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• EUR/USD clattered into the 1.0500 handle on Wednesday.
• Despite a tepid uptick in US CPI inflation, the Greenback is trading steady.
• Euro markets are pulling back slightly ahead of the ECB’s latest rate cut.

EUR/USD fell for a fourth straight day on Wednesday, shedding one quarter of one percent and easing into the 1.0500 handle as the European Central Bank’s (ECB) latest rate call hangs over Fiber traders. US Consumer Price Index (CPI) inflation figures printed tidily at median market forecasts, keeping broader Greenback flows on-balance as investors brace for Thursday’s US Producer Price Index (PPI) print.

The ECB’s latest rate call is set for Thursday, and the rate meeting is widely expected to deliver another quarter-point cut to investors. The ECB’s Main Refinancing Operations Rate is forecast to get trimmed to 3.15% from 3.4%, while the ECB Rate on Deposit Facility is anticipated to decline to a flat 3.0% from 3.25%.

US CPI inflation rose slightly for the year ended in November with headline CPI inflation ticking up to 2.7% YoY from 2.6%, while core CPI inflation held steady at 3.3% YoY. Monthly headline CPI inflation also rose in November, climbing to 0.3% MoM from October’s 0.2%. Despite the overall upswing in main inflation figures, Wednesday’s CPI print was broadly in line with forecasts, keeping investor sentiment tepid.

According to the CME’s FedWatch Tool, rate traders are now pricing in 95% odds of a 25 bps rate cut when the Fed convenes for its last rate call on December 18. Despite the near-term uptick in CPI inflation, investors have decided that the wiggle in reported figures isn’t enough to push the Fed away from delivering one last quarter-point cut to wrap up 2024.

US PPI inflation drops on Thursday, and markets are expecting a similar showing to this week’s CPI print: producer-level inflation is expected to tick higher on the front end of the curve, but expected to remain to close to recent levels overall. Core PPI is forecast to rise to 3.2% YoY, up slightly from the previous period’s 3.1%.

EUR/USD price forecast

Fiber turned into the low side for a fourth straight trading day, declining another 0.25% and wrapping up the day close to the 1.0500 handle. EUR/USD has seen a near-term bullish recovery entirely fizzle out, and the pair is extending downside momentum after flubbing a bullish recapture of the 1.0600 handle.

EUR/USD daily chart

• GBP/USD got hung up on 1.27509 on Wednesday.
• US CPI inflation ticked higher, but met expectations.
• Traders will now pivot to US PPI inflation figures due on Thursday.

GBP/USD went nowhere quickly on Wednesday, churning near 1.2750 after US Consumer Price Index (CPI) figures for November widely met median market expectations. The rest of the week remains tepid on the UK side of the economic calendar, leaving Cable traders to face US Producer Price Index (PPI) numbers on Thursday.

US CPI inflation rose slightly for the year ended in November with headline CPI inflation ticking up to 2.7% YoY from 2.6%, while core CPI inflation held steady at 3.3% YoY. Monthly headline CPI inflation also rose in November, climbing to 0.3% MoM from October’s 0.2%. Despite the overall upswing in main inflation figures, Wednesday’s CPI print was broadly in line with forecasts, keeping investor sentiment tepid.

According to the CME’s FedWatch Tool, rate traders are now pricing in 95% odds of a 25 bps rate cut when the Fed convenes for its last rate call on December 18. Despite the near-term uptick in CPI inflation, investors have decided that the wiggle in reported figures isn’t enough to push the Fed away from delivering one last quarter-point cut to wrap up 2024.

US PPI inflation drops on Thursday, and markets are expecting a similar showing to this week’s CPI print: producer-level inflation is expected to tick higher on the front end of the curve, but expected to remain to close to recent levels overall. Core PPI is forecast to rise to 3.2% YoY, up slightly from the previous period’s 3.1%.

GBP/USD price forecast

GBP/USD is battling near-term chart churn near the 1.2800 handle, with the pair suspending in a dead zone just south of the 200-day Exponential Moving Average (EMA) near 1.2830. Price action has made a slow, trudging recovery after bottoming out near 1.2500 in late November, but bullish momentum is running into trouble and another leg lower could be chalked into the chart if the 200-day EMA stops being a target and becomes a hard technical barrier.

GBP/USD daily chart

• AUD/USD softens to around 0.6370 in Thursday’s early Asian session. 
• US CPI inflation rose to 2.7% YoY in November, as expected.
• The dovish RBA bets continue to undermine the Aussie. 

The AUD/USD pair remains on the defensive near 0.6370 after bouncing off a fresh year-to-date (YTD) low of 0.6336. The dovish stance by the Reserve Bank of Australia (RBA) drags the Australian Dollar (AUD) lower. Traders will closely monitor the Australian November labor market data, along with the US Producer Price Index (PPI) data, which are due later on Thursday.

Data released by the US Bureau of Labor Statistics (BLS) showed on Wednesday that the US Consumer Price Index (CPI) climbed 2.7% YoY in November, compared to 2.6% in October. On a monthly basis, the CPI rose 0.3% following the 0.2% increase seen in October. Meanwhile, the core CPI, which excludes volatile food and energy prices, rose 3.3% YoY in November versus 3.3% prior. The monthly core CPI rose 0.3% in November.

The US Dollar (USD) edges higher as US inflation data holds steady, with traders anticipating a quarter-point interest rate cut by the Federal Reserve (Fed) next week. Markets are pricing in more than a 96% possibility that the Fed will cut rates by 25 basis points (bps) next week, up from an 86% chance before the CPI data, according to CME's FedWatch Tool. 

On the Aussie front, the RBA held rates steady at 4.35% in its final policy meeting in December but suggested a possible cut in February, with market bets showing a 63% chance. RBA Governor Michele Bullock noted that while upside inflation risks have eased, they persist and require ongoing vigilance. The unexpected dovish shift in its monetary policy statement weighs on the AUD against the Greenback. 

• Crude Oil markets rallied to push WTI to $70/barrel.
• Barrel prices jumped after the EIA posted a larger-than-expected stocks drawdown.
• OPEC has lowered its global Crude Oil demand forecast, but China hopes remain.

West Texas Intermediate (WTI) Crude Oil prices rallied on Wednesday, jumping around 2.75% and clipping into $70 per barrel after the Energy Information Administration (EIA) reported a steeper drawdown in US Crude Oil reserves than energy traders anticipated. The Organization of the Petroleum Exporting Countries (OPEC) has lowered its forecasts for global Crude Oil demand growth, however barrel traders are still banking on growing energy demand from China to sop up the extra.

According to the EIA, US Crude Oil Stocks Change for the week ended December 6 fell by 1.425 million barrels, below the forecast -1.1 million and declining further from the previous week’s decline of over 5 million barrels. With US Crude Oil reserve drying up in the pipe, barrel traders found the buy button on the expectation that US processors will be forced to increase the pace of their market buying.

OPEC reduced its forecasts for global Crude Oil demand growth in the coming year, dragging the Crude Oil consortium’s lofty expectations closer in-line with the more demure forecasts posted by the EIA. OPEC now anticipates that global oil demand will increase by 1.61 million barrels per day in 2024, a reduction from last month's forecast of 1.82 million barrels. Additionally, for 2025, they have revised their growth estimate down to 1.45 million barrels per day from the previous 1.54 million barrels.

Crude Oil price forecast

Crude Oil prices have been traveling in a rough downside wedge since dipping below $66 per barrel in September. WTI bids, despite finding a technical floor below $68 per barrel, have been unable to decisively pierce above the 50-day Exponential Moving Average (EMA), and intraday price action is poised to continue battling the moving average in the near term.

Despite barrel prices seemingly held aloft of further downside pressure from a bidding zone just north of the $66 key handle, topside momentum remains limited, and Crude Oil bulls will continue to find themselves short-changed as swing highs continue to grind lower below the 200-day EMA near $73.80.

WTI daily chart

The US Dollar surges as inflation data in the United States holds steady, with traders anticipating a quarter-point interest rate cut by the Federal Reserve next week. Investors await upcoming US data as they remain doubtful about the Fed’s upcoming monetary policy decision.

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

The US Dollar Index (DXY), which tracks the performance of a basket of six peers against the buck, rallies past 106.50, up 0.28%, underpinned by high US Treasury bond yields. The US Producer Price Index (PPI), followed by the release of Initial Jobless Claims, would be the “latest” volatility triggers ahead of the Fed’s December monetary policy meeting.

EUR/USD downtrend extended for the second consecutive day, posting weekly losses of almost 0.705, yet it remains hoovering around 1.0500 ahead of the European Central Bank (ECB) meeting on December 12.

GBP/USD trimmed its earlier losses amid a scarce economic docket, yet it remains afloat near 1.2750, with the Gross Domestic Product (GDP), the Goods Trade Balance and Industrial Production set to be known on December 13.

USD/JPY advanced steadily, bolstered by the jump in US Treasury yields. It cleared the 200-day SMA of 152.01 on Bloomberg sources indicating that the Bank of Japan might increase rates sooner rather than later ahead of next week’s BoJ policy meeting. The pair peaked at around 152.80.

AUD/USD found its foot during the session after plunging to a new year-to-date (YTD) low of 0.6336, following Tuesday’s RBA’s dovish hold. Market players’ focus shifted toward the Australian labor market data release on December 12.

USD/CAD failed to clear 1.4200 as the Bank of Canada delivered a “hawkish” cut, and Governor Tiff Macklem adopted a more gradual approach to upcoming monetary policy meetings. The pair is set to end the day with losses of over 0.14%.

Oil prices rallied sharply, with WTI soaring almost 3%. OPEC+ cut their 2024 and 2025 production forecasts on projections of economic weakness in China and India. WTI climbed past $70.00 per barrel.

Gold prices continued to ascend for the third consecutive trading day, peaking at around $2,721 a troy ounce, as investors digested soft US CPI data. Silver consolidates shy of $32.00, capped on the downside by the 50-day SMA, and with a clear path to extend its gains.

• The Dow Jones spun in a tight circle on Wednesday near 44,200.
• Market expectations for US CPI inflation were met, keeping rate cut hopes on-balance.
• The tech sector rose on Wednesday, offsetting declines in health services.

The Dow Jones Industrial Average (DJIA) spun in a tight circle on Wednesday, keeping close tabs on the 44,200 level after US Consumer Price Index (CPI) inflation broadly met market expectations. Despite an uptick in annualized CPI inflation figures, investors remained confident that the Federal Reserve (Fed) is on pace to deliver one last quarter-point rate cut before the end of the year.

US CPI inflation rose slightly for the year ended in November, with headline CPI inflation ticking up to 2.7% YoY from 2.6%, while core CPI inflation held steady at 3.3% YoY. Monthly headline CPI inflation also rose in November, climbing to 0.3% MoM from October’s 0.2%. Despite the overall upswing in main inflation figures, Wednesday’s CPI print was broadly in line with forecasts, keeping investor sentiment tepid.

According to the CME’s FedWatch Tool, rate traders are now pricing in 95% odds of a 25 bps rate cut when the Fed convenes for its last rate call on December 18. Despite the near-term uptick in CPI inflation, investors have decided that the wiggle in reported figures isn’t enough to push the Fed away from delivering one last quarter-point cut to wrap up 2024.

Dow Jones news

The Dow Jones struck a middling note on Wednesday, with gains in tech and communications stocks getting weighed down by losses in health services. Nvidia (NVDA) rose over 3.3% to test $130 per share as the AI rally continues on the back of rate cut expectations, while Unitedhealth Group shed nearly 5% to fall below $540 per share in the wake of the assassination of a Unitedhealth C-suite executive last week.

Dow Jones price forecast

The Dow Jones is holding steady on the low end of a recent downturn. The major equity index peaked just above the 45,000 major handle just last week, and bullish momentum is taking a rare breather and allowing price action to return to some version of normalcy. The index is down 1.8% from all-time highs and treading water just north of 44,000.

Despite a near-term pullback, the Dow Jones is poised for another leg higher if short momentum is able to drag bids back down to the 50-day Exponential Moving Average (EMA) near 43,460. The long-term trend still favors bidders however, with the DJIA still up a stellar 17% and change YTD in 2024.

Dow Jones daily chart

• Mexican Peso appreciates as US November inflation data meets estimates, favoring Fed’s easing.
• Mexico’s inflation continues to edge lower, enhancing prospects for a bigger Banxico rate cut.
• Investors anticipate a 25 bps rate cut by the Federal Reserve on December 18 with odds standing at 92%.

The Mexican Peso extended its gains on Wednesday after US economic data showed that November inflation was aligned with estimates, cementing the case for an interest rate cut by the Federal Reserve (Fed). Consequently, the US Dollar weakened and weighed on the USD/MXN, which traded at 20.11, down over 0.24%.

On Wednesday, US headline and core inflation prints in November were as expected. After the US Consumer Price Index (CPI) release, traders priced in a 92% chance that the Fed would lower interest rates by 25 basis points (bps) on December 18.

US Treasury yields edged lower, while the USD/MXN tumbled beneath 20.20, extending its losses as the Peso appreciated against the Greenback.

Mexico’s economic docket remains scarce on Wednesday, but traders had already digested the release of softer than expected Mexican CPI figures in November. Prior in the week the CPI showed that the disinflation process continues to evolve as headline inflation dipped from 4.76% to 4.55%, while underlying inflation dropped from 3.80% to 3.58%.

Following the data, JPMorgan hinted that the Bank of Mexico (Banxico) might lower rates by 50 basis points (bps), as inflation data shows that prices are edging lower faster than expected. “It is true that if there is a window of opportunity to deliver a 50bp rate cut and recalibrate policy to a less restrictive stance, it is now,” analysts wrote in their note on Monday.

This week, Mexico’s schedule will feature October’s Industrial Production data. In the US, the docket will reveal the Producer Price Index (PPI) for November on Thursday, alongside Initial Jobless Claims for the week ending December 7.

Daily digest market movers: Mexican Peso extends losses below 20.20

• Mexico’s Industrial Production is expected to contract -0.2% MoM in October, down from 0.6% in September. On an annual basis, the economists project production to drop from -0.4% to -0.6% YoY.
• The swaps market suggests Banxico will cut interest rates by 25 basis points at the December 19 meeting.
• US Treasury bond yields slipped with the 10-year T-note coupon diving to a low of 4.201% before recovering to 4.26%, up three basis points.
• The US Dollar Index rises by 0.24% to 106.63.
• 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.

Mexican Peso technical outlook: USD/MXN stumbles below 20.15 on strong Peso

The USD/MXN remains downwardly biased after clearing the 20.20 figure but remains shy of clearing the 50-day Simple Moving Average (SMA) of 20.03.

Momentum, as measured by the Relative Strength Index (RSI), suggests that sellers are in charge. This means that further USD/MXN downside is expected.

If USD/MXN drops below the 50-day SMA, the next support would be 20.00. A breach of the latter will expose the 100-day SMA at 19.66, followed by the psychological 19.50 figure. Once surpassed, the next stop would be the 19.00 mark.

