Forex Today: Quiet markets ahead of US CPI and the Fed; Gold extends slide

During the Asian session, RBA Governor Bullock will speak, and the Australian Westpac Consumer Confidence report is due. Japan will release wholesale inflation and trade balance figures. Later in the day, the focus turns to UK employment data and the US Consumer Price Index. The last FOMC meeting of the year kicks off.

Here is what you need to know on Tuesday, December 12:

The key event on Tuesday will be the US inflation figures. The Consumer Price Index (CPI) is expected to show a 0.1% increase, while the annual rate is projected to slow from 3.2% to 3.1%. The annual core rate is expected to remain at 4%.

The FOMC begins its two-day meeting. No change is expected to be announced on Wednesday. The focus will be on new macroeconomic projections and Federal Reserve Chair Jerome Powell’s comments.

The US Dollar Index (DXY) modestly rose on Monday, ending above 104.00, but it was unable to break the resistance area at 104.30, limited by some risk appetite. The gains were driven by a rally of the Dollar against the Japanese Yen. US Treasury yields remained little changed..

Analyst at TD Securities on the US Dollar: 

The USD surged higher post payrolls as we had expected. We are wary of the USD staying elevated at current levels in the near-term heading into US CPI and year-end. Beyond that, we continue to look for USD downside in the medium-term with steep Fed cuts in H2 24.

EUR/USD is in consolidation around 1.0760, holding steady ahead of key events. The pair traded within Friday’s range amid subdued price action. The ZEW survey will be released on Tuesday. On Thursday, the European Central Bank will have its monetary policy meeting.

USD/JPY rose for the second consecutive day and climbed above 146.00, extending the rebound from under 142.00. The Japanese Yen was among the worst performers as investors downgraded the likelihood of a short-term policy change from the Bank of Japan. Japan will release the Producer Price Index for November and the trade balance for September.

GBP/USD is steady, hovering around the 20-day Simple Moving Average (SMA) at 1.2550. The pair approached 1.2600 and pulled back. The UK employment report is due, with the Unemployment Rate expected to remain at 4.2% for the three-month period ending in October. The Bank of England will announce its monetary policy decision on Thursday.

AUD/USD closed flat at 0.6565, around the 20-day and 200-day Simple Moving Averages. The pair is moving sideways without a clear bias. Reserve Bank of Australia (RBA) Governor Michele Bullock will speak at an event. The Westpac Consumer Confidence survey and the National Australia Bank’s Business report are also due.

Gold broke below $2,000 and tumbled, reaching a low under $1,980 before stabilizing. The yellow metal remains under pressure and is struggling below the 20-day SMA. Technical indicators are showing oversold conditions. With the US CPI and FOMC meeting ahead, volatility is expected to remain elevated. Bitcoin extended its retreat from multi-month highs and dropped to around $40,000.

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