Dollar Index

The U.S. dollar got off to a strong start on Monday after a rather slow start to the day. An upward revision in the preliminary durable goods release for November set the tone for a stronger dollar. The U.S. dollar index climbed back to 108. The U.S. core PCE recorded its smallest increase in nearly half a year in November, and personal spending and income growth were broadly in line with expectations. Risk sentiment improved, and U.S. bond yields fell across the board. However, Fed officials took a hawkish stance, and the U.S. dollar index fell from a two-year high of 108.55 to a narrow range below 108.00, but continued to consolidate at a high level. U.S. President Biden signed an emergency funding bill to prevent a government shutdown. The latest bill will continue to provide operating funds for the U.S. government until March next year. In the short term, the US dollar is expected to continue to consolidate at a high level, with support levels of 107.20 and 106.50/80. As for the central bank, pay attention to the speech of Bank of Japan Governor Kazuo Ueda. Minutes of the monetary policy meetings of the Reserve Bank of Australia and the Bank of Canada; in addition, European and American markets will be closed for Christmas, and against the background of light market trading, the currency market is expected to show a volatile trend.

Following Wednesday's gains, the 14-day relative strength index (RSI), a technical indicator on the daily chart, fell sharply from last week's high of 71.50 to a low of around 64.00 as the index fell below 108.00 heading into the weekend. This pullback suggests that the recent rally to 108.55, a recent high, may be taking a breather. Nonetheless, if the U.S. Dollar Index can hold above its 20-day (106.74) simple moving average, the broader bullish structure remains intact, with room for further upside once profit-taking subsides and fundamental drivers re-emerge. and once again challenges upwards at 108.20, and 108.55 (last week’s high). On the downside, 107.56 (last Monday’s high), and 107.47 (50.0% Fibonacci rebound level) are the first target levels. It will further point to the 107.00 (market psychological mark) area level.

Today you can consider shorting the US dollar index near 108.20, stop loss: 108.30, target: 107.80, 107.70

WTI Crude Oil

Oil prices reversed course after earlier gains in Asian markets. Markets were broadly trading range-bound in search of levels ahead of final U.S. data. WTI crude oil prices moved higher for a second straight day on Monday, recovering from the more than one-week lows hit on Friday in the $68.40-$68.35 area. However, the commodity lacked bullish confidence and was trading in the $69.75-$69.80 area during the Asian session. An editorial over the weekend in a media affiliated with China's Ministry of Housing and Urban-Rural Development hinted at further measures to support the recovery of the real estate market. That helped ease concerns about slowing demand, which coupled with worries about supply disruptions due to tighter sanctions on Russia and Iran provided a tailwind for crude prices. The Organization of the Petroleum Exporting Countries and its allies (OPEC+) recently decided to delay a planned supply increase by three months to April and extend the full lifting of production cuts by a year to the end of 2026. Additionally, the International Energy Agency highlighted increased supply from non-OPEC+ countries, which in turn could cap crude prices.

Crude oil prices attempted to break above the $70.00 level but failed to achieve any gains. The risk now could turn into a squeeze, with sellers reducing their hedging against rising oil prices and possibly triggering a serious correction in the oil market. On the upside, the 100-day simple moving average at $70.79 serves as firm resistance. If oil traders can break above these levels, $71.46 (February 5 low) is the next key resistance level. A breakout would target $72.23 (50.0% Fibonacci bounce level from 77.93 to 66.53), and $72.54 (November 7 high). On the downside, this week’s 20-day EMA of $69.00, and $68.81 (Dec. 17 low) currently remain the first solid support nearby. If broken, $67.12 is the level where prices will hold in May and June 2023 and into the final quarter of 2024

Today you can consider going long crude oil near 69.35, stop loss: 69.10; target: 70.50; 70.60

Spot Gold

Gold prices were steady near $2,620 in early Asian trade on Monday. The Fed's hawkish stance could weigh on gold. However, a weaker U.S. dollar following a weak inflation report may prevent gold prices from falling further. The Fed cut interest rates as scheduled at its December meeting but signalled it would slow the pace of further declines in borrowing costs. This continues to boost the US dollar and suppress gold priced in US dollars, because rising real interest rates will increase gold price transaction costs. On the other hand, weaker-than-expected U.S. inflation data could help limit gold's losses. Since China is the world's largest consumer of gold, a pick-up in gold demand in China could boost gold prices. With less than 6 weeks to go until Chinese New Year, the world’s largest holiday gold buying is set to surpass India’s Diwali. In addition, ongoing geopolitical tensions in the Middle East may drive safe-haven capital flows, which is expected to boost gold prices.

