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Minneapolis Fed President Neel Kashkari signaled that a rate cut at the December meeting remains a "reasonable consideration," reflecting ongoing debates within the central bank. Speaking to Bloomberg TV, Kashkari stated, "Right now, knowing what I know today, still considering a 25-basis-point cut in December—it's a reasonable debate for us to have."

Kashkari highlighted that the economy's resilience in the face of higher interest rates suggests the neutral rate may be higher than previously estimated. This observation raises questions about the effectiveness of current monetary policy in cooling economic demand. He noted that if this resilience persists, it might indicate a structural shift rather than a temporary one.

"This is what I'm trying to understand right now," Kashkari said, emphasizing the need to assess "how much downward pressure we are putting on the economy, and what is the path for inflation."

Chicago Fed President Austan Goolsbee has reiterated his support for gradual reduction in the fed funds rate, provided there is no “convincing evidence of overheating” in the economy. He noted that the pace of rate adjustments would depend on evolving economic conditions and the broader outlook.

“The through line to me is pretty clear that we’re on a path, and that path is going to lead to lower rates, closer to what you might call neutral,” Goolsbee emphasized overnight.

Policymakers will assess several key data points ahead of the December meeting. Goolsbee cautioned against drawing firm conclusions from one month’s data. He remarked that inflation is now “not that far above the 2% target”.

• Gold prices experience significant drop due to hopes of a Lebanon-Israel ceasefire and the announcement of Scott Bessent as US Treasury Secretary.
• US Treasury yields fall and the dollar weakens in response to Bessent’s expected policies.
• Technical analysis indicates a bearish trend for gold in the short term, with potential support and resistance levels identified.

Gold prices have fallen around $100 today as risk on sentiment returned. Geopolitics has taken center stage at the start of the week as rumors began doing the rounds that an Israel-Lebanon deal will be announced in 36 hours.

US Treasury Pick Confirmed

The return of risk on sentiment is also partly down to the announcement by US President Elect Donald Trump of Scott Bessent as US Treasury Secretary.

Market participants see the appointment of Bessent as a steadying influence in Trump’s administration. There seems to be a sigh of relief that Trump didn’t make another risky choice for the Cabinet. Bessent’s Wall Street experience reassures them, as they believe he’ll support balanced policies and help tone down some of Trump’s more extreme ideas.

Scott Bessent has talked about using trade levies in a way that’s less likely to upset markets or cause inflation compared to Trump’s previous plans. He has also shared ideas on reducing the budget deficit to 3% by focusing on deregulation, boosting energy production, and shifting parts of the economy back to private control all aimed at driving economic growth.

These views influenced markets on Monday, with 10-year Treasury yields dropping to 4.3%, as investors felt reassured. At the same time, the dollar lost some strength against other currencies because people believe Bessent will take a softer stance on tariffs than Trump.

Source: Bloomberg

Israel-Lebanon Ceasefire Deal Nears, Russia-Ukraine Rumbles on

Rumors began circulating in the European session that a ceasefire deal between Lebanon and Israel is drawing closer. This added to the precious metals woes setting it on course for its worst day since June 7.

According to officials, the Israeli security cabinet may vote on a Lebanon deal tomorrow. Such a move could lead to continued selling pressure on the precious metal.

What is interesting though is that rumors around Russia and Ukraine have actually intensified over the past 24 hours. Rumors have swirled that the UK and France are leading discussions to allow military personnel on the ground in Ukraine. This would be seen as a major escalation, hence my surprise at the drop in Gold prices. In theory, one would think that such rumors may at least keep Gold prices slightly supported moving forward.

This will definitely be a point of interest moving forward and could be the saving grace that Gold may need following the sharp selloff and drop in US Treasury Yields.

Economic Data Ahead

Looking at the data front this week, and tomorrow we have the FOMC minutes which may provide some insight into what Fed members think of a Trump Presidency and its potential implications. Despite Chair Jerome Powell insisting politics will not dictate policy, this seems a bit tone deaf in all honesty.

It’s no secret how President Elect Trump feels about the Fed and Jerome Powell. Given Trump’s rhetoric in the election and his economic plans, the Fed will not be able to just ignore it and wait on the data. However, I could be getting ahead of myself and the Fed minutes may not reveal anything about a potential Trump Presidency.

