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Daily Pivots: (S1) 1.3819; (P) 1.3840; (R1) 1.3879; More...

Intraday bias in USD/CAD is turned neutral with current recovery, and more consolidations could be seen above 1.3798 temporary low. Further decline is expected as long as 1.3936 support turned resistance holds. On the downside, below 1.3798 will resume the fall from 1.4139 to 61.8% retracement of 1.3538 to 1.4139 at 1.3768. Firm break there will argue that whole decline form 1.4791 might be ready to resume through 1.3538 low.

In the bigger picture, current development suggests that price actions from 1.4791 is developing into a deeper, larger scale correction. In the less bearish case, it's just correcting the rise from 1.2005 (2021 low). But even so, break of 1.3538 will pave the way to 61.8% projection of 1.4791 to 1.3538 from 1.4139 at 1.3365. This will remain the favored case as long as 1.4139 resistance holds, in case of rebound.

Daily Pivots: (S1) 0.9368; (P) 0.9382; (R1) 0.9404; More....

EUR/CHF's rally from 0.9178 is in progress and intraday bias stays on the upside for 0.9452 key structural resistance. Decisive break there will carry larger bullish implications. For now, risk will stay on the upside as long as 0.9325 support holds, in case of retreat.

In the bigger picture, EUR/CHF has breached long term falling channel resistance as the rebound from 0.9278 extends. Considering bullish convergence condition in W MACD, sustained trading above 55 W EMA (now at 0.9372) will indicate medium term bottoming, and suggests that it's already in larger scale rebound. Further break of 0.9452 resistance will bring stronger medium term rally towards 0.9228 resistance next. Nevertheless, rejection by 55 W EMA will retain bearishness for another fall through 0.9278 at a later stage.

Daily Pivots: (S1) 0.8722; (P) 0.8738; (R1) 0.8750; More…

Intraday bias in EUR/GBP stays neutral for consolidations and with 0.8800 resistance intact, further decline is expected. Fall from 0.8863 should at least be a correction to the up trend from 0.8221, with risk of bearish reversal. Below 0.8720 will target 0.8631 cluster (38.2% retracement of 0.8221 to 0.8663 at 0.8618).

In the bigger picture, rise from 0.8221 medium term bottom is still seen as a corrective move. Upside should be limited by 61.8% retracement of 0.9267 to 0.8221 at 0.8867. Sustained trading below 55 W EMA (now at 0.8600) should confirm that this corrective bounce has completed. However, decisive break of 0.8867 will suggest that EUR/GBP is already reversing whole decline from 0.9267 (2022 high). That should pave the way back to 0.9267.

Daily Pivots: (S1) 1.7499; (P) 1.7565; (R1) 1.7599; More...

No change in EUR/AUD"s outlook and intraday bias stays on the downside. Fall from 1.8160 is seen as the third leg of the pattern from 1.8554. Deeper decline should be seen to 100% projection of 1.8160 to 1.7561 from 1.7976 at 1.7377. Firm break there will pave the way to 138.2% projection at 17148. On the upside, above 1.7627 minor resistance will turn intraday bias neutral and bring consolidations first, before staging another fall.

In the bigger picture, as long as 55 W EMA (now at 1.7456) holds, price actions from 1.8554 could still be a correction to rise from 1.5963 only. However, sustained break of the EMA will argue that it's already correcting the whole up trend from 1.4281 (2022 low). In this case, deeper decline would be seen to 38.2% retracement of 1.4281 to 1.8554 at 1.6922.

Gold is trading in a holding pattern near 4,200 USD per ounce on Tuesday, as markets remain in a state of suspended animation ahead of the Federal Reserve’s policy decision.

While a 25-basis-point rate cut is almost fully priced in, investors will scrutinise the updated economic projections and Chair Jerome Powell’s subsequent press conference for clarity on the policy trajectory into 2026 and beyond.

