Market moves:

  • WTI crude oil up $0.99 or 1.47% at $68.19
  • US 10-year yields up 5 bps at 4.203%
  • 2 year yield up 3.1 bps at 4.128%
  • Bitcoin down -$4176 or -4.12% at $97,037
  • Gold up $27.75 or 1.05% at $2660.06
  • S&P 500 down -37.42 points or -0.61% at $6052.85
  • Nasdaq -123.08 points or -0.62% at 19736.69

The day started with the AUDUSD and NZDUSD leading the way to the upside (lower USD) on the back of increased Chinese stimulus measures helping the risk on flows for those countries currencies. Although both are off their highs heading into the US session close, they are maintaining solid gains of 0.80% and 0.62% respectively on the day.

The JPY meanwhile tumbled (the USD rising) on the back of higher US yields. Overall, the USDJPY is down -0.85% on the day. The fall in the JPY represents the largest decline since November 6. The 10-year yield is trading up 5 basis points while the 2-year is up a more modest 3.1 basis points.

The gain in yields come despite the 85% expectation that the Fed will cut rates by 25 basis points next week.

Fundamentally, supporting the rising yields was the NY Fed survey of inflation expectations which rose modestly across the forward calendar:

  • One-year inflation expectations rose to 3.0% from 2.9% last month (a four-year low)
  • Three-year inflation expectations 2.6% vs 2.5% prior
  • Five-year inflation expectations 2.9% vs 2.8% prior

Also, US employment trends rose marking consecutive monthly gains for the first time in 2024. The increases in October and November added up to the largest two-month increase in the ETI since the torrid period of job gains in 2022 coming out of the pandemic. Recall that the US job gain and revision were higher than expectation on Friday supporting the ETI gains.

Technically,

  • The EURUSD is closing the day near the converged 100 and 200 hour moving averages at 1.0545. Move below that level and then the 100 bar MA on the 4-hour chart at 1.05307 would tilt the technical bias more to the downside. Stay above 1.0545 would give the buyers the upper hand with the 1.0592 to 1.0609 as a key upside target to get to and through.
  • The AUDUSD is off its highs for the day that tested a swing area at 0.6471 to 0.6481. The fall from that resistance took the price back toward the 100-hour MA at 0.6430 (the price is trading at 0.6438 currently). The RBA is expected to keep rates unchanged when they meet in the new trading day. If the price moves below the 100 hour MA, that would tilt the technical bias more to the downside. Conversely. stay above and getting above the 200 hour MA at 0.6462 would have traders looking to break a swing area up to 0.6482 followed by the 38.2% of the move down from the November high at 0.6493.
  • The USDJPY trended higher today, but did find some sellers near a swing area between 151.19 to 151.27. THe high reached 151.32. The price is trading at 151.22 within that swing area as the new day begins. Will the buyers keep the momentum going with the 38.2% of the move down from the November high at 151.736 as the next target, or will sellers push back to the downside after the sharp move higher on Momday?