US Dollar Index

The dollar index took a hit after the release of weak personal consumption expenditures (PCE) data in the United States before the weekend. The market is also assessing the political difficulties in the United States, which has exacerbated market sentiment. The dollar index retreated from a technical high of 108.55 in more than two years to below 108.00. In fact, the dollar index rose by more than 0.80% last weekend after rising nearly 1% last week. Currently, it remains slightly below 108.00 as US Treasury yields soared above 2.50% on Wednesday after the Federal Reserve emphasized a cautious approach to further rate cuts. Federal Reserve Chairman Jerome Powell explained that the central bank will be vigilant about further rate cuts as inflation is expected to remain above the 2% target. The Fed's monetary policy statement pointed out that economic activity remains strong while noting that labor market conditions have eased. The Fed's Summary of Economic Projections (SEP) or "dot plot" predicts only two rate cuts in 2025, down from the four rate cuts predicted in September.

After the rally in the middle of last week, the technical indicators of the US dollar, the 14-day relative strength index (RSI) and the MACD indicators, show that the US dollar index has not only fully recovered its earlier losses, but also hit a 25-month high of 108.55 this week, allowing the US dollar index to take a breather while remaining neutral around 108. Although the momentum has weakened, the overall situation remains constructive as long as the US dollar index remains above the 20-day simple moving average (106.72). In the absence of new catalysts, the US dollar may hover in the current range, waiting for clearer signals before trying to move higher. The first target is 108.55 (last week's high), further to 109.00 (round number), and 109.20 (76.4% Fibonacci rebound from 114.78 to 100.16), and a break below it points to 110.00 (market psychological level). On the other hand, as the US dollar index has risen nearly 2.0% for three consecutive weeks, there may be a wave of technical retracement in the short term to limit further gains. As for the downward view, 107.56 (last Monday's high), and 107.47 (50.0% Fibonacci rebound level) are the first target positions. Further will point to the 107.00 (market psychological barrier) area level.

Today, you can consider shorting the US dollar index around 107.95, stop loss: 108.10, target: 107.50, 107.40

WTI crude oil

Last week, WTI crude oil prices fell for four consecutive trading days before a wave of technical rebounds before the weekend. In the past week, crude oil prices denominated in US dollars have fallen on a weekly basis due to the strengthening of the US dollar. The strengthening of the US dollar has increased the cost of purchasing crude oil for buyers using other currencies, thereby suppressing crude oil demand. Oil supply is expected to exceed demand by 1.2 million barrels per day. The oil market is expected to face a surplus next year as weaker economic activity and a weak Chinese economy further dampen crude oil demand growth. In addition, energy transition measures have significantly affected demand in China. Last week, China's state-owned energy giant Sinopec announced that the country's gasoline demand is expected to peak in 2027 due to weak diesel and gasoline consumption, as the world's largest oil importer. Crude oil prices are fluctuating in a narrow range around $70.00. According to the Bloomberg Supply and Demand Calculator, U.S. commercial crude oil inventories may fall by about 537,000 barrels per day in 2025. Despite President-elect Donald Trump's promise to drill more domestic oil, it will take months or years for these new sites and wells to be fully operational, and demand will pick up under Trump's leadership.

Crude oil prices may see some hope for upside potential in 2025. President-elect Trump may be ready to drill more oil in the United States, although there are still several shale projects that need to be developed and tapped before they can be fully operational. Demand is expected to be boosted once Trump takes office in January, and some increases may be seen in the first quarter or first half of 2025. On the upside, $70.00 (psychological level) and the 100-day simple moving average at $70.82 are firm resistance levels. If oil traders can break through these levels, $71.46 (February 5 low) is the next key resistance level. A breakout would look to $72.23 (50.0% Fibonacci rebound from 77.93 to 66.53), and $72.54 (November 7 high). However, watch out for quick profit-taking as we approach the end of the year. On the downside, $70.00 (psychological level) and $70.03 (60-day SMA) have been cut so much this week that they have lost relevance for now. This means that $67.12 is the level that holds prices in May and June 2023 and the last quarter of 2024, and remains the first solid support nearby. If broken, the November 18 low of $66.53, followed by the low so far in 2024, will reach the $64.75 level.

Today, consider going long on crude oil around 69.30, stop loss: 69.10; target: 70.60; 70.80

