• A combination of factors dragged USD/CAD to a three-week low on Wednesday.
• Crude oil shot back above the $72.00/barrel mark and underpinned the loonie.
• Retreating US bond yields weighed on the USD and contributed to the downtick.
• Investors now look forward to the BoC policy decision for a fresh trading impetus.

The USD/CAD pair reversed an early European session uptick and dropped to a near three-week low, around the 1.2625-20 region in the last hour.

The pair struggled to capitalize on its attempted recovery, instead met with a fresh supply near the 1.2665 area and turned lower for the third successive day on Wednesday. Crude oil prices reversed an intraday dip and climbed back above the $72.00/barrel mark easing concerns about the impact of the new coronavirus variant on the global fuel demand. This, in turn, underpinned the commodity-linked loonie and exerted some downward pressure on the USD/CAD pair.

On the other hand, the US dollar was pressured by retreating US Treasury bond yields and a generally positive risk tone. This was seen as another factor that contributed to the USD/CAD pair's modest intraday downtick. That said, a combination of factors acted as a tailwind for the greenback and should help limit the downside for the USD/CAD pair. This warrants some caution for aggressive bearish traders and before positioning for any further downfall.

Investors seem convinced that the Fed would tighten its monetary policy sooner rather than later to contain stubbornly high inflation. In fact, the money markets indicate a high possibility for an eventual liftoff in May 2022. Hence, the market focus will remain glued to Friday's release of the latest US consumer inflation figures. The CPI report will drive the USD demand in the near term and provide a fresh directional impetus to the USD/CAD pair.

Traders also seemed reluctant, rather preferred to wait on the sidelines ahead of the Bank of Canada monetary policy meeting. The outcome is scheduled to be announced later during the early North American session. This, along with oil price dynamics, will influence the Canadian dollar and produce some meaningful trading opportunities around the USD/CAD pair amid absent relevant market moving economic releases.

Technica levels to watch

Turkey’s President Recep Tayyip Erdogan said that the country “will bring inflation, exchange rate down through low-interest rates” while speaking in an interview with NTV.

Additional comments

Market reaction

USD/TRY spiked to daily highs of 13.7245 on these comments, as the Turkish lira loses 1.41% on the day.

• WTI price is looking to retest weekly tops above $72.
• Omicron optimism and China stimulus back the higher-yielding oil.
• WTI could rise towards $74 before the bear cross gets confirmed.

WTI (NYMEX futures) is trading with moderate gains on Wednesday, looking to extend the recent recovery rally amid easing fears over the negative effects of the new Omicron covid variant on global economic growth.

Further, a fall in the American Petroleum Institute’s (API) weekly crude stockpiles also underpins the sentiment around the black gold. However, the main driver remains the escalating geopolitical tensions between the US and Russia over the Ukraine invasion matter.

At the time of writing, the US oil is flirting with daily highs near $72.10, up 0.40% on the day.

Meanwhile, WTI’s daily technical setup shows that the price has the room to rise towards a powerful resistance zone around the $74 mark, where the bearish 21-Daily Moving Average (DMA) and horizontal 100-DMA converge.

However, if the 21-DMA crosses the 100-DMA for the downside on a daily closing basis, then that would confirm a bear cross.

The Relative Strength Index (RSI) edges higher but remains below the midline, suggesting the bearish risks still persist.

A rejection at a higher level could recall the sellers for a retest of the daily lows at $71.11, below which the 200-DMA support at $70.00 could be challenged.

Alternatively, immediate resistance is seen at Tuesday’s high of $72.81. The next relevant upside target for bulls is pegged at the $74 level.

 WTI: Daily chart

WTI: Additional levels to watch

• Gold price hits fresh weekly highs as the US dollar drops with Treasury yields.
• Omicron covid optimism and pre-US inflation anxiety downs the USD.
• Gold sellers eye $1,750 as Fed stays on tightening path.

The optimism around the less severe effects of the new Omicron covid variant continues to play out so far this week, downing the safe-haven US dollar. In lieu of this, gold price clinched fresh weekly highs, also benefiting from the weakness in the Treasury yields. Investors eagerly await Friday’s US inflation data for fresh trading impulse. Hotter US inflation is likely to seal in the Fed’s faster tapering, which could impede gold’s renewed upside.

Read: Gold Price Forecast: XAU/USD at a critical juncture, awaits US inflation for next big move

Gold Price: Key levels to watch

The Technical Confluences Detector shows that the gold price is facing strong offers at $1,792, the powerful supply zone comprising of the SMAs100 and 200 one-day and the Fibonacci 61.8% one-week.

A firm break above the latter is awaited to extend the recovery momentum towards the $1800 level – the pivot point one-day R2.

The next critical upside hurdle is seen around $1,805, where the Fibonacci 38.2% one-month aligns.

On the flip side, immediate support is envisioned at the Fibonacci 23.6% one-day of $1,785.

If the selling pressure intensifies, then sellers would target the intersection of the Fibonacci 38.2% one-day and SMA10 one-day at $1,782.

Gold bears will need to crack the fierce support at $1,779, the confluence of the Fibonacci 61.8% one-day and SMA5 one-day, to open up the further downside.

Further south, $1,772 will be the level to beat for gold sellers. That level is the convergence of the previous day’s low and the Fibonacci 23.6% one-week.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

European Central Bank (ECB) Vice President Luis de Guindos made some comments on the inflation outlook during his appearance on Wednesday.

Key quotes

“The current higher phase of inflation could last longer than earlier thought. “

“No evidence of second-round inflation effects.”

“Bottlenecks are likely to shift growth.”

Related reads

• ECB’s Kazaks sets high bar for Omicron-driven extra stimulus – Bloomberg
• EUR/USD Price Analysis: Rebound remains capped below 21-DMA

In order to ramp up emergency stimulus, the new Omicron covid variant must have a significant damaging impact on the euro area economy, European Central Bank (ECB) Governing Council member Martins Kazaks said in a Bloomberg interview on Wednesday.

Key quotes

“At the current moment, we don’t know how the omicron variant will develop.”

“Unless it spills over into significant and large negative revisions to the outlook for growth, I don’t see that March -- which the market has been expecting for some time and which we’ve been communicating in the past -- should be changed.”

“If in February we see that it’s painful then, of course, we can change our views and that’s the issue of flexibility.”

“In my view, it’s possible both to restart PEPP or increase the envelope if it turns out to be necessary.”

“To exactly what level will it land in 2023-24, of course, there’s lots of uncertainty.”

“With little evidence that soaring prices are triggering wage increases that would risk entrenching faster inflation, “my baseline remains that it slides to below 2%.”

Market reaction

EUR/USD shrugs off these comments, as it continues to trade in a familiar range below 1.1300. The spot is up 0.16% on the day.

• EUR/USD rises for the first time in three days but 21-DMA offers stiff resistance.
• Falling Treasury yields keep EUR bulls hopeful amid a quiet session.
• The EUR bulls need to defend the 1.1232 support on the daily sticks.

EUR/USD is attempting a bounce from weekly lows of 1.1227, although sellers continue to lurk at 1.1300 amid a lack of relevant economic data.

The main currency pair is hovering just shy of the 1.1300 mark, adding 0.23% on the day, as the risk-on flows driven US dollar weakness aids the rebound. Also, the renewed downside in the US Treasury yields adds to the dollar’s pullback, benefiting EUR/USD’s recovery.

Despite the uptick, EUR bulls remain cautious amid the divergent monetary policy outlook between the Fed and ECB, with Friday’s US inflation data likely to bolster the Fed’s tapering expectations.

From a short-term technical perspective, the spot is advancing but remains capped between the 21-Daily Moving Average (DMA) at 1.1315 on the upside.

Meanwhile, the downside remains cushioned by the rising trendline support on the daily sticks at 1.1232.

The 14-day Relative Strength Index (RSI) is trading flatlined below the 50.00 level, suggesting the risks remain skewed to the downside.

Therefore, daily closing below the abovementioned critical support will open floors for a retest of 1.1200.

The next stop for EUR bears is seen at the yearly lows of 1.1185.

EUR/USD: Daily chart

On the flip side, recapturing the 21-DMA is critical for unleashing the recovery towards the 1.1350 psychological level.

Further up, the 1.1400 round figure could be put to test.

EUR/USD: Additional levels to consider

• AUD/USD struggled to preserve/capitalize on its early move to a one-week high.
• Rising geopolitical tensions acted as a headwind for the perceived riskier aussie.
• Retreating US bond yields undermined the USD and could help limit the downside.

The AUD/USD pair surrendered its intraday gains to a one-week high and was last seen hovering near the lower end of its daily trading range, around the 0.7120-15 region.

The pair built on this week's strong recovery from the lowest level since November 2020 and gained some follow-through traction during the early part of the trading action on Wednesday. The uptick was supported by a modest US dollar weakness, though lacked follow-through buying and ran out of steam ahead of mid-0.7100s.

