Week Ahead: USD to test 200-period SMA resistance?

The world’s reserve currency suffered its worst month this year in November.

Negative seasonal pressures on USD have historically emerged around the latter part of the year in November and December.

Bloomberg data shows the Dollar Index has returned an average of around -0.9% in December since 1997.

On the charts, the index found support at a major Fibonacci retracement level (61.8%) of the summer rally at 102.54.

The midpoint (50%) of that move higher sits above at 103.46, together with the 200-day simple moving average at 103.60.

Events Watchlist
 

• Tuesday, December 05: RBA Rate Decision

The RBA is expected to leave the cash rate unchanged at 4.35%, after a 25bp hike last month. That was due to an upward revision to the inflation outlook and came after four straight months of on hold decisions. CPI printed below forecast in October, but the bank will probably remain alert to upside risks, which should keep AUD supported.
 

• Wednesday, December 06: Bank of Canada Rate Decision

The Bank of Canada is likely to keep rates on hold at 5% at its statement-only meeting. Economic challenges are intensifying and there has been an ongoing dovish repricing of Fed rate expectations. This means there could be a modestly softer hawkish tone with support in USD/CAD at the 200-day simple moving average at 1.3515.
 

• Friday, December 8: US Non-Farm Payrolls

Analysts forecast a headline print of 200k, slightly higher than the prior 150k, which brought down the three-month average to just above 200k. Watch out for revisions. The jobless rate is expected at 3.9% and average hourly earnings at 0.3%. A softer report will reinforce the Fed pivot and see USD struggle.

Here’s comprehensive list of other key economic data and events due this week:

Monday, December 4

• EUR: ECB President Lagarde Speech, Germany trade
• USD: US factory orders

Tuesday, December 5

• CNH: China Caixin services PMI
• AUD: Reserve Bank of Australia rate decision
• EUR: Eurozone Services PMI
• JPY: Japan Tokyo CPI & PMI (Final)
• USD: US ISM Services, Job openings

Wednesday, December 6

• AUD: Australia GDP
• CAD: Bank of Canada rate decision
• EUR: Eurozone retail sales, Germany factory orders
• GBP: Bank of England biannual stability report
• USD: US trade

Thursday, December 7

• CNH: China trade, forex reserves
• AUD: Australia trade balance
• EUR: Eurozone GDP, Germany industrial production
• USD: US initial jobless claims

Friday, December 8

• JPY: Japan GPD, household spending
• EUR: Germany CPI
• USD: US jobs report, University of Michigan consumer sentiment