Market Drivers – US Session, Dec. 11

Mohamed Abdelhamid 12 December, 2023 3:04 am Commodities, Forex Market, Market Update

USD/JPY climbed above 146.00 for the second day in a row, extending the recovery from below 142.00. The Japanese yen was among the worst performers, as investors reduced the likelihood of a Bank of Japan policy change in the near term. Japan will publish the November Producer Price Index as well as the September trade balance.

The US Dollar Index (DXY) rose modestly on Monday, finishing above 104.00, but was unable to break through the resistance area at 104.30, owing to some risk appetite. The gains were fueled by a dollar rally against the Japanese yen. Treasury yields in the United States remained relatively unchanged.

As expected, the USD rose following payrolls. Economist tend to be concerned that the USD will remain elevated at current levels in the near term as we approach US CPI and year-end. Beyond that, we continue to expect USD weakness in the medium term due to steep Fed cuts in H2 24.

The EUR/USD is consolidating around 1.0760, remaining stable ahead of key events. The pair traded within Friday’s range, with price action remaining muted. On Tuesday, the ZEW survey will be released. The European Central Bank will hold its monetary policy meeting on Thursday.

GBP/USD is stable, trading near the 20-day Simple Moving Average (SMA) of 1.2550. When they got close to 1.2600, they pulled back. The UK employment report is due, and the unemployment rate is expected to stay at 4.2% for the three months ending in October. On Thursday, the Bank of England will announce its monetary policy decision.

The AUD/USD pair finished flat at 0.6565, close to the 20-day and 200-day Simple Moving Averages. The pair is moving sideways with no discernible bias. Michele Bullock, Governor of the Reserve Bank of Australia (RBA), will speak at an event. In addition, the Westpac Consumer Confidence survey and the National Australia Bank’s Business report are due.

Gold fell below $2,000 and even fell further, reaching a low of $1,980s before stabilizing. The yellow metal is still under pressure and is trading below the 20-day simple moving average. Oversold conditions are indicated by technical indicators. With the US CPI and FOMC meetings coming up, volatility is expected to remain high. Bitcoin continued its decline from multi-month highs, falling to around $40,000.

What to watch on Tuesday?

The Asian session will feature RBA Governor Michele Bullock’s speech, the Australian Westpac Consumer Confidence report, and wholesale inflation and trade balance figures from Japan.

Following that, the focus will shift to UK employment data and the US Consumer Price Index. The key event on Tuesday will be the release of US inflation figures, with the Consumer Price Index expected to rise 0.1% and the annual rate to slow from 3.2% to 3.1%.

The FOMC’s two-day meeting will centre on new macroeconomic projections and remarks from Federal Reserve Chair Jerome Powell.

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