Technical Analysis Today

[Zerologic]

USDCAD is at a high level ahead of the BOC interest rate policy

USDCAD yesterday drew a small bullish candlestick near the upper band line. Price formed a high of 1.41948, a low of 1.41556, and closed at 1.41786 on FXOpen. USDCAD price is moving in the highest area this month.

The dollar index (DXY), which tracks the value of the USD against six major currencies, rose to a high of 106,637 from a low of 106,040. However, DXY is showing reduced volatility marked by deflated Bollinger bands.

CAD is still weak, one of the factors is investors still predict that the Bank of Canada (BoC) will cut interest rates again by 50 basis points (bp) to 3.25% from 3.75% at today's monetary policy meeting.

On the other hand, the Fed is also predicted to cut interest rates by 25 basis points (bp) to 4.25%-4.50% at its December 18 meeting according to the CME Fedwatch tool.

Apart from investors' focus on the BoC's interest rate policy, investors will also focus on US CPI data.

Economists expect the annual CPI to rise 2.7% from the previous 2.6%. Meanwhile, monthly CPI is expected to rise 0.3% from the previous 0.2%. Meanwhile, the core CPI is expected to be the same 0.3% as the previous revision.

Signs of easing price pressures will accelerate the Fed's dovish bet for next week's policy meeting. On the other hand, inflationary pressures that are still high will weaken them.

 

[Zerologic]

USDCHF moves up ahead of the SNB Policy Rate

The USDCHF pair yesterday drew a bullish candle with a small body extending the previous bullish candle. Price formed a high of 0.88542, a low of 0.88112, and closed at 0.88402.

The Swiss Franc weakened slightly following US inflation data which was in line with expectations. US Core CPI showed actual data at 0.3% as expected. Monthly CPI was also 0.3% as expected, higher than the previous 0.2%, and annual CPI was 2.7% as expected but higher than the previous period's 2.6%.

The US CPI is unlikely to change market expectations of the Fed cutting interest rates by 25 basis points on December 18, but reduces expectations of monetary easing next year which ultimately supports US government bond yields and sends the US dollar higher. According to the CME group's FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points is 98.6% and the probability of interest rates remaining unchanged is only 1.4%.

The dollar index (DXY) which tracks the US dollar with six major currencies showed strength at 106.645 from a low of 106.268.

In Switzerland, the SNB is expected to cut interest rates by 25 basis points from 1.00% to 0.75% today and may leave the door open for further cuts in early 2025 given the weak inflation rate. A large rate cut, which is not completely undone, would shock the markets and hit the CHF.

Besides investors focus on SNB interest rates, they will also focus on US economic data, PPI, and Unemployment Claims, which are likely to have a broad impact on other foreign currencies including CHF.

 

[Zerologic]

GBPUSD plunged after the US released hot PPI data

Yesterday the GBPUSD pair drew a bearish candle with a long body with a shadow on the top of the candle. Price formed a high of 1.27879, a low of 1.26666, and closed at 1.26720. The decline in GBPUSD from the upper band to the middle band line reflects a sharp decline.

The US dollar strengthened against the British pound starting from the previous day, but after the US released PPI data and unemployment claims, the pound sterling weakened further against the US dollar. The US Bureau of Labor Statistics reported the Producer Price Index for final demand rose 0.4 percent in November, seasonally adjusted. Final demand prices increased by 0.3 percent in 2018 October and 0.2 percent in September. Without adjustment, the index for final demand rose 3.0 percent for the 12 months ending in November, the biggest gain since it rose 4.7 percent for the 12 months ending February 2023.

On the other hand, Unemployment Claims increased by 242k from the previous revision of 225k, higher than the expected 221k. The market response to mixed US economic data brought the dollar index (DXY) up to 107.041 from a low of 106.354. As a result, the strengthening of the USD put pressure on other currencies, including the British Pound Sterling.

