Major currencies are mostly little changed with exception of the aussie and kiwi today. Both the antipodes are being pulled lower, breaking to fresh lows for the year. AUD/USD is down 0.4% to 0.6311 now upon a break of key technical support from the August low highlighted here. Meanwhile, NZD/USD is down 0.3% to 0.5735 to its lowest since November 2022 as it sticks to the firm break under 0.5800 since last week.

That is at least making for some interesting moves before we get to the FOMC meeting later. In broader markets, equities are keeping more tentative while the selling in bonds is also taking a light breather. All eyes are on the Fed now and that’s the main event that traders will be looking to respond to next.

Coming up in European trading, there will be inflation data on the cards. The UK one will be the more heavily watched as it will come before the BOE policy decision tomorrow. But with headline and core annual inflation both expected to come in higher than the month prior, it should just reaffirm the BOE decision to pause this week.

The OIS market is already pricing in ~93% odds of the BOE leaving the bank rate unchanged. So, any upside for the pound may be more limited. That being said, the odds of a February rate cut are closer to 50-50 right now. So, higher price pressures here could still lift the quid as traders tone that down.

Headline annual inflation is estimated to come in at 2.6%, up from 2.3% previously. Meanwhile, core annual inflation is estimated to come in at 3.6%, up from 3.3% previously.

As for the Eurozone inflation data, these are final figures for November. As such, the impact is likely to be more muted.

0700 GMT – UK November CPI figures1000 GMT – Eurozone November final CPI figures1100 GMT – UK December CBI trends total orders1200 GMT – US MBA mortgage applications w.e. 13 December

That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

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

• China’s bond market is screaming the “D” word. “D” as in depression.
• US dollar reaction on Fed hints at slowing the pace of interest-rate cuts may be muted
• Australia regulator pursuing Binance Australia Derivatives re consumer protection failures
• BOJ is expected to hold its policy rate at 0.25% in its December 18-19 meeting – preview
• ICYMI – Switzerland has slashed economic growth forecasts
• Bank of America’s latest global fund manager survey – super bullish sentiment
• South Korea Finance Minister Choi – will manage the economy as stably as possible
• UBS sees gold extending gains into 2025, forecasts $2,900/oz price target
• PBOC sets USD/ CNY mid-point today at 7.1880 (vs. estimate at 7.2838)
• UK pay growth steady at 4% but expected to slow in 2025
• National Australia Bank predicts an RBA interest rate cut in May 2025 (February questions)
• Japan November exports +3.8% y/y (expected +2.8%) imports -3.8% y/y (expected +1.0%)
• Australia Leading Index: Three quarters of components now giving positive growth signals
• Australian government forecasts ballooning debt
• Nissan and Honda are said to be in talks to set up a holding company
• ‘Spy drones’ from China likely wreaking havoc over US, House foreign affairs chair claims
• ICYMI – China promised massive stimulus yesterday (will it work this time?)
• BoA bullish US stocks despite “boiling geopolitical instability”, waning US fiscal health
• Fed insider says FOMC cut today, but then “a much more cautious tone about further cuts”
• Oil – private survey of inventory shows headline crude oil draw much greater than expected
• New Zealand data: Q3 Current Account 10.6bn NZD (expected -10.5bn)
• Is Milei rewriting economic theory?
• US stocks close lower. Dow down for the 9th consecutive day
• Forexlive Americas FX news wrap: US retail sales boosted by autos
• Trade ideas thread – Wednesday, 18 December, insightful charts, technical analysis, ideas

AUD,
NZD and CAD were further losers here during the session, remaining
under pressure from weak China demand and a strong US dollar. AUD/USD
hit its lowest since October 2023 while the kiwi $ traded down to its
lowest since October 2022. The only fresh news of note was from
Australia, where the government has forecast widening deficits ahead,
and surging debt.

USD/JPY
ticked back up, to highs just short of 153.80. The Bank of Japan
Statement is due on Thursday (expected in the 0230 – 0330 GMT time
window, which is 2130 – 2230 US Eastern time). The Bank is expected
to leave rates unchanged. Bank of Japan Governor Ueda is expected to
convey hawkish signals in his following press conference (0630 GMT /
0130 US Eastern time).

Ahead
of the BoJ tomorrow is, of course, the Federal Reserve later on
Wednesday. The Fed’s Federal Open Market Committee (FOMC) is
expected to cut Fed Funds by 25bp and to indicate a slower pace of
rate cuts ahead. There is more in the previews in the points above.

