CFD Markets Analysis: News and forecasts for 27 December 2024

22:46

NZD/JPY price analysis: Pair extends gains above 20-day SMA

NZD/JPY inches higher on Friday, touching 88.90 and holding recent upside momentum.
MACD bars remain green but have flattened, signaling cautious optimism amid lingering downside risks.
RSI moves up to 51, entering positive territory as buyers tentatively return.

NZD/JPY added a modest 0.20% on Friday, climbing to 88.90 and building on the gains seen since the pair broke above its 20-day Simple Moving Average (SMA). This move comes after a notable loss of ground prompted by a breakout from a sideways trading range between 90.00 and 92.00, underscoring the pair’s ongoing effort to regain its footing.

Under the hood, the Relative Strength Index (RSI) has shifted to 51, sitting just inside the positive zone and hinting at a mild uptick in buying interest. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram remains above zero but has flattened out, suggesting that bullish momentum may need a further push to gain traction.

Looking ahead, a firm close above the 20-day SMA could help solidify the recovery, potentially targeting resistance points closer to 90.00. Should the pair slip back below this moving average, however, NZD/JPY could once again be vulnerable to renewed selling pressure.

NZD/JPY daily chart

22:01

Australian Dollar drifts near yearly support as holiday trade thins

Aussie dips to 0.6215 on a quiet Friday session.
Year-end lull keeps markets subdued.
RBA dovish bets rise amid easing inflation and mixed economic outlook.

The Australian Dollar pair trades in a very tight range near the yearly support of 0.6200 in Friday’s session. The Aussie struggles for direction as global market activity remains muted, with traders largely focused on New Year festivities. Thin liquidity and lingering policy uncertainties contribute to the currency’s softness.

Daily digest market movers: Aussie continues soft and struggles to gain traction, USD strength

December’s highlight was that the US Federal Reserve cut rates by 25 basis points but Chair Jerome Powell highlighted cautious further easing as inflation remains stubborn. In addition, the bank showed that it now sees less cuts than expected in 2025.
To add to that, potential new tariffs under the incoming Trump administration could stoke higher prices, tempering the pace of Fed rate reductions into 2025.
Market participants weigh Trump’s proposed deregulation, tax cuts, and potential tariff hikes, which could boost US growth and inflation, favoring a stronger USD.
The Australian Dollar remains pressured as RBA minutes show officials confident in easing inflation, paving the way for potential rate cuts as soon as February.
RBA Governor Michele Bullock reiterated a data-driven approach, underscoring no explicit discussion of a February rate cut, though odds stand at 65%.

AUD/USD technical outlook: Aussie extends losses as oversold signals build

The AUD/USD declined to 0.6215 on Friday, hovering near its yearly low. The Relative Strength Index (RSI) sits at 27, signaling deeper oversold territory with a mild downward bias. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints flat red bars, indicating persistent selling pressure. Despite the pair’s extended losses, thin holiday trading volumes could limit any pronounced move, leaving the Aussie vulnerable to further downside without a clear catalyst.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

18:29

US Dollar advances as year-end caution lingers

DXY trades near 107.90 on Friday on a tight range.
Trading desks remain short-staffed contributing to a muted trading.
Holiday momentum keeps Dollar elevated as 2025 comes to an end.

The US Dollar Index, which measures the value of the USD against a basket of currencies, is trading within a very tight range on Friday, holding near 108.00 mark. Markets remain cautious, and thin year-end trading conditions limit volatility. Incoming data from Japan and China hinted at further industrial slowdown, but the Greenback’s buoyancy persists. Despite profit-taking after last week’s gains, the US Dollar continues its climb as traders return from Christmas holidays.

Daily digest market movers: US Dollar eyes robust growth outlook

Government shutdown risks rise after House Republicans failed to pass a funding deal. Historically, short shutdowns have limited economic fallout, and Treasury has room to maneuver before any default risk escalates.
Longer-term yields keep climbing. The 10-year Treasury yield hovers near 4.60%, and the 30-year stands at 4.77%, both testing highs not seen since May.
The US Dollar stands on track for a near 7% annual gain as traders anticipate robust US growth and limited rate cuts in 2025, as Fed Chair Jerome Powell signals caution on further easing.
Chinese stimulus measures and deposit rate cuts have supported local markets, but the Dollar shrugs off these developments, remaining broadly bid into year-end.

