Tips for beginner traders in EUR/USD and GBP/USD on October 21, 2022

Details of the economic calendar of October 20
Weekly data on jobless claims in the United States reflected a slight increase in the overall figure.

Statistics details:

The volume of continuing claims for benefits rose from 1.364 million to 1.385 million.

The volume of initial claims for benefits fell from 226,000 to 214,000.

What are they talking about in the media?

The main news of the past day is the statement of Liz Truss that she is leaving the post of Prime Minister of Great Britain. An interesting fact is that Truss's premiership was the shortest in British history, with only 45 days.

The reason for her resignation was the discontent and dissension caused by her radical program of tax cuts and increased spending. This plan drew a sea of criticism from all economic and political circles.

How does the market react to her departure?

The pound sterling slightly appreciated in value. There were no cardinal changes in the market due to vague prospects.

Analysis of trading charts from October 20
The EURUSD currency pair once again rebounded from the control value of 0.9850. As a result, the quote returned to where the trading day on Thursday began. The value of 0.9750 serves as a support.

The GBPUSD currency pair, despite the impressive information flow, is moderately active. This suggests a characteristic uncertainty among market participants. As before, the value of 1.1150 serves as a support.

Economic calendar for October 21
At the opening of the European session, data on retail sales in the UK were published, which fell from -5.4% to -6.9%, with a forecast of -4.8%.

The reaction of the pound sterling to the negative statistics was appropriate—it continued to decline.

Trading plan for EUR/USD on October 21
In this situation, traders are guided by two main values at this stage—holding the price below 0.9750 in a downward scenario and 0.9885 in an upward market development.

It is worth noting that due to the strong information and news flow in the UK, market speculation may arise, where synchronous price jumps will occur through a positive correlation with the pound sterling.

Trading plan for GBP/USD on October 21
In this situation, keeping the price below 1.1150 will increase the chances of sellers for further decline in the direction of 1.1000. It is worth noting that the market is still in confusion. For this reason, chaotic price jumps are possible.

GBP/USD. The dollar will soar by the end of the week. It's time for the pound to cool down

The pound has been evaluating political news in a positive light since the morning. How will the mood of traders of the British currency develop in the near future and is it worth counting on the growth of the exchange rate in the future?

Today, investors are assessing the news about the appearance of a new British prime minister. Rishi Sunak was elected head of the ruling Conservative Party of Great Britain, and will also take the post of prime minister of the country.

England has surpassed itself in political twists and turns. Sunak will be Britain's third prime minister this year. In July, Boris Johnson announced his intention to resign. Liz Truss, who was elected in his place, was able to stay in the prime minister's chair for 44 days and also resigned due to an avalanche of criticism against her.

Many see the new prime minister as a source of stability. Perhaps there really is some truth in this, when compared with the chaotic rule of the Truss, during which serious volatility was observed in the markets. Time will tell what kind of ruler Rishi Sunak will be, but for now market players are breathing a sigh of relief and are in a cautiously positive frame of mind.

Today, the GBP/USD pair rose to 1.1293 from the previous closing level of 1.1275.

As expected, the pound may continue to rise in the short term, but it risks failing during the week. Economic data is ahead, and they are likely to show an even greater divergence from the US economy for the worse.

While the market has welcomed the recent developments surrounding the election of a new prime minister, they alone can do little to improve Britain's economic prospects. The GBP/USD pair may continue to rise, but estimates regarding the extent of the rate hike are already declining.

If the 1.1500-1.1700 range becomes a reality in the very near future, this does not mean that the quote will fly further and higher. Such a scenario is more like a decent short entry point. The target range for the end of the year is still 1.0800-1.1200.

Britain released a disappointing PMI on Monday. Indices of activity in the manufacturing sector and the service sector collapsed, falling below market expectations.

The composite index in October was 47.2, which is two points lower than in September. Its value has become the lowest in the last two years. In addition, the business activity indicator has been below 50 points for three consecutive months.

The reason for the sharp decline in the index in October is called political instability in the country, which caused turmoil in the financial markets.

Anyway, the current situation points to the recession that has formed in the country. A reduction in economic growth may occur as early as the third quarter, and in the fourth negative trends will only intensify.

The prospects of the pound, among other things, depend on the positioning of the US dollar and its further strength.

Will the decline in the dollar index last until the end of the week? Much will depend on how traders react to the upcoming economic reports in connection with the forecast of the Federal Reserve's policy. The focus is on the GDP report for the third quarter and the employment cost index for the same period. Data on wages and inflation will strengthen the hawkish attitude of the Fed.