***

Elsewhere:

• Nissan’s stock surged the most in at least fifty years on talk of a merger with Honda
• Bitcoin pulled back further

This article was written by Eamonn Sheridan at www.forexlive.com.

A Wall Street Journal opinion piece. Which seems to be well-founded.

• China’s Bond Yields Scream the ‘D’ Word
  

The Journal is gated, but in very brief from the article:

• China’s bond market reflects deep economic stress, with 10-year sovereign yields falling to 1.7% and 30-year yields below 2%.
• businesses are struggling, unemployment is severe, and local governments are overwhelmed by debt
• Efforts by Beijing to boost growth, including incremental stimulus measures and infrastructure investments, have failed to restore confidence, with bond markets signaling skepticism.
• State-owned institutions are prioritizing bond purchases over investing in the broader economy, underscoring weak demand and limited policy effectiveness.

I posted a yield chart earlier, here it is again (China on top, US below):

This article was written by Eamonn Sheridan at www.forexlive.com.

DXY (US Dollar Index):

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support

Pivot: 107.06

Supporting reasons: Identified as an overlap resistance close to the 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 106.12
Supporting reasons: Identified as a pullback support close to the 61.8% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 108.07
Supporting reasons: Identified as a swing-high resistance, indicating a potential area that could halt any further upward movement.

EUR/USD:

Potential Direction: Bearish

Overall momentum of the chart: Bearish

Price could potentially make a bearish reaction off the pivot and drop toward the 1st support 

Pivot: 1.0536
Supporting reasons: Identified as an overlap resistance that aligns with the 50% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 1.0432

Supporting reasons: Identified as an overlap support close to 61.8% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 1.0614
Supporting reasons:  Identified as an overlap resistance close to the 50% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

EUR/JPY:

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support 

Pivot: 162.38
Supporting reasons: Identified as an overlap resistance close to the 78.6% Fibonacci projection, indicating a potential area where selling pressures could intensify.

1st support: 160.35

Supporting reasons: Identified as a pullback support, indicating a potential level where price could find support once more.

1st resistance: 164.88
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

EUR/GBP:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could potentially make a bullish breakout the pivot and rise toward the 1st resistance

Pivot: 0.8268
Supporting reasons: Identified as a potential breakout point, indicating a potential area where buying momentum pressures could intensify.

1st support: 0.8224

Supporting reasons:  Identified as a swing low support, indicating a potential level where price could find support once more.

1st resistance: 0.8336
Supporting reasons: Identified as an overlap resistance that aligns with the 78.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

GBP/USD:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could potentially make a bullish continuation towards the 1st resistance.

Pivot: 1.2604

Supporting reasons: Identified as an overlap support that aligns with the 61.8% Fibonacci retracement, indicating a potential area where buying interests could pick up to resume the uptrend.

1st support: 1.2502

Supporting reasons: Identified as a swing low support, indicating a potential level where price could find support once more.

1st resistance: 1.2798
Supporting reasons: Identified as an overlap resistance close to the 61.8 Fibonacci retracement, indicating a potential area that could halt any further upward movement.

GBP/JPY:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support 

Pivot: 195.84
Supporting reasons: Identified as a pullback resistance close to the 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 192.44
Supporting reasons: Identified as an overlap support, indicating a key level where price could find support once more.

1st resistance: 198.21
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

USD/CHF:

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could potentially make a bullish bounce the pivot and rise toward the 1st resistance

Pivot: 0.8879
Supporting reasons: Identified as a pullback support close to the 38.2% Fibonacci retracement, indicating a potential area where buying pressures could intensify.

1st support: 0.8803

Supporting reasons: Identified as a pullback support close to the 61.8% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 0.8974
Supporting reasons: Identified a swing high resistance, indicating a potential area that could halt any further upward movement.

USD/JPY:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support 

Pivot: 154.45
Supporting reasons: Identified as a pullback resistance close to the 78.6% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 152.43
Supporting reasons: Identified as a pullback support close to the 38.2% Fibonacci retracement, indicating a potential level where price could find support once again.

1st resistance: 156.57
Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

USD/CAD:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 1.4336

Supporting reasons: Identified as an overlap resistance, indicating a potential level where selling pressures could intensify.

1st support: 1.4178
Supporting reasons: Identified as an overlap support that aligns close to a 23.6% Fibonacci retracement, indicating a key level where price could find support.

1st resistance: 1.4507
Supporting reasons: Identified as a multi-swing-high resistance, indicating a potential area that could halt any further upward movement.

