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• USD/CAD softens to near 1.4055 in Wednesday’s early Asian session. 
• Trump's tariff threat exerts some selling pressure on the Canadian Dollar. 
• FOMC minutes showed officials backed the gradual pace of rate cuts. 

The USD/CAD pair trades with mild losses around 1.4055 during the early Asian session on Wednesday. The Canadian Dollar (CAD) recovers some lost ground after reaching a 55-month low due to US President-elect Donald Trump vowing tariffs on Mexico and Canada and extra tariffs on China. 

Donald Trump said he would impose a 25% tariff on imports from Canada and Mexico on January 20 and impose an extra 10% tariff on goods from China. The prospect of likely substantial tariffs has prompted traders to become more cautious about the currencies of the United States (US) trading partners, dragging the Loonie lower against the Greenback. 

Goldman Sachs analyst, Isabella Rosenberg, said the proposed 25% tariff on Mexican and Canadian imports would represent a significant economic shock for both the Canadian Dollar and the Mexican Peso.

Minutes from the Federal Open Market Committee's (FOMC) latest meeting indicated that the policymakers are taking a cautious approach to cutting interest rates as inflation is easing and the labor market remains strong.  At the November meeting, the Fed decided to lower interest rates by a quarter-point to a range of 4.5-4.75%, the second cut in as many meetings. The cautious stance from the Fed might boost the Greenback in the near term.

Later on Wednesday, the US Core Personal Consumption Expenditures (Core PCE) - Price Index for October will take center stage. Also, the weekly Initial Jobless Claims, Pending Home Sales, the Chicago PMI and Durable Goods Orders will be released. 

• GBP/USD waffled just below the 1.2600 handle on Tuesday.
• Pound Sterling bidders remain elusive amid data-light schedule.
• Overall market sentiment is twisting ahead of key US inflation figures.

GBP/USD churned chart paper just below 1.2600 on Tuesday, marking out familiar territory as the Pound Sterling struggles to find an intraday direction against the Greenback. A limited data schedule on either side of the Atlantic kept Cable traders locked in place, but looming US inflation data could spark a fresh round of volatility ahead of the US Thanksgiving holiday slated for Thursday.

A raft of financial activity figures from the UK are slated for release on Friday, but the figures are broadly low-tier and will have a limited impact. Some particularly-studious Pound Sterling traders will be keeping one eye on the Bank of England’s latest Financial Stability Report, also due Friday, but market movement is likely to be limited from the print.

Wednesday will bring another update to US Personal Consumption Expenditure Price Index (PCEPI) inflation, a key reading of price increases underpinning the US economy. Wednesday also brings a quarterly update of US Gross Domestic Product (GDP) growth. Annualized core PCEPI inflation is set to accelerate again in October and forecast to increase to 2.8% from the previous 2.7%. QoQ US GDP growth in the third quarter is expected to hold steady at 2.8%.

GBP/USD price forecast

GBP/USD remains hobbled on the south side of the 1.2600 handle, churning bids north of 1.2500 as the pair finds some breathing room after another leg lower from early November’s choppy plateau just below 1.3000. Cable reached a six-month low of 1.2487 late last week, clipping into a 7% decline top-to-bottom from September’s peaks at 1.3434. 

In the near-term, Pound bulls hoping for an end to the current Greenback upshot will be looking for intraday bids to return to the 200-day Exponential Moving Average (EMA) near 1.2840, while long-run short positions will be looking for an opportunity to redevelop momentum and drag Cable back to 2024 lows at the 1.2300 handle.

GBP/USD daily chart

• EUR/AUD trades at 1.6209, marking a second consecutive day of gains, with a daily high of 1.6244.
• Resistance levels: 50-day SMA at 1.6261, followed by 1.6300, and the 100-day SMA at 1.6365.
• Support levels: 1.6200, 1.6161 (Nov 7 low), and key psychological level at 1.6100.

The EUR/AUD advanced for the second straight day, as Trump’s threatening to impose tariffs on China was a headwind for the Aussie Dollar. Therefore, the cross-pair rose over 0.50% and traded at 1.6209 at the time of writing.

EUR/AUD Price Forecast: Technical outlook

The EUR/AUD’s downtrend remains intact, with the pair registering a successive series of lower highs and lower lows. Even though the pair hit a daily high of 1.6244, near the day Simple Moving Average (SMA) at 1.6261, sellers stepped in, dragging prices below the head-and-shoulders neckline.

If EUR/AUD climbs past the 50-day SMA, the next resistance would be the 1.6300 figure. A breach of the latter will expose the 100-day SMA at 1.6365, followed by the 200-day SMA at 1.6373.

Conversely, If EUR/AUD drops below 1.6200, the next support would be the November 7 low of 1.6161, followed by the psychological figure of 1.6100. UP next would be the November 25 low of 1.6003, followed by the November 22 low of 1.5963.

EUR/AUD Price Chart – Daily

• NZD/USD fell by 0.23% on Tuesday, slipping to 0.5830.
• Pair extended its decline and tallied a five-day losing streak, striking a fresh low below 0.5800, its lowest in over a year.
• Indicators warn about oversold conditions, which might push the pair somewhat upwards.

The NZD/USD plunged by 0.23% to 0.5830 in Tuesday's session, marking its fifth consecutive day in the red. This decline saw the pair set a new low below 0.5800, its lowest level in over a year with indicators echoing an intenses bearish momentum.

The technical analysis reveals a bearish picture for the NZD/USD pair. The key indicators depict mounting selling pressure, accentuating the bearish outlook. The Relative Strength Index (RSI), hovering in negative territory at 36, signifies the current selling sentiment. Similarly, the Moving Average Convergence Divergence (MACD) reinforces this bearish sentiment with its histogram transitioning to red and escalating.

Despite indicators hinting at oversold conditions suggesting a potential temporary upswing, the bears still dominate the pair's trajectory. Hence, a break below 0.5830 may exacerbate losses. The support levels of note are 0.5800, 0.5750, and 0.5730, while resistance stands at 0.5900, 0.5930, and 0.5950.

NZD/USD daily chart

• NZD/JPY fell 0.94% on Tuesday to trade near 89.20.
• The pair has tallied a four-day losing streak, now at lows since September 20.
• Technical indicators are signaling continued weakness for the pair, suggesting potential for further losses.

The NZD/JPY pair continued its downward trajectory on Tuesday, falling 0.94% to trade near 89.20. This marked the fourth consecutive day of losses for the pair, bringing it to its lowest level since September 20.

The pair's downtrend was further evident in the oversold the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) histogram, both of which corroborated the bearish outlook. This is reinforced by the fact that the cross has broken out of the sideways trade pattern seen since late September, so the pair may see further weakness. On the bright side, there may be an upwards correction as sellers may take a breather after the losing streak, but the overall outlook remains negative.

NZD/JPY daily chart

• The Canadian Dollar took a plunge on Crude Oil weakness on Tuesday.
• Canada is almost entirely absent from the economic calendar this week.
• Geopolitical headlines about Israel-Hezbollah ceasefire stabilize energy markets.

The Canadian Dollar (CAD) got knocked lower on Tuesday, declining to a fresh four-plus-year low point against the Greenback. The economic calendar was a thin affair on Tuesday, with markets broadly focused on geopolitical events and renewed tariff threats from incoming US President Donald Trump.

Canada is almost entirely absent from the economic calendar this week, with Loonie traders forced to wait until Friday for Canadian quarterly growth figures. The CAD has been left exposed to broad market flows in the meantime, keeping USD/CAD bid into the attic.

Daily digest market movers: Loonie buckles after tariff threats and Israel ceasefire

• The Loonie found a fresh 55-month low on Tuesday, sending USD/CAD to 1.4178 in intraday trading.
• President-elect Donald Trump reiterated his campaign threats to impose sweeping tariffs on all goods imported into the US, verbally targeting Canada with an across-the-board 25% import fee when he takes office in January.
• Markets broadly shrugged off the economically devasting threat as investors continue to believe former President Trump will be dissuaded from revisiting the Smoot-Hawley era of US history that devastated the US economy during the Great Depression.
• Israel has inked a ceasefire deal with Lebanon, sending Crude Oil markets lower and dragging the Canadian Dollar lower in a knock-on effect as the Loonie remains exposed to Crude Oil prices.

Canadian Dollar price forecast

After briefly visiting a new four-and-a-half year low on Tuesday, the Canadian Dollar has pulled back somewhat, moderating slightly and keeping USD/CAD bids below 1.4100 for the time being. The pair is knocking on the high end of a long-term technical congestion pattern that has plagued price action since 2016 when the Loonie backslid to its lowest prices against the Greenback since early 2003.

Momentum traders could be looking for a downside break in USD/CAD bids to drag the pair back to a medium-term inflection point near the 1.3000 handle, a price that long-term trends have cycled for nearly a decade, but in the interim, broad-market Greenback strength continues to keep USD/CAD bid into the high end.

USD/CAD daily chart

• Gold price remains unchanged at $2,625, held back by a mix of geopolitical developments and stronger US Dollar.
• Trump threatens tariffs on Canada, Mexico, and China, boosting the Greenback and raising fears of a global trade war.
• Ceasefire optimism between Israel and Hezbollah dampens Gold’s appeal as a safe-haven asset.

Gold prices remain stuck at around $2,625 for the second straight day, even though US President Donald Trump threatened to impose tariffs on three of its major trading partners in a post on his social media platform. Usually, the golden metal should rise on geopolitical uncertainties, but a de-escalation in the Middle East conflict poured cold water on the precious metal.

The XAU/USD trades at $2,625, virtually unchanged. Meanwhile, the latest Federal Open Market Committee (FOMC) minutes were released. They hinted that the Federal Reserve could pause reducing rates and hold them at around restrictive levels if inflation remains elevated.

Trump’s intentions to impose tariffs on Canada, Mexico, and China boosted the Greenback, ramping up fears of a global trade war.

Bullion’s collapse on Monday was exacerbated by Israel and Hezbollah ceasefire optimism and pressured by the nomination of Scott Bessent as US Treasury Secretary for Trump’s upcoming administration. This improved risk appetite, denting demand for Gold’s safe-haven status.

Nevertheless, Gold’s losses were capped if not by the escalation of the Ukraine-Russia conflict. This prevented XAU/USD from falling beneath $2,600 a troy ounce, even though the Greenback recovered some ground.

Data-wise, the US economic docket featured the release of the Conference Board (CB) Consumer Confidence in November, which exceeded estimates and October’s number,

Ahead this week, the US economic docket will feature Durable Goods Orders, Initial Jobless Claims, and the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index.

Daily digest market movers: Gold prices fluctuate at around $2,620

• Gold prices recovered as US real yields rose eight basis points to 2.014%.
• The US Dollar Index climbs over 0.16%, up at 107.00.
• The CME FedWatch Tool suggests that investors see a 59% chance of a 25-basis-point rate cut at the US central bank’s December meeting, up from 52% a day ago.
• The Conference Board’s Consumer Confidence for November expanded by 111.7, up from 109.6, exceeding estimates of 111.3
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 22 bps of Fed easing by the end of 2024.

Technical outlook: Gold price dwindles, consolidates at around the 50,100-day SMAs

Gold's price is neutral to downward biased after sellers pushed Bullion below the $2,700 mark. Additionally, XAU/USD is carving a series of successively lower highs and lower lows. If bears push prices below $2,600, it will open the door to testing the 100-day SMA of $2,565, immediately followed by the November 14 swing low of $2,536.

Conversely, if buyers recover the 50-day SMA at $2,665, this could pave the way to challenge $2,700. Once surpassed, the next stop would be $2,750, ahead of the all-time high at $2,790.

Oscillators like the Relative Strength Index (RSI) have shifted bearishly, indicating sellers are in charge.

• The AUD/USD declined on Tuesday to 0.6460.
• Market participants await inflation data amid renewed US-China trade war fears.
• Mixed local data, hawkish RBA and US Dollar strength influence AUD/USD sentiment.

The AUD/USD pair has been struggling to sustain its intraday gains, extending its losses for the second consecutive day and currently trading around 0.6460. Market participants will be closely monitoring inflation data due for release during Wednesday's trading hours, with geopolitical concerns, particularly renewed US-China trade war fears, casting a shadow over the currency.

The AUD/USD pair faces an uncertain outlook influenced by the hawkish Reserve Bank of Australia (RBA) and mixed Australian economic data. The US Dollar's strength has weighed on the pair, but potential rate hikes from the RBA may limit the downside.

Daily digest market movers: Australian Dollar pressured lower ahead of inflation data

• President-elect Donald Trump's threatened tariffs fuel risk aversion, weakening the China-sensitive Australian Dollar.
• Australia's inflation rate is forecast to climb to 2.3% YoY in October, up from 2.1% in September.
• The RBA's next rate announcement on December 10 may be influenced by the inflation report which could stop the Aussie’s bleeding.
• On the other hand, the US Personal Consumption Expenditure Price Index on Wednesday will provide clues for Fed interest rate decisions and might also move the pair.
• On Thursday, November’s Federal Open Market Committee Minutes showed little insight.
• Federal Reserve officials had mixed views on further rate cuts but agreed not to signal future policy direction clearly.

AUD/USD technical outlook: Indicators lack momentum, but support at 0.6430 may hinder further downside.

The AUD/USD continues to struggle for momentum with technical indicators signaling further weakness. Both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in negative territory, suggesting that bears are in control. However, the currency pair has found support at 0.6430, which could potentially halt the decline. On the upside, a break above 0.6450 could trigger a recovery.

• The Reserve Bank of New Zealand is set to lower its key interest rate by 50 bps to 4.25% on Wednesday.
• The RBNZ is expected to front-load due to the economic recession and as inflation falls back into the target band.
• The New Zealand Dollar could see a big reaction to the RBNZ’s updated forecasts and Governor Orr’s press conference.

The Reserve Bank of New Zealand (RBNZ) will announce its interest rate decision on Wednesday at 01:00 GMT. The central bank is widely expected to cut the Official Cash Rate (OCR) by another 50 basis points (bps) from 4.75% to 4.25%.

A Reuters poll of 30 economists found 27 favoring a 50 bps rate reduction at the November policy meeting. The RBNZ cut the OCR by 25 bps during its August meeting and implemented an additional 50 bps reduction in October.

What to expect from the RBNZ interest rate decision?       

Economists expect the RBNZ to front-load rate cuts due to the gloomy economic outlook and as inflation falls back into the central bank’s target range between 1% and 3%.

New Zealand’s economy skirted another recession after Gross Domestic Product (GDP) declined 0.2% in the second quarter (Q2) from the previous quarter’s revised 0.1% growth. Economists expected a 0.4% contraction in the reported period, while the RBNZ projected a 0.5% drop.

Meanwhile, NZ Stats showed on October 16 that New Zealand’s annual Consumer Price Index (CPI) rose 2.2% in Q3, aligning with market forecasts and marking a sharp slowdown from the 3.3% growth in Q2.

By front-loading, the RBNZ can move into less restrictive territory, alleviating the pressures of higher borrowing costs on households and businesses. Following its October meeting, the central bank said in the policy statement that “economic activity in New Zealand is subdued, in part due to restrictive monetary policy.” 

With a 50 bps rate cut fully priced in, markets will pay close attention to the language of the Monetary Policy Statement (MPS) and the updated economic projections for fresh signals on future rate reductions.

How will the RBNZ interest decision impact the New Zealand Dollar?

Another downward revision to the OCR in the updated projections for this year and the next could reaffirm dovish expectations. The RBNZ currently forecasts the OCR at 4.92% in Q4 2024.

In this case, the New Zealand Dollar (NZD) will come under intense selling pressure, with sellers targeting levels unseen since November 2022 around 0.5750

The NZD could rally hard if the RBNZ surprises with a 25 bps rate cut or maintains the OCR forecasts. The NZD/USD could regain 0.5900 and beyond on an unexpected hawkish move. 

Dhwani Mehta, FXStreet’s Senior Analyst, offers a brief technical outlook for trading the New Zealand Dollar on the RBNZ policy announcements: “The downside risks remain intact for the NZD/USD after a Death Cross was confirmed on the daily chart last Friday. Adding credence to the bearishness, the 14-day Relative Strength Index (RSI) stays vulnerable below the 50 level.”

“If buyers defy bearish pressures, the initial resistance is seen at the 21-day Simple Moving Average (SMA) at 0.5920, above which the 0.6000 round level will be tested. Further up, the confluence zone of the 50-day SMA, 100-day SMA and 200-day SMA near 0.6060 will be a tough nut to crack for them. Alternatively, failure to defend the October 2023 low of 0.5772 will threaten the November 2022 low of 0.5741,” Dhwani adds.  

The Greenback shrugged off its bearish start to the week and regained decent upward momentum on Tuesday, supported by a modest recovery in US yields. This came as President-elect Donald Trump proposed implementing tariffs on imports from Canada, Mexico, China, and the EU.

