USD/CAD Price Forecast: Bulls Have The Upper Hand While Above Mid-1.3900s Pivotal Support

Euro Faces Challenges Amid Trade Tensions and Weak Growth

Silver price (XAG/USD) retraces its recent losses, trading around $31.00 per troy ounce during the Asian hours on Friday. The prices of safe-haven assets like Silver gained ground due to the escalated situation in the Russia-Ukraine war.

Russian President Vladimir Putin warned on Thursday that the Ukraine conflict is escalating toward a global confrontation, citing the use of US and British-supplied weapons by Ukraine to target Russia, according to Reuters.

Putin stated that Russia had retaliated by deploying a new hypersonic medium-range ballistic missile against a Ukrainian military facility, with further strikes possible. He added that civilians would receive warnings ahead of any future attacks involving these weapons.

Meanwhile, commodity traders continued to evaluate the Federal Reserve's (Fed) monetary policy outlook following the unexpected drop in US Initial Jobless Claims. Claims fell to 213,000 for the week ending November 15, down from a revised 219,000 (previously 217,000) in the prior week and below the forecast of 220,000. This development has fueled speculation about a slower pace of Fed rate cuts.

Futures traders now see a 57.8% chance of the Federal Reserve cutting rates by a quarter point, down from around 72.2% last week, according to data from the CME FedWatch Tool. Non-interest-bearing Silver may face challenges due to the higher opportunity cost associated with higher interest rates.

However, Federal Reserve Bank of Chicago President Austan Goolsbee commented on Thursday that inflation is on track to reach 2%. Goolsbee noted that over the next year, interest rates are likely to be significantly lower than their current levels. He also suggested that it might be prudent to slow the pace of rate cuts as the Fed approaches a neutral rate level.

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

Source: FXSTREET

SYDNEY - India’s Adani Group bonds were under pressure for a second day on Nov 22 following billionaire founder Gautam Adani’s indictment for fraud by US prosecutors and arrest warrants issued for him over an alleged US$265 million (S$357 million) bribery scheme.

The group tried to assure investors it was a “law-abiding organisation” and said the accusations were “baseless and denied”. That did not stop its companies losing about US$27 billion in market value on Nov 21.

In early Asian trade on Nov 22, Adani companies’ US dollar bonds were kept under pressure, nursing heavy losses from a day earlier. Adani Ports and Special Economic Zone debt maturing in 2027 traded at 92 cents on the dollar and longer-dated maturities around 80 cents.

The group’s India-listed shares are due to start trading later in the day.

Meanwhile, Kenya on Nov 21 cancelled a procurement process worth nearly US$2 billion that had been widely expected to award control of the country’s main airport to Adani Group.

Adani Group is a major corporate presence in its home market. Still, Citigroup analysts estimated Indian banks’ exposure to the group was less than 1 per cent of total loans for most lenders.

US prosecutors have charged eight people with agreeing to pay about US$265 million in bribes to Indian government officials to obtain contracts that could yield US$2 billion of profit over 20 years as well as to develop India’s largest solar power plant project.

Gautam Adani, his nephew Sagar Adani and former Adani Green Energy chief executive officer Vneet Jaain also raised more than US$3 billion in loans and bonds by hiding corruption from lenders and investors, prosecutors said.

Adani Group said on Nov 21 the accusations made by the US Department of Justice and US Securities and Exchange Commission in a parallel civil case were “baseless and denied” and that it would seek “all possible legal recourse”.

“The Adani Group has always upheld and is steadfastly committed to maintaining the highest standards of governance, transparency and regulatory compliance across all jurisdictions of its operations.

“We assure our stakeholders, partners and employees that we are a law-abiding organisation, fully compliant with all laws.” 

Source: Straitstimes

Bitcoin prices continue to rise and print fresh highs as speculation continues to grow around a favorable outlook toward crypto from the incoming Trump administration. To further support these rumors, leaks about a potential White House crypto expert appointment and rumors of Trumps social media companies interest in a buyout of crypto trading firm Bakkt has aided the rally.

The Crypto Fear and Greed index shows markets are in a period of extreme greed.

Source: FinancialJuice

The question is whether this will lead to pullback or are we set for more gains in the coming weeks?

Bitcoin’s Impressive Climb Amid Derivative Market Surge

One big reason Bitcoin’s price has gone up is because institutional demand continues to rise.. They’re putting a lot of money into Bitcoin, which makes it more trustworthy. For example, MicroStrategy has bought a lot of Bitcoin and made a good profit as its value has increased.

The way the market works also helps. More people are accepting Bitcoin as a real type of investment. Since there’s only a limited amount of Bitcoin available and more people want it, the price keeps going up on the basic rule of supply and demand.

The derivatives market is a big factor in Bitcoin’s price increase. Bitcoin’s Open Interest, which shows how many contracts are active, has reached $63 billion. This is a record amount and is much higher than in 2021 when it was over $20 billion. Back then, Bitcoin’s price was at its highest, around $69,000.

Source: Coinglass

The derivatives market surge does pose risks however with volatility expected to be higher and price swings a more common occurrence. This is simply down to leverage with wild price swings likely to lead to an increase in liquidations.

Over the past 24 hours, liquidations have totaled $450 million with around 60% of this coming from short positions. The old adage rings true for Bitcoin as well, ‘the trend is indeed your friend’.

