USD is about to end the week in the reds

The USD stabilized somewhat yesterday yet is about to end the week in the reds after the release of lower-than-expected CPI rates for October. It should be noted that financial releases yesterday may have been an obstacle for the greenback to recover more ground as they sent mixed signals. The Philly Fed Business index for November improved yet the US industrial output growth rate for October contracted more than expected, highlighting the problems faced by the US manufacturing sector. Furthermore, the weekly initial jobless claims figure rose slightly more than expected, implying an easing in the US employment market. On the monetary front, we note that a number of Fed policymakers made statements yesterday and overall, a pattern seems to emerge with Fed policymakers not being quite convinced yet about the easing of inflationary pressures and requiring more data. The statements could be regarded as leaning towards the hawkish side and if repeated today or even intensified we may see the USD getting some support. It should be noted that US equities bulls trended to hesitate yesterday with market worries being primarily on Ali Baba which shelved the idea of a spin-off of its cloud business and on Walmart which issued a warning about its revenue in the critical Christmas season with both shares retreating substantially yesterday.  

On a technical level, the USD edged lower yesterday against the JPY, yet the overall sideways motion between the 151.70 (R1) and the 150.10 (S1) levels seems to remain. The consolidation of the price action seems to be entering a bearish wedge and the RSI indicator is between the reading of 50 and 30, implying the presence of some bearish tendencies. Hence we tend to maintain our bias for a sideways motion temporarily yet warn for  a possible bearish movement. Yet for a clearcut bearish outlook, we would require the pair’s price action to clearly break the 150.10 (S1) support line, in a first signal that the upward motion has been interrupted and actively aim for the 148.25 (S2) support base. Should the bulls take over, we may see the pair breaking the 151.70 (R10 resistance line and aim for the 153.35 (R2) resistance level.    

On the commodities front, we note the wide drop in oil prices yesterday. Market worries for the demand side of the commodity especially from China, a slack in the US oil market were already weighing on the commodity’s price yet yesterday the contraction of the US industrial output seemed to place additional strain on oil prices. It should be noted that both the EIA and OPEC tended to be rather bullish about the demand outlook of the commodity, yet the markets seem to remain unconvinced for now. The drop in oil prices places more pressure on OPEC to roll over if not deepen its production cuts in its next meeting on the 26  of November, yet with no additional production cuts on the horizon currently, should the market worry about the demand side of the commodity intensify we may see further bearish pressures being exercised.

WTI’s price dropped yesterday breaking the 75.10 (R1) support line, now turned to resistance. Given the downward trendline, yesterday’s bearish breakout and the RSI being at the reading of 30, implying a bearish sentiment on behalf of the market we expect the commodity’s price to go even lower. Please note though that the price action has broken the lower Bollinger band and the RSI indicator as mentioned is at the reading of 30, both possibly implying that WTI’s price may have reached oversold levels and is ripe for a correction higher. Should the bears maintain control, we may see WTI’s price breaking the 70.00 (S1) support level aiming for the 66.85 (S2) barrier. For a  bullish outlook we would require the commodity’s price to break the 75.10 (R1) line, the prementioned downward trendline and aim if not reach the 79.65 (R2) resistance nest.

دیگر نکات مهم امروز:

Today we note the release of the UK’s retail sales, the Eurozone’s final HICP rate, Canada’s producers prices, and from the US the number of housing starts and building permits, all being for October. On the monetary front, a number of policymakers from various central banks are to make statements. 

USD/JPY 4 Hour Chart

Support: 150.10 (S1), 148.25 (S2), 147.25 (S3)

Resistance: 151.70 (R1), 153.35 (R2), 154.70 (R3)

WTI 4 Hour Chart

Support: 70.00 (S1), 66.85 (S2), 62.25 (S3)

Resistance: 75.10 (R1), 79.65 (R2), 83.00 (R3)

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