Forex News
USD/CNH continues to drift lower amid a softer US Dollar (USD) and another strong CNY fix, with the PBoC guiding the RMB along a controlled appreciation path. USD/CNH last seen at 7.0536 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note, OCBC's FX analysts Frances Cheung and Christopher Wong note.
PBoC maintains steady appreciation pattern for RMB
"USD/CNH continued to trade lower, taking cues from a softer USD and lower USD/CNY fix. The fix was set at 7.0638, the lowest in 14 months."
"The fixing pattern remains consistentsince Apr-2025 and we view this as a deliberate move to steer the RMB on a gradual appreciation path while maintaining market order. Rapid appreciation is likely not what policymakers wish to see as that could lead to a rush for exporters to convert USD holdings (in turn resulting in disorderly appreciation or higher volatility)."
"Daily momentum is flat while RSI is near oversold conditions. Support here at 7.05, 7.0380 levels. Decisive break past these levels risk the pair overshooting towards 7. Resistance at 7.08 (21 DMA)."
The Nasdaq 100 is stabilizing after breaking its descending channel and retaking the 50-DMA, but momentum is capped near the 25,890 gap, Société Générale's FX analysts note.
Index builds base after reclaiming 50-DMA
"Nasdaq 100 recently broke above the upper band of a steep descending channel and reclaimed the 50-DMA. The advance has stalled near previous down gap at 25890pts. The index appears to be forming a small base."
"The 50-DMA, currently around 25200pts, is a short-term support and defending this is crucial for continuation in the uptrend. A breakout above 25890pts could pave the way for extension in up move towards October highs near 26180pts, followed by projections around 26600pts."
Recent policy meetings suggest China has moved away from tariff-related emergency response mode. Upgrading and rebalancing gaining importance in the policy agenda to foster self-sustained growth. Macro policies will likely remain supportive, but we see little appetite to ramp up stimulus, Standard Chartered's Shuang Ding and Hunter Chan report.
From 'extraordinary' to 'necessary'
"The Central Economic Work Conference (CEWC), which concluded on 11 December, elaborated on the policy agenda for 2026. The top policy makers pledged to enhance 'countercyclical and cross-cyclical adjustment'. This indicates that the authorities are looking beyond near-term volatilities following the recent US-China trade deals, and refocusing on tech-driven growth and expanding domestic demand. A year earlier, policy makers had vowed to strengthen 'extraordinary countercyclical adjustment', scaling up stimulus to offset the negative external shock from the looming trade wars."
"China will 'continue to implement more proactive fiscal policy and moderately loose monetary policy' according to the CEWC, suggesting no major change to the macro policy stance. Policy makers pledged to maintain a 'necessary' deficit size, compared to 'raising the deficit ratio' in late 2024. We expect the official deficit ratio to be reduced slightly to 3.8% of GDP in 2026 from 4.0% in 2025. They also asked the PBoC to keep liquidity ample and use tools such as reserve requirement ratio (RRR) and policy rate cuts 'flexibly and effectively', suggesting there is no intention of aggressive easing. We expect a 25bps RRR cut in Q1-2026 and a 10bps policy rate cut in Q2."
"Policy makers also vowed to prevent a further decline in investment; rectify disorderly competition; and stabilise the housing market. Boosting the services sector was highlighted in three of the eight major tasks for 2026. We expect more fiscal resources to be directed to infrastructure and further opening up the services sector."
Brent is drifting toward October’s $60.10 support, with only limited rebound potential amid persistent failure at the 200-DMA, Société Générale's FX analysts note.
200-DMA at $66.80 remains firm resistance
"Brent is gradually approaching October’s lows near $60.10, which could act as interim support. A brief rebound cannot be ruled out; however, Brent has consistently failed to establish above the 200-DMA during the recent downtrend."
"The moving average, currently around $66.80, serves as a key short-term resistance. A failure to clear this hurdle may result in continuation of decline. Below $60.10, the next objectives could be located at the April/May lows of $58.40 and $55.00."
Silver prices (XAG/USD) rose on Friday, according to FXStreet data. Silver trades at $64.16 per troy ounce, up 0.94% from the $63.56 it cost on Thursday.
Silver prices have increased by 122.07% since the beginning of the year.
Unit measure | Silver Price Today in USD |
|---|---|
Troy Ounce | 64.16 |
1 Gram | 2.06 |
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 67.24 on Friday, broadly unchanged from 67.28 on Thursday.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
(An automation tool was used in creating this post.)
- USD/CAD falls further to near 1.3750 amid continued underperformance by the US Dollar.
- The Fed signaled on Wednesday that it will reduce the Federal Fund Rate to 3.4% by 2026.
- The BoC stated this week that interest rates should remain at their current levels in the near term.
The USD/CAD pair extends its losing streak for the fourth trading day on Friday. The Loonie pair trades 0.1% lower to near 1.3750 during the European trading hours. The pair is under pressure as the US Dollar (USD) underperforms, following the monetary policy announcement by the Federal Reserve (Fed) on Wednesday.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades vulnerably near its seven-week low of 98.13 posted on Thursday.