One of the most significant risks for the pound this week will be the US GDP report. It can show that America is emerging from a technical recession, while the UK is entering an active phase of recession. Divergence in economic prospects will undermine the pound's recovery.

A serious obstacle is the core PCE price index's release this Friday, the Fed's preferred inflation indicator. The inflation rate is expected to increase from 4.9% year-on-year to 5.2%.

If so, it will be more than enough to guarantee the Fed's hawkish attitude, which has helped the dollar reach new heights against many currencies in the weeks since the bank set course to raise the benchmark interest rate to 4.5% by the end of the year and 4.75% at the beginning of the next.

In general, the dollar index is forecast to rise to 114.00 this week.

USD/JPY: USD to come out on top again

The currency market seems to have turned upside down. The US dollar, which has remained a king on Forex this year, suddenly began to lose ground. The yen, which is considered the main outsider this year, took advantage of the greenback's weakness which. It rose significantly.

Why USD loses ground

On Thursday night, the US dollar saw a large-scale sell-off. The US dollar index dived by 1.1%, reaching the monthly low of 109.56.

The greenback dropped across the board due to increased expectations of less aggressive tightening by the Fed and more hawkish stances of the ECB and the Bank of England.

In light of the recent weak US economic reports, traders have revised their outlooks for the Fed's monetary policy.

Investors expect the regulator to raise the interest rate by 75 basis points at the next meeting. However, they believe that the regulator will hardly undertake the same rate increase in December.

Aggressive tightening launched by the Fed to tame soaring inflation has adversely affected the economy. The world's largest economy is starting to show signs of slowing down.

It may force the Fed to shift to less aggressive rate hikes. If this scenario comes true, it will be rather bearish for the US dollar.

This year, the main driver for a rally was the monetary tightening. As the Fed has hiked rates more aggressively than other central banks, the greenback has skyrocketed to multi-year highs against its rivals.

It has grown the most versus the yen amid the divergence in monetary policies of the Fed and the BoJ. Since the beginning of the year, the yen has fallen by more than 20%, logging the worst performance among all the currencies.

The yen has become an outsider due to the Bank of Japan's commitment to a dovish stance. The regulator maintains its ultra-loose stance, while other major central banks are hiking rates.

After expectations of a slowdown in monetary tightening by the Fed have increased, the yen managed to climb.

The yen has been growing for two consecutive sessions. This morning, the Japanese currency extended gains.

At the time of writing the article, the USD/JPY pair fell by 0.5%, trading around 145.6. This is almost 5% below the high of 152 reached last week.

USD likely to rebound

Now, the dollar/yen pair is rapidly recovering after recent sell-offs. It has already approached a 32-year low.

However, many analysts believe that the current rally of the JPY will be short-lived as the US dollar could assert strength amid strong US economic data.

The US GDP report for the third quarter is due today. The indicator is projected to advance by 2.4% following a decrease of 0.6% in the previous quarter.

If this scenario comes true, market participants will have to revise their forecasts for the Fed's further plans for monetary policy, abandoning hopes for a softer stance.

The US dollar is sure to regain ground, while the yen will resume a downward movement.

On top of that, the JPY may decline even more after the results of the BoJ meeting. This event has been the main driver for the yen this week

Given a domestic demand shock in Japan, many analysts believe that the Bank of Japan will maintain its ultra-loose monetary policy to spur economic growth.

"The Bank of Japan will likely keep its main policy levers unchanged, yet again. Core inflation well above the 2% target and set to hit 3% isn't enough to prompt the BOJ to reduce monetary easing. Stronger wage growth is desired first," Bloomberg emphasizes.

The BoJ may keep the interest rate in negative territory, while the ECB may raise the key rate by 75 basis points today. The Fed will do the same next week. This is why the yen may again lose luster with investors.

In the short term, it may resume a sharp decline. If the yen collapses to critical levels again, the Bank of Japan will have to intervene once again.

Over the past month, the Japanese government has intervened in the forex exchange market three times. One intervention was officially announced. Analysts are sure that there have been two more. However, the Ministry of Finance did not announce them.

All interventions had a short-lived effect. The greenback recovered quickly thanks to strong fundamental factors, which boosted bullish bias.

Bulls are confident that the pair will climb again despite any intervention. The main thing is that the Fed adheres to its hawkish stance. If so, the US dollar will definitely resume an upward movement.

