Week Ahead: More US Data to Test Dovish Fed

The rapid repricing of Fed expectations followed a rare dovish turn from normally centrist policymakers, including New York Fed President John Williams and Governor Christopher Waller. These recent remarks signalled that rates may need to be cut “in the near term” as labour conditions soften and inflation cools, prompting banks such as JPMorgan to pull forward their call for a first cut to December.

Growing Expectations of a Cut

FedWatch probabilities flipped sharply over the past two weeks. Futures markets now assign roughly an 87% chance of a 25 bp cut at the 10 December FOMC, up from about 40 to 50% just a week earlier, as traders responded to dovish Fed commentary and softer macro surprises.

Lower rate expectations have rippled through the bond market. The 10-year Treasury yield has slipped back toward the 4.0% region, while the 2-year yield is trading around 3.5%, levels more consistent with a policy path that includes several cuts over the next year.

That drop in yields has reignited demand for growth and duration-sensitive assets. US tech stocks just logged their biggest daily jump in six months, with the Nasdaq surging about 2.7% and the S&P 500 up 1.6% in one session as AI-linked names such as Broadcom, Alphabet, Microsoft and Tesla led the rebound.

Meanwhile, crypto is holding near November lows, reflecting lingering risk-off sentiment despite improved liquidity expectations.

Upcoming Events

For full view of upcoming economic events, check out the VT Markets Economic Calendar.

Key Symbols to Watch

USD Index (USDX)

• USDX traded up and retested the 99.45 zone, showing hesitation as the index reacts to shifting US rate expectations.
• If the index pulls back, traders should watch the 99.00 support area, where bullish price action may re-emerge.
• If momentum continues higher, USDX could push toward 100.50 or even 100.90, especially if upcoming US data surprises to the upside.

Gold (XAUUSD)

• Gold traded above the 4,190 monitored area, supported by softer Treasury yields and rising expectations of a December Fed rate cut.
• Price could extend toward the 4,245 resistance zone before any corrective pullback, especially if upcoming US data shows further cooling in services activity or hiring.
• If gold consolidates first, watch for bullish price action around 4,170, as weaker US employment or ISM readings this week may reinforce demand for safe havens and keep the uptrend intact.

Bitcoin (BTCUSD)

• Bitcoin traded down from the 92,450 monitored area after consolidating for more than a week, reflecting reduced risk appetite as traders reassessed the Fed’s mixed signals.
• Price is now testing the 87,070 monitored area, a key level that aligns with broader uncertainty ahead of major US data releases this week (ISM Services, ADP jobs, and PCE).
• If BTC shows another consolidation pattern at current levels, it could pave the way for a new swing low, especially if US data comes in stronger and dents December rate-cut expectations.

USDCAD

• USDCAD extended its downside move after taking out the 1.3970 liquidity zone, signalling that bearish pressure is still in play.
• If price consolidates at current levels, a push lower toward the 1.3900 support becomes likely, especially if USD sentiment stays soft.
• Traders will watch Canada’s Employment Change data on 5 December, where a stronger jobs print could add further downside pressure on USDCAD, while a weak report may trigger a corrective bounce.

USDJPY

• USDJPY dropped further and tested the 155.50 zone after BoJ Governor Ueda signalled that a December rate hike remains possible, boosting the Japanese Yen during the Asian session.
• The pair is also under pressure from a broadly weaker US Dollar, as markets price in a high probability of a Fed rate cut next week, reducing yield differentials that previously supported USDJPY.
• If the downward trend keeps going, traders should pay attention to price movements around 155.35 and 154.65, where positive reactions might happen, but ongoing strong signals from the BoJ could keep pushing prices lower.

Bottom Line

The upcoming US releases will determine whether the dovish shift has further room to run or needs recalibration, while key international figures add another layer to cross-asset flows. Traders should stay nimble and prepared for cross-asset volatility as the macro picture takes clearer shape. Stay flexible, watch key levels and react quickly to data surprises as markets position for the final major event of the year.

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