What is Consolidation in the Stock Market? Key Insights on Price Stabilization

Economic

Summary:

Learn what consolidation means in the stock market, why it happens, and how traders can use it to their advantage. Explore key indicators and strategies for trading during periods of market consolidation.

In the world of stock market trading, terms like "bull market" and "bear market" are commonly heard, but one term that may not be as frequently discussed, yet plays a crucial role in market trends, is "consolidation." While consolidation is often associated with periods of uncertainty or indecision, understanding this market phenomenon can offer traders and investors valuable insights into price action, trend reversals, and entry or exit points. In this article, we will explore what consolidation is in the stock market, why it happens, and how traders can use it to their advantage.

What is Consolidation in the Stock Market?

Consolidation refers to a phase in the stock market where a security’s price moves within a specific range without showing a clear direction — neither trending upward nor downward. It is a period of stabilization after a significant price movement (either up or down), where the stock's price fluctuates within a relatively narrow range. This "pause" in movement reflects a temporary balance between buyers and sellers, where neither side is able to establish dominance.

Consolidation typically happens after strong price movements, whether bullish or bearish. For example, after a rapid rally, the price may stabilize and move sideways for a while, as traders and investors digest recent gains or losses. The market is "catching its breath," so to speak, before determining the next major move.

Why Does Consolidation Happen?

There are several reasons why consolidation periods occur in the stock market:

Market Exhaustion: After a strong move, whether upward or downward, the market may need time to rest before continuing in either direction. This pause is an opportunity for traders to assess the market's current state and adjust their positions accordingly.

Balance of Supply and Demand: Consolidation happens when buying and selling pressures are in equilibrium. Buyers are not willing to pay higher prices, and sellers are not willing to accept lower prices. This creates a "standoff" between the two sides, resulting in a sideways price movement.

Uncertainty and Lack of Catalysts: During periods of uncertainty, such as awaiting earnings reports, economic data releases, or geopolitical events, market participants may become hesitant to take strong positions, leading to a consolidation phase.

Market Participants Waiting for a Breakout: Traders often wait for a breakout from the consolidation range before deciding to make a move. This is especially true when the market is in a wait-and-see mode, with participants looking for confirmation of either a continuation of the prior trend or a reversal.

Identifying Consolidation Patterns

Consolidation periods are often visually identifiable on price charts, and several chart patterns and indicators can help traders recognize these phases:

Sideways Channel (Range-Bound Movement): A classic consolidation pattern is a sideways trading range, where the price fluctuates between clear support and resistance levels. These ranges can last for days, weeks, or even months, depending on the security.

Triangles: Consolidation can also form triangle patterns, where price action narrows, creating a "cone" or "triangle" shape. The two most common triangle patterns during consolidation are:

Symmetrical Triangle:

This occurs when both support and resistance levels are converging at the same rate. It signals indecision in the market, with traders anticipating a breakout in either direction.

Ascending/Descending Triangles:

These patterns form when one side (support or resistance) is flat while the other side slopes. Ascending triangles typically have an upward breakout potential, while descending triangles suggest downward movement.

Flags and Pennants: These patterns typically follow a sharp price movement and then consolidate within a small range. Flags have a rectangular shape, while pennants resemble small triangles. Both are often considered continuation patterns.

Moving Averages: Traders also use moving averages (such as the 50-day or 200-day MA) to identify consolidation. When the price trades near the moving average with little deviation, it could indicate a consolidation phase.

How Long Does Consolidation Last?

The length of a consolidation phase can vary greatly. Some consolidations last only a few hours, while others can last for several weeks or even months. The key factor influencing the duration of consolidation is the overall market sentiment. If there is uncertainty or if market participants are waiting for major news or events, consolidation can extend longer. Conversely, if a catalyst triggers a breakout, the consolidation phase may be short-lived.

How Can Traders Use Consolidation?

Traders can take advantage of consolidation phases by using a few key strategies:

1. Range Trading

During consolidation, prices move within a well-defined range between support and resistance. Traders can look to buy near support and sell near resistance, taking advantage of price fluctuations within that range. This strategy works best when the market shows clear consolidation and lacks a clear trend.

