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November’s US inflation data came in line with expectations, showing no significant progress toward easing price pressures further. Headline CPI rose 0.3% mom, supported by a 0.3% mom rise in the shelter index, which accounted for nearly 40% of the monthly increase. Food prices rose by 0.4% mom, while the energy index rose 0.2% mom. Core CPI, excluding volatile food and energy prices, also rose by 0.3% mom.

On an annual basis, headline CPI ticked up from 2.6% yoy in October to 2.7% yoy in November, aligning with market forecasts. Core CPI, excluding the volatile food and energy components, remained steady at 3.3% yoy. Among key categories, food prices increased 2.4% yoy, while energy prices remained a deflationary force, falling -3.2% yoy.

Full US CPI release here.

Daily Pivots: (S1) 192.99; (P) 193.57; (R1) 194.67; More...

No change in GBP/JPY's outlook, as it stays bearish as long as 55 D EMA (now at 193.97) holds. On the downside, below 190.59 minor support will bring retest of 188.07 first. Break there will target 183.70 support next. However, sustained trading above the EMA will bring stronger rebound back to 199.79 resistance instead.

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) 159.53; (P) 159.80; (R1) 160.25; More...

No change in EUR/JPY's outlook. While recovery from 156.16 might extend, further decline is expected as long as 55 D EMA (now at 161.83) holds. On the downside, below 157.85 minor support will bring retest of 156.16 first. Break there will target 154.40 low next.

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) 0.8227; (P) 0.8255; (R1) 0.8272; More...

Intraday bias in EUR/GBP remains on the downside. Current fall is part of the larger down trend, and should target 0.8201 key support level next. Strong support could be seen there to bring rebound. On the downside, above 0.8282 minor resistance will turn intraday bias neutral first. Further break of 0.8363 resistance will be the first signal of bullish trend reversal. However, sustained break of 0.8201 will carry larger bearish implications.

In the bigger picture, down trend from 0.9267 (2022 high) is in progress. Next target is 0.8201 (2022 low), but strong support should be seen there to bring rebound. However, outlook will remain bearish as long as 0.8624 resistance holds even in case of strong rebound. Decisive break of 0.8201 will indicate long term bearish reversal.

Daily Pivots: (S1) 1.6410; (P) 1.6475; (R1) 1.6571; More...

EUR/AUD's rally from 1.5963 is resuming by breaching 1.6559. Intraday bias is back on the upside. Firm break of 1.6598 resistance will confirm that whole fall from 1.7180 has complete with three waves down to 1.5963, and target a test on 1.7180 next. For now, further rally is in favor as long as 1.6349 support holds, in case of retreat.

In the bigger picture, EUR/AUD is still 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) 0.9258; (P) 0.9293; (R1) 0.9329; More....

Intraday bias in EUR/CHF is turned neutral again with current recovery. But another decline is mildly in favor with 0.9321 resistance intact. Below 0.9254 will bring retest of 0.9204 low. Firm break of 0.9204/9 will indicate larger down trend resumption. Nevertheless, break of 0.9321 resistance will turn bias back to the upside to resume the rebound from 0.9204 instead, and that would be an early sign of bullish reversal for the near term.

In the bigger picture, outlook will now stay bearish as long as 0.9444 resistance holds. Decisive break of 0.9209 low will resume long term down trend to 61.8% projection of 0.9772 to 0.9209 from 0.9444 at 0.9096 next.

• The upcoming US CPI data release on December 11th is a key event for markets, as it could influence the Fed’s decision on interest rates at its December 18th meeting.
• While a rate cut is widely expected, a higher-than-forecast CPI print could raise questions about the Fed’s path forward.
• The US Dollar has strengthened recently, partly due to positive economic data and a risk-off sentiment in markets. Can the Dollar continue its rise?

The upcoming release of the US Consumer Price Index (CPI) data on December 11, 2024, is set to draw the attention of market participants. Scheduled for release at 8:30 a.m. EST, Inflation may be starting to play on the minds of the Fed once more following an uptick in average hourly earnings as well.

Another factor raising inflation concerns are comments by President Elect Trump who stated that he is not sure he will be available to control the potential inflationary impact of his tariff proposals. However, as many have pointed out, tariffs may just be a negotiating tactic.

Heading toward the Fed meeting on December 18, market participants are pricing in around an 86% probability of a 25 bps rate cut. Inflation in my opinion is unlikely to change that narrative with any change to policy likely to come at the Feds January meeting.

Source: CME FedWatch Tool (click to enlarge)

What is the Expected CPI Print?

Analysts predict that overall inflation (headline CPI) will go up slightly to 2.7% from 2.6% over the last year. Core inflation, which ignores food and energy price changes, is expected to stay the same at 3.3%. On a monthly basis, both measures are likely to rise by 0.3%.

This shows that inflation is steady but still a concern. Factors like stable housing costs and lower energy prices are expected to play a role in these changes.

Source: TradingEconomics (click to enlarge)

The big question is whether this will be enough to result in any change to the Fed decision this month? Most Fed members have recently said they plan to cut interest rates by 0.25% at the December meeting. The Fed are also in their ‘blackout period’ at present, which means we have nothing else but the CPI data to go on ahead of the Fed meeting.

It’s easy to think the Fed is done worrying about inflation, but if core inflation goes above the expected 0.3% for the month, this could lead to a change in the probability of a rate cut even if it might not delay it. A high core CPI reading could make it more of a 50/50 proposition although i would still lean toward a rate cut.