Technical trends suggest that bullish momentum is weakening. On the weekly chart, the 14-week relative strength index (RSI) indicator fell back to its lowest level since February, near 54. Additionally, gold/USD broke below the 20-week simple moving average (2616) after spending most of the session solidly above it and tested $2,600.00 (the market’s psychological barrier). Gold is likely to find support at last Thursday's monthly low of $2,583.80, and the 115-day EMA at $2,583.00. Once gold/USD breaks below this area and starts using it as resistance, the next bearish target could be set at $2,556.50 (130-day moving average), and then fell to the $2,536.80 area (November's shock low) mark. As for the upside, any upward move is likely to continue to face short-term resistance in front of the 89-day moving average at $2,627.50, and $2,626.50 (last Thursday's high) area. A key resistance area is near $2,663.80 (65-day EMA) – $2,664.10 (last week’s high).

Today you can consider going long gold before 2,610.00, stop loss: 2,605.00; target: 2625.00; 2630.00

AUD/USD

AUD/USD is trading within a tight range around 0.6250, with the Reserve Bank of Australia minutes taking center stage. At its policy meeting on December 10, the Reserve Bank of Australia held the policy rate steady at 4.25%. Investors shrugged off weak monthly U.S. personal consumption expenditures inflation data for November. AUD/USD was flat near 0.6250 in early Asian trading on Monday. The Australian dollar has made a modest recovery after last Wednesday's sharp decline to 0.6199, its lowest in more than two years. Traders braced for the release of Monday's Reserve Bank of Australia meeting minutes to get a sense of the Reserve Bank's interest rate outlook. Last Friday, the U.S. PCE price index was weaker than expected, suppressing the dollar lower. On the other hand, the Reserve Bank of Australia maintained the official cash rate (OCR) at 4.35% in early December. The rate has remained unchanged since November. Reserve Bank of Australia Governor Bullock emphasized that the continued strength of the job market was the reason why the Reserve Bank of Australia was lagging in launching a monetary easing cycle compared to other countries. However, growing expectations that the Reserve Bank of Australia will cut interest rates in February may weigh on the Australian dollar.

Late last week, AUD/USD climbed to around 0.6260 after hitting 0.6199, a low in more than two years, supported by oversold technical conditions. The 14-day relative strength index (RSI), a technical indicator on the daily chart, rebounded sharply to around 31, temporarily out of the oversold zone, indicating the potential for further recovery in the Australian dollar. Meanwhile, the MACD histogram shows bears losing momentum, with rising red bars suggesting a possible shift in market sentiment. While AUD/USD has gained some footing, key resistance lies at 0.6270 (October 26, 2023 low), with a break above this level needed to challenge the 0.6300 psychological barrier, and further towards 0.6382 (last week’s high). On the downside, AUD/USD may retest around 0.6199 (over two-year low) and 0.6200 (psychological level). Next support is at 0.6170 (2022 annual swing low).

Today you can consider going long Australian dollar before 0.6230, stop loss: 0.6220; target: 0.6280; 0.6290.

GBP/USD

GBP/USD lost traction and was trading close to 1.2500 in the second half of Monday. The U.S. dollar benefited from safe-haven flows and weighed on the pair as trading conditions remain weak ahead of Christmas. The GBP/USD pair started the new week on a flat note, trading within a tight trading range around 1.2575 during the Asian session. Additionally, the fundamental backdrop warrants caution before positioning for an extension of Friday’s rebound from the 1.2475 area, the lowest level since May. Some support was provided for the GBP/USD pair after the November Personal Consumption Expenditure Index report showed signs of slowing inflation and continued challenges for the economy. The Fed cut borrowing costs by 25 basis points last Wednesday as expected, but said the pace of rate cuts would slow in 2025. This remains supportive of rising U.S. Treasury yields, which, coupled with geopolitical risks from the Russia-Ukraine war and tensions in the Middle East, support bargain hunting in the U.S. dollar and could limit gains in the GBP/USD pair.

