Forex-novosti i prognoze od 12-12-2024

• GBP/USD backslid 0.55% on Thursday, slipping back below 1.2700.
• Quiet newsflows out of the UK and a limited data docket crimp Cable flows.
• Pound Sterling traders are on the backfoot heading into Friday.

GBP/USD lost its grip on Thursday, easing back below the 1.2700 handle and shedding over half of a percent in the pair’s worst showing in weeks. US Producer Price Index (PPI) inflation rose faster than expected in November, and US weekly Initial Jobless Claims also rose faster than forecasts.

US PPI inflation bucked to 0.4% in November, while October’s print was retroactively adjusted to 0.3% from 0.2% MoM. Markets were expecting a print no higher than 0.2% MoM. Core PPI inflation accelerated to 3.4% on an annualized basis, over and above the expected uptick to 3.2% from the previous 3.1% YoY. US Initial Jobless Claims for the week ended December 6 also rose to a nine-week high of 242K, further bucking investor risk appetite and missing forecasts of 220K.

Investor sentiment froze in its tracks on Thursday post-PPI inflation print, however market expectations for the Fed’s December 18 rate call have hardened around the 25 bps mark. According to the CME’s FedWatch Tool, rate traders are now pricing in over 98% odds of a quarter-point rate cut when the Federal Open Market Committee (FOMC) convenes in December 18.

Friday brings a limited data docket on either side of the Atlantic, leaving Cable traders to focus on Purchasing Managers Index (PMI) figures due early next week for both the US and UK.

GBP/USD price forecast

The GBP/USD daily chart reveals a clear transition from a prior bullish phase into a more bearish outlook, as the price has recently breached key technical levels. The 50-day Exponential Moving Average (EMA), currently at 1.2819, has been acting as dynamic resistance since mid-November, while the 200-day EMA at 1.2825 reflects a broader bearish bias. The pair's rejection at the 50-day EMA earlier this week underscores persistent selling pressure. Additionally, the downward slope of the Moving Average Convergence Divergence (MACD) histogram and a bearish crossover signal suggest that bearish momentum is intensifying.

The most recent candlestick, a large bearish candle, has decisively closed below 1.2700, signaling that the bears remain in control. This movement invalidates the recovery attempts from late November and positions the pair for further downside. Immediate support is seen near 1.2600, a psychological level, while a breach below this level could expose the August lows near 1.2550. Conversely, should buyers reclaim the 1.2700 handle, the 50-day EMA will remain the primary resistance level to watch, serving as a gauge for a potential shift in sentiment. Until then, the path of least resistance remains to the downside.

GBP/USD daily chart

Canada is considering export taxes on major commodities it exports to the US, including uranium, oil and potash, if President-elect Donald Trump imposes the broad tariffs he pledged, per Bloomberg.

Retaliatory tariffs on U.S.-made goods and export controls on certain Canadian products are most likely, with export levies also on the table as a last resort. The Bloomberg report cited officials familiar with discussions inside Prime Minister Justin Trudeau's government. 

Market reaction

At the time of writing, USD/CAD was down 0.02% on the day at 1.4223.

• USD/CAD trades with mild gains around 1.4215 in Friday’s early Asian session. 
• US annual PPI inflation rose to 3.0% YoY in November vs. 2.6% expected. 
• Trump tariff threats could undermine the Loonie, but higher crude oil prices might help limit its losses. 

The USD/CAD pair posts modest gains to near 1.4215 during the early Asian session on Friday. The uptick of the pair is bolstered by the firmer US Dollar (USD) broadly after the hotter-than-expected US Producer Price Index (PPI) inflation report. 

Data released by the US Bureau of Labor Statistics on Thursday showed that the PPI for final demand in the US rose 3.0% YoY in November. This reading followed the 2.6% increase seen in October and came in above the market consensus of 2.6%. Meanwhile, the annual core PPI climbed 3.4% YoY in the same period, beating the estimated 3.2%. On a monthly basis, the PPI and the core PPI increased 0.4% and 0.2%, respectively. The Greenback gains traction in an immediate reaction to the PPI inflation data. 

Despite the stubborn inflation in the US, markets widely expect the Federal Reserve (Fed) to lower its key overnight borrowing rate next week. According to the CME FedWatch Tool, Fed funds futures trading data reflects a nearly 95% likelihood that the US central bank will cut the rates by a quarter point. 

On the other hand, analysts from TD Economics said that both the US and Canadian economies will navigate through policy uncertainties. Analysts added that even a 10% blanket tariff on Canada would likely cause extended economic stagnation over 2 years. The concerns about Trump tariff threats might exert some selling pressure on the Canadian Dollar (CAD) and create a tailwind for the pair. Meanwhile, the recovery in crude oil prices could help limit the CAD’s losses as Canada is the largest oil exporter to the US. 
 

• EUR/AUD rebounds from a low of 1.6361, trimming earlier losses.
• Technical outlook shows EUR/AUD consolidated within the 1.6350-1.6480 range amid mixed signals.
• Resistance ahead at 1.6500 and 1.6575; support positioned near 1.6400 with potential further dip towards 1.6375/59.

The EUR/AUD trims some of its earlier losses on Thursday as the European Central Bank lowered interest rates. Initially, the cross plunged to a daily low of 1.6361, but it made a U-turn as buyers bought the dip, toward current exchange rates. At the time of wiring, the pair trades at 1.6449, down 0.15%.

EUR/AUD Price Forecast: Technical outlook

The EUR/AUD seesawed after Aussie jobs data and the ECB’s monetary  policy meeting, however it remained consolidated at around the1.6350-1.6480 range.

Momentum remains buliish as depicted by the Relative Strength Index (RSI), but sellers are looming after the cross-pair printed back-to-back bearish days.

If EUR/AUD extends its gains past 1.6500, the next resistance would be December 11 swing high at 1.6575. If surpassed, the next stop would be October 30 daily high at 1.6599.

On the other hand, sellers must take out the 1.6400 mark to extend the downtrend towards the confluence of the 100 and 200-day SMAs at 1.6375/59, followed by the 50-day SMA at 1.6281.

EUR/AUD Price Chart – Daily

• The Canadian Dollar shed four-tenths of a percent against the Greenback.
• Data from Canada remains limited following the BoC’s latest rate cut.
• Unsteady market concerns after US PPI inflation uptick keeps USD buoyed.

The Canadian Dollar (CAD) was unable to keep itself afloat on Thursday, ultimately declining another 0.4% against the safe haven Greenback. Markets hesitated after US Producer Price Index (PPI) inflation figures accelerated higher than expected, keeping risk appetite underbid and pushing the Loonie to fresh multi-year lows.

The Bank of Canada’s (BoC) latest rate cut earlier this week has sucked any bullish momentum out of CAD markets, leaving the Loonie to waffle into its lowest prices in 56 months. The Canadian Dollar is now a stone’s throw away from prices not seen since March of 2020.

Daily digest market movers: US PPI rises, Loonie falls

• The Canadian Dollar’s Thursday backslide has bolstered the USD/CAD chart, pushing the pair north of 1.4200.
• US PPI inflation accelerated to 0.4% MoM in November, over and above the forecast 0.2%.
• Core US PPI inflation rose to 3.4% YoY, thumping the forecast uptick to 3.2% and stretching even further from the previous period’s 3.1%.
• Rising US inflation pressures at the producer level sparked caution in investor sentiment.
• The BoC’s latest rate cut dragged Canada’s main reference rate down to 3.25% from 3.75% has left the Loonie with little structural support as interest rate differentials widen.

Canadian Dollar price forecast

The Canadian Dollar has given a fresh bearish push, bolstering the USD/CAD chart to fresh multi-year highs north of 1.4200. USD/CAD is now on pace to close higher for a fourth consecutive month, and the pair has risen a little over 6% bottom-to-top since September’s bottom bids near 1.3420.

USD/CAD daily chart

US PPI inflation figures ticked higher in November, causing investors to tighten their stance slightly and keep the safe haven Greenback bid into the high side, though overall market mood remains on-balance. 

Here’s what you need to know heading into Friday, December 13:

The US Dollar Index (DXY) extended into further gains on Thursday, climbing back into the 107.00 handle on broad-market investor caution after US Producer Price Index (PPI) inflation figures came in higher than expected, sparking near-term concerns that inflation could resurge in the US economy. US data is limited on Friday, and investors will likely continue to wind down their exposure ahead of the holiday season.

EUR/USD extended into a fifth consecutive down day, losing grip of the 1.0500 level and shedding yet another quarter of a percent after the European Central Bank (ECB) slashed interest rates in-line with market expectations. German Trade Balance figures for October are due on Friday, along with pan-EU Industrial Production figures for October. Both numbers are mid-tier at best, and are unlikely to move the needle in either direction.

GBP/USD tumbled back below 1.2700 on Thursday despite a thin economic data docket on the UK side. Cable traders may be giving up in the near term as GBP/USD continues to struggle with chart paper on the low side of the 200-day Exponential Moving Average (EMA) near 1.2825. No meaningful data on the GBP side is expected on Friday.

USD/JPY has coiled around its own 200-day EMA near 151.00, and a near-term bullish rebound from the key technical level has the Dollar-Yen pairing holding steady on Thursday near 152.60 despite the US’ uptick in producer-level inflation. Japan’s Tankan Large Manufacturing figures are due early Friday and are expected to decline slightly.

• Mexican Peso depreciates and reverses weekly gains amid mixed US economic reports.
• US Producer Price Index climbs to highest level since June, fueling discussions on inflation trends.
• The Fed is expected to cut interest rates by 25 basis points  next week.

The Mexican Peso weakens after posting back-to-back bullish days, dropping over 0.44% against the Greenback as mixed US economic data and a holiday in Mexico keep trading conditions thin. The USD/MXN trades at 20.20 after bouncing off around weekly lows of 20.09.

US factory gate inflation increased in November, according to the US Bureau of Labor Statistics. The Producer Price Index (PPI) rose to its highest level since June, according to monthly figures. At the same time, the Department of Labor reported that Americans filing for unemployment benefits had increased.

Even though inflation reaccelerated, market players seem confident that the Federal Reserve (Fed) will cut interest rates at next week’s meeting. Odds that the Fed will lower rates by 25 basis points are now at 99%, according to the fed fund rate futures market.

Mexico’s economic docket revealed that Industrial Production plummeted in October, in monthly and annual figures.

On Wednesday, the Bank of Mexico (Banxico) remained confident in the country’s financial system despite the “notable weakness” experienced by Latin America’s second-largest economy. In the biannual report, Banxico recognized the robust institutions for the system’s stability, adding that capital and liquidity levels are above regulation minimums.

Aside from this, Banxico is expected to continue its easing cycle following Monday’s inflation report. November’s Consumer Price Index (CPI) opened the door for further easing. Analysts at JP Morgan noted that Banxico might lower rates by 50 basis points (bps), as inflation data shows that prices are edging lower faster than expected.

The economic docket for the remaining week is empty in Mexico. In the US, it will feature Import and Export Prices.

Daily digest market movers: Mexican Peso on the backfoot after hot US PPI

• November's PPI showed headline inflation rising to 3% YoY, up from 2.4% in October and above the expected 2.6%. Core PPI also climbed to 3.4% YoY, surpassing forecasts of 3.2% and October's 3.1%.
• US Initial Jobless Claims for the week ending December 7 spiked to a two-month high of 242K, well above the projected 220K.
• Mexico’s Industrial Production contracted by -1.2% MoM in October, down from a 0.6% expansion in September and well beneath estimates of -0.2%. On an annual basis, production dropped -2.2% YoY from -0.3%, missing forecasts of -0.6%.
• The swaps market suggests Banxico will cut interest rates by 25 basis points at the December 19 meeting.
• The US yield curve for 2025 suggests that speculators estimate 100 basis points of easing toward the end of the year.
• 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.
• Banxico’s Governor, Victoria Rodriguez Ceja, remains dovish. In her last interview with Reuters, she said that given the progress of disinflation, the central bank could continue lowering borrowing costs.

USD/MXN technical outlook: Mexican Peso stumbles as pair jumps to 20.20

The USD/MXN bounces off weekly lows as the exotic pair consolidated below the 20.10 area for the last four days. However, demand for US Dollar weighed on the Peso and lifted the pair back to the 20.20 mark.

Momentum remains tilted to the downside as depicted by the Relative Strength Index (RSI). But sellers must push the USD/MXN below 20.00, which will clear the path for lower exchange rates.

In that outcome, the USD/MXN next support would be the 100-day Simple Moving Average (SMA) at 19.68, ahead of 19.50. On further weakness, the pair could test the October 4 swing low of 19.10, ahead of 19.00.

Conversely, if buyers keep USD/MXN above 20.20, the next resistance would be 20.50. A breach of the latter will expose the December 2 daily high of 20.59, followed by the year-to-date (YTD) peak of 20.82, followed by the 21.00 mark.

• The DXY gained toward 106.70 on Thursday.
• US Dollar Index rises after Christine Lagarde confirmed the ECB’s dovish stance.
• PPI figures from the US came in hot, benefiting the USD.

The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, rose toward 106.70 after Christine Lagarde, President of the European Central Bank (ECB), confirmed talks of a possible 50 bps interest rate cut. Lagarde’s comments followed the ECB cutting its benchmark rate by 25 bps, the fourth time it has lowered rates this year.

Traders favored the Greenback over the Euro following the ECB rate decision, causing the DXY to surge above 106.50.

In addition, US Producer Price Index (PPI) data showed inflation jetting above expectations, which may slow the Federal Reserve’s (Fed) turn toward loose monetary policy next year.

Daily digest market movers: ECB cut and higher US inflation push US Dollar higher

• The PPI increased by 3% YoY in November, surpassing market expectations of a 2.6% gain.
• The core PPI, excluding food and energy, climbed by 3.4% YoY, exceeding analysts' forecast of 3.2%.
• On a monthly basis, headline PPI rose by 0.4% while consensus was 0.2%.
• Initial Jobless Claims surged to 242,000 in the week ending December 7th, surpassing estimates of 220,000.
• Despite the hot producer inflation data, markets weighed the surge in joblessness and still priced in a 25 bps cut for next week’s Fed decision.

DXY technical outlook: Reclaiming 20-day moving average indicates resilience

The US Dollar Index has halted its recent decline and regained some of its lost ground on Thursday. The DXY index has managed to stay above the 106.00 level despite mixed sentiment data and speculation about the Fed slowing down its rate hiking cycle. 

The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators also suggest that the index is resilient and could continue to move higher.

The DXY faces resistance at 106.50 -107.00. If it recovers this area, it might retest the 108.00 area.

• The Dow Jones is settling back into the 44,000 handle as investors take a pause.
• US PPI inflation accelerated faster than expected in November.
• Analysts increasingly worry that it may take longer to get to 2% inflation.

The Dow Jones Industrial Average (DJIA) held steady on Thursday, drifting into the 44,000 major price handle as investors balked at the latest US Producer Price Index (PPI) inflation figures. This week’s overall US inflation data package has given traders cause for pause, but not enough to fundamentally shift expectations for December’s Federal Reserve (Fed) rate cut.

US PPI inflation bucked to 0.4% in November, while October’s print was retroactively adjusted to 0.3% from 0.2% MoM. Markets were expecting a print no higher than 0.2% MoM. Core PPI inflation accelerated to 3.4% on an annualized basis, over and above the expected uptick to 3.2% from the previous 3.1% YoY.

Investor sentiment froze in its tracks on Thursday post-PPI inflation print, however market expectations for the Fed’s December 18 rate call have hardened around the 25 bps mark. According to the CME’s FedWatch Tool, rate traders are now pricing in over 98% odds of a quarter-point rate cut when the Federal Open Market Committee (FOMC) convenes in December 18.

Dow Jones news

The Dow Jones was roughly on-balance during Thursday’s US market session, with winners equally mixed. Coca-cola (KO) found some room to move higher, climbing 1.45% to land somewhere near $63.50 per share after Deutsche Bank upgraded its stance to bullish on the soft drink manufacturer. Unitedhealth Group (UNH) continued to backslide, falling over 1.75% and approaching $524 per share after video surfaced of the company’s current CEO defending the healthcare company’s claim denial practices, which was filmed the day after Brian Thompson’s assassination. Brian Thompson was the CEO of Unitedhealth’s insurance subsidiary responsible for one of the highest claims denial rates in the US.

