US Dollar Index

The dollar is rebalancing as markets look for a December rate cut by the Federal Reserve. The dollar index returned above the key support level of 105.50, rising to 106.20. Financial markets remained relatively calm in early trading on Monday as investors did not take large positions ahead of the release of important events and data in the coming week. The European economic calendar will release the Sentix investor confidence index for December, and the US Census Bureau will release October wholesale inventory data later. Last week, the dollar fell for the third consecutive day, hitting a new one-week low. Fed officials continue to speak in favor of cautious rate cuts, and market bets on a December rate cut are currently around 70%. In addition, the Atlanta Fed's GDPNow model raised its expectations 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 dollar in December, coupled with the fading impact of political turmoil on the market, is expected to continue to fluctuate in a narrow range. The dollar index rebounded last Friday after three consecutive days of declines and closed in positive territory. The US dollar index climbed slightly above 106.00, with the benchmark 10-year US Treasury yield just below 4.15%. On Wednesday, the US Census Bureau will release the Consumer Price Index (CPI) data for November.

From the daily chart, the US dollar index stopped falling before the end of last week and rebounded above 106.00, indicating its resilience. This move came despite profit-taking activities. The index now aims to recover its 20-day simple moving average (106.41), while the 9-day (106.09), and 20-day (106.41) moving averages formed a "death cross" bearish pattern before the end of last week. As long as it remains below the 106.00 (market psychological level) level, it may intensify its short-term difficulties to the 105.72 (daily chart descending triangle support line), and 105.74 (30-day moving average) areas. If the correction continues, key levels consisting of 105.21 (40-day moving average); 105.05 (an upward trendline from the low of 100.16 on September 27); and 105.05 (38.2% Fibonacci retracement) will act as short-term supports. On the bullish side, 106.41 (20-day simple moving average), and 106.39 (last Thursday's high) are the first resistance levels. Breakouts open up to challenges of 106.72 (last Wednesday's high), and 107.00 (round number) levels.

Consider shorting the US dollar index around 106.35 today, stop loss: 106.45, target: 105.90, 105.80

WTI crude oil

WTI crude oil prices showed some resilience around $67.00 and attracted some buyers at the start of the new week. It rose 1.30% on the day and has now ended a three-day losing streak. WTI crude oil prices have shown some strength above the $67.00 round mark and attracted some buyers at the start of the new week. The commodity is currently trading just below $67.50. For now, it seems to have ended a three-day losing streak to a three-week low hit last Friday. The Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) decided last week to postpone the planned increase in supply by three months to April and extend the full lifting of the production cut plan by one year to the end of 2026. In addition, the worsening war between Russia and Ukraine, coupled with the overthrow of Syrian President Bashar al-Assad by rebels, has kept the geopolitical risk premium in play, which is conducive to oil prices. In addition, signs of economic recovery in the United States and hopes that the expansionary policies of US President-elect Donald Trump will boost fuel demand have provided some support for oil prices.

Crude oil prices seem to be set to fall further, and OPEC+ has been unable to firmly address the problem of oversupply in non-OPEC+ countries. The current weak global economic growth is unlikely to absorb the continued oversupply. From the daily chart, the rebound in oil prices in the past two weeks has been constrained by the 55-day simple moving average (the latest at 70.30), triggering a downward turn in oil prices, which is still ongoing. If tensions in the Middle East ease, the first low to challenge downward is $66.85 (the lower track of the horizontal channel). If oil prices break through this level, the low so far in 2024 will reach the key level of $64.75. On the other hand, if there is a technical rebound in oil prices, $68.32 (9-day moving average), and $69.22 (23.6% Fibonacci rebound from 77.93 to 66.53) will become huge resistance. If oil traders can break through this level, $70.00 (market psychological barrier) will become the next key level.

Consider going long on crude oil around 67.70 today, stop loss: 67.50; target: 68.90; 69.20

Spot gold

On Monday, gold gained momentum and reached a high of $2,677. News that China plans to further stimulate the economy boosted gold prices as investors prepare for key data releases and central bank meetings this week. At the beginning of the new week, gold/USD attracted some bargain hunting, continuing the rebound from the $2,614-2,613 area last Friday, but it is still confined to the range of the past two weeks. The US non-farm payrolls data released last Friday confirmed expectations that the Federal Reserve will cut interest rates in December. This put pressure on US Treasury yields and benefited non-yielding gold. Apart from this, cautious sentiment caused by the political chaos in South Korea, geopolitical tensions and trade war concerns have also become other factors supporting safe-haven gold prices. Meanwhile, growing bets that the US central bank will slow down or pause its rate-cutting cycle in January have helped the US dollar to continue to rise on the basis of a small rebound from a near one-month low last Friday. This, in turn, will curb any meaningful appreciation in gold.

