Forex News

Daily Market Movers: US Dollar on the rise ahead of labor market data

The US Dollar is currently trading with gains, with the DXY Index showing a positive upward trend neatly tucked above 103.70.
The US Dollar's upward trend appears largely driven by a sour market mood and rising bond yields.
No significant reports have surfaced during the session that could impact the US Dollar's current trajectory.
Market participants have their eyes set on key economic reports due this week. On the list are the Nonfarm Payrolls, the Unemployment Rate, ADP Employment Change and the ISM Services PMI updates, scheduled for release on Friday, Wednesday and Tuesday, respectively.
Overall, all reports are expected to show that the job creation picked up in November, while the ISM Services PMI is seen accelerating regarding its last reading of October.
US bond yields are edging higher, aligning with the Dollar's uptick. Specifically, the 2, 5 and 10-year yield rates are up, trading at 4.65%, 4.24%, and 4.29%, respectively.
The CME FedWatch Tool indicates no hikes are priced in for the upcoming December meeting, and markets speculate on rate cuts in mid-2024.

Technical Analysis: US Dollar struggles amid negative territory RSI and subdued SMAs

The indicators on the daily chart are reflecting a predominance of selling momentum. The index position, below the 20 and 100-day Simple Moving Averages (SMAs), indicates that the bears are maintaining control. This control is also noticeable from the Relative Strength Index (RSI), which shows a positive slope but remains in negative territory. This reveals that although buyers are gaining some strength, they are yet to overpower the sellers.

Meanwhile, the Moving Average Convergence Divergence (MACD) signifies decreasing red bars, adding further evidence of shrinking selling momentum. This deceleration is credited to the bears taking a breather after driving the index to its lowest level since last August.
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Support levels: 103.60, 103.30, 103.15, 103.00.
Resistance levels: 104.10 (20-day SMA), 104.40 (100-day SMA), 104.50.

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

How do the decisions of the Bank of Canada impact the Canadian Dollar?

The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

How does the price of Oil impact the Canadian Dollar?

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

How does inflation data impact the value of the Canadian Dollar?

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

How does economic data influence the value of the Canadian Dollar?

Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

USD/SEK elevates as US yields rise ahead of employment data, Riksbank minutes

Dec 04, 19:15 GMT

The USD/SEK rallies upward, up by 0.80%, trading around the 10.46 level.
A stronger USD and rising yields are pressuring the Swedish Krona.
The Riksbank November minutes showed confidence that previous rate hikes slowed the economy, which justified the pause.

In Monday's trading session, the USD/SEK advanced towards 10.458, under the influence of rising US yields and dovish sentiments cast by the Riksbank November minutes. For the rest of the week, the US employment data will be the highlight as it will help investors to continue modelling their expectations regarding the next Federal Reserve (Fed) moves.

The escalating strife between Israel and Hamas has also provided a boost for the U.S. dollar, the go-to safe-haven currency, reflecting heightened global risk aversion. In line with that, the US DXY index recovered towards 103.70, seeing more than 0.50% gains.

Currently, US Treasury yields are also rising ahead of key labour market figures from the US from November, which are due this week. The 2-year rate is recorded at 4.56%, while the 5-year and 10-year yields are marked at 4.24% and 4.28%, respectively and as yields rise, this typically benefits the USD.

In line with that, on Tuesday, the US ISM Services PMI by the Institute for Supply Management (ISM) is estimated at 52, a slight increase from the previous 51.8 and on Wednesday, the Automatic Data Processing (ADP) will release its Employment Change report. The headline events are on Friday when the US Bureau of Labor Statistics releases data on the Average Hourly Earning, Nonfarm Payrolls and Unemployment rate figures from November, all key metrics closely monitored by the Fed. In that sense, the bank will get a clearer outlook on the US economy, and it will probably have an important role in the upcoming decision, so the price dynamics of the USD may have an impact.

On the SEK’s side, Riksbank released its November meeting minutes. The document justified the surprising pause at 4% as previous rate hikes were slowing the economy, also impacting the labour market. Furthermore, no further hikes were hinted at, but the door was left open for further tightening in case data justifies it.

USD/SEK levels to watch

The indicators on the daily chart reflect that the bulls are advancing but have yet more work to do. The Relative Strength Index (RSI) position shows a positive slope but is currently in negative territory, while the Moving Average Convergence Divergence (MACD) shows rising green bars, an indication that the bullish momentum might be in its early stages, suggesting a potentially favourable condition for buyers if the momentum continues to develop and is sustained over time.

Nonetheless, the broader picture conveyed by the Simple Moving Averages (SMAs) offsets initial optimism. The asset stands below its 20, 100, and 200-day SMAs, which indicates the prevailing dominance of the sellers in the market.

Support Levels: 10.455, 10.448, 10.400.
Resistance Levels: 10.485, 10.490, 10.500.

USD/SEK daily chart

EUR/GBP sees meager rebound from 0.8560 as Euro gets a reprieve from selling pressure

Dec 04, 19:11 GMT

The EUR/GBP is moderately up on Monday, climbing 0.2%.
The Euro is catching a breather after two weeks of accelerated declines against the Pound Sterling.
A dovish ECB is doing the Euro few favors, midweek to bring EU Retail Sales figures.

The EUR/GBP is seeing a welcome break from ongoing Euro (EUR) selling, rebounding a modest two-tenths of a percent against the Pound Sterling (GBP) on Monday.

The EUR/GBP remains mostly flat on the day, with the majority of the pair’s gains coming at the very start of the new trading week’s opening session, but any news is good news for the Euro which has seen two weeks of rapid declines against the Pound Sterling.

