Forex News

• The EUR/USD found support around 1.0500 after falling by more than 1% to open the week.
• Buyers should focus on recovering the 20-day SMA.
• The are still no signs of a reversal and indicators remain deep in the red.

The EUR/USD pair started the week with a sharp decline, falling over 1% and breaking decisively below the psychological 1.0500 mark, but managed to stabilize around this level on Tuesday. 

Despite this pause, the technical outlook remains bearish as the pair stays below the 20-day Simple Moving Average, which continues to act as a strong resistance. Indicators such as the Relative Strength Index (RSI), currently at 38, remain pointed downward, suggesting room for further declines before reaching oversold territory. Similarly, the Moving Average Convergence Divergence (MACD) histogram shows weakening bullish momentum with shallow green bars, but no signs of a reversal. 

Unless a significant bullish catalyst emerges, the pair remains vulnerable to further downside, with traders closely monitoring support levels at 1.0450 and 1.0430 for potential stabilization or continued losses toward 1.0400.

EUR/USD daily chart

• GBP/USD ticks up 0.15%, yet fails to decisively breach the 1.2700 resistance.
• UK retail sales hit their lowest since April, dropping -3.4% against expectations of a 0.7% rise.
• Downward pressure persists; support levels at 1.2600 and 1.2486 remain critical for near-term direction.

The Pound Sterling climbed modestly against the US Dollar on Tuesday, yet it failed to decisively clear the 1.2700 figure for the third consecutive trading day. At the time of writing, the GBP/USD trades at 1.2667, up 0.15%.

The Britail Retail Consortium (BRC) revealed that retail sales plunged to their lowest reading since April, with the index diving -3.4%, missing estimates for a 0.7% increase. According to the BRC, every retail category experienced a decline, with shopping centres seeing the sharpest drop due to a significant fall in footfall.

GBP/USD Price Forecast: Technical outlook

The GBP/USD is downward biased despite recovering from hitting six-month low of 1.2486 on November 22. Even though the pair hit a higher high on November 29, at 1.2749, it failed to find acceptance above 1.2700.

Momentum remains bearish, as depicted by the Relative Strength Index (RSI), although the RSI aims slightly up. However, it remains below its neutral line.

On further weakness, the GBP/USD next support would be 1.2600. A breach of the latter will expose 1.2486, followed by the year-to-date (YTD) low of .12299.

Conversely, if buyers reclaim 1.2700, they could test the 200-day Simple Moving Average (SMA) at 1.2818.

GBP/USD Price Chart – Daily

• AUD/USD is trading within a range on the 4-hour chart. 
• It looks poised to rise further and fill an open gap on the charts. 

AUD/USD is trading within a range encompassed by the ceiling at around 0.6540 (green line) and floor at about 0.6440 (red line). The pair is probably in a short-term sideways trend. 

AUD/USD 4-hour Chart 

AUD/USD is currently climbing within the range towards a gap that opened on Monday (red rectangle). Technical analysis theory says that “the market abhors a gap” so there is a good chance it will continue higher until it fills the gap, which lies between 0.6515 and 0.6524. 

A break above the high of the last period at 0.6505 would provide added confirmation  of a gap-fill move up to at least 0.6524. 

The (blue) Moving Average Convergence Divergence (MACD) indicator looks poised to cross above its red signal line. If it completes a cross it will give a buy signal and reinforce the case for price moving higher. 

CTA selling activity has been weighing on prices despite concurrent signs of Chinese buying activity, TDS’ Senior Commodity Strategist Daniel Ghali notes.

Set-up now strongly favors continued upside

“With CTA selling exhaustion now in the rearview, the set-up for flows now strongly favors continued upside.”

“We now expect a whipsaw in trend follower positioning over the coming weeks, given our simulations of future prices now point to extreme asymmetry in expected flows with limited selling activity on the horizon even in a big downtape for prices, but significant buying activity in a commensurate uptape that could see CTAs shed their net shorts and build a net long position.”

OPEC+ is expected to decide on Thursday to postpone the production increase for a further three months until the end of the first quarter, Commerzbank’s commodity analyst Carsten Fritsch notes.

OPEC+ to postpone the production increase for a next three months

“This was reported by Reuters, citing four OPEC+ sources. As this would be largely in line with market expectations, the impact on the oil price is likely to be neutral. Nevertheless, there are still uncertainties.”

“The United Arab Emirates would also need to agree to a postponement, as they were granted a gradual increase in oil production totalling 300 thousand barrels per day six months ago, which was set to begin in January. However, it is hard to imagine that the voluntary production cuts will remain in place in full for another three months while one country is allowed to increase production.”

“In this context, the production figures from a Bloomberg survey, according to which the UAE significantly increased production in November and thus produced almost 350 thousand barrels per day more than agreed, could also create potential for conflict. Iraq, on the other hand, reduced its production and thus came as close as 50 thousand barrels per day to the production target, if the compensatory cuts are not factored in.”

• USD/CHF has formed a bearish H&S pattern which hints at more weakness. 
• More downside will be confirmed by a break below the base of the pattern or its “neckline”. 

USD/CHF has likely formed a bearish Head and Shoulders (H&S) reversal pattern on the 4-hour chart, which, if valid, indicates a probable decline is on the cards for the pair. 

USD/CHF 4-hour Chart 

The H&S is composed of a peak, the “head” (H) and two shoulders either side (S). A break below the neckline at the base of the pattern confirms a decline lower. The pattern is a bearish reversal sign. 

On USD/CHF the neckline is at around 0.8797. The initial target for the pattern is at 0.8703, the 61.8% Fibonacci extension of the height of the pattern extrapolated lower (red line labelled 0.618 on chart). 

Volume has declined during the formation of the H&S (red dashed line), further enhancing the validity of the pattern. 

South Korean President Yoon Suk Yeo announced on Tuesday that they have declared martial law to clear out pro-North Korea elements, per Reuters.

Yoon said the government administration has been paralyzed because of the opposition party's conducts and added that they will rebuild a free and democratic country through martial law.

Market reaction

The USD/KRW pair surged higher with the immediate reaction to this development and was last seen trading at its highest level in two years at 1,422.20, rising 1.4% on a daily basis.

• EUR/USD is trading a little higher on Tuesday after selling off steeply on the previous day. 
• Expectations the Federal Reserve will cut interest rates in December are weighing on the US Dollar. 
• The Euro, meanwhile, is facing pressure from French political risk and similar rate-cut bets for December.

EUR/USD recovers on Tuesday, with a single Euro (EUR) buying about 1.0510 US Dollars (USD) as morning breaks along the east coast of America. 

The US Dollar (USD) is trading down against the Euro (EUR) after various members of the US Federal Reserve (Fed) said on Monday, that they thought the labor market and inflation were now in balance and, as such, the Fed should continue to cut interest rates. Lower interest rates are negative for a currency as they reduce foreign capital inflows. 

Fed Governor Christopher Waller came the closest to outright advocating for a cut, after saying he was leaning “toward supporting a cut in December.” 

This helped solidify bets for the Fed making a 25 basis points interest-rate cut at its December policy meeting. The CME FedWatch tool calculates the probability of such a move as 72.5% on Tuesday, up from around 65% before his comments. 

If the Fed goes ahead with a rate cut at its meeting on December 17-18 it would probably give a boost to the stock market in time for the seasonal “Santa Rally” when stocks have a seasonal propensity to rally during Christmas time. 

In Europe, meanwhile, heightened political risk caps the Single Currency and limits gains for EUR/USD. The French government of Prime Minister Michel Barnier faces collapse after opposition parties rejected his Budget plan and signed a motion of no confidence. If ousted it will be the first time a French government has been ousted by such a vote since 1962. 

The Euro also faces pressure from cementing expectations that the European Central Bank (ECB) will also cut interest rates in the Eurozone in December, and this in turn, is likely to limit gains for the pair. 

On Tuesday, European Central Bank (ECB) board member Piero Cipollone said that US tariffs could weaken the Eurozone economy, translating into lower consumption and thus reduced pressure on prices.

"All this put together makes me think that we will have a reduction in growth but also a reduction in inflation," he said.

Lower inflation would probably lead the ECB to cut interest rates more aggressively than currently expected, thereby weakening the Euro. 

His comments follow similar statements from ECB governing council member Martins Kazaks on Monday, who suggested he was in favor of making further cuts to Eurozone interest rates on Monday.

Key data releases for the EUR/USD pair this week are likely to be US labor market metrics, including JOLTS job openings on Tuesday, Initial and Continuing Jobless Claims on Thursday and Nonfarm Payrolls (NFP) for November on Friday. 

If the labor market data reflects a resilient employment situation it will support the Greenback and drive EUR/USD lower. That said, the NFP data is likely to be lower-than-average given the negative impact of recent hurricanes on the US economy.

Recent US data, however, paints a broadly positive picture of growth for the country, with the US November Purchasing Managers Index (PMI) beating estimates and the Atlanta Fed GDPNow Tracker for Q4, pointing to 3.2% growth – its highest level on record. 

In November, the Gold price recorded its sharpest monthly decline in more than a year, falling by 3.7%, Commerzbank’s commodity analyst Carsten Fritsch notes.

Gold ETFs recorded outflows

“However, this was preceded by four months of stronger increases in some cases. In addition, the fall in November started from a record level at the end of October. The price decline primarily occurred in the first half of the month because the US dollar appreciated significantly following Donald Trump's election victory.”

“This was based on the expectation that inflation in the US would rise due to the expected policies of the US president-elect, probably prompting the US Federal Reserve to adopt a more restrictive monetary policy. However, this is not entirely certain. The Gold price recovered somewhat in the second half of November due to increasing geopolitical risks.”

“The Gold ETFs tracked by Bloomberg recorded net outflows of 27 tons in November for the first time in six months. Compared to the outflows of 114 tons following Trump's first election victory in November 2016, however, these were still limited.”

The Pound Sterling (GBP) is registering a very marginal gain on the USD on the session but it is trading flat effectively Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP holds narrow range

“There were no UK data reports today to shape trading and the pound is marking time in ranges along with its major currency peers.”

“Sterling has stalled in the upper 1.26s, with the pound making hard work of promising gains on the short-term charts. The potential for a bit more strength in the pound remains but, realistically, this is not something that is likely to develop without other currencies making a move against the USD as well. Resistance is 1.2760. Support is 1.2610.”

