FOREX: Early Risk Off Gives Way To Broader USD Gains, MXN Underperforms
USD gains have been fairly uniform against the G10 as Monday's Asia Pac session unfolded. Initial risk off drove AUD and NZD underperformance but this wasn't sustained. USD/JPY got to lows of 156.66, but now sits close to session highs, last 157.25/30, up around 0.30%. This keeps the recent uptrend intact, with upside focus likely to rest near the 158.00 (where we got to late last year post the Dec BoJ rate hike and where FX intervention rhetoric picked up from Japan officials).
- Despite the firmer US equity futures, and regional equity tone (albeit mainly focused in the tech/AI space), along with higher metal prices, the A$ has struggled to recovery ground. The pair was last around 0.6670/75. This is back close to the 20-day EMA support point, near 0.6660, which also coincides with recent lows. The 50-day EMA is further south near 0.6610.
- NZD/USD is off by a similar amount, last near 0.5750. This is close to recent lows in the pair around 0.5740, with a clean break lower potentially bringing 0.5700 back into focus.
- EUR/USD is softer as well, last 1.1680/85, levels last seen in the first half of Dec 2025. We are right around the 50-day EMA currently. GBP/USD is down 0.20% to 1.1325/30 right on the 20-day EMA support point.
- USD/MXN has risen close to 0.70%, up to 18.02/03. This keeps us close to highs from the second half of the Dec. Broader USD trends have aided the move, while remarks from US President Trump around needing to do something to curb drug flows from Mexico has likely weighed on sentiment as well. The weekend military action in Venezuela may leave the market not ruling out the possibility of US military action in Mexico to curb drug related activity.
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USDCAD TECHS: Bull Channel Breakout
- RES 4: 1.4140 High Nov 5 and a key resistance
- RES 3: 1.4131 High Nov 21
- RES 2: 1.4051 High Nov 28
- RES 1: 1.3939/4016 Low Nov 28 / 20-day EMA
- PRICE: 1.3865 @ 16:35 GMT Dec 5
- SUP 1: 1.3853 Intraday low
- SUP 2: 1.3840 50.0% retracement of the Jun 16 - Nov 6 bull cycle
- SUP 3: 1.3812 Low Sep 23
- SUP 4: 1.3779 Low Sep 22
A bear theme in USDCAD remains intact and Friday’s strong sell-off reinforces a bear theme. The pair has breached an important support at 1.3942, the base of a bull channel drawn from the Jul 23 low. The break highlights a stronger bear cycle and signals scope for an extension towards 1.3840 next, a Fibonacci retracement point. Initial firm resistance to watch is 1.4016, 20-day EMA.
LOOK AHEAD: US Week Ahead: FOMC Decision Dominates, Post Shutdown Data Catch-Up
- Next week’s US calendar is dominated by the FOMC decision on Wednesday, with a third consecutive 25bp cut almost fully priced.
- Expect it to be a contentious meeting however, with many arguing for a pause not least whilst they’re still relatively in the dark on key official data releases following the government shutdown.
- Fed Chair Powell opted for a surprisingly hawkish tone at the late October press conference, highlighting a deeply divided committee on prospects for another cut in December.
- The “fog” had appeared to win out until NY Fed’s Williams, a senior permanent voter, gave unusually explicit guidance on still seeing room “for a further adjustment in the near term”. With no pushback from FOMC members or media briefings, it appears this message has approval from the core of the FOMC which should be enough to see a rate cut this month. The likely catalyst was the further increase in the unemployment rate to 4.44% back in September, although subsequent tracking suggests stabilization and jobless claims data don’t show any signs of deterioration.
- We’ll be looking for the number of hawkish dissents (we’d be surprised if anyone joins Miran dissenting for a 50bp cut) and expect a greater number to object to a cut in the 2025 dot plot, whilst the distribution of dots for 2026 should be in greater focus.
- As for the economic projections, we expect upward revisions to GDP growth but downward revisions to near-term core PCE inflation with tariff passthrough proving less severe than previously feared.
Aside from the Fed, we also receive two months worth of JOLTS data along with other delayed releases as the shutdown data backlog is slowly caught up.
AUDUSD TECHS: Bullish Impulsive Wave Extends
- RES 4: 0.6723 High Oct 21 ‘24
- RES 3: 0.6707 High Sep 17 and a key resistance
- RES 2: 0.6660 High Sep 18
- RES 1: 0.6649 Intraday high
- PRICE: 0.6630 @ 16:32 GMT Dec 5
- SUP 1: 0.6580/6533 High Nov 13 / 20-day EMA
- SUP 2: 0.6517 Low Nov 27
- SUP 3: 0.6466/21 Low Nov 26 / 21
- SUP 4: 0.6415 Low Aug 21 / 22 and a bear trigger
A strong impulsive bull wave in AUDUSD remains intact, having printed 10 consecutive sessions of higher highs. Recent gains have cleared a number of important short-term resistance points, strengthening a bull theme and highlighting scope for a continuation higher. Today’s rally has resulted in a breach of 0.6640, 76.4% of the Sep 17 - Nov 21 bear leg. This opens 0.6707, the Sep 17 high and key resistance. Key support to watch is at 0.6533, 20-day EMA.
