of global market news about the USD/JPY, NZD/USD, GBP/USD and EUR/USD.
USD/JPY: A drop below 137.00 would seem unfavorable – UOB
While a steeper decline to the 137.00 level appears unfavorable in the near term, USD/JPY is still under pressure for the time being, according to UOB Group economists Lee Sue Ann and Quek Ser Leang.
24-hour perspective: “Yesterday, US Dollar fell steeply but only for a moment, to 137.48, before exploding higher. With the comeback, downward pressure has subsided, and the US Dollar has entered a consolidation period. In other words, the USD will probably move sideways today and is predicted to trade between 138.20 and 139.30.
Next 1-3 weeks: “In our most recent narrative, published last Thursday (November 24, with the spot price at 139.20), we maintained the position that the risk for the US Dollar has changed to the downside, approaching 137.70. The USD fell to 137.48 yesterday (November 28) before rising. Even while more USD decline is not ruled out, the likelihood of the USD falling to the next support around 137.00 is low due to declining negative momentum and oversold circumstances. Overall, the only way to know that the US Dollar is not losing further ground is if it breaks over the “strong resistance” level of 139.60.
NZD/USD: Positive impetus wanes – UOB
According to UOB Group economist Lee Sue Ann and market strategist Quek Ser Leang, NZD/USD is expected to trade between 0.6100 and 0.6240 during the following weeks.
24-hour view: “The steep decline in the New Zealand dollar to a low of 0.6156 seems exaggerated. However, NZD may go below 0.6140 since there is no indication of stabilisation. It seems doubtful that the primary support at 0.6100 will be compromised. The NZD is unlikely to decline much more if 0.6210 (a minor resistance level at 0.6190) is broken on the upside.
The NZD failed to hold onto its gains after hitting a high of 0.6289 last Thursday (November 24), and it also drastically declined by 1.38% yesterday (NY close of 0.6161). NZD is anticipated to stabilise and trade between 0.6100 and 0.6240 for the time being as upward momentum has stalled.
GBP/USD: Room for additional decline until year’s end, according to ING
Late on Monday, the GBP/USD exchange rate fell under 1.1950 before turning around early on Tuesday. ING economists predict that the pound will continue to be unstable until the end of the year.
The testimony of Bank of England Governor Andre Bailey is highlighted. “A big change in Bailey’s policy language two weeks before the BoE meeting seems improbable, but the close closeness to the meeting also implies that markets often overread MPC members’ remarks. In our judgement, a 50 bps hike is more plausible than a 57 bps increase, which markets are presently pricing.
“Cable has retreated below 1.2000 as the Dollar gained a little ground, and we see opportunity for additional decline through the end of the year as the greenback finds more support and the Pound suffers from a gloomy UK economic outlook,” said the author.
EUR/USD: Commerzbank predicts that the Euro will decline due to easing Eurozone inflation figures.
The ECB’s hawkish remarks continue to draw attention. According to Commerzbank analysts, however, the Eurozone’s November inflation data may influence rate dreams about lowering inflation.
It is anticipated that eurozone inflation decreased marginally in November. “Speculation regarding a 75 bps move has increased due to recent hawkish ECB statements. If the inflation numbers surprise on the upside today, tomorrow, and especially, speculation is likely to grow.
“A surprise on the upside on the inflation front may eventually drive the pair beyond this threshold,” said a trader after the EUR/USD made another effort to reach 1.05 yesterday but ultimately failed.
We anticipate that Eurozone inflation will have marginally decreased in November, along with the majority of experts surveyed by Bloomberg. If today’s German data were to support that, rate fancies on the market and the Euro might be dampened. However, negative pressure on the Euro will probably be restricted because of the ECB’s hawkish remarks and the still-high inflation rate.
Please click here for the Market News Updates from 28 November, 2022.
How to Use Both Fundamental and Technical Analysis in Foreign Exchange Trading?
Which kind of analysis is preferable for a trader is a topic of intense discussion. Which kind of trader is preferable, fundamental or technical? This essay will examine the distinctions between these two categories of traders and the sorts of data that forex traders, in particular, like.
