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The forex markets remain subdued as traders maintain a cautious stance ahead of the New Year. European major are notably weaker, with Swiss Franc leading the declines. Euro is also under pressure, while Sterling has shown resilience, managing to avoid sharper losses.

Meanwhile, Yen has staged a modest recovery, supported by easing US and European benchmark yields, which have tempered earlier selloffs. Commodity currencies, including Australian Dollar, are firming slightly as they digest steep losses accumulated over December. Dollar is trading sideways, reflecting an overall lack of momentum as the markets consolidate in thin year-end trading.

Looking ahead, attention is on China’s NBS PMIs, scheduled for release during the upcoming Asian session. Expectations point to slight expansions in both the manufacturing and non-manufacturing sectors for December, which could provide insights into the state of China’s recovery efforts.

Adding to the focus, President Xi Jinping is set to deliver his New Year’s address later in the week. Markets will be keen to parse his remarks for any reaffirmation of commitments to revive China’s struggling economy.

China’s authorities have already pledged to issue CNY 3 trillion in special treasury bonds in 2025 to boost fiscal stimulus, although further details are unlikely until March’s National People’s Congress. Analysts remain cautious about the effectiveness of these measures, particularly given structural challenges such as sluggish household consumption and a soft real estate market.

Aussie would be particularly sensitive to developments in China. While downside surprises in tomorrow’s Chinese PMI data could reignite selling pressure in AUD/USD, 0.6169 (2022 low) could continue to act as a critical support level. Yet any recovery might be capped below 0.6336 support turned resistance. The next big move would hinge on both the development surrounding China's outlook in 2025, as well as whether RBA would start easing sooner in February.

In Europe, at the time of writing, FTSE is down -0.51%. DAX is down -0.38%. CAC is down -0.41%. UK 10-year yield is down -0.024 at 4.616. Germany 10-year yield is down -0.021 at 2.377. Earlier in Asia, Nikkei fell -0.96%. Hong Kong HSI fell -0.24%. China Shanghai SSE rose 0.21%. Singapore rose 0.64%. Japan 10-year JGB yield fell -0.0106 to 1.094.

Swiss KOF falls below average, signals dampened outlook

Swiss KOF Economic Barometer fell to 99.5 in December, down from 102.9 in November and below market expectations of 101.1. This decline brings the indicator slightly below its medium-term average, signaling a "dampened" outlook for the Swiss economy .

KOF Economic Institute attributed the drop to weaker performance across multiple sectors. In particular, indicators for manufacturing, other services, the hospitality industry, foreign demand, and private consumption showed significant declines, collectively driving the overall decrease.

Japan's PMI manufacturing finalized at 49.6, nears stabilization and cost pressures persist

Japan's Manufacturing PMI for December was finalized at 49.6, an improvement from November's 49.0, indicating a gradual move toward stabilization in the sector.

According to Usamah Bhatti of S&P Global Market Intelligence, the data "painted a picture of a near-stabilization" in manufacturing conditions as declines in both production and new orders softened.

Encouraged by these improvements, firms increased hiring, partly to address existing labor shortages and in anticipation of future demand recovery.

However, price pressures remained elevated, with input costs rising at their fastest pace since August due to higher raw material and labor costs, compounded by Yen’s weakness. To manage these cost burdens, manufacturers passed on higher prices to clients, resulting in the strongest output charge increases in five months.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.8995; (P) 0.9011; (R1) 0.9038; More…

USD/CHF's rally continues today and intraday bias stays on the upside. Rise from 0.8374 is in progress for 61.8% projection of 0.8374 to 0.8956 from 0.8735 at 0.9095. On the downside, below 0.8983 minor support will turn bias neutral and bring consolidations again first.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with rise from 0.8374 as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes.

Market Picture

The cryptocurrency market has lost 1.4% in the last 24 hours, falling to $3.29 trillion. Over the past 10 days, the market has mostly stayed in the $3.3-3.4 trillion range, pulling back to late November levels where positions were also shaken out. Here is the classic 61.8% retracement level from the early November rally to the mid-December high.

The price of Bitcoin pulled back to $93.5k, falling below the 50-day moving average after Christmas. Like the rest of the crypto market, bitcoin has returned to the 61.8% level. Bitcoin is on the verge of a technical pullback, and a failure below $93k would signal a break in the short-term trend, which could lead to a deeper decline that could erase all the gains made in November-December.

