CFD Markets News and Forecasts — 12-11-2024

• EUR/USD trimmed further into the low end on Tuesday.
• Fiber lost a third of a percent as the pair chalks in a third straight losing day.
• US CPI inflation figures loom ahead on Wednesday.

EUR/USD trimmed further into low the side on Tuesday, shedding another third of a percent. Fiber briefly tested below 1.0600 during the day’s market session, and the pair is poised for further losses after a rapid seven-week decline from multi-month highs set just above 1.1200 in September.

A lack of meaningful EU-centric economic data has left Greenback flows front and center of the Fiber chart, though Euro traders will be looking ahead to Thursday’s pan-EU Gross Domestic Product (GDP) update. The EU’s third quarter GDP is expected to confirm the preliminary print of 0.4% QoQ, and the annualized figure is forecast to show that Europe grew by an unremarkable 0.9% YoY.

US CPI inflation figures for the month of October are slated to release on Wednesday, and markets are expecting a rebound in annualized headline consumer price growth. Full-fat CPI inflation is forecast to tick higher to 2.6% YoY compared to September’s print of 2.4%. Core CPI inflation is expected to hold steady at 3.3% YoY. The monthly figure for both inflation categories are broadly expected to hold flat month-on-month.

EUR/USD price forecast

The EUR/USD daily chart shows a clear bearish trend, with the pair trading well below the 50-day EMA (1.0895) and the 200-day EMA (1.0888). The downward momentum has accelerated after EUR/USD broke below these moving averages, both of which are now acting as resistance levels. The alignment of the shorter-term EMA below the longer-term EMA further signals that the bears are firmly in control, confirming a downtrend in the near term.

Adding to the bearish bias, the MACD indicator is showing strong downward momentum. The MACD line is below the signal line, with both moving deeper into negative territory. The histogram has expanded significantly on the downside, indicating that bearish momentum remains robust. This setup on the MACD suggests that sellers are currently dominant and that buyers have yet to step in with sufficient strength to reverse the downward trend. Without a bullish crossover or a reduction in the histogram's size, the bearish trend is likely to persist.

In terms of support levels, EUR/USD is approaching the psychological level of 1.0600, which could offer some relief to the downside pressure. If this support level fails to hold, the pair may target the 1.0500 level, where further buying interest might emerge. For the bulls to regain control, a break back above the 200-day EMA is essential, but given the current technical structure, such a recovery seems unlikely in the short term. As it stands, the bearish outlook remains intact, with downside risks prevailing in the near term.

EUR/USD daily chart

• USD/CAD trades in positive territory for the fourth consecutive day near 1.3950 in Wednesday’s early Asian session. 
• Fed's Kashkari said it was premature to declare victory over inflation.
• Lower crude oil prices weigh on the commodity-linked CAD. 

The USD/CAD pair extends the rally to around 1.3950 during the early Asian session on Wednesday. The upward movement of the pair is bolstered by the firmer US Dollar (USD) amid optimism around the Trump trades. Investors will closely monitor the release of the US October Consumer Price Index (CPI) data, which is due later on Wednesday. 

The expectation that Trump’s policies could trigger a fresh wave of inflation and compel the US Federal Reserve (Fed) to slow the pace of rate reductions boost the USD broadly. Meanwhile, the US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, climbs past the 106.00 barrier, the highest level in six months.  

On Tuesday, Minneapolis Fed President Neel Kashkari said that the central bank feels confident about its long-running battle with transitory inflation, but it’s premature to declare outright victory. Kashkari added that the Fed won't model Trump policies' effect on the economy until they become clear. Richmond Fed President Tom Barkin noted that while inflation appears to be coming down, it might still get stuck above the Fed's target levels.

The key US CPI inflation figures on Wednesday will be in the spotlight as they might give clarity about future US policy. The headline CPI inflation is expected to rise slightly to 2.6% YoY in October from 2.4% in September, while the core CPI is projected to show an increase of 3.3% YoY in the same report period.

On the Loonie front, the fall in crude oil prices continues to undermine the commodity-linked Canadian Dollar (CAD). It's worth noting that Canada is the largest oil exporter to the United States (US), and lower crude oil prices tend to have a negative impact on the CAD value.

• NZD/USD fell 0.68% to 0.5925 on Tuesday.
• Pair resumed its downfall, hitting the lowest low since August 5.
• The near-oversold levels of the RSi might trigger an upwards correction.

The NZD/USD pair extended its decline on Tuesday, falling by 0.68% to 0.5925, hitting the lowest level since August 5. The downtrend has resumed, with technical indicators pointing to further weakness.

The Relative Strength Index (RSI) is approaching oversold territory near 30, suggesting that selling pressure is rising. Meanwhile, the Moving Average Convergence Divergence (MACD) indicates that buying pressure is declining, giving more evidence of a bullish weakness. The recent technical analysis of the NZD/USD pair suggests that the downtrend could continue, but mixed signals are present, indicating a potential for a recovery due to the oversold nature of the RSI.

Support levels around 0.5950, 0.5900, and 0.5850, and resistance levels at 0.6000, 0.6050, and 0.6100.

NZD/USD daily chart

• GBP/USD shed nearly a full percent on Tuesday.
• Markets are pulling back into the Greenback meaningfully.
• UK Unemployment Rate rose appreciably in September.

GBP/USD lost its footing on Tuesday, shedding almost a full percent after UK labor figures came in mixed, but all Cable traders could focus on was a steeper-than-expected upswing in the UK Unemployment Rate. Outside of the UK, a broad-market bullish recovery in Greenback flows is keeping the USD well-bid, exacerbating intraday losses for Cable.

UK labor figures mostly exceeded expectations, but wages growth keeps inflation concerns elevated. While unemployment claims were below forecasts, jobless benefits seeker counts still rose compared to the previous month’s revised figure. 

The Bank of England’s (BoE) latest Monetary Policy Report is due early Wednesday, and investors will be looking out for hints of how the BoE plans to deal with a lopsided UK economy that continues to grapple with inflation figures. On the US side, key Consumer Price Index (CPI) inflation figures will land on markets. Full-fat CPI inflation is forecast to tick higher to 2.6% YoY compared to September’s print of 2.4%. Core CPI inflation is expected to hold steady at 3.3% YoY. The monthly figure for both inflation categories are broadly expected to hold flat month-on-month.

GBP/USD price forecast

The GBP/USD daily chart shows a significant bearish move, with the pair breaking below key support levels and intensifying selling pressure. The recent price action has pushed GBP/USD under the 200-day EMA (1.2868), which previously provided solid support and has now turned into resistance. This break below the 200-day EMA is a bearish signal that suggests a shift in the long-term trend to the downside, as bears take control of the market. Additionally, the 50-day EMA (1.3014) remains well above the current price, further confirming the bearish momentum.

The MACD indicator on the daily chart aligns with the bearish outlook, as the MACD line is below the signal line, and both lines are trending lower in negative territory. The histogram is expanding to the downside, indicating that bearish momentum is accelerating. This MACD setup implies that sellers are growing increasingly confident, and buyers have yet to show any significant strength to counter the downward trend. Unless there is a substantial recovery in the MACD, GBP/USD is likely to remain pressured in the near term.

Given the recent downside break and bearish technical signals, GBP/USD may continue to face downside risk toward the next psychological support level at 1.2700. If bearish momentum persists and this level is breached, the pair could target the 1.2600 area, where further support might emerge. However, a close back above the 200-day EMA would be required to alleviate some bearish pressure and potentially signal a consolidation phase. Until then, the path of least resistance remains to the downside, favoring sellers in the short term.

GBP/USD daily chart

• Gold prices affected by advancing US Dollar Index and rising Treasury yields following Trump's election victory.
• Market adjusts to less dovish Fed outlook with rate futures indicating lower chances of a December rate cut.
• Gold ETFs experience significant outflows, signaling investor shift toward riskier assets amid geopolitical tensions.

Gold prices dropped below $2,600 for the first time since mid-September on Tuesday as the Greenback extended its gains and hit a six-month high, according to the US Dollar Index (DXY). Rising US Treasury yields also weighed on Gold prices. At the time of writing, the XAU/USD trades at $2,599, down 0.77%.

Investors continued to digest former US President Donald Trump's victory. Attention turned to his first cabinet appointments, which would give some cues regarding pushing his policies of lowering taxes, imposing tariffs, and fighting illegal immigration.

On Tuesday, news emerged that Mike Waltz had been named the National Security Advisor and Marco Rubio would be appointed Secretary of State. Waltz and Rubio are known for their tough stances on China, hinting that tariffs would likely be imposed.

Meanwhile, market participants expect a less dovish Federal Reserve (Fed) and have raised the neutral or terminal rate to around 3.99%, according to fed funds rate futures data provided by the Chicago Board of Trade (CBOT).

The CME FedWatch Tool shows that odds for a quarter-point percentage interest rate cut at the December 2024 meeting were lowered from 65% to 58% and continue to decrease.

According to the World Gold Council's (WGC) November 2024 review, the non-yielding metal accumulates losses due to outflows from Gold ETFs.

“Global gold ETFs shed an estimated US$809mn (12t) during the first week of November, with the bulk of outflows stemming from North America, which were partially offset by strong Asian inflows. Potentially signaling renewed fears around the resumption of the trade war between the US and China. Additionally, COMEX net positioning also fell 74 tonnes, an 8% drop from the prior week,” the WGC wrote.

The WGC added that political risk-premium is out of the equation, leaving Gold’s price vulnerable as appetite for the US Dollar and strengthening US bond yields might hurt Bullion’s prospects.

In the meantime, Fed officials crossed the newswires. Richmond Fed President Thomas Barkin stated, "Inflation might be coming under control or might risk getting stuck above the Fed's 2% target.”

Minneapolis Fed President Neel Kashkari recently commented that a strong labor market and economy would continue. He added, “If inflation surprises to the upside between now and December, that might give us pause.”

This week, the US economic schedule will feature consumer and producer side inflation data, Fed speakers, Retail Sales and the release of Industrial Production data.

Daily digest market movers: Gold remains pressured by a firm US Dollar

• Gold prices fell as US real yields, which inversely correlate against Bullion, soar over ten basis points to 2.089%. The DXY registers gains of 0.45%, up to 105.99.
• The US Consumer Price Index (CPI), set for release on November 13, is expected to rise slightly from 2.4% to 2.6% YoY, with monthly figures expected to hold steady at 0.2%.
• Core CPI is forecasted to remain unchanged at 3.3% annually and 0.3% monthly.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 24 bps of Fed easing by the end of 2024.
• Fed funds rate futures for 2025 imply just 47 bps in reductions, compared with about 67 bps a few weeks ago.

XAU/USD Technical Outlook: Gold price tumbles with sellers eyeing $2,600

After XAU/USD fell below the October 10 swing low of $2,603, the yellow metal seems poised to extend its losses. If sellers achieve a daily close below $2,600, the next support would be the $2,550 psychological level, ahead of testing the 100-day Simple Moving Average (SMA) at $2,537. A breach of the latter will expose the $2,500 mark.

On the other hand, if Gold clings to $2,600, buyers will eye the 50-day SMA at $2,647, ahead of $2,650. Once surpassed, the next resistance would be the November 7 high at $2,710.

Momentum has shifted bearishly as the Relative Strength Index (RSI) distanced itself from its neutral line, a sign that XAU/USD might extend its losses.

• NZD/JPY price up in Tuesday's session, mildly rose to 91.65.
• The pair rose some but stayed in a trading channel from 92.00 and 91.00.
• RSI displayed growing buying pressure, while MACD showed flat selling pressure during the past price action.

The NZD/JPY rose mildly to 91.65 in Tuesday's session. The pair saw some gains but remains stuck in a clear trading channel between 92.00 and 91.00. A bearish crossover, about to be completed between the 20 and 100-day Simple Moving Average (SMA) might push the pair lower.

Despite rising Relative Strength Index (RSI) buying pressure and flat Moving Average Convergence Divergence (MACD) selling pressure, overall momentum seems to be mixed. The pair’s latest price action formed a neutral candlestick pattern, following negative and positive candles, suggesting indecisiveness in trend.This suggests that the overall market sentiment is neutral, with neither buyers nor sellers holding a clear advantage. However, the potential bearish crossover between the 20 and 100-day SMAs could signal a potential decline in the pair's value.

Traders should monitor the boundaries of the mentioned channel to gauge the pair's future direction as well as the pending bearish crossover for potential losses.

NZD/JPY daily chart

• AUD/USD plummets as US Dollar strengthens on upbeat data and economic sentiment.
• Australia's central bank maintains neutral stance, hinting at potential rate cut in May 2025.
• Mixed confidence indicators and upcoming economic data keep AUD/USD under scrutiny.

The AUD/USD plunged in Tuesday's session, declining by 0.66% to 0.6535. The Australian Dollar's weakness stemmed from a strengthening US Dollar. Despite maintaining a neutral stance, Australia's central bank hinted at a possible rate cut in May 2025, and that delay might keep the Aussie afloat.

The AUD/USD weakened due to US Dollar strength, bolstered by Republican election wins and positive US data. Australia's employment report to be released later this week is expected to influence the RBA's December policy decision and its next steps. 

Daily digest market movers: Australian Dollar declines due to strength in US Dollar

• The US Dollar's strength pushed the US Dollar Index (DXY) to new four-month highs, negatively impacting risk-related currencies.
• The AUD fell significantly, dropping below the 0.6600 mark and its 200-day SMA at 0.6629, indicating a potential for further declines.
• The Reserve Bank of Australia (RBA) maintained interest rates at 4.35%, with Governor Michele Bullock suggesting current levels are appropriate.
• On the data front, Australia's Consumer Confidence and Business Confidence measures improved in November and October, respectively.
• On Wednesday and Thursday, labor market data will be under scrutiny and might set the pace of the pair for the short term.

AUD/USD technical outlook: Indicators drift dangerously close to oversold levels

The technical indicators reflect the bears' dominance with the Relative Strength Index (RSI) dropping below the oversold threshold of 30 and the Moving Average Convergence Divergence  (MACD) histogram printing lower red bars. These indicators are near oversold levels, which could push the pair into a correction eventually.

The bears aim to break below 0.6500, targeting the July low of 0.6430, while the bulls need to reclaim 0.6600 to ease the immediate downside pressure.

Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari noted on Tuesday that while the Fed has many reasons to feel confident about its long-running battle with transitory inflation, it still may be too soon to declare outright victory. Key US Consumer Price Index (CPI) figures expected in the midweek are anticipated to show a slight upswing in annualized headline inflation figures.

Key highlights

• The Canadian Dollar stumbled into a fresh 25-month low against the Greenback.
• Canada is thinly-represented on the economic calendar this week and next.
• A lack of meaningful Canadian data and a surging US Dollar keep the Loonie pinned.

The Canadian Dollar (CAD) continued to shed weight against the Greenback, testing a fresh 25-month low against the globally-dominant US Dollar as Loonie traders continue to lose interest in the CAD. The economic calendar remains suppressively thin on the Canadian side, and a broad-market rally underpinning the Greenback has bolstered the USD/CAD pair into multi-year highs and inching toward 1.4000.

With Canada mostly absent from the economic data docket this week, Loonie traders will be forced to the sidelines as Greenback flows take over market momentum. Canadian Consumer Price Index (CPI) inflation figures are on the docket for next week, but not until Tuesday.

Daily digest market movers: Canadian Dollar sheds value as Greenback climbs

• The Canadian Dollar is poised to backslide another fifth of a percent against the US Dollar on Tuesday.
• A lack of CAD-centric economic calendar activity this week has the Loonie playing second fiddle to the Greenback.
• The US economic calendar is equally thin on Tuesday, though markets are gearing up for Wednesday’s US Consumer Price Index (CPI) inflation update.
• Headline US CPI is expected to rise to 2.6% YoY from 2.4%, core CPI forecast to hold steady at 3.3% YoY.
• An upswing in US consumer-level inflation could rattle market confidence in one last rate cut from the Federal Reserve (Fed) in 2024.

Canadian Dollar price forecast

The Canadian Dollar (CAD) is poised to return to its losing ways against the US Dollar this week; after snapping a five-week losing streak by closing slightly higher last Friday, weakness has returned to Loonie flows. The Greenback is mounting the steps into a multi-year high, sending the USD/CAD pair into a 25-month peak bid 1.3970.

Despite a brief test into multi-year highs, USD/CAD bidders haven’t yet managed to break free of near-term consolidation as price action waffles near 1.3950. Short interest still has time to collect from here and send the pair into a fresh leg down back toward the 200-day Exponential Moving Average (EMA) near 1.3660.

USD/CAD daily chart

Amid another strong performance, the US Dollar climbed to new six-month tops as investors maintained their optimism around the “Trump trade" ahead of the publication of key US data in the latter part of the week.