Comparison between technical and fundamental analyses
TECHNICAL ANALYSIS
FUNDAMENTAL ANALYSIS
Definition
Forecast price movements using chart patterns
Various economic data used to establish value/ target price
Data considered
Price action (charts)
Inflation, GDP, interest rates etc
Time horizon
Short, medium and long term
Medium and long term
Skillset required
Chart analysis
Economics & statistical analysis
FUNDAMENTAL ANALYSIS
Fundamental analysis entails evaluating a nation’s economy and its currency. It does not account for changes in currency rates. Fundamental forex traders will instead utilize data points to assess a currency’s strength.
The inflation rate, trade balance, gross domestic product, employment growth, and even the benchmark interest rate of the central bank are all factors that a fundamental forex trader would examine.
The economic calendar below shows how fundamental traders might stay informed about the most recent data releases. Because there are several data releases every day, traders should be able to filter the calendar to display just relevant information.
A trader determines the relative health of the nation’s economy and whether to trade the future movement of that nation’s currency by evaluating the relative trend of this and other data points.
The broad impacts that various economic statistics often have on a currency’s strength are summarised in the table below. However, this is not a certainty since various variables may affect how currencies move.
How economic data impacts currencies?
*Moderate inflation is welcomed in developed countries since it indicates a booming economy. Since it controls prices, developing countries consider declining or stable inflation a good statistic.
EXPECTATIONS
EFFECT ON CURRENCY
Gross Domestic Product (GDP)
Better than expected
Positive
Consumer Price Inflation (CPI)
Better than expected
Positive
Trade Balance
Trade deficit (imports > exports)
Positive
Central Bank benchmark rate
Increase in interest rate
Positive
ISM Manufacturing Index
Better than expected
Positive
PPI Producer Price Index
Better than expected
Positive
TECHNICAL ANALYSIS
Recognizing patterns on a price chart is a key component of technical analysis. Technical analysts search for price patterns like flags, triangles, and double bottoms. A trader will choose the entry and exit locations based on the pattern. Because the trends and patterns on the charts serve as their signals, technical traders are less concerned with why something is happening than fundamental traders are.
The double bottom pattern is an example of a chart pattern below. The market makes the first bottom, recovers a little before making a second low, and then picks up speed when the trend changes. Technical traders will wait for the market to generate higher highs and higher lows before executing the long trade and will attempt to establish a stop loss at the most recent (lowest) low.
The price movement, trend, support, and resistance levels shown on a chart will all be evaluated by a technical forex trader. Numerous patterns utilized in the technical analysis of the forex markets are also applicable to other markets.
When examining the foreign currency markets, traders also utilize oscillators and indicators added to a price chart. A technical trader’s toolbox usually includes moving averages, Bollinger Bands, MACD, Relative Strength Index (RSI), and stochastic. Technical traders choose indicators because they are simple and provide distinct indications.
The Advantages of Technical Analysis
The “black magic” that many fundamentalists assert is not a part of technical analysis. One may swiftly begin the technical analysis by evaluating the direction and force of trends. Traders will use the trend analysis to choose which pair to trade and in which direction.
Here’s an illustration of how a technical trader may identify this 6,000-pip trend, in which the AUD is mighty compared to a weak EUR (which is why the currency pair is moving down). In addition, it is easy to observe that the currency pair is moving firmly downward. This is known as a trend, and traders utilize key levels, support and resistance, and indicators to accurately and quickly identify trends.
Knowing which currencies are strong and weak can help traders determine which currency pairings are more likely to trend, resulting in trades with greater probability. Selling the EUR/AUD pair would be a trade in the direction of this specific trend.
CONCLUSION OF THE TECHNICAL VS. FUNDAMENTAL ANALYSIS IN FOREX
While giving distinct value and insights to help trading choices, the fundamental and technical analysis includes different tactics and approaches to trading. It guides on when to start or leave a trade. Depending on their desired trading style and objectives, some traders employ these sorts of analyses separately, whereas many do the opposite. Combining fundamental and technical analysis has several advantages.
