Key Highlights

Gold failed to clear the $2,725 resistance and corrected gains.

A connecting bullish trend line is forming with support at $2,630 on the 4-hour chart.

Oil prices are struggling to clear the $71.50 resistance.

EUR/USD could decline if it breaks the 1.0450 support level.

Gold Price Technical Analysis

Gold prices remained well-bid near the $2,615 zone against the US Dollar. The price formed a base and started a fresh increase above $2,640 and $2,680.

The 4-hour chart of XAU/USD indicates that the price even climbed above $2,700 but struggled to clear the $2,725 level. As a result, there was a bearish reaction below the $2,700 and $2,680 levels. The price dipped below the 50% Fib retracement level of the upward move from the $2,613 swing low to the $2,726 high.

It even settled below the 100 Simple Moving Average (red, 4 hours) and the 200 Simple Moving Average (green, 4 hours). On the downside, initial support is near the $2,630.

There is also a connecting bullish trend line forming with support at $2,630 on the same chart. The first major support is near the $2,610 level. The main support is now $2,600. A downside break below the $2,600 support might call for more downsides.

The next major support is near the $2,575 level. On the upside, immediate resistance is near the $2,665 level. The first major resistance sits near the $2,670 level.

A clear move above the $2,670 resistance could open the doors for more upsides. The next major resistance could be $2,700, above which the price could rally toward the $2,720 level.

Looking at Oil, there was a decent increase, but the bulls seem to be facing hurdles near the $71.50 level.

Economic Releases to Watch Today

Euro Zone CPI for Nov 2024 (YoY) – Forecast +2.3%, versus +2.3% previous.

Euro Zone CPI for Nov 2024 (MoM) – Forecast -0.3%, versus -0.3% previous.

US Housing Starts for Nov 2024 (MoM) – Forecast 1.340M, versus 1.311M previous.

US Building Permits for Nov 2024 (MoM) – Forecast 1.430M, versus 1.419M previous.

SINGAPORE (Dec 18): Oil prices traded in a narrow range early on Wednesday as investors remained cautious ahead of an expected interest rate cut by the US Federal Reserve, while weighing up the potential supply impact of tighter sanctions on Russia.

Brent futures inched up one cent at US$73.20 a barrel at 0420 GMT, while US West Texas Intermediate crude rose one cent to US$70.08 a barrel.

The market is watching out for clues on interest rate moves for 2025 following the Federal Open Market Committee's (FOMC) meeting, which ends later on Wednesday, analysts said.

"Additional sanctions from the West may limit some losses in today's session, but a cautious tone persists in the lead-up to the FOMC meeting," said Yeap Jun Rong, market strategist at IG.

"Looking ahead, oil prices are likely to remain constrained within their current range, with subdued price action expected to persist through the end of the year," Yeap added.

The Fed on Wednesday is widely expected to cut interest rates for the third time since its policy easing cycle began.

"Projections for rate cuts in 2025 are being second-guessed, especially with Trump planning a comeback on January 20," said Priyanka Sachdeva, senior market analyst with Phillip Nova.

"There is a prevailing narrative that Trump's policies may lead to inflation, which, coupled with concerns about potential interference with the Federal Reserve's autonomy, is causing oil investors to remain cautious," she added.

Lower rates decrease borrowing costs, which can boost economic growth and demand for oil.

Meanwhile, the European Union on Tuesday adopted a 15th package of sanctions against Russia over its invasion of Ukraine, adding an additional 33 vessels from Russia's shadow fleet used for transporting crude or petroleum products. Britain also sanctioned 20 ships for carrying illicit Russian oil.

The fresh sanctions could stoke further oil price volatility though so far they have not succeeded in shutting Russia out of the global oil trade.

In the US, American Petroleum Institute data on Tuesday showed that crude stocks fell by 4.69 million barrels in the week ended Dec 13, a source said. Gasoline inventories rose by 2.45 million barrels, and distillate stocks rose by 744,000 barrels, according to the source.

