Traders Await New Bullish Momentum On XAUUSD

Last week was full of uncertainties and mixed signals, but US indices ultimately ended in the green after the PCE report — the Fed's preferred inflation gauge — confirmed that inflation remains elevated, near 3%, well above the 2% target, but broadly stable.

Core PCE even eased slightly to 2.8% from 2.9%. More importantly for sentiment, both the 1-year and 5-year Michigan inflation expectations fell. December's survey showed a modest improvement in consumer sentiment — likely helped by the holiday season — but current conditions deteriorated. The softening in recent economic data explains why inflation expectations are easing: the weaker the labour market, the more cautious households become, and the slower price pressures build. That's not good news for Main Street — but it is good news for Wall Street, where investors are eager for rate cuts as long as corporate earnings hold up.

The good news for them is that a 25bp Fed cut on Wednesday is essentially locked in. The recent weakness in employment data and a stable, up-to-date PCE print support that decision.

But what happens next is the part no one agrees on. The FOMC is divided. Some members worry that tariff-driven inflation could offset disinflationary forces and argue for caution — versus those pushing for quicker cuts, in line with political pressures and public preference. The base case is that politics will dominate and that rates will continue to move lower as the committee rotates toward members more aligned with the incoming administration's views, starting with a new Federal Reserve (Fed) Chair.

But here is the risk: if the Fed delivers politically driven cuts without economic justification, markets could push back and long-term yields could rise.

Elsewhere, the Reserve Bank of Australia (RBA), the Bank of Canada (BoC) and the Swiss National Bank (SNB) are all expected to keep rates unchanged. In Japan, today's weak GDP print raised some doubts among Bank of Japan (BoJ) hawks, but 10-year yield continues to climb — now around 1.96% — as wage growth accelerates and keeps inflation concerns alive. The BoJ still looks likely to hike next week.

Meanwhile, tensions between China and Japan are rising, boosting Japanese defence stocks, with Mitsubishi and Kawasaki Heavy Industries each up between 2-3% this morning. Chinese equities, by contrast, are gaining on strong trade data showing a robust jump in exports last month as firms rushed to move inventory ahead of the latest tariff truce with the US.

Oil is also firmer: WTI broke above its 50-day moving average last Friday and closed the week above it, suggesting that further upside is possible, supported by a softer US dollar — which, in theory, should help EM demand — and ongoing AI-related energy needs.

AI earnings: two major AI-linked names report earnings this week. Let's start with the simpler one: Broadcom, reporting Thursday. Expectations are constructive. Broadcom continues to benefit from Google's accelerating deployment of TPUs — for internal use and for Google Cloud customers. Broadcom is one of Google's key partners in producing these chips, handling physical design and components for the latest TPU generations. Rising TPU demand therefore translates into meaningful revenue for Broadcom. The company also recently expanded its client base, including chip supply for Meta. Altogether, the stock remains — for now — relatively resilient to the broader AI-sector volatility.

Oracle, however, is more complicated. The company is now treated as a bellwether of AI-related balance-sheet RISK: it has taken on significant debt to fund its AI and cloud expansion, and carries a lower credit rating than its Big Tech peers. Its 5-year CDS widened sharply last week to a 16-month high.

Analysts expect Oracle to report roughly $16.2bn in revenue and $1.63 EPS. Those figures look solid at first glance but current estimates imply about 9–10% revenue growth and 11–12% EPS growth versus last year. That signals that Wall Street is no longer expecting blowout numbers, but rather a steadier, more incremental climb as Oracle converts its large AI-cloud backlog into realised revenue. Expectations are low — the good news. The bad news is that investors will scrutinise margins and capital efficiency.

Oracle's massive cloud and AI build-out has required equally massive spending. Capex has surged as the company races to expand data-centre capacity, putting pressure on margins just as scrutiny intensifies. At the same time, Oracle's elevated debt load remains one of the largest in Big Tech, and the recent CDS widening shows that credit markets are increasingly sensitive to how much leverage is being used to finance its AI push.

Source: Swissquote Bank SA

German industrial production rose much more than anticipated, supporting assumptions that the economy will return to growth in the final quarter of 2025.

Output increased 1.8% from the previous month in October, up from a revised 1.1% in September, Destatis said in a statement. That surpassed analyst estimates for a 0.3% gain.

The advance was driven by construction, machinery and electronics products, though output in the car industry fell, the statistics agency said.

Europe's largest economy was boosted by trade at the start of the year as companies rushed to avoid US tariffs. A reversal of that effect weighed on output in the following months, almost tipping the country into another recession.

Germany may see slight growth in the fourth quarter as exports and the manufacturing sector in general "stabilize," the Bundesbank said last month. A significant pickup is forecast next year thanks to government spending on infrastructure on defense.

Factory orders also rose in October, driven by large-scale orders — in particular a 87% jump in the transport category that includes aircraft, ships, trains and military vehicles, data Friday showed.

Industrial firms have still rung the alarm due to their worsening competitive position. The influential BDI business lobby said last week that every month without effective structural reforms will cost more jobs and prosperity.