Here is what you need to know on Wednesday, November 27:

The US Dollar Index (DXY) rose to two-day highs and reclaimed the area above the 107.00 barrier. The PCE will be the salient event, ahead of the usual weekly Mortgage Applications tracked by MBA, the Chicago PMI, Durable Goods Orders, Personal Income and Spending, Wholesale Inventories, weekly Initial Jobless Claims, Pending Home Sales and the EIA’s weekly report on US crude oil inventories.

EUR/USD quickly faded Monday’s advance and returned to the sub-1.0500 zone following further gains in the Greenback. Germany’s GfK Consumer Confidence will be the only data release along with the speech by the ECB’s Lane.

GBP/USD followed its risk-associated peers and remained on the back foot following an early bullish move above 1.2600.

USD/JPY added to Monday’s decline and receded to multi-day lows just below the 153.00 support following a marked appreciation of the Japanese Yen.

AUD/USD lost further ground and clinched fresh multi-week lows in the 0.6435-0.6430 band amid the resumption of the buying interest in the US Dollar and weak commodity prices. Next on tap in Oz will be the RBA’s Monthly CPI Indicator, followed by quarterly Construction Work Done.

Diminishing geopolitical concerns weighed on crude oil prices on Tuesday, dragging the barrel of the American WTI to multi-day lows near the $68.00 mark.

Gold prices reversed an early pullback to the boundaries of the $2,600 mark per troy ounce, eventually ending the day with marginal gains. Silver prices regained some composure and partially reversed Monday’s pronounced drop, although another test of the $31.00 mark per ounce remained elusive.

Israeli Prime Minister Benjamin Netanyahu accepted a negotiated ceasefire proposal with Lebanon late Tuesday. Israel initially invaded the neighboring country in an escalation of the Israel-Hezbollah conflict, which spilled over from the still-ongoing Israel-Hamas conflict. With a ceasefire deal in place with Lebanon, Israel has stated its intent to focus on mounting tensions with both Iran and Syria.

Global Crude Oil markets eased back on the news, with US West Texas Intermediate (WTI) Crude Oil whipsawing over 3% top-to-bottom after Israel headlines hit markets. WTI is now trading into familiar levels near $68 per barrel.

• The Dow Jones stumbled on Tuesday, weighed down by key losses in Amgen.
• Equities have broadly shrugged off renewed tariff threats from incoming President Donald Trump.
• Key inflation data looms ahead later in the week.

The Dow Jones Industrial Average (DJIA) fell back on Tuesday, shedding over 250 points at its lowest point. Investors shrugged off renewed threats of widespread tariffs on foreign goods from incoming President Donald Trump, but slightly below-expectations results for an experimental diet pill from Amgen (AMGN) dragged the weighted DJIA into the low end for the day. The major equity index has since recovered to flat for the day, with losses concentrated in key overweighted stocks.

President-elect Donald Trump reiterated his threats to enact sweeping tariffs on all imported goods into the US early Tuesday. Set to return to the White House in January, former President Trump issued a warning on social media that he intends to impose a 25% tariff on all goods coming from Canada and Mexico, with an additional 10% levy aimed at Chinese goods specifically. Investors broadly shrugged off the threat, believing that President Trump will ultimately back down from his plan to impose an import tax across the entire US economy. To investors’ credit, President Trump has walked back his extreme stance on arbitrary tariffs somewhat; the Republican candidate’s initial tariff proposals delivered on the campaign trail included import fees upwards of 65% on all Chinese goods that cross the US border. 

Investors await the Federal Reserve’s (Fed) latest Meeting Minutes, due later during Tuesday’s US market window. No particularly earth-shattering revelations are expected, especially as rate cut musing has taken a backseat in traders’ minds in recent weeks. However, markets will still take a close look at the Fed’s latest deliberations to try and sniff out how large of a rate cut investors should expect in December.

Wednesday will follow up with another update to US Personal Consumption Expenditure Price Index (PCEPI) inflation, a key reading of price increases underpinning the US economy. Wednesday also brings a quarterly update of UIS Gross Domestic Product (GDP) growth. Annualized core PCEPI inflation is set to accelerate again in October and forecast to increase to 2.8% from the previous 2.7%. QoQ US GDP growth in the third quarter is expected to hold steady at 2.8%.

Dow Jones news

Despite equities broadly maintaining an even stance on Tuesday, the Dow Jones suffered an outweighed decline after Amgen reported the latest results from their experimental weight loss drug that undershot investor expectations. Two-thirds of the Dow Jones is leaning into the high side for the day, but Amgen plummeted to a 12% decline at its lowest point after investors soured on the drugmaker’s latest tests.Amgen has recovered some footing and is currently down around 8%, trading around $270 per share.

Dow Jones price forecast

The Dow Jones is treading choppy waters near 44,700 on Tuesday, finding an intraday floor near 44,400 before settling back into the day’s opening bids. The major equity index briefly set another record all-time high bid just above 44,800, but bulls are beginning to show signs of exhaustion.

The immediate floor for any downside pullbacks is priced in at the last swing low, with candle wicks populating territory near 43,200. However, any bearish momentum will quickly run into further technical support from the 50-day Exponential Moving Average (EMA) rising through 42,800.

Dow Jones daily chart

• FOMC Meeting Minutes are the next shoe to drop later on Tuesday.
• USD fluctuates after positive Consumer Confidence figures from the Conference Board before volatility subsides.
• President-elect Trump threatens tariffs on Mexico, Canada and China, boosting the Greenback.

In Tuesday's session, the US Dollar Index (DXY) which measures the value of the Greenback against a basket of currencies, fluctuated near 107.00 following the release of key economic data. In the meantime, markets digest President-elect Donald Trump’s threat to impose tariffs on three of its largest trading partners and await clues in the Federal Open Market Committee (FOMC) Meeting Minutes to be released later in the session.

The US Dollar Index has exhibited a bullish bias, driven by strong economic data and a less dovish Federal Reserve (Fed) stance. Despite recent pullbacks due to profit-taking and geopolitical uncertainty, the uptrend remains intact. Technical indicators suggest potential consolidation with overbought conditions easing. 

Daily digest market movers: US Dollar appears neutral after Consumer Confidence data

• Consumer Confidence in the United States improved in November with the Conference Board's index increasing from 109.6 to 111.7.
• The Present Situation Index rose by 4.8 points to 140.9, while the Expectations Index edged higher to 92.3.
• Ahead of the FOMC Minutes, the CME FedWatch Tool estimates a 59% probability of a further 25 bps rate cut by the Fed on December 18.
• The US 10-year Treasury benchmark rate declined to 4.29%, down from its recent high of 4.50%.

DXY technical outlook: Consolidating near 107.00, uptrend remains intact despite recent pullbacks 

The DXY is consolidating after a strong rally, having pulled back from two-year highs. The index is currently hovering around 107.00, near the upper end of its recent trading range.

Technical indicators, such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), are suggesting potential for a correction, but the overall bullish momentum remains strong. The DXY is likely to face resistance at 108.00 and support at 106.00-106.50. A break above 108.00 would signal a continuation of the uptrend, while a break below 106.00 would indicate a deeper correction is possible.

• Mexican Peso plunges almost 2% on President-elect Trump’s harsh remarks on tariffs.
• Mexican President Sheinbaum warns of retaliatory tariffs, stressing US consumers could bear the brunt of trade war.
• Banxico's dovish stance and lower inflation expectations hint at further rate cuts, adding pressure to the Peso.

The Mexican Peso collapsed against the Greenback after US President-elect Donald Trump said on Monday that he threatened to impose 25% tariffs on Mexico. Trump blamed the country for not battling drug cartels enough and allowing the passage of illegal immigrants into the US. The USD/MXN trades at 20.77 at the time of writing, gaining more than 2%.

Late on Monday, Trump’s remarks lifted the USD/MXN from around 20.29 to its daily high of 20.74 before retreating somewhat during the European session. Nevertheless, as the North American session kicked in, the Peso remained pressured as the exotic pair advanced toward the 20.70 area.

In response to Trump, Mexican President Claudia Sheinbaum said, “One [US] tariff will be followed by another [from Mexico], and so on until we put common enterprises at risk.” She added, “The main victims will be US consumers” who buy manufactured cars from Mexico.

Aside from this, Mexico’s economic docket remains scarce on Tuesday, but it will feature the release of the Bank of Mexico's (Banxico) latest meeting minutes. Banxico unanimously lowered rates by 25 basis points (bps) on November 14 to 10.25% as expected.

Last week, Banxico Governor Victoria Rodriguez was dovish, hinting that the institution might look to decrease rates by more than 25 bps due to the progress on disinflation. Headline inflation during the first two weeks of November dipped from 4.68% to 4.56% YoY.

In the US, the economic docket revealed that Consumer Confidence improved above estimates and October’s reading. However, traders are awaiting the release of the Federal Reserve’s (Fed) last Meeting Minutes.

Ahead this week, the US economic docket will feature Durable Goods Orders, Initial Jobless Claims, and the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index.

Daily digest market movers: Mexican Peso on the defensive amid scarce docket

• Mexico’s Chamber of Deputies, after approving the dissolution of autonomous bodies, proposed adjustments to the details of a contentious reform that abolished several regulatory bodies to ensure compliance with the USMCA trade agreement.
• “The fact that MORENA is taking a more cautious approach with two of the most important regulators, antitrust and telecoms, is a positive sign,” said Rodolfo Ramos of the Brazilian bank Bradesco BBI.
• The Conference Board’s Consumer Confidence for November expanded by 111.7 up from 109.6, exceeding estimates of 111.3
• The CME FedWatch Tool suggests that investors see a 59% chance of a 25-basis-point rate cut at the US central bank’s December meeting, up from 52% a day ago.
• Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 22 bps of Fed easing by the end of 2024.

USD/MXN technical outlook: Mexican Peso plunges as USD/MXN climbs above 20.70

The USD/MNXN remains upwardly biased and approaches the current day’s peak of 20.76 on Trump’s remarks. A clear break will expose the year-to-date (YTD) high of 20.80, followed by the psychological 21.00 mark. If surpassed, the exchange rate would test the March 8, 2022, peak at 21.46, followed by the November 26, 2021, high at 22.15.

Conversely, if sellers clear 20.50, they would eye the previous year-to-date peak of 20.22. Once taken out, up next would be the 20.00 mark, followed by the November 7 low and the 50-day Simple Moving Average (SMA) around 19.75/86.

• The Minutes of the Fed’s November 7 gathering will come later.
• The Committees’ view of a potential move in December takes centre stage.
• The US Dollar Index remains close to its recent cycle peaks.

The Minutes of the US Federal Reserve’s (Fed) November 6–7 monetary policy meeting will be released later on Wednesday at 19:00 GMT.

The Committee further eased monetary policy with a 25-basis-point rate cut on November 7, following September’s surprising jumbo rate reduction that caught markets off guard.

During that event, Federal Reserve Chair Jerome Powell reportedly avoided providing any clear signals that the central bank might pause its rate-cutting cycle in the near term, despite the widely anticipated 25-basis-point cut. Fed policymakers noted that the labor market had "generally eased," while inflation appeared to be progressing toward the Fed's 2% target.

Powell also did not indicate that a pause was under consideration, with analysts interpreting his remarks to suggest that the Fed might aim for rates below 4%—or close to it—before contemplating a pause. Additionally, Powell reiterated that the upcoming election would not influence the Fed’s near-term policy decisions, emphasizing that the central bank does not speculate on how political outcomes could affect its goals.

Since the early November rate decision, US economic data has remained robust, signaling solid fundamentals alongside an uptick in October’s inflation, as tracked by the Consumer Price Index (CPI). However, Powell’s recent comments made it clear that the Fed is not in a rush to cut rates further, aligning with FOMC Governor Michelle Bowman’s view.

Currently, CME Group’s FedWatch Tool estimates the probability of a quarter-point rate cut at the December 18 meeting at nearly 60%, down from around 75% a month ago.

How could the release of the FOMC Minutes impact the US Dollar?

While another 25-basis-point rate cut seems like the logical next step, investors should not dismiss the possibility of a hold—or even a hawkish hold.

The “Red Sweep” accompanying Donald Trump’s election victory in November has revived expectations of US tariffs, looser fiscal policy, and corporate deregulation, all of which could heighten inflationary pressures sooner rather than later. This scenario could challenge the continuation of the Fed’s easing cycle, potentially forcing the central bank to pause or even halt rate cuts. Could rate hikes be back on the table?

Senior Analyst Pablo Piovano at FXStreet notes that “a glance at the technicals on the US Dollar Index (DXY) shows immediate resistance at the 2024 peak of 108.07 (November 22). Surpassing this level should encounter little resistance until the November 2022 high of 113.14 (November 3).”

“On the flip side, occasional bearish moves should find the next support at the critical 200-day SMA at 103.98,” Pablo adds.

• EUR/CAD rose 0.69% on Tuesday to 1.4780.
• Sellers successfully defended the 100-day SMA, reversing the pair's advance to the seven-day high at 1.4980.
• Bulls may keep pushing the EUR/CAD higher if momentum persists and the 100-day SMA is breached.

The EUR/CAD witnessed a 0.40% uptick to 1.4740 on Tuesday, although bulls faced resistance at the 100-day Simple Moving Average (SMA) and retreated from the seven-day high of 1.4980.

The pair's two-day upward streak have created a promising technical outlook. The Relative Strength Index (RSI), currently at 44, suggests that buying pressure is recovering despite being in negative territory. The Moving Average Convergence Divergence (MACD) histogram's red and decreasing condition indicates a decline in selling pressure. These indicators point to a potential trend reversal.

The EUR/CAD pair is currently facing resistance at the 100-day SMA. If the pair breaks above, it could extend its recovery. However, sellers may keep pulling the pair lower if the pair fails to break above this resistance. For maintaining the recovery, bulls must defend 1.4900.

EUR/CAD daily chart

• CB Consumer Confidence edged higher to 111.7 in November.
• US Dollar Index stays in daily range slightly below 107.00.

Consumer sentiment in the US improved in November, with the Conference Board's (CB) Consumer Confidence Index rising to 111.7 from 109.6 in October.

The Present Situation Index increased by 4.8 points to 140.9 in the same period, while the Expectations Index edged higher to 92.3.

Assessing the survey's findings, "consumer confidence continued to improve in November and reached the top of the range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “November’s increase was mainly driven by more positive consumer assessments of the present situation, particularly regarding the labor market."

Market reaction

The US Dollar Index showed no immediate reaction to these data and was last seen posting small daily gains at 106.90.

According to two sources familiar with the matter, measures to increase US oil and gas production are to be taken just a few days after President-elect Trump takes office, Commerzbank’s commodity analyst Carsten Fritsch notes.

Trump admin’s measures to increase the supply of the US oil and gas

“These include increasing oil drilling off the coast and on federally owned land as well as restocking the strategic oil reserves. However, Congress must first authorize the financial resources for the latter.”

“In addition, as part of the energy policy agenda, the previous government's tax incentives for the purchase of electric vehicles are to be repealed, new power plants' environmental standards lowered and the construction of new LNG export terminals authorized.”

“These measures are likely to increase the supply of oil and gas from the USA in the medium to long term. However, as the demand for fossil fuels in the USA is also likely to increase, this does not necessarily mean that US energy exports will increase significantly.”

• GBP/NZD is testing the upper line of a falling channel and trying to breakout higher.
• A successful break higher could extend the established trend to upside targets. 

GBP/NZD tests the upper tramline of a channel it has been falling in during the month of November. A successful breakout from the channel might lead to an extension higher towards resistance in the mid 2.1800s. 

GBP/NZD Daily Chart 

A break above 2.1675 – the November 15 high – would probably confirm such a move and result in a follow-through towards the upside target at 2.1845.  

The (blue) Moving Average Convergence Divergence (MACD) momentum indicator is turning up at the end and looks poised to cross above its (red) signal line, confirming a buy signal. If such a cross accompanied a breakout from price, it would provide supporting evidence for an extension of GBP/NZD higher. 

The Brent oil price came under pressure at the start of the week and fell by nearly 3% to $73 per barrel. This was triggered by the possible agreement on a ceasefire between Israel and Hezbollah, Commerzbank’s commodity analyst Carsten Fritsch notes.

OPEC+ likely to postpone production increase

“The Middle East conflict has not yet led to any supply shortfalls on the oil market. However, a ceasefire could also ease the still flaring conflict between Israel and Iran, which could have the potential to disrupt oil supplies. Concerns about supply disruptions due to the escalation in the war in Ukraine caused oil prices to rise by 6% last week, the strongest weekly increase since the Iranian missile attack on Israel at the beginning of October.”

“The upcoming OPEC+ meeting on Sunday is already casting its shadow. According to the energy minister of Azerbaijan, maintaining current oil production levels beyond the end of the year could be considered. So far, OPEC+ has planned a gradual increase in production from January, but this would lead to a considerable oversupply next year based on IEA forecasts.”

“The vast majority in a Bloomberg survey expects the planned production increase to be postponed once again. Half of this group assumes that oil production will not be increased before the second quarter. We also expect OPEC+ to decide to postpone the increase until at least the end of the first quarter.”