Here is what you need to know on Wednesday, November 13:

The US Dollar Index (DXY) rose past the 106.00 barrier to hit multi-month peaks, helped by the marked bounce in US yields. The release of the US Inflation Rate will be at the centre of the debate, seconded by the MBA’s Mortgage Applications and the API’s weekly report on US crude oil inventories. In addition, the Fed’s Logan, Musalem, and Schmid.

EUR/USD weakened further and clocked new 2024 lows in the 1.0595-1.0590 band in response to the robust sentiment around the Greenback.

GBP/USD extended its deep leg lower to the 1.2720 region, or three-month lows, always on the back of the incessant move higher in the US Dollar.

USD/JPY added to Monday’s advance and came just short of four-month highs near the 155.00. Producer Prices will be in the limelight on the Japanese docket.

Another day of marked gains in the Greenback kept AUD/USD under pressure and prompted it to revisit the area of monthly lows near 0.6510. The Wage Price Index will be unveiled.

WTI prices alternated gains with losses around the $68.00 mark per barrel following two consecutive daily pullbacks as traders gauged the OPEC+ revised forecast for crude oil demand for this year and the next once, while the strong US Dollar kept the price action subdued.

Further downside saw Gold prices tumble to two-month lows in the sub-$2,600 region per ounce troy against the backdrop of extra gains in the Greenback and increasing US yields. Silver prices deflated to five-week lows, although the key $30.00 mark per ounce zone held the downside.

• The US Dollar clings to its latest gains with the DXY above 106.00.
• Expectations for additional interest rate cuts by the Federal Reserve have waned.
• Important US data releases this week will shape the outlook for monetary policy and forex.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, is clinging to its latest gains in the US session on Tuesday. Expectations for additional interest rate cuts by the Federal Reserve (Fed) have waned, and important US data releases in the coming weeks will shape the outlook for monetary policy. These include Consumer Price Index (CPI) and Retail Sales data later this week.

The DXY is anticipated to continue its uptrend, supported by strong US economic fundamentals. The upcoming release of inflation data and Retail Sales figures is expected to bolster the US Dollar. Despite profit-taking and easing labor conditions, the Fed remains optimistic about the economy, and the Greenback's overall trend remains positive.

Daily digest market movers: US Dollar rally continues, Fed easing expectations shift

• Fed easing expectations shift with the market pricing in only 70% odds of a follow-up cut in December.
• The swaps market is pricing in around 50% odds of a December cut, showing a significant shift from September's pricing.
• The market is now pricing in 75 to100 bps of total easing over the next 12 months.
• In addition, investors are pricing in a terminal rate near 3.5% compared to 2.5% in September.
• Fed officials are likely to reinforce the cautious tone this week.

DXY technical outlook:  Greenback approaches overbought levels

The DXY index indicators lie deep in positive terrain, but the Relative Strength Index (RSI) lies near 70. Its proximity to overbought levels suggests a potential for a pullback or consolidation in the near term. However, the overall technical outlook remains bullish, with indicators pointing to further upside potential.

In case of a correction, the 105.00-105.50 level might be used as a support to consolidate gains.

• Mexican Peso tumbles following Trump’s appointments of Mike Waltz and Marco Rubio.
• Banxico expected to cut rates by 25 bps amid heightened US-Mexico tensions.
• Upcoming US inflation and Retail Sales data to impact USD/MXN currency pair.

The Mexican Peso extends its losses against the Greenback on Tuesday on risk aversion due to US President-elect Donald Trump’s first appointments to his cabinet. Trump’s campaign proposals of increasing tariffs and lowering taxes are inflation-prone, which would exert pressure on the Federal Reserve (Fed) to keep rates higher than otherwise. At the time of writing, the USD/MXN trades at 20.62, gaining 1.38%.

Risk aversion due to Trump’s naming Mike Waltz as National Security Advisor and Marco Rubio as Secretary of State hurt the prospects of the Mexican currency, which has tumbled over 2% since Monday. Waltz and Rubio are known for their tough stance on China, hinting that tariffs would likely be imposed.

Mexico’s economic schedule remains absent, though USD/MXN traders are eyeing the Bank of Mexico (Banxico) monetary policy decision on November 14. According to Reuters, 19 of 20 economists expect a 25-basis-point (bps) rate cut to the main interest reference rate, pushing it down to 10.25%.

On Monday, Mexico’s Secretary of Economy Marcelo Ebrard suggested that the Mexican government could retaliate with its own tariffs on US imports. He stressed that tariffs would increase prices in the US.

Recently, Fed officials had crossed the wires. Governor Christopher Waller failed to comment on monetary policy. Contrarily, Richmond Fed President Thomas Barkin stated that “Inflation might be coming under control or might risk getting stuck above the Fed's 2% target.”

Ahead this week, Mexico’s economic docket will feature the Banxico policy decision. On the US front, Fed speakers, inflation on the consumer and producer sides, and Retail Sales will dictate the USD/MXN pair direction moving forward.

Daily digest market movers: Mexican Peso on the defensive ahead of US CPI

• The USD/MXN has risen as the US Dollar Index (DXY), which tracks the performance of the American currency against another six, climbs to a six-month high of 106.15, up by over 0.60%.
• Mexico October Consumer Confidence, revealed on Monday, shows that Mexicans are slightly more optimistic about the economy.
• Industrial Production figures for September were mixed as traders brace for Banxico’s monetary policy decision.
• The US Consumer Price Index (CPI), to be revealed on November 13, is expected to edge up from 2.4% to 2.6% YoY and is projected to remain unchanged on MoM figures at 0.2%.
• The Core CPI is projected to stall on annual and monthly figures, each at 3.3% and 0.3%.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 23 bps of Fed easing by the end of 2024.

USD/MXN technical outlook: Mexican Peso plunges again as USD/MXN rises above 20.50

The USD/MXN uptrend remains intact, with the Greenback extending its gains sharply, threatening to challenge the year-to-date (YTD) high of 20.80 reached on November 6. If surpassed, the next resistance would be the psychological 21.00 figure, followed by the March 8, 2022 peak at 21.46.

Conversely, sellers must push the exchange rate to the 20.00 figure, if they would like to challenge the 50-day Simple Moving Average (SMA) at 19.70. On additional weakness, the USD/MXN next support would be the psychological figure at 19.50, followed by the October 14 low of 19.23.

• EUR/USD falls sharply, driven by increased demand for the Dollar following Trump’s hawkish cabinet appointments.
• US Dollar Index reaches a six-month high of 106.15, boosted by risk aversion in equity markets.
• Upcoming US inflation data eyed; potential reacceleration of inflation could influence Fed’s policy direction.

The Euro plummets sharply against Greenback, cracks below the 1.0600 figure for the first time since November 2023, refreshes new yearly lows at 1.0594. At the time of writing, the EUR/USD trades at 1.0598.

EUR/USD dips below 1.0600, hitting 1.0594 as traders flock to the safety of the US Dollar

Risk aversion keeps US equities pressured, while investors seeking safety, ditch the shared currency, and bought the US Dollar. The US Dollar Index (DXY) which tracks the performance of the buck against six peers, climbs to a six-month high of 106.15 up by over 0.60%.

US President Elect Donald Trump appointed Mike Waltz as National Security Advisor and Marco Rubio as Secretary of State, who are known to have a tough stance on China. This increased fears amongst traders, as tariffs looming, could spark a reacceleration of inflation as the Federal Reserve, embarked to ease monetary policy.

Traders are also eyeing the release of US inflation data on November 13. Estimates suggest that headline and core inflation is expected to remain halt its disinflation process, due in part to the robustness of the US economy.

EUR/USD Price Forecast: Technical outlook

Once the EUR/USD has cleared 1.0600, further downside is seen. The next support would be the November 1, 2023 daily low at 1.0516, before testing the 1.0500 figure. Conversely, if buyers emerge and lift the exchange rate above 1.0600 the next resistance would be the November 11 daily low of 1.0628, followed by 1.0700.

Indicators such as the Relative Strength Index (RSI), indicates bears are in charge.

• The Dow Jones is taking a breather as bids hold just above 44,000.
• Post-election rally pauses, but with little retracement on the cards.
• US CPI inflation data due Wednesday to drive momentum.

The Dow Jones Industrial Average shed a scant 200 points on Tuesday, marking out territory just north of the 44,000 handle as equities take a brief pause from the post-election rally that sent the Dow Jones into fresh record highs. The major equity index surged above 44,000 last week after former President Donald Trump appeared to sweep to a stunning election win, sending investors into a frenzy as they bought whatever they could find.

Now that the Dow Jones is up over 18% in 2024 alone, the post-election glut is taking a pause as investors weigh wether or not equities are encroaching on oversold territory. The DJIA is on pace to chalk in its strongest month since November of last year, when the equity board added nearly 9% in a four-week period. The Dow Jones is now up over 5.5% this November, and one-sided equity traders are taking a breather as US Consumer Price Index (CPI) inflation figures loom around the corner.

US CPI inflation figures for the month of October are slated to release on Wednesday, and markets are expecting a rebound in annualized headline consumer price growth. Full-fat CPI inflation is forecast to tick higher to 2.6% YoY compared to September’s print of 2.4%. Core CPI inflation is expected to hold steady at 3.3% YoY. The monthly figure for both inflation categories are broadly expected to hold flat month-on-month.

Dow Jones news

Tuesday’s pause in the broad-market rally has roughly two-thirds of the Dow Jones testing into the red on the day. Losses were led by 3M (MMM) and Boeing (BA), each falling a little under 3% from the day’s opening prices. 3M eased below $130 per share, while Boeing slipped back underneath $145 per share.

On the high side, Honeywell International (HON) rose nearly 3% and climbed over $231.50 per share. This week, it was revealed that activist investment holdings firm Elliott Management has taken a significant stake in Honeywell, bolstering market confidence in the tech company’s outlook. 

Elliott Management has submitted a letter to Honeywell’s board proposing a major restructuring of the company. They suggest that Honeywell should split into two independent entities. Elliott believes that this separation could increase Honeywell's share price by 51% to 75% over the next two years.

Dow Jones price forecast

Thin losses on Tuesday have crimped the Dow Jones’ mostly one-sided November chart action, though the major equity index is still holding onto bullish territory north of 44,000. Early November sparked a bullish extension after price action gave a clean bounce off of the 50-day Exponential Moving Average (EMA) back when bids and the key moving average mixed near the 42,000 handle.

Dow Jones daily chart

• EUR/CAD retreated by 0.30% to 1.4785.
• Indicators continued to lose ground as the pair fell to lows since July.
• RSI and MACD indicators suggest a bearish outlook, with rising selling pressure but an upwards correction might me coming.

The EUR/CAD pair witnessed a decline of 0.30% on Tuesday, reaching a low of 1.4785, the lowest level since July. Indicators continued to deteriorate, with both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) pointing towards a bearish trend, indicating increasing selling pressure.

As mentioned, the pair's bearish outlook is supported by technical indicators, including the RSI, which currently sits in the oversold zone at 29 with a declining slope, indicating rising selling pressure. The MACD also reinforces this view, with its histogram turning red and rising, suggesting a potential intensification of selling. Should the pair close and stay below 1.4785, it would further indicate increased selling pressure and a potential downward trend.

However, the RSI reaching oversold levels hints at the possibility of a corrective bounce above 1.4800.

EUR/CAD daily chart

Federal Reserve (Fed) Bank of Richmond President Tom Barkin noted early during the US market session on Tuesday that while inflation appears to be coming down, it might still get stuck above the Fed's target levels.

Key highlights

• GBP/USD breaches 200-day SMA, turning bearish with potential to test support at 1.2700.
• Mixed labor data and technical indicators suggest further downside risk for the Pound.
• Recovery above 1.2800 needed for bullish resumption, with 1.2900 and 1.2993 as key targets.

The Pound Sterling plummets more than 0.60% on Tuesday, after labor market data was mixed, with the Unemployment Rate rising sharply, as the economy added over 220K jobs to the economy, 150K less than in the previous reading. At the time of writing, the GBP/USD trades at 1.2792, below the 1.2800 handle for the first time since mid-August 2024.

GBP/USD Price Forecast: Technical outlook

The GBP/USD plunged below the 200-day Simple Moving Average (SMA) of 1.2817. A daily close confirmation would turn the pair bearish, and it might open the door to test the next intermediate support at the 1.2700 figure, followed by major support at August 8 swing low of 1.2664.

For a bullish continuation, buyers must regain 1.2800 and lift the spot prices above the 1.2833/43 are, support levels hit on November 6 and October 31, respectively, before testing 1.2900. Up next would be the 100-day SMA at 1.2993.

Indicators such as the Relative Strength Index (RSI) remains deeply bearish, though not yet turned oversold. Therefore, further GBP/USD downside is seen.

GBP/USD Price Chart – Daily

By contrast, Gold ETFs recorded net inflows for the sixth consecutive month in October, Commerzbank’s commodity analyst Carsten Fritsch notes.

Gold ETFs see net inflows for the sixth consecutive month

“According to the World Gold Council, these amounted to 43 tons. This means that almost 164 tons of Gold have flowed into ETFs since May. For the first time this year, Gold ETF holdings were also higher than at the end of 2023, meaning that the net outflows in the first four months of the year were more than reversed.”

“In October, there were net inflows in North America (30 tons) and Asia (23 tons), but net outflows in Europe (11 tons). According to the WGC, the inflows in North America were particularly due to the uncertainty in the run-up to the US elections. The inflows in Asia largely occurred in China, where the WGC reported a record inflow for a month.”

“This is also noteworthy because traditional Gold demand for jewellery, bars and coins in China has recently been weak. However, it remains to be seen whether the shift in Gold demand towards ETFs is here to stay. ETF outflows in Europe were widespread across all major markets. The WGC attributes this to rising yields and the weakness of local currencies.”

The People's Bank of China (PBoC) did not purchase any Gold in October either, according to data published last Thursday, Commerzbank’s commodity analyst Carsten Fritsch notes.

More Gold is now available to private households

“Accordingly, the PBoC's Gold reserves remained unchanged for the sixth consecutive month at 72.8 million ounces or 2,264 tons. The lack of buying interest from the PBoC caused central bank Gold purchases to fall to 186 tons in the third quarter, almost half the amount purchased in the previous year.”

“At the same time, China needs to import less Gold. China's Gold imports via Switzerland were down 13% year-onyear after nine months, and those via Hong Kong were down 17.5% year-on-year. In both cases, a decline in imports can be seen after the provisional end of PBoC Gold purchases in April.”

“This is because the PBoC's decision not to buy Gold from domestic mine producers means that this Gold is now available to private households.”

The Biden administration has purchased oil for the Strategic Petroleum Reserve (SPR) for the last time, the US Department of Energy reported on Friday, Commerzbank’s commodity analyst Carsten Fritsch notes.

Trump wants to increase SPR further

“The amount is 2.4 million barrels and is to be delivered in April and May 2025. In 2022, the US government released 180 million barrels of oil from the SPR within six months to bring down oil and gasoline prices, which rose significantly after the start of the war in Ukraine.”

“Since mid-2023, 59 million barrels have been bought back, with the average purchase price being significantly lower than the selling price in 2022. Currently, the SPR is at just under 390 million barrels, compared to more than 600 million barrels three years ago.”

“However, this high level does not necessarily have to be reached again, as the US is now a net oil exporter. US Presidentelect Trump has, however, indicated that he wants to increase SPR further.”

• AUD/USD stumbles to near 0.6550 as the US Dollar extends its rally on so-called ‘Trump trades’.
• Investors await the US inflation data for October, which will be published on Wednesday.
• The RBA is expected to maintain its interest rates at its current levels by the year-end.

The AUD/USD pair falls sharply to near 0.6550 in North American trading hours on Tuesday. The Aussie pair weakens as traders ramp up their bets in those assets that are expected to perform better in US President-elected Donald Trump’s administration. The US Dollar (USD) has been one of the key beneficiaries of so-called ‘Trump trades’ as Trump’s policies are expected to boost United States (US) economic growth.

Trump vowed that he would raise import tariffs by 10% universally and lower corporate taxes in his election campaign, a scenario that will boost demand for domestically-produced goods and services, labor demand, and business investment.

The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, climbs to near 105.90, the highest level seen in more than four months.

Meanwhile, investors shift focus to the US Consumer Price Index (CPI) data for October, which will be published on Wednesday. Economists expect the headline inflation to have accelerated to 2.6% from 2.4% in September, with core CPI – which excludes volatile food and energy prices – rising steadily by 3.3%.

The Australian Dollar (AUD) underperforms on Tuesday even though the Reserve Bank of Australia (RBA) is not expected to cut its Official Cash Rate (OCR) in the near term. The RBA is more focused on diminishing upside risks to inflationary pressures, with officials remaining confident over stability in the labor market.

