Forex-novosti i prognoze od 13-12-2024

• The Australian Dollar edges to 0.6392 but fails to hold gains.
• Markets anticipate that the Fed will deliver a hawkish cut.
• Higher US Treasury yields give the USD traction.

The Australian Dollar exhibits a subdued performance in Friday’s session, pressured by a strengthening US Dollar (USD). Markets anticipate the Federal Reserve (Fed) will shift toward a more hawkish stance after Wednesday’s interest rate cut. Despite robust Australian employment data briefly boosting the Aussie, the currency struggles to maintain upward momentum.

Daily digest market movers: Aussie gains clipped by mixed US data and Fed policy shift

• On Thursday, the US Bureau of Labor Statistics reported Initial Jobless Claims at 242K, above 220K forecasts, suggesting a softening labor market .
• November’s Producer Price Index (PPI) rose 3% YoY with core PPI at 3.4%, both exceeding expectations and indicating persistent inflation.
• Mixed US data initially fueled speculation of further Fed easing, but the US Dollar Index stayed near 106.79.
• Australian employment data surpassed estimates, adding 35.6K jobs and lowering unemployment to 3.9%, prompting traders to reassess Reserve Bank of Australia policy.
• Odds for a February RBA rate cut fell from 70% to 50%, though the bank maintains a dovish stance, confident inflation is trending toward target.
• Fed Chair Jerome Powell’s comments about a resilient US economy dampened hopes for a “Goldilocks” year-end scenario.
• Also, the sticky PPI figures are making markets expect the Fed to turn somewhat  hawkish in next week’s meeting.

AUD/USD technical outlook: Aussie nears oversold conditions amid persistent downward pressure

The Relative Strength Index (RSI) hovers at 34, indicating near oversold conditions and mild downward momentum. Meanwhile, the Moving Average Convergene Divervence  (MACD) histogram shows decreasing green bars, reinforcing the bearish outlook. Should these oversold signals deepen, a corrective upward move may materialize.

• EUR/USD remains tethered to the 1.0500 mark, rebounding slightly to 1.0498 after testing weekly lows.
• Technical analysis shows the pair is in a delicate balance, with potential to challenge resistance if it sustains above 1.0500.
• Key resistances are set at 1.0530 and 1.0600, while supports loom near 1.0452 and the YTD low of 1.0331.

The EUR/USD remains reluctant to remain far from the 1.0500 figure for the fifth consecutive day, even though the ECB decided to cut rates on Thursday, which pushed the pair toward its weekly low of 1.0452. Nevertheless, buyers stepped in and lifted the exchange rate toward the current level of 1.0498.

EUR/USD Price Forecast: Technical outlook

The EUR/USD daily chart suggests the pair hovers near 1.0500, unable to edge lower decisively and retest year-to-date (YTD) low figures at 1.0331. Even though the pair is carving successive series of lower and lower highs, it might be difficult to extend its downtrend.

Momentum, as measured by the Relative Strength Index (RSI), suggests that buyers gain steam. If they achieve a daily close above 1.0500, this can give them a leg-up.

In that outcome, EUR/USD’s key resistance levels lie at the December 12 high of 1.0530, followed by 1.0600 and last week's peak of 1.0629.

On the other hand, if EUR/USD remains below 1.0500, the major could extend its losses, past 1.0452. A breach of the latter will expose the November 26 low of 1.0424, followed by the November 22 swing low of 1.0331.

EUR/USD Price Chart – Daily

• Mexican Peso appreciates 0.50% against the Dollar following a week of mixed US data, bolstering Fed rate cut odds.
• Light economic docket sees US Import Prices rise slightly, while Export Prices decline in November.
• Upcoming decisions by the Fed and Banxico next week could further influence USD/MXN.

The Mexican Peso recovered after registering losses on Thursday and appreciated some 0.50% against the Greenback during the North American session. Mixed economic data from the US released in the week augmented bets that the Federal Reserve ( Fed) will cut interest rates next week. The USD/MXN trades at 20.11, down after hitting a high of 20.26.

The economic docket in Mexico and the US is light on Friday. US Import and Export Prices were featured, with the former posting a minimal rise while the latter fell in November.

During the week, Mexico’s economic data revealed that inflation dipped below estimates in headline and underlying prices in November. This cemented the case for another rate cut by the Bank of Mexico (Banxico), which will host its last meeting on December 19.

Additional data showed that Consumer Confidence in November deteriorated, sliding from 49.5 to 47.7. Industrial Production for the same period, reported on December 12, highlighted the ongoing economic slowdown, printing negative figures in monthly and annual data.

Despite this, the USD/MXN extended its losses, even though the US Dollar Index (DXY) tracks the buck's performance against six currencies, registered daily gains for six consecutive days, and clings to 107.00.

The Peso has been pressured by harsh rhetoric by US President-elect Donald Trump, who threatened to impose 25% tariffs on Mexican imports if the government doesn’t help with illegal immigration and fight the drug cartels.

Nevertheless, the USD/MXN continued to drop, favoring the Mexican currency, as the interest rate differential was maintained.

Next week, the Fed and Banxico are expected to lower borrowing costs. Barring any surprises, the USD/MXN could extend its downtrend toward 20.00 ahead of the year’s end.

Daily digest market movers: Mexican Peso boosted by Fed’s rate cut speculation

• US Import Prices in November edged up by 0.1% MoM, matching October's reading and surpassing expectations of a -0.2% decline.
• Export Prices for November remained flat at 0% MoM, down from 1% in October but beating forecasts of a -0.2% drop.
• Banxico is expected to lower its primary reference rate from 10.25% to 10.00% (25 basis points) at the December 19 meeting, according to the swaps market.
• 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.
• Analysts at JPMorgan hinted that Banxico could lower rates by 50 basis points as inflation data shows that prices are edging lower faster than expected.
• Traders' focus shifted to the Fed’s monetary policy meeting on December 17-18, with traders predicting a 93% chance of a 25 bps rate cut via data from the Chicago Board of Trade.
• Following the decision, investors will eye Fed Chair Jerome Powell's press conference, looking for clues regarding the policy path for 2025.

USD/MXN technical outlook: Mexican Peso recovers as USD/MXN drops toward 20.10

The USD/MXN would finish the week consolidated at around the 20.00-20.25 area for five straight days, unable to clear the top or the bottom of the range, with buyers and sellers finding acceptance within that area.

However, momentum shifted slightly bearishly, as portrayed by the Relative Strength Index (RSI). The USD/MXN is tilted to the downside in the near term.

The USD/MXN's first support would be the 50-day Simple Moving Average (SMA) at 20.07, which has remained almost flat since December 6. Should the pair drop below, it could test 20.00, with further declines seen toward the 100-day SMA at 19.70.

On the upside, if USD/MXN climbs past 20.25, immediate 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 US Dollar extends its winning streak on Friday, with the DXY Index trading above 107.00 for the first time in more than two weeks.
• Signs of lingering inflation pressure in the US gives the USD traction.
• There weren’t any major economic data highlights in Friday’s session.

The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, trades neutral on Friday with some minor gains in the US trading session. The Greenback is under some pressure from profit-taking after steep rallies against many major G20 currencies earlier this week. This retracement follows the release of new Chinese economic data and additional details on the stimulus package that the Chinese government is rolling out. 
In addition, the US Dollar seems to get some traction due to rising US Treasury yields, which seem to be offsetting the fact that markets are practically pricing in a cut in next week's Fed decision.

Daily digest market movers: Hot November PPI and Chinese stimulus drive market sentiment on quiet Friday

• November PPI ran hot, with a headline increase of 3.0% YoY, surpassing the expected 2.6%. The October figure was revised to 2.6% (previously 2.4%).
• Core PPI (excluding food and energy) surged by 3.4% YoY, exceeding analysts' forecast of 3.2% and revising October’s figure to 3.4% (previously 3.1%).
• PPI Services (excluding trade, transportation and warehousing) remained elevated at 4.6% YoY, suggesting sticky underlying inflation.
• Some analysts are downplaying the data due to a 56% jump in egg prices, but the core PPI still accelerated to the highest since February 2023, pointing to broad-based inflationary pressure.
• Despite the hot inflation data, markets have fully priced in a 25 bps Fed rate cut for next week, with many analysts forecasting a hawkish cut that sets up a pause in January.

DXY technical outlook: Indicators show resilience, but upside limited

The US Dollar Index continues to trade above the 107.00 level, maintaining its recovery from recent declines. On Friday, the DXY managed to stay above key levels despite mixed sentiment and speculation around the Fed's next move.

RSI and MACD indicators suggest that the DXY has regained some ground, but it may face resistance near the 107.00-107.50 range.
If the index breaks above this area, it could retest the 108.00 level, but momentum appears to be slowing down, potentially limiting further upside in the short term.
 

• The Dow Jones falls another 0.25% during quiet Friday trading.
• Equity indexes are broadly lower as investors weigh their options.
• Markets already look ahead to next week’s Fed rate call on December 18.

The Dow Jones Industrial Average (DJIA) softened during a sedate Friday session. The economic calendar was strictly a low-tier affair during the US market session, leaving investors to stew on the future pace of rate cuts from the Federal Reserve (Fed). The DJIA extended a thin but persistent near-term decline, dipping further below the 44,000 handle and posting a seventh straight downside trading day.

US Export and Import Price Index figures released on Friday broadly beat expectations, but the low impact data prints barely registered on the needle as investors look ahead to next week’s high impact economic data docket. A fresh round of US Purchasing Managers Index (PMI) survey figures will kick off next week, with S&P Global Manufacturing and Services PMI figures due on Monday. US Retail Sales figures for November will follow up on Tuesday and are expected to rise to 0.5% from 0.4% MoM.

US inflation metrics accelerated in November, according to key data releases this week. However, the uptick in costs wasn’t enough to push investors off their current bets of a quarter-point cut from the Fed’s rate call due next week on Wednesday, December 18. According to the CME’s FedWatch Tool, rate traders have piled into confident bets that the Fed will cut one last time in 2024 with 97% odds priced in of a 25 bps rate trim next week.

Dow Jones news

Most of the Dow Jones is trading on the sedate side, but losses in key equities are dragging the overall board lower with Nvidia (NVDA) shedding around 2.5% and declining to $134 per share as the broad market tech rally takes a breather. On the high side, UnitedHealth Group (UNH) has recovered 1.2% on Friday, climbing back above $522 per share after several days of headline-driven losses.

Dow Jones price forecast

Friday’s 100-plus point decline in the Dow Jones index puts the major equity board down almost 3% from recent record highs above 45,000. Despite seven straight trading days on the low side, the Dow Jones is still holding comfortably in bull country with price action north of the 50-day Exponential Moving Average (EMA) near 43,490.

A near-term bearish drag on index prices may be running out of runway in short order. The Dow Jones has put in a stellar track record over the past 12 months of outrunning its own moving averages. Bidders will likely be looking to re-enter the fray once bids make contact with the 50-day EMA. However, a snap below the last swing low into the 43,000 handle could see a fresh round of bearish momentum.

Dow Jones daily chart

• Gold declines but holds to weekly gains as mixed US economic data keeps rate cut expectations alive.
• Market braces for the Federal Reserve's decision on December 18, with a 93% likelihood of a 25 bps cut anticipated.
• Upcoming US economic data and Fed Chair Powell’s commentary will be critical for future market direction.

Gold price fell for the second consecutive day as high US Treasury bond yields weighed on the yellow metal. Traders await the Federal Reserve's (Fed) interest rate cut next week. The XAU/USD trades at $2,657, down 0.80%.

Despite posting losses, Bullion is up almost 1% in the week following a tranche of US economic data releases. US inflation data on the consumer and producer sides was mixed, but the latest Initial Jobless Claims report gave the green light to investors for pricing in the Fed’s December rate cut.

Traders' focus shifted to the Fed’s monetary policy meeting on December 17-18, with traders predicting a 93% chance of a 25 basis points (bps) rate cut via data from the Chicago Board of Trade (CBOT).

Following the decision, investors will eye Fed Chair Jerome Powell's press conference, looking for clues regarding the policy path for 2025.

Second-tier data featured on Friday showed that US Import Prices rose marginally, while Export Prices dipped in November.

The non-yielding metal extended its losses after US Secretary of State Antony Blinken said that he has seen encouraging signs that a Gaza ceasefire is possible.

Next week, the US economic docket will feature the release of S&P Global Flash PMIs, Retail Sales, Industrial Production, the Federal Open Market Committee (FOMC) policy decision, and the release of the core Personal Consumption Expenditures (PCE) Price Index.