AUD/USD:

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price has made a bearish reversal off the pivot and could potentially fall towards the 1st support.

Pivot: 0.6346

Supporting reasons: Identified as an overlap resistance, suggesting a key area where selling pressures have intensified.

1st support: 0.6285
Supporting reasons: Identified as a multi-swing-low support, suggesting a potential area where price could find support once more.

1st resistance: 0.6381
Supporting reasons: Identified as an overlap resistance close to a 23.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

NZD/USD

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price has made a bearish reversal off the pivot and could potentially fall towards the 1st support.

Pivot: 0.5756

Supporting reasons: Identified as a pullback resistance, indicating a key area where selling pressures have intensified.

1st support: 0.5727
Supporting reasons: Identified as a support that aligns with a 161.8% Fibonacci extension, suggesting a key support area where price could find support.

1st resistance: 0.5781
Supporting reasons: Identified as a swing-high resistance that aligns with a 23.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

US30 (DJIA):

Potential Direction: Bullish
Overall momentum of the chart: Bearish

Price has made a bullish bounce off the pivot and could potentially rise towards the 1st resistance.

Pivot: 43,493.60

Supporting reasons: Identified as a pullback support, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 43,059.45

Supporting reasons: Identified as a swing-low support, indicating a potential level where price could find support once again.

1st resistance: 43,828.07

Supporting reasons: Identified as an overlap resistance that aligns close to a 23.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

DE40 (DAX):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price is trading close to the pivot and could potentially make a bearish break through this level to fall towards the 1st support.

Pivot: 20,202.28
Supporting reasons: Identified as a potential breakout level where selling pressures could intensify.

1st support: 19,902.14

Supporting reasons: Identified as a pullback support that aligns close to a 38.2% Fibonacci retracement, indicating a key level where price could find support.

1st resistance: 20,400.90
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

US500 (S&P 500): 

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price could rise towards the pivot and potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 6,099.30

Supporting reasons: Identified as a swing-high resistance that aligns with the all-time high, indicating a potential area where selling pressures could intensify.

1st support: 6,026.60

Supporting reasons: Identified as an overlap support that aligns close to a 23.6% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 6,147.73
Supporting reasons: Identified as a resistance that aligns with a 161.8% Fibonacci extension, indicating a potential area that could halt any further upward movement.

BTC/USD (Bitcoin):

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price is falling towards the pivot and could potentially make a bullish bounce off this level to rise towards the 1st resistance.

Pivot: 102,886.76

Supporting reasons: Identified as an overlap support that aligns with a 38.2% Fibonacci retracement, indicating a potential area where buying interests could pick up to resume the uptrend.

1st support: 99,345.84
Supporting reasons: Identified as an overlap support that aligns with a 61.8% Fibonacci retracement, indicating a potential level where price could find support once again.

1st resistance:  107,849.06
Supporting reasons: Identified as a swing-high resistance that aligns close to the all-time high, indicating a potential area that could halt any further upward movement.

ETH/USD (Ethereum):

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price is falling towards the pivot and could potentially make a bullish bounce off this level to rise towards the 1st resistance.

Pivot: 3,760.69

Supporting reasons: Identified as an overlap support that aligns close to a 50% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 3,501.55
Supporting reasons: Identified as an overlap support, indicating a potential level where price could find support once more.

1st resistance: 4,046.02
Supporting reasons:  Identified as a multi-swing-high resistance, indicating a potential area that could halt any further upward movement.

WTI/USD (Oil):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 70.46
Supporting reasons: Identified as an overlap resistance that aligns close to a 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 69.13
Supporting reasons: Identified as an overlap support that aligns close to a 50% Fibonacci retracement, indicating a key level where price could find support once again.

1st resistance: 71.48
Supporting reasons: Identified as a multi-swing-high resistance that aligns close to a 127.2% Fibonacci extension, indicating a potential area that could halt any further upward movement.

XAU/USD (GOLD):

Potential Direction: Bearish

Overall momentum of the chart: Bearish

Price could potentially make a bearish continuation toward the 1st support

Pivot: 2666.19
Supporting reasons: Identified as a pullback resistance, indicating a potential area where selling pressures could intensify.

1st support: 2613.44

Supporting reasons: Identified as an overlap support, indicating a potential level where price could find support.

1st resistance: 2720.46

Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

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The post Wednesday 18th December 2024: Technical Outlook and Review first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 18 December 2024

What happened in the U.S. session?