Conversely, if USD/MXN soars above the December 6 high of 20.28, that could pave the way to challenge 20.50, ahead of the year-to-date peak at 20.82, followed by the 21.00 mark.

• The Canadian Dollar pared losses on Wednesday to rebound 0.2%.
• The Bank of Canada trimmed interest rates by another 50 bps.
• Weakening economic figures and labor data sparked another uptick in rate cuts.

The Canadian Dollar (CAD) bounced on Wednesday, regaining one-fifth of one percent against the Greenback and meagerly recovering from recent lows. US Consumer Price Index (CPI) inflation figures came in broadly as-expected, keeping wider market sentiment on-balance and giving Loonie traders an opportunity to claw back chart paper.

The Bank of Canada (BoC) delivered another outsized interest rate cut, slashing reference rates by 50 basis points. With Canada’s Unemployment Rate hitting multi-year highs, the BoC has been given all of the ammunition it needs to shrug off recent upticks in inflation figures and start delivering further relief to its darling industry, the Canadian mortgage sector. Real estate accounted for roughly 20% of Canada’s overall economy in 2023, and the BoC is hard-pressed to keep housing activity afloat after shock rises in interest rates following the COVID pandemic sent housing costs through the roof.

Daily digest market movers: CAD bounces on BoC rate cut

• The BoC cut Canada’s main interest rate to 3.25% on Wednesday, delivering a 50 bps rate trim.
• The Canadian Dollar bounced on the news, giving Loonie traders hope for a technical recovery.
• Broader market sentiment remains on-balance after US CPI inflation figures matched market expectations across the board.
• Despite CPI figures nailing forecasts, investors will have little to celebrate with headline US CPI inflation accelerating to 2.7% YoY in November, up from the previous period’s 2.6%.
• Meaningful Canadian economic data is done on the release calendar for this week, leaving the Loonie at the mercy of wider market flows for the back half of the trading week.

Canadian Dollar price forecast

Despite a firm bid in the Canadian Dollar post-BoC, bullish flows into the CAD remain limited, and markets pared away much of Wednesday’s intraday gains. Momentum is firmly tilted into the Greenback side on the USD/CAD chart, with the pair barely easing from multi-year highs near the 1.4200 handle.

Loonie bulls will be looking to drag the pair down to 1.4100 before making a break lower toward the 50-day Exponential Moving Average (EMA) near 1.3930.

USD/CAD daily chart

• Gold price climbs, remaining above $2,700, ignoring high US yields.
• US CPI data confirms ongoing disinflation, bolstering expectations for a Federal Reserve rate cut next week.
• Market anticipates a potential rate cut, with swaps pricing a 92% likelihood, focusing next on upcoming PPI and jobless claims data.

Gold prices prolonged their uptrend on Wednesday following the release of inflation figures in the United States (US). Expectations that the Federal Reserve (Fed) would cut interest rates next week were reaffirmed as the disinflation process evolves, yet at a slower pace. The XAU/USD trades at $2,711, posting gains of 0.40%.

The US Consumer Price Index (CPI) remained firm in November, with headline and core figures aligned with economists' monthly and annual estimates, revealed the US Bureau of Labor Statistics (BLS).

US Treasury bond yields slipped, with the 10-year T-note coupon diving to a low of 4.201% before recovering to 4.24%, up one basis point. The US Dollar Index (DXY), which measures the performance of the American currency against a basket of six other currencies, rises by 0.29% to 106.68.

Following the data, the swaps market had priced 92% odds for a 25 basis points (bps) rate cut by the Federal Reserve. This would diminish the Fed funds rate to 4.25%-4.50% at the December 17-18 meeting.

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.”

Now that CPI figures are in the rearview mirror, investors' focus will shift to the release of the Producer Price Index (PPI) and Initial Jobless Claims numbers for the week ending December 7.

Daily digest market movers: Gold price climbs ignoring high US yields

• Gold prices advanced as US real yields rose two basis points to 1.958%.
• The US Bureau of Labor Statistics (BLS) revealed that headline CPI was 0.3% MoM, a tenth high, but aligned with estimates. Core CPI was unchanged at 0.3% MoM, aligned with October and Wall Street projections.
• In the twelve months to November, CPI was up from 2.6% to 2.7%, while core CPI was unchanged compared to October, as projected by the consensus at 3.3%.
• Data from the Chicago Board of Trade, via the December Fed funds rate futures contract, shows investors estimate 24 bps of Fed easing by the end of 2024.

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

Gold uptrend continues with prices clearing the $2,700 figure, yet Bullion remains below the November 25 peak of $2,721.

Momentum remains bullish, as portrayed by the Relative Strength Index (RSI). With that said, the XAU/USD remains bullishly biased.

Bullion’s first resistance would be $2,721. On further strength, the next stop would be $2,750, followed by the all-time high of $2,790.

Conversely, if XAU/USD tumbles below the 50-day Simple Moving Average (SMA) of $2,685, the next support would be the $2,650 figure. Once surpassed, the next support would be $2,600, followed by an upsloping support trendline and the 100-day Simple Moving Average (SMA) in the $2,580 to $2,591 area.

Only about 90mn oz of Silver remains available in the LBMA's 'free float' before it grinds down below levels required to satisfy OTC average daily trading volumes, TDS’ Senior Commodity Strategist Daniel Ghali notes.

2025 is going to be Silver's year

“Typical ETF purchases in the year that follows the start of a Fed easing cycle would entirely erode this buffer and further eat into the 'free float', whereas interest in the 'catch-up' trade is already growing.”

“At the same time, there is no evidence that we have reached the strike price necessary for pressure release valves to open. Silver markets appear to have coiled towards the next leg of the rally, and Silver remains the single best expression of the energy transition theme in the commodities complex.”

• Silver price recovers from 31.60 after the US CPI data release, which showed that price pressures remained sticky in November.
• An expected growth in the US CPI has boosted Fed dovish bets for the policy meeting next week.
• Investors await China’s two-day annual economic work conference to get cues about economy’s growth prospects.

Silver price (XAG/USD) finds buying interest near the intraday low of $31.60 in Wednesday’s North American session after the release of the United States (US) Consumer Price Index (CPI) data for November. The US CPI report showed that price pressures grew in line with estimates, which encouraged traders to accelerate dovish Federal Reserve (Fed) bets for the policy meeting on December 18.

Annual headline CPI rose by 2.7%, as expected, faster than the October reading of 2.6%. The core CPI – which excludes volatile foods and energy prices – grew in line with estimates and the prior release of 3.3%. Month-on-month headline and core CPI rose expectedly by 0.3%.

The probability for the Fed to reduce interest rates by 25 basis points (bps) to 4.25%-4.50% has increased to more than 96% from 89% on Tuesday after the release of the US inflation data.  A scenario that is favorable for non-yielding assets, such as Silver, as it will reduce their opportunity costs.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, shows whipsaw moves after the data release. 10-year US Treasury yields drop to near 4.21%.

Going forward, investors will focus on the outcome of China’s two-day closed-door annual economic work conference, a meeting in which Politburo will discuss over likely stimulus package to revive domestic consumption and stability the realty sector.

Silver, as a metal, has applications in various industries, and higher economic stimulus will boost its demand.

Silver technical analysis

Silver price consolidates around $31.50. The white metal rallied at the start of the week to near $32.30 after breaking above the three-day resistance of $31.30. The asset climbs above the 20-day Exponential Moving Average (EMA) near $31.20, suggesting that the near-term trend has turned bullish.

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

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

Silver daily chart

• OPEC+ cuts global oil demand forecast by 210K barrels per day for this year.
• For 2025, the demand forecast is trimmed further by 90K barrels per day.
• WTI crude reacts with a modest rise to $69.59 per barrel following the updated demand outlook from OPEC+.

The Organization of Petroleum Exporter Countries and its allies, known as OPEC+, updated its forecast, expecting less demand for Crude due to the ongoing economic slowdown in China, India, and other regions.

OPEC+ revises demand projections downward, cites sluggish economic activity In China and India

OPEC’s global oil demand was revised down by 210K barrels per day (BPD) from November’s estimated 1.82 million to 1.61 million BPD YoY. For 2025, demand was cut by 90K BPD from the previous month's projections of 1.5 million BPD to 1.4 million YoY.

The OPEC noted, “The bulk of this revision is made in the third quarter, taking into account recently received bearish data for the third quarter.” The cartel added that China’s demand for oil shrunk by 81K BPD YoY.

OPEC cut its 2025 global oil demand growth estimate to 1.45 million bpd from 1.54 million bpd.

US Crude Oil, known as West Texas Intermediate (WTI), jumped on the headline from around $69.00 per barrel to its daily high of $69.59.

• USD/JPY increases 0.37%, buoyed by November’s CPI data which confirmed analysts' expectations.
• US headline CPI rose slightly, but core figures remained stable, supporting potential Fed rate adjustments.
• Anticipation grows for a possible Fed rate cut, with odds favoring a 25 basis point reduction next week.

The USD/JPY rose some 0.37% early in the North American session as traders digested the release of November US Consumer Price Index (CPI) figures, which came as expected by the consensus. At the time of writing, the pair trades volatile at around 152.50.

USD/JPY pair ascends, responding to inline CPI figures and stable Treasury yields

The US Bureau of Labor Statistics (BLS) revealed that headline CPI was 0.3% MoM, a tenth high, but aligned with estimates of 0.2%. Core CPI was unchanged at 0.3% MoM, which was aligned with projections for October and Wall Street.

In the twelve months to November, CPI was up from 2.6% to 2.7%, while core CPI was unchanged compared to October, as projected by the consensus at 3.3%.

After the data, the USD/JPY resumed to the upside, while the US 10-year Treasury note yield, pared its earlier gains, stands at 4.226% flat.

November’s CPI has increased the chances of the Fed cutting interest rates another 25 basis points (bps), with odds standing at 84%, according to the CME FedWatch Tool.

Source: Prime Market Terminal (PMT)

Michael Brown of Pepperstone says the figures shouldn’t deter the FOMC from a quarter-point cut next Wednesday.

This week, the US economic docket will feature the release of the Producer Price Index (PPI) along with Initial Jobless Claims figures for the week ending December 7.

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart suggests that bulls are facing stir resistance at the Kijun-Sen at 152.69, failing to gain traction, which could witness the pair rallying toward the November 20 high of 155.89, ahead of the 156.75 daily peak of November 15. However, the pair has been carving successive series of lower highs and lower lows, and unless bulls clear the Kijun-Sen, sellers could drive prices inside the Ichimoku Cloud.

On further weakness, the USD/JPY could drop below 152.00 and extend its losses toward the 100-day Simple Moving Average (SMA) at 148.65.

• GBP/JPY rises over 0.20%, showing resilience ahead of key UK economic releases.
• Technical indicators suggest bullish momentum, with the pair navigating inside the Ichimoku Cloud.
• Key resistance at 200-day SMA of 194.74; support levels to watch include 193.95 and 100-day SMA at 192.53.

The Pound Sterling registered decent gains of over 0.20% against the Japanese Yen in early trading during Wednesday's North American session despite the lack of a catalyst boosting the former. The GBP/JPY trades at 194.46 after bouncing off daily lows of 192.49.

Price action remains slightly muted. Traders are awaiting the release of Gross Domestic Product (GDP) figures in the UK on Friday, which are expected to show an improvement in October’s figures.

GBP/JPY Price Forecast: Technical outlook

The GBP/JPY recovered after falling over 4.58% in mid-November, hitting its lowest level since September at 188.06. However, buyers lifted the exchange rate well inside the Ichimoku Cloud (Kumo), clearing key technical resistance levels like the Tenkan-Sen and the Kijun-Sen.

Momentum picked up, showing that bulls are in charge, as depicted by the Relative Strength Index (RSI), which turned bullish, with the slope aiming higher.

If GBP/JPY clears the 200-day Simple Moving Average (SMA) at 194.74, further upside is seen. The 50-day SMA is next at 195.06. A breach of the latter exposes the top of the Kumo at 196.20-40.

Conversely, if GBP/JPY tumbles below the confluence of the Kijun-Sen and the Senkou Span B at around 193.95, the next support would be the 100-day SMA at 192.53 before testing the bottom of the Kumo at 191.75-95.

GBP/JPY Price Chart – Daily

The Pound Sterling (GBP) is softer, in line with its major currency peers, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP is trading softer on the day

“There were no UK data reports to shape trade this morning and, like the EUR, GBP trading largely reflects the broader tone in the USD ahead of today’s US CPI data. Sterling is a relative outperformer over the past 3 months, however, reflecting the slow-moving policy evolution at the BoE. That trend should remain in place, supporting GBP gains on the crosses.”

“GBP is trading towards the lower end of the past week’s trading range but found firm support in the low 1.27s through European dealing. Daily price action does look a little soft, however, and a low close for the pound today would signal more risk of losses in the days ahead following last week’s failure to challenge the 200-day MA. Support is 1.2700/10 and 1.2630. Resistance is 1.2775 and 1.2825.”

Euro (EUR) price action reflects the firmer tone in the USD overall as well as some re-widening in EZ/US short-term spreads, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR drops to 1.05

“Fair value has slipped a little to 1.0499 today, suggesting the EUR is trading about where it should be, based on short-term factors.”

“A fourth day of losses in the EUR is starting to see a shift in short-term trend momentum back in the USD’s favour—to align with EUR-bearish signals on the daily and weekly DMI oscillators. EURUSD is pressuring supports in the upper 1.04s and risks easing further to 1.0430/60 range in the short run. Resistance is 1.0530.”

• The US Dollar recovery stalls below 0.8850 ahead of the US inflation report.
• US CPI is expected to reflect steady price pressure that might force to scale back easing expectations for next year.
• The SNB is expected to cut rates by 25 basis points on Thursday.

The US Dollar is trading higher for the fourth consecutive day although bulls have been halted at 0.8850 with investors awaiting the reading of November’s US CPI figures.

The pair accelerated its rebound from last week's lows at 0.8735 on Tuesday. The Dollar has been appreciating across the board this week, with investors anticipating a strong US inflation report today.

November’s CPI is unlikely to alter market expectations of a 25 bps Fed cut next week but might force to scale back monetary easing hopes for next year. This would buoy US Treasury yields and drag the US Dollar higher with them.

In Switzerland, the SNB is expected to cut rates on Thursday and might leave the door open for further cuts in early 2025 considering the weak inflation levels. A large rate cut, which is not completely discarded, would take markets by surprise and hit the CHF.

The Canadian Dollar (CAD) is soft, but little changed on the session, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD on the cusp of a push through 1.42

“The Bank of Canada is widely expected to sanction the 1/2-point rate cut that markets have priced in for today’s policy decision (9.45ET). There is no MPR update but the usual post-decision press conference (Governor Macklem and Senior DG Rogers) will follow at 10.30ET.”

“A 50bps cut in the Overnight Rate to 3.25% will leave the policy rate around the upper range limit of neutral policy but the bank is likely to leave the door open to further easing ahead. Given that a 50bps rate cut is more or less fully priced in, the CAD may stage a mini, shortcovering rebound on the news. Scope for gains is limited though and the USD’s reaction to this morning US CPI data may further complicate the CAD’s response to the expected BoC easing.”