ADDITIONAL READING TO DETERMINE WHICH TYPE OF ANALYSIS IS BEST FOR YOU
Many fundamental traders keep an eye on the publication of economic data to trade the news. Since volatility might increase after significant releases, traders must use solid risk management strategies.
Technical traders use different types and methods. By adequately exploring them, this kind of analysis fits your personality.
The intraday decline in the GBP/USD is reversed as intense selling of the USD begins to take place. Spot prices continue to trade below a crucial 200-day SMA and lack bullish confidence. The mentioned obstacle is a turning point since it lines up with increasing channel resistance.
On Monday, the GBP/USD pair drew some buying in the 1.2025 area but could not take advantage of the little intraday increase. Throughout the early North American session, the pair oscillates between modest gains and losses, and it currently seems to have reached equilibrium around the 1.2060 level.
As expectations for a very modest Fed rate increase in December rise, the US Dollar faces intense selling pressure and is a major factor supporting the GBP/USD pair. Nevertheless, the risk-off mindset lessens the potential downside for the safe-haven dollar. In addition, the UK economy’s dismal prognosis makes any significant improvements for the vast company unlikely.
Technically, spot prices have been rising upward over the previous two months or so along an ascending channel. The 200-day SMA, a crucial indicator, and the upper limit of the channel above both lie in the region between 1.2170 and 1.2175 at the moment. This will now serve as a critical milestone, and if it is convincingly cleared, bullish traders will see it as a new trigger.
The daily chart’s oscillators favor optimistic traders by keeping in the positive region and being outside of the overbought area. Despite this, it will still be wise to hold off on making any further appreciating move into the 1.2270–1.2275 resistance zone until there has been a vital breakthrough past the confluence mentioned above the obstacle.
On the other hand, the daily swing low, which is at 1.2025, may safeguard the near fall before the crucial 1.2000 level. Any further slide is more likely to draw new buyers and be contained close to the horizontal support of 1.1965. If the support mentioned above is not held, the GBP/USD pair will be exposed to additional declines below the 1.1900 level.
On the way to the 1.1800 level, the corrective slide may push spot prices toward the next necessary support at the 1.1845-1.1840 area. The 1.1730 intermediate support, the 1.1700 round number, and the 100-day SMA, now in the 1.1650-1.1640 range, will all be exposed by some follow-through selling.
In this article, we have covered the highlights of global market news about the USD/CAD, EUR/USD, NZD/USD and USD/JPY.
USD/CAD declines from its one-week high but remains solidly bid around the 1.3430–35 range.
On the opening day of a new week, the USD/CAD pair builds on Friday’s upward movement and gains some momentum. However, during the early European session, spot prices pare back some of their intraday gains to reach a one-week high before falling below mid-1.3400s.
Investors are still concerned that China, the world’s top oil importer, could see a decline in gasoline consumption due to the deteriorating COVID-19 scenario. This, in turn, weakens the commodity-linked Loonie and pushes crude oil prices to a new YTD low. Aside from this, a slight rise in the US Dollar’s value, supported by the cautious atmosphere, provides some support for the USD/CAD pair.
Concerns about a deeper economic slowdown are increased by demonstrations in China over the government’s zero-COVID policy, dampening investors’ willingness for risky investments. The equities markets have a lower tone, encouraging investors to seek refuge in the US Dollar. However, declining US Treasury bond rates support the dollar’s stability.
EUR/USD may rise to the 1.0480/1.0500 range once again, according to ING.
The November pricing data will be the main event on this week’s statistics agenda for the eurozone. According to experts at ING, the EUR/USD had its highest weekly close since late June at 1.0402 and may target the 1.0480/1.0500 area.
The critical issue is whether inflation will moderate from recent highs (which are close to 11% year-on-year) and enable the European Central Bank to tone down its hawkish language maybe. The market now anticipates a 62 bps rate increase on December 15.
We say that the second part of the week “may conceivably drive EUR/USD down to the 1.02 level” but that “we cannot rule out EUR/USD moving back up to the 1.0480/1.0500 range again (though the reasons for it are far from evident”).
NZD/USD remained low at 0.6200 due to a weaker risk tone and minor USD gain.
