The US Dollar continues to
consolidate around the highs although it’s stronger against the commodity
currencies. In the bigger picture, the market reached the peak in the repricing
of interest rates expectations, and it will need stronger reasons to price out
the remaining rate cuts for 2025.

In fact, despite lots of
strong US data, the market’s pricing remaining largely unchanged around three
rate cuts by the end of 2025. The focus is now on the US CPI report. It looks
like the Fed really wants to cut next week before pausing for some months. So,
we might need an upside surprise in the core inflation numbers to force them to
change plans.

Even if the Fed decides to
cut next week despite a hot CPI, the market will likely scale back further the
rate cuts expectations for 2025 and that could trigger some risk aversion with
the US Dollar rallying across the board. The best scenario would be a soft
report given the overstretched long positions in the greenback. In such a case,
we can expect the US Dollar to selloff across the board.

On the NZD side, the RBNZ cut interest rates by 50 bps as expected
recently. We haven’t got any fresh New Zealand data in the meantime, but the
market increased the chances for a 50 bps cut in February to 57% with a total
of 104 bps of easing by the end of next year.

NZDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that NZDUSD sold off all the way to the 2023 low around the 0.5773 level.
This is where we can expect the buyers to step in with a defined risk below the
level to position for a rally back into the 0.6050 level. The sellers, on the
other hand, will want to see the price breaking lower to increase the bearish
bets into new lows.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, there’s
not much we can add here as the buyers will look for a rally from this level
and the sellers will look for a break. From a risk management perspective, the
sellers will have a better risk to reward setup around the trendline although we will likely need a soft
US CPI report today to trigger a rally into the trendline.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor downward trendline defining the current bearish
momentum on this timeframe. The sellers will likely continue to lean on it to
position for new lows, while the buyers will look for a break higher to
increase the bullish bets into the major trendline. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US CPI report. Tomorrow, we have the US Jobless Claims and
the US PPI.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The US Dollar continues to
consolidate around the highs although it’s stronger against the commodity
currencies. In the bigger picture, the market reached the peak in the repricing
of interest rates expectations, and it will need stronger reasons to price out
the remaining rate cuts for 2025.

In fact, despite lots of
strong US data, the market’s pricing remaining largely unchanged around three
rate cuts by the end of 2025. The focus is now on the US CPI report. It looks
like the Fed really wants to cut next week before pausing for some months. So,
we might need an upside surprise in the core inflation numbers to force them to
change plans.

Even if the Fed decides to
cut next week despite a hot CPI, the market will likely scale back further the
rate cuts expectations for 2025 and that could trigger some risk aversion with
the US Dollar rallying across the board. The best scenario would be a soft
report given the overstretched long positions in the greenback. In such a case,
we can expect the US Dollar to selloff across the board.

On the GBP side, the last UK CPI report came in higher than expected. The BoE’s
members sounded a bit less dovish recently and although BoE’s Governor Bailey expects four rate cuts by the end
of 2025, the market thinks otherwise seeing three rate cuts as the most likely
scenario for now.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD managed to break above the major downward trendline. The bullish momentum might now increase
but it will need support from a benign US CPI today as a hot report will likely
boost the USD. The sellers will want to see the price breaking below the major
upward trendline to position for a drop into the 1.23 handle next.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor upward trendline defining the current bullish
momentum. We have also a strong support
zone around the 1.2715 level which should give the buyers a strong technical
level where to lean on with a defined risk below the support. The sellers, on
the other hand, will want to see the price breaking lower to position for a
drop into the major upward trendline.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else we can add here as the US CPI report today should decide where we
go next. A break above the counter-trendline around the 1.2780 level should
increase the bullish momentum. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US CPI report. Tomorrow, we have the US Jobless Claims and
the US PPI. Finally, on Friday we conclude the week with the UK GDP.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

It is being reported that the US trade representative’s office will later today announce a doubling of tariff on Chinese solar wafers and polysilicon to 50%, with tungsten products also to be slapped with a 25% levy. This as part of Biden’s final efforts to protect US manufacturing from China’s cleantech industry.

The new tariffs are said to go into effect on 1 January, just a little less than three weeks before Trump officially takes office.

For some background, the solar wafers and polysilicon are primarily used in solar cell manufacturing while tungsten can be used in a variety of things but is arguably targeted as part of weaponry and chip making processes. All in all, it’s yet another area in which US is targeting China as part of the tech war between the two countries.

The full report by the FT can be found here (may be gated).

This article was written by Justin Low at www.forexlive.com.

The US Dollar continues to
consolidate around the highs although it’s stronger against the commodity
currencies. In the bigger picture, the market reached the peak in the repricing
of interest rates expectations, and it will need stronger reasons to price out
the remaining rate cuts for 2025.

In fact, despite lots of
strong US data, the market’s pricing remaining largely unchanged around three
rate cuts by the end of 2025. The focus is now on the US CPI report. It looks like the Fed really wants to cut next week before pausing
for some months. So, we might need an upside surprise in the core inflation
numbers to force them to change plans.

Even if the Fed decides to
cut next week despite a hot CPI, the market will likely scale back further the
rate cuts expectations for 2025 and that could trigger some risk aversion with
the US Dollar rallying across the board. The best scenario would be a soft
report given the overstretched long positions in the greenback. In such a case,
we can expect the US Dollar to selloff across the board.

On the EUR side, tomorrow the
ECB is expected to cut interest rates by 25 bps bringing the policy rate to
3.00%. The market’s pricing has been very aggressive lately due to a series of
weaker than expected economic releases, but the majority of ECB’s officials
pushed back against a 50 bps cut in December. After this week’s cut, the market
sees five more in 2025 which could turn out to be too much if things pick up
next year.

EURUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that EURUSD continues to consolidate between the 1.06 resistance
and the 1.05 support. From a risk management perspective, the sellers will have
a better risk to reward setup around the trendline to position for a drop into new
lows. The buyers, on the other hand, will want to see a break higher to
increase the bullish bets into the 1.09 handle next.

EURUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the rangebound price action that’s been going on for a few
weeks as the market reached the peak in the repricing of rate cuts for the Fed.
We have an interesting zone around the 1.0550 level that’s been acting as kind
of a barometer with the price above it being more bullish and below it being
more bearish. Overall though, we continue to trade in a range and the US CPI
report today should finally get us out of it.

EURUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a downward trendline defining the current bearish momentum.
The sellers will likely continue to lean on it to position for new lows, while
the buyers will look for a break higher to target the major trendline. The red
lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US CPI report. Tomorrow, we have the ECB rate decision, the
US Jobless Claims and the US PPI.

This article was written by Giuseppe Dellamotta at www.forexlive.com.