The Dollar Stopped Falling | Market Pulse


The US dollar is trying to win back losses, trading at 100.800 in USDX, however, key statistics on the labour market were negative: the number of initial applications for unemployment benefits amounted to 218.0k, much higher than 206.0k a week earlier and the expected 210.0k, as a result of which the total number of citizens receiving government assistance increased from 1.861 million to 1.875 million, putting pressure on the US currency. Market participants expect an adjustment in monetary policy from the US Federal Reserve, and also hope for a threefold reduction in borrowing costs next year. According to a CNBC survey of 300 leading investors, most expect the transition to dovish rates to begin in the second half of 2024, with some predicting it will begin in March.

EUR/USD

The EUR/USD pair is trading in the main range of 1.1083-1.1060, with the price trying to resume growth after a correction the day before, when it retreated from six-month highs at 1.1138. Immediate resistance can be seen at 1.1145, a break higher could trigger a rise towards 1.1177. On the downside, immediate support is seen at 1.1066, a break below could take the pair towards 1.1000.

The euro quotes were put under pressure by the continuing uncertainty regarding further actions (by the ECB) in the field of monetary policy. Previously, it was assumed that the European regulator, like the US Federal Reserve, would begin a cycle of easing monetary policy, but recent comments by ECB board member Robert Holtzman have somewhat changed these forecasts. The day before, in an interview with Bloomberg, the official said that it was too early to talk about the beginning of a reduction in borrowing costs in the region, while admitting that the measures taken by the department led to a noticeable weakening of inflation. The potential for the EUR/USD pair to resume its upward dynamics after the Christmas holidays remains.

The ascending channel is maintained. Now the price is near the lower border of the channel and may continue to rise.

USD/GBP

The GBP/USD pair resumed its growth after a corrective decline the day before and is currently trading around 1.2770. Immediate resistance can be seen at 1.2807, a break higher could trigger a rise towards 1.2835. On the downside, immediate support is seen at 1.2736, a break below could take the pair towards 1.2665.

Market activity has been subdued due to the Christmas holidays and today's early closure of British financial institutions. The potential for growth in the instrument's quotes also remains, as the market expects that the US Federal Reserve will move to cut interest rates next year. The Bank of England will probably be forced to take similar steps, but they will be more cautious, and maintaining borrowing costs at current levels may be longer than in the United States. December data on housing prices was presented today. The indicator has not changed. Residential property prices in the country continued their negative trend throughout the year, although their decline has slowed recently. The market remains under pressure from high interest rates from the Bank of England and declining consumer activity.

The ascending channel is maintained. Now the price is in the middle of the channel and may continue to rise.

USD/JPY

The USD/JPY pair resumed its decline after corrective growth the day before. Strong resistance can be seen at 141.97, a break higher could trigger a rise towards 142.76. On the downside, immediate support is seen at 140.81. A break below could take the pair towards 140.00.

The continuation of the negative dynamics of quotes will be facilitated by the difference in monetary approaches between the US Federal Reserve and the Bank of Japan. Japanese officials may begin raising interest rates from the current -0.10%. The current ultra-loose monetary policy may be abandoned no earlier than next spring, or even later if inflationary pressure in the country continues to weaken and consumer price growth falls below the target level of 2.0%. According to the latest data, the consumer price index in Japan fell again from 2.9% to 2.5%. Investors evaluate the Japanese macroeconomic statics presented the day before: in November, retail sales increased by 5.3% after 4.1% earlier due to the correction of the indicator in hypermarkets by 5.0% and in large retail chains by 1.0% after a fall by 1.6% in the previous period. Data on industrial production, which fell 0.9% in November, met analysts' expectations, taking into account the seasonal nature of the indicator, and did not have a negative impact on the yen, since the economy may recover during the holiday period due to strong demand.

At the lows of the week, a new downward channel has formed. Now the price has moved away from the upper border of the channel and may continue to decline.

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