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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;

USDCHF, H2

USDCHF is navigating within a symmetrical triangle, sandwiched between the 0.8950 resistance and the 0.8920 support.

• The price breaks above the DEMA and TEMA, while the RSI breaks below the 50-line.
• If the price breaks above the upper trendline, the next target will be at the 0.8990 resistance.
• However, breaching below the 0.8920 support will trigger a decline toward the 0.8870.

Market Picture

The crypto market retreated last week and is in no hurry to recover, remaining at $3.31 trillion, roughly where it was 30 days ago. The sharp dip below $3.2 trillion was also quickly bought back, but a full-blown rebound is yet to be seen. Markets continue to digest the Fed’s tougher tone, reinforced by the accumulated urge to lock in profits after a strong year.

The Crypto Market Sentiment Index is in neutral territory, compared to the shuttling between fear and extreme fear in US stocks.

Bitcoin is trading around $95.5K, receiving support near the 50-day moving average on Friday and Monday. While we expected to see the market decline here, it’s too early to say this is the end of the correction. Further declines in the stock market, of which there are many in Bitcoin and Ethereum, could trigger institutional investors, launching a deeper pullback.

Reduced holiday liquidity has the potential to amplify this amplitude. In a potential shock scenario, they see a dip into the $70K area. However, there are more chances that a pullback to $90K in the next couple of weeks will be attractive enough for buyers to stop the sell-off.

News Background

Matrixport expects that the first cryptocurrency could see a strong start in early 2025. Messari predicts that Bitcoin and real-world tokenised assets (RWAs) will be the focus of investor attention in 2025.

The average duration between Bitcoin’s first and last all-time high (ATH) in a cycle is 318 days, K33 Research noted. If the pattern repeats, the next global peak will be reached on 17 January, before the inauguration of US President-elect Donald Trump. Analysts noted an increase in coins available on the market to the highest since 2021 (22% of supply), driven by Mt. Gox proceeds and government sales.

The US SEC approved the first spot ETFs combining Bitcoin and Ethereum, issued by Hashdex and Franklin Templeton.

El Salvador will expand BTC purchases in defiance of the IMF deal. El Salvador’s National Bitcoin Office said the country will continue to buy the first cryptocurrency and possibly at an ‘accelerated pace’.

US mining company MARA has launched a second project in Finland to use the heat generated by cryptocurrency mining for home heating. With this latest initiative, 80,000 residents of the country will be provided with heat generated by mining equipment.

Daily Pivots: (S1) 195.79; (P) 196.55; (R1) 197.34; More...

Intraday bias in GBP/JPY remains neutral at this point. As noted before, corrective pattern from 180.00 is extending with another rising leg. Further rise is expected as long as 194.04 support holds. On the upside, above 1999.79 will will target channel resistance (now at 203.19).

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.