In terms of technical trends last week, GBP/USD once rebounded to just above 1.2600 late last week, but the 14-day relative strength index (RSI), a technical indicator on the daily chart, is still in the negative zone despite showing some improvement. The Moving Average Convergence/Divergence (MACD) histogram remains below the zero line, reflecting continued selling pressure. Immediate support lies at 1.2500, below which could expose the pair to 1.2475 (7-month low). On the upside, the first resistance is located at 1.2600 (market psychological level) and 1.2614 (last Friday's high) area. The next level needs to continue to break through the above levels to challenge the next key obstacle of 1.2668 (20-day moving average) and move further upward. Challenge 1.2700 (round number mark).

Today it is recommended to go long GBP before 1.2520, stop loss: 1.2510, target: 1.2570, 1.2680

USD/JPY

The Japanese yen struggled to capitalize on Friday's modest recovery gains against the US dollar. Doubts about the Bank of Japan's plans to raise interest rates and rising U.S. bond yields weighed on the lower-yielding yen. The yen started the new week on a weak note, remaining near the five-month low hit on Friday. Doubts about when the Bank of Japan will raise interest rates again have become a key factor dragging down the yen. Additionally, the recent widening of the U.S.-Japan yield gap due to the Fed's hawkish shift has weakened the low-yielding Japanese yen. Last week, U.S. 10-year government bond yields rose to their highest level in more than six months, widening the gap between U.S. and Japanese yields and weakening the yen. Japan's national consumer price index (CPI) rose more than expected in November, a government report showed, in line with expectations for further interest rate hikes in early 2025. Additionally, the generally positive tone in equity markets also dampened demand for the safe-haven yen. Meanwhile, strong inflation data from Japan on Friday opened the door for the Bank of Japan to potentially raise interest rates in January or March. This, coupled with weak USD price action, failed to aid upside opportunities for the USD/JPY pair in the absence of any relevant fundamental catalysts.

From a technical perspective, USD/JPY's Friday lows, around the 156.00 - 155.95 area, now appear to protect the immediate downside. Any further decline could be seen as a buying opportunity near the 155.69 (5-day EMA) level. The next relevant support is around the psychological 155.00 mark, which if decisively breached could shift the short-term bias towards bearish traders and send the USD/JPY pair further weakening towards last Thursday's lows around 154.45. On the other hand, 157.20 now appears to be an immediate barrier, closely followed by the 157.40 – 157.45 area and last Friday’s multi-month high of 157.90 area. Sustained buying and a break above the 158.00 mark would be seen as a new trigger for bullish traders, and the positive oscillators on the daily chart support this. The USD/JPY pair may then climb towards the 158.45 intermediate barrier.

Today it is recommended to short the US dollar before 157.35, stop loss: 157.50; target: 156.60, 156.50

EUR/USD

The EUR/USD pair continued to fall, trading near 1.0400 after an earlier recovery attempt. Holiday sentiment began to take hold, limiting action across the FX market, while cautious risk sentiment helped the dollar hold its ground, forcing the pair lower. During Monday's Asian session, the EUR/USD pair remained stable after the previous session's gains, trading around 1.0430. The pair's gains could be attributed to the dollar's decline following the release of US personal consumption expenditures price index data. According to Bloomberg, European Central Bank Governing Council member Boris Vujcic said on Saturday that the central bank plans to continue lowering borrowing costs in 2025. He said: "The direction is clear - it is a continuation of the path to 2024, with further interest rate cuts." In addition, tax reforms approved by German lawmakers strengthened the euro as Germany is the largest economy in the eurozone. These reforms will increase households' disposable income, boost consumer demand and stimulate economic growth.

As shown on the daily chart, the EUR/USD pair rebounded around 1.0440 in this morning's Asian session after a sharp drop last Wednesday. Despite the improvement, the pair remains below the 20-day simple moving average (1.0499), which continues to limit upside potential and maintain a cautious outlook. Technical indicators suggest that although selling pressure may be easing, the overall trend is still tilted to the downside. The 14-day relative strength index (RSI) has climbed to around 41.20, still in negative territory but indicating a gradual fading of bearish momentum. Meanwhile, the moving average convergence-divergence (MACD) histogram shows flat red bars, reflecting continued weakness with initial signs of stabilization. Therefore, on the upside, the 1.0499 (20-day simple moving average), and 1.0500 (round number), followed by 1.0536 (34-day simple moving average), and 1.0563 (38.2% Fibonacci rebound from 1.0937 to 1.0332) area levels can be considered first. On the downside, we will focus on 1.0400 (round mark), and 1.0332 (low point on November 22).

Today, we suggest going long on the euro before 1.0400, with a stop loss of 1.0385 and a target of 1.0450 and 1.0460.

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