Dollar decline could face tests from month-end flows and OPEC meeting outcome Dollar decline could face tests from month-end flows and OPEC meeting outcome Dollar decline could face tests from month-end flows and OPEC meeting outcome

Dollar decline could face tests from month-end flows and OPEC meeting outcome

Forex 5 minutes to read
Charu Chanana

Head of FX Strategy

Summary:  Dollar continues to extend its downtrend as market’s baseline expectation remains a soft landing. While bearish dollar picture could remain intact as seasonality and peak rates underpin, but the move is looking stretched and faces tests from month-end flows, OPEC meeting outcome or China economic data this week. RBNZ meeting tomorrow will be key for NZD to extend its rally, as Saxo clients generally position on the long side in NZDUSD and crosses. XAUUSD has come up on top in Saxo’s intraday FX dashboard as Gold rally catches momentum.

Key points:

  • Soft-landing expectation has pushed markets towards the centre of the USD smile
  • Seasonality also adds downside to the dollar – DXY index has been down an average of 1.5% in December over the last six years
  • PCE data this week could be dollar negative
  • Pockets of support could emerge for dollar with month-end flows coming up
  • OPEC meeting outcome and any let up in China recovery momentum could also be dollar positive
  • RBNZ has to push back on rate cut pricing for NZD to continue the rally
  • XAUUSD comes out on top on Saxo’s intraday client FX positioning dashboard

USD: Month-end flows, OPEC and China risks

The dollar extended its decline this week, with the DXY index now down over 3% month-to-date. Markets continue to expect the Fed rate hike cycle to have ended, but without a recession for now. This soft-landing expectation has pushed the markets towards the centre of the USD smile where economy is neither too hot not too cold, and the USD trades lower as market participants flock to riskier assets. Seasonality also adds downside to the dollar – going into the end of the year. The table below shows that dollar has fallen by an average of 1.5% in December over the last six years.

From a data perspective, focus this week is on PCE data, Fed’s preferred inflation gauge that will continue to reaffirm the disinflation rhetoric. Consensus is looking for October PCE to slow to 0.1% MoM from 0.4% previously. For core as well, PCE is expected to cool to 0.2% MoM or 3.5% YoY – that falls below the Fed’s year-end target of 3.7%. This should broadly continue to be dollar negative, as the bar for an upside surprise is large. If actual numbers come in below expectations, risks of dovish re-pricing remain and that could make DXY index test key support below 103.

Fed’s Beige Book will likely highlight the case for a slowing economy, but nothing too spark more aggressive rate cut pricing for next year. However, four factors need to be on watch for any reversal in dollar to happen:

  1. Month-end flows could result in tactical USD buying by exporters and corporates
  2. The delayed OPEC+ meeting could bring an extension and expansion of supply cuts, raising fears of sustained rise in oil prices and questioning the disinflation narrative
  3. Much of the USD decline so far has come on the back of gains inn yuan, but the China recovery will face the test of economic data once again this week as PMIs are due on Thursday.
  4. Low volatility continues to spur momentum in carry trades, and that is a dollar positive.

This could suggest that the dollar downside remains for the end of the year, but not without risks. Overall, dollar will likely remain range-bound for now, until sharper US economic downturn or clearly dovish Fed commentary comes out. Watch for support at 103, break of which could expose 61.8% fibo retracement at 102.50.

Market Takeaway: Bearish picture intact for dollar through year-end, but pockets of support likely. Only a break below 101.625 in DXY will put the focus firmly on the downside.


NZD: RBNZ decision due tomorrow

Procyclical currencies have been strong in the current risk-on environment. NZDUSD rallied above the 200DMA and the psychological 0.61 barrier this week, but the rally cooled today with the RBNZ rate decision coming due tomorrow.

New Zealand Q2 CPI at 5.5% remains well above RBNZ’s 1-3% target range but inflation expectation has eased. That gives room to RBNZ to continue to stay on hold, keeping policy rate unchanged at 5.5%. However, the Bank will need to maintain the optionality for further rate increase to push NZD higher in a new trading range. If RBNZ stays dovish, we could see NZDUSD reverse back lower towards the 38.2% fibo retracement level at 0.6018. A dovish outcome could also bring AUDNZD back closer to 1.08 after RBA Governor Bullock stuck a hawkish tone today.

Saxo’s intraday positioning for Monday (27/11) saw over a 1,000 trades in NZDUSD with 56% on the long side. NZDJPY saw a 62% long positioning while GBPNZD was 48% long.

Source: Bloomberg, Saxo

XAUUSD: Top intraday FX instrument at Saxo

Our commodity strategist Ole Hansen has been talking about the potential for a Santa rally in Gold and Silver. We also hosted a webinar today on the drivers of Gold and instruments to trade it for our institutional clients. Turns out, spot Gold was the highest traded FX instrument on the Saxo platform across offices on Monday. Fed pivot and a weaker dollar have been key drivers for the rally in Gold this month, and the precious metal has cleared key $2010 level to rise to six-month highs. Focus is now on $2,070, highs seen in 2022 and early 2023, and next catalyst will likely be a firmer outlook for Fed rate cuts which can boost ETF holdings.

Market Takeaway: XAUUSD has broken bullish and only a break below $1960 could reverse the uptrend.

Source: Bloomberg, Saxo


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.