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The AUD/USD pair climbed to 0.6192 midweek, reflecting cautious optimism in the market. Traders remain vigilant ahead of key December inflation data from the US, which could influence expectations regarding the Federal Reserve’s potential interest rate cuts in 2025. Earlier, the Australian dollar recovered some of its losses as the US dollar reacted to Producer Price Index statistics.

Key upcoming events for the AUD

Australia will release its employment report on Thursday, a critical data point for assessing the state of the labour market. These figures are crucial for adjusting forecasts concerning the Reserve Bank of Australia’s (RBA) interest rate trajectory.

Fresh Q4 2024 inflation data for Australia will also be published at the end of the month. These data will be pivotal in shaping expectations for the RBA’s upcoming meeting and its decisions on borrowing costs.

Investors currently assign a 70% probability of a rate cut at the RBA’s February meeting. If realised, the rate could decrease by 25 basis points from the current 4.35% per annum. Market prices have already factored in this potential decision.

However, lingering uncertainty about the RBA’s future policy direction and the terminal rate target for the year keeps investors cautious, limiting the AUD’s upside potential.

Technical analysis of AUD/USD

On the H4 chart, AUD/USD is developing an upward wave targeting 0.6211. This level is expected to be tested today, followed by a potential decline towards 0.6161. A consolidation range is likely to form around 0.6161. If the pair breaks upwards from this range, a correction to 0.6290 could materialise. Conversely, a downward breakout could trigger a new wave targeting 0.6116. The MACD indicator supports this scenario, with its signal line below the zero mark but pointing sharply upwards.

On the H1 chart, the pair is building a growth wave towards 0.6211, which is expected to be reached today. Following this, a corrective move to 0.6161 may occur. The Stochastic oscillator confirms this scenario, with its signal line above the 50 mark and trending upwards towards 80.

Conclusion

The Australian dollar’s recent recovery is tempered by uncertainty surrounding the RBA’s future policy decisions. Key domestic data, including employment figures and Q4 inflation, heavily influence market expectations. While technical indicators suggest short-term growth potential for AUD/USD, further gains will depend on clarity regarding the RBA’s policy trajectory and broader economic conditions.

Gold price started a fresh increase above the $2,665 resistance level. WTI Crude oil prices climbed higher above $77.00 and might extend gains.

Important Takeaways for Gold and WTI Crude Oil Prices Analysis Today

• Gold price started a steady increase from the $2,630 zone against the US Dollar.
• It cleared a key bearish trend line with resistance at $2,670 on the hourly chart of gold at FXOpen.
•  WTI Crude oil prices extended gains above the $74.40 and $76.50 resistance levels.
• There is a short-term declining channel forming with support at $76.00 on the hourly chart of XTI/USD at FXOpen.

Gold Price Technical Analysis

On the hourly chart of Gold at FXOpen, the price formed a base near the $2,630 zone. The price started a steady increase above the $2,650 and $2,665 resistance levels.

There was a decent move above the 50-hour simple moving average and $2,680. The bulls pushed the price above the $2,690 resistance zone. Finally, the bears appeared near $2,700. A high was formed near $2,697 before there was a downside correction.

A low was formed at $2,656 and the price is again rising. There was a move above the 23.6% Fib retracement level of the downside correction from the $2,697 swing high to the $2,656 low.

Gold cleared a key bearish trend line with resistance at $2,670. The RSI is now above 50 and the price is now facing hurdles. Immediate resistance is near the $2,678 level or the 50% Fib retracement level of the downside correction from the $2,697 swing high to the $2,656 low.

The next major resistance is near the $2,688 level. An upside break above the $2,688 resistance could send Gold price toward $2,698. Any more gains may perhaps set the pace for an increase toward the $2,720 level.

On the downside, immediate support is near the $2,665 level. The next major support sits at $2,655, below which the price might test $2,645. Any more losses might send the price toward the $2,630 support zone.

Oil Price Technical Analysis

On the hourly chart of WTI Crude Oil at FXOpen, the price started a major upward move from $72.30 against the US Dollar. The price gained bullish momentum after it broke the $75.00 resistance and the 50-hour simple moving average.

The bulls pushed the price above the $76.50 and $77.00 resistance levels. The recent high was formed at $77.82 and the price started a downside correction. There was a minor move toward the 23.6% Fib retracement level of the upward move from the $72.32 swing low to the $77.82 high.

The RSI is now below the 50 level and there is a short-term declining channel forming with support at $76.00. Immediate support on the downside is near the $76.50 zone.

