US Dollar Index

The US dollar fell slightly on Monday after a series of data and headlines diverted attention from the Federal Reserve's interest rate decision, which will be released later this week on Wednesday. In a risk-off environment, the US dollar rose nearly 1% last week to 107.07 points, and recorded its best weekly performance in a month last week. Despite the hot inflation data, the market has fully digested the expectation of a 25 basis point rate cut by the Federal Reserve next week as investors digest the possibility of a slower rate cut by the Federal Reserve next year, with many analysts predicting that the hawkish rate cuts will be paused in January. The US dollar rebounded, but it remains in a limited range. Cautionary sentiment has mostly favored the US dollar in the past few days. After a sharp rebound against many major G20 currencies earlier last week, the US dollar has faced some pressure due to profit-taking. This came after China released new economic data and released more details on the stimulus plan that the Chinese government is rolling out. In addition, the US dollar seems to have gained some traction due to rising US Treasury yields, which seems to offset the market's expectation that the Federal Reserve actually decided to cut interest rates this week.

In terms of recent technicals, the US Dollar Index continues to trade around the 107.00 level, maintaining its recovery from the recent decline. Before last Friday, despite mixed sentiment and speculation about the Fed's next move, the US Dollar Index still managed to stay above the key levels of $106.45 (upward support trendline from the September low of 100.16), and $106.46 (9-day moving average). The technical indicators of the daily chart, the 14-day relative strength index (RSI) and the MACD indicators, suggest that the US Dollar Index rebounded from the lows, but may face resistance around 107.56 (November 22 high). If the index breaks through this area, it may retest the previous high of 108.00, but the momentum seems to be slowing down, which may limit further gains in the short term. On the downside, 106.45 (upward support trendline from the September low of 100.16), and $106.46 (9-day moving average) are the first target levels. Further moves will target the 106.00 (market psychological level), and 105.94 (34-day moving average) area levels.

Today, consider shorting the US dollar index around 107.00, stop loss: 107.15, target: 106.50, 106.40

WTI crude oil

Crude oil prices are rebounding from important support levels around $70.00 and once rose back to $71.00 before China's November retail sales data dampened hopes of a quick recovery in the region, leading to selling pressure earlier. WTI crude oil prices pulled back after rising in the trading session at the end of last week, trading around $70.50 per barrel during the Asian session on Monday. Crude oil prices rose as expectations of tighter supply increased due to additional sanctions imposed by the United States on major producers Russia and Iran. Crude oil prices were also boosted by improved market sentiment due to recent rate cuts by the Canadian, European and Swiss central banks. Traders are now focusing on the upcoming policy decision of the Federal Reserve on Wednesday, a move that could increase oil demand as lower borrowing costs could have a positive impact on economic activity. In addition, optimism over China's plans to increase economic stimulus could boost oil demand. Chinese authorities, led by President Xi Jinping, have pledged to raise fiscal deficit targets next year, shifting policy focus toward consumption.

Crude oil prices may have risen, but investors are cautious about further gains. Any gains or upside are expected to be short-lived, and profit-taking is bound to occur before the end of 2024. The $70.00 level is the first support target. Secondly, $69.22 (23.6% Fibonacci rebound from $77.93 to $66.53), and $69.26 (34-day moving average) remain the first solid supports nearby. If broken, $68.50 (large descending triangle resistance line on the daily chart) will be seen. On the other hand, $70.96 (last week's high), and $71.12 (100-day moving average) are being tested. A breakout would see further gains to $71.74 (110-day moving average). If this level can be breached, $72.23 (50.0% Fibonacci rebound), and $72.54 (November 7 high) will become the next key areas.

Consider going long on crude oil near $70.00 today, stop loss: 69.80; target: 71.20; 71.40

Spot gold

Gold opened the week mildly optimistic, trading above $2,650, favored by a mild reversal of the dollar on the back of falling U.S. Treasury yields. However, the precious metal remains near recent lows after falling late last week. Gold buyers surfaced during the Asian trading session on Monday, reversing a two-day correction after hitting a five-week high of $2,726 last Thursday. Gold prices were also supported by Israel-Gaza tensions and political unrest in South Korea. Gold prices tend to benefit during times of geopolitical and political turmoil. However, it remains to be seen whether the gold price can sustain the rebound. Similar price action was seen during the Asian trading session on Friday, but it retreated ahead of the weekend due to a stronger dollar. Further gains in gold prices may be limited by concerns about the Chinese economy. In addition, widening gold discounts in India, as demand during the wedding season is suppressed by rising prices, may also drag down gold prices. China and India are the world's largest gold consumers.

