Forecasters have warned that the US dollar could face a “triple whammy” in the coming weeks, which could exacerbate its already weak seasonal performance.
According to Standard Bank, the US dollar could be hit if the Supreme Court rules that tariffs are illegal and if Kevin Hassett, director of the White House National Economic Council, is appointed as the chair of the Federal Reserve. The bank also said that the Japanese yen could rise if Japan raises interest rates this month.
Deutsche Bank also believes that Japan has room to raise interest rates. In addition, stronger economic data from other countries will weigh on the US dollar during the year-end period.
Steven Barrow, head of G10 strategy at Standard Bank, wrote in a report: “Interest rate hikes, coupled with unfavorable tariff rulings and a Federal Reserve led by Hassett, could be the triple whammy that shakes the dollar. Even if it doesn’t happen in the remaining weeks of this year, it will definitely occur in early 2026.”
As foreign exchange trading tapers off towards the end of the year, market liquidity often eases as investors close out positions before establishing new ones at the start of the new year. Barro added that although trading is thin and subject to seasonal factors, “it’s hard to believe that the illegality of an important Trump policy would have much impact on the dollar.”
Tim Baker, a macro strategist at Deutsche Bank, said that over the past decade, December has “undoubtedly been the worst month for the dollar”, as traders typically sell the currency to balance out gains from other US assets throughout the year. He also added that given the possibility of the Bank of Japan tightening monetary policy and potential surprises in the economic situation outside the US, the recent buying momentum of the dollar could reverse this month.
Beck wrote in a report: “We believe the dollar has room to fall back to around its third-quarter low, which is about 2% below the spot price.”
The potential candidates for the next chair of the Federal Reserve will bring another pressure point to the US dollar. President Donald Trump hinted that he might appoint his chief economic adviser, Hassett, to lead the Federal Reserve. Hassett is generally believed to support a significant interest rate cut, and his appointment might further boost market expectations for rate cuts next year.
Russell Investments’ global head of foreign exchange, Van Luu, said: “The market believes that under Hassett’s chairmanship, the market reaction function may be more dovish.” He also added that Hassett’s appointment will help the US dollar fall below the four-year low of 1.19 dollars against the euro this year.
Deutsche Bank and Standard Bank said that historically, interest rate hikes in Japan have often led to a significant appreciation of the yen, especially against the US dollar. Market expectations for a 25 basis point rate hike this month have increased. After the central bank sent the clearest signal so far on the possibility of tightening monetary policy on Monday, the market widely believes that the probability of a rate hike is as high as 80%.
Technical analysis:
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Gold: Yesterday’s alert in our plugin about the yellow area sweeping liquidity was very accurate with the price movement. After the price dropped below 4190, it didn’t continue to fall but stabilized and rebounded, and has now returned to the 4220/30 area. Overnight, the price swept liquidity once above 4230. Today, we can try to participate in the signal of a direct upward break in momentum; at the same time, we also need to pay attention to the possibility of a rebound after a second sweep of liquidity near 4200. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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Nasdaq: Yesterday, our plugin reminded us to place a buy limit in the blue area after breaking through 25,430. The price movement was exactly as we expected. After touching the blue area, it rose all the way above 25,600. For today, we suggest reducing positions but still holding the long positions. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: Yesterday, our plugin provided two scenarios. The blue area was not broken through, so there was no entry opportunity. However, the yellow low-sweep area below had a liquidity that completed a move of more than 1x. For today, we suggest paying attention to the support left by the low-sweep in the yellow area last night, but a secondary confirmation is needed. Therefore, we need to wait for a new formed bullish engulfing pattern or other breakout signals before entering. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Key economic data and events to focus on today:
18:00 Eurozone Producer Price Index (Year-on-Year) for October
21:15 US November ADP Employment Change
22:15 US Industrial Output for September
23:00 U.S. November ISM Non-Manufacturing PMI