Surveys by S&P Global last month confirmed the important manufacturing sector still faces significant challenges, with an activity index falling to a nine-month low. Firms have frequently complained about excessive red tape, high labor costs and growing competition from China.

Source: Bloomberg Europe

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Source: Bloomberg

Key Highlights

EUR/USD Technical Analysis

The Euro started a decent increase above 1.1550 against the US Dollar. EUR/USD cleared the key barrier at 1.1600 to enter a positive zone.

Looking at the 4-hour chart, the pair gained pace for a move above 1.1620. It traded as high as 1.1681 and settled above the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour).

It is now consolidating gains above 1.1620. There is also a key bullish trend line forming with support at 1.1630. Immediate resistance sits near 1.1660. The first key hurdle is seen near 1.1680.

A close above 1.1680 could open the doors for a move toward 1.1725. Any more gains could set the pace for a steady increase toward 1.1780.

On the downside, there is key support at 1.1630 and the trend line at 1.1620. The next support is 1.1580 and the 100 simple moving average (red, 4-hour). A close below the 100 simple moving average (red, 4-hour) could spark a bearish move and send the pair to 1.1510. Any more losses might call for a test of 1.1465.

Looking at GBP/USD, the pair rallied above 1.3300 and recently started a consolidation phase. The main support sits at 1.3260.

Source: ACTIONFOREX

Export Rebound Masks Deepening U.S. Trade Weakness

Trade Surplus Rises While Domestic Demand Falters

Domestic Manufacturing Under Pressure Despite External Gains

Source: CNBC

This week, market attention turns to the Fed's final rate decision of the year. Updates to the dot plot, adjustments to economic projections, and Powell's remarks could all be key factors influencing gold's year-end trajectory.

Technical Observation: Consolidation Near Highs, $4,250 Resistance Stands Out

Looking at the XAUUSD daily chart, gold has been trading in a tight range between $4,180 and $4,250. Bulls face clear resistance near $4,250, with multiple attempts failing to hold above this level. Although the uptrend formed at the end of October remains intact, buying momentum has been limited, keeping supply and demand relatively balanced.

On Monday morning, gold traded near $4,200. To the upside, $4,250 is a critical level for resuming the uptrend. A sustained break above this level, accompanied by higher volume, could reignite bullish momentum, pushing toward $4,300 and ultimately the record high of $4,381.

To the downside, a drop below last week's $4,180 low would shift focus to the October uptrend line near the 50-day moving average, likely attracting buying interest and prompting a short-term rebound.

FOMC Decision in Focus: Gold Awaits Guidance

Bullish factors remain dominant for gold. In the U.S., the December rate cut is priced at nearly 90%, the dollar is weak, and internal Fed divisions over the path of future easing have grown, all supporting gold. Meanwhile, China's central bank increased its gold holdings for the 13th consecutive month in November, reinforcing price support. Yet, last week's economic data only reinforced existing bullish narratives without providing new momentum.

At the same time, U.S. Treasuries faced continued selling, with yields rising, reflecting cautious expectations for a "hawkish cut," which adds some pressure to the non-yielding asset.

The market's focus is squarely on the Fed's decision this week. Beyond the rate cut itself, traders are watching dot plot updates, Powell's tone, and guidance on the 2026 rate cut path. Unlike Powell's previous emphasis on internal consensus, committee members now differ significantly in both policy direction and magnitude. Even minor adjustments by a few members could lead to notable dot plot shifts and rate path changes.

The baseline scenario for traders is that the U.S. labor market faces downside risks, unemployment forecasts may be slightly revised higher, and Powell may acknowledge internal Fed divisions while using moderately hawkish language on the rate cut. With dot plot uncertainty intact, this policy risk hedging could provide some support to gold.

If the Fed's outcome and comments are clearly dovish, gold's upside momentum could strengthen further. Conversely, if economic forecasts show persistent inflation and some Fed members lean hawkish, delaying 2026 rate cuts, profit-taking could intensify, putting short-term pressure on gold prices.

Beyond the Fed: Other Key Events This Week

Overall, gold remains in high-level consolidation, and market confidence in its long-term bullish outlook stays firm. In the short term, "range trading and trend-following" remains the preferred strategy. Until $4,250 is decisively breached, chasing positions carries risk. Any reasonable pullback is likely to attract buying interest and support prices.

Aside from the Fed, the market will also monitor policy meetings from the RBA, Bank of Canada, and Swiss National Bank. The market's main tension has shifted from simply validating economic data to pre-pricing potential divergences in major central bank policies. Greater volatility in interest rates and currencies could further enhance gold's appeal as a safe-haven asset.

On Tuesday, the U.S. will release October JOLTS job openings, expected at 7.15 million. This will be the first data reflecting the true labor market post-government shutdown, potentially shaping expectations for Fed policy.

If the figure falls below consensus, it may reinforce expectations of a weaker labor market, increase the probability of rate cuts, and provide additional support for gold.

Source: Pepperstone