• GBP/USD rebounds from 1.2506 low, trading at 1.2573 amid Trump’s tariff proposals.
• Technical outlook mixed; support at 1.2550, bearish targets at 1.2506, 1.2486, and 1.2299.
• Bullish case needs break above 1.2600, targeting 1.2714 resistance and 200-day SMA at 1.2818.

The Pound Sterling recovered some ground following remarks of US President-Elect Donald Trump late on Monday afternoon, in which he said that once he takes office on January 20, he would impose 25% tariffs on Canada and Mexico and 10% on all Chinese products. This boosted the Greenback against most G8 FX currencies, the Mexican Peso and the Chinese Yuan. As of late, the GBP/USD turned positive in the day after hitting a low of 1.2506, trading at 1.2573.

GBP/USD Price Forecast: Technical outlook

The pair fluctuates at around 1.2570, and we are unable to gather a definitive direction, though it printed a higher high and a lower low as well. GBP/USD traders remain undecided, yet the new UK budget dented the odds for a rate cut by the Bank of England (BoE), dealing with an expansionary fiscal policy, putting upward pressure on inflation.

If GBP/USD drops below 1.2550, the first support would be the current week’s low of 1.2506. Once surpassed, sellers will eye the November 233 low of 1.2486, ahead of the year-to-date (YTD) low of 1.2299.

Conversely, if buyers move in, reclaiming 1.2600, the next resistance would be the November 20 peak at 1.2714. If cleared, a move to challenge the 200-day Simple Moving Average (SMA) at 1.2818 is on the cards.

GBP/USD Price Chart – Daily

• NZD/USD rebounds from 0.5800 as the US Dollar gives back opening gains.
• Investors await the US PCE inflation for fresh Fed interest rate guidance.
• The RBNZ is expected to cut interest rates by 50 bps to 4.25%.

The NZD/USD pair bounces back to near 0.5850 in Tuesday’s North American session after posting a fresh yearly low of 0.5800 in the opening session. The Kiwi pair recovers as the US Dollar (USD) surrenders its intraday gains triggered after United States (US) President-elect Donald Trump threatened to raise tariffs on other economies of North America from where he expects China to pour illicit drugs into the US economy.

Trump said he would impose 25% tariffs on Mexico and Canada and 10% on China in addition to 60%, which was mentioned in his election campaign. The initial reaction from the US Dollar was bullish, however, it failed to hold gains. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, drops below 107.00.

Meanwhile, investors await the Federal Open Market Committee (FOMC) minutes for the policy meeting held on November 7, which will be published at 19:00 GMT. In the policy meeting, the Fed reduced interest rates by 25 basis points (bps) to 4.50%-4.75%.

This week, investors will pay close attention to the US Personal Consumption Expenditure Price Index (PCE) data for October, which will be published on Wednesday. Economists expect the inflation data to have accelerated from September readings on an annual basis. The month-on-month headline and core PCE inflation data are estimated to have grown steadily. The inflation data will significantly influence market expectations for the Federal Reserve’s (Fed) likely interest rate action in the December meeting.

Going forward, the New Zealand Dollar (NZD) will be influenced by the Reserve Bank of New Zealand (RBNZ) interest rate decision, which will be announced on Wednesday. According to a Reuters poll, the RBNZ is expected to cut interest rates by 50 bps to 4.25%. This would be the second straight 50 bps interest rate cut by the RBNZ and the third one of the current rate-easing cycle.

• EUR/GBP might be unfolding a bullish leg within a sideways range.  
• The MACD has crossed its signal line and is above zero, – a bullish sign. 

EUR/GBP is clawing its way back up within its multi-week range. It is possible that this may be the start of an up leg within the range towards the ceiling at around 0.8450.

The pair is probably in a sideways trend on a short-term basis and given the principle of technical analysis that prices are more likely to extend in the direction in which they are trending it will probably continue oscillating in its sideways trend until it makes a decisive breakout either higher or lower. It is overall at two and a half year lows. 

EUR/GBP 4-hour Chart 

EUR/GBP made a false break lower on November 8 and then, a second time, on an intraday basis, on November 22. On both occasions it failed to follow-through lower, however, and instead just recovered back inside the range. 

Because it is in a sideways trend the odds favor a continuation sideways, which suggests the possibility of a recovery from the current level up to ceiling. 

A break above 0.8375 would probably lead to a continuation higher to a target at 0.8440, just below the ceiling. 

The Moving Average Convergence Divergence (MACD) momentum indicator, which is a reliablñe indicator in sideways markets has crossed above its red signal line and is also now above the zero line suggesting a bullish short-term bias.

• USD/JPY tumbles as the US Dollar falls back after a stellar opening.
• US Trump threatens to raise tariffs on Canada and Mexico for providing passage to China to supply illicit drugs in the US economy.
• Investors await the US PCE inflation and the Tokyo CPI data for October.

The USD/JPY pair tumbles to near 153.00 in Tuesday’s North American session. The asset plummets as the US Dollar (USD) gives up its entire intraday gains and turns negative after a strong opening. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls to near 106.50 after a strong opening around 107.50.

The Greenback had a stellar opening after United States (US) President-elect Donald Trump threatened to impose 25% tariffs on Canada and Mexico for providing China a freeway to supply illicit drugs to the United States (US), said in a tweet on Truth.Social. For that, Trump also announced to levy additional 10% tariffs over China above 60%, which he already mentioned in the election campaign.

However, the US Dollar falls back as investors remain confident that Scott Bessent, Trump’s nomination for Treasury Secretary, will maintain political steadiness despite fulfilling the Trump’s economic agenda. Bessent said in an interview with Financial Times (FT) over the weekend that Trump’s policies will not boost inflationary pressures.

Going forward, investors await the US Personal Consumption Expenditure Price Index (PCE) data for October to get fresh cues about the Federal Reserve’s (Fed) likely interest rate action in December, which will be published on Wednesday. Economists expect the inflation data to have accelerated from September readings on an annual basis. Month-on-month headline and core PCE inflation data are estimated to have grown steadily.

Meanwhile, the Japanese Yen (JPY) performs strongly even though traders dial back expectations for the Bank of Japan (BoJ) to hike interest rates in December. Market participants expect that political uncertainty in Japan limits BoJ’s potential for raining its key borrowing rates further. This week, investors will focus on the Tokyo Consumer Price Index (CPI) data for October, which will be published on Thursday.

• USD/CAD rallies sharply following comments from President-elect Trump that he will blast his neighbors with tariffs. 
• Trump threatened to add 25% on foreign imports from Canada on the social media site Truth Social. 
• The Canadian Dollar could draw strength from green shoots in the economy, limiting upside for the pair.    

USD/CAD trades in the 1.4080s on Tuesday, after rising three quarters of a percent on the day. The exchange rate has popped its head above the top of a multi-year range and looks poised to go higher. 

The pair has pulled back from a peak of 1.4178 reached during Tuesday’s Asian session after the Canadian Dollar (CAD) rapidly depreciated against the US Dollar (USD) following comments from President-elect Donald Trump, that he would impose tariffs of 25% on Canadian (and Mexican) imports. 

Such a move would likely reduce demand for Canadian imports – and aggregate demand for the CAD to purchase them. Trump also threatened to impose an extra 10% on Chinese imports, on top of the 60% he threatened to add on the campaign trail.

“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” wrote Trump on social media website Truth Social, adding, “This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” 

The Canadian Deputy Prime Minister, Chrystia Freeland, responded to Trump’s comments by saying that Canada places “the highest priority on border security and the integrity of its shared border with the US,” according to The Guardian.  

The US relies on Canada for 52% of its Crude Oil, according to the US Energy Information Bureau (EIA), raising doubts about the practicality and potentially negative political impact of Trump’s tariff threat. This is even more the case given the importance of the price of petrol in the US to the American electorate. Another major export of Canada to its neighbor are Canadian-manufactured trucks and cars but these use a high percentage of components made in the US.

The US Dollar rose across the board after Trump delivered his tirade as markets calculated the implications of increasing tariffs on foreign imports. Such a move would lead to higher shop prices and inflation in the US. This, in turn, would lead the US Federal Reserve (Fed) to keep interest rates elevated, which would be positive for the USD as it would attract higher foreign capital inflows. 

Yet, market-based projections for US interest rates have changed little. According to the CME FedWatch tool they are still calculating the probabilities of the Fed cutting interest rates by 0.25% in December at about 60%, along with a 40% chance of no-change. This may limit upside potential for USD/CAD.

Gains for the pair could also hit a ceiling if the Canadian Dollar starts to recover again. The CAD had limited its losses and was consolidating against USD up until Trump’s tariff attack after market bets fell that the Bank of Canada (BoC) would continue with its aggressive easing cycle. 

The BoC cut interest rates by a double-dose 50 basis points (bps) (0.50%) at its meeting in October amid rapidly falling inflation and moribund growth. At first markets expected the BoC to follow this up with another 50 bps cut in December, however, a recent surprise uptick in inflation to 2.0% in October (from a three-year low of 1.6% in September) and stronger-than-expected preliminary Purchasing Manager Index (PMI) data for November has changed the outlook. Now the BoC is more likely to make a standard 25 bps (0.25%) instead, as it starts to see growth pick up. This in turn could support CAD, curtailing USD/CAD gains. 

• Israel has agreed in principle to the ceasefire proposal from the US. 
• President-elect Donald Trump has announced 25% tariffs on imports from Canada. 
• The US Dollar Index edges slightly lower on the back of the tariffs news. 

Crude Oil tries recover by jumping nearly 1% on Tuesday ahead of weekly Crude Oil stockpile change numbers from the American Petroleum Institute (API). The move comes after the President-elect has confirmed to be hitting Mexico and Canada with 25% tariffs on imported goods. Meanwhile, in the Middle East, Israel’s Prime Minister Benjamin Netanyahu is said to agree to the ceasefire proposal from the US, which is now up to Hezbollah to sign before taking effect. 

The US Dollar Index (DXY), which measures the Greenback’s performance against a basket of currencies, is struggling only because the Canadian dollar (CAD) is part of the DXY basket. A weaker CAD is being offset with a stronger Euro (EUR) and Swedish Krona (SEK) against the US Dollar. Later this Tuesday, traders will focus on the release of the Federal Reserve (Fed) Minutes for the November meeting for fresh clues on the possibility of a December interest rate cut. 

At the time of writing, Crude Oil (WTI) trades at $69.40 and Brent Crude at $73.04

Oil news and market movers: OPEC+ talks ramp up

• There is a strong case for the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to extend its production normalization timing to as late as the second quarter of 2025 to get a clearer picture of the market, RBC head of commodity strategy Helima Croft says in a note, reported by Bloomberg. 
• Russia sees its seaborne crude exports undergo its biggest drop since July, with shipments sliding to a two-month low. Flows towards key buyer India fell sharply in relationship with that, Reuters reports.
• Oil traders are pointing out that a risk premium over the situation in the Middle East still has some room to get priced out now that a ceasefire deal is just around the corner between Israel and Hezbollah, Bloomberg reports. 
• Officials from Iraq, Russia and Saudi Arabia (three of the biggest nations in OPEC+) are meeting in Baghdad to discuss energy markets just a few days before OPEC+ holds its year-end gathering on Sunday, Bloomberg reports. 

Oil Technical Analysis: Forget about it

Crude Oil price might enjoy a surge in volatility to enjoy some recovery. However, in the end, it looks like another delay in production normalization will be rescheduled yet again by the OPEC+ in its upcoming meeting. With the Trump administration set to drill and pump up more US Oil, the question could arise of whether there will ever be a production normalization from OPEC+ in 2025.

On the upside, the 100-day Simple Moving Average (SMA) at $72.53 and the pivotal level at $71.46 just below are the two main resistances. The 200-day SMA at $76.36 is still far off, although it could be tested if tensions intensify further. In its rally towards that 200-day SMA, the pivotal level at $75.27 could still slow down any upticks. 

On the other side, traders need to look towards $67.12 – a level that held the price in May and June 2023 – to find the first support. In case that breaks, the 2024 year-to-date low emerges at $64.75, followed by $64.38, the low from 2023.

US WTI Crude Oil: Daily Chart

The Gold price lost more than 3% on Monday and fell to $2,620 per troy ounce, Commerzbank’s commodity analyst Carsten Fritsch notes.

Gold is not completely immune to current developments

“This was triggered by news of a possible agreement on a ceasefire between Israel and the Hezbollah militia in Lebanon, which could reduce demand for Gold as a safe haven. Last week, Gold recorded its strongest weekly gain since March 2023 due to the escalation in the Ukraine war, rising by 6% and topping the $2,700 mark for the first time in a fortnight on Friday.”

“In doing so, Gold was also able to defy the appreciation of the US dollar and a further reduction in the Fed's interest rate cut expectations. According to Fed Funds Futures, an interest rate cut of 25 basis points in December is now only a good 50% priced in and an interest rate cut of 25 basis points at one of the two upcoming meetings, i.e. by the end of January, is not even fully priced in.”

“The sharp price decline yesterday showed that Gold is not completely immune to these developments once the support from geopolitical tensions diminishes somewhat."

The CBI’s survey of retail sales activity weakened in November, with the survey also revealing the biggest drop in retail sentiment in two years, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP trades steadily near term

“Data perhaps reflects something of a hangover for UK retailers after the government’s recent budget. Sterling is little changed on the session as investors mull the potential impact of tariffs on global FX.”

“The UK’s limited trade relationship with the US (relative to China, the Eurozone Mexico and Canada) suggest it will be a low priority for the Trump trade team which may allow for some GBP outperformance if tariffs are deployed more broadly in the coming months.”

“The Pound Sterling’s (GBP) consolidation around the mid/upper 1.25s extends this morning. The GBP is testing short-term trend resistance (1.2583) at writing but likely needs to clear recent minor highs at 1.2615 to signal more gains towards 1.2710/15. Support is 1.2500/10.”

The Euro (EUR) has firmed a little overnight, with the Eurozone escaping the president-elect’s ire for now, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR gains on relief trade

“Gains appear to be struggling to gain traction above 1.05, however, and while short-term spreads have narrowed slightly in the EUR’s favour over the past couple of sessions, the spread (in excess of 220bps for 2Y bond yields) remains close to the widest in around two years.”

“That spread will curb the EUR’s ability to rally significantly. Our fair value estimate for spot (based on real and nominal spreads plus equity returns) suggests equilibrium is 1.0433 currently.”

“The EUR is managing to sustain a relatively constructive tone on the charts after last week’s dip to, and rebound from, the low 1.03s. Spot has managed to push through and hold above short-term trend resistance at 1.0470 (now support) off the early Nov high for spot above 1.09. Gains may test the 1.06 area in the short run.”

USD/CAD snapped higher through the upper 1.41 area in response to Trump’s tariff comments last night but the CAD has stabilized through Asian and European to trade back around the 1.41 level, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

CAD off lows on threat of 25% tariffs linked to border security

“Canada’s government has responded to the tariff threat by noting that it places the ‘highest priority” on border security and noting strong trade links between the two countries. The limited drop in the CAD in response to the tariff news suggests market participants feel the president-elect is saber-rattling at this point to force both Canada and Mexico to act.’

“If it comes to 25% tariffs, the CAD will fall a lot further I have to think. BoC DG Mendes is speaking at 8.20ET. His prepared comments should hit the wires at 8.05ET, however.”

“Spot pushed to near 1.4180 overnight but settled quickly back to near the 1.41 point on the charts. New cycle highs for the USD will refresh broader bull momentum the sharp drop back from the intraday peak suggests spot may drift a little lower in the short run as markets consolidate. Support should be firm at 1.3990/00 and firmer still at 1.3945/50.”

So much for tariff gradualism under a Treasury Sec. Bessent. President-elect Trump’s threat delivered late last night to lump 25% tariffs an all goods from Canada and Mexico as well as additional tariffs on Chinese goods from ‘day one’ of his presidency has roiled FX markets, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD mixed versus majors as markets adjust to US priorities

“The CAD and MXN are today’s clear underperformers among the major currencies while the CNY is only marginally lower after the PBoC set a yuan fixing reference rate that was little changed from recent settings. The DXY itself is actually trading lower on the day overall, however, as the likes of the EUR and JPY stage a modest relief rally for—so far—not coming under the president-elect’s crosshairs. Stocks in Asia and Europe are lower while US equity futures are firmer.”

“Global bonds are mostly firmer except Treasurys and Gilts which have eased slightly on the session. The national security grounds for the tariffs cited by Trump (borders, drugs) provide him with cover to impose tariffs under executive order as soon as he is sworn in. Canada, Mexico and China have a few weeks perhaps to persuade the incoming administration that they are taking steps to address their concerns and avoid action. Significantly weaker levels for the CAD and MXN seem very likely if tariffs are actually imposed.”