“Short-term price signals suggest some mild USD selling pressure against the overnight highs in funds but the underlying trend remains USD-bullish and there is scant sign that the positive USD trend is poised to reverse. Rather, USD-bullish trend dynamics across the intraday, daily and weekly oscillators suggest the USD bull trend will persist and extend. Support is 1.4125/35. Resistance is— minor, psychological—at 1.42.”

The US Dollar (USD) is broadly higher ahead of today’s key risk events. Reuters reported that the Chinese authorities are considering abandoning their stable yuan policy and allowing the CNY to weaken, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD rises for a fourth day as markets position for CPI data

“The CNY fell 0.3%, pulling regional peers lower and dragging the AUD and NZD weaker. The JPY was choppy around comments attributed to “people familiar” with BoJ policy deliberations; officials apparently see little cost in waiting to raise interest rates but remain open to hiking next week. Swaps reflect 4-5bps of hiking risk at next week’s policy decision now, down from 16bps or so late last week.”

“US CPI data for November may bolster concerns among some Fed policymakers that progress on inflation has stalled since the summer when core inflation based at 3.2%. The consensus anticipates a 0.3% gain in headline and core prices in the month, nudging the headline inflation rate over the year up a tenth to 2.7% and holding the core rate at 3.3%. On consensus data may not weigh significantly on market expectations for a 25bps rate cut from the Fed next week but it might raise the risk of the Fed’s communications sounding a little more cautious on the outlook.”

“Firm data will give the USD a modest lift at least. Note that the Cleveland Fed’s core PCE Nowcast gauge anticipates a pickup in November to 2.9% Y/Y, the highest since last December. Assuming we get a 1/4-point cut next week to 4.50%, futures suggest easing in 2025 may be limited to just another 50-75bps in the Fed funds target rate. Shallower US rate cuts relative to Europe will underpin the outlook for a strong for longer USD into 2025.”

• EUR/USD stays afloat near the two-year low, around 0.8250, ahead of the ECB policy meeting on Thursday.
• The ECB is expected to cut interest rates by 25 bps to 3%.
• BoE interest rate expectations would be influenced by the employment data for the three months ending October and the CPI data for November.

The EUR/GBP pair trades cautiously near a two-year low around 0.8250 in the North American session on Wednesday. The cross remains vulnerable ahead of the European Central Bank (ECB) monetary policy meeting on December 18.

The ECB is almost certain to cut its Deposit Facility rate by 25 basis points (bps) to 3% as officials are worried about contracting Eurozone business activity and are confident that inflation is under control.

As the ECB is widely anticipated to cut interest rates on Thursday, investors will pay close attention to the interest rate guidance after President Christine Lagarde. Market experts expect Lagarde to deliver somewhat dovish remarks on the assumption that higher import tariffs by US President-elect Donald Trump will impact the Eurozone export sector significantly. Also, the collapse of the German and French coalition governments would result in a delay in the administration’s expenditure plans.

Meanwhile, the Pound Sterling (GBP) remains an outperformer across the board as the Bank of England (BoE) is expected to leave interest rates unchanged at 4.75% in the policy meeting on December 19. Traders see the BoE keeping interest rates at their current levels as officials have remained concerned over price pressures remaining persistent.

Before the BoE meeting, employment data for the three months ending October and the Consumer Price Index (CPI) data for November are due for release, which could influence BoE interest rate expectations.

• The Aussie has bounced up from year-to-date lows with the negative bias intact.
• Investors are wary of betting against the US Dollar with USD data on tap.
• The RBA softened its us¡ual hawkish tone on Tuesday and increased pressure on the Aussie.
   

The Australian Dollar trimmed some losses during Wednesday’s European session after hitting fresh year-to-date lows at 0.6340. The pair, however, remains vulnerable with investors reluctant to risk ahead of the release of the US CPI report.

Consumer prices in the US are expected to have accelerated slightly in November, which endorses the cautious rhetoric by Fed President Powell and suggests that the bank might be targeting a higher terminal rate next year.

On Tuesday, the Treasury Secretary, and former Fed Chair, Janet Yellen, warned that Trump’s tariffs might derail the progress on inflation, bolstering the case for a shallow easing cycle in 2025.

In Australia, the RBA rattled markets on Tuesday with an unexpected dovish shift in its monetary policy statement. The board showed confidence in inflation which boosted hopes of interest rate cuts in February, and increased selling pressure on the AUD.
 

• The US Dollar edges up slightly ahead of the US CPI report for November. 
• Traders have already sent the US Dollar higher amidst heightened expectations for an above-expectations number. 
• The US Dollar Index (DXY) is trading around 106.50 and has its eye on 107.00 on the upside. 

The US Dollar (USD) edges up on Wednesday, extending the winning streak that started on Friday. The Greenback is enjoying some safe-haven inflows on the back of recent events in Syria after former President Bashar al-Assad fled the country as the rebels took control. This adds to nervousness over the thin equilibrium of peace that resides in the region after Israel and Hezbollah agreed to a ceasefire. 

The main element on Wednesday’s economic calendar is the US Consumer Price Index (CPI) release. The monthly CPI release for both the headline and the core will catch the most attention. Any reading that exceeds expectations could diminish expectations for an interest-rate cut by the Federal Reserve (Fed) next week. 

Daily digest market movers: CPI last print to decide

• At 13:30 GMT, the US Consumer Price Index (CPI) release for November will be released:
  • The monthly headline Inflation is expected to head to 0.3%, from 0.2%. The yearly gauge should tick up to 2.7% from 2.6%. 
  • The monthly core inflation should increase by 0.3%, the same pace as the previous month. The yearly core measure should also steady at 3.3%.
  • Any print below consensus will likely weaken the US Dollar as odds for a Fed rate cut next week would rise. On the contrary,  a reading above consensus will diminish rate-cutting odds and should spark some more US Dollar appreciation. 
• Equities are struggling this Wednesday with investors worried about the geopolitical tensions that are flaring up in the Middle East. European indices are down overall by less than 0.50%. US Futures are trading rather flat.
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 86.1%. A 13.9% chance is for rates to remain unchanged. 
• The US 10-year benchmark rate trades at 4.23%, retreating a touch from its peak this week at 4.24% on Tuesday. 

US Dollar Index Technical Analysis: Ranging in bandwidth

The US Dollar Index (DXY) is defining a bandwidth that could hold until next year given the limited amount of data points left. The US Consumer Price Index (CPI)  release will likely determine if that bandwidth will be between 105.50 and 107.00 or between 105.50 and 108.00. 

US Dollar bulls have  reclaimed 106.52 (April 16 high), which was a hard bargain to get through. Next up is the 107.00 round level and 107.35 (October 3, 2023, high). Further up,  the high of November 22 at 108.7 emerges. 

Looking down,  the pivotal level at 105.53 (April 11 high) comes into play before heading into the 104-region. Should the DXY fall all the way towards 104.00, the big figure and the 200-day Simple Moving Average at 104.03 should catch any falling knife formation. 

US Dollar Index: Daily Chart

• The Japanese Yen slid after BoJ officials put next week's rate hike into question.
•  BoJ policymakers affirmed that they see little cost in waiting for the next rate hike, according to Bloomberg.
• Market expectations of a dovish ECB cut on Thursday might hamper the Euro rally.

The Japanese Yen is depreciating across the board on Wednesday, as comments from BoJ policymakers have cast doubt on a widely expected 25 bps rate hike next week. That has boosted the EUR/JPY to test the resistance area at 1.6030.

A Bloomberg report reported on Wednesday comments from BoJ officials observing that they "little cost in waiting for the next rate hike” as, in their opinion, the risks of a weak yen pushing up inflationary pressures have eased.

The officials affirmed that they would not vote against a rate hike in December if proposed, but they did not avoid the negative reaction in the  Japanese Yen

The EUR/JPY rallied about 170 pips after the news to reach a resistance area at 160.30, which, so far, is holding bulls. The ECB is widely expected to cut rates by 25 bps on Tuesday and might hint towards more easing in the light of the weak German economic outlook and the political uncertainty in Germany and France. This is likely to weigh on the pair.

• The US Dollar is gaining momentum with investors wary of risk ahead of the release of US CPI data for November.
• US inflation is expected to have ticked up above the Fed’s 2% target.
• Technically, the USD/MXN maintains the short-term negative trend intact.
   

The Mexican Peso (MXN) has been capped again near the 20.00 level and is pulling back on Wednesday. The US Dollar (USD) appreciates across the board buoyed by higher US Treasury yields as traders are growing wary of risk heading into the release of US November’s Consumer Prices Index (CPI) data.

US inflation is expected to have ticked up slightly at levels above the Fed’s 2% target rate. This, coupled with expectations that Donald Trump’s government will implement inflationary policies, is likely to limit the scope of the Federal Reserve’s (Fed) easing cycle.

Economic data from Mexico revealed that consumer confidence deteriorated in November to its weakest reading since September. On Monday, November’s CPI cooled beyond expectations, which endorses the view that the Bank of Mexico will cut interest rates again next week.

Daily digest market movers: Mexican Peso hesitates against a stronger US Dollar

• US CPI inflation is expected to have accelerated at a 0.3% pace in November and 2.7% from the same month last year from 0.2% and 2.6%, respectively, in October.
• The US core CPI, more relevant regarding monetary policy expectations, is seen growing steadily at 0.3% on the month and 3.3% year on year.
   
• Futures markets are now pricing an 85% chance that the Fed will cut interest rates by 25 basis points in December, up from below 70% last week, according to data from the CME Group’s Fed Watch tool.
   
• Former US Treasury Secretary and Fed Chair, Janet Yellen, warned at a Wall Street Journal's Summit that Donald Trump’s sweeping tariffs could “significantly raise costs to households” and derail progress on inflation.
   
• Data released on Tuesday revealed that Mexico’s Consumer Confidence dropped 1.5 points in November, to 47.4 points. The report reflected a deterioration in the households’ and the country’s economic expectations in the next 12 months.
   
• Mexico’s CPI eased at a 4.55% pace in the last twelve months to November, from 4.76% in the previous month. The market was expecting a 4.59% reading.
   
• Likewise, the core CPI dropped to 3.58% year-on-year from 3.8%, below the market consensus of a 3.6% reading.
   
• These figures boost hopes that the Bank of Mexico will cut rates by 25 bps for the fourth consecutive time after their December 19 meeting.

Mexican Peso technical outlook: USD/MXN has strong support at 20.00

The USD/MXN pair remains steady above the 20.00 support area, with upside attempts limited below the December 5 high at the 20.30 area so far.

The technical picture shows the US Dollar is building up heading into the release of the US CPI report. The 4-hour Relative Strength Index (RSI) has popped up above the 50 level, suggesting an incipient bullish momentum. The broader perspective, however, remains bearish with the double top at 20.80 suggesting the possibility of a deeper correction.

Immediate resistance is at the mentioned December 5 high at 20.30, ahead of the December 2 high at 20.60 and November’s peak at 20.80. 

On the downside, the 20.00 psychological level is the neckline of the mentioned double top ahead of November’s low at 19.75.

USD/MXN 4-hour Chart

• USD/JPY jumps to near 152.50 amid US Dollar strength ahead of the US inflation data.
• Economists expect the US CPI to have remained sticky in November.
• BoJ officials reiterated a data-dependent approach for another interest rate hike.

The USD/JPY pair climbs to near 152.50 in the European trading session on Wednesday. The asset strengthens as the US Dollar (USD) extends its winning streak for the fourth trading session on Wednesday ahead of the United States (US) Consumer Price Index (CPI) data for November, which will be published at 13:30 GMT.

The inflation report is expected to show that the annual headline CPI accelerated at a faster pace to 2.7% from the prior release of 2.6%. The core CPI – which excludes volatile food and energy prices – rose steadily by 3.3%.

Investors will pay close attention to the US inflation data as it will influence expectations for the Federal Reserve’s (Fed) interest rate action in the policy meeting on December 18. According to the CME FedWatch tool, the probability for the Fed to reduce interest rates by 25 bps to 4.25%-4.50% is 86%.

As the Fed is widely anticipated to cut its key borrowing rates next week, investors will pay close attention to the interest rate guidance. Analysts at Macquire agree with Fed rate cut market expectations for Fed rate cuts next week but expect the central bank to deliver a slightly hawkish interest rate guidance.

“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.

Meanwhile, the Japanese Yen (JPY) will be guided by expectations about whether the Bank of Japan (BoJ) will raise interest rates in the monetary policy meeting on December 19. Bloomberg reported on Wednesday some sources said few BoJ officials remain open to a hike next week depending on data and market developments. They don’t see any impact in waiting for the next rate hike.

• Oil prices are gaining some momentum with the heightened tensions in the Middle East. 
• OPEC+ is set to publish its monthly OPEC report, which shouldn’t bear any surprises after last week’s meeting. 
• The US Dollar Index pops higher on safe-have inflows and as uncertainty increases over the December Fed decision on interest rates.

Crude Oil trades higher for a third consecutive day on Wednesday, but it is unable to really bank on the escalating situation in the Middle East as traders appear to be slashing their exposure ahead of the end of the year. The news that the US is mulling additional Oil embargoes for Russian production did not help either, as it has the potential to weigh on prices. 

The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – is trading steady ahead of the US Consumer Price Index (CPI) data from November set to be released on Wednesday. The Federal Reserve (Fed), which remains data-dependent until further notice, will look at the inflation gauge to assess whether an interest-rate cut at next week’s meeting is appropriate. Higher-than-expected inflation could be enough for the Fed to halt its rate-cutting path and keep rates steady going into 2025. 

At the time of writing, Crude Oil (WTI) trades at $69.01 and Brent Crude at $72.73.

Oil news and market movers: Mulling and reporting

• OPEC+ will release its monthly OPEC report this Wednesday. Not many new elements are expected given that OPEC+ already extensively communicated its intentions last week, when it confirmed its three-month delay for its production normalization to April 2025.
• Saudi Aramco's Oil price cut for January deliveries to Asian buyers -- which account for most of its exports -- reinforces the outlook for soft market fundamentals in the first half of 2025, Reuters reports. 
• Falling CFTC speculative net-long positions in Oil futures are the result of traders slashing their risk exposure as they fret over the outlook of the US shale industry during President-elect Donald Trump’s second term and the response from OPEC+, Bloomberg reports.
• The Biden administration is weighing new and tougher sanctions against Russia’s Oil trade in order to tighten the screws on the Kremlin just weeks before President-elect Donald Trump returns to the White House, Bloomberg reports.
• The Energy Information Administration (EIA) is set to release its weekly Crude Stockpile Change report at 15:30 GMT. Expectations are for a drawdown of 1.3 million barrels against the more than 5 million barrels drawdown seen the prior week. 

