US Dollar Index

On Monday (November 20), as trade signals continued to emerge in the US economy, the Leading Indicator for October stock market trading sessions rose for the 19th consecutive month, reaching a level of concern comparable to the last financial crisis. During the US market session, as the market continued to speculate on the end of the Fed's interest rate hike cycle, the US Dollar Index maintained its downward trend. At the beginning of this week, the US Dollar Index remained at levels seen in early September and broke below the key 200-day moving average of 103.61. In addition, the minor fluctuations in the US dollar coincided with the lack of directional tone in US Treasury yields of different maturities so far, and speculation about the Fed possibly starting rate cuts as early as March 2024 continued to heat up. In terms of US data, only the Fed Leading Index will be released this week due to the Thanksgiving holiday on Thursday. Meanwhile, the downward trend of the US dollar still dominates, forcing the index to test the critical 200-day moving average of 103.61 and 103.00 (psychological barrier) at the beginning of the week. Furthermore, amid growing speculation about possible rate cuts in the first half of 2024, and with oil prices at multi-month lows, the pace of inflation decline is expected to be faster than anticipated, putting pressure on the yield curve. In turn, this should bring pressure to the US dollar. The US dollar appears to be very weak, all in response to further deflationary pressures and the gradual cooling of the labor market. However, the resilience of the US economy and hawkish comments from some Fed rate setters still provide some support for the US dollar.

From the daily chart, the US Dollar Index tested the 200-day moving average at 103.61 to the low of 103.37 since September 1st yesterday. It even set the largest weekly decline since the week of July 10 and closed with a bearish head and shoulders pattern on the weekly chart. Currently, the US Dollar Index is declining and is at 103.53 (monthly low on November 20) and slightly below 103.46 (50% Fibonacci retracement level of 99.57 to 107.34). At this stage, the short-term support for the US Dollar Index is in the region of 103.00 (psychological barrier) and 102.93 (weekly low on August 30), followed by 102.55 (38.2% Fibonacci retracement level of 99.57 to 107.34). On the upside, breaking through 104.00 (psychological barrier) may pave the way for a rise to 104.55 (highs on Thursday and Friday last week) and 104.75 (lower channel line) facing strong resistance.

Consider shorting the US Dollar Index near 103.55 today, stop-loss: 103.70; targets: 103.25, 103.15.

WTI Crude Oil

WTI crude oil prices rebounded nicely last week from the $72.40-$72.35 region (the lowest level since July 7), gaining some positive traction for the second consecutive trading day. Oil prices rose 2% yesterday, trading above $77.00. Media reports suggest that OPEC+ may discuss further supply cuts to support oil prices at the meeting scheduled for November 26, seen as a key factor supporting oil prices. In addition, major oil-producing countries Saudi Arabia and Russia are expected to extend oil production cuts into next year. Earlier, OPEC made a relatively high forecast for oil demand growth in 2024 in its monthly report. Nevertheless, the International Energy Agency (IEA) has a lower forecast for demand growth in 2024, stating that the market may shift to surplus in the first quarter. Concerns about further global economic downturn suppressing fuel demand may continue to weaken crude oil prices and hinder further upside.

From the daily chart, WTI crude oil prices are currently oscillating within the range of $76.90 (upper bound of the descending wedge) and $77.90 (200-day moving average). Traders are awaiting the FOMC meeting minutes to be released on Tuesday to look for clues about the future interest rate path. This outlook will have a crucial impact on the recent dynamics of the US dollar and drive commodities priced in dollars. Therefore, a cautious approach is advisable, waiting for strong follow-up buying before confirming that oil prices have formed a recent bottom. Once effectively breaking above the $76.90-$77.90 range, the next target prices look towards $78.94 (50% Fibonacci retracement level of $63.93 to $93.94) and $80.00 (psychological barrier). On the downside, the first support level to watch is $75.39 (61.8% Fibonacci retracement level), followed by $73.74 (low on July 17). Subsequently, $70.35 (78.6% Fibonacci retracement level of $63.93 to $93.94) and $70.00 (psychological barrier).

Consider going long on crude oil near $77.10 today, stop-loss: $76.70; targets: $78.80, $79.00.