Consumer spending in the U.S. increased for the third consecutive month as sales jumped 0.7% MoM in November, edging past the estimate of 0.6%. In addition, October’s sales figures were revised higher from 0.4% to 0.5%. The latest data points to robust consumer spending during the holiday shopping season with the largest gains recorded in categories such as motor vehicles and part dealers; non-store retailers; and sporting goods, hobby, musical instrument, and bookstores. Despite stronger-than-anticipated retail sales, the dollar index (DXY) edged lower from 106.95 to a session low of 106.75 before reversing to recover all the initial losses as it hit the 107-level.

What does it mean for the Asia Session?

As Asian markets digest the U.S. sales figures, the DXY was hovering around 107 while spot prices for gold were drifting lower towards $2,630/oz extending the downward slide from last Thursday. Crude oil prices briefly dipped under $69 per barrel overnight before recovering to climb steadily towards the $70-mark. This commodity has faced strong headwinds since the beginning of the week as it shed more than 3.5% at its lowest point so far.

The Dollar Index (DXY)

Key news events today

FOMC Statement (7:00 pm GMT)

FOMC Press Conference (7:30 pm GMT)

What can we expect from DXY today?

The final FOMC meeting of this year concludes on Wednesday where the Federal Reserve is likely to announce a third successive rate cut with analysts expecting a 25-basis point reduction. However, the dollar remains strong as consumer and producer inflation have both accelerated over the last couple of months raising concerns that the battle against inflation is far from over. Traders will be looking to Fed Chairman Jerome Powell’s press conference for further insights on the outlook of future monetary policy action with market participants anticipating a ‘hawkish’ cut by the Fed. The greenback is all but certain to experience intense volatility at the release of the statement and also during the press conference.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to lower the Federal Funds Rate target range by 25 basis points to 4.50% to 4.75% on 7th November.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance.
• The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while labour market conditions have generally eased, and the unemployment rate has moved up but remains low.
• Inflation has made further progress toward the Committee’s 2% objective but remains somewhat elevated.
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee slowed the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• The next meeting runs from 17 to 18 December 2024.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key news events today

FOMC Statement (7:00 pm GMT)

FOMC Press Conference (7:30 pm GMT)

What can we expect from Gold today?

The final FOMC meeting of this year concludes on Wednesday where the Federal Reserve is likely to announce a third successive rate cut with analysts expecting a 25-basis point reduction. However, the dollar remains strong as consumer and producer inflation have both accelerated over the last couple of months raising concerns that the battle against inflation is far from over. Traders will be looking to Fed Chairman Jerome Powell’s press conference for further insights on the outlook of future monetary policy action with market participants anticipating a ‘hawkish’ cut by the Fed. This precious metal will no doubt face extreme volatility at the release of the statement and also during the press conference.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie extended its downward slide as it fell 0.5% on Tuesday. This currency pair remains under pressure and was drifting towards 0.6320 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6300

Resistance: 0.6380

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35% on 10th December, marking the ninth consecutive pause.
• Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. However, measures of underlying inflation are around 3.5%, which is still some way from the 2.5% midpoint of the inflation target.
• The most recent forecasts published in the November Statement on Monetary Policy (SMP) do not see inflation returning sustainably to the midpoint of the target until 2026 but the Board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts with risks remaining in place.
• Growth in output has been weak as the economy grew by only 0.8% in the September quarter over the past year. Outside of the COVID-19 pandemic, this was the slowest pace of growth since the early 1990s.
• A range of indicators suggest that labour market conditions remain tight; while those conditions have been easing gradually, some indicators have recently stabilised. The unemployment rate was 4.1 per cent in October, up from 3.5 per cent in late 2022.
• Wage pressures have eased more than expected in the November SMP. The rate of wages growth as measured by the Wage Price Index was 3.5% over the year to the September quarter, a step down from the previous quarter, but labour productivity growth remains weak.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer term inflation expectations have been consistent with the inflation target and it is important that this remains the case.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 18 February 2025.

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Just like its Pacific neighbour, the Kiwi continued to its free-fall as it declined nearly 0.55% overnight. This currency pair stabilized around 0.5740 at the beginning of the Asia session but overhead pressures remain firmly in place – these are the support and resistance levels for today.