Oil Technical Analysis: Long term outlooks remain key

Crude Oil price is wrong-footed again, facing more downside than upside despite heightened tensions in the Middle East. Traders are instead slashing their positions in Crude Oil and look beyond the near-term bullish drivers, looking forward to the rather bearish silver lining once President-elect Trump takes office. Trump has promised to ramp up Oil production even more, which would weigh on prices.  

The 55-day Simple Moving Average (SMA) at $69.96 is the first big resistance level to look out for on the upside. Should tensions in the Middle East flare up further, $71.46 with the 100-day SMA at $71.25 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 other side, traders see $67.12 – a level that held the price in May and June 2023 – as the last man standing. 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

Today's inflation data for November will be the last data point before next week's FOMC meeting. Since the blackout period has already begun, there won’t be any further comments from FOMC members. The interpretation of today's data is therefore left to the individual, Commerzbank’s FX analyst Antje Praefcke notes.

USD can see another boost

“It should be noted that in recent months, the monthly rates of change in US core inflation were actually a bit too strong to be consistent with the 2% inflation target (as measured by the PCE index, which is the relevant measure for the Fed).”

“In November, core inflation could rise a little more moderately month-on-month, paving the way for a rate cut in December, even though the 0.23% our economists are expecting is still a little too high. If the data are in line with expectations, though, not much should change in terms of interest rate expectations.”

“However, if the data surprises on the upside, the doubts of the market, which is not fully pricing in the cut next week anyway, would increase and the dollar could see another boost.”

• Gold rally stalls below $2,700 with all eyes on the US CPI data for November.
• US Consumer Prices are expected to show sticky inflationary pressures and might provide a fresh boost to the USD.
• XAU/USD’s technical picture remains positive, with price action standing above the last two week’s trading range. 

Gold (XAU/USD) is hesitating on Wednesday after having rallied about 2.5% over the previous three days. The precious metal has been capped at the $2,700 round level during the early Asian session, with investors reluctant to bet against the US Dollar (USD) ahead of the release of the US Consumer Prices Index (CPI) reading at 13:30 GMT.

Price pressures in the United States are expected to have remained sticky in November, with headline inflation picking up. While the data is unlikely to deter the Federal Reserve (Fed) from cutting rates by 25 basis points (bps) next week, it might limit the scope of the easing cycle heading into 2025. 

Beyond that, the situation in the Middle East remains uncertain. The Syrian rebels have appointed a prime minister for a transitional government while Israel has stepped up its attacks on the Syrian army’s facilities. Ongoing tensions in the area are buoying safe-haven flows into Gold.

Daily digest market movers: Gold rally stalls as US Dollar firms up

• US consumer prices are expected to confirm that inflation remains sticky above the Fed’s 2% target rate. The headline CPI is seen growing by 0.3% in the month and by 2.7% yearly, faster than the 0.2% and 2.6% increases seen in October. The core CPI is expected to have increased at a steady 0.3% monthly and at a 3.3% yearly pace.
   
• The CME Group’s Fed Watch Tool shows that futures markets are pricing an 86% chance of a 25 bps Fed cut after the December 17-18 meeting, and between two to three more cuts in 2025.
   
• In Syria, the rebels have appointed the Islamist Mohammed al-Bashir as the transitional prime minister. The US and Israel have been attacking the infrastructure of the Islamic State and Syrian army bases. There is a tense calm but uncertainty about the success of the provisional government remains high.
   
• Later today, the Bank of Canada (BoC) is expected to deliver a second consecutive 50 bps cut. The Swiss National Bank (SNB) and the European Central Bank (ECB) are expected to cut their respective benchmark rates by a quarter-percentage point on Thursday.

Technical analysis: XAU/USD consolidates gains right below $2,700

Gold’s recent rally has lost some steam, with US Treasury yields bouncing up and the US Dollar appreciating ahead of the US CPI release. The broader trend, however, remains positive, with downside attempts limited above the top of the last two week’s previous range at $2,675.

Above the mentioned $2,700, the November 24 high at $2,720 will come into view ahead of the November 4,5 and 6 highs at around $2,750. 

On the downside, immediate support is the intra-day low at $2,675 and then the December 9 low at $2,630, followed by the channel bottom (November 26 and December 5 lows) at $2,610.

 XAU/USD 4-Hour Chart

USD/SGD traded a subdued range. Pair was last seen at 1.3466, OCBC’s FX analyst Christopher Wong notes.

Slight bias to downside

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

“Pair should continue to take directional cues from USD and CNY fix in absence of key data. Next set of SG data is NODX (17 Dec) and CPI (23 Dec). S$NEER strengthened; last at 1.1% above model-implied mid.”

A large consensus is that the Bank of Canada (BoC) is expected to cut interest rates another time by 50 basis points today, from 3.75% to 3.25%, Commerzbank’s FX analyst Antje Praefcke notes.

CAD to have a hard time against the USD

“This is not only supported by the weak labor market, but also by recent weak growth. At the same time, the BoC is likely to look through the recent rise in inflation and focus instead on the disinflation successes of recent months. It will likely be important what the BoC says about next year.”

“The market expects further interest rate cuts, albeit at a slower pace. Given the weak growth, the risk of US tariffs on Canadian exports and the prospect of a further widening of the interest rate differential, the CAD will continue to have a hard time against the US dollar for the time being.”

• USD/CAD trades in a limited range ahead of the US inflation data release and the BoC policy announcement.
• US core CPI is estimated to have grown steadily in November.
• The BoC is expected to cut interest rates by 50 bps to 3.25%.

The USD/CAD pair consolidates in a tight range below the round-level resistance of 1.4200 in the European trading session on Wednesday. The Loonie pair trades sideways as investors await the United States (US) Consumer Price Index (CPI) data for November and the Bank of Canada’s (BoC) monetary policy decision, which are scheduled for the North American session.

Ahead of the US inflation data, the US Dollar (USD) revisits the weekly high after extending the winning streak for the fourth trading day, with the US Dollar Index (DXY) advancing to near 106.70. Market sentiment is slightly cautious as the inflation data would influence expectations for the Federal Reserve’s (Fed) likely interest rate action in the policy meeting on December 18.

Monthly and annual headline inflation are estimated to have grown by 0.3% and 2.7%, respectively, faster than their former readings. The core CPI – which excludes volatile food and energy prices – is expected to have risen steadily by 0.3% and 3.3% on month and annually, respectively.

Signs of a slowdown in inflationary pressures could boost dovish Fed bets. On the contrary, hot figures could weaken the same. According to a Reuters poll, 90% of economists expect that there will be a 25-basis points (bps) interest rate reduction by the Fed next week.

Meanwhile, the Canadian Dollar (CAD) will be influenced by the BoC’s policy meeting in which the central bank is expected to cut interest rates again by 50 bps to 3.25%. This would be the second consecutive outsize interest rate reduction by the BoC as it also cut its key borrowing rates by 50 bps in the October meeting and the fifth in a row. The BoC has already reduced its interest rates by 125 bps this year.

USD/JPY eased lower this morning after PPI came in higher than expected. Last seen at 151.45 levels, OCBC’s FX analyst Christopher Wong notes.

Bias to sell rallies remains on the table

“Bearish momentum on daily chart shows signs of fading but rise in RSI slowed. Moving averages compression observed, with 21, 50, 200 DMAs converging. This typically precedes a directional break-out trade. Resistance at 152 levels (50, 200 DMAs) and 152.60/70 levels (21 DMA, 23.6% fibo). Support at 150.20 (38.2% fibo), 148.70 levels (100 DMA) and 148.20 (38.2% fibo retracement of Sep low to Nov high). We retain a bias to sell rallies.”

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

“The risk is a slowdown in Fed and/or BoJ’s pace of policy normalization as a slowdown may affect USD/JPY’s moves.”

US Dollar (USD) could test the 7.2400 level before a more sustained rebound is likely. 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: “We noted yesterday that USD ‘is under mild downward pressure and could edge lower to 7.2540.’ However, we were of the view that ‘the major support at 7.2400 is unlikely to be tested.’ USD subsequently fell more than expected to 7.2420 before rebounding to close at 7.2609, lower by 0.10%. There has been a slight increase in momentum. Today, USD could test the 7.2400 level before a more sustained rebound is likely. A sustained break below 7.2400 appears unlikely. On the upside, should USD break above 7.2750 (minor resistance is at 7.2660), it would suggest that USD is not weakening further.”

1-3 WEEKS VIEW: “Current price movements are likely part of range trading, probably between 7.2400 and 7.2900. 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.’ Yesterday, USD dropped to a low of 7.2420 before rebounding. The slight increase in momentum is not enough to indicate a sustained decline. Looking ahead, if USD were to break clearly below 7.2400, it could trigger further decline to 7.2200.”

For Euro (EUR), the focus is on ECB tomorrow before Germany’s vote of confidence next Monday. German Chancellor Scholz is expected to call for a vote of confidence today and the Bundestag will vote next Monday on 16 December. Political risks in Europe and concerns of dovish ECB may continue to limit the extent of any EUR’s upmove, until we get some clarity, OCBC’s FX analyst Christopher Wong notes.

Consolidation very much likely

“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 February 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.”

“Tomorrow, ECB meeting takes centerstage. Markets are now pricing just a 25bp cut but OISimplied has priced in back-to-back cuts for 1H next year, taking rates to below 2% in June 2025, or even 1.75% in July. The aggressive dovish pricing reflects a recession-driven rate cut cycle rather than a policy normalization. Nevertheless, we will pay closer attention to Lagarde’s press conference for clues on how policymakers assess growth outlook to be.”

“Daily momentum is mild bullish but RSI fell. Consolidation likely. Broader price pattern shows a classic formation of an inverted head & shoulders pattern, which is typically associated with a bullish reversal. Neckline comes in at 1.0610/20 levels. Break-out puts 1.0670 (38.2% fibo) within reach before next resistance comes in at 1.0750/75 levels (50 DMA, 50% fibo). Support at 1.0540/50 levels (23.6% fibo, 21 DMA), 1.0460 levels.”

After the inflation numbers in Hungary and the Czech Republic, this morning we also saw the numbers in Romania. November inflation rose from 4.7% to 5.1%, slightly above market expectations, ING’s FX analyst Chris Turner notes.

The complete inflation picture

“Although inflation should fall again in the coming months, we see the National Bank of Romania returning to rate cuts in the second quarter of next year at the earliest. However, for now, the main theme remains the fiscal and political situation after the election in Romania. This is probably the NBR's focus for now as well and inflation is more of a secondary theme.”

“Market attention should shift to the sovereign bond auctions in Poland and the Czech Republic before the end of the year. In both cases, we should see lower supply in December than in previous months supporting bond valuations. However, weak demand remains an issue in Poland, which should indicate an outlook for next year where supply will remain heavy.”

“FX remains rather muted in EUR-crosses where the Hungarian forint saw some retracement of previous fast gains. The Polish zloty and Czech Republic koruna remain fairly priced versus rates for now in our view. However, we see more CEE weakness against USD crosses coming from the EUR/USD dip, which remains our view since the US election.”

USD/CHF inched higher overnight, tracking broader US Dollar (USD) moves and in anticipation of SNB meeting on Thursday. Pair was last at 0.8848 levels. Last CPI print saw a small uptick to 0.7% for Nov but largely, on trend basis, inflationary pressure has come off significantly from peak of 3.5% in Aug 2023 to 0.6% in Oct 2024, OCBC’s FX analyst Christopher Wong notes.

Risks somewhat skewed to the upside

“Another 25bp cut is likely this Thu though markets have priced in ~50% chance of a jumbo 50bp cut. We will be watching for any SNB surprises on this front, as SNB Chair had said that the SNB will re-introduce negative interest rates if necessary. He added that even though SNB did not like negative rates, SNB could use negative rates as a tool to weaken CHF. So clearly, policymakers are against CHF strength.”

“If the dovish rhetoric remains, then the room for CHF to appreciate may be more restrained (unless USD falls further). Overall, we maintain a mild bearish bias on CHF on the back of dovish SNB, 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.”

“Bearish momentum on daily chart is fading while RSI rose. Risks somewhat skewed to the upside. Resistance here at 0.89 (61.8% fibo retracement of 2024 high to low). Support at 0.88, 0.8730 (50 DMA), 0.8640 (100 DMA).”

Citing people familiar with the matter, Bloomberg reported on Wednesday that the Bank of Japan (BoJ) policymakers see little cost to waiting for the next rate hike.

Some BoJ officials remain open to a hike next week depending on data and market developments, the sources said.

According to the sources, the BoJ officials see less risk of a weak Yen pushing up inflation.

Market reaction

Following these headlines, the Japanese Yen came under intense selling pressure, driving USD/JPY back above 152.50. The pair is up 0.41% on the day, as of writing.

EUR/GBP is closing in on a major support level at 0.82. And were it not for the strong dollar, the Bank of England's trade-weighted sterling index would be pushing to new highs of the year. Two related factors are driving the sterling move, ING’s FX analyst Chris Turner notes.

GBP pays the highest deposit rates in the G10 space

“The first is that a functioning UK government and some mild fiscal stimulus stand in contrast to the current political impasse in continental Europe. This means UK growth will be stronger than the eurozone's next year. And because of that, the Bank of England policy trajectory is being priced much closer to the Fed than the ECB.  This is keeping sterling hedging costs relatively high, where one-year EUR:GBP swap rate differentials remain at 200bp.” 

“Should EUR/GBP break 0.8200, expect to hear many reports of sterling returning to pre-Brexit levels – probably linking that to warming relations between the new UK Labour government and the EU. We think GBP can continue to perform well over the coming months (GBP pays the highest deposit rates in the G10 space), but our main concern is that the BoE turns more dovish in February once services inflation finally delivers another sizable leg lower.”

“For the time being, however, it is all eyes on 0.8200 in EUR/GBP.”

• GBP/JPY recovers daily losses ahead of the US inflation report.
• The JPY depreciates due to uncertain expectations for BoJ's further rate hikes.
• The Pound Sterling receives support from the increased likelihood of the BoE to keep its rates unchanged at 4.75% in December.

GBP/JPY recovers its daily losses and extends its gains for the third successive day, trading around 194.20 during the European session on Wednesday. However, the GBP/JPY cross faced challenges as the Japanese Yen (JPY) gained ground due to robust Producer Price Index (PPI) data, which suggested the possibility of further policy tightening by the Bank of Japan (BoJ).

The GBP/JPY cross may appreciate further, as the JPY struggles to maintain strong bullish momentum amid mixed sentiments surrounding the BoJ’s willingness to proceed with another rate hike in December.

While BoJ Governor Kazuo Ueda has suggested that the timing for the next rate hike is drawing closer, supported by robust underlying inflation data, dovish BoJ board member Toyoaki Nakamura has cautioned against raising rates prematurely, further fueling skepticism about the BoJ’s policy trajectory.

Moreover, the GBP/JPY cross regains its ground as the Pound Sterling (GBP) receives support from increased market confidence in the Bank of England (BoE) to keep its interest rates unchanged at 4.75% in December’s monetary policy decision.