ETF Flows Surge Approaches $2 Billion in Three Days

ETF flows have only increased over the past few days with a total nearing $2 billion over the period 18-20 November. Since November 1, Bitcoin ETFs have only experienced 5 days of outflows with 9 days of inflows.

The rise in ETF adoption is likely to continue now given the hype around the Trump Presidency and his perceived pro crypto stance. If the ETF flows continue to grow it is likely that we have not seen the last of the current Bitcoin rally.

Source: Coinglass

Technical Analysis BTC/USD

Bitcoin (BTC/USD) is on a tear this week in particular, having traded just below $90k handle on Monday.

Since then, we have had 3 consecutive days of gains boosted by a combination of factors. The difficult part about the technical outlook is that there is no historical price action to base any analysis off.

As we discussed earlier in the article, there is the risk of swings due to the surge in the derivatives market. Looking at the RSI, it has been in overbought territory since Bitcoin has breached $75k. Another sign that despite the RSI being in overbought territory there is no guarantee that a pullback will materialize.

For now, immediate support is at 95000 with a break lower eyeing a move toward 91804 and then the 90000 psychological level.

Looking at a move to the upside and the 100000 mark could lead to some wild price swings as market participants may eye some profit taking as well.  Beyond this at the moment, I will be keeping an eye on the round numbers/psychological numbers around 105000 and 110000.

Bitcoin (BTC/USD) Daily Chart, November 21, 2024

Source: TradingView.com (click to enlarge)

Support

95000

91804

90000

Resistance

100000

105000

105000

Source: MarketPulse

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Explaining our BEER model

Our Behavioural Equilibrium Exchange Rate (BEER) model estimates the real medium-term fair value of G10 currencies using productivity, terms of trades (the price of exports divided by the price of imports), current account balances (as % of GDP) and government spending (as % of GDP). We use quarterly OECD and national account data. Historically, our model has proven to have a good explanatory power (R-squared around 0.55-0.80 across different G10 pairs) and the terms of trade differential has, on average, been the factor explaining most fair value moves.

The aim of the model is to estimate mis-valuation based solely on economic fundamentals – those that generally explain long-term FX fluctuations – therefore stripping out market factors, such as interest rates and equities. However, commodity prices play an important role bearing on the model’s outputs as they influence terms of trade and current account differentials.

Latest BEER model results

Source: ING

The chart above summarises our results using third-quarter data and up-to-date real FX levels vs USD. We normally consider a currency to be severely misvalued beyond the 1.5 standard deviation bound, as that statistically points to a correction in the direction of the fair value. Since the misvaluation is a function of both the fair value and real spot rates, the convergence can occur via either a spot move or a fair value move. The second case encompasses a situation where markets price in a deterioration in economic fundamentals which ends up materialising over the medium term.

Yen stands out on the undervaluation side

The Swiss franc is a structurally overvalued currency – as is often remarked by the Swiss National Bank – and our BEER model results do not imply any specific move in CHF.

What clearly stands out in our November BEER update is the yen, which we estimate to be 18% undervalued in real terms vs USD, beyond the 1.5 standard deviation lower-bound. That is almost entirely explained by the USD-JPY interest rate gap that has consistently pressured the yen. Unlike in 2022, when the energy prices caused a deterioration in Japan’s terms of trade position, there are significantly less structural economic headwinds justifying such a cheap yen for the moment.

This result feeds into our view that USD/JPY has large downside potential in the long run. Still, since we see President-elect Donald Trump’s policy mix resulting in a shallower easing path by the Federal Reserve, we remain rather cautious on how far relatively strong fundamentals can offset the pressure from wide rate differentials. These are medium to long-term exchange equilibrium estimates, meaning a pair can trade in moderate undervaluation territory for several quarters.

EUR/USD would look quite cheap at parity

In the rest of the G10, there are no misvaluations beyond the 1.5 standard deviation line. SEK remains quite cheap (around 11% undervalued versus the EUR), but we believe a recovery will be delayed further by the Riksbank’s aggressive easing cycle.

Part of SEK’s undervaluation boils down to the generalised stabilisation in economic fundamentals – mostly, the terms of trade – for European countries relative to the US, following 2022’s commodity-led sharp terms of trade deterioration. As shown below, the euro is indeed enjoying a slight improvement in the terms of trade differential relative to the US and, by extension, a stable fair value.

EUR/USD fair value has stabilised after a big decline

Source: ING, Macrobond

Due to its lower volatility, EUR/USD has a history of much smaller misvaluation swings compared to most other G10 peers, meaning the 1.5 standard deviation band is also tighter (+/- 9%). EUR/USD is currently 5% undervalued in real terms, meaning a move to parity from around a 1.05 spot could trigger alarms of stretched misvaluation in our BEER model. That is barring a material further deterioration in the terms of trade, which is the contributor to EUR’s fair value that is most susceptible to shorter-term volatility. In simpler terms, we would need to see a commodity price shock to justify nominal EUR/USD consistently below parity within the next year or so, and that is not our base case.

This consideration is embedded in our latest EUR/USD forecast. We estimate that EUR/USD will trade below 1.05 throughout 2025-26 on the back of Trump’s policy agenda and large European Central Bank cuts, but in line with the BEER model results, we do not project a sustainable move below parity. We target 1.02 for year-end 2025 and 1.05 for the longer term.