Elsewhere in equities, Boeing shares climbed again after the airline manufacturer officially resumed production of its 737 Max project. 

Dow Jones price forecast

The Dow Jones continues to grind lower in the runup to the December market slowdown. Price action has turned tepid, sending bids drifting back toward the 50-day Exponential Moving Average (EMA) near 43,480. With a lack of key bullish momentum, the DJIA is poised to close slightly lower for a sixth consecutive trading day.

Despite bulls appearing to run out of gas in the near term, the long-term trend remains decidedly bullish. The major equity index may be down 2% in December, but that takes only a small bite out of November’s stellar 7.6% return, and the Dow Jones remains up nearly 17% YTD in 2024.

Dow Jones daily chart

• Gold declines over 1% as US PPI rises unexpectedly, countering a weak jobs report and complicating disinflation narrative.
• Investors anticipate a potential Fed rate cut with high expectations of a 25 bps reduction next week.
• US Treasury yields see a slight increase, adding pressure to Gold prices as market prepares for upcoming Fed decision.

Gold prices snapped a four-day streak of gains on Thursday, tumbling more than 1% as investors digested mixed economic data from the United States. A softer than expected jobs report, but higher prices on the producer’s side, kept traders from pushing Bullion prices higher. The XAU/USD trades at $2,684.

The Producer Price Index (PPI) exceeded forecasts, hinting that the disinflation process might be stalling. Along with that, the US Bureau of Labor Statistics revealed the labor market is cooling as the number of Americans filing for unemployment benefits was above estimates.

Bullion prices dropped on speculation that traders booked profits ahead of the Federal Reserve’s (Fed) monetary policy decision next week.

There’s growing certainty that the Fed will lower borrowing costs by 25 basis points at the December 17-18 meeting. The swaps market shows odds of 98% that the fed funds rate will be cut to the 4.25%-4.50% range.

Source: Prime Market Terminal

A timid jump in the US 10-year Treasury bond yield of one-and-a-half basis points to 4.289% weighed on the golden metal.

Earlier the European Central Bank (ECB) lowered interest rates for a third straight meeting, hinted that further easing is coming as inflation edges down toward the 2% goal.

Ahead this week, the US economic docket remains absent with traders bracing for next week’s Fed meeting.

Daily digest market movers: Gold price is heavy as US real yields climb

• Gold prices advanced as US real yields rose two basis points to 1.996%.
• The US Dollar Index remains firm at 106.75, up 13%.
• The PPI for November showed that headline inflation on the producer side rose by 3% YoY, up from 2.4% in October and above forecasts of 2.6%, while core PPI increased by 3.4% YoY, exceeding projections of 3.2% and rising from 3.1%.
• US Initial Jobless Claims for the week ending December 7 jumped to a two-month high of 242K, exceeding estimates of 220K.
• This data added to Wednesday’s CPI figures, cementing the case for another rate cut by the Fed. However, for 2025, the US yield curve suggests that speculators estimate 100 basis points of easing toward the end of the year.
• 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.
• Analysts at Goldman Sachs noted that China’s central bank “may even increase Gold demand during periods of local currency weakness to boost confidence in their currency.”

Technical outlook: Gold price resumes its bullish trend, eyes $2,721

Gold price rally pauses as the non-yielding metal retraces to the 50-day Simple Moving Average (SMA) at around $2,670. Despite this, momentum remains bullish as portrayed by the Relative Strength Index (RSI). Over the short term though, sellers are in charge.

If XAU/USD slides beneath the 50-day SMA, look for a drop toward $2,650, ahead of the $2,600 mark. On the other hand, if buyers conquer the $2,700 resistance level, the next supply zone tested would be the November 25 peak of $2,721, before challenging the record high of $2,790.

• EUR/USD declines further on Thursday, deepening losses below the 20-day SMA.
• RSI remains flat at in negative territory, signaling persistent bearish momentum.
• MACD histogram continues to print decreasing green bars, highlighting fading bullish traction.

The EUR/USD pair extended its downside on Thursday, slipping to 1.0500 and further distancing itself from the 20-day Simple Moving Average (SMA). This sustained loss of key technical support underscores the bearish outlook, with the pair struggling to find any signs of recovery.

Technical indicators remain aligned with the bearish trend. The Relative Strength Index (RSI) is flat at 40, firmly in the negative territory, reflecting ongoing selling pressure and the lack of bullish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram continues to show decreasing green bars, signaling a persistent fade in bullish traction.

With the pair trading below the 20-day SMA near 1.0530, the downside risks remain prominent. Immediate support lies at the psychological level of 1.0500, followed by the 1.0480 area. To negate the bearish bias, EUR/USD would need to reclaim the 20-day SMA and break above 1.0600 to reinstate a constructive outlook and revive bullish momentum.

EUR/USD daily chart

• AUD/USD rises to 0.6392, buoyed by weak US labor market reports
• US Initial Jobless Claims hit a two-month high, fueling speculation of continued Fed policy easing.
• Australian employment exceeds expectations with 35.6K jobs added in November, unemployment dips to 3.9%.

The Australian Dollar recovers some ground on Thursday against the Greenback, following the release of US jobs data. The US Bureau of Labor Statistics (BLS) revealed that the labor market is weakening further, suggesting that the Federal Reserve may continue to ease policy. the AUD/USD trades at 0.6392, up by 0.36%.

AUD/USD trimmed its gains after mixed US economic data

The BLS revealed that Initial Jobless Claims for the week ending December 7 jumped to a two-month high of 242K, exceeding estimates of 220K, according to Bloomberg. At the same time, the Producer Price Index (PPI) for November revealed by the same government agency showed that headline inflation in the producer side rose by 3% YoY, up from 2.4%, above forecasts of 2.6%, while Core PPI increased by 3.4% YoY, exceeding projections of 3.2%, up from 3.1%.

After the data, the American currency failing to gain traction. The US Dollar Index (DXY), which tracks the performance of the buck against other six currencies, remains firm at 106.79, up 15%.

During the Asian session, Australian Employment figures for November, crushed estimates of 25K, coming at 35.6K, while the Unemployment Rate, ticked lower from 4.1% to 3.9%, beneath forecasts of 4.2%.

The swaps market trimmed odds for a February rate cut to 50%, down from 70% ahead of the data. Nevertheless, the RBA adopted a mor dovish stance, saying “the Board is gaining some confidence that inflation is moving sustainably towards target.”

AUD/USD Price Forecast: Technical outlook

The AUD/USD rose sharply and print a daily high of 0.6429 following Aussie’s data, but it has trimmed its gains, as strong US PPI figures, hint that the Federal Reserve would adopt a cautious approach on reducing interest rates.

Momentum turned slightly bullish in the near-term, but overall, the trend Is tilted to the downside as the Relative Strength Index (RSI) is bearish.

If AUD/USD buyers reclaim 0.6400, the next resistance would be the 0.6500 mark. A breach of the latter will expose the 50-day Simple Moving Average (SMA) of 0.6568.

Conversely, if sellers stepped in and drag prices below the December 11 daily close of 0.6336, the pair might drop to 0.6300, before aiming toward October 23, 2023 swing low of 0.6270.

Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to lower the benchmark interest rate by 25 basis points at the December policy meeting and responds to questions from the press.

Key quotes

"I don't think about market pricing of rate hikes."

"We have not discussed neutral rate level in this meeting."

"Protectionism is inflationary in the short term."

"PEPP flexibility has not been used since July 2023."

"US tariffs not incorporated into ECB projections."

• Silver price falls back to near $31.50 after posting a fresh two-week high around $32.20.
• Chinese officials proposed to increase the issuance of bonds to boost infrastructure investment.
• The US producer inflation grew at a faster-than-expected pace in November.

Silver price (XAG/USD) gives up its entire gains and declines to near $31.50 in the North American session on Thursday. The white metal declines after posting a fresh two-week high around $32.20. The asset faces pressure after the conclusion of China’s two-day economic work conference. a high-level meeting that sets economic priorities for next year.

Top leaders of China didn’t provide specific details on the likely size of the stimulus package and the pace of monetary policy easing. However, officials said that they will increase the issuance of ultra-long special treasury bonds and local government special notes next year, which are important sources for infrastructure investment and other public spending, Bloomberg reported.

Investors await more details on the stimulus package to forecast the demand for Silver, given its application in various industries such as solar panels and mining, etc.

Meanwhile, hotter-than-expected United States (US) Producer Price Index (PPI) data for November has also weighed on the Silver price. As measured by the PPI, annual headline and core producer inflation accelerated to 3% and 3.4%, respectively. The impact of the hit US PPI data appears to be negligible on Federal Reserve (Fed) interest rate projections for the policy meeting on December 18 but could boost expectations that the central bank will pause the policy-easing spell in January.

After the US PPI data release, the US Dollar Index (DXY) recovered intraday losses and rises to near 106.80 and weighed on the Silver price.

Silver technical analysis

Silver price retreats after failing to revisit the horizontal resistance plotted from the May 21 high of $32.50. The near-term appeal of the Silver price remains firm until it stays above the 20-day Exponential Moving Average (EMA), which trades around $31.25.

The 14-day Relative Strength Index (RSI) approaches 60.00. A bullish momentum would trigger a decisive break above the same.

Looking down, the upward-sloping trendline is around $29.50, which is plotted from the February 29 low of $22.30 on a daily timeframe

Silver daily chart

Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to lower the benchmark interest rate by 25 basis points at the December policy meeting and responds to questions from the press.

Key quotes

"No victory yet against inflation."

"There were some discussion about a 50 bps cut."

"Reaching goal has moved a little forward in 2025."

"Wages gradually in 2025 reaching growth rate compatible with target."

"Observing decline in profit margins."

"Productivity is more promising."

"Risk to inflation is now two-sided."

Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to lower the benchmark interest rate by 25 basis points at the December policy meeting and responds to questions from the press.

Key quotes

"Underlying inflation is in line with sustained return to target."

"Profits to partially offset higher labour cost."

"Expecting inflation to fluctuate near current level in near term."

"Most measures of inflation expectations at around 2%."

"Risks to growth are tilted to downside."

"Trade friction could weigh on growth."

"Wages, profits, geopolitics are among upside risks to inflation."

"Downside risks to inflation include low confidence, geopolitical stress, low investment."

"Macroprudential policy remains the first line of defense against the build-up of financial vulnerabilities."

Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to lower the benchmark interest rate by 25 basis points at the December policy meeting and responds to questions from the press.

Key quotes

"Growth is losing momentum, firms are holding back investment."

"Exports are weak."

"Labour market is resilient."

"Surveys point to fewer jobs being created."

"Economy should strengthen."

"Recovery is slower than expected."

"Exports should support recovery if trade tensions don't escalate."

• Producer inflation in the US rose at a stronger pace than expected in November.
• US Dollar Index holds above 106.50 following the PPI data.

The Producer Price Index (PPI) for final demand in the US rose 3% on a yearly basis in November, the data published by the US Bureau of Labor Statistics showed on Thursday. This reading followed the 2.6% increase recorded in October and came in above the market expectation of 2.6%.

The annual core PPI rose 3.4% in the same period, surpassing analysts' estimate of 3.2%. On a monthly basis, the PPI and the core PPI rose 0.4% and 0.2%, respectively.

Market reaction

The US Dollar Index clings to modest daily gains above 106.50 following the November producer inflation data.

• ECB's rate cut to 3% aims to anchor inflation closer to the 2% target amid ongoing economic challenges.
• Updated ECB forecasts suggest a gradual decline in inflation, with HICP expected to reach 1.9% by 2026.
• Market attention now turns to ECB President Christine Lagarde's upcoming press conference for further cues.

The Euro weakens against the Japanese Yen during the North American session after the European Central Bank (ECB) cut interest rates. At the time of writing, the EUR/JPY trades volatile within the 159.00-159.80 range.

EUR/JPY experiences volatility, after ECB slashes interest rates and updated its forecasts

The ECB lowered their three key interest rates by 25 bps, leaving the deposit rate at 3%. The monetary policy statement mentioned that the central bank is determined to drive inflation to its 2% goal, adding they’re not pre-committed toa particular rate path.

ECB officials added that the disinflation is “well on track” and despite evolving, inflation remains high.

In its meeting, the ECB updated its forecasts for inflation and economic growth. The Harmonised Index of Consumer Prices (HICP) for 2024 is expected to end at 2.4%, down from 2.5%. For 2025 and 2026, HICP is foreseen to end at 2.1% and 1.9%, respectively.

Core HICP is projected to finish the year at 2.9%, unchanged compared to the previous forecast, and for 2025 and 2026 is foreseen to dip to 2.3% and 1.9%, respectively.

The Gross Domestic Product is foreseen at 0.7% I n2024, at 1.1% in 2025 and 1.4% in 2026.

Following the monetary statement release, traders focus shifts to ECB’s President Christine Lagarde press conference at around 13:45 GMT.

EUR/JPY Price Forecast: Technical outlook

The EUR/JPY extended its losses below 160.00, with traders eyeing a re-test of the December 11 low of 158.64. On further weakness, the cross-pair could dive towards the Tenkan-Sen at 158.45, before sliding to 158.00.

Conversely, if buyers push the exchange rate above 160.00, this could pave the way to test the Kijun-Sen at 161.07.

• Initial Jobless Claims in the US rose by 17,000 in the week ending December 7.
• US Dollar Index stays in positive territory above 106.50.

There were 242,000 initial jobless claims in the week ending December 7, the weekly data published by the US Department of Labor (DOL) showed on Thursday. This print followed the previous week's print of 225,000 (revised from 224,000) and came in worse than the market expectation of 220,000.

Further details of the publication revealed that the advance seasonally adjusted insured unemployment rate was 1.2% and the 4-week moving average stood at 224,250, an increase of 5,750 from the previous week's revised average.

"The advance number for seasonally adjusted insured unemployment during the week ending November 30 was 1,886,000, an increase of 15,000 from the previous week's unrevised level of 1,871,000." the DOL further noted in its publication.

Market reaction

The US Dollar Index retreated from daily highs after this data and was last seen posting modest daily gains at 106.70.

• The Euro remains practically unchanged, near two-year lows after the ECB’s rate cut.
• The European Central Bank eased interest rates to 3% from the previous 3.25% as widely expected.
• The BoE is expected to keep a less dovish outlook amid a resilient UK economy and higher inflationary trends.

The Euro remains depressed near two-year lows at 0.8220 following a widely expected 25 bps rate cut by the ECB. The pair has accelerated its downtrend this week and is approaching an eight-year low, at 0.8200.

European Central Bank eased its benchmark interest rate to 3% from 3.25% as widely expected. In a few minutes, President Lagarde will meet the press where she will be asked about the timing of the next rate cut.

The grim outlook of the Eurozone economy, coupled with the political uncertainty in the Regiou’s two main economies is adding pressure on the central bank to ease borrowing costs, even with inflation above target.

In the UK, the economy is showing more resilient, and the heavy spending budget released by the Labour cabinet is expected to stir inflationary prices. That will likely force the BoE to approach monetary easing more cautiously.

The RICS House Price Index rose to 25 in November, up from 16 in October. The index sits at its strongest level in two years, reflecting a steady improvement in the UK housing market since last year’s trough, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP eases slightly against EUR

“The Pound Sterling (GBP) is trading at a small loss to the USD on the session, allowing a minor rebound in EURGBP, but Cable is essentially range-trading and the broader trend in EUR/GBP remains strongly negative.”

“Cable continues to hold in a flat trading range around the 1.2750 point. Support is 1.2710/15. Resistance is 1.2800/10. Short term trend momentum is weakening, suggesting that the range trade may extend a little longer.”

“EUR/GBP has developed a minor gain from this week’s low near 0.8225. Rebounds towards 0.8260/65 resistance are likely to attract sellers.”