Monday saw the Eurozone’s December Sentix Investor Confidence Index recover less than investors expected, with indexed investor outlook printing -16.8, down from the forecast -14.4, but still an improvement from November’s Sentix Investor Confidence read of -18.6.

ECB talking points, EU Retail Sales to drive the Euro-Pound Sterling pair

The European Central Bank (ECB) has settled into a repetitive speech cycle recently, noting that inflation continues to decline within the Eurozone, and markets have seen a discount applied to the Euro as investors remain skeptical that the ECB will be able to achieve a desirable rate of price growth within a reasonable timeframe, with the ECB hoping for inflation to cool to 2% sooner rather than later.

Wednesday will see October’s Eurozone Retail Sales, and the annualized headline is expected to come in at -0.9% compared to September’s -2.9%. The MoM figure for October is forecast to see a slight improvement from -0.3% to 0.2%.

EUR/GBP Technical Outlook

Monday represents the Euro's next chance to try and reverse recent declines, with EUR bidders looking to kick off a fresh bullish rally after the new week's early rebound from 0.8560.

The EUR/GBP has closed in the red for nine of the last ten trading sessions, shedding two and a third percent peak-to-trough since retreating from November's high bids of 0.8765, slipping cleanly through the 200-day Simple Moving Average (SMA).

The long-term moving average and the 50-day SMA are consolidating around 0.8680 and set to act as a magnet for medium-term price action rather than a hard limit.

EUR/GBP Hourly Chart

EUR/GBP Daily Chart

EUR/GBP Technical Levels

RBA Decision Preview: RBA set to keep interest rates unchanged at 12-year high of 4.35%

Dec 04, 18:00 GMT

Interest rate in Australia is likely to stay on hold at 4.35% in December after November’s hike.
Reserve Bank of Australia Governor Michele Bullock could leave the door ajar for more tightening.
The Australian Dollar is set to rock on any surprise in the language of the RBA’s policy statement.

The Reserve Bank of Australia (RBA) is set to pause its tightening cycle once again, leaving the Official Cash Rate (OCR) unchanged at a 12-year high of 4.35% following the conclusion of its December monetary policy meeting on Tuesday. The decision will be announced at 03:30 GMT.

As markets widely expect the RBA to keep interest rates unchanged, all eyes will remain on Governor Michele Bullock’s forward guidance in the policy statement for a fresh directional impetus on the Australian Dollar.

Reserve Bank of Australia to stand pat as inflation resurgence wanes

Amidst a resurgence of inflationary pressures, the Reserve Bank of Australia raised the benchmark interest rate by 25 basis points (bps) from 4.10% to 4.35% in November after keeping it on hold for four straight meetings.

Since then, Australia’s inflation and retail spending have cooled down, cementing the case for the central bank to keep its cash rate unchanged this week. Data from the Australian Bureau of Statistics (ABS) on Wednesday showed its monthly Consumer Price Index (CPI) climbed at an annual pace of 4.9% in October, slowing from the previous increase of 5.6% and below expectations of a 5.2% acceleration. The RBA’s closely-watched measure of core inflation, the trimmed mean, rose an annual 5.3% in October, easing from 5.4% the previous month.

The services inflation, measured by the Wage Price Index, rose 4.0% annually, at the fastest pace since early 2009. The uptick in pay growth was largely priced in by the RBA, as it hiked rates last month. Further, markets believe the surge in wage inflation is caused by one-off factors and is unlikely to be recurrent.

Meanwhile, Australian Retail Sales dropped 0.2% in October on a monthly basis, missing expectations for growth of 0.2% while reversing a 0.9% jump seen in September. Weakening economic indicators justify the expected pause in the central bank’s rate hike cycle.

The main attention, however, is likely to be on the language in the policy statement, especially after the RBA guidance in November was perceived as dovish after Governor Bullock said in the statement, "whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks." The October policy statement cited, “some further tightening of monetary policy may be required.”

The RBA will likely maintain its cautious tone, awaiting the fourth-quarter inflation report in January to decide on the next interest rate move for its first meeting of 2024 in February. Speaking at the Hong Kong Monetary Authority and Bank for International Settlements High-Level Conference last Tuesday, RBA Governor Bullock said, “the central bank has to be a ‘little bit careful’ with using rates to bring down inflation without lifting unemployment.”

Previewing the RBA policy decision, analysts at TD Securities (TDS) explained, “data has been mixed recently, with a red-hot labor market print but a sizeable retreat in CPI inflation and slowing retail sales. Thus, the RBA may take a cautious approach and keep rates on hold until Feb to reassess after it gets new staff forecasts and the Q4 CPI. We expect little change to the MPS but a hawkish tint may not be surprising after Bullock's recent remarks.”

How will the RBA interest rate decision impact AUD/USD?

The Australian Dollar’s (AUD) fate hinges on the RBA’s communication on the path forward on the interest rate. Should Governor Bullock explicitly mention that more rate hikes remain on the table, AUD/USD is likely to extend its ongoing uptrend. On the contrary, a dovish pause by the RBA could trigger a meaningful correction in the Aussie pair toward 0.6550.

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, notes key technicals to trade AUD/USD on the policy outcome. “AUD/USD has stalled its recent upbeat momentum just shy of the 0.6700 level, the highest level in four months. The 14-day Relative Strength Index (RSI), however, remains well above the midline while flirting with the overbought territory, suggesting that there is room for more upside in the Aussie pair.”