2. Breakout Strategy

One of the most common strategies employed during consolidation is the breakout strategy. A breakout occurs when the price moves outside of the consolidation range, signaling a potential new trend. Traders look for a breakout above resistance (for a bullish move) or below support (for a bearish move). Volume plays an important role in confirming the strength of a breakout — higher volume often indicates a stronger move.

3. Trend Reversal Strategy

While consolidation often leads to continuation patterns, it can also signal a potential trend reversal. For example, if a stock has been in a strong downtrend and enters a consolidation phase, traders may anticipate a potential reversal once the price breaks above the consolidation range. Technical indicators, such as the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD), can help confirm reversal signals.

Indicators to Watch During Consolidation

Several technical indicators can help identify consolidation phases and guide traders’ decisions:

Relative Strength Index (RSI): When the RSI is near 50, it indicates that the market is neither overbought nor oversold, which is common during consolidation.

Bollinger Bands: During consolidation, the price will often trade within the bands, which tighten as volatility decreases.

Volume: Low volume during consolidation signals a lack of conviction in the market, while an increase in volume could indicate an impending breakout.

Conclusion

Consolidation is an important concept in the stock market that all traders should understand. It represents a period of price stabilization after a strong movement, where the market pauses before determining its next direction. Traders can use consolidation phases to employ range trading strategies, prepare for potential breakouts, or look for trend reversals. By recognizing consolidation patterns and employing effective trading strategies, traders can position themselves for success in any market environment.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Warren Takunda

Cryptocurrency

Bitcoin pulled back below $96,000 on Nov. 24, suggesting that short-term traders are booking profits near $100,000. Corrections are a part and parcel of every bull phase, where newbie traders panic, but experienced traders view the dips as a buying opportunity.

The prediction markets are projecting a breakout above $100,000 in 2024. Data from betting platform Kalshi suggests an 81% possibility of Bitcoin being at $100,000 or higher on Dec. 31. The median forecast is for Bitcoin to reach $122,000 by the new year. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_1

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_1

Crypto market data daily view. Source: Coin360

Another bullish voice is that of Georgii Verbitskii, the founder of the TYMIO decentralized finance platform, who told Cointelegraph that Bitcoin could rally between $100,000 and $120.000 by the end of 2024 or early 2025. As more traders join the party, Verbitskii expects Bitcoin to extend its up move to $180,000 by the end of 2025.

What are the critical support levels in Bitcoin and altcoins that are likely to attract buyers? Let’s look at the top 5 cryptocurrencies that look strong on the charts.

Bitcoin price analysis

Bitcoin is facing resistance near the psychologically crucial level of $100,000, but a positive sign is that the bulls have not ceded much ground to the bears. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_2

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_2

BTC/USDT daily chart. Source: TradingView

The rising moving averages and the relative strength index (RSI) in the overbought zone indicate the path of least resistance is to the upside. If buyers shove the price above $100,000, the BTC/USDT pair is likely to pick up momentum and dash to $113,331 and later to $125,000.

The first support on the downside is at the uptrend line and then at the 20-day exponential moving average ($88,386). If the price rebounds off the 20-day EMA, the bulls will again try to resume the uptrend. A short-term top will be signaled when the pair plunges below $85,000. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_3

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_3

BTC/USDT 4-hour chart. Source: TradingView

The pair dipped below the 20-EMA on the 4-hour chart, indicating that the bears are attempting a comeback. The next support on the downside is the uptrend line. If the price rebounds off the uptrend line, the bulls will again attempt to propel the pair above $100,000. If they do that, the pair may surge to $113,331.

Alternatively, a break below the uptrend line will signal a lack of demand at lower levels. The pair may drop to $85,000.