Analysts projected US energy firms pulled about 1.6 million barrels of crude from storage during the week ended Dec 13, according to a Reuters poll on Tuesday.

The US Energy Information Administration will release its oil storage data on Wednesday.

Source: Theedgemarkets

WHERE WE STAND

LOOK AHEAD

Teva Pharmaceutical (NYSE:TEVA) and Sanofi (NASDAQ:SNY) stocks were rising on Tuesday after the companies announced successful results of a phase 2 study involving the treatment of patients with ulcerative colitis (UC) and Crohn’s disease (CD).

The study investigated duvakitug, a human monoclonal antibody targeting, for the treatment of moderate-to-severe inflammatory bowel disease (IBD). UC and CD are the two main types of IBD. The companies announced that the Phase 2b Relieve UCCD study met its primary endpoints in patients with ulcerative colitis (UC) and Crohn’s disease (CD).    

Specifically, 36.2% of low-dose patients and 47.8% of high-dose patients with UC treated with duvakitug achieved clinical remission compared to 20.45% on placebo.

Also, 26.1% of low-dose patients and 47.8% of high-dose patients with CD treated with duvakitug achieved endoscopic response compared to 13.0% on placebo.

Overall, duvakitug was generally well tolerated in both UC and CD with no safety signal identified.

“The results from the RELIEVE UCCD study have exceeded our expectations, and I am deeply moved by the potential for duvakitug to help treat and meaningfully improve the quality of life of people living with IBD,” Eric Hughes, MD, PhD, head of global R&D and chief medical officer at Teva, said. “These positive results reinforce Teva’s ability to develop and accelerate access to innovative medicines.”

Teva and Sanofi are co-developing the IBD treatment

Teva and Sanofi are co-developing Teva’s duvakitug for the treatment of UC and CD. Each company will equally share the development costs as well as the net profits and losses in major markets.

Teva will lead commercialization of the product in Europe, Israel and specified other countries. Further, Sanofi will lead commercialization in North America, Japan, other parts of Asia, and the rest of the world.

Sanofi will lead the Phase 3 clinical development program, pending regulatory approvals.

“These unprecedented results show that duvakitug could represent the next frontier in treating ulcerative colitis and Crohn’s disease. If the magnitude of effect persists in the Phase 3 program, we believe we will have a differentiated medicine for IBD patients who are in urgent need of new options,” Houman Ashrafian, MD, PhD, executive vice president, head of R&D at Sanofi, said.

Teva stock jumps 26%

Teva stock was the top gainer on the market Tuesday, rising 26% on the news to about $20 per share. The pharma stock has risen 99% year to date, fueled by rapidly rising revenue.

In the latest quarter, Teva generated $4.3 billion in revenue, a 13% year over year increase. It was buoyed by strong results for two of its drugs, Austedo and Ajovy, and its generics.

Specifically, Austedo saw a 28% increase in revenue to $435 million in the quarter, while Ajovy revenue increased 21% to $137 million. Its generics business saw 30% revenue growth in the U.S., 8% in Europe, and 13% in international markets in Q3. The third quarter results enabled Teva to boost its revenue outlook for fiscal 2024.

Further, the progression of the duvakitug IBD study, as well as a pending review of its biosimilar candidate to Prolia by the FDA and the European Medicines Agency (EMA), gives Teva a solid pipeline for increased sales going forward.

Analysts rate Teva stock as a solid buy, with a price target of $23 per share. That would be about an 11% increase. BofA Securities raised Teva’s price target to $25 per share after the study results were released, citing the potential for increased sales.

Sanofi stock was also rising Tuesday, up about 7% to $49 per share. The pharma stock is down about 1% year to date, trading at around $49 per share. Sanofi has a P/E ratio of 24 and a forward P/E of 10, giving it a fairly attractive valuation. The median price target is about $61 per share, giving it 24% potential upside over the next 12 months.