From a technical perspective, any further strength above the $2,648-2,650 resistance zone is likely to face resistance near $2,663.40 (61.8% Fibonacci rebound from 2790.00 to 2536.80), and $2,666 (last week's high). Some follow-through buying beyond the $2,680 mark (downward trendline from November high of $2,790) will be seen as a key trigger for the bulls and enable gold prices to recapture the $2,700 round number. This momentum could extend further to the next relevant mark near $2,722. Conversely, a return below the short-term support of $2,630 could drag gold prices back to the $2,614-2,613 area. This is followed by the support zone of $2,605 (November 26 low), $2,600 (market psychological mark). A break below the latter support will point to the 100-day moving average, which is near $2,585.80.

Consider going long on gold today before 2,654.00, stop loss: 2,650; target: 2,670.00; 2,675.00

AUD/USD

AUD/USD rebounded sharply on Monday, quickly brushing aside the initial support below 0.6400, backed by potential additional stimulus from China, and returned to the 0.6470 area ahead of the key interest rate decision of the Reserve Bank of Australia on Tuesday. After hitting a four-month low near 0.6370 on Friday, the AUD/USD pair found temporary support and rose to around 0.6450 during the European session on Monday. The Australian dollar rebounded against the US dollar as investors focused on the Reserve Bank of Australia's monetary policy decision to be announced on Tuesday. AUD/USD rose to around 0.6400 in Asian trading on Monday on a weaker US dollar. There are no Fed speeches this week due to the media blackout. All eyes will be on the Reserve Bank of Australia's interest rate decision on Tuesday, and no change in interest rates is expected. On the Australian dollar side, market participants will pay close attention to the Reserve Bank of Australia's press conference. The dovish comments from policymakers may create some selling pressure on the Australian dollar against the US dollar.

The weekly technical outlook for AUD/USD remains bearish as the pair continues to struggle near the August low. The 14-day relative strength index (RSI), a momentum oscillator that measures the speed and change of price movements, is approaching oversold conditions on the daily chart, indicating severe selling pressure. Similarly, the moving average convergence divergence (MACD), which tracks the relationship between two exponential moving averages, also shows bearish dominance. However, these movements may have been overextended, so an upward correction may be in the cards. Therefore, short-term upside resistance can be focused on 0.6462 (9-day moving average), and 0.6471 (Monday's high), while key resistance levels are 0.6500 (round number), and 0.6515 (last week's high) area levels. On the downside, AUD/USD faces immediate next support at 0.6360, the monthly low of April, followed by the 2024 (August) low of 0.6348. If the bears succeed in breaking the above support levels, the next key areas are 0.6300 (round mark).

Today, consider going long on AUD before 0.6425, stop loss: 0.6410; target: 0.6480; 0.6500.

GBP/USD

GBP/USD recovered and maintained modest daily gains above 1.2750. The market cheered the improvement in risk sentiment as traders shrugged off geopolitical risks and repositioned ahead of US inflation tests, making it difficult for the US dollar to strengthen. GBP/USD has a stable trend in the new week, fluctuating in a narrow range above 1.2700 during the Asian session. Meanwhile, spot prices remain just a stone's throw away from over three-week highs above the 1.2800 mark hit last Friday, though the fundamental backdrop warrants some caution for bulls. The initial market reaction was short-lived as markets bet that the U.S. central bank will slow down the pace of rate cuts or pause the rate-cutting cycle in January. This, in turn, helped the dollar stay above its lowest level in nearly a month, which is bearish for GBP/USD. Apart from this, ongoing geopolitical tensions, China's economic woes and concerns about the upcoming trade tariffs by U.S. President-elect Trump have also become other factors supporting the dollar's safe-haven stance. On the other hand, the pound struggled to attract buyers amid the dovish outlook signaled by Bank of England Governor Andrew Bailey of four rate cuts by 2025. This further limited the upside for GBP/USD as traders now look to U.S. consumer inflation data to inject fresh momentum into it.

From the daily chart, GBP/USD remains oscillating above 1.2700, with the pair hovering around 1.2760 - 1.2670. At this stage, the pair will attract sellers once it rebounds to 1.2811 (last week's high) and 1.2821 (200-day SMA). The technical indicator 14-day relative strength index (RSI) is currently at 50.00, reflecting the lack of direction in the short term. On the upside, 1.2800 (psychological barrier), and 1.2811 (last week's high) will become key resistances. The next level will be the 200-day SMA at 1.2821, and 1.2850 levels. On the other hand, the downtrend is still looking down and the pair is expected to find the first buffer around 1.2700 (round number), and 1.2677 (21-day SMA), and the next level will point to 1.2600 (market psychological level).

