US Dollar Index

The US dollar index, which measures the performance of the US dollar against a basket of currencies, is at a two-year high around 108.00. The volatility of the US dollar has subsided and is not expected to rebound much on New Year's Eve. Based on its current status, it may still hit a two-year high before the end of the year if external events occur. The foreign exchange market was trading light at the end of the year, and the buying of the US dollar decreased significantly. This slowdown often prompts investors to reassess their positions before the end of the year, especially after the strong run of the US market, which may lead to year-end rebalancing and selling of the US dollar. However, the increase in year-end US dollar funding demand caused by the current allocation of stock positions may mitigate this effect.

From the recent month's trend, the US dollar index maintains a bullish momentum, and the 14-day relative strength index (RSI), a technical indicator of the daily chart, is now around 62 and is expected to point higher, close to the overbought level. Despite the weak trading liquidity, the US dollar index continued to rise slightly around 108.00, reflecting continued buying interest. As long as the index remains above 107.47 (50.0% Fibonacci retracement from 114.78 to 100.16) and 107.00 (market psychological level), the technical situation will remain optimistic. On the contrary, if the US dollar index continues to stay above 108.00, the next target is 108.55 (December 20 high), and a breakout points to the area formed by 109.20 (76.4% Fibonacci retracement from 114.78 to 100.16); and 109.29 (July 14, 2022 peak) as key resistance levels.

Consider shorting the US dollar index around 108.17 today, stop loss: 108.25, target: 107.80, 107.85

WTI spot crude oil

Crude oil prices rose at the beginning of the week as traders prepared for a series of data releases during the US trading session, including inventory data from the Energy Information Administration (EIA), which was changed due to the Christmas holiday on Wednesday. Oil prices closed more than 1% higher on Friday, driven by a larger-than-expected weekly decline in US crude oil inventories, and the weekly line also rose in quiet trading before the end of the year. Data released by the US Energy Information Administration (EIA) showed that US crude oil inventories fell by 4.2 million barrels in the week ending December 20 due to increased refining activity at refineries and the holiday season also boosted fuel demand. The market had previously expected a decrease of 1.9 million barrels. In addition, optimism about China's economic growth has also raised hopes for increased demand from the world's largest oil importer next year. The World Bank on Thursday raised its forecast for China's economic growth in 2024 and 2025.

As seen from the technical chart, the first resistance level of WTI crude oil is $71.46 (February 5 low) and $71.56 (120-day moving average). Obviously, oil prices have been constrained by the above resistance areas for two consecutive days in the past two weeks; and the high of $72.88 on November 7 will be regarded as the neckline position. If this area can be broken in the future, the three-bottom pattern formed in recent months will be established. Fibonacci calculations show that the 61.8% rebound level is expected to be $73.95. The support level is estimated at $69.30 on the 40-day moving average, and the next level is expected to be $67.12-the price level maintained in May and June 2023 and the last quarter of 2024-is still the first solid support nearby. If it breaks through, the low of November 18 is $66.53.

Consider going long on crude oil near 69.76 today, stop loss: 69.60; target: 70.85; 71.00

Spot gold

Gold briefly fell below $2,600 during the U.S. trading session on Monday, as poor performance of global stock markets supported demand for the dollar, which was exacerbated by weak trading conditions before New Year's Eve. In early Asian trading, gold prices attracted some buyers to around $2,625. Donald Trump's tariff and trade policies may trigger trade conflicts, providing support for gold. However, the prospect of fewer interest rate cuts by the Federal Reserve in 2025 may curb the upside of gold prices. Trading volume was lighter than usual before the New Year holiday. Trump's return to the White House may increase global trade tensions, fuel geopolitical crises, and potentially raise gold prices. Trade tensions, potential conflicts, and unpredictable policies under his leadership may prompt investors to use gold as a safe-haven asset. In addition, escalating geopolitical tensions in the Middle East and the ongoing Russia-Ukraine war may boost the price of gold, a traditional safe-haven asset.

The daily chart shows that gold prices were trading above $2,630.00 before the weekend and are in a consolidation phase as they move sideways around the 9-day ($2,614.70) and 14-day moving averages ($2,633.80). The 14-day relative strength index (RSI) is hovering below 50, reflecting a steady but weak trend. On the upside, gold prices may target last week's highs of $2,639.00 and $2,639.50 (25-day simple moving average). A breakout would point to the $2,661.70 (50-day moving average) level. On the other hand, if gold prices continue to fall below the 9-day moving average of 2,616.50, and the $2,615.50 (last week's closing price) area, it will test $2,600.00 (market psychological level), and $2,602.50 (110-day moving average), paving the way for further direct attack to $2,583 (December 19 paper point).

Today, you can consider going long on gold before 2,603.00, stop loss: 2,600.00; target: 2620.00; 2625.00

AUD/USD

AUD/USD remained up around 0.6220 in early Asian trading on Monday. However, the currency pair's potential upside may be limited as the market continues to digest the hawkish turn of the US Federal Reserve. The market may be calmer as we enter the last week of 2024. Hawkish messaging from the Fed is likely to support the US dollar in the near term, negative for AUD/USD. On the other hand, dovish bets from the RBA could drag the Australian dollar lower. The minutes of the RBA's December meeting highlighted that policymakers have become convinced that inflationary pressures are easing as expected. Traders have priced in a nearly 65% ​​probability of a 25 basis point rate cut at the February 18 meeting and fully expect a cut by April.