“It should be clear that tariffs will be the big stick that Trump 2.0 walks with and Europe and Japan should not rest too easy. The USD may edge a little lower in broad terms in the short run but scope for deep or sustained losses look even more limited as tariff risks loom. The US data run picks up a bit this morning but it is mostly second-tier stuff—housing, consumer confidence and the November Richmond Fed Manufacturing Index. The November 7 FOMC minutes are released at 14ET may reflect a degree of caution over the policy outlook after the latest easing moves.”

This evening (European time), the minutes of the November meeting of the Fed's FOMC will be published. Normally, such a publication is an important event, because it provides a fairly deep insight into the thinking of FOMC members and helps to contextualize recent monetary policy decisions. This time, however, it is different. Everything the FOMC has decided so far may be less suitable than usual for predicting the effective parts of future US monetary policy. Because the cards in the game between the government and the central bank could be reshuffled when the next US administration takes office, Commerzbank’s Head of FX Research Ulrich Leuchtmann notes.

Trump appointments promise a whole load of fun

“Immediately after taking office in January, Trump should appoint someone to succeed the current Fed Chair Jay Powell when his term of office ends in early 2026. And this designated ‘shadow chairman’ is supposed to loudly proclaim on an ongoing basis until he takes office in 2026 that he will introduce a loose monetary policy as soon as he takes office. If everyone knows that the Fed will be pursuing a loose monetary policy from spring 2026, the effect will be very similar to a loose monetary policy today.”

“There could be a residual uncertainty. Will Congress actually confirm the “shadow chairman”? Will he be able to assert himself within the Fed from the outset or will there be resistance from the governors and regional Fed presidents? Or will the shadow chairman possibly mutate from a monetary dove to a hawk when he takes office? We have seen such sudden transformations in the past.”

“Two points remain that I take from Bessent's nomination: 1. Bessent is by no means the conventional candidate that some would like to see in the role. He is potentially disruptive. 2. Even without Congress formally amending the Federal Reserve Act, there is sufficient scope for the US government to damage the Fed's independence. The strength of the US dollar with which the currency market has acknowledged the election of Trump as the next US president is therefore at the very least bold.”

• The US Dollar rolls through markets after President-elect Trump announced more tariff measures. 
• Markets are choking on the announcement, with equities recovering earlier losses. 
• The US Dollar Index whipsaws around 107.00, with the Canadian Dollar, Mexican Peso and Chinese Yuan as main losers against the Greenback.

The US Dollar (USD) rolls through markets on Tuesday after President-elect Donald Trump communicated on his social media channel that his government will issue an additional 25% tariff on imports from Canada and Mexico, with an additional 10% to the 60% already announced during his election campaign on Chinese goods. Markets are not doing well with this communication, as equities are printing red numbers across the board and the globe while US bond prices are dropping (yields are soaring). 

The US economic calendar will show some housing data on Tuesday. With the Housing Price Index for September and the New Home Sales data for October, markets will be able to see if the housing market in the US is cooling down as the last piece that was driving inflation. At the end of the day, the Federal Reserve (Fed) publishes the Minutes of its November 7 meeting.

Daily digest market movers: US Housing data ahead

• At 14:00 GMT, the monthly Housing Price Index for September is due. The number is expected to come in at 0.3%, the same as the August reading.
• At 15:00 GMT, the November Conference Board Consumer Confidence is due to come out, though no forecast is available with the previous reading at 108.70.
• At 15:00 GMT, New Home Sales data for October is expected to show a slide to 0.73 million units against 0.738 million previously. 
• The Richmond Fed Manufacturing Index for November will be released at 15:00 GMT as well. The expectation is for a contraction of -10, less severe than the -14 previously. 
• At 19:00 GMT, traders can look for clues about the December rate cut expectations in the release of the Fed’s Federal Open Market Committee (FOMC) Minutes for the November meeting.
• Equities are depressed across the board, with losses across Japan, China, Europe. Most losses remain contained to less than 1% on average. US equity futures are breaking the negative tone and are positive for this Tuesday.
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 59.6%. A 40.4% chance is for rates to remain unchanged. 
• The US 10-year benchmark rate trades at 4.29%, substantially lower from the high printed two weeks ago of 4.50% on November 15.

US Dollar Index Technical Analysis: Mixed bag

The US Dollar Index (DXY) has difficulties to thrive on the back of the comments from President-elect Donald Trump imposing even more tariffs on neighbours Canada, Mexico, and the usual suspect China. The weaker Canadian Dollar (CAD) component is being offset by a stronger Euro (EUR) and Swedish Krona (SEK). 

The DXY does not really reflect what is actually taking place in the targeted countries. Hence, the muted reaction in the US Dollar Index does not seem to break out in a way on the back of this tariff announcement. 

The fresh two-year high at 108.07 seen on Friday is the first level to beat. Further up, the 109.00 big figure level is the next one in line. The support from October 2023 at 109.36 is certainly a level to watch out for on the topside.  

Support comes in around 106.52, the double top from May. A touch lower, the pivotal 105.53 (April 11 high) should avoid any downturns towards 104.00. Should the DXY fall all the way towards 104.00, the big figure and the 200-day Simple Moving Average at 103.98 should catch any falling knife formation. 

US Dollar Index: Daily Chart

Once again, there is disagreement among the members of the ECB Governing Council about what the monetary policy reaction function of the European Central Bank should look like. In the one hand, Mario Centeno, head of the Banco de Portugal, argued in favor of lowering the ECB deposit rate to 2% on autopilot. Yannis Stournaras, governor of the Bank of Greece, recently sounded a similar note. On the other hand, ECB chief economist Philip Lane and Bundesbank chief Joachim Nagel argue in favor of a cautious, discretionary approach, Commerzbank’s Head of FX Research Ulrich Leuchtmann notes.

The upcoming ECB approach means everything

“The latter may also end up with a deposit rate of 2%, too. Nevertheless, in my opinion, both approaches have different consequences for the EUR exchange rates. Please note that the valuation of a currency in the foreign exchange market is not primarily determined by expected returns (the ‘carry’). The differences in these are negligible compared to what can be gained or lost from exchange rate fluctuations.”

“Now, a monetary policy that changes the key interest rate on autopilot runs the risk of missing out on new developments. If you have switched on autopilot, you tend to miss out on new situations. In particular, because the ECB was the very last G10 central bank to react to the post-corona inflation shock, it has the stigma of sometimes missing crucial developments.

“I think the market would not appreciate an ECB monetary policy on autopilot at all and would respond with visible EUR weakness. In the near future (including the next ECB press conference on December 12), I will therefore pay particular attention to which of the two camps will gain the upper hand.”

• EUR/JPY is pulling back within a downtrend that has unfolded since the start of November. 
• Lower lows are expected assuming a break below the November 22 low.  

EUR/JPY establishes a descending sequence of peaks and troughs from the October 31 peak. It is now probably in a short-term downtrend and given it is a principle of technical analysis that trends have a tendency to extend themselves, the odds favor the pair continuing to lower lows.

EUR/JPY 4-hour Chart 

The next target to the downside for EUR/JPY is the 158.11 September 30 swing low (red-dashed line). A break below 159.90 (November 22 low) would provide confirmation. The pair has pulled back to the 161.60s and this also provides them with an entry point that might carry less risk and more reward (unless the correction turns into a reversal).

A deeper sell-off could even take EUR/JPY down to 154.00 – 155.00, the August-September lows. 

When the Reserve Bank of New Zealand (RBNZ) started cutting rates in August this year, it did not surprise anyone, Commerzbank FX analyst Volkmar Baur notes.

RBNZ to announce the rate decision on Wednesday

“It cut the cash rate by 25 basis points. However, the indication that a move of 50 basis points was being seriously considered did surprise some. As a small open economy, New Zealand is often one of the first to recognize changes in the global economy. And more often than not, the central bank is not shy about responding to changing circumstances. This summer, the RBNZ's hint of a 50 basis point cut proved to be a harbinger for the Fed, which surprised markets by cutting rates by that amount in September.”

“And at its last meeting in October, the RBNZ followed up its August hint with a 50 basis point cut. Tomorrow morning, the RBNZ will hold its last policy meeting of the year, and once again, the RBNZ's statement may be more interesting than the decision itself. The market is pricing in a 50bp move and the majority of economists agree, according to the Bloomberg survey. However, what the central bank has to say about the increased uncertainties in the global trading system and thus the global growth and inflation outlook is likely to be more decisive.”

“Looking beyond tomorrow, the market is currently pricing in further significant moves from the RBNZ over the coming months. Another 50bp cut is almost fully priced in for the next meeting in February, another 25bp in April and a total of 150bp (6 steps of 25bp) by the summer. I think this is justified given the recent softening in inflation and economic growth. However, if the RBNZ were to focus on heightened international risks and their impact on inflation in New Zealand, the market might be forced to reconsider.”

• Gold stabilizes after a huge over-3% sell-off following news Israel and Hezbollah had reached a ceasefire deal. 
• The Israeli war cabinet meets on Tuesday to discuss the 60-day deal, while Trump issues tariff threats to neighbors and China. 
• Technically, XAU/USD forms a Bearish Engulfing candlestick pattern as it falls to support at a major trendline.  

Gold (XAU/USD) stabilizes in the $2,630s on Tuesday after sliding almost three percent – a whopping $90 plus – on Monday due to rumors Israel and Hezbollah were on the verge of agreeing on a ceasefire. 

Whilst good news for Lebanon, this was not good news for Gold as it improved the outlook for geopolitical risk, thereby reducing safe-haven flows to the precious metal. 

Gold’s sell-off stalls on Tuesday, Trump issues tariff threat

Gold weakens slightly but then recovers on Tuesday after President-elect Donald Trump threatens to impose 25% trade tariffs on Mexico and Canada, and an extra 10% to the already 60% announced in his election campaign on China. 

Trump said that he would implement the tariffs unless Mexico and Canada tightened their borders with the United States, cracked down on illegal immigration and the smuggling of illicit drugs, such as Fentanyl, into the US. 

Mexican drug cartels manufacture the drug in large quantities before smuggling it into the US. 

Meanwhile, Trump said China had to try harder to prevent the illegal supply of “precursor chemicals” to the cartels used in the narcotic’s manufacturing process. 

Gold weakened initially as Trump’s comments led to a stronger US Dollar (USD), and USD tends to be negatively correlated with Gold since the precious metal is mainly priced and traded in Dollars. At the time of publication, however, Gold has already recovered the lost ground from earlier in the session. 

Gold falls as ceasefire deal imminent 

Gold fell almost three percentage points on Monday during the US session after rumors began emerging that Israel and Hezbollah were inches away from closing a ceasefire deal in Lebanon.  

So far, such a deal has not materialized, although the BBC reports that the Israeli security cabinet is meeting on Tuesday to discuss the 60-day ceasefire deal. 

If implemented, it would see the Israeli army steadily withdraw its ground forces from Lebanon in return for Hezbollah withdrawing its militia from a zone near the border with northern Israel. The ceasefire would not cover the conflict in Gaza.

Despite the talk of a ceasefire, the Israeli Defence Force (IDF) issued an evacuation order for a district with close Hezbollah links in southern Beirut on Tuesday morning. 

In addition, in the last 24 hours, Israeli forces have killed at least 31 people in Lebanon, 11 people in Gaza, and two on the Syrian border in strikes, according to Aljazeera News. 

Technical Analysis: XAU/USD pulls back to major trendline

Gold sliced cleanly through its (red) 50-day Simple Moving Average (SMA) at around $2,666 and fell all the way down to the major trendline, mapping the precious metal’s long-term uptrend at circa $2,630. 

The steep drop that happened on Monday formed a Bearish Engulfing candlestick. If the pattern is confirmed and followed by a bearish candle today (Tuesday), this would signal a short-term reversal and probably more downside ahead.

XAU/USD Daily Chart

However, the precious metal trend is still bullish on a medium and long-term basis, and given the maxim that “the trend is your friend,” the odds still favor a continuation higher. In the short term, the trend is unclear.

A break above $2,721 (Monday’s high) would be a bullish sign and give the green light to a continuation higher. The next target would be at $2,790, matching the previous record high.

Alternatively, a decisive break below the major trendline would likely lead to further losses and flip the short-term trend bearish. A decisive break would be one accompanied by a long red candlestick that broke cleanly through the trendline and closed near its low – or three red candlesticks in a row that broke below the line. 

• EUR/CAD surges above 1.4800 as Trump warns of higher tariffs on Canada and Mexico.
• Fears of higher tariffs on Canada has weakened the Loonie.
• ECB officials shift focus to economic risks than taming price pressures.

The EUR/CAD pair soars to near 1.4830 in European trading hours on Tuesday. The cross strengthens as the Canadian Dollar (CAD) weakens after United States (US) President-elect Donald Trump threatens to raise import tariffs by 25% on Canada and Mexico.

Trump said in a post on Truth.social that China has poured illicit drugs into the US, mainly through Mexico. Trump added that he will impose an additional 10% on China, which will be over 60% that he mentioned in his election campaign.

The announcement of higher tariffs on Canada has weakened the CAD across the board. Canada is one of leading trading partner of the US and higher-level tariff on the nation will dampen its export sector.

Though investors have underpinned the Euro (EUR) against the Canadian Dollar, its performance against other major peers has remained weak as the Eurozone is also expected be the victim of higher tariffs by Trump. In the election campaign, Tump said that the bloc will pay to pay a price for not buying enough American goods.

The economic situation of the shared continent is already vulnerable, which has forced European Central Bank (ECB) officials to focus more on preserving economic growth than bringing inflation under control. ECB Vice President Luis de Guindos said on Tuesday, ”Concerns about high inflation have shifted to economic growth.” Guindos added, “Potential changes in US trade policy will only add to the uncertainty.”

Room for the sharp rally to test 7.2800 before levelling off; the next resistance at 7.3000 is unlikely to come into view. In the longer run, momentum is building again; USD could break above 7.2800, but it is too early to determine if 7.3115 is within reach, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

There’s room for a test of 7.2800 before levelling off

24-HOUR VIEW: “USD indicated the following yesterday: ‘The outlook is mixed, and today, we expect USD to trade between 7.2300 and 7.2600.’ USD then traded in a narrower range of 7.2360/7.2577. USD closed at 7.2466, but jumped shortly after opening in Asian trade today. While USD could continue to advance, the sharp and swift rally appears to be overextended. That said, there is room for USD to test the major resistance at 7.2800 before levelling off. The next resistance at 7.3000 is unlikely to come into view. On the downside, support levels are at 7.2550 and 7.2430.”

1-3 WEEKS VIEW: “We have held a positive view for more than two weeks now. In our latest narrative from last Monday (18 Nov, spot at 7.2350), we indicated that ‘momentum is beginning to slow, and if USD breaks below 7.2000 (‘strong support’ level) would mean that USD is not rising further.’ USD traded in a relatively quiet manner until today, when in a sudden move, it soared. Momentum is building again, and USD could break above 7.2800. At this time, it is too early to determine whether there is enough momentum for it to reach 7.3115 (there is another resistance at 7.3000). Meanwhile, the ‘strong support’ level has moved higher to 7.2200.”

There has been quite limited fall-out on the renminbi after Trump's social media posts, ING’s FX analyst Chris Turner notes.

Chinese authorities are trying to keep USD/CNY below 7.20

“Currently, Chinese authorities are trying to hold the line by keeping the fixings of the onshore USD/CNY below 7.20. This limits how high USD/CNY can trade and also indirectly how high USD/CNH can trade too.”

“Chinese authorities are playing the long game here and will not be devaluing the renminbi for some short-term gains for local exporters. We think authorities are far more interested in preserving the renminbi's status as an international reserve currency and in avoiding capital flight (albeit foreigners are already underweight in Chinese asset markets).”

The current price action is likely part of a range trading phase, probably between 153.60 and 154.70. In the longer run, the US Dollar (USD) is expected to trade in a range, likely between 153.30 and 156.50, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

USD is expected to trade in a range

24-HOUR VIEW: “We expected USD to edge lower to 153.70 yesterday. However, we indicated that ‘the major support at 153.30 is unlikely to come under threat.’ While our view was not wrong, as USD then dropped to 153.53, it rebounded and subsequently traded choppily. The current price action is likely part of a range trading phase, probably between 153.60 and 154.70.”

1-3 WEEKS VIEW: “Our most recent narrative was from last Thursday (21 Nov, spot at 155.25), wherein USD ‘is expected to trade in a range, likely between 153.30 and 156.50.’ There is no change in our view.”

• Silver price rebounds as the US Dollar, however, its outlook remains bearish.
• The appeal of safe-haven assets diminished on truce talks between Israel and Iran.
• The US Dollar fails to hold gains driven by US Trump’s threat to raise tariffs by 25% on Canada and Mexico.

Silver price (XAG/USD) rebounds after discovering a temporary support near the psychological support of $30.00. The white metal gains an interim ground as the US Dollar (USD) retreats. However, its outlook has weakened as its safe-haven demand weakens on potential de-escalation in the war between Israel and Iran.

