Weekly Forecast Video on Forex, BTCUSD, XAUUSD
Stay ahead in the markets with our detailed analysis of gold and forex trade setups for this upcoming week, Dec 23 to Dec 27.
XAUUSD – Gold Shines Bright on Tepid US Inflation Figures
Gold has always held a special place in the financial world. It’s not just a shiny metal; it’s a haven for investors during uncertain times and a marker of economic sentiment. Recently, gold has experienced some intriguing movements, particularly in response to economic data from the United States. Let’s dive into what’s been happening with gold prices, the factors influencing its trajectory, and why this matters to you.
XAUUSD has broken the descending channel in the upside
Understanding Gold’s Current Journey
Gold’s price movements have been anything but straightforward recently. While it managed to hold onto modest gains after a tough week, its upward momentum has faced challenges. The root of this behavior lies in economic indicators, particularly from the US, which have had a domino effect on the dollar and, consequently, on gold.
The Role of US PCE Inflation Data
The Personal Consumption Expenditures (PCE) Price Index, a key measure of inflation, plays a pivotal role in shaping market dynamics. Recent data showed a softer-than-expected increase in inflation. This wasn’t just any inflation data—it’s the Federal Reserve’s preferred measure for gauging price stability.
Here’s a quick breakdown:
- Monthly increase: PCE inflation rose by a mere 0.1% compared to the anticipated 0.2%.
- Yearly rate: It ticked up to 2.4%, still below the market’s 2.5% expectations.
- Core inflation: A crucial metric for filtering out volatile components like food and energy, core inflation eased to 0.1% from the previous month’s 0.3%.
For gold, this means mixed signals. Softer inflation typically weakens the dollar, which should benefit gold. However, when the precious metal doesn’t capitalize on this, it raises questions about underlying pressures.
The Push and Pull of US Economic Data
The US economy’s resilience continues to shape gold’s journey. The recently revised third-quarter Gross Domestic Product (GDP) and lower-than-expected jobless claims painted a picture of economic strength, supporting the Federal Reserve’s more aggressive stance on interest rates.
GDP Growth and Its Impact
US GDP for Q3 grew at an impressive annualized rate of 3.1%, a step up from earlier estimates. This robust growth underscores a healthy economy, often translating to higher interest rates. For gold, which doesn’t offer interest, this can be a dampener as investors seek better returns elsewhere.
Job Market Resilience
The job market is another key player here. Weekly jobless claims fell to 220,000, much lower than the market’s expectation of 230,000. This indicates a strong labor market, which typically supports a stronger dollar and puts downward pressure on gold.
Key Factors Keeping Gold in Check
While gold has managed to climb modestly, its recovery remains subdued. Let’s explore why:
1. High US Treasury Yields
US Treasury yields have been holding firm above the 4.50% mark, creating a challenging environment for gold. As a non-yielding asset, gold often struggles when Treasury yields are attractive. Investors looking for returns naturally gravitate towards bonds over gold in such scenarios.
2. The Dominance of the US Dollar
The US dollar, a significant factor in gold pricing, has extended its rally despite recent setbacks. A strong dollar makes gold more expensive for buyers using other currencies, limiting its appeal on the global market.
3. Fed’s Hawkish Stance
The Federal Reserve’s hawkish tone for 2025 adds another layer of complexity. With the central bank signaling higher rates for longer, gold faces headwinds as investors anticipate more dollar strength and increased bond yields.
What Does This Mean for Gold Investors?
If you’re keeping an eye on gold, you’re likely wondering what’s next. The interplay of inflation data, economic growth, and Federal Reserve policies creates a delicate balance that gold must navigate. Here’s what you might want to consider:
Short-Term Considerations
- Gold’s current resistance to break out of its slump might indicate cautious sentiment among traders.
- Key inflation reports and upcoming Federal Reserve meetings will be pivotal in determining the direction of gold prices.
XAUUSD is moving in an Ascending channel, and the market has reached the higher low area of the channel
Long-Term Outlook
- Gold remains a reliable hedge against economic uncertainty. Even if it struggles in the short term, its long-term value often shines through during economic downturns or geopolitical tensions.
- Diversification remains key. While gold might not always outperform, it can provide stability in a diversified portfolio.
Why Gold Still Matters
Despite the headwinds, gold isn’t losing its luster. It continues to serve as a trusted asset during uncertain times, offering stability when markets become volatile. Whether you’re an active trader or a long-term investor, understanding the factors influencing gold can help you make informed decisions.
Final Thoughts
Gold’s recent movements reflect the complexities of today’s economic landscape. From inflation data to Federal Reserve policies, several factors are shaping its path. While the journey might be bumpy, gold remains a valuable asset for those looking to hedge against economic uncertainty. Keep an eye on the broader picture, and remember that patience often pays off in the world of investing.
EURUSD – EUR/USD Finds Strength Amid Sluggish US Inflation Growth
The EUR/USD pair has been a hot topic among currency traders and financial enthusiasts alike. Recent developments in the global economy and decisions from central banks have significantly influenced this major currency pair. Let’s dive into why EUR/USD advanced, what factors drove this change, and what it means for the future.
EURUSD has broken the box pattern in the downside
What’s Driving the EUR/USD Rally?
The EUR/USD’s recent movement above the 1.0400 mark grabbed attention, especially after the pair dipped to a three-week low. Here’s what’s been shaping the pair’s performance:
Slower US Inflation Growth Eases Pressure on the Dollar
One of the major catalysts behind the EUR/USD rebound is the slower-than-expected growth in the United States’ Personal Consumption Expenditures (PCE) Price Index. The PCE is the Federal Reserve’s go-to metric for gauging inflation, and the latest data showed a year-over-year increase of 2.8% for core PCE inflation. This fell short of the projected 2.9%, signaling that inflation might not be as persistent as feared.
Month-on-month data also painted a subdued picture, with only a 0.1% rise compared to the anticipated 0.2%. This has cooled some of the hawkish sentiment surrounding the Federal Reserve’s policy, causing the US Dollar to soften.
Impact of Federal Reserve Policies
Although inflation slowed, the Fed remains cautious. In its latest move, the Federal Reserve trimmed its benchmark interest rate by 25 basis points to the range of 4.25%–4.50%. However, Fed Chair Jerome Powell’s statements reflected a measured approach to rate adjustments going forward. Powell emphasized that robust economic growth allows the Fed to take its time with policy changes, aiming to strike a balance between supporting growth and controlling inflation.
