Forex Today: US Dollar stays strong despite US data; Metals remain under pressure

The main focus remains on US labor market data. ADP will report on private employment on Wednesday, and the Unit Labor Cost data will also be important. Before US figures, during the Asian session, Australia will report Q3 GDP, while Eurozone Retail Sales will be released during European hours. The Bank of Canada is expected to keep rates unchanged. 

Here is what you need to know on Wednesday, December 6:

The US Dollar strengthened despite lower US Treasury yields and mixed US data. In the short term, the trend remains positive for the Greenback, however most currency pairs show overbought technical conditions. The US Dollar Index recorded its highest daily close in two weeks, around 104.00, and continued to rebound from monthly lows.

Data released from the US on Tuesday revealed a larger-than-expected decline in JOLTS Job Openings, dropping by 617,000 to 8.73 million in October, indicating a more balanced labor market. The November ISM Services PMI exceeded expectations, with an increase to 52.7. More labor market data will be released on Wednesday with the ADP Employment Report and Q3 Unit Labor Costs.

Analysts at Wells Fargo after US data, ahead of next week’s FOMC meeting: 

With prices still firmly in expansion and employment rising slightly, it suggests that recent expectations for rate cuts might have been pulled too far forward (…) We anticipate the fed funds rate probably has reached its terminal level of this cycle. But we still expect the Fed to keep the door open to the possibility for additional tightening at its policy meeting next week, particularly in the context of the recent loosening in financial conditions. Ultimately the Fed will need to see more progress on inflation before it begins to outright ease policy.

EUR/USD has declined to the 100-day Simple Moving Average (SMA), falling below 1.0800, which marks the lowest level in two weeks. This drop extends the downward movement for the fifth consecutive day, indicating a need for consolidation. However, the Euro is not showing many positive signs, despite the positive revision of Eurozone PMI data for November. On Wednesday, Eurozone Retail Sales data will be released.

The Australian Dollar weakened on Tuesday following the pause from the Reserve Bank of Australia (RBA). AUD/USD tumbled toward the 0.6550 area, falling below the 200-day Simple Moving Average (SMA) while AUD/NZD fell below 1.0700 and posted the lowest daily close since mid-October. On Wednesday, Australia's Q3 GDP data is due.

USD/CAD continued its upward trend for the second day in a row, extending its recovery from two-month lows and climbing towards 1.3600. The Bank of Canada will announce its decision on Wednesday, and market expectations point towards the key interest rate remaining unchanged at 5%. As there will be no accompanying Monetary Policy Report or press conference, the impact on the market may be limited.

Analysts at TD Securities: 

We look for the BoC to stay the course and hold rates at 5.00%, as a softer economic backdrop drives some dovish tweaks in the statement. However, its desire to maintain tight financial conditions sets a high bar for more significant changes to its guidance.

Bitcoin continued to drift higher and surpassed $43,000, reaching its highest level since April 2022. Similarly, Ethereum has climbed above $2,250, marking its highest point since May 2022.

Meanwhile, metals remain under pressure. Gold failed to benefit from lower Treasury yields, resulting in XAU/USD dropping to $2,010, the lowest level in a week. Silver tumbled to $24.00.

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