BNB price analysis

BNB rallied above the $667 resistance on Nov. 23 and again on Nov. 24, but the long wick on the candlestick shows selling at higher levels. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_4

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_4

BNB/USDT daily chart. Source: TradingView

The 20-day EMA ($619) is the critical support to watch out for on the downside. If the price bounces off the 20-day EMA, the bulls will again try to propel the BNB/USDT pair to $722. This level may again act as a formidable hurdle, but if crossed, the rally could reach $810.

If bears want to prevent the upside, they will have to swiftly pull the price below the moving averages. If they do that, it will indicate that the markets have rejected the breakout. The pair may decline to the uptrend line. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_5

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_5

BNB/USDT 4-hour chart. Source: TradingView

The bulls purchased the dip to the breakout level of $635 and pushed the price above the 20-EMA. Buyers will try to push the price to $688, which is again expected to behave as a stiff resistance. However, if buyers overcome this barrier, the pair may rally to $722.

On the contrary, if the price turns down and breaks below $635, it will suggest that the bears are selling on every relief rally. The pair may drop to the 50-SMA and later to $600.

Avalanche price analysis

Avalanche broke above the resistance line of the ascending channel pattern on Nov. 22, but the bulls are facing selling at higher levels. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_6

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_6

AVAX/USDT daily chart. Source: TradingView

The AVAX/USDT pair could retest the breakout level from the channel. If the price rebounds off the resistance line with strength, it will indicate that the bulls have flipped the level into support. The pair may then attempt an upward move to $50.

Alternatively, if the price breaks below the resistance line, it will suggest that the bulls are losing their grip. The pair may drop to the 20-day EMA ($34.34), attracting buyers again. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_7

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_7

AVAX/USDT 4-hour chart. Source: TradingView

The pair is witnessing a tough battle between the bulls and the bears near the 20-EMA. If the price rises above the 20-EMA, the bulls will again try to push the pair toward the psychological level of $50.

Meanwhile, the bears are likely to have other plans. They will try to sell the rallies and pull the pair below the 50-SMA. If they succeed, the pair may descend to $32 and subsequently to $31.

NEAR Protocol price analysis

NEAR Protocol pierced the $6.50 overhead resistance on Nov. 24, but the bulls could not sustain the breakout. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_8

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_8

NEAR/USDT daily chart. Source: TradingView

The price could dip to the 20-day EMA ($5.48), which is a crucial support to watch out for. If the price rebounds off the 20-day EMA with force, the bulls will try to propel the NEAR/USDT pair to $8.58 and then to $9.01.

On the downside, a break and close below the 20-day EMA will suggest that the breakout above $6.50 may have been a bull trap. The pair could plunge to the 50-day SMA ($4.86), extending the stay inside the large $3.42 to $6.50 range for some more time. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_9

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_9

NEAR/USDT 4-hour chart. Source: TradingView

The price rebounded off the moving averages on the 4-hour chart, indicating that the bulls continue to buy the dips. If the price rises above $6.50, the bulls will try to start the next leg of the up move by clearing the overhead hurdle at $6.80.

Conversely, if the price turns down from $6.50 or $6.80, it will signal selling on rallies. That increases the risk of a break below the moving averages. The pair may tumble to the uptrend line and, after that, to $5.

OKB price analysis

OKB has been attempting a trend change by forming a series of higher highs and higher lows. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_10

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_10

OKB/USDT daily chart. Source: TradingView

The OKB/USDT pair accelerated after breaking out of $48 on Nov. 23, clearing the path for a possible rally to $62 and thereafter to $68.

The $48 level is expected to behave as a support during pullbacks. If the price rebounds off the $48 level, it will signal that the sentiment remains positive, and traders are buying on dips.

However, if the $48 support cracks, the pair could fall to the 20-day EMA ($44.79). The deeper the fall, the greater the time needed for the up move to resume. Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_11

Bitcoin Price Dip May Spur Buying Spree in BNB, AVAX, NEAR, and OKB_11

OKB/USDT 4-hour chart. Source: TradingView

The bears are trying to halt the rally at $56.74, but the bulls are in no mood to surrender. The pair is likely to find support at $51 and then at the 20-EMA. If the price turns up from the current level or the 20-EMA, it will indicate buying on dips. That will improve the prospects of a rally above $56.74.