The Euro (EUR) has picked up a little ground as market concerns about the impending French government no confidence vote (likely Wednesday) appear to have eased, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR nudges higher

“French assets are trading more comfortably and modest gains in OATs suggest some bargain-hunting may be extending local markets some support this morning. It may be helping at the diplomatic margin that President Macron has invited President-elect Trump to this weekend’s re-opening of Notre Dame in Paris.”

“Spot is showing some tentatively positive signs on the intraday chart after rising from the upper 1.04s through the low 1.05s in European trade. But gains are still well short of the sort of level which could drive more significant appreciation into December.”

“Short-term chart patterns still lean more EUR-bullish in my view but spot gains through the upper 1.05s are needed to trigger more strength. Resistance is 1.0590/95. Support is 1.0460/70.”

The Canadian Dollar (CAD) is little changed on the session. Mildly positive risk appetite is a modest plus for the CAD as are decent gains on the session for crude oil (up 1%), Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD holds range

“The CAD remains more beholden to yield differentials and the USD’s still significant interest rate premium along the curve—a situation that is unlikely to change in the short run. The tariff threat dangling over the CAD adds to downside risks for the CAD in the coming months. Spot fair value is estimated at 1.4062 currently—suggesting the CAD is right about where it should be.”

“Spot is about midway between recent price extremes (1.3930/1.4180) and looks relatively flat on the short-term chart. Trend momentum signals continue to favour USD appreciation which means the USD should remain well-supported on dips for now. Support is 1.3990/00 and 1.3930/50. Resistance is 1.4090/00 and 1.4175/80.”

The US Dollar (USD) started off December pretty much like it finished November—on the up—despite typically unfavourable trends for the USD overall in the December month, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Waller says he’s leaning towards a December cut

“I noted yesterday that weak seasonality for the DXY was reflected in an average return of just over –1% for the month over the past 25 years. Trading so far today sees the USD edging a little lower against most of its major currency peers, however, with dovish Fed comments yesterday (Governor Waller stating that he was ‘leaning’ towards a rate cut later this month) weighing on USD sentiment. Swaps moved to price in a little more easing risk for the December 18th meeting following those remarks (18bps of cuts priced into the December contract this morning).”

“Currency gains are limited, however; the EUR is edging towards the top of the overnight performance table, with a 0.2% gain on the USD. The JPY is underperforming and is down 0.3%. Asian and European (including French) stocks are modestly higher but US equity futures are fractionally in the red. Global bonds are mostly lower (except French OATs which are outperforming marginally).”

“Very modest USD losses leave the DXY looking a little more neutral and rangey on the short-term charts. Gains may be blocked above 106.50 for now, with the dollar’s broader undertone liable to weaken a little more below 106 on the index. Key support currently sits at 105.50. On the data front, it’s all about jobs today with the JOLTS data. ADP figures drop tomorrow ahead of Friday’s payrolls. Fed speakers include Kugler and Goolsbee.”

• USD/JPY has pulled back after touching down on support at the 100-day SMA. 
• The pair is in a downtrend and has broken out of a bearish pattern, raising the risk of further declines. 

USD/JPY has found support just above the 100-day Simple Moving Average (SMA) at 148.96 and bounced. 

On Monday, the pair formed an Inverted Hammer candlestick pattern and if Tuesday ends as a green up day it will gain confirmation as a near-term reversal signal. This could indicate a recovery and correction higher.

USD/JPY Daily Chart 

Despite the risk of a correction higher, USD/JPY remains in a downtrend on a short and medium-term basis and because of the technical analysis principle that trends tend to extend, the odds favor more downside evolving eventually.

A break below the December 2 lows at 149.08 would confirm an extension of the downtrend to the first target at around 147.92 (revised down due to pattern widening), the 61.8% Fibonacci extrapolation of the height of the bearish Broadening Formation pattern extrapolated lower. 

Further bearishness could carry USD/JPY to the next target at 147.18, the September 2, key swing high.

The (blue) Moving Average Convergence Divergence (MACD) momentum indicator is diverging away from its red signal line which is bearish and has fallen below the zero line on an intraday basis. If it closes below zero then it will increase the bearishness of the indicator reading.   

• Gold pushes higher on Tuesday after some Fed speakers indicated they might be leaning towards possibly cutting interest rates in December. 
• Elevated geopolitical risk from conflicts in the Middle East and the political crisis in France further send investors to Gold. 
• Technically, XAU/USD could be about to extend a wave c lower as it completes a three-wave pattern. 

Gold (XAU/USD) edges higher to trade in the $2,640s on Tuesday after commentary from Federal Reserve (Fed) speakers led to an uptick in the probabilities of the Fed cutting interest rates at its December policy meeting. Lower interest rates are positive for Gold because they reduce the opportunity cost of holding the non-interest paying asset. 

Elevated geopolitical risks could also be underpinning Gold amid continued conflict in the Middle East intensified now by the outbreak of civil war in Syria, the Russia-Ukraine conflict, and political risk in France. During times of crisis, investors turn to Gold for safety.

Gold edges higher on Christmas-Fed-cut hopes 

Gold is drifting higher on Tuesday after comments from several Fed members appeared to lean in favor of the central bank cutting US interest rates at their December meeting.  

Fed Governor Christopher Waller said on Monday that he was leaning “toward supporting a cut in December.” 

His colleague, New York Fed President John Williams, though more cautious, said that further cuts to interest rates were needed as risks to inflation and employment were more balanced. Still, he added: “one could argue a case for skipping a rate cut in December, (I) will be watching data closely to decide.” 

Yet he went on to say, “policy is restrictive enough that a December cut still allows ample scope to slow (the) pace of cuts later if needed.” 

Atlanta Fed President Raphael Bostic, meanwhile, said on Monday that he was “keeping his options open” regarding a cut in December. However, he too appeared to lean in favor of such a move, adding that since the risks to the labor market and inflation were “roughly in balance, we likewise should begin shifting monetary policy toward a stance that neither stimulates nor restrains economic activity.” 

Their comments, as well as better-than-expected US Purchasing Manager Index (PMI) data for November, increased market bets the Fed will cut interest rates by 25 basis points. On Tuesday, the CME FedWatch tool calculates the probability of such a scenario at 72.5% (from the mid 60s previously). 

Technical Analysis: XAU/USD possibly about to unfold c-leg of three-wave pattern

Gold keeps crawling along a major trendline as it continues its overall range-bound development. 

Within that sideways market, Gold looks like it might be forming a three-wave Measured Move pattern. If so, then there is a possibility the next leg will be down, in a wave c (dashed line on chart below), which is of similar length to wave a. 

XAU/USD 4-hour Chart

A break below $2,605 (November 26 low) would confirm a follow-through lower towards the target for the end of wave c at around $2,550. 

The (blue) Moving Average Convergence Divergence (MACD) has recently crossed below its red signal line, providing a sell signal. The MACD is also in negative territory, a bearish sign. Furthermore, its general shape could indicate further downside on the cards, supporting the bearish near-term outlook.

• The US Dollar softens on profit-taking after the steep surge registered on Monday. 
• A vote of no confidence becomes inevitable in France, while elections are not foreseen until 2025.
• The US Dollar Index drops back to the lower end of 106.00, failing to hold gains above 106.50.

The US Dollar (USD) is paring back Monday’s gains, with the US Dollar Index (DXY) trading in the lower end of 106.00 on Tuesday, as traders take profits after the steep surge seen at the beginning of the week. The move comes even as investors remain on edge about the political situation in France,  with a motion of no confidence to be debated and voted on Wednesday.

If successful, it is unclear what will happen next as parliamentary elections cannot be held until next June. An option is that Macron appoints a new prime minister who could bring more stability. Still, this looks like a daunting task given the fragmentation of the current parliament.

The US economic calendar, meanwhile, is getting ready for the first key data point preceding the Nonfarm Payrolls release on Friday: the JOLTS Job Openings report for October. Markets will hear from Federal Reserve (Fed) officials as well, with three Fed speakers set to release comments after Federal Reserve Governor Christopher Waller said he is open to an interest-rate cut in December. 

Daily digest market movers: JOLTS as appetizer for Nonfarm Payrolls 

• The US JOLTS Jobs Openings report for October is due at 15:00 GMT. Expectations are for an uptick to 7.48 million job openings against the previous 7.443 million. 
• At 17:15 GMT, Federal Reserve Bank of San Francisco President Mary Daly is interviewed at Fox Business.
• Federal Reserve Governor Adriana Kugler delivers a speech about the labor market and monetary policy at an event organized by the Detroit Economic Club in Detroit near 17:35 GMT.
• Closing off near 20:45 GMT, Federal Reserve Bank of Chicago President Austan Goolsbee delivers closing remarks at the Wildwest Agriculture Conference organized by the Chicago Fed.
• Equities are surging across the board. Both Asia and Europe are seeing their indices tick up firmly, some of them over 1%. The German Dax even reached an all-time high of 20,000 points. US equity futures are lagging behind, still looking for direction. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 72.5%. A 27.5% chance is for rates to remain unchanged. The Fed Minutes and Waller’s recent comments have helped the rate cut odds for December to move higher. 
• The US 10-year benchmark rate trades at 4.21%, rather steady for a second day in a row. 

US Dollar Index Technical Analysis: Opportunity ahead

The US Dollar Index (DXY) could be in for more downside despite the increasing risk of the French government falling. An important rule of thumb in financial markets is that, when a country is facing new leadership, it is often seen as a positive in the runup towards the announcement of the new government. The reason for this is that a fresh coalition could mean more growth and a chance for relaunching plans for the economy, a scenario that would be supportive for the currency. 

A stronger Euro would weigh on the DXY because the European currency is the biggest contributor to the index’s basket. Several consecutive days of Euro strength would mean more selling pressure in the DXY. 

On the upside, 106.52 (April 16 high) remains as the first resistance to look at after failing to close above it on Monday and another failed attempt on early Tuesday. Should the Dollar bulls reclaim that level, 107.00 (round level) and 107.35 (October 3, 2023, high) are back on target for a retest. 

Should the French government fall and a new, more stable, government formation is set to take place,  the pivotal level at 105.53 (April 11 high) comes into play before heading into the 104-region. Should the DXY fall all the way towards 104.00, the big figure and the 200-day Simple Moving Average at 104.03 should catch any falling knife formation. 

US Dollar Index: Daily Chart

USD/SGD continued to inch higher, tracking the rise in USDCNH. Pair was last seen at 1.3475, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Consolidation higher likely in the near term

“Mild bearish momentum on daily chart faded while RSI rose. Consolidation higher likely in the near term. Resistance at 1.3490, 1.3520 levels. Support at 1.3390 (21 DMA), 1.3340 (200 DMA).”

