US Dollar Index

The US Dollar Index, which tracks the value of the US dollar against six major currencies, stopped its correction this week and stabilized around 109.00 on Thursday. The poor performance this week is entirely due to the decline in US Treasury yields. The US dollar turned firm this week and weakened further mid-week. The US CPI data released in December was slightly milder than expected, raising speculation about the future path of the Federal Reserve. The US Dollar Index briefly fell below 109.00 and may accelerate its decline from here. Selling pressure around the US dollar remains, and its weekly corrective decline accelerated after US inflation data was in line with the market consensus. The possibility of a rate cut in January remains. The US Dollar Index fell to a new five-day low of 108.60, breaking through the 109.00 support level and leading yields to plummet: the 10-year Treasury bond fell from a 14-month high on Monday to around 4.65%, reflecting lower inflation expectations and lower risk premiums. Investors seem to have some hope for a rate cut by the Federal Reserve later this month.

As can be seen from the daily chart, the US dollar index fell below 109.00 this week and once hit a five-day low of 108.60 as traders locked in gains due to weak inflation data. Despite the decline, it is still near the multi-year high (109.00), and the 14-day relative strength index (RSI) indicator of the technical indicator is still quite far from the overbought area, so the broader upward trend remains unchanged, with the initial target at 109.36 (9-day moving average) and 109.35 (Wednesday's high) resistance areas. 109.75 (Tuesday's high) is the second rebound target, and a break will go straight to 110.00 (round mark). On the downside, the 20-day simple moving average of 108.66 and 108.60 (Wednesday's low) repelled sellers. If the above support area is broken, the 108.00 (market psychological mark) level will be tested again.

Consider shorting the US dollar index around 109.15 today, stop loss: 109.30, target: 108.70, 108.65

WTI spot crude oil

WTI crude oil prices retreated after reaching a six-month high, rising more than 3% in the previous trading day, trading back to $77.50 on Thursday. However, crude oil prices remain positive due to tight supply and falling US inventories. Crude oil prices fell as geopolitical tensions in the Middle East may ease as the prospects for a ceasefire between Hamas and Israel improve. The end of the conflict between Israel and Hamas will ease tensions in the Middle East and reduce the threat of crude oil supply disruptions in the region. This in turn may weaken black gold prices. However, US crude oil inventories continue to decline, which may limit the downside of WTI prices. The weekly report of the US Energy Information Administration showed that US crude oil inventories fell by 1.962 million barrels in the week ending January 10, which may drag the US dollar lower and boost the prices of commodities denominated in US dollars.

The recent volatility of oil prices is largely influenced by market sentiment. The news of a potential ceasefire between Israel and Hamas has eased geopolitical tensions, but the positive API inventory data has supported bullish confidence. Overall, the market may be in a state of mixed long and short positions in the short term, with increased volatility. On a technical level, WTI crude oil is currently trading near $80/barrel, which is an important psychological level and resistance level. If oil prices continue to rise above $80/barrel, the upside target may point to $81.20/barrel (last July 19 high), which is a strong resistance level in the short term. The upper resistance level is around $82/barrel, if oil prices fail to break through the $80.00 level. The first support level is $77.00 (market psychological level), followed by $76.16 (mid-week low).

Consider going long on crude oil near 77.30 today, stop loss: 77.10; target: 78.70; 78.90

Spot gold

Gold prices rose further and managed to recapture the key $2,700 per ounce mark to a recent high of $2,724 on Thursday in response to the lack of appeal of the US dollar and the overall decline in US yields. Spot gold traded around 2,695 on Thursday, and the US core inflation data was lower than expected, inflationary pressures weakened, and the US dollar fell, which was a positive factor for gold. Spot gold hit a recent high of $2,695 on Wednesday, driven by risk appetite. Gold prices climbed for the second consecutive day, and the Federal Reserve may ease policy. Gold prices resumed their upward trend after the US Bureau of Labor Statistics (BLS) announced that potential consumer inflation declined compared with expectations and last month's readings. The data caused US Treasury yields to plummet as the Federal Reserve did not rule out the increasing possibility of a rate cut after the December meeting.

The daily chart shows that the gold/dollar pair has re-entered the area above $2,700, maintaining a bullish tone as it continues to develop above all moving averages, although the 20-day, (2645.50), and 100-day simple moving averages (2640.50) converge near the bottom, without directional strength, but still acting as dynamic support. At the same time, technical indicators are moving upward within positive levels, reflecting that buyers are still in control. In the short term, gold is neutral to bullish. The targets are the December swing high, which is around the $2,726 area. A breakout points to the $2,750 level. On the downside, the focus can be on $2,698 (January 10 high), and the psychological $2,700 level. A breakout adjusts the gold price to the $2,669.80 (10-day moving average), and $2,660.00 (January 14 low) levels.

Consider going long on gold today before 2,710.00, stop loss: 2,705.00; target: 2,726.00; 2,730.00

AUD/USD

AUD/USD faced barriers around 0.6250 in Thursday’s trading, falling to 0.6210, paring initial gains from Australia’s mixed labor force report. Deeper losses were limited by more optimistic sentiment as anxiety over potential tariff disruptions eased. Nonetheless, the pair remains under scrutiny as investors are watching the direction of Reserve Bank of Australia policy and the direction of the US dollar, which traded weaker following the release of the mid-term data. The Australian dollar remained stable above 0.6200 on Thursday after three consecutive days of gains against the US dollar. The AUD/USD pair found mild support following the release of the Australian jobs report, with the Australian dollar rising slightly. US President-elect Donald Trump’s economic team is considering gradually increasing import tariffs. Such optimism boosted risk market sentiment, supporting risk-sensitive currencies such as the Australian dollar and contributing to its appreciation.