The next major support on the WTI crude oil chart is near the $76.00 zone, below which the price could test the $75.05 level and the 50% Fib retracement level of the upward move from the $72.32 swing low to the $77.82 high.

If there is a downside break, the price might decline toward $74.50. Any more losses may perhaps open the doors for a move toward the $72.30 support zone.

If the price climbs higher again, it could face resistance near $77.05. The next major resistance is near the $77.80 level. Any more gains might send the price toward the $78.50 level.

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This morning, UK inflation data was released, as reported by ForexFactory:

• Consumer Price Index (CPI): actual = 2.5%, expected = 2.6%, previous = 2.6%;
• Core CPI: actual = 3.2%, expected = 3.4%, previous = 3.5%.

The foreign exchange market reacted with a surge in volatility as UK inflation showed a decline.

At the same time, a technical analysis of the GBP/USD chart offers some hope for bulls following a drop of more than 9% from the peaks of September 2024 (interestingly, on 10th September 2024, we noted that bulls were facing challenges).

When analysing today’s GBP/USD price movements, we observe that at the start of 2025, the price has approached a key support zone formed by:

• the lower boundary of the descending channel (drawn in red);
• the psychological level of 1.2000;
• the significant 2023 low around the 1.2040 level.

The long lower wicks on the 4-hour candles, including today’s (highlighted with an arrow), can be interpreted as a signal of increasing demand. This could be an early sign that the pound is gaining confidence to resist the building pressure from the dollar.

Traders’ attention today will be on the release of the US CPI report (at 16:30 GMT+3), which may further support the case for strengthening bulls.

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Yen's recovery gained some momentum today on as speculation over an imminent BoJ rate hike. Governor Kazuo Ueda reinforced Deputy Governor Ryozo Himino’s earlier comments, suggesting that next week’s policy meeting could bring a shift in monetary policy. The unified tone from BoJ’s leadership is seen a calculated effort to prime markets for potential action.

Overnight index swaps now indicate a 68% probability of a BoJ rate hike in January, rising to 86% by March. Positive observations by BoJ's regional branch managers on wages growth should have bolstered the confidence in BoJ’s readiness to act.

Despite this, uncertainty still lingers as BoJ policymakers await US President-elect Donald Trump’s inauguration speech early next week, which may provide more concrete insights into his trade and economic policies.

Meanwhile, Sterling is showing little reaction to inflation data released today. UK CPI reported revealed a marked slowdown in services inflation to 4.4%, its lowest level since March 2022. This has raised speculation of a BoE rate cut at its February meeting.

However, any optimism in the UK is tempered by lingering concerns over fiscal health and rising government borrowing costs. Market sentiment could deteriorate further if Thursday’s GDP data disappoints, compounding fears of a broader economic slowdown.

Overall in currency markets, Dollar has taken a step back, consolidating last week’s gains. Risk sentiment is somewhat buoyed by the absence of firm denial from Trump regarding proposals for gradual tariffs. Additionally, traders are awaiting today’s US CPI data, which could significantly impact expectations of Fed's monetary policy over the course of 2025. For now, Dollar is the worst-performing currency this week, followed by Sterling and Swiss Franc. Conversely, New Zealand Dollar leads gains, followed by Australian Dollar and Euro. Canadian Dollar and Yen are trading in middle positions.

Technically, as Dollar is retreating, there are some support levels to pay attention to. The levels include 1.0435 resistance in EUR/USD, 1.2486 resistance in GBP/USD, 0.6301 resistance in AUD/USD and 0.9007 support in USD/CHF. As long as these levels hold, Dollar's near term bullishness should be maintained in case of deeper pull back. As for USD/JPY, however, it's likely moving on its own course based on expectations on BoJ rate hike next week.

UK CPI slows to 2.5% in Dec, services inflation down to 4.4%

UK CPI slowed from 2.6% yoy to 2.5% yoy in December, below expectation of 2.7% yoy. Core CPI slowed from 3.5% yoy to 3.2% yoy, below expectation of 3.4% yoy.

CPI goods annual rate rose from 0.4% yoy to 0.7% yoy, while CPI services annual rate fell from 5.0% yoy to 4.4% yoy.

On a monthly basis, CPI rose by 0.3% mom, below expectation of 0.4% mom.

ECB’s Lane expects service inflation to ease

ECB Chief Economist Philip Lane noted during an event today that services inflation will "come down quite a bit" in the coming months. He attributed much of the anticipated moderation to a slowdown in wage growth. Additionally, firms are reportedly experiencing reduced cost pressures, which should also contribute to easing price increases.