“S$NEER was last at 0.86% above model-implied mid. This still shows that SGD remains firmer vs. peers in the trade basket but it is less firm today (vs. than for most of the year).”

Manufacturing PMI expanded for the second consecutive month, construction slowdown dragged down non-manufacturing PMI, UOB Group’s Economist Ho Woei Chen notes.

Economic recovery yet to become broad-based

“China’s Nov PMIs indicate further pick-up in manufacturing activities but the gains in non-manufacturing activities have stalled as construction contracted. Deflationary pressure increased in Nov after easing in Oct.”

“Recovery outlook remains weak even though the economy appears to have bottomed in the near-term after the recent stimulus measures. Market looks to the upcoming Central Economic Work Conference for hints of stronger support measures ahead.”

The US Dollar (USD) may rise further and break above 7.3000; the major resistance at 7.3115 is likely out of reach for now. In the longer run, rapid increase in momentum could lead to USD rising to 7.3115, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Rapid increase in momentum can lead to 7.3115

24-HOUR VIEW: “We did not anticipate USD to lift off and surged to 7.2954 (we were expecting range trading). While conditions are deeply overbought, robust momentum suggests USD may rise further and break above 7.3000. The major resistance at 7.3115 is likely out of reach for now. To maintain the momentum, USD must stay above 7.2700, with minor support at 7.2780.”

1-3 WEEKS VIEW: “We highlighted last Thursday (28 Nov, spot at 7.2500) that the recent ‘upward momentum has faded.’ We also highlighted that ‘The current price action is likely part of a consolidation range, and we expect USD to trade between 7.2200 and 7.2800 for the time being.’ Yesterday, in a sudden move, USD took off and surged to a high of 7.2954. The rapid increase in momentum could lead to USD rising to the resistance at 7.3115. Looking ahead, a clear break of this level will shift the focus to 7.3678. On the downside, a breach of 7.2550 would mean that our positive USD view is incorrect.”

CNH continued to trade under pressure amid expectations for further rate cuts at home while economic recovery remains uneven. Pair was last at 7.3013, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

PBoC may continue to restraint the RMB

“US tariffs can further hurt RMB. Yesterday, President Biden fired a parting shot in tightening curbs on China’s access to AI memory and chips tools. Recent tariff headlines served as a constant reminder that wider tariffs could soon hit when Trump comes on board officially in Jan-2025.”

“PBoC may continue to restraint the RMB from excessive weakening via daily fix, but likely they may have to also use offshore funding squeeze (not used yet) to ensure more effective transmission. Elsewhere, there may be other stimulus support measures to support the domestic economy, but these are at best mitigating factors only.”

“Path of least resistance for RMB may be skewed towards further weakening. Daily momentum shows signs of turning bullish while RSI rose towards overbought conditions. Upside risks intact. Resistance at 7.32, 7.3450 levels. Support at 7.29, 7.2745 levels.”

The US Dollar (USD) is expected to trade in a range, probably between 149.00 and 150.50. In the longer run, USD may continue to decline, but it’s unclear if there’s enough momentum for it to reach 148.65, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

USD/JPY doesn’t seem to have momentum to reach 148.65

24-HOUR VIEW: “Following USD sharp drop to 149.46 last Friday, we indicated yesterday that ‘the decline seems to be overdone, and further weakening of USD is unlikely.’ We were of the view that USD ‘is more likely to trade in a 149.40/150.70 range.’ USD subsequently rose to 150.74 before plummeting to a low of 149.06 in NY session. Despite the sharp decline, downward momentum has not increased much. Today, we continue to expect USD to trade in a range, probably between 149.00 and 150.50.”

1-3 WEEKS VIEW: “Last Thursday (28 Nov, spot at 151.40), we highlighted that ‘there has been a surge in downward momentum.’ We also highlighted that ‘given the deeply oversold short-term conditions, the next support at 149.40 may not come into view so soon.’ After USD dropped to 149.46 on Friday, we indicated yesterday (02 Dec, spot at 150.00) that ‘To continue to decline, USD must break and stay below 149.40.’ While USD dropped to a low of 149.06 in NY session, it recovered to close above 149.40 at 149.59. From here, USD may continue to decline, but given that downward momentum has not increased much further, it is unclear if there is enough momentum for it to reach 148.65. All in all, only a breach of 151.30 (‘strong resistance’ level previously at 151.80) would indicate that the weakness in USD has stabilised.”

USD/JPY fell, tracking the moves in UST yields, post Fed official Waller’s comments. Pair was last at 149.81 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

BoJ is likely to proceed with another hike

“Bearish momentum on daily chart intact while RSI shows signs of turning higher from near oversold conditions. Rebound risks not ruled out in the near term. Resistance at 151.20, 152 (200 DMA), 153.30/70 levels (61.8% fibo retracement of 2024 high to low, 21DMA). Support at 149.50, 149 levels (100 DMA). Broader bias remains to lean against strength.”

“Price-related data (Tokyo CPI, PPI, etc.), labour market development (jobless rate easing, job-to-applicant ratio increasing, etc.), wage growth expectations (PM Ishiba and trade unions calling for another 5-6% wage increase at shunto wage negotiations for 2025) and Ueda's recent comments on Nikkei over the weekend continue to reinforce the view that BoJ is likely to proceed with another hike, sooner rather than later.”

“But near term, in light of US data risks, pair may consolidate for now.”

• The Pound Sterling is rebounding against the US Dollar as sentiment switches for GBP’s transatlantic currency peer. 
• Weak UK data may limit the Pound’s gains, however, as data shows UK shoppers shy away from spending in November. 
• Technically, GBP/USD hangs onto its short-term uptrend but remains vulnerable to a reversal. 

The Pound Sterling (GBP) climbs back up to just shy of the 1.2700 mark on Tuesday as market sentiment switches against the US Dollar (USD). 

GBP/USD’s recovery comes after the pair suffered heavy losses on the previous day and declined by 0.71%. This followed tough talk from US President-elect Donald Trump in which he threatened to hit the BRICS trading bloc with 100% tariffs unless it gave up its search for an alternative to the US Dollar. Stronger-than-expected US Purchasing Manager Index (PMI) data further boosted the Buck.

However, it was comments from Federal Reserve (Fed) members, including Fed Governor Christopher Waller, that eventually capped the Greenback’s rally on Monday. 

Waller said he was leaning “toward supporting a cut in December.” This solidified bets for the Fed cutting interest rates by 25 basis points at its December policy meeting, with the CME FedWatch tool calculating a probability of 76% (from the mid 60s previously). Lower interest rates are negative for currencies as they reduce foreign capital inflows. 

Pound Sterling fails to capitalize due to weak fundamentals 

The Pound Sterling has struggled to capitalize on the US Dollar’s “fumble” as UK data disappoints. On Monday, the final reading of the UK PMI in November surprised to the downside, with the Manufacturing PMI falling to a nine-month low of 48.0, from 49.9 in October and below the flash estimate of 48.6. 

On Tuesday, the British Retail Consortium’s (BRC) Like-for-Like Retail Sales data provides no relief either. The BRC’s release shows shoppers tightening their belts with a surprise 3.4% drop in sales in November after a 0.3% gain in October, and well below the 0.7% rise expected. 

The data adds weight to the view that the Bank of England (BoE) will likely lower interest rates at its December meeting. As such, GBP/USD’s dead-cat bounce looks frail. 

Pound Sterling suffers from French contagion 

The Pound Sterling has not been spared the malaise emanating from across the channel, either, with UK government bonds (Gilts) selling off after the news that French Prime Minister (PM) Michel Barnier's minority government will face a vote of no confidence by opposition parties opposed to his Budget bill. 

The news widened the spread of 10-year Gilt yields over German Bunds to its widest “since Liz Truss was PM, closing at 221.5 bps yesterday,” said Deutsche Bank’s head of macro research Jim Reid in a note on Tuesday morning. 

Reid goes on to explain the process that will now unfold for the French government in his note. 

“In terms of what happens next, we’re in territory that hasn’t been seen in a long time, as the last successful no-confidence motion was in 1962,” says Reid, adding, “That vote is likely to take place this week, possibly as soon as Wednesday, and assuming it’s successful, that would force the government’s resignation. In the short term, the government can remain in office as a caretaker government.” 

New elections will not take place until the summer, however, as the French Constitution requires a one-year wait until another dissolution can take place. 

In the meantime, French President Emmanuel Macron will have to propose a new PM, “which could in theory be Barnier again, but there’s no reason to think a new government would be any more stable, given how fractured the National Assembly is,” says Reid. 

Regarding the ill-fated Budget, French lawmakers will probably approve a special law authorising the government to collect existing taxes, which it could spend “by decree”. 

“However, this would only permit public spending that was part of the 2024 budget, rather than additional expenditures,” adds the strategist. 

On the radar

As far as market-moving data for GBP/USD is concerned, the main focus for traders will be US JOLTS jobs data on Tuesday and Fed speakers, including San Francisco Fed President Mary Daly, Fed Governor Adriana Kugler, and Chicago Fed President Austan Goolsbee.   

Technical Analysis: Recovers after ABC correction

GBP/USD recovers into the 1.2680s on Tuesday. Monday’s sell-off could be characterized as a three-wave ABC correction which would mean the pair’s short-term uptrend from the November 22 lows remains intact, albeit by a thread.

Yet, since it is a principle of technical analysis that “the trend is your friend,” the odds continue to favor an extension of this uptrend.

GBP/USD 4-hour Chart 

A break above 1.2750 would probably activate the next upside target at around 1.2824, where the (green) 200-period Simple Moving Average (SMA) is situated. 

A break below the key support level and the bottom of the ABC correction (thick red dashed line) at 1.2617 would confirm a reversal of the short-term trend. This would likely lead to an extension down to support at 1.2527 followed by 1.2487, the November 22 lows.

The blue Moving Average Convergence Divergence (MACD) indicator has crossed below its red signal line, suggesting more weakness to come.  

Although the short-term trend is up, the medium-term trend is still bearish, indicating a risk to the downside if this time frame cycle takes over. To make matters more complicated, the longer-term trend – it could be argued – is still probably bullish.

