US Dollar Index

The US Dollar Index stabilized around 106.00 as the market recalibrated after last week's strong non-farm payrolls data. Although the Federal Reserve is widely expected to cut interest rates in December, attention now turns to the November Consumer Price Index (CPI) data released on Wednesday. Supported by the renewed geopolitical tensions and the cautious sentiment in the market ahead of the upcoming US inflation data, the US dollar overcame the bearish tone and closed the week with a large gain. The US Dollar Index rose for the second consecutive day and regained above the 106.00 mark amid a slight increase in US Treasury yields. The NFIB Business Optimism Index will be released, along with the weekly report on unit labor costs and API US crude oil inventories. The US Dollar Index opened slightly lower on Monday and remained around 105.80. Market participants turned their attention to the November Consumer Price Index (CPI) data released on Wednesday, which is expected to show an acceleration in the annual headline inflation rate from 2.6% to 2.7%. Although investors expect the Federal Reserve to cut interest rates in December, the market is still concerned about the central bank's cautious stance amid persistent inflation concerns.

The US Dollar Index continues to hover around 106.00, showing mild strength despite persistent concerns about sticky inflation and a dovish Fed. Key technical indicators on the daily chart remain mixed. The 14-day relative strength index (RSI) is declining and approaching the neutral level of 50, suggesting a weakening of bullish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator shows red bars, suggesting bearish pressure as the short-term moving average lags behind the long-term moving average. At this stage, immediate resistance is expected at 106.43 (20-day EMA), with further hurdles around 106.72 (last Wednesday's high). A break below will target 107.00 (round number). On the downside, support lies between 105.74 (30-day EMA) and 105.72 (daily chart descending triangle support line). Further moves will target 105.05 (an upward trendline extending from the low of 100.16 on September 27), and 105.00 (market psychological level).

Consider shorting the US dollar index around 106.48 today, stop loss: 106.60, target: 106.00, 105.90

WTI crude oil

US WTI crude oil was trading around $68.00 on Tuesday. WTI prices rebounded as geopolitical tensions in the Middle East increased after the fall of Syrian President Bashar Assad. WTI oil prices rebounded as geopolitical tensions in the Middle East increased after the fall of Syrian President Bashar Assad. The fall of the Syrian leader's regime could lead to a conflict involving regional countries, boosting WTI oil prices. Saudi Arabia's recent price cuts and the Organization of the Petroleum Exporting Countries (OPEC+)'s extended production cuts highlight weak demand fundamentals, especially from China. In addition, the growing expectations that China will announce further stimulus measures and will announce the first "moderately loose" monetary policy shift since 2010 may also provide support for crude oil. On the other hand, the Federal Reserve is likely to cut interest rates again on December 18. This may therefore boost the US dollar and suppress the Canadian dollar denominated in US dollars.

From the recent technical trend, the 14-day RSI and stochastic index of the daily chart's technical indicators continue to fall, and short-term oil prices are expected to remain under pressure. The support level is estimated at $66.85 (the lower track of the horizontal channel). And the November low of $66.61, the larger support reference is the low of $64.75 so far in 2024. On the other hand, the resistance level first looks at $69.10 (30-day moving average), and $69.22 (the 23.6% Fibonacci rebound level from 77.93 to 66.53). If the market can break through this area in the future, the small double bottom formed in recent months will be established. $70.00 (market psychological level), and $70.10 (50-day moving average) will become the next key levels. Breaking through will point to $71.15, and $72.55 (38.2% and 50.0% Fibonacci rebound levels respectively).

Consider going long on crude oil near 67.90 today, stop loss: 67.70; target: 68.90; 69.20

Spot gold

The upward momentum of gold prices further strengthened on Tuesday, bringing the price to a two-week high, just below the key level of $2,700 per ounce. Although the US dollar remains in recovery mode, waiting for the US Consumer Price Index (CPI) data released on Wednesday to gain new directional momentum, the price of gold rebounded from an eight-day low of $2,613 and extended the previous rebound in Asian trading on Tuesday, approaching $2,660. Gold prices benefit from geopolitical and Chinese optimism. Gold prices took advantage of the pause in rising US Treasury yields and expectations of more stimulus measures from China after weak inflation data released on Monday. In addition, the increase in geopolitical tensions in the Middle East, with the sudden collapse of the Syrian government over the weekend, maintained safe-haven demand for gold prices. Looking ahead to this week, all eyes are on Wednesday's key US inflation test, and gold prices may see more profit-taking after last week's decline. Traders may re-adjust their positions before the release of US CPI.