Israeli Ambassador Mike Herzog told on Israeli Army Radio that a ceasefire deal to end fighting between Israel and Lebanon-based Hezbollah fighters could be reached “within days”, AlJazeera reported.

Potential truce talks have diminished safe-haven demand for precious metals, such as Silver. However, the overall safe-haven appeal has not been extinguished as the war between Russia and Ukraine remains intact.

Meanwhile, an upside-down move in the US Dollar (USD) has resulted in a slight recovery in the Silver price. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, surrenders gains after a strong opening and drops to near 107.00.

The US Dollar opened on a strong note after President-elect Donald Trump threatened to raise import tariffs by 25% on Canada and Mexico and an additional 10% above the already mentioned 60% on China.

In Tuesday’s session, investors will focus on the Federal Open Market Committee (FOMC) minutes of the policy meeting held on November 7, which will be published at 19:00 GMT. In the policy meeting, the Fed reduced interest rates by 25 basis points (bps) to 4.50%-4.75% and officials were confident that inflation remains on a sustainable track towards the bank’s target of 2%.

Silver technical analysis

Silver price resumes its declining trend after a mean-reversion move to near the 20-day Exponential Moving Average (EMA) around $31.40. The white metal is expected to retreat to the November 14 low of around $29.70. The white metal weakened after the breakdown of the horizontal support plotted from the May 21 high of $32.50.

The upward-sloping trendline from the February 29 low of $22.30 will act as key support for the Silver price around $29.50.

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

Silver daily chart

• EUR/USD rebounds and returns to near 1.0500 as the US Dollar resumes its corrective trend triggered after Trump nominated Bessent for US Treasury Secretary.
• ECB policymakers support reducing interest rates gradually to abate risks of inflation becoming persistent.
• This week, investors will focus on US PCE inflation for October and Eurozone flash HICP data for November.

EUR/USD recovers intraday losses and rebounds to near the psychological resistance of 1.0500 in Tuesday’s European session. The major currency pair bounces back after a weak opening as the US Dollar (USD) surrenders most of its daily gains.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, started strongly and raised to near 107.50 in the early Asian session but surrenders most of its gains and falls to near 107.00 during the European trading hours.

Renewed fears boosted the US Dollar’s (USD) appeal in Tuesday’s Asian session after President-elect Donald Trump threatened to raise tariffs on other North American economies from where he expects China to have poured illicit drugs into the United States (US). Trump said he would impose 25% tariffs on Mexico and Canada and an additional 10% on China to the 60% already mentioned in his election campaign.

The US Dollar resumes its corrective trend, which started on Monday after Trump nominated seasoned hedge fund manager Scott Bessent for the role of Treasury Secretary. The USD fell sharply as investors anticipated Bessent to fulfill the economic agenda by maintaining fiscal discipline and political steadiness.

Going forward, investors will focus on the Federal Open Market Committee (FOMC) Minutes for the monetary policy meeting on November 7, which will be published at 19:00 GMT. In the November policy meeting, the Fed reduced its key borrowing rates by 25 basis points (bps) to the 4.50%-4.75% range. 

This week, investors will also focus on the US Personal Consumption Expenditure Price Index (PCE) data for October, which will be released on Wednesday. The inflation data will influence market speculation for the Federal Reserve (Fed) interest rate action in the December meeting. Traders are divided over whether the Fed will cut interest rates by 25 bps or leave them at their current levels next month, according to the CME FedWatch tool.

Daily digest market movers: EUR/USD bounces back despite multiple headwinds

• EUR/USD manages to recover intraday losses on Tuesday. Still,  investors expect the major currency pair to remain on the backfoot as European Central Bank (ECB) policymaker and President of Bundesbank Joachin Nagel cited concerns over economic weakness in the Eurozone’s largest economy, Germany, in his speech on Monday, Reuters reported.
• "Germany is stuck in a period of economic weakness which has now lasted two and a half years," Nagel said. He added, "Stagnation is likely in the final quarter of this year," and warned that the economy could fall behind other nations of the bloc. 
• Despite citing fears over growth, Nagel supported gradually reducing interest rates to ensure inflationary pressures get fully tamed. "It is important to remain cautious and to loosen monetary policy only gradually and not too quickly," Nagel said.
• Also, ECB Chief Economist Philip Lane praised the bank’s gradual policy-easing action in an interview with French newspaper Les Echos on Monday. Lane said that inflation is still higher than where the ECB wants it to be as a major decline in price pressures has come from moderation in energy costs, while inflation in the services sector is still too high.
• To know the current status of inflation in the Eurozone and its major economies, investors will focus on the flash Harmonized Index of Consumer Prices (HICP) data for November, which will be published on Thursday and Friday. Economists expect the Eurozone’s headline and core HICP – which excludes volatile components like food, energy, tobacco, and alcohol – to have accelerated to 2.4% and 2.9%, respectively, on year.

Technical Analysis: EUR/USD holds key support of 1.0330

EUR/USD regains strength and bounces back to near 1.0500 in Tuesday’s European session. The major currency pair continues to hold the near-term low of 1.0330. However, the outlook remains bearish as all short-to-long-term Exponential Moving Averages (EMAs) in the daily chart are declining, pointing to a downside trend.

The 14-day Relative Strength Index (RSI) rebounded after conditions turned oversold. However, the oscillator has cooled down, which could allow bears to take charge again.

Looking down, the November 22 low of 1.0330 will be the key support. On the flip side, the November 20 high round 1.0600 will be the key barrier for the Euro bulls.

European FX markets are on the move today as they digest the first of President-elect Trump's late-night social media posts on economic policy. His post threatened to enact 25% across-the-board tariffs on imports from Canada and Mexico unless they tightened border security to address the flows of illegal immigrants and drugs, particularly Fentanyl. China was threatened with an additional 10% on any current tariffs for not doing enough to address Fentanyl flows as well. His post on Truth Social said he'd use executive orders to make this happen – which he could potentially do under the US International Emergency Economic Powers Act (IEEPA), ING’s FX analyst Chris Turner notes.

DXY to stay bid in the 107-108 range

“Whilst most in the market assume that Trump will be using tariffs as a large bargaining stick – in this case to tighten US border controls – we would be careful of dismissing their market impact as some grandstanding. If 25% tariffs came close to seeing the light of day in Mexico, USD/MXN would be a 24/25 story, not just 21. We already think the currencies of Mexico and Canada will have a tougher Trump 2.0 than they did during his first term.”

“The above can help set the tone in FX markets into year-end – namely that Trump stands to deliver on his pre-election promises. These policies are generally positive for the dollar. Although the final outcome of the tariff threat may be less severe once negotiations are concluded, we recommend adopting a defensive stance in FX markets for the time being.”

“Two further inputs today should be USD positive too. The first should be a decent bounce in November US consumer confidence after Trump's win earlier this month. The second should be a mildly less dovish set of FOMC minutes, where the Fed might have acknowledged that some of the downside risks to the economy had receded ahead of that policy meeting on 7 November. DXY is to stay bid in the 107-108 range.”

That Europe was not mentioned in Trump's first tariff post could perhaps be welcome news on the Continent, ING’s FX analyst Chris Turner notes.

ECB speakers to shed some light on December

“Yet local policymakers will remain fearful that it will just be a matter of time before Trump turns his attention to the European auto sector or tariffs more broadly. In any case, the threat of further tariffs on China shows the direction of travel on world trade, which is bearish for the EUR.”

“The eurozone data calendar is pretty light today, but there are several ECB speakers. So far the market is split on whether the ECB cuts by 25bp or 50bp on 12 December. Our team slightly favours 50bp, but it is a very close call. EUR/USD can probably spend some more time consolidating in a 1.0450-1.0550 range, but the direction of travel is lower.”

“Elsewhere, look out for Riksbank speakers today. They are discussing neutral interest rates in Sweden. The market currently prices another 100bp of cuts in the policy rate (now at 2.75%). This, plus weak European growth and declining world trade, create a difficult environment for the Swedish krona.”

USD/SGD jumped above 1.35- levels this morning, in reaction to Trump’s threat of tariff. But the move higher was brief, and the pair has eased slightly since then. Pair was last seen at 1.3474, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Technical patterns suggest signs of bearish pullback

“Mild bullish momentum on daily chart continues to fade while RSI turned lower. Bearish divergence on MACD appears to be playing out. Technical patterns suggest signs of bearish pullback in the near term. Support at 1.3410, 1.3340 (200 DMA) and 1.3290 (61.8% fibo retracement of Jun high to Oct low). Resistance at 1.3520 levels. S$NEER continued to ease; last at 0.97% above model-implied mid.”

“SGD has been easing since Oct-2024 on trade-weighted terms even as MAS maintained policy status quo. That said, SGD remains stronger vs. peers in the basket but it is just less strong today (vs. than for most of the year). Historically the positive correlation between the change in S$NEER and MAS core inflation shows that SGD strength can ease when core inflation eases materially. Yesterday release of CPI report saw both headline and core CPI surprised to the downside.”

“The sharp pullback has also led to chatters if MAS would ease soon at the next MPC in Jan-2015. We think there is no hurry to ease amidst many moving parts – tariff threats, geopolitics – which may see price pressures return. MAS is better off monitoring further to avoid any risk of flip-flopping on policy. MAS maintaining policy status quo suggests that SGD can still remain somewhat resilient on trade-weighted terms. At some point in 2Q or 3Q in 2025, MAS may ease policy if core CPI does ease further. SGD strength can ease further when that happens.”

European Central Bank (ECB) policymaker Mario Centeno said on Tuesday that “inflation is getting close to the 2% target.”

Additional quotes

European Central Bank (ECB) Vice President Luis de Guindos said on Tuesday,”concerns about high inflation have shifted to economic growth.”

Additional takeaways

Meanwhile, his colleague Francois Villeroy de Galhau said that “Trump policies are likely to have limited impact on European inflation.”

Market reaction

The EUR/USD pair is back on the green, testing 1.0500 at the time of writing. The pair is up 0.10% on the day.

The New Zealand Dollar (NZD) could drop further; at this time, it does not appear to have enough momentum to reach 0.5770 for now. In the longer run, downward momentum is beginning to build; NZD is expected to weaken to 0.5770, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD is expected to weaken to 0.5770 in the longer run

24-HOUR VIEW: “Yesterday, when NZD was at 0.5855, we held the view that ‘provided that 0.5825 is not breached, NZD could edge higher to 0.5880.’ Our expectation did not materialize as NZD traded in a 0.5837/0.5869 range. NZD closed at 0.5845, but fell sharply in early Asian trade today. The sharp drop has scope to extend, but at this time, NZD does not appear to have enough momentum to reach the major support at 0.5770. Note that there is another support level at 0.5795. Minor resistance is at 0.5835; any rebound is likely to remain below 0.5855.”

1-3 WEEKS VIEW: “Our most recent narrative was from last Friday (22 Nov, spot at 0.5860), wherein ‘While the underlying tone has softened, any decline is likely part of a lower trading range of 0.5815/0.5905.’ We stated, ‘NZD is unlikely to break clearly below 0.5815.’ After dropping sharply early today, downward momentum is beginning to build. We expect NZD to weaken to 0.5770. We will maintain the same view provided that 0.5875 is not breached.”

USD/JPY continued to trade lower despite US Dollar (USD) strength seen elsewhere. Pair was last at 153.95 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is mild bearish

“Move lower remains consistent with our downside bias. Tariff threats, geopolitical uncertainties are additional drivers that should be supportive of JPY strength. Daily momentum is mild bearish while RSI fell. Risks skewed to the downside. Support at 153.30 (61.8% fibo retracement of 2024 high to low) and 152 (200 DMA). Resistance at 155.70, 156.60 (76.4% fibo).”

“PM Ishiba said that he swapped views with business and union leaders on pay talks and ask businesses to continue with pay hikes. He is also calling for bigger wage deal than this year’s. To add, PPI services came in higher at 2.9% y/y (vs. 2.5% expected). Price-related data continues to reinforce our view that BOJ should proceed with another hike next month.”

“Divergence in Fed-BoJ policies should bring about further narrowing of UST-JGB yield differentials and this should underpin the broader direction of travel for USD/JPY to the downside.”

Downward momentum is building; the Australian Dollar (AUD) could break below 0.6440 but might not be able to maintain a foothold below this level. In the longer run, AUD must break and hold below 0.6440 before a move to 0.6400 can be expected, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Below 0.6440 a move to 0.6400 can be expected

24-HOUR VIEW: “We indicated yesterday that AUD ‘could advance above 0.6560 but is unlikely to reach the major resistance at 0.6600.’ Our view was incorrect, as AUD dropped from 0.6550 to 0.6487, closing largely unchanged at 0.6504 (+0.07%). In early Asian trade, AUD dropped sharply. The sharp decline has led to a buildup in momentum. AUD could continue to decline, possibly breaking below 0.6440. That said, it might not be able to maintain a foothold below this level. To sustain the momentum buildup, AUD must remain below 0.6510 (minor resistance is at 0.6490).”

1-3 WEEKS VIEW: “Last Wednesday (20 Nov, spot at 0.6530), we indicated that AUD could rebound to 0.6560, possibly 0.6600. After AUD struggled to extend its advance, we indicated last Friday (22 Nov, spot at 0.6510) that it ‘has not been able to make any headway on the upside.’ We added, ‘if AUD breaks below 0.6470 (‘strong support’ level), it would indicate that it is not rebounding further.’ Early today, AUD fell sharply, and broke below 0.6470. Upward momentum has faded. Although downward momentum is beginning to build, it is not enough to suggest a sustained decline. AUD must break and hold below 0.6440 before a move to 0.6400 can be expected. The likelihood of AUD breaking clearly below 0.6440 will increase in the next few days, provided that 0.6525 is not breached.”

The Euro (EUR) fell in reaction to Trump’s threat on tariffs, though there was no mention of Europe. Pair was last at 1.0509 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.        

Upside surprise may aid the squeeze in EUR shorts

“EUR’s pullback lower did not find traction. Price action suggests EUR bear may also be feeling the fatigue. Bearish momentum on daily chart intact but shows signs of fading while RSI shows signs of turning higher.”

“Bullish divergence is also observed on daily MACD. Not ruling out EUR short squeeze in the near term. Resistance at 1.0510, 1.0665 (21 DMA). Key support at 1.0450 levels before 1.03 levels. Focus this week on Euro-area CPI. Upside surprise may aid the squeeze in EUR shorts.”

Silver prices (XAG/USD) rose on Tuesday, according to FXStreet data. Silver trades at $30.37 per troy ounce, up 0.15% from the $30.33 it cost on Monday.

Silver prices have increased by 27.65% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 86.36 on Tuesday, down from 86.59 on Monday.

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

• The USD/CAD rose more than 1% to 1.4178, a level not seen since April 2020.
• A corrective pullback could be triggered if the 14-day RSI breaks above the 70 mark.
• The pair may find primary supports at the nine- and 14-day EMAs.

USD/CAD extended its winning streak for the third consecutive session and rose more than 1% to 1.4178, a level not seen since April 2020. At the time of writing, the pair trades near 1.4110 during Tuesday's European session. From a technical perspective, the daily chart analysis shows the pair trending higher within an ascending channel, suggesting a strengthening bullish bias.

The 14-day Relative Strength Index (RSI) is just below the 70 level, confirming ongoing bullish momentum. However, a break above 70 would signal an overbought condition and could prompt a corrective pullback.

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

Regarding its resistance, the USD/CAD pair may attempt to re-approach its recent high of 1.4178, a level last seen in April 2020, which also aligns with the upper boundary of the ascending channel.

In terms of support, the USD/CAD pair could initially test the nine-day EMA at the 1.4000 level, followed by the 14-day EMA at 1.3984. Additional support may be found around the lower boundary of the ascending channel at 1.3960.

USD/CAD: Daily Chart

As long as the Pound Sterling (GBP) remains below 1.2600, it could test the 1.2505 level; last Friday’s low of 1.2475 is unlikely to come under threat. In the longer run, sharp drop appears to be overextended; any further decline may find it difficult to break below 1.2475, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Last Friday’s low of 1.2475 is unlikely to come under threat

24-HOUR VIEW: “We highlighted yesterday that “while upward momentum has not increased much, there is scope for it to rise to 1.2625 before levelling off.” We added, “the strong resistance at 1.2650 is unlikely to come into view.” However, GBP rose less than expected to 1.2613 in early NY trade, before easing off to trade sideways for the remaining session. GBP closed at 1.2570 (+0.28%), but fell in early Asian trade today. Despite the decline, downward momentum has not increased much. That said, as long as GBP remains below 1.2600 (minor resistance is at 1.2575), it could test the 1.2505 support. Last Friday’s low of 1.2475 is unlikely to come under threat.”

1-3 WEEKS VIEW: “Yesterday (25 Nov), when GBP was at 1.2590, we highlighted that last Friday’s “sharp drop appears to be overextended.” We pointed out, “any further decline may find it difficult to break last Friday’s low of 1.2475, which is serving as a significant support level.” Our view remains unchanged. Overall, only a breach of 1.2650 (no change in ‘strong resistance’ level) would mean that the weakness in GBP from two weeks ago has stabilised.”

