US Dollar Continues to Be Supported by Prospect of Prolonged High Interest Rates from the Fed

Forex

Summary:

USDX (US Dollar Index) is trading around 106.50, with bullish signals supported by technical indicators. The Stochastic Oscillator shows a strong recovery from oversold territory, while the price has broken above the middle line of the Bollinger Bands, signaling bullish momentum...

BUY USDX

Close Time

CLOSED

106.530

Entry Price

107.000

106.200

107.570 -0.540 -0.50%

1.0

Pips

Loss

106.200

106.520

Exit Price

106.530

Entry Price

107.000

The USDX has rebounded strongly after bottoming at 106.20 earlier in the session, thanks to the release of US CPI data in November that matched forecasts (up 2.3% year-on-year). This reinforced expectations that the US Federal Reserve will maintain high interest rates for a longer period, supporting the strength of the USD.

Meanwhile, global risk factors such as the weak economic outlook in the Eurozone and China continue to drive safe-haven flows into the USD. On the M15 chart, USDX has broken through the middle band of the Bollinger Bands and is heading towards the upper band, indicating clear bullish momentum.

Market psychology

The current market sentiment is leaning towards buying the USD as investors expect the Fed to keep interest rates high to control inflation. At the same time, the weakness of other major currencies such as the euro and the Japanese yen further strengthens the USD's position. The Stochastic Oscillator (5,3,3) on the M15 chart shows that the %K line has crossed above the %D line in the 50–60 zone, reflecting a strong buy signal and the possibility of further price increases.

Technical analysis

On the M15 chart, USDX is hovering near the upper band of the Bollinger Bands at 106.50–106.55, signaling a dominant bullish trend. The Bollinger Bands are slightly expanding, indicating increased volatility and a possible test of higher resistance levels.

The Stochastic Oscillator (5,3,3) has exited the oversold zone and is currently hovering around 77–80, confirming strong bullish momentum. The RSI (14) is also pointing above the neutral level of 50, reinforcing the bullish outlook in the short term.

The key resistance is now at 106.70 and further at 107.00; meanwhile, the nearest support lies at 106.30 and further at 106.10.

Trading Recommendations

Based on current technical analysis:

Enter buy order if price sustains above 106.50.

Entry: 106.55

Take Profit: 107.00

Stop Loss: 106.30

Risk Warnings and Disclaimers

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Adam

Forex

Summary:

The consumer price index (CPI) rose 2.3% year-on-year in November, as expected, reinforcing the possibility that the US Federal Reserve will maintain its high interest rate policy for a longer period. At the same time, pressure from the slowing economic outlook in the European region continued to weaken the euro...

SELL EURUSD

Close Time

CLOSED

1.05000

Entry Price

1.04500

1.05850

1.04249 +0.00643 +0.62%

10.1

Pips

Loss

1.04500

1.05101

Exit Price

1.05000

Entry Price

1.05850

EUR/USD is under pressure after US CPI data showed inflation remained high, in line with market expectations. This reinforced the view that the Fed will keep interest rates high for longer to control inflation. The USD is therefore strongly supported, especially as safe-haven assets become more attractive amid global economic uncertainty.

In contrast, the eurozone is facing major challenges as recent economic data point to a decline in manufacturing and services activity. The region’s composite PMI fell to 47.8 in November, below the 50 threshold that reflects economic expansion. This continues to weigh on the euro and puts EUR/USD on track for further declines.

Market psychology

The current market sentiment is biased towards the USD as investors expect the Fed to continue its tightening monetary policy. At the same time, capital flows are flowing out of risky assets in Europe due to concerns about the weak economic outlook in the region. The CCI indicator on the M15 chart shows that EUR/USD has entered the oversold zone (-135), reflecting strong selling pressure but also the possibility of a slight correction before continuing the downtrend.

Technical analysis

On the M15 chart, EUR/USD is hovering below the middle line of the Bollinger Bands at 1.0560, indicating that the downtrend is still dominant. The Bollinger Bands are expanding, signaling increased volatility and the possibility of the price continuing to break important support levels.

