US Dollar Index

The US Dollar Index, which measures the value of the US dollar against a basket of currencies, fell slightly to around 106.00 last week, driven by several key factors. The US dollar rebounded from a near one-month low of 105.41 after the release of non-farm payrolls last weekend, and the market expects the Federal Reserve to cut interest rates in December. Last week, the US dollar fell for the third consecutive day on the eve of the release of non-farm payrolls, hitting a one-month low. Fed officials continue to speak in support of cautious rate cuts, and the market is currently betting on a December rate cut at around 70%. In addition, the Atlanta Fed's GDPNow model raised its forecast for fourth-quarter economic growth to 3.3%, and economic data continued to support American exceptionalism. In the short term, the seasonal weakness of the US dollar in December, coupled with the fading impact of political turmoil on the market, is expected to continue to fluctuate in a narrow range. At this stage, the US dollar index found short-term support before the 105.50-105.40 area and moved towards 106.00 on the news of the US dollar's recovery after the strong non-farm payrolls report. The Fed’s dovish stance usually leads to a fall in the US dollar index due to expectations of rate cuts. However, despite the news, the market still led to a stronger dollar.

Driven by the news of the dollar’s ​​recovery after the strong non-farm payrolls report, the US dollar index rebounded from a one-month low of 105.41 and re-entered the 106 level, which technically shows its resilience. This move came despite the profit-taking activities. From the daily chart, the US dollar index now aims to resume trading above the 106.20 (23.6% Fibonacci retracement of 100.16 to 108.07), and 106.18 (9-day simple moving average) area, and as long as it stays above the above-mentioned area levels, it may re-enter 106.38 (20-day simple moving average), and 106.52 (April 16 high). A breakout will challenge the 107.00 (round mark) level. On the other hand, the bullish trend of the US dollar index remains, with the 9-day (106.18) and 20-day (106.20) forming a bearish "death cross" pattern before the weekend. Initial support is expected at 105.72 (daily descending triangle support line), and 105.68 (30-day moving average). If the US dollar index continues to correct, the key levels formed by 105.21 (40-day moving average); 105.05 (an upward trend line from the low of 100.16 on September 27); and 105.05 (38.2% Fibonacci retracement level) will play a short-term support role.

Today, consider shorting the US dollar index around 106.10, stop loss: 106.20, target: 105.70, 105.60

WTI crude oil

Last week, oil prices fell. Although the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have once again postponed plans to increase production, factors such as increased crude oil production in the United States and weak international crude oil demand continue to plague the commodity market. Before the weekend, Brent crude oil prices fell by more than 2.5% and WTI crude oil prices fell by 2.14%. Crude oil prices fell for the third consecutive trading day, highlighting what would happen if OPEC+ decided to increase production. OPEC+ met on Thursday and decided to postpone the start of raising oil production by three months to April next year, and extended the time for fully lifting production cuts by one year to the end of 2026 due to weak demand and increased production from non-OPEC+ oil-producing countries. The increasing number of oil and gas drilling platforms deployed in the United States last week, indicating increasing production in the world's largest crude oil producer, also depressed oil prices. Weak global oil demand and the prospect of OPEC+ increasing production immediately after the rise in oil prices put pressure on trading. The overall situation is that the market is trapped in a fairly narrow range. While short-term developments may cause it to temporarily break out of this range, the medium-term view remains quite pessimistic.

As shown in the daily chart, WTI crude oil prices continued to adjust downwards last week, facing selling pressure and more downside risks. Currently, oil prices continue to trade in a familiar sideways channel (from last month so far), which is 72.23 (50.0% Fibonacci rebound level from 77.93 to 66.53) - 66.80 (last week's low). The 14-day relative strength index (RSI) of the technical indicator fell to 41.50 in the negative zone. If tensions in the Middle East increase, $68.44 (9-day moving average), and $69.22 (23.6% Fibonacci rebound level) will become huge resistance. If oil traders can break through this level, $70.00 (market psychological level) will become the next key level. On the other hand, traders need to set their sights on the "triple bottom" support composed of $66.60-66.70 at this stage. If the above triple bottom area is broken, $67.12 (October 3 low) is the next support level, and further downwards challenge the low of $66.85 (lower track of the horizontal channel). If oil traders can break through this level, $75.27 will become the next support area. The low so far in 2024 will reach the key level of $64.75.

Today, consider going long on crude oil around 66.80, stop loss: 66.60; target: 68.20; 68.40

Spot gold

Last week, gold prices fell 0.87% to $2,632 for the week. The U.S. November job growth report showed that the labor market continued to gradually ease, leaving room for the Federal Reserve to cut interest rates again, and the data was between the two. The prospect of rate cuts starting with a half-basis point cut in September has supported gold's record gains this year, as lower interest rates increase the appeal of holding non-yielding gold. Last week, gold prices struggled to make decisive moves in either direction. This week, U.S. inflation and Chinese trade data could add to gold's volatility. At the start of the week, market participants will be keeping a close eye on China's November trade account data. A significant increase in the trade surplus could help gold prices move higher in an immediate reaction. The next day (December 11), the U.S. Bureau of Labor Statistics will release November Consumer Price Index (CPI) data. The core CPI, which excludes volatile food and energy prices, is expected to rise 0.3% on a monthly basis, the same as in October. If the core CPI rises by 0.5% or more month-on-month, it could reignite investor concerns about rising inflation. In this case, the immediate reaction could trigger a rise in U.S. Treasury yields and weigh on gold prices. On the other hand, a level of 0.3% or less could have the opposite effect on gold price movements.