The New Zealand Dollar (NZD) is under mild downward pressure; it could edge lower, but any decline is unlikely to reach the major support at 0.5840. In the longer run, for the time being, NZD is likely to trade in a range between 0.5840 and 0.5950, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD is likely to trade in a range between 0.5840 and 0.595

24-HOUR VIEW: “Last Friday, NZD edged to a high of 0.5928. Yesterday, we pointed out, ‘despite the advance, there has been no increase in momentum.’ We held the view that NZD ‘is expected to trade in a 0.5880/0.5920 range.’ However, NZD dropped to a low of 0.5865, closing at 0.5888 (-0.61%). There has been a slight increase in momentum. Today, we expect NZD to edge lower, but as downward momentum is not strong, any decline is unlikely to reach the major support at 0.5840 (there is another support level at 0.5860). On the upside, should NZD break above 0.5915 (minor resistance is at 0.5895), it would mean that the current mild downward pressure has eased.”

1-3 WEEKS VIEW: “We continue to hold the same view as last Thursday (28 Nov, spot at 0.5895). As indicated, the current price movements are likely part of a range trading phase. For the time being, NZD is likely to trade between 0.5840 and 0.5950.”

• The Euro bounces slightly against the US Dollar after the sharp correction registered on Monday. 
• Traders assess the impact of the French political turmoil after a headline-filled trading day.
• Markets are looking ahead to the final US Nonfarm Payrolls data due on Friday. 

The Euro recovers firmly above 1.0500 against the US Dollar on Tuesday after losing 0.78% on Monday due to doubts over the stability of the French government. French Prime Minister Michel Barnier used a special decree to pass his social budget reform by circumventing the French parliament, a move that set off bad blood with the opposition parties, which were very quick to support a vote of no confidence that could be held as early as Wednesday. 

Meanwhile in the US, Federal Reserve Governor Christopher Waller said that he is keen for a December interest-rate cut. This has pushed up the odds for that rate cut to take place, narrowing the rate differential between European and US bond yields. Some further easing from the US Dollar should materialize on the back of this, giving further impulse to the EUR/USD pair ahead of the US JOLTS Job Openings report to be published in Tuesday’s American session. 

Daily digest market movers: Euro pares back losses 

• The main economic event this Tuesday will be the US JOLTS Jobs Openings report for October. Expectations are for 7.48 million job openings against the previous 7.443 million, ahead of the retail-intensive Christmas Holiday period.
• Spanish Unemployment in November fell by around 16,000 people, coming from the 26,800 uptick in joblessness seen the previous month. 
• European equities are rallying, with the German Dax hitting 20,000 points for the first time ever. 
• European Central Bank (ECB) Executive Board member Piero Cipollone said on Tuesday that Europe is growing much less than it could, with upcoming US tariffs possibly lowering the growth outlook even more. This opens the door for larger rate cuts from the ECB, Bloomberg reports. 

Technical Analysis: EUR/USD to put up a fight 

EUR/USD has a long road to recover after its stellar correction in November. With policies from US President-elect Donald Trump being priced in, a lot could be priced out once it turns out that bold statements were a bargaining chip to get some deal or consensus done. 

Major banks are already calling for parity, but it would not come as a surprise that parity does not materialize. There is the possibility that the EUR/USD pair reverts back to 1.0600 and 1.0800 in the coming weeks as traders unwind positions ahead of the Christmas season and the end of the year. 

On the upside, three firm lines of resistance can be seen. The first is the previous 2024 low at 1.0601 registered on April 16. If that level breaks, the triple bottom from June at 1.0667 will be the next cap upwards. Further up, the 1.0800 round level, which roughly coincides with the green ascending trend line from the low of October 3, 2023, could deliver a harsh rejection. 

Looking for support, the 2023 low at 1.0448 is the next technical candidate. The current two-year low at 1.0332 is the second level to look out for. Further down, 1.0294 and 1.0203 are the next levels to consider. 

EUR/USD: Daily Chart

This morning we saw November inflation in Turkey, which fell from 48.6% to 47.1% YoY, slightly higher than market expectations. The 2.2% MoM reading may cast some doubt on whether the Central Bank of Turkey can start its cutting cycle at the December meeting. Hungary will also release final third-quarter GDP numbers, which should confirm the economy's return to recession with -0.7% QoQ. Also in Hungary, we could see several speakers today including the Minister for Economy Marton Nagy, ING’s FX analysts Frantisek Taborsky notes.

PLN and CZK continue to gain

“CEE FX continues to diverge with HUF weakening further following Moody's decision to change the rating outlook from stable to negative and also lower EUR/USD. On the other hand, PLN and CZK continue to gain. As we discussed yesterday, while we believe this part of the region should follow HUF, tactically we see reasons for further gains here this week.”

“Both PLN and CZK markets underperformed the rally in EUR rates yesterday, further stretching rate differentials to support the currency. In CZK in particular, we see a renewed relationship between rates and FX, which could lead below 25.200 EUR/CZK this week.”

“PLN is not showing such a strong relationship but is likely helped by the closure of earlier short positioning, which is dampening the pullback of lower EUR/USD. Additionally, the National Bank of Poland press conference on Thursday has the potential for some hawkish repricing, which would add additional impetus to PLN and we could see levels below 4.280 in EUR/PLN this week.”

Room for the Australian Dollar (AUD) to retest the 0.6440 support before a more sustained rebound can be expected. In the longer run, AUD is expected to consolidate between 0.6440 and 0.6550 for the time being, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

AUD is expected to consolidate between 0.6440 and 0.6550

24-HOUR VIEW: “Our view for AUD to trade in a range between 0.6485/0.6530 was incorrect. Instead of trading in a range, AUD fell to a low of 0.6443 and then rebounded to close at 0.6476, down by 0.66% for the day. Despite the relatively sharp drop, there has been no significant increase in momentum. That said, there is room for AUD to retest the 0.6440 support before a more sustained rebound can be expected. A clear break below 0.6440 seems unlikely for now. Resistance is at 0.6495; a break of 0.6510 would indicate that the current downward pressure has faded.”

1-3 WEEKS VIEW: “In our most recent narrative from last Thursday (28 Nov, spot at 0.6495), we highlighted that ‘the current price movements are likely part of a consolidation phase.’ We expected AUD to ‘consolidate between 0.6440 and 0.6550 for the time being.’ While AUD dropped and approached the bottom of our expected range yesterday (low has been 0.6443), there has been no significant increase in momentum. In other words, we continue to hold the same view for now. Looking ahead, for a sustained decline, AUD must break and hold below 0.6425.”

China’s Commerce Ministry announced on Tuesday that they will ban exports of dual-use items related to gallium, germanium, antimony and superhard materials to the United States (US) with immediate effect.

This comes a day after the latest crackdown on China's chip sector by US President Joe Biden's administration.

Weekend comments merely add another layer of tariff threats to China, ING’s FX analysts Chris Turner note.

USD/CNY set to test the upper 2% band of the onshore range

“Overnight, USD/CNH has pushed up to the highest levels since July as the People's Bank of China fixed USD/CNY close to 7.20.”

“It looks like USD/CNY will test the upper 2% band (7.3430 if fixings remain near 7.20) of the onshore range.”

The US Dollar (USD) eased slight overnight in response to Fed official Waller’s comments. DXY was last at 106.25, OCBC’s FX analysts Frances Cheung and Christopher Wong note.  

Daily momentum is mild bearish

“He sees more rate cuts likely needed ‘over time’ and inches towards rate cut for Dec while Williams sees overall trend of rates coming down. Implied probability of 25bp rate cut for Dec FOMC has shifted to 75%.”

“Daily momentum is mild bearish though RSI rose. Near term rebound not ruled out but likely to see consolidation. Resistance at 106.50, 107.20. Support at 106 (21 DMA), 105.40 levels (38.2% fibo), 104 (50, 200 DMAs).”

USD/BRL is trading comfortably above 6.00 as President Lula seems to be happy to prioritize politics over financial markets, ING’s FX analysts Chris Turner note.

USD/BRL can trade at 6.50 in 12 months

“Here his government has watered down planned fiscal consolidation with some tax breaks for lower-income households. The independent central bank seems happy to let the Brazilian real take the strain as a means to coerce a political U-turn on the fiscal side. Here, the central bank has a large pool of FX reserves and is currently tightening interest rate policy – but so far has avoided FX intervention or threatening more aggressive rate hikes.”

“With a difficult external environment and no sign yet of a fiscal U-turn, it is hard to see $/BRL turning lower. We have a 6.25 12-month forecast for USD/BRL. If things go very wrong for Brazil and the real effective Brazilian currency falls back to the lows in 2020, then USD/BRL could be a 6.50 story.”

Instead of weakening, the Pound Sterling (GBP) is more likely to trade in a 1.2620/1.2710 range. In the longer run, outlook for GBP has turned neutral; it is likely to trade between 1.2580 and 1.2750, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Outlook for GBP has turned neutral

24-HOUR VIEW: “Last Friday, GBP soared to a high of 1.2750. Yesterday, we indicated that ‘The sharp rise appears to be overdone, and instead of continuing to strengthen today, GBP is more likely to trade in a 1.2670/1.2745 range.’ However, GBP plummeted to a low of 1.2619, rebounding strongly to close at 1.2657 (-0.66%). This time around, the sharp drop seems overdone. In other words, instead of weakening, GBP is more likely to trade in a 1.2620/1.2710 range.”

1-3 WEEKS VIEW: “Last Thursday (28 Nov), when GBP was at 1.2670, we turned positive in GBP, but we indicated that ‘any advance is likely a recovery, potentially testing the resistance at 1.2755.’ After GBP rose to 1.2750 on Friday, we indicated yesterday (02 Dec, spot at 1.2715) that ‘the outlook remains positive, but GBP has to break and hold above 1.2755 before further advance can be expected.’ We added, ‘the likelihood of GBP breaking clearly above 1.2755 will remain intact as long as 1.2630 (‘strong support’ level) is not breached.’ We did not expect GBP to drop to 1.2619. The breach of our ‘strong support’ level indicates that instead of a recovery, GBP is likely to trade in a range, probably between 1.2580 and 1.2750. To put it another way, the current outlook is neutral.”

Most recent article: Silver price today: Silver falls, according to FXStreet data

Silver prices (XAG/USD) rose on Tuesday, according to FXStreet data. Silver trades at $30.98 per troy ounce, up 1.54% from the $30.51 it cost on Monday.

Silver prices have increased by 30.18% 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 85.41 on Tuesday, down from 86.45 on Monday.

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

Speaking in a pre-recorded interview at a financial conference on Tuesday, European Central Bank (ECB) board member Piero Cipollone said that US tariffs would weaken the economy, translating into lower consumption and thus reduced pressure on prices.