Spot Gold

On Monday (November 20), as the market almost completely ruled out the possibility of a December rate hike by the Federal Reserve, the decline in the US dollar accelerated further. Gold attempted to stabilize above $1970, benefiting from weak US inflation data, which led to a sharp drop in US bond yields and a significant decline in the US dollar index, providing reasons for the significant rebound in gold. However, even though gold seemed to rebound sharply last week, it ultimately failed to break through the psychological barrier of $2000. Boston Fed President Eric Rosengren's comments on Friday that she would not give up further tightening policies seemed to slightly dampen the market. This also somewhat hindered the rebound momentum of gold. The most significant factor currently affecting the trend of gold is the expectation of future changes in the US dollar. In terms of expectations, the market continues to digest the expectation that the Federal Reserve will not raise interest rates in December and is even digesting the possibility of a rate cut in the first half of 2024. Therefore, the gold price has been able to maintain its rebound in the high price range in the past week. In addition, the recent sharp drop in oil prices is expected to have a deflationary effect, which will bring the Federal Reserve closer to its 2% target and soften its hawkish stance. Moreover, many influential Federal Reserve officials admitted last week that progress had been made in restraining inflation, reinforcing the view that policy tightening actions may end soon.

The daily chart shows that the relative strength index (RSI) has climbed to 60, indicating that bullish momentum is strengthening in the near term. On the upside, last week's high points of $1993.50 and $1993.10 (high on November 6) constitute adjacent resistance levels. The only thing worth noting is the moving averages because the 50-day moving average ($1928.60) is trying to cross with the 89-day moving average ($1929.20), which will be a golden cross formation and a sign of buying momentum. Therefore, once gold breaks through $1993.10-$1993.50 on the upside, the next test on the upside could target $2000 (psychological barrier), with the next level to watch at $2017.70 (76.4% Fibonacci retracement level of $2081.80 to $1810.50). On the downside, the first support level is at the 20-day moving average near $1974.50, followed by $1961.50 (38.2% Fibonacci retracement level of the rebound from $2009.50 to $1931.60), forming dynamic support. If the daily closing price of gold falls below this level, it may attract bears and open the door to the range of $1940 to $1930, where the 200-day (1937.70), 100-day (1930.50), and 35-day (1940.00) moving averages converge.

Consider going long on gold near $1973 today, stop-loss: $1970; targets: $1987, $1990

AUDUSD

At the beginning of the week, the AUD/USD remained above 0.6500. At the same time, the US dollar index recorded its most significant weekly decline since mid-July, hovering near 104.00. On Monday, the AUD/USD rose above last week's high of 0.6541 to around 0.6566. Nevertheless, the weakening US dollar and the decline in US bond yields may provide some support for the AUD/USD this week. Boston Fed President Eric Rosengren stated optimistically on Friday that the central bank could reduce inflation by "patiently" taking any further interest rate measures without causing significant damage to the labor market. In addition, the minutes of the Fed meeting on Tuesday will provide some hints on the improvement in inflation and explain how much the rise in bond yields has affected the Fed's decision to stand still at that meeting. On the Australian side, Marion Kohler, Assistant Governor of the RBA, stated that inflation would continue to decline but would not reach the upper limit of the target of 2%-3% by the end of 2025. Due to the insufficient speed of the decline in inflation, the RBA raised interest rates to a 12-year high of 4.35% last week. The market expects the RBA to raise interest rates again in the first half of 2024. Market participants are awaiting the minutes of the RBA meeting and a speech by RBA Governor Lowe on Tuesday, as well as the minutes of the Fed meeting on Wednesday. These data may indicate the direction for the AUD/USD.

On Monday, the AUD/USD rose above last week's high of 0.6541 to around 0.6566, breaking through the key resistance area of 0.6500-0.6522 for the first time in almost three months. If the exchange rate can stay above 0.6500-0.6522 this week, the next target could be the 200-day moving average at 0.6591 and 0.6600 (psychological barrier), with the next level to watch at 0.6656 (61.8% Fibonacci retracement level of the rebound from 0.6895 to 0.6270). On the downside, the psychological level of 0.6500 appears to be the adjacent support, followed by 0.6454 (89-day moving average). If the AUD/USD falls below this level, 0.6417 (23.6% Fibonacci retracement level) may be the next support level.

Consider going long on the AUD near 0.6530 today, stop-loss: 0.6510; targets: 0.6610; 0.6615.

GBPUSD

The past week, dominated by U.S. economic data, has solidified expectations of the Fed ending its rate-hiking cycle. The market sentiment surrounding Fed policy expectations has kept the U.S. dollar and U.S. bond yields in tandem, helping the GBP/USD recover some of its losses. After a week of decline, bullish momentum for the pound strengthened, pressuring the U.S. dollar and pushing the GBP/USD above 1.2500 to reach a two-month high. The upside potential for the GBP/USD still depends on central bank expectations and heavyweight Purchasing Managers' Index (PMI) data to be released this week. With the 10-year U.S. Treasury yield falling below 4.50%, the U.S. dollar index dropped to a two-month low of 103.37. Additionally, the significant decline in the USD/JPY last Friday boosted the GBP/USD, triggering a new round of dollar selling. This trend offset the decline in the GBP/USD caused by weak UK retail sales. UK retail sales for October declined by 0.3%, reaching the lowest level since February 2021 when most of the UK was under pandemic lockdown.