“Aussie buyers need acceptance above the July 31 high of 0.6740 on a daily closing basis to unleash further upside toward the 0.6800 round figure. The next upside barrier is seen around the 0.6850 region. On the downside, strong support is envisioned at Friday’s low of 0.6600, below which a test of the 200-day Simple Moving Average (SMA) at 0.6580 will be on the cards. The last line of defense for buyers is seen at 0.6550.”

Australian Dollar price today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		0.24%	0.41%	0.40%	0.55%	0.25%	0.51%	0.66%
EUR	-0.25%		0.18%	0.16%	0.32%	0.00%	0.28%	0.44%
GBP	-0.43%	-0.17%		-0.01%	0.15%	-0.16%	0.11%	0.26%
CAD	-0.40%	-0.16%	0.00%		0.16%	-0.17%	0.11%	0.28%
AUD	-0.56%	-0.33%	-0.15%	-0.16%		-0.33%	-0.05%	0.12%
JPY	-0.28%	0.01%	0.33%	0.16%	0.33%		0.31%	0.43%
NZD	-0.52%	-0.28%	-0.12%	-0.12%	0.06%	-0.27%		0.16%
CHF	-0.71%	-0.45%	-0.28%	-0.29%	-0.14%	-0.44%	-0.19%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

NZD/USD Price Analysis: Plummets from a four-month high, drops below 0.6200

Dec 04, 18:58 GMT

NZD/USD hit a three-month high, past the 0.6200 figure, but high US bond yields are undermining the pair.
Further downside is seen if the pair slumps below 0.6100, with the 200-DMA in sight.
Buyers keeping the NZD/USD exchange rate above 0.6200, to pave the way for 0.6300.

NZD/USD retreats late in the Monday North American session after rallying to a new four-month high of 0.6226, but a repricing for a less dovish US Federal Reserve witnessed a jump in US bond yields. Consequently, the pair tumbled more than 0.80% and trades at 0.6154.

The NZD/USD uptrend remains intact, though it is subject to a pullback. If the pair slides past the 0.6150 figure, the next support would be the November 30 swing low at 0.6120. Up next the 200-day moving average (DMA) at 0.6089. A breach of the latter and the pair could shift neutral if it slumps below the October 11 high turned support at 0.6055.

On the other hand, if NZD/USD buyers reclaim 0.6200, further upside is seen above 0.6226, followed by a test of the July 27 high at 0.6273. If those two supply zones are erased, a jump to 0.6300 is on the cards.

NZD/USD Price Analysis – Daily Chart

NZD/USD Technical Levels

Canadian Dollar struggling to hold onto recent gains as US Dollar rebounds to kick off another NFP week

Dec 04, 16:17 GMT

Most recent article: Canadian Dollar stretches higher against the US Dollar on Friday after Canadian jobs beat

The Canadian Dollar sees downside pressure on Monday.
Canadian economic calendar data is limited in the early week, USD flows to dominate.
The next BoC rate call is coming up on Wednesday.

The Canadian Dollar (CAD) pared back some of last week’s gains as the US Dollar (USD) sees a broad-market recovery on the back of renewed risk aversion. The Canadian Dollar is down roughly a third of a percent against the Greenback on Monday.

Canada is absent from the economic calendar for the early half of the week, with the latest rate call from the Bank of Canada (BoC) due on Wednesday. The BoC is expected to hold rates steady at 5% for the fourth meeting in a row.

Daily Digest Market Movers: Risk aversion is back on the menu as investor appetite sours, Canadian Dollar softens as US Dollar recovers

The Canadian Dollar has given back half of a percent against the US Dollar in Monday trading.
The CAD has performed strongest against the Antipodeans to kick off the trading week, up around two-thirds of a percent and half of a percent against the Aussie (AUD) and the Kiwi (NZD), respectively.
The Canadian Dollar is seeing Monday gains against all major currencies except for the US Dollar.
The BoC’s upcoming rate call should represent an entire quarter of no rate hikes, as long as policymakers meet markets in the middle.
The BoC raised eyebrows when they gave interest rates an additional 25-basis-point bump back in July.
Monday’s markets are chewing on a miss in US Factory Orders, which also saw a downside revision to previous figures.
US Factory Orders declined 3.6% in October, falling even further below the median market forecast of a 2.6% contraction.
September’s US Factory Orders were revised from 2.6% to 2.3%.
Tuesday will bring more of the same CAD-light data docket, with the US ISM Services Purchasing Managers Index (PMI) being the key data focus.

Canadian Dollar price today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the US Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		0.63%	0.80%	0.46%	1.13%	0.66%	0.98%	0.62%
EUR	-0.65%		0.18%	-0.17%	0.51%	0.02%	0.37%	-0.01%
GBP	-0.84%	-0.17%		-0.34%	0.33%	-0.15%	0.18%	-0.19%
CAD	-0.46%	0.17%	0.35%		0.66%	0.18%	0.54%	0.17%
AUD	-1.15%	-0.51%	-0.34%	-0.69%		-0.50%	-0.14%	-0.53%
JPY	-0.69%	0.00%	0.31%	-0.17%	0.50%		0.35%	-0.04%
NZD	-1.00%	-0.36%	-0.18%	-0.54%	0.14%	-0.34%		-0.37%
CHF	-0.67%	0.01%	0.18%	-0.18%	0.53%	0.01%	0.36%

Technical Analysis: Canadian Dollar attempts to arrest further declines after Greenback bidders draw a line in the USD/CAD at 1.3500

The Canadian Dollar (CAD) fell back against the US Dollar (USD) in a broad-market risk rebound that sent the USD/CAD higher after rebounding from the 1.3500 handle.