• The Mexican Peso slides into a ravine after Donald Trump threatens to slap 25% tariffs on Mexican imports. 
• The Peso faces further pressure from expectations that Banxico will start cutting interest rates more aggressively due to easing inflation. 
• Technically, USD/MXN rallies to the top of a mini range within which it oscillates in the short term.

The Mexican Peso (MXN) declines by an average of one and a quarter percent in its most-traded pairs on Tuesday after President-elect Donald Trump said he would place a 25% tariff on goods entering the US from Mexico and Canada unless the countries reduced illegal migration and the cross-border traffic in illicit drugs. Trump's threat was mainly aimed at Mexico, where powerful cartels manufacture Fyentanol before smuggling it across the border into the US. 

The MXN weakened to 20.75 Pesos to one US Dollar (USD) on the news, from a closing price of 20.31 on Monday. Mexico is one of the US’s largest trading partners, with imports from the country totalling $454.8 billion in 2022, up 18.9% ($72.2 billion) from 2021, according to the Office of the United States Trade Representative. 

The imposition of tariffs of 25% would be expected to hurt demand for Mexican-made goods and for the Mexican Peso to purchase them.  

Mexican Peso faces pressure from Banxico easing

The Mexican Peso is facing further pressure from market expectations that the Bank of Mexico (Banxico) could start to cut interest rates more aggressively in future meetings following a deceleration of inflation in November’s data. Lower interest rates are usually negative for a currency as they reduce foreign capital inflows.

Mexican financial daily El Financiero noted that the headline inflation rate fell to 4.56% year-over-year in the first two weeks of November. This was below the average of 4.65% based on a Bloomberg survey of analysts. 

On Monday, the Peso made a brief but strong recovery against the USD on the news that Trump had picked hedge-fund manager Scott Bessent as his favorite for the post of US Treasury Secretary when he takes over in January. 

The Dollar weakened on the news as Bessent is viewed as fiscally conservative and, therefore, likely to restrain spending, tempering the inflationary effects of Trump’s economic policy agenda. The Peso saw gains as Bessent was expected to predominantly target China with tariffs rather than Mexico or Canada. 

Tuesday’s losses, however, more than erased the gains made on the first day of the week.   

Technical Analysis: USD/MXN rises to top of mini range

USD/MXN rallies and fills the market gap opened on Monday. 

The pair has now reached close to the top of the mini range (green dashed line on chart below) formed during November. This is also the C wave of a Measured Move pattern that has unfolded within the confines of the range. These patterns are like zig-zags in which waves A and C are of similar length.

USD/MXN Daily Chart 

USD/MXN is probably range-bound in the short term as it oscillates between the 19.70s and 20.80s. In the medium and long term, however, it is still in an uptrend within a rising channel. 

It would require a decisive break above the top of the range at 20.80 to signal the start of a more bullish short-term trend in line with longer-term up cycles. 

In the absence of such a breakout, the pair is likely to continue to oscillate within the parameters of its range, with the next move probably back down towards the range floor in the 19.70s. 

A decisive breakout higher would be one accompanied by a long green candle that pierced and rose well above the range highs, closing near its highs, or three green candles in a row that broke above the level. 

• AUD/USD dropped to a fresh multi-month trough after Trump’s tariff threats on Tuesday.
• Bets for slower Fed rate cuts lift the US bond yields and the USD and also exert pressure. 
• Bears take a brief pause for a breather and look to FOMC minutes before placing fresh bets.

The AUD/USD pair struggles to capitalize on its intraday bounce from the 0.6435-0.6430 area, or its lowest level since August 5 touched earlier this Tuesday and keeps the red through the first half of the European session. Spot prices currently trade around the 0.6480 region, down for the second straight day, and seem vulnerable amid renewed US-China trade war fears.

US President-elect Donald Trump threatened to impose a 25% tariff on all products coming into the US from Mexico and Canada and an additional 10% tariff on all Chinese imports. This, in turn, tempers investors' appetite for riskier assets and turns out to be a key factor undermining the China-proxy Australian Dollar (AUD), which, so far, has failed to benefit from the Reserve Bank of Australia's (RBA) hawkish stance. Apart from this, the emergence of some US Dollar (USD) buying adds credence to the near-term negative outlook for the AUD/USD pair. 

Scott Bessent's nomination as the US Treasury secretary did provide a temporary respite to US bond investors amid concerns that Trump's expansionary policies will reignite inflation and force the Federal Reserve (Fed) to cut interest rates slowly. This, in turn, triggers a fresh leg up in the US Treasury bond yields and assists the USD to attract fresh buyers following the overnight slide. Furthermore, geopolitical risks should offer support to the safe-haven Greenback and support prospects for a further depreciating move for the AUD/USD pair. 

Traders, however, seem reluctant to place aggressive bets and opt to wait for the FOMC meeting minutes for cues about the future rate-cut path. Apart from this, Tuesday's economic docket also features the release of the Conference Board's Consumer Confidence Index, New Home Sales data and the Richmond Manufacturing Index. The data might influence the USD and provide some impetus to the AUD/USD pair. The focus will then shift to the Australian consumer inflation figures, due for release during the Asian session on Wednesday.

FX markets received a jolt this morning as President-elect Trump said that he will impose 25% tariff on all products from Mexico and Canada and additional 10% tariff on goods from China. Taking a step back, knee jerk market reaction looked modest, partly due to how well-flagged the threat of tariff has been. Question is still about the timing of tariff implementation and by how much. And it remains uncertain if Trump referred to tariffs as bargaining chips to level the playing ground or unlock other agendas. DXY was last at 107.07, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Mild bullish momentum shows signs of fading

“Nonetheless, a combination of tariff threats, heightened geopolitical uncertainties, signs of slowing growth in other DM nations, reduction in fed cut expectation amid plausible return of us exceptionalism are some factors that may still keep USD broadly supported on dips, while Asian FX trade on the back foot in the interim. But our observation is that the USD momentum appears weary. Tariff fears saw a kneejerk reaction but lacked follow-through. Stretched USD valuation, technical signals and potential December seasonality effect (DXY fell in 8 out of the last 10 Decembers) are perhaps some considerations that may slow or even reverse USD’s momentum.”

“We would look to US data this week for cues. Data are frontloaded due to Thanksgiving Day holiday on Thu. Focus is on conference board consumer confidence (Tue); 3Q GDP, core PCE, durable goods orders, Chicago PMI, FOMC minutes (Wed). Firmer print will add to US exceptionalism narrative, keeping USD rates and USD elevated for longer, while softer print should add to USD unwinding momentum (i.e. USD may ease more).”

“Mild bullish momentum on daily chart shows signs of fading while RSI fell. Bearish divergence on daily MACD, RSI observed. We are still not ruling out the risk of technical retracement lower. Support at 106.20, 105.40/50 levels (21 DMA, 38.2% fibo). Resistance at 107.40, 108.10 (recent high).”

• EUR/JPY faces challenges due to risk-off mood following US President-elect Donald Trump's announcement of import tariffs.
• The Japanese Yen may struggle due to uncertainty surrounding the BoJ’s future rate hikes.
• The ECB is widely anticipated to implement a 25 basis point rate cut in December.

EUR/JPY remains in negative territory despite trimming intraday losses, trading near 161.20 during European hours on Tuesday. The EUR/JPY cross faces headwinds as the safe-haven Japanese Yen (JPY) holds firm, bolstered by heightened global risk aversion following US President-elect Donald Trump's renewed tariff threats on China, Mexico, and Canada.

These developments have dampened market sentiment, adding downward pressure on European economies and weighing on the risk-sensitive Euro. As a result, the EUR/JPY cross struggles to gain traction amid a challenging external environment.

However, the Japanese Yen (JPY) may struggle due to uncertainty surrounding the Bank of Japan's (BoJ) future rate hikes. BoJ Governor Kazuo Ueda has hinted at the possibility of another interest rate hike as early as December. Traders are focused on upcoming Tokyo Consumer Price Index data for November, which is seen as a leading indicator of nationwide price trends.

In the Eurozone, markets have fully priced in a 25-basis-point (bps) rate cut by the European Central Bank (ECB) in December, with the probability of a larger 50 bps cut rising to 58%. This underscores growing market pessimism about the region's economic outlook.

Such expectations weigh heavily on the Euro, further limiting the upside potential of the EUR/JPY cross, as concerns about monetary easing and economic weakness continue to dominate market sentiment.

The downside risks persist for the EUR/JPY cross as the Euro also faces pressure from growing concerns about the Eurozone's economic outlook. These concerns are fueled by uncertainties surrounding political instability in Germany and France.

The Euro (EUR) is likely to trade with a downward bias towards 1.0420; the next support at 1.0390 is not expected to come into view. In the longer run, EUR must break and remain below the 1.0333 low before further decline can be expected, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Next support at 1.0390 is not expected to come into view

24-HOUR VIEW: “After EUR traded higher at the open yesterday, we indicated that it ‘could edge higher to 1.0520.’ However, we were of the view that ‘the strong resistance at 1.0560 is unlikely to come under threat.’ Our view was not wrong, as EUR rose to 1.0530, pulling back to close at 1.0494 (+0.74%). EUR fell in early Asian trade today, and downward momentum appears to be building, albeit tentatively. Today, EUR is likely to trade with a downward bias towards 1.0420. The next support at 1.0390 is not expected to come into view. Resistance is at 1.0495, followed by 1.0520.”

1-3 WEEKS VIEW: “Our update from yesterday (25 Nov, spot at 1.0475) is still valid. As highlighted, while the weakness in EUR remains intact, it must break and remain below last Friday’s low of 1.0333 before further decline can be expected. The likelihood of EUR breaking below 1.0333 is not high, but it will remain intact as long as 1.0560 (no change in ‘strong resistance’) is not breached in the next few days. Looking ahead, if EUR breaks above 1.0560, it would suggest that the weakness from late last week has ended.”

• NZD/USD may find support around the lower boundary of the descending channel at the 0.5800 level.
• A corrective rebound is possible once the 14-day RSI falls below the 30 mark.
• The nine-day EMA at the level of 0.5867 would act as an immediate barrier.

NZD/USD extends its losing streak for the fifth successive day, trading around 0.5840 during European trading hours on Tuesday. A review of the daily chart highlights a deepening bearish trend as the pair moves within a descending channel pattern.

The nine-day Exponential Moving Average (EMA) remains below the 14-day EMA, signaling persistent weakness in short-term price momentum. Furthermore, the 14-day Relative Strength Index (RSI) is hovering just above the 30 level, reflecting the prevailing bearish sentiment. A dip below 30 would indicate oversold conditions, potentially paving the way for a corrective rebound.

Regarding its support, the NZD/USD pair tests the psychological level of 0.5800, which coincides with the lower boundary of the descending channel. A decisive break below this level would strengthen the bearish outlook, increasing downward pressure and potentially driving the pair toward its two-year low of 0.5772, last seen in November 2023.

On the upside, immediate resistance lies at the nine-day EMA around 0.5867, followed by the 14-day EMA at 0.5888, which aligns with the upper boundary of the descending channel. A breakout above this channel could weaken bearish momentum and pave the way for the pair to test the psychological resistance level of 0.6000.

NZD/USD: Daily Chart

• EUR/GBP attempts to extend gains after recovering daily losses on Tuesday.
• The risk-sensitive Euro could struggle as European economies may face challenges amid President-elect Donald Trump's tariff threat.
• The Pound Sterling may appreciate as BoE could potentially keep interest rates steady at 4.75% in December.

EUR/GBP remains steady after recovering daily losses, trading near 0.8350 during early European hours on Tuesday. However, downside risks persist for the EUR/GBP cross as the Euro faces pressure from growing concerns about the Eurozone's economic outlook. These concerns are fueled by uncertainties surrounding political instability in Germany and France.

The Euro, being sensitive to risk, could face additional downward pressure as European economies may struggle amid worsening global sentiment. This follows US President-elect Donald Trump's pledge to impose higher tariffs on China, Mexico, and Canada, intensifying fears of escalating global trade tensions.

Markets have fully priced in a 25 basis point (bps) rate cut by the European Central Bank (ECB) in December, while the likelihood of a larger 50 bps cut has climbed to 58%, highlighting growing market pessimism about the Eurozone's economic prospects.

In contrast, market sentiment has shifted toward the Bank of England (BoE) potentially slowing the pace of policy easing and keeping interest rates steady at 4.75% during its December meeting. This is attributed to the annual inflation rate surging to 2.3% in October, the highest level in six months, up from 1.7% in September. Such a decision would strengthen the Pound Sterling (GBP) and apply further downward pressure on the EUR/GBP cross.

However, the GBP faced challenges last week due to weak economic data. UK Retail Sales saw a sharper-than-expected decline in October, while the flash S&P Global/CIPS Composite Purchasing Managers' Index (PMI) for November dropped below the 50.0 mark for the first time since October 2023, signaling a contraction in economic activity.

• The Pound Sterling trades lower against the US Dollar as Donald Trump warns of more tariffs on other North American economies.
• Investors await the FOMC Minutes on Tuesday and the PCE inflation data for October on Wednesday.
• BoE’s Lombardelli supports a gradual policy-easing approach and warns of upside risks to inflation.

The Pound Sterling (GBP) recovers some losses against the US Dollar (USD) in Tuesday’s London session after diving near the psychological support of 1.2500 in Asian trading hours. The GBP/USD pair rebounds as the US Dollar surrenders most intraday gains after a strong opening. 

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, had a stellar opening after President-elect Donald Trump warned that he would impose 25% import tariffs on all products from Canada and Mexico. Trump added that there will be an additional 10% tariff on imports from China for pouring illicit drugs into the United States (US) through Mexico.

However, the Greenback has given up more than half of its gains on expectations that Trump nominating Scott Bessent for the role of Treasury Secretary would maintain geopolitical steadiness parallelly fulfilling Trump’s economic agenda. In an interview with the Financial Times (FT) over the weekend, Bessent said that he will focus on enacting tariffs, however, objectives would be “layered in gradually”. 

On the monetary policy front, investors await the US Personal Consumption Expenditures Price Index (PCE) data for October, which will be published on Wednesday. Economists expect the inflation data to have accelerated from September readings on an annual basis. The month-on-month headline and core PCE inflation data are estimated to have grown steadily. 

The inflation data will significantly influence market expectations for the Federal Reserve’s (Fed) likely interest rate action in the December meeting. The probability of the Fed cutting interest rates by 25 bps to the 4.25%-4.50% range in December is 56%, while the rest favors the central bank opting to leave interest rates steady, according to the CME FedWatch tool.

In Tuesday’s session, investors will focus on the Federal Open Market Committee (FOMC) Minutes of the policy meeting held on November 7, which will be published at 19:00 GMT. In the policy meeting, the Fed cut interest rates by 25 basis points (bps) to the 4.50%-4.75% range.

Daily digest market movers: Pound Sterling consolidates amid uncertainty over BoE interest rate path

• The Pound Sterling trades broadly sideways against its major peers on Tuesday, with investors looking for fresh cues about the Bank of England’s (BoE) likely interest rate path. Most BoE policymakers, including Governor Andrew Bailey, have supported a gradual policy-easing approach, citing persistent concerns over price pressures.
• BoE Deputy Governor Clare Lombardelli said in a speech at King's Business School on Monday, “I support a gradual removal of monetary policy restriction.” Lombardelli warned about risks of inflation remaining higher than the bank’s forecast, where wage growth normalizes at 3.5%-4% and the Consumer Price Index (CPI) around 3% rather than 2%. 
• When asked about the economic performance in the context of weak preliminary S&P Global/CIPS Purchasing Managers Index (PMI) data for November, Lombardelli said, “Flash PMIs for November may suggest some slowing in the United Kingdom (UK) economy, but I don’t take a strong signal from a single release.”
• On the contrary, BoE external policy member Swati Dhingra appears to support a less gradual interest rate cut approach as she doesn't see the UK as an outlier for inflation among advanced economies. Dhingra added that the policy is weighing on investment.
• Currently, traders expect the BoE to leave interest rates unchanged at 4.75% in the December policy meeting.

Technical Analysis: Pound Sterling remains vulnerable above 1.2500

The Pound Sterling hovers below the upward-sloping trendline near 1.2550 against the US Dollar, which is plotted from October 2023 low around 1.2040. The outlook of the GBP/USD pair remains bearish as the 20- and 50-day Exponential Moving Averages (EMAs) at 1.2735 and 1.2883, respectively, are sloping downwards.

The 14-day Relative Strength Index (RSI) oscillates inside the 20.00-40.00 range, suggesting that the downside momentum is intact.

Looking down, the pair is expected to find a cushion near May’s low of 1.2446. On the upside, the November 20 high at around 1.2720 will act as key resistance.

• USD/CHF drifts higher to near 0.8875 in Tuesday’s early European session. 
• Trump’s fresh tariff threats provide some support to the USD. 
• Geopolitical risks might boost the Swiss Franc and cap the pair’s upside. 