CCI (14) is in the oversold zone (-135), but there is no clear reversal signal yet. RSI (14) fluctuates around 30–35, reflecting that the downtrend still has room to continue. The nearest support level is currently at 1.0550 and further at 1.0520; meanwhile, resistance lies at 1.0585 and further at 1.0610.

Trading Recommendations

Based on fundamental and technical analysis:

Enter a sell order if price remains below 1.0560.

Entry: 1.0500

Take Profit: 1.0450

Stop Loss: 1.0585

Risk Warnings and Disclaimers

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Eva Chen

Central Bank

Forex

Summary:

Due to the uncertainty surrounding the Bank of Japan's (BOJ) potential interest rate hikes, the yen has depreciated. Meanwhile, the likelihood of the Bank of England (BOE) maintaining its interest rate at 4.75% in December has increased, providing support for the pound.

BUY GBPJPY

EXP

TRADING

194.484

Entry Price

202.570

189.500

196.400 -0.357 -0.18%

0.0

Pips

Flat

189.500

Exit Price

194.484

Entry Price

202.570

Fundamentals

The GBPJPY has recovered from its intraday losses, marking its third consecutive day of gains, trading around 194.20 during the European session on Wednesday.

The GBPJPY may appreciate further, as the BOJ perceives the cost of waiting for the next interest rate hike to be minimal. Officials reportedly believe that the next rate increase is merely a matter of timing rather than a question of whether to raise rates. Additionally, they assess that the risk of the yen's depreciation exacerbating inflationary pressures is relatively low at this stage.

As a result of the news, the yen is facing significant selling pressure. The GBPJPY dropped to a low of 192.54 before surging back to around 194.50. Current market sentiment indicates that investors anticipate only about a 26% probability of a 25 basis point rate hike by the BOJ next week.

Furthermore, the pound has found support as market confidence strengthens regarding the BOE's decision to maintain interest rates at 4.75% in December. The GBPJPY has regained its footing.

Currently, the market anticipates that BOE policymakers will vote to keep interest rates unchanged, as the overall inflation rate in the UK has risen again after briefly dropping below BOE's 2% target. The BOE had previously forecasted a rebound in inflation following a temporary alignment with the target range.

Investors will also be focusing on the UK's monthly GDP and industrial and manufacturing production data for October this week. Economists expect that following a decline in September, factory output and GDP will show growth (bullish for the pound).

Bulls Have Once Again Solidified Their Positions_1

Technical Analysis

The GBPJPY surged over the critical resistance level of 193.00 on Tuesday and continued to rise on Wednesday, reinforcing the recent upward trend. This indicates that the momentum of the rebound is still in play. The next significant levels to watch are the 200-day and 50-day SMAs near 195.00, which could pose substantial obstacles to further upward movement.

On the downside, a break of the weak support level at 190.59 would initially retest 188.07. A drop below this support level would target the 183.70 support level.

Trading Recommendations

Trading Direction: Buy

Entry Price: 193.50

Target Price: 202.57

Stop Loss: 189.50

Valid until: December 26, 2024 23:55:00

Support: 193.84, 192.94, 192.54

Resistance: 195.00, 197.76, 199.84

Risk Warnings and Disclaimers

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Eva Chen

Forex

Central Bank

Summary:

The USDJPY continued to rise on Wednesday, surpassing the 152.00 threshold, after previously experiencing a decline of 0.5%. Officials from the Bank of Japan (BOJ) believe that the current depreciation of the yen poses a minimal risk of increasing inflationary pressures.

BUY USDJPY

Close Time

CLOSED

152.213

Entry Price

160.210

149.100

156.302 -1.112 -0.71%

151.6

Pips

Profit

149.100

153.729

Exit Price

152.213

Entry Price

160.210

Fundamentals

Recent reports have emerged indicating that some policymakers at the BOJ may support an interest rate hike in December. However, they also believe there is no need to rush, as they perceive the costs of waiting to raise rates as "minimal."

Following this news, the likelihood of a further rate increase by the BOJ has decreased to approximately 23%. This, in turn, has led to increased buying of the USDJPY, resulting in a decline in the yen. Initially, the USDJPY dropped to a low of 150.99, but it subsequently rebounded to around 152.30.

