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The next couple of weeks could be massive for financial markets going into 2024, with a range of data from the US in the coming days setting us up nicely for the Fed meeting on the 13th.

The standout event is the jobs report on Friday, with the Fed still seemingly of the view that getting inflation back sustainably to target will require some more slack in the labor market. Another weaker report, especially one paired with 0.2% monthly wage growth, could further fuel the belief that not only is the tightening cycle over but rate cuts may not be far away.

Fed Chair Jerome Powell's comments on Friday ahead of the start of the blackout period appeared to suggest the central bank needs no more convincing. In a short time, the narrative has shifted from further tightening likely being necessary and rates remaining higher for longer to being prepared to tighten further if it becomes appropriate, suggesting the view on the FOMC is that it no longer is.

The dot plot next week is now far less about whether the committee is anticipating another hike, rather when they expect the first cut. Markets are pricing a March cut as slightly more likely than not and by May as almost certain. Even with a late pivot, that doesn't leave the Fed much time so we'll need to see a stark difference in next week's forecasts compared with September and an acknowledgement of a rate cut soon.

There are plenty of other US releases this week including JOLTS job openings and the ISM services PMI tomorrow, ADP employment figures on Wednesday, and jobless claims on Thursday. Today is quieter with markets a little subdued so far in Europe.

Oil prices decline further after OPEC+ "deal"

The OPEC+ "deal" last week was unconvincing, to say the least, and oil prices have been in decline ever since. Brent crude is off around 8% from Thursday's highs and not trading far from the November lows. There's clearly a lack of unity around the recent cuts so compliance is going to be a major issue.

And with markets seemingly anticipating more of an economic slowdown next year, the announcement simply doesn't go far enough. It's another large cut but how much will actually be delivered on? And are we at the limits of what the alliance is willing to achieve to balance the markets?

Gold hits new record high in style

Gold entered record territory in style in early trade this week, bursting through the previous peak before exploding higher to reach $2,135, and then giving it all back over the next few hours. Perhaps the combination of pending orders above the previous high and an illiquid moment in the markets contributed to the extremely volatile move, with the yellow metal now trading back around the previous record highs.

Bitcoin hits 19-month highs

Bitcoin is also enjoying a very strong start to the week, breaking above $40,000 and up more than 7% on the day. A 19-month high and backed by excitement over an ETF approval, which has been a long time coming. And we still don't quite know when it will but there's a strong belief it will and soon.

• AUD/USD lower on Monday
• RBA likely to maintain rates on Tuesday

The Australian dollar has started the week in negative territory. In the European session, AUD/USD is trading at 0.6648, down 0.40%. The Australian dollar is coming off a strong week, with gains of 1.38%.

RBA expected to hold rates

The Reserve Bank of Australia is expected to hold rates at 4.35% at its Tuesday rate meeting. The central bank has paused for four straight months and the markets don’t expect any further hikes. Still, the RBA could send a hawkish message along with the pause to dampen speculation about a rate hike in 2024, with inflation still high at 4.9%, which is well above the 2% target.

Powell sends mixed message, dollar slumps

Federal Reserve chair Jerome Powell spoke on Friday, and his split message sent the US dollar sharply lower against most of the majors, including the Australian dollar which jumped 1.06%.

Powell noted that monetary policy is “well into restrictive territory” and that inflation is “moving in the right direction”. The markets interpreted these remarks as signals that the Fed is done with rate tightening. Although Powell warned that it was premature to assume that the Fed had achieved a “sufficiently restrictive stance”, investors viewed the remarks as dovish and the US dollar fell sharply.

The futures markets have priced in a rate cut in March at 59% and in May at 87%, according to the CME FedWatch tool. The Fed clearly doesn’t share this stance, as most Fed members who spoke last week supported the case for holding rates at current levels for some time.

This disconnect between the Fed and the markets is likely to continue as the Fed is unlikely to discuss rate cuts while inflation remains above the 2% target. The markets are looking at a rate cut in late 2024, but a lot could happen until then. If the economy cools more quickly than expected, the RBA would have to give thought to cutting rates in order to boost growth.