Support: 0.5740

Resistance: 0.5810

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 4.25% on 27 November, marking the third consecutive rate cut.
• The Committee assessed that annual consumer price inflation has declined and is now close to the midpoint of the MPC’s 1 to 3% target band; inflation expectations are also close to target and core inflation is converging to the midpoint.
• Economic activity remains subdued and output continues to be below its potential. With excess productive capacity in the economy, inflation pressures have eased. If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year.
• Domestic economic activity remains below trend, as a result of weakness in demand for durable goods consumption and investment. This has been reflected in falling activity in interest rate sensitive sectors such as construction, manufacturing, and retail trade. In contrast, some services sectors have continued to grow.
• Consistent with feedback from business visits, high frequency indicators suggest that the economy has stabilised in recent months. Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery.
• Wage growth is slowing, consistent with inflation returning to the target midpoint while employment levels and job vacancies have declined, reflecting subdued economic activity; unemployment is expected to continue rising in the near term.
• Expectations of future inflation, the pricing intentions of firms, and spare productive capacity are consistent with the inflation target being sustainably achieved, providing the context and the confidence for the Committee to further ease monetary policy restraint.
• The next meeting is on 19 February 2025.

Next 24 Hours Bias

Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

After rising for six straight trading days, USD/JPY suffered its first down day as it eased nearly 0.6%, shedding almost 60 pips in the process. This currency pair found its footing around 153.50 as Asian markets came online with continued yen weakness keeping this pair elevated – these are the support and resistance levels for today.

Support: 152.00

Resistance: 154.60

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 31st October, by a unanimous vote, to set the following guideline for money market operations for the intermeeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to be at around 2.5% for fiscal 2024 and then be at around 2% for fiscal 2025 and 2026.
• While the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices are expected to wane, underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• Comparing the projections with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rates are more or less unchanged. The projected year-on-year rate of increase in the CPI (all items less fresh food) for fiscal 2025 is somewhat lower due to factors such as the recent decline in crude oil and other resource prices.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 19 December 2024.

Next 24 Hours Bias

Medium Bullish

The Euro (EUR)

Key news events today

CPI (10:00 am GMT)

What can we expect from EUR today?

Inflationary pressures in the Euro Area have dissipated significantly throughout 2024 with headline CPI easing to an annual rate of 1.7% in September while the core moderated to 2.7%. However, headline CPI has accelerated for two consecutive months since September as it jumped to 2.3% in November while the core remained unchanged at 2.7%, based on preliminary estimates. The final inflation reading for November is expected to show unchanged figures and could provide a near-term relief for the Euro which has seen intense selling pressures drive it under 1.0500 once again.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 12 December to mark the third successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 3.15%, 3.40% and 3.00% respectively.
• The disinflation process is well on track and most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027
• The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 30 January 2025.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Ongoing weakness in the franc caused USD/CHF to initially surge towards 0.8974 before pulling back towards 0.8920 on Tuesday. This currency pair was hovering around 0.8930 at the beginning of the Asia session but it should remain elevated as the day progresses – these are the support and resistance levels for today.

Support: 0.8880

Resistance: 0.8975

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking for the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector was again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was
• normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely, and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

CPI (7:00 am GMT)

What can we expect from GBP today?

Inflationary pressures in the U.K. have dissipated for most parts of 2024 but prices accelerated in October with headline and core CPI increasing at an annual rate of 2.3% and 3.3% respectively. The forecast for November points to a second successive month of acceleration for both headline and core CPI and should prices rise higher than originally anticipated, the pound is likely to see strong tailwinds before the start of the European trading hours.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8 to 1 to reduce the Bank Rate by 25 basis points, to 4.75% on 7 November 2024 – one member preferred to maintain the Bank rate at 5.0%.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024.
• Twelve-month CPI inflation fell to 1.7% in September but is expected to increase to around 2.5% by the end of the year as weakness in energy prices falls out of the annual comparison; services consumer price inflation has declined to 4.9%.
• CPI inflation is expected to increase to around 2.75% by the second half of 2025 as weakness in energy prices falls out of the annual comparison, revealing more clearly the continuing persistence of domestic inflationary pressures.
• The MPC’s latest projections for activity and inflation are also set out in the accompanying November Report; this forecast is based on the second case where CPI inflation is projected to fall back to around the 2% target in the medium term as a margin of slack emerges later in the forecast period that acts against second-round effects in domestic prices and wages.
• GDP had grown by 0.5% in 2024 Q2, 0.2% weaker than had been expected in the August Report, and 0.1% weaker than the earlier outturn had indicated at the time of the MPC’s previous meeting. Through the second half of 2024, GDP was projected to grow at a somewhat slower rate than in Q2 – headline GDP growth is expected to fall back to its recent underlying pace of around 0.25% per quarter over the second half of this year.
• The combined effects of the measures announced in Autumn Budget 2024 are provisionally expected to boost the level of GDP by around 0.75% at their peak in a year’s time, relative to the August projections, while the Budget is provisionally expected to boost CPI inflation by just under 0.5% at the peak.
• Annual private sector regular average weekly earnings growth has continued to fall but remained elevated at 4.8% in the three months to August; the MPC judges that the labour market continues to loosen, although it appears relatively tight by historical standards.
• Based on the evolving evidence, a gradual approach to removing policy restraint remains appropriate but monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.
• The Committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 19 December 2024.