Euro sadness is growing: macro data makes you sad. And the dollar is no stranger to: either retreat, or win

The US currency has once again bypassed the European one, which is seriously puzzled by a new batch of news about inflation. At the same time, the dollar draws confidence in the Federal Reserve's actions, which allows the completion of the current cycle of rate hikes.

The greenback significantly strengthened at the beginning of this week, restoring some of the positions lost over the past month. This was largely facilitated by the expectation of another interest rate hike from the Fed, whose two-day meeting is scheduled for November 1-2. According to preliminary calculations, on Wednesday, November 2, the central bank will raise the key rate by 75 bps, to 3.75-4.00%. This will be the fourth step on the Fed's part in raising rates.

However, many analysts and market participants doubt the continuation of the Fed's harsh rhetoric. According to experts, after the fourth rate hike by 75 bps, the central bank will take a less aggressive position on this issue. Michael Wilson, currency strategist at Morgan Stanley, is sure of this. He believes that the Fed's rate hike cycle is nearing completion. In support of his words, Wilson cites the inversion of the yield curve of ten-year and three-month US Treasury bonds. Recall that this is one of the key indicators indicating the need for a reversal of the central bank's tight monetary policy to a softer one.

However, some experts do not share the optimism of the Morgan Stanley representative. Currency strategists at UBS Global Wealth Management are confident that a reversal in the Fed's policy is unlikely, since the inflation rate in the US remains high. Against this background, the central bank will have to raise the rate until inflation recedes, the bank emphasizes.

The current situation puts pressure on the dollar, which, despite the current tension, is gradually strengthening. Against this background, the EUR/USD pair has been declining for the third consecutive day, continuing to struggle with the pull of the downward trend. On the morning of Tuesday, November 1, the EUR/USD pair was cruising near 0.9911. This is a difficult situation for the euro since it has to resist negative macro data.

Recall that reports on inflation in the eurozone were published on the evening of Monday, October 31, which again demonstrated its sharp rise. As a result, the inflation rate in the region soared to a new historical high, and the euro bloc economy lost its growth momentum. According to analysts, consumer prices in the EU rose by 10.7% in October 2022 compared to October 2021, exceeding forecasts. In the third quarter of this year, the volume of production in the eurozone decreased to 0.2% compared to the same period last year.

According to experts, the current situation is aggravated by a sharp increase in the European Central Bank's interest rates. At the same time, many analysts believe that the central bank should continue to actively fight inflation, which includes raising rates. It is possible that after the recent rate hike, the ECB will raise it again by 75 bps at the next meeting, which is scheduled for December 15. However, such a scenario is still in question, as well as a possible pause in the process of raising rates by the Fed.

Some analysts do not expect dovish decisions from the US central bank, although the current situation requires revision. According to experts, the aggressive tightening of the monetary policy contributes to the early onset of a recession in the United States, as well as a large-scale drop in treasury state bonds and stocks over the past few years. Take note that as rates rose and the economic downturn that followed the tightening of the monetary policy, the markets were gripped by a crisis. It was followed by an increase in the number of defaults, which seriously hit investors. In the current situation, the leading central banks will have to solve the issues that provoked such problems.

The current situation significantly affected the dynamics of the EUR/USD pair, provoking a correction at the end of September. However, the pair is gradually returning to a relatively stable course. According to experts, a new round of risk appetite in the markets will save the EUR/USD pair from further decline. At the same time, experts expect a New Year rally on the US stock market and the growth of risky assets in the near future.

USD slides down after Fed interest rate hike

The US currency reacted negatively to another Fed funds rate increase following the FOMC meeting. USD slumped significantly, losing many of its earlier gains. However, market players and analysts believe that the US dollar is strong enough to recoup its losses.

USD decreased late on Wednesday after the Federal Reserve increased the interest rate by 75 basis points. Fed policymakers stated that future rate hikes, which are aimed at decreasing galloping inflation, could be smaller than the previous ones.

Analysts noted that the market regarded this statement as quite dovish. Investors assumed that the regulator will slow down the pace of rate hikes in the current situation. Many analysts believe that the Fed would increase the rate by only 50 bps in December.

While some market players expected the Fed to slow down monetary tightening significantly, these expectations were dispelled by Fed chairman Jerome Powell. At the press conference following the meeting he said that the Federal Reserve does not plan to slow down the pace of rate hikes. "It is very premature to be thinking about pausing," Powell added. The Fed chairman said the regulator will present a new summary of interest rate trajectory projections.