DXY technical outlook: Indicators hold upward traction

The Dollar Index maintains its bullish momentum, with indicators pointing higher and nearing overbought levels. Despite thin trading liquidity, the DXY keeps inching upward near 108.00, reflecting continued buying interest. As long as the index remains above 106.00, the technical picture stays positive.

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

18:10

Canadian Dollar continues its tepid stance on Friday

The Canadian Dollar tested back into recent lows and struggled to find gains.
Canada’s economic data docket remains incredibly thin in the near term.
Policy rate divergence is set to be the Loonie’s primary driver heading into 2025.

The Canadian Dollar (CAD) continued its soft stance on Friday, easing into familiar near-term lows and shedding one-quarter of one percent against the US Dollar. The Loonie is entering a lull period with functionally no releases on the data docket in the immediate future, leaving CAD traders to battle it out near multi-year lows.

Following the midweek market closure for the Christmas holiday, a soft-footed market footprint remains ahead of the New Year’s midweek holiday next Wednesday.

Daily digest market movers: Battered CAD holds near multi-year lows

The Canadian Dollar continues to churn chart paper near 56-month lows, bolstering the USD/CAD rate back above the 1.4400 handle.
Constrained holiday markets will bleed slowly into the new year, but volumes to remain crimped for the time being.
Canadian economic data is entirely absent from the release schedule next week.
The upcoming New Year’s midweek market closure will further hobble market flows.
The Bank of Canada (BoC) is expected to continue easing rates, while the Federal Reserve (Fed) is poised to slowe the pace of cuts in 2025, widening the policy rate divergence currently pummeling the Loonie.

Canadian Dollar price forecast

The Canadian Dollar is back into the low side to wrap up the Christmas trading week, falling against the Greenback and pushing USD/CAD into the high end of recent chart congestion. The pair continues to drift higher as bids trade well north of the 50-day Exponential Moving Average (EMA) near 1.4100.

December is poised to close out deep in the green and will notch in a fourth consecutive gain month for USD/CAD as the Loonie crumples. Both Greenback bidders and Loonie shorts will target a long-term barrier near 1.4700, where the pair would be pushing into its highest bids in over 20 years. For now, the uptrend must overcome December’s peak of 1.4467.

USD/CAD daily chart

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

How do the decisions of the Bank of Canada impact the Canadian Dollar?

The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

How does the price of Oil impact the Canadian Dollar?

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

How does inflation data impact the value of the Canadian Dollar?

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

How does economic data influence the value of the Canadian Dollar?

Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

18:02

United States Baker Hughes US Oil Rig Count meets forecasts (483)

18:00

United States EIA Crude Oil Stocks Change came in at -4.237M, below expectations (-2M) in December 19

16:54

Dow Jones Industrial Average backslides amid tech decline

The Dow Jones lost 400 points on Friday.
Holiday markets traded on the low side, Dow ended the week flat.
Another midweek holiday next week will crimp market volumes.

The Dow Jones Industrial Average (DJIA) shed around 400 points on a quiet Friday. Most investors are still out of the markets on holidays and thin volumes have left the Dow Jones roughly a full percent lower.

Holiday market flows are in full swing in equities, with a broad-base cooling effect in the long-run tech rally as investors pull up stakes and do some light profit-taking ahead of the rollover into the new year. A thin data release schedule this week, followed by another midweek holiday next week, leaves equity indexes on the tepid side in the near term.

Traders are still grappling with the Federal Reserve’s (Fed) recent pivot into expectations of less rate cuts in 2025 than previously expected. According to the Fed’s latest Summary of Economic Projections (SEP), policymakers only expect another two quarter-point rate cuts through next year, hobbling market expectations for a steeper decline in the headline reference rate.