On Thursday, the AUD/USD pair traded slightly above 0.6210, testing the upper line of the "downward channel" on the daily chart at 0.6245. A successful breakthrough would weaken the bearish bias. The 14-day relative strength index (RSI) rose to 43 levels, indicating a short-term recovery. The AUD/USD pair faces immediate resistance at the upper line of the downward channel, around 0.6245. The next level points to 0.6281 (34-day moving average). Regarding its support, the AUD/USD pair may test 0.6200 (psychological level), break it and test the support level of 0.6161 (Tuesday's low), as well as 0.6100 (round number level).

Today, consider going long on AUD before 0.6200, stop loss: 0.6190; target: 0.6250; 0.6260.

GBP/USD

On a rather quiet day in the FX market, GBP/USD hovered around 1.2230 against the backdrop of weaker USD price action and further correction in UK 10-year gilt yields. GBP/USD edged lower in Asian trading on Thursday, trading around 1.2220 after two days of gains. The British pound came under downward pressure following lower-than-expected UK inflation data released midweek. The UK 10-year gilt yield fell to 4.73%, retreating from multi-year highs after official data showed an unexpected decline in UK headline inflation, increasing expectations of a Bank of England rate cut. However, GBP/USD gained as the US dollar extended its losses following lower-than-expected US CPI inflation data for December, fueling speculation that the Federal Reserve could implement two rate cuts this year. The US Dollar Index, which measures the performance of the US dollar against six major currencies, traded around 109.00.

The British pound rose slightly on Wednesday, fluctuating widely in the 1.2100 - 1.2310 range midweek, but remained stable at its current exchange rate. At this stage, GBP/USD is trading at 1.2220. The 14-day relative strength index (RSI) has fallen to 32.80, still in negative territory, indicating that market sentiment has not yet recovered and buyers are still facing headwinds. The pair's downtrend remains intact, although it consolidates around the 1.2200 (round mark) - 1.2160 (mid-week low) area. There is still a chance to test 1.2099 (Jan. 13 low) in the short term. Buyers tested strong resistance in the area formed by 1.2300 (psychological mark); 1.2302 (9-day moving average); and 1.2306 (Wednesday high), and if they stay above the latter resistance area, they may aim for 1.2367, the high of Jan. 9, which forms resistance. Further gains to 1.2400.

Today, we recommend going long on GBP before 1.2215, stop loss: 1.2205, target: 1.2270, 1.2280

USD/JPY

USD/JPY rebounded from an intraday low of 155.20 to around 156.00, but retreated again to around 155.00 during Thursday's North American trading session. The yen attracted buying for a second day on Thursday as hawkish comments from Bank of Japan Governor Kazuo Ueda hinted at a possible rate hike next week. In addition, signs of expanding inflationary pressures in Japan supported the prospect of further tightening by the Bank of Japan, pushing Japanese government bond yields to multi-year highs. Meanwhile, lower-than-expected U.S. inflation increased the likelihood of two rate cuts by the Federal Reserve this year. This put dollar bulls on the defensive and dragged the USD/JPY pair to a fresh four-week low around the 155.20 area during Thursday's Asian session. That said, risk appetite may prevent traders from building new bullish bets around the safe-haven yen and provide some support for the pair.

From the technical trend this week, any further decline may find some support around the 155.00 psychological level, and if it falls below this level, the USD/JPY pair may slide to the 154.55-154.50 area. The latter represents the lower line of a four-month rising channel and should serve as a key pivot point. Spot prices may fall further below the 154.00 mark and test the next relevant support level of 153.40-153.35 levels. On the other hand, any attempted rebound may now encounter resistance around the 156.00 round mark, followed by the 156.75 area. Some follow-up buying led to a subsequent breakthrough of the 157.00 mark and pushed USD/JPY towards the 158.00 round mark.

Today, it is recommended to short the US dollar before 155.40, stop loss: 155.60; target: 154.50, 154.30

EUR/USD

EUR/USD quickly resumed its rise, shaking off Wednesday's pullback and retesting the area above 1.0300 against the backdrop of further selling pressure on the US dollar. EUR/USD held steady around 1.0290 in early Asian trading on Thursday. US CPI inflation data came in lower than expected, increasing bets that the Federal Reserve will cut interest rates twice this year, dragging down the dollar. However, concerns about eurozone economic growth may limit the upside for this major currency pair. The market currently expects the US central bank to cut interest rates by 40 basis points by the end of the year, compared with about 31 basis points before the inflation data is released. The European Central Bank cut interest rates four times last year, and traders expect three to four rate cuts this year due to concerns about the weak economic outlook in the eurozone. Bets on further ECB rate cuts may weaken EUR/USD in the short term.

EUR/USD briefly rose slightly to around 1.0335 mid-week, and while the pair has found some support after the recent decline, it has struggled to firmly surpass the 20-day simple moving average of 1.0342. Looking at the 14-day relative strength index (RSI), a technical indicator on the daily chart, it has recovered to 42, which shows that market sentiment is recovering, but it remains in negative territory, indicating that buyers are still facing headwinds. Meanwhile, the moving average convergence divergence (MACD) reinforces the view that bullish forces are far from dominant. Currently, immediate resistance is located at 1.0342 (20-day EMA), which is consistent with 1.0352 (Wednesday's high), and a decisive breakthrough could brighten the short-term outlook and open the door to 1.0400. On the downside, failure to hold the 1.0300 mark could see sellers re-emerge, potentially pulling the pair towards 1.0258 (Wednesday's low) or below. The next level to look at is 1.0200 (round mark).

Today it is recommended to go long on Euro before 1.0285, stop loss: 1.0275, target: 1.0340, 1.0350.

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