Daily digest market movers: Gold price treads water amid US Treasury yields jump

• Gold prices plunged as US real yields rose almost five basis points to 2.066%, up from 1.996%.
• The US 10-year Treasury bond yield rises four-and-a-half basis points to 4.375%, weighing on the golden metal.
• The US Dollar Index remains firm at 107.05, virtually unchanged.
• Import Prices for November ticked up 0.1% MoM, unchanged compared to October but exceeded forecasts of a -0.2% deceleration.
• Export Prices for the same period dropped from 1% to 0% MoM, above estimates of -0.2%.
• Sources cited by Reuters noted, "We have reached the time of year when convictions are low, and positions are being held on a short leash, meaning any price reversal - in both directions - will quickly be met with position-squaring."
• 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 retreats, sellers eye 100-day SMA

Gold price continued its correction after hitting a two-month peak of $2,726 before sliding toward the $2,650 region. It seems the golden metal found its fair value price within the $2,600-$2,700 range near the 50 and 100-day Simple Moving Averages (SMAs) at $2,670 and $2,597, respectively.

A weekly close below the 50-day SMA could motivate sellers to drive Gold’s price lower. Key support levels lie at $2,600, the 100-day SMA and near November 14 low of $2,536. On the bullish side, if buyers reclaim $2,700, the next resistance would be the December 12 peak at $2,726, followed by the record high at $2,790.

• EUR/USD edges higher on Friday, settling at 1.0495 as it approaches the 20-day SMA.
• RSI rises sharply to 44 but remains in negative territory, indicating improving momentum within a bearish context.

The EUR/USD pair managed a modest rebound on Friday, rising by 0.2% to 1.0495 after testing fresh lows earlier in the week. The pair inched closer to the 20-day Simple Moving Average (SMA) near 1.0550 but failed to breach it, keeping the short-term outlook tilted to the downside.

Technical indicators show signs of stabilization but remain broadly bearish. The Relative Strength Index (RSI) has risen sharply to 44, reflecting improving momentum, though it stays in negative territory, indicating the recovery lacks robust follow-through. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram continues to print decreasing green bars, signaling persistent bearish pressure despite the daily gains.

For the bulls to regain control, EUR/USD must decisively reclaim the 20-day SMA, currently near 1.0550, to shift the outlook to neutral or positive. Until then, the bearish bias remains intact, with immediate support at the psychological 1.0500 level, followed by 1.0480. Failure to hold above these levels could accelerate the downside.

EUR/USD daily chart

• Silver struggles at $31.00, declines over 1% to test the 100-day SMA amid rising US bond yields.
• Technical outlook sees potential consolidation between the 100-day and 200-day SMAs, with key support at $29.49.
• Resistance levels ahead at $31.00 and $31.64, with potential upward movement towards $32.00 if regained.

Silver prices dropped on Friday after buyers could not hold prices above $31.00. Even though there are expectations that the US Federal Reserve will cut interest rates next week, US yields are rising, a headwind for the precious metals segment. The XAG/USD trades at $30.53, down more than 1%, testing the 100-day Simple Moving Average (SMA).

XAG/USD Price Forecast: Technical outlook

Next week's events would provide a catalyst and define Silver’s path toward the end of the year. Despite this, the grey metal is set to finish with gains of over 30%, but in the short term, it could consolidate within the 100-day SMA and the 200-day SMA at $29.49.

If buyers push prices above $31.00, the next resistance level would be the 50-day SMA at $31.64. A breach of the latter will expose $32.00 before aiming for higher prices at $33.00.

Conversely, if sellers clear the 100-day SMA, the next support would be the $30.00 figure. Once hurdled, the next support would be the November 28 daily low of $29.64 before testing the 200-day SMA.

XAG/USD Price Chart – Daily

• USD/CAD sees more upside as BoC Macklem kept doors open for more interest rate cuts.
• Monthly Canadian Manufacturing Sales rose by 2.1%, faster than expectations of 1.3%.
• The Loonie pair remains firm, holding the Ascending Triangle breakout.

The USD/CAD pair refreshes more than a four-year high around 1.4240 on Friday. The Loonie pair performs strongly even though the US Dollar (USD) gives up intraday gains, suggesting a sharp weakness in the Canadian Dollar (CAD).

The CAD remains an underperformer, as the Bank of Canada (BoC) maintains an aggressive policy-easing stance. Price pressures have come under control, and labor demand is weak.

The BoC cuts its interest rates by 50 basis points (bps) to 3.25% on Wednesday. This was the second straight jumbo interest rate cut by the BoC. BoC Governor Tiff Macklem guided a gradual policy-easing cycle as policy rates have come down significantly. The central bank has reduced interest rates by 175 bps this year.

On the economic data front, monthly Manufacturing Sales for October were better than expected. Sales in the manufacturing sector rose by 2.1%, faster than estimates of 1.3%, after contracting by 0.6% in September, which was downwardly revised from 0.5%.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls after failing to sustain above the key resistance of 107.00.

USD/CAD has shown a robust rally after a breakout of the Ascending Triangle formation on a weekly timeframe, which has resulted in volatility expansion. The upward-sloping 20-week Exponential Moving Average (EMA) near 1.3900 suggests that the near-term trend is bullish.

The 14-week Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting a strong upside momentum.

Going forward, a decisive break above the intraday high near 1.4240 would drive the asset towards the round-level resistance of 1.4300 and 31 March 2020 high of 1.4350.

On the flip side, a downside move below the November 25 low of 1.3928 would drag the major toward the round-level support of 1.3900, followed by the November 8 low of 1.3860.

USD/CAD weekly chart

UK activity data for October was soft. Monthly GDP fell 0.1%, versus expectations of a 0.1% rise, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

GBP eases broadly

“Manufacturing, construction and services outputs were weaker than forecast. The UK also posted a larger than forecast trade deficit in the month. However, the BoE/Ipsos inflation expectations survey firmed to 3.0% for the next 12 months, up from 2.7% in October. Sterling weakened broadly on the soft growth data, lifting EURGBP for a second day.”

“Cable is steadying in the mid-1.26s on the short-term chart after sliding in European trade. The pound’s drop out of its trading range around 1.2750 and a low close on the week is turning the technical picture a bit grimmer after the pound’s failure against the 200-day MA (1.2820) last week. A low close on the week will point to more losses ahead.”

“EUR/GBP’s rebound from the low 0.82 zone has abruptly curtailed the GBP’s bull run on the cross, meanwhile—at least for now. Better selling interest may re-emerge nearer the mid-0.83s.”

The US Energy Information Administration has not made any significant changes to its forecasts, Commerzbank’s commodity analyst Carsten Fritsch notes.

The EIA expects US net crude oil imports to fall by more than 20%

“It predicts that US crude oil production will increase by an average of 280 thousand barrels per day next year, slightly less than previously expected. At 13.6 million barrels per day, the production level at the end of 2025 is expected to be the same as at the end of 2024. US oil production including NGLs is expected to increase by 390 thousand barrels per day next year.”

“This casts more doubt on the IEA's optimistic production forecast, which expects the US to increase output by 240 thousand barrels per day. The EIA also expects US net crude oil imports to fall by more than 20% year-on-year to 1.9 million barrels per day next year, which would be the lowest level since 1971.”

“The reason for this is the continued rise in crude oil production with a simultaneous drop in crude oil processing.”

The usual leaks that follow ECB rate decisions emerged yesterday to suggest that policymakers are leaning towards 25bps cuts in January and March at this point. Markets have priced in a bit more easing risk; swaps reflect 69bps of anticipated easing through March, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR is trading soft

“ECB Governor Villeroy—a dove—went further, stating that lower rates were coming and that policymakers were comfortable with market pricing (of more than 100bps of easing anticipated for the year). The Bundesbank’s latest forecast anticipates virtually no growth (0.2%) in Germany next year. Despite a mild rebound from the intraday low, with the help of short-covering on the crosses, the outlook for the EUR looks pretty bleak.”

“Intraday gains are providing some, potentially bullish, respite for the EUR, with an outside range higher developing around the intraday low. Gains may prove to be short-lived and minor bear trend channel resistance at 1.0505 is yet to be tested. A push above here is needed to drive a little more strength in the short run.”

“Broader technical trends are EUR-bearish though and a net loss on the week for the EUR remains likely—which would heap technical misery on the EUR after last week’s failure to hold above 1.06. I doubt any pickup in the EUR will extend much beyond the mid-1.05s.”

OPEC has revised its forecast for oil demand downwards for the fifth month in a row, Commerzbank’s commodity analyst Carsten Fritsch notes.

OPEC expects oil market to remain undersupplied

“OPEC now expects an increase of 1.6 million barrels per day this year and 1.5 million barrels per day next year.”

“In July, the corresponding forecasts were still a good 600 thousand and 400 thousand barrels per day higher. The forecast reductions in recent months represent a gradual adjustment to reality. However, the current forecasts are still far too optimistic, meaning that further downward revisions are likely to follow in the coming months.”

“Despite the lowered demand forecast, the oil market would continue to be undersupplied in the coming year, even if OPEC+ were to gradually increase the oil supply from April as planned. OPEC+ does not appear to believe the forecast, otherwise the decision to further postpone the planned production increases would not have been necessary.”

The Canadian Dollar (CAD) remains under pressure into the end of the week amid rising trade tensions. The CAD pushed through 1.42 yesterday afternoon following reports that Canada was mulling commodity export taxes as one possible response to US tariffs. Losses extended somewhat overnight, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD weakness extends

“I do think the persistent widening trend in US/ Canada interest spreads is close to a peak but there is little hope for a CAD rebound, at least in a significant or meaningful way, while its interest rate disadvantage versus the USD remains so onerous and the tariff shoe is still to drop—somewhere, somehow. However, keep in mind that the CAD does sometimes see a brief snap higher late in December that might give USD buyers an opportunity right ahead of year-end.”

“The CAD’s rebound from the intraday low near 1.4250 has not developed too far at this point but there are potential signs of a minor top in funds developing today if the CAD can hold or extend gains into the close. The overall bull trend in the USD remains deeply entrenched on the charts though, so scope for CAD gains is very limited.”

“Dips may be limited to the upper 1.41 support zone for now. Spot would need to push well below 1.41 to challenge the broader bull trend at this point. Resistance is 1.4250 and 1.4350.”

The world's largest Palladium producer from Russia expects an almost balanced Palladium market in 2024, according to a press release published this week, Commerzbank’s commodity analyst Carsten Fritsch notes.

Russia expects an almost balanced Palladium market in 2024

“The world's largest Palladium producer from Russia expects an almost balanced Palladium market in 2024, according to a press release published this week. This is based on the assumption of higher Palladium supply from Russia and weaker demand from the automotive industry. Previously, a considerable supply deficit of 900 thousand ounces was expected.”

“The company also anticipates a balanced market in 2025 as lower mine production is likely to be compensated for by a higher recycling supply in the automotive industry, while demand is likely to stagnate at this year's level. The company is forecasting a supply deficit of 200 thousand ounces for the platinum market next year, with the market expected to be balanced this year.”

“The World Platinum Investment Council, on the other hand, expects larger supply deficits for platinum in both years, which can largely be explained by investment demand. This is apparently not taken into account by the aforementioned company.”

The US Dollar (USD) is ending the week on a mixed note. But the Dollar Index (DXY) is tracking lower from its intraday high, reflecting a rebound in the EUR from early session lows, and that does leave a bit of a dent in the short-term technical outlook for the index and might point to broader losses developing over the next day or so, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Yields are USD supportive

“The JPY is a relative underperformer on the session, meanwhile. The BoJ’s Tankan survey reflected a small but unexpected improvement in business sentiment in Q4 but the proliferation of reports this week suggesting that BoJ policymakers are in no rush to tighten have slashed expectations for a rate hike next week. Sterling is also a relative underperformer on the day following weak data reports in the UK.”

“ Remarkably, or oddly, the DXY continues to track its performance profile following President-elect Trump’s first win in 2016—with the trend in gains running counter to the usually reliable seasonal softness in the DXY through December. Somewhat firmer US yields perhaps have something to do with that. Expectations for next week’s core PCE data have been measured by yesterday ‘s PPI release, despite the headline overshoot relative to forecasts.”

“Consensus estimates suggest a 2.8% Y/Y gain in core PCE, down a tenth from the forecasts prevailing before the data. Still, some Fed policymakers might be concerned about the broader stall in the disinflation process seen since the middle of the year and US yields are putting in some solid gains on the week, with the 10YY up 18bps or so. That will be somewhat USD supportive at least moving into light trading next week ahead of the holiday.”

• USD/CHF strives to reclaim an almost five-month high of 0.8960 amid weakness in the Swiss Franc (CHF).
• The SNB unexpectedly cuts its interest rates by 50 bps to 0.5% on Thursday.
• Investors expect the Fed to reduce its key borrowing rates by 25 bps on Wednesday.

The USD/CHF pair aims to revisit a five-month high of 0.8960 in Friday’s North American session. The Swiss Franc pair ticks higher as the outlook of the Swiss currency has weakened across the board after the Swiss National Bank (SNB) surprisingly reduced its key borrowing rates by 50 basis points (bps) to 0.5% on Thursday.