Near-term bullish momentum remains limited with the USD/CAD getting snagged on the 50-hour Simple Moving Average (SMA), and Monday’s current high bid sits at 1.3560.

Intraday action sees a technical ceiling at the 200-hour SMA near 1.3610, and the figure for Canadian Dollar bidders to beat will be Monday’s bottom bids at 1.3480.

Monday’s pullback brings omens of US Dollar (USD) strength on the daily candlesticks, with the 200-day SMA acting as technical support just above the 1.3500 handle.

Adding to the US Dollar rebound picture, technical indicators are leaning firmly into exhaustion territory, with the 14-day Relative Strength Index (RSI) tapping the lower bound, indicating oversold conditions.

On the other hand, a bullish continuation of the Canadian Dollar’s recent strength will see a fresh run at September’s low bids near 1.3380.

USD/CAD Hourly Chart

USD/CAD Daily Chart

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

How do the decisions of the Bank of Canada impact the Canadian Dollar?

How does the price of Oil impact the Canadian Dollar?

How does inflation data impact the value of the Canadian Dollar?

How does economic data influence the value of the Canadian Dollar?

Mexican Peso plummets to a two-day low against US Dollar

Dec 04, 15:52 GMT

Mexican Peso treads versus the US Dollar as USD/MXN posts solid gains, approaches to 17.50.
Mexico’s economic docket revealed that Gross Fixed Investment printed a monthly decline in September.
Money market futures expect the US Federal Reserve to slash rates by more than 130 basis points toward the end of next year.

Mexican Peso (MXN) loses steam against the US Dollar (USD) during the North American session, as the rise in US Treasury bond yields is underpinning the US Dollar. Even though US Federal Reserve (Fed) Chair Jerome Powell pushed back against rate cut expectations, he failed. Nevertheless, the USD/MXN does not reflect that, as it trades at around 17.48, gaining more than 1.80 % daily.

Mexico's economic docket revealed that Gross Fixed Investment fell -1.5% MoM in September, reported the National Statistics Agency, INEGI. The same measures grew 21.9% in the twelve months to September, slowing from 29.2% from the August reading. Last Friday, the Bank of Mexico (Banxico) revealed that remittances in October rose by $5.81 billion. However, a stronger Peso dragged down the value of cash sent home by Mexicans living overseas. In Pesos, remittances fell 2.3% and 6.3% in real local currency terms when considering the Mexican currency appreciation, Goldman Sachs Analysts cited by Reuters said.

In the meantime, on Friday, Fed Chair Powell said he requires more evidence of the disinflationary process in the US despite acknowledging a decrease in prices. Nevertheless, he cautioned that it’s too soon to declare victory against inflation and added the Fed is ready to raise rates if needed. Despite Powell’s words, money market futures had priced in more than 130 basis points of rate cuts by the US central bank next year, with the first slash expected as soon as May 2024.

US Treasury bond yields are rising, with the 10-year benchmark note coupon at 4.255%, a tailwind for the Greenback. The US Dollar Index (DXY), which tracks the currency’s performance against a basket of six rivals, climbs 0.46%, up at 103.66.

Daily digest movers: Mexican Peso trims last Friday’s gains

Banxico revises economic growth upward from 3% to 3.3% for 2023 and projects the economy will rise 3% in 2024, from 2.1% previously forecast.
Regarding inflation prospects, the Mexican central bank foresees headline inflation at 4.4% in Q4 2023 (5.3% for core), while at the end of 2024, it is estimated at 3.4% (3.3% for core). The central bank forecasts headline and core inflation not to hit the 3% target imposed by the institution until 2025.
The Federal Reserve's favorite inflation gauge in October, the Core PCE Price Index rate softened from 3.7% to 3.5% YoY. Moreover, headline PCE inflation dropped from 3.4% to 3.0% YoY for the same twelve-month period.
On November 27, Banxico’s Deputy Governor, Jonathan Heath, commented that core prices must come down more, adding that one or two rate cuts may come next year, but “very gradually” and “with great caution.”
On November 24, a report revealed the economy in Mexico grew as expected in the third quarter on an annual and quarterly basis, suggesting the Bank of Mexico would likely stick to its hawkish stance, even though it opened the door for some easing.
Mexico's annual inflation increased from 4.31% to 4.32%, while core continued to ease from 5.33% to 5.31%, according to data on November 23.
A Citibanamex poll suggests that 25 of 32 economists expect Banxico's first rate cut in the first half of 2024.
The poll shows “a great dispersion” for interest rates next year, between 8.0% and 10.25%, revealed Citibanamex.
The same survey revealed that economists foresee headline annual inflation at 4.00% and core at 4.06%, both readings for the next year, while the USD/MXN exchange rate is seen at 19.00, up from 18.95, toward the end of 2024

Technical Analysis: Mexican Peso trips down as USD/MXN climbs above the 100-day SMA

The USD/MXN edges higher, as depicted by the daily chart, threatening to reclaim the 100-day Simple Moving Average (SMA) at 17.36. A breach of the latter could expose the November 30 daily high at 17.49, ahead of testing the 200-day SMA at 17.56. If buyers reclaim that level, then there would be nothing on the way north to challenge the 50-day SMA at 17.69.

Conversely, a bearish resumption is possible if USD/MXN stays under the 100-day SMA and slides below the 17.20 area. Once done, the first demand zone would be the 17.05 mark, ahead of the November 27 swing low of 17.03. If the pair drops below that level, the psychological 17.00 figure would be up next.

