Sample Category Title

• EURGBP reversed from support zone
• Likely to rise to resistance level 0.8325

EURGBP currency pair today reversed up from the support zone located between the strong support level 0.8265 (which has been revering the pair from the start of November) and the lower daily Bollinger Band.

The upward reversal from this support zone stopped the earlier impulse waves iii and (iii) –which belong to the downward impulse sequence 1 from August.

Given the strength of the support level 0.8265 and the triple bullish divergence on the daily Stochastic indicator, EURGBP currency pair can be expected to rise to the next resistance level 0.8325.

• The US Dollar rose this morning as President Elect Trump took aim at BRICS over de-dollarization efforts.
• The Euro weakens further due to concerns over a potential French government collapse.
• The Dollar Index shows potential for both upside and downside moves, with key resistance at 107.00 and support at 105.00.

The US Dollar kicked December off on the front foot as market participants digested comments from US President Elect Donald Trump. This is the second week that markets have taken their cue from Trump comments to start the week, with the President Elect threatening tariffs of 100% to BRICS countries.

BRICS group of developing nations spearheaded by Russia, China, India, Brazil and South Africa have been discussing a rival to the US Dollar as well as a potential alternative to the swift system. Trump has warned the bloc which has had a surge of interest for membership this year that includes the likes of Turkey, Saudi Arabia, Iran and a host of other developing nations.

The US Dollar for its part shook off the malaise from the Thanksgiving holiday week to trade back above the key 1.0600 handle once more.

France Uncertainty Hits the Euro

Another major reason that the DXY has roared to life this morning could be down to developments in Europe. The Euro, which is the main currency in the US Dollar Index basket of currencies, has been under pressure as concerns around France continue to mount.

The failure of budget talks have led to concerns that the French Government may collapse given its current composition. France’s far-right National Rally is likely to support a no-confidence vote against the government unless there’s a last-minute change. Marine Le Pen has given Prime Minister Michel Barnier until Monday to meet their demands during ongoing budget negotiations.

At present though market sentiment appears to be largely driven by ongoing trade war concerns and how they may impact markets moving forward.

Trump’s Threat to BRICS, a Concern or Not?

President Elect Donald Trump continues to shake up global markets with his comments. His most recent tweet targeted at BRICS countries has however generated a lot of interest. As calls have grown in recent times for an alternate money system to swift as well de-dollarization, many did not expect Trump’s comments.

However, I would urge caution as despite the optimism around the US Dollar the implications of Trump’s proposed measures are fraught with danger. Firstly, the US is no longer a manufacturing but a service and consumer driven economy, meaning it has a strong reliance on imports. Thus any tariffs imposed may be met with tariffs in return which could push up prices which US consumers will bear the brunt off. This could affect the strong support Trump enjoys with the working class American.

If anything, consumers are opting and prioritizing affordability in recent years which means that sudden spikes in prices could have a negative impact on US and global growth. Markets will be hoping that last week’s appointment of Scott Bessent as Treasury Secretary will reign in some policies that could in theory create more problems than they would solve.

There has been no comment from the BRICS group as yet toward President Trump’s comments and it will be interesting to see if we get any form of unified statement.

US Jobs Report Key This Week

The US Dollar may continue to trade choppy this week and may take cues from any further geopolitical development ahead of Friday’s key.

Markets are leaning more toward a rate cut from the Fed in December following last weeks data and the hope is that the jobs report on Friday will confirm this.

Technical Analysis

US Dollar Index (DXY)

The Dollar Index has been interesting to monitor of late and has been a driving force for dollar denominated pairs.

The DXY is trading below the multi-month key level at 107.00 following last week’s selloff. However, a strong bounce this morning off support at the 105.63 handle does offer bulls some hope that further upside may be on the cards this week.

The daily chart did print a change of structure last week with the previous higher low at 106.13 being broken hinting that a downtrend may be in play.

This brings the key multi-month resistance level at 107.00 back in the spotlight. A rejection here could send the DXY tumbling back to last week’s lows or a potential retest of the psychological 105.00 handle.

Data releases ahead of Friday may stoke volatility but barring a really surprising print I expect any moves to prove short lived.