Furthermore, Powell pointed out the steady rise of the US dollar and called it "a challenge" for many countries. Expectations of an excessively high rate hike strongly pressured USD. Early on Thursday, November 3, EUR/USD traded near 0.9825. Earlier, the pair rose to 0.9832, but retreated slightly afterwards.

Market players hoped the Fed would slow down interest rate hikes this year and ultimately end the tightening cycle in the first quarter of 2023. However, the Fed's actions did not match their expectations. A 50 bps rate increase in December is the only likely policy adjustment the regulator can do.

Rising employment in the US became a key indicator signalling that the Fed would not soften their stance. According to the latest data by ADP, the US economy added 239,000 new jobs in October, well above 192,000 new jobs reported in September. The Federal Reserve uses such data to determine the level of inflation and interest rate adjustments. Strong US labor market data gives the Fed more room for maneuver, allowing the regulator to tighten its monetary policy more aggressively to fight soaring inflation.

Amid such developments, experts note that the US dollar rally can potentially continue in 2023, fuelled by concerns over a global recession and the hawkish Fed. FX strategists at Capital Economics believe that the Fed's tightening cycle is close to an end. The research firm's chief economist Jonas Goltermann predicts that the US dollar will continue to climb in the first half of 2023.

Goltermann believes that if interest rates reach their peak, it will not be an obstacle for a USD rally in the future. The economist said falling risk appetite in the global markets and rising demand for safe haven assets have given support to the US dollar. According to Goltermann, the US currency went up during earlier tightening cycles.

Earlier outlooks by some analysts saw the Fed increase interest rates up to 5% in 2023. Bloomberg predicts that the effective Fed funds rate could hit a peak of 5.1% by May 2023. Market players expect the key interest rate to decrease afterwards in the first or second quarters of the year.

Tips for beginner traders in EUR/USD and GBP/USD on November 9, 2022

Details of the economic calendar from November 8
The midterm elections to the US Congress are in the center of everyone's attention. During which the House of Representatives and a third of the Senate will be re-elected. The first polling stations closed in a number of districts of Indiana and Kentucky at 23:00 UTC, and the last at 05:00 UTC - stations in Alaska and Hawaii stopped accepting ballots.

Ballot counting is still ongoing. As a result, 435 members of the House of Representatives and a third of its Senate will be elected. In addition, the governors of 36 states and three US overseas territories are elected.

As I wrote in the previous article, the victory of the Republicans will lead to heavy clashes in promoting legislative initiatives of the White House. As a result, characteristic uncertainty and even investors' fears may arise, which will lead to the sale of the US dollar.

Analysis of trading charts from November 8
The EUR/USD currency pair continues to show an upward trend in the market. A short stagnation within the parity level was replaced by a subsequent inertial move, which let the quote approach the local high of October.

The GBP/USD currency pair managed to maintain the upward cycle previously set in the market during the impulse jump. As a result, the quote remained above the 1.1525 mark. The scale of the strengthening of the pound sterling from November 4 to November 8 is about 400 points.

Economic calendar for November 9
Today, the macroeconomic calendar is empty, and it would not be of interest to traders because all their attention is focused on counting ballots.

Thus, investors and traders will monitor the information and news flow coming to the media and act on the market in relation to it.

Trading plan for EUR/USD on November 9
In this situation, the value of 1.0100 is considered a variable resistance level. In order for there to be a subsequent increase in the volume of long positions, the quote needs to stay above this value for at least a four-hour period. In this case, both the current upward cycle and the corrective move from the bottom of the downward trend will be prolonged.

At the same time, traders are considering the scenario of a price rebound from 1.0100. In this case, the inertial move may be interrupted, and the quote will return to the parity level limit.

Trading plan for GBP/USD on November 9
A stable holding of the price above 1.1525 may lead to a prolongation of the upward cycle. Under this scenario, it is possible to update the local high of October, which, in turn, will open the way in the direction of the resistance level 1.1750.

As for the downward scenario, it will again be considered by traders in case the price returns to the boundaries of the area of interaction of trading forces 1.1410/1.1525.

What is shown in the trading charts?
A candlestick chart view is graphical rectangles of white and black light, with sticks on top and bottom. When analyzing each candle in detail, you will see its characteristics of a relative period: the opening price, closing price, and maximum and minimum prices.