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

AUD/USD slumping back into 0.6600 as Aussie backslides ahead of RBA rate call

Dec 04, 18:22 GMT

The AUD/USD is down over a full percent in one-sided action on Monday.
The Aussie has seen Friday’s gains entirely pared away as markets bid up the US Dollar.
RBA broadly expected to stand pat on rates once more as the Australian economy weakens.

The AUD/USD has steadily fallen on Monday, backsliding a full percent plus extra and paring back last week’s late rally, sending the Aussie (AUD) back towards the 0.6600 handle against the US Dollar (USD).

The Reserve Bank of Australia (RBA) is broadly expected to hold interest rates at 12-year highs of 4.35% for the December rate call, scheduled to be announced at 03:30 GMT.

See More: Australia Interest Rate Decision Preview

Market focus will be on RBA Governor Michele Bullock’s ensuing press conference as investors attempt to glean as much forward guidance out of the RBA’s statements as possible.

The RBA gave an additional 25 basis point rate hike in November as inflation continues to plague the Australian economy, but hampered economic growth and unsteady domestic market pressures are leaving the RBA stuck between a rock and a hard place.

RBA expected to hold at 4.35%

Further rate hikes threaten to further destabilize the Australian economy, and too little action on rates in the face of still-high inflation threatens to exacerbate inflation in a self-fulfilling prophecy cycle of prices running ahead of consumer expectations of further inflation.

With Aussie markets focusing squarely on the RBA, the Aussie central bank’s rate statement will dictate the near-term flows of the AUD, but near-term moves will be quickly capped off heading into the mid-week as investors gear up for 2023’s final US Nonfarm Payrolls print due on Friday.

AUD/USD Technical Outlook

The Aussie’s Monday backslide sees 0.6600 back on the table, wiping away Friday’s bull rally into 0.6690. The AUD/USD’s inability to reclaim the 0.6700 handle is exacerbating downside flows, and the pair is set for an intraday clash with the 200-hour Simple Moving Average (SMA).

The AUD/USD has seen a bullish recovery in recent weeks, climbing nearly 7% from October’s bottom bids at 0.6270. Further bullish topside is looking limited with prices struggling to develop momentum at the 200-day SMA, but bidders will be looking for an upside continuation if an extended decline sees the pair challenging the 50-day SMA rising into 0.6450.

AUD/USD Hourly Chart

AUD/USD Daily Chart

AUD/USD Technical Levels

USD/JPY gains as the US 10-year bond yield climb

Dec 04, 18:14 GMT

USD/JPY gains steam sponsored by overall US Dollar strength and high US yields.
Expectations that the US Federal Reserve would cut rates had been adjusted.
Upcoming US data eyed, the ISM Services PMI and JOLTs job openings.

USD/JPY edges higher by more than 0.30% on Monday, though it remains below the Ichimoku Cloud (Kumo), which suggests the pair is undergoing an ongoing upward correction as the pair resumes its downward trend. Hence, the major Is trading at 147.23 after hitting a daily low of 146.22.

The pair sees an uptick, trading at 147.23, as market dynamics shift following recent economic data and Fed signals

The USD/JPY pair remains trading in an uptrend as US Treasury bond yields advance, mainly the 10-year benchmark note, rising close to ten basis points at 4.289%, a tailwind for the major. Another factor is that investors aggressively priced in rate cuts by the US central bank, according to the Chicago Board of Trade (CBOT) data.

Last Friday, the Federal Funds Rate futures contract for December 2024 suggested the US central bank would cut rates by 140 basis points to 4.105%. Nevertheless, the same contract has witnessed a ten basis point jump due to investors reducing rate-cut bets by Jerome Powell and Co.

On the data front, US Factory Orders disappointed investors, as the US Commerce Department revealed a contraction of -3.6% in new orders for US made goods, below September’s 2.3% expansion, though missed estimates of a -2.8% contraction. It’s the most significant monthly drop since April 2020. The data failed to trigger a reaction in the markets, which are eyeing the release of the ISM Non-Manufacturing PMI on Tuesday, alongside employment data.

On the Japanese front, the Japanese Yen (JPY) will get direction from the Tokyo inflation report, alongside Jibun Bank Services and Composite PMIs.

USD/JPY Price Analysis: Technical outlook

The daily chart portrays the pair as neutral to downward biased, with the USD/JPY staying below the Kumo. If buyers want to shift the bias, they must reclaim key resistance levels, as they need to break above the top of the Kumo, as of Today, seen at 149.40. Once done, the next resistance would be 149.50 before testing the 150.00 figure.

On the other hand, USD/JPY falling below the 147.00 figure could exacerbate a test of the September 11 low at 145.89, ahead of the September 1 daily low at 144.44.

USD/CHF climbs back over 0.8700 after Swiss CPI inflation misses the mark

Dec 04, 17:27 GMT

The USD/CHF caught some relief, rebounding back over 0.8700 on Monday.
Swiss CPI inflation declined faster than markets expected, pressuring the Swiss Franc.
Broader markets have turned into the US Dollar as risk aversion returns to the fold.

The USD/CHF has rebounded on Monday, climbing 0.6% and touching 0.8750 as the US Dollar (USD) climbs across the board, fueled by broad-market risk-off flows, and the Swiss Franc (CHF) takes a hit after the Swiss Consumer Price Index (CPI) inflation reading misses the mark.

