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Daily Pivots: (S1) 1.0365; (P) 1.0407; (R1) 1.0470; More....

EUR/USD is staying in consolidation above 1.0330 and intraday bias stays neutral for the moment. While stronger recovery cannot be ruled out, outlook will remain bearish as long as 1.0629 resistance holds. Firm break of 1.0330 will confirm decline resumption and target 61.8% projection of 1.0936 to 10330 from 1.0629 at 1.0254, and then 100% projection at 1.0023.

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) 1.2491; (P) 1.2553; (R1) 1.2630; More...

GBP/USD is staying in consolidations above 1.2474 temporary low and intraday bias remains neutral. 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.

Daily Pivots: (S1) 155.64; (P) 156.78; (R1) 157.61; More...

USD/JPY is staying in consolidation below 157.91 temporary top and intraday bias stays neutral. Deeper pull back cannot be ruled out, but outlook will stay bullish as long as 153.15 support holds. On the upside, break of 157.91 will resume the rally from 139.57 to 61.8% projection of 139.57 to 156.74 from 148.64 at 159.25 next.

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) 0.8898; (P) 0.8946; (R1) 0.8979; More…

USD/CHF bounces after drawing support from 55 4H EMA, but stays below 0.9020 temporary top. Intraday bias remains neutral at this point. While deeper pull back might be seen, downside should be contained above 0.8735 support to bring another rally. Above 0.9020 will resume the rise from 0.8374 and target 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.

Dollar edged higher in subdued holiday trading, maintaining its recent  strength but staying within a narrow range below last week’s highs against major currencies. Markets largely brushed aside the disappointing US durable goods orders data, as the series is known for its volatility. Moreover, traders are prioritizing labor market and consumption trends, which Fed views as more significant for its policy decisions for the moment.

Canadian Dollar Showed little reaction to the better-than-expected October GDP growth, as concerns about sustained economic strength linger. November’s advance estimate pointed to a contraction, reinforcing the overall sluggish outlook. BoC has shifted into a measured phase of easing, where further rate cuts are evaluated on a meeting-by-meeting basis. While policymakers have signaled a slower pace of reductions in 2025, uncertainty remains around the overall depth and timing of further easing, keeping CAD on the defensive.

Looking ahead to the Asian session, RBA's December meeting minutes will be a focal point. RBA’s latest dovish shift has raised speculation that policymakers are moving closer to rate cuts, though recent data suggests that easing is not yet imminent. Traders will scrutinize the minutes for details on the board’s reasoning for the pivot and the conditions that could prompt the first cut.

Technically, AUD/USD is quickly approaching 0.6169 key support after last week's downside acceleration. For now, given the light economic calendar at this year period, it's unlikely for the pair to break through this support yet. Indeed, less dovish that expected RBA minutes might help AUD/USD for a bounce. Yet, the medium term down trend is expected at a later stage, probably in later January after Australia's Q4 CPI is published. Any bounce in the near term could be viewed as selling possibilities.

In Europe, at the time of writing, FTSE is up 0.12%. DAX is down -0.14%. CAC is down -0.07%. UK 10-year yield is up 0.034 at 4.543. Germany 10-year yield is up 0.025 at 2.312. Earlier in Asia, Nikkei rose 1.19%. Hong Kong HSI rose 0.82%. China Shanghai SSE fell -0.50%. Singapore Strait Times rose 0.87%. Japan 10-year JGB yield rose 0.0136 to 1.069.

US durable goods orders slump -1.1% mom, transportation sector leads decline

US durable goods orders dropped -1.1% mom in November to USD 285.1B, significantly missing market expectations of a -0.3% mom decline. This also marks the third decline in the last four months.

Excluding transportation, orders edged down -0.1% mom to USD 189.6B, while orders excluding defense fell -0.3% mom to USD 267.4B. The transportation equipment category, which has also fallen in three of the past four months, accounted for the largest share of the decline, with a -2.9% mom drop to USD 95.5B.

Canada’s GDP beats Oct expectations, but Nov decline looms

Canada’s GDP rose 0.3% mom in October, surpassing expectations of 0.2% mom, with 12 out of 20 sectors contributing to the growth.

This marked a rebound for the goods-producing industries, which expanded by 0.9% mom after four months of contraction, driven primarily by mining, quarrying, and oil and gas extraction.

The services-producing industries edged up by 0.1% mom, supported by growth in real estate and rental and leasing, which saw its fifth consecutive month of expansion.

However, preliminary data for November suggests a -0.1% mom contraction in real GDP, with declines in mining, quarrying, and oil and gas extraction, as well as transportation, warehousing, and finance and insurance. These losses were partly offset by gains in accommodation and food services and continued strength in real estate and rental and leasing.

ECB’s Lagarde: Inflation target within reach, services inflation still stubborn

In an interview with the Financial Times, ECB President Christine Lagarde expressed optimism about nearing the inflation target.

She remarked that ECB is "very close" to declaring that inflation has been "sustainably" brought back to its 2% medium-term target.

The latest inflation reading of 2.2% reflects the success of ECB’s restrictive monetary policy. However, she highlighted persistent concerns in the services sector, where inflation remains high at 3.9%, describing it as "not budging much" despite showing slight signs of decline.