Investors still hope that the Fed will cut interest rates by 25 bps at its December 18 meeting. According to the CME group's Fedwatch tool, the probability of the Fed reducing interest rates by 25 basis points is 94.7% and the probability of interest rates remaining unchanged is only 5.3%.

Meanwhile, the Bank of England (BoE) is predicted to follow a more gradual policy easing cycle because UK inflation is still high so the BoE is still on the slow path to cutting interest rates.

Today investors will focus on UK GDP data which is forecast to rise 0.1% from the previous data revision of -0.1%.

 

[Zerologic]

EURGBP surges as UK GDP data disappoints

In Friday trading, the EURGBP pair drew a bullish candle with a long body almost without a shadow. Price formed a low 0.82560 high 0.83208 closed at 0.83181 on FXOpen. The price has crossed the middle band from the downside near MA 50.

The Euro strengthened against the Pound Sterling for the second day in a row on Friday. Data from the UK released Friday Gross Domestic Product contracted for the second month in a row, with manufacturing production falling sharply. This data casts doubt on the UK's economic prospects and adds pressure on the BoE to continue easing monetary policy.

The publication from the Office for National Statistics revealed that the actual GDP data was -0.1%, the same as the previous revision, even though it had been predicted that GDP would increase by 0.1%.

On the other hand, the ECB lowered its benchmark interest rate by 25% basis points on Thursday and is predicted to continue lowering interest rates in the first half of next year.

On the other hand, the BoE looks to move more slowly and maintains interest rates at 4.75%.

Today investors will see the Euro and UK economic data which is the focus of traders, PMI Manufacturing and German services which are expected to rise from before. and the UK PMI is also expected to be higher than before.

 

[Zerologic]

USDCAD rises further ahead of Canadian inflation data

The US Dollar seems to be maintaining its strengthening against the Canadian Dollar this week. Yesterday USDCAD rose drawing a bullish candle with a small body extending the previous increase. Price formed a low of 1.42166, a high of 1.42704, and closed at 1.42437. Prices are at their highest peak throughout 2024.

One of the reasons for the weakening of the Canadian dollar is the divergence in policy between the Fed and the BoC, and US President-elect Trump's threat to increase tariffs on Canadian products. Sometime after Trump stated tariffs on imports from Canada, the market response caused the Canadian dollar to depreciate against the US dollar, and it seems that this effect is still ongoing.

The Fed is predicted to cut interest rates more carefully next year considering that Trump's deeper protectionist policies could cause inflation to rise. Even though it is predicted that the Fed will cut interest rates by 25 basis points tomorrow. The CME group's Fedwatch tool puts the probability of a 25 basis point rate cut at 95.4% and the probability of rates remaining unchanged at just 4.6%.

On the other hand, the Bank of Canada cut interest rates by 50 bp last week for the second time in a row. The Bank of Canada has lowered interest rates by 1.75% to 3.25% since June and is likely to cut them even lower.

Today investors will focus on Canadian inflation data and American retail sales which may be triggers for currency changes.

Canada's CPI is forecast to fall 0.1% from the previous 0.4%. Median CPI is expected to be 2.4% from the previous 2.5% while Trimmed CPI is predicted to be the same as the previous 2.6%.

Meanwhile, US Core Retail Sales are predicted to increase by 0.4% from the previous 0.1%, and retail sales which measure Change in the total value of sales at the retail level are expected to increase by 0.6% from the previous 0.4%.

 

[Zerologic]

Gold prices are still under pressure ahead of the Fed rate decision

Yesterday's gold price drew a bearish candle with a small body after previously drawing an indecision candle. Price formed a high of $2658, a low of $2533, and closed at $2644, slightly below the middle band line.

Last week the price of gold began to decline from around $2725 with two consecutive downward candles due to the strengthening of the USD and the influence of the Chinese economy.