Market participants anticipated the SNB cutting interest rates by 25 bps as the central bank remained worried about the risks of inflation undershooting the bank’s target and growing concerns over the global markets due to potential tariffs by United States (US) President-elect Donald Trump.

After a larger-than-usual interest rate cut decision, SNB Chairman Martin Schlegel commented, "With our easing of monetary policy today we are countering the lower inflationary pressure." On the interest rate outlook, Schlegel said, "We will continue to monitor the situation closely, and will adjust our monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term."

Meanwhile, the US Dollar (USD) surrenders its intraday gains and turns negative as the Federal Reserve (Fed) is widely anticipated to cut its key borrowing rates by 25 bps to 4.25%-4.50% in the policy meeting on Wednesday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls back to near 106.75 after facing selling pressure above 107.00.

Though the Fed is certain to cut interest rates next week, it is expected to pause the policy-easing cycle in January as progress in disinflation appears to have stalled. According to the CME FedWatch tool, there is a 77% chance that the Fed will leave interest rates unchanged next month.

• The Euro bounces up from two-year lows with the GBP tumbling after weak UK data.
• UK GDP contracted for the second consecutive month in November.
• The diverging forward guidance of the ECB and the BoE has kept the Euro vulnerable.

The Euro is rallying for the second consecutive day on Friday and approaches the 0.8300 level after bouncing from a two-year low at 0.8225 earlier this week.

Data from the UK released earlier on Friday revealed that the Gross Domestic Product contracted for the second consecutive month, with Manufacturing production dropping sharply. These figures cast doubt on the UK’s economic outlook and add pressure on the BoE to keep easing monetary policy.
 

The Pound had rallied about 1.6% against the Euro in December and more than 3% since early August on speculation that the softer Eurozone economy would force the ECB to cut rates deeper than the BoE.

The ECB trimmed its benchmark interest rate by 25% basis points on Thursday and is expected to keep cutting rates at every meeting in the first half of next year.

The BoE, on the other hand, is seen moving more slowly and keeping rates on hold at the current 4.75% next week although further negative data might put this view into question and add pressure on the GBP.

• The US Dollar sprinted higher in early trading on Friday for a sixth consecutive trading session. 
• The Greenback is favored after the European Central Bank rate cut on Thursday, China’s promise of monetary easing and hot US producer inflation data. 
• The US Dollar Index (DXY) trades above 107.00 for the first time since November 26. 

The US Dollar (USD) extends its winning streak on Friday, with the DXY Index trading above 107.00 for the first time in more than two weeks, driven by signs of lingering inflation pressures in the US and prospects of further monetary policy easing in two of the US main trading partners: China and the Eurozone.

The USD got a boost on Thursday after Producer Price Index (PPI) data for November came well above expectations. While the data failed to change the broader view that the US Federal Reserve (Fed) will cut interest rates by 25 basis points next week, it did pare some bets of further cuts in 2025. 

The Greenback was also supported by expectations of further stimulus elsewhere. In Europe, the European Central Bank (ECB) President Christine Lagarde admitted that a 50 basis point rate cut scenario was on the table. However, the Governing Council agreed that a 25 basis point rate cut was more appropriate. 

In China, recent news also signaled bolder economic support in 2025. The Politburo, led by President Xi Jinping, vowed to embrace a “moderately loose” monetary policy in 2025 and a “more proactive” fiscal policy. In response, bond prices have soared and China’s 10-year bond yields fell to a record low of 1.77%, Bloomberg reports.   

The US economic calendar is light on Friday, with only the Import and Export Price Index at hand. Traders will likely  keep their powder dry and look ahead to the US Federal Reserve meeting next week. 

Daily digest market movers: Outside help

• China's top leaders and policymakers are considering allowing the yuan to weaken in 2025, Reuters reports. Several analysts are seeing the risk that China is heading towards a Japan scenario, where bond yields could fall further, Bloomberg reports. 
• At 13:30 GMT, the Import-Export Price Index for November is due. The monthly Export Index is expected to contract by 0.2% after expanding in October by 0.8%. The Import Index is expected to shrink by 0.2% against the 0.3% increase in October. 
• Equities are very geographically divided this Friday. In Asia, all major Chinese and Japanese indices are in red territory. Meanwhile, in Europe and in the US, the major indices are seeing green numbers. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 96.4%. 
• The US 10-year benchmark rate trades at 4.32%, a fresh high for this week.

US Dollar Index Technical Analysis: There go yields

The US Dollar Index (DXY) is being fueled for another rally thanks to the move in bond markets this week. After the ECB already widened the rate differential gap between the US and Europe, prospects of further easing in China add to that gapthis Friday China is adding to that gap. WiIth the plunge in Chinese yields, the gap between the US and China is getting wider, fueling which fuels a stronger US Dollar. 

The 107.00 got broken this Friday, but and needs to see a daily close above it, to actbe acting as support from; now on. Very close, by there is the 107.35 (October 3, 2023, high) level that might act as a brief resistance. Further up,  the high of November 22 at 108.7 emerges. 

Looking down, 106.52 is now the new first supportive level to look for in case ofif any profit taking should occur. Next in line is the pivotal level at 105.53 (April 11 high) that 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 104.17 should catch any falling knife formation. 

US Dollar Index: Daily Chart

European Central Bank (ECB) policymaker Mario Centeno noted on Friday that the ECB's decision to lower key rates by 25 basis points (bps) was "absolutely consensual," per Reuters.

Centeno noted that 'gradualism' will be the most important word for policymaking moving forward, adding that the level of interest rates in the Euro area remains restrictive. "In a few quarters, we will have normalization of the policy with interest rate close to 2% if there are no other shocks," he said.

Market reaction

EUR/USD showed no immediate reaction to these comments and was last seen trading at 1.0495, where it was up 0.25% on the day.

The Gold price reached its highest level since the US presidential election five weeks ago at $2,725 per troy ounce yesterday, but then fell back below the $2,700 mark, Commerzbank’s commodity analyst Carsten Fritsch notes.

Gold seems to be running out of steam

“This week's price rise occurred detached from developments in the US dollar, bond yields and interest rate expectations. A Fed rate cut of 25 basis points on Wednesday next week is now fully priced in. Only the news that the Chinese central bank bought a small amount of Gold in November for the first time in seven months could be cited as an argument.”

“It therefore comes as no surprise that a correction was triggered yesterday by a stronger US dollar and higher bond yields. Profit-taking may also have played a role, as shown by the strong outflow of almost 5 tons from the world's largest Gold ETF. At $2,700, Gold seems to be running out of steam.”

USD/SGD continued to inch higher, tracking broader USD strength while softer EUR and RMB spillover. Pair was last at 1.3475, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Pair to take directional cues from USD and CNY moves

“Mild bearish momentum on daily chart faded while RSI rose. Consolidation likely with slight bias to the upside. Resistance at 1.3490, 1.3520 levels. Support at 1.3340 (200 DMA, 23.6% fibo retracement of Sep low to Nov high), 1.33. 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 0.98% above model-implied mid.”

• The Yen extends losses on dovish BoJ comments and higher US Yields.
• Hopes of gradual easing by the Fed are keeping the US Dollar buoyed.
• US Vdata seen this week revealed that inflation pressures are picking up.

The US Dollar is trading higher on Friday, approaching the 153.50 area supported by the widening gap between US and Japanese Treasury yields, as hopes of a BoJ hike next week fade.

A Bloomberg report citing BoJ officials revealed that the bank sees little cost in waiting to hike rates. These comments have boosted speculation that the Bank will keep rates on hold next week hammering the Yen across the board.

In the US, data released on Thursday was mixed, with US Jobless Claims increasing against expectations and Producer Prices accelerating beyond the market consensus.

These figures, coupled with the strong US CPI reading seen earlier this week, confirm that inflation pressures are picking up and endorse the view of only gradual Fed easing next year. 
 

USD/CNH stayed bid but largely capped below 7.30. Pair was last at 7.2830 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

PBOC policymakers are looking for relative stability

“Berish momentum on daily chart shows signs of fading while RSI rose. Consolidation likely in recent range as PBOC daily fixing suggests policymakers are looking for relative stability. 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 7.2940, 7.3150 levels.”

“2-day CEWC concluded with President Xi signalling for more borrowing and spending in 2025. Officials also reiterated their pledges to keep the Chinese currency stable at reasonable and equilibrium levels.”

US Dollar (USD) is expected to trade in a 7.2550/7.2900 range. In the longer run, current price movements are likely part of range trading, probably between 7.2400 and 7.2900, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Current price movements are likely part of range trading

24-HOUR VIEW: “Yesterday, we expected USD to ‘trade in a range, most likely between 7.2500 and 7.2900.’ However, USD traded in a narrower range than expected (7.2560/7.2833), closing largely unchanged at 7.2790 (-0.02%). Momentum indicators are neutral, and further range trading appears likely. Expected range for today: 7.2550/7.2900.”

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 traded in a relatively quiet manner the past few days and there is no change in our view.”

Dollar Index (DXY) continued to go higher on better-thanexpected PPI and softer EUR, following ECB meeting. Focus next on FOMC next week. DXY was last at 107 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Head and shoulders pattern have formed

“Focus next on FOMC next week. A 25bp cut is more or less a done deal (markets pricing 97% probability of a cut).”

“Bearish momentum faded while RSI rose. Head and shoulders pattern have formed but DXY has yet to break below the neckline and is now challenging the second shoulder. A decisive break below neckline is required for bears to gather momentum.”

“If not a rise in DXY back above the “head” would nullify the H&S pattern. Resistance at 107.20 (first shoulder), 108 (2024 high). Support at 106.20/50 levels (23.6% fibo, 21 DMA), 105 levels (38.2% fibo retracement of Sep low to Nov high, 50 DMA). Today brings import/export price indexes.”

• Oil prices are broadly flatlining near $70.00 for the second day in a row. 
• Traders are cautious due to the bleak Oil demand outlook. 
• The US Dollar Index trades above 107.00, the highest level in more than two weeks. 

Crude Oil trades roughly flat near $70.00 on Friday as investors remain reluctant to add to the rally seen earlier in the week. The OPEC+ report was a good element for Oil prices to head higher, but traders are still warning for the 2025 projections when President-elect Donald Trump will stay in the White House. Several commitments have already been put in place to drill more US Oil and become a bigger exporter in an already oversupplied market. 

The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – is higher ahead of next week’s Federal Reserve meeting. The Greenback is seeing inflow again with interest rate gaps widening between US against Chinese and European rates, fueling a stronger Greenback. 

At the time of writing, Crude Oil (WTI) trades at $70.37 and Brent Crude at $73.90.

Oil news and market movers: Short term vs Long Term

• Oil producer Abu Dhabi National Oil Co., or Adnoc, has cut crude allocations to some Asian customers, according to equity and term lifters of the oil, Bloomberg reports.
• Weak fundamentals will pressure oil prices in 2025 as a looming supply glut mutes the effect of war risks, sanctions and OPEC+ cuts, Bloomberg analyst Pol Lezcano reports. 
• The year-end scramble by US Oil suppliers to lower their tax bills typically spurs a December jump in crude exports. But seasonally low inventories on the Gulf Coast are set to buck that trend, analysts say, Reuters reports.

Oil Technical Analysis: Careful now

Crude Oil prices might have rallied, but traders are cautious about adding to that rally. With the year-end and the prospects of a new US President that favors drilling more Oil, any upside looks limited. Expect any uptick or leg higher to be short-lived, with profit taking bound to happen before the 2024 comes to an end. 

The 55-day Simple Moving Average (SMA) at $70.06 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 $71.12  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 the 55-day SMA will be reclaimed again at $70.06. 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

US Dollar (USD) is expected to trade with an upward bias, but is unlikely to reach the major resistance at 153.30. In the longer run, the next level to watch is 154.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Above 153.30, USD/JPY can test 154.00

24-HOUR VIEW: “USD swung in a wide range between 151.00 and 152.79 on Wednesday. Yesterday (Thursday), we highlighted that ‘the choppy price action has resulted in a mixed outlook.’ We also highlighted that USD ‘could trade in range, probably staying within yesterday’s range of 151.00/152.79.’ USD then traded in a narrower range than expected (151.79/152.77), closing at 152.62 (+0.11%). The price action has resulted in a slight increase in momentum. Today, we expected USD to trade with an upward bias, but the major resistance at 153.30 is likely out of reach. Support levels are at 152.30 and 151.80.”

1-3 WEEKS VIEW: “We continue to hold the same view as yesterday (12 Dec, spot at 152.15). As highlighted, there has been a tentative buildup in momentum, and USD ‘could grind higher towards 153.30.’ Looking ahead, should USD break above 153.30, the next level to watch is 154.00.”