There is a saying in China - "guo jin, min tui" (国进民退) — which roughly translates as "the state advances, the private sector retreats". It describes the feeling among business people in China that the years of economic reform and opening up, during which the private sector played an increasingly important role in the economy, are over, Commerzbank’s FX analyst Volkmar Baur notes.

Chinese currency to struggle against the EUR and the USD

“And if you take a closer look at yesterday's credit growth figures, you might come to the same conclusion. Since 2017, China's central bank (PBoC) has not only published its own credit indicator (aggregate financing), but also the details of new government bond issues. Since then, government bonds have always accounted for around 20% of total new lending. Since 2023, however, this share has risen sharply and recently exceeded 50%.”

“And the foreign direct investment figures released at the end of last week tell a similar story. According to these figures, foreign companies withdrew more capital from the country than they invested in the third quarter. This is the second negative quarter in a row and the third among the last five, after not a single negative quarter between 2010 and mid-2023. So it is not only the Chinese private sector that is reluctant to borrow, but also foreign companies are showing less interest in investing in China.”

“The lack of private credit and foreign investment does not suggest that the Chinese economy will regain its old momentum any time soon. We will have to get used to slower growth from the Middle Kingdom. This is just one of the reasons why the Chinese currency will struggle against the euro and the US dollar in the coming months. Even without new Trump tariffs.”

Oil prices have been under pressure since the end of last week. Brent is now trading at just under $72 per barrel, WTI at around $68, Commerzbank’s commodity analyst Carsten Fritsch notes.

Chinese demand continues to weaken

“The recent price slide was triggered by disappointment over the lack of additional stimulus measures in China, which did little to alleviate demand concerns in the world's second-largest oil consumer. These concerns were further fuelled by the report that Saudi Arabia will supply less crude oil to China in December than in previous months.”

“As reported by Reuters, citing trade sources, December deliveries are expected to be 36.5 million tons. In November, with one calendar day less, 37.5 million tons are expected, following 46 million tons in October. This confirms what was already indicated by the weak Chinese crude oil imports in October and the reduction of the official selling prices for December.”

“Chinese demand continues to weaken and no improvement is in sight for the fourth quarter. After nine months, Saudi Arabia's oil exports to China were already almost 11% lower than in the same period last year.”

The Gold price came under pressure in the immediate aftermath of Donald Trump's election victory and, with a decline of almost 2%, recorded its largest weekly loss since the end of May, Commerzbank’s commodity analyst Carsten Fritsch notes.

Gold price continues to fall

“Yesterday, the price fell sharply again and continues to fall today. In the morning, Gold slid below the $2,600 per troy ounce mark. From its record high at the end of October, Gold has thus fallen almost $200. The selling pressure was caused by a significantly stronger US Dollar (USD) and a sharp rise in US bond yields. Yesterday, the trade-weighted US dollar index rose to its highest level since the beginning of July.”

“The US 10-year yield also marked a four-month high the day after the election. Trump's proposed tariffs are likely to lead to higher inflation, making further interest rate cuts by the Fed more difficult. Our economists have raised their forecast for the bottom of the US key interest rate by 50 basis points to 4%. This means that there should only be two further interest rate cuts by the Fed of 25 basis points each after the expected rate cut in December.”

“In the weeks leading up to the election, the USD had already risen markedly in anticipation of a Trump victory. However, this did not stop the Gold price from rising to new record highs. Apparently, market participants are acting after the election according to the principle of ‘buy the rumour, sell the fact’.”

• GBP/CAD is breaking out of its Rising Wedge pattern and declining. 
• It will probably continue towards the pattern’s downside targets.  

GBP/CAD is breaking decisively out of a Rising Wedge pattern and declining quite quickly. 

GBP/CAD Daily Chart 

It has breached the 1.7871, November 6 low, indicating a probable confirmed breakout. The next target to the downside is 1.7719, the October 3 swing low. 

A break below that would probably initiate further weakness to the next target at 1.7518, the 61.8% extrapolation of the width of the Rising Wedge at its widest part extrapolated lower. This is the usual technical method for forecasting breakouts. 

GBP/CAD broke temporarily above the upper guardrail of the Rising Wedge pattern on several occasions (blue circles on chart) on September 20 and November 1. This is a sign of bullish exhaustion and an early warning of impending reversal. 

Looking at the Norwegian inflation figures published yesterday, I can only conclude: Norges Bank is doing it right. At its interest rate meeting last week, it gave no indication that the policy rate could be lowered earlier than announced in September (first cut in March 2025), even though the disinflation process has progressed since the summer. It postponed this decision until December, when it will have more data on inflation, Commerzbank’s FX analyst Antje Praefcke notes.

NOK remains under the influence of market uncertainty

“Norges Bank received the first set of data yesterday with the October figures. These confirm the basic picture that the disinflation process is gradually progressing. Although the headline rate appears to have risen again slightly (+0.6% mom), the seasonally adjusted trend continues to point downwards and is broadly consistent with the inflation target. The same applies to the core rate, although it is still proving somewhat more stubborn than the headline rate. This is a phenomenon that we are familiar with from many industrialized countries.”

“If the inflation figures for November, which will be published on December 10 and thus before Norges Bank's next interest rate meeting on December 19, do not cloud this picture, it is quite possible that Norges Bank will then also change its interest rate path when the new monetary policy report with the new projections is published and hint at a first interest rate cut as early as January.”

“This may then still lead to shifts in market expectations. For the time being, however, the NOK remains under the influence of market uncertainty and oil price developments.”

• USD/CAD surrenders some of its intraday gains even though the USD Index holds gains around 105.90.
• Trump promised to raise import tariffs by 10% and lower taxes.
• The Fed is expected to cut interest rates by 25 bps while the BoC is estimated to reduce them by 50 bps in December.

The USD/CAD pair gives up half of its intraday gains after facing selling pressure above the key resistance of 1.3950 in the North American session on Tuesday. The Loonie pair surrenders some gains even though the US Dollar (USD) clings to an intraday high, suggesting that the Canadian Dollar (CAD) gains some strength.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, jumps to near 105.90, the highest level seen in more than four months. The USD Index strengthens on improved United States (US) economic and inflation outlook, given that President-elected Donald Trump vowed to raise import tariffs and lower corporate taxes in his election campaign, which will emphasize the need for the Federal Reserve (Fed) to favor a more gradual policy-easing stance.

Currently, the Fed is expected to cut interest rates by 25 basis points (bps) to 4.25%-4.50% in the December meeting, according to the CME FedWatch tool. Going forward, investors will focus on the US Consumer Price Index (CPI) data for October, which will be published on Wednesday.

Meanwhile, the Canadian Dollar bounces back even though the Bank of Canada (BoC) is expected to cut interest rates by 50 basis points (bps) to 3.25% in December. This will be the second 50 bps interest rate cut by the Fed in a row.

USD/CAD trades near the upper boundary of the Ascending Triangle chart pattern on a weekly timeframe around 1.3950. Upward-sloping 20-week Exponential Moving Average (EMA) around 1.3740 suggests a strong uptrend.

The 14-day Relative Strength Index (RSI) hovers near 60.00. Should RSI (14) sustain above 60.00, a bullish momentum will be triggered.

More upside would appear if the asset breaks above the immediate high of 1.3950. The scenario will pave the way for the psychological resistance of 1.4000 and the round-level resistance of 1.4100.

On the contrary, a downside move below the October 29 low of 1.3875 will expose the asset to the October 15 high near 1.3840, followed by the round-level figure of 1.3800.

USD/CAD weekly chart

• EUR/CHF is trying to break out of a Triangle pattern. 
• If it succeeds it will probably lead to further downside towards the price objective for the pattern.

EUR/CHF is attempting to break out of a Triangle pattern it has formed over the last three months (see chart below).

EUR/CHF Daily Chart

A bearish close on Tuesday will indicate a decisive breakout has happened and suggest the start of a likely strong decline. 

The market activity prior to the formation of the Triangle (Since May 27) further tips the odds in favor of a downside evolution. 

If EUR/CHF breaks below the 0.9307 level (September 11 lows) it will further confirm an authentic bearish breakout, with the next target to the downside at 0.9132, the 61.8% Fibonacci extrapolation of the height of the Triangle lower. 

Monday continued the momentum of ‘Trump Trade 2.0’ though several markets are approaching critical levels, DBS’s Senior FX Strategist Philip Wee notes.

DXY nearing a full retracement

“The Dollar Index (DXY) appreciated from 103.4 to 105.5 since the November 5 US election, nearing a full retracement of its 3Q decline from 106.1. EUR/USD dropped below 1.07, closing 0.6% lower at 1.0650 overnight, but is near the year’s low of 1.06 reached in mid-April.”

“USD/CAD struggled to break above 1.3950 this month, with similar resistance for USD/JPY at 154. The S&P 500 Index rallied 5% after the election, hitting an all-time high at the psychological 6000 level. Bitcoin’s spectacular post-election surge from sub-70k is near a test – a trendline resistance level slightly above 90k.”

“In contrast, gold fell 4.4% this month, after a four-month rally, with profit-taking fuelled by concerns that Trump’s incoming policies could reverse the Fed’s easing cycle.”

• EUR/GBP is in a downtrend and at two-and-a-half year lows, however, fundamentals do not support a reversal. 
• The Eurozone economy is expected to be worse hit by US trade tariffs amid already weak growth. 
• German political instability and GBP’s resilience to geopolitical risk are further factors weighing on the pair.

EUR/GBP trades flat on Tuesday as it finds its feet following a five-day losing streak. The pair is trading at over two-and-a-half-year lows in the 0.8280s, driven by a mixture of Euro (EUR) weakness and Pound Sterling (GBP) resilience. It is in a downtrend on all major timeframes. 

EUR/GBP Weekly Chart

The Euro is depreciating on a combination of fears that the imposition of tariffs by the US will dent already weak growth, political uncertainty in Germany. This was reflected in  the lower ZEW sentiment data for both the Euro Area and Germany released on Tuesday. 

Economists at Nomura forecast Eurozone Gross Domestic Product (GDP) to fall “by a minimum 0.3pp cumulative over 2025-26” as a result of US trade tariffs brought in by the Trump administration. 

Interest rates in the UK are expected to remain higher than in the Eurozone as the outlook for growth in the UK remains positive compared to the Eurozone. Relatively higher interest rates will bolster the Pound compared to the Euro, potentially driving EUR/GBP lower.

“The political crisis in Germany, dovish ECB pricing vs Fed and BoE, and the threat of tariffs on EU exports to the US (€500bn per annum, or 2.5% of GDP worth) are combining for a bleak backdrop (for the Euro) into year-end,” says Kenneth Broux, Senior Strategist at Societe Generale, “..we can’t see any lasting bounce materialising until after the German confidence vote and snap elections,” he adds. 

The Pound is more resilient to the geopolitical shocks compared to the Euro, according to analysts at Goldman Sachs. GBP is also more positively aligned to risk-on and has a “positive beta to global risk” adds the bank. Should US equities continue to rally as a result of the outlook due to the new administration in Washington, this should further support Sterling. 

The Bank of England (BoE) is unlikely to cut interest rates in December which makes it an outlier amongst major central banks, including the European Central Bank (ECB). 

This is likely to support GBP since relatively high interest rates attract more foreign capital inflows. 

The BoE’s bank rate is already quite high at 4.75% compared to the ECB’s main refinancing operations rate of 3.40%, suggesting an overall downside bias for EUR/GBP. 

• Crude Oil finds a small floor, trading mildly in the green on Tuesday, after two sessions of sharp losses. 
• Several analysts are projecting a $40 price per barrel under Trump’s presidency. 
• The US Dollar Index rallies further with the Trump trade sweeping markets. 

Crude Oil trades broadly in the green on Tuesday after briefly ticking below $68.00, trying to recover from two consecutive sessions of sharp losses. The Organization of the Petroleum Exporting Countries (OPEC) report released on Tuesday spelled out the obvious element of oversupply, with OPEC revising down its global Oil demand forecast for a fourth time in a row. Analyst oil economist Phil Verleger calls for the possibility of prices falling to $40 per barrel once President-elect Donald Trump takes office due to expectations of additional support for shale and other Oil mining projects jointly with tariffs on China, which would translate into higher supply. 

The US Dollar Index (DXY), which tracks the performance of the Greenback against six other currencies, is extending Monday’s gains. The Trump trade is sending the Greenback surging against all major G20 trade currencies with no exceptions. Expectations that the Fed will still cut interest rates further this year, together with the announced stimulus packages from President-elect Donald Trump, offer a small Goldilocks scenario for the US Dollar (USD) and equities. 

At the time of writing, Crude Oil (WTI) trades at $68.66 and Brent Crude at $72.31.

Oil news and market movers: Trump administration weighs on Oil 

• Donald Trump's aggressive tariffs on imports may send energy prices sharply lower in the next two years, Dow Jones reports. The tariffs imposed would hurt the biggest demand parties in the Oil market, such as China and India. 
• Russia’s seaborne crude exports rebounded in the latest week, with a jump in cargoes from the Arctic region helping to stabilize the four-week average, Bloomberg reports. 
• The monthly OPEC report came in as expected, not bearing many new elements. The main takeaway is that OPEC has revised its global Oil demand downwards for the fourth month in a row. 

Oil Technical Analysis: Trump trade to hurt Oil

Crude Oil prices have found some room to breathe but the outlook remains bleak. Even when OPEC could limit its production further, the US is set to offload even more volumes in the coming years under President Donald Trump. With the US probably becoming more and more independent on Oil imports, Crude Oil prices could correct further. 

On the upside, The 55-day Simple Moving Average (SMA) at $70.51 is the first to be considered before the hefty technical level at $73.85, with the 100-day Simple Moving Average (SMA) and a few pivotal lines. The 200-day SMA at $76.74 is still quite far off, although it could get tested in case tensions in the Middle East arise. 

Traders need to look much lower, towards $67.12 – a level that held the price in May and June 2023 – to find the first support. In case that level breaks, the 2024 year-to-date low emerges at $64.75, followed by $64.38, the low from 2023.

US WTI Crude Oil: Daily Chart

Why are the inflationary effects of possible or announced US import tariffs widely discussed, while the corresponding effects of deportations are not? The Peterson Institute estimates that in the extreme case, more than 8 million workers could be withdrawn from the US labor market. Such a number should be economically relevant to the markets. Currently, there are around 7½ million unfilled vacancies in the US labor market. When the number reached 12 million in 2022, it resulted in wage inflation of around 6% (year-on-year), Commerzbank’s FX Head of FX and Commodity Research Ulrich Leuchtmann notes.

Mass deportations may weigh on the USD

“Many people do not expect deportations to be as extreme as this and assume they will be limited to a few symbolic cases. The announcement that Stephen Miller will become Deputy Chief of Staff in the White House, but above all that Tom Homan will become ‘border czar’, suggests that one should not completely lose sight of the fact that things could turn out differently. As a reminder, Homan is considered the father of the strategy of separating children from their parents at the border to deter immigrants.”

“If — in a risk scenario — deportations were to take on proportions that would fuel wage inflation (at least in some sectors), that inflation would hardly be USD positive, unlike the one triggered by import tariffs. It would be the consequence of a negative supply shock, i.e. a reduction in the productive capacity of the US economy.”

“It would make capital invested in the US less profitable: the greater the labor shortage, the larger portion of the cake goes to the labor factor and the less remains for the remuneration of capital. The attractiveness of the dollar as a ticket to invest in the US would be reduced. While this is not the most likely scenario, it is another argument in favor of my view that bets on sustainable USD strength are incredibly risky. The more such arguments emerge, the more I feel comfortable warning against betting on sustained USD strength.”

• The US Dollar takes off again and crushes all its G20 peers. 
• The Trump trade is the main driver underpinning the Greenback. 
• The US Dollar index makes its way through a string of strong resistances. 

The US Dollar (USD) extends its rally on Tuesday as the Trump trade adds another wave of US Dollar buying. The Greenback is crushing markets, steamrolling across the quote board against other major currencies. A goldilocks momentum is taking place with the US Federal Reserve (Fed) sticking to its interest-rate cutting cycle, while the rollout plan from President-elect Donald Trump is favouring equities due to prospects of stimulus and tax reduction packages once Trump takes office. 

The US economic calendar is rather empty this Tuesday in terms of data, with the numbers from the National Federation of Independent Business (NFIB) and from the TechnoMetrica Institute of Policy and Politics. Markets will rather focus on the batch of Fed speakers who will be speaking this Tuesday. After Fed Chairman Jerome Powell vowed that the Fed will remain data-dependent, a continuation of the rate-cutting cycle could fuel the current Trump trade rally in equities and the US Dollar even more. 