BoE policymakers are anticipated to vote to keep interest rates unchanged, as UK headline inflation has risen again after briefly falling below the bank's 2% target. The central bank had previously forecasted a rebound in inflation following its temporary alignment with the target range.

Traders are likely to focus on the UK’s October monthly Gross Domestic Product (GDP) and Industrial and Manufacturing Production data. Economists anticipate growth in factory output and GDP following declines in September.

Scope for US Dollar (USD) to test 152.45 before the risk of a pullback increases. In the longer run, USD must break and hold above 152.45 before further advances can be expected, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Above 152.45 further advances can be expected

24-HOUR VIEW: “After USD rose sharply two days ago, we indicated yesterday that ‘while further USD strength appears likely, any advance is unlikely to breach the major resistance at 152.00.’ The anticipated advance exceeded our expectations as USD rose to 152.17. While the rapid rise appears to be excessive, there is scope for USD to test 152.45 before the risk of a pullback increases. Today, a sustained break above 152.45 seems unlikely. To keep the momentum going, USD must hold above 151.20 (minor support is at 151.50).”

1-3 WEEKS VIEW: “Last Thursday (05 Dec, spot at 150.35), we highlighted that the recent USD weakness ‘appears to have stabilised.’ We also highlighted that ‘the current price movements are likely the early stages of a range trading phase, probably between 148.65 and 152.00.’ Although USD broke above 152.00 and reached a high of 152.17 yesterday, the increase in momentum is not enough to indicate a sustained rise. USD must break and hold above 152.45 before further advances can be expected. The likelihood of USD breaking clearly above 152.45 will remain intact, provided that the ‘strong support’ level, currently at 150.45 is not breached in the next few days.”

US CPI is upon us tonight (930pm SGT) and this should give Fed officials a final look at inflation environment ahead of next week’s FOMC. A 25bp cut is more or less a done deal for next week’s FOMC unless US CPI unexpectedly surprises a lot to the upside. DXY was last at 106.56, OCBC’s FX analyst Christopher Wong notes.

Daily momentum is mild bearish

“Headline CPI may have ticked higher partly because of the base effect but core CPI is expected to come in steady at 3.3%. For DXY, there could be room for downside should core CPI come in softer. But given FOMC, and a refreshed dot plot next week, there may also be limitations to how much lower the USD can go.”

“Daily momentum is mild bearish while RSI is flat. Head and shoulders pattern appears to have formed but DXY has yet to break below the neckline. A decisive break below neckline should see bears gather momentum.”

“Support at 105 levels (38.2% fibo retracement of Sep low to Nov high), 104.60 (50 DMA) and 104.10 (200 DMA, 50% fibo). Resistance at 106.70 (second shoulder). Tomorrow brings PPI data.”

Silver prices (XAG/USD) fell on Wednesday, according to FXStreet data. Silver trades at $31.73 per troy ounce, down 0.27% from the $31.82 it cost on Tuesday.

Silver prices have increased by 33.36% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 84.84 on Wednesday, up from 84.60 on Tuesday.

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

• EUR/USD tests region below 1.0500 as the Euro (EUR) weakens, weighed by expectations of further ECB interest-rate cuts.
• The ECB is expected to cut its Deposit Facility rate by 25 bps on Thursday for the third meeting in a row.
• Investors await the US inflation data for fresh interest-rate guidance.

EUR/USD extends its downside around the psychological support of 1.0500 in Wednesday’s European session. The major currency pair weakens due to firm expectations that the European Central Bank (ECB) will reduce its Deposit Facility rate by 25 basis points (bps) to 3% in the policy meeting on Thursday and US Dollar (USD) strength ahead of the United States (US) Consumer Price Index (CPI) data for November. 

As for the ECB, a rate cut would be the third straight one in a row and the fourth this year.

A 25-bps interest rate reduction by the ECB is widely anticipated as policymakers are increasingly convinced that inflation is under control and increasing signs that Eurozone business activity is struggling. Meanwhile, a handful of ECB officials see risks of inflation undershooting the central bank’s target due to potential tariff threats by US President-elect Donald Trump and weak domestic demand.

With traders pricing in an ECB rate cut on Thursday, investors will pay close attention to President Christine Lagarde’s comments in the press conference after the policy decision for fresh interest-rate guidance. Lagarde could deliver somewhat dovish remarks due to political instability in Germany and France and the potential adverse impact of Trump’s tariffs on the export sector.

Daily digest market movers: EUR/USD under pressure ahead of US inflation data

• EUR/USD is down as the US Dollar extends its winning streak for the fourth trading session ahead of the US inflation report, which will be published at 13:30 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, climbs above 106.50.
• Economists expect annual headline inflation to have accelerated to 2.7% from the October reading of 2.6%. In the same period, the core CPI – which excludes volatile food and energy prices – is expected to have risen steadily by 3.3%. The month-on-month headline and core CPI are estimated to have grown by 0.3%.
• The impact of the inflation data shouldn’t significantly tweak market expectations for the Federal Reserve’s (Fed) likely interest rate action in the policy meeting on December 18 unless there is a dramatic deviation from what’s expected. Recent commentaries from a majority of Fed officials have indicated that they are confident about inflation remaining on a sustainable path towards the bank’s target of 2%.
• According to the CME FedWatch tool, the probability for the Fed to reduce interest rates by 25 bps to 4.25%-4.50% is almost 90%. 

Technical Analysis: EUR/USD struggles to hold 1.0500

EUR/USD struggles near the psychological figure of 1.0500. The outlook of the major currency pair remains bearish as the 20-day EMA near 1.0565 acts as key resistance for the Euro (EUR) bulls.

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

Looking down, the November 22 low of 1.0330 will be a key support. On the flip side, the 50-day EMA near 1.0700 will be the key barrier for the Euro bulls.

New Zealand Dollar (NZD) could decline further but may not be able to break clearly below the major support at 0.5770. In the longer run, NZD may decline below 0.5770, but it remains to be seen if it can maintain a foothold below this level, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD may decline below 0.5770

24-HOUR VIEW: “Following NZD’s sharp rise to 0.5888 on Monday, we pointed out yesterday (Tuesday) that ‘the rapid rise appears to be overdone, and instead of continuing to rise, NZD is more likely to trade between 0.5825 and 0.5890.’ Instead of trading in a range, NZD plummeted to 0.5792, closing on a weak note at 0.5801 (-1.10%). The strong downward momentum signals further declines, but deeply oversold conditions suggest NZD may not be able to break clearly below the major support at 0.5770. To sustain the oversold momentum, NZD must remain below 0.5835 (minor resistance is at 0.5820).”

1-3 WEEKS VIEW: “On Monday (09 Dec), when NZD was at 0.5860, we indicated that it ‘is likely to trade with a downward bias, but the likelihood of it reaching 0.5770 is not high for now.’ After NZD rebounded strongly, we indicated yesterday (10 Dec, spot at 0.5860) that ‘although our strong resistance’ at 0.5890 has not been breached yet, the slowing momentum suggests the likelihood of NZD declining to 0.5770 has diminished.’ We did not expect NZD to then drop to 0.5792. While the price action suggests NZD may decline below 0.5770 this time around, it remains to be seen if it can maintain a foothold below this level. On the upside, the ‘strong resistance’ level has moved lower to 0.5865 from 0.5890. Looking ahead, the next level to monitor below 0.5770 is 0.5740.”

The European data calendar is quiet this week, and investors await the main event of the week – Thursday’s ECB decision. This month EUR/USD is staying offered despite a strong seasonal bullish tendency, ING’s FX analyst Chris Turner notes.

January and February may become bearish for EUR/USD

“Market pricing has settled on a 25bp ECB rate cut – with which we agree – although a dovish press conference from President Lagarde could keep the euro offered. Certainly, rate differentials remain very wide in favour of the dollar, although it will probably now require a hawkish repricing of the Fed curve to drive this differential wider from current levels.”

“For EUR/USD today, the focus will largely be on the US CPI reading and perhaps, too, on the Bank of Canada decision. Technical indicators suggest EUR/USD is now ready to restart its bear trend should macro and geopolitical inputs allow. For that reason, we have a preference that 1.0550/70 may be the best EUR/USD level of the day and look for catalysts to take it down to the 1.0450 area.” 

“This month EUR/USD is staying offered despite a strong seasonal bullish tendency. Typically January and February prove bearish months for EUR/USD. We suspect corporate America would be very grateful for any EUR/USD bounce into which they would offload the euro.”

• AUD/USD hits a fresh year-to-date low and is pressured by a combination of factors.
• The RBA’s dovish tilt and China’s economic woes continue to weigh on the Aussie.
• Bets for a slower Fed rate cut path underpin the USD ahead of the US CPI report.

The AUD/USD pair remains under some selling pressure for the second straight day on Wednesday and drops to the 0.6340 area, or the lowest level since November 2023 during the first half of the European session. Moreover, the fundamental backdrop suggests that the path of least resistance for spot prices remains to the downside, though bearish traders might await the release of the US consumer inflation figures before placing fresh bets. 

The crucial US Consumer Price Index (CPI) report will be looked upon for the interest rate outlook in the US and guide the Federal Reserve (Fed) policymakers on their decision next week. This, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide a fresh directional impetus to the AUD/USD pair. In the meantime, the growing conviction that the US central bank will adopt a cautious stance on cutting interest rates remains support of a further rise in the US Treasury bond yields. Apart from this, persistent geopolitical risks lift the safe-haven buck to a one-week high and continue to weigh on the currency pair. 

The Australian Dollar (AUD), on the other hand, is undermined by the Reserve Bank of Australia's (RBA) dovish tilt, which is seen as another factor that contributes to the offered tone surrounding the AUD/USD pair. The RBA, in its monetary policy statement released on Tuesday, said that the board has gained confidence that inflation was heading towards the 2%-3% annual target. Moreover, the central bank omitted the previous line that policy needs to remain restrictive, reaffirming bets for an early rate cut. Apart from this, worries about China's fragile economic recovery and US-China trade war fears validate the negative outlook for the currency pair. 

The aforementioned fundamental backdrop suggests that an immediate market reaction to softer US CPI print is more likely to be limited. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. Hence, any attempted recovery in the AUD/USD pair could be seen as a selling opportunity and run the risk of fizzling out rather quickly.

The Australian Dollar (AUD) could weaken further; given the deeply oversold conditions, it remains to be seen if it can break below 0.6350. 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.

Below 0.6350 further decline can be expected

24-HOUR VIEW: “We did not expect AUD to plummet to 0.6366 yesterday (we were expecting range trading). Further weakness is not ruled out, but given the deeply oversold conditions, it remains to be seen if AUD can break below 0.6350. On the upside, a breach of 0.6420 (minor resistance is at 0.6395) would indicate that the current downward pressure has eased.”

1-3 WEEKS VIEW: “We revised our view from negative to neutral yesterday (10 Dec, spot at 0.6440), indicating that ‘the current price movements are likely part of a consolidation phase, expected to be in a range of 0.6375/0.6500.’ We did not anticipate AUD to drop to 0.6366. While downward momentum is beginning to build again, it is not enough to signal a sustained decline. AUD has to break and remain below the significant support at 0.6350 before further weakness can be expected. The probability of AUD breaking clearly below 0.6350 will remain in place as long as 0.6445 is not breached. Looking ahead, the next support level below 0.6350 is at 0.6310.”

• Bank of Canada is expected to cut its policy rate by 50 bps.
• The Canadian Dollar fell to fresh four-year lows against the US Dollar.
• Headline inflation in Canada ticked modestly higher in October.

The Bank of Canada (BoC) will announce its decision on monetary policy on Wednesday. The BoC is widely anticipated to trim the benchmark interest rate by 50 basis points (bps), taking it down to 3.25% and totalling 175 bps in cuts since entering the tightening cycle in June.

Ahead of the announcement, the Canadian Dollar (CAD) hovers around its lowest in four years against its American rival. The US Dollar (USD) firmed up particularly in the last quarter of the year, as investors welcomed the Federal Reserve’s (Fed) decision to also quick-start the monetary tightening path. The result of the United States (US) presidential election also backs the Greenback, as the Republican party will return to the White House in 2025 by the hand of Donald Trump. 

Canadian economic growth is still a concern

Growth in Canada remains in the eye of the storm. The real Gross Domestic Product (GDP) increased by 0.3% in the third quarter of the year after rising 0.5% in both the second and first quarters. GDP is tracking below BoC’s forecast in the second half of the year, meaning rate cuts have yet to significantly impact economic progress. 

Meanwhile, inflation has remained within the central bank’s goal. According to the latest release from Statistics Canada, the Consumer Price Index (CPI) rose by 2.0% in October,  higher than the 1.6% posted in September and above the market expectations of 1.9%. On a monthly basis, the CPI gained 0.4%, reversing the previous 0.4% monthly decline and also coming in above estimates. Additionally, core CPI, which strips out volatile items like food and energy, showed an annual uptick to 1.7% from 1.6% in September. On a monthly basis, core CPI gained by 0.4% compared to September's flat reading.

The uptick in price pressures indeed is not good news for the BoC, yet it is far from concerning. The central bank has clarified in its latest Monetary Policy Report that they expect headline inflation to remain close to target levels for the foreseeable future, as risks to inflation are roughly balanced out. Policymakers also expect GDP to expand a modest 1.2% this year but improve in 2025 by growing 2.1%. 

“Canadians can breathe a sigh of relief. It’s a good news story,” BoC Governor Tiff Macklem said during a press conference after the rate announcement. “It’s been a long fight against inflation, but it’s worked, and we’re coming out the other side.”

“Now our focus is to maintain low, stable inflation. We need to stick the landing,” Macklem added.

As a side note, the US will release the November Consumer Price Index (CPI) briefly before the BoC announcement. US inflation figures may have a substantial impact on USD/CAD, particularly if the CPI is hotter than anticipated, given the Federal Reserve (Fed) is scheduled to meet next week.

When will the BoC release its monetary policy decision and how could it affect USD/CAD?

The Bank of Canada will announce its policy decision at 14:45 GMT on Wednesday, followed by a press conference from Governor Macklem at 15:30 GMT. As previously stated, the BoC is anticipated to trim the benchmark interest rate by 50 bps. 

A reading in line with the market expectations will have a modest negative impact on the CAD, with the main focus shifting to Macklem’s words. Market players will be looking for hints on whatever policymakers are planning in the near future to rush to price it in.

Surprise decisions, as usual, will have a larger impact on price. A modest 25 bps interest rate cut could be read as “hawkish," resulting in a stronger CAD. 

Valeria Bednarik, Chief Analyst at FXStreet, notes: “The USD/CAD pair neared the 1.4200 level before retreating from the area, still at risk of extending its advance. The broad US Dollar’s strength is unlikely to recede beyond intraday woes. From a technical perspective, USD/CAD is bullish, yet a corrective decline is on the cards. An initial bearish target and potential support level is 1.4104, the November 15 daily high. A break below the level exposes the 1.3920 - 1.3930 price zone.”

Bednarik adds: “A dovish message regarding future interest rate movements may help the pair breach the 1.4200 mark. USD/CAD may then run towards 1.4297, the April 2020 monthly high.”