Next 24 Hours Bias

Weak Bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

After easing steadily throughout most parts of this year, consumer inflation in Canada remained sticky in November as median- and trimmed-CPI printed higher than their respective forecasts on Tuesday. The Loonie strengthened briefly as USD/CAD pulled back towards 1.4250 but the move was short-lived. This currency pair rebounded strongly as it surged past 1.4300 to hit an overnight high of 1.4323 – these are the support and resistance levels for today.

Support: 1.4180

Resistance: 1.4340

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 50 basis points bringing it down to 3.25% while continuing its policy of balance sheet normalization on 11 December; this marked the fifth consecutive meeting where rates were reduced.
• Canada’s economy grew by 1% in the third quarter, somewhat below the Bank’s October projection, and the fourth quarter also looks weaker than projected. Third-quarter GDP growth was pulled down by business investment, inventories and exports.
• The unemployment rate rose to 6.8% in November as employment continued to grow more slowly than the labour force while wage growth showed some signs of easing, but remains elevated relative to productivity.
• Headline CPI has declined significantly from 2.7% in June to 1.6% in September while shelter costs inflation remains elevated but has begun to ease; the preferred measures of core inflation are now below 2.5%.
• CPI inflation has been about 2% since the summer, and is expected to average close to the 2% target over the next couple of years. Since October, the upward pressure on inflation from shelter and the downward pressure from goods prices have both moderated as expected.
• Looking ahead, the GST holiday will temporarily lower inflation but that will be unwound once the GST break ends. In addition, the possibility the incoming US administration will impose new tariffs on Canadian exports to the United States has increased uncertainty and clouded the economic outlook
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate by a further 50 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The Governing Council has reduced the policy rate substantially since June and going forward, they will be evaluating the need for further reductions in the policy rate one decision at a time.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 29 January 2025.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

EIA Crude Oil Inventories (3:30 pm GMT)

What can we expect from Oil today?

Crude oil prices extended its downward slide as WTI oil initially plunged nearly 2% on Tuesday. However, this benchmark reversed sharply to climb towards $70 after falling as low as $68.80 per barrel. Following which, the API stockpiles reported a larger-than-expected decline in weekly inventories as 4.7M barrels of crude were drawn from storage, notably higher than the forecast of a 1.9M-drawdown. Should the EIA inventories also register a higher-than-anticipated draw, these latest inventory data points could provide a near-term floor for crude prices.

Next 24 Hours Bias

Weak Bearish

The post IC Markets Asia Fundamental Forecast | 18 December 2024 first appeared on IC Markets | Official Blog.

The market is preparing for potentially significant moves later today as we await the latest interest rate update from the FOMC. FX traders are closely watching the Euro for opportunities to capitalize on any surprise updates from the Fed, as it could provide a cleaner trade compared to other major currencies that also have central bank rate decisions in the coming days.

The FOMC is widely expected to cut interest rates by 25 basis points. Anything other than that result will likely trigger substantial market moves. However, most anticipate that any volatility will stem from changes in the dot plot and/or forward guidance from Jerome Powell and the rest of the committee.

The Euro has been trading in relatively tight ranges over the past week, and traders are hoping today’s Fed update will push the single currency into new ranges. The pair has dropped nearly 8% from peak to trough since its high in September, and traders are now looking for a less dovish update from the Fed for this trend to continue. If we do receive a less dovish message, the recent annual low at 1.0333 could come under pressure. Conversely, if the committee signals more rate cuts than expected heading into 2025, we could see a strong rally back into higher ranges, with the monthly high and trendline resistance on the hourly chart likely to provide strong initial resistance.

