Expected Fed hikes nearly doubled, and the dollar beat all seven majors

Last week's note closed on two Action Forex levels on AUD/USD. By those levels, a session close below 0.6854 would point to a deeper fall, and a close above 0.6952 would be the pair's first above that level since Wednesday 4 November. The lower side fired on Wednesday, when the pair closed at 0.68476, and it closed below the line again on Thursday and Friday. Friday's close, 0.67725, was its lowest since January on our feed. It never reached 0.6723, the target Action Forex had set for a decisive break: the week's low was 0.67695, at 21:36 UTC on Friday. Action Forex's new weekly report keeps its bias on the downside, toward 0.6756 first and 0.6723 after a firm break there, and said a move above 0.6853 would turn its intraday bias neutral.

The week's main story was a change in what markets expect from the Fed. Action Forex said market pricing went from about 47 basis points of further tightening through September 2027 at the 6 November close to about 90 by Friday, almost double, and that a December hike went from a 76.3% probability to fully priced. Fed Governor Christopher Waller's warning on Tuesday, and October's US CPI a few hours later, set it off. On our feed the dollar finished the week higher against all seven majors, from 0.38% against the New Zealand dollar to 2.24% against the Swiss franc, and Action Forex said the dollar index rose 1.11% to 103.410, above its previous 2026 high. Gold fell 4.61% to $3,878.38, giving back almost all of the previous week's gain: it ended $3.20 above its 30 October close.

Monday: the kiwi jumped after New Zealand's election

On Monday NZD/USD rose 1.55% to 0.56314 after the preliminary count in New Zealand's general election, in which the governing coalition held a slim majority, FXStreet said. The dollar closed lower against all seven majors, a session after closing higher against all seven. Gold rose 1.86% to $4,141.59, its highest close since 19 October, and WTI slid on hopes of US-Iran diplomacy; after the close, FXStreet put it below $85.50, its lowest since August. AUD/USD's low, 0.6856 in the session's first hour, stopped 2 pips above the lower line of our tell.

Tuesday: Waller warned, and CPI ran hot

On Tuesday Waller backed a 25-basis-point hike in December, speaking in London before the data, and said a 50-basis-point move should be considered if October inflation stayed elevated, Action Forex reported. US consumer prices then rose 0.4% on the month, against a 0.3% forecast, and core prices 0.3%, against 0.2%. Action Forex said it was the third month in a row of core at 0.3%, and investingLive said the annual rates were not published.

The dollar closed higher against all seven majors. Gold fell 2.67% to $4,031.10, and the Treasury sold 10-year notes at 5.02%, investingLive said. FXStreet said new 10-year notes had not paid that much since 2006. AUD/USD fell 0.87%, the most of the seven, and dipped below 0.6854 several times between 15:50 and 18:16 UTC, down to 0.68436, before closing 12 pips above it.

Wednesday: the Aussie broke the line, and the euro fell below 1.11

Veterans Day closed the US bond market, investingLive said, and on Wednesday the dollar rose against all seven majors for a second session. AUD/USD closed at 0.68476, below 0.6854, and our tell fired on its lower side. EUR/USD fell 0.67% to 1.10893, and FXStreet said the break below 1.1100, the floor of a five-week range, put 1.1000 in focus. USD/CHF rose 0.94%, the dollar's biggest gain of the day. USD/JPY rose 0.66% to 159.792, and gold fell 1.14% to $3,985.26, its first close below $4,000 since 3 November.

Thursday: USD/JPY touched 160, and gold fell below its 30 October close

On Thursday gold fell 2.77% to $3,874.70, below its 30 October close of $3,875.18, after a low of $3,852.42 that FXStreet called a one-year low. USD/JPY touched 160.044 at 16:41 UTC, fell to 159.314 two minutes later and closed at 159.834. Earlier, in the Asian session, Japan's top currency diplomat, Atsushi Mimura, called recent moves too rapid, FXStreet reported; no headline reported an intervention.

The dollar rose against all seven majors for a third session, and FXStreet put the dollar index at a 19-month high of 103.08 and the euro at its lowest in 18 months. UK GDP rose 0.2% in September, against a 0.0% forecast, and GBP/USD still fell for a third session, to 1.32364.