Yesterday, gold prices continued their decline amid US economic data which released retail sales rising 0.7%, better than expectations of 0.6%. US Census Bureau reports Advance estimates of U.S. retail and food services sales for November 2024, were $724.6 billion, an increase of 0.7 percent (±0.5 percent) from the previous month, and up 3.8 percent (±0.5 percent) from November 2023.

The dollar index (DXY) has shown a consolidation value in the range of 106.937, slightly up from a low of 106.698. The US dollar traded mixed across foreign exchange exchanges strengthening against commodity currencies such as CAD and AUD and barely falling against European currencies, as the Federal Reserve's monetary policy announcement drew closer. The Fed will announce its decision on monetary policy on Wednesday and is widely anticipated to cut its benchmark interest rate by 25 basis points. The focus will then turn to the Summary of Economic Projections (SEP) and Chairman Jerome Powell's statement on what may happen in 2025.

In China, annual Industrial Production rose 5.4% as expected from 5.3% previously. However, retail sales data showed 3.0% lower than the previous 4.8%, even below market expectations of 5.0%.

Apart from waiting for the important momentum of the Fed's interest rate decision, investors will also focus on UK economic data. The annual CPI is forecast to rise 2.6% from the previous revision of 2.3%.

 

[Zerologic]

The Fed cut interest rates by 25 basis points. The USD strengthened sharply afterward

Yesterday the price of Silver (XAGUSD) fell drawing a bearish candle with a long body crossing the lower band and MA 200 from the upper side. Price formed a high of 30,567, a low of 29,305, and closed at 29,348.

In the FOMC Statement released on December 18, the Fed decided to lower the target range for the federal funds rate by 25 bps to 4.25% – 4.50%, in line with analyst expectations. The Fed noted that inflation has made progress toward its 2% target but remains high. The central bank believes that the risks to achieving its employment and inflation targets are broadly balanced.

The Fed also projects that the change in real GDP in 2024 is expected at 2.5%, The forecast for 2025 was increased from 2.0% to 2.1%. Unemployment Rate projection for 2025 is estimated to be lower at 4.4% to 4.3%. Meanwhile, the projected federal funds rate for 2025 was increased from 3.4% to 3.9%. The 2026 estimate was also increased from 2.9% to 3.4%.

The dollar index (DXY) strengthened sharply from a low of 106,823 to a high of 108,269 as traders focused on the Fed's economic projections. Changes in the projected federal funds rate have led to bullishness in the US dollar.

As a result, many major currencies depreciated against the USD, including silver prices which fell after the Fed lowered interest rates by 25 basis points.

Today investors will also wait for other important economic news. The Bank of England rate is predicted to remain unchanged at 4.75%. Meanwhile, in the US we will be waiting for the release of GDP and Unemployment Claims data which might change market direction.

 

[Zerologic]

The Japanese yen weakened more against the US dollar

The price of the USDJPY pair yesterday drew a long-body bullish candlestick with a slight shadow on the top candle. Price formed a low of 154,439, a high of 157,807, and closed at 157,396. The rise in the USDJPY pair and even breaking the upper band line indicates a strong rally.

The weakening of the Japanese Yen was due to the strengthening of the US dollar after the Fed lowered interest rates yesterday and the US economic projections in the FOMC statement which received a market response have brought the dollar index (DXY) up from a low of 106,823 to now at a high of 108,103 for two days in a row.

The Fed projects two rate cuts in 2025 which sends US Yields and the USD soaring.

On the other hand, the BOJ kept its benchmark interest rate unchanged at 0.25% with Governor Ueda failing to clarify whether they will raise interest rates in January, as had been anticipated by some market sources. According to Ueda, prolonged easing conditions could cause a spike in inflation.

From within the country, Japanese politics may have an impact on the Japanese Yen. The ruling Liberal Democratic Party (LDP) does not have a majority in parliament, it could be forced to call new elections. A clearer win for the LDP would ensure stability and potentially strengthen the Yen.