An increase in the CPI prints, particularly the core reading could then in theory be responsible for another leg higher in the US Dollar index (DXY).

Technical Analysis – US Dollar Index (DXY)

From a technical standpoint, the dollar has strengthened this week, partly because of the very positive small business optimism report released yesterday. It’s not surprising that US business owners are excited about possible tax cuts and fewer regulations next year.

This coupled with a risk of tone at the start of the week which helped boost the US Dollars safe haven appeal have left the US Dollar Index eyeing acceptance above the 107.00 handle.

There is a trendline break which has come to fruition and hints at further US Dollar upside. Based on the rules of a trendline break the overall target of the breakout is around the 107.50 which could come into play on a higher US CPI reading.

The implications of this on other assets could be broad ranging with it likely to effect US equities, currencies and bond markets.

US Dollar Index (DXY) Daily Chart, December 11, 2024

Source: TradingView.com (click to enlarge)

Support

• 106.13
• 105.63
• 105.00

Resistance

• 107.00
• 107.50
• 108.00

• USDCAD slows pace after fresh four-year high
• Bears wait below 1.4150, but uptrend could stay intact
• BoC rate announcement due at 14:45 GMT

USDCAD broke above a neutral symmetrical triangle with a bang last Friday, surpassing November's four-year high of 1.4176, but since then the pair has been losing pace, raising questions about whether the rally is nearing a peak.

With the RSI and the stochastic oscillator hanging near overbought levels, a slowdown is likely. Yet only a drop below the 1.4150 barrier could activate fresh selling orders toward the 1.4075-1.4100 area. Another failure there could confirm additional losses toward the 1.4000 level, while a steeper decline could push toward the 50-day exponential moving (EMA) at 1.3945.

On the upside, if the bulls successfully claim the 1.4200 number, they could next target the 1.4265-1.4285 resistance trendline zone. A continuation above 1.4300 could take a halt near 1.4350 or around the 1.4400 mark.

Overall, USDCAD is still in a positive trajectory and any potential declines could present a “buying the dip” opportunity. A move below 1.4150 could trigger the next bearish action, whilst a move above 1.4200 could shift the attention back to the upside.  

As evidenced by the USD/CAD chart, yesterday the rate climbed above 1.4190 – a level not seen since April 2023, when the world was gripped by panic over the spread of the coronavirus.

Today, the weakness of the Canadian dollar relative to the USD is being influenced by a rich fundamental backdrop. As reported by the media:

→ Formerly elected President Donald Trump has previously stated that he would impose a 25% tariff on all goods from Mexico and Canada as soon as he takes office on 20 January, joking that Canada should become the 51st state. Yesterday, Trump posted on social media that he looks forward to meeting with Canadian Prime Minister Trudeau again to "continue our in-depth discussions on tariffs and trade."

→ At 17:45 GMT+3 today, the Bank of Canada will announce its decision. It is expected to cut its interest rate by 50 basis points to 3.25% and likely signal that further rate cuts are possible in light of the sharp rise in unemployment levels.

→ At 16:30 GMT+3 today, the Consumer Price Index (CPI) data will be released. It is expected that US inflation will remain unchanged.

As a result, heightened volatility is highly likely today, which could significantly affect the nature of the current upward trend.

Note that on 25–26 November, a spike in volatility was observed on the USD/CAD chart, visible through the ATR indicator, which caused the channel's slope to become less steep. Today’s batch of news carries the highest significance: traders should prepare for both the scenario of a new 56-month high being reached and an attempt by bears to reverse the trend.

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Market Picture

The cryptocurrency market remained roughly the same as the day before at $3.45 trillion, down 7% from its peak levels at the start of the week. The sentiment index rolled back to 74, in ‘greed’ territory. The altcoin season index has pulled back to 63 from a peak of 87 a week earlier. This is a typical story where Bitcoin’s inability to grow soon translates into pressure on altcoins.

There is a meaningful change of ownership for Bitcoin in the $95-100k range. Bitcoin experienced another wave of selling in the US session on Tuesday, just as it did the day before. Once again, buyers retook the initiative when the price dipped under $95k, and at the time of writing, the price has recovered to $98k. The meaningful round level has prompted long-term private holders to sell. At the same time, there is a growing appetite for corporations to buy on their balance sheets. Then, there is the key to how governments holding impressive amounts of confiscated Bitcoins will behave.

For now, we believe Bitcoin is meeting psychological resistance like 2020, when it hesitated to cross $20K at year-end but eventually broke through, doubling in price shortly after. In this cycle, we see upside potential to $120-140K in the next couple of months before the next major shakeout.

News Background

CryptoQuant notes that on 5 December, when the price was at an all-time high, significant transfers from holders could have caused a sharp drop to $90,500.

Stablecoin market capitalisation has surpassed $200 billion, adding 3% in the last seven days. Coinbase attributed the dynamics to a sharp rise in on-chain lending rates.

Mining company MARA Holdings used the proceeds from the bond sale to buy 11,774 BTC for ~$1.1bn at an average price of around $96K per coin. The firm has 40,435 BTC worth $3.9bn in reserves.

Another mining company, Riot Platforms, plans to float $500 million in convertible bonds, using the funds to buy more bitcoins and for general corporate purposes.