The Silver price (XAG/USD) extends the recovery to near $29.60 during the early Asian session on Monday, bolstered by the softer-than-expected US November Personal Consumption Expenditures (PCE) Price Index inflation data. However, the upside of the white metal might be limited amid the cautious approach to monetary easing next year from the Federal Reserve (Fed). 

According to the daily chart, the bearish outlook of the Silver price remains in play as the price holds below the key 100-day Exponential Moving Average (EMA). Additionally, the downward momentum is reinforced by the 14-day Relative Strength Index (RSI), which stands below the midline around 39.20, suggesting that further downside cannot be ruled out. 

The potential support level for XAG/USD emerges in the $29.10-$29.00 zone, representing the lower limit of the Bollinger Band and psychological level. A breach of this level could expose $27.70, the low of September 9. The additional downside filter to watch is $26.45, the low of August 8. 

On the upside, the crucial upside barrier for the precious metal is seen at the $30.00 level. Sustained trading above the mentioned level could pave the way to $30.60, the 100-day EMA. Further north, the next hurdle is located at $32.17, the upper boundary of the Bollinger Band. 

Source: FXSTREET

The graphic is a grid of line charts depicting the performance of several assets in 2024, and 10-year treasury yield in 2024.

The line charts show China's retail sales, industrial output, new house prices and urban unemployment from November 2023 to November 2024.

Annual change in Japan's 10-year government bond yield, in basis points (bps)

Graphic shows most distressed EM bonds in USD have outperformed the EMBIGD index

Source: Reuters

"The only thing we can be certain of is that there will be even more uncertainty in early 2025," said Chris Zaccarelli, chief investment officer for Northlight Asset Management.

Source: yahoo finance

As markets wind down for the year-end holiday period, forex trading activity turns subdued, with limited momentum across major pairs. Dollar, while maintaining its position as the strongest currency of the month, is facing challenges in decisively breaking last month’s highs against European majors. However, the greenback still made some headway against Yen and commodity currencies.

This week’s economic calendar is notably lighter, with the focus shifting to central bank minutes from BoJ, BoC, and RBA, alongside a handful of key data releases from the US, Canada, and Japan.

Technically, while EUR/USD failed to break through 1.0330 support on first attempt last week, it seems not giving up yet, with the recovery capped below falling 55 4H EMA. Another fall remains in favor through 1.0330 to 61.8% projection of 1.0936 to 10330 from 1.0629 at 1.0254. However, a significant breakout below this projection is likely to occur only after the New Year.

In Asia, Nikkei closed up 1.19%. Hong Kong HSI is up 0.70%. China Shanghai SSE is down -0.50%. Singapore Strait Times is up 0.88%. Japan 10-year JGB yield rose 0.011 to 1.067.

ECB’s Lagarde: Inflation target within reach, services inflation still stubborn

In an interview with the Financial Times, ECB President Christine Lagarde expressed optimism about nearing the inflation target.

She remarked that ECB is “very close” to declaring that inflation has been “sustainably” brought back to its 2% medium-term target.

The latest inflation reading of 2.2% reflects the success of ECB’s restrictive monetary policy. However, she highlighted persistent concerns in the services sector, where inflation remains high at 3.9%, describing it as “not budging much” despite showing slight signs of decline.

On the topic of US tariff threats, Lagarde emphasized the economic risks of retaliatory trade measures, stating, “Retaliation was a bad approach.” She warned that tit-for-tat trade conflicts could harm the global economy.

Natural gas prices surge on winter demand and long-term power trends

Natural gas prices climbed to a nearly two-year high, driven by immediate weather-related demand and a bullish long-term outlook for global energy consumption.

In the short term, forecasts for below-average temperatures across the northern hemisphere—including North America, Europe, China, and Japan—are expected to significantly increase daily heating demand as these regions, which account for more than two-thirds of global gas consumption, enter their peak heating season. This has bolstered sentiment, with limited downside for prices likely until well into 2025.

Beyond the seasonal factors, the long-term outlook for natural gas remains robust. Rising electricity demand as the race for artificial intelligence accelerates, is projected to grow power consumption for such facilities by 10–15% annually through 2030, potentially accounting for up to 5% of global power demand by that time.

Natural gas is expected to play a pivotal role as a baseload energy source in this transition, given its current dominance in power generation. In the US, natural gas powers approximately 40–45% of electricity production, while globally, that share is closer to 25%. However, as more countries transition from coal to gas, the share of gas in electricity generation is anticipated to increase.

Technically, the break of 3.446 resistance last week was an important sign of underlying medium term momentum. Rise from 1.570 (Feb low) is now expected to continue to 161.8% projection of 1.570 to 3.024 from 1.852 at 4.204.

Nevertheless, momentum should target to wane above 4.204, and, in particular, as it approaches 38.2% retracement of 10.03 to 1.570 at 4.80.

Minutes and deliberations from BoC, BoJ and RBA highlight a holiday week

With the global markets winding down for the holiday season, the week ahead features a much lighter economic calendar. The spotlight will fall on central bank deliberations and meeting minutes from BoJ, BoC and RBA. A handful of key economic data releases from the US, Canada, and Japan will also attract attention as the year concludes.

For BoJ, Summary of Opinions for December, due on Friday, holds more weight than Tuesday’s October minutes, as markets seek clarity on the board’s discussions regarding a potential rate hike in January. The report will also provide insights into BoJ’s perspective on two critical issues: the uncertainty surrounding wage growth in 2025 and the risks posed by US trade policies. These considerations are likely to influence the pace and direction of Japan’s policy normalization, shaping expectations for the coming months.

