The first week of December has shown a dip-buying seasonal pattern, as all major indices consistently rose. Yet, under the surface, a more important price pattern unfolded in the forex market as shifting central bank expectations and an improving global risk tone drove a meaningful rotation.
The U.S. Dollar spent most of the week underperforming G10 currencies. A run of data – softer private employment, mixed but not alarming labor indicators, and the Fed’s preferred inflation gauge slipping to its lowest year‑on‑year level since May – all reinforced the conviction that the central bank will cut rates.
Although longer‑dated Treasury yields staged a firmer rebound into the end of the week, that move was not enough to rebuild a meaningful Dollar bid. As risk sentiment improved, investors showed renewed appetite for higher‑beta currencies.
The Swiss Franc underperformed, reflecting a fade in defensive positioning as yields outside Switzerland ticked higher and equity markets held their nerve. The Euro also traded heavy, struggling to generate upside despite US dollar softness, as investors remained wary of the euro area’s lacklustre growth profile and limited yield advantage. In contrast, the Australian Dollar surged to the top of the pack as markets leaned into the idea that the RBA may ultimately need to resume tightening in 2026.
Governor Michele Bullock’s comments to parliament regarding the danger of re-accelerating inflation provided a narrative that traders quickly embraced.
The Canadian Dollar was not far behind, supported by another strong labor market print that bolstered expectations for the Bank of Canada to hold rates steady well into 2026, while Sterling continued to benefit from lingering optimism following the broadly well‑received Autumn Budget.
Pairs In Focus
1. EUR AUD
Aussie dollar strength pushed this pair to fresh lows as price action broke the critical support level.
The focus is now on a lower trendline, although further near-term opportunities could come from selling the pullbacks, particularly if they reject the support.
EUR AUD daily chart, Source: TradingView
2. CHF SGD
After a fakeout high, this pair returned to a key level and then created a short-term higher high. Although clear signs of a market structure break are here, it is worth watching for a potential level break and a new lower low.
If such a scenario transpires, there will be opportunities to short any pullbacks and capture a larger move to the downside.
CHF SGD, daily chart, Source: TradingView
The Week Ahead
Looking ahead, the week’s market is firmly focused on the FED’s December decision, though the market sees it as almost a done deal. The CME FedWatch tool shows the probability of a rate cut at nearly 90%.
With a cut fully priced in, the US dollar’s path is less about the cut itself but more about how convincingly the Fed signals its easing trajectory into 2026, and whether the incoming market data can validate the relatively aggressive rate-cut profile.
Note: Any opinions expressed in this article are not to be considered investment advice and are solely those of the authors. Singapore Forex Club is not responsible for any financial decisions based on this article's contents. Readers may use this data for information and educational purposes only.
