USD/JPY under pressure to fall

Forex

Summary:

The latest data from the US, including the ISM services PMI and the performance of government bond yields, have dampened the USD's momentum. Meanwhile, the Japanese Yen continues to be supported by potential changes in the BoJ's monetary policy, clearly reflected in the market's risk sentiment....

SELL USDJPY

Close Time

CLOSED

150.450

Entry Price

150.200

150.650

157.920 +0.831 +0.53%

25.0

Pips

Profit

150.200

Exit Price

150.450

Entry Price

150.650

USD/JPY is being heavily influenced by both economies. The latest data from the US showed that the ISM services PMI fell to 52.0 in November, below expectations of 53.2 and the previous month's 52.9. This reflects a decline in the services sector - a major contributor to US GDP. In addition, the yield on the 10-year US government bond fell to 4.12%, indicating that the pressure on the USD is increasing.

In Japan, recent comments from Governor Kazuo Ueda that the BoJ is considering adjusting its yield curve control (YCC) policy have strengthened the yen. Investors are now shifting capital flows into safe-haven assets, boosting the value of the yen amid uncertain global economic conditions.

Market psychology

Market sentiment is turning cautious as investors worry about the US economic outlook amid a possible change in monetary policy. The VIX, a gauge of investor fear in the US market, rose slightly to 19.5 today, reflecting heightened volatility. Meanwhile, ETF flows showed money flowing out of US stocks last week, focusing on safe havens such as gold and the Japanese yen.

In addition, information from the Japanese market also showed positive sentiment towards the Yen when the Nikkei 225 index remained stable at 33,100, up slightly 0.2% from the previous session.

Technical analysis

On the M15 chart, USD/JPY is trading below the 20-period moving average (20 SMA), confirming the bearish pressure in the short term. Bollinger Bands show that the price range is narrowing, indicating that the market may soon have a breakout to the downside.

The Stochastic (5,3,3) indicator has fallen into the overbought zone at 68, and the %K line is crossing below the %D line, signaling a possible further downside correction. The current strong support level is at 150,200, if broken, the price may continue to decline to the 149,800 area. On the contrary, the nearest resistance level is identified at 150,600, where the recent peak and the 50 SMA converge.

Trading Recommendations

Overall, USD/JPY is facing downward pressure due to weak economic data from the US and the prospect of a change in BoJ monetary policy. Current technical signals also suggest a continuation of the downtrend in the short term.

Entry: 150.450

Take Profit: 150.100

Stop Loss: 150.650

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The NZD/USD pair has corrected to near 0.5880 after a three-day decline, as weaker-than-expected US Services PMI data pressured the US Dollar.

SELL NZDUSD

Close Time

CLOSED

0.58620

Entry Price

0.57200

0.59700

0.56267 -0.00089 -0.16%

59.4

Pips

Profit

0.57200

0.58026

Exit Price

0.58620

Entry Price

0.59700

The New Zealand Dollar (NZD) has managed a slight recovery, bouncing back toward the 0.5880 mark against the US Dollar (USD) after a three-day losing streak. This reversal comes as the US Dollar weakened following disappointing US economic data that dampened investor sentiment. The catalyst for the Kiwi’s rebound was weaker-than-expected services sector activity in the US, which pushed the Greenback lower.

On Wednesday, the US Institute for Supply Management (ISM) Services Purchasing Managers' Index (PMI) showed that growth in the services sector slowed significantly in November. The PMI dropped to 52.1, down from 56.0 in October, coming in well below the consensus estimate of 55.5. The data revealed that while the services sector continued to expand, the pace of growth was considerably slower, reflecting broader concerns about economic resilience in the US.

The immediate impact was seen in the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies. At the time of writing, the DXY hovered just above a key support level of 106.00, reflecting a cautious mood in the broader forex market. The ongoing weakness in the USD is likely to persist until further US economic data is released, with the Nonfarm Payrolls (NFP) report for November, due out on Friday, likely to be the next major market mover.

Economists anticipate that the US economy added 200,000 jobs in November, with the unemployment rate edging up to 4.2% from 4.1% in October. These figures are expected to hold significant weight in shaping expectations regarding the Federal Reserve’s monetary policy. If the jobs report shows a stronger-than-expected labor market, it could bolster the case for the Fed to maintain its hawkish stance. However, the weaker-than-expected PMI report may give the central bank some leeway to adopt a more cautious approach to future rate hikes, particularly in light of recent remarks from Fed Chair Jerome Powell.