However, if the opposition ultimately succeeds and returns to leading there is possibility for fiscal expansion that could weaken the currency.

If the government continues without elections, it is likely that the budget will not be so high as to maintain the currency.

Today, investors focusing at the US Core PCE (Personal Consumption Expenditures) Price Index, one of the Fed's most widely used inflation indicators, which is expected to fall 0.2% from the previous 0.3%.

 

[Zerologic]

Will gold shine even more towards the end of the year?

The price of gold on Friday last week drew a bullish candle with a fairly long body. Price formed a high of $2631, a low of $2589, and closed at $2622 on FXOpen.

Throughout 2024, the price of gold experienced a significant price increase until finally drawing a new all time high in 2024.

Gold's journey as a safe-haven asset throughout 2024 received a positive boost amid the Gaza and Ukraine conflicts and central bank purchases.

This year the central bank has also reduced interest rates in a number of countries, which has contributed to gold's performance. India's decision to reduce gold import duties to the lowest level has also contributed to gold demand in the last decade.

In November when Trump won the 2024 US election, gold came under pressure from the strengthening USD until it fell from its highest level, dampening the hopes of some investors who expected gold to rise further. Gold, which had previously risen, suddenly turned down, stopping its previous winning streak.

At the Fed meeting last December, the US central bank lowered interest rates by 25 bps. Gold prices tried to stretch again, on Friday weekend the price formed a bullish candle trying to recover from previous losses.

Even though the Fed cut interest rates by 25 bps, the revised Summary of Economic Projections (SEP) or dot plot, shows that policymakers see the policy rate at 3.9% by the end of 2025, implying a 50 bps cut over the course of the year, compared to with 100 bp projected in the September SEP.

A slower decline may reduce the pace of gold demand, as bond yields may be more attractive than maintaining gold exposure.

In 2025, gold may face the obstacles of the Fed's monetary policy decisions, Trump's economic and foreign policies, and geopolitical risk changing being the main drivers.

On the other hand, China, which is a global gold importer, is also being challenged by Trump's increase in tariffs and may retaliate in a trade war which will allow the economy to slow down and reduce demand for gold.

 

[Zerologic]

USDCHF rose around 0.90018 as USD strengthened.

The USDCHF pair yesterday drew a bullish candle with a long body almost the same as the length of the previous bearish candle. USDCHF price formed a low of 0.89216, a high of 0.90018, and closed at 0.89835. The pair is attempting a recovery from Friday's weekend losses.

The US dollar recovered as traders expected the Fed to hold interest rates steady in January. The dollar index (DXY) which tracks the US dollar against six major currencies is now at 108.079 slightly up from a low of 107.684.

The Fed's latest dot plot shows it sees the Federal Funds rate heading to 3.9% in 2025. According to the CME group's Fedwatch tool, the probability of the Fed leaving interest rates unchanged at its January 29, 2025 meeting is 93.6% and the probability of a 25 bps cut is only 6.4%.

Fed policymakers are expected to take a cautious approach to rate cuts due to uncertainty over Trump's upcoming policy.

Meanwhile, the Swiss National Bank (SNB) is predicted to loosen monetary policy further amid concerns that inflation is below the bank's 2% target. The SNB has lowered interest rates by 125 basis points (bp) this year to 0.5%.

Today there is no important news on the economic calendar ahead of Christmas, allowing trading volume to be uncertain.

 

[Zerologic]

Bitcoin increases even ahead of Christmas

When the forex market is more sluggish due to the decline in trading volume ahead of Christmas, it is different from Bitcoin in the crypto market. BTCUSD rose yesterday drawing a bullish long-body candle indicating a strong rebound. BTCUSD formed a low at 93528 high of 99444 and closed at 98401.

