This week, the foreign exchange market was influenced by the aftermath of the U.S. election, Federal Reserve policy expectations, and geopolitical tensions. The EUR/USD rose toward …, supported by a weaker U.S. Dollar following remarks from President-elect Donald Trump about potential tariffs targeting multiple regions and month-end portfolio adjustments. The Federal Reserve's recent decision to lower interest rates by 25 basis points to 4.75%-5.00% reflected its commitment to bringing inflation back to its 2% target. However, uncertainty over future monetary policy persisted as mixed signals emerged from the November meeting minutes, and Fed Chair Jerome Powell emphasized a cautious approach. In the eurozone, inflation concerns remained a key focus for the European Central Bank, with Q3 wage growth accelerating to 5.42%. Hawkish remarks from ECB board member Isabel Schnabel further supported the euro, while upcoming inflation data from Germany and the eurozone are expected to provide more clarity on the ECB’s next steps. Meanwhile, Trump’s proposed tariffs could shift market dynamics by potentially strengthening the USD and pressuring EUR/USD.
On the other hand, the AUD/USD pair struggled to achieve significant gains, balancing U.S. Dollar weakness against subdued Australian economic data. October’s CPI remained flat at 2.1%, with falling energy prices contributing to lower inflation. The trimmed mean CPI rose to 3.5%, but the Reserve Bank of Australia is unlikely to adjust rates, viewing these factors as transitory. In the U.S., solid Q3 GDP growth of 2.8%, declining jobless claims, and steady Core PCE inflation at 2.8% YoY lent strength to the Greenback. Although markets still anticipate a Fed rate cut in December, reduced expectations for easing in November have further capped AUD/USD gains.
Geopolitical tensions also weighed on markets, notably with the ceasefire deal brokered between Israel and Hezbollah following heavy selling on Monday. The two sides agreed to a 60-day ceasefire, which has so far held. However, skepticism remains high, as analysts argue the agreement may prove unsustainable without a resolution to the ongoing hostilities in Gaza, according to Bloomberg News.
The Euro advanced 0.81% against the US Dollar, reaching …, as hawkish comments from ECB member Isabel Schnabel supported the currency. Schnabel emphasized that the ECB should avoid accommodative rate policies, boosting market confidence in the Euro. Meanwhile, weak US economic data failed to bolster the Greenback, which had already appreciated by 5.50% against the Euro since the elections. October’s US Durable Goods Orders increased by 0.2% MoM, slightly above September’s figure but falling short of the 0.5% forecast. Additionally, the second estimate for Q3 GDP growth came in at 2.8%, in line with expectations but below Q2’s 3% growth. The US Labor market also showed signs of strain, with Initial Jobless Claims for the week ending November 23 holding steady at 213K, missing expectations of 217K. Furthermore, the Fed’s core PCE Price Index, its preferred inflation gauge, remained unchanged at 2.8% YoY, slightly up from the previous 2.7% reading but failing to spark momentum for the Greenback.
In Europe, Germany’s Gfk Consumer Climate index for November plummeted to -23.3, worse than expected. The report highlighted a sharp decline in consumer income expectations and a reduction in willingness to spend, contrasted by an increased propensity to save. Despite this, the Euro benefited from the ECB's hawkish tone, offsetting the negative impact of weak consumer sentiment data.
From a technical perspective, the EUR/USD downtrend persists, but recent price action shows slight gains, suggesting limited acceptance near the …-… range. A break above the November 20 high of … could pave the way for a resistance level of … supported by the 20-days Simple Moving Average (SMA). On the flip side, a drop below … may prompt a bearish move toward … as November Low price.
The AUD/USD rose to … on Wednesday, supported by a weaker US Dollar following the release of key economic data, despite subdued Australian CPI inflation figures limiting the Aussie’s gains. The broader weakness in the Greenback continues to favor the Australian Dollar. However, the pair has faced challenges recently, influenced by mixed Australian economic data, a hawkish Reserve Bank of Australia (RBA), and ongoing US Dollar strength. The AUD/USD remains sensitive to both domestic and US economic data, as the monetary policy divergence between the RBA and the Federal Reserve could further impact the pair.
From a technical perspective, the AUD/USD pair has shown a slight rise in its indicators but remains in a negative position, signaling persistent bearish momentum. The RSI is hovering near 40, and the MACD histogram is still red. The price is facing resistance at the 20-day Simple Moving Average (SMA) of …, which is limiting upward movement. This suggests that the AUD/USD may continue to encounter selling pressure in the near term, with further declines expected unless the SMA is breached. On the flip side, the support level could be at …, reinforced by the three-month low. If the price breaks below this level, the bearish trend may continue.