The Role of the Eurozone in EUR/USD’s Performance
The Euro also played a critical role in the pair’s recent surge. The currency found strength amid favorable domestic developments.
Germany’s Taxation Reforms Bolster Economic Sentiment
Germany, the Eurozone’s largest economy, recently implemented taxation reforms that are set to reduce annual tax revenue by €14 billion. While this might sound like a loss, the reality is quite different. Lower taxes mean households have more disposable income, potentially boosting spending and stimulating economic growth. This has lifted expectations for stronger demand, diminishing fears of inflation falling significantly below the European Central Bank’s (ECB) 2% target.
ECB’s Gradual Approach to Rate Adjustments
Christodoulos Patsalides, a prominent policymaker at the ECB, has been vocal about preferring gradual interest rate changes rather than abrupt shifts. He mentioned that larger rate cuts would only be considered if inflation expectations plummet well below the target for an extended period. This cautious stance supports stability in the Euro, further aiding the EUR/USD recovery.
Broader Economic Influences on EUR/USD
Beyond inflation and central bank policies, other factors have subtly influenced the EUR/USD pair’s movements.
Stronger US Economic Growth Data
Despite inflationary pressures, the US economy displayed resilience with impressive third-quarter Gross Domestic Product (GDP) numbers. The Bureau of Economic Analysis revised Q3 GDP growth upward to 3.1%, an improvement over the previously reported 2.8%. This robust growth has kept market participants guessing about the Federal Reserve’s next steps, as a strong economy allows room for flexibility in monetary policy.
Market Sentiment and Currency Movements
Market sentiment can be a powerful driver of currency pairs. In this case, traders’ expectations for interest rate cuts in the Eurozone and the United States shaped the EUR/USD’s trajectory. With the ECB projected to implement four more rate cuts by mid-2025, the Euro could see periods of volatility, but its current strength suggests confidence in its short-term outlook.
What Does This Mean for Traders and Investors?
For those closely watching EUR/USD, here’s why these developments matter:
- Short-Term Strength for the Euro: The combination of Germany’s tax reforms and the ECB’s measured approach to rate adjustments provides a solid foundation for the Euro in the near term.
- Weakened Dollar Dynamics: The slower PCE inflation growth eases some of the upward pressure on the Dollar, offering breathing room for the Euro to gain ground.
- Economic Resilience as a Double-Edged Sword: While the US economy’s resilience is a positive sign, it complicates the Federal Reserve’s decision-making process. This could lead to periods of uncertainty and fluctuations in the Dollar’s value.
EURUSD is moving in a box pattern
Final Thoughts
The EUR/USD pair’s rebound above 1.0400 underscores how intertwined global economies and central bank policies are. From slower US inflation growth to Germany’s household-friendly reforms and the ECB’s cautious approach, multiple factors have contributed to this movement.
For traders and investors, the key takeaway is to stay informed and adaptable. Currency markets are dynamic, and understanding the economic narratives behind price movements can give you an edge. Keep your eyes on central bank communications, economic data releases, and fiscal policies—they’re often the hidden forces behind the numbers you see on the charts.
USDJPY – Yen Gains as USD/JPY Reverses from Recent Highs on Weak US PCE Report
When it comes to forex trading, the USD/JPY currency pair often grabs attention due to its volatility and significance in global markets. This week was no exception, with the pair retreating below the 157.00 mark as traders digested economic data and policy insights. Let’s break down what happened, why it matters, and what could be next for this dynamic currency pair.
What Sparked the USD/JPY Retreat?
The USD/JPY pair’s decline came after the release of key economic data and a Federal Reserve announcement. While the pair had been riding high earlier in the week, soft inflation figures in the US triggered a shift in sentiment, prompting traders to scale back on their bullish bets for the US Dollar.
Soft US PCE Data: A Key Catalyst
The Personal Consumption Expenditures (PCE) index is closely monitored as a measure of inflation. This week’s data painted a picture of slowing price pressures:
- Goods Prices: Edged up by less than 0.1%, reflecting muted consumer demand.
- Service Prices: Increased by 0.2%, showing only a modest uptick.
- Core PCE (Excluding Food & Energy): Rose by 0.1% month-over-month and 2.8% year-over-year, coming in below expectations.
For traders, these numbers suggest that inflation may be stabilizing, reducing the urgency for aggressive Federal Reserve actions.
The Fed’s Role in the USD/JPY Movement
Whenever the Federal Reserve speaks, the financial world listens. This week, the Fed’s interest rate decision and Chair Jerome Powell’s remarks shaped market sentiment significantly.
A Rate Cut, but with Caution
The Fed announced a 25 basis point rate cut, bringing the key rate to 4.25%-4.50%. While this move was widely anticipated, Powell’s tone during the press conference caught traders’ attention.
- What He Said: Powell struck a cautious note, suggesting that the central bank might not embark on aggressive monetary easing anytime soon.
- Why It Matters: Hawkish commentary from the Fed can limit the downside for the US Dollar, even when rates are cut.
USDJPY at the retest area of the broken Ascending channel
For the USD/JPY pair, this means that while short-term dips are possible, the broader trend might still lean toward strength in the dollar.
How These Factors Affect USD/JPY Traders
With the economic and policy backdrop in mind, let’s dive into how these developments impact traders and what to watch going forward.
Short-Term Sentiment: Bearish but Guarded
The softer PCE data undoubtedly weighed on the US Dollar, leading to the pullback in USD/JPY. However, the downside was somewhat limited by the Fed’s hawkish tone. Traders looking for short-term opportunities should pay close attention to upcoming data releases, such as December’s labor market report.
Long-Term Outlook: Mixed Signals
While the Fed’s cautious approach suggests limited rate cuts, ongoing inflation trends and geopolitical factors could introduce uncertainty. For long-term traders, the pair’s trajectory will likely depend on:
- Economic Data: A robust labor market or stronger inflation could reignite dollar strength.
- Monetary Policy Divergences: The Fed’s actions relative to the Bank of Japan’s policies will remain a critical factor.
What’s Next for USD/JPY?
As we look ahead, several key developments could shape the USD/JPY pair’s performance:
Labor Market Data
Scheduled for early January, the US labor market report will provide insight into employment trends and wage growth. Strong numbers could support the dollar, while weaker data might reinforce the current bearish sentiment.