Key Levels:
Resistance 2: 1.0629 – December High and Trendline Resistance
Resistance 1: 1.0521 – 200-Day Moving Average

Support 1: 1.0362 – Trendline Support
Support 2: 1.0333 – 2024 Low

The post Trade the Euro on the FOMC Rate Decision first appeared on IC Markets | Official Blog.

Both the Swiss government and the private KOF Swiss Economic Institute expect slower growth for the economy.

• Switzerland’s State Secretariat for Economic Affairs (SECO) Economic Growth Forecasts:

  • 2023: Swiss economy projected to grow 0.9% (down from a prior forecast of 1.2%).
  • 2024: Growth forecast revised to 1.5% (previously 1.6%).
  • 2026: First forecast predicts 1.7% growth.
  • All forecasts are below Switzerland’s long-term average growth of 1.8%.

• Factors Impacting Growth:

  • Slower global demand, particularly from Germany and China, is weighing on exports.
  • Domestic demand expected to drive growth in 2024.

• Risks Ahead:

  • US trade policy, including tariffs under the incoming Trump administration, adds uncertainty.
  • Broader international economic and trade policy remains unpredictable.

• KOF Swiss Economic Institute Forecast:

  • Expects growth of 1.4% in 2025 and 1.7% in 2026.
  • Predicts weak foreign demand until mid-2025, with gradual improvement thereafter.

This article was written by Eamonn Sheridan at www.forexlive.com.

US Markets Ease Ahead of Federal Reserve – Dow Down 0.6%

US stocks eased lower again in trading yesterday as investors looked ahead to today’s key Fed rate decision, with the Dow marking its ninth consecutive day of losses. The Dow fell 0.61% on the day, followed by the S&P, which dropped 0.39%, and the Nasdaq, which closed 0.32% lower. Treasury yields ended the session near flat, with the 2-year yield finishing at 4.245% and the 10-year at 3.99%. Currencies remained relatively quiet, but the dollar edged higher against most of the majors, with the DXY gaining 0.13% to reach 106.98. Oil prices fell further as investor concerns over future demand persisted, with Brent down 0.97% to $73.19 and WTI slipping 0.90% to $70.08. Meanwhile, gold continued to trade within recent ranges, easing 0.28% to $2,646.15.

All About the Fed Today

The long-awaited conclusion of the Federal Reserve Bank’s final meeting of the year is now just a few trading hours away, and traders are anticipating subdued markets ahead of the rate announcement. Expectations heavily favour a 25-basis-point cut today, and any deviation from this outcome is likely to trigger significant market movements. Excluding the unlikely scenarios of no change or a 50-point cut, volatility is expected to stem from any updates to the dot plot and forward guidance from the committee. The market is leaning towards a less dovish stance as it looks ahead to 2025 and the incoming Trump administration. Regardless of the outcome, traders anticipate immediate reactions following the rate decision and subsequent press conference, as markets digest the updates or continue recent trends if there are no surprises.

Famine and Feast Ahead for Traders

Today has the potential to be the most volatile trading day of the week, though most of the action is expected to take place in the final hours of trading following the Federal Reserve’s rate announcement. The macroeconomic calendar is relatively sparse during the Asian session, and markets are expected to remain muted. However, the European session features significant tier-1 data from the UK, with CPI figures set to be released. A deviation from the anticipated 2.6% increase could create heightened activity among sterling traders, particularly as it comes just a day ahead of the Bank of England’s rate decision. Despite this, most market participants expect rangebound conditions until the US session, when the Fed announcement is scheduled late in the day.

The post General Market Analysis – 18/12/24 first appeared on IC Markets | Official Blog.

South Korea Finance Minister Choi:

• will utilise all available resources to manage the economy as stably as possible.

South Korea Foreign Minister Cho

• noted that US President Biden expressed confidence in Korean democracy and support for the bilateral alliance in a recent phone call.
• Cho stated they will make every effort to bring diplomacy back to normal and rebuild trust.
• Cho mentioned plans regarding the North Korea nuclear issue will be prepared before the new US administration takes office.
• Cho acknowledged that communication with the Trump team has been affected by recent events and will make efforts to keep it smooth.
• Cho said Yoon’s martial law attempt undercut political momentum for communication built with Trump.
• Cho admitted there are limitations with Yoon suspended from duty and it will take time to restore momentum.
• Cho is trying to restore communication with the Trump side as soon as possible despite limitations.
• Cho said they cannot confirm whether Trump has invited the South Korea president and will consider this while monitoring the situation.
• Choi stated they will actively respond to excessive volatility in the forex market.
• Cho remarked that Trump has raised prospects for the end of the Ukraine war but noted it would take a considerable amount of time until it happens.
• Cho expressed openness to any opportunities for negotiation with North Korea, including on the nuclear issue, and said they will be proactive.
• Cho announced they will devise a roadmap to prepare for Trump’s potential resumption of talks with North Korea.
• Cho expects China’s Xi to attend next year’s APEC Summit in South Korea.
• Cho is considering reciprocal measures to China’s visa exemption.