• The Mexican peso holds onto recent losses against a stronger US Dollar.
• Mexican economic figures disappointed this week, boosting speculation of a Banxico rate cut on Thursday.
• The USD/MXN pair keeps trading within the weekly range, with upside attempts limited below 20.30.

The Mexican Peso (MXN) is trading lower for the second day in a row and is on track for a moderate decline this week, as the US Dollar remains bid, underpinned by higher US Treasury yields.

US Jobless Claims figures released on Thursday cemented hopes that the Federal Reserve (Fed) will cut rates next week, but the higher Producer Price Index (PPI) figures made traders increasingly convinced that next year's easing will be very gradual.

Mexican data, on the contrary, disappointed this week. The Industrial Output in October deteriorated beyond expectations and consumer inflation eased more than forecasted in November. These figures have endorsed the view that the Bank of Mexico will cut rates for the fourth consecutive time next week.

Daily digest market movers: MXN suffers on downbeat Mexican data and USD strength

• The US Dollar Index keeps marching higher, on track for a 1% increase this week, boosted by higher US yields. The benchmark 10-year yield has gained 20 basis points this week to reach levels above 4.30% for the first time in three weeks.
   
• US Consumer and Producer inflation accelerated this week, showing that price pressures are picking up. This scenario is likely to limit the scope for Fed easing next year.
   
• The CME Fed Watch tool shows that the market is nearly fully pricing a 25 bps rate cut after the December 17-18 meeting. However, for next year, the market is leaning toward two more cuts, with the option of three cuts losing support.
   
• In Mexico, Thursday’s data revealed that the Industrial Production contracted by 1.2% in October, beyond market expectations of a 0.2% decline. Year-on-year, the Industrial Output declined 2.2% instead of the 0.6% expected. Data released in September showed a 0.6% monthly increase and a 0.3% decline in the previous 12 months.
   
• Earlier this week, Mexican consumer prices eased at a 4.55% yearly rate from 4.76% in October, beyond market expectations of a 4.59% reading. Likewise, the monthly CPI eased 0.44%, below the 0.48% expected, from 0.55% in the previous month.

Mexican Peso technical outlook: USD/MXN likely to find resistance at 20.30

The USD/MXN pair has bounced up from an important support level at the psychological 20.00 area, but it remains trading within the weekly range below the December 5 and 10 high at 20.30.

The pair’s short-term bias remains bearish as long as the mentioned 20.30 resistance remains in place. The double top at 20.80 suggests the possibility of a deeper correction.

A confirmation above 20.30 would shift the focus towards the December 2 high at 20.60 before November’s peak at around 20.80. On the downside, the 20.00 level is holding bears. Below here, the October 24 and November 7 low at 19.75 is likely to be targeted.
 

USD/MXN 4-Hour Chart

SNB surprised with a 50bp cut to bring policy rate to 0.5%. Markets were split between a 25 and 50bp cut. USD/CHF was last seen at 0.8938 levels, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Safe-haven characteristic of the CHF may play up

“There was a slight tweak in the statement to say that policymakers will ‘adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.’ Vs its Sep statement, which indicated that ‘Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term.’ The phrase ‘further cuts’ was dropped in the current statement. SNB Chairman Schlegel did say that ‘if needed we will adjust rate at March meeting.. will tolerate inflation outside 0 - 2% range’.”

“It does give the impression that policymakers will be more tolerant of any slippage in inflation in the short term but policymakers will still be watchful of CHF appreciation. Statement mentioned that SNB is prepared to intervene in FX markets if needed and that Schlegel reiterated their willingness to implement negative interest rates if necessary. Overall, we maintain a mild bearish bias on CHF on the back of dovish SNB that is watchful of strong CHF, amid ongoing disinflationary pressures.”

“That said, safe-haven characteristic of the CHF may play up in the event of geopolitical risk-offs or during episodes of political uncertainties in Germany, France. USD/CHF rose. Bearish momentum on daily chart faded while RSI rose. Risks skewed to the upside. Resistance at 0.8955, 0.9020 (76.4% fibo retracement of 2024 high to low). Support at 0.8850 (21 DMA), 0.88 levels (50% fibo).”

New Zealand Dollar (NZD) is likely to drift lower; any decline is unlikely to reach 0.5740. In the longer run, slight increase in momentum could lead to NZD testing the support at 0.5740, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD can test the support at 0.5740

24-HOUR VIEW: “NZD fell to 0.5763 two days ago before recovering slightly. Yesterday, we held the view that it ‘could retest the 0.5765 level before a more sustained recovery can be expected.’ We indicated that ‘should NZD break above 0.5815, it would mean that the current downward pressure has faded.’ The subsequent price action unfolded differently than what we expected. NZD rose to a high of 0.5818 before dropping to 0.5763. NZD closed lower by 0.28% at 0.5768. Downward momentum has increased slightly, and NZD is likely to drift lower today. Given the mild downward momentum, any decline is unlikely to reach 0.6740. Resistance levels are at 0.5785 and 0.5800.”

1-3 WEEKS VIEW: “We indicated two days ago (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. Yesterday, NZD fell by 0.28% and closed at 0.5768. The resulting slight increase in momentum could lead to NZD testing the support at 0.6740. At this time, the probability of a sustained break below this level is not high. The mild downward pressure would remain intact as long as 0.5830 (‘strong resistance’ level was at 0.5845 yesterday) is not breached.”

EUR fell. ECB rhetoric is dovish (though the extent of dovishness can be debatable), OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Focus next shifts to German politics

“During the press conference, President Lagarde reiterated that the direction for policy was ‘very clear.’ President Lagarde stated that the Council would debate the neutral rate ‘in due course’ but that a discussion remained “premature” at this stage. Lagarde also mentioned that 50bp cut was discussed though 25bp cut decision was unanimous. Growth concerns remain on policymakers’ radar.”

“EUR was at 1.0465 levels. Mild bullish momentum on daily chart is fading while RSI fell. Risks skewed to the downside. Support at 1.0460, 1.0410 levels. Resistance at 1.0525 (21 DMA), 1.0540 (23.6% fibo retracement of Oct high to Nov low), 1.0670 (38.2% fibo).”

“Chancellor Scholz has called for a vote of confidence on Wed 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.”

Australian Dollar (AUD) is expected to trade in a 0.6350/0.6410 range. In the longer run, AUD has to break and remain below 0.6350 before further decline can be expected, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

AUD can break and remain below 0.6350

24-HOUR VIEW: “AUD dropped to 0.6337 two days ago and then rebounded. Yesterday, when AUD was at 0.6380, we pointed out that ‘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.’ The subsequent price movements did not turn out as we expected, with AUD rising to 0.6430 before declining to 0.6362. AUD closed unchanged at 0.6369. The price action provides no fresh clues, and today, we expect AUD to trade in a 0.6350/0.6410 range.”

1-3 WEEKS VIEW: “On Wednesday (11 Dec, spot at 0.6380), we highlighted that ‘while downward momentum is beginning to build again, it is not enough to suggest 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.’ Yesterday, AUD closed unchanged at 0.6369. There has been no further increase in downward momentum, and we continue to hold the same view for now. Overall, only a breach of 0.6430 (no change in ‘strong resistance’ level) would mean that the chance of AUD breaking clearly below 0.6350 has dissipated.”

• AUD/USD struggles around 0.6350 as the US Dollar gains further.
• Fed’s policy-easing cycle is expected to stall in January.
• The Australian Dollar is also performing strongly as traders pare RBA dovish bets.

The AUD/USD pair exhibits a subdued performance in Friday’s European session. The Aussie pair stays under pressure as the US Dollar (USD) performs strongly on expectations that the Federal Reserve (Fed) will shift its policy stance from “dovish” to “slightly hawkish” after cutting interest rates in the policy meeting on Wednesday.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, gains for the sixth trading day in a row on Friday and climbs above 107.00.

Traders fully price in the Fed to reduce its key borrowing rates by 25 basis points (bps) to 4.25%-4.50% on Wednesday and are confident about leaving them unchanged in the January meeting, according to the CME FedWatch tool.

“The recent slowdown in the pace of US disinflation, a lower Unemployment Rate than what the Fed projected in September, and exuberance in US financial markets are contributing to this more hawkish stance,” analysts at Macquire said.

Meanwhile, the Australian Dollar (AUD) is also performing strongly against a majority of its peers as upbeat Australian employment data for November has forced traders to pare bets that the Reserve Bank of Australia (RBA) will start reducing interest rates from the February meeting.

The Australian economy added 35.6K workers, higher than estimates of 25K and the former release of 12.1K. The Unemployment Rate surprisingly fell to 3.9% from 4.1% in October, which was expected to accelerate to 4.2%.

Apart from domestic strength in the AUD, People’s Bank of China’s (PBoC) resolute to prevent the risk of exchange rate overshooting has also offered some support. China’s lower exchange rate would make their exports competitive in global markets, a scenario that is favorable for the Australian Dollar being a leading trading partner of China.

EUR/USD was largely unchanged on yesterday's European Central Bank event risk despite President Christine Lagarde not sounding extremely dovish, with a slightly weaker euro only at the end of the trading session, ING’s FX analyst Chris Turner notes.

1.0450-1.0550 may prove the extremes of the short-term range

“The direction of travel is lower for eurozone rates and rates will not necessarily be stopping at neutral (2.00/.2.25%). Some might note the sell-off in eurozone bond markets and especially the widening of the Italian:German sovereign spread. Yet this spread had been exceptionally tight and the widening looks profit taking/position adjustment rather than any view that the ECB is blind to the looming eurozone slowdown.”

“EUR/USD largely remains glued to 1.05 and we doubt it needs to stray too far from that level today. Next Wednesday's FOMC meeting is probably the next big test of the dollar now and we very much doubt those short EUR/USD will need to cut what is a carry-positive position. 1.0450-1.0550 may prove the extremes of the short-term range.”

“Elsewhere, the Swiss National Bank did go for the more aggressive 50bp rate cut option. New SNB President, Martin Schlegel, was honest in saying the SNB does not like negative rates but is prepared to use them if necessary. We are not yet fully subscribed to the SNB negative rate story next year but in any case maintain the position that the SNB will not be able to cut as deeply as the ECB and that EUR/CHF will trend lower.”

• Gold rally fails at around $2,720 and pares previous gains amid higher US yields.
• The divergence between the Federal Reserve and the rest of the major central banks is supporting the USD.
• XAU/USD is under growing negative pressure, aiming for $2,660. 

Gold (XAU/USD) has given away earlier gains and is trading lower for the second consecutive day during Friday’s European session. The US Dollar (USD) maintains its bullish tone, supported by rising US Treasury yields, which keeps the precious metal under pressure.

Recent US data is showing a resilient US economy with inflation picking up. Donald Trump’s high tariffs for imports and restricted immigration are expected to lift consumer prices, forcing the Federal Reserve (Fed) to approach cautiously with monetary easing next year.

Most of the major central banks, in contrast, are expected to cut rates aggressively, as shown by the European Central Bank (ECB), the Bank of Canada (BoC), and the Swiss National Bank (SNB) this week. This provides a competitive advantage for the Dollar, which has rallied more than 1% so far this week, to the detriment of Gold prices.

Daily digest market movers: Gold pares weekly gains amid a strong US Dollar

• Gold is on track to a moderate advance this week. The uncertainty in the Middle East has provided support to the safe-haven commodity, but the positive momentum faded as markets calmed and the focus shifted to the US economy.
   
• Data from Thursday showed that US Jobless Claims increased by 242K against expectations of a slight decline to 220K from the previous week’s 225K.
   
• US Producer Prices were mixed, with the headline PPI accelerating at a 0.4% pace, twice as much as the 0.2% expected, from 0.3% in October. The core PPI eased to 0.2% from 0.3% last month.
   
• These data cemented hopes of Fed cuts next week and favoured a shallow bounce in Gold prices. However, the US Dollar resumed its bullish trend as the dust settled with investors coming to terms with the view of only gradual Fed cuts in 2025.
   
• In Europe, the ECB cut rates by 0.25% to 3% against the will of some doves, who wanted more aggressive cuts. The SNB took markets by surprise with a large cut and hinted at more easing.
   
• These decisions highlighted the divergence in the forward guidance of the Fed and the rest of the major central banks and provided important support for the US Dollar.
   
• Earlier this week, US consumer prices grew at their fastest pace in seven months, which adds to evidence that the cooling inflationary trend has faded.

Technical analysis: XAU/USD under growing bearish pressure

Gold’s rally was capped again at the $2,720 resistance area earlier this week, and the precious metal is trading lower. Bears appear to be taking control, aiming for a retest of the previous week’s range top between $2,660 and $2,665.

Below here, the pair might find support at the December 9 low at around $2,630 ahead of the channel bottom and the November 25, 26 and December 5 lows at around $2,610.