Market-implied probabilities currently assign an 87% likelihood to a cut today. However, expectations for future easing have moderated, with just two rounds of cuts now anticipated for next year, down from three a week ago.

Before the Fed announcement, traders will also assess the latest JOLTS job openings data for additional labour market insights.

In a supportive development for the metal, the People’s Bank of China expanded its gold reserves for the 13th consecutive month, bringing its total holdings to 74.12 million troy ounces.

Technical Analysis: XAU/USD

H4 Chart:

On the H4 chart, XAU/USD continues to consolidate in a sideways range following its late-November advance. The price is currently trading below the middle Bollinger Band, suggesting a gradual loss of bullish momentum. The upper band has flattened, confirming the consolidation phase within the 4,163–4,240 USD zone.

Support at 4,163 USD remains critical, with the price having rebounded from this level multiple times in recent sessions. A decisive break below would open the way to the next significant support near 4,136 USD, which aligns with the lower Bollinger Band.

Resistance is clearly defined at 4,240 USD. A sustained move above this level would provide the first strong signal for a renewed upward move, initially targeting 4,265 USD.

H1 Chart:

On the H1 chart, gold shows a near-term bearish bias after failing to break above resistance at 4,240 USD. The price is consistently positioned below the middle Bollinger Band, with the lower band reinforcing the selling pressure. Local support has solidified around 4,163 USD, a level tested repeatedly in recent trading.

The Stochastic oscillator remains near oversold territory, indicating weak momentum, though a clear reversal signal has yet to emerge.

Should buyers defend the 4,163 USD support and propel the price back above the middle Bollinger Band, a recovery toward 4,200 USD and later 4,240 USD would become likely. Conversely, a breakdown below 4,163 USD would signal a deeper corrective move toward 4,136–4,100 USD.

Conclusion

Gold remains in a state of cautious equilibrium as traders await the Fed’s policy signal and updated economic forecasts. While underlying physical demand – particularly from central banks – continues to provide a supportive floor, the technical picture reflects consolidation with a slight near-term bearish tilt.

The RBA kept the cash rate on hold as expected. The Board was slightly more hawkish but Governor Bullock was firmly focused on the upside risks to inflation. We are less convinced that capacity constraints will be an issue for inflation, which could bring back the debate for rate cuts.

• As widely expected, the RBA kept the cash rate on hold at 3.6% in a unanimous decision. The statement struck a slightly more hawkish note but in the following media conference Governor Michele Bullock was focused on the upside risks to inflation.
• Following the media conference, the probability of a rate hike has risen. But we see this to be dependent on data over the coming months and a more likely scenario is a prolonged pause.
• Rate cuts could still be brought back to the table if our view that supply will not be a constraint and the economy can grow faster without triggering inflation is realised.
• As such, our current baseline is for two 25bp rate cuts but not until mid-2026. This would bring the cash rate to 3.1% –125bp below its peak this monetary policy cycle.

Today’s decision by the RBA to leave the cash rate unchanged at 3.6% was widely anticipated by the market and economists. It was a unanimous decision. The statement struck a slightly more hawkish note but in the following media conference, Governor Bullock indicated that the Board was focused on the upside risks to inflation.

She confirmed that at today’s meeting “a rate cut was not on the table”, adding that supply and demand conditions are a little tight. The potential necessary conditions for a rate hike in 2026 were also discussed as the Board believe the balance of risks for inflation have tilted to the upside.

While the Board acknowledged that some of the recent increase in underlying inflation was due to temporary factors, they still saw some signs of a broader pick-up. They also remain concerned over labour market tightness and strong growth in broader measures of wages and high unit labour costs.

They will continue to monitor these factors against a backdrop of what they believe to be a stronger pick up in private demand that could lead to capacity pressures.

But as our Chief Economist Luci Ellis recently noted in “Swing up, you won’t hit a wall”, the view that stronger private demand will quickly collide with supply constraints is misplaced. Indeed, we think the RBA and some other economists’ projection of trend growth of 2% is too conservative. We see 2¼% or higher as realistic given population, participation, and potential productivity gains.