Source: FXSTREET

The US Dollar Index (DXY) trades with a mild negative bias near 106.85 during the early European trading hours on Wednesday. The speculation that the Federal Reserve (Fed) will adopt a more cautious stance on cutting interest rates might provide some support to the US Treasury bond yields and the US Dollar (USD). 

The US Census Bureau revealed on Tuesday that Retail Sales in the US climbed by 0.7% MoM in November versus a 0.5% increase (revised from 0.4%) in October. This figure came in stronger than the expectation of a 0.5% increase. Meanwhile, US Industrial Production came in below the market consensus, declining by 0.1% MoM in November, compared to a fall of 0.4% (revised from -0.3%) in October. However, the US Retail Sales data had no impact on expectations that the Fed would reduce interest rates at its December meeting on Wednesday. 

The US central bank is scheduled to announce its interest rate decision at its December meeting on Wednesday. The markets expect that the Fed will cut rates for the third time in a row, bringing the Federal Funds Rate lower to a target range of 4.25% to 4.50%. According to the CME FedWatch Tool, there is now a 97.1% odds of a 25 basis points (bps) rate cut, while the probability of maintaining current rates stands at 4.6%. 

Jacob Channel, senior economist at LendingTree, said that the Fed will likely proceed with a 25 bps reduction at its upcoming meeting, but there may not be further cuts in the immediate future. Traders will take more cues from the Fed Chair Jerome Powell’s Press Conference and Summary of Economic Projections (dot-plot) after the meeting. If the Fed officials deliver the less dovish comments, this could lift the Greenback against its rivals. However, any signs of further Fed rate reduction could weigh on the USD. 

Source: FXSTREET

USD/CHF extends its losses after pulling back from a six-month high of 0.8974, reached on Tuesday. The pair trades around 0.8920 during the Asian hours on Wednesday. Traders are bracing for a potential 25 basis point rate cut by the US Federal Reserve (Fed) later in the North American session.

According to the CME FedWatch tool, markets are now almost fully pricing in a quarter basis point cut at the Fed's December meeting. Additionally, traders will closely monitor Fed Chair Jerome Powell's press conference and Summary of Economic Projections (dot-plot) after the meeting.

On Tuesday, the US Census Bureau reported that US Retail Sales rose 0.7% MoM in November, compared to the 0.5% prior increase. Meanwhile, the Retail Sales Control Group increased 0.4% from the previous decline of 0.1%.

The Swiss Franc (CHF) came under pressure after the Swiss National Bank (SNB) unexpectedly cut its key interest rate by 50 basis points last week, surpassing expectations for a smaller reduction, as it seeks to address subdued inflation.

The SNB reaffirmed its commitment to maintaining price stability over the medium term, signaling readiness to adjust monetary policy if needed. The central bank noted that "underlying inflationary pressure has decreased again this quarter," with annual inflation declining from 1.1% in August to 0.7% in November, nearing the lower end of its target range of 0-2%.

Switzerland's State Secretariat for Economic Affairs (SECO) has revised its economic growth forecasts, projecting the Swiss economy to grow by 0.9% in 2023, down from the previous estimate of 1.2%. For 2024, the growth forecast has been adjusted to 1.5%, slightly lower than the earlier projection of 1.6%. The KOF Swiss Economic Institute forecasts growth of 1.4% in 2025 and 1.7% in 2026, anticipating weak foreign demand until mid-2025, followed by a gradual recovery.

Swiss Franc FAQs

What key factors drive the Swiss Franc?

The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

Why is the Swiss Franc considered a safe-haven currency?

The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

How do decisions of the Swiss National Bank impact the Swiss Franc?

The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

How does economic data influence the value of the Swiss Franc?

Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

How does the Eurozone monetary policy affect the Swiss Franc?

As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

Source: FXSTREET