Relations between the US and Russia took a turn for the worse after US President Joe Biden threatened to impose economic and other measures on Russia if it invades Ukraine. This, in turn, kept a lid on the recent optimistic move in the financial markets and acted as a headwind for the perceived riskier Australian dollar.

Meanwhile, reviving safe-haven demand led to a fresh leg down in the US Treasury bond yields, which undermined the US dollar and helped limit the downside for the AUD/USD pair. That said, the prospects for a faster policy tightening by the Fed support prospects for the emergence of some USD dip-buying and warrant caution for bulls.

The markets have been pricing in the possibility for an eventual Fed liftoff in May 2022 amid worries about the persistent rise in inflationary pressures. Hence, the focus shifts to the release of the US CPI report on Friday, which will influence the Fed's policy outlook and provide a fresh directional impetus to the AUD/USD pair.

In the meantime, the US bond yields will drive the USD demand and produce some short-term trading opportunities around the AUD/USD pair. Apart from this, traders will further take cues from geopolitical developments and the broader market risk sentiment amid absent relevant market moving economic releases from the US.

Technical levels to watch

• A combination of factors prompted some selling around USD/JPY on Wednesday.
• Reviving safe-haven demand underpinned the JPY and exerted some pressure.
• Retreating US bond yields weighed on the USD and contributed to the selling bias.
• Hawkish Fed expectations should help limit the USD fall and lend some support.

The USD/JPY pair remained on the defensive through the early European session and was last seen trading with modest intraday losses, just below mid-113.00s.

The pair witnessed some selling on Wednesday and snapped two consecutive days of the winning streak that pushed spot prices to a one-week high, around the 113.75-80 region touched on Tuesday. Rising geopolitical tensions kept a lid on the recent optimistic move in the financial markets and benefitted the safe-haven Japanese yen.

The US recently announced that it would boycott the Winter Olympics in Beijing to protest China's alleged violations of human rights and actions against Muslims in Uyghur. Similarly, relations between the US and Russia took a turn for the worse after US President Joe Biden threatened to impose economic and other measures on Russia if it invades Ukraine.

Bearish traders further took cues from retreating US Treasury bond yields, which undermined the US dollar. The USD downside, however, remained cushioned, at least for the time being, amid the prospects for a faster policy tightening by the Fed. This, in turn, warrants some caution positioning for any meaningful decline for the USD/JPY pair.

Investors seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Hence, the market focus now shifts to the release of the US CPI report on Friday, which will influence the near-term USD price dynamics and provide a fresh directional impetus to the USD/JPY pair.

In the meantime, traders will take cues from the broader market risk sentiment to grab some short-term opportunities. Apart from this, the US bond yields will drive the USD demand and further provide some impetus to the USD/JPY pair amid absent relevant market moving economic releases.

Technical levels to watch

• Palladium consolidates recent gains after four-day uptrend, refreshes intraday low at the latest.
• 10-DMA, bullish MACD signals challenge sellers, five-month-old resistance line adds to the upside filters.

Palladium (XPD/USD) stays pressured around an intraday low of $1,851.70, down 0.37% on a day as European traders brace for Wednesday’s bell.

In doing so, the bullish prices print daily losses for the first time in three days while stepping back from a one-week high. The pullback moves could also be linked to the quote’s failures to cross the 20-DMA level.

Even so, XPD/USD trading beyond 10-DMA and bullish MACD signals keep buyers hopeful of overcoming the immediate hurdle, namely the 20-DMA level of $1,871.

Following that, the $1,900 threshold and late October’s swing low surrounding $1,955 may tet the bulls before directing them to the $2,000 psychological magnet.

During the palladium’s run-up beyond the $2,000 mark, a multi-day-old resistance line near $2,072 and a two-month-old horizontal area surrounding $2,175 will be crucial to watch.

Alternatively, a downside break of 10-DMA level of $1,800 will re-open doors for the XPD/USD sellers to aim for the yearly low of around $1,695.

In a case where palladium bears dominate past $1,695, a March 2020 low of $1,494 should gain the market’s attention.

Palladium: Daily chart

Trend: Further recovery expected

FX option expiries for December 8 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.1305 345m
• 1.1350 423m

- USD/JPY: USD amounts                     

• 112.30 477m
• 113.00 723m
• 113.80 524m
• 114.00 535m

- AUD/USD: AUD amounts

• 0.6900 742m

- USD/CAD: USD amounts       

• 1.2670 463m

• USD/ZAR seesaws around weekly bottom, pauses two-day declines.
• South African GDP snapped four-quarter advances with -1.5% figures for Q3 2021.
• Risk-on mood, softer yields and receding fears of Omicron keep sellers hopeful.

USD/ZAR takes rounds to $15.85-80, down 0.05% while challenging the previous two-day downtrend during early Wednesday morning in Europe. The South African currency (ZAR) pair struggles to cheer the broad US dollar weakness as the national GDP flashed negative surprise the previous day.

That said, South African GDP for Q3 2021 dropped for the first time in four quarters, down -1.5% QoQ versus -1.2% expected and +1.2% prior, as bearing the double whammy of coronavirus and political trauma in the nation. “South Africa's economy contracted 1.5% in the third quarter compared with the previous three months, as some of the worst unrest of the post-apartheid era in July hurt sectors like agriculture, manufacturing and trade,” said Reuters.

On the other hand, diplomats from Cape Town recently rejected the proposal to change the national constitution to explicitly allow the expropriation of land with no compensation. “Redressing them has been a flagship promise of the ruling African National Congress (ANC) but little progress has been made on it nearly three decades since the end of apartheid,” per Reuters.

Alternatively, receding fears of the South African covid variant, dubbed as Omicron, joins hopes of more stimulus from China and Japan to favor risk-on mood and weigh on the US dollar. Though, geopolitical and financial headlines concerning Russia and China keep traders cautious amid a lackluster day.

That said, the US 10-year Treasury yields drop 1.5 basis points (bps) to 1.465% while the stock futures remain mildly bid at the latest.

Looking forward, market sentiment remains as the key catalyst for USD/ZAR traders ahead of Friday’s US Consumer Price Index (CPI).

Technical analysis

While a clear downside below 10-DMA and weekly resistance line, around $16.00, direct USD/ZAR to the south, an ascending trend line from October 20, close to $15.65 at the latest, becomes key for the pair sellers to watch before taking fresh entries.

• GBP/USD gained some positive traction on Wednesday amid a modest USD weakness.
• The prevalent risk-on mood, retreating US bond yields weighed on the safe-haven USD.
• Hawkish Fed expectations should help limit the USD fall and cap the upside for the pair.

The GBP/USD pair traded with a mild positive bias heading into the European session and was last seen hovering around mid-1.3200s, up only 0.10% for the day.

Having found some support ahead of the 1.3200 mark on Tuesday, the GBP/USD pair managed to regain some positive traction on Tuesday and was supported by a modest US dollar weakness. Against the backdrop of the upbeat market mood, retreating US Treasury bond yields acted as a headwind for the safe-haven greenback and extended some support to the major.

The global risk sentiment remained well supported by easing concerns about the negative impact of the new coronavirus variant on the economic recovery. This comes on the back of reports, indicating that indicated that Omicron patients had only shown mild symptoms. This led to a strong rally in the global equity markets over the past two trading sessions.

That said, rising geopolitical tensions kept a lid on the recent optimistic moves, which along with the prospects for a faster policy tightening by the Fed should help limit the USD losses. Apart from this, the UK-EU impasse over the Northern Ireland Protocol held back traders from placing aggressive bullish bets and capped gains for the GBP/USD pair.

Investors seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Hence, the market focus will remain glued to the release of the latest US CPI report on Friday, which will influence the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair.

In the meantime, the broader market risk sentiment and the USD price dynamics would play a key role in driving the USD and provide some trading opportunities around the GBP/USD pair. In the absence of any relevant market-moving economic releases, it will be prudent to wait for a strong follow-through buying before positioning for any further gains.

Technical levels to watch

Here is what you need to know on Wednesday, December 8:

Increasing scientific evidence that the new Omicron covid variant is less aggressive and, therefore, could pose limited risk to the global economic recovery continues to underpin the market mood. The Asian stocks tracked the rally in Wall Street overnight while the S&P 500 futures advanced 0.40% so far.

South African hospitals continue to hint that Omicron has milder symptoms. Additionally, a South African Study showed that the Pfizer vaccine provides partial protection against the new strain. The scientist noted, “study shows a 40-fold reduction in neutralization capacity of Pfizer vaccines vs. Omicron.

China’s policy support to boost economic growth and help the country’s distressed property sector also keep the upbeat tone intact for the third day in a row.

The risk-on flows dulled the US dollar’s appeal as a safe haven, fuelling a relief rally across the fx board. The US Treasury yields softened amid pre-inflation data anxiety, adding to the weight on the buck.

