Another week of strong gold buying has now raised the alarm bells given the risk of long liquidation should the yellow metal fail to hold onto its US CPI price boost above $1830. Last week the net long in gold reached a 14-month high at 164k lots and the speed of the accumulation, especially the 70% jump during the past two weeks alone carries, will be raising a red flag for tactical trading strategies looking for pay day on short positions should support give way.

Gold extended Friday’s drop below $1850 overnight, before bouncing ahead of key support in the mentioned $1830-35 area. The risk of a quicker withdrawal of Fed stimulus supporting real yields and the dollar has for now reduced gold's ability to build on the technical breakout. Fed expectations and a stronger US dollar might keep a lid kept a lid on further gains for gold prices.

XAUUSD D1 11 22 2021 1324


From a technical perspective, spot prices managed to find some support ahead of the $1,834-32 strong horizontal resistance breakpoint. This should now act as a key pivotal point and help determine the next leg of a directional move. A sustained break below would prompt some technical selling and accelerate the fall towards the $1,808-07 region en-route the $1,800 mark.

On the flip side, some follow-through buying beyond the $1,850 level might trigger a short-covering move and push gold towards the $1,865 resistance zone. The next relevant hurdle is pegged near the $1,875-77 area (multi-month highs), above which the XAU/USD could aim to reclaim the $1,900 mark for the first time since June.




According to the US Nonfarm Payrolls data, the US added only 194K jobs in September. Sentiment shifted from negative to positive, hitting the currency as markets rallied.
The EUR/USD is consolidating losses at its 2021 bottom and has room to fall further. The EUR/USD weekly forecast is bearish as the US dollar continues to grind higher across the board while worrisome Eur figures remain a concern.

As the globe battles to combat the epidemic, the EUR/USD pair dropped to a new 2021 low of 1.1528. Because the recovery is unequal throughout the world, resuming economic activity will confront significant obstacles and supply chain interruptions.

The week was jam-packed with statistics, culminating on Friday with the US Nonfarm Payrolls report release. Unfortunately, it was a big letdown, as the country only gained 194K new employment in September, far less than the 500K forecast. 

EURUSD W1 10 11 2021 1415


Following the announcement, the greenback came under selling pressure, but the EUR could not profit from the dollar’s wide weakening.
The German statistics were the most disappointing since the majority of them fell short of market forecasts. Factory orders were down 7.7% month over month in August, while industrial production was down 4%. The EUR/USD pair is still trading below 1.1600, and the weekly chart indicates that the pair is losing for the sixth week in a row. 

EURUSD D1 10 11 2021 1415


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EURUSD D1 11 15 2021 1255

Forward concerns on EU growth have been gathering on the natural gas and power crunch that developed into early autumn and is driving an ugly kind of tightening on the economy before the ECB ever gets around to contemplating a rate lift-off. And now we have the latest wave of Covid concerns, especially in Germany where the case count acceleration has been remarkable, as an additional factor that could hold back confidence and activity. This is all adding to the pressure on the euro after strong US inflation numbers and solid jobs and survey numbers in the US have brought Fed expectations to new highs for the cycle – even if the longer end of the US yield curve remains a conundrum in my book. South of 1.1500 and the trend is the trend, but the pair is getting very cheap at these levels based on traditional fair value calculations.

For this week, the US macro calendar highlights include the first of the regional November US manufacturing surveys, the Empire and Philly Fed surveys on Monday and Thursday, respectively, while the data highlight of the week is perhaps the US Oct. Retail Sales figure on Thursday. But from one moment to next during US waking hours, the overhanging risk for short term volatility will be on President Biden’s Fed Chair nomination announcement, with the algos primed to jump on the Brainard-or-Powell headline, even as it is unlikely that this changes the Fed policy outcomes. I would also like to highlight an intriguing speech up next Friday from Fed Vice Chair Richard Clarida, who is scheduled to speak on Friday on “global monetary policy coordination, cooperation and collaboration” with a Q&A. If this US dollar is set for significant further gains, global central banks will have no choice but to coordinate policy to send it back lower. 

