Forex Signals Brief December 18: The Next FED Rate Cut Is Here!
Today the Federal Reserve will hold it’s meeting and is expected to cut interest rates by 25 bps, but markets will focus on Powell’s statement, which will show which way the FED will lean after this move.
yesterday’s US retail sales data was solid but lacked the acceleration some had hoped for. While auto sales performed well, likely driven by discounts and lower prices, restaurant sales showed weakness, potentially signaling caution among consumers. However, November’s data is somewhat tricky to interpret due to calendar effects and the lingering impact of the previous month’s hurricanes, particularly on vehicle sales. The U.S. dollar remained largely unchanged following the release.
In Canada, slightly lower-than-expected headline CPI inflation figures contributed to the loonie falling to a four-year low. Despite this decline, there didn’t appear to be strong internal factors driving the move, as the Australian dollar outperformed the loonie even amid ongoing political turmoil.
Today’s Market Expectations
The UK inflation data shows a slight deceleration in November, with the month-on-month CPI at 0.1%, down from 0.6% previously. Year-on-year CPI is forecast at 2.6%, higher than the prior 2.3%. Core CPI is expected to rise to 3.6% from 3.3%, while Services CPI is predicted at 5.1%, marginally up from 5.0%. Despite these changes, market expectations remain firm that the Bank of England (BoE) will keep rates unchanged at this week’s meeting, with an 87% probability of no adjustment. Markets anticipate three 25 basis point rate cuts in 2025, beginning as early as March.
In the U.S., the Federal Reserve is expected to announce a 25 basis point rate cut, lowering the Federal Funds Rate to a range of 4.25–4.50%. The updated Summary of Economic Projections (SEP) is likely to indicate two rate cuts in 2025, alongside upward revisions to growth and inflation forecasts. Fed Chair Powell is expected to highlight the strength of U.S. economic data and signal a pause in the pace of easing.
Yesterday the USD dollar retreated ahead of the FOMC meeting tomorrow, is expected to cut rates by 25 bps. However, most pairs traded in a range so we couldn’t close any forex signals. We opened four trading signals in total, one in Gold and three in forex which continued to remain open into today.
Gold Rejected at November 25 Highs
Gold prices experienced a sharp $100 decline last week after failing to break the $2,725 resistance level, influenced by anticipation of the Federal Reserve’s rate cut and strong U.S. services PMI data. Prices found support at $2,633, near the 200 SMA, and have since recovered $12 following the U.S. retail sales report.
XAU/USD – Daily Chart
USD/CAD Storms Above 1.43 After the Soft Canadian Inflation
In the USD/CAD market, the pair reached 1.4270 on Monday before retreating to 1.4220. However, yesterday buyers returned and the price rebounded above 1.43. Moderate Canadian inflation data and renewed buying pressure have helped sustain the pair above this level, with buyers maintaining control.
AUD/USD – H4 Chart
Cryptocurrency Update
Bitcoin Retreats After Climbing Above $108,000
In the cryptocurrency market, Bitcoin closed November above $100,000 for the first time, reaching $102,000. Strong demand has pushed prices beyond $107,000, despite a brief dip below $95,000, with analysts predicting further gains above $120,000 in the coming months.
BTC/USD – Daily chart
Ethereum Retreats Below the $4,000 Level Again
Ethereum (ETH) rebounded from its dip below $3,000, trading close to $4,000. The cryptocurrency remains above $3,500 and its 50-day SMA, reflecting improved investor sentiment. However, ETH failed to hold gains above the $4,000 resistance yesterday after the bullish move on Monday, leading to a slight pullback. Despite this, the recovery underscores steady confidence in Ethereum’s performance.
ETH/USD – Daily chart
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