Lane highlighted the challenges of providing a definitive future path for interest rates, citing significant uncertainties in the global economic environment, including escalating trade tensions.

"From our point of view, saying here's where we think the future rate path is going to be conveys a sense of certainty that we don't feel," Lane said, reinforcing the ECB's cautious stance.

On the topic of exchange rates and their influence on prices, Lane pointed out that while movements in the euro-dollar exchange rate can impact European prices over time, the short-term relationship is less predictable. He noted that in the early stages of a significant currency shift, much of the impact is "absorbed by firms.

“The exchange rate, I think, over time plays a role,” Lane said. “But in terms of the month-by-month, quarter-by-quarter correlation between the exchange rate and import prices is not that stable.”

BoJ’s Ueda signals rate hike on the table next week

BoJ Governor Kazuo Ueda today provided further hints that the central bank may be considering a rate hike at its upcoming policy meeting.

Ueda noted, “We are currently analyzing data thoroughly and will compile the findings in our quarterly outlook report. Based on that, we will discuss whether to raise interest rates at next week's policy meeting and would like to reach a decision.”

Ueda emphasized the significance of Japan's wage outlook, which has recently been a key focus for policymakers. He pointed to encouraging signals from wage negotiations, which could bolster consumer spending and support BoJ's inflation target.

Additionally, Ueda remarked that the economic policies of the incoming US administration, coupled with domestic wage trends, would play a pivotal role in determining the timing of any rate adjustment.

The governor's remarks align closely with those of BoJ Deputy Governor Ryozo Himino, who earlier this week suggested that a rate hike was on the table.

USD/JPY Daily Outlook

Daily Pivots: (S1) 157.33; (P) 157.76; (R1) 158.41; More...

Intraday bias in USD/JPY remains neutral for the moment as sideway trading continues. Further rally is in favor as long as 156.0 support holds. On the upside, decisive break of 61.8% projection of 139.57 to 156.74 from 148.64 at 159.25 will extend the rally from 139.57 to retest 161.94 high. However, considering bearish divergence condition in 4H MACD, firm break of 156.01 support will confirm short term topping. Intraday bias will then be back on the downside for 55 D EMA (now at 154.46) 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) 157.33; (P) 157.76; (R1) 158.41; More...

Intraday bias in USD/JPY remains neutral for the moment as sideway trading continues. Further rally is in favor as long as 156.0 support holds. On the upside, decisive break of 61.8% projection of 139.57 to 156.74 from 148.64 at 159.25 will extend the rally from 139.57 to retest 161.94 high. However, considering bearish divergence condition in 4H MACD, firm break of 156.01 support will confirm short term topping. Intraday bias will then be back on the downside for 55 D EMA (now at 154.46) 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.

UK CPI slowed from 2.6% yoy to 2.5% yoy in December, below expectation of 2.7% yoy. Core CPI slowed from 3.5% yoy to 3.2% yoy, below expectation of 3.4% yoy.

CPI goods annual rate rose from 0.4% yoy to 0.7% yoy, while CPI services annual rate fell from 5.0% yoy to 4.4% yoy.

On a monthly basis, CPI rose by 0.3% mom, below expectation of 0.4% mom.

Full UK CPI release here.

BoJ Governor Kazuo Ueda today provided further hints that the central bank may be considering a rate hike at its upcoming policy meeting.

Ueda noted, “We are currently analyzing data thoroughly and will compile the findings in our quarterly outlook report. Based on that, we will discuss whether to raise interest rates at next week's policy meeting and would like to reach a decision.”

Ueda emphasized the significance of Japan's wage outlook, which has recently been a key focus for policymakers. He pointed to encouraging signals from wage negotiations, which could bolster consumer spending and support BoJ's inflation target.

Additionally, Ueda remarked that the economic policies of the incoming US administration, coupled with domestic wage trends, would play a pivotal role in determining the timing of any rate adjustment.

The governor's remarks align closely with those of BoJ Deputy Governor Ryozo Himino, who earlier this week suggested that a rate hike was on the table.

ECB Chief Economist Philip Lane noted during an event today that services inflation will "come down quite a bit" in the coming months. He attributed much of the anticipated moderation to a slowdown in wage growth. Additionally, firms are reportedly experiencing reduced cost pressures, which should also contribute to easing price increases.

Lane highlighted the challenges of providing a definitive future path for interest rates, citing significant uncertainties in the global economic environment, including escalating trade tensions.

"From our point of view, saying here's where we think the future rate path is going to be conveys a sense of certainty that we don't feel," Lane said, reinforcing the ECB's cautious stance.

