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• USD/CAD consolidates around 1.4400 amid thin trading volume in a holiday-curtailed week.
• Fed policymakers see more than one interest rate cut in 2025.
• The BoC has guided a gradual policy-easing approach for the next year.

The USD/CAD pair trades sideways around 1.4400 in Tuesday’s North American session. The Loonie pair consolidates as it follows the footprints of the US Dollar (USD), which is grappled with volatility contraction in a thin volume trading day due to the holiday-shortened week.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades lackluster above 108.00.

The outlook of the Greenback remains firm as the Federal Reserve (Fed) indicated that it would follow a more measured approach to further policy-easing. In the latest Fed’s dot plot, policymakers collectively forecasted a target for the federal fund rate at 3.9% by the end of 2025, suggesting more than one interest rate cut from their current levels.

According to the CME FedWatch tool, traders fully anticipate that the Fed will leave interest rates unchanged in January at 4.25%- 4.50%.

Meanwhile, the Canadian Dollar (CAD) remains weak across the board amid the wide policy divergence of the Bank of Canada (BoC) compared to other central banks. The BoC has already reduced its key borrowing rates by 175 basis points (bps) this year. However, it has guided a gradual policy easing approach, as officials advise patience to see the full effects of past cuts.

• The US Dollar trades broadly steady despite headlines out of China about ramping up bond sales next year. 
• Chinese policymakers plan to sell a record 3 trillion yuan of special treasury bonds in 2025, the highest on record.
• The US Dollar Index (DXY) resides at 108.00, very close to eke out a fresh two-year high.

The US Dollar (USD) trades sideways on Tuesday, with the DXY Index slightly above 108.00, as markets are starting to unwind towards the Christmas holiday.  The Greenback failed to significantly move despite news that China’s policymakers are floating the idea of selling nearly 3 trillion Yuan (CNH) in special treasury bonds in 2025, Reuters reported on Tuesday. The additional capital should boost the slowing and sluggish Chinese economy. 

The US economic calendar is a very light one on Tuesday, with just minor indicators such as the Philadelphia Fed Non-Manufacturing Activity Index and the Richmond Fed Manufacturing Index regional surveys for December. One main takeaway for the last few data points of December is that the US manufacturing sector is sounding the alarm bell, with several indicators confirming the sector is falling further into contraction. 

Daily digest market movers: Light participation

• Policymakers in China plan to sell a record 3 trillion Yuan ($411 billion) of special treasury bonds in 2025, Reuters reported Tuesday. The government seeks to support consumption subsidies, business equipment upgrades as well as investments in key technology and advanced manufacturing sectors, according to Reuters.
• French Prime Minister Francois Bayrou aims to reach an agreement with parliament on a 2025 budget that would reduce the deficit to close to 5%, near the level of his predecessor Michel Barnier, Bloomberg reports.
• Near 13:30 GMT,  the Philadelphia Fed Non-Manufacturing Activity Index for December is published. The previous reading stood at -5.9.
• At 15:00 GMT, The Richmond Fed Manufacturing Index is expected to stay in contraction at -9 coming from -14.
• Asian equities are fired up after the 3 trillion Yuan expected injection from China. Europe is rather struggling to benefit from that tailwind and remains looking sluggish. US futures are marginally in the green. 
• The CME FedWatch Tool for the first Fed meeting of 2025 on January 29 sees a 91.4% chance for a stable policy rate against a small 8.6% chance for a 25 basis points rate cut.  
• The US 10-year benchmark rate trades at 4.59%, the high of last week.

US Dollar Index Technical Analysis: Final straw

The US Dollar Index (DXY) is trading in a rather narrow range this Tuesday. More and more traders will not participate in markets today, which will mean nearly no reaction in prices unless a big headline comes up. It thus looks like the DXY is set to close off Christmas eve very close to a two-year high. 

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

The first downside barrier comes in at 107.35, which has now turned from resistance into support. The second level that might be able to halt any selling pressure is 106.52. From there, even 105.53 could come under consideration while the 55-day Simple Moving Average (SMA) at 105.23 is making its way up to that level. 

US Dollar Index: Daily Chart

• Oil prices trade in tight ranges as traders head into the Christmas holidays. 
• Markets are not taking any stance despite some headlines about further stimulus in China, one of the top global consumers. 
• The US Dollar Index trades just shy of a two-year high as volatility winds down. 

Crude Oil prices are starting to see volatility die down on Tuesday as traders look ahead to Christmas Eve rather than the release of the American Petroleum Institute (API). Even headlines of further stimulus in China are not driving Oil prices higher: Chinese policymakers want to boost the economy with a 3 trillion Yuan bond injection, a move that should ramp up spending and result in a boost in demand for Oil from one of the world’s top consumers. 

The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – is residing just below the two-year high. The Greenback sees volatility die down in these final trading hours before Christmas. With its current position, a fresh two-year high could still be hit before the end of the year. 

At the time of writing, Crude Oil (WTI) trades at $69.63 and Brent Crude at $72.84.

Oil news and market movers: Not making big waves

• Policymakers in China are planning to sell a record 3 trillion Yuan ($411 billion) of special treasury bonds in 2025. The government seeks to support consumption subsidies, business equipment upgrades as well as investments in key technology and advanced manufacturing sectors, according to Reuters.
• India’s state Oil refiners are finding it hard to buy the volume of Russian crude they need, people familiar with the matter told Bloomberg.
• Methane emissions in the US Permian Oil basin plunged 26% last year as companies tightened operations and deployed new technology to stop leaks of the potent greenhouse gas, according to a study by S&P Global Commodity Insights.
• At 21:30 GMT, the American Petroleum Institute (API) will release its weekly Crude Stockpile Change number. The previous week was a drawdown of 4.7 million barrels. 

Oil Technical Analysis: Mild action

Crude Oil prices aren’t jumping significantly despite headlines that China is set to boost its local demand with a massive 3 trillion Yuan (CNH) injection. This should be beneficial for the local Oil demand as China is one of the world's biggest consumers. The fact that the stimulus plan still needs to be outlined further and that several market participants are not trading on Tuesday makes a big move in Oil prices very unlikely. 

Looking up,  the 100-day Simple Moving Average (SMA) at $70.76 and $71.46 (February 5 low) act as firm resistance levels nearby. Should more tailwinds emerge in support for Oil, the next pivotal level will be $75.27 (January 12 high). However, watch out for quick profit-taking as the year-end quickly approaches. 

On the downside, $67.12 – a level that held the price in May and June 2023 and during the last quarter of 2024 – is still the first solid support nearby.  In case that breaks, the 2024 year-to-date low emerges at $64.75, followed by $64.38, the low from 2023.

US WTI Crude Oil: Daily Chart

• AUD/USD falls to near 0.6230 as the RBA opens doors for interest rate cuts.
• Fed’s fewer interest rate cut guidance has kept the US Dollar on the frontfoot.
• The declining 20-week EMA suggests that the broader outlook of the Aussie pair is bearish.