Today, we suggest going long on GBP before 1.2740, stop loss: 1.2725, target: 1.2800, 1.2820

USD/JPY

USD/JPY climbed above 151.000, with the yen completely weak. Japan's GDP grew faster at 1.2% in the third quarter of this year. Investors await US CPI data for new interest rate guidance. The yen continues to struggle to gain any meaningful traction against the dollar and continued its consolidation trend in the Asian market on Monday. Although Japan's third-quarter GDP was revised upward, doubts about whether the Bank of Japan will further cut interest rates in December became a key factor that was bearish for the yen. This, coupled with a slight rise in the US dollar, supported USD/JPY. Nevertheless, geopolitical tensions, coupled with concerns about the upcoming trade tariffs imposed by US President-elect Trump, and the recent decline in US Treasury yields, have hindered aggressive bets on yen shorts. Therefore, caution is needed before making aggressive directional bets around USD/JPY. Investors may also choose to wait for the US consumer inflation data due this week for clues and some meaningful impetus on the Fed’s rate cut path.

From a technical perspective, the range-bound movement can be categorized as a bearish consolidation phase on the back of the recent pullback from the multi-month top (156.75) reached in November. Moreover, the oscillators on the daily chart remain in negative territory, suggesting that the path of least resistance for USD/JPY is to the downside. On the other hand, the 9-day (150.20), and 55-day (150.75) formed a bearish “death cross” pattern before last weekend. Meanwhile, the post-non-farm payrolls low near 149.35 now appears to be acting as short-term support ahead of the 149.00 mark and the 100-day moving average, currently at 148.68. The latter coincides with the near two-month low reached last Tuesday and should act as a key pivot point. Some follow-through selling could drag USD/JPY down to the key support area of ​​148.17 (50.0% Fibonacci retracement of 139.58 to 156.75); and 148.00 (round number), and then to 147.35 (Oct. 8 low), and 147.00 round number. Conversely, attempts to recover could be around the 151.50 mark and last week’s swing high of 151.25. A sustained break above the latter would see USD/JPY test the very important 200-day moving average around 151.98.

Today, it is recommended to go long on the US dollar before 151.00, stop loss: 150.80; target: 151.70, 151.90

EUR/USD

The EUR/USD pair failed to test or surpass the key 1.0600 mark, ultimately succumbing to a late rally in the dollar on the back of steady expectations ahead of Wednesday’s US CPI data. EUR/USD consolidated around 1.0580 in the European session on Monday as investors focused on the ECB’s monetary policy decision on Thursday. The market almost fully priced in a 25 basis point cut in the deposit facility rate to 3% by the ECB as many officials expressed concerns about the risk of inflation falling below the bank’s target due to a weak economic outlook. On the US side, the US Consumer Price Index inflation report for November is due on Wednesday. On Thursday, the ECB’s interest rate decision will be in focus. Investors will be looking for clues on what will happen next. With hopes high for a US rate cut later this month, Wednesday’s inflation data could be the only potential obstacle to the Fed’s third consecutive rate cut. The ECB is expected to unveil its fourth rate cut this year at its last policy meeting until 2024 on Thursday. Any dovish comments from ECB policymakers could weigh on EUR/USD.

Before the weekend, EUR/USD has been trading around 1.0550 - 1.0560 at the start of this week, after briefly testing the psychological barrier of 1.0600 near 1.0630 and retreating, but still staying above the 20-day simple moving average (1.0538). This level continues to provide key support, suggesting that the short-term outlook remains constructive despite Friday's pullback. Technical indicators on the daily chart are showing mixed signals. The 14-day relative strength index (RSI) remains in negative territory, reflecting traders' cautious attitude. Meanwhile, the moving average convergence divergence (MACD) indicator prints a rising green bar, indicating a gradual bullish momentum. Therefore, the first upside targets are 1.0600 (market psychological barrier), 1.0630 (last week's high), and then 1.0678 (40-day moving average) levels. At this stage, the risk of EUR/USD is still biased to the downside. The short-term support is at 1.500 (round mark), and a break below the latter will expose the 1.0460 (last week's low) area.

Today, it is recommended to go long on the euro before 1.0550, stop loss: 1.0535, target: 1.0590, 1.0610.

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