From the daily chart, gold prices are fighting for the 21-day simple moving average support at $2,652.50. The 14-day relative strength index (RSI) of the technical indicator is flat around the 50 level, indicating a lack of clear directional bias at present. If gold buyers exert their strength, the rebound may test the 50-day at $2,670.60 and the $2,673 (the central axis of the daily horizontal channel) area. A breakout will challenge the $2,700 level. Further gains may retest the multi-week high of $2,726. On the other hand, a daily close below the 21-day moving average of $2,652.50 and $2,647.50 (last week's close) could lead to a retest of $2,621.50 (89-day moving average). The last line of defense for gold buyers is at the $2,600 level (market heart).

Consider going long on gold before 2,648.00 today, stop loss: 2,645.00; target: 2,668.00; 2,672.00

AUD/USD

AUD/USD rebounded above 0.6350 in Asian trading on Monday after mixed data from China. The pair remains supported by the pullback in the US dollar. AUD/USD rebounded slightly in early Asian trading on Monday, rising to around 0.6370. The two-day Federal Reserve meeting ended on Wednesday, with the Fed expected to cut interest rates by 25 basis points. Analysts expect the Fed to prepare the market for a rate cut while preparing for the Fed to stay put as the US economy is strong and progress in combating inflation is likely to stagnate above 2%. Fed Chairman Powell's press conference and dot plot will be closely watched. Hawkish speeches by Fed officials could boost the US dollar and weigh on AUD/USD. On the other hand, the Chinese authorities' disappointing monetary measures and lack of concrete policies amid the looming threat of US tariffs on exports have weighed on AUD/USD, which has fluctuated lower.

From the technical indicators on the daily chart, the 14-day relative strength index (RSI) of AUD/USD hovers around 36, indicating an approaching oversold state and mild downside momentum. Meanwhile, the moving average convergence divergence (MACD) histogram shows a decrease in green bars, reinforcing the bearish outlook. If these oversold signals deepen, a corrective rise is likely. If the pair rebounds above 0.6395 (9-day moving average), and 0.6400 (round number), the next level will be 0.6452 (20-day moving average), and a break below that will lead to 0.6470 (38.2% Fibonacci rebound from 0.6687 to 0.6336). On the other hand, 0.6336 (1-year low), and 0.6348 (yearly low on August 5) may serve as temporary support. A successful break above this level may strengthen the bearish bias and push the AUD/USD pair towards the 0.6300 (round number) area.

Today, consider going long on AUD before 0.6355, stop loss: 0.6340; target: 0.6390; 0.6400.

GBP/USD

GBP/USD regained momentum on Monday, trading above 1.2670, as UK PMI data showed continued private sector growth in early December. GBP/USD opened stronger on Monday and now appears to have broken a three-day losing streak, trading around 1.2620 in Asian trading, although significant strength seems difficult to achieve ahead of key central bank event risk this week. The Federal Reserve is scheduled to announce its policy decision on Wednesday, followed by the Bank of England's meeting on Thursday. The Fed is widely expected to lower borrowing costs for the third consecutive meeting, although traders are pricing in the possibility of a slower pace of rate cuts next year. Therefore, the accompanying policy statement, the latest economic forecasts including the so-called dot plot, and Fed Chairman Powell's speech at the post-meeting press conference will all be carefully watched for signals on the path of future rate cuts. This will therefore in turn affect the near-term dollar volatility and provide some impetus to GBP/USD.