South Korea continues to mop up after the brief imposition of martial law.

This article was written by Eamonn Sheridan at www.forexlive.com.

Gold prices held steady this week at around $2,650/oz, weighed by recent US dollar strength, rising Treasury yields, and improving investor sentiment toward US equities. Since hitting an all-time high at the end of October, the metal has retreated 4.7%. However, UBS remains bullish on gold’s outlook, highlighting its strong performance—up nearly 29% year-to-date—which has outpaced the S&P 500.

UBS expects gold to build on these gains, forecasting prices to reach $2,900/oz by the end of 2025, supported by a combination of central bank demand, rising investor interest, and a lower rate environment.

Central Banks to Drive Continued BuyingGlobal central banks remain a significant driver of gold demand as they diversify reserves amid broader de-dollarization trends. UBS notes that October’s net gold purchases, as reported by the International Monetary Fund, reached their highest monthly level of the year. UBS revised its 2024 estimate for central bank gold purchases to 982 metric tons—up from 900mt—citing underreporting trends in official data. While still below the highs of the past two years, this figure is a sharp increase from the 500mt average seen annually since 2011.

Looking ahead, UBS expects central banks to maintain strong buying momentum, projecting purchases of 900mt or more in 2025 as reserve diversification efforts continue.

Gold as a Key Hedge in an Uncertain ClimateInvestor demand for gold as a portfolio hedge is expected to rise amid ongoing geopolitical risks and policy uncertainty. UBS flags lingering concerns around the Russia-Ukraine conflict, tensions in the Middle East, and uncertainty surrounding US fiscal and trade policy under President-elect Donald Trump’s administration. These risks, coupled with Trump’s transactional policy approach, could increase inflows into gold-backed exchange-traded funds (ETFs) as investors seek safe-haven assets.

Lower Rates and a Weaker Dollar to Bolster GoldUBS sees further tailwinds for gold stemming from lower interest rates. The Federal Reserve is expected to continue easing monetary policy with a 25 basis point rate cut on Wednesday (US time), with more cuts anticipated in the year ahead. Lower rates reduce the opportunity cost of holding gold, which does not generate interest.

Additionally, UBS expects the US dollar to weaken over the medium term due to lower rates and growing concerns about the US government’s debt trajectory. As gold is priced in US dollars, a weaker dollar makes the metal more affordable for international investors, further boosting demand.

Beyond gold

Beyond gold, UBS also highlights opportunities in copper and other transition metals, citing rising global investment in power generation, energy storage, and electric transport as long-term demand drivers.

This article was written by Eamonn Sheridan at www.forexlive.com.

There are multiple factors weighing on the hapless AUD. The only fresh news today is the ballooning debt:

• Australian government forecasts ballooning debt

AUD/USD to its lowest since late November 2023:

This article was written by Eamonn Sheridan at www.forexlive.com.

Pay increases offered by British employers remained steady at 4% in the three months leading up to November, but they are expected to slow in 2025 as companies adjust to higher tax burdens introduced in the government’s latest budget, according to a Brightmine survey.

• Current Pay Trends:

  • Median pay awards held steady at 4% for the fifth consecutive month (down from 6% in 2023).

• Future Outlook:

  • Pay growth likely to slow in 2025 due to higher employer taxes and a 7% minimum wage increase starting in April.
  • Brightmine forecasts median pay awards at 3% for 2025, down from 4.5% for 2024.

• Economic Context:

  • Rising wage pressures persist; official data shows earnings growth accelerating.
  • Bank of England expected to hold interest rates in December (the meeting is Thursdat this week); inflation outlook depends on employer responses to fiscal changes.

• Employer Response:

  • 40% of employers surveyed plan to reduce salary budgets following the government’s budget measures.

• Survey Details:

  • Based on 22 pay awards (Sept–Nov), covering approximately 227,000 employees.

****

Bank of England due Thursday, December 19, 2024:

This article was written by Eamonn Sheridan at www.forexlive.com.