A worse-than-expected decline in US Factory Orders in October is fueling the broader market's souring risk appetite, with overall orders for manufactured goods in the US declining 3.6% versus the market's median expectation of -2.6%. September's Factory Orders also saw a downside revision from 2.8% to 2.3%.

Risk appetite takes a hit on Monday

Investors are seeing renewed jitters about the global economy as economic indicators begin to decline across the board, and growth appears to be wobbling across all major markets.

Switzerland's November CPI missed expectations, with the annualized CPI into November printing at 1.4% compared to the forecast 1.6%, declining even further from October's YoY print of 1.7%. The decline in Swiss CPI appears to be accelerating at the front end of the tail, with November's MoM CPI slipping -0.2% compared to October's 0.1% print.

It's a thin week on the economic calendar for the CHF, and the market's focus will be turning to Tuesday's US ISM Services Purchasing Manager's Index (PMI). Markets are hoping for an upside print in the monthly US Services PMI, which is forecast to tick upwards from 51.8 to 52.0.

USD/CHF Technical Outlook

Despite Monday's rebound, the USD/CHF remains notable bearish, with the Dollar-Franc pairing coming off the back of three consecutive weeks of declines. The pair is down five and a half percent from October's early bids near 0.9245, and US Dollar bulls have their work cut out for them.

The immediate floor for bids sits at Monday's early low of 0.8666, and the 0.8700 handle is proving a sticky level for the USD/CHF.

Technical indicators are leaning firmly into overbought territory, and an elastic snap higher will see bidders taking a fresh run at the 200-day Simple Moving Average (SMA) which is descending into 0.8950.

A near-term bull run will have to contend with a 50-day SMA set for a bearish crossover of the 200-day SMA, and the immediate ceiling for bidders will be sdupport-turned-resistance at mid-October's swing low into the 0.8900 handle.

USD/CHF Daily Chart

USD/CHF Technical Levels

Gold Price Forecast: XAU/USD retreats from all-time-high, as US bond yields advance

Dec 04, 16:52 GMT

Gold price experiences a significant drop of over 2%, after reaching a record high of $2,135.40.
Fed Chair Jerome Powell's recent remarks emphasized caution, stating that the Fed is prepared to act if necessary and that it's too early to declare victory over inflation.
US Real yields, a key driver for gold, also increased by nine basis points to 2.06%.

Gold price plunges more than 2% in early trading during the North American session on Monday after reaching an all-time-high (ATH) due to money market futures traders increasing bets the US Federal Reserve (Fed) would slash rates next year. At the time of writing, XAU/USD is trading at $2,024.13.

XAU/USD sees a sharp decline following Fed Chair Powell's comments and rising US Treasury yields

On Friday, the Fed Chair Jerome Powell pushed back against rate cut expectations, saying that if needed, the US central bank is prepared to act. Even though it acknowledged that inflation is slowing, and welcomed the latest PCE reading, he emphasized that it’s too early to declare victory. After Powell’s remarks, money market futures priced in 140 basis points of rate cuts toward December 2024. Futures attached to December’s contract expect the federal funds rate (FFR) at 4.105%.

In the meantime, US Treasury bond yields had trimmed some of last week’s losses. The US 10-year benchmark note rate is at 4.288%, nine basis points up from its opening price. Consequently, US Real yields, which greatly influence the prices of Gold, rose nine basis points, up by 2.06%.

The US economic docket revealed that orders for newly made goods fell more than estimated in October, the biggest drop in three and a half years. Estimates were around -2.8% contraction, but factory orders dropped -3.6%, below September’s downward revised 2.3% jump. The report shows the manufacturing sector is feeling the impact of higher interest rates. Last week’s ISM Manufacturing PMI was unchanged at 46.7, suggesting the economy continued to slowdown

XAU/USD Price Analysis: Technical outlook

Gold uptrend remains intact, but Monday’s price action could pave the way for a deeper correction as the downtrend accelerates, registering losses of more than $45.00 USD. The next support is seen at the October 27 daily high at $2,009.42 before challenging the $2,000 figure. A bullish resumption might happen, once the XAU/USD climbs above the May 4 swing high at $2,081.82, and the $2,100 mark.

GBP/USD slipping back towards 1.2600 as Pound Sterling sheds weight

Dec 04, 16:41 GMT

The GBP/USD is faltering on Monday as risk aversion seeps back into market sentiment.
The US Dollar is front-running the rest of the FX market as investors pull back into safe havens.
The Pound Sterling has shed three-quarters of a percent against the US Dollar on Monday.

The GBP/USD is down nearly eight-tenths of a percent on Monday as the Pound Sterling (GBP) gives up ground to the US Dollar (USD) in a broad-market risk-off bid that has investors pulling back into the safe haven Greenback.

The new trading week has kicked off with a fresh bout of risk aversion as investors come face-to-face with a global slowdown looming over economies across all three major market sessions.

There's little of note on the economic calendar for the Pound Sterling to kick off the new week, and the rest of the week remains lightly-populated as well. The US Dollar is set to drive market reactions to data heading through the rest of the week, which culminates in another reading of the US Nonfarm Payrolls (NFP) report on Friday.

US data to feature heavily this week, Friday's NFP looms ahead

US Factory Orders in October declined more than investors expected, printing at -3.6% versus the expected -2.6%, and September's manufactured goods purchases also saw a downside revision from 2.8% to 2.3%. Economic activity is beginning to show hardening weak spots, both in the US and across the globe.

Investors appear to be remembering that despite an economic slowdown accelerating the chance of rate cuts from the Federal Reserve (Fed), a global recession is, in fact, bad for business, and souring economic data is seeing investors pulling back into safe havens.