On the topic of exchange rates and their influence on prices, Lane pointed out that while movements in the euro-dollar exchange rate can impact European prices over time, the short-term relationship is less predictable. He noted that in the early stages of a significant currency shift, much of the impact is "absorbed by firms.

“The exchange rate, I think, over time plays a role,” Lane said. “But in terms of the month-by-month, quarter-by-quarter correlation between the exchange rate and import prices is not that stable.”

Sentiment was slightly better and the dollar was slightly lower on Tuesday on the back of a softer-than-expected PPI report from the US and on news that Donald Trump’s America First team would only ‘gradually’ increase tariffs on the rest of the world – if that’s any comfort.

Diving deeper, the US core PPI unexpectedly remained steady at the 3.5% level, and the headline PPI jumped from 3% to 3.3% - instead of 3.5% as expected. But many components that feed into the Federal Reserve’s (Fed) PCE index were mixed. Energy prices, for example, surged by 3.5% due to a 9.7% rise in gasoline, transportation and warehousing services saw increases, while food prices fell by 0.1% with fresh and dry vegetables down 14.7%, and service prices remained flat overall. As such, yesterday’s helped cooling worries but didn’t meaningfully reversed them. The US 2-year yield eased to 4.36%, while the 10-year yield flirted with the 4.80% mark for the second straight session. The US dollar eased amid rising hopes that the implementation of new Trump-era tariffs will be less dramatic than investors initially feared. The EURUSD was also boosted by a surprise rebound in Italian manufacturing last November, but the pair is seeing resistance near the 1.03 offers this morning.

All eyes are on the US CPI data due today. The headline inflation in the US is expected to have ticked higher from 2.7% to 2.9% in December, while core inflation is seen sticky near the 3.3% level. A higher-than-expected set of data could reverse yesterday’s selloff in the US dollar and weigh on treasuries and equities, while a softer-than-expected figure could help cooling the hawkish Fed expectations and let the US dollar give back field, and the treasuries and equities take a breather. Given how hawkish the Fed expectations have become, a soft-looking data could have a greater impact in terms of price action today, but in all cases, volatility will likely be on the menu. According to Citigroup, the S&P500 could move 1% up or down after the data based on the pricing of the ATM put and call options, competing with the Fed’s next rate decision.

The S&P 500 closed yesterday slightly up and above the 100-DMA, the CPI data will either keep the index above this level or send it below sustainably. Also on the menu du jour: the US bank earnings. They are expected to print a 40% growth in earnings in Q4 of last year thanks to comfortable comparison to the Q4 of the year before, robust net interest income and improved trading activity.

Elsewhere, the Eurozone countries are also releasing fresh updates to their inflation numbers today with the Eurozone aggregate figure for December due Friday, meanwhile the UK printed a set of lower-than-expected inflation figures this morning. UK’s monthly core and headline inflation ticked higher in December but they came in lower than pencilled in by analysts, while yearly figures fell for both readings, giving the Bank of England (BoE) room to provide relief to the UK’s renewed debt aches if needed.

Yesterday’s bond selloff in the UK went surprisingly well. It was the first major issuance since last week’s debt drama, and the £1bn worth 30-year bond auction was three times oversubscribed. The latter looked like it cooled the downside pressure in the gilt market but the 30-year yield rebounded, while the 10-year yield is back testing the 4.90% this morning. Rachel Reeves hasn’t yet convinced global investors that the gilt selloff is nothing meaningfully more than the global bond selloff and that her spending cuts will be enough to get the budget plans right. The market’s unwillingness to fund her spending plans are weighing on British growth outlook and on sterling beyond the global pressure on government bonds. Cable cleared the 1.22 support this morning after the CPI release and the outlook remains bearish on political uncertainties and expectations of stronger BoE support. Cable is at levels well above the Liz Truss times (when the pair had dived to 1.0350, remember). But the market reaction to Truss gives an idea on how bad things could get in a short period of time, and exacerbate the situation. Risks prevail.

Across the Channel, the new French PM Bayrou is walking on a tightrope by giving concessions on the heated pension reform and deficit target to avoid losing the divided government’s support and face the same faith than Barnier. But being the French PM today is like riding a rodeo bull... The rise of the French yields could equally be put on the back of the global debt selloff. But, infine, all comes down to the same rhetoric for most developed economies – high debt levels and slow progress (and even a U-turn) in inflation trajectory suggesting higher inflation levels in the longer run. Note, however, that yields used to be higher before the subprime crisis and the latter didn’t necessarily prevent economies from performing well. Yet the rising volatility in borrowing costs is not ideal.