US Dollar Index (DXY) Daily Chart, December 2, 2024

Source: TradingView.com

Key Levels to Consider:

Support

• 106.13
• 105.63
• 105.00

Resistance

• 107.00
• 107.50
• 108.00

Markets

Outright divergence again reigns between US and European markets as US investors return from the Thanksgiving/Black Friday ‘long weekend’. Political/budgetary developments in France continue to set the tone for trading on European markets. The minority government of French Prime Minister Barnier and Finance Minister Armand is playing hard ball with the Rassemblement National on concessions (less savings) to a proposed budget that aims/aimed to reduce the French budget deficit to 5.0% next year. This morning, the Fin Min Armand warned that he wouldn’t allow his administration to be blackmailed. However, this afternoon, AFP reported Premier Minister Barnier offered a final concession by not cutting reimbursements for medicines next year. Whether this will be enough to avoid a vote of no confidence and/or even more political chaos is still highly uncertain. At least, European markets showed some’ relief’ after the headlines but they could be short-lived. Barnier in the meantime forced through the budget using article 49.3. The Left will propose a motion of no confidence which Le Pen’s party is said to back. German yields are ceding between 4-5 bps across the curve. The German 10-y yield is coming ever closer to the 2% psychological barrier (2.05%). The French-German 10-y yield spread rises to 87 bps. ECB Kazaks in an interview explicitly left the door open for a bigger interest rate cut (still ‘only’ about 15% of a 50 bps cut discounted for next week). US yields in the meantime aborted last week’s correction adding between 7 bps (2-y) and 4 bps (30-y). Maybe Donald Trumps warning to BRICS countries threatening them with a 100% import tariff if they don’t commit to continue using the dollar as financial anchor e.g. by creating a new alternative currency. Maybe the threat at least helped to revive at least part of the Trump-Trade (higher yields and stronger dollar). With the eco data today (Manufacturing ISM) and later this week (ADP, Jolts job openings, services ISM and payrolls later this week) deciding on an extension of the move. DXY at least shows a nice rebound today (106.45 from 105.82). EUR/USD was under pressure from the start in Asian this morning, only temporarily interrupted by the ‘positive’ headlines on the concessions in the French budget negotiations. The pair currently trades near 1.047. Gains of the dollar against the yen today still were negligible on persistent yen strength (USD/JPY 149.9). A bit remarkable, European equities today outperform the US (Eurostoxx 50 + 0.6%, S&P 500 little changed).

At the time of finishing this report, US manufacturing ISM improves from 46.5 to 48.4. At the same time prices paid dropped from 54.8 to 50.3. Other details show no clear trend. Yields show no big reaction. The dollar gains further.

News & Views

The decline in the Czech manufacturing accelerated in November with the PMI drop ping from 47.2 to 46 (PMI <50 boom/bust level since June 2022). Weak domestic and external demand weighed on sales and international orders. Structural issues in the automotive sector and challenges to the German manufacturing economy were often highlighted. Companies cut input buying and reduced stock in response to low orders. They did point at extended supplier delivery times as strikes at ports and capacity issues at vendors. The pace of job shedding did slow to the weakest since March. An uptick in input prices didn’t translate into higher selling prices. Czech manufacturers stay upbeat on output expectations over the coming year, but optimism dropped to the lowest since January. The krone didn’t respond to the weak PMI with EUR/CZK stuck between 25.20 and 25.40 since the start of Q4 2024.

The leader of Hungarian opposition party Tisza ahead of next year’s elections vowed to unlock EU-funds (€20bn), copying Polish PM Tusk’s strategy, and steer the country towards euro adoption. Peter Magyar would as a first step allow the EU prosecutor’s office to probe corruption in Hungary, which has been a major stumbling block and something that Orban has rejected. These blocked funds are one of the reasons why Moody’s cut the outlook on its Baa2 rating from stable to negative last Friday. Magyar added that a new government with predictable economic policies would wintrust of markets if it doesn’t change laws daily or doesn’t seek to penalize foreign investors. It could help lower the country’s risk premium. He would like to have a date for joining the euro area with a predictable FX rate giving stability and predictability for markets, entrepreneurs and Hungarians. There’s no evidence of that yet, with EUR/HUF today testing the YTD top around 415.

WTI oil price rose over 1% on Monday after better than expected China’s manufacturing data boosted positive sentiment, while fresh concerns about the Middle East ceasefire collapse, add support.

Fresh gains peaked above $69.00 mark but were so far unable to hold gains, as Friday’s bearish candle with long upper shadow, points to solid offers.

