Weekly Outlook | Market Reactions to Geopolitical Tensions, Central Bank Decisions, and Key Economic Data

Fundamental data:

Last week, the CAD dominated the forex market, with the CADCHF currency pair as the top performer gaining +1.45% driven by a rise in Canadian bond yields, particularly the 10-year yield, which climbed 5.8 basis points to 3.5%. This was fueled by a Canadian fiscal stimulus proposal and reduced expectations for a significant rate cut from the BoC. The SNB’s focus on low inflation also supported the CAD. Conversely, the EUR was the weakest currency, with EURCAD losing 1.85% amid weaker-than-expected PMI data across the Eurozone. In commodities, XAUUSD rose to USD 2,710 per ounce, bolstered by safe-haven demand following escalating geopolitical tensions between Ukraine and Russia. Worth noting that crypto markets remain strong in general and the positive risk sentiment also helps to cause equities to rise.

Important events this week:

New Zealand Interest Rate- on Wednesday 26 November 2024 at 02:00 CET, the New Zealand official cash rate figure will be released forecasted at 4.25%. The Reserve Bank of New Zealand lowered its official cash rate (OCR) by 50 basis points to 4.75% during its October 2024 policy meeting, marking the second consecutive rate cut and aligning with market expectations.

NZDUSD broke key daily chart support at 0.5850 last week, pressured by dovish RBNZ rate cut expectations (50 bps) and a stronger-than-expected US Flash Services PMI (57.0 vs. 55.2 forecast), boosting USD strength. If the breakout holds, bears may target 0.5520.

US Core PCE MoM – on November 27, 2024, at 02:00 CET, the US Core PCE Price Index m/m is set for release, with a forecast of 0.3%. This follows a 0.3% increase in September, the largest gain in five months, after August’s upwardly revised 0.2% rise, aligning with market expectations.

EURUSD broke the key weekly chart support at 1.0450 last week, driven by weak Eurozone PMI data, broad USD strength, geopolitical tensions, and policy uncertainties amplifying sovereign risks. If the breakout holds, bears may target 0.9930; a reversal could see bulls eyeing 1.0620, with moves hinging on German Prelim CPI (Nov 28), US Core PCE, and escalating Russia-Ukraine tensions weighing on the Euro.

Gold (XAUUSD) – Gold extended its recovery despite a surging dollar hitting a 2-year high, supported by easing US Treasury yields (2-year down 3.8 bps to 4.2%, 10-year down 5 bps to 4.4%) and safe-haven demand amid escalating geopolitical tensions, including Ukraine’s missile strike and Russia’s hypersonic retaliation with renewed nuclear threats.

XAUUSD broke 4H resistance at USD 2,710, driven by safe-haven demand amid Ukraine’s first strike on Russia and recovery from post-election losses. If the breakout holds, bulls may target USD 2,820; if it fails, bears could aim for USD 2,670, with price action shaped by escalating Russia-Ukraine tensions fueling safe-haven flows.