AUD/USD Current Price: 0.6703 US Dollar mixed, supported by a modest rebound in Treasury yields. RBA meeting minutes are to be released on Tuesday. The AUD/USD reached a fresh monthly high but failed to hold above 0.6730.  The AUD/USD hit a fresh four-month high on Monday at 0.6735, slightly above last week's highs, and then pulled back. The pair continues to trade around 0.6700 as the US Dollar remains weak; however, it is stabilizing as Federal Reserve (Fed) officials pushed back against easing expectations. On a quiet Monday, most currency pairs offered limited price action. AUD/USD moved sideways after being unable to break above 0.6730. After reaching the fresh high, it pulled back to the 0.6695 area amid a stronger US Dollar due to higher Treasury Yields. Nonetheless, the pair remains near recent multi-month lows. Market sentiment sees the Fed cutting interest rates in the first half of next year, but it is not being considered as a base case scenario by Fed officials. Until the market focus shifts back to activity data, the US Dollar could remain under pressure. The key report in the US this week will be on Friday with the Core Personal Consumption Expenditure Price Index (Core PCE) which, if it shows further deceleration, could weigh on the US Dollar. Last week, labor market data from Australia surpassed expectations but did not boost the Aussie. On Tuesday, the Reserve Bank of Australia (RBA) will release the minutes of its latest meeting. However, no surprises are expected. It will be a quiet week in terms of economic data in Australia. AUD/USD short-term technical outlook The AUD/USD remains within a bullish channel, with strong support at the 20-day Simple Moving Average (SMA) and a dynamic support at the 0.6570 zone. A decline below this mentioned area would change the bias from bullish to neutral. If the pair gains momentum and rises sharply, it is expected to encounter sellers around the 0.6800 level, triggering a retreat.  On the 4-hour chart, technical indicators are showing signs of weakness. The MACD has turned bearish, the Relative Strength Index (RSI) is moving south, and Momentum is also declining. However, as long as the price remains above 0.6690, the downside potential should be limited. Below that area, a further correction towards 0.6660 appears likely. On the other hand, consolidation above 0.6730 would suggest a potential move towards fresh cycle highs. Support levels: 0.6690 0.6660 0.6620 Resistance levels: 0.6735 0.6760 0.6795

The Bank of Japan has kept interest rates in negative territory since February 2016. Japanese inflation has stayed above the central bank's 2% goal for over a year and a half. USD/JPY corrective advance could extend beyond 145.00 with a dovish central bank. The Bank of Japan (BoJ) will announce its monetary policy decision early Tuesday, with market participants expecting no surprises from it. The central bank has kept its benchmark rate unchanged at -0.1% since early 2016 and will likely keep it that way once again. Additionally, the central bank established a  Yield Curve Control (YCC) policy, limiting the yield flotation on its 10-year government bond. Regarding the latter, the latest decision was to allow a 50 basis point (bps) band on either side of its 0% target. Policymakers are still waiting for more evidence that price pressures have reached healthier levels even though annual inflation has been above 2% for over a year and a half. At the same time, fears about the consequences of leaving the ultra-loose monetary policy held them back. Officials are paving the way for a rate hike when most major central banks would engage in rate cuts. Governor Kazuo Ueda recently noted that the accommodative monetary policy and the effects of economic stimulus measures are supporting the Japanese economy while adding policymakers will patiently continue monetary easing under YCC to support economic activity and the cycle of wage growth.  Additionally, BoJ Deputy Governor Ryozo Himino recently discussed the benefits of a rate hike. Such comments fueled speculation the central bank was preparing to act, but Governor Ueda quickly clarified that's not the case. At the time being, there are 15% odds a rate hike will be delivered in April. If something, the focus will revolve around a potential adjustment of the Yield Curve Control program and any relevant change in the wording of the statement. BoJ officials always express concerns about USD/JPY wild rides one way or the other, although the recent JPY appreciation brought some relief, as a weaker Japanese Yen means soaring import prices and a wider trade deficit. The recent downward correction makes it easy for BoJ's officials to avoid damaging the economy should they finally decide to drop the ultra-loose monetary policy.   USD/JPY possible scenarios The USD/JPY pair trades around the 143.00 level ahead of the announcement, with the Japanese Yen appreciating sharply even since bottoming against the US Dollar at 151.90 mid-November, just below the USD/JPY October 2020 record peak at 151.94. From a technical point of view, the daily chart for the USD/JPY pair shows that the risk skews to the downside, with the ongoing advance seemingly corrective. The pair is recovering above a mildly bullish 200 Simple Moving Average (SMA) but still far below a bearish 20 SMA, which extends its slide below the 100 SMA. Finally, technical indicators are correcting oversold readings, aiming higher within negative levels. An on-hold BoJ with a dovish communique, without hints of potential tightening, will likely push the pair north. An intermediate resistance level comes at 143.60 en route to the 144.40 region. Opposed, clearer clues on monetary policy adjustments could back the Japanese Yen. USD/JPY's immediate support level comes at 142.45, followed by the 141.80 price zone.  

