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.