Before Christmas, several banks closed in Europe, such as Germany, which closed early, the impact on the forex market was quite significant, reducing transaction volume and market volatility. Several pairs such as Gold, Silver, EURUSD, USDJPY, and GBPUSD, are seen moving steadily sideways near the previous open. In contrast to the Bitcoin market which seems to experience different market patterns compared to forex. Bitcoin yesterday tried to rebound after consecutive declines after the Fed projected 2025 interest rates.

Major changes in Bitcoin are influenced by Bitcoin whales such as Micro Strategy, and BlackRock. Micro Strategy, for example, dared to purchase Bitcoin worth $516 million BTC even though Bitcoin prices were already high. It seems they are optimistic about Bitcoin's future potential. Moreover, Elon Musk, who is part of Trump's cabinet, is an influential figure in the Bitcoin market, which allows him to influence Trump's looser policies in the crypto market. Now Micro Strategy's holdings have reached 444 262 BTC.

Meanwhile, community sentiment on Coinmarketcap shows bullish expectations with 79% of votes and 21% of votes for bearish. This means that the majority of people in this community still believe in the bullish prospects for Bitcoin in the future. Meanwhile, the Fear and Greed indicator points to number 55 which is closer to the neutral position. The value of this indicator indicates the level of fear and greed for an asset. A value of 100 is considered market extremely greedy and the possibility of correction. A value of 0 means the market is extremely fearful and the a possibility of a rebound.

Today is Christmas, a holiday for many global banks in the world, allowing for a decrease in transactions on financial markets. However, the crypto market is different from forex, they are mostly traded on exchanges and operate 7 days a week.

 

[Zerologic]

The EUR/USD pair is forecast to be flat due to the Christmas holidays

In today's trading, the EURUSD pair opened with a slight gap. The open price at 1.04201 was higher than the previous closing of 1.03922 on FXOpen. EURUSD price movements ahead of Christmas look flat. This pair drew a small bearish candle with a low of 1.03836, a high of 1.04100, and a close of 1.03922.

Today it is estimated that the EURUSD pair will still be influenced by the Christmas holidays in various countries. Even though trading is enabled on this pair for today's trading, perhaps many traders are also still celebrating and enjoying the Christmas holidays. Today's calendar schedule shows bank holidays in New Zealand, Australia, Switzerland, Germany, Italy, and the UK which are likely to reduce transactions in the forex market greatly.

Even though there will be the release of US Unemployment Claims which is expected to increase by 223k from the previous 220k, perhaps many investors will not respond due to the holiday period.

The dollar index (DXY) at 108.123 ahead of Christmas shows a small doji candle indicating market indecision. Referring to the EMA 20 line which draws an upward channel below the price, DXY strengthened more.

ECB's Lagarde said she was confident inflation would return to the bank's target of 2% sooner than previously forecast.

Meanwhile, in the latest dot plot, the Fed indicated only two interest rate cuts in 2025. The Fed will make two 25-bp interest rate cuts at the June and September policy meetings.

 

[Zerologic]

USDJPY extends to rise post-Christmas

The USDJPY currency pair yesterday drew a bullish candle continuing the JPY's weakness amid fading expectations of a BoJ interest rate hike. Price draws a slightly long-body bullish candle past the previous high. Price formed a high of 158,082, a low of 157,069, and a close of 167,991.

BOJ Governor Kazuo Ueda left open the possibility of waiting longer for the next hike and said the central bank would need more information on wage trends. Additionally, the BoJ's October policy meeting minutes stressed the need for caution amid domestic and global uncertainty. However, widespread inflationary pressures in Japan could force the BoJ to raise interest rates again in early 2025.

Japanese inflation data increased in November, opening up the opportunity for the BoJ to raise interest rates in January or March. Meanwhile, the US central bank signaled that it will slow the pace of interest rate cuts next year and dampened expectations of a sharp narrowing in the US-Japan interest rate gap. This is another factor that weakens the lower-yielding JPY.

