US Dollar Index

The US Dollar Index, which measures the value of the greenback against a basket of currencies, rose for the fifth consecutive session against almost all of its major G20 peers on Monday. The market is rebalancing towards a tighter Fed policy in 2025 following the release of the latest US jobs report. The DXY briefly touched 110.00 and is looking to consolidate around these highs as the dollar remains bullish given the solid non-farm payrolls data last Friday and the Fed's cautious tone on easing policy in last week's minutes. The dollar surged last week, rising to 109.97, the highest since November 2022, and its sixth consecutive week of gains, as a stronger-than-expected non-farm payrolls report pushed back the Fed's rate cut timeline, sparking demand for the greenback. This is the longest streak of weekly gains since 2023, when it rose for 11 consecutive weeks. Strong labor data helped the dollar maintain its gains, as Fed officials have shifted to a more cautious approach. The market increasingly believes that no further rate cuts will be seen in the short term, reinforcing the dollar's strength. .

The daily chart shows that the US Dollar Index has risen to a new high of 110.18 not seen since November 2022 in the first half of the year and is still close to 110.00. Buyers are expected to come in and quickly push the US Dollar Index higher. On the upside, the key is that the rising trend line can act as support, although this is usually not the case in the future. If the US Dollar Index can break through 109.97 (more than two-year high) - 110.00 (psychological barrier), 110.43 (upper Bollinger Band on the weekly chart) will become the next level. Once it exceeds this, it reaches the 111.19 (76.4% Fibonacci rebound level of 114.78 to 99.58) level. Conversely, the first downside barrier is 109.28 (5-day moving average), and 109.07 (Friday's low), which has now turned into support. The next level that may stop any selling pressure is the 1108.55 (weekly rising trend line) level.

Consider shorting the dollar index around 109.95 today, stop loss: 110.05, target: 109.60, 109.50

WTI spot crude oil

WTI attracted strong follow-up buying due to concerns about tightening global supply. Technical buying above the very important 200-day daily average helped to boost the momentum. Hawkish expectations from the Federal Reserve supported the dollar, which may limit the gains in crude oil prices. WTI oil prices hit a more than three-month high of $77.80 on Monday, extending Friday's gains as the market expected that the United States would increase sanctions on the Russian oil industry, which would lead to a suppression of Russian supplies to China and India; in addition, cold weather in the United States and parts of Europe also stimulated winter fuel demand. On the other hand, the market is worried that the most extensive package of sanctions imposed by the United States on Russia's oil and gas revenues to date will lead to supply disruptions. The Biden administration has imposed new sanctions on Russian oil producers, tankers, intermediaries, traders and ports, as well as market expectations of cold weather leading to reduced inventories, which are driving oil prices higher.

WTI oil prices rose again at the beginning of this week, hitting a three-month high of $77.80. As shown in the technical chart, the high of 72.88 on November 7 will be regarded as the neckline position. If this area is broken, the triple bottom pattern will be established. The 250-day moving average of 75.85 is an important reference and was just broken last week. It is expected that the current upward test target will be seen at the high of $77.93 on October 8 last year or $78.58 (the high of August 13 last year), and further to the psychological level of $80. On the downside, the 14-day relative strength index (RSI) indicator of the technical indicator rose above 75, reflecting a technical shift in the short-term overbought tendency. Initial support is expected at $76.40 (100-week MA). The next level is expected to be $75.91 (38.2% Fibonacci rebound from 93.98 to 64.75), and $75.85 (250-day MA) area levels.

Consider going long on crude oil around 77.15 today, stop loss: 77.00; target: 78.50; 78.70

Spot gold

Gold prices are on the defensive and reversed four consecutive days of declines in response to further improvement in the US dollar and investors' reassessment of the Federal Reserve's only one rate cut this year (or no rate cut at all), especially after the release of Friday's non-farm payrolls. Gold prices fell slightly around $2,690 in early Asian trading on Monday as the US dollar generally strengthened. However, safe-haven demand due to uncertainty about the policies of President-elect Trump's administration may help limit gold's losses. Stronger-than-expected U.S. jobs data last Friday reinforced market expectations that the Federal Reserve will not significantly cut interest rates this year. This, in turn, weighed on non-yielding assets. On the other hand, Trump's policy risks may boost gold prices as a traditional safe-haven asset. Despite the much stronger-than-expected jobs report, gold has shown resilience, and one of the factors supporting gold is the uncertainty seen ahead of the U.S. presidential inauguration. In addition, escalating geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict may have an impact on the downside of precious metals.