EURUSD W1 11 15 2021 1252


USDJPY has reversed fairly hard here, probably as US treasury yields were the chief driver of the original rally sprint to 111.50+ and the pair looked overextended as long US yields eased back and traded sideway, as the focus shifted to deleveraging in risky assets. A total reversal here is note the base case here and would take more downside  falling back below 110.00  with a coincident erasure of the recent pop higher in US yields at the long end of the curve. Barring a very ugly volatility event  which we by no means can do  the sights are set higher in the medium term, assuming the Fed is set to continue its path towards policy normalization. Still, it is interesting to note that a number of JPY crosses are sucking wind and poking back toward major support levels after this equity market consolidation
equity markets have entered the danger zone in volatility terms in which only binary outcomes seem possible  either a continued and possibly accelerating sell-off or a huge bounce of equal energy to the prior down move  or first the former followed by the latter. In FX, we have seen an odd “tick-tock” in which first it was only the US dollar that was ascendant on the sharp rise in US yields in the wake of the FOMC meeting, followed by a now more vicious and steep rally in the Japanese yen after USDJPY spiked to new highs, as US yields then calmed as risk deleveraging continued. If the risky asset sell-off extends with treasuries sidelined and even rallying, the JPY may edge out the US dollar as a safe haven, but this would likely prove only a short-term development as long as yields are set to rise further down the line, as is our base case.

USDJPY W1 10 04 2021 1505


Need to see the climax of this risk-off event in the rear view mirror before judging market potential here outside of the general idea that anything can happen and FX volatility, as  USDJPY implied volatility is still below 6.0%.



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USDCHF slipped below its 200-day moving average yesterday and that the EURCHF pair is now working down into the last bits of its range ahead of the cycle low near 1.0500, where the defense against further CHF strengthening is likely to stiffen significantly from the SNB. Such a persistent move lower suggests either some loss of faith in the real rate outlook for the EU relative to Switzerland or some safe  haven seeking under the radar. 

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Trade accordingly with your risk.

EURJPY launched a sharp rally on the risk in long yields, which also affect EU fixed income, as Bund yields. The stronger the mandate the likely center-left coalition gets in the German election outcome, the greater the potential for EU yields to rise and EU yield curves to steepen, supportive for the euro and a headwind for the JPY, especially as Japanese fiscal plans are seen as less JPY supportive and more likely to crimp Japan’s real yields, which have so far somehow escaped the developments elsewhere, but can’t defy gravity forever if energy prices continue rising. In any case, EURJPY deserves watching here as a function of the ability of the EU yield curve to continue to steepen in sympathy with any possible developments in the US yield curve and as a function of the German election outcome. We present the weekly bar as today’s close offers could see a weekly hammer candlestick. 

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For a partial discussion on the likely outcome and the potential difficulties in forming a majority ruling coalition in the wake of the German election. Since the advent of the AfD and its 10+% result in the polls in 2017 and a likely similar result , majority coalitions are tough to build when neither side of the center is willing to consider working with the AfD. The “stoplight” coalition idea is much discussed, but the “yellow” FDP has a traditional liberal/supply side focused platform that looks incoherent compared to the Red/Green focus on higher wages and significant fiscal outlays.

In terms of how to trade the German election, the likely difficulty in forming a ruling coalition could make this a slow burn issue for months, but EURCHF upside optionality is still fairly inexpensive at 4.25% implied volatility for 3-month tenors if we get a surprisingly strong result and mandate for the Greens/Reds and a repricing much higher of EURCHF in the weeks and months to come. 

EURCHF W1 09 27 2021 1306



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Interesting to see how any realization of stagflationary risks affects key currencies that sit astride conflicting themes that such a realization brings. The risk of ever higher commodities prices and an eventual repricing of the forward rate curve as the RBA trips over its forward guidance by early next year could prove very supportive for the Australian dollar, while the risk of cratering risk sentiment and forward concerns for the real growth outlook could add a negative drag. For now, AUDUSD is knocking at the door on key resistance and has poked above the local pivot high. We would like a couple of ugly days of equity markets selling off with AUDUSD simply taking that development in stride and not selling off before believing that we are headed for a major push higher back into the zone above 0.7600. But regardless, the technical lay of the land is such that the 0.7500-0-7600 zone looks to be the key for establishing whether the chart remains structurally bearish or is neutralized by a rally back into the upper zone.

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The Reserve Bank of Australia issued the minutes of its last meeting, but nothing was found. In the document, policymakers voice confidence in the economic recovery but reiterate that a rate hike won’t happen until 2024. The AUD/USD exchange rate rose for a third straight week, traded near a new three-month high of 0.7545. Although speculative interest ignored the dollar’s usually positive hints, the Australian dollar mimicked Wall Street momentum. Australia will focus on the CPI forecast for the third quarter, September retail sales forecast for 0.2%, and third quarter PPI forecast for 3.2%.