This optimistic view will be negated in the near term if the price dives below the 20-EMA. The pair may then drop to the 50-SMA.

Source: Cointelegraph

Risk Warnings and Disclaimers

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SAXO

Economic

Commodity

Forex:

In forex, speculators responded to heightened Russia–Ukraine tensions by lifting their combined USD long against eight IMM futures by one-third to a six-month high at USD 23.1 billion. Except for short covering in JPY, another haven currency, all other currencies saw net selling, including the Mexican peso, which had rallied 3% during the week. Selling was most pronounced in EUR, resulting in a 35,000-contract increase in the net short to 42,600 contracts, and followed by Sterling which saw a 15,700 contract reduction in the net long to 40,300 contracts.

With the dollar getting increasingly overbought last week, the risk of a reversal rose and it came to fruition overnight in Asia where the US dollar gapped lower in reaction to Trump’s choice of Scott Bessent for Treasury Secretary, with the move strongest versus CHF, JPY and the Euro. Bessent’s more moderate views on tariffs than some of the other choices and his views on reducing the deficit helped lower US yields, supporting the US dollar move. Whether it will be enough for the dollar to reverse course remains to be seen, not least considering elevated georisks, and the prospect of diverging rate cutting paths between the Federal Reserve compared with others, not least the ECB.

Commodities:

In the latest reporting week, the Bloomberg Commodity Index rose by 1.2%, with gains led by the energy sector, where crude and fuel products all rose. This was followed by precious metals, where prices for platinum and palladium recovered strongly, and gold stabilised ahead of a week that ended with the strongest weekly gain in 20 months. This gain was driven by fresh momentum buying supported by escalating tensions between Russia and the West. The agriculture sector traded mixed, with strong weather-related gains in cocoa and coffee offset by renewed selling across the soybean complex as well as cotton.

The response to these price developments from managed money accounts was relatively muted, with the overall exposure across the 27 major futures contracts tracked showing a small reduction. On an individual level, the strongest demand was seen in Brent, gas oil, gasoline, silver, cocoa, and coffee, while selling was concentrated in gold, soybeans, and cotton.

Today in Asia, markets responded with a risk-on move that saw the dollar and US Treasury yields trade lower and stocks move higher after US President-elect Donald Trump chose hedge fund billionaire Scott Bessent as Treasury Secretary. Bessent is known as a fiscal hawk and has advised Trump to create a “3-3-3" policy, including cutting the budget deficit by 3% of GDP by 2028, pushing GDP growth to 3% via deregulation, and pumping an extra 3 million barrels of oil per day. He has also expressed that tariffs should be used more as a negotiating tool and implemented gradually.

Commodities saw a mixed reaction to the news, with gold suffering a steep drop on reduced concerns about the US debt situation, thereby squeezing recently established long positions. Crude traded lower after Israel said it was nearing a ceasefire agreement with Hezbollah, while industrial metals traded higher, supported by a weaker dollar and Bessent’s more moderate views on tariffs. COT Report: USD Long Jumps One-third; Mixed Week in Commodities_2

COT Report: USD Long Jumps One-third; Mixed Week in Commodities_2

COT Report: USD Long Jumps One-third; Mixed Week in Commodities_3

COT Report: USD Long Jumps One-third; Mixed Week in Commodities_4

COT Report: USD Long Jumps One-third; Mixed Week in Commodities_5

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Pepperstone

Economic

WHERE WE STAND

Well, after a week or so away, it’s back to the grindstone for the final stretch of 2024. Effectively, I’d argue, the year probably ends this week, with Thanksgiving on Thursday marking the time when most start to close up their books, though we officially still have five weeks to run until the year is done.

So, what did I miss?

It appears geopolitical concerns have shot to the forefront of the agenda once more, with the Russia-Ukraine conflict at the front of traders’ minds, amid an apparent escalation in both fighting, and the ongoing war of words. The firing of western missiles inside Russia has, predictably, been met with disdain from the Kremlin, who apparently in response tweaked the nuclear doctrine, to effectively lower the threshold at which said missiles could be used.