Bank of Japan’s Policy Stance
The Bank of Japan (BOJ) continues to maintain an ultra-loose monetary policy. Any signals of change, such as a potential tweak to yield curve control, could significantly impact the yen’s strength.
Global Economic Trends
Broader themes, such as geopolitical tensions or changes in commodity prices, can also influence USD/JPY dynamics.
Final Thoughts
The USD/JPY pair’s retreat below 157.00 highlights the complex interplay between economic data and central bank policies. While the softer PCE figures dampened bullish sentiment for the US Dollar, the Federal Reserve’s hawkish tone acted as a counterweight, preventing a sharper decline.
For traders, this week’s developments underscore the importance of staying informed and adaptable. Whether you’re focused on short-term trades or longer-term strategies, keeping an eye on economic indicators and central bank actions will be crucial in navigating the ever-evolving forex market.
Remember, in trading, patience and discipline often make the difference between success and setbacks. Keep those charts ready, and let’s see what the next wave of data brings!
GBPUSD – Pound Gains Momentum as US Inflation Data and BoE Stance Drive GBP/USD Higher
The world of currency trading is always buzzing with activity, and this week was no different. The GBP/USD pair, a favorite among traders, saw some intriguing movements driven by fresh data from the US and the UK. Let’s break down the key events and explore what went on.
US PCE Data: Softer Inflation Brings a Sigh of Relief
The US Personal Consumption Expenditure (PCE) data, a significant inflation indicator closely monitored by the Federal Reserve, came in softer than expected. This news caught the attention of traders, easing fears of aggressive rate hikes in the near future. Here’s what stood out:
GBPUSD is moving in an uptrend
- Headline PCE Movement: The monthly figure showed a modest 0.1% increase, a step down from the previous month’s 0.2%. On an annual basis, it ticked up slightly to 2.4%, which, although above last month’s 2.3%, fell short of market expectations.
- Core PCE Data: Core PCE, which excludes volatile food and energy prices, also painted a picture of easing pressures. The monthly measure dropped to 0.1% from 0.3%, well below the expected 0.2%.
This softer inflation data has helped reduce the pressure on the Federal Reserve to keep raising interest rates. The CME FedWatch Tool indicated a high likelihood—around 90%—that the Fed will maintain its current policy rate during its next meeting, with only a slim chance of a rate cut. For traders and investors, this news acted as a stabilizing factor, keeping USD movements more predictable.
Bank of England Holds Rates Steady: What’s Next?
Across the Atlantic, the Bank of England (BoE) made headlines by holding its benchmark interest rate steady at 4.75%. While this decision was largely expected, what raised eyebrows were the growing divisions within the BoE regarding potential future rate cuts.
Internal Divisions at the BoE
- Three policymakers voted in favor of cutting rates, citing concerns about the slowing economy. This reflects a cautious shift within the central bank, hinting that the road ahead may see gradual easing of monetary policy.
- BoE Governor Andrew Bailey struck a cautious tone, stating that the timeline and extent of future rate cuts remain uncertain due to the “heightened economic uncertainty.”
With inflation in the UK having shown signs of acceleration over the past few months, the central bank appears to be navigating a delicate balancing act. On one hand, there’s a need to address cooling economic growth; on the other, inflation remains a persistent concern.
UK Retail Sales: A Disappointing Picture
While inflation and monetary policy grabbed the spotlight, UK Retail Sales data brought more sobering news. For November, the numbers were underwhelming, adding to concerns about weak consumer demand in certain sectors.
- Monthly Growth: Retail sales grew by just 0.2%, falling short of the anticipated 0.5%. While this was a recovery from October’s sharp decline of 0.7%, it was still a lackluster performance.
- Annual Figures: Year-over-year sales growth was equally disappointing, coming in at 0.5%, well below the projected 0.8% and a far cry from the previous year’s stronger performance.
GBPUSD is moving in a descending channel, and the market has fallen from the lower high area of the channel
The weak retail sales data highlighted a significant issue: declining demand in key sectors such as clothing. This weakness may be tied to broader economic challenges, including inflationary pressures and waning consumer confidence.
GBP/USD Pair: A Tug of War Between US and UK Data
The interplay of these economic indicators had a notable impact on the GBP/USD pair. After the release of the US PCE data and the BoE’s monetary policy decision, the pair rebounded slightly. However, gains were tempered by the combination of cautious BoE policies and underperforming UK retail sales.
Traders often look at currency pairs like GBP/USD to gauge the relative strength of two economies. In this case, the softer US inflation data provided some support for the British pound against the US dollar. However, the mixed signals from the UK—a central bank hinting at potential rate cuts and weaker retail performance—limited the pair’s upward momentum.
Final Thoughts: What Lies Ahead for Traders?
This week’s events were a classic example of how intertwined global economies are and how quickly market sentiment can shift. Here’s what traders might want to keep in mind moving forward:
- US Data Watch: Softer inflation data has provided some relief, but the Federal Reserve’s next moves will still hinge on upcoming economic indicators. For now, the Fed seems content to hold steady, but any surprises in the data could quickly change the narrative.
- BoE’s Balancing Act: The Bank of England is clearly navigating a complex path. With divisions among policymakers and lingering inflation concerns, traders should pay close attention to any further signals from the central bank about its long-term plans.
- Consumer Demand in Focus: Weak retail sales in the UK serve as a reminder that economic recovery is far from guaranteed. This will likely remain a key area of concern, influencing both policymaker decisions and market sentiment.
In the world of forex trading, staying informed is half the battle. By understanding the nuances behind each data release and central bank decision, traders can better position themselves for the opportunities—and challenges—that lie ahead. Keep your eyes peeled, stay nimble, and as always, trade smart!
USDCAD – USD/CAD Breaks Records as Oil Crashes and Global Markets Seek Stability
The USD/CAD currency pair has been making headlines, reaching levels not seen since March 2020. If you’ve been keeping an eye on the forex market, you might be wondering what’s causing this dramatic shift. Let’s dive deep into what’s driving this appreciation, focusing on the factors behind the USD’s strength and the CAD’s struggles.
USDCAD is moving in a box pattern
Why Is the US Dollar Flexing Its Muscles?
