The US dollar has fallen due to predictions of large Federal Reserve rate cuts next year. This sentiment was fueled by Fed Governor Waller's suggestion of lowering the policy rate if inflation falls. This was a major change from a hardline official. Market investors have upped their wagers on a 25 basis point decrease fully factored in for May, raising the total projected rate cuts for next year from 90 to 115 basis points.
The November jobs report, projected to show a steady 3.9% unemployment rate and rising nonfarm payrolls, is the week's highlight. The impact on market expectations for Fed rate decreases may depend on whether wages reaccelerate.
The analysis shows that rising inflation, which would require the Fed to raise interest rates for a longer time, might support the currency. Conversely, a wage slowdown may strengthen investors' views and decrease the dollar. Recent market movements show that investors sell the dollar more aggressively when evidence supports their beliefs than buy it when data supports 'higher for longer.'
Turning to the Australian currency, the RBA hiked interest rates in November but left open the possibility of another hike. After the meeting, the Aussie fell, but the new RBA Governors hawkish comments and inflation concerns kept rate hike hopes alive. After a lower-than-expected October CPI rate, investors forecast another jump by March at 40%. The RBA is anticipated to keep rates at its next meeting, but it may not end the hiking cycle, allowing the Aussie to recover against the US dollar.
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Forex Technical Outlook for 04 December 2023 to 08 December 2023
Let’s see the list of events to look at this week:
- CPI m/m on Monday
- RBA Cash Rate & RBA Rate Statement on Tuesday
- ISM Services PMI on Tuesday
- JOLTS Job Openings on Tuesday
- BOE Gov Bailey Speaks on Wednesday
- ADP Non-Farm Employment Change on Wednesday
- BOC Cash Rate and Rate Statement Thursday
- US Non-Farm Employment Change on Friday
- US Average Hourly Earnings m/m on Friday
- US Unemployment Rate on Friday
Let’s see the market outlook from the weekly forecast:
The EUR/USD price started the week with a bullish momentum but failed to hold the momentum above the 1.0900 mark. However, the fundamental weakness of the EUR failed to grab sufficient buyers' attention, setting the weekly close sideways below last week’s low.
In the EUR/USD price, the 61.8% Fibonacci retracement of the 1.1275 high to 1.0447 low acts as an immediate support to bulls. Moreover, the immediate resistance level of 1.0900 signals a significant opportunity for sellers, paving the way for a further downward movement.
Examining the weekly chart of EUR/USD, technical indicators have shifted from a bullish stance to a neutral-to-bearish position. Simultaneously, the pair remains positioned above its 20 and 100 Simple Moving Averages (SMAs), with a slight downward slope.
According to the daily chart, a potential downward continuation for the EUR/USD pair is potent. Technical indicators are firmly pointing south, although they operate within positive levels. The dynamic 20 SMA indicates a lower bullish strength while maintaining a position above the longer SMAs.
Based on the weekly forecast for EURUSD, the primary resistance lies at 1.0960. A breach above it could expose the recent multi-month high at 1.1016. After surpassing this level, EUR/USD may extend its upward momentum towards the 1.1060 price zone.
On the bearish side, if the pair remains below 1.0860, the price may lower to the 1.0790 level.
The Sterling grabbed the buying pressure against the US Dollar, pushing the GBP/USD price higher at a months high. However, the Non-farm payroll is coming in the coming days, which could set the clear direction for this pair.
The buying pressure in the GBP/USD price is active after the recent ascending channel breakout a couple of weeks ago. Therefore, the next crucial level is the 1.2900 psychological level, which could open the long opportunity towards the 1.2996 crucial level.
The 14-day Relative Strength Index (RSI) remains at the 50.00 neutral level, which indicates a potential bullish pressure. Adding to the buying momentum, the 20-day EMA crossed above the 200- and 100-day SMAs, which indicates a strong crossover.
On the bearish side, the Pound Sterling bullish might struggle to remain above the 1.2900 psychological level. In that case, a daily close below the 20 EMA could signal a bearish opportunity, where the main aim is to set the 1.2374 level, which is a crucial monthly low.
AUD/USD bulls showed their presence in the previous week, taking the price higher with an impulsive bullish week formation. However, the coming trading days might be the last volatile week before the holiday season.