Unsurprisingly, havens have been bid in reaction, most notably gold, with the yellow metal having advanced over 6% last week, in its best week for 18 months, in turn reclaiming $2,700/oz. Momentum appears to be back with the bulls, as it has been for so much of the year, with dips likely being viewed as buying opportunities for the time being, particularly with spot having reclaimed the 50-day moving average on Friday.

Crude has also found buyers of late, amid no sign of a resolution to ongoing tensions in the Middle East, with both Brent and WTI gaining more than 5% last week. I’d be reluctant to buy into the rally here, though, instead seeking to fade any geopolitical risk premium priced in to crude, particularly as the demand outlook remains rather dour.

Last week’s ‘flash’ PMI figures provided further evidence of this, with the eurozone manufacturing gauge printing a dismal 45.2, while the comparable US figure remained in contractionary territory at 48.8.

There remains a notable divergence in fortunes between the manufacturing and services sectors, as well as a significant transatlantic divergence to boot. S&P Global’s composite gauge of US economic output rose to a 31-month high per the preliminary November reading, while the equivalent eurozone print slipped to a 10-month low 48.1, and the UK figure fell to 49.9, a 13-month low.

Against this backdrop, which helps to reinforce the ‘US exceptionalism’ theme, it’s no surprise to find the USD continuing to perform well against most peers. The DXY briefly rose to the 108 figure for the first time in a couple of years on Friday, before paring intraday gains. That said, I find it tough to bet against the buck at this moment in time, as US growth continues to vastly outpace that of peers, and as risks around the FOMC outlook become much more two-sided into early-2025.

Other G10s remain unattractive, with the EUR the ‘sick man’ of the G10 FX world of late, dipping as low as 1.0335 on Friday, its weakest in over two years. Some of this selling pressure could, though, be a little overdone, particularly with the ECB apparently loath to deliver a ‘jumbo’ 50bp cut next month, despite money markets pricing around a 50/50 chance of such action. Friday’s ‘flash’ CPI figures will probably put that idea to bed, with core inflation seen accelerating to 2.8% YoY. A short-term EUR relief rally could, hence, be on the cards, though I’d be a seller into the 1.05 figure, if we get there.

Here in the UK, while the BoE remain a hawkish outlier among G10 central banks, likely continuing with a “gradual” pace of easing, and not delivering another Bank Rate cut until next February, this hawkishness is for the ‘wrong’ reasons. The BoE remain more reluctant to normalise policy than peers primarily due to the stubborn nature of price pressures within the UK economy, with services inflation still running at 5% YoY.

This comes just as the economy loses momentum, with GDP having risen by a dismal 0.1% QoQ in the three months to September, and with retail sales having fallen a chunky 0.7% MoM last month. There seems little by way of festive cheer on the horizon for GBP assets, with rallies in the quid there to be sold.

There is, however, likely to be some festive cheer on the cards for equity participants, with the path of least resistance continuing to lead to the upside amid strong economic and earnings growth, and as – for now – the global policy put continues to provide support. Seasonal trends also support this view, likely a result of the typical year-end portfolio ‘window dressing’. Over the last 30 years, from now until year-end, the S&P has on average notched a gain of 1.9%, while the index has notched a monthly December gain in four of the last five years. It remains tough to bet against the bull market for now.

LOOK AHEAD

A quiet-ish calendar awaits to kick-off what could well prove to be a quiet-ish week, particularly with US participants away on Thursday, and most being away on Friday too.

On the data front, the latest German sentiment surveys from the IFO institute stand as the calendar highlight. The headline business climate gauge is set to drop to 86.0, from a prior 86.5, continuing the recent run of dismal data from Europe’s stalling economic engine.

Stateside, regional manufacturing figures are due from the Dallas Fed, along with national activity data from the Chicago Fed, though neither are likely to be particularly market-moving.