Dow Jones news

Despite an overall blustery year that saw the Down Jones climb nearly 21.5% bottom-to-top, the major equity index still got coal in its stocking as December turns deeper into the red and pares away November’s heady gains. All but five of the Dow’s listed securities are testing into the red on Friday, with losses led by Nvidia (NVDA), which fell over 2% and is back below $137 per share.

Nvidia appears to have shrugged off recent reports that its latest Blackwell AI-focused chipset may have experienced an overheating problem, but fresh woes for the AI-fueled tech rally have cropped up as investors weigh the prospect of stiffer restrictions on Chinese access to US-manufactured silicon solutions. An outsized amount of Chinese demand for recently-developed AI-focused chipsets could leave profit expectations for Nvidia in the lurch if regulations hamper trade.

Dow Jones price forecast

The Dow Jones’ stellar 2024 run appears to be taking a breather after declining for three consecutive weeks. The DJIA is down nearly 5% from record highs above 45,000, testing the waters just south of the 43,000 handle.

The Dow Jones has fallen below its 50-day Exponential Moving Average (EMA) near 43,345 for the second time in as many months, but price action is still holding well above the 200-day EMA near 40,960 after bids found a technical floor near 42,000.

Dow Jones daily chart

Dow Jones FAQs

What is the Dow Jones?

The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.

What factors impact the Dow Jones Industrial Average?

Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

What is Dow Theory?

Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.

How can I trade the DJIA?

There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.

15:43

EUR/USD price analysis: Pair inches up to 1.0430, still capped by key resistance EURUSD

EUR/USD registers a minor uptick on Friday, trading near 1.0430 after recent losses.
RSI climbs to 44 in negative territory, indicating a tepid recovery but still suggesting sellers hold the upper hand.
MACD histogram shows flat green bars, hinting at fading bearish momentum while the 20-day SMA remains a key hurdle.

The EUR/USD pair ended a shortened week with a modest bounce, inching up to around 1.0430 on Friday. While this uptick offers brief respite from recent declines, the pair continues to trade below the 20-day Simple Moving Average (SMA), highlighting the prevailing downtrend. The SMA, parked above current price levels, will be the first target on the agenda in 2025 if buyers seek to bolster a more constructive outlook.

Technical signals are mixed but lean cautiously toward the downside. The Relative Strength Index (RSI) has risen sharply to 44, yet it remains entrenched in negative territory, suggesting that bullish efforts are tentative at best. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram shows flat green bars, implying that the market may be losing some of its earlier bearish traction but has yet to shift decisively in favor of the bulls.

Looking ahead, traders will need to see a sustained move above the 20-day SMA to confirm a meaningful trend change. In the absence of such a breakthrough, the pair is likely to stay vulnerable to fresh selling pressure, keeping downside risks in play despite the recent stabilization in price action.

EUR/USD daily chart

15:30

United States EIA Natural Gas Storage Change rose from previous -125B to -93B in December 20

14:43

NZD/USD Price Forecast: Wobbles around two-year low of 0.5300 NZDUSD

NZD/USD gains to near 0.5630 as the US Dollar ticks lower in a thin trading volume day.
The Fed is expected to cut interest rates two times next year.
Investors expect that the RBNZ will cut interest rates by 50 bps in February.

The NZD/USD pair moves higher to near 0.5630 in Friday’s North American session. The Kiwi pair gains as the US Dollar (USD) drops in a holiday-thinned trade. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks lower to near 107.90.

The near-term outlook for the Greenback remains firm, as the Federal Reserve (Fed) has guided a more gradual rate-cut approach for 2025. A recent Fed dot plot showed that policymakers collectively see Federal Fund rates heading to 3.9% by the end of 2025, suggesting that there will be two interest rate cuts of 25 basis points (bps) next year.

Meanwhile, the broader outlook for the New Zealand Dollar (NZD) remains weak, as the Reserve Bank of New Zealand (RBNZ) is expected to continue aggressively reducing interest rates. The NZ economy sank into a recession in the third quarter, fueling the need for more interest rate cuts.