Against this backdrop, EUR/USD outperformed and almost tested 1.1300, as the rebound extends despite the mixed German ZEW data and ECB-speak.

GBP/USD is consolidating its bounce around 1.3250, as bulls remain cautious amid rising Omicron cases in the UK. The Kingdom reported 101 new cases of the Omicron variant, taking the total cases to 437, as of Tuesday. Additionally, the Brexit stalemate will likely cap the further upside in cable.

AUD/USD is holding onto the latest upside but remains capped below 0.7150 despite the yuan hitting three-year highs against the greenback.

USD/JPY is battling 113.50 amid softer yields and the dollar. USD/CAD is posting small gains around 1.2650 amid a pullback in WTI prices, ahead of the key Bank of Canada (BOC) decision. The BOC is expected to keep the key rate unchanged at 0.25% amid rising inflation.

The US oil fails to take advantage of the US-Russia geological tensions, especially after President Joe Biden warned his Russian counterpart of ‘strong measures’ amid Ukraine invasion fears.

Gold is testing the critical $1,792 barrier, at fresh weekly highs.  

Bitcoin is battling $50,000, as bulls contemplate the next move amid news that Google disrupted a massive botnet used by hackers to mine crypto using the Bitcoin blockchain.

• EUR/GBP pokes intraday high, snaps two-day downtrend.
• Steady RSI line favor recovery moves towards 10-week-old resistance line.
• Key Fibonacci retracement levels, 200-DMA act as additional resistances.

EUR/GBP prints the biggest daily gains of the week, up 0.14% intraday around 0.8525 heading into Wednesday’s London open.

The cross-currency pair dropped to a one-week low the previous day before bouncing off 50-DMA and 38.2% Fibonacci retracement (Fibo.) of September-November declines.

Although the firmer RSI line favors the latest recovery, a clear break of the 50% Fibo. level near 0.8520 becomes necessary for the bulls to keep reins.

Following that, a descending trend line from late October and 61.8% Fibonacci retracement level, respectively around 0.8545 and 0.8555, will challenge the EUR/GBP buyers.

It should be noted, however, that the pair’s run-up beyond 0.8555 will need validation from the 200-DMA level of 0.8560.

Alternatively, a daily closing below the 50-DMA level around 0.8480 will highlight multiple supports around 0.8460 and 0.8420 for EUR/GBP sellers.

However, the pair’s weakness past-0.8420 will be challenged by November’s low of 0.8380, which is also the lowest level since early 2020.

EUR/GBP: Daily chart

Trend: Further recovery expected

• Gold gained traction for the second successive day and shot to a one-week high on Wednesday.
• Retreating US bond yields weighed on the USD and drove flows towards the non-yielding metal.
• Rising geopolitical tensions further benefitted the safe-haven metal and contributed to the uptick.
• The market focus now shifts to the release of the latest US consumer inflation figures on Friday.

Gold edged higher for the second successive day and climbed to a one-week high, around the $1,790 region during the early part of the trading action on Tuesday. Retreating US Treasury bond yields undermined the US dollar and turned out to be a key factor that benefitted the dollar-denominated commodity. Apart from this, rising geopolitical tensions further underpinned the safe-haven precious metal and contributed to the uptick.

The US recently announced that it would boycott the Winter Olympics in Beijing in protest of China's alleged violations of human rights and actions against Muslims in Uyghur. Similarly, relations between the US and Russia took a turn for the worse after US President Joe Biden threatened to impose strong economic and other measures on Russia if it invades Ukraine. This kept a lid on the recent optimistic moves in the financial markets.

Investors abandoned all concerns about the impact of the new coronavirus variant on economic recovery after reports indicated that Omicron patients had only shown mild symptoms. This was evident from a strong two-day rally in the equity markets, which tends to drive flows away from traditional safe-haven assets. Nevertheless, gold, so far, has managed to hold in the positive territory, with bulls awaiting a sustained move beyond the 200-day SMA.

The focus now shifts to the latest US consumer inflation figures, due for release on Friday. The data would influence the Fed's decision to taper its stimulus at a faster pace and set the stage for an eventual interest rate hike in 2022. It is worth mentioning that the money markets have been pricing in the possibility of liftoff in May. Hence, the US CPI report will play a key role in influencing the near-term trajectory for the non-yielding gold.

In the meantime, developments surrounding the coronavirus saga would be looked upon for some impetus. Apart from this, traders will take cues from the US bond yields, which will drive the USD demand and produce short-term opportunities around gold amid absent relevant market-moving economic releases from the US.

Technical outlook

From a technical perspective, bulls might wait for a sustained move beyond a technically significant 200-day SMA before positioning for any further appreciating move. The mentioned barrier coincides with 100-day SMA. A convincing breakthrough the mentioned confluence hurdle should push spot prices beyond the $1,800 mark, towards the next relevant resistance near the $1,810-15 supply zone. The momentum could further get extended towards the $1,832-34 strong horizontal barrier, which should act as a key pivotal point for short-term traders.

On the flip side, the $1,783 area now seems to protect the immediate downside ahead of the overnight swing low, around the $1,772 region. This is followed by support near the $1,762 zone (monthly low), below which the XAU/USD could accelerate the fall towards the $1,752-51 support.

Gold daily chart

Key levels to watch

The Bank of Japan (BOJ) Deputy Governor Masayoshi Amamiya is back on the wires, via Reuters, commenting on the central bank’s pandemic emergency stimulus and the new Omicron covid variant.

Key quotes

Market reaction

USD/JPY was last seen trading at 113.45, down 0.07% so far.

• USD/IDR prints three-day downtrend, remains pressured around intraday low.
• Indonesia Consumer Confidence jumps to highest since early 2020.
• Softer yields, risk-on mood also exert downside pressure.

USD/IDR stays depressed near $14,330 while declining for the third consecutive day, down 0.14% intraday, ahead of Wednesday’s European session.

Although broad US dollar weakness could be linked to the Indonesian rupiah (IDR) pair’s declines, firmer consumer sentiment data from Indonesia also favored the pair sellers of late.

That said, the nation’s Consumer Confidence Index jumped to 118.5 during November, versus October 113.4, to print the highest level since January 2020. The sentiment gauge portrays “improving perception of economic conditions amid a rise in incomes and job opportunities, the central bank said in a report on Wednesday,” per Reuters.

On the other hand, receding fears of the South African coronavirus variant, dubbed as Omicron, join Japan and China’s readiness to safeguard respective economies to favor risk appetite. It’s worth noting that geopolitical tensions between the Washington and Kremlin, as well as the US-China tussles, join fears of Chinese real-estate companies’ default to probe the optimists and challenge USD/IDR bears.

Against this backdrop, the US 10-year Treasury yields drop 1.7 basis points (bps) to 1.463% at the latest while S&P 500 Futures and Asia-Pacific stocks remain positive by the press time.

Moving on, risk catalysts are the key for intraday traders of the USD/IDR pair while inflation data from China and the US, scheduled for release on Thursday and Friday respectively, will be important to watch afterward.

Technical analysis

A clear downside break of the 200-DMA, around $14,365 at the latest, keeps USD/IDR sellers hopeful to aim for the late November’s swing low surrounding $14,170.

• USD/TRY consolidates recent losses inside bearish chart pattern.
• Receding bullish bias of MACD, downside break of 5-DMA suggest pullback.
• 10-DMA adds strength to $13.25 support level, weekly resistance line offers extra hurdle to the north.

USD/TRY hovers around $13.55, up 0.55% intraday during early Wednesday morning in Europe.

The Turkish lira (TRY) pair dropped the most in a week the previous day while breaking the 5-DMA support. That said, the quote remains inside a two-week-old rising wedge bearish formation.

Also keeping the pair sellers hopeful is the receding bullish bias of the MACD and overbought RSI conditions.

Even so, the 10-DMA toughens the $13.25 support and challenge short-term sellers, a break of which will confirm the bearish chart pattern suggesting a slump towards sub $11.00 region.

During the fall, a November 24 low of $11.57 may offer an intermediate halt whereas October’s peak surrounding $9.40 will lure the USD/TRY bears afterward.

On the contrary, a clear upside break of 5-DMA, around $13.65 at the latest, will push the pair towards a one-week-old descending trend line near $13.90.

In a case where the USD/TRY rises beyond $13.90, the $14.00 round figure and the upper line of the stated wedge close to $14.50, will be in focus.

USD/TRY: Daily chart

Trend: Pullback expected

• EUR/USD rises the most in a week, off late November bottom.
• Yields weigh amid geopolitical, financial chatters but Omicron, stimulus keep markets hopeful.
• ECB seems divided over easy money after mixed data, absence of Fedspeak adds to the bullish bias.
• US inflation becomes the key, risk catalysts can entertain bulls meanwhile.

EUR/USD grinds higher around the intraday top of 1.1293, up 0.20% on a day, heading into Wednesday’s European session. The major currency pair benefits from the US dollar pullback, underpinned by the softer Treasury yields amid a lack of major catalysts.