Speaking of central banks, a handful of speakers are due, including ECB Chief Economist Lane, and BoE Deputy Governor Lombardelli, with the former likely to cast further doubt on the idea of a 50bp cut next month.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Last week, we saw GBP/AUD slip below the 200-day moving average, which can be considered a technical signal that the exchange rate has moved into a downtrend.

Indeed, GBP/AUD is now below all the key moving averages we monitor, and other momentum signals are advocating for lower levels. For instance, the RSI is at 41 and is pointing lower, consistent with the softening outlook.

This all raises the odds that the coming weeks will see lower GBP/AUD levels, with the October 04 low at 1.9124 being the first target.

Pound to Australian Dollar Week Ahead Forecast: Breaking Down_1

GBP/AUD starts the new week with a slight gain, but we would need to see it break back above the 200 DMA (currently at 1.9338) for the setup to stabilise.

As the above chart shows, already an attempt to retake the 200 DMA has been rejected, suggesting the level now acts as a resistance point to any strength.

If the Pound can claw its way back above this resistance line then the near-term outlook stabilises somewhat in favour of a potential GBP/AUD rebound.

This is what we will be looking for in the early stages of the week, but the initial failure leaves us wary of such an outcome.

GBP/AUD's recent breakdown came after Friday's UK PMI release revealed a sharp deterioration in UK business sentiment following the government's tax-grabbing budget.

Businesses have started to lower headcounts as the government's tax on jobs (national insurance) makes hiring and retaining staff more expensive.

"Underneath the hood, we are seeing stress on hiring plans. Both the manufacturing and services sectors reported falls in hiring plans. And (input) prices – particularly for services – have started to firm – as businesses digest the Budget tax implications," says Sanjay Raja, Deutsche Bank's Chief UK Economist.

Investment bank GBP/AUD consensus forecasts: The end-2024 and 2025 guide from Corpay has been released. Featuring the median, mean, high and low points forecasted by over 30 investment banks.

A rise in unemployment levels could encourage the Bank of England to cut interest rates faster, which would weigh on the Pound.

Growing economic headwinds in the UK contrast poorly with Australia, where the economy continues to run at full employment with now warnings blipping on the Reserve Bank of Australia's radar.

The RBA will be amongst the last central banks to cut interest rates, bestowing the AUD with some interest rate support into year-end.

In addition, the election of Donald Trump on November 05 has not turned out to be the AUD-negative development that some analysts had feared.

This all leaves GBP/AUD without any near-term disruptors, leaving the balance of risks look pointed to the downside, in our view.

Source: Poundsterlinglive

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Risk Warnings and Disclaimers

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ING

Economic

Commodity

Energy – Colder weather pushes US natural gas higher

Natural gas prices jumped higher this morning on expectations of colder weather in the US and the inventory draw over the last week. Henry hub Dec-24 contract jumped by around 9% to US$3.39/MMBtu this morning while the Jan-25 contract also increased by around 7% to US$3.52/MMBtu at the time of writing. Escalated geopolitical tension between Russia and Ukraine has also been broadly supportive of natural gas prices as peak demand season approaches. The US sanctioned Russian bank Gazprombank last week, the last major financial institution handling payments from European energy customers to Russia.

Crude oil prices started the week on a soft note after a positive run last week as geopolitical concerns remain although no new major escalation was seen over the weekend. ICE Brent slipped below US$75/bbl this morning while NYMEX WTI has been trading at around US$70.9/bbl. ICE Brent has been trading in a range of around US$70-75/bbl over the past few weeks as demand concerns keep a cap at around US$75/bbl while geopolitical concerns provide a floor around US$70/bbl.

Weekly positioning data from the CFTC shows that managed money net long position in NYMEX WTI dropped for the second consecutive week. Money managers trimmed net longs in NYMEX WTI by 17,810 lots over the week to 108,132 lots as of 19 November. On the other hand, exchange data shows that speculators have built fresh longs of 31,390 lots in ICE Brent over the last week to leave them with 134,929 lots of net long position. Fresh concerns around the Russia-Ukraine war have pushed up speculative interest in energy commodities. Speculators also added 7,319 lots of long positions to the NYMEX gasoline contracts to push net longs to 68,380 lots last week.