The RBNZ has already reduced its key Official Cash Rate (OCR) by 125 bps this year and is expected to cut further by 50 bps in the policy meeting in February.

NZD/USD finds a temporary cushion near the two-year low of 0.5520 on a weekly timeframe. The outlook of the Kiwi pair remains bearish as the 20-week Exponential Moving Average (EMA), which trades around 0.5900.

The 14-week Relative Strength Index (RSI) slides to near 30.00, suggesting a strong bearish momentum.

The Kiwi pair could decline to near the four-year low of 0.5470 and the round-level support of 0.5400 if it breaks below the psychological support of 0.5500.

On the other hand, a decisive break above the November 29 high of 0.5930 could drive the pair to the November 15 high of 0.5970 and the psychological resistance of 0.6000.

NZD/USD daily chart

New Zealand Dollar FAQs

What key factors drive the New Zealand Dollar?

The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

How do decisions of the RBNZ impact the New Zealand Dollar?

The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

How does economic data influence the value of the New Zealand Dollar?

Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

How does broader risk sentiment impact the New Zealand Dollar?

The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

13:40

AUD/USD exhibits indecisiveness around 0.6200 in thin year-end trading AUDUSD

AUD/USD consolidates around 0.6200 amid thin trading volume following the Christmas and Boxing Day holidays.
The RBA becomes confident over inflation easing in line with their expectations.
The Fed turns cautious in interest rate cuts as progress in inflation towards the central bank’s target of 2% has stalled.

The AUD/USD pair trades in a very tight range near the yearly support of 0.6200 in Friday’s North American session. The Aussie pair struggles for direction as the price action is broadly muted in global markets amid thin trading volume, given that traders are busy welcoming the New Year.

The Australian Dollar (AUD) is currently exposed to a fresh downside move below 0.6200 against the US Dollar (USD) as the Reserve Bank of Australia (RBA) minutes for December’s policy meeting showed that policymakers have become confident that price pressures are easing in line with their expectations, which makes “appropriate for them” to begin relaxing the “degree of monetary policy tightness”.

This has led to an increase in RBA dovish bets. Traders expect the RBA to start reducing its key borrowing rates from the policy meeting in February.

Meanwhile, the US Dollar (USD) drops slightly, with the US Dollar Index (DXY) struggling to hold the key support of 108.00. The Greenback ticks lower while its outlook remains firm as the Federal Reserve (Fed) is expected to deliver fewer interest rate cuts in 2025.

The Fed has shifted its stance from “dovish” to “cautionary” on interest rates as progress in the disinflation trend has stalled in last three months and labor market conditions are not as bad as they appeared in the September meeting. Additionally, policymakers see incoming immigration, tariff and tax policies from the US President-elect Donald Trump as inflationary for the economy.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

13:31

United States Goods Trade Balance below forecasts ($-100.9B) in November: Actual ($-102.9B)

13:30

United States Wholesale Inventories came in at -0.2%, below expectations (0.2%) in November

13:00

US Dollar trades steadily, ignoring weak industrial data from China and Japan

The US Dollar trades broadly stable in very calm holiday trading
Monthly Industrial Production in Japan fell by 2.3%, less than the expected 3.5%, while big Chinese manufacturers also reported falling profits.
The US Dollar Index (DXY) resides at 108.00, close to a two-year high.

The US Dollar (USD) is trading within a very tight range on Friday, with the DXY index holding above 108.00, as markets remain cautious and trading desks are short-staffed due to the Christmas holiday. The Dollar failed to react to more action in Asian markets, with data signaling further contraction in Japan’s Industrial Production and Chinese industrial companies reporting lower profits.

The US economic calendar is very light on Friday, with the preliminary Goods Trade Balance and the Wholesale Inventories data. Not much movement is expected from these data points. So a rather steady trading session is expected.