From a short-term technical perspective, the RSI indicator remains above the 50 level, suggesting that pound bulls still have an advantage. The 20-day moving average (1.2273) crossing above the 50-day moving average (1.2255) from below forms a bullish golden cross, increasing the bullish outlook. If the upside momentum can effectively regain strength above the 200-day moving average (1.2444), bulls may target the 100-day moving average (1.2505) next. The next upside targets are 1.2600 (psychological level) and then the September high of 1.2713. On the downside, 1.2380 (midline of the upward channel) may provide support. A sustained break below this level could trigger a new downturn, testing 1.2298 (23.6% Fibonacci retracement level of the rebound from 1.3143 to 1.2037). The final defense line for pound bulls is around 1.2200.

Recommendation for today: Consider going long on the GBP near 1.2490, stop-loss: 1.2470, targets: 1.2545, 1.2560.

USDJPY

On Monday, Japanese Finance Minister Taro Aso made some remarks, stating that the current situation presents a rare opportunity to overcome deflation, and signs of economic recovery are emerging in Japan. Last week, Aso reiterated his concerns about excessive volatility in the currency markets, emphasizing that the government will take all necessary measures to respond to exchange rate movements. This information highlights Japan's cautious stance regarding various global factors, including the Fed's outlook, geopolitical tensions in the Middle East, and China's economic growth. Before the Bank of Japan seeks to adjust its monetary policy, it needs to consider many uncertain variables. After Finance Minister Taro Aso's speech, the yen rebounded from the two-week low touched last Friday and rose to near the high of 148.10 during Monday's Asian session.

USD/JPY faced selling pressure last Friday, currently falling below the 50-day simple moving average of 149.48 and trading just above 148. If prices break below this highly technically significant area in the coming days, the pullback could accelerate, opening the door for a decline to 146.55 (100-day moving average) and 147.27 (October 23rd low). On the other hand, if USD/JPY resumes its upward move, resistance lies at 150.00 (psychological level), followed by 150.67 (10-day moving average). If this upper limit is threatened, Tokyo may intervene to support the yen; however, without forex intervention, a breach could lead to a climb to 151.50 (midline of the upward channel). Further upside movement could result in a rebound to 151.94 (highest level in 32 years).

Recommendation for today: Consider shorting the USD near 148.60, stop-loss: 148.90, targets: 147.27, 146.55.

EURUSD

Last week's significant sell-off in the US dollar was evident across a range of dollar currency pairs, especially Euro/USD. Euro/USD's intraday surge validated the short-term bullish outlook, seemingly firmly favoring bullish traders. With the background of a potential future weakening of the US dollar, some favorable news for the Euro may lead to the currency pair reaching multi-month highs in the coming weeks. After a year of global rate hikes and central bank tough talk, the interest rate market is now fully digesting a round of rate cuts by central banks next year. The latest Euro interest rate forecasts show the European Central Bank is expected to cut rates by 100 basis points next year. Economic data released this week could bring volatility to the Euro, with November PMI readings most likely to impact price movements. Any signs of improvement in sentiment in Germany and the Eurozone after months of weak data will be reassuring and boost the Euro. Additionally, European Central Bank President Lagarde will speak after the release of this data, and the central banker's thoughts need to be carefully analyzed.

On the daily chart, Euro/USD significantly broke through the 200-day moving average (1.0805) last week with full support from the bulls, rebounding to 1.0914, the highest level since August 31. The golden cross formed by the 20-day moving average (currently at 1.0697) and the 50-day moving average (1.0836) adds a positive upward bias. The level at 1.0861 (50% Fibonacci retracement level of the rebound from 1.1275 to 1.0448) may serve as short-term support for the currency pair. If a bullish flag pattern emerges, resistance around 1.1065 (August 10th high) to 1.1000 (psychological test level) may eventually come under pressure. Support levels are at 1.0805 (200-day moving average), followed by 1.0763 (38.2% Fibonacci retracement level) and 1.0740 (midline of the upward channel).

Recommendation for today: Consider going long on the Euro near 1.0915, stop-loss: 1.0888, targets: 1.0985, 1.0995.

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