The US Dollar is broadly weakening amid expectations that the Fed will deliver more interest rate cuts in 2026 than what the latest dot plot showed. According to the CME FedWatch tool, there is a 58% chance that the Fed will cut borrowing rates at least two times through October 2026. On the contrary, the Fed’s dot plot showed that officials see the Federal Fund Rate sliding to 3.4% by the end of 2026, suggesting that there will be one interest rate cut next year.
Meanwhile, the Canadian Dollar (CAD) outperforms its peers, except antipodeans, as the Bank of Canada (BoC) is unlikely to cut interest rates in the near term. In the monetary policy statement on Wednesday, the BoC reiterated that the “current rate is at about the right level to keep inflation close to 2%” as long as the “economy and inflation evolve in line with projections”.
USD/CAD technical analysis
USD/CAD trades lower at 1.3760 on Friday. The pair sits below the descending 20-day Exponential Moving Average (EMA) at 1.3921, keeping the short-term bias bearish and capping rebounds.
The 14-day Relative Strength Index (RSI) at 28 is oversold, flagging stretched downside conditions. Measured from the 1.3543 low to the 1.4142 high, the 61.8% retracement at 1.3772 offers interim support. A close below it would open the 78.6% retracement at 1.3671.
Downside pressure persists while price holds under the 20-EMA, with recovery attempts expected to struggle against this dynamic barrier. RSI remains below 30 and would need to rebound to stabilize momentum. A move back above the 20-EMA at 1.3921 would ease the bearish tone and allow a corrective bounce, whereas failure to defend 1.3772 would keep focus on lower levels.
(The technical analysis of this story was written with the help of an AI tool)
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
- Gold scales higher for the fourth straight day and remains supported by a combination of factors.
- The Fed’s dovish outlook weighs on the USD and continues to act as a tailwind for the commodity.
- Geopolitical risks further benefit the safe-haven XAU/USD, offsetting the prevalent risk-on mood.
Gold (XAU/USD) prolongs its uptrend for the fourth straight day and climbs beyond the $4,300 mark, hitting a fresh high since October 21 during the first half of the European session on Friday. The US Dollar (USD) struggles to attract any meaningful buyers and remains close to a two-month low, touched on Thursday, amid the Federal Reserve's (Fed) dovish outlook. This, in turn, is seen as a key factor that continues to drive flows towards the non-yielding yellow metal.
Apart from this, stalled talks on the Russia-Ukraine peace deal keep geopolitical risks in play and turn out to be another factor that benefits the safe-haven Gold. The supporting factors, to a larger extent, offsets the risk-on mood and does little to hinder the safe-haven commodity's move higher. This, in turn, suggests that the path of least resistance for the bullion remains to the upside. Traders now look to speeches from influential FOMC members for short-term impetus heading into the weekend.
Daily Digest Market Movers: Gold bulls retain control as Fed rate cut bets keep USD on the defensive
- The US Federal Reserve's dovish outlook dragged the US Dollar to an over two-month low and lifted the non-yielding Gold to its highest level since October 21 on Thursday. In a widely expected move, the US central bank lowered borrowing costs by 25 basis points on Wednesday and projected just one more rate cut in 2026.
- Fed Chair Jerome Powell said during the post-meeting press conference that the US labor market has significant downside risks and that the central bank does not want its policy to push down on job creation. This fueled speculations about two more rate cuts by the Fed next year and, in turn, favors the XAU/USD bulls.
- Meanwhile, Asian stocks tracked the overnight strength on Wall Street and advanced in early trade on Friday, which is seen undermining demand for the traditional safe-haven bullion. However, prospects for lower interest rates in the US, along with persistent geopolitical uncertainties, could lend support to the commodity.
- Meanwhile, US President Donald Trump is extremely frustrated with Russia and Ukraine, and he doesn't want any more talk, his spokeswoman said on Thursday. Earlier, Ukrainian President Volodymyr Zelensky said that the US was pushing it to cede land to Russia as part of an agreement to end a nearly four-year war.
- There isn't any relevant market-moving economic data due for release from the US on Friday, leaving the USD at the mercy of speeches from influential FOMC members. Apart from this, the broader risk sentiment could provide some impetus to the yellow metal, which remains on track to register strong weekly gains.
Gold builds on strength beyond $4,300 following a trading range breakout on Thursday
The overnight strong move up confirmed a fresh bullish breakout through a nearly two-week-old trading range hurdle, around the $4,245-4,250 region. Moreover, oscillators on the daily chart are holding in positive territory and are still away from being in the overbought zone, suggesting that the path of least resistance for the Gold price remains to the upside. Hence, any further pullback towards the aforementioned resistance breakpoint could be seen as a buying opportunity. This should limit losses for the XAU/USD pair near the $4,220-4,218 region, which is followed by the $4,200 mark and the $4,170-4,165 support area. A convincing break below the latter might shift the bias in favor of bearish traders and pave the way for deeper losses.
On the flip side, the $4,300 mark now seems to act as an immediate hurdle, above which the XAU/USD pair could climb to the next relevant hurdle near the $4,328-4,330 region. The momentum could extend further and allow the Gold to aim towards challenging the all-time peak, around the $4,380 zone, touched in October. Some follow-through buying beyond the $4,400 round figure will be seen as a fresh trigger for bullish traders and set the stage for an extension of the commodity's recent well-established uptrend from the October monthly swing low.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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