As we step into Tuesday, December 10, 2024, global financial markets are setting the stage for another week of heightened volatility. Traders are closely analyzing key economic events and market movements from the previous week while preparing for critical data releases that will likely steer the market’s trajectory in the coming days. Last week’s trading sessions were marked by sharp fluctuations in major currency pairs as market participants responded to a series of impactful economic announcements. The U.S. labor market data and OPEC meeting grabbed much of the spotlight, setting the tone for risk sentiment. Meanwhile, central bank activities across the globe, including the RBA’s latest rate decision, added to the volatility.
The spotlight remains firmly on the U.S. dollar, which experienced mixed performance against its counterparts as traders digested robust labor data and inflationary trends. On the other side of the globe, the Australian dollar showed resilience following the Reserve Bank of Australia’s (RBA) decision to hold rates steady, with market participants speculating on its future policy direction. At the same time, the Japanese yen faced renewed selling pressure amidst a risk-on environment and strengthening U.S. Treasury yields. The British pound struggled to maintain its momentum, with its movements largely tied to mixed economic data and ongoing monetary policy speculation.
This week, all eyes will be on the continued fallout from the RBA rate decision and upcoming U.S. inflation data, which could have significant implications for the global currency market. Let’s delve into how major currency pairs performed in light of the most recent developments and assess potential trading strategies for the week ahead.
GBP/USD
Technicals in Focus
The GBP/USD pair showed heightened volatility, trading near the 1.2780 level after sharp swings influenced by weak U.K. manufacturing data and anticipation of U.S. inflation metrics. Traders remain cautious ahead of the Bank of England’s outlook on inflation. Key technical observations:
- The MACD indicates weakening bullish momentum.
- The Stochastic Oscillator is recovering from oversold levels.
- The 14-day RSI suggests a neutral to bullish bias.
Trading Strategy
- Neutral to Buy: Buy above 1.2780-1.2800, targeting 1.2830-1.2860, with a stop loss below 1.2750.
- Sell Scenario: Short below 1.2750, with targets at 1.2720-1.2690, stops above 1.2780.
USD/JPY
Technicals in Focus
The USD/JPY surged to the 151.13 level, driven by rising U.S. Treasury yields and upbeat labor market data. Market participants are closely monitoring upcoming U.S. CPI data and Japanese GDP figures for further direction. Technically:
- The MACD shows strong bullish momentum.
- The Stochastic Oscillator is overbought, signaling a potential corrective move.
- The 14-day RSI indicates an overbought condition, suggesting caution for long positions.
Trading Strategy
- Neutral to Sell: Sell below 151.10-150.90, targeting 150.50-150.20, with a stop loss above 151.40.
- Buy Scenario: Buy above 151.30, targeting 151.70-152.00, with stops below 151.00.
AUD/USD
Technicals in Focus
The AUD/USD rebounded sharply to close near 0.6460, buoyed by optimistic employment data from Australia and risk-on sentiment. However, upcoming RBA rate decisions will dictate the next leg of the move. Technically:
- The MACD is moving upward, signaling strengthening bullish momentum.
- The Stochastic Oscillator is exiting oversold territory, indicating potential for further gains.
- The 14-day RSI is neutral to bullish.
Trading Strategy
- Neutral to Buy: Buy above 0.6460-0.6480, targeting 0.6510-0.6530, with a stop loss below 0.6430.
- Sell Scenario: Short below 0.6430, with targets at 0.6400-0.6370, stops above 0.6460.
Market Outlook
Looking ahead, key economic releases such as the RBA rate decision and U.S. consumer inflation expectations are expected to influence market sentiment. The U.S. CPI data later in the week remains a critical focus, as it could shape Federal Reserve policy expectations.
In the U.K., the focus shifts to inflationary pressures and their impact on the GBP/USD, while Australian employment and RBA decisions will determine the AUD/USD trajectory. For the USD/JPY, yield differentials remain the driving force, with Japanese GDP data providing additional context.
Traders should prepare for elevated volatility as the markets react to these pivotal developments.