During the New York Times DealBook Summit on Wednesday, Powell indicated that the Fed officials might be more inclined to adopt a “wait-and-see” approach regarding interest rate cuts. He suggested that, given the strength of the US economy, the central bank could afford to be patient before making any moves to reduce rates. This dovish tone has added to the market’s uncertainty regarding the future trajectory of US monetary policy.

While the US data has pressured the USD, the New Zealand Dollar (NZD) is facing its own set of challenges. The Reserve Bank of New Zealand (RBNZ) remains under pressure to reduce interest rates, as inflationary concerns linger despite the central bank’s previous efforts to tighten monetary policy. Having already cut its Official Cash Rate (OCR) to 4.25%, the RBNZ is widely expected to lower rates by 50 basis points (bps) in its first policy meeting of 2025, which would likely weigh on the NZD.

With expectations for further rate cuts, the outlook for the New Zealand Dollar remains largely bearish. The RBNZ’s ability to address inflation while fostering economic stability is a delicate balance, and the potential for additional rate reductions could continue to erode investor confidence in the Kiwi.

Technical Analysis

From a technical perspective, the NZD/USD pair remains within a cautious range, struggling to break through key support and resistance levels. The pair is currently oscillating near the 50-day Exponential Moving Average (EMA50), which has acted as a crucial intraday resistance level. The immediate outlook for the pair remains bearish, with a potential target of 0.5800 if the selling pressure continues. A break below this level would likely open the door for further declines, with the next support seen at 0.5720.

The NZD/USD pair faces crucial resistance at 0.5935. Holding below this level is essential for the continuation of the bearish trend. A breach above 0.5935 could signal a shift in momentum, potentially leading to a bullish correction with the next key target at 0.6020.

For today, the expected trading range for NZD/USD is between 0.5810 on the downside and 0.5905 on the upside. The near-term trend remains bearish, and unless the pair can break above 0.5935, the outlook for the Kiwi remains frail.

TRADE RECOMMNDATION

SELL NZDUSD

ENTRY PRICE: 0.58620

STOP LOSS: 0.5970

TAKE PROFIT: 0.5720

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

USD/CAD rises to 1.4075 as expectations for a Bank of Canada rate cut and falling oil prices weigh on the Canadian dollar. Fed Chair Powell's positive outlook supports the US dollar.

BUY USDCAD

Close Time

CLOSED

1.40585

Entry Price

1.42000

1.40000

1.43981 +0.00507 +0.35%

82.0

Pips

Profit

1.40000

1.41405

Exit Price

1.40585

Entry Price

1.42000

The USD/CAD currency pair edged higher during the early Asian session on Thursday, trading near 1.4075, as traders assessed a blend of mixed economic data and contrasting monetary policy signals from the US Federal Reserve and the Bank of Canada. This uptick is largely fueled by growing expectations of further rate cuts by the Bank of Canada, alongside a weakening of crude oil prices, which tend to pressure the Canadian dollar. Although the US dollar faced some temporary downward pressure from disappointing economic figures, the market’s broader focus remains on the resilience of the US economy, which continues to bolster the Greenback.

Fed Chair Jerome Powell provided an optimistic outlook for the US economy on Wednesday, asserting that despite ongoing inflationary pressures, the labor market remains robust, with unemployment levels at historically low rates. Powell’s comments suggested that the Federal Reserve could afford to take a more measured approach to interest rate cuts going forward, thus supporting the US dollar in the near term. Powell described the US economy as being "remarkably good shape," signaling that while inflation remains a concern, the central bank's cautious stance is not likely to shift abruptly. This dovish stance, focused on continued low unemployment and ongoing progress in inflation, strengthens the underlying demand for the Greenback.

However, the positive outlook for the US dollar was partially offset by the latest data from the Institute for Supply Management (ISM), which showed a surprising decline in the US Services PMI for November, falling to 52.1 from 56.0 in October. The reading was well below market expectations of 55.5, which momentarily pressured the USD, though the decline in the services sector was not severe enough to alter the broader market sentiment towards the Greenback. The weaker-than-expected data raised concerns about a potential slowdown in the US economy, but the overall tone of Powell’s statements helped to mitigate the immediate market reaction.

In contrast, the Bank of Canada’s more dovish stance remains a key factor driving the USD/CAD rally. With market expectations high that the BoC will continue its aggressive rate-cutting cycle at its December meeting, the Canadian dollar is under pressure. Current market pricing suggests that the BoC could deliver a rate cut of up to 50 basis points, which would exceed the Fed's pace of tightening. As a result, the Canadian dollar is facing a growing divergence between the central banks’ monetary policies, further weighing on the CAD.