There is no denying that overall productivity has been very weak. But as we have previously highlighted, this in part reflects the rapid increase in the share of the care economy over recent years, which is very labour intensive and mechanically less productive than the market sector. But as private demand and the market sector become an increasing driver of economic growth, this will support an improvement in headline productivity measures. This is not just a shift in the composition of the economy. The recovery in business investment, as seen in the Q3 National Accounts, and the solid lift in private business capex intentions will see the share of business investment lift from its historical lows. With more capital per worker, we will see stronger productivity. Then there is the technological innovation and adoption, including an eventual lift from AI.

It is also worth noting that the economy is not booming. Real disposable income per person has only just returned to 2020 levels, the stimulatory impact of Stage 3 tax cuts are rolling off and with rates on hold for longer, the boost from earlier rate cuts will also fade.

Overall, we do not expect the economy to hit a hard capacity wall any time soon. If this view proves correct, the economy can grow faster without triggering further inflation, reducing the need for slightly restrictive policy.

Indeed, we expect core inflation to ease back toward, and eventually below, the mid-point of the target band by the end of 2026. Much of the recent increase reflects higher administrative prices, seasonal volatility and the removal of cost-of-living assistance. These are unlikely to be repeated to the same extent. Further out, as productivity improves and wage inflation moderates this will also support lower core inflation.

As such, our current baseline is for two more 25bp rate cuts but not until mid-2026. This would bring the policy rate to 3.1% – 125bp below its peak this monetary cycle.

Still, following Governor Bullock’s comments in today’s press conference, the probability of a rate hike has risen. This would be dependent on persistence of the current reacceleration in inflation. Instead, we see the risks as being more tilted to a prolonged pause. The evolution of the data over the coming months will see the RBA reassess the sustainability of inflation moving back to target and the restrictiveness of current policy settings.

Markets

In advance one could have assumed that a thin calendar and markets awaiting additional guidance from Wednesday’s Fed meeting to result in subdued technical trading in core yield markets. Quod non. It didn’t take into account some trend-supporting quotes from influential ECB board member Isabel Schabel. She advocated that some kind of reflationary momentum helped by a supportive fiscal policy might narrow the EU output gap and prevent a further decline in EMU (core) inflation even as headline inflation might temporarily drop below 2%. However, if this downward deviation is small, Schnabel assesses that the ECB should look through it. In such a scenario, it is possible that after a period of rate stability, the next ECB move could be a rate hike. Over the previous weeks, Japan and the UK often were the drivers of higher risk bond premia. Yesterday’s Schnabel comments took over that role. Bunds underperformed Treasuries, gilts and JGB’s with yields adding 7.8 bps (5-y) to 3.1% (30-y), the belly of the curve underperforming. US yields initially also jumped substantially higher, but momentum dwindled as the US session proceeded. A decent $58 bln US 3-y action helped to smooth the pressure. In a daily perspective, US yields added between 1.5 bps (2-y) and 3.5 bps (5-y). Higher yields/risk premia also arrested the recent equity rebound (S&P 500 -0.35%, Eurostoxx 50 +0.03%). On FX markets, the euro initially tried to capitalize on additional interest rate support, but the move was again abruptly countered by an intraday USD comeback in US dealings. EUR/USD even closed the session marginally softer at 1.1637. USD/JPY extended its recovery to close just below the 156 handle. EUR/GBP finished little changed near 0.8735.