The Canadian Dollar (CAD) is steady. The BoC duly cut the policy rate 50bps yesterday and signaled that the pace of policy easing would moderate, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Spreads stabilize after BoC cut

“Aggressive rate cuts over the past few months leave the Overnight Target Rate at 3.25%, right on the upper range of the 2.25-3.25% zone the Bank has indicated as the nominal neutral rate band. Rates are still expected to ease but swaps are pricing in just 50bps of cuts over H1 2025. Assuming a 25bps cut from the Fed next week, the policy spread looks likely to stabilize around the 125bps point now.”

“That may see some (limited) backtracking in term spreads that have widened significantly on the Fed/BoC policy divergence and could give the CAD a temporary toe-hold against the USD. We expect the policy gap will narrow significantly through 2026, which should eventually feed through to term spreads and the forward discount—but perhaps not just yet. Regardless, tariff/trade threats remain a significant risk for the CAD and it’s too soon to anticipate a sustained turnaround in the weak CAD trend.”

“Estimated spot fair value sits at 1.4109 currently. CAD has stopped falling against the USD over the past two sessions but there are scant signs from the charts that a major CAD recovery is looming. Short-term trend momentum has moderated but remains bullishly oriented for the USD. Longer run signals are firmly USD bullish. Intraday USD support sits at 1.4095/00, with a drop back to the 1.40 area perhaps developing below there. Resistance remains 1.42.”

The US Dollar (USD) is mixed versus its major peers, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD mixed versus majors as markets digest inflation data

“The DXY is showing a minor gain on the session, due to losses in the CHF after the SNB cut its policy rate a larger -than-expected 50bps, and a minor dip in the GBP. Note Brazil’s central bank raised the Selic rate hike a larger-than-expected 100bps (to 12.25%) late yesterday. Most other majors are steady to slightly firmer, however, with the AUD leading gains following a stronger than expected jobs report earlier (a 35.6k gain in jobs, led by full-time work, and a fall in the unemployment rate to 3.9% - against expectations of a rise to 4.2%). Short rates rose modestly and swaps have reduced the odds of a February RBA rate cut to a 50/50 shot.”

“US inflation data yesterday matched expectations but that was perhaps the limit of the good news. Core and underlying trend measures of inflation picked up and while these gains were modest, they do support the impression that the process of disinflation in the US has stalled. Markets added another couple of bps to anticipated easing at next week’s FOMC, effectively fully pricing in a 1/4-point cut and added marginally to easing expectations in 2025 but more hawkish-minded Fed policymakers will be taking note of core price trends and a cut next week may be accompanied by a more cautious-looking statement on the potential for rate cuts in 2025.”

“PPI data today may reflect moderate M/M gains but the consensus still expects a pickup in prices over the year. The BoJ’s Tankan survey for Q4 is released this evening and is expected to reflect steady, but relatively firm, business confidence into year-end. Rising business optimism supports the outlook for gradual BoJ tightening ahead.”

The ECB is expected to cut its policy rate 25bps to 3.00% this morning. No surprise—a 1/4-point ease is fully priced in, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR chops around 1.05

“Swaps reflect the market’s anticipation that rates have a lot further to fall in the Eurozone—around 125bps of additional cuts are reflected in the curve over the next 12 months or so. That might be a bit too much but it seems unlikely that President Lagarde will shift to a more cautious policy bias at this point.”

“ECB monetary policy may run a fair bit softer relative to its peers in 2025, setting the EUR up to underperform in the medium term.”

“The EUR is little changed on the session. Spot remains within its recent range but has lost ground on the week and a net decline through Friday will emphasize the negative technical impact of last week’s failure to hold gains above 1.06. Short-term support sits at 1.0460/80, ahead of a drop to 1.0400/20. Resistance is 1.0540/50.”

• NZD/USD surrenders daily gains as the US Dollar rebounds despite dovish Fed bets.
• The Kiwi pair exhibits a Bullish Divergence formation but will less likely get triggered.
• The RBNZ has reduced its interest rates by 125 bps to 4.25% this year.

The NZD/USD pair gives up its intraday gains and returns below the round-level figure of 0.5800 in Thursday’s early North American session. The Kiwi pair falls back as the US Dollar (USD) reverses losses even though traders have priced in the Federal Reserve (Fed) to cut interest rates by 25 basis points (bps) to 4.25%-4.50% after the two-day monetary policy meeting on Wednesday.

The Kiwi pair has been battered badly for more than two months and is wobbling near the two-year low. The asset has faced an intense sell-off as the outlook of the New Zealand Dollar (NZD) has weakened, given that the Reserve Bank of New Zealand (RBNZ) has reduced its Official Cash Rate (OCR) aggressively by 125 basis points (bps) to 4.25% in three policy meetings.

The RBNZ was compelled to follow an aggressive policy-easing cycle due to slowing inflationary pressures, weakening labor demand, and poor business activity.

Meanwhile, the US Dollar performs strongly across the board on expectations that policies of higher import tariffs and lower income taxes by President-elect Donald Trump will be inflationary for the United States (US) economy.

NZD/USD daily chart shows a Bullish Divergence formation, which suggests a slowdown in the selling momentum that results in a reversal move. While the asset has formed a lower low formation on a daily timeframe, the 14-day Relative Strength Index (RSI) has made higher lows. The formation needs confirmation to set off a bullish reversal.

A decisive break above the November 29 high of 0.5930 could confirm a reversal setup and push it higher to the November 15 high of 0.5970 and the psychological resistance of 0.6000.

However, the chances of a bullish divergence confirmation are weak due to unsupportive NZ fundamentals, which could take the Kiwi pair lower to the November 2022 low of 0.5740 and the round-level support of 0.5700 if it breaks below the two-year low of 0.5770.

NZD/USD daily chart

• Oil prices increase for a fourth straight day this week. 
• The EIA report on Wednesday revealed Cushing Crude Supply fell to a seven-year low. 
• The US Dollar Index trades lower as the focus shifts to the European Central Bank interest-rate decision. 

Crude Oil trades higher for a fourth consecutive day on Thursday, jumping to $70, after a 2.5% price increase on Wednesday. The surge came after the weekly report from the Energy Information Administration (EIA) revealed that US stockpiles at Cushing plunged to just 22.9 million barrels, the lowest level since 2007. Meanwhile, Oil traders largely ignored the latest forecasts from OPEC, which downwardly revised global Oil demand by 210,000 barrels per day. .

The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – is trading softer with the focus shifting towards Europe. The European Central Bank (ECB) will make its last policy decision for 2024, with the most likely scenario being another interest-rate cut amidst controlled inflation and a contraction of economic activity in the region. In the US, Wednesday’s Consumer Price Index (CPI) data appeared to be enough for traders to raise bets on a rate cut for the Federal Reserve meeting next week. 

At the time of writing, Crude Oil (WTI) trades at $69.93 and Brent Crude at $73.30.

Oil news and market movers: US reserves drying up

• The Energy Information Administration (EIA) report on Wednesday revealed that stockpiles at Cushing, Oklahoma, plunged by the most since early September after a 1.3 million barrel drawdown. That brings them to just 22.9 million barrels, their lowest seasonal level since 2007. Lower imports from Canada probably contributed to the draw, Bloomberg reports. 
• In its monthly report, The Organization of Petroleum Exporting Countries (OPEC) chopped projections for consumption growth in 2024 by 210,000 barrels a day to a total of 1.6 million barrels a day, Reuters reports. This means that OPEC has slashed its projections by 27% since July.
• Russian Oil company Rosneft has agreed to supply about 500,000 bpd of crude to Indian refiner Reliance, Reuters reports, citing three people familiar with the matter.

Oil Technical Analysis: It did not take much

Crude Oil price popped higher as volumes start to diminish going into the year-end. Such a spike can happen when markets like the commodity sector are starting to see thinner volumes being traded. Should another leg higher take place this Thursday, the $71.50 level and beyond can not be ruled out before Christmas. 

The 55-day Simple Moving Average (SMA) at $70.04 is being tested and needs to see a hold and daily close above it in order to become support. Further up, $71.46 and the 100-day SMA at $71.19  will act as thick resistance. In case Oil traders can plough through that level, $75.27 is up next as a pivotal level. 

On the downside, it is too early to see if that 55-day SMA will act as support at $70.04. That means that $67.12 – a level that held the price in May and June 2023 – 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

• The US Dollar eases on Thursday as the dust settles after the US CPI report, which showed inflation accelerated slightly as expected. 
• Traders shift their focus to Europe ahead of the European Central Bank’s last meeting of the year, with economists broadly expecting another rate cut. 
• The US Dollar Index (DXY) trades around 106.50, looking for direction. 

The US Dollar (USD) softens slightly on Thursday, with the DXY US Dollar Index trading around 106.50, ahead of the last European Central Bank (ECB) meeting for 2024. All eyes will be on President Christine Lagarde as traders will want to see how the ECB will address the recent downturn in economic activity in the Eurozone. Although a 25 basis points interest-rate cut looks to be a near certainty, estimates for a 50 basis point rate cut and even no rate cut at all are on the table as well. 

In the US, the economic calendar is rather light. The weekly Jobless Claims will probably soak up the latter part of the attention, whereas the Producer Price Index (PPI) report is not expected to create much waves. The most inflationary elements were already analyzed on Wednesday with the Consumer Price Index (CPI) report, and traders quickly positioned themselves to lock in a rate cut from the Fed next week. According to the CME FedWatch Tool, the chances of such a decision are currently at almost 99%. 

Daily digest market movers: Focus shifts towards Eurozone

• At 13:30 GMT, all US data for this Thursday will be released:
  • Initial Jobless Claims for the week of December 6 will be released. Expectations are for claims to decline to 220,000 from 224,000 a week earlier.
  • As for the Producer Price Index (PPI) data for November, the monthly headline PPI should increase at a stable pace of 0.2%, while the yearly figure is expected to tick up to 2.6% from 2.4%. The monthly core PPI should increase by 0.2%, slowing from the 0.3% increase seen the previous month. The yearly figure is anticipated to tick up to 3.2% from 3.1%.
• Equities trade mixed, with the main European indices marginally in the green and US Futures are slightly subdued. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 98.6%, the highest probability seen yet after the US CPI release. 
• The US 10-year benchmark rate trades at 4.28%, a fresh high for this week.

US Dollar Index Technical Analysis: Push and pull 

The US Dollar Index (DXY) is further defining a bandwidth that could hold until next year given the limited amount of data points left. The US Consumer Price Index (CPI)  release did not really move the needle, with the DXY staying between 105.50 and 107.00. 

The US Dollar bulls failed on Wednesday to close above 106.52 (April 16 high), a level that on previous occasions has also been  a hard barrier to get through.. Next up is the 107.00 round level and 107.35 (October 3, 2023, high). Further up,  the high of November 22 at 108.7 emerges. 

Looking down,  the pivotal level at 105.53 (April 11 high) comes into play before heading into the 104-region. Should the DXY fall all the way towards 104.00, the 200-day Simple Moving Average at 104.14 should catch any falling knife formation. 

US Dollar Index: Daily Chart

The US Dollar recovery loses steam with bulls halted at 152.90.
Dovish comments from BoJ officials and strong US data are supporting the pair.
The immediate bias remains positive, with bears capped above 152.00.

The US Dollar has snapped a three-day positive trend on Thursday. The pair is trading with moderate losses with the market focusing on US Producer Prices and and Jobless Claims figures, due later today.

From a wider perspective, however, the pair maintains its immediate bullish trend. The dovish comments from BoJ policymakers suggesting that there is no rush to hike interest rates cast doubts on the outcome of next week’s monetary policy decision and will likely keep the Yen on its back foot.

A dovish BoJ and strong US data support the Dollar

The higher US Treasury yields, with the 10-year yield hitting 4.3% - from 4.12% last week is another source of support for the Greenback. US inflation accelerated in November at its fastest pace in seven months, which is forcing investors to dial back hopes of monetary easing for 2025.

The focus today is on November’s PPI and last week’s Jobless Claims figures. Price pressures are expected to have also increased at factory gates with unemployment claims declining. This would endorse the view of a resilient US economy, increasing support for the Greenback

USD/JPY Technical Outlook

The 4-hour USD/JPY chart shows the pair correcting higher, with bulls capped so far at the 50% Fibonacci retracement level of November’s sell-off.

The immediate bias remains positive, with price action standing above the 100-period SMA, which meets the price right below 152.00. the key support for the upside trend is at 150.90. Resistances are at 152.85 and 153.60 

 

• Australian Dollar recovery has met resistance at 0.6435, and a steady USD is weighing on Aussie's upside attempts.
• Strong Australian employment figures accelerated AUD's recovery earlier today.
• US PPI and Jobless claims data is expected to reiterate the US economic exceptionalism and support the Dollar.
   

The Australian Dollar accelerated its rebound from year-to-date lows following stronger-than-expected Australian employment data seen earlier today. The pair, however, has met resistance at 0.6430. which keeps the broader negative trend intact.

Australian employment showed a net increase of 36.6K in November, well above the 25K forecasted by the market and also above the downwardly revised 12.1K in October.

The Unemployment Rate has posted another positive surprise, with a decline to 3.9%, the lowest level since March against market expectations of an increase to 4.2%. The jobless rate had remained steady at 4.1% since last summer.

The US Dollar remains firm on positive US data

These figures have offset the impact of Tuesday’s dovish-tilted RBA monetary policy statement but, so far, are showing insufficient to counter the pair’s bearish trend.

The US Dollar Index, which measures the Greenback against the six most traded currencies, remains steady near two-week highs, supported by higher US yields.

US consumer inflation accelerated in November at its fastest rate in seven months. Later today, US Producer Prices Index and Jobless Claims data are expected to endorse the US exceptionalism rhetoric.
 

Expect weak growth in 2025, a high risk of recession, and the ECB forced into accommodative policy. It is possible that a more benign tariff outcome or resilient European consumers mitigate downside risks. A more forceful policy reaction is also possible, either via fiscal, trade or institutional channels, Standard Chartered’s Economist Christopher Graham notes.

Creative solutions

“We have written extensively over the past few months on the structural economic issues facing Europe, as well as the trade and foreign policy risks presented by the incoming US administration. We think it is worth at least considering the optimistic angle. There is significant doubt over Trump’s approach to tariffs, how countries will be impacted, and whether Europe’s efforts to negotiate carve-outs are successful, so there is a pathway to a more benign tariff outcome. It is also possible that the European consumer is more resilient next year as rates fall and the labour market remains tight.”

“But how Europe responds to its economic problems also matters. ‘Forged in crises’, references the belief of Jean Monnet, one of the EU founding fathers, that European integration would be propelled by periodic crises. We have seen European institutions become stronger in the aftermath of previous economic challenges; next year’s headwinds – an emerging tariff war, or changes to US security guarantees in the region – could catalyse similar progress. And there is plenty that policy makers could pursue on this front, from completion of banking and capital markets unions to addressing Europe’s competitiveness issues.”

“However, we think the political will to push forward in these areas is currently lacking; we also recognise that the inexorable shift towards ‘more Europe’ that has emerged from previous crises has been met by growing support for populist parties, something that could offer a countervailing force to further European integration now. Where progress seems more likely is on the fiscal front. We do not think another suspension of the fiscal rules is realistic, but greater flexibility being applied to those rules is possible, alongside potential agreement to increase common borrowing.”

• The Mexican peso trades practically flat against the US Dollar near the 20.00 level.
• Hopes of Fed interest-rate cuts next week are acting as a headwind for the US Dollar.
• Technically, the USD/MXN pair remains bearish, with upside attempts limited at 20.30.

The Mexican Peso (MXN) trades practically flat against the US Dollar (USD) on Thursday, with the key 20.00 support area holding the Greenback ahead of the US Producer Price Index (PPI) and Weekly Jobless Claims data. The Peso picked up on Wednesday after the US Consumer Prices Index (CPI) figures cemented hopes of a Federal Rerserve’s (Fed) rate cut next week.

The USD is drawing some support from higher US Treasury yields, which have rallied for the last three days with investors paring back hopes of monetary easing for 2025. The strong US macroeconomic data and the outlook of higher inflationary pressures from Donald Trump’s policies are likely to limit the US central bank’s leeway to lower borrowing costs.