The US Dollar (USD) has been on a steady rise recently, leaving traders and economists buzzing about its strength. But what’s fueling this surge? Here’s a closer look at the key reasons:
Stronger-than-Expected Economic Growth
Recent data shows the US economy is growing at a solid pace. The Gross Domestic Product (GDP) annualized growth rate hit 3.1% in the third quarter, exceeding market expectations. This robust performance signals that the economy is resilient despite global uncertainties. Strong GDP numbers often boost investor confidence in the USD, making it a sought-after currency in the global market.
Labor Market Resilience
Unemployment claims have been dropping, which is another feather in the cap for the US economy. For instance, initial jobless claims recently fell to 220,000, well below predictions. A healthy labor market tends to strengthen the Dollar because it reflects underlying economic stability. Simply put, when more people are employed, they spend more, driving economic growth.
Cautious Fed Stance on Rate Cuts
The Federal Reserve (Fed) has taken a cautious approach toward monetary policy, specifically rate cuts. Fed Chair Jerome Powell emphasized the importance of balancing inflation and economic activity, signaling a reluctance to make drastic changes. Inflation, still hovering above the 2% target, adds to the case for a strong USD. Investors often flock to currencies backed by central banks with prudent monetary policies.
Why the Canadian Dollar Is Struggling
On the flip side, the Canadian Dollar (CAD) hasn’t had the same good fortune. Let’s unpack why the CAD is facing headwinds and what’s weighing it down.
The Oil Price Factor
Canada is one of the world’s largest exporters of crude oil, making the CAD heavily tied to oil prices. When oil prices decline, the Canadian economy often takes a hit. Recently, crude oil prices have been under pressure, which has a direct impact on the CAD. Weak oil prices mean reduced revenue for Canada’s energy sector, leading to a weaker currency.
USDCAD is moving into the Ascending channel
Bank of Canada’s Rate Cut Expectations
The Bank of Canada (BoC) has been leaning toward rate cuts, albeit cautiously. Speculation around further reductions in 2025 has dampened investor enthusiasm for the CAD. While aggressive cuts may be off the table, even moderate adjustments can weigh on the currency’s value. A dovish central bank stance makes the CAD less attractive in the global forex market.
Upcoming Canadian Retail Sales Data
Another factor influencing the CAD is the upcoming retail sales data. Traders are keenly watching these numbers to gauge the health of consumer spending in Canada. Weak retail sales could further undermine confidence in the Canadian economy, exacerbating the CAD’s struggles.
Key Data to Watch for USD and CAD
While the broader trends are clear, upcoming economic data releases could shake things up. Here’s what to keep an eye on:
US Economic Indicators
- Personal Consumption Expenditures (PCE) Inflation: This is a critical measure of inflation that the Fed closely monitors. If inflation remains elevated, it could solidify the Fed’s cautious stance, further supporting the USD.
- Michigan Consumer Sentiment Index: This reflects consumer confidence in the economy. Strong numbers here often bolster the Dollar as they suggest continued economic growth.
Canadian Retail Sales
- Retail sales data for October will provide insights into the health of the Canadian economy. Strong numbers could offer some much-needed support to the CAD, while weak data may reinforce its downward trajectory.
What This Means for Traders
So, what does all this mean if you’re trading USD/CAD or just keeping an eye on the forex market? Here are some takeaways:
- Expect Volatility: With major economic data releases on the horizon, volatility in the USD/CAD pair is likely. This could present opportunities for traders but also underscores the importance of staying informed.
- Follow Economic Trends: The ongoing strength of the US economy and the challenges facing Canada make it clear why the USD is currently outperforming the CAD. Keeping tabs on GDP growth, inflation rates, and labor market data can provide valuable insights.
- Oil Prices Are Crucial: If you’re trading the CAD, pay close attention to oil market trends. A rebound in oil prices could lend some support to the Canadian currency, while continued declines could spell trouble.
The Bigger Picture
The appreciation of USD/CAD is a reflection of broader economic forces at play. The US economy’s resilience, coupled with a cautious but firm Fed, has made the USD a powerhouse. Meanwhile, Canada’s reliance on oil and concerns around rate cuts have left the CAD struggling to keep up.
As we move forward, the forex market will remain dynamic, influenced by a mix of economic data, central bank decisions, and global events. Whether you’re a seasoned trader or just someone fascinated by currency movements, staying informed is your best bet for navigating these waters.
So, keep watching, stay curious, and remember that behind every currency movement lies a story of global economics at work!
USDCHF – Dollar Strengthens Against Franc: Key Focus on Upcoming US Economic Data
When it comes to the forex market, the USD/CHF currency pair is one that frequently grabs traders’ attention. This duo, often referred to as the “Swissie,” represents the exchange rate between the US Dollar (USD) and the Swiss Franc (CHF). Let’s dive deep into what influences this pair and how different economic and geopolitical factors play a role.
Understanding USD/CHF: What Makes It Tick?
The USD/CHF pair is known for its unique blend of stability and volatility, thanks to the strong economies it represents. The US Dollar is a global reserve currency, heavily influenced by economic data and Federal Reserve policies. On the other hand, the Swiss Franc is often seen as a safe-haven currency, providing refuge during uncertain times.
So, what are the primary drivers behind the movements in USD/CHF? Let’s explore the major influences.
Key Drivers of USD/CHF Movements
1. Central Bank Policies: The Federal Reserve and the Swiss National Bank
Central banks play a pivotal role in shaping currency trends. Recently, the US Federal Reserve made headlines with its hawkish stance despite a widely expected rate cut. The Fed signaled a slower easing cycle for the next year, suggesting fewer interest rate reductions than initially anticipated. This approach strengthens the USD by projecting confidence in the US economy.
USDCHF has broken the Ascending channel in the downside
Meanwhile, the Swiss National Bank (SNB) has adopted a dovish tone. A reduction in key interest rates by the SNB signals a willingness to support economic growth but also places downward pressure on the CHF. However, the Franc’s safe-haven appeal often counterbalances these pressures, especially during global crises.
2. Economic Data and Its Ripple Effect
Economic indicators such as GDP growth, employment figures, and inflation rates significantly impact the USD/CHF pair. For instance, recent data revealed robust US GDP growth and a drop in weekly jobless claims, highlighting the resilience of the American economy. These numbers tend to attract investors toward the USD, strengthening its position against other currencies, including the CHF.
In contrast, Switzerland’s economy, though stable, often relies on its status as a financial hub and a haven currency. While not as influenced by day-to-day economic releases as the USD, Swiss economic policies and projections are critical in the long run.