Upside attempts are likely to find resistance at the $2,700 psychological level and the mentioned $2,730 (November 22 and December 11 highs).

XAU/USD 4-Hour Chart

Sharp sell-off seems excessive; the Pound Sterling (GBP) is likely to consolidate in a 1.2650/1.2725 range. In the longer run, bias for GBP appears to be tilted to the downside; any decline is expected to face significant support at 1.2610, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

GBP appears to be tilted to the downside

24-HOUR VIEW: “Yesterday, we expected GBP to ‘trade in a sideways range of 1.2720/1.2785.’ GBP then rose a couple of pips above the upper end of our expected range (high has been 1.2787) before staging a surprisingly sharp drop, reaching a low of 1.2668. GBP closed lower by 0.61% at 1.2673. The sharp and swift sell-off seems excessive, and GBP is unlikely to weaken much further. Today, it is more likely to consolidate its loss, most likely trading in a range of 1.2650/1.2725.”

1-3 WEEKS VIEW: “We have a held positive GBP view since early this week. On Wednesday (11 Dec, spot at 1.2775), we highlighted 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.’ Yesterday (Thursday), GBP plummeted, breaking below our ‘strong support’ level at 1.2700. Upward momentum has dissipated. Downward momentum has increased slightly, and the bias for GBP appears to be tilted to the downside. That said, any decline is expected to face significant support at 1.2610. The downward bias will remain intact provided that the ‘strong resistance’ level, currently at 1.2755, is not breached.”

The German central bank, Bundesbank, predicted in its monthly report published on Friday that the economy is set to expand only modestly next year after a decline of 0.2% in Gross Domestic Product (GDP) this year.

Additional takeaways

The German central bank, Bundesbank, predicted in its monthly report published on Friday that the economy is set to grow only modestly next year after a decline of 0.2% in Gross Domestic Product (GDP) this year.

Additional takeaways

German economy to shrink by 0.2% this year, grow by 0.2% in 2025 and 0.8% in 2026.

German economy to stagnate in the winter half-year, to make a slow recovery over the course of 2025.

Trump tariffs could lower German economic growth by 1.3% to 1.4% through to 2027.

The German economy is not only battling economic headwinds but also structural problems.

The labor market was now also reacting "noticeably" to persistent economic weakness.

It has been a busy week for the events calendar but the dollar is ending the week towards the top end of its range. US inflation data this week has come in towards the firmer side of expectations, ING’s FX analyst Chris Turner notes.

DXY can push through resistance at 107.00

“US inflation data this week has come in towards the firmer side of expectations, although it does now look like next week's release of the core CPI deflator will come in at a reasonable 0.2% month-on-month. In all, there has not been much re-pricing of the Federal Reserve cycle this week and in reality, we doubt next week's FOMC meeting will have a major impact on the dollar either.”

“We can say 'so far, so good' for dollar bulls like ourselves, where December seasonal weakness has so far not touched the dollar. We do not have too much to add here beyond what we present in this month's FX Talking and we cannot rule out DXY pushing through resistance at 107.00 to 107.50 in quiet markets.”

Eurozone’s industrial sector activity showed no growth in October, the latest data published by Eurostat showed on Friday.

Industrial output in the old continent came in 0% MoM,  compared to the expected decrease of 0.1% and a -1.5% recorded in September.

Eurozone Industrial Production fell at an annual rate of 1.2% in October versus September’s -2.2%. The market forecast was for -1.9%.

EUR/USD reaction to the Eurozone Industrial Production data

The upbeat Eurozone industrial figures powered the Euro, as EUR/USD holds the bounce near 1.0500. The pair is up 0.21% on the day, at the press time.

Euro (EUR) may edge lower; as momentum is not strong, any decline is unlikely to break clearly below 1.0440. In the longer run, slight increase in momentum is not enough to signal a sustained decline; EUR must break clearly below 1.0440 first, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR must break clearly below 1.0440 first

24-HOUR VIEW: “We held the view that EUR ‘is likely to trade in a 1.0475/1.0535 range’ yesterday. However, EUR traded choppily between 1.0462 and 1.0530 before settling at 1.0467 (-0.26%). Despite the erratic price movements, there has been a slight increase in downward momentum. Today, EUR may edge lower, but as momentum is not strong for now, any decline is unlikely to break clearly below 1.0440. Resistance is at 1.0490; a breach of 1.0505 would indicate that the mild downward pressure has faded.”

1-3 WEEKS VIEW: “Our latest narrative was from two days ago (11 Dec, spot at 1.0530), wherein ‘the current price movements are likely part of a range trading phase, expected to be between 1.0465 and 1.0610.’ Yesterday, EUR dipped slightly below 1.0465, touching a low of 1.0462. The slight increase in momentum is not enough to signal the start of a sustained decline. Looking ahead, only a clear break below 1.0440 would suggest that EUR is ready to head lower to 1.0400. The likelihood of EUR breaking clearly below 1.0440 appears slim for now, but it will remain intact as long as 1.0540 is not breached.”

China held its annual Central Economic Work Conference (CEWC) on 11-12 Dec 2024. The 2-day closed door meeting was chaired by Chinese President Xi Jinping, with the key role to plan the economic work for 2025. Going into the meeting, the focus has been on the size of stimulus to stabilise China’s growth next year, UOB Group’s economist Ho Woei Chen notes.

CEWC repeats policy pledge from Dec Politburo

“The CEWC continued to adopt the strong language from the Chinese Communist Party’s Politburo on Mon (9 Dec), reiterating the pledge to strengthen policy support in 2025. Expanding domestic consumption and improving investment efficiency are at the top of the task list for 2025.”

“Monetary policy will be 'moderately loose' where reserve requirements and interest rates will be cut in a timely manner, maintain sufficient liquidity, and match the growth of social financing scale and money supply with the expected goals of economic growth and overall price levels. The PBOC indicated another 25-50 bps reduction to banks’ reserve requirement ratio (RRR) by year-end. In 2025, we now expect an additional 50-100 bps cut to the RRR and 30 bps cut to the benchmark 7-day reverse repo rate (with loan prime rates to fall by 30 bps).”

“Fiscal policy will be "more proactive” and the fiscal deficit ratio will be raised to increase the intensity of fiscal expenditures. This suggests that the fiscal deficit target could be increased closer to 4.0% of GDP from the implicit ceiling of 3.0%. The government pledged to increase the issuance of ultra-long-term special government bonds (we expect to be doubled to CNY2 tn from CNY1 tn this year) and increase the issuance and use of local government special bonds (we expect NPC’s quota to be raised above CNY4 tn from CNY3.9 tn in 2024).”

Silver prices (XAG/USD) fell on Friday, according to FXStreet data. Silver trades at $30.75 per troy ounce, down 0.70% from the $30.97 it cost on Thursday.

Silver prices have increased by 29.23% 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 86.90 on Friday, up from 86.53 on Thursday.

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

• USD/CAD grips gains near a fresh four-year high at 1.4245 as the US Dollar performs strongly.
• The Fed is widely anticipated to cut interest rates by 25 bps on Wednesday.
• The Canadian economic outlook has weakened amid worries over likely import tariffs by US Trump.

The USD/CAD pair holds gains near a fresh more than four-year high at 1.4245 in Friday’s European session. The Loonie pair strengthens as the US Dollar (USD) performs strongly against its major peers on expectations that the Federal Reserve (Fed) could pause its policy-easing cycle in January after cutting interest rates by 25 basis points (bps) to 4.25%-4.50% in the policy meeting on Wednesday.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, climbs above 107.00.

According to the CME FedWatch tool, the Fed is certain to cut interest rates on Wednesday, but there is an almost 75% chance that it will keep rates steady in January’s monetary policy meeting. The major contribution to higher bets supporting the Fed taking a steady interest rate decision in January has come from signs that the disinflation process has stalled.

The United States (US) core Consumer Price Index (CPI) – which excludes volatile food and energy prices – has remained steady at 3.3% since September after accelerating from 3.2% in August. Meanwhile, the annual US headline Producer Price Index (PPI) has accelerated at a faster-than-expected pace to 3% in November, the highest level seen since March 2023.

Meanwhile, the Canadian Dollar (CAD) underperforms against the US Dollar for almost three months as the Bank of Canada (BoC) is easing its monetary policy aggressively. The BoC slashed its borrowing rates by 50 bps to 3.25% on Wednesday, as expected, but guided a more gradual easing approach as policy rates have come down significantly.

After the policy decision, BoC Governor Tiff Macklem warned that US President-elect Donald Trump’s tariffs on their exports will have a significant impact on the economy.

European Central Bank (ECB) policymaker and Bank of Spain Governor José Luis Escrivá said on Friday that “it is logical to have further rate cuts in upcoming meetings.”

He added that “rate cuts are to continue should baseline projections hold.”

Meanwhile, ECB policymaker Robert Holzmann noted that “yesterday's decision was good.”

• NZD/USD drifts lower for the fourth straight day and is pressured by a combination of factors.
• The RBNZ’s dovish tilt continues to weigh on the NZD on the back of US-China trade war fears.
• Bets that the Fed will pause its rate-cutting cycle underpin the USD and also weigh on the pair.

The NZD/USD pair prolongs its weekly downtrend for the fourth consecutive day and drops to the 0.5755 area, or a fresh low since November 2022 during the first half of the European session on Friday. 

The New Zealand Dollar (NZD) continues with its relative underperformance on the back of a more aggressive policy easing by the Reserve Bank of New Zealand (RBNZ) and concerns about China's economic recovery. The US Dollar (USD), on the other hand, consolidates its recent gains registered over the past week or so, to a fresh monthly peak and exerts additional downward pressure on the NZD/USD pair. 

This week's release of the US Consumer Price Index (CPI) and the Producer Price Index (PPI) indicated that the progress in lowering inflation to the Federal Reserve's (Fed) 2% target has virtually stalled. This, along with expectations that US President Donald Trump's expansionary policies will boost inflation, suggests that the Fed will adopt a more cautious stance on cutting interest rates going forward.

The prospects for a less dovish Fed remain supportive of a further rise in the US Treasury bond yields and continue to act as a tailwind for the USD. Apart from this, geopolitical risks stemming from the protracted Russia-Ukraine war and tensions in the Middle East, along with renewed trade war fears, further benefit the safe-haven Greenback and contribute to driving flows away from the risk-sensitive Kiwi. 

There isn't any relevant market-moving economic data due for release from the US on Friday, leaving the NZD/USD pair at the mercy of the USD price dynamics. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices remains on the downside. Traders, however, might refrain from placing aggressive bets ahead of the crucial FOMC meeting next week.

Citing the People's Bank of China (PBOC), CCTV reported on Friday, they “will keep the Yuan basically stable.”

Additional takeaways

Market reaction

AUID/USD was last seen trading at 0.6369, 0.05% up on the day.

• EUR/USD slips to near 1.0450 after the ECB’s dovish monetary policy decision and a firmer US Dollar.
• The ECB reduced its key borrowing rates by 25 basis points on Thursday, but a few officials also discussed the possibility of a 50-bps cut.
• Fed officials are expected to deliver slightly hawkish remarks on interest rate guidance on Wednesday.

EUR/USD broadly consolidates near 1.0470 in Friday’s European session, staying under bearish pressure after comments from European Central Bank (ECB) President Christine Lagarde on Thursday indicated that more interest rate cuts are in the pipeline, a scenario that has dampened the Euro’s (EUR) outlook. 

After the ECB opted to reduce its Deposit Facility rate by 25 basis points (bps) to 3%, Christine Lagarde highlighted the deteriorating Eurozone growth outlook amid a slowdown in exports and weak business investment, which points to the need for further policy easing. “Surveys indicate that manufacturing is still contracting and growth in services is slowing,” she said, adding that “firms are holding back their investment spending in the face of weak demand and a highly uncertain outlook.”.

The comments from Lagarde also indicated that a handful of ECB officials supported a larger-than-usual interest rate cut of 50 bps, suggesting that policymakers are worried about faltering economic growth. The new ECB staff projections forecast the Eurozone economy to grow by 0.7% in 2024 and 1.1% in 2025, less than previously expected. 

Christine Lagarde was confident about inflation returning to 2% on a sustained basis. “Our projections are telling us that we will be at 2% target in the course of 2025.” When asked about the impact on inflation from higher import tariffs by the United States (US), Lagarde said that these are “probably net inflationary” in the short term, but that “It is going to depend on the scope of the measures and retaliation that is decided, on the rerouting of trade traffic from other parts of the world”.

Going forward, investors will look to commentaries from ECB officials on the interest rate guidance, given that the blackout period is over.