On the topic of US tariff threats, Lagarde emphasized the economic risks of retaliatory trade measures, stating, "Retaliation was a bad approach." She warned that tit-for-tat trade conflicts could harm the global economy.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.8898; (P) 0.8946; (R1) 0.8979; More…

USD/CHF bounces after drawing support from 55 4H EMA, but stays below 0.9020 temporary top. Intraday bias remains neutral at this point. While deeper pull back might be seen, downside should be contained above 0.8735 support to bring another rally. Above 0.9020 will resume the rise from 0.8374 and target 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.

Stock market sentiment is moving out of the extreme fear zone it plunged into last week, and the dollar has paused its strengthening. Friday’s CPI report came in slightly weaker than average forecasts, reducing the fear of future Fed monetary policy.

Traders probably assumed that the Fed had better information about recent inflationary trends, which caused the sell-off in US equities to accelerate and expand. However, Friday’s data eased the pressure, allowing the indices (except for Russell2000) to begin to recoup losses. The dollar index took a step back, returning below 108, while EURUSD bounced above 1.04 and GBPUSD above 1.25.

One can understand the change in tone from Fed members, as the Personal Consumption Price Index accelerated to 2.4% y/y against 2.3% in October and a low of 2.1% in September. The Fed’s preferred inflation gauge showed gains of 2.8% y/y in November and October. That, too, is an acceleration from June’s 2.6%, the lowest in this cycle. On the other hand, it is lower than the 2.9% y/y anticipated.

Favourable vibes were reinforced by the University of Michigan report, which showed inflation expected in a year at 2.8% vs. the first estimate of 2.9% and the same expectations but accelerating from 2.6% previously.

Friday’s data triggered short-term profit-taking in dollar long positions. The effect is unlikely to be long-lasting, affecting the intensity of the current trend but not the direction. Inflation remains above target, accelerating instead of slowing. US economic activity is currently better than many peers, keeping the balance in favour of higher interest rates compared to other G10 currencies.

Simply put, fundamentals continue to point to the potential for a stronger dollar, bringing it closer to parity with the euro in the next couple of weeks and into the 0.95 area by the end of Q1 2025. The dollar index would then return to the 2022 highs, entering the 112-115 territory.

US durable goods orders dropped -1.1% mom in November to USD 285.1B, significantly missing market expectations of a -0.3% mom decline. This also marks the third decline in the last four months.

Excluding transportation, orders edged down -0.1% mom to USD 189.6B, while orders excluding defense fell -0.3% mom to USD 267.4B. The transportation equipment category, which has also fallen in three of the past four months, accounted for the largest share of the decline, with a -2.9% mom drop to USD 95.5B.

Full US durable goods orders release here.

Canada’s GDP rose 0.3% mom in October, surpassing expectations of 0.2% mom, with 12 out of 20 sectors contributing to the growth.

This marked a rebound for the goods-producing industries, which expanded by 0.9% mom after four months of contraction, driven primarily by mining, quarrying, and oil and gas extraction.

The services-producing industries edged up by 0.1% mom, supported by growth in real estate and rental and leasing, which saw its fifth consecutive month of expansion.

However, preliminary data for November suggests a -0.1% mom contraction in real GDP, with declines in mining, quarrying, and oil and gas extraction, as well as transportation, warehousing, and finance and insurance. These losses were partly offset by gains in accommodation and food services and continued strength in real estate and rental and leasing.

Full Canada GDP release here.

The Canadian dollar posted its fourth straight losing week, declining about 1%. In Monday’s European session, USD/CAD is trading at 1.4397, up 0.16% at the time of writing.

Canada’s GDP expected to remain at 0.1%

The market is keeping expectations low for today’s GDP report, with a forecast of 0.1% m/m for October after a 0.1% gain in September. The economy grew at annualized rate of 1% in the third quarter, which was below the Bank of Canada’s forecast of 1.5%.

The economy outlook remains weak and the Bank of Canada is expected to continue lowering rates in order in order to kick-start the economy. The BoC has been aggressive, cutting rates five times since June for a total of 175 basis points. The central bank slashed the benchmark rate by 50 basis points to 3.25% earlier this month, the first time since the covid pandemic that the BoC has delivered back-to-back jumbo cuts of 50 basis points. We can expect a dovish shift in rate policy, however, as Governor Macklem said that the BoC would take a “more gradual approach to monetary policy”. This is likely to mean rate cuts in increments of 25 bp, provided that inflation and employment data comes in as expected.

The New Year could bring be marked by political instability in Canada. Finance Minister Chrystia Freeland quit the government last week and Prime Minister Trudeau could face a non-confidence motion from his coalition partner in January. Trudeau has plummeted in popularity and increasingly it appears that his days as prime minister are numbered.

The US wrapped up the week with the personal consumption expenditures price index, the Fed’s preferred inflation indicator. Headline PCE dropped to 0.1% in November from 0.2% in October but annually ticked higher to 2.4%, up from 2.3%.

Core PCE was unchanged at 2.8% y/y. Monthly, core CPI rose 0.1% from 0.3% in October. The data indicated that inflation showed limited movement in November but remains above the Fed’s 2% target.

USD/CAD Technical

• USD/CAD is testing resistance at 1.4382. Above, there is resistance at 1.4428
• 1.4328 and 1.4282 are the next support levels

CADJPY, Daily

In the Daily timeframe, CADJPY formed a symmetrical triangle pattern. The price is testing the upper trend line and MA50. At the same time, the lips crossed the jaw of the Alligator, indicating a possible upside.

• If the bulls push the price above the trend line and 109.000, the upside to 111.200 will start;
• A bounce off the upper trendline will drop the price to the lower trendline of 106.500;