After the DXY snaps a two-day recovery, US Dollar fails to break the resistance of 105.00 and bounced back. DXY portrays the market’s cautious mood ahead of the United States’ key inflation numbers for November, the Consumer Price Index which is going to be released on Tuesday, since the inaction of DXY could be linked to the mixed prints of the early signals for it, as well as the mixed reaction to the headlines surrounding China and Russia.

Besides, while investors broadly expect the Fed to raise rates by 50 basis points, the market will be focused on the central bank’s projections for how high rates will ultimately rise and to what degree the U.S. economy can withstand monetary tightening and the CPI data has sparked explosive market gyrations, as surging inflation forced the Fed to embark on its most aggressive monetary policy.

The Dow Jones Industrial Average has raised 1.58% to close at 34005.04. The S&P 500 raised 1.43% to close at 3990.56. The tech-heavy Nasdaq Composite raised 1.26% to close at 11143.74. The surge in the stock market was the reaction to the coming of CPI, the estimated softer inflation was also seen from the PPI and the UoM Consumer Sentiment Index, moreover, the survey of consumer inflation expectations from the Fed also stated that the 1-year ahead inflation expectations slumped to their lowest level since 2021. Treasury yields drop,  U.S. 10-year treasury yield sits at around 3.6%. The policy-sensitive 2-year treasury yield sits at 4.381%.

US inflation expectations as per the 10-year and 5-year breakeven inflation rate, challenge the recently dovish bias over the Fed, as well as downbeat forecasts for the US Consumer Price Index, and the latest prints of the 5-year and 10-year inflation expectations portray a rebound to 2.28% and 2.35% respectively. The downbeat prints of the United States PPI also hinted at softer US inflation.

Main Pairs Movement

The US Dollar Index extends the previous weekly gains, the first time in three weeks, as it picks up bids to refresh its intraday high around 105.10 during early Monday. The DXY index fell sharply during the UK trading period to a daily low of 104.67 level ahead of the American session. The latest market inaction could be linked to the investors’ cautious mood ahead of the United States’ key inflation numbers for November, namely the Consumer Price Index (CPI).

The GBPUSD has little changed on Monday, as Gross Domestic Product (GDP) grew by 0.5% on a monthly basis in October following September’s 0.6% contraction. This reading came in much better than the market expectation for a contraction of 0.1% but the positive impact of the upbeat GDP data on the Pound Sterling remained short-lived. However, data failed to act as a tailwind for the pair, the pair erased most daily gains in the American session as market participants turned cautious. Meanwhile, EURUSD dropped dramatically in the early American trading session and the pair slid by 0.03% on a daily basis.

Gold dropped by 0.88% on a daily basis, the most in a week, as the US Dollar began the crucial week on a positive note despite downbeat inflation expectations and upbeat performance of the equities, as well as the Treasury bond yields.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR recorded solid gains against the greenback during the trading course of North America due to the overall weakness of the US dollar. The US inflation report may confirm that rate hikes are curbing inflation, which could pave the way at a faster pace. Last week’s US Department of Labor showed that US PPI rose for the third consecutive month, over 0.3% of expectations and increasing 7.4% YoY versus 7.2% expected. Meanwhile, the US CPI will be disclosed on Tuesday, expected to fall to a consensus of 7.3% YoY from 7.7% last month. If the figure shows that inflation is cooling off, this could trigger Euro buying and put pressure on the dollar.

In the Eurozone, ECB expected to raise interest rates by at least 50 basis points. The federal reserve may be responsible for the unexpected decline in the greenback, as the turning point in inflation has been proven. Conversely, it is too early to assert that the same is true for the ECB; thus, inflation in the EU remains high and there is little respite. These very different scenarios mean that this week’s central bank meeting could support EUR/USD.

The EURUSD has rebounded from a 20-year low of 0.9536 set in October and is trading at 1.0595 currently, but it has failed to rise above previous highs of 1.0615 and 1.0638, these levels may continue to act as resistance levels. The 260-day SMA is also in this area as a resistance level which is at 1.0596 currently. On the downside, support can be considered as 1.0443, 1.0290 and 1.0198 which are previous low and inflexion points.