Additionally, the decline in crude oil prices has compounded the negative sentiment surrounding the Canadian dollar. As a major oil exporter to the United States, Canada’s economy—and by extension, its currency—has a strong correlation with oil price movements. The recent drop in crude oil prices, driven by concerns over weakening global demand and rising inventories, has added additional downward pressure on the CAD. Lower oil prices tend to diminish Canada’s export revenues, which in turn affects the value of the Canadian dollar. Given that oil is a key driver of Canadian economic activity, the continued softness in oil prices is expected to contribute to the USD’s outperformance relative to the CAD in the near term.

Later today, traders will turn their attention to the release of two critical economic reports: the Canadian Ivey PMI for November and the US weekly Initial Jobless Claims. The Ivey PMI, which gauges Canadian business sentiment, will provide valuable insight into the health of the Canadian economy, potentially influencing the BoC’s future policy decisions. Meanwhile, the Initial Jobless Claims data from the US will shed light on the state of the labor market, which remains a key factor in the Federal Reserve's decision-making process. While a surge in claims could dampen expectations of continued US economic strength, any significant surprise could shift market sentiment.

Technical Analysis

USD/CAD Rises Amid Diverging Monetary Policies and Weaker US Data_1

Technically, the USD/CAD pair remains in a consolidation phase, with the price fluctuating within a tight range. However, the overall trend remains bullish, with the pair eyeing a break above the key resistance level at 1.4120. A breakout above this level would open the door for a move toward the recent high of 1.4200, further confirming the bullish outlook. On the downside, 1.4000 remains a crucial support level, and a break below this threshold could signal a shift in momentum.

The technical indicators suggest that the pair may need additional catalysts to push through its current range. Nonetheless, the underlying trend remains positive as long as the pair holds above the 1.4000 mark. Any short-term pullbacks should be seen as potential buying opportunities for those betting on the continuation of the bullish trend in USD/CAD.

TRADE RECOMMENDATION

BUY USDCAD

ENTRY PRICE: 1.40585

STOP LOSS: 1.4000

TAKE PROFIT: 1.4200

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Summary:

Bitcoin surged past $100,000, driven by Donald Trump’s nomination of pro-crypto Paul Atkins as the new SEC Chair.

BUY BTC-USDT

Close Time

CLOSED

101000.0

Entry Price

110000.0

95000.0

95902.8 -2630.1 -2.67%

6000.0

Pips

Loss

95000.0

94966.0

Exit Price

101000.0

Entry Price

110000.0

Bitcoin (BTC) reached a significant milestone on Thursday, breaking above the $100,000 threshold for the first time in its history. This rally marks a new chapter in the cryptocurrency’s evolution, driven by a confluence of technical momentum and a fundamental shift in regulatory sentiment. The digital asset’s ability to recover from its recent pullback and smash through the psychological barrier has reignited enthusiasm among investors and analysts alike.

A key catalyst behind this surge was former President Donald Trump’s announcement on Wednesday that Paul Atkins would replace Gary Gensler as Chair of the U.S. Securities and Exchange Commission (SEC). The market interpreted this move as a major win for the crypto industry. Atkins, known for his pro-crypto stance and advocacy for financial deregulation, represents a sharp departure from Gensler, whose tenure was marked by heightened scrutiny of digital assets.

The impact of this announcement was immediate. Bitcoin, which had been consolidating after its recent correction, surged 2.8% following the news. By Thursday, the momentum intensified, pushing BTC to an all-time high of $100,000 and beyond. This rally was not just a reaction to sentiment but a reflection of broader market optimism about the future regulatory landscape. Atkins’ potential leadership is seen as a harbinger of more crypto-friendly policies, possibly paving the way for long-awaited approvals, such as a Bitcoin exchange-traded fund (ETF).

Technical Analysis

Technically, Bitcoin’s price action has entered a phase known as price discovery, where the asset ventures into uncharted territory with no established resistance levels. Analysts are now eyeing targets between $105,000 and $113,000, citing the return to a bullish channel that has historically supported extended upward moves. The break above $100,000 has opened the door for further gains, provided the market can maintain its momentum and avoid significant corrections.

The current technical outlook remains overwhelmingly bullish. Bitcoin’s rise above the $99,588 mark—a key resistance point—signaled the start of a new leg higher. If BTC can sustain its position above $100,000, it could quickly target the $110,000 level. From there, the next significant barrier stands at $113,000, a level that many analysts believe is achievable given the current macroeconomic and market dynamics. However, caution remains warranted. A break below $99,585 could signal a short-term bearish correction, potentially pulling BTC back toward the $95,000 region.