The Pound Sterling will get another chance at redemption, or at least preventing further declines, when the UK's BRC Life-For-Like Retail Sales for the year into November prints early Tuesday at 00:01 GMT. Markets are expecting a tick down in UK comparative retail sales from 2.6% to 2.5%.

GBP/USD Technical Outlook

The Pound Sterling (GBP) saw refreshed selling pressure on Monday against the US Dollar (USD), with the GBP/USD opening up the trading week slipping from early bids near 1.2720 back down towards 1.2600.

Intraday charts are seeing a technical snag at the 200-hour Simple Moving Average (SMA), but the GBP/USD remains firmly bearish in the near term as the pair trades on the south side of the 50-hour SMA.

Daily candlesticks for the GBP/USD are getting mired in the midrange, with recent upside momentum facing a technical ceiling at the 1.2700 handle. The GBP/USD has been on the climb ever since crossing the 200-day SMA near 1.2450 back in mid-November, but bullish momentum appears to be draining and the pair is primed for at least a minor pullback.

GBP/USD Hourly Chart

GBP/USD Daily Chart

GBP/USD Technical Levels

Silver Price Analysis: XAG/USD faces downward rally after reachingm multi-month highs, rising yields

Dec 04, 16:24 GMT

The XAG/USD is experiencing a more than 3% downward rally, after soaring to near $26.00.
A stronger US dollar amid escalating tensions between Israel and Hamas weighed on the metal.
US bond yields are seeing nearly 2% increases on the day.
The US will report key employment data throughout the week.

The XAG/USD pair witnessed a downward rally in Monday's trading session, currently trading around $24.50 as bulls consolidate gains, which took the price to a high since May of $25.95 earlier in the session. The key movers of the day pushing Silver lower are the rise in US yields ahead of key employment data from the US. In addition, the intensification of the geopolitical conflict between Israel and Hamas has benefited the USD, and as global tensions rise, investors are resorting to the green haven.

In line with that, US Treasury yields are rising, seeing more than 2% increases. The 2-year rate is at 4.64%, while the 5-year and 10-year rates are trading at 4.22% and 4.28% respectively. This yield surge negatively affects the price of non-yielding metals, as US Treasury bond yields are usually perceived as their opportunity cost. That said, the dovish rhetoric on the Federal Reserve (Fed) dominates markets, recently pushing the price higher and the US bond rates lower. The short-term focus is now on employment data, which will determine the trajectory of the bond market, as the bank remains data-dependent and left the door open for further tightening.

On Wednesday, investors will pay close attention to the Automatic Data Processing (ADP) Employment Change report from November, and on Thursday, weekly Jobless Claims are due. On Friday, the spotlight will be on the U.S. Bureau of Labor Statistics as they release crucial data on the Unemployment Rate and Nonfarm Payrolls, significant indicators of the US labour market's health closely monitored by the Fed. Its outcome may affect the expectations of the next decisions and hence may trigger volatility in bond markets and in the metal’s price.

XAG/USD levels to watch

The daily chart indicators reflect indications of a bullish consolidation in the short term to correct overbought conditions. The Relative Strength Index (RSI), projecting a negative slope while still within the positive territory, indicates a potential pullback or consolidation phase as the bulls take a breather after jumping to nearly $26.00 earlier in the session, its highest since May. In addition, the Moving Average Convergence Divergence (MACD) displays rising red bars, denoting that selling pressure is increasing.

However, as the price is trading above the 20, 100, and 200-day SMAs, the longer-term buying momentum is significantly stronger, suggesting that despite short-term interruptions, the bulls maintain overall control.

Support Levels: $24.00, $23.76 (20-day SMA), $23.00.
Resistance Levels: $25.00, $25.50, $26.00.

XAG/USD daily chart

US Dollar jumps to crucial technical levels on Monday

Dec 04, 12:30 GMT

Most Recent Artcile: US dollar strengthens amid sour market mood and rising yields

The US Dollar Index steady in the 103-area though a technical rejection looms.
The Greenback booked its third consecutive weekly decline on Friday.
US traders are entering the last two weeks of normal trading before the holidays.

The US Dollar (USD) is going all in for risk off this Monday as tensions in the Middle East are creating risk off across the board in equity markets. With a flight to safe havens, yields are soaring in favor of the Greenback, which in it turns sees traders come back and buy the US Dollar. This makes an interesting case going forward, if the US Dollar Index (DXY) might be breaking back above a crucial technical indicator with more strenght ahead.

On the economic front, a very light calendar is due on Monday, but data will pile up throughout the week up to the main event on Friday: the US Jobs Report, or Nonfarm Payrolls. Expect to see mild moves in the crosses against the Greenback with most traders keeping their powder dry for Friday. Other job-related data like the JOLTS and ADP numbers will also be released this week.

Daily digest: US session ekes out more gains

Several reports emerge out of Gaza where Israeli tanks have been spotted just outside Khan younis.
The spread between US and German bonds is soaring again, after tightening throughout November.
At 15:00 GMT,US Factory Orders data for October was released, with a decline from 2.3% to -3.6%.
The US Treasury can benefit from the recent decline in US rates and will be placing a 3-month and a 6-month bill in the markets.
Equities continue to slide in Asia. The Hong Kong Hang Seng Index leads the decline, losing more than 1%. European equities are mildly in the red, while US futures are flat ahead of the start of this trading week.
The CME Group’s FedWatch Tool shows that markets are pricing in a 97.7% chance that the Federal Reserve will keep interest rates unchanged at its meeting next week.
The benchmark 10-year US Treasury Note trades at 4.27%, and steady off this week’s low.