However, speculation has emerged that the Japanese government could intervene to shore up its domestic currency which could limit JPY's weakness. Japanese Finance Minister Katsunobu Kato warned against excessive foreign exchange movements and emphasized that the government is ready to act to stabilize the domestic currency.

On the other hand, fears of a trade war triggered by Trump may restrain traders from placing bearish bets on JPY as a safe haven currency.

Next, traders will anticipate core CPI, retail sales, and employment data which will be released today to get a picture of the Japanese economy which might be a clue to the central bank's next policy.

 

[Zerologic]

EUR/JPY is trading with low volume on Friday

The EURJPY pair drew a small bearish candle on Friday after Japan released inflation and employment data. Price formed a high of 164,819, a low of 164,017, and closed at 164,428 on FXOpen.

Japan released core CPI data on Friday which showed it was higher than the previous period but lower than expected. Core CPI came in at 2.4% from the expected 2.5% and previous data of 2.2%. Meanwhile, Japan's unemployment rate remained the same as the previous period at 2.5% as expected. Meanwhile, annual retail sales showed 2.8%, higher than the previous 1.3%, and exceeded expectations of 1.5%.

On the other hand, the BOJ highlighted the possibility of a gradual increase in interest rates if inflation has the potential to reach 1.0% in fiscal 2025. The BOJ also highlighted the focus on developing wages, service prices, and personal consumption as considerations for increasing interest rates. This is in line with BOJ Governor Kazuo Ueda's statement that the central bank will wait for further data on whether wage growth can maintain its upward momentum next year, to get better clarity on economic trends.

Apart from that, Japan will focus on US economic developments and the policies taken.

Meanwhile, the ECB has moved closer to its goal of sustainably reducing inflation to its medium-term target of 2%. However, Lagarde will continue to pay particular attention to inflation in the services sector. One of the ECB officials, Boris Vujcic, told Bloomberg that the ECB plans to continue lowering borrowing costs in 2025.

Today, looking at the economic calendar schedule, Japan will release the Final Manufacturing PMI which is expected to be the same as previously at 49.5. Meanwhile, Spain will release the annual Flash CPI which is expected to rise 2.6% from the previous 2.4%.

 

[Zerologic]

Approaching the new year the price of the Chinese Yuan weakens

USD/CNH prices in Monday's trading session showed USD strengthening against CNH and drawing a bullish long-body candle after the previous week moved in a narrow space during the Christmas holidays. USDCNH price formed a high of 7.3192, a low of 7.2935, closing at 7.3151.

The Chinese Yuan currency still faces significant challenges as a sluggish real estate market and weak consumer spending continue to weigh on the currency. On the other hand, talk about delaying US tariffs imposed on Chinese exports further complicates matters regarding China's future economic prospects.

The graph arranged in the monthly time frame shows that the Chinese Yuan's weakening started in October and continued until the end of the year when it experienced significant weakening. Renmimbi's weakening occurred more after Trump became the winner in the 2024 US election.

An anonymous source stated that the Chinese Politburo will take a fairly loose approach to its monetary policy in the future, which gives an indication of easing credit and interest rates. This announcement had an impact on global markets and encouraged appreciation of the US Dollar (USD) against the Chinese Renminbi Yuan (CNH).

Today some banks close early which may reduce trading volumes on the forex market such as Japanese and German bank holidays. Bank closures can reduce market liquidity.

Meanwhile, today China will release Manufacturing PMI data which is expected to experience an expansion of 50.3, the same as the previous data. And the Non-Manufacturing PMI which is predicted to be 50.2 is higher than the previous 50.0

 

[Zerologic]

What are the prospects for gold prices in 2025?

Gold price is now trading at around $2623 moving below the middle band line. At the end of 2024, the gold price drew a bullish candle with a body larger than the previous bearish candle. Price formed a high of $2627, a low of $2602, and closed at $2623 on FXOpen. Gold prices tend to move in a range during the Christmas and New Year holidays.