Today's Bank of Canada (BoC) decision may have some read over to the US, ING’s FX analyst Chris Turner notes.

BoC rate policy is going to move USD/CAD

“Two-thirds of economists polled on the subject expect a 50bp rate from the BoC – where the BoC would emulate peers in New Zealand, who have delivered back-to-back 50bp rate cuts. Money markets also price 44bp of Canadian rate cuts today. Our thinking goes as follows: if the BoC cuts by 50bp, briefly taking the Fed-BoC policy rate spread to a hugely wide 150bp, the BoC will have a strong view that the Fed cuts 25bp next week.”

“Under this scenario, the Canadian dollar weakens, but also the US dollar could soften a little as expectations of a 25bp Fed cut are firmed up. Should the BoC surprise and only cut by 25bp, it will be a signal that the BoC has strong doubts about next week's Fed cut.”

“For example, we doubt the BoC is ready to leave the Fed-BoC rate spread at 150bp at year-end (BoC cuts by 50bp to 3.25%, Fed leaves rates at 4.75%), where such a wide rate differential would send USD/CAD upwards of 1.43. If indeed the BoC only cuts by 25bp then the US dollar might catch a bid on the view that next week's FOMC meeting really is a toss-up after all!”

Pound Sterling (GBP) may edge higher; as momentum is not strong for now, any advance is unlikely to break above 1.2810. In the longer run, momentum is beginning to slow; GBP has to break and hold above 1.2810, or the chance of a rise to 1.2850 will diminish quickly, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Below 1.2810, the chance of a rise to 1.2850 to diminish quickly

24-HOUR VIEW: “We expected GBP to trade in a 1.2710/1.2790 range yesterday. It then traded in a narrower range of 1.2725/1.2777, closing modestly higher at 1.2772 (+0.16%). The price action has resulted in a slight increase in momentum. Today, GBP may edge higher, but as momentum is not strong for now, any advance is unlikely to break above 1.2810. Support is at 1.2750; a breach of 1.2725 would indicate that the current mild upward pressure has faded.”

1-3 WEEKS VIEW: “We highlighted last Friday (06 Dec, spot at 1.2760) that ‘there has been a strong surge in momentum,’ and we were of the view that GBP ‘may rise to 1.2850.’ GBP traded in a range over the past couple of days, and upward momentum is beginning to slow. 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. Conversely, a breach of 1.2700 (‘strong support’ level previously at 1.2685) would suggest that it is not ready to head higher to 1.2850.”

The US Dollar (USD) has come back bid – partly on the exceptionally strong US NFIB small business optimism index released yesterday. Perhaps it should be no surprise that US entrepreneurs welcomed the prospect of tax cuts and deregulation next year. At the top of the agenda today is the release of November US CPI, ING’s FX analyst Chris Turner notes.

US CPI to shape the movement

“At the top of the agenda today is the 1430 CET release of November US CPI. While it is tempting to say that the Fed has moved on from the inflation story, any upside surprise to the already high consensus expectation for core inflation at 0.3% month-on-month would likely send the dollar higher.”

“This is because the market now prices an 88% chance of a 25bp Fed rate cut next Wednesday and a high core CPI reading could make it more of a 50:50 proposition.”

Chance for Euro (EUR) to retest the 1.0500 level before a more sustained recovery is likely. In the longer run, current price movements are likely part of a range trading phase, expected to be between 1.0465 and 1.0610, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR expected to trade between 1.0465 and 1.0610

24-HOUR VIEW: “Our view of sideways trading yesterday was incorrect. Instead of trading sideways, EUR fell to 1.0498 before recovering to close at 1.0526 (-0.25%). Despite the decline, downward momentum has not increased much. That said, there is a chance for EUR to retest the 1.0500 level before a more sustained recovery is likely. The major support at 1.0465 is unlikely to come under threat. On the upside, resistance levels are at 1.0545 and 1.0570.”

1-3 WEEKS VIEW: “In our most recent narrative from last Friday (06 Dec, spot at 1.0585), we indicated that EUR ‘has to break and remain above 1.0610 before further advance to 1.0650 is likely.’ Yesterday, EUR dropped to a low of 1.0498. Although our ‘strong support’ level of 1.0500 was only slightly breached, upward momentum has largely faded. The current price movements are likely part of range trading phase, expected to be between 1.0465 and 1.0610.”

• NZD/USD tests its two-year low at 0.5772, a level last seen in November 2023.
• An upward correction could be triggered once the 14-day RSI drops below the 30 mark.
• The nine-day EMA at 0.5839 appears as the primary resistance level.

The NZD/USD pair extends its gains for the second successive day, trading around 0.5780 during the European session on Wednesday. Technical analysis of the daily chart suggests a strengthening bearish bias as the pair is confined within a descending channel pattern.

Additionally, the NZD/USD pair remains trading below the nine- and 14-day Exponential Moving Averages (EMAs), signaling weak short-term price momentum. Furthermore, the 14-day Relative Strength Index (RSI) falls toward the 30 level, reflecting a predominantly bearish sentiment. A drop below the 30 level would indicate an oversold condition, potentially triggering an upward correction.

The immediate support for NZD/USD lies at the two-year low of 0.5772 level, last seen in November 2023. A break below this level could strengthen the bearish sentiment and push the pair to approach the lower boundary of the descending channel at 0.5720 level.

On the upside, NZD/USD may find initial resistance at the nine-day EMA at 0.5839 level, followed by the descending channel’s upper boundary at 0.5850 level. A break above this channel would weaken the bearish bias and support the pair to explore the region around its four-week high of 0.5930 level.

NZD/USD: Daily Chart

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser said in a scheduled speech in Sydney on Wednesday that the “direct impact of any US tariffs on Australia is likely to be limited.”

Additional quotes

Market reaction

AUD/USD is off the multi-month low but remains 0.40% lower on the day, near 0.6360, as of writing.

• AUD/JPY depreciates as traders exercise caution ahead of the US CPI report.
• The Australian Dollar faced challenges as the RBA Governor Bullock stated that upside inflation risks have eased.
• The JPY gained ground as robust Japan's PPI data suggested the possibility of further BoJ’s rate hikes.

AUD/JPY continues to lose ground for the second successive day, trading around 96.30 during early European hours on Wednesday. The risk-sensitive Australian Dollar (AUD) faces challenges against its major peers due to market caution ahead of crucial US November Consumer Price Index (CPI) data, which are expected to be released later in the North American session.

The downside of the AUD/JPY cross could be attributed to a weaker Aussie Dollar following less hawkish remarks from the Reserve Bank of Australia (RBA) Governor Michele Bullock in the post-meeting conference held on Tuesday.

RBA Governor Bullock highlighted that while upside inflation risks have eased, they persist and require ongoing vigilance. Bullock also stated that the RBA will closely monitor all economic data, including employment figures, to guide future policy decisions. The Reserve Bank of Australia decided to keep the Official Cash Rate (OCR) unchanged at 4.35% in its final policy meeting in December.

The AUD/JPY pair faced downward pressure due to a stronger Japanese Yen (JPY), driven by robust Producer Price Index (PPI) data, which suggests the possibility of further policy tightening by the Bank of Japan (BoJ).

However, the JPY lacks strong bullish momentum, as uncertainty lingers over the BoJ’s willingness to implement another rate hike in December. While BoJ Governor Kazuo Ueda recently hinted that the timing for the next rate hike is approaching, supported by solid underlying inflation data, dovish BoJ board member Toyoaki Nakamura has warned against premature rate increases, adding to the skepticism surrounding the BoJ’s policy direction.

• The Pound Sterling oscillates in a tight range near 1.2750 against the US Dollar ahead of the US inflation data for November.
• Economists expect the Fed to cut interest rates by 25 bps after the policy meeting on December 18.
• Investors await the UK monthly GDP data to get cues about the current status of the economy.

The Pound Sterling (GBP) trades in a tight range near 1.2750 against the US Dollar (USD) in Wednesday’s European session. The GBP/USD pair consolidates as investors appear to be sidelined ahead of the United States (US) Consumer Price Index (CPI) data for November, which will be published at 13:30 GMT.

The inflation report is expected to show that the annual headline CPI accelerated at a faster pace to 2.7% from the prior release of 2.6%. The core CPI – which excludes volatile food and energy prices – is expected to have risen steadily at 3.3%. The month-on-month headline and core CPI are expected to have grown by 0.3%.

The inflation data is unlikely to influence Federal Reserve (Fed) interest rate expectations for the policy meeting on December 18 unless the data deviates from expectations significantly.

According to the latest Reuters poll, 90% of economists expect that there will be a 25-basis points (bps) interest rate reduction next week. The poll also showed that a majority of economists expect the Fed to pause the policy-easing spree from the first policy meeting of 2025 in January, assuming that policies of higher import tariffs and lower taxes by US President-elect Donald Trump will be inflationary.

Daily digest market movers: Pound Sterling looks at US inflation, UK  monthly GDP

• Like the US Dollar, the Pound Sterling is also struggling for a direction against other major currencies amid the light United Kingdom (UK) economic calendar. Therefore, the British currency will be influenced by market expectations for the Bank of England’s (BoE) likely interest rate action in the policy meeting on December 19.
• Traders expect the BoE to leave interest rates unchanged at 4.75% next week as price pressures persist. Ahead of the BoE policy decision, employment data for three months ending October and the Consumer Price Index (CPI) data for November will be released, which could influence BoE interest rate expectations.
• Meanwhile, growing concerns over UK labor market strength could compel BoE officials to deliver a dovish interest rate guidance. A recent survey by the BoE Decision Maker Panel (DMP) showed that one-year forward employment growth expectations fell to four-year lows. 
• Later this week, investors will focus on the UK monthly Gross Domestic Product (GDP), and Industrial and Manufacturing Production data for October. The GDP and factory data will show the current status of economic health. Economists expect the factory and GDP data to have expanded after declining in September.

Technical Analysis: Pound Sterling consolidates above 20-day EMA

The Pound Sterling strives to reclaim the key resistance of 1.2800 against the US Dollar. The GBP/USD pair holds slightly above the 20-day Exponential Moving Average (EMA) around 1.2720.

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

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

Here is what you need to know on Wednesday, December 11:

The US Dollar (USD) stays resilient against its major rivals early Wednesday, with the USD Index holding comfortably above 106.00. The US Bureau of Labor Statistics will publish the Consumer Price Index (CPI) data for November. Additionally, the Bank of Canada (BoC) will announce monetary policy decisions following the last meeting of the year.

The cautious market mood helped the USD find demand during the American trading hours on Tuesday. Moreover, the benchmark 10-year US Treasury bond yield recovered above 4.2%, further supporting the currency. On a yearly basis, the CPI is forecast to rise 2.7% in November following the 2.6% increase recorded in October. The core CPI, which excludes volatile food and energy prices, is expected to rise 0.3% on a monthly basis. Ahead of this key CPI report, US stock index futures marginally higher on the day.

USD/CAD edged higher on Tuesday and touched its strongest level since April 2020 near 1.4200. The pair stays in a consolidation phase above 1.4150 in the European morning on Wednesday. The BoC is expected to lower the policy by 50 basis points to 3.25%. BoC Governor Tiff Macklem will deliver the policy statement and respond to questions in a press conference starting at 15:30 GMT.

EUR/USD closed marginally lower on Tuesday and continued to stretch lower early Wednesday. Nevertheless, the pair manages to hold above 1.0500 to begin the European session.

GBP/USD failed to gather bullish momentum and registered small gains on Tuesday. The pair stays relatively quiet at around 1.2750 in the European morning.

The data from Japan showed on Wednesday that the Producer Price Index rose 3.7% on a yearly basis in November, coming in above the market expectation of 3.4%. After closing in the green on Monday and Tuesday, USD/JPY edges lower and trades near 151.50 on Wednesday.

Gold preserved its bullish momentum following Monday's rally and registered strong gains on Tuesday. After testing $2,700 in the Asian session on Wednesday, XAU/USD corrected lower and was last seen trading at around $2,690.

• WTI price appreciates as China announced plans to adopt proactive fiscal stimulus measures next year.
• API Weekly Crude Oil Stock rose by 0.499 million barrels against an expected decrease of 1.30 million barrels.
• Traders are anticipating the upcoming OPEC Monthly Oil Market Report to evaluate crude Oil market trends for the year ahead.

West Texas Intermediate (WTI) Oil price extends its gains for the third successive session, trading around $68.80 per barrel during Asian hours on Wednesday. Crude Oil prices gained ground as the demand outlook improved following the Politburo’s announcement that China to adopt a “moderately loose” monetary policy and a “more proactive” approach to fiscal stimulus next year. This would mark a departure from the more cautious tone of the past decade. potentially boosting energy demand from the world’s largest crude importer.

Additionally, China's crude Oil imports increased in November for the first time in seven months, rising over 14% year-on-year. On the supply side, the American Petroleum Institute (API) weekly report showed that US crude Oil stockpiles rose by 0.499 million barrels for the week ending December 6, compared to a 1.232 million-barrel increase in the previous week. Market expectations had anticipated a decrease of 1.30 million barrels.

Moreover, escalating geopolitical tensions in the Middle East could lend support to WTI prices. Over the weekend, turbulence intensified as Syrian President Bashar al-Assad and his family fled to Moscow, where they were granted political asylum, marking the end of a 50-year dictatorship.

Meanwhile, investors are closely monitoring key US inflation data, which could shape the Federal Reserve's interest rate outlook. The US CPI inflation is estimated to rise to 2.7% YoY in November from 2.6% in October. Meanwhile, the core CPI, excluding Food & Energy, is expected to remain consistent at a 3.3% increase YoY. Traders are now pricing in nearly an 85.8% chance of Fed rate reductions by 25 basis points, according to the CME FedWatch Tool.

Traders are expected to closely monitor the upcoming OPEC Monthly Oil Market Report (MOMR), which addresses key issues impacting the global Oil market and offers a forecast for crude Oil market trends in the year ahead.

• EUR/GBP trades softer to around 0.8245 in Wednesday’s early European session. 
• Hopes of further ECB monetary easing on Thursday weigh on the Euro. 
• The BoE is expected to keep the rate on hold next week as policymakers signaled they will cut only gradually. 

The EUR/GBP cross remains on the defensive near 0.8245 during the early European trading hours on Wednesday. The growing speculation that the European Central Bank (ECB) will cut another interest rate at the December meeting continues to undermine the Euro (EUR) against the Pound Sterling (GBP). 

Investors might prefer to wait on the sidelines ahead of the ECB interest rate decision on Thursday. The ECB is anticipated to cut the Deposit Facility Rate to 3.0% from 3.25%. It would be the ECB's third straight reduction amid a bleak eurozone outlook. "While there is a strong case for the ECB to accelerate the pace of policy easing by delivering a (half point) cut, a majority of the governing council seems to prefer a quarter-point reduction,” noted Capital Economics analysts. 