In Mexico, softer-than-expected Consumer Prices Index data, coupled with a deteriorated Consumer Confidence index, has bolstered the case for a 25 bps cut by the Bank of Mexico next week.

Daily digest market movers: Weak Mexican data likely to weigh on MXN

• Mexico’s Industrial Production is expected to have contracted by 0.2% in November compared with the previous month after increasing by 0.6% in October. Year-on-year, output is expected to decline by 0.6% from the 0.4% drop in October.
   
• Later today, the US PPI is expected to have grown at a steady 0.2% pace in November and by 2.6% year-on-year, up from 2.4% in October. The core PPI is seen easing to 0.2% from 0.3% in the previous month with the yearly rate accelerating to 3.2% from 3.1%.
   
• US Initial Jobless Claims are seen declining to 220K in the first week of December from 224K in the previous week.
   
• On Wednesday, US Consumer Price Index (CPI) figures revealed that inflation accelerated to 0.3% in November and to 2.7% on the year as expected, posting its largest increase in seven months.
   
• Futures markets, however, are now nearly fully pricing a 25 bps cut by the Fed next week. The CME Fed Watch tool shows a 98% chance of such a scenario, up from 85% earlier this week.

  US Dollar PRICE Today

  The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.

  	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
  USD		-0.04%	0.02%	-0.18%	-0.13%	-0.53%	-0.23%	0.27%
  EUR	0.04%		0.06%	-0.14%	-0.09%	-0.49%	-0.19%	0.30%
  GBP	-0.02%	-0.06%		-0.19%	-0.15%	-0.55%	-0.25%	0.24%
  JPY	0.18%	0.14%	0.19%		0.03%	-0.35%	-0.08%	0.44%
  CAD	0.13%	0.09%	0.15%	-0.03%		-0.39%	-0.09%	0.40%
  AUD	0.53%	0.49%	0.55%	0.35%	0.39%		0.30%	0.79%
  NZD	0.23%	0.19%	0.25%	0.08%	0.09%	-0.30%		0.49%
  CHF	-0.27%	-0.30%	-0.24%	-0.44%	-0.40%	-0.79%	-0.49%

  The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Mexican Peso technical outlook: USD/MXN remains supported above 20.00 key level

The USD/MXN pair remains steady above the 20.00 support area, with the December 5 high at the 20.30 area capping upside attempts. The pair is trading practically flat, awaiting US data.

The short-term bias remains bearish as a double top at 20.80 suggests the possibility of a deeper correction. The 20.00 psychological level is a key support. Below here the target is November’s low at 19.75.

On the upside, the December 5 high at 20.30 is holding upside attempts ahead of the December 2 high at 20.60 and November’s peak at around 20.80.

USD/MXN 4-Hour Chart

EUR/CHF decline has stalled after achieving graphical level of 0.9250/0.9210 representing lows of December 2023 and August 2024, Societe Generale’s team of FX analysts note.

EUR/CHF has a chance to establish below 0.9250/0.9210

“Daily MACD has started posting positive divergence denoting receding downward momentum. A brief rebound can’t be ruled out but multi-month descending trend line at 0.9370 could be an important hurdle. Inability to cross this resistance could denote risk of further decline.”

“In case the pair establishes below 0.9250/0.9210, the phase of correction could deepen towards next projections of 0.9160 and 0.9125.”

• The Gold rally halts right below a one-month high at $2,720, but downside attempts are limited.
• Higher Treasury yields are acting as support for the US Dollar and weighing on the recent Gold rally.
• XAU/USD broader technical picture remains positive, with price action printing higher highs and higher lows. 

Gold (XAU/USD) is hesitating below a one-month high at $2,720 on Thursday’s European session following a sharp rally over the last three days. The rebound on US Treasury yields, with the benchmark 10-year yield more than 15 pips above last week’s lows, is weighing on the precious metal’s rally.

However, downside attempts remain limited, with investors nearly fully pricing a 25 basis points (bps) interest-rate cut by the Federal Reserve (Fed) next week. The hot US Consumer Price Index (CPI) report did not scratch investors’ hopes of further monetary easing, although the outlook of a shallower easing cycle in 2025 underpins the US Dollar (USD).

Daily digest market movers: Gold rally stalls with the Dollar steady near two-week highs

• US consumer prices grew at their fastest pace in seven months,  0.3% up in November compared with the previous month and 2.6% year-on-year, from 0.2% and 2.6%, respectively. The core CPI remained steady at 0.3% monthly and 3.3% from November last year.
   
• Market expectations of a 25 bps Fed rate cut on December 18 increased to 98% from 85% before the CPI release and around 75% last week, as shown by the CME Group’s Fed Watch Tool.
   
• Futures markets are increasingly pricing the chance of two additional rate cuts in 2025, instead of three as previously thought.
   
• Strong US macroeconomic data and expectations of higher inflation stemming from Donald Trump’s policies are forcing investors to scale back Fed easing prospects, and pushing US yields higher. 
   
• The yield of the benchmark 1-year Treasury note has reached 4.30% from 4.12% lows last week after having rallied for four consecutive days. This provides important support to the Greenback.
   
• The Swiss National Bank (SNB) cut interest rates by 50 basis points against market expectations of a 25 bps cut. The European Central Bank (ECB) is next with the market consensus anticipating a quarter-point interest-rate cut. Another jumbo cut would rattle markets and send the US Dollar higher.

Technical analysis: XAU/USD consolidates with $2,720 resistance in focus

Gold’s rally has lost some steam, with US Treasury yields bouncing up and the US Dollar appreciating on the back of strong US inflation data. However, the broader trend remains positive, with bearish attempts contained above $2,700.

On the upside, the November 24 high at $2,720 emerges as the first resistance. The next upside target is the November 4, 5 and 6 highs at around $2,750. 

On the downside, previous resistance at around $2,700 (December 10 high) is acting now as support ahead of the $2,675 intra-day level and the December 9 low at $2,630.

XAU/USD 4-Hour Chart

 

• Silver price posts a fresh five-week high around $32.30 as traders price in Fed rate cut bets for the policy meeting on Wednesday.
• A moderate growth in rental prices boosted Fed dovish bets.
• Investors await the outcome of China’s closed-door economic work conference.

Silver price (XAG/USD) refreshes an almost five-week high at around $32.30 in Thursday’s European session. The white metal strengthens as traders have fully priced in the Federal Reserve (Fed) to cut interest rates again by 25 basis points (bps) to 4.25%-4.50% in the policy meeting announcement on Wednesday, a scenario that is favorable for non-yielding assets, such as Silver, as it reduces their opportunity costs.

Fed dovish bets escalated after the release of the United States (US) Consumer Price Index (CPI) report for November, which showed that rental prices rose at a moderate pace. Annual headline and core CPI – which excludes volatile food and energy prices – rose by 2.7% and 3.3%, respectively, in line with expectations.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, ticks lower to near 106.50. 10-year US Treasury yields advance to near 4.30%.

Going forward, investors will focus on the outcome of China’s two-day economic work conference, a high-level meeting of China’s top leadership that will show the economic agenda for 2025. The administration is expected to release a mammoth stimulus package to boost domestic consumption and stabilize the realty sector.

The demand for Silver as a metal would strengthen if the Chinese government released a robust economic package, given its application in various industries such as solar energy, electric vehicles, and mining.

Silver technical analysis

Silver price refreshes monthly higher near $32.30 after breaking above the two-day resistance of $32.00. A bull cross, represented by 20- and 50-day Exponential Moving Averages (EMAs), suggests a fresh bullish trend.

The 14-day Relative Strength Index (RSI) approaches 60.00. Should the bullish momentum trigger if the RSI breaks above 60.00

Looking down, the upward-sloping trendline around $29.50, which is plotted from the February 29 low of $22.30 on a daily timeframe, would act as key support for the Silver price. On the upside, the horizontal resistance plotted from the May 21 high of $32.50 would be the barrier.

Silver daily chart

Brazil's central bank, BCB, aggressively hiked rates by 100bp to 12.25% last night and promised two further hikes of a similar magnitude, ING’s FX analyst Chris Turner notes.

USD/BRL can go back to 5.80/85 today

“The phrase 'getting ahead of the curve' seems appropriate here as the BCB delivers a forceful signal that the rise in inflation expectations will not be tolerated. In addition, BCB announced a $4bn FX auction today to provide liquidity to the spot market. This aggressive move could carry USD/BRL back to 5.80/85 today.”

“However, this aggressive rate hike is entirely down to the loose fiscal policy of the Lula administration and the damage it has done to the exchange rate. Unless some credible fiscal consolidation package is announced, the BRL will stay vulnerable.”

“Our position is that fiscal consolidation will be difficult in the run-up to the 2026 Presidential election, and combined with the new US administration's trade war on China – and the threat of secondary sanctions on Brazil – USD/BRL will probably head up to the 6.25 area.”

USD/CNH rose yesterday after a Reuters report said that China’s top leaders and policymakers are considering allowing the RMB to weaken in 2025 as they brace for tariffs. But the pair fell today after daily USD/CNY fix continue to be set below 7.20. USD/CNH was last at 7.2668 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Risks remain skewed to the downside

“We expect policymakers to continue using the fix to manage RMB expectations for now until tariff hits (if any). In the interim, we would keep a look out for the China’s CEWC meeting which wraps up today. Expectations are building up for stimulus support after politburo vowed to stabilise property and stock markets.”

“Officials also pledged to ramp up ‘extraordinary counter-cyclical policy adjustment’ to support the economy. Follow-up policy action is crucial, and bear in mind markets are impatient. We caution that any delay in concrete policy action may setup a case for disappointment (again). An unwinding of politburo optimism may weigh further on other Asian FX such as KRW, SGD and MYR.”

Daily momentum is bearish while RSI fell. Risks remain skewed to the downside. Support at 7.26 (21 DMA), 7.2340 (23.6% fibo retracement of Sep low to Dec high) and 7.2040 (200 DMA). Resistance at 7.27, 7.2940 levels.

The region switched to muted mode with a quiet calendar in the second half of the week, ING’s FX analyst Frantisek Taborsky notes.

CEE trading will depend heavily on the ECB's tone

“The market seems to be waiting for the ECB decision and even the lower EUR/USD didn't change much on the CEE currencies yesterday. The Czech National Bank blackout period starts today and potentially we may still see some headlines. However, in the last few days, the board has been very active but overall the message is clear.”

“A December pause in the cutting cycle will be on the table and from the tone of the interviews we would say that is the primary scenario for most of the board. A pause in December and February is the baseline of our economists. Board members mention the February forecast as a possibility for additional rate cuts if January inflation is kept in check. While December seems like a done deal, February is open depending on the numbers in the meantime.”

“Today's CEE trading will depend heavily on the ECB's tone. Given the strong levels and rally in PLN and CZK over the past two weeks, we see risk on the downside coming from the possible dovish tone of the ECB. Both currencies have been showing resistance to further strength for the last three days and any signs of weakness on the European side in the ECB comments could lead to profit-taking in our view.”

USD/SGD firmed, tracking the move up in USD/CNH. Pair was last at 1.3435, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Pair to continue to take directional cues from USD and CNY

“Mild bearish momentum on daily chart intact while RSI fell. Consolidation likely with slight bias to the downside. Support at 1.3340 (200 DMA, 23.6% fibo), 1.33, 1.3240 (32.8% fibo retracement of Sep low to Nov high). Resistance at 1.3460, 1.3490 levels.”

“Pair should continue to take directional cues from USD and CNY moves in absence of key data. Next set of SG data is NODX (17 Dec) and CPI (23 Dec). S$NEER was last at 1.08% above model-implied mid.”

US Dollar (USD) could trade in a range, most likely between 7.2500 and 7.2900. In the longer run, current price movements are likely part of range trading, probably between 7.2400 and 7.2900, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.  

Current price movements are likely part of range trading

24-HOUR VIEW: “We detected a ‘slight increase in momentum’ yesterday. We held the view that USD ‘could test the 7.2400 level before a more sustained rebound is likely.’ USD subsequently dropped to 7.2425 before staging a surprising strong rise, reaching a high of 7.2928. It then pulled back to close at 7.2807 (+0.27%). The price action provides no clarity. Today, USD could trade in a range, most likely between 7.2500 and 7.2900.”

1-3 WEEKS VIEW: “Our most recent narrative was from last Friday (06 Dec, spot at 7.2660), wherein ‘the current price movements are likely part of range trading, probably between 7.2400 and 7.2900.’ USD fell to 7.2420 two days ago. Yesterday, it rose slightly above 7.2900 (high of 7.2928). There has been no increase in either downward or upward momentum, and we continue to expect USD to trade between 7.2400 and 7.2900.”

USD/JPY rose sharply, in response to news that BoJ officials see little cost to waiting before raising rates. Pair was last seen at 152.20 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

BoJ to carry on with policy normalization

“Bearish momentum on daily chart shows signs of fading but rise in RSI slowed. We reiterated a compression of moving averages, with 21, 50, 200 DMAs converging. This typically precedes a directional break-out trade. Resistance at 152.50/70 levels (21 DMA, 23.6% fibo), 154.70 levels. Support at 152 (50, 200 DMAs), 150.20 (38.2% fibo retracement of Sep low to Nov high).”

“Tomorrow brings Tankan survey before BoJ MPC (19 Dec). But largely, we are looking for BoJ to carry on with policy normalization with a hike next week and into 2025. Recent uptick in base pay supports the view about positive development in labour market, alongside still elevated services inflation, better 3Q GDP and expectations for 5- 6% wage increases for 2025.”

“That said, the risk is a slowdown in Fed and/or BoJ’s pace of policy normalisation would affect USD/JPY’s moves.”

Outlook for US Dollar (USD) is mixed; it could trade in a range, probably staying within yesterday’s range of 151.00/152.79. In the longer run, tentative buildup in momentum suggests USD could grind higher towards 153.30, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.  

USD can grind higher towards 153.30

24-HOUR VIEW: “Two days ago, USD soared to 152.17. Yesterday, we stated that ‘while the rapid rise appears to be excessive, there is scope for USD to test 152.45 before the risk of a pullback increases.’ The ensuing price movements did not develop as we expected as USD swung between 151.00 and 152.79, closing at 152.45 (+0.33%). The choppy price action has resulted in a mixed outlook. Today, USD could trade in range, probably staying within yesterday’s range of 151.00/152.79.”

1-3 WEEKS VIEW: “We indicated yesterday (11 Dec, spot at 151.80) that USD ‘must break and hold above 152.45 before further advances can be expected.’ USD then rose to a high of 152.79, pulling back to close at 152.45. While we would prefer a stronger daily close, the price action suggests that USD could grind higher towards 153.30. On the downside, if USD breaks below 151.75 (‘strong support’ level was at 151.45 yesterday), it would indicate that the current tentative buildup in upward momentum has faded.”

A 25bp cut is likely a done deal. OIS-implied has priced in back-to-back cuts for 1H next year, taking rates to below 2% in Jun 2025, or even 1.7% in July. The aggressive dovish pricing reflects a recession-driven rate cut cycle rather than a policy normalisation. Last at 1.0513 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Broader price pattern shows an inverted head & shoulders pattern

“Nevertheless, we would pay closer attention to Lagarde’s press conference for clues on how policymakers assess growth outlook to be. On German politics, Chancellor Scholz has called for a vote of confidence yesterday and the Bundestag will vote next Monday on 16 Dec. To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. But in the event, he fails, then Germany is likely to make way for elections on 23 Feb 2025.”

“Far right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections in Feb-2025. The concern here is the explicit language to quit EU unlike its manifesto ahead of the European parliament elections previously in Jun-2024. Political risks in Europe, risk of dovish ECB and renewed weakness in RMB may continue to weigh on EUR, until we get some clarity. EUR fell, dragged by RMB’s decline yesterday.”  

“Daily momentum is mild bullish but RSI fell. Consolidation likely. Broader price pattern shows a classic formation of an inverted head & shoulders pattern, which is typically associated with a bullish reversal. Neckline comes in at 1.0610/20 levels. Decisive break out puts next resistance at 1.0670 (38.2% fibo), 1.0710 (50 DMA). Support at 1.0460 levels.