BoC’s December meeting marked a turning point in its monetary policy stance, with a 50bps rate cut and a clear message that further easing would no longer be automatic. Policymakers indicated that decisions would now be taken on a meeting-by-meeting basis, reflecting a shift toward caution after substantial easing since June. The minutes will be analyzed for clues about how close the BoC is to a pause, the expected pace of additional cuts, and how deep further easing might go.

Meanwhile, RBA introduced a surprising dovish pivot at its December meeting. Growing confidence in the disinflationary trend led the board to omit language suggesting openness to further tightening. However, while this shift suggests the RBA is exploring a less restrictive path, it does not necessarily mean the first rate cut is imminent. Market participants will scrutinize the meeting minutes to understand the reasoning behind this “big pivot” and gauge what data RBA considers essential before moving toward easing.

On the data front, attention will turn to US consumer confidence and durable goods orders, Canada’s monthly GDP, and Tokyo CPI from Japan.

Here are some highlights for the week:

Monday: Germany import prices; UK Q3 GDP Final; Swiss UBC economic expectations; Canada GDP, IPPI, RMPI; US consumer confidence; BoC summary of deliberations.

Tuesday: BoJ minutes; RBA minutes; US durable goods orders, new home sales.

Wednesday: Japan corporate services prices.

Thursday: Japan housing starts, US jobless claims.

Friday: Japan BoJ summary of opinions, Tokyo CPI, industrial production, retail sales, unemployment rate; US goods trade balance.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6219; (P) 0.6247; (R1) 0.6278; More...

Intraday bias in AUD/USD remains neutral for sideway trading above 0.6198. Consolidations should be relatively brief as long as 0.6336 support turned resistance holds. Break of 0.6198 will resume the fall from 0.6941 to 0.6169 long term support, and then 138.2% projection of 0.6941 to 0.6511 from 0.6687 at 0.6074. Nevertheless, firm break of 0.6336 will bring stronger rebound lengthier correction before staging another decline.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term consolidation to the down trend from 0.8006. Firm break of 0.6169 support will confirm down trend resumption for 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806 next. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6588) holds.

Source: ACTIONFOREX

Gold price (XAU/USD) attracts some follow-through buying at the start of a new week and looks to build on its recovery from a one-month low touched last Thursday. Geopolitical risks stemming from the protracted Russia-Ukraine war and tensions in the Middle East, along with trade war fears, turn out to be key factors benefiting the safe-haven precious metal. That said, a generally positive risk tone acts as a headwind for the commodity. 

Apart from this, the emergence of some US Dollar (USD) dip-buying, led by the Federal Reserve's (Fed) hawkish signal and elevated US Treasury bond yields, contributes to capping the upside for the non-yielding Gold price. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further appreciating move. Traders now look to the release of the Conference Board's Consumer Confidence Index for a fresh impetus.

Gold price attracts some haven flows amid geopolitical risks; upside remains capped

The US Dollar pulled back from a two-year high on Friday following the release of the US Personal Consumption Expenditure (PCE) Price Index, which pointed to signs of inflation moderation. 

The US Bureau of Economic Analysis (BEA) reported that inflation in the US, as measured by the change in the PCE Price Index, edged higher to 2.4% on a yearly basis in November from 2.3% previous. 

Meanwhile, the core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% during the reported period, matching October's reading but arriving below the expectation of 2.9%. 

Furthermore, Personal Income decelerated sharply from 0.7% in October and grew 0.3% last month, while Consumer Spending rose 0.4% after a downwardly revised reading of 0.3% in October.

Russian President Vladimir Putin has pledged retaliation after Ukraine staged a major drone attack on the city of Kazan, which damaged residential buildings and shut down the airport.

Israeli forces bombed the so-called “safe zone” in southern Gaza, causing tents to go up in flames and killing at least seven Palestinians, taking the death toll over the past day to at least 50.

The Federal Reserve last week signaled that it would slow the pace of rate cuts in 2025, lifting the benchmark US Treasury bond yield to its highest level in more than six months last week. 

Monday's US economic docket features the release of the Conference Board's Consumer Confidence Index and might provide some impetus later during the early North American session. 

Gold price could face stiff resistance near 38.2% Fibo. level, around the $2,637 area

From a technical perspective, acceptance above the 23.6% Fibonacci retracement level of the recent pullback from a one-month peak favors bullish traders. That said, negative oscillators on daily/4-hour charts warrant some caution before positioning for any further appreciating move. Hence, any subsequent move up might still be seen as a selling opportunity and seems limited. 

Meanwhile, the 38.2% Fibo. level, around the $2,637 area, now seems to act as an immediate hurdle ahead of the $2,643-$2,647 congestion zone, which coincides with the downward sloping 200-period Simple Moving Average (SMA) on the 4-hour chart. The latter should act as a key pivotal point, which if cleared decisively,  should pave the way for a further appreciating move.

On the flip side, the $2,616-$2,615 region that is deemed as a pullback area, or the 23.6% Fibo. level could offer immediate support. This is followed by the $2,600 round-figure mark, below which the Gold price could retest the monthly swing low, around the $2,583 zone touched last week. Some follow-through selling will be seen as a fresh trigger for bears and set the stage for deeper losses in the near term.

Source: FXSTREET