The Australian Dollar lost some momentum during the European session on Monday, with AUD/USD retreating toward the 0.6700 handle after touching an over-one-year high of 0.6727 earlier in the day. The pullback reflects a classic bout of profit-taking following weeks of strong gains rather than a decisive shift in market sentiment, as the broader macro backdrop continues to tilt in favor of the Aussie.

The retreat comes at a time when the US Dollar is trading with little conviction. The US Dollar Index (DXY), which measures the greenback against a basket of six major peers, hovered around the 98.00 mark, underscoring a lack of strong directional drivers ahead of key US policy signals. Currency markets are largely in wait-and-see mode ahead of the release of the Federal Open Market Committee (FOMC) minutes on Tuesday, which could provide fresh insight into the Federal Reserve’s thinking on the path of interest rates.

Despite Monday’s modest pullback, the Australian Dollar has been one of the standout performers in recent weeks. The rally has been fueled by growing confidence that the Reserve Bank of Australia may ultimately need to maintain a tighter policy stance for longer — and potentially even consider rate hikes in 2026 — if inflation pressures prove sticky.

Those expectations were reinforced by the latest inflation data. Australia’s monthly Consumer Price Index rose at a faster-than-expected pace of 3.8% year-on-year in October, highlighting persistent price pressures in parts of the economy. While the RBA has maintained a cautious tone, the data strengthens the case that policymakers may be reluctant to pivot dovishly anytime soon. In relative terms, that contrasts with the US outlook, where markets continue to price in a more aggressive easing cycle.

At its most recent meeting, the Federal Reserve cut interest rates by 25 basis points, taking the benchmark rate to a range of 3.50%–3.75%, and signaled that only one additional rate cut may be delivered in 2026. However, market pricing tells a different story. According to the CME FedWatch Tool, traders currently see a 73.3% probability that the Fed will reduce rates by at least 50 basis points in 2026, highlighting a growing divergence between official guidance and investor expectations.

This disconnect has helped cap US Dollar strength and provided breathing room for higher-yielding and growth-linked currencies such as the Australian Dollar. Until that gap between the Fed’s messaging and market pricing is resolved, the greenback may struggle to regain sustained upside momentum.

From a technical perspective, the AUD/USD pullback looks corrective rather than trend-changing. The pair remains in a well-defined bullish structure, characterized by higher highs and higher lows on the daily chart. Price action continues to respect an ascending channel, often viewed as a bullish continuation pattern, with shallow pullbacks suggesting strong underlying demand.

Earlier in the rally, AUD/USD consolidated in a key demand zone around 0.6580–0.6600. The subsequent clean breakout from that area signaled accumulation and confirmed bullish intent. More recently, the pair has pushed above prior resistance levels, effectively turning them into support — a classic sign of strengthening momentum.

Momentum indicators also paint a constructive picture. Relative strength measures remain positive, with no clear bearish divergence visible, even as the market flirts with overbought territory. Importantly, price continues to trade above the 50-period exponential moving average (EMA50), reinforcing the view that the short-term trend remains firmly to the upside.

From here, the 0.6700 region represents an important near-term support area, aligned with former resistance and the upper boundary of the prior breakout zone. As long as AUD/USD holds above channel support in the 0.6650–0.6670 range, the broader bullish bias remains intact. A deeper pullback toward the 0.6420–0.6450 area would threaten that outlook, but for now such a move appears unlikely without a major shift in fundamentals.

On the topside, sustained strength could open the door toward the 0.7050–0.7100 region over the medium term, particularly if Australian inflation remains elevated and US rate-cut expectations continue to weigh on the Dollar.

BUY AUDUSD

ENTRY PRICE: 0.6700

STOP LOSS: 0.6650

TAKE PROFIT: 0.7100

The New Zealand dollar was the best - performing major currency last week, rising approximately 1.3% against the euro and outperforming most major currency pairs. The asset has continued its downward trend from the November highs, with momentum indicators signaling an accelerating decline phase. Nevertheless, as the secondary decline failed to break below the previous low, the asset is likely to resume its upward momentum.

Fundamental conditions have trended favorable in recent weeks. The most crucial shift came from the Reserve Bank of New Zealand (RBNZ), which signaled that the 25 bp rate cut in November might be the final move of the easing cycle. This guidance marks a notable shift in market sentiment after months of concerns over downside risks to economic growth.

Subsequent data has largely confirmed the RBNZ’s stance. GDP rebounded strongly by 1.1% QoQ in Q3, sufficient to offset the unexpected 0.9% QoQ contraction in Q2. Business confidence has also improved sharply, with the ANZ Business Confidence Index surging to a 30-year high in December.

These developments have sparked early speculation that the RBNZ may even consider a rate hike by the end of 2026 if the economic recovery gains strong traction. However, such talk remains premature and is highly contingent on the sustained improvement of the overall economy.