Resistance: 1.06

Support: 1.0443, 1.0290, 1.0223 

GBPUSD (4-Hour Chart)

The GBP firmed on Monday in a bullish cycle that is targeting the 1.2400 area, which could be a measure up from the recent lows around 1.2100. On the fundamental side, the world is focusing on the Fed and BoE interesting rate announcements this week. Generally speaking, BoE is expected to raise by 50 points to 3.50%. As for the Fed, same as BoE, they are expected to rise by 50 points to 4.25%-4.50%. Meanwhile, world interest rate probabilities suggest that a 50 bp hike on December 14 by the FOMC is fully priced in, with only around 10% odds of a larger 75 points move. When we take a look at UK, uncertain growth outlook in the future growing domestically. Concerns about a prolonged recession in the U.K. are still weighing on sentiment. Analysts at Rabobank believe the U.K. recession is likely to have started since last quarter and is widely expected to continue throughout the next whole year. Another potential risk for the GBP lies in the vulnerability of the housing market. Some hawkish favoured upside in EURGBP, as the ECB has the wiggle room to deliver 75 points, based on the market’s expectations for 50 points raise.

GBPUSD managed to stay above its 200-day moving average after the decline in the first half of the week. On the daily chart, the RSI stays above 60 and the pair continues to trade within the rising regressing channel that has been in place since the end of September. 1.1200, the key support of 200-day SMA. If the pair falls below this level and becomes resistant, the pair would go south to 1.2000 or 1.1900.

Resistance: 1.2400, 1.2600

Support: 1.2100, 1.1900, 1.1760

XAUUSD (4-Hour Chart)

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The US Department of Labor will release November inflation figures on Tuesday. The annual rate of core CPI, which excludes volatile food and energy prices, is expected to rise to 6.4% from 6.3% in October.

Market reaction to the inflation report is likely to be immediate, with a weaker core CPI reading suppressing the dollar and providing a boost to XAUUSD and vice versa. A rise in 50 point rate should not be surprising based on FOMC chairman Powell admitting in his last public statement that it would make sense to moderate the pace of interest rate hikes. However, if Fed chooses to raise by 75 points, which is very unlikely at this point, gold could come under heavy bearish pressure and fall sharply.

The New York Fed released its Survey of Consumer Expectations, which showed that inflation expectations for the year ahead have declined, although they remain high. Meanwhile, the survey showed that expected inflation marked a record MoM decline in November, while the median inflation uncertainty fell in the short and medium term.

The charts for gold still show a bullish bias, but the upside shows the difficulty in holding on above $1,800.

A clear sign is a daily close above $1,805 last week, which could open the door to the next strong resistance at $1,810. In the very short term, the bias is to the downside, with the next support level at

$1,775. The price has been down to $1,780 at this moment.

Resistance: 1800, 1810, 1830

Support: 1775, 1765, 1748, 1726

Economic Data

The upcoming financial week will be filled with economic data and speculation, as inflation and interest rate decisions will be announced by most central banks.

The CPI inflation figures in the US are expected to rise by 0.3% in November, which might signify another slowdown in inflation. The financial markets will pay close attention to these figures as they could impact the Fed interest rate decision.

The UK Consumer Price Index annual inflation rate is expected to rise to 11.3% in November.

Meanwhile, the Swiss National Bank (SNB), Bank of England (BoE), and European Central Bank (ECB) are scheduled to announce their monetary policy decisions this week.

Here are the financial market updates for the week ahead:

​​UK Gross Domestic Product (12 December)

In September, UK Gross Domestic Product contracted by 0.6% month-on-month, following a downwardly revised 0.1% decline in August.

UK GDP is expected to increase by 0.4% in October.

US Consumer Price Index (13 December)

October’s US CPI increased 0.4% month-on-month, slowing the annual inflation rate in the US to 7.7% in October, the lowest since January 2022. 

Analysts predict that November’s CPI will increase slightly by 0.3%, to 7.6%.

UK Consumer Price Index (14 December)

The CPI annual inflation rate in the UK jumped from 10.1% in September to 11.1% in October, and analysts expect that it will further rise to 11.3% in November.