Spot gold bottomed out and rebounded last week, falling to a two-week low of $2,613.50 earlier. There was no obvious trigger in the fundamentals, and the gold price was quickly supported by bargain hunting, reversing the entire decline and rebounding to around $2,640. The 14-day relative strength index (RSI) of the technical indicator on the daily chart is slightly below 50. In fact, the RSI has been in a narrow range of 46 to 50 in the past two weeks, indicating that the gold price lacks direction in the short term. Therefore, it is expected that the gold price will run within the high/low range of the past two weeks, that is, $2,605 to $2,666. If the gold price effectively rises above $2,666, the next target will be $2,672.50, the 34-day moving average. If it breaks through, it will look up to $2,693.20 (61.8% Fibonacci rebound level from 2790.00 to 2536.80), and finally point to $2,700 (round mark). On the contrary, if it falls below the lower part of the range of $2,605 (the low point on November 26, which is also the 89-day moving average), it will repeatedly test $2,583.50 (the 100-day moving average). This reflects a weakening of buying interest. It is not ruled out that the gold price will test $2,536.80 (the low point on November 14) again.

Consider going long on gold today before 2,628.00, stop loss: 2,624; target: 2,645.00; 2,650.00

AUD/USD

The US dollar surged on the last trading day of last week, with AUD/USD falling to 0.6372, its lowest level since August. In the absence of data releases from Australia, the market is mainly focused on macroeconomic developments in the United States. Mixed employment data initially put pressure on the US dollar, but better-than-expected preliminary estimates of the US consumer confidence index turned the tide. Earlier, the United States released the November non-farm payrolls report. The headline data showed that 227,000 new jobs were added this month, higher than the 200,000 expected by market analysts. Meanwhile, the Reserve Bank of Australia will hold its monetary policy meeting this week. The central bank will announce its decision, and the market generally expects that interest rates will remain unchanged. The official cash rate (OCR) has remained stable at 4.35% since the Reserve Bank of Australia announced its latest rate hike in November 2023. Australia's growth has been tepid, and Reserve Bank of Australia Governor Michelle Bullock should take note. However, the earliest rate cut is expected to be in February 2025, and there is a growing consensus that the cut could be delayed until March.

From the daily chart, the Australian dollar fell to its lowest level since August against the US dollar last week. AUD/USD is trading around 0.6372. The technical indicators show a cautious side. The 14-day relative strength index plunged to a near one-month low of 33.80, indicating a sharp increase in downward momentum, while the average directional index (ADX) is close to 33, indicating a lack of strong trend direction. Technically, AUD/USD faces the next immediate support level of 0.6360, the monthly low in April, followed by the 2024 (August) low of 0.6348. If the bears successfully break through the above support levels, the next key areas are 0.6300 (round mark), and 0.6270 (2023 annual low). On the other hand, since AUD/USD fell too fast last week, it is not ruled out that there will be a technical rebound this week before a new decline. Therefore, the first upward rebound target is 0.6430 (the central axis of the horizontal channel on the daily chart), and further upward targets include the 10-day moving average of 0.6472 and 0.6480 (the upper track of the downward channel on the daily chart). The key resistance levels are 0.6515 (last week's high) and 0.6522 (30-day moving average) area levels.

Today, you can consider going long on the Australian dollar before 0.6376, stop loss: 0.6360; target: 0.6440; 0.6450.

GBP/USD

Early last week, Trump threatened to impose 100% tariffs on BRICS countries if they try to replace the dollar with their own currencies. Fears of a tariff war have heightened risk aversion in financial markets, re-boosting demand for the dollar as a safe-haven asset while weighing on riskier currencies such as the British pound. The pair hit a weekly low of 1.2617. Sterling buyers have since regained control, rebounding to a three-week high near 1.2811. Also, continued bets on a 25 basis point rate cut by the Federal Reserve in December weighed on the dollar despite cautious comments from Fed Chairman Powell. A slew of U.S. economic data releases, including the ISM survey, JOLTS job openings and ADP employment change, were mixed, failing to change market expectations for a rate cut this month, limiting the dollar's upside attempts. The U.S. Bureau of Labor Statistics announced better-than-expected nonfarm payrolls for November on Friday but failed to boost the dollar, helping GBP/USD maintain its weekly gains. Still, the dollar was supported by market jitters over geopolitical and trade war risks. On the other hand, the British pound has regained momentum, shrugging off dovish comments from Bank of England Governor Andrew Bailey on Wednesday. Bailey said he "expects four rate cuts in the UK next year as inflation eases."

