Market momentum remains limited in early Tuesday as mixed sentiment and the holiday mood take hold. The US Dollar faces challenges in holding its gains, with recent US data raising doubts about the Fed’s hawkish stance. Meanwhile, China’s Ministry of Finance announced fiscal measures to support its struggling economy, helping Asian stocks follow Wall Street's modest gains.
However, trade war fears and geopolitical tensions, combined with the festive atmosphere, restrict Forex market reactions. On Monday, the US launched a trade investigation into "legacy" Chinese semiconductors, fueling concerns about a potential trade war, which weighed on AUDUSD. The pair extended its losses after dovish RBA minutes added to its struggles.
EURUSD remains under pressure, while GBPUSD recovers some losses without major catalysts. USDJPY faces intervention fears and speculation about potential Bank of Japan rate hikes. NZDUSD shows little direction, while USDCAD ends a three-day losing streak despite a slight rise in crude oil. Gold benefits from its haven appeal but lacks momentum amid low liquidity and a quiet economic calendar.
Despite the US Dollar brushing off Monday's weak CB Consumer Confidence and Durable Goods Orders and softer Fed inflation data from Friday, the holiday mood in the West is limiting market reactions. The lack of major negative news or dovish ECB comments is preventing EURUSD from falling further, even though bearish pressure remains.
Meanwhile, GBPUSD sees some buying as traders take advantage of previous losses amid thin liquidity and the US Dollar’s recent struggles. However, weak UK GDP data and concerns over further rate cuts from the Bank of England (BoE) are keeping Pound buyers cautious.
The Bank of Japan's October meeting Minutes revealed policymakers are open to further rate hikes if inflation and growth align with expectations, leading to a pullback in USDJPY. Japan’s Finance Minister, Katsunobu Kato, also indicated readiness to intervene to defend the Yen in case of excessive moves.
Meanwhile, NZDUSD remains weak, despite low liquidity, due to economic concerns in New Zealand and expectations of rate cuts by the Reserve Bank of New Zealand (RBNZ). USDCAD, on the other hand, posted its first gain in four days, supported by a dovish Bank of Canada (BoC) outlook, political instability in Canada, and softer economic data, despite higher crude oil prices.
China-related concerns and a broadly hawkish Fed bias keep AUDUSD under bearish pressure, with the latest RBA Minutes adding to the downside. Market caution, driven by mixed data and geopolitical tensions, along with holiday-related low liquidity, is limiting the pair's momentum.
Gold rebounds, reversing previous losses, as traders seek safe haven amid mixed market sentiment. There's also optimism for a strong year-end close, with gold set for its biggest annual rally since 2010. However, a stronger US Dollar is limiting XAUUSD gains.
Crude oil rises on expectations of more stimulus from China and concerns over Middle East supply disruptions, even as OPEC+ suggests higher output from suppliers.
Although optimism around Trump keeps crypto buyers positive, year-end consolidation and risk-negative news from the US IRS are pushing Bitcoin (BTCUSD) and Ethereum (ETHUSD) sellers into action.
With major data and events absent, holiday trading in key economies will keep market momentum subdued. Light trading and low liquidity mean prices could fluctuate sharply, so caution is advised. While recent gains in Gold and weaker Antipodeans could face challenges, the US Dollar may stay stronger, supported by a broadly hawkish Fed outlook for 2025.
May the trading luck be with you!