Spot gold

Gold prices fell 0.95% so far last week, supported by a weaker dollar and U.S. Treasury yields, as U.S. economic data showed slowing inflation. The Federal Reserve's hawkish interest rate outlook has caused gold prices to fall 0.95%. The dollar's technical retreat before the weekend has made gold cheaper for overseas buyers, while U.S. Treasury yields have also retreated slightly from more than six-month highs. The report showed that the monthly inflation rate slowed in November, after little improvement in the previous few months. The personal consumption expenditures (PCE) price index rose 0.1% last month, after an unrevised increase of 0.2% in October. "Not only the PCE data, but also the personal income data and personal spending data were weaker than expected. Investors can be seen returning to the gold market and re-establishing positions. Two rate cuts have been reflected in the price, causing a sharp sell-off in gold. Now there is a possibility of a third rate cut under a more accommodative policy, but it is too early to draw conclusions." Higher interest rates increase the opportunity cost of holding gold, which does not generate any interest. Since physical demand is currently at the bottom, it means that we are now entering 2025, when expectations of Fed rate cuts are relatively low. If inflation concerns end up being exaggerated, this may drive gold prices higher, giving the Fed more room to maneuver. From a technical perspective, the break below the 100-day moving average (2607.50) after the FOMC interest rate meeting is seen as a new trigger for bearish traders. In addition, the 14-day relative strength index (RSI), one of the technical indicators on the daily chart, has also re-traced downwards, remaining around the 45.85 level last week. It has been gaining negative traction, indicating that the path of least resistance for gold prices is to the downside. Therefore, any subsequent upward movement may continue to face short-term resistance ahead of the 89-day EMA at $2,627.50, and $2,626.50 (last Thursday's high) area. However, some follow-through buying may trigger a short-covering rally and lift XAU/USD to the next relevant resistance zone around $2,663.80 (65-day EMA) - $2,664.10 (last week's high). A sustained strength above the latter may offset the negative bias and pave the way for further gains towards the psychological level of $2,700.00. On the other hand, the monthly low of $2,583.80 hit last Thursday and the 115-day moving average near 2,583.00 may initially protect the recent downside space. After breaking below, gold prices may fall to around $2,556.50 (130-day moving average), and then fall to the $2,536.80 area or the swing low mark in November.

Today, you can consider going long on gold before 2,618.00, stop loss: 2,615.00; target: 2638.00; 2642.00

AUD/USD

AUD/USD closed down for the third consecutive week, hitting a low of 0.6199 in more than two years before the weekend. Spot prices traded around 0.6250 before the weekend, but there is still a lack of bullish conviction in the short term. A slight pullback in US Treasury bond yields has curbed the recent momentum of the US dollar to a two-year high, becoming a key factor temporarily supporting AUD/USD above 0.62. Nevertheless, the hawkish signal from the Federal Reserve that it will slow the pace of rate cuts in 2025 should be a positive factor for US Treasury yields and the US dollar. In addition, the general risk aversion sentiment may support the safe-haven US dollar and curb further gains in the risky Australian dollar. Investors remain concerned about the continued geopolitical risks brought by the protracted Russia-Ukraine war and tensions in the Middle East. In addition, concerns about the tariff proposals put forward by US President-elect Trump have also taken a toll on global risk appetite. In addition, China's economic difficulties and the dovish turn of the Reserve Bank of Australia should curb the upside of AUD/USD.

Last week, AUD/USD plunged to 0.6199, the lowest level in more than two years, and the daily chart shows that there will be a persistent bearish bias as the currency pair continues to search for a bottom. However, the technical indicator 14-day relative strength index (RSI) remains below 30 (latest at 29.85), indicating oversold conditions, while the MACD histogram shows that bears have weakened momentum, with rising red bars indicating a possible shift in market sentiment. This indicates that there is a possibility of a technical adjustment to the upside in the short term. This indicates that there is potential for further recovery in the Australian dollar. Although AUD/USD has gained some foothold, the key resistance is located at 0.6270 (October 26, 2023 low), and a breakthrough above this level is needed to challenge the psychological level of 0.6300, and further challenge 0.6382 (last week's high). On the downside, AUD/USD may retest 0.6199 (more than two-year low) and 0.6170 (2022 yearly swing low), highlighting a key support area in the current bearish trend. Eventually it may fall to 0.6130 (lower line of the downtrend channel), and 0.6100 (round mark) before it can settle down.

Today, you can consider going long on the Australian dollar before 0.6240, stop loss: 0.6225; target: 0.6285; 0.6300.

GBP/USD

GBP/USD rebounded after the release of US inflation data and the Bank of England's monetary policy decision last week. Although the pair benefited from the lower-than-expected US personal consumption expenditures (PCE) data, the Bank of England's cautious attitude towards rate cuts and weaker UK retail sales data limited gains. The US personal consumption expenditures (PCE) data for November showed weakening inflationary pressures. Data showed that the CME Fed Watch tool expects a 90% chance that the Fed will maintain its policy rate at its meeting on January 29, 2025, and a 10% chance of a 25 basis point rate cut. Meanwhile, the US 10-year Treasury yield was at 4.50%, down from a peak of 4.60% reached on Thursday. In the UK, the Bank of England kept its key lending rate at 4.75%, in line with widespread expectations. Governor Andrew Bailey highlighted the uncertainty of future rate cuts, saying: "We cannot commit to when or how much rate cuts will be in 2025 due to the high level of uncertainty in the economy." Following the announcement, market participants expected the Bank of England to cut interest rates by 53 basis points in 2025.