Oil price remains below psychological $70 level for the sixth consecutive day and also hold below converged daily Tenkan/Kijun-sen ($69.69), with near-term action being also weighed by last Monday’s large bearish candle (oil price was down 3.25% in the biggest daily fall since Oct 14).

On the other hand, bears have so far found a temporary footstep at $68.00 zone that keeps near-term action within a range.

Technical studies are mixed on daily chart as 14-momentum is neutral, MA’s in bearish configuration and stochastic is oversold.

Look for direction signals on break of either $68.00 or $70 triggers.

Res: 69.33; 70.00; 70.30; 71.00
Sup: 68.00; 66.93; 66.33; 65.26

Dollar's rally extended its rally, bolstered by stronger-than-expected ISM manufacturing data. The notable jump in new orders and easing prices suggest an improving outlook for the US manufacturing sector. In the background, the greenback had a head start for the week after US President-elect Donald Trump adopted a firm stance on maintaining the Dollar’s dominance, demanding that BRICS nations abandon plans to develop a competing currency, or face 100% tariffs on non-compliant nations, marking a sharp pivot from his previous preference for a weaker Dollar.

Meanwhile, Euro faced additional pressure amid political turmoil in France, where Prime Minister Michel Barnier’s government is at risk of collapse. Reports suggest Barnier plans to invoke article 49.3 to bypass parliamentary approval on parts of the budget, potentially triggering a no-confidence vote. Opposition parties, including far-left groups and the far-right Rassemblement National, have signaled their intention to support the motion, raising the stakes for Barnier’s leadership.

Overall for the day so far, Dollar is currently the strongest one, but trailed closely by Yen, while Loonie is a distant third. Euro is the runaway loser, followed by Aussie and then Kiwi. Sterling and Swiss Franc are positioning in the middle, as both are supported somewhat by buying against Euro.

Technically, EUR/JPY's current downside acceleration now raises the chance that whole decline from 175.41 is resuming through 154.40 low. Yet, the cross will face an important cluster support zone ahead at 153.15, which is close to 61.8% projection of 175.41 to 154.40 from 166.67 at 153.65, and 38.2% retracement of 114.42 to 175.41 at 152.11. Strong support is still in favor at this zone to contain downside. But decisive break there indicate that deeper medium term correction is underway, with increased risk of long term bearish reversal.

In Europe, at the time of writing, FTSE is up 0.39%. DAX is up 0.88%. CAC is down -0.67%. UK 10-year yield is down -0.0005 at 4.247. Germany 10-year yield is down -0.042 at 2.049. Earlier in Asia, Nikkei rose 0.80%. Hong Kong HSI rose 0.65%. China Shanghai SSE rose 1.13%. Singapore Strait Times rose 1.13%. Japan 10-year JGB yield closed flat at 1.077.

US ISM manufacturing rises to 48.4, new orders jump, prices ease sharply

US ISM Manufacturing PMI rose to 48.4 in November, up from October’s 46.5 and exceeding expectations of 47.5. While still in contraction territory (below 50), the improvement reflects signs of stabilization in the manufacturing sector.

New orders led the gains, climbing from 47.1 to 50.4, signaling expansion after seven consecutive months in contraction. Production edged up from 46.2 to 46.8, and employment saw a notable rise from 44.4 to 48.1, though both remain below the neutral threshold. Prices, however, declined sharply from 54.8 to 50.3, indicating easing inflationary pressures within the sector.

ISM noted that the November reading aligns with a projected annualized GDP growth of 1.7%, suggesting moderate economic expansion despite ongoing headwinds in manufacturing.

UK PMI Manufacturing finalized at 48.0, to 48.0, high costs, low demand and raised uncertainty

UK PMI Manufacturing was finalized to 48.0 in November, marking a nine-month low and reflecting a deepening contraction in the sector. The decline from October's 49.9 underscores persistent challenges, including high costs, subdued demand, and a "bleak" export environment.

Rob Dobson, Director at S&P Global Market Intelligence, noted that conditions "deteriorated again" as manufacturers faced falling output, reduced orders, and cutbacks in purchasing, jobs, and inventories.

Exports remained under pressure, with weaker demand from key markets in the US, China, and the EU driving a further decline in new export business. Supply chain disruptions also intensified, fueled by the ongoing Red Sea crisis, port delays, and border regulation challenges.

