Last week delivered one of November's strongest turnarounds on record, with U.S. equities staging a multi-day winning streak despite the shortened holiday week. But the real story played out in currency markets, where the dollar tried to rally and failed spectacularly.
The greenback ended up as the weakest performer among G10 currencies, unable to hold above the psychologically important 100 level on the dollar index. The yen and Swiss franc weren't much better, rounding out the bottom of the performance table. Meanwhile, the Singapore dollar managed to outperform both the Swiss franc and British pound, a notable shift in cross-currency dynamics.
Why the dollar weakness? The fundamental driver is straightforward: markets are pricing in a Fed rate cut in December. When the central bank signals easier policy ahead, the currency typically suffers, and that's exactly what we're seeing play out.
The broader market mood shift came from macro factors rather than company-specific news. A series of data releases calmed fears about a hard landing while strengthening the case for looser monetary policy heading into year-end. Seasonality played its part too. Equities historically tend to bottom in late November before the so-called Santa rally kicks in, and this year's price action followed that seasonal script almost perfectly.
Liquidity was thin, as you'd expect during Thanksgiving week. But traders who returned from the holiday got an unwelcome surprise: a major technical disruption that briefly dominated headlines. A cooling failure at one of CME Group's data centers knocked several key futures and FX venues offline. Trading on Globex futures and options, EBS FX, and BMD markets ground to a halt for several hours before systems were restored. CME warned afterward that price adjustments might take time to normalize.
It was an unusual disruption that served as a reminder of how dependent modern markets are on technology infrastructure, and how fragile that infrastructure can be when something as basic as air conditioning fails.
Currency Pairs Making Moves
NZD/JPY Breaks Free
After five full months stuck in a trading range, NZD/JPY finally broke out. The pair closed above the key 89 level and has rejected attempts to pull back below it, which is exactly the kind of price action bulls want to see after a breakout.
The technical picture suggests that as long as the pair maintains bullish momentum above 89, we should expect continued strength. The next major target sits at the 2024 resistance level around 92, which could take some time to challenge but represents a logical destination for this move.
EUR/AUD at a Critical Juncture
The Australian dollar has been on a tear lately, helped by recovering commodity prices. EUR/AUD has been trading in a broadening pattern since early July, one of those formations that can resolve violently in either direction.
The pair recently rejected from a key level in the middle of this pattern, signaling potential weakness ahead. A test of support around 1.76 looks increasingly likely. If that level breaks, it could trigger a bearish resolution of the entire pattern, opening up considerable downside potential. This is one to watch closely in the coming sessions.
What's Coming This Week
The week ahead could determine whether the emerging December rate cut narrative survives contact with fresh economic data. Markets have already priced in a more dovish Fed path, and equities are leaning into the seasonal Santa rally playbook. Now comes the test.
The ISM manufacturing and services reports will take center stage, along with other releases that feed directly into the Fed's decision-making process. After the recent risk-on move and dollar weakness, any upside surprises in activity or pricing components could quickly cool rate cut optimism. That would likely spark a tactical squeeze higher in bond yields and the greenback. On the flip side, softer readings would validate the recent equity rally and keep pressure on the dollar, particularly against higher-beta currencies like the Australian dollar.
Friday brings the main event: Non-Farm Payroll data, the first on-schedule release since September. Expectations call for a modest rebound from the soft prior print. A strong upside surprise could force markets to push back their rate cut timeline, which would pressure equities at the margin while lifting the dollar. A disappointing number would likely extend the current pro-risk, anti-dollar environment that's been driving markets recently.
With markets now positioned for easier policy and seasonal strength, the data will either confirm or challenge that narrative. Either way, we're likely to see some volatility as traders adjust their positions accordingly.