Daily digest market movers: EUR/USD is weighed down by outperforming US Dollar

• EUR/USD is also beaten by firm US Dollar (USD), which has extended its winning spell for the sixth trading day. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, climbs above 107.00. The Greenback gains on expectations that the Federal Reserve (Fed) could deliver a slightly hawkish interest rate guidance after cutting its key borrowing rates by 25 basis points (bps) to 4.25%-4.50% in the policy meeting on Wednesday.
• According to the CME FedWatch tool, traders have priced in a 25-bps interest rate reduction on Wednesday but are confident about leaving them unchanged at 4.25%-4.50% in the policy meeting in January.
• “The recent slowdown in the pace of US disinflation, a lower Unemployment Rate than what the Fed projected in September, and exuberance in US financial markets are contributing to this more hawkish stance,” analysts at Macquarie said.
• A faster-than-expected acceleration in the United States (US) Producer Price Index (PPI) data for November has also added to evidence that the Fed could turn slightly hawkish on the interest rate outlook. The US PPI report showed that the annual headline and core PPI – which excludes volatile food and energy prices – rose by 3% and 3.4%, respectively.

Technical Analysis: EUR/USD trades below 1.0500

EUR/USD trades below the psychological figure of 1.0500. The major currency pair sold off sharply after a mean-reversion move to near the 20-day Exponential Moving Average (EMA) around 1.0580, which is close to 1.0550 at the press time. 

The 14-day Relative Strength Index (RSI) dives below 40.00, suggesting a resumption of the downside momentum.

Looking down, the two-year low of 1.0330 will be a key support. On the flip side, the 20-day EMA will be the key barrier for the Euro bulls.

European Central Bank (ECB) policymaker Martins Kazaks said on Friday that “the direction of interest rates is clearly down.”

Additional quotes

Market reaction

At the time of writing, EUR/USD is trading modestly flat on the day near 1.0470.

• The Pound Sterling sells off sharply after data showed the UK monthly GDP surprisingly declined by 0.1% in October.
• UK Industrial and Manufacturing Production also contracted in October compared with the previous month.
• Investors expect the Fed to pause the policy-easing spell in January after cutting interest rates next Wednesday.

The Pound Sterling (GBP) falls sharply against its major peers on Friday after the United Kingdom (UK) Office for National Statistics (ONS) reported that monthly Gross Domestic Product (GDP) and factory data surprisingly contracted in October. The report showed that the economy declined by 0.1%, as it did in September, while economists expected it to expand by 0.1%.

Month-on-month, both Manufacturing and Industrial Production data contracted by 0.6%, posting as well a second consecutive monthly decline. Economists expected the factory output to rebound. In the year to October, Industrial Production declined by 0.7%, while Manufacturing Production remained flat.

Signs of consistent weakness in the factory activity suggest that producers are not operating at a high capacity on the assumption that a slowdown in the labor demand due to higher employer costs will weaken domestic consumption. The Labour Party pushed employers’ contribution to National Insurance (NI) higher to 15% from 13.8% in their first budget release, a move that led to dissatisfaction among employers.

Going forward, investors should brace for more volatility in the British currency next week as the UK employment data for the three months ending October and the Consumer Price Index (CPI) data for November are scheduled to be released. Moreover, the Bank of England (BoE) will meet on Thursday to decide about interest rates, with markets broadly expecting policymakers to leave them unchanged at 4.75%.

Daily digest market movers: Pound Sterling underperforms US Dollar

• The Pound Sterling slumps below 1.2630 against the US Dollar (USD) after the release of the weak monthly GDP data. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, extends its winning streak for the sixth trading day on Friday and climbs above 107.00.
• The Greenback strengthens on the back of the hotter-than-expected United States (US) Producer Price Index (PPI) report for November. The report showed that both headline and core producer inflation accelerated at a faster-than-expected pace to 3% and 3.4%, respectively. On month, the headline PPI surprisingly rose by 0.4%, faster than the former release of 0.3%, while the core producer inflation rose by 0.2% as expected.
• Higher producer inflation suggests rising input costs, which business owners tend to pass on to consumers, boosting overall consumer inflation and likely forcing the Federal Reserve (Fed) to be cautious about cutting interest rates further.
• Traders are still fully pricing in a 25-basis-points (bps) interest-rate reduction by the Federal Reserve (Fed) in the policy meeting on Wednesday, according to the CME FedWatch tool, but higher producer inflation adds to evidence supporting that the US central bank could pause the policy-easing cycle in January.

Technical Analysis: Pound Sterling falls below 20-day EMA

The Pound Sterling extends its downside to near 1.2625 against the US Dollar after failing to sustain above the 20-day Exponential Moving Average (EMA) around 1.2715. The GBP/USD pair drops to near the upward-sloping trendline around 1.2610, which is plotted from the October 2023 low near 1.2035.

The 14-day Relative Strength Index (RSI) slides to near 40.00. Should the RSI drops below 40.00, further bearish momentum will set off.

Looking down, the pair is expected to find a cushion near the psychological support of 1.2500. On the upside, the December 6 high of 1.2810 will act as key resistance.

European Central Bank (ECB) policymaker Madis Muller said on Friday that “temporary ups and downs on inflation are inevitable.”

Additional quotes

In an interview with BFM business radio on Friday, European Central Bank (ECB) policymaker Francois Villeroy de Galhau said that there will be further rate cuts, per Reuters. 

Villeroy added that they are at ease with market projections on future rates and noted that French bond spreads have moved away from Germany and moved closer to Italy.

Market reaction

The Euro stays under modest bearish pressure following these comments. At the time of press, EUR/USD was trading at its lowest level since November 26 at 1.0458, losing 0.1% on the day.

• GBP/JPY remains subdued following the disappointing UK data for October.
• UK Gross Domestic Product contracted 0.1% MoM in October, against the expected increase of 0.1%.
• The JPY receives upward support from safe-haven flows amid a slight deterioration in global risk sentiment.

GBP/JPY continues to lose ground after the release of disappointing key economic data from the United Kingdom (UK), trading around 193.00 during the European hours on Friday. Office for National Statistics reported that the UK Gross Domestic Product (GDP) contracted 0.1% month-over-month in October, against the expected increase of 0.1%.

Meanwhile, Industrial Production fell 0.6% MoM following a previous decline of 0.5%, against the expected 0.3% rise. The monthly Manufacturing Production declined 0.6% in October, against the expected 0.2% increase and September’s 1% decline.

The downside risks for the British Pound (GBP) seem limited due to the increased likelihood that the Bank of England (BoE) will adopt a slower pace of policy easing compared to other central banks in Europe and North America.

The Japanese Yen (JPY) receives upward support from safe-haven flows due to a slight deterioration in the global risk sentiment, along with geopolitical tensions and trade war fears. However, this upside of the JPY is restrained due to the growing market conviction that the Bank of Japan (BoJ) will not raise interest rates at its upcoming policy meeting next week.

On Friday, the Bank of Japan's Tankan Large Manufacturing Index rose to the reading of 14 in the fourth-quarter period, marking the highest reading since March 2022. Furthermore, firms expect inflation to rise 2.4% a year from now.

Here is what you need to know on Friday, December 13:

The US Dollar (USD) Index continues to push higher early Friday and trades at its strongest level in over two weeks above 107.00 after closing in positive territory every day this week. Eurostat will publish Industrial Production data for October and the US economic calendar will feature Export Price Index and Import Price Index data for November ahead of the weekend.

The European Central Bank (ECB) announced on Thursday that it lowered key rates by 25 basis points (bps) following the December meeting, as expected. In the post-meeting press conference, ECB President Christine Lagarde refrained from committing to further policy easing in the near term but noted that they have discussed a 50 bps cut at the meeting. She also acknowledged that the recovery in the Euro area was slower than expected and noted that they expect inflation to settle at around the Governing Council's 2% medium-target on a sustained basis. EUR/USD stretched lower following the ECB event and closed the fifth consecutive trading day in the red on Thursday. The pair struggles to stage a rebound on Friday and trades at around 1.0450.

Meanwhile, the data from the US showed on Thursday that the annual Producer Price Index rose by 3% in November. This reading followed the 2.6% increase recorded in October and surpassed the market expectation of 2.6%. The benchmark 10-year US Treasury bond yield extended its weekly uptrend and climbed above 4.3% in the American session, boosting the USD.

In the European morning on Friday, the UK's Office for National Statistics reported that the Gross Domestic Product contracted by 0.1% on a monthly basis in October, coming in worse than analysts' estimate for an expansion of 0.1%. GBP/USD came under renewed bearish pressure after this data and was last seen trading below 1.2650.

USD/CHF rose sharply after the Swiss National Bank (SNB) decided to cut the policy rate by 50 bps on Thursday. The pair continues to edge higher and trades slightly below 0.8950 early Friday, rising more than 1.5% this week.

The data from Japan showed in the Asian session that Industrial Production increased by 2.8% on a monthly basis in October, compared to the market expectation of 3%. USD/JPY showed no reaction to this report and was last seen consolidating its weekly gains slightly below 153.00.

After posting strong gains in the first half of the week, Gold staged a deep correction on Thursday and lost more than 1% on the day. XAU/USD holds its ground early Friday but stays below $2,700.

• EUR/GBP appreciates following the release of weaker-than-expected UK data for October.
• UK Gross Domestic Product contracted 0.1% MoM in October, against the expected increase of 0.1%.
• Germany’s seasonally adjusted Trade Balance reported a surplus of €13.4 billion for October, below the expected €16.1 billion.

EUR/GBP extends its gains for the second successive session following the release of key economic data from the United Kingdom (UK) and Germany, the largest economy in the European Union (EU) and the world's third-largest exporter. The EUR/GBP cross trades around 0.8280 during the early European hours on Friday.

Data released by the Office for National Statistics reported that the UK Gross Domestic Product (GDP) contracted 0.1% month-over-month in October, against the expected increase of 0.1%. Meanwhile, Industrial Production fell 0.6% MoM following a previous decline of 0.5%, against the expected 0.3% rise. The monthly Manufacturing Production declined 0.6% in October, against the expected 0.2% increase and September’s 1% decline.

The British Pound (GBP) may regain its ground due to the increased likelihood that the Bank of England (BoE) will adopt a slower pace of policy easing compared to other central banks in Europe and North America.

Germany's Federal Statistics Office reported a seasonally adjusted trade surplus of €13.4 billion for October, below the expected €16.1 billion and September's €17.0 billion. During the same period, German exports fell by 2.8%, while imports saw a slight reduction of 0.1%.

On Thursday, the European Central Bank (ECB) decided to reduce its Rate on Deposit Facility by 25 basis points (bps) to 3.0%, as expected. Similarly, the Main Refinancing Operations Rate was reduced by 25 bps to 3.15%. This was the third straight 25 bps interest rate cut by the ECB in a row and the fourth of the year.

The upside of the Euro could be limited as ECB President Christine Lagarde acknowledged that officials discussed reducing interest rates by 50 bps. Lagarde said, "Risks to growth are tilted to the downside" as "Trade friction (with the United States) could weigh on growth."

• UK GDP declined 0.1% MoM in October, missed forecast.
• GBP/USD drops below 1.2650 after the UK economic data.

The UK economy contracted at a monthly pace of 0.1% in October after declining 0.1% in September, the latest data published by the Office for National Statistics (ONS) showed on Friday. The market forecast was 0.1% growth in the reported period.

Meanwhile, the Index of services (October) arrived at 0.1% 3M/3M versus September’s 0.1%.

Other data from the UK showed that the monthly Industrial Production and Manufacturing Production decreased by 0.6% in October. Both readings undermined market expectations.

Separately, the UK Goods Trade Balance came in at GBP-18.969 billion MoM in October vs. GBP-15.50 billion expected and GBP-16.321 billion previous.

Market reaction to the UK data

The UK economic data added to the downside in the Pound Sterling. At the press time, GBP/USD is trading 0.25% lower on the day near 1.2630.

FX option expiries for Dec 13 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0375 2.6b
• 1.0400 5.2b
• 1.0420 1.2b
• 1.0450 1.9b
• 1.0470 1.1b
• 1.0500 7.6b
• 1.0525 1b
• 1.0550 2.7b
• 1.0600 4.8b
• 1.0700 5.7b

USD/JPY: USD amounts                     

• 150.00 992m
• 152.60 774m
• 154.00 983m

USD/CHF: USD amounts     

• 0.8900 403m
• 0.9000 600m

USD/CAD: USD amounts       

• 1.4000 1.1b
• 1.4225 984m
• 1.4275 1.3b

EUR/GBP: EUR amounts        

• 0.8185 694m

• Silver price extends its losses amid a momentum shift to bearish from bullish bias.
• The emergence of the bearish bias is confirmed as the 14-day RSI breaks below the 50 mark.
• XAG/USD may find immediate barriers at the 14-day EMA at $31.17, aligned with the nine-day EMA at $31.22.

Silver price (XAG/USD) extends its losses for the second session, trading around $30.90 per troy ounce during the Asian hours on Friday. The daily chart analysis indicates a momentum shift to bearish from bullish bias as the pair has broken below the ascending channel pattern.