XAU/USD Current price: 2,022.49 Canada, the United Kingdom and the United States will release inflation updates this week. US Treasury yields remain near recent multi-week lows, undermining demand for the US Dollar. XAU/USD is technically neutral, as investors remain away from safe-haven assets. Gold prices trade with a soft tone, although XAU/USD stands a few bucks above Friday's close at $2,018.19 a troy ounce. Demand for the US Dollar remained subdued amid softer government bond yields following the latest Federal Reserve (Fed) monetary policy decision. The central bank pretty much confirmed the end of monetary tightening by holding fire for a third consecutive meeting while beginning to pivot towards rate cuts. As a result, US Treasury yields retreated sharply, with the 10-year note offering as low as 3.92% after a record peak of 4.99% in October. At the time being, the yield on the 10-year bond stands at 3.95%, adding barely 2 basis points (bps) on the day, hardly enough to underpin the US Dollar. Meanwhile, Wall Street shrugged off the sour tone of its overseas counterparts, and the three major indexes trade in the green, further limiting demand for the safe-haven Greenback. The ruling optimism, however, also undermines demand for the bright metal, maintaining XAU/USD in a tight range. As financial markets head into winter holidays, some relevant data remains to watch out for. Throughout the upcoming days, the United Kingdom and Canada will release inflation updates, while the Bank of Japan (BoJ) will announce its decision on monetary policy. Finally on Friday, the United States (US) will publish the Core Personal Consumption Expenditures (PCE) Price Index, the Fed's favorite inflation gauge. The PCE Price Index is expected to have increased by 3.3% YoY in November, down from 3.5% in the previous month. XAU/USD short-term technical outlook The daily chart for XAU/USD offers a neutral-to-bullish stance. The pair trades just above a bullish 20 Simple Moving Average (SMA), which advances well above the longer ones. Technical indicators, on the contrary, turned marginally lower within neutral levels, reflecting the absence of buying interest. Gold is neutral in the 4-hour chart. XAU/USD is stuck around its 20 and 100 SMAs, with the shorter one advancing but the longer one holding pat. The Momentum indicator heads south below its 100 line, while the Relative Strength Index (RSI) indicator rotated lower, currently standing at around 52, not enough to confirm a leg lower. Support levels:  2,014.10 2,003.90 1,991.45 Resistance levels: 2,035.40 2,047.90 2,065.60