Daily digest market movers: Steamrolling 

• The National Federation of Independent Business (NFIB) Optimism index, which gauges sentiment among US small and medium-sized firms, came in at 93.7 in October, up from 91.5 a month earlier and beating market expectations.
• The TechnoMetrica Institute of Policy and Politics will release its Economic Optimism data for November around 15:00 GMT. A similar pattern as with the NFIB number is expected, ticking up to 47.3, from 46.9.
• Four Fed speakers are set to release comments to the markets: 
  • At 15:00 GMT, Federal Reserve Governor Christopher Waller delivers a keynote speech at the Clearing House Annual Conference in New York.
  • Around 15:15 GMT, Federal Reserve Bank of Richmond Thomas Barkin delivers a speech and participates in a moderated Q&A session at the Together Summit in Baltimore.
  • At 19:00 GMT, Federal Reserve Bank of Minneapolis President Neel Kashkari participates in a moderated conversation on "The Fed's New Focus" at the Yahoo Finance Invest event in New York.
  • Finishing off this Tuesday at 22:00 GMT, Federal Reserve Bank of Philadelphia Patrick Harker delivers a speech about Fintech, AI & the Changing Financial Landscape at the Carnegie Mellon University Lecture Series.
• Equities are giving back Monday’s gains, with European indices sinking near 1%. US Futures look bleak ahead of the US Opening bell. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 68.8%. A smaller 31.2% chance is for rates to remain unchanged. While the rate-cut scenario is the most probable, traders have pare back some of the rate-cut bets compared with a week ago.
• The US 10-year benchmark rate trades at 4.35%, up sharply after the bank holiday on Monday.  

US Dollar Index Technical Analysis: Slicing through

The US Dollar Index (DXY) is being fueled by the Trump trade, which is steamrolling through markets for a second day in a row. There is even a Goldilocks scenario on the table where the Fed is still cutting while markets are cheering ahead of President-elect Donald Trump taking office. A small caveat here might be that markets will have priced in everything too quickly before President-elect Trump is able to issue any measure at all. 

This Tuesday, the rather heavy 105.89 (May 2 high) is being tested as resistance. Once that level is broken, 106.52, the high of April and a double top, will be the last level standing before starting to talk about 107.00.

On the downside, the round level of 104.00 and the 200-day Simple Moving Average (SMA) at 103.87 should refrain from sending the DXY any lower. Before that level, there is not much in the way with maybe some slim support at 104.63 (high of October 30). 

US Dollar Index: Daily Chart

Today's September release of UK earnings data has come in slightly stronger than expected and it looks like the downward momentum in private sector pay has started to slow. However, this data set has fallen out of favour with the Bank of England (and hence the market), ING’s FX analyst Chris Turner notes.

EUR/GBP set to continue to head lower

“More interesting today should be a 10CET panel appearance today from Chief Economist Huw Pill. The subject of the panel is: 'Reversing the great global tightening – how far and how fast?' Pill dissented from the BoE decision to cut rates in August and is therefore seen more as a centre/hawk on the MPC.”

“The market is already pricing in only a modest BoE easing cycle from here – just three rate cuts next year. And unless there is a major surprise from Pill today, that pricing can stay intact. If so, EUR/GBP will struggle to sustain a move over 0.8300/8315 now and should continue to head lower.”

• USD/JPY is probably forming a bearish Broadening Formation price pattern. 
• These often occur during periods of market volatility and end with a breakout lower.

USD/JPY is probably forming a Broadening Formation price pattern which began in the last week of September. 

The Broadening Formation occurs when price starts to go sideways but forms higher highs and lower lows with each leg of its unfolding. When the highs and lows of the range are connected with trendlines this creates a widening range, or price pattern. 

USD/JPY 4-hour Chart 

Broadening Formations usually occur during periods of high market volatility as has been the case during the formation of the one on USD/JPY which coincides with the US presidential election. 

When it forms at a price top the pattern is bearish as is the case with the one on USD/JPY. Eventually price is likely to break below the lower boundary line and decline rapidly lower. The distance it is likely to go depends on how wide the pattern becomes at its broadest point.

It is difficult to determine when these patterns have concluded, however, it is worth keeping USD/JPY on a watchlist and assessing its maturity as it evolves. 

The Moving Average Convergence Divergence (MACD) momentum indicator is a useful indicator for trading the up and down legs of the pattern. The blue MACD tends to be a useful indicator of turning points in price as it turns above or below its red signal line.

After the big boost in the US Dollar (USD) last week, the party is likely to be over for now. There are still a few US data points on the agenda during the week, such as tomorrow's new CPI data for October or retail sales and industrial production on Friday. On the one hand, the Fed is unlikely to change its course in the short term, because inflation is considered to be under control, although it is likely to have risen slightly again in October, as it did in the two previous months. And on the other hand, the economy remains resilient, so the data are unlikely to bring any excitement to the market, Commerzbank’s FX analyst Antje Praefcke notes.

The roller coaster ride to start up again by the end of January

“The ‘showdown’ between Trump and the Fed will only come next year, if at all, when the new president is in office and if it becomes apparent in a few months' time that his economic policy is having an inflationary effect. Therefore, the future inflation data are crucial for the dollar, and not the data that will be released this week.”

“With the realization of who will be the next US president, and the big question of how and when he can or will implement some of his plans, the dollar will remain the big driver of exchange rates in the future. It will determine what happens in the currency markets. Yesterday, for example, the possible appointment of Robert Lighthizer, a well-known protectionist hardliner, as US trade representative, caused nervousness in Europe and let the dollar to trend firmer.”

“In this respect, we in the foreign exchange market should be pleased about a hopefully calm end to the year with a few fluctuations in EUR/USD (but in all likelihood with a tendency towards a stronger dollar). Because the roller coaster ride will probably start up again by the end of January at the latest, when Trump really gets going again.”

The 'Atlantic' spread as some traders call it has widened even further, ING’s FX analyst Chris Turner notes.

EUR/USD looks ready to test 1.0600

“Two-year EUR:USD swap differentials have now widened beyond 180bp in favour of the dollar. We haven't seen this kind of level since 2022, when EUR/USD was trading close to parity. Admittedly those parity levels in 2022 were partly caused by the surge in energy prices and the terms of trade impact on the euro – a negative factor that is not present today.”

“EUR/USD looks ready to test 1.0600, below which our end-year target at 1.05 beckons. As above, one month implied EUR/USD volatility is being brought back up towards 8% having been offered near 6.50% last week.”

“The only events of note on the European calendar today are ECB speakers (Olli Rehn and Robert Holzmann), who will probably not stand in the way of an ECB rate cut in December. The question is, will it be 25bp or 50bp? The market prices 30bp. Our eurozone team think it will be 50bp.”

• EUR/CAD weakens as the EURO faces selling pressure across the board.
• Trump’s victory and German political uncertainty have weighed on the Euro.
• The BoC is expected to cut interest rates by 50 bps next month.

The EUR/CAD pair trades close to more than a three-month low around 1.4820 in European trading hours on Tuesday. The cross extends its losing streak for the third trading day on Tuesday as the Euro (EUR) remains on the backfoot across the board.

The Euro faces intense selling pressure on Republican Donald Trump’s victory in United States (US) presidential elections who vowed to raise import tariffs by 10% universally in his election campaign. Though the impact should be seen on all trading partners of the US, the Euro appears to be a bigger victim, with Trump mentioning in his election campaign the euro bloc will "pay a big price" for not buying enough American exports.

Meanwhile, German political uncertainty after the collapse of the three-party coalition has also weighed on the Euro, challenging the economic growth by paving the way for a confidence vote on December 18 and a snap election on February 23, according to a report from Focus Online.

Though investors have underpinned the Canadian Dollar (CAD) against the US Dollar (USD), its outlook remains weak on growing expectations that the Bank of Canada (BoC) will cut interest rates further. The BoC is expected to reduce its key borrowing rates by 50 basis points (bps) again in the December meeting.

EUR/CAD delivers a breakdown of the Distribution formation on a daily timeframe in which the asset is transferred from institutional investors to retail participants, which results in a bearish reversal. The longer-term trend of the asset has also turned bearish as it has slipped below the 200-day Exponential Moving Average (EMA), which trades around 1.4866.

The 14-day Relative Strength Index (RSI) slides below 40.00, adds to evidence of more downside ahead.

The cross could decline to the July 10 low near 1.4730 and the round-level support of 1.4700 after breaking below the July 12 low near 1.4800.

On the flip side, a recovery move above the November 11 high of 1.4927 will drive the asset towards the psychological resistance of 1.5000 and the October 28 high of 1.5045.

EUR/CAD daily chart

• Gold falls to key support from a major trendline for the long-term uptrend at $2,600. 
• A strong US Dollar is reducing the price of Gold, whilst competition from Bitcoin and stocks is also bearish. 
• Expectations for the Federal Reserve slowing the pace of interest rate cuts and reduced safe-haven demand could also weigh on Gold’s price.

Gold (XAU/USD) trades at seven-week lows around $2,600 as it finds support from a major trendline on Tuesday. A stronger US Dollar (USD) puts pressure on the precious metal due to market perceptions that President-elect Donald Trump’s economic policies will be positive for the Greenback. Given Gold is mainly priced and traded in US Dollars, a stronger USD alone is often enough to bring down its price.

Trump’s pledges to impose tariffs on imports, reduce taxes, and deport millions of illegal immigrants are likely to push up prices in the US and drive higher inflation.  This would likely lead to the US Federal Reserve (Fed) slowing the pace of interest rate cuts as it tries to combat the resulting inflation. Relatively higher interest rates are negative for Gold since they increase the opportunity cost of holding the non-interest paying asset. 

Market-based gauges are already showing a 31% probability the Fed will leave interest rates unchanged at their December meeting when previously they had shown a 100% probability of at least a quarter percent reduction, according to the CME FedWatch tool. 

Gold price falls as competition from Bitcoin and Stocks bites

Gold is also falling due to competition from alternative assets such as Bitcoin (BTC), which keeps pushing to new all-time highs in the $80,000s because of expectations of laxer crypto regulation under the Trump administration. 

US stocks are rising as investors anticipate lower corporation tax and looser regulations boosting company profits.

Impact on safe-haven flows

The perception that Trump will be able to bring an end to the Ukraine-Russia war, which he boasted he could settle “in one day – 24 hours,” might also be reducing safe-haven demand for Gold. 

In a private call after his election victory, Trump supposedly warned Putin “not to escalate in Ukraine”, according to The Washington Post. However, this was later denied by the Kremlin who called such reports “pure fiction”, according to the BBC.  

The war in the Middle East looks far from over as Trump strengthens ties with regional ally Israel, which is likely to stoke further enmity from Iran and its proxies. The latest reports suggest Israel is stepping up its bombardment of the Gaza Strip and Lebanon with a dawn raid killing at least 17 Palestinians in Gaza, “including 11 displaced people in the so-called “safe zone” of al-Mawasi,” according to Al Jazeera News, as well as 14 people in a northern Lebanese town far from the Israel-Lebanon border. 

Technical Analysis: XAU/USD falls to support at major trendline

Gold falls to support from a major trendline for its long-term uptrend situated at around the $2,600 mark. 

The precious metal has broken below the 50-day Simple Moving Average (SMA) at $2,648 and is now in a short-term downtrend. Given it is a principle of technical analysis that “the trend is your friend,” the odds favor a continuation lower. 

XAU/USD Daily Chart

A decisive break below the major trendline would confirm an extension of the downtrend, probably to the next target at $2,538, the 100-day SMA and August highs. 

A decisive break would be one accompanied by a longer-than-average red candle that pierced well below the trendline and closed near its low, or three red candles that broke clearly below the trendline.

However, the precious metal remains in an uptrend on a medium and long-term basis, giving the material risk of a reversal higher in line with these broader up cycles. Still, there are no signs currently of such a resumption as price action remains bearish for the time being. 

US equity markets continue to plough ahead. There is an emerging narrative that unlike in 2016, when Donald Trump was unprepared for office, this time around he plans to hit the ground running in January. To some degree that supports the extension of the Trump trades right now and tends to subdue the investment thesis that it will take his administration a year to deliver any major initiatives – as was the case in 2017, ING’s FX analyst Chris Turner notes.

New USD bull trend is rising

“What we have seen so far this week are early signs of active engagement in a new dollar bull trend. Traded levels of volatility are rising notably as it seems the market is actively positioning (investors) or hedging (corporate treasurers) in expectation of a stronger dollar. All we would say here is not to fight this emerging trend.

“Today we will see the October update of the NFIB small business optimism index. This is expected to remain off early-year lows and presumably could pick up over coming months on the Republican win and what it means for corporate taxes. And at 1600CET we have a speech from the Fed's Christopher Waller.”

“Presumably, he will follow Chair Jerome Powell's lead from last week and not get drawn into questions about how the Fed will react to Trump's proposed agenda. DXY has some resistance here at 105.70, but the highs of the year near 106.50 are very much in focus.”

• Germany’s ZEW Economic Sentiment Index dropped to 7.4 in November.
• EUR/USD keeps the red above 1.0600 after German and Eurozone ZEW surveys.

The headline German ZEW Economic Sentiment Index worsened to 7.4 in November from 13.1 reported in October, missing the expectations of 12.8.

The Current Situation Index slipped to -91.4 in the eleventh month of the year, as against October’s -86.9 readout. Data missed the anticipated –86.0 print.

The Eurozone ZEW Economic Sentiment Index arrived at 12.5 in November versus the October figure of 20.1. The market consensus was 20.5.

Key points

Market reaction

The EUR/USD pair remains in negative territory after the downbeat German and Eurozone ZEW surveys. The pair is shedding 0.29% on the day to trade near 1.0620, at the press time.

USD/SGD resumed its move higher this morning, tracking moves in broad USD. Pair was last at 1.3376 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Consolidation on the day

“Daily momentum turned mild bullish while RSI rose. Consolidation likely with slight risk to the upside. Support at 1.3290 (61.8% fibo retracement of Jun high to Oct low), 1.3190 (50% fibo), 1.31 (38.2% fibo).”

“S$NEER was last at 1.42% above model-implied mid.”

This Tuesday, more comments are crossing the wires from European Central Bank (ECB) policymaker Olli Rehn.

Bank of England (BoE) Chief Economist Huw Pill commented on the inflation and interest rate outlook during his scheduled appearance on Tuesday.

Key quotes

Market reaction

GBP/USD is finding some comfort from Pill’s commentary, cutting losses while regaining 1.2800. The pair is currently trading at 1.2821.

• Silver price weakens as Trump’s victory is expected to boost US growth and consumer spending.
• The US Dollar rallies on expectations that the Fed could follow a slower policy-easing approach.
• Investors expect the Fed to cut interest rates by 25 bps in December.

Silver price (XAG/USD) falls further to near $30.20 in European trading hours on Tuesday. The white metal weakens as the US Dollar (USD) strengthens on expectations that President-elected Donald Trump’s policies will boost the United States (US) economic growth and inflationary pressures.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, inches close to the key resistance of 106.00. The higher US Dollar makes the Silver price an expensive bet for investors. Meanwhile, 10-year US Treasury yields jump to near 4.37%. Higher yields on interest-bearing assets reduce the opportunity cost of holding an investment in non-yielding assets, such as Silver.

Trump vowed to raise import tariffs by 10% and lower corporate taxes in his election campaign, a move that will increase demand for domestic goods, boost labor demand and business investment, which will eventually prompt inflationary pressures and allow the Federal Reserve (Fed) to follow a more gradual rate-cut cycle.

In the December meeting, there is a 65% chance that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50%, according to the CME FedWatch tool.

Going forward, investors will focus on the US Consumer Price Index (CPI) data for October, which will be released on Wednesday for fresh interest rate guidance. Also, a slew of Fed officials, including Chair Jerome Powell, are set to speak this week.

Apart from the US Dollar’s strength, an absence of direct stimulus in the Chinese economic package to revive the economy has also weighed on the Silver price. Silver, as a metal, has applications in various industries associated with renewable energy and mining. A scenario of bleak growth in China weighs on the Silver price.

Silver technical analysis

Silver price declines toward the upward-sloping trendline around $29.00, plotted from the February 28 low of $22.30. The white metal weakened after breaking below the horizontal support plotted from the May 21 high of $32.50.

The near-term trend of the Silver price has weakened as the 20-day Exponential Moving Average (EMA) starts declining, which trades around $30.26.

The 14-day Relative Strength Index (RSI) slides below 40.00. A bearish momentum will trigger if the RSI (14) sustains below the same.