Fed Interest Rate Decision (15 December)

The Federal Reserve increased its benchmark interest rate by 75bps, to 3.75% – 4% in November, which marks the sixth consecutive hike and the fourth three-quarter point increase.

Jerome Powell, the current Fed chairman, has hinted that the Fed may scale back the pace of its interest rate hikes come December. Analysts believe the Fed will raise the federal funds rate by 50bps this month.

SNB, BoE, ECB Rate Statement (15 December)

Monetary policy decisions by the SNB, BoE, and ECB are being closely monitored this week.

SNB increased its interest rate by 75bps and is forecast to increase by a further 50bps in December to 1%.

BoE voted to raise interest rates by 75bps to 3% in November, with interest rates expected to increase by 50bps to 3.5%.

ECB increased its key interest rate by 75bps. Analysts forecast ECB to raise another 50bps in December.

US Retail Sales (15 December)

The US retail sales rose 1.3% month-on-month in October after a flat reading in September.

According to analysts, retail sales is either expected to maintain at 0.0%, or fall by 0.1% in November.

Eurozone, UK, and US Flash Services and Manufacturing PMI (16 December)

French and German Flash Services PMI declined in November. However, an increase was recorded in their manufacturing PMI.

On the other hand, UK Flash Services and Manufacturing PMI remained the same in November from the previous month. In the US, Flash Services PMI fell from October to November.

Flash Services PMI in France and Germany is expected to decline in December, with UK and US figures forecast to rise. Manufacturing PMI in the UK, France, and Germany may also decline for this month.

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The DXY and the US equity market moved in an inverse correlation, the U.S. Michigan Consumer Sentiment and PPI released last Friday both showed a positive future for the U.S. Dollar, the greenback had little bounce that raised 0.11%, sits at $104.932, moreover, the December CPI report scheduled to release on Tuesday, might lead to further gains for US stocks the turning point for stock market of this week, the market expects inflation to cool down further and the annual CPI to drop to 7.3% from 7.7% and a drop of monthly CPI from 0.4% to 0.3%, both shows a bearish in the USD market.

The Dow Jones Industrial Average has dropped 0.9% to close at 33476.46. The S&P 500 dropped 0.73% to close at 3934.38. The tech-heavy Nasdaq Composite dropped 0.7% to close at 11004.62. The fall of the stock market was the reaction to the decline of the annual PPI, also Consumer sentiment indicated the bearish for the stock market. Treasury yields rose, U.S. 10-year treasury yield sits at around 3.567%. The policy-sensitive 2-year treasury yield sits at 4.33%.

According to last week, the headline CPI is expected to remain stable at 7.7%. While the core inflation could display a slight improvement to 6.4% from the former release of 6.3%. The inflationary pressures could display a surprise jump as labour demand remained extremely tight in November and the service sector is booming led by solid demand, S&P500 faced heat on Friday and is expected to remain precautionary ahead as a further rate hike by the Fed is going to escalate recession fears in the United States economy.

Main Pairs Movement

GBP/USD has failed to surpass the resistance of 1.23 and dropped to near 1.2250, the US Dollar index is failing to recapture the round-level resistance of 105.00 as investors have shifted to the sidelines amid a cautious market mood. On the United Kingdom front, the BOE is set to hike its interest rates further by 50 bps, the United Kingdom’s economy is in a recession led by an extreme debt crisis, weak economic prospects, and an absence of exhaustion in inflation.

EUR/USD remains in a bullish structure with a focus on a break above 1.0600, before that, it has to break 1.055 first, overall the US data is firmer than Europe, which in turn could help the EUR/USD pair bears to keep the reins. However, major attention will be given to the ECB versus Fed drama for clear directions.

