USD

• The Fed left interest rates unchanged as
  expected with a shift in the statement that indicated the end of the tightening
  cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t
  push back against the strong dovish pricing and even said that they are focused
  on not making the mistake of holding rates high for too long, which implies a
  rate cut coming soon.
• The US CPI last
  week came in line with expectations with the disinflationary progress
  continuing steady. This was also confirmed by the US PPI the
  day after where the data missed estimates.
• The labour market has been showing signs of
  weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
  in strongly.
• The US Retail Sales last
  week beat expectations across the board as consumer spending continues to hold.
• The latest ISM Manufacturing
  PMI
  missed expectations falling further into contraction, while the ISM Services PMI beat
  forecasts holding on in expansion.
• The market expects the Fed to start cutting rates
  in Q1 2024.

NZD

• The RBNZ kept its official cash rate
  unchanged at the
  last meeting while stating that demand growth continues to ease and it’s
  expected to decline further with monetary conditions remaining restrictive.
• The New Zealand inflation data missed expectations supporting the
  RBNZ’s stance.
• The latest labour market report showed a notable increase in
  the unemployment rate and a slowdown in wage growth which is something that will
  keep the RBNZ on the sidelines.
• The Manufacturing PMI fell further into contraction
  followed by the Services PMI which fell back into contraction.
• The market expects the RBNZ to start
  cutting rates in Q3 2024.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD surged
to new highs following the surprisingly dovish FOMC decision and it’s now
testing a key trendline. This is
where we can expect the sellers to step in with a defined risk above the
trendline to position for a pullback into the upward trendline and eyeing a
break lower. The buyers, on the other hand, will want to lean on the upward
trendline where they will find the 21 moving average for confluence.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that in case of a
pullback the buyers will also find the 50% Fibonacci retracement level
around the trendline for further confluence. From a risk management
perspective, the buyers will have a much better risk to reward setup around the
upward trendline to target the 0.64 handle. The sellers, on the other hand,
will want to see the price breaking below the trendline to invalidate the bullish
setup and increase the bearish bets into the 0.6050 support.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
pair is diverging with
the MACD right
at the key trendline. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. Some aggressive buyers might want to lean
on the minor upward trendline to position for a breakout to the upside and
target the 0.64 handle. The sellers, on the other hand, will want to see the
price breaking below the trendline to confirm the reversal and target the 50%
Fibonacci retracement level.

Upcoming Events

This week is a bit empty on the data front as we head
into the Christmas holidays. Today, we have the US Consumer Confidence report. Tomorrow,
we get the latest US Jobless Claims data, while on Friday we conclude the week
with the US PCE report.

This article was written by FL Contributors at www.forexlive.com.

• Prior -35

The slump in UK factory orders eases in December, with the headline reading being the highest since September. That being said, it’s still a poor reading overall but at least output expectations did see a rise to +5 from -7 in November.

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

USD

• The Fed left interest rates unchanged as expected with a shift in the statement that
  indicated the end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t push back against the strong dovish pricing
  and even said that they are focused on not making the mistake of holding rates
  high for too long, which implies a rate cut coming soon.
• The US CPI last week came in line with expectations
  with the disinflationary progress continuing steady. This was also confirmed by
  the US PPI the day after where the data missed
  estimates.
• The labour market has been showing signs of
  weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
  in strongly.
• The US Retail Sales last week beat expectations across the board as
  consumer spending continues to hold.
• The latest ISM Manufacturing PMI missed expectations falling further into
  contraction, while the ISM Services PMI beat forecasts holding on in expansion.
• The market expects the Fed to start cutting rates
  in Q1 2024.