"All this put together makes me think that we will have a reduction in growth but also a reduction in inflation," he said.

Market reaction

At the time of writing, EUR/USD is off the highs, trading 0.20% higher on the day at 1.0517.

• The US JOLTS data will be watched closely ahead of the release of the November employment report on Friday.
• Job openings are forecast to remain below 8 million in October.
• The state of the labor market is a key factor for Fed officials when setting policy.

The Job Openings and Labor Turnover Survey (JOLTS) will be released on Tuesday by the US Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of job openings in October, alongside the number of layoffs and quits.

JOLTS data is scrutinized by market participants and Federal Reserve (Fed) policymakers because it can provide valuable insights regarding the supply-demand dynamics in the labor market, a key factor impacting salaries and inflation. Job openings have been declining steadily since coming in above 12 million in March 2022, indicating a steady cooldown in labor market conditions. In September, the number of jobs declined to 7.44 million, marking the lowest reading since January 2021.

What to expect in the next JOLTS report?

Markets expect job openings to stand at around 7.5 million on the last business day of October. Federal Reserve (Fed) policymakers have made it clear after the July policy meeting that they are shifting their focus to the labor market, given the encouraging signs of inflation retreating toward the central bank’s target.

It is important to note that while the JOLTS data refers to the end of October, the official Employment report, which will be released on Friday, measures data for November. 

In October, Nonfarm Payrolls (NFP) rose by only 12,000, as hurricanes and labor strikes impacted hiring in a significantly negative way. Commenting on the employment situation in the US, “the labor market is close to stable, full employment,” said Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee. “It may make sense to slow pace of interest rate cuts as the Fed gets close to where rates will settle,” he added, saying that he has gotten more comfort from the fact that they are not “crashing through full employment.”

The CME FedWatch Tool currently shows that markets are pricing in about a 65% probability of another 25 basis points (bps) rate cut in December. In case there is a positive surprise in the job openings data, with a reading of at or above 8 million, the immediate reaction could boost the US Dollar (USD) by causing investors to reassess the probability of a December rate cut. On the other hand, a disappointing print at or below 7 million could hurt the USD. 

"Over the month, hires changed little at 5.6 million. The number of total separations was unchanged at 5.2 million," the BLS noted in its September JOLTS report. "Within separations, quits (3.1 million) and layoffs and discharges (1.8 million) changed little."

When will the JOLTS report be released and how could it affect EUR/USD?

Job opening numbers will be published on Tuesday at 15:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his view on the potential impact of JOLTS data on EUR/USD:

“Unless there is a significant divergence between the market expectation and the actual print, the market reaction to JOLTS data is likely to remain short-lived, with investors refraining from taking large positions ahead of the highly-anticipated November labor market data, which will be published on Friday.”

“EUR/USD’s near-term technical outlook suggests that the bearish bias remains intact. The Relative Strength Index (RSI) indicator on the daily chart stays well below 50, and the pair continues to trade below the 20-day Simple Moving Average (SMA).”

“On the upside, 1.0600 (Fibonacci 23.6% retracement level of the October-December downtrend, 20-day SMA) aligns as key resistance. If EUR/USD rises above this level and starts using it as support, technical buyers could take action. In this scenario, 1.0700 (Fibonacci 38.2% retracement) could be seen as the next hurdle ahead of 1.0800 (Fibonacci 50% retracement, 50-day SMA). Looking south, first support could be spotted at 1.0400 (end-point of the downtrend) before 1.0330 (November 22 low) and 1.0300 (static level, round level).”

• USD/CAD attracts some sellers on Tuesday and is pressured by a combination of factors.
• An uptick in Oil prices underpins the Loonie and weighs on the pair amid a softer USD.
• The downside, however, seems limited as traders seem reluctant ahead of the US data.

The USD/CAD pair extends the previous day's late pullback from the vicinity of the 1.4100 mark and continues losing ground through the first half of the European session on Tuesday. The intraday slide is sponsored by a combination of factors and drags spot prices closer to the 1.4000 psychological mark in the last hour.

Despite a ceasefire deal between Israel and the Lebanon-based Hezbollah militant group, geopolitical risk premium remains in play amid the worsening Russia-Ukraine conflict. Apart from this, expectations that the Organization of Petroleum Exporting Countries and allies (OPEC+) would further delay plans to increase production lend support to Crude Oil prices for the second straight day. This, along with reduced bets for a bigger rate cut by the Bank of Canada (BoC) in December, undermines the commodity-linked Loonie and exerts some pressure on the USD/CAD pair amid a modest US Dollar (USD) downtick.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, fails to build on the overnight bounce from a nearly three-week low amid a greater chance that the Federal Reserve (Fed) will cut rates in December. Investors, however, seem convinced that US President-elect Donald Trump's expansionary policies will reignite inflationary pressures and force the Fed to keep rates higher for a longer period. This, in turn, provides a modest lift to the US bond yields and lends support to the USD. Apart from this, concerns about Trump's tariff plans should cap the Canadian Dollar (CAD) and the USD/CAD pair.

Traders now look to the release of the US JOLTS Job Openings for short-term opportunities later during the North American session. Apart from this, this week's important US macro data, including the closely watched Nonfarm Payrolls (NFP) report, and Fed Chair Jerome Powell's speech should provide some cues about the interest rate outlook in the US. This, in turn, will play a key role in driving the USD demand and provide some meaningful impetus to the USD/CAD pair. Investors will also keep a close eye on the crucial OPEC+ meeting on Thursday, which should influence Oil price dynamics in the near term.

French political drama sent EUR/USD below 1.05 yesterday. Rate spreads have pushed out to the wides of the year as the market assumes that pressure is only going to grow on the ECB for rate cuts if governments in both France and Germany are out of order, ING’s FX analysts Chris Turner note.

EUR/USD correction may be limited to the 1.0550 area

“EUR/USD may not need to fall much further from here at the moment. And indeed there is some upside risk if US JOLTS data disappoints today.”

“However, any EUR/USD correction may be limited to the 1.0550 area. Expect EUR/USD to pay increasing attention to the French-German bond spread and the French sovereign CDS to see how far investors are prepared to push French sovereign risk.” 

“We are a little surprised not to see EUR/CHF trading below 0.93 on this news and continue to favour a retest of 0.9200/9210 over the coming months.”

Political drama in Europe and weak trends in many emerging market currencies are keeping the dollar bid. We doubt that this environment will change anytime soon, although we would look out for today's US JOLTS job opening data (16CET) as the main threat to the dollar today, ING’s FX analysts Chris Turner note.

DXY to stay bid in a 106-107 range today

“Fortunately, we had another great speech from the Fed's Christopher Waller last night indicating his inclination to vote for a rate cut on 18 December. The market currently prices 18bp of a 25bp Fed rate cut and so there is room for short-dated US rates and the dollar to fall were the JOLTS data today to surprise on the downside and signal further slack in the US labour market.”

“However, on the international stage, the currencies of many US trading partners are suffering from some home-grown problems. In Europe, it looks like the French government may fall by the end of the week. And many of the BRICS currencies are under pressure. This has less to do with the weekend threats from Donald Trump to tariff any country threatening to support a pre-eminent reserve currency other than the US dollar.”

“Expect DXY to stay bid in a 106-107 range today, unless the JOLTS data surprises sharply to the downside.”

The Euro (EUR) continued to trade near recent lows amid political uncertainties in Europe. Pair was last at 1.0522 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum turns flat

“No-confidence vote may come as early as Wed after PM Barnier used rare constitutional powers to force a social security bill through. On Germany, far-right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections likely on 23 Feb-2025 (there is an explicit language here to quit EU unlike its manifesto ahead of the European parliament elections).”

“Bear in mind that Chancellor Scholz is expected to call for a vote of confidence on 11 Dec and the Bundestag will vote on 16 Dec. To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. Political uncertainties in Germany and France may re-assert on EUR in the interim.”

“Daily momentum turned flat while RSI fell. Risks somewhat skewed to the downside. Support at 1.0450 levels before 1.0330. Resistance at 1.0610 (21 DMA), 1.0670 (38.2% fibo retracement of Oct high to Nov low). Week remaining brings services PMI, PPI (Wed); retail sales (Thu); 3Q GDP, employment (Fri).”    

The Euro (EUR) is unlikely to weaken further; it is more likely to trade in a 1.0470/1.0540 range. In the longer run, instead of a rebound, EUR is expected to trade in a range for now, most likely between 1.0430 and 1.0580, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR is expected to trade in a range for now

24-HOUR VIEW: “Yesterday, when EUR was at 1.0555, we stated that ‘The current price action is likely part of a lower trading range of 1.0520/1.0580.’ Our view was incorrect, as EUR plunged to 1.0459 before rebounding to close at 1.0497, down sharply by 0.74%. The rebound in deeply oversold conditions and slowing momentum indicate that EUR is unlikely to weaken further. Today, EUR is more likely to trade in a 1.0470/1.0540 range.”

1-3 WEEKS VIEW: “Our most recent narrative was from last Thursday (28 Nov, spot at 1.0565), wherein EUR ‘could rebound further, potentially reaching 1.0650.’ EUR subsequently rebounded to 1.0597, but yesterday, in a sudden move, it plunged to a low of 1.0459. The breach of our ‘strong support’ level at 1.0490 indicates that instead of a rebound, EUR is expected to trade in a range for now, most likely between 1.0430 and 1.0580.”

• Silver price climbs to around $30.90 in Tuesday’s early European session, up 1.24% on the day. 
• Silver crosses above the 100-day EMA, but further consolidation cannot be ruled out with the neutral RSI indicator. 
• The first upside barrier is located at $31.68; the initial support level is seen at $30.50.

The Silver price (XAG/USD) gains traction to near $30.90 during the early European session on Tuesday. The white metal edges higher due to the potential stimulus measures from China and ongoing geopolitical uncertainty. 

However, JPMorgan analysts expect a near-term downside for base metals in early 2025 due to potential US tariffs on Chinese goods but see a recovery later in the year, bolstered by stronger Chinese economic stimulus and improved valuations.

According to the daily chart, Silver is set to resume its upside as the price crosses above the key 100-day Exponential Moving Average (EMA). However, further consolidation cannot be ruled out as the 14-day Relative Strength Index (RSI) hovers around the midline, indicating the neutral momentum of the white metal. 

The immediate resistance level for XAG/USD emerges near the upper boundary of the Bollinger Band of $31.68. Any follow-through buying above this level could pave the way to the $32.90-$33.00 zone, representing the psychological level and the high of November 5. The additional upside filter to watch is $34.55, the high of October 29. 