AUD/USD Technical

• AUD/USD tested support at 0.6639 earlier. Below, there is support at 0.6603
• 0.6712 and 0.6748 are the next resistance lines

December begins extremely optimistically for the cryptocurrency market, resembling:

→ December 2020, when bitcoin grew by 46.9%;

→ December 2017, when bitcoin grew by 38.9%;

→ December 2016, when bitcoin grew by 30.8%.

If there are psychological patterns in the increase in demand on the eve of the holidays, then perhaps they come into force, since on the morning of December 4, the price of Bitcoin exceeded the psychological barrier of 40k and reached 41,700 per coin — for the first time since April 2022.

Fundamentally, demand is based on expectations of the approval of several Bitcoin ETFs. The fear and greed index reached a value of 74, indicating growing greed. Another driver is expectations of Fed rate cuts, which leads to more affordable loans and, accordingly, increased demand for risky assets.

Technically, the price was in a consolidation zone in November. Buyers overcame resistance around the level of 38,000. The pressure of demand is evidenced by growing lows. When the resistance was behind, buyers did not encounter any tangible obstacles, which is noticeable in the width of the bullish candles.

Presumably, the price of bitcoin may consolidate near the upper boundary of the parallel channel — bulls will be motivated to take profits. But buying bitcoin now may mean trying to jump on a ship that has sailed away too far.

It is acceptable to assume that the market is in an overbought state, judging by the readings of the RSI indicator. Therefore, it is possible that the price of bitcoin may reach the upper limit of the channel and then correct.

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Eurozone Sentix Investor Confidence Index's latest update offers a mixed but cautiously optimistic view of the region's economic outlook. In December, the index rose from -18.6 to -16.8, slightly below the expected -16 but marking its highest level since May. Current Situation Index improved from -26.8 to -23.5. More notably, the Expectations Index inched higher from -10.0 to -9.8, reaching its peak since February.

The consecutive rise in the Expectations Index for the third month is a signal that some economists might interpret as the beginning of a trend reversal. However, Sentix cautions against over-optimism, noting "The still weak overall momentum and the lack of a certain amount of international support speak against this."

Despite these reservations, Sentix identifies potential for significant improvement at the start of the new year, largely due to positive shifts in the inflation outlook. The Sentix inflation barometer, which tracks expectations about inflation, has shown improvement for the fifth consecutive time, reaching 16.25.

Sentix elaborated on this, stating, "From this positive view of inflation, investors not only deduce an end to the central banks' prolonged cycle of interest rate hikes, but now also expect positive support from monetary policy." The corresponding theme barometer, reflecting this optimism, has ascended to 14.25, the highest since April 2021.

Full Eurozone Sentix release here.

• Gold posts a fresh all-time peak of 2,142 on Monday
• But fails to hold onto its gains, falling back below April high
• Momentum indicators point at an overstretched advance

Gold had been in a steep uptrend since November 10, when the price bounced off the crucial 200-day simple moving average (SMA). On Monday, bullion recorded a fresh all-time high of 2,144 before erasing all its intraday rally, with the price reversing back below its previous record peak.

Given that the momentum indicators are starting to ease from overbought conditions, gold could pull back towards 2,021, which is the 78.6% Fibonacci retracement of the 2,079-1,810 downleg. Sliding beneath that floor, the price may challenge the 61.8% Fibo of 1,976. Even lower, the 50.0% Fibo of 1,944 could provide downside protection.

On the flipside, should the bulls attempt to propel the price higher, the April peak of 2,079 could act as the first line of resistance. A violation of that zone could set the stage for the 2,100 psychological mark. Failing to halt there, the price could revisit its recent all-time high of 2,144, which lies very close to the 123.6% Fibonacci extension.

In brief, gold surged to an all-time high in today’s session, but has already surrendered all its daily gains. Can the recent completion of a golden cross between the 50- and 200-day SMAs refuel the rally?