EUR/USD Current price: 1.0918 The German IFO survey showed Business Climate worsened in December. ECB and Fed policymakers working on the "higher for longer" case. EUR/USD holds above 1.0900 with bulls on pause but retaining control. The EUR/USD pair hovers in a tight range around the 1.0900 figure on Monday,  with the US Dollar trading mixed across the board as investors try to digest the latest central banks' announcements. The Federal Reserve (Fed) and the European Central Bank (ECB) decided to keep interest rates on hold in their last meetings of 2023, holding their fire for the third consecutive meeting, somehow confirming the end of monetary tightening without explicitly saying so. The outlooks and the accompanying statements, however, differed, as risk to inflation and growth seem higher in the Eurozone. Still, market players welcomed the decisions with increased risk appetite, maintaining the USD on the back foot despite the United States (US) encouraging macroeconomic data. As the new week starts, fresh comments from policymakers hit the wires. On the one hand, ECB Governing Council member Peter Kazimir said that the mistake of premature easing would be more significant than the risk of staying tight for too long. On the other hand, Fed Bank of Cleveland President Loretta Mester declared that the next phase is about how long they need monetary policy to remain restrictive, not when to cut rates. Data-wise, Germany published the December IFO survey on Business Climate, which resulted in worse than anticipated. The headline reading contracted from 87.2 in November to 86.4, while Expectations shrank to 84.3. Finally, the assessment of the current situation printed at 88.5, down from 89.4 in the previous month. The US macroeconomic calendar has nothing relevant to offer today. EUR/USD short-term technical outlook The EUR/USD pair posts modest gains, holding at the lower end of Friday's range. The daily chart shows it holds above the 23.6% Fibonacci retracement of the 1.0447/1.1016 rally at 1.0883. At the same time, the pair holds above all its moving averages, with the 20 Simple Moving Average (SMA) directionless above the longer ones and a few pips below the Fibonacci support level. Finally, the Momentum indicator heads marginally lower below its 100 level, while the Relative Strength Index (RSI) indicator ticks north at around 56, failing to provide clear directional clues. The 4-hour chart offers a neutral-to-bullish stance. EUR/USD is meeting buyers around a bullish 20 SMA, currently at around 1.0905. Technical indicators, however, lack directional strength but remain within positive levels, suggesting bulls hold the grip. The case for a downward extension should increase if the pair slides through the aforementioned Fibonacci support. Support levels: 1.0905 1.0880 1.0845 Resistance levels: 1.10930 1.0965 1.1000

EUR/USD regained its traction after closing in negative territory on Friday. The pair's near-term technical outlook suggests that the bullish bias stays intact. Euro could target 1.1000 once it clears 1.0950. EUR/USD closed in negative territory on Friday but still gained more than 1% in the previous week. Following a quiet Asian session on Monday, the pair regained its traction and rose toward 1.0950. Hawkish comments from New York Federal Reserve (Fed) President helped the US Dollar hold its ground ahead of the weekend and caused EUR/USD to erase a small portion of its weekly gains. Williams said that they were not currently discussing rate cuts and argued that the market may be overreacting. In the meantime, Chicago Fed President Austan Goolsbee said over the weekend that he did not rule out the possibility of a rate cut at the policy meeting in March and made it difficult for the USD to preserve its strength to start the new week. On the other hand, Reuters reported that the European Central Bank (ECB) policymakers were unlikely to consider a policy pivot before March. Citing seven sources familiar with the matter, the news outlet said that officials thought that it would be difficult to cut key rates before June.

The Federal Reserve's (Fed) rate cut talk is getting chaotic and frankly, hard to follow. After the Fed signaled a possible end to its monetary policy tightening campaign and the European policymakers refused to adhere, some Fed members including John Williams and Raphael Bostic pushed back the Fed cut expectations. But anyway, investors could give the Fed doves the benefit of the doubt until Friday's PCE data. The PCE, the Fed's favourite gauge of inflation, is expected to show a further decline in both headline and core inflation. Elsewhere, the Bank of Japan (BoJ) will announce the year's final policy verdict on Tuesday. The BoJ Governor Ueda's comments, two weeks ago, that the BoJ's policy would be hard to maintain from the year end had triggered expectations that the BoJ will finally say goodbye to negative rates. There is nothing more than a slim probability for the BoJ to exit negative rates this week, but investors are eager to hear further details about how and when the BoJ will leave the negative rate territory. Concrete details regarding the BoJ's policy plans and/or changes in BoJ's inflation outlook could cause swift moves in yen markets, which became very volatile since Ueda hinted that something is cooking in his kitchen.