The US Dollar Index (DXY) snaps a five-day uptrend, down 0.14% intraday around 96.17 by the press time. That said, the US 10-year Treasury yields drop 1.7 basis points (bps) to 1.463% at the latest while retreating from a weekly high.

An absence of Fed rate hike signals, due to the generally observed silent period before the next week’s Federal Open Market Committee (FOMC) and Friday’s US Consumer Price Index (CPI) seems to weigh on the US Treasury yields of late, which in turn weigh on the US dollar. Also exerting downside pressure on the pair is the market’s risk-on mood that reduces the greenback’s safe-haven demand.

The receding fears of the South African coronavirus variant, dubbed as Omicron, join policymakers’ readiness to safeguard respective economies of China and Japan to favor risk appetite. On the other hand, geopolitical tensions between the Washington and Kremlin, as well as the US-China tussles, join fears of Chinese real-estate companies’ default to probe the optimists and challenge EUR/USD buyers.

Additionally supporting the EUR/USD bulls could be the European Central Bank (ECB) policymakers’ indecision over the next moves. ECB governing council member Madis Muller said on Tuesday that it is not obvious that the bank should be adding to its Asset Purchase Programme purchase volumes beyond March in light of high inflation and the uncertain outlook. On the same line were comments from Slovak central bank Governor and European Central Bank governing council member Peter Kazimir  who said, per Reuters, “We should be wary of premature tightening.”

It’s worth noting that the policymaker from Germany and recently mixed data challenge the ECB doves hence raising doubts on the EUR/USD run-up.

Moving on, a lack of major data/events highlights risk catalysts as the key for the near-term trade direction. Important among them are headlines from China and Russia, as well as concerning Omicron.

Technical analysis

EUR/USD rebound needs validation from the 10-DMA level surrounding the 1.1300 to aim for a five-week-old resistance line near 1.1380. In absence of this, the pair remains directed towards the 1.1230 and the yearly low of 1.1186.

• USD/INR refreshes intraday high, pokes weekly top following RBI decision.
• RBI matches market forecasts of no change in policy rates, Governor Das sounds optimistic.
• Market sentiment remains firm amid receding fears from Omicron, hopes of more stimulus.
• Headlines from China, Russia test bulls but softer yields, Wall Street gains underpin optimism.

USD/INR rakes the bids to renew daily high around 75.46 following the Reserve Bank of India (RBI) Interest Rate Decision on early Wednesday.

The Indian central bank kept the benchmark interest rate (Repo) and Reverse Repo rate unchanged at 4.0% and 3.35% respectively, matching market consensus. It’s worth noting that some analysts on the street cited mild chances of a hike in the Reverse Repo rate ahead of the event. Additionally, the RBI also kept Marginal Standing Facility (MSF) and Bank Rate unchanged.

Following the monetary policy decision, RBI Governor Shaktikanta Das said, “Prospects of economic activity steadily improving,” per Reuters. “Stance accommodative as long as necessary to revive growth on a durable basis,” adds RBI’s Das.

Other than the RBI verdict, risk-on mood and downbeat US Treasury yields were trying the challenge the latest run-up in the USD/INR prices.

An absence of the Fed rate hike chatters, mainly due to the silent period before the next week’s Federal Open Market Committee (FOMC) and Friday’s US Consumer Price Index (CPI). On the other hand, receding fears of the South African coronavirus variant, dubbed as Omicron, join policymakers’ readiness to safeguard respective economies of China and Japan to favor risk appetite.

Alternatively, geopolitical tensions between the Washington and Kremlin, as well as the US-China tussles, join fears of Chinese real-estate companies’ default to probe the optimists and limit the USD/INR downside.

Amid these plays, the US 10-year Treasury yields drop 1.7 basis points (bps) to 1.463% at the latest while retreating from a weekly high whereas the S&P 500 Futures rise 0.40% intraday by the press time. It’s worth noting that Wall Street benchmarks rallied the previous day with the S&P 500 marking the best run-up since March.

Moving on, a lack of major data/events may challenge the USD/INR pair traders, highlighting the risk catalysts to be watched for fresh impulse. However, Thursday’s inflation data from China, followed by the US CPI, will be crucial to follow ahead of the next week’s Fed meeting.

Technical analysis

Although 75.50 guards the immediate upside of the USD/INR prices, comprising mid-October tops, bullish bias remains intact until the quote drops back below a seven-week-old horizontal area near 75.20.

• NZD/USD extends the previous day’s rebound to refresh one-week high.
• Clear break of three-week-old descending trend line, bullish MACD and firmer RSI favor bulls.
• Weekly support line, October 2020 high will challenge bears.

NZD/USD pierces 50-SMA to refresh weekly top around 0.6800 during early Wednesday.

The kiwi pair’s latest run-up could be linked to the sustained break of a descending trend line from November 18. Also favoring the pair buyers are the bullish MACD signals and firmer RSI line, not overbought.

It should be noted, however, that a clear run-up past 50-SMA level of 0.6805 becomes necessary for the NZD/USD prices to aim for a 10-week-old horizontal area surrounding 0.6860-65, a break of which will recall the 0.6900 threshold to the charts.

Should NZD/USD fades upside momentum, the previous resistance line near 0.6785 will precede the recent lows near 0.6735 and the 0.6700 round figure to lure the short-term sellers.

Additionally, the quote’s bearish impulsive past-0.6700, it becomes vulnerable to slump towards the November 2020 lows near 0.6590 will be in focus.

To sum up, NZD/USD rebound need validation before convincing the bulls.

NZD/USD: Four-hour chart

Trend: Further upside expected

• Asian equities remain amid optimism surrounding Omicron, stimulus.
• Sino-American tussles, Russia-Ukraine tension weigh on yields, Evergrande, Kaisa also challenge optimists.
• Japan’s Q3 GDP eases, US pushes for faster debt ceiling extension.
• S&P 500 rose the most since March, yields refreshed weekly top before the latest pullback.

Asian shares print gains during early Wednesday amid the market’s hopes to overcome the South African covid variant with the available resources. Adding to the firmer sentiment could be comments from Japan and China showing readiness to safeguard financial markets from coronavirus and default risks.

That said, the MSCI’s index of Asia-Pacific shares outside Japan rises over 0.45% intraday while Japan’s Nikkei 225 gains 1.5% heading into the European session.

As Japanese policymakers battle over multi-billion dollars of the aid package, the easing of the Q3 GDP figures adds strength to the government pushing for easy money. The same could be said for China as Evergrande and Kaisa defaults loom. As a result, stocks in China and Pacific markets are mostly up amid stimulus hopes.

South Korea’s KOSPI and Indonesia’s IDX Composite tracks China but fears of Sino-American tussles, following the major boycott of Beijing Olympics 2022, probe the bulls. Also challenging the market sentiment is the US-Russia tussles over Ukraine as US President Joe Biden warns Russia of sanctions and helps Ukraine with military power if Kremlin invades Kyiv.

Furthermore, India’s BSE Sensex rises 1.30% at the latest as markets brace for the Reserve Bank of India’s (RBI) inaction.

Elsewhere, the US 10-year Treasury yields decline two basis points (bps) to 1.47% at the latest while retreating from a weekly high whereas the S&P 500 Futures print rise 0.20% intraday at the latest. It’s worth noting that Wall Street benchmarks rallied the previous day with the S&P 500 marking the best run-up since March.

Considering a lack of major data/events, Asia-Pacific markets will Thursday’s China inflation data and Friday’s US Consumer Price Index (CPI) for clear direction. Meanwhile, geopolitical headlines and company-specific news from China, coupled with the Omicron updates, will entertain the traders.

Read: Yields decline, S&P 500 Futures print mild gains on mixed concerns

• USD/CAD runs hard into support territory on the weekly and daily time frames. 
• Bulls could be looking for an entry should the price start to correct and eye 1.2750. 

USD/CAD has dropped this week all the way to the 38.2% Fibonacci retracement of the prior bullish impulse. Moving into the daily time frame, the area has been a significant zone for where transactions took place and it could therefore be expected to act as a support. The following illustrates the price action and confluences of technical influences that could lead to a correction towards 1.2750 in the coming days. 

USD/CAD weekly chart

The daily chart illustrates the support more clearly and a correction from here could target a 50% mean reversion near 1.2740 in the coming days:

USD/CAD daily chart

The expected resistance zone also has the 10-EMA in confluence which would be expected to reinforce that area on initial tests. 

• AUD/USD prints three-day rebound from yearly bottom, rises one-week high at the latest.
• Clear break of 10-DMA, descending trend channel favor buyers.
• RSI, MACD conditions add to the bullish bias targeting 10-week-old horizontal resistance.
• Lows marked during November 2020, December 2021 offer strong support.