From a short-term technical perspective, GBP/USD rebounded to a near one-month high of 1.2811 last week. However, its gains are capped below the 200-day simple moving average of 1.2821, where sellers are likely to remain in control. Adding credence to the negative outlook, the pair had presented a double bearish death cross a week ago. However, the 14-day relative strength index (RSI) has recovered from negative territory to just below 50, suggesting that the rally may extend before the next leg lower. GBP needs to sustain above the support zone formed by 1.2800 (psychological level); 1.2811 (last week's high); and 1.2821 (200-day SMA) to sustain the rally. The next important area of ​​contention is around 1.2848 (38.2% Fibonacci retracement from 1.3434 to 1.2487). Further upside, the 50-day moving average at 1.2891, and 1.2915 (76.4% Fibonacci retracement from 1.3048 to 1.2487) could challenge the bearish commitment. On the downside, immediate support is at the 21-day moving average at 1.2685, below which the pair could test 1.2645 (Nov. 28 low), and last week’s low at 1.2617.

Today, we recommend going long on GBP before 1.2725, stop loss: 1.2715, target: 1.2780, 1.2790

USD/JPY

The US added more jobs than expected in November, but the unemployment rate rose slightly as the labor market has rebounded from data in October that was negatively affected by bad weather and labor strikes. The US dollar index fell and then rebounded after the release of the non-farm data, re-touching the 106 level. The yen fluctuated in a narrow range against the US dollar during the late part of last week. Meanwhile, the recent bias seems to favor yen bulls amid a more hawkish stance from the Bank of Japan. In fact, the Bank of Japan is still expected to raise interest rates further, while other major central banks including the Federal Reserve are expected to further reduce borrowing costs. Apart from this, the recent decline in US Treasury yields and a slight deterioration in global risk sentiment seem to support the safe-haven yen. This, coupled with the weak US dollar price trend, kept the USD/JPY defensive around the psychological 150.00 mark after the release of the US non-farm payrolls report. The key data may provide new clues on the Fed's rate cut path, which in turn will boost the US dollar and affect the currency pair in the short term.

From a technical perspective, the weekly low is around 148.65 and now seems to protect the immediate downside ahead of 150.18 (115-day moving average), and 150.19 (38.2% Fibonacci retracement of 139.58 to 156.75). 148.65 should be a key pivot point and if decisively broken, it will be considered as a new trigger for bearish traders. Given that one of the technical indicators on the daily chart, the 14-day relative strength index (RSI), remains in negative territory (41.20), still away from oversold territory, suggesting that the path of least resistance for USD/JPY is to the downside. Therefore, USD/JPY could fall to the key support area consisting of 148.30 (lower line of the downtrend channel); 148.17 (50.0% Fibonacci retracement); and 148.00 (round number), and then to 147.35 (Oct. 8 low). Further downside, it could test 146.14 (61.8% Fibonacci retracement). On the other hand, the recovery attempt may now face some resistance near 151.23 (last Wednesday's high), and 151.29 (134-day moving average). Closely followed by 151.98 (200-day moving average),

Short USD today recommended before 150.20, stop loss: 150.40; target: 149.20, 149.10

EUR/USD

EUR/USD hit a near one-month high of 1.0630 before the end of last week. The dollar fell after the release of the US non-farm payrolls report, but quickly recovered the losses, pushing the currency pair back below 1.0600. US employment-related data failed to trigger major action ahead of the Federal Reserve's monetary policy meeting on December 17-18. Policymakers will enter a quiet period in the meantime. Overall, the data showed that the labor market is in good shape and slightly stronger than the Fed hoped. However, the data is not enough to reverse the Fed's stance this month. Political turmoil in France also took a toll on the euro. The minority government fell after a vote of no confidence in Prime Minister Michel Barnier. Barnier was overthrown for using controversial constitutional provisions to force through a law to cut the social security budget. Finally, the US non-farm payrolls report released on Friday showed that 227,000 new jobs were added in November, higher than the expected 200,000. The unemployment rate rose to 4.2% from 4.1% previously, in line with expectations. However, average hourly earnings were slightly higher than expected, raising concerns about rising inflation.

The weekly chart of the EUR/USD pair shows that buyers are still on the sidelines. The pair made higher highs and higher lows last week, but it remains well below all moving averages. Further, the 20-week simple moving average (1.0882) has gained downside traction, consistent with another wave of declines, although between the directionally ambiguous 100-week (1.0829), and 200-week (1.0976) SMAs. Finally, the 14-week relative strength index (RSI), one of the technical indicators on the weekly chart, is well below the midline (last reported at 38.40), consistent with the lack of directional interest. Otherwise, EUR/USD remains neutral on the daily chart. It is above the firmly bearish 20-day moving average, which offers support around 1.0542, but the 100-day (1.0888) and 200-day (1.0844) moving averages are above the current levels. Finally, technical indicators are unclear in terms of direction, with the Momentum indicator stuck near its 100 line and the 14-day RSI indicator around 46, with the risk biased to the downside. Short-term support is at 1.500 (round number), a break below which would expose the 1.0460 (last week's low) area.

Today's recommendation is to go long on EUR before 1.0550, with a stop loss of 1.0535 and targets of 1.0590 and 1.0610.

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