Gold price is aiming to recapture a five-month high at around $1,800.00 as the risk-on profile is regaining traction. The precious metal is aiming to extend its recovery above the round-level resistance of $1,800.00 as the risk-appetite theme has regained strength. Besides, investors have shifted their focus toward the release of the US Consumer Price Index (CPI), which is scheduled for Tuesday

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD has traded mostly sideways on the last trading day of the week. The Euro found bidding at the start of the European trading session but soon came under selling pressure as the U.S. released its PPI data, which came in above market expectations. The hotter-than-expected PPI figure buoyed the Greenback but bidding did not sustain into the American trading session; on the other hand, U.S. equities continued to fall after the impact of the hotter-than-expected PPI figure and closed the week on a low note. On the economic docket, the U.S. FOMC interest rate decision will be announced during the late U.S. trading session on the 14th, while the ECB interest rate decision will be announced at the start of the American trading session on the 15^th.

On the technical side, EURUSD has attempted to break above our previously estimated resistance level of 1.0595 but was ultimately successful. EURUSD continues to hover slightly below that level. The support level for the pair remains at around the 1.031 price region. RSI for the pair sits at 53.98, as of writing. On the four-hour chart, EURUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.06

Support: 1.031, 1.0265

GBPUSD (4-Hour Chart)

Cable edged higher on the last trading day of the week. The British Pound was able to gain against the rising Dollar due to a major reformation proposed by the British government on Friday. The new reformation, the Edinburgh Reforms,  is set to relax some of the stringent restrictions the U.K. financial sector had to follow under EU rules. The new reformation is expected to spur growth and competitiveness in the U.K. financial sector and hopefully attract foreign investments. However, the reformation has also attracted criticism, which reminded the public of the catastrophe, that happened more than 15 years ago, triggered by unbalanced favouring of the financial sector. On the economic docket, the Bank of England will announce its interest rate decision during the late European trading session on the 15th, while the Fed’s interest rate decision will be announced during the late American trading session on the 14^th.

On the technical side, GBPUSD currently trades below our previously estimated resistance level of 1.234. The short-term support level for the pair remains at 1.177. The 23.6% Fibonacci retracement level of 1.2065 indicates another near-term support level. RSI for the pair sits at 62.28, as of writing. On the four-hour chart, GBPUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.2400, 1.2600

Support: 1.2154, 1.1927, 1.1765

XAUUSD (4-Hour Chart)

Gold continued its upward trend on the last trading day of the week. The precious metal is entering its third straight day of gains as the Dollar continues to retreat ahead of the FOMC interest rate decision. The yellow metal closed out the week with modest gains and consolidated around the $1800 per ounce price level. Market participants will now turn their attention to a heavily packed economic data release week with releases from the Fed, BoE and ECB. A spike in volatility for Gold is expected around the time of the key interest rate decisions by these three major central banks. Gold prices were able to advance despite negative signs of higher inflation still slipping out at key economic data such as China’s PPI and the U.S. PPI, indicating higher price pressure for November. Geopolitical tensions around the globe and recessionary fears have both acted as tailwinds for the yellow metal.

On the technical side, Gold continues to hover slightly below our previously estimated resistance level of $1800 per ounce. The weaker Dollar has allowed Gold to break through this key psychological level a couple of times on Friday, but the yellow metal fails to consolidate above $1800 per ounce this week. RSI for the pair sits at 56.54, as of writing. On the four-hour chart, XAUUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: $1810

Support: $1766, $1735

Economic Data

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U.S. equities bounced back as the Initial Jobless Claims showed higher than the previous number, which is a sign that the inflationary pressures are still around, and the Fed may keep rates higher. On Friday, the data releases include producer prices and the University of Michigan’s consumer sentiment reading will be the turning point for the stock market of this week. The Dow Jones Industrial Average has raised 0.55% to close at 33781.48. The S&P 500 raised 0.75% to close at 3963.51.

The tech-heavy Nasdaq Composite raised 1.13% to close at 11082. The Dow rose was due to tech rebounded, shrugging off a climb in Treasury yields as investors looked ahead to data due Friday expected to show a further easing in inflation. Treasury yields rose, U.S. 10-year treasury yield sits at around 3.485%. The policy-sensitive 2-year treasury yield sits at 4.315%.

This Friday, after US shares, posted their first gain this month, with traders awaiting key inflation figures in China and the US. Oil rose at the open in Asia after tapping a fresh one-year low in a volatile session on Thursday. 