The XAG/USD pair moves below the nine- and 14-day Exponential Moving Averages (EMA), indicating an ongoing bearish outlook and signaling to weaken short-term price momentum. This points to increasing selling interest and raises the likelihood of further price depreciation.

Additionally, the 14-day Relative Strength Index (RSI) falls below the 50 mark, further confirming the emergence of the bearish bias.

On the downside, the XAG/USD pair could navigate the region around the psychological level of $30.00, followed by a “throwback support” level at its three-month low of $29.65, which was recorded on November 28.

The immediate barriers appear at the 14-day EMA at $31.18, followed by the nine-day EMA at $31.22. A break above these levels could cause the bullish bias to re-emerge and help the Silver price to return to the ascending channel pattern.

A return to the channel would support the XAG/USD pair to retest its five-week high of $32.28, followed by the ascending channel’s upper boundary at $33.00.

XAG/USD: Daily Chart

• EUR/USD struggles near a multi-week low and is pressured by a combination of factors.
• The ECB’s dovish outlook is seen undermining the shared currency amid a bullish USD.
• Bets that the Fed will adopt a cautious stance and rising US bond yields support the buck.

The EUR/USD pair remains depressed during the Asian session on Friday and touches a near three-week low, around the 1.0455 area in the last hour. Moreover, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside and supports prospects for an extension of the recent downtrend.

The shared currency continues to be undermined by the European Central Bank's (ECB) dovish bias and concerns about the faltering Eurozone economy. In fact, the ECB cut interest rates for the fourth time this year on Thursday and left the door open to further easing in 2025. This marks a big divergence in comparison to expectations for a less dovish Federal Reserve (Fed) and validates the negative outlook for the EUR/USD pair.

The release of the US Consumer Price Index (CPI) and the Producer Price Index (PPI) this week indicated that the progress in lowering inflation to the Fed 2% target has virtually stalled. Furthermore, the growing market conviction that US President Donald Trump's expansionary policies will boost inflationary pressures, suggests that the Fed will adopt a more cautious stance on cutting interest rates going forward.

The outlook remains supportive of a further rise in the US Treasury bond yields and assists the US Dollar (USD) to preserve its gains registered over the past week or so, to a fresh monthly peak touched on Thursday. Apart from this, persistent geopolitical risks stemming from the Russia-Ukraine war and Middle East tensions, along with trade war fears, underpin the safe-haven buck and exert downward pressure on the EUR/USD pair. 

Traders, however, seem reluctant to place aggressive bets and might opt to move to the sidelines ahead of the crucial two-day FOMC monetary policy meeting next week. The outcome will be looked upon for fresh cues about the Fed's rate-cut path, which, in turn, should determine the near-term trajectory for the Greenback and the EUR/USD pair. Nevertheless, the aforementioned fundamental backdrop seems tilted in favor of bearish traders.

• GBP/USD continues to lose ground due to risk aversion amid US tariff threats.
• US PPI provided support for the US Dollar as it jumped 0.4% MoM in November, the largest gain since June.
• Traders await the UK’s key economic data due on Friday to gain fresh impetus into the nation's economic health.

GBP/USD holds losses for the third successive day, trading around 1.2660 during the Asian hours on Friday. The pair depreciates as the potential tariff threats from Trump’s administration have boosted the US Dollar (USD) across the board and created a headwind for the risk-sensitive British Pound (GBP).

Additionally, the release of the hotter-than-expected US Producer Price Index (PPI) report on Thursday provided support for the US Dollar and undermined the GBP/USD pair. The US PPI jumped 0.4% MoM in November, the largest gain since June, after an upwardly revised 0.3% increase in October. This reading was better than the 0.2% expected.

Traders await the US Federal Reserve (Fed) interest rate decision scheduled next week. Financial markets are now fully pricing in a 25 basis point rate cut on December 18, according to the CME FedWatch Tool.

Traders are expected to focus on the United Kingdom's (UK) monthly Gross Domestic Product (GDP) and October's factory data, set to be released on Friday. These figures will provide insights into the nation's economic health.

The downside risks of the Pound Sterling seem limited due to increased expectations that the Bank of England (BoE) will adopt a slower pace of policy easing compared to other central banks in Europe and North America.

• The Indian Rupee remains subdued due to risk aversion amid Trump’s tariff threats.
• Asian currencies struggle as offshore Chinese Yuan falls following remarks from a senior trade adviser to US President-elect Trump.
• Indian benchmark indices opened lower on Friday, mirroring Wall Street's overnight decline.

The Indian Rupee (INR) extends losses for the second successive session, hovering near fresh record lows on Friday. The upside of the USD/INR pair could be attributed to the stronger US Dollar (USD) amid Trump’s tariff threats.

Asian currencies are under pressure amid a weaker offshore Chinese Yuan (CNH), driven by remarks from a senior trade adviser to US President-elect Donald Trump. The adviser warned China against currency manipulation, according to a Reuters report.

The INR may also face challenges following the appointment of bureaucrat Sanjay Malhotra as the next RBI Governor, which prompts traders to raise their bets on the interest rate cuts. Additionally, India’s retail inflation moderated to 5.48% in November, from October's 14-month high of 6.21%, helped by slowing food prices, boosting expectations of an RBI’s interest rate cut in the February policy review.

The downside of the Indian Rupee might be capped by the foreign exchange intervention by the Reserve Bank of India (RBI). The Indian central bank often intervenes by managing liquidity, including selling USD to prevent steep INR depreciation.

Indian Rupee remains subdued amid foreign fund outflows

• Indian benchmark indices, the BSE Sensex and Nifty 50, opened lower on Friday, mirroring Wall Street's overnight decline. Investors in India are expected to remain cautious ahead of the upcoming Federal Reserve's (Fed) Federal Open Market Committee (FOMC) meeting next week.
• On December 12, Foreign Institutional Investors (FIIs) recorded net sales of Indian equities worth ₹3,560.01 crore, while Domestic Institutional Investors (DIIs) made net purchases amounting to ₹2,646.65 crore.
• Financial markets are now fully pricing in a 25 basis point rate cut by the Federal Reserve on December 18, according to the CME FedWatch Tool.
• On Thursday, the US Producer Price Index (PPI) jumped 0.4% MoM in November, the largest gain since June, after an upwardly revised 0.3% increase in October. This reading was better than the 0.2% expected.
• 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.
• S&P Global Ratings on Tuesday estimated 6.8% growth for the Indian economy in FY25, followed by 6.9% growth in FY26, on the back of strong urban consumption, steady service sector growth, and ongoing investment in infrastructure.

Technical Analysis: USD/INR marks fresh highs near 85.00

The Indian Rupee remains subdued near its all-time lows against the US Dollar on Friday. The USD/INR pair trades around 84.80 on Friday, with a technical analysis of the daily chart suggesting a strengthening bullish bias. The pair moves upwards within an ascending channel pattern, with the 14-day Relative Strength Index (RSI) positioning slightly below the 70 level.

The USD/INR pair may attempt to surpass its all-time high of 84.88, recorded on December 12. A breakout above this level could allow the pair to test the upper boundary of the ascending channel, situated near 85.10.

The initial support could be found at the nine-day Exponential Moving Average (EMA) of 84.73 level, which aligns with the lower boundary of the ascending channel near the psychological level of 84.70.

USD/INR: Daily Chart

Gold prices rose in India on Friday, according to data compiled by FXStreet.

The price for Gold stood at 7,327.90 Indian Rupees (INR) per gram, up compared with the INR 7,310.66 it cost on Thursday.

The price for Gold increased to INR 85,472.13 per tola from INR 85,270.09 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 regains positive traction following Thursday’s pullback from a multi-month peak.
• Geopolitical risks, trade war fears and Fed rate cut bets continue to benefit the commodity.
• Expectations for a less dovish Fed and elevated US bond yields might cap the precious metal.

Gold price (XAU/USD) attracts some dip-buyers during the Asian session on Friday and reverses a part of the previous day's profit-taking slide from a five-week high, around the $2,726 area. Geopolitical risks stemming from the Russia-Ukraine war and tensions in the Middle East, along with concerns over US President-elect Donald Trump's tariff plans, continue to boost safe-haven demand. Apart from this, the growing market conviction that the Federal Reserve (Fed) will deliver a third consecutive rate cut at the end of the December policy meeting next week turns out to be key factors that benefit the non-yielding yellow metal.

Meanwhile, signs that the progress in lowering inflation down to the Fed's 2% target has stalled suggest that the US central bank will adopt a more cautious stance towards cutting interest rates. This remains supportive of elevated US Treasury bond yields and continues to act as a tailwind for the US Dollar (USD), which, in turn, might cap gains for the Gold price. Traders might also refrain from placing aggressive bets and opt to wait for the outcome of the FOM meeting next Wednesday. Investors will look for cues about the Fed's rate-cut path to determine the next leg of a directional move for the Greenback and the precious metal. 

Gold price draws some support from haven flows; the upside seems limited 

• Ukraine has fired US-supplied missiles, targeting strategic sites deep into Russian territory. Meanwhile, Russian forces edge closer to a key eastern Ukraine city Pokrovsk after monthlong intense fighting. 
• Israel said on Thursday that its military would stay in the Syrian territory it seized until a new force was established that met its security demands and filled the vacuum after the collapse of the Syrian regime. 
• This marks a significant escalation in geopolitical tensions and drives some haven flows towards the Gold price amid bets that the Federal Reserve will lower borrowing costs at the end of the December meeting.
• In the absence of any major upside surprise from the latest US consumer inflation figures released on Wednesday, the markets now seem to have fully priced in a 25 basis points Fed rate cut move next week. 
• The US Bureau of Labor Statistics reported on Thursday that the headline Producer Price Index (PPI) rose 0.4% in November and the yearly rate accelerated from 2.6% in October to 3% during the reported month.
• The annual core PPI rose 0.2% in November and stood at 3.4% compared to the same time period last year, beating estimates and indicating that the progress in lowering inflation to the 2% target has stalled.
• This comes on top of expectations that US President Donald Trump's expansionary policies will boost inflation and suggests that the Fed will adopt a more cautious stance on cutting interest rates going forward.
• Expectations for a less dovish Fed continue to push the US Treasury bond yields and assist the US Dollar to preserve its weekly gains to a fresh monthly peak, which might cap the lower-yielding yellow metal.
• Investors keenly await the crucial FOMC policy decision next week for cues about the interest rate outlook in the US. This will drive the USD demand and provide some meaningful impetus to the XAU/USD. 

Gold price needs to move beyond $2,726 for bulls to retain near-term control

From a technical perspective, any further strength back above the $2,700 mark is likely to confront resistance near the $2,725-26 region or the monthly high touched on Thursday. The subsequent move up could lift the Gold price to the $2,735 intermediate hurdle en route to the $2,748-2,750 supply zone. The next relevant barrier is pegged near the $2,775 region, above which bulls might aim to challenge the all-time peak, around the $2,800 neighborhood touched in October.

On the flip side, the $2,675-2,674 area now seems to have emerged as an immediate strong support. A convincing break below, however, might prompt some technical selling and 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. The latter should act as a key pivotal point, which if broken decisively could make the Gold price vulnerable to weaken further towards the $2,632-2,630 area en route to the $2,600 round-figure mark. 

• USD/CAD marks a fresh multi-year high of 1.4239 on Friday.
• The US Dollar gains ground due to the tariff threats from Trump’s administration.
• The commodity-linked CAD faces challenges due to lower WTI Oil prices.

USD/CAD extends its gains for the second successive session, reaching a fresh multi-year high of 1.4239 during Friday's Asian trading hours, the highest level since April 2020. This upside could be attributed to the tariff threats from Trump’s administration, which have boosted the US Dollar (USD) across the board and created a headwind for risk-sensitive currencies like the Canadian Dollar (CAD).

Additionally, the commodity-linked Canadian Dollar could have faced challenges due to lower crude Oil prices as Canada is the largest crude Oil exporter to the United States (US). West Texas Intermediate (WTI) crude Oil price remains tepid for the second successive session, trading around $69.70 per barrel at the time of writing.

However, the Loonie Dollar may limit its downside as the Bank of Canada (BoC) signaled a slower pace of future interest rate cuts following its recent decision on Wednesday. BoC Governor Tiff Macklem stated, "We anticipate a more gradual approach to monetary policy if the economy evolves broadly as expected." Macklem also highlighted "a major new uncertainty" stemming from potential US tariffs under President-elect Donald Trump.

In the United States, the release of the hotter-than-expected US Producer Price Index (PPI) report on Thursday provided support for the US Dollar. The US PPI jumped 0.4% MoM in November, the largest gain since June, after an upwardly revised 0.3% increase in October. This reading was better than the 0.2% expected.