Daily Pivots: (S1) 186.03; (P) 186.77; (R1) 187.35; More...

Intraday bias in GBP/JPY remains neutral first. Price actions from 188.63 short term top is seen as a near term consolidation pattern for now. As long as 184.44 support holds, further rally is expected. Decisive break of 188.63 will resume larger up trend.

In the bigger picture, as long as 184.44 support holds, larger up trend from 123.94 (202 low) should still be in progress, next target is 195.86 (2015 high). However, firm break of 184.44 will now argue that a medium term top is formed, possibly in bearish divergence condition in D MACD, and bring deeper fall back to 178.02 support.

Daily Pivots: (S1) 159.02; (P) 160.40; (R1) 161.15; More....

Intraday bias in EUR/JPY remains on the downside at this point. Fall from 164.29 is in progress for 161.8% projection of 164.29 to 161.22 from 163.70 at 158.73. Sustained break there will target 154.32 cluster support (38.2% retracement of 139.05 to 164.29 at 154.64). On the upside, above 160.58 support turned resistance will turn intraday bias neutral and bring consolidations first.

In the bigger picture, bearish divergence condition in 55 D EMA indicates that a medium term top could be formed at 164.29 already, after hitting rising channel resistance. But price actions from there are tentatively seen as a correction only. There is no clear sign that the up trend from 144.42 (2020 low) has completed yet. As long as 55 W EMA (now at 152.12) holds, another rally through 164.29 is still in favor as a later stage.

Daily Pivots: (S1) 0.8535; (P) 0.8585; (R1) 0.8612; More....

Intraday bias in EUR/GBP remains on the upside for the moment. As noted before, rebound from 0.8491 should have completed as a corrective move at 0.8764. Deeper fall should be seen to retest 0.8491 low first. Firm break there will resume larger down trend. On the upside, touching 0.8634 minor resistance will turn intraday bias neutral and bring consolidations first, before staging another decline.

In the bigger picture, current development suggests that down trend from 0.9267 (2022 high) is still in progress. This decline is now seen as the third leg of the pattern from 0.9499 (2020 high). Break of 0.8201 will target 100% projection of 0.9499 to 0.8201 from 0.9267 at 0.7969. In any case, outlook will stay bearish as long as 0.8764 resistance holds.

Daily Pivots: (S1) 1.6221; (P) 1.6375; (R1) 1.6457; More...

Despite today's recovery, further decline is expected in EUR/AUD with 1.6449 support turned resistance intact. While fall from 1.7062 is in progress for 100% projection of 1.7062 to 1.6319 from 1.6844 at 1.6106 next. On the upside, above 1.6649 resistance will turn intraday bias and bring consolidations first, before staging another decline.

In the bigger picture, the break of medium term trend line support now suggests fall from 1.7062 correcting the whole up trend from 1.4281 (2022 low). Deeper decline would be seen to 38.2% retracement of 1.4281 to 1.7062 at 1.6000. Strong support could be seen there to bring rebound on first attempt. But risk will stay on the downside as long as 1.6844 resistance holds. Sustained break of 1.6000 would bring further fall to 61.8% retracement at 1.5343.

Daily Pivots: (S1) 0.9424; (P) 0.9484; (R1) 0.9519; More...

Despite today's recovery, further decline is expected in EUR/CHF with 0.9543 minor resistance intact. Retest of 0.9507/16 support zone should be seen next. Decisive break there will resume larger down trend. On the upside, touching 0.9543 minor resistance will delay the bearish case and turn intraday bias neutral first.

In the bigger picture, rejection by 0.9691 cluster resistance (38.2% retracement of 1.0095 to 0.9416 at 0.9675) maintains medium term bearishness in EUR/CHF. Firm break of 0.9047 support (2022 low) will resume long term down trend. Next target will be 61.8% projection of 1.1149 to 0.9407 from 1.0095 at 0.9018. For now, outlook will be neutral at best as long as 0.9683 holds.