The USD/CHF pair holds positive ground around 0.8875 during the early European session on Tuesday. The US Dollar (USD) gains traction broadly after US President-elect Donald Trump on Monday vowed tariffs on Mexico and Canada and extra tariffs on China. 

Trump said that he would sign an executive order imposing a 25% tariff on all products coming into the United States from Mexico and Canada and additional tariffs on China. This, in turn, lifts the Greenback against its rivals. 

Furthermore, economists expect just two rather than four rate reductions next year, and the Federal Reserve (Fed) will likely cut its key rate when it meets in the December meeting. Financial markets are now pricing in a nearly 55.9% possibility that the Fed will cut rates by a quarter point, down from around 69.5% a month ago, according to the CME FedWatch Tool. Traders await the Federal Open Market Committee (FOMC) Minutes for fresh impetus. The less dovish remarks from the Fed officials might further support the Greenback in the near term.

On the other hand, the escalating geopolitical tension between Russia and Ukraine could boost the safe-haven flows, benefiting the Swiss Franc (CHF). Sky News reported on Tuesday that Russian forces are advancing at the fastest rate since the early months of the war, according to analysts at the Institute for the Study of War (ISW). 

Here is what you need to know on Tuesday, November 26:

Following the bearish action seen at the beginning of the week, the US Dollar (USD) recovers modestly early Tuesday. The US economic calendar will feature Housing Price Index for September, New Home Sales data for October and the Conference Board's Consumer Confidence Index for November. Later in the day, the Federal Reserve will release the minutes of the November policy meeting.

News of Donald Trump nominating fund manager Scott Bessent as the US Treasury Secretary triggered a USD selloff early Monday. Later in the day, reports of Israel and Lebanon closing in on a ceasefire agreement boosted risk sentiment, putting additional weight on the USD. However, markets seem to have adopted a cautious stance on Tuesday after Trump said he would impose a 25% tax on all products entering the country from Canada and Mexico and an additional 10% tariff on goods from China as one of his first executive orders. At the time of press, the USD Index was in positive territory above 107.00 and US stock index futures were trading flat.

EUR/USD benefited from the selling pressure surrounding the USD on Monday and registered daily gains. The pair struggles to find a foothold in the European morning on Tuesday and trades below 1.0500.

Gold came under heavy pressure amid easing geopolitical tensions on Monday and lost over 3%. XAU/USD consolidates its losses above $2,600 early Tuesday.

After rising above 1.2600, GBP/USD lost its bullish momentum and ended the first day of the week little changed. The pair continues to edge lower to begin the European session and was last seen trading at around 1.2550.

USD/CAD shot higher on Trump's tariff remarks and reached its highest level since April 2020 above 1.4150. The pair stages a downward correction and trades near 1.4100 in the European morning. Similarly, the Mexican Peso stays under pressure against the USD on Tuesday, with USD/MXN rising more than 1% on the day at 20.5875.

USD/JPY registered small losses on Monday. The pair stays relatively quiet on Tuesday and fluctuates in a narrow band at around 154.00.

• AUD/JPY finds some support near the 99.00 mark and rebounds from a near two-month low.
• The technical setup favors bearish traders and supports prospects for further depreciation.
• A sustained strength beyond the 101.00 mark might negate the near-term negative outlook.

The AUD/JPY cross drops to its lowest level since early October during the Asian session on Tuesday, albeit it finds decent support and rebounds around 75-80 pips from the vicinity of the 99.00 round figure. Spot prices, however, remain below the 100.00 psychological mark and seem vulnerable amid US-China trade war concerns.

US President-elect Donald Trump threatened to impose a 25% tariff on all products coming into the US from Mexico and Canada and an additional 10% tariff on all Chinese imports. Adding to this, persistent geopolitical risks stemming from the Russia-Ukraine war and the ongoing conflicts in the Middle East temper investors' appetite for riskier assets. This, in turn, drives some haven flows towards the Japanese Yen (JPY) and weighs on the perceived riskier Aussie, exerting some downward pressure on the AUD/JPY cross. 

From a technical perspective, oscillators on the daily chart have just started gaining negative traction and support prospects for a further depreciating move. That said, resilience below the 100-day Simple Moving Average (SMA) and the subsequent bounce warrant some caution for bearish traders. This makes it prudent to wait for a sustained break and acceptance below the 99.00 mark before positioning for deeper losses. The AUD/JPY cross might then slide below the 98.70-98.65 intermediate support and test the 98.00 mark.

On the flip side, any move up beyond the 100.00 mark is likely to confront some resistance near the Asian session high, around the 100.25-100.30 region, ahead of the 100.55-100.60 horizontal barrier. This is followed by the overnight swing high, around the 101.00 round figure, which if cleared could lift the AUD/JPY cross to the 101.55 intermediate resistance en route to the 102.00 mark. The momentum could eventually lift spot prices back towards the 102.30-102.40 region, or the highest level since July 24 touched earlier this month.

AUD/JPY daily chart

• USD/MXN climbs to near 20.50 in Tuesday’s early European session, adding 1.1% on the day. 
• Trump’s fresh tariff threats exert some selling pressure on the Mexican Peso. 
• The FOMC meeting minutes will take center stage later on Tuesday. 

The USD/MXN pair surges to around 20.50, the highest since early November, during the early European session on Tuesday. The Mexican Peso (MXN) weakens sharply after US President-elect Donald Trump vowed to enact 25% tariffs on all products from Mexico. 

Early Tuesday, Trump said that he would announce a 25% tariff on all products from Mexico and Canada from his first day in office and impose an extra 10% tariff on goods from China. The prospect of likely substantial tariffs has prompted traders to become more cautious about the currencies of the United States' (US) trading partners. This, in turn, drags the MXN lower against the Greenback as Mexico is the number one exporter to the US.

“Risk sentiment is getting crushed for now on Trump’s tariff risks — the dollar is being viewed as a haven and the affected nations’ currencies like the Mexican peso are getting hammered,” said Mingze Wu, currency trader at StoneX Financial.  

Investors will take more cues from the FOMC meeting minutes, which is due later on Tuesday. The cautious stance from the Federal Reserve (Fed) could contribute to the USD’s upside, while the dovish tone from the Fed officials might weigh on the USD in the near term. On Wednesday, the US preliminary Gross Domestic Product (GDP) data for the third quarter (Q3) and Core Personal Consumption Expenditures (Core PCE) - Price Index for October will be in the spotlight. 

FX option expiries for Nov 26 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0415 1.7b
• 1.0475 1.7b
• 1.0500 2.1b
• 1.0600 1.3b

EUR/GBP: EUR amounts        

• 0.8375 466m

USD/JPY: USD amounts                     

• 156.00 697m

• Silver prices fell by nearly 3% following reports that Israel and Hezbollah are close to reaching a ceasefire agreement.
• President-elect Donald Trump plans to impose tariffs on imports from Mexico, Canada and China.
• The non-yielding Silver struggled due to bond market optimism following the selection of Scott Bessent as the US Treasury Secretary.

Silver price (XAG/USD) hovers around $30.40 per troy ounce during the Asian trading hours on Tuesday, following a nearly 3% drop in the previous session. This downside risk for safe-haven assets like Silver metal is linked to reports suggesting that Israel and Hezbollah are close to reaching a ceasefire agreement.

Additionally, the price of dollar-denominated Silver has been pressured by a stronger US dollar (USD) after President-elect Donald Trump announced plans to impose a 25% tariff on all imports from Mexico and Canada starting on his first day in office, alongside an additional 10% tariff on goods from China. A stronger US dollar makes precious metals more expensive for foreign buyers, negatively affecting Silver demand.

The non-yielding Silver faced downward pressure due to optimism in the bond market following the selection of Scott Bessent as US Treasury Secretary in the incoming administration. Bessent has advocated for a phased approach to trade restrictions and expressed a willingness to negotiate tariff levels in coordination with President-elect Donald Trump.

However, Tuesday's less hawkish comments from Federal Reserve (Fed) officials may have offered some support for Silver prices. Chicago Fed President Austan Goolsbee suggested that the Fed is likely to continue lowering interest rates toward a neutral stance that neither stimulates nor restricts economic activity. Meanwhile, Minneapolis Fed President Neel Kashkari pointed out that another rate cut could be considered at the Fed's December meeting, according to Bloomberg.

Investors are now focusing on the Federal Reserve's November meeting minutes, set to be released later in the North American session. These minutes could offer crucial insights into the central bank’s direction on monetary policy.

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

The price for Gold stood at 7,113.87 Indian Rupees (INR) per gram, broadly stable compared with the INR 7,112.67 it cost on Monday.

The price for Gold was broadly steady at INR 82,974.10 per tola from INR 82,960.83 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.)

• GBP/USD attracts some dip-buyers following an intraday dip to the 1.2500 neighborhood.
• The USD struggles to capitalize on its modest gains and lends some support to the major.
• Bets for slower Fed rate cuts, rising US bond yields favor USD bulls and might cap gains.

The GBP/USD pair attracted fresh sellers on Tuesday and dropped to the 1.2500 neighborhood, closer to its lowest level since May 2024 during the Asian session. Spot prices, however, manage to rebound a few pips from the daily trough and currently trade around mid-1.2500s, down just over 0.10% for the day.

The underlying bullish sentiment across the global financial markets fails to assist the safe-haven US Dollar (USD) to capitalize on its modest intraday gains, which, in turn, offers some support to the GBP/USD pair. Any meaningful USD depreciation, however, seems elusive amid speculations that US President-elect Donald Trump's expansionary policy will reignite inflation and force the Federal Reserve (Fed) to cut interest rates slowly. 

Meanwhile, the initial market reaction to Scott Bessent's nomination as the US Treasury secretary turned out to be short-lived and is evident from a fresh leg up in the US Treasury bond yields. Adding to this, persistent geopolitical risks stemming from the Russia-Ukraine war and the ongoing conflicts in the Middle East should act as a tailwind for the safe-haven Greenback. This, in turn, might keep a lid on any further gains for the GBP/USD pair. 

Bearish traders, however, need to wait for a sustained break and acceptance below the 1.2500 psychological mark amid reduced bets that the Bank of England (BoE) will cut rates next month. Data released last week showed that the underlying price growth in the UK gathered speed and accelerated sharply to the 2.3% YoY rate in October. This suggests that the BoE will move cautiously on rate cuts and might offer support to the British Pound (GBP). 

Investors now look forward to the release of the FOMC meeting minutes, which will be scrutinized for cues about the future rate-cut path. The attention will then shift to the first revision of the US Q3 GDP growth and the US Personal Consumption Expenditure (PCE) Price Index data later this week. The crucial data will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the GBP/USD pair.

• EUR/USD remains subdued as Trump’s tariff plans dampen the market sentiment.
• President-elect Donald Trump plans to impose tariffs on imports from Mexico, Canada and China.
• The Euro struggles due to growing concerns over downside risks to the Eurozone economy.

EUR/USD pares its daily losses, trading around 1.0490 during the Asian hours on Tuesday. However, the pair may continue to depreciate due to dampened market sentiment following President-elect Donald Trump’s announcement of planning to impose a 25% tariff on imports from Mexico and Canada, along with a 10% hike in tariffs on all Chinese goods entering the United States (US).

The US Dollar (USD) remains subdued following comments from Federal Reserve (Fed) officials on Tuesday. However, the USD’s downside risks are limited, supported by strong preliminary S&P Global US Purchasing Managers’ Index (PMI) data. These robust figures have strengthened expectations that the Fed may adopt a more gradual approach to further rate cuts.

Federal Reserve Bank of Chicago President Austan Goolsbee indicated that the Fed is likely to continue lowering interest rates toward a neutral stance that neither stimulates nor restricts economic activity. Meanwhile, Minneapolis Fed President Neel Kashkari highlighted that it remains appropriate to consider another rate cut at the Fed’s December meeting, according to Bloomberg.

The Euro faces pressure amid growing concerns over downside risks to the Eurozone economy. These risks stem from uncertainties related to a potential second Trump administration, the ongoing war in Ukraine, and political instability in Germany and France. 

Markets have already fully priced in a 25 basis point (bps) rate cut by the European Central Bank (ECB) in December. Additionally, the likelihood of a more aggressive 50 bps rate reduction has increased to 58%, reflecting heightened market pessimism regarding the region's economic outlook.

• Gold price attracts some haven flows near $2,600 after Trump’s tariff threats. 
• Rebounding US bond yields revive USD demand and might cap gains in XAU/USD. 
• Traders now look to FOMC meeting minutes for some meaningful impetuses. 

Gold price (XAU/USD) plunged over 3% on Monday and eroded a major part of last week's strong gains, which marked the best weekly performance since March 2023. Scott Bessent's nomination as the US Treasury Secretary, coupled with reports that Israel was close to reaching a ceasefire with military group Hezbollah in Lebanon, triggered a fresh wave of global risk-on trade. This overshadowed a modest US Dollar (USD) weakness and weighed heavily on the precious metal.

The subsequent fall, however, stalls ahead of the $2,600 mark during the Asian session on Tuesday amid reviving safe-haven demand in the wake of US President-elect Donald Trump's tariff threat. That said, expectations for a less dovish Federal Reserve (Fed), a fresh leg up in the US Treasury bond yields, and renewed US Dollar (USD) buying should cap the non-yielding yellow metal. Traders now look to the release of the FOMC meeting minutes for some meaningful impetuses. 

Gold price benefits from reviving safe-haven demand amid trade war fears

• The optimism over Scott Bessent's nomination as the US Treasury secretary and the Israel-Hezbollah ceasefire deal weighed heavily on the safe-haven Gold price at the start of a new week. 
• Hopes that Bessent will take a more phased approach on tariffs in an attempt to rein in the budget deficit triggered a sharp fall in the US Treasury bond yields and undermined the US Dollar. 
• The yield on the benchmark 10-year US government bond dropped by the most since early August, though the downfall remains limited amid bets for a less dovish Federal Reserve. 
• Chicago Fed President Austan Goolsbee said on Monday that barring some convincing evidence of overheating, he foresees the central bank continuing to lower rates. 
• Separately, Minneapolis Fed President Neel Kashkari said that it is still appropriate to consider another interest-rate reduction at the December FOMC policy meeting.
• Traders, however, continue scaling back their bets for another 25-basis-points Fed rate cut in December amid expectations that Trump's policies will boost inflation. 
• This acts as a tailwind for the US bond yields and assists the USD to fill the weekly bearish gap, which might cap any meaningful upside on the non-yielding yellow metal. 
• US President-elect Donald Trump threatened to impose a 25% tariff on all products coming into the US from Mexico and Canada and an additional 10% tariff on all Chinese imports.
• Meanwhile, Israeli forces have intensified operations in north Gaza in recent weeks and continue to hammer Lebanon, raising the risk of a further escalation of conflict. 
• Adding to this, worries about the economic impact of increased duties temper investors' appetite for riskier assets and drive some haven flows towards the XAU/USD.
• Market players now look to the FOMC minutes for cues about the future rate-cut path, which will drive the USD demand and provide a fresh impetus to the commodity. 
• This week's US economic docket also features the first revision of the US Q3 GDP print and the release of the US Personal Consumption and Expenditure (PCE) Price Index. 

Gold price might struggle to build on intraday bounce; $2,600 holds the key for bears

From a technical perspective, the intraday bounce from the 61.8% Fibonacci retracement level of the recent recovery from a two-month low is likely to face stiff resistance near the $2,650 confluence. The said area comprises the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 38.2% Fibo. level, which, in turn, should act as a key pivotal point. A sustained strength beyond could trigger a short-covering rally towards the $2,700 mark en route to the overnight swing high, around the $2,721-2,722 zone.

On the flip side, the $2,600 round figure (61.8% Fibo. level) might continue to protect the immediate downside. Some follow-through selling will expose the 100-day SMA, currently pegged near the $2,565 region. The subsequent decline has the potential to drag the Gold price towards the monthly swing low, around the $2,537-2,536 area. A convincing break below the latter will be seen as a fresh trigger for bearish traders and set the stage for an extension of the recent sharp retracement slide from the $2,800 neighborhood, or the all-time peak touched in October.

• USD/CAD rose more than 1% to 1.4178, a level not seen since April 2020.
• The risk-sensitive CAD’s downside is fueled by dampened market sentiment.
• President-elect Donald Trump announced plans to impose a 25% tariff on imports from Canada.

The USD/CAD pair continues to climb, trading near 1.4110 during Tuesday’s Asian session, marking levels last seen in April 2020. The pair has surged over 1%, fueled by weakened market sentiment after President-elect Donald Trump announced plans to impose a 25% tariff on imports from Mexico and Canada, along with a 10% hike in tariffs on all Chinese goods entering the United States (US).

According to Reuters, citing a Canadian source familiar with the matter, US President-elect Donald Trump and Canadian Prime Minister Justin Trudeau had a conversation on Monday night, discussing trade and border security in what was described as a positive exchange. 