Silver daily chart

Instead of continuing to advance, USD is more likely to trade in a 153.00/154.10 range. In the longer run, upward momentum has eased; USD is expected to trade in a 151.30/154.70 range, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Upward momentum has eased

24-HOUR VIEW: “When USD was trading at 152.80 yesterday, we noted that ‘provided that USD remains above 152.25 (minor support is at 152.50), it could edge higher to 153.25, potentially reaching 153.55.’ Our view was of a higher USD was not wrong, even though the anticipated advance exceeded our expectation as USD rose to a high of 153.95. USD then pulled back from the high to close at 153.71. The pullback in overbought conditions and slowing momentum suggests instead of continuing to advance, USD is more likely to trade in a 153.00/154.10 range.”

1-3 WEEKS VIEW: “We shifted from a positive to neutral USD stance yesterday (11 Nov, spot at 152.80), indicating that ‘upward momentum has eased.’ We expected USD to trade in a 151.30/154.70 range. We continue to hold the same view.”

• The Mexican Peso depreciates amid uncertainty over the future of trade with the US and the likely imposition of tariffs. 
• The threat of mass deportation of Mexican immigrants could further hit remittance flows and demand for MXN.  
• USD/MXN rebounds from the bottom of a rising channel, and looks poised to resume its established uptrend. 

The Mexican Peso (MXN) edges lower in its main pairs as it continues its run of weakness into the third day on Tuesday. Investor fears about the impact of President-elect Donald Trump’s policy agenda on the Mexican economy are a major factor in the Peso’s depreciation, as are expectations that the Bank of Mexico (Banxico) will forge ahead with a quarter percent interest rate cut at its meeting on Thursday and, more generally, a stronger US Dollar (USD).  

Mexican Peso declines on uncertainty regarding Trump policies towards Mexico

The Mexican Peso weakens as markets digest the implications of Trump’s proposed policy agenda on the Mexican economy, including the outlook for trade relations between the two nations, issues surrounding migration, the war on drugs and the radical constitutional changes to the judiciary pushed through by Mexico’s Morena-led governing coalition.

The two countries (and Canada) have an existing free trade deal, the United States-Mexico-Canada Trade Agreement (USMCA) which is in place until 2026. However, Mexico’s recent changes to its constitution, such as the controversial reform to the judiciary that will make judges elected by popular vote rather than appointed, contravene the agreement. This could give Trump the opportunity to press for an immediate renegotiation, according to El Financiero.

On Friday, the Peso weakened almost 2.0% in a day after the Financial Times reported that Donald Trump had offered Washington lawyer Robert Lighthizer the job of US trade chief. Although the rumors were later contradicted by Reuters, who quoted a source in the White House as saying they were “untrue,” the possibility the known protectionist hawk could get the job was another risk for MXN. 

The Mexican Peso is likely to further weaken as it looks as if Trump is going ahead with his pledge to deport millions of illegal migrants, many of whom are likely Mexican. Trump has already picked immigration hardliner Tom Homan as “Border Tzar” to spearhead the mass deportations. 

Such a policy could affect the many Mexican workers who illegally work in the US black economy and send substantial remittances back home to their families in Mexico. This, in turn, would reduce aggregate demand for the Peso. In addition, the influx of illegal immigrants sent back to Mexico could create a supply shock, which could lead the Banxico to cut Mexican interest rates more aggressively, reducing foreign capital inflows and causing the Peso to weaken further. 

The increasing likelihood that the Republican party will win a majority in the US Congress, allowing them free reign to implement Trump’s radical policies, might also impact MXN. The final seats are still being called, but as things stand the Republican party has won 214 to the Democratic party’s 205 seats, with only 16 outstanding, according to the Associated Press. The threshold for a majority is 218.

According to forecasts by El Financiero, a Republican majority in Congress with Trump as President could lead the Peso to weaken even further against the USD. They estimate a band of between 21.14 and 22.26 for USD/MXN in such a scenario. 

If the Republicans fail to win a majority in Congress, however, the pair is likely to end up in a range between 19.70 and 21.14, says El Financiero. 

The Peso could see volatility later in the week when the Bank of Mexico (Banxico) meets on Thursday for its November policy meeting. Although recent headline inflation data came out higher than expected, core inflation fell to 3.80% YoY in October, from 3.91% previously, bringing it closer to Banxico’s 3.0% target. Experts see a good chance of Banxico cutting the bank rate by 0.25% to 10.25% on Thursday. Such a move would be negative for the Peso since lower interest rates attract lower foreign capital inflows. 

Technical Analysis: USD/MXN rebounds from base of channel

USD/MXN recovers from the bottom of its rising channel and starts to extend higher in line with the broader uptrend. 

USD/MXN 4-hour Chart 

The pair is in a short, medium and long-term uptrend. As the old technical analysis saying goes “the trend is your friend”, suggesting the odds favor more upside to come. 

A break above 20.58 (November 11 high) would add weight of evidence to the bullish short-term thesis. 

For more confidence that the uptrend has resumed, traders should wait for a break above the 20.80 high of November 6. Such a move would probably confirm more gains ahead, with 21.00 as the next key target and resistance level (round number, psychological support).  

Silver prices (XAG/USD) fell on Tuesday, according to FXStreet data. Silver trades at $30.24 per troy ounce, down 1.49% from the $30.70 it cost on Monday.

Silver prices have increased by 27.08% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 85.81 on Tuesday, up from 85.42 on Monday.

(An automation tool was used in creating this post.)

The Australian Dollar (AUD) traded with a heavy bias amid disappointment with Chinese stimulus post-NPC while higher UST yields, USD weighed. AUD was last seen at 0.6545 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Mild bullish momentum on daily chart is fading

“Near term, policy uncertainties associated with Trump presidency may continue to see swings in AUD but also, lack of impactful Chinese stimulus may well influence AUD volatility more.”

“Mild bullish momentum on daily chart is fading while RSI looks to head lower. Risks skewed to the downside for now. Support at 0.6490/0.6510 levels (recent low). Resistance at 0.6630/50 levels (21, 200 DMAs), 0.6690/0.6720 levels (50, 100 DMAs).”

“Data focus this week on wage price index (Wed), labour market report (Thu).”

• EUR/USD declines to near 1.0600 as investors expect that Trump’s protectionist policies will significantly weigh on the Eurozone export sector.
• The ECB is expected to cut interest rates by 50 bps in December.
• Investors shift their focus to the US inflation data for October.

EUR/USD posts a fresh nearly seven-month low below 1.0620 in Tuesday’s European session. The major currency pair continues to face intense selling pressure on heightened concerns over the Eurozone export sector outlook, given that President-elect Donald Trump vowed to raise import tariffs by 10% in his election campaign. 

Market experts believe that Trump’s landslide victory is favorable for consumer confidence and business sentiment in the United States (US) but is worrisome for their leading trading partners. Trump's protectionist policies could also lead to a vicious cycle of global trade war, especially with the Eurozone, as Trump mentioned that the euro bloc will "pay a big price" for not buying enough American exports.

Implementing a 10% tariff on all imported goods advocated by Trump would have a negative impact of 0.1% on the European Union’s (EU) Gross Domestic Product (GDP), according to a recent London School of Economics and Political Science paper. 

Meanwhile, the collapse of the German three-party coalition after Chancellor Olaf Scholz sacked Finance Minister Christian Linder last week has also been a major cause of weakness in the Euro (EUR). Olaf is willing to call for a no-confidence vote in December and a snap election in early 2025, according to Deutsche Welle news.

German political uncertainty and potential weakness in the volume of exports are expected to be borne by the European Central Bank (ECB). “It seems a leap of faith at this stage to expect a complete turnaround in the German fiscal position and instead, the onus will be on the European Central Bank to support the eurozone economy, which is expected to cut interest rates by 50 basis points (bps) in December,” analysts at ING said.

Daily digest market movers: EUR/USD weakens as US Dollar gains further

• EUR/USD is also down by US Dollar’s (USD) strength, which continues to enjoy so-called ‘Trump trades’. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, extends its rally above 105.70. 
• The Greenback rises further on optimism over potential outcomes of Trump’s policies, such as higher labor demand, business investment, and persistent price pressures, which would force the Federal Reserve (Fed) to follow a more gradual policy-easing approach.
• Analysts at JP Morgan have raised its terminal rate forecast to 3.5% from 3%, predicting a steady pace of 25 bps cuts beginning in December. According to the CME FeDwatch tool, the probability of the Fed reducing interest rates by 25 bps to 4.25%-4.50% in December is 65%.
• For more cues about the interest rate path, investors will pay close attention to the US Consumer Price Index (CPI) data for October, which will be released on Wednesday, and commentaries from a string of Fed officials this week, including Fed Chair Jerome Powell.
• Economists expect the headline inflation to have accelerated to 2.6% from 2.4% in September, with core CPI – which excludes volatile food and energy prices – rising steadily by 3.3%.

Technical Analysis: EUR/USD slides to near 1.0600

EUR/USD extends its losing streak for the third trading day on Tuesday. The major currency pair declines further and approaches the year-to-date (YTD) low at around 1.0600. The shared currency pair is expected to face more downside, with the 20-day Exponential Moving Average (EMA) turning vertically south near 1.0800.

The return of the 14-day Relative Strength Index (RSI) in the range of 20.00-40.00 indicates bearish momentum gaining traction and adds to evidence of more downside.

Looking down, the pair could decline to near the psychological support of 1.0500 after breaking below 1.0600. On the flip side, the round-level resistance of 1.0700 will be the key barrier for the Euro bulls.

• EUR/JPY remained tepid after the German Harmonized Index of Consumer Prices data released on Tuesday.
• German HICP increased by 2.4% YoY in October, up from the September’s 1.8% reading.
• Japan's Finance Minister Katsunobu Kato cautioned to take appropriate action to manage fluctuations in the FX market.

EUR/JPY has offered its recent gains from the previous session, falling to near 163.50 during the European trading hours on Tuesday. The Euro faces downward pressure as expectations grow for the European Central Bank (ECB) to adopt aggressive rate cuts. The ECB is expected to lower rates by 25 basis points in December, with market projections indicating a potential decline to 2% by June.

On the data front, Germany’s Consumer Price Index (CPI) rose to 2.0% year-over-year in October, up from September’s three-and-a-half-year low of 1.6%, marking the highest inflation rate in three months. Additionally, the Harmonized Index of Consumer Prices (HICP) increased by 2.4% YoY, up from the previous 1.8% reading, and climbed 0.4% month-over-month after a 0.1% decline in September.

On the political side, German Chancellor Olaf Scholz has expressed a willingness to move the parliamentary confidence vote forward by several weeks, possibly scheduling it before Christmas. This shift could pave the way for an early election.

The Japanese Yen (JPY) found support after new verbal interventions from Japanese officials. Finance Minister Katsunobu Kato warned that authorities are prepared to take “appropriate action” to manage sharp fluctuations in the foreign exchange market.

However, the JPY’s upward momentum is capped by uncertainty surrounding the Bank of Japan’s (BoJ) rate-hike plans. Japan’s fragile minority government is likely to complicate any moves toward tightening monetary policy. Additionally, the BoJ’s Summary of Opinions from its October meeting indicated a division among policymakers regarding further rate hikes.

European Central Bank (ECB) policymaker Olli Rehn said on Tuesday that “if disinflation stays on track, it would make a case for further rate cuts.”

Additional quotes

Market reaction

At press time, EUR/USD loses 0.25% on the day to trade near 1.0625. Traders await the German ZEW sentiment survey for further impetus.

• AUD/USD remains under some selling pressure for the third straight day amid a bullish USD.
• Fears about Trump’s potential protectionist tariffs on China further undermine the Aussie.
• The technical setup favors bearish traders and supports prospects for further near-term losses.

The AUD/USD pair attracts sellers for the third successive day on Tuesday and slides back below mid-0.6500s during the first half of the European session.

The US Dollar (USD) buying remains unabated in the wake of expectations that US President-elect Donald Trump's policies will spur economic growth and boost inflation, which could limit the scope for the Federal Reserve (Fed) to ease its policy. Adding to this, concerns about Trump's potential protectionist tariffs on China undermine the China-proxy Australian Dollar (AUD) and exert additional pressure on the AUD/USD pair.

From a technical perspective, last week's failure near the 100-day Simple Moving Average (SMA) and the subsequent slide back below the 61.8% Fibonacci retracement level of the August-September rally favors bearish traders. Moreover, negative oscillators on the daily chart suggest that the AUD/USD pair could slide further towards challenging the lowest level since August 8, around the 0.6515-0.6510 region touched last week. 

Some follow-through selling below the 0.6500 psychological mark should pave the way for a decline towards the next relevant support near the 0.6475-0.6470 area. The AUD/USD pair could eventually drop to the 0.6400 mark and extend the downward trajectory towards the 0.6350-0.6345 region, or the year-to-date (YTD) low touched in August. 

On the flip side, any attempted recovery might now confront stiff resistance and meet with a fresh supply ahead of the 0.6600 round-figure mark. A sustained strength beyond might trigger a short-covering rally towards the 0.6635 area or the 200-day SMA. The AUD/USD pair could climb further towards retesting the 100-day SMA strong barrier, currently pegged near the 0.6685-0.6690 region, en route to the 50-day SMA, near the 0.6715-0.6720 area.

AUD/USD daily chart

The New Zealand Dollar (NZD) is expected to trade in a range between 0.5945 and 0.5985. In the longer run, outlook is unclear; NZD could trade in a broad 0.5915/0.6045 range for now, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The next level to watch is 0.5915

24-HOUR VIEW: “After NZD fell sharply last Friday, we indicated yesterday that ‘The sharp decline has scope to extend to 0.5940 before stabilisation can be expected.’ We pointed out that NZD ‘is not expected to reach last week’s low, near 0.5915.’ Instead of declining further, NZD traded in a tight 0.5953/0.5977 range, closing largely unchanged at 0.5964 (-0.07%). Momentum indicators are turning flat, and NZD is expected to continue to trade in a range, probably between 0.5945 and 0.5985.”

1-3 WEEKS VIEW: “We highlighted yesterday (11 Nov, spot at 0.5965) that ‘The outlook is unclear after the sharp but short-lived swings.’ We were of the view that NZD ‘could trade in a broad range of 0.5915/0.6045 for now.’ We continue to hold the same view.”

Ishiba will remain as PM after receiving support from parliament after 2 rounds of voting in a special parliamentary session yesterday. USD/JPY drifted higher; last at 153.83 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is mild bearish

“Ishiba will lead the minority government with LDP-Komeito coalition, alongside the support from Democratic Party for the People (DPP) on a confidence and supply agreement (while staying out of the coalition).”

“DPP wants to raise the income ceiling for tax payments and had previously critic the BoJ for raising rates. Markets may also ‘speculate’ that BoJ may not hike this year, further adding to JPY weakness. USDJPY inched higher this morning.”

“Daily momentum is mild bearish, but RSI rose. Near term risks skewed to the upside. Resistance at 154.80 (recent high) and 156.50 (76.4% fibo). Support at 153.30 (61.8% fibo retracement of Jul high to Sep low), 151.70 levels (21, 200 DMAs), 150.70 (50% fibo).”

The Australian Dollar (AUD) is likely to trade in a 0.6555/0.6595 range. In the longer run, outlook is mixed; AUD could trade in a choppy manner between 0.6515 and 0.6690, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.  

AUD can reach 0.6515 near term

24-HOUR VIEW: “We indicated yesterday that AUD ‘could decline to 0.6550 before stabilisation is likely.’ We also indicated that ‘any further decline is unlikely to reach 0.6515.’ Our view did not turn out as AUD traded in a relatively quiet manner between 0.6564 and 0.6599. AUD closed slightly lower by 0.14% (0.6574). While the price movements appear to be part of range trading phase, the soft underlying tone suggests AUD is likely to trade in a lower range of 0.6555/0.6595.”

1-3 WEEKS VIEW: “Our update from yesterday (11 Nov, spot at 0.6585) is still valid. As highlighted, the recent pronounced but short-lived price movements have resulted in a mixed outlook. AUD could continue to trade in a choppy manner, likely between 0.6515 and 0.6690.”

The Euro (EUR) continued to trade lower, in line with our caution that EUR may bear the brunt of the US election outcome. Pair was last seen at 1.0623 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is bearish

“Trump presidency will result in shifts in US foreign, trade policies. The potential 20% tariff (if implemented) can hurt Europe where growth is already slowing, and that US is EU’s top export destination. EU-UST yield differentials have already widened and may widen further as markets speculate on a dovish ECB. In Germany, there is risk that the current government may be falling.”

“Chancellor Scholz dismissed Finance Minister and called for confidence vote on 15 Jan 2025. In terms of US foreign policy, military aid to Ukraine may dwindle when Trump takes over. He has on many occasions in the past said his priority is to end the war and stop what he described as a drain on US resources. Europe will have to take responsibility for its security and that would mean increasing defense spending – possibly adding to fiscal burden for some EU nations.”