Technical Analysis Gold (XAU/USD)

From a technical analysis standpoint, Gold is down around 3.21% at the time of writing. Last weeks selloff did find support at the 100-day MA before rallying to peak just above the $2700/oz mark.

Overall the trend on the daily is bearish from a price action point of view, with further downside a possibility. Gold has been largely driven by fundamental factors of late, which is not to say that the technicals have not given us any clues to the precious metals next move.

Looking at the selloff today and once could argue that the fibonacci retracement provided a hint that a selloff may materialize around the 2693 and 2735, which is the 61.8-78.6 fib retracement zone.

However, many may have been caught off guard given the bullish pressure we saw last week. I for one will have to admit i did not see such an aggressive selloff to start to the week, which begs the question… will the precious metal push lower or will the situation around Russia-Ukraine reignite safe haven demand?

immediate support rests at 2625 and 2600 which is just above the 23.6% retracement level which rests at 2596.

A recovery from the current price may face resistance around the 2639 handle before the 2650 and 2673 handle comes into focus.

GOLD (XAU/USD) Daily Chart, November 25, 2024

Source: TradingView (click to enlarge)

Support

• 2625
• 2600
• 2574

Resistance

• 2639
• 2650
• 2673

The EURUSD currency pair is starting the week trying to stabilize after dropping to 1.0332 last week, its lowest level in two years. The Euro has struggled, falling 4.21% this month and 5.54% since the start of 2024, as concerns about the Eurozone's slowing economy weigh on the currency. Business activity in the region unexpectedly shrank, raising fears about future growth and putting pressure on the European Central Bank (ECB) to cut interest rates more aggressively. Rising wages, political challenges in Germany and France, and potential tariffs from Donald Trump's presidency add to the Euro's troubles. ECB President Christine Lagarde has emphasized the need for Europe to deepen its capital markets and support innovation to counter these challenges. Let's look now at the current technical outlook from our weekly market review session.

EURUSD – W1 Timeframe

The weekly timeframe price action indicates that price has reached a critical level, and a reversal may follow. There is a weekly timeframe pivot (the horizontal red line) and a rally-base-rally demand zone serving as the visible confluence on the weekly timeframe. A closer look at the price action on the lower timeframe would give ample detail on the criteria for entry in the direction of the bullish sentiment.

H4 Timeframe

The 4-hour timeframe presents a classic break-and-retest pattern, where the point of interest is the demand zone at the base of the break of structure. In any case, the overall sentiment for EURUSD is bullish, albeit the point of entry may differ slightly.

Analyst's Expectations:

• Direction: Bullish
• Target:1.07089
• Invalidation: 1.03044

The US dollar strengthened following Trump's victory, pushing the GBPUSD currency pair down to 1.2487, its lowest level in six months, before closing at 1.2528. The pound has dropped 2.86% this month and 1.59% since the start of 2024, with its performance under pressure due to the more robust US economy. In contrast, the UK faces challenges like stagnant productivity, rising inflation (up 2.3% in October), and higher energy bills. Investors now expect the Bank of England to make three rate cuts in 2025, with a February cut fully priced. Until the UK economy improves, the pound's struggle against the dollar will likely continue. Here is a breakdown of the analysis performed on GBPUSD during our weekly market review session on the Telegram channel.

GBPUSD – D1 Timeframe

On the daily timeframe chart of GBPUSD, we see the price being rejected off the confluence region of the trendline support and the drop-base-rally demand zone. There is also a daily timeframe pivot zone on the scene, as highlighted by the two horizontal red lines. Let's dive into the 1-hour timeframe to recount the required entry confirmation.

H1 Timeframe

The required trigger for the buy on the 1-hour chart of GBPUSD would be a break above the previous high and the trendline resistance. The arrowed lines indicate the path I expect the price to take to complete the required confirmation.

Analyst's Expectations:

• Direction: Bullish
• Target:1.27676
• Invalidation: 1.24381

• EURCHF reversed from support zone
• Likely to rise to resistance level 0.9360

EURCHF currency pair recently reversed up from the support zone located between the long-term support level 0.9250 (which has been reversing the price from the end of December) and the lower daily Bollinger Band.

The upward reversal from this support zone created the daily Japanese candlesticks reversal pattern Bullish Engulfing.

Given the strength of the support level 0.9250 and the bullish euro sentiment seen today, EURCHF currency pair can be expected to rise further to the next resistance level 0.9360.