The AUD/USD pair drops to near 0.6230 in Tuesday’s European session. The Aussie pair falls as the Reserve Bank of Australia (RBA) monetary policy minutes for the policy meeting that happened on December 10 appeared as slightly dovish, which has weighed on the Australian Dollar (AUD.

The minutes showed that RBA policymakers have become confident that price pressures are easing in line with their expectations, which makes it “appropriate for them” to begin relaxing the “degree of monetary policy tightness”.

Price pressures in Australia have eased to 3% in November. Still, they are higher than the RBA’s target 2% and are unlikely to return before 2026.

Meanwhile, the US Dollar (USD) holds gains in a thin trading volume holiday-curtailed week. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains above 108.00. The Greenback remains firm as the Federal Reserve (Fed) has guided a gradual interest rate cut approach for 2025. The Fed sees only two interest rate cuts next year, which analysts at UBS project in policy meetings in June and September.

AUD/USD trades slightly above the four-year low of 0.6180. However, the outlook for the Aussie pair is bearish, as the 20-week Exponential Moving Average (EMA), which trades around 0.6520, is sloping downwards.

The 14-week Relative Strength Index (RSI) oscillates between 20.00 and 40.00, indicating that bearish momentum is intact.

If the Aussie pair fails to hold its recovery above the round-level support of 0.6200, more downside towards the 6 March 2020 low of 0.6120 and the psychological support of 0.6000 will appear.

On the other hand, a decisive recovery above the November 25 high of 0.6550 will drive the asset towards the round-level resistance of 0.6600, followed by the September 11 low of 0.6622.

AUD/USD weekly chart

• Silver price falls to near $29.50 amid firm US Treasury yields.
• US bond yields trade near more than a six-month high as the Fed guided fewer rate cuts in 2025.
• Silver price remains broadly weak amid a breakdown of the upward-sloping trendline.

Silver price (XAG/USD) falls to near $29.30 in Tuesday’s European session, though it remains inside Monday’s trading range amid thin trading volume due to holidays on Wednesday and Thursday on account of Christmas Eve and Thanksgiving Day. The white metal is broadly under pressure as the Federal Reserve (Fed) has guided a moderate hawkish stance on the monetary policy outlook.

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

In the latest dot plot, the Fed guided two interest rate cuts for 2025, which analysts at UBS see coming in June and September.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, oscillates in a tight range above 108.00. 10-year US Treasury yields wobble near a more-than-six-month high of around 4.6%. Firm yields on interest-bearing assets weigh on non-yielding assets, such as Silver, as they result in higher opportunity costs for them.

Silver technical analysis

Silver price stays below the upward-sloping trendline, plotted from the February 29 low of $22.30 on a daily timeframe, after a breakdown near $30.00. The white metal wobbles around the 200-day Exponential Moving Average (EMA), suggesting that the longer-term outlook is uncertain.

The 14-day Relative Strength Index (RSI) rebounds to near 40.00. A fresh bearish momentum would trigger if it fails to break above that level.

Looking down, the September low of $27.75 would act as key support for the Silver price. On the upside, the 50-day EMA around $30.90 would be the barrier.

Silver daily chart

• The Pound Sterling trades back-and-forth above 1.2500 as the trading volume is light amid holidays in global markets on account of Christmas Day.
• Fed policymakers see the fund rates heading to 3.9% by the end of 2025.
• Trades have fully priced in two interest rate cuts by the BoE next year.

The Pound Sterling (GBP) trades sideways above the psychological support of 1.2500 against the US Dollar (USD) in Tuesday’s London session. The GBP/USD pair consolidates as trading volume is low amid a holiday-shortened week due to Christmas Eve and Boxing Day on Wednesday and Thursday, respectively.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, also trades sideways around 108.15.

More broadly, the Greenback remains on the front foot amid firm expectations that the Federal Reserve (Fed) will follow a more gradual interest rate cut approach for the next year. Fed policymakers see the central bank delivering fewer interest rate cuts than previously expected amid a slowdown in the disinflation process and uncertainty over the impact on the economy of incoming immigration, trade, and tax policies by President-elect Donald Trump.

The recent Fed dot plot showed that officials see the federal funds rate heading to 3.9% by the end of 2025, suggesting that there will be more than one interest rate cut next year. According to the CME FedWatch tool, traders are pricing in that the central bank will leave interest rates unchanged in the current range between 4.25% and 4.50% for January's policy meeting.

Looking at the US economic calendar for the rest of the week, Initial Jobless Claims for the week ending December 20, to be released on Thursday, is the only major economic indicator that could impact the US Dollar. The number of individuals claiming jobless benefits for the first time is estimated to come in at 218K, slightly lower than the former release of 220K.

Daily digest market movers: Pound Sterling rises against major peers

• The Pound Sterling trades higher against its major peers on Tuesday. The British currency gains as investors largely ignore a mild increase in Bank of England’s (BoE) dovish bets for the next year. Traders see a 53-basis points (bps) interest rate reduction in 2025, slightly up from 46 bps after the BoE policy announcement on Thursday.
• BoE dovish bets accelerated after three out of nine Monetary Policy Committee (MPC) members proposed reducing interest rates by 25 bps, more than the one projected by market participants. Investors considered the 6-3 vote split as a dovish buildup for the next year, which weighed heavily on the Pound Sterling. 
• BoE Governor Andrew Bailey refrained from committing a pre-defined rate cut path after leaving rates unchanged in December. “Due to heightened uncertainty in the economy, we can't commit to when or by how much we will cut rates in 2025,” he said.
• Contrary to market expectations, analysts at Deutsche Bank expect the BoE to announce four interest-rate cuts next year, one coming in the first half and the rest in the second half.

Technical Analysis: Pound Sterling remains bearish on upward-sloping trendline breakdown

The Pound Sterling remains vulnerable against the US Dollar as it has decisively fallen below the upward-sloping trendline around 1.2600, which is plotted from the October 2023 low of 1.2035.

A death cross, represented by the 50-day and 200-day Exponential Moving Averages (EMAs) near 1.2790, also suggests a strong bearish trend in the long run.

The 14-day Relative Strength Index (RSI) falls below 40.00. A fresh downside momentum could trigger if the oscillator sustains below that level.

Looking down, the pair is expected to find a cushion near the April 22 low around 1.2300. On the upside, the December 17 high at 1.2730 will act as key resistance.

Silver prices (XAG/USD) broadly unchanged on Tuesday, according to FXStreet data. Silver trades at $29.63 per troy ounce, broadly unchanged 0.07% from the $29.65 it cost on Monday.

Silver prices have increased by 24.51% 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 88.34 on Tuesday, up from 88.07 on Monday.