From the daily chart, gold has successfully broken away from the 100-day simple moving average after fluctuating at $2,635.60 at the beginning of this year. In addition, gold prices closed above the 20-day, 100-day and 50-day simple moving averages for four consecutive days, while the 14-day relative strength index (RSI) indicator, one of the technical indicators, retreated to around 53.80, but still reflected a shift in short-term bullish bias. The Fibonacci 23.6% retracement of the June 2,286.70 to November 2,790 uptrend acts as the first support at $2,671.20. As long as this level holds, technical buyers are likely to remain interested. In this case, $2,700 (round number level) may be considered as the next resistance level, followed by $2,790 (all-time high). Conversely, if gold fails to stabilize above $2,671.20, it may lose traction and encounter the next support at $2,645-2,635 (50-day; 20-day; 100-day MA), followed by $2,600 (market psychological level).

Consider going long on gold today before 2,658.00, stop loss: 2,655.00; target: 2,680.00; 2,683.00

AUD/USD

AUD/USD rose to around 0.6170 above the 0.6170 level during Monday's North American session. The AUD/USD pair gained despite the U.S. dollar outperforming most of its peers as traders cut their dovish bets on the Fed following the release of upbeat U.S. non-farm payrolls data for December. AUD/USD remained defensive around 0.6150 during early Asian trading on Monday. Stronger-than-expected U.S. job growth in December broadly supported the dollar. Better U.S. labor market data for December, which could convince the Fed to keep interest rates unchanged this month, supported the dollar against the Australian dollar. Market participants said: It would take a very bad set of employment reports for the Fed to ease policy again in March, so the next rate cut is now expected to be in June, followed by the last rate cut in September. On the other hand, AUD/USD remains under selling pressure and is trading at its lowest level since April 2020. Slowing Chinese economic growth and deflation risks continue to weaken the AUD, which is linked to China. The last quarter of last year is expected to be the seventh consecutive quarter of negative GDP deflator in China.

The 14-day relative strength index (RSI), a technical indicator on the daily chart, is around 33.30, indicating oversold territory and continuing to move lower. Meanwhile, the moving average convergence divergence (MACD) histogram shows rising red bars, reflecting the intensifying bearish momentum. With the pair trading at lows around 0.6170, any recovery attempt may be difficult to achieve unless market sentiment improves or the Fed eases its hawkish stance. Immediate support is moving towards the 0.6130-0.6125 intermediate support level, which may eventually drag the spot price to the 0.6100 round mark. On the upside, initial resistance is seen around the 0.6200 round number mark, followed by the 0.6250 (25-day SMA) area.

Consider going long on AUD today before 0.6155, Stop Loss: 0.6140; Target: 0.6200; 0.6210.

GBP/USD

After bottoming out below the 1.2100 support level, GBP/USD has now regained some composure and is attempting a small rebound, although it is expected to remain under pressure following the UK fiscal situation and a rise in gilts. GBP/USD entered a bearish consolidation phase at the start of the new week, hovering around 1.2200, the lowest level since November 2023 hit on Friday, during the Asian session. Moreover, the fundamental backdrop seems to favor bearish traders, suggesting that the path of least resistance for spot prices remains to the downside. The British pound continues to perform relatively poorly due to stagflation concerns in the UK, stubborn inflation and stagnant growth. Moreover, the recent rise in UK government bond yields has raised concerns about the UK’s fiscal health, which is seen as another factor weakening the pound and validating the negative outlook for GBP/USD against the backdrop of a bullish USD. The outlook remains supportive of rising US Treasury yields, which, along with risk aversion, supports the prospect of further appreciation of the safe-haven USD and weighs on further declines in GBP/USD.