TRADE RECOMMENDATION

BUY BTCUSD

ENTRY PRICE: 101000

STOP LOSS: 95000

TAKE PROFIT: 110000

Risk Warnings and Disclaimers

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Eva Chen

Economic

Commodity

Summary:

The gold price has remained within a familiar trading range for approximately the past week. The market is focused on Powell's speech and the non-farm payrolls.

BUY XAUUSD

Close Time

CLOSED

2599.98

Entry Price

2706.00

2550.00

2626.16 +9.45 +0.36%

106.4

Pips

Loss

2550.00

2589.34

Exit Price

2599.98

Entry Price

2706.00

Fundamentals

The gold price has remained within a familiar trading range over the past week, lacking a clear direction.

After surging to a record high of US$2,790 at the end of October, gold prices have since declined by approximately 6%. This drop partially reflects the rebound of the U.S. dollar following the elections, and may also be indicative of the ceasefire between Israel and Hezbollah.

The post-election decline in gold prices may come as a surprise, especially since gold was previously touted as part of the 'Trump trade' in the lead-up to the elections; conversely, following Trump's victory, gold prices experienced a significant downturn, while most other assets thrived.

In light of Trump's election win, we have revised our forecasts for the dollar and U.S. Treasury yields for 2025; thus, it is reasonable to adjust our expectations for gold prices downward.

We currently anticipate that by 2025, the U.S. Dollar Index (USDX) will increase by approximately 4%, with real yields also expected to rise slightly from current levels. Given the typically negative correlation between the U.S. dollar, real yields, and gold prices, this suggests that gold prices will face pressure in the coming year.

Higher real interest rates generally have an adverse effect on the investment demand for gold (which accounted for about 20% of total demand in the third quarter), as they increase the opportunity cost of holding gold.

At present, gold prices remain confined within a familiar range over the past week, as investors appear reluctant to make aggressive directional bets ahead of remarks from Federal Reserve Chairman Jerome Powell. Investors will be looking for clues regarding the future path of interest rate cuts, which in turn will drive demand for the U.S. dollar and provide some meaningful momentum for the XAUUSD.

Meanwhile, concerns about a significant slowdown in the U.S. labor market have eased, and expectations that Trump's expansionary policies will elevate inflation suggest that the Federal Reserve may adopt a cautious stance on interest rate cuts. The outlook continues to support a slight increase in U.S. Treasury yields, which bolsters the U.S. dollar and diminishes demand for non-yielding gold.

Buy Low and Sell High when Trading in Fluctuations_1

Technical Analysis

The gold price has remained within a familiar trading range over the past week, with both bullish and bearish positions having open contracts, resulting in fluctuations spanning US$100; it is recommended to set the foundation.

Trading Recommendations

Trading Direction: Buy

Entry Price: 2600

Target Price: 2706

Stop Loss: 2550

Valid until: December 19, 2024 23:55:00

Support: 2621, 2605, 2598

Resistance: 2666, 2687, 2696

Risk Warnings and Disclaimers

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Eva Chen

Forex

Central Bank

Summary:

The final PMI for the UK services sector in November stood at 50.8, indicating stagnation in growth due to rising costs and a bleak outlook. Bank of England (BOE) Governor Bailey reiterated the strategy of gradual interest rate cuts.

BUY GBPUSD

Close Time

CLOSED

1.26912

Entry Price

1.30250

1.24800

1.25052 -0.00182 -0.15%

64.9

Pips

Profit

1.24800

1.27561

Exit Price

1.26912

Entry Price

1.30250

Fundamentals

In November, the UK service sector exhibited signs of a slowdown, with the final PMI for services declining from 52.0 in October to 50.8, marking the lowest level in 13 months. The composite PMI also fell from 51.8 to 50.5, barely remaining above the expansion threshold.

Tim Moore, the Economic Director at S&P Global Market Intelligence, noted that business activity among service providers is "approaching stagnation." Companies are grappling with weak sales channels, project delays, and increasingly cautious customers, all of which are constraining growth.

Furthermore, employers anticipate an increase in national insurance contributions, which is impacting hiring decisions, leading to a reduction in workforce numbers for the second consecutive month. Many firms cite profit pressures as a reason for not replacing departing employees.