Among the top coins, Ethereum managed to swim against the tide, adding 0.6% for the day. The coin has been attracting buyers on the decline towards $3300 in recent days, forming an uptrend.

News Background

Net outflows in the BTC ETF for the week totalled $387.5 million, the highest since early September. The positive weekly trend was broken after three weeks of inflows. Cumulative inflows since the launch of bitcoin ETFs in January fell to $35.66 billion (-1.1% for the week).

Net inflows into ETH ETFs rose to $349.2 million for the week. The positive weekly trend continued for the fifth consecutive week. Cumulative net inflows from ETF launches in July rose to $2.68 billion (+15% for the week).

Strive Asset Management has filed to launch a bond ETF for bitcoin strategy companies such as MicroStrategy. The firm was founded by Vivek Ramaswamy, who will be working with Elon Musk at DOGE under the Trump administration.

CryptoQuant CEO Ki Young Ju said that the bearish trend in the bitcoin market has not yet formed, and the price is far from its peak. In his opinion, BTC will soon rise by more than 30%.

Bitcoin selling pressure and increased volatility may intensify in the coming days, believes a CryptoQuant contributor nicknamed IT Tech. He noted an increase in bitcoin reserves of centralised exchanges – by about 20,000 BTC in recent days.

Daily Pivots: (S1) 197.60; (P) 198.16; (R1) 199.10; More...

Intraday bias in GBP/JPY remains neutral and outlook is unchanged. As noted before, corrective pattern from 180.00 is extending with another rising leg. Further rise is expected as long as 194.04 support holds. On the upside, above 1999.79 will will target channel resistance (now at 203.63).

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Daily Pivots: (S1) 164.14; (P) 164.49; (R1) 164.94; More...

EUR/JPY's rally from 156.16 is still in progress and intraday bias stays on the upside. Corrective pattern from 154.04 is extending with another rising leg. Further rise should be seen to 166.67 resistance next. On the downside, below 163.79 minor support will turn intraday bias neutral first.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.

Daily Pivots: (S1) 0.8271; (P) 0.8300; (R1) 0.8318; More...

EUR/GBP failed to break through 0.8326 resistance and retreated, and intraday bias stays neutral On the upside, firm break of 0.8326 resistance will confirm short term bottoming at 0.8221, ahead of 0.8201 key support, on bullish convergence condition in 4H MACD. Intraday bias will be turned back to the upside for 0.8446 structural resistance next.

In the bigger picture, focus is now on whether 0.8201 key support (2022 low) is strong enough to complete the whole down trend from 0.9267 (2022 high). In any case, medium term outlook will be neutral at best until decisive break of 0.8624 key resistance. Otherwise, risk will stay on the downside even in case of strong rebound.

Daily Pivots: (S1) 1.6730; (P) 1.6767; (R1) 1.6805; More...

Intraday bias in EUR/AUD is turned neutral with current retreat and some more consolidations would be seen. But further rally is expected as long as 1.6573 resistance turned support holds. Above 1.6800 will resume the rally from 1.5963 to retest 1.7180 high next.

In the bigger picture, EUR/AUD is holding on to 1.5996 key support despite brief breach. Larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5995 will indicate that such up trend has completed and deeper decline would be seen.

Daily Pivots: (S1) 0.9374; (P) 0.9392; (R1) 0.9424; More....

EUR/CHF's rebound from 0.9284 extended higher and focus is no won 0.9417 resistance. Firm break there will resume the rally from 0.9204 to 0.9481 fibonacci resistance next. On the downside, below 0.9359 minor support will turn intraday bias back to the downside for 0.9284 support instead.

In the bigger picture, a medium term bottom is probably in place at 0.9204. More consolidations would be seen above there with risk of stronger rebound to 38.2% retracement of 0.9928 to 0.9204 at 0.9481. But outlook will remain bearish as long as 0.9481 holds and another fall through 0.9204 to resume larger down trend is in favor.

• EUR/USD remains range bound as the year comes to a close, with the pair trading just above 1.0400.
• ECB policymakers are cautious about future rate cuts due to a sluggish Euro.
• The US Dollar Index (DXY) held its gains last week, supported by positive US data.
• The lack of liquidity may mean that upcoming US economic data (Pending Home Sales and Chicago Purchasing Managers Index) has little impact on the US Dollar.