• EURGBP reversed from support zone
• Likely to rise to resistance level 0.8375

EURGBP currency pair previously reversed up from the support area located at the intersection of the support level 0.8260 (which stopped the previous minor impulse wave i) and the lower daily Bollinger Band.

The upward reversal from this support zone created the daily Japanese candlesticks reversal pattern Long Legged Doji – strong buy signal for this currency pair.

Given the bullish divergence on the daily Stochastic indicator, EURGBP currency pair can be expected to rise further to the next resistance level 0.8375 (top of the previous minor correction a).

Markets

Trump’s pick for the US Treasury Secretary triggered a relief rally in the bond market. Scott Bessent brought a catchy 3-3-3 pitch: reduce the government deficit to 3% of GDP, aim for 3% growth and pump up an additional 3 million barrels a day. He favours tariffs and the tax cuts the president-elect plans to push through. But he’s a bit more a moderate voice compared to some of the hardliners in Trump 2.0. Markets expect Bessent to soften some of the sharpest edges of Trump’s America First strategy for the sake of financial and macro stability. In absence of a lot of other major news, it served as a perfect trigger for some short-term consolidation that even might morph into a correction following the blistering yields’ rally since mid-September. US rates ease between 7 and 10 bps in a bull flattening move. German Bunds slightly underperform after Friday’s post-PMI surge. A cautious yield recovery attempt ended in tears nonetheless, especially at the long end of the curve. The 30-yr drops 5 bps. The 2-yr tenor adds about 2 bps. The technical charts offered some help with the 2% support cracking but for the time being surviving. Given what’s priced in for the ECB terminal rate (<1.75%) this level should hold theoretically though there are clear risks for a break lower. Sentiment on stock markets is constructive. The likes of the EuroStoxx50 add a modest 0.3% and Wall Street opens with gains between 0.8-1%. It’s a boon to the euro, which hit a 2-yr low against the dollar just before the weekend. EUR/USD bounced back from 1.043 to 1.052. It’s as much euro strength as dollar weakness though. The trade-weighted greenback slid below 107 (106.64), USD/JPY marches south (153.78). Oil on commodity markets slides to $73.9 per barrel. European natural gas (Dutch TTF) prices rise about 3%, closing in on the €50 mark (per MWh) for the first time in over a year and underscoring once again the loss cheap energy as a competitive advantage. A cold snap is expected for the second part of this week, prompting speculation for higher demand at a time when Europe already tapped earlier than usual in its inventories.

News & Views

Overall confidence in the Czech economy increased in November. The composite indicator (consumer & business confidence) rose from 96.8 to 98 (vs 96.6 consensus), matching its best level since June 2022. Both consumer (101.6 from 100.7; 6-month high) and business confidence (97.3 from 96; 5-month high) contributed to the improvement. The number of consumers who do not plan to make large purchases in the next 12 months has decreased. Households' concerns about an increase in unemployment over the next year have decreased slightly as well. In contrast, the number of households concerned about further price increases has increased. Details of the business survey showed a mixed picture. Improvements in construction, trade and selected services was partly offset by a weakening in industry confidence. Especially the share of respondents expecting an increase in the pace of production activity in the next three months fell significantly. CZ markets didn’t respond to the release. The Czech krone keeps trading on the weak side (EUR/CZK 25.30) with tighter financial conditions in the US, the proximity to war in Ukraine, a struggling German economy and increasing gas prices all contributing.

The Hungarian government announced that minimum wage will increase by 9% next year, followed by 13% and 14% increases in 2026 and 2027. PM Orban hopes to revive the economy in the run-up to general elections in 2026. They aim to keep workers from seeking employment abroad and are based on a scenario where economic growth and productivity increase hand-in-hand. The government, labour unions and employers agreed to review the wage hike target should key indicators for growth and especially inflation miss government forecasts. MNB vice-governor Virag already warned against boosting growth at the cost of higher inflation. The forint today rebounds off YTD lows, from EUR/HUF 412.50 to 409.50.

Daily Pivots: (S1) 153.82; (P) 154.64; (R1) 155.36; More...

USD/JPY is extending consolidation pattern from 156.74 and intraday bias remains neutral. On the downside, break of 153.27 will bring deeper correction to 38.2% retracement of 139.57 to 156.74 at 150.18. Meanwhile, on the upside, firm break of 156.74 will resume the rally from 139.57 towards 161.95 high.

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.