In the monthly chart, the November close has appeared as a blessing to bulls as it eliminated the last three months' losses. Moreover, the weekly price suggests a bullish continuation with a range breakout. The dynamic 20-week EMA indicates a bullish momentum as the current reading is below the current price level.
In the daily chart, the existing bullish range breakout indicates a buying pressure, where the dynamic 20 EMA is below the current price with an upward slope. The 14-day RSI reached the 70.00 overbought level, which might provide an early sell signal.
Based on the daily outlook of AUD/USD, the existing bullish pressure might extend towards the 0.6821 resistance level. However, the buying possibility is valid as long as the price trades above the 0.6569 support.
On the bearish side, an immediate selling pressure with a D1 candle below the dynamic 20 EMA could indicate the first bearish opportunity, targeting the 0.6400 level.
The broader US Dollar weakness at last week's end shifted the USD/JPY pair's market direction. However, the longer-term buying view is intact, which needs more clues before forming a strong bearish signal.
The USD/JPY monthly chart shows a bearish two-bar reversal with a potential double-top formation. Moreover, the gap with the 20 SMA suggests a downside possibility, even if the broader bullish outlook is intact.
In the weekly chart, the 20-week SMA is the immediate support from where bulls may regain the momentum. However, recent candlestick formation indicates strong selling pressure, but a stable trend might come after high voltage releases this week.
Strong downside momentum is visible in the daily price, where the immediate resistance is the 148.53 level. Therefore, a downside continuation is potent as long as the price trades below the 148.53 level. In that case, the price might extend lower towards the 145.00 psychological level.
On the bullish side, a strong reversal is needed above the dynamic 20 EMA, which could resume the trend, targeting the 150.00 level.
Gold moved above the 2010.00 crucial level and reached near the record high. The evidence of the lower inflation in Europe and the US came with the end of rate hikes. However, more clues will come from the US job report, which is set to be released this week.
In the weekly XAU/USD price, upward pressure is solid due to the safe haven nature of Gold, which indicates a bullish possibility toward the 2085.00 resistance level. As the weekly price is set above the 2050.00 level, we may expect the buying pressure to extend this week.
The weekly chart's technical indicators are bullish, indicating an overbought condition. In that case, a bearish daily close below the 2010.00 level could be a potential short opportunity, targeting the 1975.00 level.
On the other hand, the ongoing buying pressure is supported by the 20-day EMA, which might extend the upward pressure above the 2080.00 level in the coming days.
Bitcoin (BTC) has attained a noteworthy achievement, attaining a price of $39,000 level, representing the highest level since early May 2022. Recent disclosures concerning the official approval window for a spot Bitcoin ETF coincide with this surge.
The cryptocurrency community has been enthralled by the anticipation that the U.S. Securities and Exchange Commission (SEC) may approve a spot Bitcoin ETF. James Seyffart, a renowned ETF analyst, stated on the X social media network that the official approval window will be in effect from January 5 to January 10.
Any approval orders are probable to be issued on January 8, 9, or 10, according to Seyffart. This provides a high degree of certainty. Nonetheless, he speculates that the likelihood of a delay is 10% or less if SEC Chair Gary Gensler adopts a stricter stance.
The ascent of the Bitcoin price to its unprecedented zenith in 2023 can be ascribed to many critical factors. Changing economic conditions and influential investors' optimistic outlook have contributed to the recent surge. The expectation of institutional demand is a noteworthy determinant, as industry experts posit that heightened adoption by prominent financial institutions such as BlackRock and Fidelity may further escalate the cryptocurrency's price. When combined with anticipated rate reductions, these elements create a favorable environment for a potential bull run.
The convergence of Bitcoin's ascent to unprecedented price levels and the impending determination on the sanction of a spot Bitcoin ETF has generated a vibrant and positive environment within the cryptocurrency sector.
In the daily chart, the BTC/USDT price trades within a corrective buying pressure, where the current price remains within the rising wedge formation. Moreover, the existing buying momentum is questionable from the divergence formation with the RSI.
In that case, a bearish daily close below the 37,726.75 level could be a strong bearish signal before aiming for the 32000.00 level. However, a bullish continuation from the 20-day EMA could be a strong, long opportunity, aiming for the 40,000.00 level.