Friday: producer prices cooled, and the dollar still rose

US producer prices rose 0.3% in October, against a 0.4% forecast, and investingLive said hawkish Fed worries ebbed after the data. On Friday the dollar still closed higher against six of the seven majors; only the yen gained on it. USD/JPY traded above 160.00 in four of the session's hours, up to 160.19 at 06:16 UTC, and closed at 159.695, its 14th close in a row above 157.50. Finance Minister Satsuki Katayama said Japan would engage with the US Treasury, FXStreet reported.

AUD/USD closed at 0.67725, its lowest close since January on our feed, and NZD/USD at 0.55244, below the previous Friday's close, so all of Monday's election rise was gone. EUR/USD made its fourth lower close in a row and USD/CHF its fourth higher one: it traded above 0.8394, the level Action Forex's daily outlook expected to be retested, in every hour from 17:00 UTC to the close, up to 0.83968 at 20:48 UTC, but closed below it, at 0.83888. Gold rose 0.09% to $3,878.38, its first higher close after three lower ones.

The week in our price feed

Last one-minute price before the Friday close in our own MT5 feed; changes are computed from unrounded prices. After rising against six of the seven last week, the dollar closed this one higher against all seven: most against the Swiss franc and the Australian dollar, least against the New Zealand dollar. Day by day, it closed lower against all seven on Monday, higher against all seven from Tuesday to Thursday, and higher against six on Friday. Gold fell 4.61%, from $4,065.82 to $3,878.38.

Action Forex said the two-year Treasury yield rose 34 basis points to 4.852% and the ten-year 28 to 5.139%, while the S&P 500 gained about 2.5% and the VIX fell about 25%. In its reading, that was a repricing of interest rates, not a flight from risk, and it is why the pressure fell on assets that pay no interest, gold among them.

What our own gauges saw

Market Readiness Score (MRS), Carry Trade Score (CTS) and Forex Strength Index (FSI) readings at each session's close. The last two columns come from our strength table: the currency that spent the most minutes in first place, with its share, and the dollar's rank on that count; "no clear leader" means the top two were within the noise margin. The MRS's news component read its full 20 at every close, so its moves came from its volatility component, which read 11 on Monday, 30 on Tuesday and 22 on the last three days, and from a one-point rise in its positioning component on Thursday. The CTS read 50 at every close, with its carry backdrop at 64 out of 100. The FSI closed every session Neutral, between 48 and 55.

Over the 7,185 minutes of the five sessions, the Australian dollar spent the most minutes at the top of the table, 1,193 of them, ahead of the Swiss franc on 1,148. The dollar was sixth, on 797, and the pound last, on 622. So the two currencies with the most minutes in first place were the two the dollar gained the most against: the table counts minutes in first place, not how far a currency moves.

What stays open

The Fed comes first. Action Forex said markets now price more tightening than any Fed official has endorsed, so the next questions are the US two-year yield's test of 5% and whether the Fed validates that path. Its calendar has the minutes of the Fed's latest meeting on Wednesday at 19:00 UTC, and US retail sales for October on Tuesday at 13:30 UTC, with consensus at 0.2%; Wells Fargo, in a note carried by Action Forex, also expects 0.2%.

Inflation abroad follows. The same calendar has Canada's October CPI on Monday at 13:30 UTC, with consensus at 0.3% on the month, after 3.1% on the year in September. Wells Fargo said it is the last inflation reading before the Bank of Canada's December meeting and sees some modest upside risk that the headline annual rate prints 3.1% again, and TD Economics said the question is whether core measures, still near 2%, start to pick up. UK CPI follows on Wednesday at 07:00 UTC, with consensus at 3.6% on the year, from 3.5%; Wells Fargo expects 3.8%, above the Bank of England staff forecast of 3.7%. Australian jobs data comes on Thursday at 00:30 UTC, and Wells Fargo expects Japan's October CPI to rise to 2.6%, from 2.1%.

The tell to watch. 160.38 and 157.65 on USD/JPY. Action Forex's weekly outlook said the pair lost momentum ahead of 160.38, which it calls key structural resistance, and turned its initial bias neutral. It said a firm break of 160.38 would target 162.21, and that a break of 157.65 would indicate short-term topping and bring a deeper fall to 156.06. On Friday the pair reached 160.19 on our feed and closed at 159.695. By those levels, a session close above 160.38 would put the pair above a level it has not traded above on our feed since 2 September, while a close below 157.65 would be its first since 30 October. Tokyo is part of the test: FXStreet said 160.00 is where Japan bought yen twice this year.