Markets Rattle Amid Geopolitical Strains and Rate Speculation (11.21.2024)

The Japanese yen rose to around 155 per dollar on Thursday, recovering some ground after losses in the previous session. However, uncertainty surrounding the Bank of Japan’s future interest rate hikes continued to weigh on the currency. BOJ Governor Kazuo Ueda suggested on Monday that any rate hikes would be gradual, depending on economic conditions, but he provided no specific timeline for when such hikes might occur. Meanwhile, recent verbal warnings from Japanese authorities appeared less effective in curbing market concerns, with traders eyeing the 160 level as a potential trigger for further government intervention. Investors are now awaiting Japan's October inflation data, due for release on Friday, to help shape the economic outlook. Meanwhile, the yen remains under pressure from the US dollar, strengthened by expectations that Trump’s policies could reignite inflation and limit future interest rate cuts by the Federal Reserve.

In the USD/JPY, the first resistance level is 156.10 followed by 157.50 and 158 respectively. On the downside the first support level is 153.80 and next support levels to watch are 152.50 and 151.80 consecutively.

Gold Climbs Above $2,650 as Geopolitical Tensions Escalate

Gold extended its recent gains to above $2,650 per ounce on Thursday, rising for the fourth consecutive session, as investors sought safety in the metal as geopolitical uncertainty intensified with escalating Russia-Ukraine tensions. On Wednesday, Ukraine launched Western-supplied long-range weapons for the second time, a day after President Putin approved an updated nuclear doctrine expanding the conditions for using nuclear weapons. At the same time, the US vetoed a UN resolution for a Gaza ceasefire, reigniting concerns over the ongoing Middle East conflict. On the monetary policy front, markets continued to assess the Federal Reserve’s interest rate outlook, closely watching Fedspeak for new trading signals. A slight majority of the market still expects a 25bps rate cut in December, which would reduce the opportunity cost of holding non-interest-bearing gold.

In the XAU/USD, the first resistance level is 2665 followed by 2692 and 2712 respectively. On the downside the first support level is 2630 and next support levels to watch are 2590 and 2550 consecutively.

British Pound Nears Six-Month Low on Rising Risks and BoE Outlook

The British pound is trading around 1.2650 on Thursday, approaching again a six-month low touched last week, amid mounting tensions between Russia and Ukraine. Reports emerged that Ukraine had fired UK cruise missiles into Russia for the first time. Early, the pound touched $1.271 after a hotter-than-expected inflation print reinforced the Bank of England's cautious stance on future interest rate cuts. The annual inflation rate in the UK went up to 2.3% in October, the highest in six months, compared to 1.7% in September, exceeding both the BoE's target and market expectations of 2.2%. Services inflation, which the central bank views as a key measure of domestically generated price pressure, edged up to 5% from 4.9%. Markets now see just a 14% chance of a further quarter point trim this year and only two cuts in 2025.

In the GBP/USD, the first resistance level is 1.2700 followed by 1.2740 and 1.2820 respectively. On the downside the first support level is 1.2595 and next support levels to watch are 1.2520 and 1.2475 consecutively.

Industrial Weakness Limits Silver Rebound

Silver prices rose eased to $31 per ounce on Wednesday, halting the rebound that lifted prices from the two-month low of $30.2 on November 18th as the pessimistic outlook for the metal’s industrial usage weighed against fresh support from bullion due to escalation in the Russia-Ukraine war. Ukraine fired UK-built and US-built missiles into Russian territory for the first time since the start of the war in 2022. This was in the same week as Russia changed its doctrine to relax conditions for atomic weapon responses, limiting investors’ risk sentiment. Still, lower demand for silver as an industrial input limited the rebound. The lack of new stimulus flows from the Chinese government held the view that solar panels, a major source of silver consumption, will remain oversupplied. Additionally, reports indicated that Chinese-owned solar panel companies started cutting production as Trump’s election victory raised the prospect of higher tariffs on the sector.

In the XAG/USD the first resistance level is 31.60 followed by 32.50 and 32.80 respectively. On the downside the first support level is 30.80 and next support levels to watch are 30.20 and 29.80 consecutively.