• The Pound Sterling trades sideways but remains firm on the assumption that the BoE will keep interest rates steady on December 19.
• Traders expect the BoE to cut interest rates at a slower pace when compared to other central banks in Europe and North America..
• Markets fully price in that the Fed will cut interest rates by 25 bps on Wednesday.

The Pound Sterling (GBP) consolidates against its major peers on Thursday, but the British currency remains firm against its major counterparts due to expectations that the Bank of England (BoE) will follow a more gradual policy-easing cycle compared with other central banks in Europe and North America.

Inflation in the United Kingdom (UK) services sector remains high, allowing the BoE to remain in a slow lane towards interest rate cuts. BoE Monetary Policy Committee (MPC) external member Megan Greene warned in her latest commentary that she suspects the BoE’s inflation target “by the end of our forecast period, which is three years.”

Signs of more government expenditure and higher employer costs in Labour’s first budget have also escalated uncertainty over the inflation outlook. UK employers are expected to pass on the impact of higher employers’ contribution to National Insurance to consumers.

Market expectations that the BoE will cut interest rates at a moderate pace have also kept the Pound Sterling strong against the US Dollar this year, unlike other European currencies such as the Euro (EUR) and the Swiss Franc (CHF), which are down 4.9% and 5.5%, respectively.

For the BoE policy meeting announcement on December 19, traders see the central bank leaving interest rates unchanged at 4.75%, but price in three interest rate cuts in 2025.

On the economic data front, investors await the monthly Gross Domestic Product (GDP) and the factory data for October, which will be released on Friday, to get cues about the current status of the UK’s economic health.

Daily digest market movers: Pound Sterling ticks up against US Dollar

• The Pound Sterling moves higher against the US Dollar (USD) in Thursday’s London session but continues to struggle to revisit the key resistance of 1.2800. The GBP/USD pair rises as the US Dollar (USD) drops amid firm expectations that the Federal Reserve (Fed) will cut interest rates in the monetary policy announcement on Wednesday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops around 106.50.
• Traders have almost fully priced in an interest rate reduction of 25 basis points (bps) to 4.25%-4.50% by the Fed for next week’s policy meeting, according to the CME FedWatch tool. Fed dovish bets strengthened after the release of the United States (US) Consumer Price Index (CPI) report for November on Wednesday, which showed that inflationary pressures grew in line with estimates.
• The CPI report showed that annual headline and core inflation – which excludes volatile food and energy prices – rose by 2.7% and 3.3%, as expected. The growth in headline inflation was the highest in four months, suggesting that progress in the disinflation process has stalled. Still, moderate growth in rental prices prompted dovish Fed bets.
• Investors will pay close attention to the US Producer Price Index (PPI) data for November and the Initial Jobless Claims data for the week ending December 6, which will be published at 13:30 GMT.

Technical Analysis: Pound Sterling stalls around 1.2750

The Pound Sterling consolidates in a tight range around 1.2750 against the US Dollar for almost a week. The GBP/USD pair holds slightly above the 20-day Exponential Moving Average (EMA) around 1.2720.

The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend.

Looking down, the pair is expected to find a cushion near the upward-sloping trendline around 1.2500, which is plotted from the October 2023 low near 1.2035. On the upside, the 200-day EMA around 1.2830 will act as key resistance.

New Zealand Dollar (NZD) could retest the 0.5765 before a more sustained recovery can be expected. In the longer run, NZD may decline below 0.5770, but it remains to be seen if it can maintain a foothold below this level, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.  

NZD may decline below 0.5770

24-HOUR VIEW: “While we expected NZD to ‘decline further’ yesterday, we indicated that ‘deeply oversold conditions suggest NZD may not be able to break clearly below the major support at 0.5770.’ NZD fell more than expected to 0.5763 before recovering to close at 0.5784 (-0.29%). While there has been no further increase in momentum, NZD could retest the 0.5765 level before a more sustained recovery can be expected. The next support at 0.5740 is not expected to come into view. On the upside, should NZD break above 0.5815, it would mean that the current downward pressure has faded.”

1-3 WEEKS VIEW: “We indicated yesterday (11 Dec, spot at 0.5800) that NZD ‘may decline below 0.5770.’ However, we pointed out, ‘it remains to be seen if it can maintain a foothold below this level.’ NZD subsequently dropped to 0.5763 before recovering. There has been no further increase in momentum. For NZD to decline further, it must hold below 0.5770. The likelihood of this happening will remain intact provided that 0.5845 (‘strong resistance’ level was at 0.5865 yesterday) is not beached. Looking ahead, the next level to monitor below 0.5770 is 0.5740.”

In its monthly oil market report published on Thursday, the International Energy Agency (IEA) raised 2025 global oil demand growth forecast to 1.1 million barrels per day (bpd) from 990,000 bpd.

Additional takeaways

Silver prices (XAG/USD) rose on Thursday, according to FXStreet data. Silver trades at $32.19 per troy ounce, up 0.98% from the $31.88 it cost on Wednesday.

Silver prices have increased by 35.30% 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 84.33 on Thursday, down from 85.23 on Wednesday.

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

The market has firmed up its view that the ECB will cut by 25bp today. There are chances of a 50bp cut, and there could be some downward revision to growth and perhaps even inflation forecasts today, ING’s FX analyst Chris Turner notes.

ECB is set to cut by 25bp today

“In focus will be whether the ECB reduces these inflation forecasts which in September were set at 2.5%, 2.2% and 1.9% for 24, 25 and 26 respectively. For example, dropping the 2025 forecast closer to 2.0% could potentially lay the path for an accelerated easing cycle.”

“Market pricing of the ECB already sees rates being cut into accommodative (sub-2%) territory next summer. That pricing could drift even lower. Overall we remain bearish on EUR/USD and don't see the case for the ECB to aggressively push back against current market pricing.”

“However, there is quite a large FX option expiry around 1.0550 today and we cannot rule out EUR/USD having to consolidate around here or trading 1.0550 at the 16CET option expiry today if Christine Lagarde has not sufficiently fed the euro bears.”

• EUR/CHF appreciates after SNB unexpectedly cut rates by 50 basis points, doubling market expectations of a 25 basis point cut.
• SNB Chairman Schlegel highlighted that rate cuts remain the primary tool for monetary easing if further adjustments are required.
• Traders expect the ECB to deliver a quarter-basis point rate cut later on Thursday.

EUR/CHF gains ground following the SNB Monetary Policy Assessment, trading around 0.9340 during the European hours on Thursday. The EUR/CHF cross appreciates as the Swiss Franc (CHF) faces challenges as the Swiss National Bank (SNB) unexpectedly cuts its benchmark Sight Deposit Rate by 50 basis points (bps), lowering it from 1.00% to 0.50%. This decision caught markets off guard, as consensus had anticipated a smaller 25 bps reduction to 0.75% for the quarter ending in December.

In its Monetary Policy Assessment, the Swiss National Bank emphasized its readiness to intervene in the foreign exchange market when necessary. The SNB reaffirmed its commitment to closely monitoring economic developments and stated that it would adjust its monetary policy as needed to ensure inflation remains within the range consistent with medium-term price stability.

SNB Chairman Martin Schlegel addressed the surprise rate cut during the post-policy meeting press conference, explaining the rationale behind the decision. Schlegel emphasized that rate cuts remain the primary tool for monetary easing if further adjustments are required. He also noted that the current monetary easing aims to counteract reduced inflationary pressures. Additionally, he reaffirmed the SNB's readiness to intervene in foreign exchange markets when necessary.

In the Eurozone, the European Central Bank (ECB) is set to announce its interest rate decision following the December monetary policy meeting later on Thursday. Markets widely anticipate a 25 basis point rate cut, reducing the Main Refinancing Operations Rate to 3.15% from 3.40% and the Deposit Facility Rate to 3.00% from 3.25%.

Traders will closely monitor ECB President Christine Lagarde's press conference following the policy decision, where she is expected to present a prepared statement on monetary policy and address questions from the media.

Australian Dollar (AUD) is likely to trade in a range between 0.6355 and 0.6415. In the longer run, AUD has to break and remain below 0.6350 before further decline can be expected, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.  

Below 0.6350 before AUD to decline further

24-HOUR VIEW: “Following AUD’s sharp decline to 0.6366 on Tuesday, we pointed out yesterday (Wednesday) that it ‘could weaken further.’ We also pointed out that ‘given the deeply oversold conditions, it remains to be seen if AUD can break below 0.6350.’ Although AUD broke below 0.6350, it rebounded from a low of 0.6337, closing at 0.6369, slightly lower by 0.14%. The rebound in oversold conditions and slowing momentum suggests that AUD is likely to trade in a range today, probably between 0.6355 and 0.6415.”

1-3 WEEKS VIEW: “Yesterday (11 Dec), when AUD was at 0.6380, we highlighted that “while downward momentum is beginning to build again, it is not enough to signal a sustained decline.” We also highlighted that AUD ‘has to break and remain below the significant support at 0.6350 before further weakness can be expected.’ The condition for a sustained decline was not met, as AUD rebounded from 0.6337 to close at 0.6369. That said, there is still a chance for AUD to break clearly below 0.6350 as long as 0.6435 (‘strong resistance’ level was at 0.6445 yesterday) is not breached.”

Swiss National Bank (SNB) Vice Chairman Antoine Martin is speaking at the post-policy meeting press conference, explaining the reason behind the surprise rate cut move.

Key quotes

Uncertainty about global economic outlook has increased.

Geopolitical tensions could lead to weaker global economic development.

Political uncertainty in Europe has risen.

Future course of US economic policy is uncertain.

Meanwhile, SNB governing board member Petra Tschudin noted that “Swiss economic growth should pick up slightly next year thanks to monetary easing.”

“Developments abroad are the main risk to swiss economy,” Tschudin added.

Market reaction

USD/CHF was last seen trading 0.50% higher on the day at 0.8885, with traders digesting the SNB’s surprise 50 basis points (bps) rate cut to 0.50%.

The US Dollar (USD) remains well supported this December as trading partners move to cut interest rates quite quickly. For today, all eyes will be on Europe, but in the US we'll focus on the November PPI reading, ING’s FX analyst Chris Turner notes.

DXY risks to move towards 107

“Canada has now delivered back-to-back 50bp rate cuts and central banks in Europe could deliver cuts of a similar magnitude today. At the same time, a raft of source stories in Japan suggest that the Bank of Japan will not be hiking next week after all. That is helping USD/JPY up to the 153 level. And yesterday morning the dollar also got a bid from a source report that China is considering a softer renminbi.”

“Back to the US domestic story, there were no real surprises in yesterday's CPI data and the market has firmed up its view that the Fed can cut by 25bp next week. This move will be characterised as the Fed taking the opportunity to deliver less restrictive policy while it can. For today, all eyes will be on Europe, but in the US we'll focus on the November PPI reading. Any upside surprise – and what it means for next Friday's release of the core PCE deflator – could prove a minor dollar positive.”

“We see no reason to leave the safety, liquidity and high yield (one-week deposit rates at 4.55% p.a.) of the dollar and DXY risks a move towards 107 if the ECB is sufficiently dovish today.”

Swiss National Bank (SNB) Chairman Martin Schlegel is speaking at the post-policy meeting press conference, explaining the reason behind the surprise rate cut move.

Key quotes

Market reaction to SNB Schlegel’s comments

As of writing, USD/CHF is consolidating the rebound to near 0.8900, adding 0.42% on the day.

Pound Sterling (GBP) is expected to trade in a sideways range of 1.2720/1.2785. In the longer run, momentum is beginning to slow; GBP has to break and hold above 1.2810, or the chance of a rise to 1.2850 will diminish quickly, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.  

Momentum is beginning to slow

24-HOUR VIEW: “Yesterday, we noted ‘a slight increase in momentum.’ We were of the view that GBP ‘may edge higher, but as momentum is not strong for now, any advance is unlikely to break above 1.2810.’ Our view did not turn out, as GBP fluctuated between 1.2716 and 1.2782, closing at 1.2751 (-0.17%). The price action did not result in any increase in either downward or upward momentum. Today, we expect GBP to trade sideways, most likely in a range of 1.2720/1.2785.”

1-3 WEEKS VIEW: “We have a held positive GBP view since early this week. After GBP traded in a range for a few days, we indicated yesterday (11 Dec, spot at 1.2775) that ‘upward momentum is beginning to slow, and GBP has to break above and hold above 1.2810 within these 1 to 2 days, or the chance of a rise to 1.2850 will diminish quickly.’ We continue to hold the same view as long as 1.2700 (no change in ‘strong support’ level) is not breached. Looking ahead, a breach of 1.2700 would indicate that GBP may trade in a range for a period.”

Market reaction was largely muted in the FX space as CPI report was in line with expectations, with headline coming in at 2.7% and core holding steady at 3.3%. DXY was last at 106.60. Head and shoulders pattern have formed but DXY has yet to break below the neckline, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Bearish momentum on daily chart is fading

“The DXY was firmer but the bullish momentum started in Asia afternoon (well before US CPI report was released) after a Reuters report said that China’s top leaders and policymakers are considering allowing the RMB to weaken in 2025 as they brace for tariffs.”

“DXY received another boost after a report says that BoJ officials see little cost to waiting before raising rates. Focus next on PPI report later tonight before FOMC next week. A 25bp cut is more or less a done deal (markets pricing 98.5% probability of a cut).”

“Bearish momentum on daily chart is fading but rise in RSI moderated. Head and shoulders pattern have formed but DXY has yet to break below the neckline. A decisive break below neckline is required for bears to gather momentum. Support at 106.20/40 levels (23.6% fibo, 21 DMA), 105 levels (38.2% fibo retracement of Sep low to Nov high, 50 DMA) and 104.10 (200 DMA, 50% fibo). Resistance at 106.80 (second shoulder), 107.20 (first shoulder).”

• USD/CHF jumps to near 0.8900 as the SNB cuts its key borrowing rates by 50 bps to 0.5% against estimates of a 25 bps interest rate reduction.
• SNB Schlegel kept the option of negative interest rates on the table in his last commentary in November.
• An expected growth in the US inflation pushes Fed rate cut bets to the threshold.

The USD/CHF pair surges to a fresh two-week high near 0.8900 as Swiss France (CHF) dives after the Swiss National Bank (SNB) surprisingly reduces its key borrowing rates by 50 basis points (bps) to 0.5%. This is the fourth straight interest rate cut by the SNB in a row but first larger-than-usual. The SNB was anticipated to reduce interest rates but at a slower pace of 25 bps to 0.75%.

SNB’s rate-cut expectations were based on extremely dovish remarks from SNB Chairman Martin Schlegel at an event in Zurich in late November. "I want to emphasize that lower interest rates, plus negative interest rates, are not excluded from our toolbox," Schlegel said.

Schlegel chose dovish remarks for the interest rate guidance as inflationary pressures in the Swiss economy have remained in their desired range of 0%-2% since June 2023. The Annual Swiss Consumer Price Index (CPI) decelerated to 0.6% in October.

Meanwhile, the US Dollar (USD) trades slightly lower as traders have priced in 25 bps interest rate reduction by the Federal Reserve (Fed) to 4.25%-4.50% for the policy meeting on Wednesday. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, edges lower to near 106.50.

Fed dovish bets strengthened after the release of the United States (US) Consumer Price Index (CPI) data for November, which showed a moderate growth in rental prices. Annual headline and core CPI – which strips off volatile food and energy prices – rose in line with estimates of 2.7% and 3.3%, respectively.

Euro (EUR) is unlikely to weaken much further; it is more likely to trade in a 1.0475/1.0535 range. In the longer run, current price movements are likely part of a range trading phase, expected to be between 1.0465 and 1.0610, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.  

EUR expected to be between 1.0465 and 1.0610

24-HOUR VIEW: “EUR fell to a low of 1.0498 two days ago before recovering. Yesterday, we held the view that ‘there is a chance for EUR to retest the 1.0500 level before a more sustained recovery is likely.’ However, EUR dropped more than expected to a low of 1.0478, closing at 1.0494 (-0.30%). Despite the decline, there is no clear increase in downward momentum, and EUR is unlikely to weaken much further. Today, EUR is more likely to trade in a 1.0475/1.0535 range.”

