DBG Markets: Market Report for Nov 15, 2024

Market Overview

On Thursday, Federal Reserve Chair Jerome Powell indicated that there is no immediate urgency to reduce interest rates, citing robust economic conditions, a strong job market, and persistent inflationary pressures. Consequently, market participants have sharply lowered the probability of a quarter-point rate cut at the Feds December meeting, with the odds dropping to approximately 59%, down from 82.5% the previous day.

Investors also digested data showing a slight increase in U.S. producer prices for October, as the core Producer Price Index (PPI) exceeded expectations. This reinforced the dollar‘s strength, buoyed further by expectations that President Trump, along with a Republican-controlled Congress, may implement inflationary policies that could constrain the Fed’s capacity to lower borrowing costs. Additionally, forecasts of heightened deficit spending are contributing to higher Treasury yields, which, in turn, are supporting the dollar.

However, some analysts continue to predict a Fed rate cut in December. Carol Kong, a currency strategist at the Commonwealth Bank of Australia (CBA), noted, “Markets just took (Powell‘s) comments at face value and therefore scaled back expectations for the pace of FOMC cuts. We still think a December 25bp cut is likely. I think that’s a reasonable baseline, but Powell‘s comments just underscored the resilience of the U.S. economy.” She added, “Markets are going to focus on the prospect of President Trump’s policy platform, so in the near term, we could see further gains in the U.S. dollar.”

GOLD - Gold has found a temporary bottom following several consecutive days of declines. Although prices continued downward yesterday, we anticipate a period of consolidation in the near term, allowing gold to normalize within a trading range. Fundamentally, with the latest PPI data supporting dollar strength, we see increased potential for further downside in gold prices, especially with the possibility of Fed rate cuts being postponed. The MACD reflects growing bullish momentum, while the RSI also signals the potential for an upward pullback.

SILVER - Similar to gold, silver has found its current support level but is likely to resume its downward movement after a brief pullback. Both the MACD and RSI indicate a slight bullish uptick, suggesting that any short-term gains could be temporary before bearish momentum resumes.

DXY - The dollar is poised to record its highest weekly gain as market expectations for a December rate cut are scaled back following recent economic data. We expect continued buying momentum in the dollar, with both the RSI and MACD pointing to a possible short-term correction before the next major rally. Its possible the dollar may consolidate by the end of Friday, with further gains anticipated next week.

GBPUSD - The pounds outlook remains bearish, with price action showing strong selling momentum. However, both the MACD and RSI indicate the possibility of a minor correction before the downtrend continues. We are maintaining an overall bearish outlook on the pound, with a watchful eye on any temporary retracements.

AUDUSD - The Australian dollar continues to exhibit strong bearish momentum, and we see high probabilities of this downtrend persisting. Although the MACD and RSI hint at a potential pullback, the overall price action suggests the bearish trend will resume afterward.

NZDUSD - The Kiwi is also under continued selling pressure, aligning with the broader trend of dollar strength against most other currencies. Both the MACD and RSI show signs of a possible correction due to oversold conditions; however, we expect the downtrend to resume in the near term.

EURUSD - The Euro is trading lower, with substantial indicators of continued bearish momentum. Despite this, both the MACD and RSI suggest a possible short-term correction. Our overall outlook remains bearish, with an expectation of resumed declines following any near-term pullbacks.

USDJPY - The Yen is experiencing a wave of selling pressure, as the reduced likelihood of a Fed rate cut weighs on sentiment. While the RSI indicates the potential for a minor correction, the MACD shows lighter histograms that support the continuation of buying momentum. We foresee further gains for the Yen in the medium term.

USDCHF - The Franc remains in a bullish trend, with price action displaying strong continuation potential. Both the RSI and MACD indicate a possible pullback, but the broader trend suggests that the bullish momentum will likely persist following any near-term retracements.

USDCAD - The CAD remains weak as price action and the MACD indicate a continuation of the dollars bullish trend against it. While the RSI shows a slight divergence, current levels do not indicate overbought conditions, suggesting further upside potential and a continuation of the current bullish momentum.