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

• GBP/JPY consolidates in a range on Tuesday amid mixed fundamental cues.
• The BoJ rate hike uncertainty undermines the JPY and supports spot prices.
• The BoE’s dovish stance keeps the GBP bulls on the defensive and caps gains.
• Intervention fears should further contribute to keeping a lid on the cross.

The GBP/JPY cross struggles for a firm intraday direction and oscillates in a narrow trading band, below the 197.00 round-figure mark through the first half of the European session on Tuesday. Moreover, the mixed fundamental backdrop warrants caution before positioning for the near-term trajectory amid mixed fundamental backdrop and thin trading volumes on Christmas Eve. 

The Japanese Yen (JPY) continues with its relative underperformance in the wake of the uncertainty over when the Bank of Japan (BoJ) will hike interest rates again. In fact, the Japanese central bank offered few clues on how soon it could push up borrowing costs at the end of the December policy meeting. Moreover, BoJ Governor Kazuo Ueda last week opened up the possibility of waiting longer for the next hike and said that the central bank will need a little bit more info on wage trends. This, along with a generally positive risk tone, continues to undermine the Japanese Yen (JPY) and acts as a tailwind for the GBP/JPY cross. 

Meanwhile, data released last Friday showed that Japan's core inflation accelerated in November and left the door open for a potential BoJ rate hike in January or March. Furthermore, speculations that Japanese authorities might intervene to prop up the domestic currency hold back traders from placing aggressive bearish bets around the JPY. Japan's Finance Minister Katsunobu Kato warned against excessive foreign exchange moves and reiterated earlier this Tuesday that the government is ready to act to stabilise the domestic currency. Apart from this, persistent geopolitical risks and trade war fears support the safe-haven JPY.

The British Pound (GBP), on the other hand, is undermined by the Bank of England's (BoE) split vote decision to leave interest rates unchanged last week and a dovish outlook It is worth mentioning that three members of the BoE's MPC voted to reduce rates. Moreover, policymakers downgraded their economic forecast for the fourth quarter of 2024. This might further contribute to capping the upside for the GBP/JPY cross. Hence, it will be prudent to wait for sustained strength and acceptance above the 197.00 mark before positioning for an extension of the monthly uptrend from the vicinity of the 188.00 round-figure mark.

• NZD/USD hovers around the descending channel’s lower boundary, reflecting a growing bearish bias.
• The bearish sentiment is being reinforced as the RSI maintains its position below the 30 mark.
• The initial resistance appears around the nine-day EMA at the 0.5708 level.

The NZD/USD pair remains tepid for the second successive day, trading around 0.5650 during the European hours on Tuesday. The technical analysis of the daily chart indicates a growing bearish bias as the pair remains near the lower boundary of a descending channel.

The 14-day Relative Strength Index (RSI) remains below the 30 level, signaling oversold conditions that may prompt a corrective bounce. However, if the RSI continues to hover near the 30 mark, it could further strengthen bearish sentiment.

Additionally, the NZD/USD pair is trading below the nine- and 14-day Exponential Moving Averages (EMAs), reflecting weak short-term price momentum and suggesting that downward pressure is likely to persist.

Regarding its support, the NZD/USD hovers near the lower boundary of the descending channel at 0.5630 level, followed by the 26-month low of 0.5607 level, which was recorded on December 19. A decisive break below this critical region would reinforce the bearish sentiment and push the pair to navigate the area around its multi-year low at 0.5518 level, last seen in October 2022.

The NZD/USD pair may find initial resistance at the nine-day EMA at 0.5708 level, followed by the 14-day EMA at 0.5743 level. A break above this level could improve the short-term price momentum and support the pair to test the descending channel’s upper boundary at the 0.5800 level.

NZD/USD: Daily Chart

• EUR/JPY depreciates as the latest BoJ Meeting Minutes highlighted the possibility of gradual rate hikes if inflation trends as expected.
• The Euro remains under pressure as ECB plans to continue lowering borrowing costs next year.
• ECB Lagarde highlighted that the central bank could achieve its goal of reducing inflation to the 2% medium-term target.

EUR/JPY retraces its recent gains from the previous session, trading around 163.20 during the European hours on Tuesday. The EUR/JPY cross remains subdued following the release of the Bank of Japan's (BoJ) Meeting Minutes for October’s monetary policy.

BoJ board members highlighted the possibility of gradual rate hikes if inflation trends align with expectations, potentially reaching 1.0% by late fiscal 2025. The Meeting Minutes also underscored a cautious approach to monetary policy, focusing on wage-driven economic growth while addressing domestic and global uncertainties, along with fiscal measures to counter deflationary pressures.

Japan’s Finance Minister Katsunobu Kato stated on Friday that the government “will take appropriate action against excessive moves” in the foreign exchange market and will continue coordinating with international authorities on forex policies.

Last week, BoJ Governor Kazuo Ueda reiterated that the central bank would wait for further data to assess whether wage growth could maintain its upward momentum next year, aiming for greater clarity on economic trends.

The downside risks for the EUR/JPY cross is strengthened due to the subdued Euro amid rising bets of further rate reduction by the European Central Bank (ECB). Financial Times published an interview of European Central Bank (ECB) President Christine Lagarde on Monday, stating that the central bank is nearing its goal of sustainably bringing inflation down to the medium-term target of 2%. However, Lagarde stressed the importance of continued vigilance, particularly concerning inflation in the services sector.

On Saturday, ECB Governing Council member Boris Vujcic highlighted that the central bank plans to continue lowering borrowing costs in 2025, according to Bloomberg. “The direction is clear—it’s a continuation of the path from 2024, with further reductions in interest rates,” he said.

• USD/CAD tests the immediate resistance at the ascending channel’s upper boundary of 1.4400 level.
• The bullish bias is reinforced as the 14-day RSI remains above the 70 mark.
• The nine-day EMA at the 1.4323 level would act as initial support for the pair.

USD/CAD breaks its three-day losing streak, trading around 1.4380 during the European session on Tuesday. From a technical standpoint, the daily chart suggests that the USD/CAD pair is testing the upper boundary of an ascending channel, indicating a strengthening bullish bias.

The 14-day Relative Strength Index (RSI) remains above the 70 level, signaling an overbought condition and the possibility of a downward correction. However, if the RSI holds near this level, it could reinforce bullish sentiment.

Moreover, the USD/CAD pair continues to trade above the nine- and 14-day Exponential Moving Averages (EMA), highlighting a bullish trend and strong short-term price momentum. This alignment reflects robust buying interest and the potential for further upside movement.

On the upside, the USD/CAD pair attempts to reclaim and break above the immediate resistance at the ascending channel’s upper boundary of the 1.4400 level. A decisive breach above this channel would reinforce the bullish bias and open the door for a potential retest of the multi-year high at 1.4467 level, which was marked on December 19.

