Asia-Pacific markets start the week positively, with Japan returning from a four-day holiday. There's cautious optimism due to fresh uncertainty around the Federal Reserve's 2025 moves, as recent data failed to fuel US Dollar bulls. News of China's stimulus and strong Caixin Services PMI also supports sentiment. However, concerns over Donald Trump's potential actions, new US sanctions on Russian oil, and rising US-China tensions keep traders cautious of key events this week.
The US Dollar Index (DXY) remains under pressure after pulling back from a two-year high, but this doesn't boost Gold or Crude Oil prices. Instead, major currencies and Antipodeans see slight gains. Notably, USDJPY bucks the trend, staying mildly positive despite mixed signals from Bank of Japan (BoJ) Governor Kazuo Ueda.
Friday’s upbeat US ISM PMI didn’t boost the US Dollar as traders await this week’s FOMC Minutes and US NFP to confirm the previous hawkish Fed stance.
The Dollar's retreat allowed EURUSD to extend its recovery from the lowest level since November 2022, fueled by cautious FOMC member statements. Similarly, GBPUSD bounced back from its lowest point since April 2024, despite a British Chambers of Commerce survey showing over half of businesses plan to raise prices in the next three months.
Despite a weaker US Dollar, USDJPY remains mildly bid on the first trading day of 2025 in Japan. This move aligns with cautious comments from BoJ Governor Ueda, who stated that interest rate hikes depend on economic growth and inflation. Along with uncertainty over the Fed's next moves and a hint of market optimism, these factors supported the risk-sensitive pair.
China’s Caixin Services PMI hit a seven-month high, alongside the People’s Bank of China (PBoC) planning to boost financial support for innovation and consumption to drive economic growth. This lifted sentiment and benefited commodity-linked currencies. Over the weekend, a PBoC-backed newspaper confirmed the bank's strong support for the Yuan.
As a result, AUDUSD and NZDUSD saw a three-day rebound from yearly lows, while USDCAD broke a three-day winning streak, unaffected by a pullback in Crude Oil and political tensions in Canada.
Gold remains under pressure after pulling back from a three-week high, ignoring the US Dollar's retreat, as traders stay cautious ahead of key events this week. Similarly, Crude Oil fails to rally despite geopolitical tensions and a weaker US Dollar, retreating from its highest level since mid-October 2024.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) remain resilient, breaking through short-term consolidation patterns. A positive industry outlook, driven by hopes around a potential Trump presidency and increased crypto buying by major players, along with a softer US Dollar, support their upward momentum.
With the New Year festivities behind, a busy week of data and events awaits market players. Key highlights include the FOMC Minutes, EU inflation data, and employment reports from Canada and the US. Also, final PMI readings for December from Germany, the Eurozone, the UK, and the US, along with US Factory Orders and Germany’s inflation figures, will catch the attention of intraday traders.
The US Dollar is likely to consolidate its recent gains and remain pressured intraday, due to mixed data and a cautious mood ahead of major events. This could allow Gold and Crude Oil to recover losses, while other major currencies and Antipodeans may edge higher. Cryptocurrencies and equities may face slight declines, and USDJPY bears could struggle as doubts about the BoJ's rate hikes persist.
May the trading luck be with you!