The price of gold fell to a low of $2536 in mid-November in the wake of the Fed's projections about future policy on slowing interest rate cuts due to the possibility of higher inflation as a result of President Trump's protectionist policies. Gold however again bounced back drawing a range top of $2725 and hit a low of $2584 in December.

What are the prospects for gold in 2025? According to Goldman Sachs, gold can reach $3000, this institution has entered gold as a top commodity for 2025 because President Trump's policies could risk launching a trade war against several countries and gold is one of the safe-haven assets that is an option amidst uncertainty.

In line with Goldman Sachs, Macquarie Group Ltd also estimates that gold can reach $3000 even though in the first quarter gold prices slackened due to the strengthening of the USD. Meanwhile, analysts from UBS Group AG project that gold can reach $2900 by the end of 2025.

Meanwhile, according to Mitsubishi UFJ Financial Group (MUFG) analysts, the outlook for gold in 2025 is a long gold spot with a prediction that gold can reach US$3000 in 2025, which is supported by risk factors. geopolitics and the US as a global asset that is under challenge. Meanwhile, demand for central bank gold from developing countries is expected to rise, triggered by concerns about sanctions.

On a quarterly basis, MUFG predicts the average gold price could reach US$2,750 per ounce in the first quarter, then US$2,850 in the second quarter, US$3,050 in the third quarter, and US$3,080 in the fourth quarter of 2025. On an annual basis, the average gold price in In 2025 it could reach US$2,939 per ounce, an increase compared to the average 2024 prediction of US$2,410. In 2026, the average gold price is predicted to reach US$3,280 per ounce.

 

[Zerologic]

The pound sterling is under pressure from the strengthening of the USD in early 2025

Yesterday, the GBP/USD currency pair drew a bearish candle with a long body crossing the lower band line indicating a strong downtrend. Price formed a high of 1.25406, a low of 1.23522, and closed at 1.23779.

On the monthly time frame, we can see that GBPUSD started its decline in October ahead of the US election, which was held on November 5, until it was still extending its decline at the beginning of January.

The strengthening of the USD seems to continue after the New Year holidays. The dollar index (DXY) which tracks the USD against six major currencies rose to a high of 109.533 from a low of 108.267.

In December, the UK Manufacturing Purchasing Managers' Index (PMI) showed actual data of 47.0 lower than the expected 47.3 and previous similar data. According to S&P Global, the manufacturing contraction is due to weak market confidence and operational restructuring in response to upcoming legislative changes impacting output and demand.

Risk aversion is also another reason investors choose safer assets due to concerns about central bank policy and geopolitical risk tensions.

Today investors will focus on some minor but possibly relevant UK economic data with GBP, M4 Money Supply, Mortgage Approvals, and Net Lending to Individuals. Meanwhile, the US will release ISM Manufacturing PMI data which is predicted to fall to 48.2 from the previous data of 48.4. Meanwhile, ISM Manufacturing Prices are predicted to rise to 51.5 from the previous 50.3.

 

[Zerologic]

EURUSD rebounds after meeting 1.0247 support, further decline is possible

On Friday's trading, the EURUSD pair rose drawing a bullish candle from the low of 1.02620 to the high of 1.03099 and closed at 1.03066. Even though it is rising, this increase still draws a lower high than the previous candle which drew a bearish candle with a low of 1.02247 which is the current support point. Breaking the support level allows the pair to fall deeper.

Market experts see the currency pair falling further to parity levels due to the divergence of views of the Federal Reserve and the European Central Bank on the monetary policy outlook. On the one side, the Fed is predicted to reduce interest rates more slowly in 2025. On the other hand, the ECB sees a continuation of the policy easing cycle at the current pace.

Looking at the latest dot plot in the Fed's Summary of Economic Projections, stakeholders see the Federal funds rate heading toward 3.9% by the end of the year. This has indicated policymakers will only cut interest rates twice in 2025. According to the CME group's Fedwatch tool, the Fed did not change interest rates at its January meeting with the probability of reaching 88.8% while the probability of interest rates falling is only 11.2%.