“Daily momentum is bearish while RSI fell. Support at 1.06 levels (2024 low). Breach below this support will open way for further downside towards 1.0450/1.05 levels. Resistance at 1.0740 (76.4% fibo), 1.0810/30 levels (21 DMA, 61.8% fibo retracement of 2024 low to high).”

Scope for GBP to drop to 1.2835; given the oversold conditions, the major support at 1.2800 is unlikely to come under threat. In the longer run, slight buildup in momentum indicates GBP is likely to edge lower; the 1.2800 level is expected to provide significant support, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

GBP is likely to edge lower

24-HOUR VIEW: “Last Friday, GBP fell to a low of 1.2885. Yesterday (Monday), when GBP was at 1.2910 yesterday, we highlighted that ‘there is room for GBP to dip below the 1.2885 low before a more sustained rebound is likely.’ We added, ‘the major support at 1.2850 is unlikely to come under threat.’ While our view was validated as GBP fell to a low of 1.2858, there is no sign of a rebound just yet. Today, there is scope for GBP to drop to 1.2835. Given the oversold conditions, the major support at 1.2800 is unlikely to come under threat. On the upside, should GBP break above 1.2910 (minor resistance is sat 1.2890), it would suggest that the weakness in GBP has stabilised.”

1-3 WEEKS VIEW: “Last Friday (08 Nov, spot at 1.2980), we highlighted that, ‘the recent buildup in downward momentum has faded, and the outlook is unclear.’ We expected GBP to ‘trade in a range between 1.2850 and 1.3055.’ Yesterday, GBP dropped to a low of 1.2858. There has been a slight buildup in downward momentum. From here, GBP is likely to edge lower, but the 1.2800 level is expected to provide significant support. To maintain the buildup in momentum, GBP remain below 1.2975”

The US Dollar (USD) extended its move higher, likely in anticipation of US CPI data tomorrow. DXY was last at 105.76 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Near term risks skewed to the upside

“Consensus expects core to hold steady at 3.3% while headline CPI may come in higher at 2.6%. The uptick may raise doubts if Fed will still cut rates in Dec, adding to USD upward pressure. We do however expect Fed to cut in Dec amid cooling job market.”

“Moreover, post-FOMC last week, Powell commented that the election will have no near-term effect on monetary policy decisions. Elsewhere, tariff risk and Trump policy uncertainty may continue to keep USD supported on dips.”

“Daily momentum turned bullish while RSI rose. Near term risks skewed to the upside. Break puts next resistance at 106.20, 106.50 levels (2024 high). Support at 104.60 (61.8% fibo), 103.70/80 levels (200 DMAs, 50% fibo retracement of 2023 high to 2024 low).”

• NZD/USD depreciates as the US Dollar receives support from Trump’s potential fiscal policies.
• The NZD struggles as the Trump administration may impose a 60% tariff on imports from China.
• Trump’s proposed fiscal policies could lead the Fed to adopt a more hawkish monetary policy.

The NZD/USD pair remains subdued near 0.5950 during European trading hours on Tuesday. Concerns are mounting that President-Elect Donald Trump’s expected tariff increases on Chinese goods could pressure the NZD, given New Zealand's close trade relationship with China.

Morgan Stanley’s analysis divides the Trump administration's macroeconomic policies into three primary areas: tariffs, immigration, and fiscal measures. The report anticipates that tariff policies will take precedence, with expectations for an immediate 10% tariff increase globally and a more substantial 60% increase targeting Chinese imports.

Adding to downward pressure on the NZD, China’s recent stimulus measures have underwhelmed investor expectations, weakening demand prospects for New Zealand's largest trading partner. Last week, China introduced a 10 trillion Yuan debt package but refrained from implementing direct economic stimulus measures, disappointing markets.

Meanwhile, the Reserve Bank of New Zealand (RBNZ) is anticipated to announce a more substantial 75 basis point rate cut later this month due to the significant time between meetings. A 50 basis point cut has already been fully priced in by markets.

The US Dollar (USD) continues to gain strength following the confirmation of Trump’s victory in the US election. Market analysts believe that Trump’s proposed fiscal policies could stimulate investment, spending, and labor demand, potentially heightening inflation risks. This could lead the Federal Reserve (Fed) to adopt a more hawkish monetary policy.

However, Federal Reserve Chair Jerome Powell stated on Thursday that he doesn’t anticipate Trump’s potential return to the White House impacting the Fed’s near-term policy decisions. “We don’t guess, speculate, and we don’t assume what future government policy choices will be,” Powell noted after the bank decided to lower interest rates by 25 basis points to a range of 4.50%-4.75%, as expected.

EUR could decline further; the major support at 1.0600 could be just out of reach for now. In the longer run, the next level to watch is 1.0600; if EUR breaks below 1.0600, the focus will shift to 1.0555, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Below 1.0600, the focus will shift to 1.0555

24-HOUR VIEW: “While we expected EUR to trade with a downward bias yesterday, we noted that it ‘does not seem to have enough momentum to reach 1.0665.’ We underestimated the momentum, as EUR not only reached 1.0665, but also dropped further to 1.0628. It then closed on a weak note at 1.0654, down by 0.60% for the day. The rapid drop appears to be a tad overdone, but with no sign of stabilisation just yet, EUR could decline further today. However, the major support at 1.0600 could be just out of reach for now. To keep the momentum going, EUR must not break above 1.0705, with minor resistance at 1.0675.”

1-3 WEEKS VIEW: “In our latest narrative from last Thursday (07 Nov, spot at 1.0730), we indicated that the steep selloff last Wednesday ‘suggests further EUR weakness’ and ‘the levels to watch are 1.0665 (low in Jun) and the year-to-date low of 1.0600 in April.’ Yesterday (Monday), EUR broke below 1.0665, reaching a low of 1.0628. As indicated, the next level to watch is 1.0600. We will continue to hold a negative EUR view as long as 1.0760 (‘strong resistance’ level previously at 1.0815) is not breached. Looking ahead, if EUR breaks below 1.0600, the focus will shift to 1.0555.”

• The Pound Sterling slumps to nearly 1.2800 against the US Dollar after the release of the weak UK employment data.
• UK Unemployment Rate jumped to 4.3%, while Average Earnings grew faster than expected in the three months ending September.
• Investors await the US inflation data for fresh interest-rate guidance.

The Pound Sterling (GBP) weakens against its major peers on Tuesday after the release of employment data from the United Kingdom (UK) showed loosening labor market conditions. The Office for National Statistics (ONS) reported that the ILO Unemployment Rate rose to 4.3% in the three months to September from 4.0% in the three months ending August, higher than estimates of 4.1%. In the same period, UK employers added 219K new workers, fewer than the former release of 373K.

Signs of slowing labor demand have weighed on the British currency even as not all components of the release were GBP-negative. Average Earnings data, a measure of wage growth, grew at a faster-than-expected pace in the three months ending September. Earnings excluding bonuses rose by 4.8%, higher than estimates of 4.7% but slower than the former release of 4.9%. Average Earnings Including bonuses accelerated to 4.3% against expectations and the prior reading of 3.9%.

Bank of England (BoE) officials have been closely tracking wage growth when deciding on interest rates as it is a major driving force to inflationary pressures in the service sector. The policy-easing cycle by the BoE has been more gradual compared with other G-7 nations, and higher service inflation is the key reason behind this approach.

It will be interesting to see whether traders increase BoE rate cut bets due to the slowing job market or pare them amid faster-than-projected wage growth. Currently, traders are slightly bent towards another interest rate reduction by 25 basis points (bps) in the December monetary policy meeting. The BoE also reduced its key borrowing rates by 25 bps last week, but favored a more gradual policy-easing approach.

Daily digest market movers: Pound Sterling weakens against US Dollar

• The Pound Sterling slides to near 1.2800 against the US Dollar (USD) in Tuesday’s London session, the lowest level seen in almost three months. The GBP/USD pair weakens due to a slower UK job market and the strength in the US Dollar across the board.
• The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, refreshes a four-month high above 105.70. The Greenback extends its upside trend generated by Donald Trump’s victory in the United States (US) presidential election as it looks increasingly likely that Republicans will control both the Senate and the House of Representatives when Trump takes office in January, according to projections from Decision Desk HQ.
• Trump’s protectionist trade practices and his promise to lower corporate taxes are expected to boost inflationary pressures, which would force the Federal Reserve (Fed) to follow a more gradual policy-easing approach. In the December policy meeting, the Fed is expected to cut interest rates again by 25 basis points (bps) to 4.25%-4.50%, according to the CME FedWatch tool. Still, investors have recently pared back bets of such an outcome.
• Meanwhile, investors await the US Consumer Price Index (CPI) data for October, which will be released on Wednesday, and commentary from a slew of Fed policymakers for fresh interest rate guidance. Economists expect the headline inflation to have grown by 2.6%, faster than 2.4% in September on year-on-year. In the same period, the core CPI – which excludes volatile food and energy prices – is expected to have risen steadily by 3.3%.
• The impact of inflation is expected to be weak on the Fed monetary policy action in December unless there is a significant deviation from the consensus, as policymakers seem to be confident about inflation remaining on track to the bank’s target of 2%.

Technical Analysis: Pound Sterling falls to near 1.2800

The Pound Sterling posts a fresh almost three-month low near 1.2800 against the US Dollar. The GBP/USD extends its downside after failing to hold the 200-day Exponential Moving Average (EMA), which trades around 1.2860. The overall trend of the Cable turned negative after a breakdown from the lower boundary of the rising channel, which set a bearish reversal.

A bearish momentum has kicked in with the 14-day Relative Strength Index (RSI) falling below 40.00.

Looking down, the August low at 1.2665 will be a major cushion for Pound Sterling bulls. On the upside, the Cable will face resistance near the psychological figure of 1.3000.

• USD/CAD continues to gain ground as Trump’s potential fiscal policies could delay further rate cuts by the Fed.
• The commodity-linked CAD struggles as crude Oil prices extend their losing streak.
• Oil prices decline as proposed tariffs from Trump could dampen demand growth in China.

USD/CAD extends its winning streak for the third consecutive day, trading around 1.3950 during the European session on Tuesday. The US Dollar (USD) continues to gain strength following the confirmation of Trump’s victory in the US election.

Market analysts believe that Trump’s potential fiscal policies could stimulate investment, spending, and labor demand, potentially heightening inflation risks. This could lead the Federal Reserve (Fed) to adopt a more hawkish monetary policy, further supporting the US Dollar and the USD/CAD pair.

On Sunday, Minneapolis Fed President Neel Kashkari remarked that the US economy has demonstrated impressive resilience as the Fed works to control inflation. However, Kashkari emphasized that the Fed is "not all the way home" and will need additional evidence to ensure inflation fully returns to the 2% target before considering another rate cut.

The commodity-linked Canadian Dollar (CAD) receives downward pressure from lower crude Oil prices, given the fact that Canada is the largest Oil exporter to the United States (US). West Texas Intermediate (WTI) Oil price trades around $67.90 at the time of writing. Crude Oil prices extend losses amid the fears that a Trump administration will spark a tariff-led trade war and concerns about demand growth in China.

Traders will likely focus on the Canadian September Building Permits later in the North American session. Attention will then turn to the US inflation data set for release on Wednesday, which could provide key insights into future US monetary policy.

• EUR/GBP gains traction to near 0.8295 in Tuesday’s early Asian session. 
• The UK Unemployment Rate climbed to 4.3% in three months to September.
• The ECB is on track to deliver more rate cuts.

The EUR/GBP cross gathers strength to around 0.8295 during the early European session on Tuesday. The Pound Sterling (GBP) weakens against the Euro (EUR) after the recent mixed UK labor market data. The attention will shift to the German November ZEW survey, which is due later on Tuesday. 

Data released by the Office for National Statistics (ONS) on Tuesday showed that the UK ILO Unemployment Rate rose to 4.3% in the three months to September from 4.0% in the previous period. This figure came in weaker than the expectation of 4.1%. Meanwhile, the Claimant Count Change increased by 26.7K in October versus 10.1K prior (revised from 27.9), below the market consensus of 30.5K. 

UK Wage inflation, as measured by Average Earnings excluding Bonus climbed 4.8% 3M YoY in September versus 4.9% in August,  beating the estimation of a 4.7% rise. Average Earnings including Bonuses also rose by 4.3% in the same period, compared to 3.9% (revised from 3.8%) quarter through September. The Pound Sterling attracts some sellers in an immediate reaction to the UK employment report. 

On the other hand, the European Central Bank (ECB) policymaker Robert Holzmann said on Sunday that there is no reason for the European Central Bank not to cut interest rates in December, but the decision will be based on the incoming data. The expectation that the ECB is likely to deliver more rate cuts might cap the upside for the cross in the near term. Markets have fully priced in a 25 basis points (bps) rate cut then, as well as a nearly 20% chance of a larger 50 bps move. 

• AUD/JPY depreciates as Japan's Finance Minister Katsunobu Kato cautions to take appropriate action to manage fluctuations in the FX market.
• The JPY may face challenges due to uncertainty around the BoJ rate hike plans.
• The AUD struggles as the Trump administration may impose immediate tariffs of 60% on imports from China.

AUD/JPY retraces its recent gains from the previous session, trading around 100.70 during the early European hours on Tuesday. This dip comes as the Japanese Yen (JPY) gains support following new verbal interventions from Japanese officials. Japanese Finance Minister Katsunobu Kato cautioned that authorities would take "appropriate action" to address sharp fluctuations in the foreign exchange market.

However, the Yen's upside potential remains limited due to uncertainty around the Bank of Japan's (BoJ) rate-hike plans. The presence of a fragile minority government in Japan is expected to complicate any moves toward monetary tightening. Additionally, the BoJ’s Summary of Opinions from its October meeting indicated a split among policymakers on whether to pursue further rate hikes.

Additionally, the Australian Dollar (AUD) faces downward pressure amid concerns about potential tariff increases on Chinese goods by US President-Elect Donald Trump, as China is one of Australia’s largest export markets. Additionally, China’s latest stimulus measures fell short of investor expectations, raising concerns over demand from Australia’s largest trading partner and further weighing on the AUD.

On a positive note, the Westpac Consumer Confidence index rose by 5.3% to 94.6 points in November, marking its second consecutive month of improvement and the highest level in two and a half years. However, the index has stayed below 100 for almost three years, indicating that pessimists still outnumber optimists.

The Australian Dollar's downside may be somewhat limited, as Reserve Bank of Australia (RBA) Governor Michele Bullock reaffirmed a hawkish stance after last week’s interest rate hold. Bullock emphasized the need for restrictive monetary policy in light of persistent inflationary pressures and a strong labor market.

• The UK Unemployment Rate rose to 4.3% in three months to September.
• The Claimant Count Change for Britain arrived at 26.7K in September.
• GBP/USD remains pressured toward 1.2800 after mixed UK employment data.

The United Kingdom’s (UK) ILO Unemployment Rate ticked up to 4.3% in the three months to September, following 4.0% in August, the data published by the Office for National Statistics (ONS) showed on Tuesday. The market had expected a 4.1% reading in the reported period.

Additional details of the report showed that the number of people claiming jobless benefits climbed by 26.7K in October, compared with a revised gain of 10.1K in September, missing the expected 30.5K print.

The Employment Change data for September came in at 219K versus August’s 373K.

Meanwhile, Average Earnings, excluding Bonus, in the UK increased 4.8% 3M YoY in September versus a 4.9% raise in August. The market forecast was for a 4.7% growth.

Another measure of wage inflation, Average Earnings, including Bonus, rose 4.8% in the same period after accelerating by 3.9%  in the quarter through August. The data beat the estimated 3.9% growth.

Commenting on the UK employment report, Work and Pensions Secretary Liz Kendall MP said, “ 2.8 million people – a near record number are locked out of work due to poor health. This is bad for people, bad for businesses and it’s holding our economy back. That’s why our Get Britain Working plan will bring forward the biggest reforms to employment support in a generation, backed by an additional £240m of investment.”

“And while it’s encouraging to see real pay growth this month, more needs to be done to improve living standards too. So, from April next year over three million of the lowest paid workers will benefit from our increase to the National Living Wage, delivering a £1,400 a year pay rise for a full-time worker,” Kendall added.

GBP/USD reaction to the UK employment report

GBP/USD inches further south in reaction to the mixed UK employment data. The pair is trading 0.42% lower on the day at 1.2814, as of writing.

Here is what you need to know on Tuesday, November 12:

Asian FX affair witnessed a negative shift in risk sentiment, as investors moved away from higher-yielding/ risk assets amid lingering concerns over China’s economic concerns and US President-elect Donald Trump’s potential protectionism policies.

Citing people familiar with the matter, Bloomberg News reported that Chinese regulators are considering cutting deed tax for home buyers to as low as 1%, down from the current rate of up to 3%. However, this additional support measure from China failed to provide any zest to traders.