Metals – Global steel output edges higher

The latest data from the World Steel Association (WSA) shows that global steel production rose marginally by 0.4% YoY to 151.2mt in October. Higher output from China (+2.9% YoY to 81.9mt), India (+1.7% YoY to 12.5mt) and the European Union (+5.7% YoY to 11.3mt) was partially offset by lower production from Russia (-15.2% YoY), South Korea (-18.3% YoY) and Japan (-7.8% YoY). Cumulatively, global steel output fell by 1.6% YoY to 1,546.6mt over the first 10 months of the year. Chinese steel production fell 3% YoY to 850.7mt for the year to date.

Meanwhile, Shanghai Futures Exchange (SHFE) inventory data shows that weekly inventories for all base metals (except nickel) fell over the reporting week. Copper stocks fell by 10,229 tonnes for a fifth consecutive week to 120,236 tonnes, the lowest since 9 February 2024. Meanwhile, aluminium inventories decreased by 1,827 tonnes for a fourth consecutive week to 231,854 tonnes (the lowest since June 2024). Lead and zinc stocks also fell by 20,547 tonnes and 4,521 tonnes over the week. In contrast, nickel inventories rose by 2.4% week-over-week to 31,194 tonnes.

The latest positioning data from the CFTC shows that speculators decreased their net longs of COMEX copper by 732 lots for a second consecutive week to 10,214 lots as of 19 November, the lowest since the week ending 13 August 2024. The move was driven by falling gross longs and gross shorts by 8,608 lots and 1,570 lots respectively. In precious metals, managed money net longs in COMEX gold decreased by 7,038 lots to 190,324 lots (the least bullish bets since the week ending on 6 August 2024) over the last reporting week. In contrast, speculators increased net longs of silver by 1,835 lots to 25,896 lots as of last Tuesday after previously reporting declines for three consecutive weeks.

Agriculture – Ukraine grain exports rise

Recent data from Ukraine’s Agriculture Ministry shows that the season's grain exports have increased by 43% YoY to 17.2mt as of 22 November, up from 12mt for the same period last year. The increase was driven by wheat, with exports rising significantly by 57% YoY to 8.6mt. Similarly, corn exports stood at 6.5mt, up 16% from a similar period a year ago. Total grain exports have reached almost 3mt so far this month. Meanwhile, farmers have already planted 6.1m hectares (slightly ahead of last year) of winter crops from 98% of the planted area. In a separate release, the Ministry said the total grain harvest declined 3.8% YoY to 53.4mt for the period mentioned above. The above includes a wheat harvest of 22.4mt, in line with the previous year's crop. Corn harvest stood at 23.6mt, down from 24.9mt at the same stage last year, while soybean harvest rose 25% YoY to 6mt.

Recent estimates from the Western Australia Grain Association show that wheat harvest from the nation's top wheat-producing state could rise to a third-biggest harvest of 10.3mt for the 2024/25 season, slightly above the previous estimate of 9.3mt. The rise in estimates was largely driven by the better yields, despite dry weather conditions in the country. An unexpected increase in wheat exports from the country would help to reduce concerns about potential disruptions to shipments from the Black Sea region, due to the Russia-Ukraine war.

The latest CFTC data show that money managers increased their net short position in CBOT wheat by 6,239 lots for a second consecutive week to 51,546 lots as of 19 November, the most bearish bet since 27 August 2024. The move was dominated by increasing gross shorts by 15,614 lots. Similarly, speculators increased their net bearish bets in soybeans by 13,165 lots after reporting a decline for two consecutive weeks to 67,701 lots. The move again was led by increasing gross shorts by 13,559 lots to 176,921 lots. Meanwhile, the net speculative long position in CBOT corn rose by 4,639 lots for a third consecutive week to 114,628 lots (the most bullish bets since 21 February 2023) over the last reporting week, following a decrease in gross longs and gross shorts by 9,424 lots and 14,063 lots respectively.