Horizontal levels are price coordinates, relative to which a stop or a price reversal may occur. These levels are called support and resistance in the market.

Circles and rectangles are highlighted examples where the price of the story unfolded. This color selection indicates horizontal lines that may put pressure on the quote in the future.

The up/down arrows are the reference points of the possible price direction in the future.

Hot forecast for GBP/USD on 11/11/2022

Inflation, or rather the reassessment of the Federal Reserve's succeeding actions, turned out to be much more important for the market than the results of the midterm elections in the United States. Moreover, the counting of votes is still ongoing. So as soon as it became known that the growth rate of consumer prices in the United States slowed from 8.2% to 7.7%, a real rally began in almost all markets. The only exception was probably the oil market. But the pound jumped by more than three hundred points. After all, if inflation slows down much faster than forecasts, and the most desperate optimists expected it to fall to 8.0%, then the Fed has no reason to further tighten monetary policy. In other words, the US central bank may well start lowering interest rates next year. It was this change in expectations that caused the dollar to fall sharply.

Inflation (United States):

But the movement turned out to be so impressive that a rebound, or even a local correction, would only take a matter of time. And it is quite possible that today's preliminary data on UK GDP will just be an excellent reason for this. Indeed, according to forecasts, the economic growth rate of the United Kingdom should slow down from 4.4% to 2.3%.

GDP growth Rate (UK):

The pound has strengthened in value by more than 350 points against the US dollar. This strong inertial move led to a control tracking of the price with subsequent resistance levels of 1.1750.

The RSI H1 technical instrument entered the overbought zone during such an intense price move, which corresponds to a convergence with the resistance level. RSI D1 is moving confidently in the upper area of the 50/70 indicator, which indicates ongoing upward interest in the market.

The MA moving lines on Alligator H4 and D1 are directed upwards, this signal corresponds to the general mood of market participants.

Expectations and prospects

In this situation, the technical signal about the overbought pound still takes place on the market. For this reason, traders are considering the scenario of a price pullback from the resistance level of 1.1750.

As for the subsequent upward cycle, market participants will consider it in case the price stays stable above the 1.1750 level. With this development, the overbought signal will be ignored by traders.

Complex indicator analysis in the short, intraday and medium-term periods has a buy signal due to the upward cycle.

Is the yen deflating?

The dollar-yen pair is gradually recovering from a collapse that happened last week. At the start of Tuesday, the major pair received a new breath from the economic data of Japan.

Recall that last week the USD/JPY pair experienced the most dramatic fall in 14 years. According to the results of five sessions, it sank by almost 6% and fell below 139.

The ground from under the dollar's feet was knocked out by data on inflation in the United States. The statistics for October turned out to be much softer than the forecast, which increased traders' fears about a possible slowdown in the pace of tightening in America.

The greenback was able to return to life only after the weekend. It was revived a bit by a hawkish commentary by Christopher Waller.

On Sunday, a member of the Federal Reserve's Board of Governors said it's unreasonable to judge the weakening of inflation by just one month. The central bank will need to get some more hard evidence before moving to a less aggressive policy.

Hints of further sharp rate hikes in the US helped USD/JPY recover slightly. Yesterday, the quote rose by more than 0.5% and crossed the threshold of 140.

This morning, the pair has confidently settled above this level, having received support from Japan's macro statistics. Shocking data on GDP for the third quarter came out at the beginning of the day, which not only fell short of the forecast, but also turned out to be much worse than preliminary estimates.

The report showed that on a quarterly basis, the Japanese economy fell by 0.3% against expectations of growth of 0.3%. And in annual terms, the indicator fell by 1.2%, while an increase of 1.1% was predicted.

According to analysts at Bloomberg, the unexpected contraction in Japan's GDP reflects the impact of a weaker yen on the economy.

This year, the JPY has fallen by more than 20% against the dollar due to the strong divergence in the monetary policy of the Bank of Japan and the Fed.

Unlike its American counterpart, which actively fights inflation by raising rates, the Japanese central bank adheres to an ultra-soft rate and maintains ultra-low rates.

The weakness of the currency led to an increase in the country's spending on imports, which significantly undermined the growth of Japan's economy, which was already very fragile.

Japan has yet to recover from the COVID-19 pandemic. It is for this reason that the BOJ continues to go the dovish route and pump liquidity into the economy.

Recall that last month, Japanese Prime Minister Fumio Kishida developed another stimulus package, and his cabinet approved an additional budget of $207 billion to fund these measures.