Separately, Canada’s Deputy Prime Minister stated that the "Canada-US relationship today is balanced and mutually beneficial, particularly for American workers." However, the statement made no reference to Trump’s threat of imposing tariffs.

A drop in crude Oil prices could pressure the commodity-linked Canadian Dollar (CAD). As the largest Oil exporter to the United States (US), Canada’s currency often moves in tandem with Oil price fluctuations. Lower crude prices typically weaken the CAD.

West Texas Intermediate (WTI), Oil price trades around $69.00 at the time of writing. The decline follows reports that Israel and Lebanon have agreed on terms to resolve the Israel-Hezbollah conflict, according to unnamed senior US officials. This development has contributed to easing geopolitical tensions, weighing on Oil prices.

The US Dollar (USD) remains under pressure following comments from Federal Reserve (Fed) officials on Monday. Federal Reserve Bank of Chicago President Austan Goolsbee indicated on Tuesday that the Fed is likely to continue lowering interest rates toward a neutral stance that neither stimulates nor restricts economic activity. Meanwhile, Minneapolis Fed President Neel Kashkari highlighted that it remains appropriate to consider another rate cut at the Fed’s December meeting, according to Bloomberg.

Despite this, the USD’s downside risks are limited, supported by strong preliminary S&P Global US Purchasing Managers’ Index (PMI) data. These robust figures have strengthened expectations that the Fed may adopt a more gradual approach to further rate cuts.

• The Indian Rupee weakens in Tuesday’s Asian session.
• The INR is facing some selling pressure as Trump's tariff promise boosts the USD. 
• The FOMC Minutes will be the highlight on Tuesday. 

The Indian Rupee (INR) attracts some sellers on Tuesday after reaching its strongest level in over two weeks. The renewed US Dollar (USD) demand driven by strong US economic data, escalating tensions in the Russia-Ukraine conflict and US President-elect Donald Trump’s plan on new tariffs exert some selling on the local currency. 

However, inflows from MSCI's index rebalancing, declining US bond yields and lower crude oil prices could lift the INR in the near term. Investors will monitor the FOMC Minutes, which are due later on Tuesday. Also, the US Conference Board’s Consumer Confidence, New Home Sales, the Richmond Fed Manufacturing Index and the Dallas Fed Services Index will be released. 

Indian Rupee remains vulnerable despite inflows from MSCI's index rebalancing  

• Indian equities are estimated to see passive inflows of about $2.5 billion on account of the rebalancing of MSCI's equity indexes, according to estimates by Nuvama Alternative & Quantitative Research.  
• “The dollar-rupee pair is anticipated to trade within a defined range in the medium term, with support at 83.80 and resistance around 84.50. The overall bias, however, tilts toward the downside,” said Amit Pabari, managing director at CR Forex.
• Chicago Fed President Austan Goolsbee said on Monday that he foresees the US central bank continuing to lower rates toward a stance that neither restricts nor promotes economic activity. 
• Minneapolis Fed President Neel Kashkari noted that it is still appropriate to consider another interest-rate cut at the Fed’s December meeting. 
• Traders pared back their expectations for an interest rate cut in December. Futures traders are now pricing in 55.9% odds that the Fed will cut rates by a quarter point, down from around 69.5% a month ago, according to the CME FedWatch Tool. 

USD/INR’s longer-term constructive bias is under pressure

The Indian Rupee weakens on the day. The USD/INR maintains the bullish outlook above the key 100-day Exponential Moving Average (EMA) on the daily chart, even though the price has broken below an ascending trend channel. The 14-day Relative Strength Index stands above the midline near 54.60, supporting the buyers in the near term. 

The all-time high and the upper boundary of the trend channel of 84.52 appears to be a tough nut to crack for the bulls. A decisive break above this level could pave the way to the 85.00 psychological level.

On the flip side, the potential support level emerges in the 84.00-83.90 zone, representing the round mark and the 100-day EMA. A breach of the mentioned level could expose 83.65, the low of August 1. 

After US President-elect Donald Trump’s threat to impose additional 10% tariffs on all Chinese goods, China’s Embassy in Washington responded by saying that “no one will win a trade war or a tariff war.”

Additional quotes

Reuters reported on Tuesday, citing a Canadian source directly familiar with the situation, that US President-elect Donald “Trump and Canada’s  Prime Minister (PM) Justin Trudeau spoke on Monday night about trade and border security.”

The source said Trump and PM Trudeau had a "good discussion" and that the “two men agreed to stay in touch."

Meanwhile, the Canadian Deputy PM noted that “Canada places the highest priority on border security and the integrity of shared border with the US.”

“Canada-US relationship today is balanced and mutually beneficial, particularly for American workers,” the Deputy PM added.

Reuters said that the Canadian Deputy PM's statement did not mention Trump's tariff threat.

Market reaction

USD/CAD is paring back gains following these comments, still trading 1% higher on the day at around 1.4125.

• The Australian Dollar extends its losses as market sentiment takes a hit following Donald Trump’s announcement of increase in tariffs.
• Australia’s Monthly Consumer Price Index for October is the focus on Wednesday.
• The latest US PMI has reinforced the likelihood of the Fed slowing the pace of rate cuts.

The Australian Dollar (AUD) continues to weaken against the US Dollar (USD) on Tuesday, driven by dampened market sentiment following President-elect Donald Trump's announcement of a 10% increase in tariffs on all Chinese goods entering the United States (US), along with a 25% tariff on imports from Mexico and Canada.

The downside for the AUD/USD pair may be limited, as the Australian Dollar could find support from the Reserve Bank of Australia's (RBA) hawkish outlook on future interest rate decisions. Traders are now turning their attention to Australia’s Monthly Consumer Price Index (CPI) for October due on Wednesday, a key indicator that could influence expectations regarding domestic monetary policy.

The RBA’s November Meeting Minutes indicated that the board remains cautious about the risk of further inflationary pressures, underscoring the need to maintain a restrictive monetary policy stance. While the board noted there was no "immediate need" to adjust the cash rate, it stressed the importance of keeping all options open for future policy changes, highlighting a flexible and data-driven approach.

Daily Digest Market Movers: Australian Dollar weakens amid dampened market sentiment

• The US Dollar Index (DXY), which measures the USD's performance against six major currencies, remains subdued near 107.30 due to bond market optimism. This follows President-elect Donald Trump's selection of fund manager Scott Bessent as the US Treasury secretary, a seasoned Wall Street figure and fiscal conservative.
• The downside risks for the USD remain contained, bolstered by robust preliminary S&P Global US Purchasing Managers’ Index (PMI) data, which have reinforced expectations that the Federal Reserve (Fed) may slow the pace of rate cuts.
• Futures traders are now assigning a 52.3% probability to the Federal Reserve cutting rates by a quarter point, down from 58.7% a week earlier, according to the CME FedWatch Tool.
• In November, S&P Global US Composite PMI climbed to 55.3, indicating the strongest growth in private sector activity since April 2022. The US Services PMI rose to 57.0, up from 55.0 in October and significantly surpassing market expectations of 55.2, marking the sharpest expansion in the services sector since March 2022. Meanwhile, the US Manufacturing PMI increased to 48.8 from 48.5 in October, aligning with market forecasts.
• The Judo Bank Australia PMI Composite Output Index dropped to 49.4 in November from 50.2 in October, indicating a modest contraction in private sector output for the second time in three months. Manufacturing PMI rose to 49.4 in November from 47.3 in October, marking its 10th consecutive month of contraction. Meanwhile, the Services PMI fell to 49.6 from 51.0, signaling the first contraction in services activity in ten months.
• Australia's four largest banks are predicting the Reserve Bank of Australia's first rate cut. Westpac has revised its forecast for the first cut to May, up from February. National Australia Bank (NAB) also expects the cut in May. Meanwhile, the Commonwealth Bank of Australia (CBA) and ANZ are cautiously forecasting a rate cut in February.
• Fed Chair Jerome Powell downplayed the likelihood of imminent rate cuts, highlighting the economy's resilience, robust labor market, and persistent inflationary pressures. Powell remarked, "The economy is not sending any signals that we need to hurry to lower rates."

Australian Dollar extends losses to near 0.6450 due to persistent bearish bias

The AUD/USD pair hovers near 0.6470 on Tuesday, with technical analysis of the daily chart suggesting strengthening short-term bearish momentum. The pair remains confined within a descending channel, while the 14-day Relative Strength Index (RSI) stays below 50, signaling persistent negative sentiment.

On the downside, the AUD/USD pair could test its yearly low of 0.6348, last reached on August 5, with additional support found near the descending channel's lower boundary at 0.6330.

The resistance lies at the nine-day EMA of 0.6503 and the 14-day EMA of 0.6512. A decisive break above these levels could weaken the bearish outlook and open the door for a potential rally toward the four-week high of 0.6687.

AUD/USD: Daily Chart

• The Japanese Yen attracts some haven flows on Tuesday, albeit lacking follow-through.
• The BoJ rate-hike uncertainty acts as a headwind for the JPY amid renewed USD buying.
• A fresh leg up in the US bond yields also contributes to capping the lower-yielding JPY.

The Japanese Yen (JPY) edges higher against its American counterpart during the Asian session on Tuesday, albeit lacking bullish conviction and remains confined in a familiar range held over the past week or so. A slight deterioration in the risk sentiment – as depicted by a weaker tone around the equity markets – offers some support to the safe-haven JPY. That said, the heightened uncertainty over the timing of the next rate hike by the Bank of Japan (BoJ) might continue to cap any meaningful appreciating move for the JPY. 

Meanwhile, Scott Bessent's nomination as the US Treasury secretary provided a short-lived respite to US bond investors amid expectations for a less dovish Federal Reserve (Fed). In fact, market players now seem convinced that US President-elect Donald Trump’s expansionary policies will reignite inflation and force the Fed to cut interest rates slowly. This, in turn, triggers a fresh leg up in the US Treasury bond yields, which assist the US Dollar (USD) in filling the weekly bearish gap and should cap the lower-yielding JPY. 

Japanese Yen struggles to lure buyers amid doubts over BoJ’s ability to hike rates further

• Data published by the Bank of Japan this Tuesday showed that the Services Producer Price Index (PPI) rose 2.9% YoY in October as compared to 2.6% in the previous month.
• This comes after last week's stronger consumer inflation figures from Japan and BoJ Governor Kazuo Ueda's hawkish remarks and keeps the door open for a December rate hike.
• BoJ Governor Kazuo Ueda has stressed the bank's readiness to raise interest rates again if inflation becomes driven more by robust domestic demand and higher wages.
• Meanwhile, investors have been scaling back their bets for another 25-basis-points rate by the BoJ in December in the wake of increased domestic political uncertainty. 
• US President-elect Donald Trump said that he will charge Mexico and Canada a 25% tariff on all products coming into the US and will charge China an additional 10% tariff.
• Concerns about the economic impact of increased duties temper investors' appetite for riskier assets and drive some haven flows towards the Japanese Yen on Tuesday.
• The yield on the benchmark 10-year US government bond fell by the most since early August on Monday in response to Scott Bessent's nomination as the US Treasury secretary.
• Chicago Fed President Austan Goolsbee said on Monday that barring some convincing evidence of overheating, he foresees the central bank continuing to lower rates. 
• Separately, Minneapolis Fed President Neel Kashkari said that it is still appropriate to consider another interest-rate reduction at the December FOMC policy meeting.
• Traders have been paring back their expectations for an interest-rate cut by the Federal Reserve in December amid concerns that Trump's policies could boost inflation.
• The US Dollar regains positive traction following the previous day's slide amid a fresh leg up in the US bond yields, which, in turn, should cap the lower-yielding JPY. 
• Traders now look forward to the release of the FOMC meeting minutes for cues about the future rate-cut path and determining the near-term trajectory for the Greenback. 
• This week's US economic docket also features the first revision of the US Q3 GDP print and the US Personal Consumption and Expenditure (PCE) price Index. 

USD/JPY bears need to wait for some follow-through selling below 153.30-153.25 support

The USD/JPY pair has been consolidating near the 100-period Simple Moving Average (SMA) on the 4-hour chart. Moreover, mixed oscillators on daily and hourly charts make it prudent to wait for some follow-through selling below last week's swing low, around the 153.30-153.25 region, before positioning for any further losses. Spot prices might then weaken further below the 153.00 mark, towards the next relevant support near mid-152.00s en route to the very important 200-day SMA, currently around the 152.00 mark.

On the flip side, the 154.75-154.80 area now seems to have emerged as an immediate strong barrier. A sustained move beyond, leading to a subsequent strength above the 155.00 psychological mark, could lift the USD/JPY pair to the 155.40-155.50 supply zone. The momentum could extend further towards reclaiming the 156.00 mark before spot prices aim to retest the multi-month top, around the 156.75 region touched on November 15.

• NZD/USD weakens to around 0.5810 in Tuesday’s Asian session. 
• The RBNZ is expected to cut its OCR to 4.25% at its meeting Wednesday.
• The cautious stance from the Fed might support the USD and cap the pair’s upside.

The NZD/USD pair attracts some sellers to around 0.5810 during the Asian trading hours on Tuesday. The rising expectation of aggressive rate cuts from the Reserve Bank of New Zealand (RBNZ) exerts some selling on the Kiwi. All eyes will be on the RBNZ interest rate decision on Wednesday. 

The New Zealand central bank will reduce the Official Cash Rate (OCR) by 50 basis points (bps) to 4.25% on Wednesday, according to the majority of economists by Bloomberg. ANZ analysts highlight that the upcoming RBNZ meeting is unlikely to spark a positive shift for the New Zealand Dollar (NZD) and the ongoing dovish stance from the central bank might continue to undermine the NZD against the US Dollar (USD) in the near term. 

President-elect Donald Trump said the US will impose an additional 10% tariff on Chinese goods on top of all existing levies due to the influx of illegal drugs such as narcotics, per Bloomberg. Early Tuesday, China's ambassador said that US trade policy will impact China and other countries. This, in turn, drags the China-proxy NZD lower as China is a major trading partner to New Zealand.

On the USD’s front, the stronger economic data and the cautious stance from the US Federal Reserve (Fed) might support the Greenback and create a headwind for the pair. Fed Chair Jerome Powell signaled last week that the Fed isn’t necessarily inclined to cut rates at the next upcoming meetings.“The economy is not sending any signals that we need to be in a hurry to lower rates,” said Powell.

 

China’s Ambassador to Australia said on Tuesday that “US policy on trade with China and other countries will have an impact.”

The Envoy noted that they “expect China and the US to engage with each other to talk about each other's policies on how to manage relationship.”

In a post on Truth Social early Tuesday, US President-elect Donald Trump said that he would announce a 25% tariff on all products from Mexico and Canada from his first day in office and an additional 10% tariff on goods from China.

"On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders," Trump said

Trump blamed China of not taking strong enough action to stop the flow of illicit drugs crossing the border into the US from Mexico.

He further noted that "until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America.”

Market reaction

Following these comments, the US Dollar caught a fresh bid against its major rivals, opening with a bullish gap to test 107.50. Meanwhile, the Chinese proxy, the Australian Dollar slumped across the board. The AUD/USD pair is now trading at 0.6465, still down 0.51% on the day.

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Tuesday at 7.1910, as compared to the previous day's fix of 7.1918 and 7.2357 Reuters estimates.

• WTI price attracts some sellers to near $68.55 in Tuesday’s Asian session. 
• The possible Middle East peace deal caps the WTI’s upside. 
• Expectations for a revival of China's imports could boost the black gold. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.55 on Tuesday. The WTI price edges lower after the reports that Israel and Lebanon had agreed to the terms of a deal to end the Israel-Hezbollah conflict, citing unnamed senior U.S. officials. However, the escalating geopolitical tensions, particularly Russia's actions in Ukraine might cap the WTI’s downside. 

Israeli and US officials said Israel and Lebanon appear to be close to a ceasefire deal, with the Israeli cabinet set to meet on Tuesday to discuss it, per BBC. Giovanni Staunovo of UBS noted, "It seems the news of a ceasefire between Israel and Lebanon is behind the price drop, though no supply has been disrupted due to the conflict between the two countries and the risk premium in oil has been low already before the latest price decline." 

However, Oil traders will closely monitor the developments surrounding geopolitical risks. Ukraine launched US-made longer-range missiles targeting a military base inside Russian territory last week. In response, Russian President Vladimir Putin warned of lowering its doctrine to use nuclear weapons and fired a hypersonic missile at Ukraine. The escalating geopolitical tensions between Russia and Iran raised concerns over potential supply disruptions, which might boost the WTI in the near term. 

Furthermore, the signs of a recovery in Chinese oil demand lift the black gold price as China is the world's largest crude oil importer. According to LSEG Oil Research, China's crude import may reach 11.4 million barrels per day this month due to price cuts. Additionally, S&P Global estimated that China's oil demand may grow by 1.1% to 17.29 million bpd in 2024 and increase by 1.7% to 17.59 million bpd in 2025.