The new RBNZ Governor, Adrian Orr, has firmly dismissed speculation about monetary policy tightening, emphasizing that policy is not set in stone. In fact, some soft spots remain in the economy. The services sector continues to languish, with the Bank of New Zealand Services Index hovering at 46.9 in November.

From a technical perspective, EURNZD triggered a strong rebound last week after briefly breaking below the 2.0075 level. The robust support at the MA55 is a clear bullish signal in the near term. The current secondary decline has not breached the previous low, and the key focus is on the resistance level of the medium - term uptrend line (currently at 2.0680). A sustained break above this resistance will further confirm that the decline from last week's low of 2.0075 has concluded and will form a continuation of the upward momentum.

Trade Direction: Buy

Entry Price: 2.0231

Target Price: 2.0904

Stop Loss: 2.0000

Valid Until: 13 January, 2026, 23:55:00

Support: 2.0220/2.0157/2.0074

Resistance Levels: 2.0561/2.0682/2.0823

The Euro–Pound cross traded modestly lower on Monday, hovering around the 0.8715 area at the time of writing, as the rally seen in the previous session began to lose momentum. The pause comes against a backdrop of diverging — yet increasingly nuanced — monetary policy expectations between the Bank of England (BoE) and the European Central Bank (ECB), with Sterling finding relative support from a more restrained outlook on future rate cuts.

The British currency has been underpinned by recent remarks from BoE Governor Andrew Bailey, who struck a careful balance between acknowledging the need for further easing and warning against assuming an aggressive cutting cycle. Bailey indicated that interest rates are likely to come down further, but stressed that any moves would be gradual and increasingly constrained as borrowing costs approach what policymakers consider a neutral level. His comments reinforced the message that future decisions will be finely balanced and highly sensitive to incoming economic data, particularly on inflation and wage growth.

That caution is rooted in the UK’s still-uncomfortable inflation picture. While headline inflation eased to 3.2% in November from earlier highs, it remains significantly above the BoE’s 2% target, keeping policymakers on edge. The central bank’s December decision to cut rates by 25 basis points to 3.75% was passed by a narrow five-to-four vote, underscoring persistent divisions within the Monetary Policy Committee and lingering concern that inflationary pressures may prove sticky.

Growth data offer little comfort either. UK GDP expanded by just 0.1% in the third quarter, in line with expectations, but momentum remains fragile. The BoE has already warned that growth is likely to be flat in the final quarter of the year, highlighting the delicate trade-off facing policymakers as they attempt to support activity without reigniting inflation. For now, markets appear to view the BoE as committed to a shallow and cautious easing path, a perception that has helped the Pound outperform the Euro at the margin.

On the Euro side, losses in EUR/GBP have been contained by signs that the ECB may be nearing the end of its own easing cycle. The central bank left interest rates unchanged earlier this month and signaled that policy is likely to remain on hold for some time. ECB President Christine Lagarde has repeatedly emphasized that the bank cannot offer clear forward guidance in the current environment, citing elevated uncertainty and reiterating a strictly data-dependent, meeting-by-meeting approach.

Money market pricing reflects this shift in expectations. Traders are now assigning less than a 10% probability to a 25-basis-point ECB rate cut as early as February, suggesting growing confidence that policymakers are comfortable with current settings. This perception of policy stability has helped limit downside pressure on the Euro, even as relative rate differentials continue to favor Sterling in the near term.

From a broader perspective, the Pound’s resilience reflects investor belief that the BoE will avoid aggressive easing well into 2026, provided inflation remains stubbornly above target. In contrast, the ECB’s apparent pause may cap EUR/GBP losses, resulting in a more range-bound environment as the year draws to a close. With liquidity expected to thin ahead of New Year celebrations, sharp moves may be limited unless fresh data deliver a clear surprise.

From a technical standpoint, EUR/GBP has begun to show clearer signs of fatigue. The pair has succumbed to negative momentum signals, with stochastic indicators turning lower and prompting a break below the previously supportive bullish trend around 0.8755. This move has opened the door to a corrective phase, with prices stabilizing near the 0.8730 region.

The former support level has now morphed into fresh resistance, reinforcing the bearish tone. At the same time, stochastic oscillators are attempting to push toward oversold territory, a combination that supports the dominance of sellers in the near term. As long as the pair remains capped below the broken trend line, downside risks appear to outweigh upside potential.

The next key area of interest lies around the 55-period moving average near 0.8670. A decisive move below this level would expose the additional support zone around 0.8685, where buyers may attempt to re-enter. Conversely, any rebound is likely to face selling pressure toward the 0.8745 area.

SELL EURGBP

ENTRY PRICE: 0.87250

STOP LOSS: 0.8770

TAKE PROFIT: 0.8670

The latest summary of opinions from the BoJ’s meeting held on December 18-19 has reinforced a distinct tightening bias. Many policymakers argued that the interest rate hike in December should not mark the end of the current cycle.