Asian stock markets gave up early gains and turned into negative territory as traders took account of the tensions mentioned above. Semiconductor stocks led the decline in the regional indices following a Reuters report that the US told Taiwan Semiconductor Manufacturing Co. are said to halt shipments to Chinese customers of advanced chips often used in AI applications.

The US Dollar (USD) continues its upbeat momentum following Donald Trump's victory in the US elections, capitalising on ‘Trump trades’ while fading expectations of future interest rate cuts by the US Federal Reserve (Fed) also keep the buying interest around the USD alive and kicking.

Potentially inflationary tariffs and immigration policies under a Trump presidency have seen markets trimming bets of a quarter-point Fed interest rate cut on Dec. 18 to about 65% from about 85% seen before the election, according to CME Group's FedWatch Tool.

Across the G10 FX board, USD/JPY seems to have stabilized above 153.50 after swinging between 154.00 and 153.40 earlier in the Asian session. The absence of Japanese verbal intervention, sustained US Dollar strength and uncertainty over the Bank of Japan (BoJ) rate hikes help keep the pair afloat.

AUD/USD trades with sizeable losses near 0.6550, undermined by weak Australian Westpac Consumer Confidence data, Chinese economic concerns, falling commodity prices, and a firmer US Dollar. Meanwhile, NZD/USD holds lower ground near 0.5955, tracking the weakness in the Aussie.

EUR/USD resumes its downtrend, approaching 1.0600 in early Europe. Germany’s political risks and bets for aggressive easing policy by the European Central Bank (ECB) weigh on the Euro. Speeches from ECB policymakers and the German ZEW Economic Sentiment data will provide fresh trading incentives.

GBP/USD extends its decline toward 1.2800 as traders look to UK labor market data for some saving grace.

USD/CAD rebounds to near 1.3950 amid US Dollar demand and falling WTI oil prices. The US oil is down 0.50%, trading below $68.  

Gold maintains a three-day downtrend, currently testing two-month lows just above $2,600. Speeches from several Fed policymakers will be closely scrutnized for fresh insights on the Fed’s rate cut outlook.

• USD/CHF trades in positive territory for the third consecutive day near 0.8810 in Tuesday’s early Asian session. 
• The US CPI inflation data will be the highlight on Wednesday. 
• The SNB made no commitment to keep cutting interest rates.

The USD/CHF pair attracts some buyers to around 0.8810 during the early European session on Tuesday. The stronger US Dollar (USD) broadly provides some support to the pair. The Federal Reserve’s (Fed) Christopher Waller, Thomas Barkin, Neel Kashkari and Patrick Harker are set to speak later in the day. The US Consumer Price Index (CPI), and Producer Price Index (PPI) will be in the spotlight on Wednesday. 

Trump's proposed policies including tax cuts, trade tariffs and deficit spending could trigger a fresh wave of inflation and could compel the US Fed to slow the pace of rate reductions. This, in turn, might underpin the Greenback against the Swiss Franc (CHF). 

The US Dollar Index (DXY), which tracks the performance of the USD against six peers, climbed to fresh four-month highs near 105.70. Traders will shift the focus to the US October CPI inflation data on Wednesday, which might offer some hints about the Fed’s future rate path. 

On the Swiss front, the Swiss National Bank (SNB) Vice Chairman Antoine Martin said on Monday that the central bank is not locked into more interest rate cuts in December. “It’s not useful for central banks to lock themselves into forward-looking communications, since between now and the next decision, there may be changes in conditions that render current communications invalid,” noted Martin. The markets expect the SNB to cut at least 25 basis points (bps) from the current 1% level at its next meeting on December 12.

• GBP/JPY attracts fresh sellers on Tuesday and is pressured by a combination of factors.
• Intervention fears underpin the JPY, while a bullish USD continues to weigh on the GBP.
• The BoJ uncertainty and the BoE’s hawkish tilt could limit losses ahead of UK jobs data.

The GBP/JPY cross meets with a fresh supply following an Asian session uptick to levels just above the 198.00 mark and reverses a major part of the previous day's move up. Spot prices currently trade around the 197.00 mark, down over 0.35% for the day, as traders now look forward to the UK monthly employment details for a fresh impetus.

The UK Office for National Statistics (ONS) is expected to report that the number of people claiming unemployment-related benefits rose to 30.5K in October, from 27.9K, and the jobless rate edged higher to 4.1% during the three months to September. Investors will also pay close attention to the wage growth data, which might influence expectations about the Bank of England's (BoE) policy decision in December. This, in turn, will provide some meaningful impetus to the British Pound (GBP) and the GBP/JPY cross. 

In the meantime, speculations that Japanese authorities might intervene in the FX market to prop up the domestic currency, along with fears about US President-elect Donald Trump's protectionist tariffs, underpin the Japanese Yen (JPY) and exert pressure on spot prices. Any meaningful JPY appreciating move, however, seems elusive on the back of uncertainty over the Bank of Japan's (BoJ) rate-hike plans. Apart from this, the BoE's hawkish tilt could offer support to the GBP and help limit the downside for the GBP/JPY cross. 

Even from a technical perspective, the recent breakout above the very important 200-day Simple Moving Average (SMA) favors bullish traders and supports prospects for the emergence of some dip-buying at lower levels. This further makes it prudent to wait for strong follow-through selling before confirming that the GBP/JPY cross has topped out and positioning for a deeper corrective decline in the near term.

FX option expiries for Nov 12 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0600 1.8b
• 1.0625 1.1b
• 1.0725 2.3b
• 1.0740 935m
• 1.0750 2.3b
• 1.0800 1.1b
• 1.0825 762m

GBP/USD: GBP amounts     

• 1.3000 412m

USD/JPY: USD amounts                     

• 152.00 536m
• 155.00 1.1b

USD/CHF: USD amounts     

• 0.8700 436m
• 0.8750 654m
• 0.8800 843m

AUD/USD: AUD amounts

• 0.6650 480m

USD/CAD: USD amounts       

• 1.3750 705m
• 1.3800 490m
• 1.3900 515m

• GBP/USD weakens to near 1.2840 in Tuesday’s early European session. 
• Investors await the UK job data on Tuesday for fresh impetus. 
• The USD gains ground on Trump trades. 

The GBP/USD pair extends its downside to near 1.2840 on Tuesday during the early European session. The Greenback remains firm as Trump trades continue to rally. Investors will closely monitor the UK employment data, which is due later on Tuesday.

The Bank of England (BoE) decided to cut interest rates by 25 basis points (bps) last week, bringing the bank’s key rate to 4.75%. The BOE Governor Andrew Bailey stated during the press conference that the UK central bank needs to retain a “gradual approach” to policy easing.  

The UK job data on Tuesday will be closely watched as it might offer some hints about the BoE policy decision in the December meeting. The Unemployment Rate in the UK is expected to tick higher to 4.1% in the three months to September from 4.0% in the quarter ending August. 

Additionally, the Average Earnings Excluding bonuses are projected to grow by 4.7% versus 4.9% prior, while Average Earnings including bonuses are estimated to rise by 3.9% from the prior release of 3.8%. If the report shows a stronger-than-expected outcome, this could support the Pound Sterling (GBP) against the USD. 

On the USD’s front, a possibility that the Trump administration will propose policies, including steep tariffs, tax cuts, and interference with the Federal Reserve’s monetary policy, might boost the USD and bond yields. Fed officials are likely to reinforce the cautious tone this week, and traders will take more cues from the release of the US Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales reports later this week.

• EUR/CAD may find an immediate barrier around a “pullback resistance” at the 1.4870 level.
• The 14-day RSI remains below the 50 level; a further decline toward the 30 mark would strengthen bearish bias.
• The psychological level of 1.4800 appears as the immediate support for the pair.

The EUR/CAD cross attempts to halt its two days of losses, trading around 1.4840 during the Asian session on Tuesday. An analysis of the daily chart highlights a strong bearish bias, as the pair remains below the nine-day Exponential Moving Average (EMA).

The 14-day Relative Strength Index (RSI), a key momentum indicator, stays below the 50 level, indicating sustained bearish momentum. A further dip toward the 30 level would intensify this downward trend for the EUR/CAD cross.

Additionally, the nine-day Exponential Moving Average (EMA) remains below the 14-day EMA, signaling continued weakness in short-term price momentum for the EUR/CAD cross.

On the downside, the EUR/CAD cross may test the psychological level of 1.4800, followed by the key level of 1.4700. A break below the latter could put downward pressure on the pair to navigate the region around its seven-month low of 1.4587 level.

Regarding the resistance, the EUR/CAD cross finds an immediate barrier around “throwback support” turned “pullback resistance” at the 1.4870 level. A break above the level could lead the pair to test the nine-day EMA at 1.4951 level, followed by the 14-day EMA at 1.4974 level.

EUR/CAD: Daily Chart

Gold prices fell in India on Tuesday, according to data compiled by FXStreet.

The price for Gold stood at 7,101.08 Indian Rupees (INR) per gram, down compared with the INR 7,114.27 it cost on Monday.

The price for Gold decreased to INR 82,824.36 per tola from INR 82,979.44 per tola a day earlier.

FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.

(An automation tool was used in creating this post.)

• EUR/AUD gains some positive traction, though the bias seems tilted in favor of bearish traders.
• Worries about a fresh US-China trade war could undermine the Aussie and cap any further gains.
• A 'Death Cross' formation supports prospects for the emergence of fresh selling at higher levels.

The EUR/AUD cross attracts some buyers during the Asian session on Tuesday and reverses a part of the previous day's slide, though it lacks bullish conviction. Spot prices currently trade around the 1.6235-1.6240 region, up less than 0.20% for the day as traders now look to German macro data – the final CPI print and ZEW Economic Sentiment. 

In the meantime, the Australian Dollar (AUD) continues with its relative underperformance amid worries that US President-elect Donald Trump's protectionist stances could trigger a fresh US-China trade war. This, to a larger extent, overshadows the Reserve Bank of Australia's (RBA) hawkish stance and continues to undermine the China-proxy Aussie, offering some support to the EUR/AUD cross. 

Meanwhile, Trump warned before the election that the European Union would have to pay a big price for not buying enough American exports. This, in turn, could strain the Eurozone’s export sector and potentially impact economic growth. Apart from this, a bullish US Dollar (USD) continues to exert some downward pressure on the shared currency and should keep a lid on the EUR/AUD cross. 

From a technical perspective, the formation of 'Death Cross' – the 50-day Simple Moving Average (SMA) crossing below the 200-day SMA – further warrants caution for bullish traders. Moreover, oscillators on the daily chart have been gaining negative traction and are still away from being in the oversold zone, suggesting that the path of least resistance for the EUR/AUD cross is to the downside. 

Hence, any subsequent move-up might continue to attract fresh sellers ahead of the 1.6300 round figure. This, in turn, should cap spot prices near the 50-day SMA, currently pegged near the 1.6325 region. A sustained strength beyond, however, could lift the EUR/AUD cross back towards the 1.6400 mark, or the 200-day SMA, which should now act as a key pivotal point for short-term traders. 

On the flip side, the 1.6200 round figure, closely followed by the 1.6180 horizontal zone might continue to protect the immediate downside. A convincing break below will reaffirm the negative bias and make the EUR/AUD cross vulnerable to weaken below the 1.6150-1.6145 support, towards the 1.6110-1.6100 area en route to the 1.6060-1.6050 region and the October low, around the 1.6000 psychological mark.

EUR/AUD daily chart

• Gold price ticks higher, though it remains close to a one-month low touched on Monday.
• The Trump-related trades keep the USD near a multi-month peak and cap the precious metal.
• Elevated US bond yields support prospects for XAU/USD to experience further downside.

Gold price (XAU/USD), after recording its steepest weekly decline in over five months, fell over 2% on Monday and dived to its lowest level since October 10 amid strong follow-through US Dollar (USD) buying. Traders anticipate a cautious approach from the Federal Reserve (Fed) moving forward amid hopes that US President-elect Donald Trump's politics will boost economic growth and inflation. This, in turn, remains supportive of elevated US Treasury bond yields, which pushed the USD to over a four-month top and weighed heavily on the non-yielding yellow metal.

The downward trajectory, however, stalled ahead of the $2,600 mark, amid fears that Trump’s protectionist policies will impact the global economy. This, in turn, drives some haven flows and assists the Gold price in holding steady during the Asian session on Tuesday. Any meaningful recovery, however, seems elusive in the wake of the underlying strong bullish sentiment surrounding the USD. Traders might also opt to wait on the sidelines ahead of this week's release of the US consumer inflation figures and speeches by influential FOMC members, including Fed Chair Jerome Powell.

Gold price draws some support from concerns about Trump’s protectionist policies

• The US Dollar prolonged its positive trend that followed Donald Trump's victory in the US presidential election and shot to its highest level since early July, which prompted heavy selling around the Gold price on Monday.
• Trump's expansionary policies and corporate tax cuts could put upward pressure on inflation, and limit the Federal Reserve's scope to ease its monetary policy more aggressively. This continues to underpin the Greenback.
• Minneapolis Fed President Neel Kashkari said on Sunday that the central bank wants to have confidence and needs to see more evidence that inflation will go back to the 2% target before deciding on further interest rate cuts. 
• The US Treasury bond yields hold steady below the post-US election swing high as investors assess broader implications of Trump's victory in the US presidential election on fiscal policy and interest rate cut expectations.
• Before the election, Trump had pledged to impose a universal 10% tariff on imports from all countries. This fuels concerns about an escalation of the global trade war and offers some support to the safe-haven XAU/USD. 
• Traders now await speeches from influential FOMC members, including Fed Chair Jerome Powell, for cues about the future of interest rates in the US amid speculations that the US central bank might delay its easing cycle.
• According to the CME Group's Fedwatch tool, traders are now pricing in a 65% chance of another 25-basis-point rate cut by the Fed and a 35% probability of a ‘no change’ at the next FOMC monetary policy meeting in December. 
• Investors this week will also confront the release of the US consumer inflation figures and the US Producer Price Index (PPI), which might contribute to determining the next leg of a directional move for the commodity.

Gold price could accelerate the fall once the $2,600 mark is broken

From a technical perspective, the overnight breakdown below the 50-day Simple Moving Average (SMA) was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have been gaining negative traction and are still away from being in the oversold zone, suggesting that the path of least resistance for the Gold price is to the downside. 

That said, the overnight slump stalled ahead of the $2,600 mark, which represents the 38.2% Fibonacci retracement level of the June-October rally and should act as a key pivotal point. A convincing break below the said handle should pave the way for an extension of the recent pullback from the all-time peak and drag the Gold price to the $2,540-2,539 confluence. This comprises 50% Fibo. level and the 100-day SMA, which if broken decisively will reaffirm that the XAU/USD has topped out in the near term.

On the flip side, the $2,632-2,635 area now seems to act as an immediate hurdle, above which a bout of a short-covering move could lift the Gold price to the $2,659-2.660 static resistance. A sustained strength beyond the latter should pave the way for a move towards the $2,684-2,685 region en route to the $2,700 mark and the $2,710 supply zone. Some follow-through buying will suggest that the recent corrective decline has run its course and shift the bias back in favor of bullish traders. 

• Silver prices face challenges due to a reduced demand for safe-haven assets following Trump’s election victory.
• The demand for riskier assets improves as markets assess the potential impacts of the proposed Trump policies.
• The dollar-denominated Silver struggles due to a stronger US Dollar and rising Treasury yields.

Silver prices (XAG/USD) experiences a third consecutive day of declines, trading around $30.60 per troy ounce during the Asian session on Tuesday. The precious metals sector, including Silver, is facing pressure due to a reduced demand for safe-haven assets.

Traders are increasingly shifting toward riskier assets as markets assess the potential impacts of US President-Elect Trump’s potential fiscal policies and monetary strategies. The possibility of tariffs being implemented early in Trump’s presidency could lead to inflation, which in turn may cause the Federal Reserve (Fed) to delay its expected easing measures in the coming year.

As a result, the dollar-denominated Silver is also struggling amid a stronger Greenback and rising US Treasury yields. The US Dollar Index (DXY), which tracks the value of the US Dollar against six major currencies, is hovering near a four-month high at 105.70. Meanwhile, the yields on 2-year and 10-year US Treasury bonds are at 4.28% and 4.32%, respectively, at the time of writing.

China’s recent stimulus measures have fallen short of investor expectations, undermining earlier hopes for industrial support in the largest manufacturing hub and negatively impacting the outlook for industrial metals across the board. This has put additional pressure on Silver, which has significant usage in electrification, particularly in solar panels.

Last week, China announced a 10 trillion Yuan debt package aimed at easing local government financing pressures and boosting the economy. However, the package did not include direct economic stimulus measures, which many had hoped for.