As you can see, the circle is closed: the soft monetary rate necessary for GDP growth weakens the yen, and this further slows down the economy. Japan has found itself in a trap into which it has driven itself, and is unlikely to find a way out in the near future.

Now, as fears of a global recession are rising amid a massive increase in rates, it is becoming increasingly clear that the recovery of the Japanese economy is once again being postponed.

And given the latest data on GDP, many analysts have no doubt that the BOJ can further strengthen the dovish rhetoric at its next meeting. This will be another blow to the yen.

Experts predict that the JPY's downtrend will continue despite speculation about a possible slowdown in US rate hikes, especially since the market has already taken this risk into account.

Most investors are well aware that the US central bank has not yet finished its fight against rising prices. To return inflation to its target, it will have to raise rates a few more times.

But even if the central bank does it less abruptly than before, the dollar-yen pair should still get at least the slightest benefit from each round of rate hikes.

Tips for beginner traders in EUR/USD and GBP/USD on November 17, 2022

Details of the economic calendar of November 16
Inflation in the UK reached a 41-year high. The consumer price index rose from 10.1% to 11.1%. Consequently, the Bank of England will continue to raise interest rates at the same pace.

Prime Minister Rishi Sunak said on this occasion that inflation control is a key goal of the government.

As for the US ballot count, the preliminary totals are:

House of Representatives: Democrats 211 - Republicans 218. Control requires 218 seats out of 435.

Senate: Democrats 50 - Republicans 49. Control requires 51 seats out of 100.

Although counting of votes is still ongoing, President Joe Biden officially congratulated the future House speaker Kevin McCarthy on his election victory.

The Republican Party gains control of the US House of Representatives in the midterm elections.

Analysis of trading charts from November 16

The GBPUSD currency pair is in the stage of a pullback-stagnation relative to the psychological level of 1.2000. The absence of a transition to a full-size correction suggests that traders' interest in long positions on the pound sterling is still maintained in the market.

The EURUSD currency pair formed a stagnation at the conditional peak of the ascending cycle. This occurred after the quote came close to the 1.0500 resistance level.

Economic calendar for November 17
Today, the final data on inflation in the European Union is expected, the growth rate of which should accelerate from 9.9% to 10.7%. The market is more ready for these indicators, so if they coincide, you should not expect anything drastic. In any case, rising inflation is a clear signal that the ECB will continue to raise interest rates at the current pace.

During the American trading session, weekly data on jobless claims in the United States will be published, where figures are expected to rise. This is a negative factor for the US labor market.

Statistics details:

The volume of continuing claims for benefits may increase from 1.493 million to 1.5 million.

The volume of initial claims for benefits may remain at the same level of 225,000.

Time targeting:

EU Inflation – 10:00 UTC

US Jobless Claims – 13:30 UTC

Trading plan for EUR/USD on November 17
In this situation, the stagnation of the past day can serve as a catalyst for trading forces, in which there was a regrouping of working positions. In this case, subsequent price jumps are not excluded. The following values are considered as signal levels: 1.2050, in case of an upward scenario, which may lead to the prolongation of the current cycle; 1.1750, while holding below this value, a transition from the pullback stage to the full-size correction stage is possible.

Trading plan for GBP/USD on November 17
Little has changed on the chart compared to the previous day—the quote is standing still. This means that there is a process of accumulation of trading forces before a new speculative price jump.

From a technical analysis point of view, the signal levels are in the values: 1.0500 for an upward scenario and 1.0300 for a downward price development.

What is shown in the trading charts?
A candlestick chart view is graphical rectangles of white and black light, with sticks on top and bottom. When analyzing each candle in detail, you will see its characteristics of a relative period: the opening price, closing price, and maximum and minimum prices.

Horizontal levels are price coordinates, relative to which a stop or a price reversal may occur. These levels are called support and resistance in the market.

Circles and rectangles are highlighted examples where the price of the story unfolded. This color selection indicates horizontal lines that may put pressure on the quote in the future.

The up/down arrows are the reference points of the possible price direction in the future.

The Fed writes between the lines. The dollar is lost in speculation. No clear strategy or desire to play with the markets

The dollar index is showing signs of recovery. Perhaps it will show even stronger signs in the coming sessions. However, traders will refrain from making bold attempts to push the dollar higher before the release of the Federal Reserve minutes. The fact that we are facing a short week may also play a role here. The United States will be celebrating its Thanksgiving holiday on Thursday, which will lead to lower activity in markets and limited reaction to market data and other news.