In the bearish event, sustained trading below $30.50, the 100-day EMA, could see a drop to $29.65, the low of November 28. A breach of the mentioned level could expose $27.70, the low of September 9. 

Silver price (XAG/USD) Daily Chart

Here is what you need to know on Tuesday, December 3:

Major currency pairs fluctuate in tight ranges early Tuesday as investors gear up for this week's key events. Later in the day, the US economic calendar will feature JOLTS Job Openings data for October and RealClearMarkets/TIPP Economic Optimism Index for December. During the American trading hours, several Federal Reserve (Fed) policymakers are scheduled to deliver speeches.

The US Dollar (USD) benefited from the cautious market mood at the start of the week, with the USD Index closing in positive territory on Monday. In the European morning on Tuesday, the index stays relatively quiet at around 106.50, while US stock index futures trade little changed. 

EUR/USD dropped below 1.0500 on Monday and lost more than 0.7% on the day. Political jitters in France seems to be weighing on the Euro. French Finance Minister Antoine Armand said on Tuesday that the “country is at a turning point," adding that they have a responsibility not to plunge the country "into uncertainty.”

"The French government is all but certain to collapse later this week after far-right and left-wing parties submitted no-confidence motions on Monday against Prime Minister Michel Barnier," Reuters reported on Monday.

GBP/USD fell toward 1.2600 and snapped a three-day winning streak on Monday. The pair stays in a consolidation phase at around 1.2650 in the European morning on Tuesday.

USD/JPY stages a rebound and trades slightly above 150.00 early Tuesday after closing the first trading day of the week virtually unchanged.

AUD/USD holds steady above 0.6450 following Monday's decline. China has reportedly announced that it lifted all restrictions on exports from Australian meat works.

Gold started the week on the back foot and dropped toward $2,620 before erasing a large portion of its daily losses in the American session. XAU/USD was last seen trading modestly higher on the day at around $2,650.

French Finance Minister Antoine Armand said on Tuesday that the “country is at a turning point.”

He further noted that “French politicians have a responsibility not to plunge the country into uncertainty.”

His comments come as Prime Minister Michel Barnier, appointed by President Macron after July’s inconclusive parliamentary election, faces a no-confidence motion over the budget - a vote he will almost certainly lose, per BBC News.

Marine Le Pen’s far-right National Rally (RN) threatened to pull the plug on the fragile coalition government led by Prime Minister Barnier over the latter’s plan to rein in the massive French deficit.

Market reaction

The Euro remains vulnerable, leaving EUR/USD on the back foot below 1.0500 at the time of writing.

• EUR/USD trades in negative territory for the second consecutive day near 1.0490 in Tuesday's early European session. 
• Growing concerns about a possible government collapse in France undermine the Euro. 
• US Manufacturing PMI came in stronger than expected in November. 

The EUR/USD pair loses ground to around 1.0490 during the early European session on Tuesday. The Euro (EUR) weakens against the Greenback as a budget standoff in France fuelled concern about the Eurozone’s second-biggest economy. 

The French Prime Minister Michel Barnier's plan to pass a social security bill without a parliamentary vote has prompted opposition parties to declare their intention to vote for a no-confidence motion against Barnier. This move is likely to cause the French government to collapse this week. 

The political uncertainty in France exerts some selling pressure on the shared currency. Meanwhile, the yield spread between French and German 10-year government bonds rose 7.6 basis points (bps) to 87.3 bps after reaching 90 bps last week, its highest level since 2012. "Crashing political sentiment in France and another activity data beat in the U.S. have handed the euro a dire start to December," said Kyle Chapman, FX market analyst at Ballinger Group.

Across the pond, US economic data released on Monday showed US manufacturing activity improving in November, suggesting that the US economy remains robust, lifting the US Dollar. However, the US Federal Reserve (Fed) remains data-dependent, and the employment report due on Friday will be closely watched. The Nonfarm Payrolls (NFP) might offer some hints as to whether the Fed would cut rates again on December 18.

• GBP/USD struggles to lure buyers on weaker UK retail sales and a modest USD uptick.
• Expectations that the Fed will keep rates higher for a longer period underpin the buck.
• Reduced bets for another BoE rate cut in December help limit the downside for the pair.

The GBP/USD pair remains on the defensive through the Asian session on Tuesday, albeit it lacks follow-through selling and currently trades just below mid-1.2600s. 

The British Retail Consortium (BRC) reported earlier today that sales volumes dropped by 3.3% in the 12 months to November. This marks the weakest reading since April and was significantly influenced by the timing of Black Friday sales. Nevertheless, the data still points to weakening consumer confidence and undermines the British Pound (GBP). This, along with a modest US Dollar (USD) uptick, is seen acting as a headwind for the GBP/USD pair. 

The USD Index (DXY), which tracks the Greenback against a basket of currencies, looks to build on the overnight bounce from a nearly three-week low amid bets that the Federal Reserve (Fed) will keep rates high for a longer period. Investors seem worried that US President-elect Donald Trump's tariff plans would trigger global trade wars. Moreover, Trump's expansionary policies could boost inflation and limit the scope for the Fed to ease its policy further. 

Apart from this, persistent geopolitical tensions stemming from the worsening Russia-Ukraine war further benefit the safe-haven buck and weigh on the GBP/USD pair. Meanwhile, traders have been scaling back their bets for another interest rate cut by the Bank of England (BoE) this year after data released last week showed that the underlying price growth in the UK gathered speed in October. This, in turn, helps limit the downside for the currency pair. 

Traders also seem reluctant and opt to wait on the sidelines ahead of important US macro releases scheduled at the beginning of a new month, including the closely watched Nonfarm Payrolls (NFP) report. Apart from this, Fed Chair Jerome Powell's speech should provide cues about the future rate-cut path and drive the USD demand. In the meantime, Tuesday's release of JOLTS Job Openings data could produce short-term opportunities around the GBP/USD pair.

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

The price for Gold stood at 7,197.29 Indian Rupees (INR) per gram, up compared with the INR 7,184.82 it cost on Monday.

The price for Gold increased to INR 83,947.81 per tola from INR 83,802.28 per tola a day earlier.

FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.

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

• Gold price lacks a firm direction and is influenced by a combination of diverging forces.
• Bets for a less dovish Fed underpin the USD and act as a headwind for the XAU/USD.
• Trade war fears, geopolitical risks and depressed US bond yields lend some support.

Gold price (XAU/USD) struggles to capitalize on the previous day's rebound from the $2,620 region and oscillates in a narrow band during the Asian session on Tuesday. A firmer US Dollar (USD), bolstered by expectations for a less dovish Federal Reserve (Fed), is seen as a key factor undermining demand for the commodity. That said, concerns about US President-elect Donald Trump's tariff plans, persistent geopolitical uncertainty and suppressed US Treasury bond yields act as a tailwind for the precious metal.

Furthermore, traders seem reluctant and opt to wait for more cues about the Fed's rate-cut path before placing fresh directional bets around the non-yielding Gold price. Hence, the focus will remain on this week's important US macro data, including the closely watched US monthly employment details or the Nonfarm Payrolls (NFP) report on Friday. Apart from this, Fed Chair Jerome Powell's speech will play a key role in influencing the near-term USD price dynamics and provide a fresh impetus to the XAU/USD.

Gold price struggles to lure buyers amid a mixed fundamental backdrop

• The US Dollar looks to build on the overnight recovery from a multi-month low amid bets that the Federal Reserve will keep interest rates high for a longer period and undermine the Gold price.
• Investors remain concerned that US President-elect Donald Trump's tariff plans could trigger a second wave of global trade wars, which, in turn, acts as a tailwind for the safe-haven precious metal.
• The Institute of Supply Management's (ISM) Manufacturing Purchasing Managers Index (PMI) rose to 48.4 in November amid hopes of business-friendly policies from the incoming Trump administration.
• The CME Group's FedWatch Tool indicates a nearly 75% chance that the US central bank will lower borrowing costs by 25 basis points at its upcoming monetary policy meeting later this month.
• The yield on the benchmark 10-year US government bond languishes near its lowest levels since late October and further contributes to limiting the downside for the non-yielding XAU/USD. 
• Russia fired at least 60 North Korean missiles against Ukraine. North Korean leader Kim Jong Un vowed that his country will invariably support Moscow until Russia achieves a great victory in Ukraine.
• Investors keenly await this week's important US macro releases and Fed Chair Jerome Powell's speech, which might influence the outlook for interest rates in the US and drive the commodity. 
• Tuesday's US economic docket features the release of Job Openings and Labor Turnover Survey (JOLTS) Job Openings data, though the focus remains on the Nonfarm Payrolls (NFP) on Friday. 

Gold price needs to surpass $2,666-2,667 hurdle for bulls to regain control

From a technical perspective, Monday's breakdown below a four-day-old ascending channel was seen as a key trigger for bearish traders. That said, mixed oscillators on daily/4-hour charts and the overnight bounce warrant some caution before positioning for a meaningful downside. Any positive move beyond the $2,650 area, however, might confront resistance near last Friday's swing high, around the $2,666 region. The next relevant hurdle is pegged near the $2,677-2,678 zone, above which the Gold price could aim to reclaim the $2,700 round figure. 

On the flip side, the overnight trough, around the $2,622-2,621 area, now seems to protect the immediate downside ahead of the $2,605-2,600 region. Some follow-through selling might expose the 100-day Simple Moving Average (SMA), currently around the $2,577 zone. A convincing break below the latter should pave the way for a slide towards the November swing low, around the $2,537-2,536 region.

FX option expiries for Dec 3 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0470 727m
• 1.0500 1.4b
• 1.0565 734m
• 1.0580 612m
• 1.0625 640m
• 1.0700 649m

USD/JPY: USD amounts                     

• 149.00 730m
• 151.80 660m

AUD/USD: AUD amounts

• 0.6575 582m
• 0.6710 1b

USD/CAD: USD amounts       

• 1.4200 430m

• The Indian Rupee extends its downside in Tuesday's Asian session. 
• Trump's tariff threat, foreign fund outflows, and a stronger USD weigh on the INR. 
• The US October JOLTs Job Openings will be released on Tuesday.

The Indian Rupee (INR) remains under pressure on Tuesday after depreciating to a fresh all-time low in the previous session. The disappointing Indian macroeconomic data, persistent foreign fund outflows and the renewed Greenback demand continue to undermine the local currency. The US President-elect Donald Trump on Saturday threatened a 100% tariff on the BRICS nations if they act to undermine the US Dollar (USD). This, in turn, could weigh on the INR against the Greenback.