Traders await the US Federal Reserve (Fed) interest rate decision scheduled next week. Financial markets are now fully pricing in a 25 basis point rate cut on December 18, according to the CME FedWatch Tool.

• WTI oscillates in a narrow trading band and is influenced by a combination of diverging factors.
• Concerns about slowing fuel demand and increasing supply act as a headwind for the commodity.
• Geopolitical risks remain in play and hold back bears from placing bets around the black liquid.

West Texas Intermediate (WTI) US Crude Oil prices struggle to gain any meaningful traction during the Asian session on Friday and remain on the defensive below the monthly top, around the $70.30 area touched the previous day. The commodity currently trades around the $69.65 region, down 0.20% for the day, though it remains on track to register strong weekly gains amid mixed fundamental cues.

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, last week decided to postpone planned supply increases by three months until April and extend the full unwinding of cuts by a year until the end of 2026. This, along with Saudi Arabia's move to cut oil prices for Asian buyers, highlights concern about a slowdown in demand, which, in turn, acts as a headwind for the black liquid. 

Meanwhile, the International Energy Agency, in its monthly report, expected non-OPEC+ nations to boost supply by about 1.5 million barrels per day (bpd) next year, exceeding demand growth forecast of 1.1 million bpd. This turns out to be another factor capping Crude Oil prices. The downside, however, remains cushioned amid concerns about supply disruptions stemming from tighter sanctions on Russia and Iran.

Furthermore, hopes that Chinese stimulus measures could lift demand in the world's top oil importer and signs of US economic resilience offer some support to the commodity. The mixed fundamental backdrop, along with the recent range-bound price action witnessed over the past two months or so, warrants some caution before placing aggressive directional bets around Crude Oil prices.

Reserve Bank of Australia (RBA) Chief Economist Sarah Hunter spoke at the University of Adelaide Luncheon on Friday, outlining the use of scenarios in setting policy.

Huntered offered no guidance on future monetary policy in her speech.

Market reaction

AUD/USD flirts with multi-month lows near 0.6350 following these comments, down 0.10% so far.

• The Japanese Yen drops to a fresh two-week trough against the USD on Friday.
• Fading hopes for a December BoJ rate hike keep the JPY bulls on the defensive.
• Elevated US bond yields underpin the USD and weigh on the lower-yielding JPY.

The Japanese Yen (JPY) remains on the defensive against its American counterpart, lifting the USD/JPY pair closer to the 153.00 neighborhood, or a fresh monthly peak during the Asian session on Friday. Recent media reports suggested that the Bank of Japan (BoJ) will not raise interest rates at its upcoming policy meeting next week, which, in turn, continues to undermine the JPY. Adding to this, expectations for a less dovish Federal Reserve (Fed) remain supportive of elevated US Treasury bond yields and further weigh on the lower-yielding JPY.

Meanwhile, the BoJ's quarterly Tankan survey released earlier today showed business confidence in Japan's large manufacturers improved slightly in the fourth quarter of 2024. This goes well with the central bank's plans to gradually raise interest rates and might hold back the JPY bears from placing aggressive bets. Furthermore, persistent geopolitical risks and concerns about US President-elect Donald Trump's tariff plans should help limit losses for the safe-haven JPY ahead of next week's key central bank event risks – the FOM and BoJ policy meetings. 

Japanese Yen continues to be weighed down by diminishing odds for a December BoJ rate hike

• The Bank of Japan's quarterly Tankan survey showed on Friday that the headline index measuring big manufacturers' business confidence rose to +14  during the September-December period, marking the highest reading since March 2022. Furthermore, firms expect inflation to rise 2.4% a year from now.
• Expectations that consumer prices in Japan will remain above the BoJ's 2% target, along with a moderately expanding economy and a rise in wages by the fastest rate since November 1992, give the BoJ another reason to hike interest rates. That said, media reports suggested that the BoJ may skip a rate hike this month.
• Reuters, citing sources familiar with the Bank of Japan's thinking, reported on Thursday that the central bank is leaning toward keeping interest rates steady next week. The report added that policymakers prefer to spend more time scrutinising overseas risks and clues on next year's wage outlook.
• A Bloomberg report on Wednesday said that BoJ officials see little cost to waiting before raising interest rates while still being open to a hike next week depending on data and market developments. This, along with mixed signals from BoJ officials, adds to uncertainty over the December policy decision.
• BoJ Governor Kazuo Ueda recently said that the timing of the next rate hike was approaching. In contrast, BoJ's dovish board member, Toyoaki Nakamura said that the central bank must move cautiously in raising rates. This continues to weigh on the Japanese Yen and lifts the USD/JPY pair to over a two-week high. 
• The US Bureau of Labor Statistics reported on Thursday that the headline Producer Price Index (PPI) rose 0.4% in November, from the previous month's upwardly revised 0.3% gain. Moreover, the yearly rate accelerated from the 2.6% increase recorded in October to 3% during the reported month.
• The annual core PPI rose 0.2% in November and stood at 3.4% compared to the same time period last year, beating estimates. This comes on top of the US consumer inflation figures on Wednesday and signals that the progress in lowering inflation toward the Federal Reserve's 2% target has stalled.
• This might force the Fed to adopt a more cautious stance and point to fewer rate cuts coming at a slower pace than previously anticipated. This remains supportive of a further rise in the US Treasury bond yields high, pushing the US Dollar to a fresh monthly peak and also weighing on the lower-yielding JPY. 
• The market attention now shifts to the key central bank event risks next week – the outcome of the highly-anticipated two-day FOMC monetary policy meeting and the crucial BoJ decision. In the meantime, traders might opt to move to the sidelines and refrain from placing aggressive directional bets.

USD/JPY seems poised to appreciate further; a move beyond the 152.70-152.80 confluence awaited

From a technical perspective, the lack of follow-through buying beyond the 152.70-152.80 confluence warrants some caution for bullish traders. The said area comprises the 200-period Simple Moving Average (SMA) on the 4-hour chart and the 50% retracement level of the recent pullback from the multi-month high. Given that oscillators on daily/4-hour charts are holding in positive territory, a sustained strength beyond could lift the USD/JPY pair to the 153.00 mark en route to the 153.65 region, or the 61.8% Fibonacci retracement level. The momentum could extend further and allow spot prices to reclaim the 154.00 mark.

On the flip side, weakness below the 152.00 mark might continue to find some support near the 151.75 area or the 38.2% Fibo. level. The said area nears the overnight swing low and should now act as a key pivotal point. Some follow-through selling could make the USD/JPY pair vulnerable to weaken further below the 151.00 round figure, towards the 150.50 intermediate support before eventually dropping to the 150.00 psychological mark.

• The Australian Dollar faces challenges as Trump’s tariff threats have created a headwind for the risk-sensitive currencies.
• The AUD declined as Chinese policymakers considered letting Yuan fall in response to an expected sharp hike in US tariffs.
• The US Dollar gained ground following a hotter-than-expected US PPI report released on Thursday.

The Australian Dollar (AUD) continues to struggle against the US Dollar (USD) on Friday. The tariff threats from Trump’s administration have boosted the US Dollar (USD) across the board and created a headwind for the AUD/USD pair. Additionally, speculations about a potential 10% tariff on Chinese goods might drag the AUD lower as China has been the largest trading partner of Australia.

The AUD received support after the release of domestic mixed employment data on Thursday. The seasonally adjusted Employment Change rose by 35,600, bringing the total number of employed people to 14,535,500 in November. Meanwhile, the Unemployment Rate dropped to 3.9%, the lowest since March, lower than market estimates of 4.2%.

The US Dollar appreciated due to the hotter-than-expected US Producer Price Index (PPI) report released on Thursday. The US PPI jumped 0.4% MoM in November, the largest gain since June, after an upwardly revised 0.3% increase in October. This reading was better than the 0.2% expected.

The US Federal Reserve (Fed) interest rate decision will take center stage next week. Traders are now fully pricing in a 25 basis point rate cut on December 18, according to the CME FedWatch Tool.

Australian Dollar faces challenges due to tariff threats from Trump’s administration

• Beijing has already begun retaliation against Trump trade sanctions, launching a probe into Nvidia, threatening to blacklist a US apparel company, blocking the export of critical minerals to the United States, and tightening the supply chain for drones.
• 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 Australian Dollar 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.
• China President Xi Jinping stated on Tuesday, "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 RBA kept 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.

Technical Analysis: Australian Dollar maintains its position above 0.6350, yearly lows

The AUD/USD pair hovers near 0.6360 on Friday. The daily chart analysis suggests a strengthening bearish bias as the pair moves downwards within a descending channel pattern. The 14-day Relative Strength Index (RSI) also remains slightly above the 30 level, indicating sustained bearish momentum.

The yearly low of 0.6348, last seen on August 5, serves as immediate support. A successful break below this level could strengthen the bearish bias and lead the AUD/USD pair toward the descending channel’s lower boundary around the 0.6190 level.

On the upside, the AUD/USD pair may find initial resistance around the nine-day Exponential Moving Average (EMA) at 0.6404. The next barrier appears at the 14-day EMA at 0.6427, which is aligned with the upper boundary of the descending channel. A decisive breakout above this channel could drive the pair toward the seven-week high of 0.6687.

AUD/USD: Daily Chart

• Gold price rebounds to around $2,690 in Friday’s Asian session, adding 42% on the day. 
• Gold demand and geopolitical risks could support the Gold price. 
• The cautious stance of the Fed due to Trump tariff policies might put pressure on the USD-denominated Gold. 

Gold price (XAU/USD) recovers some lost ground to around $2,690 during the Asian trading hours on Friday after retreating from a five-week high in the previous session. All eyes will be on the US Federal Reserve (Fed) interest rate decision next week.

Gold buying by central banks, including the People's Bank of China (PBoC) could provide some support on the yellow metal. The Chinese central bank resumed gold purchases in November after a six-month hiatus, increasing its reserves to 72.96 million fine troy ounces. This move comes as Beijing signals a shift to an “appropriately loose” monetary policy, with plans for a more proactive fiscal approach in 2024. Goldman Sachs analysts noted that the People's Bank of China (PBoC) “may even increase Gold demand during periods of local currency weakness to boost confidence in their currency.”  

Additionally, the escalating tensions in the Middle East might boost the safe-haven demand flows, benefiting the precious metal. Reuters reported that an Israeli strike killed at least 30 Palestinians and wounded 50 others who were sheltering in a post office in the central Gaza Strip, bringing the death toll on Thursday in the enclave to 66.

On the other hand, the speculations that US President-elect Donald Trump's tariff policies might prompt inflation might convince the Fed to adopt a more cautious stance on cutting interest rates. This, in turn, could act as a headwind for non-yielding assets like gold. According to CME Group's FedWatch Tool, traders are now pricing in a nearly 96.4% chance that the Fed will reduce its rate by 25 basis points (bps) rate cut at the December meeting.

On Friday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1876, as compared to the previous day's fix of 7.1854 and 7.2745 Reuters estimates.

• NZD/USD edges higher to around 0.5770 in Friday’s early Asian session. 
• US PPI increased by the most in five months in November, hotter than expected. 
• Trump tariff threats could undermine the China-proxy Kiwi.

The NZD/USD pair gains ground to near 0.5770 during the early Asian session on Friday. The Greenback strengthens due to the hotter-than-expected US Producer Price Index (PPI) report. The US Federal Reserve (Fed) interest rate decision will take center stage next week.

Data released by Business NZ  revealed that New Zealand’s Performance of Manufacturing Index (PMI) eased to 45.5 in November from 45.8 in the previous reading. The reading indicated that Manufacturing sector is still under significant pressure. 

Furthermore, the tariff threats from Trump’s administration have boosted the US Dollar (USD) across the board and created a headwind for the pair. Speculations about a potential 10% tariff on Chinese goods might drag the China-proxy New Zealand Dollar (NZD) lower as China has been the largest trading partner of New Zealand. 

On the USD’s front, financial markets have almost fully priced in a 25 basis points (bps) rate cut at the Fed's December 17-18 policy meeting, according to CME Group's FedWatch Tool. The US PPI for final demand jumped 0.4% MoM in November, the largest gain since June, after an upwardly revised 0.3% increase in October, the Labor Department's Bureau of Labor Statistics reported Thursday. This reading was better than the 0.2% expected. 

Business confidence at large manufacturers in Japan improved in the fourth quarter (Q4) of 2024, according to the Bank of Japan's quarterly Tankan survey on Friday. 

The headline large Manufacturers' Sentiment Index came in at 14.0 in Q4 from the previous reading of 13.0, above the market consensus. 

Further details unveil that the large Manufacturing Outlook for the third quarter arrived at 13.0 versus 14.0 prior.  
 

Market reaction to Japan’s Tankan survey

At the time of press, the USD/JPY pair was up 0.05% on the day at 152.55.