Regarding support, the USD/CAD pair could first test the nine-day EMA at the 1.4323 level, followed by the 14-day EMA at the 1.4274 level. Further support appears at the lower boundary of the ascending channel at 1.4210 level.

USD/CAD: Daily Chart

• EUR/USD is stuck in a tight range around 1.0400 amid thin trading volumes in a holiday-truncated week.
• ECB Lagarde said she is confident about inflation sustainably returning to the bank’s target of 2% sooner than previously thought.
• According to UBS, the Fed will deliver two interest rate cuts next year, in June and September. 

EUR/USD consolidates in a tight range around 1.0400 in Tuesday’s European session. Thin trading volume due to holidays in Forex markets on Wednesday and Thursday on account of Christmas Day and Boxing Day, respectively, has kept the pair’s price action muted.

The overall outlook of the major currency pair is bearish. The Euro (EUR) weakened slightly on Monday after European Central Bank (ECB) President Christine Lagarde told the Financial Times (FT) in an interview that the central bank is “very close” to declaring that inflation has been brought sustainably to its medium-term target of 2%.

However, Christine Lagarde also warned that the central bank should remain vigilant to inflation in the services sector. While headline Eurozone inflation has eased to 2.2%, service inflation is still high at 3.9%.

When asked about her views on how the European Union (EU) should address incoming tariffs from United States (US) President-elect Donald Trump, Lagarde said that "retaliation was a bad approach because I think that overall trade restrictions followed by retaliation and this tit-for-tat, conflictual way of dealing with trade is just bad for the global economy at large”.

ECB dovish bets for 2025 stay afloat amid firm expectations that Eurozone inflation will return to the bank’s target of 2%. Traders expect the ECB to cut its Deposit Facility rate by 25 basis points (bps) in each of the next four policy meetings.

Daily digest market movers: EUR/USD follows sideways US Dollar

• EUR/USD stays sideways, following the footprints of the US Dollar (USD) in European trading hours. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, oscillates in a tight range above the key support of 108.00 amid thin trading volume. The broader outlook for the USD remains firm as the Federal Reserve (Fed) has guided fewer interest rate cuts for 2025.
• In the latest dot plot, the Fed signaled only two interest rate cuts in 2025 compared to the four cuts projected in September. According to analysts at UBS, the Fed will deliver two 25-bps interest rate cuts in the June and September policy meetings.
• Latest commentaries by Fed officials have shown that they have moved to a more measured approach to interest rate cuts due to stubborn inflation, better labor market conditions than previously anticipated, and the uncertainty over the impact of incoming policies by President-elect Donald Trump on the economy.
• Going forward, investors will focus on the US Initial Jobless Claims data for the week ending December 20, which will be published on Thursday. Due to a light US economic calendar, investors will pay close attention to the data. Economists estimate that the number of individuals claiming jobless benefits for the first time was at 218K, lower than the previous release of 220K.

Technical Analysis: EUR/USD consolidates around 1.0400

EUR/USD juggles around 1.0400 on Tuesday, holding above the two-year low of 1.0330. However, the outlook for the major currency pair remains strongly bearish as all short-to-long-term Exponential Moving Averages (EMAs) are declining. 

The 14-day Relative Strength Index (RSI) oscillates in the bearish range of 20.00-40.00, indicating a downside momentum.

Looking down, the asset could decline to near the round-level support of 1.0200 after breaking below the two-year low of 1.0330. Conversely, the 20-day EMA near 1.0500 will be the key barrier for the Euro bulls.

Here is what you need to know on Tuesday, December 24:

Major currency pairs fluctuate in tight ranges early Tuesday as trading conditions thin out. Stock and bond markets in the US will close early on Christmas Eve and will remain closed on Christmas Day on Wednesday. The economic calendar will not feature any data releases until Thursday.

The data from the US showed on Tuesday that the Conference Board's Consumer Confidence Index declined to 104.7 in December from 112.8 (revised from 111.7) in November. In the meantime, Durable Goods Orders declined by 1.1% on a monthly basis in November, while New Home Sales increased by 5.9%. The US Dollar (USD) struggled to gather strength following the mixed data releases but the USD Index managed to register small gains on Monday.

The Bank of Japan noted in its Monetary Policy Meeting Minutes that gradual rate hikes will be possible if inflation trends align with their expectations. According to the publication, one member suggested a gradual rate hike to 1.0% by the second half of fiscal 2025 for better economic assessment. After rising nearly 0.5% on Monday, USD/JPY fluctuates in a tight range slightly above 157.00 in the European morning on Tuesday.

EUR/USD edged higher during the European trading hours on Monday but failed to preserve its recovery momentum in the second half of the day. The pair seems to have entered a consolidation phase at around 1.0400 in the early European session on Tuesday.

GBP/USD closed marginally lower on Monday following a recovery attempt toward 1.2600. The pair moves up and down in a narrow band below 1.2550 on Tuesday.

Gold edged lower as the benchmark 10-year US Treasury bond yield continued to stretch higher on Monday. XAU/USD holds steady near $2,620 in the European morning.

• USD/CHF trades with mild gains near 0.8990 in Tuesday’s European session. 
• Fed indicated fewer rate reductions ahead, supporting the US Dollar. 
• Geopolitical risks might boost the safe-haven currency like the CHF and cap the upside for the pair. 

The USD/CHF pair posts modest gains to around 0.8990 during the early European session on Tuesday. The prospect of higher-for-longer US interest rates continues to underpin the Greenback for the time being. Trading volumes are likely to thin out as the year-end approaches. 

The Federal Reserve (Fed) projections outlined a slower pace of rate cuts than traders had expected, supporting the US Dollar (USD). The Summary of Economic Projections, or ‘dot-plot’, indicated a half-percentage point rate cut in 2025, compared with a full percentage cut projected in September.

Data released by the Census Bureau on Monday showed that the US New Home Sales jumped 5.9% to a seasonally adjusted annual rate of 664,000 in November. The reading for October was revised higher to a rate of 627,000 units from the previously reported 610,000 units. Additionally, Durable Goods Orders in the US declined by 1.1% in November to $285.1 billion, followed by a 0.8% increase reported in October, weaker than the expectations of a 0.4% decline. 

On the Swiss front, traders will closely monitor the development surrounding escalating geopolitical tensions in the Middle East. Ant signs of geopolitical risks could boost the safe-haven currency like the Swiss Franc (CHF) and act as a headwind for USD/CHF. Israel’s defence minister has confirmed that Israel killed Hamas's political leader Ismail Haniyeh in Tehran in July and warned that the military would also “decapitate” the leadership of Yemen’s Houthi rebels, per BBC. On the other hand, Israeli Prime Minister Benjamin Netanyahu said some progress had been made towards agreeing a ceasefire in Gaza with Hamas, but he could not give a timeline for when a deal would be reached.