The NZD/USD pair declined further from its highest level since August 18 was hit last week as it began with a somewhat negative gap on Monday. The pair has remained weak through the early European session and is now trading at the 0.6200 level, just a few pips above the daily low.
A surge of demonstrations in China against the government’s zero-COVID policy, stoking worries of a worse economic collapse, had a toll on the perception of global risk. The safe-haven US Dollar receives some support from the anti-risk flow, which ultimately significantly pushes the pair down for a second consecutive day. However, the likelihood of a more gradual tightening of monetary policy by the Fed keeps a lid on any additional gains for the dollar. It should assist in restraining losses for the major.
It is important to remember that the November FOMC meeting minutes, which were published last Wednesday, revealed that most decision-makers agreed that it would soon be prudent to pause the pace of rate rises. Additionally, the likelihood of a modest 50 bps lift-off at the December FOMC meeting is now higher than before. The continuous decline in US Treasury bond rates, which should discourage US Dollar bulls from making risky wagers and provide some support for the NZD/USD pair, serves as more evidence.
USD/JPY flirts with a daily low, trading below mid-138.00s, as global investors flee to safety.
On the opening day of a new week, the USD/JPY pair experiences some fresh selling pressure after Friday’s minor rebound. The pair maintains its offered tone through the early European session and is now edging ever-closer to the daily bottom, in the 138.30-138.25 range.
The Japanese Yen is viewed under pressure from haven flows because of the deteriorating COVID-19 scenario, which is regarded as placing downward pressure on the USD/JPY pair. In fact, on Saturday, China recorded a record-high number of daily infections, pushing the government to enact stringent anti-COVID regulations in several cities. The zero-COVID policy has also sparked demonstrations throughout China and raised worries about a further slowdown in economic activity due to widespread unhappiness. This increases demand for conventional safe-haven investments and puts investors on edge.
The flight to safety and rising acceptance of the Fed’s less aggressive policy tightening are factors that are lowering the rates on US Treasury bonds. Consequently, the US-Japan rate disparity continues to shrink, boosting the Japanese Yen’s value even more. However, a little increase in the US Dollar’s value gives the USD/JPY pair some support. This might help minimize any additional losses, at least temporarily, combined with a significant difference between the Federal Reserves and the Bank of Japan’s stances on monetary policy.
Please click here for the Market News Updates from 25 November, 2022.
One of the world’s most valuable and frequently used metals, copper is a highly traded item on the primary commodities market. Learn about copper, its history, what influences copper prices, and trading advice in this article.
WHAT DOES COPPER MEAN?
Copper is a plentiful, reddish-brown metal mined for use in various industries, including agriculture and construction. It is far less expensive since it is not regarded as a monetary standard, in contrast to other metals sold on the commodities market (such as gold and silver). Copper is a volatile, often traded item on the main commodities market. Still, some of the supply and demand variables that impact it are similar to those that drive other commodities.
WHAT IS THE USE OF COPPER?
Fertilizers, jewelry, home appliances, and other items are just a few uses for copper. It is a crucial element in electrical equipment like wiring and motors, as well as in the building of pipes and tubing, since it is a robust and ductile conductor of heat and electricity. It is also employed in alloys like bronze and brass, which are used for decorations, zips, and valves, among other things.
THE HISTORY OF COPPER
Copper’s history dates back around 10,000 years to the Bronze Age, when it was the first metal to be smelted. At this time in history, copper’s worth was determined through bartering, in which goods like food, wine, animals, and other metals were exchanged for one another.
Since the Roman period, It has been used in addition to gold and silver to manufacture coins. Still, due to its poor intrinsic worth, copper was never regarded as a monetary standard.
Today, in the 20th century, the red metal is employed in a variety of industries all over the globe. As a consequence, the price of copper has been closely related to its industrial uses in the industries mentioned above.
Copper’s price increased significantly during the commodities boom of the 2000s, rising from around $1/lb at the beginning of 2004 to $4/lb by May 2006. This, other significant price changes throughout the following years and the causes are shown in the figure below.