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Warren Takunda

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The euro risks falling to parity with the US dollar for the first time since late 2022 if a new transatlantic trade war weakens the already struggling eurozone economy, analysts have warned.

The euro sank below $1.04 against the dollar, the weakest level since November 2022, last Friday after a survey of European purchasing managers showed eurozone private sector output has fallen this month.

The threat of new US tariffs on imports from Europe has pushed the euro lower since the US election – it was worth $1.09 on 5 November but has since dropped against the dollar for three weeks running. It ended last week at $1.041, but could have further to fall once Donald Trump’s new administration lays out its economic plans.

Trump has floated the idea of imposing a 60% to 100% levy on Chinese products and a 10% to 20% levy on goods from the rest of the world, which would make European exports to the US less competitive and could damage economic growth.

Deutsche Bank analyst George Saravelos has calculated that the full impact of Trump imposing new tariffs, clamping down on immigration and increasing net fiscal spending by extending tax cuts is only 30% “priced in” by financial markets, indicating that the currency could experience a significant sell-off if the measures are implemented.

Saravelos told clients last week that “the bottom line is the market is still not pricing a lot of Trump”.

“We remain bullish on the dollar and would view euro-to-dollar levels of 1.00 as pricing the intensity of the Trump policy mix at closer to 50%, with potential for even greater downside depending on what happens next year,” Saravelos added.

Last Friday’s dire PMI survey showed eurozone business activity moved back into contraction in November, sparking a flurry of bets on steep cuts to interest rates in the single currency bloc next month.

Money market pricing suggests investors now price a 50% chance of a half-point, or 50-basis point, rate cut at the European Central Bank’s December meeting, with a smaller quarter-point cut now fully priced in. The eurozone deposit rate is 3.25%, following a cut last month.

The fortunes of several key eurozone economies are in the spotlight with Germany, traditionally the engine of the bloc, expected to hold a general election fought against the backdrop of a stagnating economy and France forecast to experience a slowdown in growth.

“The composite eurozone PMI slumped to 48.1, thanks to an unexpected dive to 49.2 in the services sector that has hugely increased the odds of a 50bp rate cut in September,” said foreign exchange market analyst Kyle Chapman at Ballinger Group.

“The euro is decisively breaking through key levels, falling below 1.04 for the first time since the energy crisis in late 2022. Having crossed this threshold, parity is no longer a huge leap,” Chapman added.

However, Donald Trump’s choice of Scott Bessent as Treasury secretary could possibly offer the euro a reprieve.

The nomination of Bessent, a billionaire hedge-fund manager, is “expected to receive a tick of approval from global markets”, predicted Tony Sycamore, market analyst at IG, due to his “expertise” and previously stated preference that “tariffs be layered in gradually”.

Bessent told Bloomberg TV this month that falling inflation would lead to lower interest rates, and “a market-based dollar depreciation”.

However, economists expect new US trade tariffs to be inflationary, leading to higher interest rates and a strong dollar. In this scenario, the US Federal Reserve keeps US interest rates high to fight inflation, while the ECB cuts borrowing costs sharply to fight off a eurozone recession.

Analysts at ABN Amro predict the return of President Trump is likely to mean a “significant rise in US import tariffs” in 2025, with China bearing the brunt, but Europe also hit.

“All of this is likely to drive a divergence in Fed and ECB policy, with slower and fewer Fed rate cuts, and the ECB deposit rate falling to 1%,” they forecast last week. “This will push the euro to parity vs the dollar in the course of 2025.”

Source: TheGuardian

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Forex:

Commodities:

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WHERE WE STAND

LOOK AHEAD

Pound to Australian Dollar Week Ahead Forecast: Breaking Down

Source: Poundsterlinglive

The Commodities Feed: Natural Gas Prices Jump Higher

Energy – Colder weather pushes US natural gas higher

Metals – Global steel output edges higher

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Possible Europe-US Trade War Could Push Euro Into Parity With the Dollar

Source: TheGuardian

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