AUD/USD takes the bids to refresh weekly high around 0.7145 during early Wednesday. In doing so, the Aussie pair justifies the upside break of the key 0.7110 resistance confluence, now support, amid firmer sentiment.

Given the receding bearish bias of the MACD and RSI’s rebound from the oversold area, the quote is likely to extend recovery from a horizontal area including lows marked during November 2020 and so far during December 2021, near 0.6990.

Hence, the AUD/USD bulls are set to battle the 0.7170 resistance that encompasses September lows and last week’s tops. However, the quote’s further upside will need validation from bottoms marked during late August and September, close to 0.7225-30.

Meanwhile, pullback moves will aim for the 0.7000 threshold but the rock-solid support near 0.6990 will challenge the AUD/USD bears afterward.

In a case where the pair drops past-0.6990, it becomes vulnerable to slump towards June 2020 swing lows of 0.6775. During the fall, the 0.6900 and the 0.6800 thresholds may act as buffers.

AUD/USD: Daily chart

Trend: Further upside expected

• GBP/USD bulls are in play and testing the resistance in the 1.3250s.
• The US dollar is on the back foot as risk appetite picks up again. 

At the time of writing, GBP/USD is printing back in the green at 1.32537 after climbing from a low of 1.3231 to a high of 1.3254 in Asia so far. The US dollar is sliding and trades down some 0.11% as measured against six major rival currencies in the DXY index. 

The Benchmark 10-year and 30-year US Treasury yields have pulled back from their one-week highs hit on Tuesday and are sliding further in Asia which is pressuring the greenback. Most other asset classes are in the green with Japanese shares rebounding as investors stay hopeful that the Omicron coronavirus variant may be less disruptive for the global economy than initially feared. 

South Africa was the first country to detect the Omicron variant, since then it has dealt with a massive surge in coronavirus cases. But in the last few days, the trend gave the impression that the situation was improving. For many, this has been highly encouraging. However, levels in testing are not constant so the data is hard to ratify. Nevertheless, the signs, so far, are that the variant is not any more severe than other variants of covid-19 and for now, markets are cheering that. 

BoE eyed

Meanwhile, traders are looking to the Bank of England that is now expected to hold off again next week on becoming the world's first big central bank to raise interest rates from their pandemic lows. On Tuesday, investors were pricing in a roughly 50% chance of the BoE raising Bank Rate to 0.25% on Dec. 16 This lower from around 75% last week but higher than just a one-on-three chance immediately after the speech by MPC's  Michael Saunders on Friday.

Saunders, one of two members of the nine-strong Monetary Policy Committee who voted to raise the Bank Rate to 0.25% in November, said on Dec. 3 there "could be particular advantages in waiting to see more evidence" of Omicron's impact. 

Key data on Dec 10

Looking ahead for the week, the domestic date on Dec 10 monthly will be the Gross Domestic Product report for October. ''Manufacturing likely pulled down on growth with a relatively sharp fall, driven in part by a decline in motor vehicle production, but we see upside risks elsewhere (including for the Index of Services), as consumers pulled forward demand over fears of end-of-year shortages, '' analysts at TD Securities said. ''This would leave GDP growth roughly on track for the BoE's recent forecast of 1.0% QoQ.

On the same day, the US Consumer Price Index (CPI) report is due and economists in a Reuters poll forecast November CPI at 0.7%.

• USD/CNH takes offers to refresh multiday low, down for second consecutive day.
• RSI, Momentum hints at further weakness before the bounce.
• Channel’s support, yearly bottom act as the key levels for bears to watch, 20-DMA guards immediate upside.

USD/CNH stands on the slippery ground near $6.3590, down 0.10% intraday as the quote drops to the fresh low since November 16 during early Wednesday.

In doing so, the Chinese offshore yuan (CNH) remains on the back foot inside a downward sloping trend channel established since October 19.

Given the descending RSI and Momentum line, not oversold, USD/CNH has some room to the south before hitting the likely reversal points.

Among them is the support line of the stated channel, around $6.3545, followed by the yearly low of $6.3524.

In a case where USD/CNH bears dominate below $6.3524, the bottom of the year 2018 near $6.2355 will be in focus.

Alternatively, 20-DMA level of $6.3815 guards immediate upside ahead of the channel’s upper line, close to $6.3970.

Should the USD/CNH breaks $6.3970, the $6.4000 threshold will challenge the bulls ahead of directing them to the descending resistance line from April, near $6.4620.

USD/CNH: Daily chart

Trend: Further weakness expected

• USD/CHF is losing grip of the mid point of the 0.92 area. 
• USD is on the backfoot, but markets are keeping an eye on the SNB.
• Markets will be looking to the US JOLTS and then Consumer Price Index as another potential catalyst. 

USD/CHF is a touch lower in Asia, trading down 0.1% at the time of writing after travelling between a low of 0.9237 and a high of 0.9250 so far on the day. The is scope for further downside to test the 0.9220 support area with the US dollar under some pressure ahead of key US data later in the week. 

Meanwhile, the broader theme is risk-on with investors cheering comments from the weekend that cases in South Africa, where the Omicron variant was expected to have originated, showed milder symptoms. The top US infectious disease official, Anthony Fauci, said "it does not look like there's a great degree of severity" so far. This has been supporting risk appetite which led to an unwind in the Swiss franc at the start of the week. The US dollar caught a bid as well which propelled USD/CHF to 0.9275. 

However, the heat in the dollar has cooled in recent trade and it is treading water in the middle of its range over the past 2-1/2 weeks near 96.20. as measured by six currencies in the dollar index, DXY. There is scope for lower levels, however, as the euro, the component of the index with the largest share, is on a tear higher. EUR/USD has rallied from a New York session low of 1.1227 to a high of 1.1283 in Asia. 

Eyes on SNB

Meanwhile, the Swiss National Bank (SNB) is following the Swiss franc's exchange rate "very closely" to monitor its impact on the economy. Markets are hesitant to chase the strength in the swiss franc due to the prospects of the central bank intervening.  Governing board member Andrea Maechler told recently stated that the SNB remains ready to intervene when necessary,

"At the SNB, we're always ready to intervene in foreign exchange markets if needed," Maechler said during the interview with RTS' TV programme Forum. "We don't target a specific exchange rate, neither a specific level nor a specific rate versus the euro or the dollar, but we follow it very closely to see the impact on the economy."

The Swiss franc hit its highest level against the euro six years earlier this week, albeit without signs of the currency interventions the SNB has often undertaken at such moments in the past. Maechler said it was difficult for the economy to deal with sudden changes in the exchange rate, while gradual adjustments were easier to handle. "An exchange rate is a value versus a foreign currency so it also depends on the inflation we have here in Switzerland versus the inflation abroad," she said.

"Inflation signals that the economy is on the path towards recovery. From that point of view, we see it with great optimism," she said. "The question is how fast it goes up and currently we see a certain inflationary pressure. The question is whether this is temporary or the beginning of a big upwards movement."

It was not the central bank's role to react to "each and every shock", she added. She explained it is there to maintain inflation within the SNB's 0% to 2% target range over a mid-term horizon of two to three years.

Looking ahead for the week, the JOLTS report on US job openings is due later Wednesday and this should provide further evidence of a tightening labour market, potentially adding fodder for bets on earlier Fed tightening, which could boost the dollar. Money markets are currently fully priced for a quarter-point rate increase by June. On December 10, markets will be looking to the US Consumer Price Index as another potential catalyst. 

''We expect inflation to slow significantly as fiscal stimulus fades and supply constraints ease, but we don't expect the data to be validating in the near term'', analysts at TD Securities said. ''The CPI likely surged in Nov, with a drop in oil coming too late to avert another large gain in gasoline and core prices boosted by rapidly rising used vehicle prices and post-Delta strengthening in airfares and lodging.''

• US 10-year Treasury yields snap two-day uptrend to ease from weekly top.
• S&P 500 Futures track Wall Street benchmark that jumped the most since March.
• Geopolitical news challenges Omicron-linked optimism, financial market fears also test optimists.
• Light calendar, market’s wait for US CPI can trouble momentum traders.

Risk appetite sours during early Wednesday as geopolitical risks emanating from China and Russia weigh on the previous optimism amid a light calendar day.

To portray the mood, the US 10-year Treasury yields decline two basis points (bps) to 1.47% at the latest while retreating from a weekly high. On the other hand, the S&P 500 Futures print rise 0.20% intraday and the stocks in Asia-Pacific are also trading mixed at the latest.

Among the key-risk headlines were those conveying the latest jitters between the US and Russia, as well as Sino-American tussles. Adding to the market’s fears were chatters over the reliability of the Chinese financial markets considering the heavyweights’ looming debt payment.

Starting with the Washington-Kremlin tussle, President Joe Biden warns Russia of sanctions and helps Ukraine with military power if Kremlin invades Kyiv. “The Biden administration is in ‘intensive consultations’ with the new German government over its response if Russia invades Ukraine and believes Germany would be ready to take significant action if Russia launches an attack, a senior U.S. State Department official said on Tuesday,” said Reuters.

