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Daily Pivots: (S1) 1.6504; (P) 1.6542; (R1) 1.6597; More...

EUR/AUD's rally resumed and the break of 1.6598 resistance confirms that fall from 1.7180 has completed with three waves down to 1.5963. Intraday bias is back on the upside. Further rally should be seen to retest 1.7180 high. On the downside, below 1.6485 minor support will turn intraday bias neutral and bring consolidations, before staging another rise.

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. Deeper decline would be seen to 61.8% retracement of 1.4281 to 1.7180 at 1.5388, even as a correction.

Daily Pivots: (S1) 0.9342; (P) 0.9380; (R1) 0.9404; More....

Intraday bias in EUR/CHF is turned neutral with current retreat and some consolidations would be seen below 0.9417 temporary top. Further rally is expected as long as 0.9343 resistance turned support holds. Above 0.9417 should resume the rise from 0.9204 through 0.9444 resistance to 0.9841 fibonacci level. On the downside, sustained break of 0.9343 will argue that rebound form 0.9204 has completed and turn bias back to the downside for 0.9254 support instead.

In the bigger picture, the break of 55 D EMA (now at 0.9359) suggests that a medium term bottom might be in place already. Strong rise could be seen 38.2% retracement of 0.9928 to 0.9204 at 0.9481. Reaction from there would reveal whether rebound from 0.9204 is merely a corrective rise, or reversing the down trend from 0.9928.

Daily Pivots: (S1) 1.0469; (P) 1.0501; (R1) 1.0524; More...

Intraday bias in EUR/USD remains neutral as range trading continues. Corrective pattern from 1.0330 might extend further. But outlook will stay bearish as long as 55 D EMA (now at 1.0668) holds. On the downside, below 1.0452 will bring retest of 1.0330 low.

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) 1.2676; (P) 1.2703; (R1) 1.2739; More...

No change in GBP/USD's outlook and intraday bias remains neutral. On the downside, break of 1.2615 minor support will indicate that corrective recovery from 1.2486 has completed. Retest of this low should be seen next, and break will target 1.2298 cluster support zone. Nevertheless, break of 1.2810 will turn bias to upside for stronger rebound.

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.

Daily Pivots: (S1) 0.8903; (P) 0.8939; (R1) 0.8963; More…

Intraday bias in USD/CHF is turned neutral with current retreat and some consolidations would be seen below 0.8974 temporary top. Outlook will stay bullish as long as 0.8735 support holds. Break of 0.8974 will resume larger rise from 0.8374 to 61.8% projection of 0.8374 to 0.8956 from 0.8735 at 0.9095.

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.

Daily Pivots: (S1) 152.99; (P) 153.66; (R1) 154.17; More...

Intraday bias in USD/JPY stays neutral and more consolidations could be seen. Further rally is expected as long as 151.79 minor support holds. Above 154.47 temporary top will target a retest on 156.74 high first. Firm break there will resume whole rally from 139.57, and target 61.8% projection of 139.57 to 156.74 from 148.64 at 159.25 next. However, break of 151.79 will turn bias back to the downside for 148.64 support instead.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.4217; (P) 1.4244; (R1) 1.4272; More...

Intraday bias in USD/CAD stays on the upside for the moment. Current up trend is in progress for 1.4391 projection level. On the downside, break of 1.4242 minor support will turn intraday bias neutral again first, and bring deeper pull back to channel support (now at 1.4125). But outlook will stay bullish as long as this channel support holds, and any consolidations would be brief.

In the bigger picture, up trend from 1.2005 (2021) is in progress. Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3418 at 1.4391. Medium term outlook will remain bullish as long as 55 W EMA (now at 1.3706) holds, even in case of deep pullback.

Daily Pivots: (S1) 0.6319; (P) 0.6349; (R1) 0.6365; More...

AUD/USD's decline resumed by breaking through 0.6336 temporary low and intraday bias is back on the downside. Current fall from 0.6941 should target 0.6269 support next. On the upside, above 0.6382 minor resistance will turn intraday bias neutral and bring consolidations again, before staging another fall.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term consolidation to the down trend from 0.8006. More sideway trading could be seen above 0.6169, but overall outlook will stay bearish as long as 0.6941 resistance holds. Firm break of 0.6169 will resume the down trend to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806 next.