The CPI, PPI, NFP, and Pre-Fed sentiment keeps DXY bulls hopeful even as downbeat US data since mid of November, risk-on mood favour bears. The dollar remained lower versus its major counterparts as the geopolitics-driven appetite for haven investments faded. The Australian and New Zealand dollars held gains from overnight in early Asian trading. However, the greenback’s gauge versus the six major currencies braces for the first weekly gain in three ahead of the key US consumer-centric data.

Main Pairs Movement

The US dollar’s consecutive losses since Wednesday, the release of U.S. Initial Jobless Claims on Thursday adds another resistance on the hawkish side, though the number was too high and overestimated, it is still higher than the previous, which is taken as negative/bearish for the USD. Meanwhile, the consensus is for China’s inflation indexes to have headed down last month, though the market investors expect a pickup as the economy reopens.

EUR/USD continues its strength and keeps winning, and this pair is eying more upside towards a weekly high at 1.0600 amid a cheerful market mood. EUR/USD is eying more upside towards a weekly high at 1.0600 amid a cheerful market mood and looking for stability at this point.

The Gold price extends a three-day uptrend, thanks to the firmer sentiment, and downbeat United States statistics weighed on the US Dollar. Not only due to the Fed policy and statement, China is one of the world’s key Gold consumers, with its new rules about coronavirus, but the China Consumer Price Index (CPI) is also looking optimistic, the gold price is with the scheduled top-tier readings from China and the United States.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD continued its rallying trend from a low of 1.0458 this week to a high of 1.0563 on the day. The rising trend came from the diminishing expectations for the Fed to keep raising interest rates at the same aggressive pace. Weekly initial jobless claims rose to 230K, as expected, continuing claims, however, jumped to 1.671M, exceeding the forecast of 1.6M.  The initial jobless claims reports showed signs that the labour market is slowing down. The European Central Bank is set to announce interest rate decisions next week and is expected to fight against stubbornly high inflation. “At the next week’s meeting, we expect the ECB to deliver a 50bp rate hike with a hawkish twist. Specially, we expect the ECB to present key principles of the end to reinvestments under the Asset Purchase Program process and an open-ended wording for more rate hikes to come. This will be a compromise, which we believe will be palatable to both hawks and doves.” analysts at Danske Bank said.

While on the front side of the daily trendline, EUR/USD bulls are firming from near 1.0480 support and are taking on resistance around 1.0570. A break there opens the risk of a move in EUR/USD beyond 1.0600. A move in EUR/USD below the trendline, however, will expose supports near 1.0490 and 1.0440 and open prospects of a deeper correction towards 1.0400.  Bulls are defending the downside at around 1.0490, with little chance of a bearish breakout at the time. The following support positions will head south to around 1.031.

Resistance: 1.06

Support: 1.031, 1.0265

GBPUSD (4-Hour Chart)

GBPUSD has extended its gains from the previous trading day and traded higher again throughout Thursday’s trading. Cable is expected to ebb around the 1.2 price region ahead of next week’s major monetary policy decisions by the two central banks. The Fed FOMC will announce its interest rate decision during the late American trading session on the 14th; whereas, the Bank of England will announce their interest rate decision during the late European trading session on the 15th. Both countries also have CPI data scheduled to be released next week. U.S. equities have turned positive throughout Thursday’s trading, thus allowing the Dollar to retreat slightly and pushing the British Pound higher against the Greenback.

On the technical side, GBPUSD continues to float slightly below our previously estimated resistance level of 1.23. Near term support level for the pair remains at 1.177. Any upside or downside shock from the BoE or FOMC next week could quickly destroy the recovery path of Cable, which began around late September. RSI for the pair sits at 63.36, as of writing. On the four-hour chart, GBPUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.2400, 1.2600

Support: 1.2154, 1.1927, 1.1765

XAUUSD (4-Hour Chart)

Gold has entered its third straight day of gains amid a broadly weaker U.S. Dollar. Risk on sentiment across equity markets on Thursday weighed on the U.S. Greenback and allowed the Dollar-denominated Gold to climb higher. Sideways trading of the precious metal is expected for the yellow metal as market participants will be heavily invested in next week’s FOMC interest rate decision and how the decision will impact the Greenback. Geopolitical tensions around the world continue to buoy Gold at above the $1700 per ounce price level. Despite winter nearing, Russia’s invasion of Ukraine shows no signs of slowing down. The Kremlin has engaged in a 1-to-1 prisoner swap with the U.S. government to regain one of the more influential arms dealers—Victor Bout.