• EUR/GBP comes under downward pressure as ECB plans to continue lowering borrowing costs next year.
• ECB Lagarde highlighted that the central bank could achieve its goal of reducing inflation to the 2% medium-term target.
• The Pound Sterling faces challenges due to rising odds of the BoE’s dovish policy outlook for the next year.

EUR/GBP halts its three-day winning streak, trading around 0.8290 during the early European hours on Tuesday. This downside of the EUR/GBP cross is attributed to the decline in the Euro amid rising bets of further rate reduction by the European Central Bank (ECB).

On Monday, Financial Times published an interview of European Central Bank (ECB) President Christine Lagarde, stating that the central bank is nearing its goal of sustainably bringing inflation down to the medium-term target of 2%. However, Lagarde stressed the importance of continued vigilance, particularly concerning inflation in the services sector.

Additionally, ECB Governing Council member Boris Vujcic stated on Saturday that the central bank plans to continue lowering borrowing costs in 2025, according to Bloomberg. “The direction is clear—it’s a continuation of the path from 2024, with further reductions in interest rates,” he said.

The EUR/GBP pair advanced as the Pound Sterling (GBP) weakened against its major counterparts, driven by increasing expectations of a dovish policy stance from the Bank of England (BoE) in the coming year. Market participants now anticipate a 53-basis-point (bps) rate cut in 2025, up from the previously expected 46 bps. This shift follows a 6-3 vote by the Monetary Policy Committee (MPC), with three out of nine members advocating for a 25 bps rate reduction, which investors interpreted as signaling a dovish trend for the year ahead.

Market expectations for 53 bps reduction in interest rates in 2025 suggest that there will be at least two 25-basis-points rate cuts. However, speculation for the number of interest rate cuts by the UK central bank is fewer than those expected from the European Central Bank (ECB), making the British Pound an attractive bet against the Euro.

• AUD/JPY tumbles to around 97.95 in Tuesday’s early European session, down 0.25% on the day. 
• The cross keeps the negative view below the 100-day EMA with the bearish RSI indicator. 
• The first downside target is seen at 96.00; the first upside barrier emerges at 98.74. 

The AUD/JPY cross attracts some sellers to near 97.95 during the early European session on Tuesday. The Japanese Yen (JPY) edges higher after the verbal intervention from the Japanese authorities. Japan’s Finance Minister Katsunobu Kato said on Friday that they “will take appropriate action against excessive moves.”

According to the daily chart, AUD/JPY remains capped under the key 100-day Exponential Moving Averages (EMA), suggesting that the path of least resistance is to the downside. The downward momentum is reinforced by the Relative Strength Index (RSI), which stands below the midline near 48.00, supporting the sellers in the near term. 

The lower limit of the Bollinger Band and round mark at 96.00 act as an initial support level for the cross. A breach of this level could see a drop to 94.78, the low of September 6. Further south, the next contention level to watch is 93.59, the low of September 11. 

On the bright side, the first upside barrier emerges at 98.74, the high of December 19. The additional upside filter to watch is 99.25, the 100-day EMA. The 100.00 psychological level appears to be a tough nut to crack for bulls.  

AUD/JPY daily chart

China’s Finance Ministry said in a statement at the National Fiscal Work Conference on Tuesday that they “will step up fiscal spending, accelerate spending in 2025.

Additional takeaways

• GBP/USD struggles to gain any meaningful traction and languishes near a multi-month trough.
• The Fed’s hawkish shift underpins the USD and caps the upside amid the BoE’s dovish stance. 
• The recent failures near the 200-period SMA hurdle on the 4-hour chart favor bearish traders. 

The GBP/USD pair consolidates in a range below mid-1.2500s during the Asian session on Tuesday and remains within striking distance of its lowest level since May touched last week. Moreover, the fundamental backdrop and the technical setup suggest that the path of least resistance for spot prices remains on the downside. 

The US Dollar (USD) stands firm near a two-year peak and continues to draw support from the Federal Reserve's (Fed) hawkish signal that it would slow the pace of interest rate cuts in 2025. The British Pound (GBP), on the other hand, is undermined by the  Bank of England's (BoE) split vote decision to leave interest rates unchanged and a dovish outlook. This, in turn, validates the near-term negative outlook for the GBP/USD pair.

From a technical perspective, the recent repeated failures near the 200-period Simple Moving Average (SMA) on the 4-hour chart and the lack of any meaningful buying reaffirm the bearish bias. Given that oscillators on the daily chart are holding deep in the negative territory, the GBP/USD pair could challenge the 1.2500 psychological mark. Some follow-through selling will confirm a breakdown and pave the way for deeper losses. 

The subsequent fall has the potential to drag spot prices to the May swing low, around the 1.2445 region, en route to the 1.2400 mark and the year-to-day trough, around the 1.2300 round figure. The latter should act as a strong base for the GBP/USD pair and help limit the downside amid the year-end thin trading volumes.

On the flip side, the 1.2600 mark is likely to act as an immediate hurdle, above which a bout of a short-covering could lift spot prices to the 200-period SMA on the 4-hour chart, currently pegged near the 1.2680 region. This is closely followed by the 1.2700 round figure, which if cleared decisively will set the stage for some meaningful recovery and push the GBP/USD pair towards the 1.2735 zone intermediate hurdle en route to the 1.2775-1.2780 supply zone.

GBP/USD 4-hour chart

• WTI price moves little as trading activity remains subdued before the Christmas holiday.
• Oil prices received some support after recent data indicated that the US economy remained strong heading into the year-end.
• The third-largest Oil importer India's crude Oil imports, increased by 2.6% YoY to 19.07 million metric tons in November.

West Texas Intermediate (WTI) Oil price continues to remain tepid for the second successive session, trading around $69.30 per barrel during the Asian hours on Tuesday. However, crude Oil prices found some support due to thin trading activity ahead of the Christmas holiday.

Additionally, Oil prices gained some support after US data showed that the economy of the United States (US), the largest Oil consumer, remained robust as the year-end approached. New orders for essential US-manufactured capital goods surged in November, driven by strong demand for machinery, while new home sales also rebounded, signaling that the US economy is on solid footing as the year ends.

Meanwhile, India's crude Oil imports, the third-largest in the world, increased by 2.6% year-on-year to 19.07 million metric tons in November, driven by strong demand amid rising economic and travel activity.

However, the prices of the black gold could find challenges due to concerns about potential oversupply during next year. European supply fears also eased after reports indicated that the Druzhba pipeline resumed operations following technical issues at a Russian pumping station.

The demand for dollar-denominated Oil faces challenges due to the stronger US Dollar (USD), which makes crude Oil more expensive for buyers holding foreign currencies. The Greenback receives support as traders are factoring in only two rate cuts in 2025 after Fed policymakers signaled fewer interest rate cuts next year due to a slowdown in the disinflation process.