Meanwhile, Chinese-owned solar panel manufacturers have begun scaling back production, partly due to concerns that Trump’s election victory in the US could lead to higher tariffs on the sector. Morgan Stanley has predicted that the Trump administration may impose immediate tariffs of 60% on imports from China.

• The Indian Rupee edges lower in Tuesday’s Asian session. 
• Sustained outflows from local equities weigh on the INR. 
• Investors will monitor India’s October Consumer Price Index (CPI) and Fedspeak on Tuesday.

The Indian Rupee (INR) remains weak near an all-time low on Tuesday. The downward pressure for the local currency is pressured by persistent foreign fund outflows and a muted trend in domestic equities. Additionally, the renewed US Dollar (USD) demand from oil companies and foreign banks contributes to the INR’s downside. 

Nonetheless, the significant depreciation of the INR might be capped by the decline in crude oil prices and the likely foreign exchange intervention by the Reserve Bank of India (RBI). Looking ahead, traders brace for India’s October Consumer Price Index (CPI), which is due on Tuesday. On the US front, the Federal Reserve’s (Fed) Christopher Waller, Thomas Barkin, Neel Kashkari and Patrick Harker are scheduled to speak later in the day. On Wednesday, the attention will shift to the US October CPI inflation data. 

Indian Rupee slips to near a fresh low, hurt by outflows from local equities

• Foreign investors have withdrawn more than $2.5 billion from Indian stocks over November so far, adding to the $11 billion of outflows in October.
• "In the medium term, the rupee is expected to trade within the 83.80 to 84.50 range, as the Reserve Bank seems to cap the downside of the rupee with sufficient Forex reserves in its kitty," said Amit Pabari, CR Forex Advisors MD. 
• India's foreign exchange reserves declined by $2.675 billion to $682.13 billion for the week ended November 1, the RBI said on Friday.
• The Indian Rupee could undergo a depreciation of 8%-10% against the US Dollar with Trump's return to power, even as the local currency recorded an all-time low of 84.38 on Monday, according to the State Bank of India (SBI). 
• The Indian CPI is expected to show an increase of 5.80% YoY in October versus 5.49% prior. 
• The markets have priced in nearly 65.3% of the 25 basis points (bps) rate cut by the Fed at the December meeting, down from 75% last week, according to the CME FedWatch Tool.  

USD/INR keeps the bullish vibe in the longer term, though overbought RSI suggest caution 

The Indian Rupee weakens on the day. The strong uptrend of the USD/INR pair remains intact, with the pair holding above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. However, further consolidation looks favorable before positioning for any near-term USD/INR appreciation as the 14-day Relative Strength Index (RSI) exceeds 70, indicating an overbought condition.

The first upside barrier for USD/INR emerges at 84.50. A strong rally past the mentioned level could clear the way for the 85.00 psychological level.

In the bearish event, any follow-through selling below the lower limit of the trend channel and the high of October 11 in the 84.05-84.10 zone could see a drop to 83.84, the 100-day EMA. Further south, the next support level to watch is 83.46, the low of September 24. 

• EUR/USD slips as the ECB is anticipated to implement more aggressive interest rate cuts compared to the Fed.
• German Chancellor Olaf Scholz has expressed willingness to move the parliamentary confidence vote forward by several weeks.
• The US Dollar gains ground as Trump’s fiscal policies could potentially heighten inflation risks.

The EUR/USD pair continues its decline for a third consecutive session, trading around 1.0640 during Asian hours on Tuesday. Fiscal policies anticipated under US President-Elect Donald Trump may negatively impact the European economy, adding pressure on the Euro.

Expectations that the European Central Bank (ECB) will pursue more aggressive rate cuts than the Federal Reserve (Fed) are also weighing on the Euro. The ECB is anticipated to reduce rates by 25 basis points in December, with markets projecting a decline to 2% by June. The CME FedWatch Tool currently shows a 65.3% probability that the Fed will lower rates by a quarter percentage point at its December meeting.

Politically, German Chancellor Olaf Scholz has shown openness to advancing the parliamentary confidence vote by several weeks, potentially moving it up to before Christmas. This could set the stage for an early election.

The US Dollar (USD) continues to gain strength following the confirmation of Trump’s victory in the US election. Analysts believe that if Trump’s fiscal policies are enacted, they could stimulate investment, spending, and labor demand, potentially heightening inflation risks. This could lead the Federal Reserve to adopt a more hawkish monetary policy, further supporting the Greenback.

On Sunday, Minneapolis Fed President Neel Kashkari remarked that the US economy has demonstrated impressive resilience as the Fed works to control inflation. However, Kashkari emphasized that the Fed is "not all the way home" and will need additional evidence to ensure inflation fully returns to the 2% target before considering another rate cut.

Traders will likely focus on the German Harmonized Index of Consumer Prices and the ZEW Survey – Economic Sentiment, scheduled for Tuesday. Attention will then turn to the US inflation data set for release on Wednesday, which could provide key insights into future US monetary policy.

Citing people familiar with the matter, Bloomberg News reported early Tuesday that China’s regulators are planning to to reduce taxes on home purchases.

The report noted that the Chinese authorities are developing a proposal enabling major cities, such as Shanghai and Beijing, to reduce the deed tax for buyers to as low as 1%, down from the current rate of up to 3%.

Market reaction

The Chinese proxy, the Australian Dollar, is a little impressed by these measures. At the time of writing, AUD/USD is shedding 0.15% on the day to trade at 0.6564.

• The Japanese Yen continues with its underperformance amid the BoJ rate-hike uncertainty. 
• Trump-related tariff fears and elevated US bond yields also undermine the lower-yielding JPY.
• Traders look to speeches by Fed officials and key economic data releases for a fresh impetus.

The Japanese Yen (JPY) remains on the back foot against its American counterpart during the Asian session on Tuesday and seems vulnerable to weaken further. A fragile minority government in Japan is expected to make it difficult for the Bank of Japan (BoJ) to tighten its monetary policy. Moreover, the BoJ Summary of Opinions from the October meeting revealed that policymakers were split on whether to raise interest rates again. This, along with concerns about the return of President-elect Donald Trump's tariffs, underpins the JPY. 

Meanwhile, Trump's expansionary policies and corporate tax cuts should put upward pressure on inflation, which could limit the Federal Reserve's (Fed) scope to ease policy. This, in turn, remains supportive of elevated US Treasury bond yields and validates the near-term negative outlook for the lower-yielding JPY. The US Dollar (USD), on the other hand, preserves the positive trend that followed Trump's victory in the US presidential election and suggests that the path of least resistance for the USD/JPY pair remains to the upside. 

Japanese Yen is pressured by the uncertainty surrounding the BoJ’s rate-hike path

• Japan's political landscape raised doubts about the Bank of Japan's ability to hike interest rates again and the speculations were further fueled by the Summary of Opinions from the October meeting released on Monday.
• According to Kyodo News, Japanese Prime Minister Shigeru Ishiba is arranging his first summit with Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation forum summit in mid-November.
• Japanese PM Ishiba said on Monday that the government planned to meet with business and labor union representatives later this month to discuss next year’s annual wage negotiations.
• The tariffs promised by US President-elect Donald Trump could strain Japanese firms, which export heavily to the US, and potentially impact economic growth, creating another hurdle for the BoJ's rate-hike plans.
• Minneapolis Fed President Neel Kashkari said on Sunday that the central bank wants to have confidence and needs to see more evidence that inflation will go back to the 2% target before deciding on further interest rate cuts. 
• Investors now seem convinced that Trump's expected policy measures would spur economic growth and boost inflation, restricting the Federal Reserve from easing its monetary policy more aggressively.
• The US Treasury bond yields hold steady below the post-US election swing high and the US Dollar remains close to its highest level since early July touched on Monday, offering some support to the USD/JPY pair. 
• A slew of influential FOMC members are scheduled to speak this week, including Fed Chair Jerome Powell, which, along with the US consumer inflation figures, should offer cues about the US central bank's rate-cut path. 
• This week's economic docket also features the release of the Prelim Q3 GDP print from Japan and the US monthly Retail Sales figures on Friday, which might contribute to providing a fresh impetus to the USD/JPY pair. 

Technical Outlook: USD/JPY seems poised to challenge multi-month top, around the 154.70 area

From a technical perspective, the recent breakout above the 200-day Simple Moving Average (SMA) and the overnight close above the 61.8% Fibonacci retracement level of the July-September downfall favors bullish traders. Moreover, oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone, validating the near-term positive outlook for the USD/JPY pair. Hence, a subsequent move up back towards challenging a multi-month top, around the 154.70 area, looks like a distinct possibility. This is closely followed by the 155.00 psychological mark, above which spot prices could accelerate the momentum towards the 155.65-155.70 intermediate resistance en route to the 156.00 round figure. 

On the flip side, the 61.8% Fibo. resistance breakpoint, around the 153.35 region, now seems to protect the immediate downside ahead of the 153.00 mark and the 152.70-152.65 horizontal support. Any further corrective decline might still be seen as a buying opportunity near the 152.00 mark and remain limited near the 200-day SMA. The latter is currently pegged around the 151.75 region and is followed by last week's swing low, around the 151.25 area. A convincing break below the latter might prompt some technical selling and drag the USD/JPY pair further below the 151.00 round figure, towards the 150.35-150.30 intermediate support en route to the 150.00 psychological mark.

• The Australian Dollar loses ground amid concerns over potential tariffs on Chinese goods from US President-Elect Donald Trump.
• Australia's Westpac Consumer Confidence index increased by 5.3% in November, reaching 94.6 points.
• Traders await the US Consumer Price Index data release on Wednesday for insights into future US policy.

The Australian Dollar (AUD) extends its losses against the US Dollar (USD) for the third consecutive session on Tuesday. Proposed tariff increases on Chinese goods by US President-Elect Donald Trump could negatively impact the AUD, as Australia is one of China’s largest exporters.

Australia's Westpac Consumer Confidence index rose by 5.3% to reach 94.6 points in November, marking its second consecutive month of improvement and the highest level in two and a half years. However, the index has remained below 100 for nearly three years, reflecting that pessimists still outnumber optimists.

Matthew Hassan, Senior Economist at Westpac, noted, "Consumers are feeling less pressure on their family finances, are no longer worried about further interest rate rises, and are increasingly confident in the economic outlook."

The US Dollar continues to strengthen following the US election results that confirmed Trump’s victory. Analysts suggest that if Trump’s fiscal policies are implemented, they could boost investment, spending, and labor demand, raising inflation risks. This scenario might prompt the Federal Reserve (Fed) to adopt a more restrictive monetary policy, potentially strengthening the Greenback and putting added pressure on the AUD/USD pair.

Traders await the US inflation data release on Wednesday for insights into future US policy. The headline Consumer Price Index (CPI) is expected to show a 2.6% year-over-year increase for October, while the core CPI is projected to rise by 3.3%.

Daily Digest Market Movers: Australian Dollar struggles amid concerns over potential Trump’s tariff

• The Australian Dollar's downside could be restrained as the Reserve Bank of Australia (RBA) Governor Michele Bullock reiterated a hawkish stance after the interest rate decision last week, emphasizing the need for restrictive monetary policy given persistent inflation risks and a strong labor market.
• The Aussie Dollar also struggled due to lower-than-expected Chinese Consumer Price Index (CPI) data released on Saturday. China’s Consumer Price Index (CPI) rose 0.3% year-over-year in October, slightly below market expectations and down from September’s 0.4%. This marks the ninth consecutive month of consumer price inflation but represents the lowest rate since June. Month-over-month, the CPI dropped by 0.3%, a sharper decline than the expected 0.1% decrease, following a flat reading in September.
• China's latest stimulus measures fell short of investor expectations, further dampening demand prospects for Australia’s largest trading partner and weighing on the Australian Dollar. China announced a 10 trillion Yuan debt package on Friday designed to alleviate local government financing pressures and support struggling economic growth. However, the package stopped short of implementing direct economic stimulus measures.
• Minneapolis Fed President Neel Kashkari stated on Sunday that the US economy has shown remarkable resilience as the Fed continues its efforts to curb inflation. However, Kashkari noted that the Fed is still “not all the way home.” He also mentioned that the Fed aims to be confident that inflation will fully return to the 2% target and needs additional evidence before considering another rate cut.
• Morgan Stanley divides the Trump administration's macroeconomic policies into three key areas: tariffs, immigration, and fiscal measures. The report predicts that tariff policies will be prioritized, with an anticipated immediate imposition of 10% tariffs globally and 60% tariffs specifically on China.
• On Thursday, Federal Reserve Chair Jerome Powell stated that he doesn’t anticipate Trump’s potential return to the White House impacting the Fed’s near-term policy decisions. “We don’t guess, speculate, and we don’t assume what future government policy choices will be,” Powell noted after the bank decided to lower interest rates by 25 basis points to a range of 4.50%-4.75%, as expected.
• Fed Chair Jerome Powell also emphasized that the Fed will continue to assess economic data to decide on the "pace and destination" of future rate changes, highlighting that inflation has been gradually slowing toward the Fed's 2% target.

Technical Analysis: Australian Dollar remains below the nine-day EMA near 0.6600

AUD/USD trades around 0.6570 on Tuesday. Analysis of the daily chart shows short-term downward pressure, as the pair remains below the nine-day Exponential Moving Average (EMA). Furthermore, the 14-day Relative Strength Index (RSI) consolidates below the 50 level, reinforcing the bearish outlook.

On the support side, the AUD/USD pair could test its three-month low of 0.6512, recorded on November 6. Further key psychological support is at 0.6500. 

To the upside, immediate resistance is found at the nine-day EMA at 0.6596, followed by the 14-day EMA at 0.6609. A break above these EMAs might push the AUD/USD pair toward its three-week high of 0.6687, with the next psychological target at 0.6700.

AUD/USD: Daily Chart

On Tuesday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1927, as compared to the previous day's fix of 7.1786 and 7.1944 Reuters estimates.

• NZD/USD softens to around 0.5960 in Tuesday’s Asian session. 
• The firmer USD continues to undermine the pair. 
• New Zealand’s two-year inflation expectations rose to 2.12% in Q4 vs. 2.03% prior. 

The NZD/USD pair extends the decline to near 0.5960 during the early Asian session on Tuesday. The New Zealand Dollar (NZD) weakens against the Greenback amid concerns about possible tariffs by Donald Trump's incoming administration. 

Economists expect Trump’s combination of proposed tariffs and tax cuts would put new pressure on inflation and balloon the deficit, making it more challenging for the US Federal Reserve (Fed) to cut the interest rates. According to the CME FedWatch Tool, the markets have priced in nearly 65.3% of the 25 basis points (bps) rate cut by the Fed at the December meeting, down from 75% last week. The odds that the Fed would hold rate steady stand at 34.7%. 

Investors await a slew of Fed speakers and the US October Consumer Price Index (CPI) data this week for fresh interest rate guidance. Any signs of hotter inflation might diminish the possibility of a December rate reduction, boosting the Greenback. 

On the Kiwi front, Donald Trump’s victory in the US elections has raised the specter of higher tariffs on China. This, in turn, could weigh on the China-proxy NZD against the USD as China is a major trading partner for New Zealand. 

New Zealand’s two-year inflation expectations inched higher to 2.12% in the fourth quarter, up from 2.03% in Q3, according to the Reserve Bank of New Zealand’s (RBNZ) latest monetary conditions survey on Monday. Expectations for one-year ahead annual inflation eased to 2.05% in Q4 from 2.40%. The RBNZ trimmed the Official Cash Rate (OCR) by 50 bps to 4.75% on November 27 and is expected to reduce rates by another 50 bps at the November 27 meeting. 

• WTI price drifts lower to near $68.00 in Tuesday’s early Asian session. 
• The stronger USD weighs on the USD-denominated Oil. 
• China's stimulus plan disappointed investors, dragging the WTI price lower. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.00 on Tuesday. The WTI price edges lower amid the fears that a Trump administration will spark a tariff-led trade war and concerns about demand growth in China. 

Donald Trump's US presidential election victory may continue to affect the WTI prices. Trump has announced his intention to impose a blanket tariff ranging from 10% to 20% on all imports and additional tariffs on up to 60% of products imported from China. A renewed trade war with China would also likely hurt economic growth in China, delaying any recovery in crude oil demand.

The firmer Greenback contributes to the WTI’s downside. Meanwhile, the US Dollar Index (DXY), a measure of the USD's value relative to a basket of foreign currencies, climbs to fresh four-month peaks around 105.70. This makes USD-denominated Oil prices more expensive. However, the profit-taking in the Greenback might cap the downside for the black gold for the time being. 

Beijing's latest stimulus package, which was announced on Friday, fell short of market expectations. Additionally, data released on the weekend showed that Chinese consumer prices rose at the slowest pace in four months in October while producer price deflation deepened, raising concerns about demand growth in the world's second-biggest oil consumer.