Chile, Peru, and China are the nations with the highest volume of copper production. Chile produces more than twice as much as the next-largest producer, Peru; in 2018, Chile produced 5.8 million metric tonnes, while Peru produced 2.4 million. The top ten producers are shown below, along with their metric tonnage production during 2018:
Chile –5.8 million
Peru–2.4 million
China –1.6 million
United States – 1.2 million
DR Congo –1.2 million
Australia–0.95 million
Zambia –0.87 million
Indonesia –0,78 million
Mexico –0.76 million
Russia –0.71 million
Source, Statista 2018
The three biggest participants in the copper market as of 2019 are the US-based Freeport-McMoRan, the Chilean Codelco, and the Anglo-Australian mining behemoth BHP Billiton.
WHAT FACTORS AFFECT COPPER PRICES?
Numerous variables based on supply and demand issues, as well as the forecast for substitute metals, affect the price of copper.
Supply
Geopolitical and natural occurrences that reduce mining production, including strikes and earthquakes, may influence prices.
Demand
Net importing nations, which import more copper (or other products and services) than they export, feed the demand side. The demand for copper has increased almost 20 times in the last century as emerging countries utilize it to build their infrastructure and strengthen their economies.
Since a significant portion of the metal is used in the construction of homes, the price of copper is also correlated with domestic housing markets. This implies that variables like non-farm payrolls, mortgage rates, and GDP that influence the housing sector often impact copper prices.
Substitute metals
Last but not least, the price of copper may also be affected by the use of substitute metals. If copper prices increase too high, consumers will look for less expensive options, which would reduce demand. For instance, aluminum usage improvements for wiring and vehicle manufacturing occurred in the middle of the 2000s due to the growing price of copper.
How is Copper Traded?
There are several methods to trade the red metal, including exchange-traded funds, copper futures, and options on the commodities market (ETFs). Spread betting and CFD trading may also be utilized, as allowed, to make predictions about the price of copper. Learn more about trading copper and the technical analysis methods that will enable you to trade this commodity more reliably.
Reasons to Invest in Copper
The justifications for trading copper vary somewhat from those for gold and silver. Despite being widely used and popular among merchants, copper is in plentiful supply. Therefore, copper’s price is determined by its use, unlike gold and silver, which have intrinsic worth.
Because copper pricing may be used to gauge economic health, it has acquired the moniker “Doctor Copper” and the reputation of possessing a metaphorical Ph.D. in economics. Consequently, traders can position themselves in copper depending on their perception of global growth and GDP.
But there is danger involved in making bets on copper prices since the market would suffer if the economy slowed down. Copper supplies are limited, like all other metals, and could run out in the next 60 to 70 years is another factor that commodity traders need to consider.
Although it doesn’t follow through, USD/CAD rebounds off the weekly low it reached earlier on Friday. The demand for the USD is rekindled, and the major gains some support from an increase in US bond rates. The Loonie is supported by a modest increase in oil prices, which also restrains any significant rebound.
The USD/CAD pair experiences some purchasing in the 1.3315–1.3320 range and makes a little comeback from a new weekly low reached earlier this Friday. While lacking bullish conviction, USD/CAD maintains its gains at the 1.3350 area through the early North American session and seems to have ended a three-day losing skid for the time being.
The US Dollar gains momentum on the last day of the week thanks to a slight increase in US Treasury bond rates, which is regarded as providing some support for the USD/CAD pair. However, the USD bulls are being restrained from making risky bets, and the increasing belief is limiting the major’s upward potential that the Fed would decrease the pace of its policy tightening.
It is important to remember that the Federal Open Market Committee (FOMC) meeting minutes from November, which were made public on Wednesday, showed that policymakers were mainly confident they could halt front-loading rate rises. This, in turn, confirms predictions for a comparatively lower rate increase of 50 basis points at the FOMC’s next policy meeting in December. Aside from this, the safe-haven Greenback is kept in check by an overall positive risk tone.
Furthermore, the commodity-linked Loonie is supported by a goodish increase in Crude Oil prices, which further weighs on the USD/CAD pair despite sparse trade volumes. The underlying background calls for some prudence before preparing for any more intraday bullish rise in the absence of any significant market-moving economic release from the US or Canada.