One view pointed out that there "remains a considerable gap" from the neutral rate level, and explicitly called for interest rate hikes "every few months". Another view held that the weakness of the Japanese yen and the rise in long-term yields are partly due to the policy rate being excessively low relative to the inflation level, indicating that a delay in policy normalization could exacerbate financial distortions.

Inflation took a prominent position throughout the discussions. Multiple members described the recent price pressures as "stubborn". One member emphasized that the spring wage negotiations will be a crucial test, noting that if wages maintain the target level for the third consecutive year, it can be confirmed that the underlying inflation rate has reached 2%.

However, not all parties endorsed an aggressive policy approach. Some policymakers urged prudence, pointing to uncertainties surrounding the neutral interest rate and the rapidly evolving global interest rate environment. They argued that flexibility should take precedence over setting specific policy targets.

At the meeting, the BoJ raised its policy rate to 0.75%, the highest level in 30 years.

The minutes showed that the government led by Prime Minister Takaichi Sanae did not oppose the BoJ’s latest rate hike, but struck a cautious tone. The representative of the Cabinet Office attending the meeting stated, "It is necessary to fully monitor the future developments of factors such as corporate fixed asset investment and corporate profits."

Famous for advocating stimulus policies, Takaichi Sanae took office as Prime Minister in October. Her inauguration sparked market doubts about the room for Kazuo Ueda to push ahead with policy normalization, but the political costs brought by inflation and the weak yen are believed to have limited resistance to this month’s rate hike.

Minister of Economic Growth Strategy Minoru Kiuchi was one of the three Cabinet Office representatives present at the meeting. He was a founding member of a group within the ruling party that advocates for supportive stimulus policies.

The market has largely priced in this month’s rate hike in advance, as signals from Kazuo Ueda prior to the decision indicated that conditions for scaling back monetary easing were falling into place.

The consolidation of USDJPY since 157.88 is still ongoing, with the intraday trend remaining neutral. Given that the support level at 154.33 remains intact, the outlook stays bullish. On the upside, a decisive break above the key structural resistance level at 158.85 will serve as a crucial medium-term bullish signal, with the next target being the high of 161.94. However, a break below 154.38 will shift the trend to downward, potentially triggering a deeper correction.

Trade Direction: Buy

Entry Price: 156.00

Target Price: 161.07

Stop Loss: 154.00

Valid Until: 13 January, 2026, 23:55:00

Support: 156.04/155.54/154.33

Resistance Levels: 156.73/157.05/157.76

According to data from job search website Adzuna, the UK labor market is experiencing a simultaneous cooling in hiring and rising wages. Over the year to November, the number of online job advertisements fell sharply by 15.2%, the largest drop since 2025, and has declined for five consecutive months on a month-on-month basis, indicating a clear contraction in employers' willingness to hire. This trend is closely tied to the policy environment: since Chancellor Rachel Reeves raised social security contributions last year, businesses have become more cautious about staffing, while concerns over potential further tax increases have also weighed on the jobs market, pushing the UK unemployment rate to its highest level since 2021 in the three months to October. In stark contrast to the slowdown in hiring activity, wage growth remains robust. Over the same period, advertised salaries rose by 7.7% compared with the previous year, an acceleration from the prior month, with particularly strong wage gains in the IT sector. This contradictory situation puts the Bank of England in a dilemma: strong wage growth could intensify inflation stickiness, while signs of cooling hiring and economic slowdown support continued accommodative monetary policy. In December, the BoE cut its policy rate by 25 basis points to 3.75%, with a vote split of 5–4 highlighting persistent inflation concerns. Although November's inflation rate fell to 3.2%, it remains well above the BoE's 2% target. UK GDP grew by 0.1% in Q3, in line with expectations, but the BoE expects Q4 GDP to be flat. Governor Bailey hinted that rates are likely to decline further, but warned that as rates approach neutral levels, room for additional cuts is limited. Any move beyond the latest cut would require careful calibration and would largely depend on forthcoming economic data.

The CME FedWatch tool shows an 80.6% probability that the Federal Reserve will keep rates unchanged at its January meeting, up from 77.9% a week earlier. Meanwhile, the likelihood of a 25-basis-point cut has dropped from 22.1% a week ago to 19.4%. The US central bank cut the federal funds rate by 25 basis points in December, lowering the target range to 3.50%–3.75%. Amid a cooling labor market and still-elevated inflation, the Fed plans cumulative rate cuts of 75 basis points in 2025. In addition, the latest weekly US labor market data were mixed. Initial jobless claims fell to 214,000 from 224,000 the previous week, better than the market forecast of 223,000. Meanwhile, continuing claims rose from 1.885 million to 1.923 million, while the four-week moving average of initial claims edged down from 217,500 to 216,750. Traders may focus on Tuesday's FOMC meeting minutes from December, as they could shed light on internal policy debates that shape the Fed's outlook for 2026.