On the other hand, the Bank of England (BoE) policymakers hinted that they would cut the interest rate gradually. "Signalling from the BoE about gradual rate reductions has been very strong of late, suggesting very low odds of a cut next week," said JP Morgan economist Allan Monks. 

Traders are currently betting on the BoE cutting interest rates only three times between now and the end of 2025, lowering the Bank Rate by a total of 75 bps. The expectation that the UK central bank will likely move more slowly to reduce borrowing costs than the ECB provides some support to the GBP and creates a headwind for the EUR/GBP cross. 

• USD/CHF gains ground to near 0.8835 in Wednesday’s early European session. 
• Traders raise bets on Fed rate cut this month to 86%. 
• The SNB will likely cut rates by 25 bps at the December meeting on Thursday. 

The USD/CHF pair trades in positive territory for the fourth consecutive day around 0.8835 during the early European session on Wednesday. The uptick of the pair is bolstered by the stronger Greenback due to the rising bets for a less dovish stance from the US Federal Reserve (Fed). Investors will keep an eye on the US November Consumer Price Index (CPI) data, which is due later on Wednesday. The attention will shift to the Swiss National Bank (SNB) interest rate decision on Thursday. 

The US CPI inflation data released on Wednesday are the final major piece of data that Fed officials will consider before they meet next week to decide on interest rates. A modest increase is unlikely to deter Fed policymakers from cutting their key rate by a quarter point. The odds of a 25 basis points (bps) rate cut at the Fed's December meeting are high, with 86% of traders expecting a cut, according to the CME FedWatch tool. 

On the Swiss front, the SNB is widely expected to deliver a quarter-point rate reduction to 0.75% at its December meeting on Thursday. "Market pricing may make a 25bp rate cut a slightly hawkish surprise, but we continue to see no reason - and also little chance of lasting success in terms of the exchange rate - for larger cuts given the resilient economy and stable exchange rate," said Christian Schulz, deputy chief European economist at Citi. However, he anticipates the Swiss central bank to downgrade its short-term forecasts again, adding, "The SNB's guidance will likely remain dovish."
 

FX option expiries for Dec 11 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0400 1.1b
• 1.0490 1.4b
• 1.0500 2b
• 1.0550 1b
• 1.0660 1.3b

GBP/USD: GBP amounts     

• 1.2725 880m

USD/JPY: USD amounts                     

• 148.75 1.2b
• 151.60 890m

AUD/USD: AUD amounts

• 0.6350 988m
• 0.6450 754m

USD/CAD: USD amounts       

• 1.4185 407m

NZD/USD: NZD amounts

• 0.5735 510m
• 0.5800 410m
• 0.5900 656m

• EUR/USD receives downward pressure due to market caution ahead of the US inflation report.
• US headline and core inflation are estimated to rise to 2.7% and 3.3%, respectively, YoY in November.
• The Euro faces challenges as the ECB is widely expected to implement a 25 basis point rate cut on Thursday.

EUR/USD remains subdued for the fourth consecutive day, trading around 1.0530 during the Asian session on Wednesday. However, the pair faced challenges as the US Dollar (USD) gained support from market caution, which could be attributed to the upcoming US Consumer Price Index (CPI) data release due on Wednesday.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, appreciates as the US Treasury yields continue to rise amid market caution ahead of the Federal Reserve’s (Fed) policy decision. The DXY maintains its position around 106.40 with 2-year and 10-year yields on US Treasury coupons standing at 4.16% and 4.23%, respectively, at the time of writing.

The US CPI inflation is estimated to rise to 2.7% YoY in November from 2.6% in October. Meanwhile, the core CPI, excluding Food & Energy, is expected to increase 3.3% YoY. Any indications of stalled progress could significantly diminish the likelihood of a Federal Reserve’s (Fed) rate cut. However, markets are now pricing in nearly an 85.8% chance of Fed rate reductions by 25 basis points, according to the CME FedWatch Tool.

In the Eurozone, traders await the European Central Bank's (ECB) policy decision, scheduled for release on Thursday. The central bank is widely expected to implement a 25 basis point cut, lowering the Main Refinancing Operations Rate from 3.4% to 3.15% and the Deposit Facility Rate from 3.25% to 3.0%.

• USD/CAD pulls back from a multi-year top, though the downside seems limited.
• Rising oil prices underpins the Loonie and exert pressure on the currency pair.
• The technical setup supports prospects for the emergence of some dip-buyers.

The USD/CAD pair edges lower during the Asian session on Wednesday, though it lacks follow-through and remains close to the highest level since April 2020 touched the previous day. Spot prices currently trade just above mid-1.4100s, down less than 0.10% for the day, as traders keenly await the US consumer inflation figures and the Bank of Canada (BoC) policy decision before placing fresh directional bets.

In the meantime, rising Crude Oil prices seem to underpin the commodity-linked Loonie and exert some pressure on the USD/CAD pair. That said, bets for a larger BoC rate cut might hold back traders from placing aggressive bullish bets around the Canadian Dollar (CAD). Furthermore, the growing market conviction that the Federal Reserve (Fed) will adopt a cautious stance on cutting interest rates assists the US Dollar (USD) in preserving its gains registered over the past three days and acts as a tailwind for the currency pair. 

From a technical perspective, the recent sustained breakout and acceptance above the 1.4100 mark was seen as a key trigger for bullish traders. Moreover, oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone, suggesting that the path of least resistance for the USD/CAD pair remains to the upside. Hence, any further slide might still be seen as a buying opportunity and remain limited near the aforementioned handle, which should now act as a pivotal point.

Some follow-through selling, leading to weakness below the 1.4070 support zone, might prompt some long-unwinding trade and drag the USD/CAD pair to the 1.4020 area en route to the 1.4000 psychological mark. The corrective pullback could extend further towards the next relevant support near the 1.3960-1.3950 area en route to the November 25 low, around the 1.3925 region. 

On the flip side, the 1.4200 mark might continue to act as an immediate barrier, above which the USD/CAD pair could surpass an intermediate hurdle near the 1.4260 area and test the April 2020 swing high, around the 1.4300 round figure. Spot prices could eventually climb to the 1.4335-1.4340 region.

USD/CAD daily chart

• EUR/JPY loses traction to near 159.50 in Wednesday’s Asian session. 
• The Japanese PPI came in stronger than expected, boosting the JPY.
• The uncertainty over how soon the BoJ could raise rates might cap the downside for the cross.

The EUR/JPY cross attracts some sellers to around 159.50 during the early European session. The Japanese Yen (JPY) strengthens against the Euro (EUR) after the stronger-than-expected Japanese Producer Price Index (PPI) for November. The European Central Bank (ECB) interest rate decision will be in the spotlight on Thursday. 

The preliminary reading by the Bank of Japan (BoJ) showed on Wednesday that the country’s Producer Price Index (PPI) increased by 0.3% MoM in November, better than the 0.2% expected. On an annual basis, the PPI rose by 3.7% YoY during the same reported period, above the market consensus of 3.4%. 
 
Furthermore, the expectation that the ECB will implement aggressive interest rate cuts to prop up the faltering regional economy could weigh on the shared currency. The ECB is widely expected to cut the deposit facility by another 0.25% to 3.00%. This expectation aligns with the ECB’s strategy to guide inflation toward its 2% target against a backdrop of weaker economic growth in the Eurozone.

Nonetheless, the dovish remarks from the Japanese authorities might undermine the JPY and cap the downside for the cross. BoJ’s board member Toyoaki Nakamura said last week that the central bank must move cautiously in raising rates, fueling uncertainty about the BoJ’s December policy decision.

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

The price for Gold stood at 7,342.29 Indian Rupees (INR) per gram, down compared with the INR 7,344.80 it cost on Tuesday.

The price for Gold decreased to INR 85,644.76 per tola from INR 85,668.30 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 advances to over a two-week high and draws support from a combination of factors. 
• Geopolitical risks, trade war fears and rate cuts by major central banks underpin the XAU/USD. 
• Rising US bond yields underpin the USD and cap the yellow metal ahead of the US CPI report.

Gold price (XAU/USD) prolongs its weekly uptrend for the third consecutive day on Wednesday and climbs to a two-and-half-week high during the Asian session. The commodity now looks to extend the momentum beyond the $2,700 mark and remains well supported by a combination of factors. Geopolitical risks stemming from the worsening 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. Adding to this, the expected interest rate cuts by major central banks offer additional support to the non-yielding yellow metal.

That said, the recent US Dollar (USD) move up to a near one-week top touched on Tuesday keeps a lid on any further gains for the USD-denominated Gold price. Furthermore, bulls opt to lighten their bets ahead of the release of the US consumer inflation figures later today, which might guide Fed policymakers on their decision next week. This, in turn, will influence the USD and provide a fresh impetus to the precious metal. The fundamental backdrop, meanwhile, suggests that the path of least resistance for the XAU/USD is to the upside. 

Gold price continues to draw support from haven flows and bets for more rate cuts by major central banks

• Israel launched airstrikes at military targets across Syria and deployed ground troops beyond a demilitarized buffer zone for the first time in 50 years following the collapse of President Bashar al-Assad's regime over the weekend. 
• Ukraine's President Volodymyr Zelenskyy issued orders to increase funding for equipping brigades with new drones and raised the idea of foreign troops being deployed in Ukraine until it could join the NATO military alliance.
• US President-elect Donald Trump has pledged to impose big tariffs against America’s three largest trading partners – Mexico, Canada and China – and also threatened a 100% tariff on the so-called 'BRICS' nations.
• The Bank of Canada is expected to cut rates later today, while the European Central Bank and the Swiss National Bank are likely to follow suit on Thursday, which should continue to support the non-yielding Gold price.
• According to the CME Group's FedWatch Tool, the markets are currently pricing in over an 85% probability that the Federal Reserve will lower borrowing costs by 25 basis points at its December policy meeting. 
• However, the recent hawkish remarks from several influential FOMC members, including Fed Chair Jerome Powell, suggested that the US central bank might adopt a more cautious stance on cutting interest rates. 
• Expectations for a less dovish Fed assisted the US Treasury bond yields to finish higher for the second day on Tuesday and lifted the US Dollar to a four-day high, albeit did little to dent the bullish sentiment around the precious metal. 
• The market focus remains glued to the crucial US Consumer Price Index (CPI) report, which might offer cues about the interest rate outlook in the US and provide a fresh impetus to the non-yielding XAU/USD. 
• The headline US CPI is expected to increase by 0.3% in November and rise by 2.7% on a yearly basis. Meanwhile, the core gauge (excluding food and energy prices) is forecast to remain unchanged at the 3.3% YoY rate.

Gold price could accelerate the positive momentum once the $2,720-2,722 strong barrier is cleared decisively

From a technical perspective, this week's breakout through the $2,650-2,655 supply zone and the subsequent move up favors bullish traders. Moreover, oscillators on the daily chart have been gaining positive traction and are still far from being in the overbought territory. This, in turn, validates the near-term positive outlook for the Gold price and supports prospects for the emergence of some dip-buying near the aforementioned resistance breakpoint. This should help limit the downside for the XAU/USD near the $2,630 area, below which the downward trajectory could extend further towards the $2,600 round figure.

On the flip side, a sustained move beyond the $2,700 round figure could extend further towards the $2,720-2,722 hurdle. This is followed by resistance near the $2,735 region, which if cleared will suggest that the recent corrective decline from the all-time high touched in October has run its course and shift the bias in favor of bullish traders. The momentum might then lift the Gold price to the $2,758-2,760 barrier en route to the $2,770-2,772 region and the $2,790 area, or the record peak.

• GBP/USD maintains its position as the BoE is widely expected to keep rates unchanged in December.
• UK headline inflation has risen again after briefly dipping below the BoE’s 2% target.
• Traders adopt caution ahead of US Consumer Price Index data scheduled to be released on Wednesday.

GBP/USD extends its winning streak for the third successive session, trading around 1.2780 during the Asian hours on Wednesday. The Pound Sterling (GBP) gains support against its major peers as traders become increasingly confident that the Bank of England (BoE) will keep its interest rates unchanged at 4.75% in December’s monetary policy decision.

Most BoE officials are expected to vote to keep interest rates unchanged, as UK headline inflation has risen again after briefly dipping below the bank's 2% target. The central bank had earlier predicted a rebound in inflation following its temporary alignment with the target range.

Traders are likely to focus on the UK’s October monthly Gross Domestic Product (GDP) and Industrial and Manufacturing Production data. Economists anticipate growth in factory output and GDP following declines in September.

The upside of the GBP/USD pair could be restrained as the US Dollar (USD) receives support from market caution, which could be attributed to the upcoming US Consumer Price Index (CPI) data release due on Wednesday. The US CPI inflation is estimated to rise to 2.7% YoY in November from 2.6% in October. Meanwhile, the core CPI, excluding Food & Energy, is expected to increase 3.3% YoY.

Any indications of stalled progress could significantly diminish the likelihood of a Federal Reserve’s (Fed) rate cut. However, markets are now pricing in nearly an 85.8% chance of Fed rate reductions by 25 basis points, according to the CME FedWatch Tool.

• The US Consumer Price Index is set to rise 2.7% YoY in November.
• The core CPI inflation is seen steady at 3.3% last month.
• The Fed is expected to cut interest rates by 25 bps in December.

The US Consumer Price Index (CPI) report for November, a key measure of inflation, will be unveiled on Wednesday at 13:30 GMT by the Bureau of Labor Statistics (BLS). 

Markets are buzzing in anticipation, as the release could trigger significant swings in the US Dollar (USD) and influence the Federal Reserve's (Fed) plans for interest rates in the months ahead.

What to expect in the next CPI data report?

As measured by the CPI, inflation in the US is expected to increase at an annual rate of 2.7% in November, slightly higher than the 2.6% growth reported in the previous month. Core annual CPI inflation, which excludes volatile food and energy prices, is projected to remain steady at 3.3% during the same period.

On a monthly basis, the headline CPI and core CPI are forecasted to rise by 0.3% each.

Previewing the October inflation report, TD Securities analysts said: “We look for core inflation to stay largely unchanged in November, registering another firm 0.3% m/m advance. Rising goods prices are expected to explain most of the strength in the series, while slowing housing inflation is likely to provide some relief. On a y/y basis, headline CPI inflation is expected to inch higher to 2.7% while core inflation likely stayed unchanged at 3.3%.”

In his latest remarks at an event hosted by the New York Times on December 4, Federal Reserve Chair Jerome Powell shared that the central bank's approach to future interest rate adjustments could take a more measured pace, thanks to the economy's stronger-than-anticipated performance this year.

Reflecting on the economic growth, Powell noted that the resilience had surpassed earlier forecasts, allowing the Fed to adopt a more cautious stance as it works toward finding a "neutral" rate policy. He acknowledged that "the economy is strong, and it’s stronger than we thought in September," even as inflation has been running slightly higher than anticipated.

Powell explained that this backdrop is shaping the Fed's outlook as it prepares for its upcoming meeting on December 17-18, a session that markets had widely expected to result in another rate cut.

How could the US Consumer Price Index report affect EUR/USD?