Dollar has strengthened against commodity currencies this week but remains range-bound against Euro and Pound, as markets await Fed’s rate decision to gauge the next move. While a 25bps rate cut is fully expected in with no chance of deviation, the focus is on how hawkish Fed's messaging will be. Key questions include the likelihood of a pause in January, the projected pace of easing in 2025, and any adjustments to the neutral rate. The answers to these will shape the direction of Dollar, yields, and broader markets, at least for the near term.

British Pound showed little reaction to today’s UK CPI data, which confirmed persistent inflationary pressure. Services inflation remains elevated at 5%, with no clear signs of easing materially. Coupled with yesterday’s wage growth data, this is more than enough for BoE to hold rates steady this week. Markets maintain a base case of four rate cuts in 2025, with little expectation for a shift unless BoE delivers unexpectedly drastic signals during its upcoming meeting.

For the week so far, the Pound leads as the strongest performer, followed by Yen and then Dollar. Australian Dollar is the weakest, trailed by Canadian Dollar and New Zealand Dollar, while Euro and Swiss Franc are mixed in the middle.

Technically, USD/JPY's rally from 148.64 is losing some momentum as see in 4H MACD. Another rise is in favor for now. But real near term hurdle lies in 156.74 resistance. Break of 4.5% handle in 10-year yield is probably needed to push USD/JPY through 156.74 to resume the rally from 139.57. Otherwise, the pair could engage in range trading between 148.64/156.74 for longer, with risk of another fall before completing the corrective pattern from 156.74.

Looking ahead, Eurozone CPI final will be released in European session. US will release building permits and housing starts, current account later in the day. But main focuses will be on FOMC rate decisions.

Key FOMC Questions: Pause in January, Easing Path in 2025, and Neutral Rate

FOMC rate decision takes center stage today, with a 25bps rate cut widely anticipated, lowering the federal funds rate to 4.25–4.50%. Markets see virtually no chance of a different outcome, making the focus squarely on Fed Chair Jerome Powell’s statement and the updated economic projections. Expectations are for Fed to signal a slower pace of easing in 2025, aligning with signs of a resilient economy and sticky inflation.

Three key questions arise from today’s new projections.

First, the possibility of a pause in January is in focus. With markets pricing an 84% probability of no rate change at the next meeting, the voting split within the FOMC could hint at how close policymakers are to a pause in the easing cycle.

Second, attention will shift to the pace of easing in 2025. Fed’s prior projections and dot plot suggested a median rate of 3.4% by the end of next year. Markets are currently pricing in a 33% chance of rates falling to 3.75–4.00% by December 2025. A significant upward revision in Fed’s median forecast would signal caution about inflation persistence and align with tighter-than-expected monetary policy.

Third, the neutral rate will be scrutinized. The previous projection of a longer-run rate was 2.9%, slightly higher than 2.8% in June. A move toward or above 3% could be psychologically significant, signaling higher baseline expectations for economic growth and inflation stability in the post-tightening environment.

In terms of market reactions, Fed’s "hawkish cut" could lift both the 10-year Yield and Dollar Index. However, breaking out of current ranges will require more than today’s decision.

For the DXY, resistance at 108.07 must be cleared to confirm underlying bullish momentum, which would likely need support from a 10-year yield break above 4.505%. These breakouts would likely hinge on clarity around fiscal and trade policies from the incoming administration.

UK CPI accelerates to 2.6% in Nov, core CPI up to 3.5%

UK CPI accelerated from 2.3% yoy to 2.6% yoy in November, matched expectations. Core CPI, (excluding energy, food, alcohol and tobacco), accelerated from 3.3% yoy to 3.5% yoy, below expectation of 3.6% yoy. CPI goods annual rate rose from -0.3% yoy to 0.4% yoy , while CPI services annual rate was unchanged at 5.0% yoy.

Japan's export rises 3.8% yoy in Nov, while import falls -3.8% yoy

Japan’s exports rose 3.8% yoy in November to JPY 9.152T, supported by increased shipments of chip-making equipment to Taiwan and nonferrous metals to China, marking the second consecutive month of export growth. Imports, however, fell -3.8% yoy to JPY 9.270T, marking their first decline in eight months due to reduced demand for crude oil from Saudi Arabia and electronics parts from Taiwan.

The overall trade deficit stood at JPY -117.6B, extending its red streak to five months. On a seasonally adjusted basis, the deficit widened to JPY -384B from JPY -229B in October, as imports increased 1.9% mom, outpacing the 0.2% mom rise in exports.

Trade with key partners highlighted persistent imbalances. Japan recorded a JPY 664.03B trade surplus with the US, despite exports falling -8.0% yoy, while imports dipped slightly by -0.6% yoy.