In the Middle East, efforts by mediators Egypt, Qatar, and the US to end the fighting between Israel and Hamas have gained momentum this month, with Israeli and Palestinian officials noting that the gaps between the parties have narrowed. However, crucial differences remain unresolved, according to Reuters.

• NZD/USD drifts lower to 0.5645 in Tuesday’s Asian session.
• The Chinese MoF said it was committed to fostering domestic demand growth. 
• The expectation of the Fed rate cut path might underpin the USD. 

The NZD/USD pair remains on the defensive around 0.5645 during the Asian trading hours on Tuesday. The announcement of China’s fresh fiscal support measures fails to boost the Kiwi as the markets turn cautious ahead of the holiday-shortened trading week. 

China’s Ministry of Finance said on Tuesday that the authorities will step up fiscal spending in 2025 and plan to intensify efforts to mitigate risks in key sectors. Ministry of Finance added that the government is committed to fostering domestic demand growth, and fiscal spending will focus more on people's livelihoods and boost consumption. However, the announcement has little to no impact on the New Zealand Dollar (NZD). 

On the other hand, the US Federal Reserve (Fed) cut its federal funds rate by 25 basis points (bps), bringing the rate to a range of 4.25% to 4.50%, down from its previous target range of 4.5% to 4.75%. "Fed officials might prefer to be cautious in light of uncertainty about the new administration's policies, especially possible tariff increases," noted Goldman Sachs economists. 

Last month, US President-elect Donald Trump unveiled plans to place a 25% tariff on all imports from Mexico and Canada in January and intends to levy an additional 10% fee on all imports from China. Many economists expect the potential Trump’s tariff policies could fuel inflation and might convince the Fed to slow or pause its rate decisions next year in a wait-and-see approach. This, in turn, might support the Greenback and act as a headwind for NZD/USD. 

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

The price for Gold stood at 7,171.28 Indian Rupees (INR) per gram, up compared with the INR 7,150.38 it cost on Monday.

The price for Gold increased to INR 83,644.34 per tola from INR 83,400.63 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 edges higher on Tuesday, albeit lacking strong follow-through buying.
• The Fed’s hawkish shift acts as a tailwind for the USD and caps the precious metal.
• Geopolitical tensions and trade war fears should support the safe-haven XAU/USD.

Gold price (XAU/USD) attracts some dip-buyers during the Asian session on Tuesday and stalls the overnight modest pullback from a three-day top, though any meaningful appreciating move seems elusive. The US Dollar (USD) stands firm near a two-year high touched last week amid the Federal Reserve's (Fed) hawkish outlook. Furthermore, the prospects for a slower pace of rate cuts by the Fed in 2025 remain supportive of elevated US Treasury bond yields and could act as a headwind for the non-yielding yellow metal. 

Apart from this, a generally positive tone around the equity markets might contribute to capping gains for the safe-haven Gold price. Meanwhile, the fundamental backdrop seems tilted in favor of bearish traders and suggests that the path of least resistance for the XAU/USD is to the downside. That said, persistent geopolitical risks stemming from the protracted Russia-Ukraine war and tensions in the Middle East, along with concerns about US President-elect Donald Trump's tariff plans, could lend support to the precious metal. 

Gold price lacks firm near-term direction amid mixed fundamental cues

• The Federal Reserve last week tempered the outlook for further rate cuts in 2025, marking a turning point in its monetary policy and underscoring uncertainties surrounding potential policy changes under the incoming Trump administration.
• The yield on the benchmark 10-year US government bond shot to its highest level since May on Monday and the US Dollar stood firm near a two-year peak touched last week, which should cap the upside for the non-yielding Gold price. 
• The Israel Defense Forces (IDF) said this Tuesday that sirens were sounded in the centre and south of Israel and that it had intercepted a projectile fired from Yemen as Israeli forces continued their attacks in besieged northern Gaza. 
• Russian forces captured two villages in Ukraine and are making steady progress in the Donetsk area. US President-elect Donald Trump urged Ukrainian President Volodymyr Zelenskyy to consider a ceasefire and abandon Russian-occupied territories.
• Traders now look forward to the release of the Richmond Manufacturing Index, which, along with the US bond yields, will influence the USD and provide some impetus amid a relatively thin liquidity on Christmas Eve.

Gold price seems vulnerable amid the formation of a bearish flag on hourly charts

From a technical perspective, the recent recovery from a one-month low, along an ascending channel, constitutes the formation of a bearish flag pattern on hourly charts. Moreover, oscillators on the daily chart remain in negative territory, suggesting that the path of least resistance for the Gold price is downward. That said, it will still be prudent to wait for a convincing break below the channel support, currently pegged around the $2,605-$2,600 area, before positioning for any further depreciating move. 

The subsequent downfall could drag the Gold price back towards the monthly trough, around the $2,583 region touched last week. Some follow-through selling will be seen as a fresh trigger for bears and set the stage for a slide towards the November monthly swing low, around the $2,537-$2,536 area en route to the $2,500 psychological mark.

On the flip side, the $2,633-$2,634 zone, or a multi-day top touched on Monday, which nears the top boundary of the ascending channel, might continue to act as an immediate strong barrier. A sustained strength beyond might prompt some short-covering and lift the Gold price to the $2,654-$2,655 region. The latter should act as a key pivotal point, which if cleared decisively will negate the near-term negative bias and pave the way for additional gains towards reclaiming the $2,700 round figure.

• Silver price gains ground as trading activity remains subdued before the Christmas holiday.
• The non-yielding Silver may struggle as traders factor in only two rate cuts next year.
• Concerns about potential tariffs from the incoming Trump administration have heightened fears of weakened industrial demand for Silver.

Silver price (XAG/USD) extends its winning streak for the third consecutive session, trading around $29.70 during the Asian hours on Tuesday. Prices of precious metals like Silver are supported probably due to thin trading activity before the Christmas holiday. Additionally, soft US PCE data have tempered inflation concerns, presenting a mixed outlook for the economy, which benefits non-yielding assets like Silver.

However, Silver prices may receive downward pressure as traders continue to assess the Federal Reserve’s (Fed) outlook for 2025, factoring in only two rate cuts in 2025 after Fed policymakers signaled fewer interest rate cuts next year due to a slowdown in the disinflation process.

According to the CME FedWatch tool, markets now anticipate a nearly 93% probability that the Federal Reserve will keep interest rates unchanged in January, maintaining the current range of 4.25%–4.50%.

Potential tariffs from the incoming Trump administration have intensified fears of weak demand for Silver as an industrial input, causing the metal to underperform in the fourth quarter. Additionally, Chicago Fed President Austan Goolsbee stated that uncertainty surrounding Trump’s policies after taking office led him to revise his projection for 2025. While he had previously anticipated a 100-basis-point (bps) interest rate reduction, he now expects fewer cuts.