EUR/USD finished last week on a positive note despite the rise in the US Dollar Index. EUR/USD traded within a 60-pip range last week as thin liquidity kept any significant moves at bay.

This morning EUR/USD has continued its grind, trading just above the 1.0400 handle. Trading conditions remain choppy with the New Year holiday approaching. For now the status quo remains unchanged, leaving EUR/USD confined to last week’s range.

Currency Strength Chart: Strongest – Weakest NZD, AUD, CAD, CHF, GBP, EUR, USD, JPY 

Source: FinancialJuice

ECB Policymakers Lead with Caution

ECB Policymakers of late have been cautious in their rhetoric given the developments heading into 2025. The sluggish Euro Area economy coupled with potential threat of tariffs have left policymakers with a lot to ponder.

The cautious approach by policymakers continued over the weekend. In an interview with the Austrian newspaper Kurier, Robert Holzmann, a member of the European Central Bank’s Governing Council, mentioned that it might be a while before the ECB lowers interest rates again. He noted that some energy prices seem to be rising, but there are other ways inflation could increase, such as if the euro loses more value.

The comments will no doubt add to the Euro’s resilience. This in turn could help cap any downside on EUR/USD and keep the pair rangebound.

US Dollar Index (DXY)

The US Dollar Index (DXY) held onto its gains last week as market liquidity thinned. A sprinkling of positive US Data kept the data supported while concerns over rising rates and Treasury Yields have kept the greenback on the front foot.

Later today, the US economic calendar will include the November Pending Home Sales and the December Chicago Purchasing Managers Index.

The lack of liquidity may mean that the data has very little impact on the US Dollar outlook moving forward.

US Dollar Index (DXY) Daily Chart, December 30, 2024

Source:TradingView.com

Technical Analysis on EUR/USD

EUR/USD has struggled for direction since the FOMC selloff on December 18. Since then, EUR/USD has attempted to recover toward the 1.0500 handle but selling pressure persists, capping further upside.

Price action last week saw EUR/USD confined to a range of around 60 pips between the 1.0440 and 1.0380. A break of this range is needed to provide some insights into where the pair may go next.

This week however, has echoes of last week with the New Year holiday and this liquidity. Thus the question is are we in for another week of rangebound price action or will a breakout materialize.

Immediate support rests at 1.0400 before last weeks lows around 1.0380 comes into focus.

Looking at the upside and immediate resistance rests at 1.0440 before the key 1.0500 handle becomes the main area of interest. A break above this 1.0500 handle may lead to further gains as it would indicate a change in structure, potentially putting bulls in control.

EUR/USD Daily Chart, December 30, 2024

Source:TradingView.com

Support

• 1.0400
• 1.0380
• 1.0331

Resistance

• 1.0440
• 1.0500
• 1.0600

Daily Pivots: (S1) 1.0404; (P) 1.0424; (R1) 1.0443; More...

Sideway trading continues in EUR/USD and intraday bias remains neutral for the moment. Stronger recovery cannot be ruled out, but outlook will remain bearish as long as 1.0629 resistance holds. Firm break of 1.0330 will confirm resumption of whole decline from 1.1213. Sustained trading below 1.0404 fibonacci level will carry larger bearish implications.

In the bigger picture, focus stays on 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404. Strong rebound from this level will keep price actions from 1.1273 (2023 high) as a medium term consolidation pattern only. However, sustained break of 1.0404 will raise the chance that whole up trend from 0.9534 has reversed. That would pave the way to 61.8% retracement at 1.0199 first. Firm break there will target 0.9534 low again.

Daily Pivots: (S1) 1.2526; (P) 1.2559; (R1) 1.2614; More...

GBP/USD is staying in consolidations and intraday bias remains neutral at this point. While another recovery cannot be ruled out, outlook will stay bearish as long as 1.2810 resistance holds. On the downside, break of 1.2474 will resume the fall from 1.3433 to 1.2298 cluster support zone.

In the bigger picture, price actions from 1.3433 medium term are seen as correcting whole up trend from 1.0351 (2022 low). Deeper decline could be seen to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. But strong support is expected there to bring rebound to extend the corrective pattern.