Sources indicate that even if the BOJ decides to postpone a rate hike until January or slightly later, the relevant authorities believe this will not incur significant costs, as there are signs suggesting that the risk of inflation overshooting is low.

According to the sources, officials believe that the next interest rate hike is merely a matter of timing, as the economy and inflation align with their forecasts. The sources indicate that officials will make a final decision only after carefully assessing data and financial markets prior to announcing policy decisions in December.

BOJ Governor Kazuo Ueda and his committee will discuss next week whether there is a need to raise the benchmark interest rate from 0.25%. Unlike the situation in July, the yen has not shown strong signs of depreciation, leading the BOJ to conclude that the risks of rising inflation have diminished.

In fact, the likelihood of the BOJ raising interest rates this month was low from the outset, and as of earlier today, that probability stands at approximately 30%.

Technical Analysis

The USDJPY has surged strongly after breaking above the 200-day SMA near the 152.00 level.

The break of the 152.00 resistance indicates that the pullback from 156.74 has been completed, suggesting that the upward movement from 139.57 is still in progress. The price has returned to an upward trajectory, with the first target being a retest of 156.74. A breakout above this resistance will aim for the high of 161.95. Currently, as long as the support level at 148.64 remains intact, this scenario is the most favorable.

Additionally, momentum indicators have resumed a positive bias, with the Relative Strength Index surpassing the 50 level, and the stochastic oscillator rising in the overbought zone.

On the other hand, if a downward reversal occurs again, immediate support is located around 151.10, followed by a one-month low at 148.63. A break below this level could potentially drive the price towards the 146.50-147.15 range.

Overall, the strong upward movement of the USDJPY near the short-term ascending trend line and the 200-day SMA indicates that the medium-term uptrend has not been reversed.

Trading Recommendations

Trading Direction: Buy

Entry Price: 152.00

Target Price: 160.21

Stop Loss: 149.10

Valid until: December 26, 2024 23:55:00

Support: 151.00, 150.34, 149.35

Resistance: 152.90, 153.30, 156.74

Risk Warnings and Disclaimers

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Alan

Central Bank

Forex

Summary:

The Bank of Canada is set to announce its latest interest rate decision today, with expectations pointing toward a 50-bps cut, potentially weakening the Canadian Dollar (CAD).

BUY GBPCAD

Close Time

CLOSED

1.80579

Entry Price

1.83900

1.79850

1.80600 +0.00634 +0.35%

72.9

Pips

Loss

1.79850

1.79840

Exit Price

1.80579

Entry Price

1.83900

Fundamentals

Later today, the Bank of Canada will unveil its latest interest rate decision. Market expectations lean heavily toward further easing, aiming to stimulate economic growth. According to CIBC forecasts, the central bank may cut rates by approximately 50 basis points each in December and January, bringing the overnight rate down to 3% by January and projected to decrease further to 2.25% by June. This will keep downward pressure on the CAD over the coming period.

In contrast, the Bank of England (BoE) is scheduled to release its own interest rate decision on December 19th. Markets largely anticipate that the BoE will hold interest rates at 5.25%, with only a 10% chance of a rate cut, offering short-term support to the British Pound (GBP) and fueling its advance against the CAD.

Technical Analysis

Depreciation Pressure on CAD Intensifies_1

In the daily chart, GBP/CAD has maintained an uptrend since late September last year. After encountering strong resistance at 1.8150 twice this year, it saw a sharp retreat but held above the rising trend line. Then, by subsequently initiating a V-shaped recovery, GBP/CAD completely retraced previous losses. This indicates strong buying power and suggests potential for further breakthrough beyond 1.8150.

Currently, GBP/CAD stands a good chance of breaching the key pressure level once a 50-bps rate cut is confirmed. The first upward target points at the monthly pressure level of 1.8415. Therefore, try to buy at lows.

Trading Recommendations

Trading direction: Buy

Entry price: 1.8060

Target price: 1.8390

Stop loss: 1.7985

Valid Until: Dec 25th, 2024 15:00:00

Support: 1.8041/1.8150/1.7920

Resistance: 1.8111/1.8026/1.8415

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The USD/CAD pair remains range-bound ahead of key economic releases, with the US CPI data and the Bank of Canada’s (BoC) policy decision taking center stage.