Regarding the daily chart, GBP/USD forms a "dark cloud cover" pattern. The MACD and signal lines are about to produce a death cross, and RSI highs are starting to retreat, signaling an impending correction. The price is likely to break below the EMA12 area. Nearby support lies around the EMA12 and the Bollinger Middle Band at approximately 1.343 and 1.330, respectively. RSI stands at 67, indicating bullish sentiment in the market. The one-hour chart suggests that the Bollinger Bands are widening downward, moving averages are diverging lower, and price has broken below the EMA50. MACD upward momentum is gradually weakening, with both lines crossing bearishly and falling below the zero line, suggesting short-term bearish momentum. Support is found near the EMA200 and round-number levels at roughly 1.344 and 1.340. RSI is at 42, reflecting pessimistic sentiment, and RSI highs are gradually declining. Therefore, it is recommended to sell at highs.

Trade Direction: Sell

Entry Price: 1.349

Target Price: 1.29

Stop Loss: 1.36

Support: 1.3/1.29/1.28

Resistance: 1.35/1.36/1.373

Geopolitical uncertainty is also driving market risk-aversion sentiments. Trump disclosed that ceasefire negotiations between Russia and Ukraine are "close to reaching an agreement," but key territorial disputes remain unresolved. Ukrainian President Zelenskyy claimed that an agreement on security guarantees with the U.S. has been reached; however, Russia launched a large-scale missile strike early on the 27th targeting Kyiv and other areas’ energy and civilian infrastructure, indicating that the conflict is unlikely to see substantial de-escalation in the near term. Additionally, the Trump administration announced a blockade on sanctioned oil tankers operating in and out of Venezuela. These geopolitical events have exacerbated market volatility, boosting demand for safe-haven assets. Capital flow trends further confirm increased market activity. As of December 26, the world's largest gold ETF, SPDR Gold Trust, holdings rose to 1,071.13 tons, an increase of 18.59 tons over the week. IG analyst Tony Sycamore noted that the silver market is exhibiting "generational bubble" characteristics, with significant capital inflows into precious metals. This phenomenon is driven not only by market expectations of Federal Reserve interest rate cuts and central bank and private sector physical buying but also by the severe imbalance in silver supply and demand, fueling a surge in physical silver buying enthusiasm.

The Federal Reserve has implemented three rate cuts this year, with traders anticipating an additional two reductions next year. According to the CME FedWatch tool, financial markets project nearly a 19.4% probability of a rate cut at the Fed's upcoming January meeting. Last week, President Trump expressed his preference for the next Federal Reserve chair to maintain low-interest rates indefinitely and to avoid policy divergence. The market's expectations for a dovish shift in U.S. monetary policy through 2026 continue to intensify, with current forecasts indicating two rate cuts for the year, potentially beginning as early as mid-year. Additionally, market participants are closely monitoring potential Fed chair candidates, with current National Economic Council Director Hassett and former Fed Governor Warsh regarded as front-runners. Given President Trump's longstanding calls for rate reductions, market sentiment suggests that the new chair may adopt a dovish stance, further reinforcing the narrative of medium- to long-term monetary easing. Despite recent resilient economic data in the U.S., investor optimism for policy easing remains unaffected. On the debt front, U.S. Treasury debt has surpassed US$38.5 trillion, with escalating debt pressures fueling concerns over economic and financial risks in 2026—prompting continued safe-haven demand for precious metals. Meanwhile, the global central bank's gold reserve accumulation and de-dollarization structural trends have solidified gold prices' long-term support.

The 4H Bollinger bands are contracting, indicating narrowing price volatility, while SMAs remain flat, suggesting that the bullish trend persists. The candlestick shows a long upper shadow, signaling significant short-term resistance. The MACD has formed a death cross, indicating weakening upward momentum; the MACD line and signal line are pulling back towards the zero-axis, which is still relatively distant, implying that the correction is incomplete. A breach below the middle Bollinger band would likely lead to a correction towards the EMA50 or the lower Bollinger band, at approximate levels of 4418 and 4400 respectively. The RSI stands at 52, indicating a neutral market with resistance at 4500 and 4550. In the 1D timeframe, prices are trending upward along the upper Bollinger band, but a bearish engulfing pattern suggests caution; as long as 4550 is not broken, a short-term correction towards the EMA12 at around 4400 is expected. The RSI peak is beginning to decline without confirming a top, while the RSI reading of 72 indicates the price remains in a bullish zone. It is recommended to go short before going long.

Trading Direction: Sell

Entry Price: 4494

Target Price: 4100

Stop Loss: 4600

Support: 4200, 4100, 3800

Resistance: 4530, 4550, 5000