However, the downside for the INR might be capped amid the routine intervention from the Reserve Bank of India (RBI). Traders will keep an eye on the US JOLTs Job Openings for October, which is due later on Tuesday. The Federal Reserve’s (Fed) Adriana Kugler and Austan Goolsbee are also set to speak. On Friday, the Reserve Bank of India (RBI) interest rate decision and the US Nonfarm Payrolls for November will be the highlights. 

Indian Rupee trades weaker amid multiple challenges

• The HSBC India Manufacturing Purchasing Managers Index (PMI) declined to 56.5 in November from 57.5 in October. This figure was below the market consensus of 57.3.  
• "India recorded a 56.5 manufacturing PMI in November, down slightly from the prior month, but still firmly within expansionary territory. Strong broad-based international demand, evidenced by a four-month high in new export orders, fuelled the Indian manufacturing sector's continued growth,” said Pranjul Bhandari, Chief India Economist at HSBC. 
• India’s foreign exchange reserves declined USD 1.31 billion to USD 656.582 billion for the week ended November 22, the RBI said on Friday.
• The US manufacturing improved more than expected in November but continued to indicate a contraction. The US ISM Manufacturing PMI climbed to 48.4 in November from 46.5 in October, better than the estimation of 47.5. 
• Fed Governor Christopher Waller said on Monday that he’s inclined to vote to cut the interest rates when Fed officials meet on December 17-18, but added that data due before then could make the case for holding rates steady.
• Atlanta Fed President Raphael Bostic said on Monday that he’s undecided on whether a rate cut is needed in the December meeting, adding that he’ll wait for more data before making up his mind about the next meeting. “I’m keeping my options open,” he said. 

USD/INR accelerates above ascending channel, poised to seek new highs 

The Indian Rupee loses momentum on the day. The USD/INR pair maintains a strong bullish trend on the daily chart, with the price holding above the key 100-day Exponential Moving Average (EMA). Nonetheless, the 14-day Relative Strength Index (RSI) stands above the midline near 75.15, indicating the overbought RSI condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation.

The 85.00 psychological mark appears to be a tough nut to crack for bulls. Sustained trading above the mentioned level could attract enough bullish demand and expose 85.50.

On the flip side, a rejection from the resistance-turned-support at 84.55 could drag the pair lower to 84.22, the low of November 25. The next support level emerges at 83.98, the 100-day EMA. 

• WTI consolidates its recent losses to a two-week low amid mixed cues.
• Easing supply disruption worries and a stronger USD act as a headwind.
• Traders seem reluctant ahead of OPEC+ meeting on Thursday and US data.

West Texas Intermediate (WTI) US Crude Oil prices struggle to gain any meaningful traction on Tuesday and oscillate in a range below the $68.00/barrel mark during the Asian session. 

A ceasefire deal between Israel and the Lebanon-based Hezbollah militant group eased concerns about supply disruptions from the Middle East. This, in turn, is seen as a key factor that keeps the black liquid depressed near a two-week low touched on Monday. Furthermore, the recent US Dollar (USD) strength is seen undermining demand for USD-denominated commodities, including Crude Oil prices.

That said, the worsening Russia-Ukraine conflict keeps geopolitical risks premium in play and acts as a tailwind for the black liquid. Apart from this, expectations that the Organization of Petroleum Exporting Countries and allies (OPEC+) would further delay plans to increase production amid persistent concerns over slowing demand growth contribute to limiting the downside for Crude Oil prices. 

Traders also seem reluctant to place aggressive bets and opt to wait for important US macro releases scheduled at the beginning of a new month, including the US monthly employment details, or the Nonfarm Payrolls (NFP) report. The crucial data would influence expectations about the Federal Reserve's (Fed) rate-cut path, which, in turn, will drive the USD demand and provide a fresh impetus to Crude Oil prices.

• The Japanese Yen attracts some sellers on Tuesday, though it lacks follow-through.
• Rising bets for another BoJ rate hike in December help limit the downside for the JPY.
• Geopolitical risks, Trump’s tariff threats and suppressed US bond yields favor JPY bulls. 

The Japanese Yen (JPY) edges lower against its American counterpart during the Asian session on Tuesday and pushes the USD/JPY pair away from the lowest level since October 16 touched the previous day. However, speculations that the Bank of Japan (BoJ) could hike interest rates again in December should limit any meaningful JPY depreciation. Apart from this, US President-elect Donald Trump's looming trade tariff threats, along with persistent geopolitical risks, might underpin the safe-haven JPY. 

Meanwhile, the recent decline in the US Treasury bond yields fails to assist the US Dollar (USD) to build on the overnight bounce from a multi-month low and could further offer support to the lower-yielding JPY. This, in turn, warrants some caution before placing aggressive bullish bets around the USD/JPY pair. Moreover, traders might also opt to wait for more cues about the Federal Reserve's (Fed) rate-cut path. Hence, this week's crucial US macro data will drive the USD and provide a fresh impetus to the currency pair. 

Japanese Yen bulls have the upper hand amid December BoJ rate hike bets

• Tokyo November Consumer Price Index (CPI) released last week suggested that the underlying inflation is gaining momentum and lifted expectations for a December rate hike by the Bank of Japan. 
• BoJ Governor Kazuo Ueda said on Saturday that the central bank will adjust the degree of monetary easing at the appropriate time if it becomes confident that the underlying inflation rises toward 2%.
• Russia fires at least 60 North Korean missiles against Ukraine. North Korean leader Kim Jong Un vowed that his country will invariably support Moscow until Russia achieves a great victory in Ukraine.
• US President-elect Donald Trump has pledged to impose big tariffs against America’s three biggest trading partners and 'BRICS' nations, raising the risk of a second wave of a global trade war. 
• Investors remain concerned that Trump's tariff plans and expansionary policies will reignite inflationary pressures and force the Federal Reserve to stop cutting rates or possibly raise them again. 
• The Institute of Supply Management's (ISM) Manufacturing Purchasing Managers Index (PMI) rose to 48.4 in November amid hopes of business-friendly policies from the Trump administration.
• According to the CME Group's FedWatch Tool, traders are currently pricing in a nearly 75% chance that the US central bank will lower borrowing costs again by 25 basis points later this month. 
• The benchmark 10-year US Treasury bond yield had fallen to its lowest levels since late October, narrowing the US-Japan yield differential, which should also benefit the lower-yielding Japanese Yen.
• Investors keenly await important US macro releases scheduled at the beginning of a new month for more cues about the Fed's future rate-cut path, which will influence the USD and the USD/JPY pair. 

USD/JPY could attract fresh sellers at higher levels and remain capped near 151.00

From a technical perspective, last week's breakdown below the 38.2% Fibonacci retracement level of the September-November rally could be seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone, suggesting that the path of least resistance for the USD/JPY pair remains to the downside. That said, a modest bounce from the 100-day Simple Moving Average (SMA) support, currently pegged near the 149.00 mark, warrants some caution before positioning for deeper losses. A convincing break below the said handle should pave the way for a slide towards the 50% retracement level, around the 148.20 region en route to the 148.00 mark. Some follow-through selling might expose the 61.8% Fibo. level, around the 147.00 round figure, with some intermediate support near the 147.35 area.

On the flip side, a further strength beyond the 150.00 psychological mark now seems to confront stiff resistance near the overnight swing high, around the 150.75 region, ahead of the 151.00 round figure. A sustained strength beyond the latter might trigger a short-covering rally and lift the USD/JPY pair to the 151.65 region en route to the 152.00 mark. The latter represents the very important 200-day Simple Moving Average (SMA) and should act as a key pivotal point, which if cleared decisively will suggest that the recent corrective pullback from a multi-month top has run its course. This, in turn, would shift the near-term bias back in favor of bullish traders.

• NZD/USD attracts some sellers to near 0.5880 in Tuesday's Asian session. 
• US ISM Manufacturing PMI climbed to 48.4 in November vs. 47.5 expected.
• Trump's tariff threats continue to undermine the Kiwi. 

The NZD/USD pair loses traction to around 0.5880 on Tuesday during the Asian trading hours. The New Zealand Dollar (NZD) weakens amid the US President-elect Donald Trump’s threats of further tariffs. Investors await the US JOLTs Job Openings for October, which are due later on Tuesday, along with the speeches from the Federal Reserve’s (Fed) Adriana Kugler and Austan Goolsbee. 

Federal Reserve officials on Monday emphasized the need to continue lowering interest rates over the next year, but they did not commit to making the next rate cut later this month. Fed Governor Christopher Waller said he’s inclined to vote to lower borrowing costs when Fed members meet on December 17-18 but noted that data released before then might support the case for keeping rates unchanged.

The Institute for Supply Management (ISM) showed on Monday that US manufacturing improved more than expected in November but continued to indicate a contraction. The US ISM Manufacturing PMI rose to 48.4 in November versus 46.5 in October, beating the 47.5 expected. 

The Bureau of Labor Statistics will release the Nonfarm Payrolls (NFP) report on Friday, which might offer some hints about the labor market condition and the US interest rate outlook. The US economy is expected to see 195K jobs added in November. 

On the Kiwi front, Trump has proposed a 25% tariff on all products from Mexico and Canada and an additional 10% tariff on goods from China.  The tariffs could lead to a global trade war and might weigh on the NZD, as China is a major trading partner of New Zealand. 

On Tuesday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1996, as compared to the previous day's fix of 7.1865.

• The Australian Dollar edges lower in Tuesday's early Asian session.
• Renewed USD demand and Trump’s tariff threats weigh on the pair; hawkish expectations of the RBA might cap its downside. 
• Investors brace for the US October JOLTs Job Openings and Fedspeak on Tuesday. 

The Australian Dollar (AUD) extends its downside to near 0.6470 during the early Asian session on Tuesday. The stronger US Dollar (USD) to the three-day highs drags the pair lower. Additionally, the eruption of a global trade war under returning US President-elect Donald Trump could exert some selling pressure on the Aussie. 

Nonetheless, the hawkish comments by Reserve Bank of Australia (RBA) Governor Michele Bullock might help limit the AUD’s losses. The RBA Governor Bullock said last week that the core inflation remains too high to consider near-term interest rate cuts, which increased the demand for the AUD. Later on Tuesday, the US JOLTs Job Openings for October will be published. Also, the Federal Reserve’s (Fed) Adriana Kugler and Austan Goolsbee are set to speak. The Australian Gross Domestic Product (GDP) for the third quarter (Q3) will be closely watched on Wednesday. 