Daily digest market movers: Markets indigestion

At 13:30 GMT both data points from the US for this Friday will be released:
- The November Goods Trade Balance is expected to show a widening deficit of 100.9 billion USD against the previous 98.7 billion USD deficit.
- November Wholesale Inventories are expected to grow at a stable 0.2%.
Equities trade mixed on Friday, with all US equity futures trading in the red before the opening bell.
The CME FedWatch Tool for the first Fed meeting of 2025 on January 29 sees an 89.3% chance for a stable policy rate against a small 10.7% chance for a 25 basis points rate cut.
The US 10-year benchmark rate trades at 4.60%, not far from this week’s high at 4.64%.

US Dollar Index Technical Analysis: Not much going on

The US Dollar Index (DXY) is not expected to attack any firm levels this Friday given the low liquidity and only a handful of market participants present between Christmas and New Year. Any big movements aren’t expected unless an outside event takes place on the geopolitical front. It looks like the DXY will head into New Year’s Eve trading just above 108.00.

On the upside, a trend line originating from December 28, 2023, is acting as a moving cap. The next firm resistance comes in at 109.29, which was the peak of July 14, 2022, and has a good track record as a pivotal level. Once that level is surpassed, the 110.00 round level comes into play.

The first downside barrier comes in at 107.35, which has now turned from resistance into support. The second level that might be able to halt any selling pressure is 106.52. From there, even 105.53 could come under consideration while the 55-day Simple Moving Average (SMA) at 105.83 is making its way up to that level.

US Dollar Index: Daily Chart

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

12:11

Crude Oil ticks up ahead of key US inventory data

Oil prices are up near 1.00% this Friday ahead of last Oil data points for 2024.
With the unusual trading week due to Christmas, all data has been moved to Friday.
The US Dollar Index trades flat and resides just above 108.00, heading into New Years Eve next week.

Crude Oil prices increase on Friday as traders brace for a string of data releases in the US trading session, including stockpile data from the Energy Information Administration (EIA), which was moved due to the Christmas Day holiday on Wednesday. While other asset classes are seeing low volatility, it looks like Oil prices are set to see some last spikes before the week ends.

The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – remains residing just below the two-year high at around 108.00. The Greenback has seen volatility die down and is not expected to pick up much towards New Year’s Eve. With its current position, a fresh two-year high could still be hit before the end of the year in case an outside event takes place.

At the time of writing, Crude Oil (WTI) trades at $70.00 and Brent Crude at $73.33.

Oil news and market movers: Schedule ahead

At 15:30 GMT, the Energy Information Administration (EIA) will release its weekly Gas Storage Change number. The previous week's storages stood at 125 billion cubic meters.
At 17:00 GMT, the EIA will release the Crude Oil stockpile change numbers. The expectation is for a drawdown of 2 million barrels against the previous drawdown of 0.934 million barrels.
On Tuesday, the weekly US American Petroleum Institute (API) stockpile data showed a draw of 3.2 million barrels, lower than the 4.7 million decline seen a week earlier.
At 18:00 GMT, the Baker Hughes Oil Rig Count will close off this Friday. No forecast is available, with the previous reading at 483 rigs operational.

Oil Technical Analysis: Save the best for last

Crude Oil price action could be an outlier on Friday as other assets are fully into the Christmas market lull. With still some key data points to digest, Oil traders will need to be on point because there will be a very limited window of opportunity to trade. Expect to see some brief volatile moves, although any possible rally will lack fundamentals to extend into 2025.

Looking up, the 100-day Simple Moving Average (SMA) at $70.59 and $71.46 (February 5 low) act as firm resistance levels nearby. Should more tailwinds emerge in support for Oil, the next pivotal level will be $75.27 (January 12 high). However, watch out for quick profit-taking as the year-end quickly approaches.

On the downside, $67.12 – a level that held the price in May and June 2023 and during the last quarter of 2024 – is still the first solid support nearby. In case that 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

WTI Oil FAQs

What is WTI Oil?

WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.

What factors drive the price of WTI Oil?

Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.

How does inventory data impact the price of WTI Oil

The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

How does OPEC influence the price of WTI Oil?

OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.