From the daily chart, GBP/USD's rebound in the previous week was blocked before approaching the 200-day simple moving average of 1.2820. The upcoming “death cross” and the previous “double bear cross” may continue to act as resistance for GBP in the coming days. The 50-day (1.2830) SMA is about to cross the 200-day (1.2820) SMA from above, which, if it happens, will confirm the death cross. In addition, the 14-day relative strength index (RSI) has returned to negative territory, around 46, supporting the view of further downside. GBP must break through 1.2700 (round number), which will target 1.2734 (23.6% Fibonacci retracement of 1.2487 to 1.2811), and the 34-day SMA level near 1.2741. Conversely, if selling pressure intensifies, last week’s low of 1.2608, and 1.2600 (market psychological level) will be tested, below which will test 1.2563 (76.4% Fibonacci retracement of 1.2487 to 1.2811), and find a buffer near 1.2500.

Today’s recommendation is to go long GBP before 1.2665, stop loss: 1.2650, target: 1.2720, 1.2730

USD/JPY

USD/JPY continues to rise as the yen remains a laggard in the G10 FX complex. Despite an improvement in Japan’s Jibubank Flash PMI for December, traders ignored the data. The pair is trading above 154.00 points, a level last seen on November 26. The yen fell slightly in Asian trading on Monday. The initial reaction to Japan’s release of better-than-expected core machinery orders and manufacturing PMI was short-lived as investors grew increasingly confident that the Bank of Japan would not raise interest rates later this week. Moreover, bets on a less-dovish Fed remain supportive of rising US Treasury yields and act as another factor undermining the low-yielding yen. That said, ongoing geopolitical risks stemming from the protracted Russia-Ukraine war and ongoing conflict in the Middle East, as well as concerns over US President Trump’s tariff plans, could limit losses for the safe-haven yen.

From a technical perspective, USD/JPY surged above 153.00 (round mark) last week, and a sustained move and acceptance above 153.65 (61.8% Fibonacci rebound from 156.75 to 148.65) could be seen as a fresh trigger for the bull market. Moreover, oscillators on the daily chart have just started to gain positive traction, suggesting that the path of least resistance for the USD/JPY pair remains to the upside. Therefore, on the way to the psychological level of 155.00, investors continue to move towards the next relevant barrier, around the 154.84 (76.4% Fibonacci rebound) area, which seems to be a distinct possibility. On the other hand, the Asian intraday lows around 153.35-153.30 now seem to act as strong support immediately before the 153.00 mark. A break below the latter may expose 152.70 (50.0% Fibonacci rebound), and further to the 200-day moving average of 152.10.

Today's recommendation is to go long USD before 153.95, stop loss: 153.60; target: 154.60, 154.80

EUR/USD

EUR/USD is hovering around 1.0500 and unable to find a clear direction. EU PMI data was better than expected but still pointed to a contraction in the EU economy. US PMI showed a sharper contraction in the manufacturing sector in December but upbeat service sector output. In a risk-off environment, the EUR/USD pair closed in the negative territory amid a rebound in the US dollar but remained in a limited range. Cautious sentiment has mostly favored the US dollar over the past few days while profit-taking ahead of the close provided short-term support to the euro. The pair closed around 1.0500 levels as investors prepared for the year-end central bank meetings. The ECB announced last Thursday that policymakers decided to cut each of the three major interest rates by 25 basis points. President Christine Lagarde continued to use less hawkish language in her press conference, sparking speculation that the ECB's monetary policy is close to neutral. In addition to the Fed, the Bank of Japan and the Bank of England will also announce their monetary policy decisions and generate noise in the financial markets.

From a technical perspective, EUR/USD is expected to extend its recent decline. On the daily chart, the pair is developing below the 20-day simple moving average (1.0604). Meanwhile, the 100- and 200-day moving averages gain bearish strength more than 300 pips above current levels, and technical indicators resume their decline after correcting oversold conditions, reflecting that sellers are still in the driver's seat. The 20-day simple moving average has provided dynamic resistance since last Wednesday. It will have less impact on the technical picture in the coming days, but in any case, reflects that bears are in the driver's seat. Meanwhile, the momentum indicator is directionless around its 100 level, failing to provide directional clues, while the 14-day relative strength index (RSI) indicator hovers around 43, also lacking directional strength. The pair has immediate support at the 1.0440 level, which is the low in October, followed by the 1.0400 (round number) range. The first resistance is in the 1.0570 (30-day moving average) area, followed by the 1.0600 (market psychological level), and 1.0604 (20-day moving average) thresholds.

Today it is recommended to go long on Euro before 1.0488, stop loss: 1.0475, target: 1.0550, 1.0560.

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