Inflationary pressures are intensifying, with wage costs driving input prices to rise at the fastest pace since April. Coupled with concerns regarding the policies outlined in the autumn budget, this has resulted in a "significant decline" in business optimism.

During an interview with the Financial Times, BOE Governor Bailey acknowledged that although the inflation rate has recently fallen to target levels, there remains "a considerable distance to cover" in terms of managing price stability. He indicated that the inflation rate may temporarily exceed the target level again in the future.

Bailey discussed market expectations for four interest rate cuts next year, emphasizing that the BOE's forecasts "depend on market rates" and highlighted the term "gradual" in relation to its approach to rate reductions.

Regarding the potential impact of Donald Trump's return to the White House and the subsequent increase in tariffs, Bailey stated that the effects are "not direct at all."

He explained that such policies could influence trading prices, but they also depend on the reactions of other countries and adjustments in exchange rates, which further complicates the inflation outlook.

Trade Cautiously as the Market Remains Neutral_1

Technical Analysis

The GBPUSD has reversed the decline triggered by dovish comments from BOE Governor Bailey; however, the outlook remains unchanged, leaning towards a neutral stance for the day. While the possibility of a further increase cannot be dismissed, as long as the 55-day SMA (currently at 1.2858) holds, the outlook will remain bearish.

A break of the weak support level at 1.2615 would shift the intraday bias back towards the downside, potentially retesting 1.2486. A drop below this level would reinstate the downtrend that started from 1.3433.

On the other hand, the inverse head and shoulders pattern continues to support buying the dips. However, a break below 1.2598 may lead to an extended period of consolidation. It is recommended to trade cautiously.

Trading Recommendations

Trading Direction: Buy

Entry Price: 1.2630

Target Price: 1.3025

Stop Loss: 1.2480

Valid until: December 19, 2024 23:55:00

Support: 1.2616, 1.2580, 1.2507

Resistance: 1.2750, 1.2768, 1.2832

Risk Warnings and Disclaimers

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Alan

Central Bank

Forex

Summary:

Despite a slight uptick in Eurozone inflation in November, the market largely expects further rate cuts from the ECB, putting pressure on the euro to weaken. In contrast, Japan's CPI data signals ongoing economic recovery and growing expectations of interest rate hikes by the BoJ.

SELL EURJPY

Close Time

CLOSED

158.289

Entry Price

150.500

160.600

164.180 +0.935 +0.57%

231.1

Pips

Loss

150.500

160.625

Exit Price

158.289

Entry Price

160.600

Fundamentals

Eurozone:

On Friday last week, Eurostat released the Eurozone CPI for November, showing an initial annual increase of 2.3%, higher than the previous figure of 2%. This marks the second consecutive month of rebound, with core harmonized CPI remaining at 2.7% for the third month in a row. Service costs showed slight decreases but remained high, while non-energy industrial goods prices saw their second consecutive monthly rise.

Despite this inflationary bump, it is widely believed that it will not alter the ECB's plan for a rate cut. The market has already fully priced in a 25-bps rate cut for December. If realized, this would be the fourth rate cut this year by the ECB, likely leading to continued euro weakness.

Japan:

On the same day, Japan reported its CPI figures for November. Tokyo's core CPI rose by 2.2% year-on-year, exceeding forecasts and previous readings, while overall inflation climbed to 2.6% due to rising food prices.

November's CPI highlights Japan's ongoing economic recovery and positive inflation trends, supporting the normalization of monetary policy by the BoJ. This reinforces market expectations for a potential interest rate hike.

Overall, with the ECB maintaining its rate cut expectations and the BoJ's tightening stance gaining momentum, the EURJPY may continue to face downward pressure.

Technical Analysis

In the weekly chart, despite current oscillations near highs, there are signs of weakening as candlestick peaks start to decline. A key support level is around 156.40. Breaking below could suggest a shift from range-bound consolidation towards a medium-term bearish trend.

Daily analysis shows that the pair found support near 156.00 after a drop, yet the RSI remains outside oversold territory, indicating a possible continuation of declines with limited upside room.

At present, the first target for any rally should be 158.60 resistance, followed by the 160.00 psychological level. Strategy-wise, consider selling upon confirmation of weakness following a pullback.

Trading Recommendations

Trading direction: Sell

Entry price: 158.50

Target price: 150.50

Stop loss: 160.60

Valid Until: Dec 18, 2024 15:00:00

Support: 157.60/156.17/155.15

Resistance: 158.88/159.33/160.33

Risk Warnings and Disclaimers

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USD/JPY under pressure to fall

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