3. Geopolitical Tensions and Safe-Haven Flows
The Swiss Franc’s safe-haven status comes into sharp focus during geopolitical instability. Recent tensions in the Middle East and ongoing conflicts in Europe have once again highlighted CHF’s role as a refuge for investors. Escalating situations often see the Franc gaining strength as traders seek stability amidst uncertainty.
The Role of Geopolitics in Forex Trading
Middle East Conflicts
Geopolitical events, like those in the Middle East, have far-reaching implications. For example, Israel’s military operations and retaliatory actions against Houthi targets in Yemen draw attention globally. These events ripple through financial markets, pushing investors to seek safer assets like the CHF.
Russia-Ukraine Conflict
The prolonged conflict between Russia and Ukraine continues to weigh heavily on market sentiment. Uncertainty in this region disrupts global economic flows, leading to increased demand for currencies like the Swiss Franc, which traders perceive as less risky.
How Traders React to These Influences
1. Balancing Risks and Rewards
Forex traders often analyze central bank policies and economic indicators to predict the USD/CHF’s next move. A hawkish Fed might drive demand for the USD, while a dovish SNB could weaken the CHF unless geopolitical factors boost its appeal.
2. The Power of Sentiment
Market sentiment is another key player. Safe-haven demand for the Swiss Franc spikes during crises, often overriding traditional economic indicators. This sentiment-driven movement makes USD/CHF a fascinating pair to watch.
3. News-Driven Volatility
Major news events, whether related to economic data or geopolitical developments, can cause sharp fluctuations in the USD/CHF pair. Traders must remain vigilant and adapt quickly to changing conditions.
What Should You Watch For in the USD/CHF Pair?
Upcoming Economic Reports
Economic reports like inflation rates, jobless claims, and GDP figures can influence USD/CHF movements. Keeping an eye on both US and Swiss economic releases provides traders with crucial insights.
Central Bank Announcements
The Fed and SNB meetings are must-watch events. Changes in monetary policy or hints about future strategies often lead to significant shifts in the USD/CHF rate.
Global Geopolitical Developments
From tensions in the Middle East to European conflicts, geopolitical events play a critical role. Understanding their potential impact on safe-haven flows is key to navigating USD/CHF trading.
Final Thoughts: Navigating USD/CHF in an Ever-Changing Market
The USD/CHF pair embodies a dynamic relationship influenced by a mix of economic policies, data releases, and geopolitical events. While the US Dollar gains strength from robust economic data and a hawkish Fed, the Swiss Franc continues to hold its ground as a safe-haven currency during turbulent times.
For traders, staying informed and adapting to market developments is essential. Whether you’re drawn to the stability of the Swiss Franc or the opportunities presented by the US Dollar, understanding these currencies’ unique drivers will help you make more informed decisions. So, keep an eye on the latest updates and use the insights wisely in your trading journey!
USD Index – Inflation Slowdown Pressures the US Dollar
The US Dollar Index (DXY) recently faced some pressure, dipping toward the lower levels as traders took profits following a period of strength. Let’s dive into what’s been happening with the DXY and what’s driving this latest move.
What’s Happening with the DXY?
The DXY, which tracks the value of the US dollar against a basket of other major currencies, has been in the spotlight recently. After a solid run fueled by economic data and Federal Reserve policies, it has now started to pull back. This dip comes in the wake of softer-than-expected Personal Consumption Expenditures (PCE) data and heightened political uncertainty in the US.
The market is buzzing with discussions about disinflation, Federal Reserve policy, and the looming possibility of a government shutdown. While these factors might seem disconnected, they’re all playing a significant role in shaping the currency’s movements.
Economic Data That’s Shaping the Market
1. Disinflationary PCE Data
The PCE data, which is closely watched by the Federal Reserve as a key inflation gauge, came in softer than expected. Monthly headline inflation was reported at 0.1%, and the annual rate dropped to 2.4%, just below the forecast. Core PCE, which excludes volatile food and energy prices, also missed expectations.
Disinflation, or the slowing pace of price increases, is generally seen as a positive development for consumers. However, for the Federal Reserve, it raises questions about whether further rate hikes are necessary to keep inflation in check.
2. Federal Reserve’s Stance
The Fed recently indicated that it might be nearing the end of its rate-hiking cycle. Despite this, the central bank has maintained a cautious approach, emphasizing a “wait and see” posture. This means they’re keeping a close eye on economic indicators like inflation, employment, and growth before making any big moves.
What does this mean for the dollar? The Fed’s hawkish tone—hinting at fewer cuts in the future—has supported the dollar’s strength. However, softer inflation readings could slightly dampen that momentum as markets reassess the likelihood of future rate changes.
3. US Economic Resilience
Despite the recent focus on inflation and interest rates, the broader US economy remains resilient. Third-quarter GDP growth came in strong at 3.1% (seasonally adjusted annual rate), bolstered by robust consumer spending. Economic growth forecasts for the fourth quarter also remain positive, adding to the overall narrative of a strong economic foundation.
USD Index Market price is moving in a box pattern
Political Woes Add to Market Uncertainty
The Government Shutdown Risk
Political tensions in Washington have created additional uncertainty. House Republicans recently failed to pass a funding deal, raising the risk of a government shutdown. While short-term shutdowns often have limited impact on markets, prolonged political gridlock can rattle investor confidence and influence currency markets.
How This Affects the Dollar
Market sentiment tends to sour during periods of political instability, which can weigh on the dollar. However, the US dollar often benefits from its status as a “safe-haven” currency during global uncertainties, creating a tug-of-war effect.
Treasury Yields and the Dollar’s Direction
Another factor in the DXY’s recent movements is the behavior of US Treasury yields. Longer-term yields, such as the 10-year and 30-year, have been climbing steadily. This steepening yield curve typically signals investor confidence in the economy’s long-term growth prospects.
Rising yields can attract foreign investment, boosting demand for the dollar. However, there’s a delicate balance. If yields rise too quickly or signal inflationary concerns, it could have a destabilizing effect.
Final Thoughts: What’s Next for the Dollar?
So, where does the DXY go from here? The combination of economic resilience, disinflationary signals, and political uncertainty creates a mixed bag of factors. Traders are likely to keep a close eye on upcoming economic data releases and Fed commentary for further clues.
While the DXY’s recent dip might seem like a setback, it’s important to remember the broader context. The US dollar remains supported by a strong economy and relatively high interest rates compared to other major currencies. As markets navigate the current landscape, the dollar’s role as a global reserve currency continues to provide a solid foundation.