1-3 WEEKS VIEW: “We indicated yesterday (11 Dec, spot at 1.0530) that ‘the current price movements are likely part of a range trading phase, expected to be between 1.0465 and 1.0610.’ There is no change in our view.”

• USD/CAD could potentially retest 1.4195, the highest level since April 2020.
• The bullish sentiment could be strengthened if the RSI remains near the 70 level.
• The pair could find initial support at the nine-day EMA of 1.4118 level, aligned with the ascending channel’s lower boundary.

USD/CAD remains tepid for the second successive day, trading around 1.4150 during the European session on Thursday. From a technical perspective, the daily chart analysis shows the Loonie pair trends higher within an ascending channel pattern, suggesting a strengthening bullish bias.

The 14-day Relative Strength Index (RSI) has retreated from the near 70 mark, suggesting a potential downward correction. However, if the RSI maintains its position near the 70 level, it would strengthen the bullish sentiment.

Additionally, the USD/CAD pair remains above the nine- and 14-day Exponential Moving Averages (EMA), signaling a bullish outlook and indicating strengthening short-term price momentum. This suggests strong buying interest and the potential for further price gains.

On the upside, the USD/CAD pair may retest the region around its recent high of 1.4195, a level last seen in April 2020. A successful break above this level could strengthen the bullish bias and lead the pair to test the upper boundary of the ascending channel at a psychological level of 1.4300.

Regarding support, the USD/CAD pair could first test the nine-day EMA at the 1.4118 level, which aligns with the lower boundary of the ascending channel. The 14-day EMA at 1.4090 could also provide additional support. A break below this region could weaken the bullish sentiment and push the pair toward the psychological level of 1.4000.

USD/CAD: Daily Chart

Following Thursday's quarterly monetary policy assessment, the Swiss National Bank (SNB) cut the benchmark Sight Deposit Rate by 50 basis points (bps) to 0.50% from 1.00%.

 The decision surprised markets, as they expected a 25 bps rate reduction to 0.75% in the quarter to December.

Summary of the SNB policy statement

Market reaction to the SNB interest rate decision

The USD/CHF pair rebounded firmly to test 0.8900 in a knee-jerk reaction to the SNB interest rate decision before easing to 0.8875, where it now wavers. The pair is down 0.48% on the day.

• EUR/USD moves higher around 1.0520 with investors focusing on the ECB’s monetary policy decision at 13:15 GMT.
• The ECB is almost certain to cut its Deposit Facility rate by 25 bps to 3%.
• No surprise in the US CPI data cemented Fed rate cut bets for next week’s meeting.

EUR/USD gains sharply around 1.0520 in Thursday’s European session ahead of the European Central Bank’s (ECB) interest rate decision, which will be announced at 13:15 GMT. The ECB is widely anticipated to cut its Deposit Facility rate by 25 basis points (bps) to 3% as Eurozone price pressures seem under control and the economy continues to deteriorate. This would be the third straight interest rate cut by the ECB in a row and the fourth of the year.

Therefore, investors will pay close attention to the interest rate guidance from ECB President Christine Lagarde at the press conference after the policy decision to be held at 13:45 GMT. 

"Fundamentals fully justify the December cut and more dovish forward guidance, given the deterioration in the growth picture. Underlying inflationary pressures have eased and risks of further headwinds to growth have increased after the United States (US) election results," Annalisa Piazza at MFS Investment Management said. 

Meanwhile, German Chancellor Olaf Scholz submitted a request for a no-confidence vote on December 16 to the President of the Bundestag, Bärbel Bas, a necessary precursor for holding elections on February 23, 2025, Euronews reported. German government collapsed after Scholz dismissed Finance Minister Christian Lindner, dissolving the three-party coalition.

Daily digest market movers: EUR/USD gains at US Dollar’s expense

• EUR/USD rises as the US Dollar (USD) declines in Thursday’s European session. The US Dollar Index (DXY), which tracks the Greenback value against six major currencies, falls to near 106.40 as US inflation data for November matched expectations, boosting dovish Federal Reserve (Fed) bets. 
• As measured by the Consumer Price Index (CPI), headline inflation accelerated to 2.7% from the prior release of 2.6%, and the core CPI – which excludes volatile food and energy prices – rose steadily by 3.3%.
• US inflation data boosted Federal Reserve (Fed) dovish bets for the policy meeting announcement on Wednesday. According to the CME FedWatch tool, the probability for the Fed to reduce interest rates by 25 bps to 4.25%-4.50% next week has escalated to almost 99%d from 88% on Tuesday.
• In Thursday’s US session, investors will focus on the US Producer Price Index (PPI) data for November and the Initial Jobless Claims data for the week ending December 6.

Technical Analysis: EUR/USD hovers above 1.0500

EUR/USD wobbles above the psychological figure of 1.0500. The outlook of the major currency pair remains bearish as the 20-day EMA near 1.0560 acts as key resistance for the Euro (EUR) bulls.

The 14-day Relative Strength Index (RSI) wobbles near 40.00. Should the RSI fall below this level, a bearish momentum will trigger.

Looking down, the November 22 low of 1.0330 will be a key support. On the flip side, the 50-day EMA near 1.0680 will be the key barrier for the Euro bulls.

Chinese Commerce Ministry said in a statement on Thursday that “China is open to contact and communication with the Trump administration's economic and trade team.”

Commenting on Australian lobster imports, the Ministry said that “China and Australia are still in technical talks.”

Market reaction

AUD/USD stalls its recovery following these comments, currently trading at 0.6415, still up 0.75% on the day.

• The European Central Bank is expected to cut benchmark interest rates by 25 bps at the December policy meeting.
• ECB President Christine Lagarde’s presser will be closely scrutinized for fresh policy cues.
• The ECB policy announcements are set to ramp up the Euro’s volatility.

The European Central Bank (ECB) interest rate decision will be announced following the December monetary policy meeting at 13:15 GMT on Thursday.

ECB President Christine Lagarde's press conference will follow, beginning at 13:45 GMT, where she will deliver the prepared statement on monetary policy and respond to media questions. The ECB announcements are likely to drive the Euro’s (EUR) valuation in the second half of the week.

What to expect from the European Central Bank interest rate decision?

Following the October policy meeting, the ECB announced that it lowered key rates by 25 basis points (bps). With this decision, the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility, also known as the benchmark interest rate, stood at 3.4%, 3.65% and 3.25%, respectively.

The ECB is widely expected to lower key rates by another 25 bps after the December meeting. 

In the post-meeting press conference in October, President Lagarde said that the ECB policy was still restrictive and noted that they are concerned about the growth outlook. Although she refrained from clearly stating whether they would opt for another policy-easing step at the last meeting of the year, markets widely expect the ECB to lower key rates by 25 bps.

Commenting on the policy outlook, ECB policymaker Joachim Nagel noted that he would have no objections to reducing the policy rate, given that the disinflation process is proceeding largely as currently projected. On a similar note, Governing Council member Francois Villeroy de Galhau said: “There is every reason to cut on December 12th.” “Optionality should remain open on the size of the cut, depending on incoming data, economic projections and our risk assessment,” he added.

Assessing the EUR’s positioning in the Commitment of Traders report (COT), “EUR net short positions have increased for the third consecutive week, driven by an increase in short positions,” Rabobank analysts said. They added: “EUR was the worst performing G10 currency in the month of November, depreciating 2.37% against USD. EUR has suffered from deteriorating economic fundamentals and impending cuts from the ECB. We expect the ECB to cut the policy rate 25bp at the December 12th.”

How could the ECB meeting impact EUR/USD?

In November, EUR/USD lost nearly 3%. In addition to the negative impact of the ECB’s dovish policy outlook on the EUR, the broad-based US Dollar (USD) strength following Donald Trump’s victory in the US presidential election weighed heavily on EUR/USD. Since the beginning of December, EUR/USD has been fluctuating in a relatively tight range, reflecting investors’ hesitancy to take large positions ahead of the ECB and the Federal Reserve’s (Fed) final meetings of 2024.

In case the ECB unexpectedly lowers key rates by 50 bps, the immediate reaction could trigger a Euro selloff and open the door for another leg lower in EUR/USD. If the ECB opts for a 25 bps cut but Lagarde voices concerns over the economic situation in the Eurozone and mentions growing downside risks to inflation, EUR/USD is likely to extend its downtrend, even if the immediate market reaction is mixed.

In this current market environment, the Euro would need a significant hawkish surprise to stage a steady recovery against the USD. If Lagarde adopts a more optimistic tone about the economic outlook and highlights the need for patience in further policy easing, EUR/USD could gain traction in the near term. 

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD:

“Following the modest rebound seen in December, EUR/USD’s near-term technical outlook points to a loss of bullish momentum. On the daily chart, the Relative Strength Index edges higher toward 50 and the pair manages to hold above the 20-day Simple Moving Average (SMA).”

“On the upside, the Fibonacci 38.2% retracement of the October–December downtrend aligns as the next resistance at 1.0700 before 1.0800 (Fibonacci 50% retracement) and 1.0840 (200-day SMA). In case EUR/USD flips 1.0530 (20-day SMA) into resistance, technical sellers could continue to dominate the pair’s action. In this scenario, 1.0400 (end-point of the downtrend) could be seen as the next support before 1.0260 (static level).”

• NZD/USD rebounds from a two-year low of 0.5761, which was recorded on Wednesday.
• The New Zealand Dollar may struggle as China may allow the Yuan to depreciate further in 2025
• The US Dollar remains subdued due to rising odds of a Fed rate cut next week.

NZD/USD breaks its two days of losses after reaching a two-year low at 0.5761 on Wednesday, currently trading around 0.5820 during the early European hours on Thursday. However, the New Zealand Dollar (NZD) remains under pressure due to reports that Beijing may allow the Yuan to depreciate further next year to offset the impact of US tariffs. A weaker Yuan often negatively affects the NZD, considering New Zealand's heavy reliance on China as a key export market.

Additionally, market participants are anticipating a significant 50 basis point (bps) interest rate cut by the Reserve Bank of New Zealand (RBNZ) in its February meeting, which is contributing to the weakening of the New Zealand Dollar (NZD).

The upside of the NZD/USD pair comes as the US Dollar (USD) corrects downwards after breaking its four-day winning streak despite higher US Treasury yields. The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 106.40 with 2-year and 10-year yields on US Treasury bonds standing at 4.16% and 4.28%, respectively, at the time of writing.

The US Dollar encounters headwinds as the latest US CPI report appears insufficient to dissuade the Federal Reserve (Fed) from reducing interest rates in December. According to the CME FedWatch Tool, there is nearly a 99% probability of a 25 basis point rate cut on December 18. Traders now turn their attention to the US November Producer Price Index (PPI), set for release on Thursday, for new market catalysts.

Here is what you need to know on Thursday, December 12:

The European Central Bank (ECB) and the Swiss National Bank (SNB) will announce monetary policy decisions following the last policy meeting of the year on Thursday. In the second half of the day, weekly Initial Jobless Claims and November Producer Price Index (PPI) data from the US will be watched closely by market participants.

The US Bureau of Labor Statistics (BLS) reported on Wednesday that annual inflation in the US, as measured by the change in the Consumer Price Index (CPI), edged higher to 2.7% in November from 2.6% in October, as anticipated. On a monthly basis, the CPI and the core CPI both rose 0.3% to match analysts' estimates. The US Dollar (USD) Index continued to edge higher after November inflation report and closed the fourth consecutive day in positive territory. Early Thursday, the USD Index holds steady at around 106.50.

During the Asian trading hours, the data from Australia showed that the Unemployment Rate declined to 3.9% in November from 4.1%. This reading came in better than the market expectation of 4.2%. In this period, Employment Change was up 35.6K, compared to the market forecast of 25K. AUD/USD gathered bullish momentum on upbeat labor market data and was last seen gaining more than 0.8% on the day above 0.6400.

The Bank of Canada (BoC) announced on Wednesday that it lowered the policy rate by 50 basis points to 3.25%, as expected. In its policy statement, however, the BoC adopted a cautious tone regarding further policy easing. The BoC dropped the language about it being reasonable to expect further rate cuts if the economy were to evolve in line with the forecasts. Instead, it said that it will evaluate the need for further rate cuts one decision at a time. USD/CAD edged lower following the BoC decision and registered small daily losses on Wednesday. Early Thursday, the pair stays on the back foot and trades below 1.4150.

USD/CHF closed marginally higher on Wednesday but lost its traction in the European morning on Thursday. At the time of press, the pair was down 0.2% on the day at 0.8825. The SNB is expected to cut the policy rate by 25 bps to 0.75%.

EUR/USD continued to push lower and posted losses for the fourth consecutive trading day on Wednesday. The pair stages a rebound early Thursday and trades comfortably above 1.0500. The ECB is forecast to lower key rates by 25 bps. Following the decision, ECB President Christine Lagarde will deliver the policy statement and respond to questions at a press conference starting at 13:45 GMT.

GBP/USD posted small losses on Wednesday but managed to find a foothold early Thursday. The pair was last seen edging higher toward 1.2800.

USD/JPY fluctuates in a tight range above 152.00 after closing in positive territory on Wednesday.

Gold extended its weekly rally and gained about 1% on Wednesday. XAU/USD stays in a consolidation phase near $2,720 in the European morning on Thursday.

• EUR/JPY extends the rally to near 160.35 in Thursday’s early European session, adding 0.15% on the day. 
• The cross resumes an uptrend above the key 100-period EMA with the bullish RSI indicator. 
• The immediate resistance level is located at 160.70; the crucial support level emerges at the 160.00 psychological level. 

The EUR/JPY cross trades in positive territory for the fourth consecutive day around 160.35 during the early European session on Thursday. The Japanese Yen (JPY) weakens after Reuters reported on Thursday that the Bank of Japan (BoJ) is considering keeping interest rates steady at its December meeting next week. A source said, “Policymakers prefer to spend more time scrutinising overseas risks and clues on next year's wage outlook.” Later on Thursday, investors will closely monitor the European Central Bank (ECB) interest rate decision. 

Technically, EUR/JPY resumes its uptrend on the 4-hour chart as the price crosses above the key 100-period Exponential Moving Average (EMA). The upward momentum is supported by the Relative Strength Index (RSI), which stands above the midline near 59.45, supporting the buyers in the near term. 

The first upside barrier for the cross emerges at 160.70, the high of December 11. Sustained trading above this level could pave the way to 161.10, the upper boundary of the ascending trend channel. The next potential resistance level is seen at 162.00, representing the high of November 26 and the round figure. 

On the other hand, a breach of the 160.00 psychological level could drag the cross lower to 159.10, the lower limit of the trend channel. Any follow-through selling below the mentioned level could see a drop to 158.65, the low of December 11.  

EUR/JPY 4-hour chart

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

EUR/USD: EUR amounts

• 1.0380 1.8b
• 1.0400 1.2b
• 1.0475 1b
• 1.0500 1.6b
• 1.0550 2.1b
• 1.0575 862m
• 1.0600 1.6b
• 1.0620 935m

USD/JPY: USD amounts                     

• 148.90 736m
• 152.00 820m
• 152.70 1.3b

USD/CHF: USD amounts     

• 0.8790 543m

AUD/USD: AUD amounts

• 0.6390 521m
• 0.6450 1.4b
• 0.6500 956m

USD/CAD: USD amounts       

• 1.4100 1.3b
• 1.4230 1.3b
• 1.4250 709m

NZD/USD: NZD amounts

• 0.6060 1.3b

EUR/GBP: EUR amounts        

• 0.8190 418m

• Silver attracts some buyers on Thursday and remains closer to over a one-month top.
• The technical setup favors bullish traders and supports prospects for additional gains.
• Any corrective pullback could be seen as a buying opportunity and remain limited. 

Silver (XAG/USD) trades with a positive bias above the $32.00 mark during the Asian session on Thursday and remains close to over a one-month high touched earlier this week. Moreover, the technical setup suggests that the path of least resistance for the white metal remains to the upside. 

