KVB Market Analysis | 29 Nov: USD/JPY Declines on Tokyo CPI Surge and BoJ Rate Hike Speculation

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

On Friday morning (November 29), spot gold prices quickly rebounded from a daily low of $2,633.85 per ounce, reaching a high of $2,645.52. Gold remains above $2,600 per ounce amid geopolitical tensions and speculation about potential Federal Reserve rate cuts. Israel and Lebanon have agreed to a 60-day ceasefire. However, the escalating Russia-Ukraine conflict may support gold prices above $2,600. On Thursday, Russian President Putin said the large-scale attacks on Ukraine were a response to Ukraine using Western missile systems to strike Russian territory. Earlier that day, Ukraine reported that energy facilities across the country were under attack by Russian forces.

Technical Analysis:

Gold prices are moving sideways between the 50-day Simple Moving Average (SMA) at $2,668 per ounce and the 100-day SMA at $2,572 per ounce. In the short term, gold has some room to rise, but buyers need to overcome key resistance levels. If gold breaks above the 50-day SMA, the next target will be $2,700 per ounce. If it surpasses that, prices could aim for $2,750 and the all-time high of $2,790 per ounce. On the downside, if sellers push the price below $2,600, it could test the 100-day SMA at $2,572, followed by the November 14 low at $2,536 per ounce.

Product: USD/JPY

Prediction: Decrease

Fundamental Analysis:

On Friday morning (November 29) in the Asian session, USD/JPY dropped sharply, falling to around 150.60, down 90 points for the day. Analysts say higher-than-expected Tokyo CPI data has increased bets on a Bank of Japan (BoJ) rate hike in December, boosting the yen. According to Bloomberg, inflation in Tokyo accelerated this month as the Japanese government reduced energy subsidies. Overall, the data shows Japan‘s price growth remains generally in line with the BoJ’s forecasts. Tokyo‘s core Consumer Price Index (CPI) rose 2.2% year-on-year in November, up from 1.8% last month and above economists’ expectations of 2%. Higher food prices also pushed overall inflation to 2.6%. After the report, the yen strengthened against the dollar. Bloomberg noted this indicator of national trends could fuel speculation about a BoJ rate hike next month, as it suggests Japans inflation momentum continues.

Technical Analysis:

The core CPI in Japan remains above the Bank of Japan's (BoJ) 2% target, keeping hopes alive for a possible interest rate hike soon. This strengthens the Japanese yen (JPY) and puts pressure on the USD/JPY pair. BoJ Governor Kazuo Ueda has said the bank will raise rates further if inflation stays on track to meet the 2% target consistently. Meanwhile, Wednesday's US PCE data showed that progress in reducing inflation has slowed recently. This could lower expectations for the Federal Reserve (Fed) to cut rates in 2025. However, US bond yields may see a slight rebound, supporting the US dollar. Markets currently estimate a 62.8% chance of a Fed rate cut in December, up from 55.7% earlier this week, according to the CME FedWatch Tool.

Product: BTC/USD

Prediction: Increase

Fundamental Analysis:

Bitcoin rebounded strongly, surging past $95,600 after an overnight dip. Former President Trumps newly announced cabinet has a strong cryptocurrency focus, with over five senior members being experienced Bitcoin enthusiasts. While the nominations still require Senate approval, they are likely to pass, given the Republican majority. Notably, several cabinet members, including Trump himself, are open supporters of cryptocurrencies, with some disclosing holdings in Bitcoin and other digital assets. Trump has reported owning $1-5 million in Ethereum-based assets and earned over $7.15 million from three NFT projects, including Mugshot and two Donald Trump Trading Cards series.

Technical Analysis:

It‘s worth noting that only 20% of call options have strike prices at or above $100,000, representing a nominal value of $4.25 billion set to expire in November. In contrast, less than 2% of put options have strike prices of $100,000 or higher, making most of these options nearly worthless, with their nominal value dropping to about $80 million. Here are four likely scenarios based on the current price trends, derived from data on Deribit exchange. The outcome of Thursday's expiring options will depend on Bitcoin’s settlement price. This analysis assumes call options are used for bullish positions, while put options represent neutral-to-bearish strategies. However, this is a simplified approach and doesnt account for more advanced or complex strategies.