Additionally, Silver prices are facing pressure from a constrained industrial outlook, driven by overcapacity in China’s solar panel industry. This has led photovoltaic companies to participate in a government-led self-discipline program to regulate supply. Pressure on Silver prices was also noted due to concerns over a potential Yuan devaluation, in line with China’s looser monetary policy stance.

• USD/CAD appreciates as its upside potential is strengthened by the slightly hawkish sentiment surrounding the Fed’s policy outlook.
• The US Consumer Confidence Index fell by 8.1 points in December, landing at 104.7.
• Canada’s Gross Domestic Product expanded by 0.3% MoM in October, exceeding the forecasted 0.1% decline.

USD/CAD holds thin gains after three days of losses, trading around 1.4380 during the Asian hours on Tuesday. The upside potential for the USD/CAD pair is bolstered as Federal Reserve (Fed) policymakers signaled fewer interest rate cuts next year due to a slowdown in the disinflation process. However, soft US PCE data have tempered inflation concerns, presenting a mixed outlook for the economy.

On the data front, US Durable Goods Orders for November were weaker than anticipated, declining by 1.1% compared to the expected 0.4% drop. This follows an upward revision for October, which showed an increase of 0.8%, up from the previously reported 0.2%.

The US Consumer Confidence Index, published by the Conference Board, fell by 8.1 points in December, landing at 104.7. “The recent rebound in consumer confidence was not sustained in December as the Index dropped back to the middle of the range that has prevailed over the past two years,” noted Dana M. Peterson, Chief Economist at The Conference Board.

US households expressed concerns about President-elect Trump’s economic policies, with nearly half of respondents fearing that tariffs could drive up the cost of living. These concerns were compounded by the Federal Open Market Committee’s (FOMC) recent projections, which indicated fewer rate cuts in 2025, reflecting caution amid persistent inflationary pressures. 

In Canada, Gross Domestic Product (GDP) rose by 0.3% month-over-month in October, exceeding the forecasted 0.1% decline. However, the Raw Material Price Index in Canada contracted by 0.5% in November, a sharp drop from the 4.0% increase recorded in October and well below the anticipated 0.6% rise.

Looking ahead, Canada’s GDP is expected to have contracted by 0.1% month-over-month in November, marking the first monthly contraction of the year and aligning with the central bank’s recent warnings and downwardly revised growth projections.

• The Japanese Yen remains depressed near a multi-month low against the USD. 
• The BoJ’s dovish stance and a positive risk tone undermine the safe-haven JPY.
• The Fed’s hawkish outlook for 2025 acts as a tailwind for the USD/JPY pair.

The Japanese Yen (JPY) continues with its relative underperformance against its American counterpart for the second straight day on Tuesday and remains close to the multi-month low touched last week. The Bank of Japan (BoJ) last week opened up the possibility of waiting longer for the next hike, while the Federal Reserve (Fed) signaled a slowdown in the pace of monetary easing next year. This, in turn, tempers expectations of a sharp narrowing in the US-Japan rate differential and turns out to be a key factor undermining the JPY. 

Apart from this, a generally positive tone around the equity markets further dents demand for the safe-haven JPY, which moved little following the release of the October BoJ meeting Minutes. This, along with a bullish US Dollar (USD), bolstered by the Fed's hawkish shift, assists the USD/JPY pair to hold above the 157.00 mark during the Asian session. That said, the recent inflation data from Japan keeps the door open for a potential BoJ rate hike in January or March. This might hold back the JPY bears from placing aggressive bets. 

Japanese Yen continues with its struggle to lure buyers amid BoJ rate-hike uncertainty

• The Bank of Japan October meeting Minutes released this Tuesday reiterated the possibility of gradual rate hikes if inflation trends align with expectations, with a potential path to 1.0% by late fiscal 2025.
• The BoJ Minutes also emphasized a cautious approach to monetary policy, wage-driven economic growth amid domestic and global uncertainties and fiscal measures to counter deflationary pressures. 
• BoJ Governor Kazuo Ueda said last week that the central bank preferred to await data on whether wages would retain their upward momentum next year and to gain clarity on Trump's economic policies.
• Investors now seem convinced that the BoJ will not hike interest rates at its next monetary policy meeting in January and wait until March, which, in turn, continues to undermine the Japanese Yen on Tuesday. 
• As the market continues to adjust to the Federal Reserve's (Fed) less dovish outlook for 2025, the yield on the benchmark 10-year US government bond shot to its highest level since May the previous day. 
• The US Dollar remains close to a two-year peak and seems unaffected by a slight disappointment from the Conference Board's US Consumer Confidence index, which fell to 104.7 from 111.7 previously. 
• Investors now look to the release of the Richmond Manufacturing Index from the US for some impetus amid relatively thin trading volumes on Christmas Eve.

USD/JPY seems poised to retest multi-month top and prolong the appreciating trend

From a technical perspective, the multi-month top, around the 158.00 neighborhood touched last Friday, could act as an immediate hurdle. A sustained strength beyond the said handle will be seen as a fresh trigger for bulls and lift the USD/JPY pair to the 158.45 intermediate resistance en route to the 159.00 mark amid positive oscillators on the daily chart. 

On the flip side, weakness below the 157.00 round figure now seems to find decent support near the 156.65 horizontal zone, below which the USD/JPY pair could slide to the 156.00 mark. Any further decline could be seen as a buying opportunity near the 155.50 region and seems limited near the 155.00 psychological mark. The latter should act as a strong base for spot prices.

• The Indian Rupee loses traction in Tuesday’s Asian session. 
• A weak offshore Chinese Yuan, strong USD demand from importers, and higher crude oil prices weigh on the INR. 
• The intervention by the RBI might help limit the local currency’s losses.

The Indian Rupee (INR) extends its downside on Tuesday after reaching an all-time low in the previous session. The strong US Dollar (USD) demand by corporates, likely related to month-end payments and weakness in the Chinese Yuan could drag the local currency lower. The slight uptick in crude oil prices contributes to the INR’s downside as India is the world's third-largest oil consumer. 

However, the routine intervention by the Reserve Bank of India (RBI) might help limit the INR’s losses. The RBI has been intervening aggressively to support the INR. The Indian central bank has ramped up its forward USD sales to limit the impact of spot market interventions on cash in the banking system and on foreign exchange reserves. The markets are likely to trade in a quiet session ahead of the holiday trading week.

Indian Rupee weakens amid global cues

• India's benchmark indexes were closed higher on Monday. The Nifty 50 rose 0.7% to 23,753.45 points, while the BSE Sensex climbed 0.64% to 78,540.17, with both benchmarks snapping a five-session losing streak.
• "The Reserve Bank of India likely intervened in the currency market to prevent the exchange rate from depreciating further from the 85.12 levels. There were dollar sales from public sector banks, likely on behalf of the RBI," a currency trader from a state-run bank said.
• The US New Home Sales climbed 5.9% to a seasonally adjusted annual rate of 664,000 in November, the Census Bureau reported on Monday. The sales pace for October was revised higher to a rate of 627,000 units from the previously reported 610,000 units.
• Durable Goods Orders in the US dropped by 1.1% in November to $285.1 billion, according to the US Census Bureau on Monday. This reading followed a 0.8% increase reported in October, missing the estimation of a 0.4% decline.  