AUD/USD fell to 0.6215 over the weekend, hovering near yearly lows. The 14-day relative strength index (RSI) of technical indicators is around 30, suggesting deeper oversold territory with a slight pre-downside bias. Meanwhile, the moving average convergence divergence (MACD) histogram printed flat red bars, indicating sustained selling pressure. Despite the pair's continued decline, thin holiday trading volumes are likely to limit any notable moves, leaving the Australian dollar vulnerable to further declines without a clear catalyst. Therefore, on the downside, the four-year low of 0.6180, and 0.6120 (low of March 6, 2020) and the psychological support of 0.6000 can be watched. On the other hand, last week's high of 0.6265 will be the first resistance level, followed by 0.6300 (round mark), and 0.6348 (5-week moving average).

Today, consider going long on AUD before 0.6210, stop loss: 0.6195; target: 0.6250; 0.6260.

GBP/USD

After hitting a 10-day high above 1.2600 earlier in the week, GBP/USD turned down and fell to 1.2500. The pair rebounded as holiday trading eased and stabilized around 1.2550. The demand for safety tilted the risk to the downside. GBP/USD extended its recovery to around 1.2600. Trading volume was lighter than usual ahead of the New Year holiday. Rising US Treasury yields could benefit the dollar. In addition, expectations that US President-elect Donald Trump's policies of loose regulation, tax cuts, tariffs and tighter immigration could fuel inflation and slow the pace of the Fed's rate cuts also contributed to the dollar's upside. The Bank of England's increased dovish bets for next year could weigh on GBP/USD in the short term.

From the recent technical trend, GBP/USD remains vulnerable after breaking below the upward sloping trendline of 1.2600 drawn from the October 2023 low of 1.2035. All short- to long-term exponential moving averages are sloping downward, indicating a strong bearish trend in the long run. The 14-day relative strength index (RSI), a technical indicator, fell below 45.00. If the oscillator remains below this level, it could trigger a new downward momentum. Looking down, if it falls below the immediate support levels of 1.2505 (Friday's low), and 1.2500 (round mark), the currency pair is expected to find a buffer near the "double bottom" formed by 1.2485 (November 22) and 1.2475 (December 20). On the positive side, the recent resistance level is at 1.2600 (round mark). Looking up, the next obstacle is at the 1.2667 (December 19 high) - 1.2677 (40-day moving average) range level.

Today, it is recommended to go long on GBP before 1.2535, stop loss: 1.2520, target: 1.2575, 1.2680

USD/JPY

The yen continued to strengthen against the US dollar on Monday. The USD/JPY pair remained weak as the yen strengthened on the possibility of a rate hike by the Bank of Japan in January following the release of Tokyo Consumer Price Index (CPI) inflation data last week. The yen remained strong against the U.S. dollar on Monday. The USD/JPY pair remained subdued as the Bank of Japan may raise interest rates in January following the release of Tokyo Consumer Price Index (CPI) inflation data last week. The Jibun Bank Manufacturing PMI for December reached 49.6, slightly higher than the preliminary reading of 49.5 and improved from 49.0 in November. Although it was the highest level since September, it still showed a sixth consecutive month of decline in manufacturing activity. On Monday, the Nikkei 225 fell to around 39,950 points, ending a two-day winning streak. Earlier, U.S. futures fell slightly, affected by the decline on Wall Street on Friday driven by rising Treasury yields and more cautious expectations of rate cuts in 2025.

The USD/JPY exchange rate rose to around 158.08, a nearly five-month high, last week. The daily chart analysis shows that the pair is in a sustained bullish trend, moving upwards within an ascending channel pattern. The 14-day relative strength index (RSI) of the technical indicator is slightly below the 70 level, reinforcing the bullish outlook. A break above the 70 level could signal overbought conditions, which could lead to a potential downward correction in the pair. USD/JPY could retest the monthly high of 158.08 reached last Thursday. A break above this level could support the pair to target 158.86 (July 16 high), and further challenge 160.00 (market psychological level), and the upper line of the ascending channel near 160.30. As for the downside, USD/JPY could be at the 9-day moving average level of 156.58. The next level would point to the market psychological level of 156.00.

Today's recommendation is to short USD before 157.00, stop loss: 157.25; target: 156.10, 156.00

EUR/USD

On Monday, EUR/USD lost early traction but held at familiar levels around 1.0400. The negative shift in risk sentiment, as reflected by the bearish opening on Wall Street, supported the dollar, making it difficult for the pair to gain a foothold. It traded around 1.0430 during the Asian session. The pair's rise can be attributed to comments from ECB Governing Council member Robert Holtzmann. On Saturday, ECB's Holtzmann said the central bank's next rate cut could be delayed following the recent rise in inflation. He also said, "I don't see a rate hike at this point. In addition, potential gains for EUR/USD may be limited as the market continues to digest the hawkish turn of the US Federal Reserve. The Fed's hawkish message may support the US dollar and pose a headwind for EUR/USD in the short term.

From the daily chart, the 14-day relative strength index (RSI) indicator of the EUR/USD technical indicator is around 41.20, highlighting that the short-term trend of EUR/USD is still hesitant, but slightly weak. The first resistance level for EUR/USD may be the 20-day moving average around 1.0466, which will be the first key obstacle for the euro to rise. Breaking through the above level will look to 1.0500 (round mark), and finally challenge 1.0530 (40-day moving average). On the downside, if the currency pair will 1.0400 (round mark), and 1.0383 (December 24 low) turns into resistance, then 1.0350 (static level) and 1.0332 (two-year low) may be seen as the next support.

Today, it is recommended to go long on the euro before 1.0390, stop loss: 1.0380, target: 1.0440, 1.0450.

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