BUY USDCAD

Close Time

CLOSED

1.42000

Entry Price

1.43000

1.41000

1.43695 -0.00268 -0.19%

26.0

Pips

Profit

1.41000

1.42260

Exit Price

1.42000

Entry Price

1.43000

The USD/CAD currency pair traded in a tight range below the critical resistance level of 1.4200 on Wednesday, consolidating ahead of two major market-moving events: the United States’ Consumer Price Index (CPI) release for November and the Bank of Canada’s (BoC) interest rate decision. The pair has been trending sideways as investors prepare for these pivotal announcements, which could have far-reaching implications for monetary policy outlooks and market sentiment.

In the early European trading session, the US dollar (USD) extended its rally to fresh weekly highs, with the US Dollar Index (DXY) climbing toward the 106.70 mark. This marked the fourth consecutive day of gains for the greenback, buoyed by the ongoing anticipation of the US inflation data. The market remains cautious, with traders weighing the potential implications of the CPI figures on the Federal Reserve’s policy stance heading into the December meeting.

Economists expect the headline CPI for November to show a monthly increase of 0.3%, bringing the annual inflation rate to 2.7%, slightly faster than previous readings. The core CPI, which strips out the more volatile food and energy components, is anticipated to show a steady 0.3% rise month-on-month, while the year-on-year increase is projected at 3.3%. These figures will be crucial for shaping the market’s expectations regarding the Federal Reserve’s monetary policy decisions, particularly the possibility of another rate cut.

A slowdown in inflation could fuel dovish expectations for the Fed, potentially weighing on the USD in the short term. Conversely, stronger-than-expected inflation figures could dampen the outlook for a near-term reduction in interest rates, offering support to the greenback. According to a Reuters poll, 90% of economists anticipate a 25-basis point (bps) rate cut by the Fed at its policy meeting next week, highlighting the significant market dependence on inflation data as the key to determining the Fed's future course.

On the other side of the border, the Canadian dollar (CAD) is also in focus, as the BoC is widely expected to follow through with a 50-bps interest rate cut at its policy meeting later today. This move would mark the second consecutive oversized rate cut by the central bank and the fifth in total this year. The BoC has already slashed its key borrowing rates by a cumulative 125 bps in 2024, signaling an accommodative stance aimed at supporting economic growth amid a cooling economy and lower inflation expectations.

While the BoC has faced mounting pressure to act decisively in response to economic headwinds, its policy decisions have largely centered around providing stimulus in the form of lower borrowing costs. Should the BoC follow through with its expected rate cut, it would likely exert additional downward pressure on the CAD, especially in the face of a strong USD. The Canadian economy, while resilient, has struggled with sluggish growth, and the central bank’s dovish stance reflects its efforts to support recovery while navigating a volatile global economic landscape.

Technical Analysis

From a technical perspective, the USD/CAD pair remains range-bound in the 1.4110–1.4240 zone, with resistance at the 1.4178 level. This marks a significant point of contention for the pair, as it has struggled to breach this level in recent trading sessions. A slight bearish bias has emerged, but technical indicators, such as the stochastic oscillator, are building positive momentum, suggesting that the USD could break through this resistance if inflation data supports hawkish expectations for the Federal Reserve.

A sustained breach above the 1.4178 level could open the door for a further rally towards the next target at 1.4300, providing additional upside for the greenback. On the downside, a break below the 1.4145 support would likely lead to a correction lower, with initial targets at 1.4070 and potentially 1.4000 if the bearish momentum accelerates.

TRADE RECOMMENDATION

BUY USDCAD

ENTRY PRICE: 1.4200

STOP LOSS: 1.4100

TAKE PROFIT: 1.4300

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The GBP/JPY cross has reversed its earlier losses, extending its gains for the third consecutive day.