Today’s eco calendar is again relatively thin, but yesterday’s price action illustrated that this is no guarantee for subdued trading. In the US, October JOLTS job openings give some (admittedly) delayed insights on momentum in the US job market. Questions is whether/to what extent markets are prepared to change recent rather ‘hawkish positioning’ even in case of softer than expected data. In Europe, the vote on the French social security budget again is expected to be a close call to avoid further political/budgetary chaos. BoE policymakers will attend a hearing before the Treasury Committee of Parliament. The US Treasury will sell $39 bln of 10-y. In FX markets, current ‘noisy market sentiment’ in some way apparently still supports the dollar even as non-US yields are rising at least as fast as is the case in the US. The EUR/USD 1.1682/1.1725 area in this respect proofs relative strong resistance short-term.

News & Views

“The question is, is it just an extended hold from here or is it possibility of a rate rise?” This one quote from Governor Bullock of the Reserve Bank of Australia is telling of the central bank’s state of mind. It kept the policy rate steady at 3.6% this morning and is clearly worried about inflation. The RBA does not like where prices are headed to and said risks have flipped to the upside. The October monthly print quickened from 3.6% to 3.8%. That’s well above the 2%-3% target range and comes after the Q3 quarterly outcome - still the gold standard for the RBA - had significantly surpassed the RBA’s previous expectations. Core gauges also run hotter than the RBA would like to. The board sees “signs of a more broadly based pick-up in inflation” which against the backdrop of recovering economic activity and still tight labour market conditions needs to be monitored for its persistence. Bullock at the presser said policymakers hadn’t explicitly considered the case for a rate hike but did discuss the circumstances where one could be needed. The market implied probability for such a move increased significantly with 50-50 odds for the March meeting next year. A first full rate hike was pulled forward from August to June. Australian swap yields surge up to 8 bps at the front. AUD/USD appreciates to 0.664.

Consumers’ inflation expectations in the NY Fed’s monthly survey stabilized at all horizons: 3.2% for the one-year ahead gauge and 3% for the 3- and 5-year one. Household perceptions of their current financial situation deteriorated notably, however, with a larger share of respondents reporting they are worse off than a year ago. Expectations about the year-ahead situation also worsened, be it slightly. In a positive sign, the household mean probability of unemployment to be higher one year from now decreased by 0.4 percentage points to 42.1%. Lastly, there is a decrease in the net share of respondents who expect that credit will be easier to obtain a year from now.

Daily Pivots: (S1) 180.80; (P) 181.15; (R1) 181.81; More...

EUR/JPY is still bounded in range below 181.98 and intraday bias stays neutral. With 179.74 support intact, further rally is expected. On the upside, break of 181.98 will resume larger up trend to 100% projection of 161.06 to 173.87 from 171.09 at 183.90 next. However, firm break of 178.80 will argue that deeper correction is already underway towards 55 D EMA (now at 178.10).

In the bigger picture, up trend from 114.42 (2020 low) is in progress and should target 61.8% projection of 124.37 to 175.41 from 154.77 at 186.31. However, considering bearish divergence condition in D MACD, upside should be capped by 186.31 on first attempt. Outlook will continue to stay bullish as long as 55 W EMA (now at 170.25) holds, even in case of deep pullback.

In focus today

In the US, the delayed September JOLTs report is finally due for release in the afternoon. The number of job openings is a key measure of labour demand for the Fed, and the release will gather extra attention in light of the FOMC rate decision tomorrow. NFIB's small business optimism index for November and ADP's weekly private sector employment estimate will also be released today.

In Denmark, we expect foreign trade data and the current account for October. It will be interesting as exports remain the key driver of growth in Denmark.

In China, overnight, we will see CPI for November, which is expected to move more into positive territory (cons: 0.7% y/y, prior: 0.2% y/y). Core inflation has moved higher over the past six months as well. China still suffers from deflationary pressures in the producer prices, though, and PPI is expected to stay around -2.0% y/y in November.

Economic and market news

What happened overnight

In Australia, the Reserve Bank held its cash rate at 3.60%, citing upside inflation risks and recovering demand. Governor Michele Bullock noted the board is considering the likelihood of rate hikes in 2026 and has not ruled out an increase as soon as its next meeting in February. The move resulted in higher yields and a slightly stronger AUD.