Ultimately, the DXY’s path forward will depend on how these various forces play out in the weeks and months ahead. Stay tuned—there’s plenty more action to come in the world of currencies!
AUDUSD – Traders Eye RBA Insights as Aussie Shows Signs of Recovery
The Australian Dollar (AUD), often affectionately called the “Aussie,” is seeing some interesting movements in the forex market. It recently showed a mild recovery, sparking curiosity among traders and investors alike. Let’s break it down and explore what’s happening, why it matters, and what might come next.
The Aussie Dollar and the Current Market Mood
The Aussie is consolidating, with its recent performance linked to various global economic factors. A primary driver is the latest data from the U.S. regarding inflation and interest rates. Traders and investors are always on the lookout for these cues, as they set the tone for currency movements.
Why Inflation Data is a Big Deal
The U.S. Personal Consumption Expenditures (PCE) inflation data plays a pivotal role in shaping market sentiment. When inflation softens, it often signals to central banks like the Federal Reserve (Fed) that there’s less urgency to raise interest rates. This impacts the U.S. Dollar, which, in turn, influences the Aussie.
Recently, soft PCE figures hinted at cooling inflation, giving the Aussie some breathing room to recover. The Fed is expected to hold interest rates steady in early 2025, adding to the narrative of a more stable financial environment in the near term.
The Aussie’s Tug of War: Global and Domestic Influences
The Australian Dollar doesn’t operate in a vacuum. Its performance is tied to a mix of domestic developments and international events. Let’s dive into some of these factors.
Domestically: The Role of the RBA
Back home, the Reserve Bank of Australia (RBA) plays a crucial role in shaping the AUD’s trajectory. Traders are eagerly awaiting the RBA’s minutes from its latest meeting, as these provide insights into the central bank’s thought process. Governor Michele Bullock has expressed optimism about easing wage and demand pressures, a sign that Australia might navigate economic challenges without aggressive rate hikes.
Globally: The China Connection
China’s economy is another major player in this story. As Australia’s largest trading partner, any slowdown in China’s growth or trade policies has a direct impact on the Aussie. Concerns about China’s sluggish growth and potential U.S. tariffs remain a headwind for the Australian currency. While softer U.S. inflation data has offered temporary relief, these global uncertainties linger.
AUDUSD is moving in a downtrend channel
Key Market Drivers Shaping the Aussie’s Journey
To better understand where the Aussie might head next, it’s important to look at the broader market dynamics at play. Here are some key points shaping the AUD’s movements:
1. The U.S. Dollar’s Influence
The U.S. Dollar Index (DXY), which measures the greenback against a basket of other currencies, eased slightly after hitting a significant high. This gave the Aussie some space to recover. When the U.S. Dollar weakens, other currencies like the AUD often strengthen by comparison.
2. Interest Rate Expectations
Both the Fed and RBA’s approaches to interest rates are critical. The Fed is signaling a pause in rate hikes, which has eased pressure on global currencies. Meanwhile, the RBA’s next steps remain a topic of speculation, with traders closely watching for hints of future rate adjustments.
3. Geopolitical and Economic Factors
Ongoing trade discussions, potential tariffs, and geopolitical developments can swing the AUD in unexpected directions. While today’s environment has provided some calm, these factors can quickly change the landscape.
Why You Should Keep an Eye on the Aussie
If you’re involved in forex trading, investing, or simply interested in the global economy, keeping tabs on the Aussie is worthwhile. Its movements often reflect broader market trends, making it a valuable indicator of economic sentiment.
Opportunities for Traders
For traders, the Aussie’s current consolidation phase might present opportunities. Whether you’re a short-term trader looking for quick gains or a long-term investor, understanding the factors driving the AUD can help you make informed decisions.
Impact on Everyday Australians
For everyday Australians, a fluctuating currency affects more than just investments. It influences travel costs, import prices, and even mortgage rates. A stronger Aussie can make overseas travel cheaper, while a weaker one could increase the cost of imported goods.
Looking Ahead: What’s Next for the Aussie?
The Australian Dollar’s future will depend on several unfolding factors. Here’s what to watch:
- Upcoming RBA Minutes: Keep an eye on the central bank’s insights, as they will shed light on the potential direction of interest rates.
- China’s Economic Outlook: Developments in China’s growth and trade policies will remain a critical driver for the Aussie.
- Global Economic Trends: Pay attention to global inflation data, interest rate decisions, and geopolitical events.
The Aussie might face some challenges ahead, but it has also shown resilience in navigating uncertain times.
Final Thoughts
The Australian Dollar is more than just a currency—it’s a reflection of global economic dynamics and domestic policies. While the recent soft U.S. inflation data has given the Aussie a bit of a lift, its path forward will be shaped by a mix of domestic decisions, global trends, and market sentiment.
Whether you’re a trader looking for your next move, an investor keeping tabs on global markets, or just someone curious about the economy, the Aussie’s story offers valuable lessons. Stay informed, and you’ll be better prepared to navigate the twists and turns of the forex market.
NZDUSD – Can NZD/USD Rebound? Focus Shifts to Upcoming US Economic Data
When it comes to trading forex, the NZD/USD pair often takes center stage due to its connection with global economic trends and risk sentiment. Recently, the New Zealand Dollar (NZD) has faced headwinds, leaving traders wondering whether this trend will continue. Let’s explore the factors influencing this currency pair and what could be on the horizon.
What’s Happening with NZD/USD Right Now?
The NZD/USD pair has struggled to find its footing lately. While it made a modest recovery in the early European session on Friday, risks of further downside remain. A major factor contributing to this pressure is the strengthening US Dollar (USD), which has gained momentum from positive US economic data and a climate of risk aversion in the markets.
On the flip side, New Zealand’s trade deficit showed some improvement in November, driven by higher exports and reduced imports. However, this wasn’t enough to offset the broader concerns weighing on the New Zealand Dollar, such as disappointing GDP figures and expectations of monetary easing by the Reserve Bank of New Zealand (RBNZ).
The US Dollar: A Force to Be Reckoned With
Better-Than-Expected US Economic Data
The USD has been on a roll, thanks to some solid economic data coming out of the United States. Let’s break it down:
- Gross Domestic Product (GDP): The US economy posted an impressive 3.1% annualized growth rate in Q3, far surpassing expectations of 2.8%. This robust performance highlights the resilience of the US economy even amid global uncertainties.