This week's sustained move beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart was seen as a key trigger for bullish traders. Moreover, the recent move-up witnessed over the past two weeks or so has been along an upward-sloping channel. Apart from this, positive technical indicators on daily/hourly charts validate the near-term positive outlook for the XAU/USD and support prospects for additional gains.

Hence, a subsequent move up towards retesting the monthly swing high, around the $32.55-$32.60 area, which now coincides with the top boundary of the aforementioned channel, looks like a distinct possibility. Some follow-through buying will confirm a fresh breakout and lift the XAG/USD to the next relevant hurdle near the $32.80-$32.85 region en route to the $33.00 round figure mark and the $33.20-$33.25 horizontal resistance.

On the flip side, weakness below the $32.00-$31.90 area now seems to find some support near the $31.60 horizontal zone ahead of the $31.45-$31.40 confluence. The latter comprises the 200-period SMA on the 4-hour chart and the ascending channel support, which if broken decisively might prompt aggressive selling and shift the bias in favor of bearish traders. The XAG/USD might then drop to sub-$31.00 levels en route to mid-$30.00s.

Silver 4-hour chart

• USD/CHF edges lower due to the softer US Dollar amid increased odds of a Fed rate cut next week.
• CME FedWatch Tool indicates nearly a 99% likelihood of a 25 basis point rate cut on December 18.
• The Swiss Franc remains stable ahead of an SNB Interest Rate Decision later on Thursday.

USD/CHF offers its recent gains as the US Dollar (USD) corrects downwards after breaking its four-day winning streak. The USD/CHF pair trades around 0.8840 during the Asian hours on Thursday. The Greenback receives downward pressure as the recent US CPI report seems not enough to keep the Federal Reserve (Fed) from cutting rates in December.

The CME FedWatch Tool suggests nearly a 99% chance of Fed rate reductions by 25 basis points on December 18. Traders shift their focus on the US November Producer Price Index (PPI) for fresh impetus, which is due later on Thursday.

US Consumer Price Index (CPI) rose to 2.7% year-over-year in November from 2.6% in October. The headline CPI reported a 0.3% reading MoM, in line with the market consensus. Meanwhile, the core CPI, excluding volatile food and energy prices, climbed 3.3% YoY, while the core CPI increased 0.3% MoM in November, as expected.

The Swiss Franc (CHF) remains relatively stable in anticipation of the Swiss National Bank (SNB) cutting its key policy rate by 25 basis points (bps) at its meeting later in the day. This rate cut will mark the fourth consecutive reduction, as inflation remains "comfortably" within the central bank’s 0-2% target range.

However, some economists anticipate a bumper 50 basis point cut in December to boost economic growth as Swiss consumer price inflation rose to 0.7% in November, up from 0.6% in October but falling short of the projected 0.8%. Additionally, Switzerland's economy remains sluggish, with GDP growing by 0.4% quarter-on-quarter in Q3, compared to 0.6% in Q2.

Citing five sources familiar with the Bank of Japan’s (BoJ) thinking, Reuters reported on Thursday that the Japanese central bank is considering to keeping interest rates steady next week.

A source said, “policymakers prefer to spend more time scrutinising overseas risks and clues on next year's wage outlook.”

"Japan isn't in a situation where imminent rate hikes are needed," one of the sources said.

"With inflation benign, it can afford to spend time scrutinising various data," another source said, a view echoed by two more sources.

"The biggest risk for Japan's economy comes from overseas," a third source said, saying that sluggish global demand could hurt corporate profits and dampen their appetite to hike pay.

In a sign of its confidence over the economic outlook, the central bank is likely to maintain its view that consumption is "increasing moderately as a trend," they said.

Market reaction

USD/JPY has recovered losses on these headlines, rebounding to near 152.50. The pair hit an intraday low at 151.95 earlier in the Asian session on Thursday.

• EUR/USD attracts some buyers on Thursday amid subdued US Dollar price action.
• The upside remains capped amid expectations for a more ECB rate cut in 2025. 
• Bets for a less dovish Fed underpin the USD and contribute to capping the major.

The EUR/USD pair edges higher during the Asian session on Thursday and for now, seem to have snapped a four-day losing streak to over a one-week low touched the previous day. Spot prices currently trade around the 1.0500 psychological mark, up just over 0.10% for the day, as traders keenly await the highly-anticipated European Central Bank (ECB) decision before placing fresh directional bets.

The ECB is all but certain to cut interest rates again amid concerns about the faltering Eurozone economy, though investors remain split over the possibility of a larger rate cut. Hence, the focus will remain glued to the accompanying monetary policy statement and ECB President Christine Lagarde's remarks at the post-meeting press conference. Investors will look for signals about further easing in 2025, which, in turn, will play a key role in influencing the shared currency and provide some meaningful impetus to the EUR/USD pair. 

Heading into the key central bank event risk, subdued US Dollar (USD) price action is seen as a key factor lending some support to the currency pair. The near-term bias for the USD remains tilted in favor of bullish traders amid the growing conviction that US President-elect Donald Trump's policies will boost inflation and force the Federal Reserve (Fed) to pause its rate-cutting cycle. This continues to push the US Treasury bond yields higher, which is seen underpinning the USD and capping the upside for the EUR/USD pair. 

Furthermore, concerns about the economic impact of Trump's tariff plans warrant some caution before confirming a near-term bottom for spot prices and positioning for any further appreciating move. Apart from the crucial ECB policy decision, traders on Thursday will take cues from the US macro data – the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims. This, along with the US bond yields and the broader risk sentiment, will drive the USD and produce short-term opportunities around the EUR/USD pair.

• GBP/USD appreciates as the US Dollar corrects downwards due to the increased likelihood of a Fed rate cut in December.
• Traders await Thursday’s US Producer Price Index data for November to gain fresh impetus.
• UK RICS Housing Price Balance rose 25% in November, up from a 16% increase in October.

GBP/USD recovers its recent losses registered in the previous session, trading around 1.2770 during the Asian hours on Thursday. The GBP/USD pair gains ground as the US Dollar (USD) corrects downwards after breaking its four-day winning streak despite higher US Treasury yields.

The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 106.50 with 2-year and 10-year yields on US Treasury bonds standing at 4.16% and 4.28%, respectively, at the time of writing.

The US Dollar faces some challenges as the recent US CPI report seems not enough to keep the Federal Reserve (Fed) from cutting rates in December. The CME FedWatch Tool suggests nearly a 99% chance of Fed rate reductions by 25 basis points on December 18. Traders shift their focus on the US November Producer Price Index (PPI) for fresh impetus, which is due later on Thursday.

US Consumer Price Index (CPI) rose to 2.7% year-over-year in November from 2.6% in October. The headline CPI reported a 0.3% reading MoM, in line with the market consensus. Meanwhile, the core CPI, excluding volatile food and energy prices, climbed 3.3% YoY, while the core CPI increased 0.3% MoM in November, as expected.

In the United Kingdom (UK), the RICS Housing Price Balance surged 25% in November, up from a 16% rise in October, surpassing market expectations of a 19% increase. Released by the Royal Institution of Chartered Surveyors, this survey highlights trends in UK housing prices. It reflects the strength of the UK housing market, which often serves as an indicator of the broader economy due to its sensitivity to the business cycle.

The Pound Sterling (GBP) gains ground due to rising market confidence in the Bank of England (BoE) to keep its interest rates unchanged at 4.75% in December’s monetary policy decision. BoE policymakers are anticipated to vote to keep interest rates unchanged. Traders are likely to focus on the UK’s October monthly Gross Domestic Product (GDP) data due on Friday.

• WTI extends its upside to $69.95 in Thursday’s early European session. 
• A possible tightening of US sanctions on Russian oil and further China stimulus measures lift the WTI price. 
• OPEC cuts demand growth outlook for 2024-2025 for five months in a row. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $69.95 on Thursday. The WTI price edges higher amid concerns over sluggish global demand growth and possible tighter sanctions on Russia and Iran.

The Biden administration on Wednesday is considering stricter sanctions on Russia’s oil trade to increase pressure on the Kremlin, just weeks before Donald Trump returns to the White House, per Bloomberg. Additionally, the European Union agreed on a new round of sanctions against Russia on Wednesday because of its ongoing war in Ukraine. This, in turn, could tighten global crude supplies and lift the WTI price. 

Growing expectations of further China stimulus contribute to the WTI’s price. Chinese authorities said on Monday it would adopt an "appropriately loose" monetary policy in 2025 as Beijing tries to boost its economy with the first easing of its stance in 14 years. "This has sparked optimism in the oil market, with traders hopeful that these initiatives could drive higher oil consumption," said Li Xing Gan, financial markets strategist consultant to Exness.

A fall in US crude inventories last week might underpin the black gold price. The US Energy Information Administration (EIA) weekly report showed Crude oil stockpiles in the United States for the week ending December 6 declined by 1.425 million barrels, compared to a fall of 5.073 million barrels in the previous week. The market consensus estimated that stocks would decrease by 1.1 million barrels. 

On the other hand, OPEC cut its forecasts for demand growth in 2024 and 2025 for the fifth straight month on Wednesday. "OPEC are squaring up to reality about what they are facing, the (demand growth forecast) cuts highlight that they have their hands full in terms of trying to balance this market heading into 2025," said John Kilduff, partner at Again Capital in New York.

Gold prices remained broadly unchanged in India on Thursday, according to data compiled by FXStreet.

The price for Gold stood at 7,408.53 Indian Rupees (INR) per gram, broadly stable compared with the INR 7,414.59 it cost on Wednesday.

The price for Gold was broadly steady at INR 86,411.06 per tola from INR 86,481.71 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.)

• Gold price witnesses an intraday turnaround from over a one-month top touched on Thursday.
• Bet for a less dovish Fed and rising US bond yields undermine the non-yielding yellow metal. 
• Geopolitical risks, trade war fears and December Fed rate cut bets could support the XAU/USD.

Gold price (XAU/USD) retreats sharply after touching over a one-month high, around the $2,726 area during the Asian session on Thursday and for now, seems to have snapped a three-day winning streak. Investors now seem convinced that the Federal Reserve (Fed) will adopt a cautious stance on cutting interest rates amid signs that the progress in lowering inflation toward its 2% target has virtually stalled. Expectations for a less dovish Fed continue to push the US Treasury bond yields higher, which, in turn, acts as a tailwind for the US Dollar (USD) and drives flows away from the non-yielding yellow metal.

Apart from this, a generally positive risk tone undermines demand for safe-haven assets and drags the Gold price to the $2,700 mark in the last hour. Meanwhile, the markets now seem to have fully priced in a third consecutive interest rate cut by the Fed next week. Apart from this, persistent geopolitical risks stemming from the Russia-Ukraine war and conflicts in the Middle East, along with concerns about US President-elect Donald Trump's impending trade tariffs, could limit losses for the XAU/USD. This, in turn, warrants caution before confirming that the commodity's recent breakout momentum has run out of steam.

Gold price is weighed down by expectations that the Fed could pause its rate-cutting cycle

• The release of the mostly in-line US consumer inflation figures on Wednesday reinforced market expectations that the Federal Reserve will lower borrowing costs again at its upcoming policy meeting next week. 
• The US Bureau of Labor Statistics (BLS) reported that the headline Consumer Price Index rose 0.3% in November, marking the largest gain since April, and the yearly rate edged up to 2.7% from 2.6%  in October.
• Additional details revealed that the core gauge, which excludes volatile food and energy prices, increased 0.3% during the reported month and was up 3.3% as compared to the same time period last year.
• According to the CME Group's FedWatch Tool, the likelihood of another 25-basis points rate cut by the Fed on December 18 shot to more than 98%, pushing the Gold price to over a one-month high on Thursday. 
• The lifts the yield on the benchmark climbs to a two-week high amid expectation that US President-elect Donald Trump's policies will boost inflationary pressures and force the Fed to pause its rate-cutting cycle.
• This, in turn, assists the US Dollar to preserve its recent strong gains to a fresh monthly top, which, along with the prevalent risk-on environment, prompts some profit-taking around the non-yielding yellow metal. 
• Meanwhile, geopolitical risk premium remains in play amid the worsening Russia-Ukraine war and the ongoing conflicts in the Middle East. Moreover, trade war fears should help limit losses for the XAU/USD. 
• Traders now look to Thursday's US economic docket – featuring the release of the US Producer Price Index and the usual Weekly Initial Jobless Claims data – for some impetus later during the North American session.
• The focus, however, will remain glued to the highly anticipated FOMC monetary policy meeting next week, which will play a key role in determining the next leg of a directional move for the non-yielding commodity. 

Gold price bulls have the upper hand while above the overnight low, around $2,675 area

From a technical perspective, the Relative Strength Index (RSI) on hourly charts has eased from slightly overbought conditions. Furthermore, oscillators on the daily chart have just started gaining positive traction, which, in turn, supports prospects for the emergence of some dip-buying around the Gold price. Hence, any further weakness below the $2,700 mark might continue to find some support near the overnight swing low, around the $2,675-2,674 area. Some follow-through selling, however, could pave the way for further losses towards the $2,658-2,656 confluence – comprising 50- and 200-period Simple Moving Averages (SMAs) on the 4-hour chart.

On the flip side, the Asian session high, around the $2,726 area, now seems to act as an immediate hurdle, above which the Gold price could aim to surpass the $2,735 barrier and test the $2,748-2,750 supply zone. A sustained strength beyond the latter will set the stage for a move towards challenging the all-time peak, around the $2,800 neighborhood touched in October, with some intermediate resistance near the $2,775 region.

• USD/CNH depreciates as PBOC-backed Chinese media reported that the Yuan remains stable and balanced.
• China's 10-year yield fell to 1.805%, with the spread between Chinese and US yields expanding to nearly 250 basis points.
• Traders await US November Producer Price Index data due on Thursday to gain fresh impetus.

USD/CNH retraces its recent gains from the previous session, trading around 7.2660 during the Asian hours on Thursday. PBOC-affiliated Chinese financial media reported that the Yuan remains stable and balanced. The People’s Bank of China (PBOC) set the central rate for USD/CNY, the Chinese Yuan onshore, for Thursday's trading session at 7.1854, compared to the previous day's fix of 7.1843.

Unnamed experts cited by the PBOC-backed media suggest that the possibility of the US Dollar (USD) weakening is increasing, aligned with expectations of the Federal Reserve (Fed) cutting rates in December. Consequently, the Chinese Yuan is expected to continue fluctuating in both directions under market forces.

On Thursday, Chinese long-term yields fell, expanding the yield disadvantage of 10-year treasuries against US counterparts to the widest level in over 22 years. China's 10-year yield dropped to a low of 1.805%, with the spread between China and US yields expanding to nearly 250 basis points, the largest gap since June 2002.

The offshore Yuan (CNH) faced challenges following reports that top leaders and policymakers in China considered letting the currency fall in response to an expected sharp hike in US tariffs, per Reuters. The tariffs could include a universal 10% import duty and a 60% duty on Chinese goods entering the United States (US).

On Tuesday, China President Xi Jinping stated, "China has full confidence in achieving this year's economic target." Xi emphasized that China will continue to serve as the largest engine of global economic growth and asserted that there would be no winners in tariff wars, trade wars, or tech wars.

• The Japanese Yen benefits from a modest USD downtick, though the upside seems limited.
• The uncertainty around a December BoJ rate hike and the risk-on mood might cap the JPY. 
• Bets for a less dovish Fed could underpin the USD and offer support to the USD/JPY pair.

The Japanese Yen (JPY) gains some positive traction during the Asian session on Thursday, with the USD/JPY pair snapping a three-day winning streak to a two-week high touched the previous day. The JPY seems to draw some support from a modest US Dollar (USD) weakness, led by firming expectations that the Federal Reserve (Fed) will cut interest rates next week. Apart from this, the intraday JPY strength lacks any obvious fundamental catalyst and is more likely to be limited amid fading hopes for another interest rate hike by the Bank of Japan (BoJ) in December. 