On the technical side, XAUUSD currently hovers slightly below our previously estimated short-term resistance level of $1800 per ounce. The short-term support level for Gold settles around the 61.8% Fibonacci retracement level of $1783 per ounce. RSI for the pair sits at 56.78, as of writing. On the four-hour chart, XAUUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: $1800

Support: $1766, $1735

Economic Data

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U.S. equities kept falling as Gold seemed as a hedge currency, S&P 500 is starting to turn more decisively lower and the gold price raised 0.86%. The Dow Jones Industrial Average has little raise to close at 33597.92. The S&P 500 dropped 0.19% to close at 3933.92. The tech-heavy Nasdaq Composite dropped 0.51% to close at 10958.55. After a result, the risk-off factor came from Moscow, mid-US session. Russian President Vladimir Putin warned that the threat of a nuclear war is rising, coming with the news, yields finished the day in the red, as demand for government bonds resurged. U.S. 10-year treasury yield sits at around 3.438%.  The policy-sensitive 2-year treasury yield sits at 4.26%.

The dollar index slipped on Wednesday, reversing the bounce of the past two days after it repeatedly failed to clear strong resistance at $105.57.Although fundamentals are getting mixed for the dollar, deflated since October by speculations that the Fed would slow the pace of its aggressive policy tightening, as the latest economic data signal that the US economy remains quite robust and less harmed by a strong rise in interest rates than initially anticipated.

Besides, earlier in the day, China announced a series of measures relaxing coronavirus restrictions, moving away from the zero-Covid policy and the US Dollar finished Wednesday with losses against most of its major rivals, despite a dismal market mood. The decline was contained, but it’s clear that the tie has changed for the American currency and more declines are now on the docket.

Main Pairs Movement

The US dollar finished with losses on Wednesday, after a consecutive rise since the beginning of the week. Earlier in the day, China announced a series of measures relaxing coronavirus restrictions, moving away from the zero-Covid policy, and another risk-off factor came from Moscow, mid-US session. Russian President Vladimir Putin warned that the threat of a nuclear war is rising, adding that nuclear weapons could be used to defend itself and its allies.

EUR/USD was up for the day but off high on Wednesday, the pair had fallen to below  1.05 following the warns by Russian President Putin about the increasing nuclear war risks, however, after two consecutive daily losses, recovering from the three-day lows, the primary trend remains bullish and is aiming the resistance at 1.0600.

The gold price rose and broke the $1780, thanks to the optimism surrounding China and the risk from  Russia’s nuclear threat, also with the United States Treasury bond prices rallied, together with the Gold price, which in turn drowned the bond yields and the US Dollar, the benchmark 10-year Treasury bond yields dropped to the lowest levels since early September by losing 3.30% in a day to 3.42% level at the latest. Further, the politic-sensitive two-year counterpart dropped 2.54% to the 4.26% mark.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD traded 0.41% higher throughout yesterday’s trading. The Euro found ample bidding at the start of the European trading session; however, as soon as the American trading session began, the Euro came under immense selling pressure as market participants bid up the Greenback. Market participants will now turn their attention to ECB president Lagarde’s speech, which is scheduled during the late European trading session. The U.S. will be releasing weekly initial jobless claims figures at the start of the American trading session. The falling U.S. treasury yield has acted as a tailwind for the Euro during recent months. As U.S. interest rate expectations fall short-term yields are expected to continue to fall; however, a definitive pivot from the Fed should not be expected at the December FOMC interest rate decision.