From the daily chart, GBP/USD has regained above 1.2600 after hitting a low of 1.2475 last week, but technical indicators remain in negative territory, although showing some improvement. The 14-day relative strength index (RSI) has risen but still shows bearish momentum (latest at 41.20 negative territory), while the moving average convergence/divergence (MACD) histogram remains below the zero line, reflecting continued selling pressure. The pair will find immediate support around 1.2563 (76.4% Fibonacci retracement of 1.2487 to 1.2811), and 1.2500 (psychological support barrier). A break below the above levels could expose 1.2475 (7-month low). On the other hand, since the sharp sell-off of GBP/USD seems to be overdone, it is not ruled out that the pair will re-enter the 1.2609 (5-day moving average) and 1.2614 (last Friday's high) areas, and a breakout will point to 1.2668 (20-day moving average), and further challenge 1.2700 (round mark), with short-term targets at 1.2730 (downward trend line from the high of 1.3048 on November 6), and 1.2734 (23.6% Fibonacci retracement of 1.2487 to 1.2811).

Today, it is recommended to go long on GBP before 1.2560, stop loss: 1.2545, target: 1.2590, 1.2610

USD/JPY

The dollar rebounded more than 2% after the Fed and Bank of Japan decisions touched above 157.00. The Bank of Japan kept interest rates at 0.25% and made further tightening conditional on progress in wage negotiations. Monetary policy divergence between the US and Bank of Japan is weighing on the yen. As widely expected, the Bank of Japan kept its short-term policy rate target steady in the 0.15%-0.25% range after a two-day policy meeting that ended on Thursday. According to the summary of the Bank of Japan's policy statement, Japan's economy is recovering modestly but remains fragile. Inflation expectations rose modestly. However, uncertainties about the future of Japan's economy and prices remain strong. Meanwhile, the Fed's hawkish rate cut on Wednesday pushed long-end U.S. Treasury yields to multi-month highs, which is expected to weigh on the low-yielding yen. In addition, the dollar's rise to its highest level in two years after the Fed meeting should help limit the downside of USD/JPY.

On the back of a strong up move from the 3rd low of this month at 148.65 support or the monthly low, a strong move above the psychological 155.00 level while holding below the 100-day moving average (148.75) could be seen as a key trigger by the bulls. Moreover, daily oscillators have maintained bullish momentum and remain away from overbought territory. Therefore, a sustained move above the above levels could see USD/JPY break above the 158.00 (round number) level and then reclaim the 158.62 (July 17 high) level. This momentum could extend further to test the multi-month round high near 160.00. On the other hand, the $156.75 (November 15 high) area now appears to be an immediate support ahead of the $156.00 round number level. Some follow-through selling could see a test of Thursday’s low near 154.45.

Today, it is recommended to short before 156.55, stop loss: 156.80; target: 155.60, 155.50

EUR/USD

After hitting a three-week low of nearly 1.0343 last week, EUR/USD rebounded sharply to above 1.0400. The major currency pairs rebounded as the growth of the US personal consumption expenditure price index (PCE) data in November was still lower than expected. And the lower-than-expected inflation growth put pressure on the US dollar. The US dollar index, which tracks the value of the US dollar against six major currencies, fell below 108.00 after hitting a two-year high of 108.55 earlier before the weekend. The mild growth in inflation data is unlikely to affect the market's expectations that the Federal Reserve will keep interest rates unchanged at current levels in January. After cutting the key borrowing rate by 25 basis points to a range of 4.25%-4.50%, the Federal Reserve indicated that it would reduce interest rate cuts in 2025 amid strong growth rates. At the press conference, Fed Chairman Jerome Powell said that the strength of the economy gives the central bank the ability to cautiously cut interest rates. Meanwhile, better-than-expected gross domestic product (GDP) in the third quarter solidified hopes for a cautious rate cut by the Fed next year.

From the daily chart, after suffering a sharp drop of more than 1% to 1.0343 in the middle of last week, EUR/USD rebounded slightly before the weekend and re-crossed 1.0400 to trade around 1.0428. Despite this mild improvement, the pair remains below the 20-day simple moving average (1.0501), which continues to limit upside potential and maintain a cautious outlook. Technical indicators suggest that although selling pressure may be easing, the overall bias is still tilted to the downside. The 14-day relative strength index (RSI) has climbed to 39.85, still in negative territory, but indicating a gradual reduction in bearish momentum. Meanwhile, the moving average convergence/divergence (MACD) histogram shows flat red bars, reflecting continued weakness and initial signs of stabilization. Nevertheless, EUR/USD is still in a correction phase rather than turning bullish. On the downside, the first static support is located at 1.0400, and 1.0386 (the axis of the daily downtrend channel), followed by 1.0332 (the low of November 22). A break will further point to the 1.0305 (lower line of the downtrend channel), and 1.0300 (market psychological level) levels. If the pair stabilizes above 1.0400 (static round number), the next resistance may be 1.0468 (upper line of the downtrend channel), and 1.0474 (23.6% Fibonacci rebound level from 1.0937 to 1.0332). The ultimate short-term target is 1.0553 (34-day simple moving average), and 1.0563 (38.2% Fibonacci rebound level) levels.

Today it is recommended to go long on Euro before 1.0415, stop loss: 1.0400, target: 1.0470, 1.0480.

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