The focus is increasingly turning to whether US data continues to paint a picture of economic slowdown in the US and increase speculation of a Fed pivot. US retail sales and industrial production will add more meat to the bones this week.

Elsewhere there is inflation and Q3 GDP for major economies. A raft of tier-one UK data will paint a picture of how tough the job is for the Bank of England to manage the economy through growing recession pressures.

Watch for:

• North America – US Retail Sales, Industrial Production and regional Fed surveys. Canadian CPI is also important.
• Europe – Eurozone Q3 GDP, along with UK unemployment, wage growth, CPI inflation and retail sales.
• Asia – Japanese Q3 GDP and core CPI, with Australian unemployment.
• LatAm – Q3 GDP for Colombia and Chile

North America

N.B. Forecasts are the latest available consensus 

US dollar (USD)

According to the latest FOMC meeting, the Fed is data-dependent. After months of surprises to the upside, last week’s surprise drop in CPI inflation has cemented expectations that the Fed will now begin to scale back on its aggressive policy tightening. Already we are seeing Fed Funds futures scaling back the terminal rate expectations to well below 5%. Subsequently, the momentum is certainly now with a USD correction on major forex pairs and could continue this week. Housing data continues to disappoint to the downside, whilst retail sales are expected to show only marginal growth.

However, given the inflation negative shock and subsequent market reaction, it will be worth keeping an eye on how Fed speakers react this week. In the November FOMC, Fed Chair Powell was at pains to emphasise it was not the pace of travel but the destination on the terminal rate that matters. Speakers reacting to the CPI print could be important to frame what is seen as a shift to a less hawkish Fed. USD moves will be reactive.

Canadian dollar (CAD)

CAD is rallying (although not as much as other major currencies) as the USD has slipped. However, with the Bank of Canada already more cautious in its monetary policy CAD traders will be watching Wednesday’s Canadian inflation reading with keen interest. If Canadian inflation follows that of the US, then there could be a volatile swing back lower on CAD.

• USD/CAD – A big head and shoulders top has been completed on a decisive move below 1.3500 support. This implies a correction towards 1.3020 in the coming weeks. The neckline and a failed near-term pullback rally have left key resistance between 1.3500/13570. The next support is at 1.3225.

Commodities

There has been a decisive rally in commodities over the past week. Even before the soft US CPI print, there was a drive higher that was developing. However, with US inflation falling, US Treasury yields have fallen sharply. This has pulled real yields lower and if this continues, it will fuel further rallies for precious metals such as gold and silver. The risk is that there is potential for a sharp unwind from near-term overbought positioning if there is s swing in sentiment. However, we would now see weakness as a chance to buy precious metals.

Oil has failed in its recovery but the prospect of a less hawkish Fed monetary policy will help to encourage oil demand. With trading sentiment also on the upswing, this helps to underpin oil in the near term at least.

• Brent Crude Oil – the outlook has been choppy in the past week, with the recovery trend being breached. The instant swing back higher has improved the outlook once more, but there is a lack of decisiveness right now. The resistance at $99.50/$101.20 could come under pressure this week. A breakout would end the choppy phase.
• Gold – A massive rally with strong momentum has completely changed the medium to longer term outlook. A big base pattern above $1735 implies a rally towards $1855 in the coming months. The support for a pullback is around $1735 this week.
• Silver – Breaking above $21.25 opens the next resistance at $22.50. We look to use near-term supported corrections as a chance to buy now. The breakout support band at $20.85/$21.25 is now key. 

Wall Street

The enormous rally on Wall Street that came from the lower-than-expected US inflation shows how finely tuned stocks have become to the Fed pivot narrative. Massive outperformance of the high-growth NASDAQ versus the more defensive Dow leaves scope for a significant tech rally if the market hangs on to the prospect of an earlier Fed pivot.

• S&P 500 futures – The breakout above 3935 resistance is a key move that has opened a test of the primary downtrend. The breakout now needs to become supportive between 3883/3935 to build the basis for the next leg higher.
• NASDAQ 100 futures – The tech index has been a laggard in recent weeks, but if there is a sustainable risk rally, it could storm towards the top of the relative performance charts. A decisive closing breakout above resistance at 11730 completes a base pattern and implies a recovery towards 12800. Building support of higher lows is key this week too.
• Dow futures – A strong recovery has been building for the past month and has now broken the primary downtrend. With a strong momentum configuration, we look to use weakness as a chance to buy for a test of the next important resistance at 34245. Good support is around 32500/33100.

Asia:

N.B. Forecasts are the latest available consensus 

Japanese yen (JPY)

The JPY has been the best-performing major currency in November. This has come as bond yields for major economies have started to fall and spreads with the perennially static JGB yields have tightened. If yields continue to fall, we can expect the JPY to continue to recover on the XXXJPY major crosses.

• USD/JPY – Crucial medium-term supports are being smashed as an enormous corrective move on the pair has now broken an eight-month uptrend. The move may see some kind of retracement in the coming days but the reaction to resistance will be key. Initial resistance is 140.30/141.50. 
• AUD/JPY – As the JPY has strengthened even more so than a recovering AUD, we have seen a pull lower on AUD/JPY. The technical outlook remains choppy and effectively there is a trading range that has formed in recent weeks. Support starts around 91.40 with resistance strengthening above 95.00. 

Australian dollar (AUD)

AUD performance has been seeing relative underperformance as the Reserve Bank of Australia has been more cautious recently. However, it has clawed some of this back in the wake of the big USD correction. A less aggressive Fed is supportive of risk appetite and therefore the AUD benefits from this. If markets continue to take this line, then a rally on AUD can continue.

• AUD/USD – A strong rally through 0.6545 has completed a base pattern that implies a recovery towards 0.6820 in the coming weeks. The important move will be the reaction to a pullback. Neckline support is around 0.6520/0.6545.

New Zealand dollar (NZD)

The NZD has been consistently outperforming the USD for the past month, even before the recent USD correction set in. As other majors have played catch up there has been a slightly less impressive performance from the kiwi. Furthermore, it will be interesting to see how it performs if and when the RBNZ joins other central banks and begins to ease off the tightening rhetoric. For now though, performance remains strong.

• NZD/USD – An impressive recovery had already been building strongly even before the USD meltdown recently. The pair is trending decisively higher on strong momentum. This suggests that weakness is a chance to buy, with good support between 0.5840/0.5940. Above 0.6160 would be the next bullish breakout.