BUY GBPJPY

Close Time

CLOSED

194.100

Entry Price

198.000

190.000

196.400 -0.357 -0.18%

153.9

Pips

Profit

190.000

195.639

Exit Price

194.100

Entry Price

198.000

The GBP/JPY currency pair demonstrated resilience during Wednesday's European session, recovering from earlier losses to extend its gains for the third consecutive day. Trading around the 194.20 mark, the pair faced headwinds earlier in the day as the Japanese Yen (JPY) gained strength due to positive domestic economic data. Specifically, the Producer Price Index (PPI) figures signaled upward pressure on inflation, reigniting market expectations of further tightening from the Bank of Japan (BoJ).

Despite the JPY's brief push higher, the overall sentiment surrounding the BoJ remains mixed. Japan’s central bank is navigating a delicate balance between the potential need for tighter monetary policy and the risk of stifling the country's fragile economic recovery. While BoJ Governor Kazuo Ueda has hinted that the timing of the next rate hike could be near, largely supported by persistent inflationary pressures, there is notable dissent within the BoJ itself. Dovish board member Toyoaki Nakamura has expressed caution, urging against raising rates prematurely, which has fueled skepticism regarding the BoJ's ability or willingness to act decisively.

This internal division within the BoJ has left the Japanese Yen vulnerable, as investors remain uncertain whether the central bank will proceed with additional rate hikes or delay them. With this uncertainty surrounding Japan's monetary policy, the JPY’s recent bullish momentum could be short-lived, and further weakness in the Yen seems likely if the BoJ does not signal an aggressive stance on tightening.

In contrast, the British Pound (GBP) has found support amid growing market confidence that the Bank of England (BoE) will keep interest rates at 4.75% when it meets in December. This sentiment has been bolstered by the recent uptick in UK inflation, which has risen again after briefly dipping below the BoE’s 2% target. Although the central bank had previously anticipated inflation to fall within its target range, this renewed pressure on prices makes it more likely that the BoE will opt to maintain its current policy stance, at least in the near term.

As a result, the GBP has gained traction, supported by a more hawkish outlook for the BoE, especially with the expectation that it will refrain from further rate cuts. In addition to the central bank’s policy stance, traders are also eyeing important economic data from the UK, including the October Gross Domestic Product (GDP) report and industrial and manufacturing production figures. These data points will be crucial in assessing the UK’s economic performance after a disappointing September, when both GDP and industrial output showed signs of contraction. Should the data show signs of recovery in October, the Pound could see further gains, which would lend additional support to the bullish trend in GBP/JPY.

Technical Analysis

From a technical perspective, the GBP/JPY cross has shown a solid bullish momentum. The pair successfully bounced off the 190.70 support level and rallied to test the 194.10 mark, which represents the 50% Fibonacci retracement level. This upward move confirms the continuation of the bullish trend, although the pair faced some temporary resistance at that level. The 192.80 level has since emerged as an important support, with stochastic indicators continuing to signal positive momentum.

Looking ahead, the immediate target for the GBP/JPY pair remains the 196.00 resistance, with a strong possibility of pushing through to 198.80 and eventually testing the 199.50 level if the current momentum persists. Although traders may watch for any signs of resistance or a corrective pullback at these levels, the general outlook remains positive, as the market continues to favor the BoE’s stance on interest rates and remains cautious about the BoJ’s ability to follow through on tightening.

The expected trading range for today is between 193.35 and 194.80, with further upside pressure likely to build if the bullish trend continues.

TRADE RECOMMENDATION

BUY GBPJPY

ENTRY PRICE: 194.100

STOP LOSS: 190.00

TAKE PROFIT: 198.00

Risk Warnings and Disclaimers

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US Dollar Continues to Be Supported by Prospect of Prolonged High Interest Rates from the Fed

Market psychology

Technical analysis

Trading Recommendations

EUR/USD: Pressure From US CPI

Market psychology

Technical analysis

Trading Recommendations

Bulls Have Once Again Solidified Their Positions

Fundamentals

Technical Analysis

Trading Recommendations

Aim for the 160.00 Threshold

Fundamentals

Technical Analysis

Trading Recommendations

Depreciation Pressure on CAD Intensifies

Fundamentals

Technical Analysis

Trading Recommendations

USD/CAD Consolidates Amid Anticipation of US Inflation Data and BoC Policy Decision

GBP/JPY Rebounds as Market Awaits US Inflation Data and BoJ Rate Hike Clarity

Risk Disclosure