Wednesday will be an important trading day. A series of macroeconomic data will be released on this day, as well as the minutes. There might be a flurry of activity before holidays and weekends. It is possible that there will be a delayed reaction to all of this as early as next week. In the meantime, markets are evaluating or rather quietly studying the fresh opinions of the Fed members on the central bank's further steps.

The main question is whether the central bank will eventually shorten the time period during which it is not expected to pause in policy tightening. No matter what the Fed members say, investors are hoping for less aggressive measures and an early transition to dovish rhetoric. They will be looking for signals for such a scenario in all publications, statements and other news reports.

News from the Fed

The speech of the head of the San Francisco Fed, Mary Daly, was quite long. The members of the central bank don't seem to have a definite line on what they plan to do next. Now is the time when they are thinking and discussing their next steps.

Citing new research from her regional bank, Daly said that "the level of financial tightening in the economy is much higher than what the (federal) funds says." Financial markets are acting as if it is about 6%.

Markets have priced in QE parameters that far exceed those outlined by the Fed. In this regard, Daly noted that "it will be important to remain conscious of this gap between the federal funds rate and the tightening in the financial markets. Ignoring it raises the chances of tightening too much."

Anyway, the Fed still has a lot of work to do to steer monetary policy in the right direction to curb inflation. Those were probably the key words.

Daly, speaking to reporters, made no secret of the fact that she has yet to decide which rate hike she will support at the December FOMC meeting. We need to look at new economic data before making a decision.

The central bank representative also warned against using the market funds rate of 6% as a benchmark for determining the actual policy.

"I use the proxy rate as a point of reference, not as an indication that we should stop early," Daly summarized.

In economic forecasts released in September, the central bank's policy makers outlined an average target rate of 4% for the next year. Most officials have since assumed that, given the dynamics of inflation and the continuing strength of the labor market, they may want to go higher. Daly did not rule out the possibility of an increase to 5.25%.

At the same time, everyone understands and knows that raising rates too sharply will cause great damage to the economy, so the possibility of reducing the size of individual rate hikes is being discussed in parallel. In addition, recent data showing signs that inflation may slow down has given officials some room for such a maneuver.

Daly said in her formal remarks that the next stage for the Fed will be "in many ways more difficult". She added that officials will need to be "mindful" of their choices and its consequences. Too much adjustment can lead to an unnecessarily painful recession. At the same time, "adjusting too little will leave inflation too high".

The dollar reflects

BNP Paribas has provided a number of new interesting research for dollar bulls. According to analysts' calculations, the bottom of the stock market in the current bear market has not yet been reached.

After analyzing 100 years of crashes, BNP Paribas finds market bottoms typically require a capitulation event – which is associated with a coordinated spike in volatility, skew, and convexity.

"We have not yet seen this, suggesting that the bottom is not yet in," says Calvin Tse, Head of US Macro research, at BNP Paribas. "Recessionary bear markets historically have often ended with a capitulation. We are calling for a capitulation in equities next year."

Therefore, if the bottom of the stock market has not yet been reached, then neither is the dollar's peak.

The dollar is countercyclical and rises in bad market conditions as investors seek cash as protection against asset depreciation. If the BNP Paribas economists' assessment has merit, then those who advocate for a stronger dollar could win.

Meanwhile, the dollar index rose for the third consecutive session and is trading near the key barrier at 108.00. Although, the bulls' grip eased somewhat.

The uptrend meets obstacles in the way. However, if it breaks through the 109.18 resistance and then the 109.70 level, it could encourage the exchange rate to rise in the short term.

Today's dollar losses could be due to the fact that investors are cautiously awaiting the latest Fed meeting's minutes, which could affect the U.S. rate forecast. Traders also analyzed various comments from Fed officials and found them largely soft. Central Bank officials are still sticking to their version of lower inflation, but doubts are certainly present.

Meanwhile, the dollar index jumped 1% on Monday due to the worsening Covid situation in China. This factor is known to have a short-term effect.

GBP/USD. End of the "Scottish issue"

The GBP/USD pair tested the 21st figure on Thursday - for the first time since the beginning of August. This is mainly due to the dollar getting weaker, as it stopped moving upward across the market. U.S. trading floors were closed yesterday (Thanksgiving Day in America), and the minutes of the November FOMC meeting, published the day before, were interpreted against the dollar. Such a fundamental background made it possible for GBP/USD bulls to hit a new multi-month high, marking 1.2152.