The daily chart shows that the trend of gold prices has turned from falling to rising, and as for the technical indicator, the 14-day relative strength index (RSI) has broken through the mid-line upward. Gold prices have now broken through the recent range of $2,663.40 (61.8% Fibonacci rebound level from 2790.00 to 2536.80), and $2,666 (last week's high) near resistance, in conjunction with the key 50-day simple moving average at $2,668, a daily close above the latter is crucial to provide additional momentum to support the continued recovery of gold prices. The next relevant resistance is at the $2,700 round mark. A breakout points to $2,721 (November 25 high). Conversely, if the upward momentum weakens, $2,663.40-2,666 will provide strong support for buyers. This is followed by the 20-day moving average at $2,634.50. Last week's low of $2,613 will be the next target for sellers, and a break below this point will threaten the $2,600 (market psychological barrier) level.

Consider going long on gold today before 2,688.00, stop loss: 2,685; target: 2,710.00; 2,715.00

AUD/USD

AUD/USD succumbed to further selling pressure, breaking the key support of 0.6400 as market participants adjusted the dovish message from the Reserve Bank of Australia meeting on Tuesday. The Reserve Bank of Australia kept the official cash rate (OCR) unchanged at 4.35% after the December policy meeting. The decision was largely in line with market expectations. The Reserve Bank of Australia kept its policy unchanged for the ninth consecutive meeting. The Reserve Bank of Australia will raise the benchmark interest rate by 25 basis points in November 2023. The Australian dollar continued its downward trend as the Reserve Bank of Australia extended its pause in rate hikes. AUD/USD fell 0.80% during the session, hitting a low of 0.6379. Reserve Bank of Australia Governor Bullock previously said that inflation is unlikely to return to the central bank's target range "sustainably" before 2026. She also said that Australia's core inflation rate is still "too high" to consider a rate cut soon. Rising core and service inflation rates in Australia and a relatively tight labor market are the main reasons for the RBA's cautious stance. Traders are taking a cautious approach ahead of the release of US Consumer Price Index (CPI) data on Wednesday.

Technical trends show that AUD/USD traded around 0.6400 on Tuesday, with a low of 0.6365, and bearish momentum has increased. AUD/USD remains in a descending channel, while the 14-day relative strength index (RSI) of the technical indicators on the daily chart remains around 37, maintaining a bearish bias. On the downside, AUD/USD has fallen below the five-month low of 0.6434 recorded on November 26, and 0.6400 (round mark). A clear break below this level again could open the way to the year's low of 0.6348, followed by 0,6300 (market psychological mark). Near-term resistance for AUD/USD is at 0.6471, the high of the week, and the 0.6475 (20-day moving average) area, followed by the psychological level of 0.6500 to pave the way.

Today, consider going long on AUD before 0.6370, stop loss: 0.6355; target: 0.6420; 0.6430.

GBP/USD

On Tuesday, GBP/USD was trading in a narrow range around 1.2770, due to continued buying interest in the US dollar ahead of the US CPI release on Wednesday. GBP/USD remained stable for the second consecutive day, trading around 1.2750 in the Asian session on Tuesday. Risk-sensitive currency pairs may face challenges as the US dollar continues to rise amid cautious market sentiment due to the US Consumer Price Index (CPI) data scheduled for release on Wednesday. The British pound hovered near a four-week high as investors awaited key economic data and the upcoming central bank meeting. Data due next Friday are expected to show that the UK economy rebounded in October, with signs of recovery in the manufacturing sector. Investors widely expect the Bank of England to keep interest rates unchanged at its meeting on December 19. On Monday, Sir Dave Ramsden, the BoE's deputy governor for markets and banking, stressed the need for the central bank to remain "vigilant" amid heightened uncertainty over the UK's economic outlook.

The daily chart shows that GBP/USD has a medium-term bearish bias, with the pair trading below its 200-day moving average at 1.2821. After a sharp sell-off in early November, the pair found initial support around 1.2667 (20-day moving average), marking a key low. Since then, there has been a corrective bounce, but upside momentum has been capped around the 1.2750-1.2800 area, which coincides with previous support-turned-resistance and the approaching 50-day moving average. The pair has highlighted indecision recently as it tried to climb higher but closed slightly above the previous day’s close of 1.2749, reflecting only weak bullish strength. Therefore, selling pressure remains around the 1.2800 (psychological barrier), and 1.2811 (last week’s high) resistance zone. A sustained breakout above this zone could signal further recovery with a potential target at the 1.2900 psychological level. On the downside, failure to sustain above the 1.2700 level could expose the pair to downside risks again, with initial support at 1.26667 and then 1.2600 (psychological barrier).