What happened yesterday

In the US, President Trump announced that Nvidia's H200 chips will be allowed for export to China, with Nvidia required to pay a 25% fee on sales, up from the initial 15%. Trump claimed that President Xi reacted positively to the decision, despite China expressing scepticism about such a deal last week. The decision has faced criticism from US lawmakers, who raised concerns over national security and the risk of the chips being used for military purposes in China.

In the euro area, the December Sentix indicator came in slightly better than expected at -6.2 (cons: -7.0, prior: -7.4), indicating investors have gotten less pessimistic about the economic recovery. Given how Sentix is the first sentiment indicator for December, the rise could signal improvements in other sentiment indicators to be released this month.

In Germany, industrial production increased by 1.8% m/m in October, significantly exceeding expectations and marking the second consecutive monthly rise. Growth was driven by construction and manufacturing, while the automotive sector detracted. Despite this sign of short-term stabilisation, soft indicators remain cautious. The Ifo Index fell in November as weaker expectations outweighed a slight improvement in the current assessment, and the Manufacturing PMI dropped to 48.2, its sharpest contraction since February. This highlights that while production shows improvement, weak demand and sentiment suggest recovery remains dependent on the impact of fiscal easing measures.

Equities: Equities had a slow start to the week and generally ended somewhat lower. The S&P 500 closed down 0.4% and the Stoxx 600 slipped 0.1%. Interestingly, the selling was again concentrated in defensives, similar to Friday. Hence, it was a slow day but not risk off emerging. Futures are little changed this morning.

One standout style yesterday was momentum, which has regained traction both on the day and over the past two weeks. One driver is the ongoing TPU-vs-GPU battle between Alphabet and Nvidia, which appears to have stalled. Alphabet fell 2% yesterday, while Nvidia and Microsoft both gained around 2%. After the close, the Trump administration announced that some of Nvidia's chip exports (H200 AI chips) to China may resume, which might have contributed to the rotation.

Another notable sector is health care: A top performer over the past three months—up roughly 8% in global terms. However, it has also been the sector investors have found financing in during the recent rebound, falling about 3% the last two weeks. This contributes to the divergence between defensives and cyclicals, both in risk-off and risk-on phases. Strong recent performance has narrowed global health care's valuation discount to global equities from 20% earlier this year to about 9% today. That is still one standard deviation below the 10-year average of 0%, and so we continue to recommend an overweight in this sector but admit that the upside has declined.

FI and FX: Yields are grinding higher despite the expectations of a Fed rate cut on Wednesday. Markets are seemingly getting a bit worried that the cut will be delivered with a more hawkish communication, and risk sentiment has also been dented with small declines in US and Asian equity indices overnight. EUR/USD declined towards 1.1620 yesterday afternoon as US yields temporarily spiked around 16.00 CET. With yields subsequently moving lower, EUR/USD settled around 1.1640-1.1650. The RBA kept the policy rate on hold at 3.60% as widely expected and signaled that risks from here are on the upside, resulting in a bearish steepening of the curve with the 2y point rising 9bp and the 10y rising 5bp, along with a stronger AUD.

Daily Pivots: (S1) 206.94; (P) 207.37; (R1) 208.16; More...

GBP/JPY's rally resumed after brief consolidations and it's now pressing 208.09 high. Intraday bias is back on the upside, and decisive break of 208.09 will confirm larger up trend resumption. Next near term target will be 61.8% projection of 184.35 to 205.30 from 199.04 at 211.98. Outlook will stay bullish as long as 205.17 support holds, in case of retreat.

In the bigger picture, price actions from 208.09 (2024 high) are seen as a corrective pattern which might have completed at 184.35. Firm break of 208.09 high will resume the up trend from 123.94 (2020 low). Next target is 61.8% projection of 148.93 to 208.09 from 184.35 at 220.90. However, decisive break of 199.04 support will dampen this view and extend the corrective pattern with another fall.