Take note that the bulls were getting closer to the area of 20 figures during the last two weeks. After almost a week-long flat in the range of 1.1800-1.1950, the bulls decided to make a swift upward move, which enabled them not only to cross the level of 1.2000, but to also probe the area of the 21st figure. Do remember that the pound's growth was caused not only by the dollar getting weaker, but because it also had political overtones.

The fact is that this week the British Supreme Court rejected the Scottish referendum bid for independence. According to the court's verdict, the Scottish government cannot initiate a second referendum without the UK Parliament's approval.

In other words, the Supreme Court put an end to a long-playing story that has emerged (making GBP/USD traders nervous) and then disappeared into oblivion. Therefore, this court ruling is strategically important for the British currency. The pound got rid of a threat that had been hanging over it for several years, threatening to collapse. After all, if the Supreme Court verdict had been the opposite, next year the UK could have experienced events comparable to those of 2016, when the historic referendum on Brexit was held.

As mentioned, the so-called "Scottish issue" has been hyped from time to time in the global press, going beyond local discussions in the local media. The last time this topic was actively discussed was at the end of last year, when the problems associated with the Coronavirus receded into the background. Back in September 2021, Scottish Prime Minister Nicola Sturgeon confirmed at the Scottish National Party conference that she was planning to hold a second independence referendum before the end of 2023. She stressed that these plans, put on pause because of the pandemic, are "unchanged."

Recall that in the 2014 Scottish independence referendum, 45% of those who voted "for" and 55% voted "against." That is, the majority voted for union with Great Britain. This plebiscite was held two years before another - historic - referendum, where the majority of British residents (though by a slim margin) voted for secession from the European Union. The Scots, in turn, were unequivocal: nearly 70% of the region's population voted against Brexit. After that "separatist" sentiments intensified in the region. According to experts, Scotland is now essentially divided 50/50 on independence. But analysts don't rule out a possibility that many politically neutral residents of Scotland can mobilize if necessary and use the chance that fell out. After all, it would obviously present itself to them next time in several decades. That is why sociologists have repeatedly warned that at the "X hour", when hypothetical plans for a new referendum take shape, the scales will tip in favor of the region's independence.

But to the disappointment of supporters of Scottish independence, the Supreme Court did not allow the local authorities to organize a second vote without an approval from the British Parliament.

Downing Street has already rushed to say that the Cabinet will not allow another plebiscite. According to the government, this is a "once in a generation" event. It is obvious that the Conservatives, who control the House of Commons (and will control it at least until 2024) will not allow the Scottish nationalists to realize the idea of another referendum. Therefore, this issue can be considered closed: for the foreseeable future, all slogans and calls for Scottish independence will have no effect on the pair.

However, despite the importance and significance of the Supreme Court ruling, the pair's fate now depends on the dollar's behavior. The "Scottish issue" usually flares up brightly, but fades quickly. And it looks like this time it will fade today and for a long time. Next week traders of dollar pairs will focus on the Federal Reserve representatives' rhetoric. The market's tumultuous reaction to the minutes of the November FOMC meeting suggests that the dollar continues to "rule" the currency pairs of the major group. Traders in the second round played back the news that the U.S. central bank will slow down the pace of monetary policy tightening as early as December. But at the same time, the question of what level of the rate the central bank will stop at in the current cycle is still a matter of debate. And this discussion, the degree of "hawkishness" of which will be determined by members of the Fed, will allow GBP/USD traders to determine the vector of price movement.

In my opinion, the Fed's minutes will fade into the background at the beginning of next week (Fed representatives have already announced all the theses of this document). The focus will be on U.S. statistics (Nonfarm) and comments of the Fed members. If they reiterate that it is not the speed of rate hikes that matters but the end of the current cycle, then the dollar may come out on top again. The probability of this scenario is quite high, given the earlier statements of Fed Chairman Jerome Powell and many of his hawkish wing colleagues.

Bulls on GBP/USD, who are taking advantage of the moment (shortened trading session on Friday, low liquidity), may try to cross the resistance level of 1.2150 (the upper line of the Bollinger Bands on the D1 timeframe) again. However, taking into account the current fundamental background, it is better to wait for the upward momentum to end, and by next week, you should consider short positions with the first target being 1.1940 (the Tenkan-sen line on D1) and the main target at 1.1700 (the middle line of Bollinger Bands on the same timeframe).