On the technical side, EURUSD has failed to break above our previously estimated resistance level of 1.0595. The short-term support level for the pair remains at around the 1.031 price region. The 61.8% Fibonacci retracement level of 1.0265 presents itself as a secondary support level for the pair. RSI for EURUSD sits at 52.08, as of writing. On the four-hour chart, EURUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.06

Support: 1.031, 1.0265

GBPUSD (4-Hour Chart)

GBPUSD snapped its two-day losing streak and headed higher throughout Wednesday’s trading. Risk-averse market sentiment sent the U.S. Greenback higher on Tuesday, but the Dollar retreated over Wednesday as U.S. treasury yields also fell lower. The most recent speech by Fed Chair Jerome Powell has convinced a majority of market participants that a pivot on the Fed’s stance on monetary policy is just around the corner; however, what these market participants fail to consider is the fact that inflation has been running at more than 9% since early 2021. The Fed’s ultimate goal of price stability and bringing inflation back down to normal levels will continue to require higher interest rates and slower growth of the economy. On the economic dockets, the U.S. will release initial jobless claims figures on Thursday and PPI data on Friday.

On the technical side, GBPUSD has failed to break above our previously estimated resistance level of 1.2349. The short-term support level for Cable exists at around the 1.177 price region. RSI for the pair sits at 55.82, as of writing. On the four-hour chart, GBPUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.2400, 1.2600

Support: 1.2154, 1.1927, 1.1765

XAUUSD (4-Hour Chart)

After suffering a 1.61% drop on the first trading day of the week, Gold rebounded strongly throughout Wednesday’s trading. The precious metal found relief as the U.S. Greenback retreated over falling treasury yields. Several factors could undermine the recent rally of the yellow metal, however, including China finally easing Covid-19 restrictions and the all-important FOMC meeting scheduled for December 13th to the 14th. Geopolitical tensions worldwide continue to be the central pillar supporting Dollar-denominated Gold. The prolonged war between Russia and Ukraine continues to plague the world economy and provides optimism for Gold bulls.

On the technical side, XAUUSD has consolidated around the $1770 per ounce price region and is on its way to our previously estimated resistance level of $1800 per ounce. The short-term support level for the yellow metal sits at around the $1766 per ounce price region. RSI for Gold sits at 56.04, as of writing. On the four-hour chart, XAUUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: $1800

Support: $1766, $1735

Economic Data

U.S. equities hit their peak and kept falling after the speech of Fed Chair Powell on 12/1. There was a rebound on 12/2 because of the release of nonfarm payrolls, but the pressure from hawkishness is on the cards. The Dow Jones Industrial Average dropped 1.03% to close at 33596.34. The S&P 500 dropped 1.44% to close at 3941.26. The tech-heavy Nasdaq Composite dropped 2% to close at 11014.89. After all, a step down to 50 basis points in December would be an unambiguous signal that a specific deceleration in policy tightening should benefit long equities and USD shorts so long as US corporates can ward off an earnings recession, keeping risk on an even keel. The dollar falls, and short-term Treasury rates fall. The 10-year Treasury yield in the United States is still hovering around 3.539%. The yield was last seen trading over 3.7% at the end of November. The policy-sensitive 2-year Treasury yield sits at 4.34%.

Although the US dollar has weakened precipitously since the beginning of December, the S&P 500 has struggled to break higher ground, then the NFP saved the DXY, and now investors find themselves torn between trading the downturn in inflation vs. the negative impact on growth due to the aggressive hiking cycle. In the meantime, DXY hits its resistance at $105.5.

Besides, with CPI, PPI, and, most importantly, the core PCE deflator pointing to weakening price pressures, the Federal Reserve’s hawkish messaging will unquestionably be challenged by the market via cycle compression. Play the short dollar card and aim for the rising potential stock market for the best risk/reward.

Main Pairs Movement

The US dollar ended Tuesday with modest gains of 0.26% daily. In the absence of an economic calendar, the safe-haven greenback attracted some risk-aversion flow during the US trading session, managing to rebound from a daily low of 104.9 to around 105.5. Now, investors are seeking safety amid gloomy economic warnings from bank chiefs at a time when concerns about the impacts of Federal Reserve policy on growth and corporate earnings are running rampant.

