Foreign exchange trading reminder: The dollar is approaching the 200-day moving average, bullish signals are increasing, and attention is paid to the Bank of Canada's decision

Wednesday (December 7) Asian session, the dollar index narrowly oscillated, currently trading around 105.60. The dollar rose slightly against the euro and the yen on Tuesday, the U.S. stock market was sold off, providing safe-haven support for the dollar, investors are trying to prepare for the Federal Reserve's expected interest rate hike next week. From a technical point of view, after the bottom of the dollar index daily level MACD deviated from the initial gold fork, KDJ gold fork, short-term bullish signal has strengthened, 200-day moving average and 10-day moving average resistance are around 105.68. If it stands above this position, it is expected to further rise to the 21-day moving average near 106.49.

The dollar edged up 0.27 per cent on Tuesday to close at 105.57, extending gains on Monday when data showed an unexpected pick-up in US services activity in November, prompting speculation that the Federal Reserve's rate-hiking cycle could peak higher than recently expected. Traders now expect the Fed to announce a 50 basis point rate hike on December 14.

"There wasn't a lot of new stimulus," said Marc Chandler, chief market strategist at BannockburnGlobalForex. "There was a lot of activity yesterday, but the biggest focus was next week's Fed meeting."

Next week will also see key data such as the Consumer Price Index (CPI) for November.

Mr. Chandler said the dollar could benefit from bearish sentiment in equities, noting that it "tends to benefit from a risk-averse environment". All three major US stock indexes closed sharply lower on Tuesday, with the S & P 500 closing lower for a fourth straight session.

The euro fell 0.26% to $1.0465 against the dollar on Tuesday, while the dollar rose 0.8% against the yen.

ConstantinosHerodotou, a member of the European Central Bank's governing council and president of the Central Bank of Cyprus, said on Tuesday that interest rates would rise further but were now "very close" to neutral levels.

The dollar rose 0.5% against the Canadian dollar on Tuesday, hitting a one-month high at 1.3675 during the session to close at 1.3650, making the Canadian dollar the worst performing currency on Tuesday. The Bank of Canada will announce its interest rate decision on Wednesday. Slightly more than half of economists polled by Reuters expect a 50 basis point hike, but traders put the probability of a 25 basis point hike at 73.3%. The slump in international oil prices on Tuesday also weighed on the Canadian dollar's performance.

The Australian dollar ended the session down 0.15 per cent at $0.6687 against the dollar, having rallied after the Reserve Bank of Australia raised interest rates for the eighth time in as many months. The Reserve Bank of Australia also said it was not on a course to tighten policy but inflation remained high.

Francesco Pesole, currency strategist at ING, said the impact on energy markets could be felt soon after Western countries' price caps on Russian seaborne crude oil take effect on Monday.

Key economic data and events on Tuesday

15:00 European Central Bank Chief Economist Lien delivers a speech

22:30 ECB Executive Panetta delivers a speech

23:00 Bank of Canada announces interest rate decision

institutional perspective

Goldman Sachs CEO: 35% chance of a soft landing in a recession

Goldman Sachs CEO Solomon said Tuesday that he expects a recession in the U.S. economy in the coming months, as interest rate hikes and inflation will continue to cripple the current relatively strong economy. He said that while many companies and clients are still performing relatively well, the outlook for 2023, along with projected geopolitical uncertainty and Federal Reserve rate hikes, has made Goldman Sachs and its clients much more cautious. Goldman Sachs economists are currently forecasting global economic growth of 1.9 percent in 2023, but 2024 is still less certain. When asked about the possibility of a soft landing, Solomon said there is about a 35 percent chance, while the economy will maintain a positive growth pattern of around 1 percent, while inflation is around 4 percent.

JPMorgan CEO Dimon: Inflation could push the U.S. into recession next year

Dimon said Tuesday that U.S. businesses are still in good shape and consumer spending remains strong, but that may not last long. He said the Federal Reserve may raise interest rates to 5 percent next year, but even that may not be enough to bring inflation back to its 2 percent target. A growing number of influential Wall Street executives and business titans have seen their views on the economy deteriorate in recent months, with Goldman Sachs CEO David Solomon, Tesla and Twitter CEO Elon Musk, Alphabet CEO Sundar Pichai and former Amazon CEO Jeff Bezos all expressing concern about the possibility of a recession next year

The Atlanta Fed's GDPNow model has raised its fourth-quarter GDP forecast for the United States

The current Atlanta GDPNow model's projection for US real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2022 stands at 3.4%, up from 2.8% on December 1. Forecasts for real personal consumption expenditure growth in the fourth quarter and real government spending growth in the fourth quarter rose from 3.2% and 0.8% to 3.7% and 1.1%, respectively, following the release of the latest data from the US Census Bureau, the US Bureau of Labor Statistics, and the Institute for Supply Management. However, these figures were slightly offset by the recent forecast for private gross domestic investment in the fourth quarter falling from 2.0% to 1.7%. In addition, the near-term forecast for the contribution of changes in real net exports to real GDP growth in the fourth quarter rose from 0.16 percentage points to 0.37 percentage points.

ABN Amro: Bank of Canada will raise interest rates by 50 basis points, but the positive for the Canadian dollar will be short-lived

Persistently high inflation, strong economic activity and an extremely tight job market provide the rationale for the Bank of Canada to raise interest rates by another 50 basis points. However, recession fears are growing and policy is in restrictive territory, which means rates appear to be near the top. Markets are currently pricing in just 32 basis points, so a 50 basis point hike would be seen as a surprise move by hawks and could push the Canadian dollar higher, butforeign exchange marketThe reaction should be short-lived, as external factors remain more important to the Canadian dollar. The fragility of recent risk sentiment suggests that downside risks for all high-beta currencies remain high. But the tighter supply situation in the crude oil market does leave room for a recovery in oil prices, which should be a positive development for the Canadian dollar. With the strengthening of the dollar likely to be offset by a potential oil price recovery, the dollar is expected to reach around 1.37 against the Canadian dollar this year.