CAD

• The BoC kept the interest rate steady at
  5.00% as expected with the usual caveat that
  it’s prepared to raise the policy rate further if needed.
• BoC Governor Macklem recently has been leaning on a more
  neutral side and even started to talk about rate cuts although he remains
  uncertain on the timing.
• The recent Canadian CPI missed expectations across the
  board and the underlying inflation measures eased, which was a welcome
  development for the BoC.
• On the labour market side, the latest report beat expectations
  although the unemployment rate ticked higher again.
• The Canadian PMIs continue to fall
  further into contraction as the economy keeps on weakening amid restrictive
  monetary policy.
• The market expects the BoC to start
  cutting rates in Q2 2024.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD is
testing the key swing level at 1.3382. The price looks a bit overstretched as
depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move. The buyers are likely to step in here with
a defined risk below the low to target a rally into the trendline.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair has
been consolidating around the key level recently as the buyers are starting to
pile in. Some aggressive sellers might lean on the red 21 moving average to
target a break below the low and extend the selloff into the 1.3225 level. From
a risk management perspective, the sellers will have a much better risk to
reward setup around the trendline where they will also find the confluence with the
previous swing low level and the 50% Fibonacci retracement level.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been diverging with
the MACD coming
into the key swing level. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. This should be another layer of confluence
for the buyers with the trendline being the natural target. A break above the
recent resistance zone
at the 1.34 handle should see the buyers increase their bullish bets into the
trendline. The sellers, on the other hand, will try to defend the level and
fold as soon as the price breaks higher.

Upcoming Events

This week is a bit empty on the data front as we head
into the Christmas holidays. Today, we have the Canadian CPI data. Tomorrow, we
will get the US Consumer Confidence report. On Thursday, we get the Canadian
Retail Sales and the US Jobless Claims data, while on Friday we conclude the
week with the US PCE report.

This article was written by FL Contributors at www.forexlive.com.

• Prior +2.9%
• Core CPI +3.6% vs +3.6% y/y prelim
• Prior +4.2%

No change to the initial estimates as this reaffirms a continued slowdown in euro area inflation pressures last month.

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

USD

• The Fed left interest rates unchanged as expected with a shift in the statement that
  indicated the end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t push back against the strong dovish pricing
  and even said that they are focused on not making the mistake of holding rates
  high for too long, which implies a rate cut coming soon.
• The US CPI last week came in line with expectations
  with the disinflationary progress continuing steady. This was also confirmed by
  the US PPI the day after where the data missed
  estimates.
• The labour market has been showing signs of
  weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
  in strongly.
• The US Retail Sales last week beat expectations across the board as
  consumer spending continues to hold.
• The latest ISM Manufacturing PMI missed expectations falling further into
  contraction, while the ISM Services PMI beat forecasts holding on in expansion.
• The market expects the Fed to start cutting rates
  in Q1 2024.

EUR

• The ECB left interest rates unchanged as
  expected maintaining the usual data dependent language.
• President Lagarde highlighted
  once again that the risks to the economy are skewed to the downside and that
  they did not discuss rate cuts, which was a pushback against the aggressive
  market’s rate cut pricing.
• The recent Eurozone CPI missed
  expectations across the board, further reaffirming that the ECB is done for the
  cycle with rate cuts likely coming soon.
• The labour market remains historically
  tight with the unemployment rate hovering at cycle lows.
• The Eurozone PMIs missed
  expectations across the board with both the Manufacturing and Services sectors
  falling further into contraction.
• The ECB members continue to repeat that they will
  keep rates high for as long as necessary and that the market’s expectations are
  too aggressive.
• The market expects the ECB to start cutting rates in
  Q1 2024.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that EURUSD bounced
on the 50% Fibonacci retracement level of
the entire rally from the October lows and surged into the 1.10 handle
following the surprisingly dovish FOMC decision and the less dovish than
expected ECB announcement. The resistance formed
by the 1.10 handle and the 61.8% Fibonacci retracement level of the entire fall
since the 1.13 level continues to be a tough nut to crack for the buyers.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair
reversed some of the gains last Friday. The buyers leant on the red 21 moving average where
they had the confluence with the
38.2% Fibonacci retracement level and the 1.09 handle. The price is now
consolidating as the market awaits some catalyst to push it in either direction
but given that we are now basically in the Christmas period, the pair might
just keep on ranging around these levels.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been trading inside an ascending triangle. The
price broke to the upside of the pattern and what follows is generally a
sustained move in the direction of the breakout. The buyers are likely to keep piling
in to target a rally into the 1.10 handle. The sellers, on the other hand, will
want to see the price reversing and breaking below the minor trendline of the triangle
to position for another bearish impulse.

Upcoming Events

This week is a bit empty on the data front as we head
into the Christmas holidays. On Wednesday, we have the US Consumer Confidence
report. On Thursday, we get the latest US Jobless Claims data, while on Friday
we conclude the week with the US PCE report.

