As the Christmas holiday period edges ever closer, there is a massive week for financial markets to negotiate. Everywhere you turn there are massive announcements. The US CPI inflation data is the last key data for the Fed to digest ahead of the FOMC decision on Wednesday. After recent upside surprises, another in the CPI could push the Fed into being more hawkish than previously thought.

Elsewhere there are important monetary policy decisions for other major central banks including the Swiss National Bank, the Bank of England and the European Central Bank. With a smattering of inflation, retail sales and flash PMIs traders could be in for a bumpy ride.

Watch for: 

  • North America – US CPI, Retail Sales and Industrial Production with the FOMC meeting key
  • Europe – Monetary policy decisions from the SNB, BoE and ECB, along with UK Unemployment, CPI and Retail Sales
  • Asia – Australian Unemployment, Chinese Industrial Production and Retail Sales, with flash PMIs for Australia and Japan
  • LatAm – Central bank monetary policy for Mexico and Colombia

North America

N.B. Forecasts are the latest available consensus 

US dollar (USD)

Financial markets come towards a crucial FOMC meeting with the dollar finely balanced. The USD corrective move since October has come to a pivotal moment. Recent positive surprises in data have called into question the Fed’s monetary policy position. Nonfarm Payrolls and ISM Services have shown ongoing tightness in the labour market and strong wage growth. If the US CPI also surprises to the upside it could usher a more hawkish line from the Fed than previously anticipated. 

Traders will be watching the Fed Funds futures (which currently price for a terminal rate just shy of 5.00%. Positive surprises in the US CPI could swing this higher. This could drive USD into recovery once more. Key resistance on the Dollar Index is between 107/108. Consistent closes below 104.60 would drive further USD correction.

Canadian dollar (CAD)

The Bank of Canada remains cautious despite what seemed like a slightly aggressive 50 basis points rate hike to 4.25% last week. The bank is now on “considering” whether further rate hikes will be required. It acknowledges that there is “growing evidence that tighter monetary policy is restraining domestic demand” despite growth being resilient for now. This is likely to continue to weigh heavily on the CAD performance, especially on major currency crosses.

  • USD/CAD – Even as the USD has started to weaken again, USD/CAD is remaining firm. The technicals show the market holding above what could now be a mid-range pivot band around 1.3500/1.3570. The run of higher lows over the past month shows the underperformance of the CAD. There will be volatility this week, but a move above 1.3700 opens 1.3800/1.3850.  


If the slide in Treasury yields continues this should be supportive for precious metals in the commodities complex. However, we can expect some considerable volatility this week with US CPI and the FOMC meeting. A positive surprise in US CPI could drive a correction through precious metals, certainly if this is then confirmed by a more hawkish than anticipated FOMC in response. When the dust begins to settle the outlook for US bond yields remains the key driver for precious metals with a strong negative correlation still in play. 

Oil has struggled recently with the less positive market sentiment. However, as the cold winter bites in Europe, energy prices could begin to find support. With oil, an oversold position could play into a technical rally.

  • Brent Crude Oil – A sharp breakdown in the past week, below the support band between $81.40/$83.55 drives a decisively corrective outlook that opens the next support around $69.560. However, a near-term oversold position could leave room for a technical rally. The old support becomes new resistance.
  • Gold – The big double-bottom base pattern continues to imply recovery towards $1844. With support from a one-month uptrend and the 21-day moving average, we favour using any supported weakness on the elevated volatility this week as a chance to buy. Initial support is $1765 with $1728 key support now. A close above $1810 opens the $1844 target. 
  • Silver – The run of higher lows continues to find support around the old breakout levels, leaving the latest support band around $22.00/$22.50. Once the dust begins to settle on what is likely to be a volatile week, we still look to use supported weakness as a chance to buy.

Wall Street

The risk recovery has waned in the past week and the bull trends have cracked. December is traditionally a positive month for equities. Equity markets are likely to have a volatile week with the raft of tier-one data and the FOMC decision. A higher-than-expected US CPI could pull bond yields higher and induce a downside break, driven by the NASDAQ. 

  • S&P 500 futures – This is a crucial few days ahead for the futures. Holding the support band 3912/3935 would sustain the recovery potential to retest the resistance at 4106/4145. A decisive close below 3912 turns the market corrective and would bring 3750 back into play.
  • NASDAQ 100 futures – The recovery has been seriously questioned as the recovery traction has stuttered in recent weeks. The support between 11465/11730 has come under significant pressure but essentially remains intact, for now. A decisive downside break brings 10500/10800 back into view.
  • Dow futures – The recovery has lost momentum and the bottom of the key support band 33620/34245 has come under serious scrutiny. It is holding for now, but a downside break would complete a corrective top pattern. Resistance at 34705 is key. Breaking below 33190 support would confirm a corrective outlook.


N.B. Forecasts are the latest available consensus 

Euro (EUR)

There is a far greater degree of uncertainty coming into the ECB meeting than seemed likely just over a week ago. The drop in Eurozone inflation is encouraging. However, the hawks have been more vocal recently. Despite this, the consensus is going for a +50bps hike, which suggests that there is a mild risk of a hawkish surprise. Even if there is a 50bps hike, it could also be a “hawkish 50bps”. We also get the inflation and GDP projections which need to be watched.

