Market Analysis: US Dollar Falls amid Expectations of a US Interest Rate Cut

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The position of the US dollar remains under pressure amid expectations of the imminent launch of the US Federal Reserve's interest rate reduction program, as well as due to the publication of controversial macroeconomic statistics. Macroeconomic statistics from the United States published yesterday put moderate pressure on the position of the American currency. The housing price index in October decreased from 0.7% to 0.3%, with a forecast of 0.5%. The S&P price indicator in annual terms strengthened from 3.9% to 4.9%. The Federal Reserve Bank of Chicago National Activity Index strengthened in November from -0.49 points to 0.03 points. The indicator of activity in the industrial sector of the Dallas Fed in December - from -19.9 points to -9.3 points. The focus of investors today will be on American statistics on the dynamics of mortgage lending and retail sales volumes from Redbook for the week of December 22.

EUR/USD

According to EUR/USD technical analysis, the EUR/USD pair shows weak trading dynamics, remaining close to 1.1040. Immediate resistance can be seen at 1.1034, a break higher could trigger a move towards 1.1089. On the downside, immediate support is seen at 1.0996, a break below could take the pair towards 1.0978.

Activity in the market remains extremely low, due to the Christmas holidays, due to which many trading platforms are closed. Investors continue to assess the prospects for a change in the direction of monetary policy by the world's major central banks. The US Federal Reserve is expected to take the first steps aimed at lowering interest rates as early as March 2024. The ECB and the Bank of England may make similar decisions, given the pace of decline in inflationary pressure in the EU and the UK.

The ascending channel is maintained. Now the price is in the middle of the channel and may continue to rise.

GBP/USD

On the GBP/USD chart, the pair is trading with slight positive dynamics, testing the 1.2727 mark for an upward breakdown. Immediate resistance can be seen at 1.2794, a break higher could trigger a rise towards 1.3394. On the downside, immediate support is seen at 1.2688, a break below could take the pair towards 1.2657.

Changes in monetary policy are also expected from the Bank of England, but experts agree that the regulator may be one of the last to decide on such actions. Meanwhile, the UK economy continues to slow. At the end of last week, the market received updated statistics on GDP dynamics for the third quarter, reflecting a decrease of 0.1% in monthly terms. In annual terms, the economy added 0.3%, which was twice as bad as the previous value. At the same time, the dynamics of retail sales in November accelerated by 1.3% after 0.0% in the previous month, while experts expected 0.4%.

The ascending channel is maintained. Now the price is in the middle of the channel and may continue to rise.

USD/JPY

On the USD/JPY chart, the pair is showing moderate growth, developing a weak corrective impulse formed at the beginning of this week. The price is testing the 142.60 mark for a breakout upward. Strong resistance can be seen at 142.92, a break higher could trigger a rise towards 143.43. On the downside, immediate support is seen at 141.81. A break below could take the pair towards 141.00.

Currently, more than 70.0% of analysts suggest that the first interest rate adjustment by 25 basis points could occur as early as during the regulator's March meeting. Meanwhile, the Bank of Japan is generating opposite signals. At the beginning of the week, the head of the central bank, Kazuo Ueda, noted that officials are ready to consider the possibility of abandoning the policy of negative interest rates as inflation approaches the target level of 2.0% in the near future, provided that wage growth in the country continues. The November statistics from Japan published this week do not provide significant support for the yen. The unemployment rate remained at 2.5%, and the ratio of vacancies to applicants adjusted from 1.3 to 1.28. The volume of housing starts fell by 8.5% after -6.3% a month earlier, while analysts expected -4.3%, and in absolute terms, the number of housing starts dropped from 0.808 million to 0.775 million. Tomorrow investors will evaluate the data from Japan on the dynamics of retail sales and industrial production. Forecasts call for sales to rise 4.2% to 5.0% in November, with industrial production contracting 1.6% after rising 1.3%.

The price has broken through the upper boundary of the downward channel and may continue to rise.

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