US Dollar Index

The US Dollar Index, which measures the value of the US dollar against a basket of currencies, rose mid-week to reclaim the 109 high after two days of decline. The hawkish tone of the Federal Reserve supports rising US bond yields, which is favorable for US dollar bulls. Strong labor market and service sector PMI helped the US dollar to reduce losses ahead of December non-farm payrolls. The US dollar index encountered safe-haven buying mid-week, and safe-haven inflows supported the US dollar index after the US ISM service sector PMI data exceeded the median market forecast by a large margin. The overly good data hit market confidence as US price pressures remain high and are likely to keep inflation at a higher level than investors would like.

From the daily chart, the US dollar index maintains an overall bullish structure, and the 14-day relative strength index (RSI) of the technical indicator maintains an upward momentum (latest at 64.40). Despite the weak intraday performance, the US dollar index successfully defended its 20-day simple moving average (108.09), reflecting solid underlying support. Although recent overbought signals may trigger a moderate correction, continued demand for US assets and higher yields may keep the index high unless there is any major risk reversal. Therefore, on the upside, 108.97 (61.8% Fibonacci rebound level from 114.78 to 99.58) and 109.00 (round mark) can be watched as major near-term technical resistance levels. Once it is effectively above, 109.37 (Wednesday's high) and 109.56 (this month's 2nd high) can be watched. As for the downside support, 108.55 (yesterday's low) and 108.07 (20-day moving average) can be watched, and then the 107.75 level of the early week low.

Consider shorting the US dollar index near 109.15 today, stop loss: 109.25, target: 108.80, 108.70

WTI spot crude oil

On Wednesday, the US WTI crude oil price once traded near the top of $74.00. During the US trading session, the WTI price gave up 1.2% to slightly below $73.00 due to the expectation of increased Chinese demand and a sharp drop in US crude oil inventories. In addition, the escalation of geopolitical tensions in the Middle East and the continued conflict between Russia and Ukraine may boost crude oil prices in the short term. On Tuesday, China's top economic planning agency, the National Development and Reform Commission (NDRC), issued guidance on building a unified national market, breaking down market barriers to promote domestic demand while enhancing openness. Positive developments around China's stimulus measures may boost crude oil prices as China is the world's second largest economy. "While the market is currently range-bound, the market recorded gains due to improved demand expectations driven by holiday traffic and China's economic commitments,"

From the recent trend, the WTI crude oil market has broken through the 160-day moving average (73.29) for the first time since July last year. Last week, bulls have been embracing the breakout, but the last breakout was a bull trap, which caused investors who chased higher momentum to suffer the consequences of lack of patience. In addition, this special move above the 160-day moving average occurred in post-Christmas/New Year holiday trading, which is prone to unsustainable price surges caused by algorithms. In other words, holiday markets and holiday breakouts are not credible. Therefore, the downside support can focus on $72.59 (140-day moving average) and $72.54 (November 7 high), and the break points to $72.23 (50.0% Fibonacci rebound level from 77.93 to 66.53) and $71.23 (120-day moving average). On the upside, watch out for $74.00 (round mark), the early week high of $74.48, and $74.84 (200-day moving average). Then test the key resistance level of the psychological level of $75.00.

Today, consider going long on crude oil around 72.60, stop loss: 72.40; target: 73.80; 74.00

Spot gold

Gold prices maintain risk-driven returns. The benchmark 10-year U.S. Treasury yield remained at its highest level since late April, close to 4.7%, limiting the directional strength of gold prices. U.S. stocks will continue to be closed on Thursday. Gold prices stabilized after retreating from the $2,665 resistance level the day before. At the same time, the prospect of the Federal Reserve slowing down its rate cuts continues to push up U.S. Treasury yields and pose a headwind to non-yielding gold. In addition, the strong bullish tone of the U.S. dollar is another factor limiting the commodity. However, the downside in gold prices remains cushioned by uncertainty over US President-elect Donald Trump’s tariff plans. Moreover, expectations that Trump’s protectionist policies could reignite inflation should favor gold’s position as a hedge against rising prices. This, coupled with trade war concerns, geopolitical risks and risk aversion, should continue to provide some support to the safe-haven precious metal and warrant caution before making aggressive bets or positioning for a clear intraday direction.

From a technical perspective, the horizontal area of ​​the three-week high of $2,665.00 and $2,660.50 (65-day moving average) now appears to be an immediate strong barrier. Given that the oscillators on the daily chart have just started to enter the positive territory, a sustained break above this barrier will be seen as a new trigger for the bulls and pave the way for further gains to $2,665.00 and $2,660.50. The subsequent rise could push gold prices to the intermediate resistance around $2,681-2,683 and, in turn, the psychological $2,700 mark. On the other hand, a break below the $2,630.80 (20-day moving average) area may continue to find some support at the weekly lows around $2,615-2,614 hit on Monday. This is followed by the psychological confluence of $2,600.

Consider going long gold before 2,658.00 today, stop loss: 2,655.00; target: 2675.00; 2680.00

AUD/USD

The Australian dollar faced challenges against the US dollar for the second consecutive trading day, and the AUD/USD pair remained in the red despite stronger-than-expected monthly inflation data released on Wednesday. Traders are now focusing on Friday's non-farm payrolls report for further insights into policy direction. However, the closely watched core inflation measure, the trimmed mean, fell from 3.5% to 3.2%, gradually approaching the Reserve Bank of Australia's (RBA) target range of 2% to 3%. Traders are currently pricing in a 55% chance that the Reserve Bank of Australia will cut the cash rate by 25bps to 4.35% in February, with another 25bps cut expected by April. In the short term, the AUD is expected to continue to consolidate broadly, with room for modest gains as the USD weakens.