Moving on, the American boycott of the 2022 Beijing Olympics doesn’t bode well with China as the dragon nation hints at consequences due to the same. Additionally, global financial markets turn cautious as Evergrande and Kaisa are approaching bond payment deadlines after barely paying the interests.

On the contrary, Japan’s optimism for more stimulus and Beijing’s readiness to safeguard the financial markets join the receding fears of the South African coronavirus variant, dubbed as Omicron, to favor the market sentiment.

That said, a cautious mood may challenge optimists ahead of Friday’s US Consumer Price Index (CPI), which in turn highlights risk catalysts as the key factor to watch clear direction.

Read: Forex Today: Optimism leads, but would it last?

• Gold prices grind higher around weekly top, eyes to snap three-week downtrend.
• DXY pullback stops sellers even as market sentiment dwindles of late.
• Yields step back, stock futures print mild gains amid fresh challenges to risk appetite ahead of the key US CPI.
• Gold Price Forecast: Consolidative phase continues, 1,758.80 still at sight

Gold (XAU/USD) picks up bids around $1,787 during early Wednesday, after refreshing the weekly high the previous day.

The yellow metal previously cheered the risk-on mood but the latest challenges to sentiment confront US Dollar Index (DXY) pullback to test the gold traders. That said, the yellow metal remains on the way to snap a three-week downtrend while keeping the previous week’s bounce off the monthly bottom.

DXY drops 0.08%, the first daily loss in six days while tracking the softer US bond coupons. The US 10-year Treasury yields decline two basis points (bps) to 1.47% at the latest while retreating from a weekly high. However, the S&P 500 Futures print mild gains and the stocks in Asia-Pacific are also trading mixed as traders jostle with contrasting news.

The receding fears of the South African coronavirus variant, dubbed as Omicron, joined policymakers’ readiness to safeguard respective economies of China and Japan to favor risk appetite previously. However, geopolitical tensions between the Washington and Kremlin, as well as the US-China tussles, joins fears of Chinese real-estate companies’ default to recently weighing on risk appetite.

That said, the US marks its dissent over the Russia-Ukraine tension by warning the Kremlin of sanctions, in addition to backing Ukraine with military power, if the two countries indulge in a war. “The Biden administration is in ‘intensive consultations’ with the new German government over its response if Russia invades Ukraine and believes Germany would be ready to take significant action if Russia launches an attack, a senior U.S. State Department official said on Tuesday,” said Reuters.

On a different page, China hints at consequences for the US, per local media, after Washington boycotts the 2022 Beijing Olympics. It’s worth noting that the reports of partial payment to Evergrande bondholders and looming payment for Kaisa raise fears in the Chinese markets, challenging global sentiment as well.

While challenges to risk appetite tests gold buyers, in contrast to the softer yields favoring prices, a lack of major data/events keeps the commodity traders looking for more macros for clear direction ahead of Friday’s US Consumer Price Index (CPI).

Technical analysis

In contrast to the latest performance, technical patterns challenge gold buyers as it remains below the previous support line from September 30 amid bearish MACD signals.

Also favoring gold sellers is the bearish play of the moving average crossover, popularly known as the bear cross, portrayed by the 50-day EMA’s piercing off 200-day EMA.

That said, gold’s fresh declines may initially look to a seven-week-old horizontal area surrounding $1,762-60. Though, the $1,750 round figure and September’s low near $1,721 will question the metal’s further downside.

Alternatively, recovery moves will initially aim for the weekly top near $1,787 but the support-turned-resistance will challenge the gold buyers around $1,795.

Even if the bullion manages to cross the $1,795 hurdle, the stated EMA’s will act like a tough nut to crack for the gold bulls near the $1,800 threshold.

Gold: Daily chart

Trend: Further weakness expected

Bank of Japan's Masayoshi Amamiya said that Japan’s economy has stagnated but is expected to show clearer recovery through next year.

The comments follow today's Gross Domestic Product (GDP) that, quarter-on-quarter basis, fell 0.9%, slightly worse than the initial reading and median forecast for a 0.8% drop.

Japan's economy shrank 3.6% in the third quarter, worse than the initial estimate of a 3.0% contraction, revised government data showed on Wednesday, posting a decline as private spending took a hit from a resurgence in COVID-19.

Separate data due on Dec. 10 at 8:50 a.m. (Dec. 9 at 2350 GMT) is expected to show wholesale inflation accelerated further to a new 40-year high, according to Reuters. ''The corporate goods price index likely gained 8.5% in November from a year earlier, after rising 8.0% in October.''

USD/JPY analysis

• USD/JPY tracks yields to snap two-day uptrend around 113.50

From a daily perspective, the price is stalling at a 38.2% Fibo and could easily flip to the downside at this juncture:

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.3677 vs the last close of 6.3658.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day closing level and quotations taken from the inter-bank dealer.

• DXY snaps five-day uptrend, refreshes intraday low at the latest.
• Yields ease as virus-linked optimism fades, geopolitical tensions erupt.
• Financial market risk from China adds strength to the sour sentiment.

US Dollar Index (DXY) steps back from the week’s high, pressured around intraday low near 96.25 during Wednesday’s Asian session. The greenback gauge tracks US Treasury yields to the south amid fresh challenges to the market sentiment, as well as due to the absence of major catalysts at home.

Recently probing market optimists are the geopolitical headlines concerning the rift between the Washington and Kremlin, as well as the US-China tussles. Adding to the market fears could be the doubts over Chinese real-estate giants.

Russian refrain to make peace with Ukrain irritates the US as President Joe Biden warns Russian counterpart Vladimir Putin of sanctions and helps Ukraine with military power if Kremlin invades Kyiv. “The Biden administration is in ‘intensive consultations’ with the new German government over its response if Russia invades Ukraine and believes Germany would be ready to take significant action if Russia launches an attack, a senior U.S. State Department official said on Tuesday,” said Reuters.

On a different page, the US boycott of the 2022 Beijing Olympics doesn’t bode well with China as the dragon nation hints at consequences for America due to the same, per Chinese media. Additionally, the market’s optimism also fades amid doubts over China’s struggling real-estate firms’, Evergrande and Kaisa, capacity to pay the looming debt after barely paying the interests.

Alternatively, receding fears of the South African coronavirus variant, dubbed as Omicron keeps markets hopeful.

Amid these plays, the US 10-year Treasury yields snap two-day uptrend around 1.47%, down two basis points (bp), whereas S&P 500 Futures struggle to follow its Wall Street benchmark that rallied the most since March.

It’s worth noting that the mixed second-tier data from the US also weigh on the DXY ahead of the key US Consumer Price Index (CPI) for November, up for publishing on Friday. Before that, the risk catalyst is important to determine near-term US Dollar Index moves.

Technical analysis

Despite the latest pullback, DXY bulls remain hopeful until the quote drops below the six-week-old support line near 94.90.

• EUR/USD is attempting to move higher despite the bearish prospects on the hourly chart. 
• Risk-on themes are making their way through to Asian markets on Wednesday.  

The greenback in sliding in Asia and the euro has extended gains on a strong hourly impulse that started in the early hours of the Nother American session on Tuesday. Concerns over the severity of the omicron virus strain continued to fade which supported riskier asset classes. China also announced measures to boost economic growth which lifted stocks and fed through into the forex space. 

At the time of writing, the single currency is on the front foot vs the greenback, printing a fresh corrective high in Tokyo of 1.1277. The US dollar index is down on the day and extending its losses from overnight despite the Federal Reserve Chair Jerome Powell's hawkish stance.

Meanwhile, US stocks rallied the most in nine months, with major averages rising at least 2% on hopes that the omicron variant will not derail global growth. Consequently, US treasuries fell, causing two-year yields to reach their highest level since March 2020. The CBOE volatility index also fell five points to 22 as the risks of the covid variant abate. 

In terms of data, the US trade deficit shrank, while third-quarter productivity fell. Private consumption was the most important driver of the eurozone's most recent economic expansion. In the eurozone, Industrial Production in Germany outperformed in October gaining 2.8% MoM. However, the ZEW Survey of Expectations for December weakened from the previous month but was stronger than expected.

US CPI eyed

Looking ahead for the week, the US Consumer Price Index will be key. ''We expect inflation to slow significantly as fiscal stimulus fades and supply constraints ease, but we don't expect the data to be validating in the near term,'' analysts at TD Securities explained. ''The CPI likely surged in Nov, with a drop in oil coming too late to avert another large gain in gasoline and core prices boosted by rapidly rising used vehicle prices and post-Delta strengthening in airfares and lodging.''

EUR/USD technical analysis

From a daily perspective, the price is trapped between support and resistance with 1.1300 the upside target, as per the following line chart's analysis:

One-month risk reversal (RR) of silver (XAG/USD) struggles to portray any clear trend on the daily basis with the latest 0.0000 figures. However, the spread between call and put prices remains firm on the weekly, up 0.125, following a three-week downtrend.