The GBPUSD fell 0.47% daily, as mixed market sentiment and a lack of major data, as well as optimism surrounding China and the pre-Fed blackout, allowed the GBP/USD to remain firmer. However, the pair was dropping below the 1.2140 level at the late American trading hour as the US Dollar successfully found some positive traction. In the meantime, the EURUSD fell below the 1.0470 level and recorded 0.23% losses on Tuesday.

The XAUUSD was slightly moving up with a 0.13% daily gain for the day, struggling to find a decisive direction in the absence of clues about the Federal Reserve’s rate hike policy. During the late UK trading session, gold broke through the $1780 mark, but faced heavy selling and fell below the $1770 mark during the American trading hours.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD traded 0.45% lower throughout Monday’s trading. The Dollar Index, which tracks the U.S. Dollar against a basket of foreign currencies, rose 0.75% throughout yesterday’s trading. Without major economic data releases, EURUSD retraced higher throughout the 6^th. Observing the pair since September, EURUSD has been on a steady rise, and the pair was further stimulated after the ECB hiked rates by 75 basis points in late October. The increasingly hawkish ECB and the gradually dovish Fed could soon create a sentiment differential between the two central banks; however, compared to the EU, the economic outlook for the U.S. remains more upbeat—evident from the upward surprise of the nonfarm payrolls figure released last week.

On the technical front, the EURUSD hit our previously estimated short-term resistance in the 1.06 price range during yesterday’s trading. Short-term support for the pair remains around the 1.035 price region. The 76.4% Fibonacci retracement of 1.0391 presents itself as a short-term entry opportunity for the recovering euro. RSI for the pair sits at 53.9, as of writing. On the four-hour chart, EURUSD currently trades above its 50, 100, and 200-day SMAs.

Resistance: 1.06

Support: 1.0391, 1.035

GBPUSD (4-Hour Chart)

GBPUSD traded 0.82% lower throughout Monday’s trading. On Monday, the British pound fell against the dollar as market participants saw a dip in buying opportunities for the US currency. On Tuesday, the U.K. released its November construction PMI figure, which came in at 50.4, a downward surprise from the market consensus of 52. The lower PMI figure from the U.K. is a confident signal for the BoE as the central bank hikes interest rates by 75 basis points in November. Slowing price pressure from the manufacturing sector is a long-awaited sign for the BoE as the central bank suffers from running out of measures to tame inflation in a quickly contracting British economy. On the economic docket, the U.S. will release jobless claims figures on the 8^th and November PPI on the 9^th.

On the technical side, GBPUSD has continued to challenge our previously estimated resistance level at around the 1.23 price region. Cable has yet to break out of this resistance level, but the weakening U.S. dollar will present pound bulls with ample opportunity. RSI for the pair sits at 55.3, as of writing. On the four-hour chart, GBPUSD currently trades above its 50, 100, and 200-day SMAs.

Resistance: 1.2400, 1.2600

Support: 1.2154, 1.1927, and 1.1765

XAUUSD (4-Hour Chart)

XAUUSD retreated 1.67% throughout Monday’s trading. The precious metal met heavy selling pressure as the U.S. dollar rebounded. The momentum behind the recovering dollar was further boosted by the rise in short-term U.S. treasury yields. The benchmark U.S. 10-year Treasury yield has recovered above 3.5% and was last seen trading at 3.551%. The upward surprise of the U.S. ISM PMI index released on Monday rattled market participants, who had falsely bought into the narrative of a Fed pivot and potential slowing of interest rate hikes. Gold, however, remains attractive as global geopolitical tensions continue to rise. The Russian-Ukrainian war continues to rage on in Eastern Europe, while China’s “zero CO2” policy has sparked protests across the country.

On the technical side, XAUUSD continues to retrace from our previously estimated resistance level of $1800 per ounce. Our short-term support level estimate remains at $1735 per ounce. The 50% Fibonacci retracement level of $1769 per ounce also acts as short-term support for the yellow metal. On the four-hour chart, XAUUSD currently trades above its 50, 100, and 200-day SMAs.

Resistance: $1800

Support: $1769, $1735

Economic Data