GBP/USD has confirmed a six-week-old “falling wedge” breakout after closing below the lower line of the wedge at 1.2330 before the end of last week. The 14-day relative strength index (RSI), a technical indicator on the daily chart, is hovering in negative territory around 28, suggesting more room for downside. Moreover, the 50-day (1.2621), and 200-day (1.2799) simple moving average death crosses confirmed last month remain in play, acting as resistance for the pair. If sellers gain momentum and hold the pair below the previous 14-month low of 1.2191, the next downside target is 1.2140 (static level in November 2023), and a break below that will target 1.2100 (low at the beginning of the week). Conversely, any rebound needs to break through the 1.2300 (market psychological level), and 1.2322 (Friday's high) area, and the pair will challenge 1.2344 (23.6% Fibonacci rebound from 1.2788 to 1.2208) and 1.2350 levels.

Today, it is recommended to go long on GBP before 1.2190, stop loss: 1.2180, target: 1.2250, 1.2260

USD/JPY

USD/JPY once fell to around 156.90, despite the US dollar hitting a two-year high. Traders pared back dovish bets on the Federal Reserve on the back of upbeat December U.S. nonfarm payrolls data. The deepening risk aversion boosted the safe-haven appeal of the yen. On Monday, the yen rose for the third consecutive day against its U.S. counterpart, moving away from the multi-month lows hit last week. Risk aversion — as indicated by weak equity markets — has become a key factor supporting the safe-haven yen. However, doubts over the Bank of Japan’s rate hike plans should limit the yen’s gains. Moreover, the recent widening of the U.S.-Japan yield gap may also limit the yen’s gains. Apart from this, the underlying bullish sentiment around the U.S. dollar, as the market expects the Fed to pause its rate-cutting cycle, should provide a tailwind for the USD/JPY pair. In the absence of any relevant economic data releases, the mixed fundamental backdrop warrants caution before positioning for any further yen appreciation moves.

From a technical perspective, last Friday’s low, around the 157.20-157.25 area, could provide immediate support ahead of the 157.00 mark and the 156.80-156.75 support zone. Any further weakness could be seen as a buying opportunity near the 25-day moving average low, around 156.32. This should help limit the downside for USD/JPY near the 156.00 psychological mark and pave the way for deeper losses. On the other hand, the early Asian session high, around 158.00, now appears to act as an immediate barrier ahead of the 158.45-158.50 area and the 158.85-158.90 range, or the multi-month highs hit on Friday. Follow-up buying above the 159.00 mark would be seen as a new trigger for bulls and push USD/JPY towards the 160.00 psychological mark.

Today, it is recommended to short the USD/JPY before 157.70, stop loss: 157.90; target: 156.80, 156.60

EUR/USD

The EUR/USD pair hit a new cycle low around 1.0176 on the back of a strong upward USD move, paving the way for a possible entry into parity soon. It has since recovered most of its losses and re-entered around 1.2040. At the start of the week, the EUR/USD pair attempted to halt a four-day losing streak and held steady around 1.0240 during the Asian trading session. However, the pair faced challenges as the EUR/USD pair depreciated against the USD as strong US labor data reinforced expectations that the Fed would maintain current interest rate levels, as stronger-than-expected US job growth in December strengthened expectations of the Fed maintaining interest rates at current levels. Strong US labor market data in December could reinforce the US Federal Reserve's stance of keeping interest rates unchanged in January, supporting the dollar's performance against other currencies. In addition, the euro faced resistance as traders expected the ECB to implement four rate cuts at each of its meetings before the summer. ECB policymakers seemed satisfied with these dovish expectations as inflationary pressures in the eurozone are largely under control.

From a technical perspective, the EUR/USD pair fell for the fifth consecutive week, with no technical signs suggesting a mid-term bottom is imminent. In fact, EUR/USD is oversold on the weekly chart, but the relative strength index (RSI) indicator is moving downward despite being around 33.60. The momentum indicator on the same chart rebounded slightly from extreme levels, but it is still far below the midline and is not enough to indicate an imminent rebound. Finally, the 20-week (1.0592) accelerated its decline and broke below the flat 100-week (1.0803) simple moving average, reflecting the strength of sellers. Downside support appears at 1.0200 (round mark), once it falls below this bottom, it will expose the bottom around 1.0163 (November 11, 2022 low), and the next level will point to 1.0100 (round barrier). As for the upside, if EUR/USD rises above 1.0265 (the central axis of the daily chart downward channel), the next level will be 1.0300 (psychological barrier).

Today it is recommended to go long on Euro before 1.0225, stop loss: 1.0215, target: 1.0290, 1.0295.

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