Today’s recommendation is to go long GBP before 1.2755, stop loss: 1.2745, target: 1.2800, 1.2820

USD/JPY

The US dollar appreciated on the increased demand for safe assets and investor caution ahead of the US CPI release. US inflation is expected to support the Fed's gradual easing of policy through 2025. The widening gap between US and Japanese government bond yields weighed on the yen. The yen fell against the dollar for a second day in Asian trading on Tuesday and pulled the USD/JPY exchange rate to a more than one-week high above 151.50. The uncertainty about how soon the Bank of Japan can raise interest rates again has kept yen bulls on the defensive. In addition, the rebound in US Treasury yields from October lows overnight also weakened the lower-yielding yen. Apart from this, the dollar recovered from a near one-month low after the release of the non-farm payrolls report, and expectations of a less dovish Fed also provided a tailwind for the currency pair. Traders may also avoid making aggressive bullish bets on the USD/JPY pair and choose to wait for the latest US consumer inflation data to be released on Wednesday. The crucial US Consumer Price Index report will provide new clues on the Fed's rate cut path. This will in turn drive demand for the US dollar and provide some significant thrust to the currency pair ahead of key central bank event risks next week.

From a technical perspective, USD/JPY is more likely to encounter strong resistance near the confluence of 151.98 (200-day moving average)-152.70 (23.6% Fibonacci retracement of 139.58 to 156.75) and continue to cap. As the daily oscillator has recovered from the negative zone, a sustained breakout of the above resistance zone will pave the way for further gains to the 152.70-152.75 area or the 50% Fibonacci level. After that is the 153.00 round mark. If USD/JPY remains above this mark, it may continue to strengthen to around 153.50 (upper track of the daily downward channel). On the downside, a break below the 151.00 mark seems to find suitable support around the 150.10 38.2% Fibonacci retracement and the 150.00 (market psychological level) area. The next relevant support is in the 149.50-149.45 area, and then down to the 149.00 mark and the monthly low, which is around 148.65 hit last week.

Today, it is recommended to go short before 152.10, stop loss: 152.30; target: 151.10, 151.00

EUR/USD

Against the backdrop of additional USD gains, EUR/USD briefly breached the key 1.0500 support level, while investors have begun to shift their attention to the upcoming US CPI data and the ECB rate decision. EUR/USD has slightly lowered its stance at the start of the week, retreating from the 1.0600 mark to 1.0550 after encountering a technical rejection at a key level last week. Euro traders are preparing for the ECB rate hike on Thursday, while dollar bidders are awaiting another round of US Consumer Price Index (CPI) inflation updates on Wednesday. And the early part of the week was a thin record. The market is predicting that inflation will rise again on an annual basis, with US CPI inflation on Wednesday rising 2.7% year-on-year, compared to 2.6% in October. The first half of the trading week was a quiet performance for the euro as the clouds of ECB rate cuts gathered in the distance. The pan-European Sentix investor confidence survey for December fell to a 13-month low of -17.5, keeping euro bulls at bay. The ECB is widely expected to cut its main refinancing and deposit rates by 25 basis points each on Thursday.

On the daily chart, EUR/USD remains below Friday's high of 1.0630 and its 34-day moving average of 1.0642, maintaining bearish outlook. After a sharp decline to a one-year low near 1.0332 in mid-November, it has entered a consolidation phase. The 1.0630-1.0642 area prevents EUR/USD from moving upward. On the downside, the MACD line remains below the signal line, suggesting that the overall trend has not yet changed convincingly. A break below the 1.0500 mark could accelerate downward momentum, paving the way for a retest of the 1.0472 (last week's low) support level and possibly lower. On the other hand, unless EUR/USD breaks through the 1.0630-1.0642 area, the bearish trend remains. Once the above level is broken, the next step is to look at 1.0700 (round mark), which will open the door to retest 1.0728 (50-day moving average).

Today, it is recommended to go long on the euro before 1.0510, stop loss: 1.0500, target: 1.0560, 1.0570.

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