Conversely, its trade deficit with China expanded to JPY 682B, as exports grew 4.1% yoy, and imports rose 4.2% yoy.

The trade gap with the EUR remained significant at JPY 210.19B, with exports plunging -12.5% yoy, while imports decreased -5.4% yoy.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6319; (P) 0.6349; (R1) 0.6365; More...

AUD/USD's decline resumed by breaking through 0.6336 temporary low and intraday bias is back on the downside. Current fall from 0.6941 should target 0.6269 support next. On the upside, above 0.6382 minor resistance will turn intraday bias neutral and bring consolidations again, before staging another fall.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term consolidation to the down trend from 0.8006. More sideway trading could be seen above 0.6169, but overall outlook will stay bearish as long as 0.6941 resistance holds. Firm break of 0.6169 will resume the down trend to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806 next.

Markets

Retail sales for November were solid on face value though the details offered a more balanced picture. That was enough to cap the intraday rise in US yields. Net daily changes varied in a tight range between -1 bps and +0.7 bps in an otherwise uneventful session. German rates eased up to 1.7 bps (10-yr) but finished off the intraday lows set following a disappointing IFO indicator. UK gilts hugely underperformed with yields adding almost 10 bps at the front end of the curve. That came after yesterday’s labour market report which showed a sharper-than-expected increase in wage growth. The Bank of England’s room to cut rates is shrinking rapidly and that’s not changing with this morning’s November CPI release. While falling below expectations, accelerating headline CPI of 2.6%, core CPI of 3.5% and services inflation of 5% should not comfort the central bank in any way. UK money markets expect less than three rate cuts next year. Due to the slight CPI miss, sterling does give back some of yesterday’s gains. EUR/GBP is trading around 0.827. The pair remains in the technical danger zone.

Today’s going to be a drawn out countdown to the Fed decision. A rate cut from 4.5-4.75% to 4.25-4.5% is all but certain. Markets have more or less fully discounted such a scenario since the lack of an upward CPI surprise last week. After three consecutive rate cuts (50-25-25) we expect the Fed to steer the market to a pause in January. Chair Powell last month referring the strong economy said there’s no hurry in lowering the policy rates. It also offers the Fed a moment to assess president-elect Trump’s first policy announcements when entering the office on January 20. The updated dot plot will show fewer rate cuts for 2025 with three reductions instead of the current four the most plausible scenario. We think that the long-term estimate, a proxy for the neutral rate, will have shifted further north from 2.875% to 3%. It was already a close call in September. Since US money markets price in only 50 bps of cuts in 2025, we may see a kneejerk downleg in US (front-end) yields and the dollar after the dot plot release. It won’t stretch very far though if Powell strikes a generally hawkish tone in the presser afterwards by keeping the onus on the solid state of the economy. That should offer solid support to both yields and the dollar, the latter especially against an ongoing ailing euro. First meaningful support in EUR/USD is at 1.0335 (November correction low).

News & Views

The National Bank of Hungary (MNB) kept its policy rate unchanged at 6.5% yesterday, citing inflationary risks coming from volatile global investor sentiment and ongoing political tensions. Looking ahead, a careful and patient approach to monetary policy is warranted with the central bank referring to a further pause in cutting interest rates. Restrictive monetary policy contributes to the maintenance of financial market stability and the achievement of the inflation target in a sustainable manner by ensuring positive real interest rates. Updated inflation forecasts show that the 3% inflation target will now only be sustainably met in 2026 instead of 2025 as suggested in September. The MNB plots an inflation path of 3.65%-3.7%-3% for the 2024-2026 policy horizon, coming from 3.7%-3.15%-3% in September. The in-depth analysis will be published in tomorrow’s inflation report. The new growth path faced a downward revision for this year, but was broadly stable afterwards: 0.4%-3.1%-4% from 1.4%-3.2%-4%. The volatility around the MNB-verdict was limited for once. EUR/HUF was broadly unmoved around 409.

The International Energy Agency’s annual coal report shows that the global use of coal is poised to rise to 8.77bn tonnes in 2024, a record. Moreover, demand is set to stay close to this level (even slightly higher) through 2027. While coal use has plummeted in Europe and the US, rising demand in India and China is more than enough to offset that. The new forecast breaks with last year’s view that we would be heading for a decade of lower coal demand as renewable energy sources play a greater role in generating power and as coal consumption levels off in China. The speed at which electricity demand grows will be very important over the medium term, the IEA added.