This article was written by FL Contributors at www.forexlive.com.

The overall economic assessment still reads as „recovering moderately although some areas stalled recently“ but the government did note that „business sentiment is improving“. Adding that the „business mood and corporate profits are also improving but these have not spilled over to domestic demand“.

In any case, it’s now all about the spring wage negotiations in March and April for Japan. That’s the key focus as we look towards next year.

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

• The next phase is not when to reduce rates, even though that’s where the markets are at
• It is about how long do we need monetary policy to remain restrictive in order to get inflation back to 2% target
• Markets are a little bit ahead
• They have jumped to the end part i.e. „we are going to normalise quickly“, and I don’t see that
• Fed’s policy settings are now in a good place
• But you don’t want to inadvertently become more restrictive than what you think is appropriate

The full interview from the FT can be found here (may be gated). This echoes the comments from Williams on Friday. But it highlights a failure in communication by the Fed somewhat, in having to walk back Powell’s press conference last week.

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

Last week, the Dow Jones surged to new highs
following the surprisingly dovish FOMC decision where
the Fed increased the rate cuts expected in 2024 to three and Fed Chair Powell
delivered some dovish comments. In the last part of the week, we got a slate of
soft-landing data as the US Jobless Claims and Retail Sales beat
expectations, while the US PMIs missed on the manufacturing side and beat on
the services one.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones last
week surged to a new all-time high following the dovish FOMC decision. The
rally since the end of October has been pretty insane with very shallow
pullbacks which points to either a short squeeze or lots of FOMO. Waiting for
pullbacks didn’t provide any opportunity, but chasing such rallies is generally
a bad idea as they can reverse most of the gains once a negative catalyst hits
the market.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that from
a risk management perspective, the buyers would be better off leaning on the trendline where
they will find the confluence with
the previous all-time high level and the red 21 moving average. The
sellers, on the other hand, will want to see the price breaking below the
trendline to position for a drop into the 35683 level.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action and we can notice that the buyers will also
find the confluence with the 38.2% Fibonacci
retracement level around the trendline. This makes it
a strong support zone where the buyers will lean onto to position for another
rally while the sellers will want to see the price breaking lower to invalidate
the bullish setup and target new lows.

Upcoming Events

This week is a bit empty on the data front as we head
into the Christmas holidays. On Wednesday, we have the US Consumer Confidence
report. On Thursday, we get the latest US Jobless Claims data, while on Friday
we conclude the week with the US PCE report.

This article was written by FL Contributors at www.forexlive.com.

• In the real world, there’s inevitably a degree of inaccuracy in economic
  measurement
• Currently, there’s a little more uncertainty
  than usual about the behaviour of unemployment
• Official estimates of wage growth have
  been volatile
• Other indicators have exhibited slightly lower rates
  of growth through much of this year
• It takes time to understand the forces driving
  the economy, particularly services inflation and wage growth
• It will probably require a
  more protracted and clearer decline in wage growth data before we can safely conclude
  that things are on a firmly downward trend
• Full speech

That’s a really long and roundabout way of saying that „we still don’t see enough data to justify a policy pivot yet“.

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

It’s been a quiet start to the week and not too surprising as markets are looking to wind down for the year already. The dollar benefited from NY Fed president Williams‘ comments late on Friday, but is seen trading more mixed and mostly little changed today. USD/JPY is up 0.3% to 142.50 levels now, running back up against its 200-day moving average (blue line) at 142.55:

That comes despite Treasury yields sitting lower today with 10-year yields down 3 bps to just under 3.90% currently.

Going back to USD/JPY, keep below the 200-day moving average and sellers will continue to retain a more bearish bias in the pair for the time being.

Elsewhere, EUR/USD is up 0.2% to 1.0913 with large option expiries at 1.0910 in play. GBP/USD is down marginally at 1.2670 while AUD/USD is up 0.4% to 0.6725 as the antipodean currencies are keeping a more positive start to proceedings this week. NZD/USD is also up 0.5% to 0.6235 even with a lack of headlines to work with.

Both the aussie and kiwi are building on technical breaks from last week, with equities also consolidating at the highs for the year for now.

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