Moreover, the recent goodish rebound in the US Treasury bond yields and the prevalent risk-on environment should contribute to capping the safe-haven JPY. That said, the JPY bears might refrain from placing aggressive bets and opt to wait for the BoJ's final policy meeting of the year next week. This, along with geopolitical risks and the uncertainty surrounding US President-elect Donald Trump's policies, could offer some support to the safe-haven JPY. Meanwhile, the mixed fundamental backdrop warrants caution before confirming that the USD/JPY pair has topped out.

Japanese Yen might struggle to attract any meaningful buying amid fading hopes for a December BoJ rate hike

• A Bloomberg report on Wednesday said that the Bank of Japan (BoJ) sees little cost to wait before raising interest rates again, though officials are still open to a hike next week depending on data and market developments.
• Moreover, mixed signals from BoJ officials suggest that the central bank is in no hurry to tighten its policy, dragging the Japanese Yen to a two-week trough against its American counterpart on Wednesday. 
• Meanwhile, Japan's economy is expanding moderately, while wages are rising steadily and inflation remains above BoJ's 2% target. This indicates that conditions for another interest rate hike are falling in place. 
• Traders, however, might refrain from placing aggressive directional bets around the Japanese Yen ahead of the BoJ decision next week, just hours after that of the Federal Reserve's expected interest rate cut.
• The US Bureau of Labor Statistics (BLS) reported on Wednesday that the headline Consumer Price Index rose 0.3% in November, marking the largest gain since April, and the yearly rate accelerated to 2.7%.
• Meanwhile, the core CPI, which excludes volatile food and energy prices, increased 0.3% during the reported month and was at 3.3% in the 12 months through November, in line with market expectations.
• According to the CME Group's FedWatch Tool, the Federal Reserve is still expected to deliver a third consecutive rate cut at the end of December meeting next week on the back of signs of a cooling labor market. 
• Meanwhile, the US CPI report indicated that the progress in lowering inflation toward the Fed's 2% target has stalled, which might force the Fed to adopt a more cautious stance on cutting interest rates going forward. 
• The markets are already anticipating that the Fed may hit the pause button as early as the January meeting amid the growing uncertainty surrounding US President-elect Donald Trump's policies and impending tariff plans. 
• This, in turn, lifts the yield on the benchmark 10-year US government bond to a two-week high on Thursday, which acts as a tailwind for the US Dollar and should continue to offer some support to the USD/JPY pair. 
• Thursday's US economic docket features the release of the US Producer Price Index and the usual Weekly Initial Jobless Claims data, which might provide some impetus later during the North American session.

USD/JPY needs to strengthen beyond the 152.70-152.80 confluence for bulls to retain control in the near term

From a technical perspective, the overnight breakout through the 200-day Simple Moving Average (SMA), around the 152.00 mark, was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and are still away from being in the overbought zone, suggesting that the path of least resistance for the USD/JPY pair remains to the upside. 

The subsequent move up, however, stalls near the 152.70-152.80 confluence, comprising the 200-period SMA on the 4-hour chart and the 50% retracement level of the recent pullback from the multi-month high. The said area might continue to act as an immediate hurdle, above which the USD/JPY pair could surpass the 153.00 mark and aim to test the next relevant hurdle near the 153.65 region, or the 61.8% Fibonacci retracement level. 

On the flip side, weakness below the 152.00 mark might now find some support near the 151.75 area, or the 38.2% Fibo. level. Any further slide might continue to attract fresh buyers and remain limited near the 151.00 round figure. The latter should act as a key pivotal point, below which the USD/JPY pair could slide to the 150.50 intermediate support before eventually dropping to the 150.00 psychological mark.

• The Indian Rupee weakens in Thursday’s Asian session. 
• The weakening in the Chinese Yuan, firmer USD and dovish expectations following Malhotra's appointment weigh on the INR. 
• The Indian CPI inflation and US PPI data will be the highlights on Thursday. 

The Indian Rupee (INR) loses ground on Thursday after hitting a record low in the previous session. A sharp decline in the Chinese Yuan and increased US Dollar (USD) from importers and foreign banks might drag the local currency lower. Furthermore, the appointment of career bureaucrat Sanjay Malhotra as the next governor of the Reserve Bank of India (RBI) prompted traders to raise their expectations on the interest rate cuts, which could exert some selling pressure on the INR. 

Nonetheless, the downside for the Indian Rupee might be limited as the RBI might step in to limit further depreciation. The Indian central bank often intervenes by selling USD to prevent steep INR weakness. 

Traders will keep an eye on the US November Producer Price Index (PPI) and weekly Initial Jobless Claims, which are due later on Thursday. On the Indian docket, the CPI inflation, Industrial Output and Manufacturing Output data will be released on Thursday.  

Indian Rupee remains weak amid multiple challenges

• India’s GDP growth is estimated to rise to 7% in FY26, led by a capex cycle reboot, tailwinds from back-ended fiscal spending in FY25, a cut in the cash reserve ratio (CRR), and likely further macro-prudential easing, which could help revive credit growth, according to Axis Bank.
• Economists at Capital Economics anticipate a 25 bps cut in India’s repo rate at Malhotra’s first MPC meeting in February, if not in an unscheduled meeting earlier. Economists estimated that the cut would come in April under Das’ leadership.
• The US Consumer Price Index (CPI) inflation rose to 2.7% YoY in November from 2.6% in October, the US Bureau of Labor Statistics showed on Wednesday. This reading was in line with the market consensus. 
• The core CPI, excluding volatile food and energy prices, climbed 3.3% YoY in November, compared to 3.3% during the same period. On a monthly basis, the headline CPI increased 0.3% MoM, while the core CPI rose 0.3% MoM in November.
• Fed funds futures are pricing in a roughly 95% chance that the US central bank lowers rates in the December meeting, according to CME’s FedWatch Tool. 

USD/INR keeps the bullish vibe in the longer term

The Indian Rupee softens on the day. The USD/INR pair paints a positive picture on the daily chart as the pair is well-supported above the key 100-day Exponential Moving Average (EMA). Nonetheless, the 14-day Relative Strength Index (RSI) is located above the midline near 67.70, suggesting the support level is more likely to hold than to break. 

The potential resistance level emerges at 85.00, representing the ascending trend channel and the psychological level. Extended gains above this level could see a rally to 85.50. 

On the other hand, the lower boundary of the trend channel at 84.70 acts as an initial support level for USD/INR. Sustained trading below the mentioned level could pave the way to 84.22, the low of November 25, followed by 84.10, the 100-day EMA.

• USD/CAD depreciates as BoC Governor Macklem indicates a more gradual approach to policy outlook if the economy evolves broadly.
• Broader market sentiment remains steady after the US inflation figures aligned with market expectations.
• Traders await US November Producer Price Index data due on Thursday to gain fresh impetus.

USD/CAD extends its losses for the second successive day, trading around 1.4150 during the Asian session on Thursday. The USD/CAD pair continues its retreat from Wednesday's high of 1.4194, the highest level since April 2020. This downside is due to the strengthening of the Canadian Dollar (CAD) as the Bank of Canada (BoC) signaled a slower pace of future interest rate cuts following its recent decision.

On Wednesday, the Bank of Canada implemented another substantial 50 basis point rate cut, bringing the main interest rate down to 3.25%. With Canada's Unemployment Rate reaching multi-year highs, the BoC has all the necessary grounds to disregard recent inflation upticks.

Bank of Canada (BoC) Governor Tiff Macklem stated "We anticipate a more gradual approach to monetary policy if the economy evolves broadly as expected." Macklem also said that monetary policy no longer clearly needs to be in restrictive territory.

Broader market sentiment remains on balance after US CPI inflation figures matched market expectations on Wednesday. US Consumer Price Index (CPI) rose to 2.7% year-over-year in November from 2.6% in October. The headline CPI reported a 0.3% reading MoM, in line with the market consensus. Meanwhile, the core CPI, excluding volatile food and energy prices, climbed 3.3% YoY, while the core CPI increased 0.3% MoM in November, as expected.

This latest US inflation report does not seem enough to keep the Federal Reserve (Fed) from cutting rates at its December meeting next week. Traders await the release of the US November Producer Price Index (PPI) for fresh impetus, which is due later on Thursday. The CME FedWatch Tool suggests nearly a 99% chance of Fed rate reductions by 25 basis points on December 18.

• AUD/JPY climbs to near 97.40 in Thursday’s Asian session, adding 0.20% on the day. 
• The Australian dropped to 3.9% in November from 4.1% in October, stronger than expected.
• BoJ rate hike uncertainty drags the JPY lower. 

The AUD/JPY cross gathers strength to around 97.40 during the Asian session on Thursday. The Aussie gains traction after the release of the Australian employment report. Traders will keep an eye on the Japanese Tankan Large Manufacturing Index for the fourth quarter (Q4), which is still later on Tuesday 

Data released by the Australian Bureau of Statistics (ABS) showed on Thursday that the country’s  Unemployment Rate ticked lower to 3.9% in November from 4.1% in October. This reading came in below the market consensus of 4.2%. Additionally, the Australian Employment Change arrived at 35.6K in November from 12.1K in October (revised from 15.9K). 
 
This figure came in better than the 25.0K expected. The Australian Dollar (AUD) attracts some buyers in an immediate reaction to the upbeat employment report. This report prompts traders to lower their bets for the Reserve Bank of Australia (RBA) rate cut and boosts the Australian Dollar (AUD). 

On the other hand, the uncertainty over the Bank of Japan's (BoJ) rate hike in December might cap the downside for the cross. BoJ Governor Kazuo Ueda signaled that the next rate hike is approaching, supported by solid underlying inflation data, while the dovish policymaker Toyoaki Nakamura warned last week that the Japanese central bank must move cautiously in raising rates. Meanwhile, the escalating geopolitical tension in the Middle East and global economic uncertainty could boost the safe-haven flows, benefiting the JPY. 

• The Australian Dollar appreciates following the domestic mixed labor market.
• Australia’s Employment Change rose by 35,600 in November, exceeding the previous 12,100 and the expected 25,000 readings.
• Traders still expect the Fed to proceed with a quarter-point rate cut in December following the latest US CPI report.

The Australian Dollar (AUD) halts its two days of losses against the US Dollar (USD) on Thursday. The AUD remains stronger after the release of domestic mixed employment data. The seasonally adjusted Employment Change increased by 35,600, bringing the total number of employed people to 14,535,500 in November. This exceeded the previous reading of 12,100 and the expected figure of 25,000. Meanwhile, the Unemployment Rate fell to 3.9%, the lowest since March, lower than market estimates of 4.2%.

The AUD/USD pair faced challenges due to the broadly stronger US dollar (USD) following the release of the US inflation report on Wednesday. US Consumer Price Index (CPI) rose to 2.7% year-over-year in November from 2.6% in October. The headline CPI reported a 0.3% reading MoM, in line with the market consensus. Meanwhile, the core CPI, excluding volatile food and energy prices, climbed 3.3% YoY, while the core CPI increased 0.3% MoM in November, as expected.

However, the latest US inflation report does not seem enough to keep the Federal Reserve (Fed) from cutting rates at its December meeting next week. Traders are now pricing in nearly a 99% chance of Fed rate reductions by 25 basis points on December 18, according to the CME FedWatch Tool.

Australian Dollar appreciates despite China’s anticipated sharp hike in US tariffs

• The AUD received downward pressure on Wednesday as China, a key trading partner of Australia, saw its top leaders and policymakers consider letting the Chinese Yuan fall in response to an expected sharp hike in US tariffs, per Reuters.
• On Tuesday, China President Xi Jinping stated, "China has full confidence in achieving this year's economic target." Xi emphasized that China will continue to serve as the largest engine of global economic growth and asserted that there would be no winners in tariff wars, trade wars, or tech wars.
• China's Trade Balance (CNY) increased to CNY 692.8 billion in November, up from CNY 679.1 billion in the previous month. Exports grew by 1.5% year-over-year in November, compared to the 11.2% rise in October. Meanwhile, imports increased by 1.2% YoY, recovering from the 3.7% decline recorded earlier.
• The Reserve Bank of Australia decided to keep the Official Cash Rate (OCR) unchanged at 4.35% in its final policy meeting in December. RBA Governor Michele Bullock highlighted that while upside inflation risks have eased, they persist and require ongoing vigilance. The RBA will closely monitor all economic data, including employment figures, to guide future policy decisions.
• Australia's economy grew at its slowest annual pace since the pandemic in the third quarter. The OZ nation’s Gross Domestic Product (GDP) rose 0.3% in the September quarter, missing market forecasts of 0.4%. Weaker-than-expected GDP growth made markets almost fully price in a rate cut next April at 96% (from 73% before), according to Refinitive interest rate probabilities data.
• The Australian Dollar received support from improved sentiment and stimulus expectations from China. China’s leaders announced plans for proactive fiscal and looser monetary policies to accelerate domestic consumption in 2024. Weak Chinese CPI data (-0.6% in November, worse than expected) highlights challenges in the recovery but bolsters stimulus speculation.

Australian Dollar tests nine-day EMA after breaking above 0.6400

AUD/USD trades near 0.6410 on Thursday. The technical analysis of a daily chart indicates a strengthening bearish bias as the pair is confined within a descending channel pattern. Additionally, the 14-day Relative Strength Index (RSI) remains below the 50 level, indicating sustained negative momentum.

On the downside, the yearly low of 0.6348, last seen on August 5, served as immediate support in the previous session. However, a break below this level could strengthen the bearish bias and push the AUD/USD pair toward the descending channel’s lower boundary around the 0.6200 level.

The AUD/USD pair faces an initial barrier around the nine-day Exponential Moving Average (EMA) at 0.6422, followed by the descending channel’s upper boundary at 0.6440 level. A decisive breakout above this channel could pave the way for a potential rally toward the seven-week high of 0.6687.

AUD/USD: Daily Chart

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Thursday at 7.1854, as compared to the previous day's fix of 7.1843 and 7.2438 Reuters estimates.

• AUD/NZD attracts buyers for the fourth straight day and climbs to a two-week high. 
• The upbeat Aussie jobs data tempers bets for an early RBA rate cut and lifts the AUD.
• Expectations for a more aggressive RBNZ easing contribute to the strong move up.

The AUD/NZD cross builds on this week's goodish rebound from the 1.0930 area, or its lowest level since early October and gains positive traction for the fourth successive day on Thursday. The buying interest picks up pace following the release of the upbeat Australian employment details and lifts spot prices to over a two-week high, around the 1.1060 area in the last hour.

The official data released by the Australian Bureau of Statistics (ABS) showed that the Unemployment Rate dropped to 3.9% in November, beating estimates for an uptick to 4.2% from 4.1% in the previous month. Additional details revealed that the number of employed people rose more than expected, by 35.6K during the reported month on the back of a solid jump in full-time jobs. The report forces investors to temper their expectations for a February rate cut by the Reserve Bank of Australia (RBA) and boosts the Australian Dollar (AUD). 

The New Zealand Dollar (NZD), on the other hand, continues with its relative underperformance on the back of bets for a more aggressive policy easing by the Reserve Bank of New Zealand (RBNZ). This provides an additional lift to the AUD/NZD cross and further contributes to the ongoing recovery move from a technically significant 200-day Simple Moving Average (SMA) support. Meanwhile, the fundamental backdrop and the recent price action suggest that the path of least resistance for spot prices remains to the upside.

Australia’s Unemployment Rate came in at 3.9% in November, compared with the previous figure of 4.1%, according to the official data released by the Australian Bureau of Statistics (ABS) on Thursday. The figure came in below the market consensus of 4.2%.

Furthermore, the Australian Employment Change arrived at 35.6K in November from 12.1K in October (revised from 15.9K), compared with the consensus forecast of 25.0K. 

Market reaction to the Australia’s employment data

At the time of writing, the AUD/USD pair is trading 0.60% higher on the day to trade at 0.6409.

On Wednesday, China’s top leaders and policymakers are considering letting the Chinese Yuan fall to weather what is likely to be a sharp hike in tariffs, per Reuters. The yuan immediately dipped against the USD, along with currencies across Asia which are highly sensitive to Chinese demand.

Trump has said he plans to impose a 10% universal import tariff and a 60% tariff on Chinese imports into the United States.

Market reaction 

At the time of writing, the AUD/USD pair is trading 0.24% higher on the day to trade at 0.6386.