The upcoming Trump administration is expected to adopt a stricter stance on immigration, a more relaxed approach to fiscal policy, and a reintroduction of tariffs on imports from China and Europe. Together, these factors are likely to exert upward pressure on inflation, potentially prompting the Fed to pause or even halt its ongoing easing cycle, thereby providing additional support to the US Dollar (USD).

However, with the gradual cooling of US labour market conditions and the likely persistence of sticky inflation, the November inflation report is unlikely to significantly alter the Fed’s stance on monetary policy.

Currently, markets are pricing in an approximately 85% probability that the Fed will lower rates by 25 basis points in December, according to the CME Group’s FedWatch Tool.

Pablo Piovano, Senior Analyst at FXStreet, provides a brief technical outlook for EUR/USD, arguing: “The December high of 1.0629 (December 6) serves as the initial resistance, followed by the intermediate 55-day SMA at 1.0776 and the more significant 200-day SMA at 1.0842.”

Pablo adds: “On the downside, if the spot price breaks below the December low of 1.0460, it could pave the way for a potential test of the 2024 bottom at 1.0331 (November 22).”

• Silver price bounced back toward Monday's monthly high of $32.28.
• Precious metals, including silver, gained support on news of potential economic stimulus measures from China.
• Non-yielding assets like Silver receive support from the rising likelihood of the Fed’s rate cut again in December.

Silver price (XAG/USD) extends its gains for the third successive session, trading around $32.00 during the Asian hours on Wednesday. The demand outlook for precious metals, including Silver, in the world’s largest consumer of raw materials has been increased following news of potential economic stimulus from China.

The Politburo announced plans to adopt a “moderately loose” monetary policy and a “more proactive” approach to fiscal stimulus next year, marking a departure from the more cautious tone of the past decade.

Silver prices receive support from increased odds of the US Federal Reserve (Fed) cutting interest rates again in December. Markets are now pricing in nearly an 85.8% chance of Fed rate reductions by 25 basis points, according to the CME FedWatch Tool.

However, the upside of the Silver price could be restrained due to the stronger US Dollar (USD), which makes dollar-denominated Silver less affordable for buyers with foreign currencies, dampening its demand.

The US Dollar gains ground as traders adopt caution ahead of the US Consumer Price Index (CPI) data scheduled to be released on Wednesday. The US CPI inflation is estimated to rise to 2.7% YoY in November from 2.6% in October. Meanwhile, the core CPI, excluding Food & Energy, is expected to increase 3.3% YoY. Any indications of stalled progress could significantly diminish the likelihood of a Federal Reserve’s (Fed) rate cut.

• The Indian Rupee tumbles to near an all-time low in Wednesday’s Asian session.
• The dovish bets after the government named career bureaucrat Sanjay Malhotra as the new RBI governor weighs on the INR. 
• The US November CPI inflation report will take center stage on Wednesday. 

The Indian Rupee (INR) weakens near a record low on Wednesday as the appointment of career bureaucrat Sanjay Malhotra as the next governor of the Reserve Bank of India (RBI) prompted traders to raise their bets on the interest rate cuts. Furthermore, a decline in its Asian peers and persistent strength in the US Dollar (USD) from importers and foreign banks could drag the local currency lower. 

Nonetheless, significant weakness of the INR might be capped by the foreign exchange intervention by the RBI. The Indian central bank often intervenes by managing liquidity, including selling USD to prevent steep INR depreciation. Later on Wednesday, all eyes will be on the US Consumer Price Index (CPI) for November. On the Indian docket, the CPI inflation data will be released on Thursday, along with Industrial Output and Manufacturing Output.  

Indian Rupee remains weak as appointment of new RBI chief spurs dovish bets

• Economists expect Das’s exit could add a dovish tilt to India's monetary policy committee, as Das and RBI Deputy Governor Michael Patra were seen as the most hawkish members of the six-member rate-setting panel.
• Economists at Capital Economics anticipate a 25 bps cut in India’s repo rate at Malhotra’s first MPC meeting in February, if not in an unscheduled meeting earlier. Economists estimated that the cut would come in April under Das’ leadership.
• India’s 10-year bond yields were down 2 basis points (bps) at 6.699% on Tuesday, signaling market expectations of a rate reduction, according to data from LSEG. 
• 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. 
• Financial markets are now pricing in nearly an 85.8% possibility of a 25 basis points (bps) rate cut by the Fed on December 17-18, according to the CME FedWatch tool.  

USD/INR keeps the bullish bias in the longer term

The Indian Rupee trades softer on the day. The USD/INR pair keeps the bearish vibe on the daily timeframe as the pair is well above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) stands above the midline near 72.75, indicating the overbought RSI condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation.

The upper boundary of the ascending trend channel and the psychological level of 85.00 appear to be a tough nut to crack for the bulls. Sustained trading above this level could see a rally to 85.50.

On the flip side, the boundary of the trend channel and the low of December 9 at 84.65 act as an initial support level for USD/INR. A break below this support zone could drag the pair lower to the next bearish target at 84.22, the low of November 25, followed by 84.08, the 100-day EMA.

• The Japanese Yen strengthens slightly following the release of stronger PPI print from Japan.
• The uncertainty over how soon the BoJ could raise rates keeps the JPY bulls on the defensive.
• The USD preserves its recent gains and lends support to USD/JPY ahead of the US CPI report.

The Japanese Yen (JPY) edges higher during the Asian session on Wednesday as a stronger Producer Price Index (PPI) from Japan keeps the door open for a December interest rate hike by the Bank of Japan (BoJ). The uptick, however, lacks bullish conviction amid scepticism regarding the BoJ's intention to tighten its monetary policy further. Apart from this, a further recovery in the US Treasury bond yields contributes to capping gains for the lower-yielding JPY.

Furthermore, the recent US Dollar (USD) move up to a near one-week high, touched on Tuesday, should help limit the downside for the USD/JPY pair. Traders might also refrain from placing aggressive directional bets and opt to wait for the release of the US consumer inflation figures. The crucial US data would offer cues about the Federal Reserve's (Fed) rate-cut path and provide some meaningful impetus ahead of the key central bank event risks next week. 

Japanese Yen lacks bullish conviction amid wavering expectations that BoJ will hike rates in December

• A preliminary report by the Bank of Japan revealed this Wednesday that Japan's Producer Price Index (PPI) increased by 0.3% in November and rose by 3.7% compared to the same time period last year.
• This comes on top of last Friday's wage growth figures, which showed that October base pay grew 2.7% YoY, or the fastest rate since November 1992 and gives the BoJ another reason to hike interest rates.
• Moreover, BoJ Governor Kazuo Ueda recently said that the timing of the next rate hike was approaching, though some media reports suggested the central bank may skip a rate hike later this month.
• Furthermore, BoJ's more dovish board member Toyoaki Nakamura said last week that the central bank must move cautiously in raising rates, fueling uncertainty about the BoJ’s December policy decision.
• The US Treasury bond yields ended at their highest levels in at least a week on Tuesday on the back of growing acceptance that the Federal Reserve will adopt a cautious stance on cutting interest rates. 
• The US Dollar preserves its gains registered over the past three days and offers some support to the USD/JPY pair as traders keenly await the release of the latest US consumer inflation figures later today.
• The headline US Consumer Price Index (CPI) is expected to increase to 0.3% in November as compared to 0.2% in the previous month and rise to 2.7% on a year-over-year basis from 2.6% in October. 
• Meanwhile, the core gauge (excluding food and energy prices) is forecast to remain unchanged at 0.3% for November and at a 3.3% YoY rate, raising concern over lingering inflationary pressures.
• The data won’t necessarily derail expectations for a rate cut by the Fed at next week’s meeting, though would suggest fewer rate cuts coming at a slower pace than many had been anticipating.

USD/JPY needs to find acceptance above 200-day SMA, around 152.00 for bulls to seize control

The overnight failure to find acceptance above the 152.00 mark, which coincides with the 200-day Simple Moving Average (SMA), warrants caution for bulls. Moreover, neutral oscillators on the daily chart make it prudent to wait for a sustained strength beyond the said barrier before positioning for an extension of the recent bounce from a near two-month low. The USD/JPY pair might then climb to the 152.70-152.75 region, or the 50% retracement level of the downfall from a multi-month top touched in November. This is followed by the 153.00 round figure, above which spot prices could extend the momentum towards the 61.8% Fibonacci level, around the 153.70 area. 

On the flip side, weakness below the 151.55-151.50 region could be seen as a buying opportunity and find decent support near the 151.00 mark. Some follow-through selling, however, might expose the 150.00 psychological mark, with some intermediate support near the 23.6% Fibo. level, around the 150.50 area. Failure to defend the said support levels could drag the USD/JPY pair back towards the 149.55-149.50 region en route to the 149.00 round figure and 148.65 zone, or the lowest level since October 11 touched last week.

• The Australian Dollar may decline due to market caution ahead of the US November Consumer Price Index data.
• The AUD depreciated after the RBA maintained its interest rates at 4.35% in December.
• The US CPI and core inflation are estimated to rise to 2.7% and 3.3%, respectively, year-over-year in November.

The Australian Dollar (AUD) hovers against the US Dollar (USD) on Wednesday after experiencing losses in the previous session. The AUD/USD pair faced challenges, driven by the broadly stronger US dollar (USD). Traders now focus on the release of crucial US November Consumer Price Index (CPI) data, which are expected to be released later in the North American session.

The US CPI inflation is estimated to rise to 2.7% YoY in November from 2.6% in October. Meanwhile, the core CPI, excluding Food & Energy, is expected to increase 3.3% YoY. Any indications of stalled progress could significantly diminish the likelihood of a Federal Reserve’s (Fed) rate cut, potentially boosting the US Dollar. Traders are now pricing in nearly an 85.8% chance of Fed rate reductions by 25 basis points on December 18, according to the CME FedWatch Tool.

The AUD received downward pressure after the Reserve Bank of Australia’s (RBA) decision to keep the Official Cash Rate (OCR) unchanged at 4.35% in its final policy meeting in December. RBA Governor Michele Bullock highlighted that while upside inflation risks have eased, they persist and require ongoing vigilance. The RBA will closely monitor all economic data, including employment figures, to guide future policy decisions.

Australian Dollar declined after the RBA decision to keep interest rates unchanged

• 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 Australian Unemployment Rate remained at 4.1% in October for the third consecutive month. The economy added 9,700 full-time jobs and 6,200 part-time roles, making a net change of 15,900 positions.
• The RBA’s closely watched inflation gauge, the annual Trimmed Mean Consumer Price Index (CPI), slowed to 3.5% from 4.0% in the third quarter but stayed well above the Bank’s 2%- 3% target.
• 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.
• US November NFP data from Friday showed a robust 227,000 gain, well above expectations, and stable Average Hourly Earnings growth at 0.4% MoM.
• The AUD received support from improved sentiment and stimulus expectations from China. China’s leaders announced plans for proactive fiscal and looser monetary policies to accelerate domestic consumption in 2024.
• Weak Chinese CPI data (-0.6% in November, worse than expected) highlights challenges in the recovery but bolsters stimulus speculation.

Technical Analysis: Australian Dollar falls towards 0.6350 near yearly lows

AUD/USD trades near 0.6370 on Wednesday. The technical analysis of a daily chart shows strengthening bearish momentum as the pair moves downwards within a descending channel pattern. Additionally, the 14-day Relative Strength Index (RSI) is positioned slightly above 30, indicating sustained negative sentiment.

The immediate support appears around its yearly low of 0.6348, last seen on August 5. A break below this level could strengthen the bearish bias and put downward pressure on the AUD/USD pair to navigate the region around the descending channel’s lower boundary at 0.6220 level.

On the upside, the AUD/USD pair may find initial resistance around the nine-day Exponential Moving Average (EMA) at 0.6428, followed by the 14-day EMA at 0.6449, which aligns closely with the upper boundary of the descending channel. A decisive breakout above this channel could pave the way for a potential rally toward the seven-week high of 0.6687.

AUD/USD: Daily Chart

• NZD/USD trades with a negative bias near 0.5795 in Wednesday’s early Asian session. 
• The US CPI inflation report will be the highlight on Wednesday. 
• The disappointing Chinese trade figures weigh on the Kiwi. 

The NZD/USD pair trades on a softer note around 0.5795 during the Asian session on Wednesday. However, the upside of the pair seems limited amid weak Chinese trade data and the potential fresh tariffs from US President-elect Donald Trump. Traders await China’s closed-door annual economic conference and US November Consumer Price Index (CPI) data.

Investors expect the US Federal Reserve (Fed) to cut interest rates at the December 17-18 meeting. According to the CME FedWatch Tool, traders are now pricing in nearly 86% odds of a 25 basis points (bps) Fed rate reduction. The US CPI inflation data on Wednesday could offer some hints about the US interest rate outlook before the Federal Reserve's (Fed) final policy meeting of 2024. Any signs of a hotter-than-expected outcome could lift the US Dollar (USD) and act as a headwind for the pair. 

"Obviously the market's kind of nervous about a stronger print, which might lead to a slightly more hawkish outlook on the Fed, or maybe a little bit of a repricing," said Brad Bechtel, global head of FX at Jefferies. 

China's exports slowed sharply, and imports unexpectedly fell in November, raising concerns about the world’s second-largest economy as Donald Trump's imminent return to the White House brings the potential for fresh tariffs. The disappointing Chinese trade figures might drag the China-proxy Kiwi lower, as New Zealand is one of the leading trading partners of China.

On Wednesday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1843, as compared to the previous day's fix of 7.1896 and 7.2379 Reuters estimates.

• WTI trades with mild gains near $68.20 in Wednesday’s early Asian session. 
• Discouraging Chinese economic data and a surprise climb in crude inventories drag the WTI lower. 
• US crude stockpiles rose 499K barrels last week, noted API. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.20 on Wednesday. The WTI price remains on the defensive amid a surprise climb in crude inventories and weak demand outlooks, particularly in China. However, the escalating geopolitical tensions in the Middle East might cap the downside for the WTI price. 

WTI prices edges lower after disappointing China's international trade data on Tuesday. China's exports rose 6.7% YoY in November, while Imports fell by 3.9% YoY during the same period. Both the readings came below the market consensus. Additionally, China also reported a weaker-than-expected consumer price index (CPI) on Monday, underlining the ongoing sluggish domestic demands. This, in turn, could undermine the WTI price as China is  the world's biggest oil importer, China's demand outlook has a direct influence on the crude markets

An increase in US crude inventories last week might weigh on the black gold price. The US American Petroleum Institute (API) weekly report showed Crude oil stockpiles in the United States for the week ending December 6 rose by 499,000 barrels, compared to a rise of 1.232 million barrels in the previous week. The market consensus estimated that stocks would decrease by 1.3 million barrels. 

On the other hand, turbulence in the Middle East increased over the weekend as Syrian President Bashar al-Assad and his family fled to Moscow and were granted political asylum, ending 50 years of a brutal dictatorship. The ongoing geopolitical tensions in tthe Middle East could help limit the WTI’s losses.