AUD/USD is trading just above 0.6200 mid-week, maintaining a bearish outlook as it remains confined within a descending channel on the daily chart. The 14-day relative strength index (RSI) technical indicator is retreating towards the 35 level, suggesting that bearish momentum may intensify. From a downside perspective, AUD/USD could retest 0.6200 (psychological level), and 0.6179 (26-month low) in a range. A break below that could see it test 0.6150 (mid-axis of the descending channel). On the upside, AUD/USD could retest the 25-day moving average at 0.6281, and the 0.6300 (psychological barrier) resistance area.

Today, consider going long on AUD before 0.6205, stop loss: 0.6190; target: 0.6260; 0.6270.

GBP/USD

This week, GBP/USD encountered mild buying before falling again, reaching the lowest level since April last year at 1.2321. Currently, the technical recovery is faltering. After ending 2024 with three consecutive months of decline, the new year on the GBP chart has started shaky, with bidding momentum hampered near the medium-term low due to low data volume for GBP traders. UK year-on-year retail sales soared to 3.1% in the year to December, but GBP flows could not overcome a new round of risk aversion after the US Purchasing Managers Index (PMI) activity and business cost survey results dashed short-term hopes of the Federal Reserve to continue cutting interest rates in early 2025.

Technical analysis on the daily chart shows a weakening bearish trend as GBP/USD trades above the upper line of the descending channel pattern. Nevertheless, the 14-day relative strength index (RSI) of the technical indicator remains below the 35 level, indicating continued bearish pressure. Moreover, the pair is below the 20-day (1.2546) and 34-day (1.2602) moving averages, suggesting weak short-term price momentum. A clear break above the above moving averages could indicate a shift from a bearish to a bullish outlook. On the downside, GBP/USD could retest the area around 1.2321 (yesterday's low), and 1.2300 (round number) levels. Re-entering the bearish bias. The initial resistance for GBP/USD is at 1.2400 (round number), followed by the 10-day moving average at 1.2485.

Today, we recommend going long on GBP before 1.2350, stop loss: 1.2335, target: 1.2400, 1.2410

USD/JPY

The yen is hovering near six-month lows and looks vulnerable to extending its one-month downtrend amid uncertainty over the timing of the next Bank of Japan rate hike. Beyond that, the recent widening of the US-Japan yield spread, coupled with the reduction in bets on further rate cuts from the Federal Reserve, validates the short-term negative outlook for the low-yielding yen. That being said, a host of factors could prevent yen bears from making new bets. Japanese Finance Minister Katsunobu Kato delivered some verbal intervention on Tuesday. This, coupled with concerns about US President-elect Trump's tariff plans, geopolitical risks and cautious market sentiment, could provide some support for the safe-haven yen. Meanwhile, the Fed's hawkish outlook continues to support the dollar's fundamental bullish tone, which has helped the USD/JPY pair stand firmly above the 158.00 mark.

From a technical perspective, the 158.00 round number mark, coupled with positive oscillators on the daily chart, favors the bulls for further gains. Therefore, a strong follow-through move towards the 159.00 mark, followed by the 159.50 intermediate resistance and the 160.00 psychological mark, looks like a distinct possibility. On the other hand, the 157.60 area now seems to be restraining the upcoming downside, followed by the 157.35-157.30 area and the 157.00 round number mark. The latter should act as a pivotal point, below which the USD/JPY pair could slide towards the 1 56.50 intermediate support and then the 156.00 market psychological mark. Some follow-through selling could negate the bullish bias and pave the way for a deeper corrective decline.

Today, we recommend going long before 158.15, stop loss: 157.95; target: 158.70, 158.80

EUR/USD

The EUR/USD pair is trading around 1.0320 after falling to 1.0275. Job data, a cautious Fed, and President-elect Donald Trump's tariffs have shaken the financial committee and kept investors cautious. EUR/USD rose to around 1.0350 during the early European session on Wednesday. However, the potential upside for this major currency pair may be limited given that the Fed may slow down the pace of rate cuts in 2025. This will support the US dollar. In addition, hawkish comments from Fed officials may help boost the US dollar. On the European front, despite rising inflation, the market continues to expect the ECB to cut interest rates sharply in 2025. This in turn may exert some selling pressure on EUR/USD. The ECB is expected to cut interest rates by 25 basis points at its next meeting on January 30. For the whole year, traders expect a cumulative rate cut of just over 100 basis points.

From a technical perspective, the daily chart of EUR/USD has maintained small gains during the week, but has again encountered sellers around the bearish 20-day SMA (1.0396). Further, the 100-day SMA area crossed below the 200-day SMA, which usually signals more declines ahead. On the other hand, technical indicators have corrected oversold conditions but turned flat in negative territory, suggesting limited buying interest. In the short term, according to the 4-hour chart, the EUR/USD pair seems ready to extend its decline. Targets to watch are 1.0300 (psychological level), and 1.0258 (Jan. 3 low). Meanwhile, technical indicators have retreated from overbought readings, although they remain well above their midlines. The 1.0400 round number provides short-term resistance, a break of which points to 1.0437 (this week's high), a key level for the dollar to resume its bullish trend.

Today it is recommended to go long on Euro before 1.0305, stop loss: 1.0290, target: 1.0360, 1.0370.

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