One good news is that Israel and Hamas are apparently nearing a ceasefire agreement before Trump’s inauguration next week. The latter helped cooling the rally of the US crude prices into the $80pb level, as Brent crude eased below the $80pb mark. But note that some experts warn that Israel may ease pressure in Gaza to strengthen its ties with the US to increase pressure on Iran – which is a major oil exporter with around 1.6mbpd exported in October last year. As such, the geopolitical tensions remain high both on the Russian and Middle Eastern fronts. Minor support to US crude is seen near $76pb, the minor 23.6% retracement on the latest crude rally, while major supports stand near $75.40pb, the 200-DMA, and $74.30pb, the major 38.2% Fibonacci retracement on the latest selloff.

Markets

US president-elect Trump so far didn’t push back against rumours that any possible tariffs would be gradually installed. European stock markets lost some intraday momentum but still managed a 0.5% positive close. The bear steepening of European yield curve continued as well with EU swap rates adding 3.7 bps (2-yr) to 5.5 bps (30-yr) and German yields rising by 2.6 bps (2-yr) to 4.6 bps (30-yr). EUR/USD rebounded from 1.0239 to 1.0309. Apart from the euro-rebound story, USD lost some momentum as well after December producer prices rose less than feared (0.2% M/M vs 0.4% M/M for headline figure). Core PPI gauges painted a similar picture and provided some hope that the feared acceleration in US CPI (release this afternoon) won’t materialize. Daily changes on the US yield curve varied between -1.4 bps (2-yr) and +1.4 bps (10-yr). Stakes going into the CPI release are still high. We see asymmetric risks after the strong sell-off in US Treasuries with the market more eager to respond/rebound on a lower figure.

Sterling extended its underperformance with EUR/GBP testing the October top at 0.8448 as UK Chancellor Reeves was unable to calm investor nerves over the government’s fiscal trajectory. December inflation numbers this morning don’t make the GBP-equation any easier. Headline, core and services inflation all slowed more than hoped in Y/Y-terms, respectively to 2.5%, 3.2% and 4.4%. Recent sterling weakness came on the back of rising risk premia. Slowing inflation is welcome, but could deprive the UK currency faster from short-term interest rate support.

Bank of Japan governor Ueda said that the central bank will make a decision over whether to raise rates next week. He also flagged the (strong) US economy and the momentum toward spring wage negotiations. Together with yesterday’s similar remarks from deputy governor Himino – not ruling out a rate hike in January – and last week’s rumours about upward revision to inflation forecasts in the new quarterly projections (linked to surge in cost of rice and weaker yen), it’s a signal that can’t be ignored. The market implied probability of a 25 bps (to 0.50%) rate hike, our base case, increased from 60% to 75%. By the end of the year, one more additional rate hike (to 0.75%) is currently discounted. Japanese bond yields follow the global momentum. The Japanese 10-yr yield trades above 1.25% for the first time since April 2011. The 2-yr yield crossed 0.7% for the first time since October 2008 in the wake of the Ueda-comments. USD/JPY ticks lower to 157.50, but that move remains technically insignificant. The pair remains attracted by last year’s top at 161.95. Only a return below 148.65 would turn the picture more neutral.

News & Views

The European Commission (EC) approved another delay to Belgium’s submission of the budget plan covering the next couple of years. This second extension comes after missing the end-of-2024 target as negotiations to form a new government are still ongoing. Bart De Wever (N-VA) is leading the talks and expressed hopes to have an Arizona-coalition (including MR, CD&V, Les Engagés and Vooruit) in place no later than January 31. But the EC’s approval comes with some strings attached. The new deadline for the plan is set at end-April and should by then explain in detail which reforms and measures Belgium will be taking to reduce outsized deficits. If it doesn’t, the country will no longer have the option to spread the fiscal effort over 7 years. Instead, it will be locked in into the 4-year trajectory during which Belgium’s primary budget deficit has to decline by 0.72% of GDP over 2025-2028. Increases in expenses during that period are capped at 2.4% in 2025, 1.9% in 2026 and 2% in 2027.

The British Retail Consortium (BRC) after surveying 52 large UK retailers said about two-thirds of the CFOs warned they’ll pass on the increase of employer national insurance contributions to consumers. The increase of the payroll tax was part of the broader £40bn tax rises UK Chancellor Reeves presented during last year’s Autumn budget. Retailers have been warning ever since that it’ll further stoke inflation at a time when it is still well above the Bank of England’s 2%-target. As an example, the BRC said that food price inflation is expected to rise 3.5% this year, compared with the 2.9% in 2024.