The same hints at the absence of bearish bias for silver, as far as the options market is concerned. Though, the bulls are yet to retake control.

Looking at the prices, XAG/USD picks up bids to $22.53, up 0.09% intraday during Wednesday’s Asian session. That said, the bright metal prints a 0.13% weekly loss while trading around the lowest levels since late September after declining for consecutive three weeks.

It’s worth noting that the recent challenges to the market sentiment underpin the US dollar strength but an absence of Fedspeak ahead of next week’s Federal Open Market Committee (FOMC), as well as Friday’s US Consumer Price Index (CPI), challenges the silver traders.

• USD/JPY steps back from weekly top, refreshes intraday low.
• US Treasury yields drop, stock futures dwindle as geopolitical headlines weigh on previous optimism.
• Japan Q3 GDP came in softer, Tankan Survey portrays optimism for December.
• Qualitative catalysts will be important for clear direction amid a lack of major data/events.

USD/JPY stays pressured around the daily bottom of 113.35 as markets in Tokyo open for Wednesday. In doing so, the yen pair declines for the first time in two days, down 0.05% of late, as fresh challenges to the sentiment weigh on US bond coupons.

Among the key-risk catalysts are the geopolitical tensions between the Washington and Kremlin, as well as the US-China tussles. Adding to the sour sentiment could be the chatters surrounding the fears of Chinese real-estate companies’ default.

US President Joe Biden warns Russia of sanctions and helps Ukraine with military power if Kremlin invades Kyiv. “The Biden administration is in ‘intensive consultations’ with the new German government over its response if Russia invades Ukraine and believes Germany would be ready to take significant action if Russia launches an attack, a senior U.S. State Department official said on Tuesday,” said Reuters.

Further, the US boycott of the 2022 Beijing Olympics doesn’t bode well with China as the dragon nation hints at consequences due to the same. Additionally, the market’s optimism also fades amid doubts over China’s struggling real-estate firms’, Evergrande and Kaisa, capacity to pay the looming debt after barely paying the interests.

It’s worth noting that Japan’s optimism for more stimulus and receding fears of the South African coronavirus variant, dubbed as Omicron keeps USD/JPY buyers hopeful. On the same line is China’s readiness for safeguarding the financial system from default and covid risks.

Talking about data, Japan’s Q3 GDP dropped below -0.8% initial forecast to -0.9% while Tankan Manufacturers’ survey for December was quite optimistic, citing manufacturers’ gauge refreshing four-month high.

While portraying the market mood, the US 10-year Treasury yields snap two-day uptrend around 1.47%, down two basis points (bp), whereas S&P 500 Futures struggle to follow its Wall Street benchmark that rallied the most since March.

Given the lack of interesting data/events on the calendar, risk-related headlines are important for the USD/JPY traders to watch for fresh impulse.

Technical analysis

Tuesday’s Doji below 20-DMA level of 113.95 directs USD/JPY towards the previous resistance line from March, around 112.60 at the latest.

• AUD/USD grinds higher at weekly top following two-day uptrend.
• Yields retreat, US stock futures stay mildly bid on mixed concerns.
• US-Russia, Sino-American stories battle receding fears from Omicron.
• Light calendar, market’s wait for Friday’s US CPI highlights risk catalysts for fresh impulse.

AUD/USD eases to 0.7120, following an uptick to refresh weekly top during the early Asian session on Wednesday.

While fresh challenges to the market’s previous risk-on mood could be cited as testing the bulls, the Aussie pair’s technical breakout of the key hurdle keeps buyers hopeful amid a likely quiet session with no major data/events.

The US warns Russia of sanctions and helps Ukraine with military power if Kremlin invades Kyiv. “The Biden administration is in ‘intensive consultations’ with the new German government over its response if Russia invades Ukraine and believes Germany would be ready to take significant action if Russia launches an attack, a senior U.S. State Department official said on Tuesday,” said Reuters.

Elsewhere, the US boycott of the 2022 Beijing Olympics doesn’t bode well with China as the dragon nation warns Washington of consequences due to the same. Additionally, the market’s optimism also fades amid concerns over China’s struggling real-estate firms like Evergrande and Kaisa.

On the contrary, receding fears of the South African coronavirus variant, dubbed as Omicron, as well as hopes of more stimulus from China, keeps AUD/USD buyers hopeful.

Against this backdrop, the US 10-year Treasury yields snap two-day uptrend around 1.47%, down two basis points (bp), whereas S&P 500 Futures struggle to follow its Wall Street benchmark that rallied the most since March.

Moving on, a lack of major data/events will keep risk catalysts on the driver’s seat. That said, the latest risk-off factors may trigger consolidation of the AUD/USD gains due to the pair’s risk barometer status.

Technical analysis

AUD/USD pierced the key hurdle to the north around 0.7110, comprising 10-DMA and the upper line of a five-week-old descending channel.

That said, the receding bearish bias of MACD signals and RSI rebound from oversold area back the pair’s recovery moves from a horizontal area including lows marked during November 2020 and so far during December 2021, near 0.6990.

Hence, the AUD/USD bulls are set to battle the 0.7170 resistance that encompasses September lows and last week’s tops.

• AUDNZD bulls are taking charge for a test of 1.05 the figure. 
• The daily inverse head and shoulders in compelling.

AUD/NZD is on the move in Asia and the price is on the verge of a breakout. The following illustrates the bullish bias from both a longer-term and short term perspective. 

AUD/NZD daily & weekly chart

The price is completing am inverse head and shoulders on the daily time frame and has penetrated the weekly chart's M-formation's neckline:

The daily chart illustrates the bullish wick that has been left in the prior day's close which would be expected to be filled in in the coming sessions as per the lower time frame's price action:

AUD/NZD H1 chart

On the hourly chart, the price has formed a bullish structure above what was the prior resistance in the M-formation's neckline. The counter trendline is all that stands in the way of the price fulling the wick.

• GBP/JPY dribbles inside a small range after stepping back from weekly high.
• Brexit optimism fades, US-Russia tension, fears from China challenge previous optimism.
• Japan’s Q3 GDP , Tankan survey flashed upbeat results for December.
• Brexit, Omicron updates are the key for fresh impulse.

GBP/JPY holds onto the previous day’s pullback from a one-week high inside a choppy range above 150.00, around 150.35 during Wednesday’s Asian session.

The cross-currency pair refreshed weekly top the previous day amid the market’s optimism but Brexit concerns and a lack of major data/events weighed on the quote afterward. Adding to the bearish bias are the recently down US Treasury yields and challenges to risk appetite.

Among the key risk catalyst is the fears of a prolonged Brexit deadlock as the UK’s readiness to resolve fishing tussles with France couldn’t please the European Union (EU) to step forward and help overcome the Northern Ireland (NI) border issue. It’s worth noting that the bloc’s monetary help to the Northern Ireland of late is being considered escalating tension among the old neighbors.

Elsewhere, the US warns Russia of sanctions and helps Ukraine with military power if Kremlin invades Kyiv. In addition to the fears emanating from the US-Russia story, the market’s optimism also fades amid concerns over China’s struggling real-estate firms like Evergrande and Kaisa. Furthermore, China’s dislike of the US boycott of the 2022 Beijing Olympics also tests risk appetite.

That said, the global markets previously cheered receding fears of the South African coronavirus variant, dubbed as Omicron, as well as hopes of more stimulus from China. On the same line was the absence of Fedspeak ahead of the next week’s Federal Open Market Committee (FOMC) meeting.

Talking about data, Japan’s Q3 GDP dropped below -0.8% initial forecast to -0.9% while Tankan Manufacturers’ survey for December was quite optimistic.

Against this backdrop, US 10-year Treasury yields snap two-day uptrend around 1.47%, down one basis point (bp), whereas S&P 500 Futures struggle to follow its Wall Street benchmark that rallied the most since March.

Moving on, a light calendar probes momentum traders but risk catalysts can trigger GBP/JPY moves and hence become worth observing.

Technical analysis

GBP/JPY seesaws between September’s low near 148.95 and 200-day EMA level surrounding 151.00 with a bearish bias.

• GBP/USD consolidates recent losses, picks up bids around yearly low.
• Bearish chart pattern, absence of oversold RSI keep sellers hopeful.
• Key SMAs, monthly resistance line adds to the upside filters.

GBP/USD grinds lower despite picking up bids to 1.3250 during Wednesday’s Asian session.

The cable pair remains pressured for the last one week around the 20221 bottom. In doing so, it forms a bearish chart pattern called pennant and keeps the sellers hopeful. Also favoring the bears is an absence of the oversold RSI.

However, a clear downside break of 1.3220 becomes necessary for the GBP/USD sellers to aim for the theoretical target surrounding 1.2900.