Looking ahead, the manufacturing sector faces additional headwinds. Recent UK budget measures, including higher labor costs and employer national insurance contributions, are expected to increase operational expenses in 2025.

Combined with rising geopolitical tensions and the threat of heightened global protectionism, manufacturers are bracing for an extended period of "high costs, low demand and raised uncertainty".

Eurozone PMI manufacturing finalized at 45.2, recession looks never going to end

Eurozone Manufacturing PMI slipped to 45.2 in November, down from October’s 46.0, reflecting deepening contraction in the sector.

The downturn remains widespread, with manufacturing activity deteriorating across major economies. Germany and France recorded PMI readings of 43.0 and 43.1 (a 10-month low), respectively, indicating severe weaknesses. Italy followed closely at 44.5, hitting a 12-month low, while the Netherlands posted a reading of 46.6, an 11-month low. Spain and Greece maintained levels above 50, but both fell to two-month lows at 53.1 and 50.9, respectively.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, described the figures as "terrible," suggesting the manufacturing recession “is never going to end.”

De la Rubia forecasted a -0.7% contraction in manufacturing output for Q4, with the slump likely "going to drag into next year". The capital goods sector is bearing the brunt of the downturn, while companies continue to trim staff, signaling rising unemployment ahead.

ECB’s Lane signals shift to forward-looking policy approach ahead

In an interview with the Financial Times, ECB Chief Economist Philip Lane indicated that the central is preparing to adjust its monetary policy approach as inflation moves closer to the 2% target.

While acknowledging that inflation has fallen near the desired level, Lane noted that "there is a little bit of distance to go," especially with services inflation needing further reduction.

However, Lane emphasized that once the disinflation process is complete, monetary policy decisions will need to become "essentially forward-looking," focusing on upcoming risks rather than relying on past data. He highlighted the importance of scanning the horizon for "new shocks" that could impact inflation pressures.

Over the course of next year, Lane expects a "transition to a more sustainable neighborhood of 2%," signifying a shift from combating high inflation to maintaining price stability on a sustainable basis.

ECB’s Kazaks calls for further rate cut as inflation problem will soon end

Latvia’s ECB Governing Council member Martins Kazaks indicated his support for an interest rate cut at next week’s ECB meeting, citing the belief that inflation problem "will soon end."

However, Kazaks acknowledged the high level of uncertainty following the widely expected rate cut. He pointed to risks tied to US President-elect Donald Trump’s upcoming administration, noting that new tariffs could further weigh on Europe’s economy.

Despite these concerns, Kazaks maintained a cautiously optimistic view, stating that "Europe’s economy is going from its lowest point upwards."

Japan's PMI manufacturing finalized at lowest since March, but optimism grows for 2025 recovery

Japan’s Manufacturing PMI was finalized at 49.0 in November, down from October’s 49.2, marking its lowest reading since March. The decline reflects ongoing challenges, with weaker demand leading to sustained declines in new orders and production levels.

S&P Global Market Intelligence’s Usamah Bhatti described the sector’s performance as "downbeat," noting subdued capacity pressures and firms reducing employment for the first time in nine months due to the lack of demand-driven growth.

Cost inflation remained elevated in November, prompting manufacturers to increase selling prices at a stronger rate to protect margins.

However, firms remain optimistic about the future, with confidence reaching its highest level since August. Optimism is supported by expectations of domestic and global economic recovery, alongside planned new product launches that could drive future sales.

Separately, capital spending rose 8.1% yoy in Q3, exceeding expectations of 6.7% yoy and accelerating from Q2’s 7.4% yoy growth. This marks the fastest annual growth in investment since Q4 last year, providing a silver lining amid subdued manufacturing activity.

Australia’s retail sales beat expectations with 0.6% mom growth in Nov

Australia’s retail sales increased by 0.6% month-on-month to AUD 36.7B in November, surpassing the forecasted 0.4% mom rise. On a year-on-year basis, sales grew 3.4% yoy, supported by early Black Friday promotions.

Strong gains were seen in non-food categories, with other retailing up 1.6% and household goods retailing rising 1.4%, driven by demand for electronics like televisions. However, declines were noted in clothing, footwear, and personal accessories (-0.6%) and department stores (-0.3%).

Food-related sectors also performed well, with cafes, restaurants, and takeaway services rising 0.3% for the third consecutive month. Food retailing rebounded 0.3%, led by a 1.7% jump in liquor sales, returning turnover to July 2024 levels.