USD/INR’s positive picture prevails

The Indian Rupee edges lower on the day. However, the constructive view of the USD/INR pair remains in play, characterized by the price holding above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. 

The first upside barrier to watch is the ascending channel upper boundary at 85.25. Extended gains above this level could see a rally to 85.50, en route to the 86.00 psychological level. 

On the downside, the 85.00-84.95 zone acts as a potential support area for USD/INR. The 14-day Relative Strength Index (RSI) is located above the midline near 68.95, suggesting that the support level is likely to hold rather than break. Else, a breach of the mentioned level could expose 84.21, the 100-day EMA.

• The Australian Dollar depreciates as the RBA may begin rate cuts in February.
• The RBA’s Meeting Minutes suggested that the board had grown more confident about inflation; however, risks persisted.
• US Dollar appreciated as Fed policymakers signaled fewer rate cuts in 2025 due to a slowdown in the disinflation process.

The Australian Dollar (AUD) loses ground for the second successive day against the US Dollar (USD) on Tuesday following the release of the Reserve Bank of Australia’s (RBA) Meeting Minutes for its December monetary policy. Trading activity is expected to be subdued before the Christmas holiday.

The RBA’s Meeting Minutes indicated that the board had grown more confident about inflation since its previous meeting, though risks persisted. The board emphasized the need for monetary policy to remain "sufficiently restrictive" until there was greater certainty about inflation.

The RBA board also noted that if future data aligns with or falls below forecasts, it would bolster confidence in inflation and make it appropriate to start easing policy restrictions. However, stronger-than-expected data could require maintaining restrictive policy for a longer period.

Reserve Bank of Australia Governor Michele Bullock highlighted the continued strength of the labor market as a key reason the RBA has been slower than other nations to commence its monetary easing cycle.

Australian Dollar weakens as traders expect fewer Fed rate cuts next year

• The US Dollar rebounded following a sharp sell-off as Federal Reserve (Fed) policymakers signaled fewer interest rate cuts next year due to a slowdown in the disinflation process. However, soft US PCE data have tempered inflation concerns, presenting a mixed outlook for the economy.
• According to the CME FedWatch tool, markets now anticipate a nearly 93% probability that the Federal Reserve (Fed) will keep interest rates unchanged in January, maintaining the current range of 4.25%–4.50%.
• US Durable Goods Orders for November came in weaker than expected, with fresh orders declining by 1.1%, compared to the projected 0.4% drop. This follows an upwardly revised increase of 0.8% in October, up from the initially reported 0.2%.
• On Friday, Cleveland Fed President Beth Hammack said that she prefers to hold interest rates steady "until the Fed gets further evidence that inflation is resuming its path to its 2% objective,” per Reuters.
• Chicago Fed President Austan Goolsbee stated in an interview with CNBC that uncertainty surrounding Trump’s policies after taking office led him to revise his projection for 2025. While he had previously anticipated a 100-basis-point (bps) interest rate reduction, he now expects fewer cuts.
• US core PCE inflation year-over-year, the Fed’s preferred inflation measure, rose steadily by 2.8%, slower than estimates of 2.9%. The monthly core inflation grew moderately by 0.1%, against forecasts of 0.2% and the prior release of 0.3%.

Australian Dollar remains below 0.6250, with RSI reflecting risks to the upward correction

AUD/USD trades near 0.6230 on Tuesday, with the daily chart signaling a persistent bearish bias as the pair remains within a descending channel pattern. The 14-day Relative Strength Index (RSI) dips below the 30-level, suggesting the potential near-term upward correction to dissipate.

On the downside, the AUD/USD pair may test the lower boundary of the descending channel near the 0.6110 support level.

To the upside, the AUD/USD pair faces an initial barrier at the nine-day Exponential Moving Average (EMA) of 0.6288, followed by the 14-day EMA at 0.6322. A more significant hurdle is the descending channel’s upper boundary, around 0.6370. A decisive breakout above this channel could open the door for a rally toward the nine-week high of 0.6687.

AUD/USD: Daily Chart

Japan’s Finance Minister Katsunobu Kato on Friday that they “will take appropriate action against excessive moves.”

Additional quotes

Market reaction

USD/JPY is erasing gains, retreating toward 157.00 following these above comments. The pair is currently trading modestly flat on the day.

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Tuesday at 7.1876, as compared to the previous day's fix of 7.1870 and 7.3031 Reuters estimates.

• EUR/USD softens to near 1.0400 in Tuesday’s early Asian session. 
• The Fed sees fewer interest rate cuts in 2025 amid a slowdown in the disinflation process. 
• ECB’s Lagarde said the Eurozone inflation was getting "very close" to reaching 2% in the near term. 

The EUR/USD pair trades with mild losses around 1.0400 during the early Asian session on Tuesday. The expectation that the US Federal Reserve (Fed) will deliver fewer rate cuts in 2025 provides some support for the Greenback. Trading volumes are likely to be low ahead of the holiday trading week.

A renewed "higher for longer" policy approach by the Fed will hang over the final trading days of the year, which might lift the US Dollar (USD) broadly. The US central bank lowered its benchmark interest rate by another quarter point last week. According to the latest quarterly dot plot, the Fed committee has dialed back its expectations for rate reductions in 2025 and beyond. The Fed now predicts just a 50 basis points (bps) reduction or two rate cuts, down from four quarter-point cuts. 

Across the pond, the Euro (EUR) weakens amid rising bets of further rate reduction by the European Central Bank (ECB). The ECB President Christine Lagarde said on Monday that the Eurozone was getting "very close" to reaching the ECB's medium-term inflation target, per the Financial Times on Monday. Lagarde further stated that the central bank would cut interest rates further if inflation continued to ease towards its 2% goal, as curbing growth was no longer necessary.

The Reserve Bank of Australia (RBA) published the Minutes of its December monetary policy meeting on Tuesday, highlighting that the board had gained confidence in inflation since the prior meeting, but risks remained. Policy needed to be "sufficiently restrictive" until confident about inflation.

Key quotes

Market reaction to the RBA Meeting Minutes

At the time of writing, AUD/USD is trading 0.15% lower on the day to trade at 0.6240. 

The Bank of Japan (BoJ) board members shared their views on the monetary policy outlook on Tuesday, per the BoJ Minutes of the October meeting.  

Key quotes

Market reaction to the BoJ Minutes

At the time of writing, USD/JPY was up 0.03% on the day at 157.18.