During the fall, the yearly low near 1.3190 and the 1.3000 psychological magnet will act as intermediate halts.

Meanwhile, 50-SMA adds strength to the pennant’s resistance line, around 1.3290, to challenge the recovery moves.

Even if the quote rises past 1.3290, a convergence of the 100-SMA and one-month-old descending trend line near 1.3350 will be a tough nut to crack for the GBP/USD buyers.

To sum up, GBP/USD bears keep reins and await a clear break of 1.3220 for further dominance.

GBP/USD: Four-hour chart

Trend: Bearish

• USD/CAD stays pressured near 12-day low after declining the most since late August.
• Oil retreats from weekly top despite price-positive EIA inventories.
• Risk-on mood, expectations of hawkish halt from BOC favor bears.
• Virus updates, China news are also important, US inflation is the key.

USD/CAD remains on the back foot around 1.2650, following the heavy fall to refresh a two-week low. That said, the quote seesaws of late as Asian traders brace for Wednesday’s Bank of Canada (BOC) Interest Rate Decision.

The Loonie pair dropped the most since August 23 on Tuesday as risk-on mood joins upbeat prices of Canada’s main export WTI crude oil.

Market sentiment improved amid receding fears of the South African coronavirus variant, dubbed as Omicron, as well as hopes of more stimulus from China after Beijing pledged to safeguard the financial system. Adding to the risk-on mood could be mixed data from the US and an absence of Fedspeak ahead of next week Federal Reserve (Fed) monetary policy meeting.

WTI cheered upward revision to 2022 demand forecast by the US Energy Information Administration (EIA) and growing tension between Russia and Ukraine. As per Reuters, “The Biden administration is in ‘intensive consultations’ with the new German government over its response if Russia invades Ukraine and believes Germany would be ready to take significant action if Russia launches an attack, a senior U.S. State Department official said on Tuesday.”

Elsewhere, firmer prints of Canada’s International Merchandise Trade for October and Ivey Purchasing Managers Index for November add to the Canadian dollar’s (CAD) strength.

Amid these plays, the US 10-year Treasury yields remained firmer the previous day while Wall Street benchmarks also had a good day for bulls.

Moving on, USD/CAD traders will pay close attention to how the BOC hints at the possible rate hike after the bond purchases were ended in October. That said, the benchmark interest rate is likely to remain unchanged at 0.25%.

“The BoC will maintain that the outlook is evolving in line with the October MPR, and we expect it to repeat that inflation strength is largely transitory,” said TD Securities ahead of the event.

Technical analysis

A clear downside break of 20-DMA level of 1.2680 and an ascending support line from November 16, now resistance around 1.2790, directs USD/CAD bears toward an upward sloping trend line from late October, near 1.2570.

As per the latest report from Reuters Tankan Survey, “Japanese manufacturers' business confidence index rose to a four-month high in December as supply constraints began to ease.”

The sentiment poll adds, “offering policymakers some hope the economy was headed for a moderate recovery.”

Key quotes

The monthly poll, which tracks the Bank of Japan's (BOJ) closely watched Tankan quarterly survey next due on Dec. 13, showed the manufacturers' sentiment index improved to 22 in December, following three straight months of declines to 13 in November. That compared with a reading of 18 in the BOJ's latest October survey.

Sentiment among non-manufacturers also improved in December, suggesting consumption was gradually recovering after the lifting of social curbs by end-September to contain the spread of coronavirus cases.

On outlook, both manufacturers and services companies were more optimistic, with the three-month forward index among manufacturers rising to 26 from 19 and for services companies to 21 from 15.

FX reaction

USD/JPY retreats from weekly top to 113.55 during the pre-Tokyo open trading amid Wednesday’s Asian session. The yen pair previously cheered the risk-on mood but the firmer US dollar challenges buyers of late.

Read: USD/JPY bears are moving in as the US dollar grows weary

• The NZD/USD begins the Asian session in the right foot, up some 0.46%.
• A candlestick morning-star formation in the daily chart opens the door for 0.6900.

The NZD/USD bounced off year-to-date lows, is rising as the Asian session begins, trading at 0.6789 during the day at the time of writing. On Tuesday in the overnight session, the NZD/USD pair dipped as low as 0.6736, then rallied on the back of positive omicron COVID-19 news, up to high 0.6770s. Then, through the rest of the day, the pair advanced steadily, leaving behind the 50 and the 100-hour simple moving average (SMA), below the spot price, but the upside move stalled around the R3 daily pivot point around 0.6784.

NZD/USD Price Forecast: Technical outlook

Daily chart

The NZD/USD chart depicts the pair has a downward bias after posting losses on 11 of the last 13 days. Furthermore, the 50-day moving average (DMA) crossed below the 100-DMA, leaving the DMA’s correctly positioned in bearish order with the 200 on top and the 50-DMA on the bottom. Nevertheless, as shown by the candlesticks, the price action of the last three days is forming a morning star, a chart pattern with bullish implications that would need another bullish candle to confirm its validity.

Hence, the bias in the near term is tilted to the upside. The first resistance would be 0.6800. The breach of the latter exposes crucial resistance levels, with the September 28 cycle low-turned-resistance at 0.6859, followed by the figure at 0.6900.

1-hour chart

The NZD/USD broke to the upside of the 100-hour simple moving average (SMA) in the last four hours but stalled around 0.6785. As previously mentioned, the 50 and the 100-hour SMA’s lie below the spot price, so the upward bias is in place, but a break above the 200-hour SMA at 0.6802, could pave the way for further gains.

The first resistance on the way up would be the confluence of the 200-hour SMA and the R1 Wednesday’s daily pivot at 0.6806. A break above that level would expose the R2 pivot at 0.6827, followed by the R3 daily pivot at 0.6862.

• WTI retreats from weekly high, prints mild gains as Asian session picks up.
• Upbeat sentiment, doubts over OPEC+ verdict favored oil buyers but firmer USD, EIA news probe advances.
• API Weekly Crude Oil Stock dropped more than -0.747M.
• EIA data, risk catalysts eyed, US inflation, China and Omicron are the key.

WTI crude oil prices ease from a weekly high to $71.50 after a two-day run-up, marking 0.40% intraday gains during early Wednesday morning in Asia. The black gold’s latest pullback part ways from the lesser-than-previous private oil stocks change figures from the American Petroleum Institute (API).

As per the latest API Weekly Crude Oil Stocks data for the period ended on December 03, the inventories shrank 3.089M versus the previous depletion of 0.747M.

The commodity prices jumped to more than a week’s high the previous day as the market’s risk appetite improved amid receding fears of the South African coronavirus variant, dubbed as Omicron. Adding to the market’s risk-on mood were hopes of China’s additional monetary policy easing after the People’s Bank of China’s (PBOC) Reserve Ratio Requirement (RRR) cut.

Furthermore, the US Energy Information Administration (EIA) energy demand forecast and firmer equities, not to forget the geopolitical tensions in the Middle East, could be cited as additional catalysts behind the commodity’s strength.

In the latest monthly Short-Term Energy Outlook (STEO) report, the EIA raised its forecast for 2022 world oil demand growth by 200K barrels per day (BPD) on Tuesday, and now demand growing 3.55M BPD YoY next year. The EIA STEO cut its forecast for 2021 world oil demand growth by 10K BPD to a 5.1M BPD YoY increase. Moving on, S&P 500 posted the biggest daily gains since March whereas Iran still refrains to abide by the nuclear deal.

Additionally, the US thinks over plans to manage the oil flows if Russia attacks Ukraine and the same fuel the oil prices. "The Biden administration is in 'intensive consultations' with the new German government over its response if Russia invades Ukraine and believes Germany would be ready to take significant action if Russia launches an attack, a senior U.S. State Department official said on Tuesday," per Reuters.

It’s worth noting, however, that the recently escalated tussles between the US and China join firmer US Treasury yields to challenge the oil prices.

Looking forward, weekly official oil inventory data from the US Energy Information Administration (EIA), -0.91M prior, will be important for fresh direction. Also on the radars will be macros from China and Omicron updates. However, more important will be Friday’s US Consumer Price Index (CPI) and the next week’s Fed meeting.

Technical analysis

A clear upside break of 200-DMA, around $70.00 by the press time, directs WTI crude oil prices towards a five-month-old horizontal resistance of around $74.80.

• AUD/USD is making its way through critical volumes towards 0.7025 breakout territory. 
• Bulls are moving in on resistance in solid correction. 

AUD/USD has been correcting in the wake of a positive risk environment this week. The pair is now loving in on critical resistance, piecing it in recent trade. This would now be expected to act as support for the forthcoming sessions.

AUD/USD H1 chart

The bulls are engaging in this area and will likely push for a test to the midpoint of the 0.71 area. If this is broken, then 0.7180 will be the next likely target.

With that being said, the daily chart illustrates that there is a level of resistance here that could see the price rejected from.