- Jobless Claims: Initial jobless claims fell significantly to 220,000 for the week ending December 13, down from 242,000 the prior week. This signals a strong labor market, further boosting confidence in the USD.
Federal Reserve’s Hawkish Stance
Adding fuel to the fire, the Federal Reserve (Fed) recently implemented a hawkish 25 basis point rate cut. While this may seem contradictory, the market interpreted it as a cautious move to balance inflation and economic growth, signaling potential for further policy tightening. The result? Increased demand for the USD as a safe-haven asset.
NZDUSD is moving in a descending channel, and the market has reached the lower low area of the channel
The New Zealand Dollar: Facing Tough Times
Weaker GDP Data Dampens Sentiment
Over in New Zealand, things haven’t been as rosy. The country’s Q3 GDP figures came in weaker than expected, raising concerns about the pace of economic growth. This has prompted speculation that the Reserve Bank of New Zealand (RBNZ) might opt for more aggressive monetary easing.
Markets are already pricing in a significant 50 basis point rate cut at the RBNZ’s upcoming February meeting. While lower interest rates can stimulate economic activity, they often lead to a weaker currency, making the NZD less attractive to investors.
Improvement in Trade Deficit: A Silver Lining?
One positive development for New Zealand has been the narrowing of its trade deficit in November. Here’s a quick snapshot:
- Exports: Up 9.1% year-on-year to NZD 6.48 billion, driven by increased demand for key commodities.
- Imports: Down 3.9%, reflecting reduced demand for foreign goods.
While this improvement is encouraging, it hasn’t been enough to shift the broader narrative around the NZD. The currency remains under pressure from external factors, including the stronger USD and global risk aversion.
What’s Driving Risk Aversion in the Markets?
Risk aversion plays a significant role in the forex market, particularly for currency pairs like NZD/USD. As a commodity-linked currency, the NZD is highly sensitive to global risk sentiment. When investors are cautious, they tend to flock to safer assets like the USD, leaving riskier currencies like the NZD vulnerable.
Key Factors Fueling Risk Aversion:
- Economic Uncertainty: Lingering concerns about global economic growth have kept investors on edge.
- Central Bank Policies: Diverging monetary policies between the Fed and RBNZ have widened the gap between the USD and NZD.
- Geopolitical Tensions: Ongoing geopolitical issues add to the climate of caution, further supporting the USD as a safe haven.
What’s Next for NZD/USD?
So, where does this leave us? While the NZD/USD pair may experience short-term recoveries, the overall outlook remains tilted to the downside. Here are a few things to watch for:
- US Economic Data: Keep an eye on upcoming releases, particularly the US Personal Consumption Expenditures (PCE) data. Strong numbers could further bolster the USD.
- RBNZ Policy Decisions: The February meeting will be crucial in determining the direction of the NZD. A significant rate cut could add more pressure.
- Global Risk Sentiment: Any shifts in market sentiment—whether due to economic data, central bank actions, or geopolitical developments—will likely have a direct impact on this currency pair.
Final Thoughts: Stay Informed and Adaptable
The forex market is nothing if not unpredictable, and the NZD/USD pair is a prime example of how quickly things can change. While the NZD faces its share of challenges, the USD’s current strength and global risk aversion are the key drivers shaping this pair’s trajectory.
For traders, the best approach is to stay informed and adaptable. Monitor the data, pay attention to central bank moves, and keep an eye on broader market trends. Most importantly, remember that patience and discipline are your greatest allies in navigating the ever-changing forex landscape.
By staying ahead of the curve, you’ll be better equipped to make informed decisions and seize opportunities as they arise. Happy trading!
EURGBP – Weak UK Retail Numbers Propel EUR/GBP Closer to Key Level
The EUR/GBP currency pair has been grabbing attention, with its performance around the 0.8300 level. This movement reflects a dynamic interplay of economic factors, particularly influenced by the United Kingdom’s retail performance and evolving policy directions from the European Central Bank (ECB). In this article, we’ll unpack the key drivers behind the EUR/GBP’s behavior in the market.
EURGBP is moving in a box pattern, and the market has reached the resistance area of the pattern
How UK Retail Sales Impact the Pound
The UK Retail Sales data has a significant influence on the British Pound, and this week’s report did not disappoint in stirring the market. Released by the Office for National Statistics, the data showed that retail sales rose by 0.2% in November. While this was an improvement from October’s decline of 0.7%, it fell short of market expectations, which had forecasted a 0.5% increase.
Why Retail Sales Matter
Retail sales data acts as a critical barometer for the health of the economy, reflecting consumer spending habits and overall economic activity. When sales figures disappoint, it often signals weaker consumer confidence or spending power, both of which can weigh on the Pound.
For November, although retail sales showed some recovery, the year-on-year growth of 0.5% was modest compared to a revised 2.0% in the previous period. These figures painted a mixed picture of the UK economy, leading to a softening of the GBP.
The Euro’s Side of the Story: ECB Policy Outlook
On the Eurozone side, the European Central Bank (ECB) continues to play a pivotal role in shaping the currency’s strength. Recently, ECB policymakers hinted at maintaining their current pace of rate cuts, emphasizing a steady approach as inflation appears to be under control.
ECB’s Rate-Cut Strategy
ECB President Christine Lagarde and Governing Council members have indicated that future decisions on interest rates will hinge on inflation data. Gediminas Simkus, a key voice in the ECB, highlighted that borrowing costs are likely to see further reductions, which could keep the Euro’s upside capped against the Pound.
Investors are now eyeing the ECB’s first rate-setting meeting of 2025, scheduled for January 30. Expectations are building for a slightly more aggressive easing path next year, but this could potentially limit the Euro’s ability to rally further against the GBP.
What’s Driving EUR/GBP Momentum?
The EUR/GBP pair’s recent movement to around 0.8300 reflects a tug-of-war between the two currencies. Let’s break this down:
- GBP Weakness Post-Retail Data: The weaker-than-expected retail sales figures have dented confidence in the Pound, providing an opening for the Euro to gain ground.
- ECB’s Policy Stance: Although the ECB is signaling a controlled approach to rate cuts, the outlook remains slightly dovish. This has kept the Euro’s upside limited, balancing out the pair’s movement.
- Market Sentiment: Traders are cautiously navigating between the economic data and the anticipated monetary policies of both regions, contributing to the pair’s relatively narrow range.