Australian Dollar softens amid Trump’s tariff threats

• Australia’s Retail Sales climbed by 0.6% MoM in October, compared to a rise of 0.1% in September, according to the Australian Bureau of Statistics (ABS) on Monday. The reading was above the estimations of a 0.3% growth. 
• The US ISM Manufacturing PMI rose to 48.4 in November versus 46.5 in prior. This reading came in stronger than the market expectation of 47.5.  
• Atlanta Fed President Raphael Bostic said on Monday that he’s undecided on whether a rate cut is needed in the December meeting but still believes Fed officials should continue lowering rates over the coming months, per Bloomberg.
• New York Fed President John Williams stated on Monday that the Fed officials will likely need to cut the interest rates further to move policy to a neutral stance now that risks to inflation and employment have become more balanced.
• Fed Governor Christopher Waller noted that he was leaning toward supporting an interest rate cut at the December meeting amid expectations for inflation to continue to ease toward the Fed's 2% target.  

Technical Analysis: Australian Dollar’s negative trend continues

The Australian Dollar weakens on the day. The AUD/USD pair remains in a downtrend on the daily chart, characterized by the price holding below the key 100-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) stands below the 50-midline, supporting the sellers in the near term. 

Bearish candlesticks below 0.6434, the low of November 26, may attract Aussie bears and drag AUD/USD to the lower limit of the descending trend channel of 0.6330. Extended losses could see a drop to 0.6285, the low of October 3, 2023. 

On the other hand, sustained trading above the upper boundary of the trend channel of 0.6530 could set the pair to 0.6626, the 100-day EMA. Bullish candlesticks above this level could pave the way to 0.6687, the high of November 7. 

• EUR/USD lost ground again on Monday, skidding back into 1.05.
• Fiber failed to recapture the 1.0600 handle as near-term bounce fizzles.
• Plenty of ECB speeches dot the landscape, US NFP jobs numbers loom on Friday.

EUR/USD kicked off another trading week with a decline back into familiar near-term lows, flubbing a fresh run at the 1.0600 handle and backsliding into 1.0500, shedding nearly eight-tenths of a percent on Monday. US Purchasing Managers Index (PMI) figures beat the street but still came in below the 50.0 contraction level, bolstering the safe haven Greenback.

European economic data remains thin in the front half of the trading week, though several European Central Bank (ECB) speeches are smattered across the data docket. Another Nonfarm Payrolls (NFP) week looms over markets with US net jobs additions figures slated for Friday, and plenty of labor and wages preview data throughout the week.

US ISM Manufacturing PMI figures rose in November, climbing to a five-month high of 48.4 versus the previous 46.5, over and above the forecast 47.5. Despite the uptick in business expectation survey results, the indicator is still stuck in contraction territory below 50.0, implying the majority of business operators still see declines in overall activity in the coming months.

EUR/USD price forecast

EUR/USD is stuck in the dumps near 1.0500 after a bullish recovery fizzled. Fiber only managed to squeeze out a single green weekly candlestick after hitting multi-year lows near 1.0330. The 50-day and 200-day Exponential Moving Averages (EMA) have confirmed a bearish cross, with the 50-day EMA accelerating downward into 1.0700 as the 200-day EMA prices in a firm ceiling near 1.0840.

EUR/USD daily chart

Federal Reserve Bank of Atlanta President Raphael Bostic said on Monday that he’s undecided on whether an interest-rate cut is needed in the December meeting, but still believes Fed officials should continue lowering rates over the coming months, per Bloomberg.  

Key quotes

“The risks to achieving the committee’s dual mandates of maximum employment and price stability have shifted such that they are roughly in balance, so we likewise should begin shifting monetary policy toward a stance that neither stimulates nor restrains economic activity,”

“I’m keeping my options open” over whether he will support a rate reduction when officials gather in Washington Dec. 17-18.”

“None of these trends send a strong signal that the labor market is rapidly deteriorating nor extremely tight.”

“Instead, they suggest that the labor market is cooling in a largely orderly fashion in the face of higher interest rates, a perspective we also hear from our business contacts.”

“There are certainly upside risks to price stability,” Bostic said, but added, “I do not view the recent bumpiness as a sign that progress toward price stability has completely stalled.”

“One of the things that we have seen over the last six or seven years is that there are lots of proposals that get floated around, and they change a lot as you go through.”  

Market reaction 

The US Dollar Index (DXY) is trading 0.01% lower on the day at 106.38, as of writing.

Federal Reserve Bank of New York President John Williams said on Monday that the Fed officials will likely need to cut the interest rates further to move policy to a neutral stance now that risks to inflation and employment have become more balanced, per Bloomberg.  

Key quotes

One could argue a case for skipping a rate cut in December, will be watching data closely to decide.

Policy is restrictive enough that a Dec cut still allows ample scope to slow pace of cuts later if needed.

Forecasts show inflation on the path to 2% in medium term.

Money policy remains 'significantly restrictive’.

Still 'a ways to go' in reducing rate to neutral.

The speed and timing of cuts to be determined by economic conditions.

When I look at a broader range of labor market data, it tells a fairly consistent story over the past year about moderating demand relative to supply.

Recent data on inflation indicate that progress may be stalling.

If policymakers' estimates of the target range at the end of next year are close to correct, then the Committee will most likely be skipping rate cuts multiple times on the way to that destination.

Expects more rate cuts to happen over time.

Monetary policy remains in a restrictive stance.

What the Fed does with policy depends on incoming data.

Outlook for economy and policy remains ‘highly uncertain.’

Expects US GDP at 2.5% this year, might be higher.

Sees unemployment rate between 4%-4.25% over coming months.

Expects US inflation around 2.25% for 2024.

Further progress on inflation may be uneven.

The US economy is in good place, labor market is solid, in balance.

Expects inflation to continue to gradually ebb to 2%.

Job market unlikely to be a source of higher inflation.

Labor market is softer but still pretty solid.

Will need to bring interest rates down over time.

Unclear where neutral rate is right now

Businesses are finding less ability to push through price increases

Direction is toward lower rates over time.

Appropriate for policy to be somewhat restrictive given inflation.

Critical to get inflation back to 2%.

Not seeing any signs of a US recession. 

Market reaction 

The US Dollar Index (DXY) is trading 0.01% lower on the day at 106.40, as of writing.

• USD/CAD holds steady around 1.4045 in Tuesday’s early Asian session.
• US ISM Manufacturing PMI rose to 48.4 in November vs. 46.5 prior.
• Canadian Manufacturing PMI climbed to a 21-month high in November.

The USD/CAD pair trades flat near 1.4045 during the early Asian session on Tuesday. However, Trump’s threats of further tariffs and renewed US Dollar (USD) demand could provide some support to the pair. The US JOLTs Job Openings for October are due later on Tuesday. The Federal Reserve’s (Fed) Adriana Kugler and Austan Goolsbee are scheduled to speak.

Data released Monday showed that the US ISM Manufacturing PMI improved to 48.4 in November from 46.5 in October. This reading came in better than the market expectation of 47.5. The Greenback edges higher in an immediate reaction to the upbeat US economic data.

Furthermore, the cautious stance of the US Fed might contribute to the USD’s upside. Fed officials on Mondays made it clear they expect the central bank to continue lowering interest rates over the next year but stopped short of saying they are committed to making the next cut in the December meeting. According to the CME FedWatch Tool, money markets have priced in nearly a 76.0% chance that the Fed will cut rates by a quarter point in December, while there is a 24.0% probability that the policy rate will remain unchanged.

On the Loonie front, the Canadian S&P Global Manufacturing PMI came in stronger than expected in November, rising to 52.0 from 51.1 in October, its highest level since February 2023. This figure was above the market consensus of 50.8. However, US President-elect Donald Trump's tariff threats could exert some selling pressure on the Canadian Dollar (CAD) as Trump threatened to impose a 25% tariff on all Canadian imports.

• GBP/USD fell 0.7% on Monday to fall back below 1.2700.
• A lack of UK data left the Greenback front and center.
• US PMI data came in better than expected, but still below contraction level.

GBP/USD backslid below the 1.2700 handle on Monday, kicking off the new trading week by snapping a three-day winning streak and keeping Cable on the low side of the 200-day Exponential Moving Average (EMA). The data docket was clear on the UK side, leaving markets to roil after US Purchasing Managers Index (PMI) figures popped higher but still remained in contraction territory below 50.0.

Another US Nonfarm Payrolls (NFP) week is underway, and the economic calendar is littered with plenty of US jobs preview figures in the runup to Friday’s bumper job additions report. UK data releases are limited this week, although Bank of England (BoE) Governor Andrew Bailey will be making an appearance on Wednesday via a pre-recorded interview at an event hosted by the Financial Times.

US ISM Manufacturing PMI figures rose in November, climbing to a five-month high of 48.4 versus the previous 46.5, over and above the forecast 47.5. Despite the uptick in business expectation survey results, the indicator is still stuck in contraction territory below 50.0, implying the majority of business operators still see declines in overall activity in the coming months.

GBP/USD price forecast

Monday’s declines dragged GBP/USD back below the 1.2700 handle, keeping price action on the bearish side of the 200-day EMA, which is still rolling over into bearish territory near 1.2800. Cable caught a near-term bounce from multi-month lows after declining into 1.2500, but topside momentum remains limited.

GBP/USD daily chart

• NZD/JPY fell 0.79% on Monday, trading near 88.05.
• After breaking out of a range last week, bears pushed NZD/JPY lower, towards 88.00.
• Indicators continue losing ground but approach oversold conditions which might trigger a period of consolidation.

The NZD/JPY declined by 0.79% to 88.05 on Monday, after breaking out of a clear side-ways range last week. The Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicators are losing ground and confirm the selling pressure, and the outlook is now bearish, at least for the short-term.

In that sense, the RSI is in the oversold area, signaling rising selling pressure, while the MACD is also indicating that bearish momentum is increasing. The RSI suggests oversold conditions, may trigger consolidation, but the indicators' continued decline indicates that the downtrend is likely to persist. In case the cross corrects upwards, the bulls might attempt to recover the 89.00 area, and if lucky, they might extend a recovery to 90.00. On the downside, the selling traction is strong enough to continue pushing the pair towards the 85.00-86.00 range if the buyers don’t step in.

NZD/JPY daily chart