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The EUR/GBP dropped on Friday to 0.8519, the lowest level in three weeks, before rebounding back above 0.8530. The area around 0.8530 is the key short-term support, with a consolidation under that area opening the doors to 0.8505.

The ECB was about as in-line with expectations as possible, as the central bank delivered a “dovish taper” that was rather pre-announced already, given that Lagarde and company had announced that the pace of asset purchases would be “front-loaded” earlier this year. At the same time, the bank announced that it sought to maintain flexibility in the rate of purchases, theoretically allowing it to expand purchases again early next year if deemed necessary. There were a couple of small adjustments to the forecasts, with the GDP estimate for this year raised to 5.0% from 4.7% and the inflation forecast raised for this year through 2023 (to 1.5% ). That last adjustment is too small to indicate any concern that current high inflation levels will prove stickier than anticipated. The meeting was essentially a punt to the December meeting, which will have to see the bank rolling out a plan for how it will wind down the emergency QE after March of next year and transfer some percentage of that to the standard asset purchase plan to avoid a cliff edge. A new German government will likely loom large as well.

The ECB probably wanted to buy a bit more time before indicating taper plans to see how the first couple of months of fall and early winter shape up before taking next steps. EU sovereign bonds rallied on the meeting. 

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The weekly chart shows the euro being rejected again from above the 0.8600 area and also from the 20-week moving average. The bias still favors the downside. Below 0.8500 the bearish pressure could raise, exposing the 0.8450 zone. The area around 0.8470 is a strong barrier.

On the upside, a weekly close clearly above 0.8600 should strengthen the outlook for the euro, pointing to more gains, targeting initially levels above 0.8700.


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The GBP/USD pair preserved its bullish momentum in the second half of the previous week despite the dollar's resilience and has gone into a consolidation phase above 1.3700 on Monday.

The renewed Brexit optimism combined with the Bank of England's (BoE) rate hike prospects helped the British pound find demand. Mirroring the broad GBP strength, the EUR/GBP pair slumped to its lowest level since February 2020 at 0.8422 on Friday.

David Frost, the British minister responsible for implementing the Brexit deal, has reportedly said there is still a gap between the EU's and the UK's negotiating positions with regards to the Northern Ireland protocol. In case the EU refuses to renegotiate the protocol and the UK asks for additional concessions, the GBP could find it difficult to continue to outperform its rivals. Meanwhile, several EU member states are pushing Brussels to plan for a prolonged trade war with the UK.

Rising inflation pressures are increasingly putting pressure on central banks to act, with the Bank of England putting themselves front and center after hawkish comments from Governor Andrew Bailey. Bailey said that the bank would “have to act” in response to soaring inflation, with markets now pricing in a 65% chance that the bank will raise rates in November. While the BoE look set to raise rates this year, the fact that the ECB is not expected to increase rates until late-2022 highlights the basis for further EURGBP weakness.

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Concerning the RBA monetary policy decision, Bloomberg's latest poll of 16 economists said, “Australia’s central bankers are set to revisit the question of whether to delay a planned taper of bond purchases as a worsening outbreak of the delta variant dims prospects of a rapid economic rebound."

“Reserve Bank of Australia will defer scaling back quantitative easing on Tuesday,” Ten of 16 economists surveyed mentioned per Bloomberg.

The piece highlights the RBA's recent readiness to scale back weekly bond purchases from September to A$4 billion ($3 billion) from A$5 billion while also citing the challenges for the Aussie central bank going forward. 

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AUDUSD has now completed a proper V-shaped reversal of its recent sell-off, which may not lead immediately to further gains toward the next key 0.7500 area, but is a kind of exclamation point encouraging the view that we have seen the lows for now after the run down to the 0.7105 area lows before this rally emerged. A record Australian trade surplus data point overnight helped remind us of the longer term shift in the current account fundamentals, which have accelerated in the Aussie’s favour over the last year, with the Covid outbreak and the RBA’s pedal to the QE metal providing off-setting pressure until the last week or so. This rally  also in the crosses  suggest that the AUD underperformance could be set to ease for a while here and mean revert to the positive side. 

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