The Fed's dovish forecast is driven by Trump's inflation-boosting policies such as strict immigration, higher import tariffs, and lower taxes.

Meanwhile, the dollar index (DXY), which previously rose at 109,533, saw a slight decline to 108,922. The Dollar Index is a benchmark for tracking the value of the USD against six major currencies.

Today investors' focus is on the EURUSD pair regarding German Prelim CPI data which is predicted to rise 0.3% from the previous revision of -0.2%.

 

[Zerologic]

USD/CHF records two days of losses as Swiss Real Retail Sales increase

Yesterday the USDCHF currency pair drew a bearish candle extending the decline of the previous candle at the weekend. Price has formed a high of 0.91047 and a low of 0.90085 closing at 1.90447.

Swiss Retail Sales increased 0.8% YoY in November, compared to 1.2% expected and 1.5% last. Even though it was beyond expectations, data from the US was the reason for the weakening of the USD yesterday. The US Final Services PMI was only 56.8 lower than the expected 58.5 the same as the previous data revision.

The dollar index (DXY) recorded a decline yesterday from 109,069 to a low of 107,750. The dollar index value is used to track the USD currency with six other currencies.

Apart from the influence of the weakening US dollar, the strengthening of the Swiss Franc was also due to increasing geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict. Considering the Swiss Franc is a safe-haven currency.

On Friday, the US manufacturing sector continued to contract in December, albeit at a slower pace, as the ISM Manufacturing PMI improved to 49.3 from 48.4 in November. This figure exceeded market expectations of 48.4.

However, the US dollar is still expected to strengthen. The Fed is expected not to reduce interest rates at its meeting at the end of January. In the latest dot plot in the Fed's Digest of Economic Projections, policymakers anticipate the Federal Funds Rate reaching 3.9% by the end of this year, indicating expectations of only two rate cuts in 2025.

According to data from the CME group's Fedwatch tool, the possibility of the Fed not changing interest rates in the January meeting is 93.1%, and only a 6.9% possibility of a rate cut.

Fed officials will be more cautious about their approach to rate cuts throughout 2025. Richmond Fed President Thomas Barkin highlighted that benchmark interest rates should remain tight until there is greater confidence that inflation will return to the 2% target

Today investors will focus on Swiss CPI data which is expected to fall -0.1%, the same as the previous revision. Meanwhile, data from the US focuses on ISM Services PMI and JOLTS Job Openings which may have a direct impact on currency performance.

 

[Zerologic]

AUD/USD is back under pressure after rising on Monday

Ahead of the release of Australian inflation data yesterday, the AUDUSD pair fell, drawing a bearish candle with a long shadow on the top candle, indicating buyer pressure was getting resistance. The AUDUSD currency pair formed a high of 0.62882, a low of 0.62279, and closed at 0.62291.

The Australian Dollar experienced an increase from its lowest level for three consecutive days as it received support from a moderate decline in the US Dollar even though Building Permit data for November was weaker than forecast.

The dollar index (DXY) has now returned to a rise at 108.683 from a low of 107.548. On the other hand, the prospect of a slower Fed rate cut and rising US bond yields supports USD buyers.

While US and China trade war concerns may lead the RBA to a dovish shift that could limit the Australian dollar's gains. The uncertainty of President Trump's tariff plans still worries investors to be more defensive.

On the other hand, the Fed indicated that it would slow down the pace of reducing interest rates in 2025. The US central bank is expected not to reduce interest rates at its January meeting.

Today investors will pay attention to Australian CPI data which is expected to be 2.2% from the previous revision of 2.1%. And US economic data ADP Non-Farm Employment Change is expected to fall 139k from the previous revision of 146k, and Unemployment Claims data is expected to rise 214k from the previous 211k.