US Dollar Index technical analysis: New US Dollar cycle

The US Dollar trades around 103.31 at the time of writing when gauged by the DXY US Dollar Index. From a technical point of view, the US Dollar is trading near crucial levels. Although last week the DXY was unable to break back above important technical levels, it appears that a more substantial catalyst is needed to push the DXY back above that crucial 200-day Simple Moving Average (SMA) near 103.58, visible on a daily chart. With the US Jobs Report on Friday, that might be enough for the Greenback to reestablish its status as King Dollar before closing up shop for the holidays.

The DXY is making its way further up towards the 200-day Simple Moving Average (SMA), which is near 103.58. The DXY could still make it through there should employment data trigger rising US yields again. A two-tiered pattern of a daily close lower followed by an opening higher would quickly see the DXY back above 104.28, with the 200-day and 100-day SMA turned over to support levels.

To the downside, historic levels from August are coming into play, when the Greenback summer rally took place. The lows of June make sense to look for some support, near 101.92, just below 102.00. Should more events take place that initiate further declines in US rates, expect to see a near-full unwind of the 2023 summer rally, heading to 100.82, followed by 100.00 and 99.41.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

Euro weakens to the 1.0820 region, or three-week lows

Dec 04, 09:05 GMT

The Euro loses further ground against the US Dollar.
European stocks trade with decent gains across the board.
US Factory Orders surprised to the downside in October.

The Euro (EUR) loses further grip against the US Dollar (USD), dragging EUR/USD to retreat to three-week lows around the 1.0820 region at the beginning of the week. This area also coincides with the critical 200-day SMA.

Conversely, the Greenback appears to be enjoying marked buying interest circa 103.70 when gauged by the performance of the US Dollar Index (DXY), managing to flirt with the area of multi-session tops and surpass the key 200-day SMA at the same time.

Considering the broader economic landscape, investors consider potential interest rate reductions by both the Federal Reserve (Fed) and the European Central Bank (ECB) in the spring of 2024.

In the Eurozone docket, Germany’s trade surplus widened to €17.8B in October and the sentix Index, which measures Investors' Confidence in the euro bloc, improved to -16.8 for the month of December. Later in the session, ECB’s Vice Chair of the Supervisory Board Frank Elderson is also due to speak.

Across the ocean, US Factory Orders contracted at a monthly 3.6% in October.

Daily digest market movers: Euro looks weak and revisits the 200-day SMA

The EUR starts the week well on the defensive against the USD.
US yields rebound following Friday's strong pullback.
Investors see the Fed reducing its rates in Q2 2024.
The ECB could start cutting rates in the spring of 2024, according to markets.
ECB's Vice President Luis De Guindos reiterated the bank's data-dependent stance.
EMU Sentix Index improved a tad to -16.8 in December.
Lagarde will speak later in the session, around 14:00 GMT.

Technical Analysis: Euro risks a deeper drop below 1.0820

EUR/USD kicks off the new week with a marked retracement and approaches the critical 200-day Simple Moving Average (SMA) at 1.0818.

If the EUR/USD continues to experience further losses, it could potentially face the mentioned 200-day SMA as an initial point of support. In the event of a breach, the 55-day SMA at 1.0682 is likely to provide temporary support. However, if this level is also cleared, it would expose the weekly low of 1.0495 (October 13), followed by the 2023 low of 1.0448 (October 3) and the psychological level of 1.0400.

If there are occasional bullish attempts, they are likely to encounter immediate resistance at the November peak of 1.1017 (November 29). This is followed by the August high of 1.1064 (August 10) and another weekly top of 1.1149 (July 27). These levels act as hurdles before reaching the 2023 peak of 1.1275 (July 18).

The pair is anticipated maintaining its bullish outlook while remaining above the 200-day SMA.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

EUR/USD Price Analysis: Initial support emerges at 1.0820

Dec 04, 14:55 GMT

- EUR/USD gives away further ground and retests 1.0820.

- The loss of the 200-day SMA should spark extra declines.

EUR/USD retreats for the fourth session in a row and puts the key 200-day SMA to the test on Monday.

A drop below the latter should pave the way for a deeper pullback to, initially, the intermediate 100-day SMA at 1.0778 and the 55-day SMA at 1.0681.

So far, while above the significant 200-day SMA, the pair’s outlook should remain constructive.

EUR/USD daily chart

Australia: Further rate hikes by the RBA are not ruled out – UOB

Dec 04, 14:49 GMT

Economist at UOB Group Lee Sue Ann comments on the upcoming RBA monetary policy meeting (December 5).

Key Quotes

While we are keeping our policy outlook unchanged (expecting the RBA to keep the peak policy rate of 4.35% at the Dec meeting and in 1Q24), the chance of another interest rate rise remains a live option, especailly amid concerns inflation may remain stubbornly high for longer then expected.

We have also now pushed back our first rate cut to take place in 3Q24

USD Index Price Analysis: Further gains likely above 103.57

Dec 04, 14:45 GMT

DXY resumes the upside and approaches 103.80.
Extra upside looks likely once the 200-day SMA is cleared.

DXY regains the smile and advances to multi-day highs past 103.70 on Monday.

If the key 200-day SMA (103.57) is surpassed, the index is expected to face more sustained gains to, initially, the weekly top of 104.21 (November 22) ahead of the transitory 100-day SMA at 104.37.

In the meantime, above the key 200-day SMA, the outlook for the index is expected to shift to bullish.