China’s Caixin PMI manufacturing rises to 51.5, confidence grows but challenges in jobs persist

China’s Caixin Manufacturing PMI climbed to 51.5 in November, up from 50.3 in October and surpassing expectations of 50.5. This marks the fastest pace of growth since June, driven by a rebound in new orders, which rose at their quickest pace since February 2023, alongside renewed export growth. Output price inflation reached a 13-month high, and business confidence strengthened to its highest level in eight months.

Wang Zhe, Senior Economist at Caixin Insight Group, highlighted that manufacturers increased supply to meet expanded demand, with businesses purchasing more to build inventories. Input costs and output prices also rose, while supply chains remained stable.

However, employment continued to contract, underscoring lingering challenges. Wang noted that the economy faces "prominent downward pressure," with the government's stimulus measures yet to significantly impact the labor market and workforce expansion.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0548; (P) 1.0572; (R1) 1.0603; More...

Intraday bias in EUR/USD stays neutral at this, despite today's dip. Outlook remains bearish with 1.0609 resistance intact. On the downside, break of 1.0330 will resume the fall from 1.1213. Also, sustained trading below 1.0404 key fibonacci level will carry larger bearish implication. Nevertheless, firm break of 1.0609 will confirm short term bottoming, and turn bias back to the upside for 1.0760 support turned resistance first.

In the bigger picture, immediate focus is now 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.

US ISM Manufacturing PMI rose to 48.4 in November, up from October’s 46.5 and exceeding expectations of 47.5. While still in contraction territory (below 50), the improvement reflects signs of stabilization in the manufacturing sector.

New orders led the gains, climbing from 47.1 to 50.4, signaling expansion after seven consecutive months in contraction. Production edged up from 46.2 to 46.8, and employment saw a notable rise from 44.4 to 48.1, though both remain below the neutral threshold. Prices, however, declined sharply from 54.8 to 50.3, indicating easing inflationary pressures within the sector.

ISM noted that the November reading aligns with a projected annualized GDP growth of 1.7%, suggesting moderate economic expansion despite ongoing headwinds in manufacturing.

Full US ISM Manufacturing release here.

Daily Pivots: (S1) 148.89; (P) 150.30; (R1) 151.13; More...

Further decline in USD/JPY is expected with 151.94 minor resistance intact, despite loss in downside momentum. Sustained trading below 38.2% retracement of 139.57 to 156.74 at 150.18 will argue that whole rise from 139.57 could have completed. Deeper fall should then be seen to 61.8% retracement at 146.12 next. On the upside, break of 151.94 will turn bias back to the upside for stronger rebound 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) 0.8792; (P) 0.8815; (R1) 0.8834; More…

Range trading continues in USD/CHF and intraday bias stays neutral. Also, with 0.8800 support intact, further rally remains in favor. On the upside, break of 0.8956 will resume the rally from 0.8374, and target 0.9223 key resistance next. However, firm break of 0.8800 will confirm short term topping and turn bias back to the downside for 55 D EMA (now at 0.8725).

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern. Rise from 0.8374 is seen 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) 1.2687; (P) 1.2719; (R1) 1.2765; More...

Intraday bias in GBP/USD remains neutral at this point. While another rise cannot be ruled out, outlook will stay bearish as long as 55 D EMA (now at 1.2867) holds. Below 1.2615 minor support will turn intraday bias back to the downside for retesting 1.2486. Break there will resume whole fall from 1.3433.

In the bigger picture, a medium term top should be in place at 1.3433, and price actions from there are correcting whole up trend from 1.0351 (2022 low). Deeper decline is now expected as long as 55 D EMA (now at 1.2867) holds, to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. Strong support should be seen there to bring rebound.

Daily Pivots: (S1) 1.0548; (P) 1.0572; (R1) 1.0603; More...

Intraday bias in EUR/USD stays neutral at this, despite today's dip. Outlook remains bearish with 1.0609 resistance intact. On the downside, break of 1.0330 will resume the fall from 1.1213. Also, sustained trading below 1.0404 key fibonacci level will carry larger bearish implication. Nevertheless, firm break of 1.0609 will confirm short term bottoming, and turn bias back to the upside for 1.0760 support turned resistance first.

In the bigger picture, immediate focus is now 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.