  • EUR/USD – The recovery has held up well in the face of another threatened correction. Momentum is bullishly configured and weakness continues to be bought into, leaving initial support at 1.0442 above the 1.0290 higher low. A move above 1.0615 opens the key May high of 1.0785.

British pound (GBP)

The Bank of England remains stuck between a rock and a hard place. A fairly terrible set of economic data is a shackle for tacking inflation that is forecast to remain above 11% this week. A 50bps hike seems like a compromise and has been anticipated since the dovish lean of the 7-2 vote for a 75bps hike in November. This may see GBP struggle against the EUR on Thursday as both central banks announce. 

  • GBP/USD – The uptrend recovery has been leaving key higher lows and with positive RSI configuration, weakness continues to be bought into. There is initial support at 1.2105, but the key support from a technical perspective is at 1.1900, the first confirmed higher low. A break above resistance at 1.2400 opens moves towards 1.2600/1.2670.


The recovery trends on European indices have been broken. The concern is that equity markets are beginning to falter even as US Treasury yields have continued lower. This could give rise to a near-term corrective move. In a risk-negative environment, the DAX is likely to lead indices lower.

  • DAX – The seven-week uptrend has been broken as the market has shied away from the long-term resistance at 14700/14800. For now, this is a range-play between 14125/14605 but with faltering momentum, the corrective risk is growing. The next move could be key.
  • FTSE 100 – The recovery uptrend has been broken as the market has pulled back from the big resistance at 7625/7695. Seeing as how this has been a key market for swing traders throughout 2022, the risk of a decisive correction is growing. A decisive break under 7440 could open the move lower towards 7300 as the next support.


N.B. Forecasts are the latest available consensus 

Japanese yen (JPY)

We continue to see the direction of major bond yields as being crucial for the performance of the JPY. As yields have fallen over recent weeks, yield differentials have become far more favourable for JPY positions. This has driven a significant JPY outperformance on major crosses. All eyes will be on the US inflation and the Fed this week. Any upside surprises in the CPI or a hawkish lean from the Fed will drive a JPY correction. However, if yields continue to track lower we favour further outperformance from the JPY.

  • USD/JPY – The technical rally has faltered around the resistance of the old key support band between 137.65/139.40. The six-week downtrend and falling 21-day moving average are key gauges of resistance now too. We favour a retest of the 133.60 low and then towards 131/132 in due course.
  • AUD/JPY – Despite a near-term rebound, there is a growing trend of JPY outperformance that is dragging the pair towards a test of the 90.51/90.83 July/October lows. Near-term rallies look to be a chance to sell, with resistance between 92.60/93.85.

Australian dollar (AUD)

The slight hawkish lean in the RBA rate hike last week has failed to translate into notable gains for the AUD. With a raft of other major central banks this week, traders may begin to view AUD in a different light. Whatever happens, we continue to favour NZD outperformance.

  • AUD/USD – The Aussie recovery has been gradually losing the strength of momentum and this is a risk if the USD begins to recover once more. We are tentative in our preference for a move towards the September high of 0.6915. Initial support at 0.6668 will be a gauge this week. Below 0.6641 turns corrective.

New Zealand dollar (NZD)

With the hawkish bias of the RBNZ we continue to favour NZD outperformance in the major forex space. This is especially if major bond yields continue to track lower. We expect elevated volatility this week, but unless there are any significant hawkish surprises from the Fed, we play for continued NZD recovery.  

  • NZD/USD – The recovery momentum remains strong and weakness is quickly used as the next opportunity to buy. . Initial support around 0.6300 will be a gauge this week, but in the absence of any hawkish lean from the Fed, we favour continued recovery to break above the 0.6470 resistance of the key August high.


N.B. Forecasts are the latest available consensus 

Brazilian real (BRL)

The Brazilian Central Bank kept the Selic rate on hold at 13.75% for the third consecutive meeting last week. With inflation tracking decisively lower, holding interest rates up at six-year highs is helping to support the BRL. This comes as Brazilian bond yields have been slightly more stable recently. However, the central bank did highlight concerns over Lula’s fiscal policy as being inflationary, and yields have started to tick higher again. This has yet to weigh on the BRL which has performed better recently. However, it is worth tracking yields as this could begin to be negative for BRL again as it did in early November. 

  • USD/BRL –the rate has benefitted from the corrective pressure of the USD in the last couple of weeks, pulling USD/BRL back under the 5.3200 area which is resistance this week. The focus will be more on the US Federal Reserve this week. Reaction to support at 5.1940 will be key as a breakdown opens 5.05/5.12 again. 

Mexican peso (MXN)

With both the Mexican Central Bank and the US Federal Reserve announcing monetary policy it will be a week of elevated volatility on USD/MXN. The sharp corrective pressure on MXN has been contained in recent days and a forecast 50bps hike on Thursday could help to sustain support.

USD/MXN – The pair spiked higher last week after a long sustained run lower. This move has stalled around the resistance of the old key support floor between 19.750/19.830. Reaction to this resistance will be key in the coming days. A decisive close higher opens further recovery towards 20.175. Support at 19.600/19.630 will be an initial gauge.   

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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