EURGBP is moving in a descending channel
What Could Happen Next?
Both the UK and Eurozone economies are at a crossroads, and the EUR/GBP pair’s trajectory will largely depend on upcoming economic developments. Here’s what to watch for:
UK’s Economic Prospects
As the holiday season unfolds, retail performance during December could provide a clearer picture of consumer confidence. Better-than-expected results might boost the Pound, while any disappointments could lead to further selling pressure.
ECB’s January Meeting
The ECB’s rate-setting meeting in January will be a crucial event. Any unexpected changes in the pace or tone of rate cuts could sway the Euro in either direction.
Broader Market Trends
External factors, such as geopolitical developments and global economic conditions, could also influence the pair. With both currencies being relatively safe havens, any global uncertainty might lead to heightened demand for the EUR/GBP.
Final Thoughts
The EUR/GBP pair is a fascinating case study in how economic data and central bank policies shape currency dynamics. For now, the Pound faces headwinds from underwhelming retail sales, while the Euro is navigating the uncertainties of future rate cuts.
As we head into the new year, the interplay between these factors will determine the pair’s direction. For traders and investors, staying tuned to economic releases and central bank updates will be essential in understanding and capitalizing on EUR/GBP movements.
By keeping an eye on both sides of the story, you’ll be better equipped to navigate the twists and turns of this compelling currency pair. So, let’s watch how these factors unfold—because in the world of forex, there’s always more to the story than meets the eye!
BTCUSD – Bitcoin Stumbles from Its High: Is the Rally Over?
Bitcoin has had its fair share of ups and downs, and recent events have left investors scratching their heads. The Federal Reserve’s hawkish stance on interest rates, coupled with Bitcoin’s price swings, has led to a wave of uncertainty. But is this the end of the bull run, or is there more to the story?
Let’s dive deep into the dynamics shaping Bitcoin’s journey and explore what might lie ahead for this revolutionary digital asset.
Why the Market Is Buzzing: The Fed’s Rate Cut Decision
The Federal Reserve’s recent announcement has sent shockwaves through the financial world, including the crypto market. Investors had hoped for a more aggressive series of rate cuts in 2025, but the Fed’s decision to scale back to just two rate cuts dampened those expectations.
This cautious approach has added pressure to an already volatile crypto market. U.S.-based investors were particularly reactive, contributing significantly to the sell-off. This trend reflects growing concerns about how macroeconomic policies directly impact the digital asset space.
Bitcoin’s Market Cycles: A Familiar Yet Evolving Narrative
Bitcoin has long been known for its four-year market cycle, which includes accumulation, bull runs, distribution, and bear markets. Historically, this cycle has provided a roadmap for investors. However, recent developments suggest some deviations, raising the question: Is the classic cycle still relevant?
The Historical Four-Year Cycle
Traditionally, Bitcoin reaches a new peak roughly a year after its halving event—a programmed reduction in mining rewards that occurs every four years. This mechanism historically aligns with bullish sentiment and surging prices. Here’s how it played out in the past:
- 2015-2018 Cycle: Bitcoin surged to record highs in 2017, one year after its 2016 halving.
- 2019-2022 Cycle: Similarly, the 2020 halving was followed by an all-time high in 2021.
This predictable behavior offered investors a sense of security and timing. But the current cycle tells a slightly different story.
BTCUSD is moving in an Ascending channel, and the market has reached the higher low area of the channel
Breaking the Mold
In 2024, Bitcoin reached a new peak before its expected halving event, disrupting the usual pattern. This deviation has left market participants pondering whether the halving remains a reliable indicator of Bitcoin’s trajectory.
Is this a one-off anomaly, or does it signify a broader shift in Bitcoin’s price behavior?
ETFs and Institutional Influence: Changing the Game
The emergence of Bitcoin ETFs (Exchange-Traded Funds) has introduced a new player in the crypto arena: institutional investors. These funds provide a regulated and convenient way for large-scale investors to gain exposure to Bitcoin without the complexities of directly handling the asset.
How ETFs Are Reshaping Bitcoin
ETFs have fueled Bitcoin’s price surges by attracting significant institutional interest. Unlike traditional crypto investors accustomed to volatility, institutional players bring a more measured approach. They prioritize operational efficiency and lower custody risks, creating a stabilizing effect on the market.
However, this influx of institutional money may also shift Bitcoin’s traditional dynamics. The question remains: Will these new participants follow the historical cycles, or will their influence create a new normal for Bitcoin?
Sentiment Indicators: What Are the Metrics Saying?
While market sentiment appears shaky, some indicators suggest there’s still room for growth. One such metric is the Average Unrealized Profit (AVIV Ratio), which gauges how profitable investors are on paper. Historically, bull markets end when most participants lock in extreme profits, leading to oversupply and dwindling demand.
Current AVIV Trends
According to recent data, the AVIV Ratio hasn’t yet reached the euphoric levels seen at the peaks of previous cycles. This suggests that the market still has potential for upward movement. Additionally, the recent dip has reignited the “buy-the-dip” mentality among investors, indicating renewed optimism for a recovery.
The Bigger Picture: External Factors and Future Speculation
Beyond technical metrics, broader external factors are influencing Bitcoin’s outlook. For example, the anticipation of more pro-crypto policies under potential political changes in the U.S. has added an element of excitement among market watchers.
Regulatory Hopes
The upcoming administration is expected to usher in friendlier regulations for digital assets, which could bolster investor confidence. Coupled with leadership changes in regulatory bodies, these shifts may create a more accommodating environment for Bitcoin and other cryptocurrencies.
Final Thoughts: Is Bitcoin’s Bull Run Really Over?
Despite the turbulence, it’s not all doom and gloom for Bitcoin. The recent sell-off may be a temporary bump rather than a definitive end to its bull cycle. Key indicators like the AVIV Ratio and the rise of institutional interest via ETFs hint at the possibility of further growth.
Moreover, evolving dynamics in market behavior, coupled with external regulatory shifts, suggest that Bitcoin’s journey is far from predictable. Whether you’re a seasoned investor or new to the crypto space, keeping an eye on these broader trends will be crucial.
So, while the market may feel uncertain now, Bitcoin’s story is far from over. The best advice? Stay informed, stay patient, and remember that Bitcoin has a history of surprising everyone. Keep your eyes on the bigger picture—because the future of Bitcoin is as exciting as ever.
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