US Dollar Index

The US Dollar Index, which measures the value of the US dollar against a basket of currencies, has reinforced inflation concerns, with the US dollar consolidating at current levels. Inflation fears take over and trigger a mini crisis in UK gilts. The US Dollar Index is currently trading around the 109.00 mark, with strong demand amid ongoing monetary policy tightening signals. Investors now have their eyes on Friday's US Non-Farm Payrolls (NFP) for December. The Fed's hawkish turn remains supportive of rising US bond yields, favouring US dollar bulls. Meanwhile, geopolitical risks and trade war concerns help maintain safe-haven flows, limiting any pullback in the US dollar. Investors are bracing for a tight release schedule ahead of Friday's key US Non-Farm Payrolls report. The US Dollar Index retreated from a mid-week high as investors continued to stick to the safe-haven dollar due to lack of confidence. And keep an eye on Friday's last Non-Farm Payrolls (NFP) data.

The daily chart shows that the US Dollar Index defended above its 20-day simple moving average of 108.19, confirming the underlying bullish momentum. The technical indicator 14-day relative strength index (RSI) maintains upward momentum (latest at 64.85) indicating continued gains, but has not yet approached overbought territory, suggesting further upside to 109.37 (Wednesday's high), and 109.56 (two-year high). Any declines are likely to be shallow as buyers seek safe haven funds and strong yield appeal. Unless there is a major shift in sentiment, the 108.69 (9-day moving average), and 108.00 (market psychological level) levels can be watched below.

Today, consider shorting the US dollar index around 109.25, stop loss: 109.40, target: 108.80, 108.70

WTI spot crude oil

On Thursday, WTI crude oil prices traded around $73.50. Crude oil prices remained higher against the backdrop of a stronger US dollar. However, concerns about supply disruptions may limit the downside of WTI prices. A stronger dollar has put some selling pressure on black gold as it makes it more expensive for holders of other currencies to buy oil. U.S. crude inventories fell for the seventh consecutive week, which could support WTI prices. In addition, new sanctions on Iranian and Russian crude exports could limit global oil supplies and push up black gold prices. All eyes will be on the December U.S. employment data released on Friday. Any signs of a strong labor market could boost the dollar and put pressure on dollar-denominated commodity prices in the short term.

WTI continues its modest recovery from September last year and could challenge the mid-week high of $74.65 again in the coming days, which is also the highest level since October 10 last year. However, if the rebound is also capped below the $74.65, and $74.65 (200-day moving average) resistance area, WTI crude oil may lose its bullish pace and then be sold off, with the initial target being the support area formed by $72.52 (140-day moving average); $72.54 (November 7 high); and $72.23 (50.0% Fibonacci rebound level from 77.93 to 66.53), and a break of $71.23 (120-day moving average). On the upside, $74.00 (round mark), the early week high of $74.48, and $74.77 (200-day moving average) can be watched. Then test the key resistance level of the psychological barrier of $75.00.

Consider going long on crude oil near 73.40 today, stop loss: 73.20; target: 74.50; 74.60

Spot Gold

Gold extended its weekly recovery, trading at its highest level since mid-December above $2,676. The bright metal fell slightly in a quiet trading session in the US market, which closed on the National Day of Mourning. Gold prices retreated from the monthly high of $2,670 set on Wednesday as disappointing Chinese inflation data and hawkish Fed minutes made buyers cautious. All eyes are now on a slew of Fed officials who are set to speak as trading was thin due to the US holiday. Slowing inflation in China points to weak domestic demand in the world's largest consumer, as economic concerns grow despite multiple stimulus measures from authorities. Heightened economic concerns in China have exacerbated the correction in gold prices, as China is the world's largest gold consumer. In addition, gold prices have been affected by the recent rise in the US dollar and rising US Treasury yields.

The daily chart shows that the 14-day relative strength index (RSI), a technical indicator, has turned above its midline but remains above it. This suggests that gold buyers may be facing some fatigue. Further evidence of waning recovery momentum is that the 20-day simple moving average (2630.70) will cross the 100-day moving average (2632.00) from above, which if achieved on the daily close will validate the "death cross" bearish pattern. If the gold price correction continues, the initial demand area will be at the 50-day simple moving average of $2,644. A sustained break below this level will challenge the 100-day simple moving average of $2,632. A deeper decline will test the low of $2,615 on January 6, followed by the round number mark of $2,600. On the other hand, if gold buyers re-enter the market, they must continue to break through and hold the static resistance of the three-week high of $2,665.00 and $2,661.50 (65-day moving average). Further up, the high of $2,692 and $2,700 levels on December 13 last year will become the next targets for buyers.

Consider going long on gold before 2,665.00 today, stop loss: 2,662.00; target: 2680.00; 2685.00

AUD/USD

AUD/USD once plunged to around 0.6170 before, as the US inflation outlook remained stubborn and the US dollar performed strongly. Investors await US NFP data for new interest rate guidance. The Australian dollar weakened due to mild growth in Australian retail sales and inflation in China. The Australian dollar fell against the US dollar for the third consecutive day, and traders now focus on Friday's US non-farm payrolls report for more insights on policy direction. Australia's trade surplus rose to 7,079 million in November, beating expectations of 5,750 million. Exports rose 4.8% month-on-month in November, up from 3.5% in October. Meanwhile, imports rose 1.7% month-on-month in November, compared to 0% in the previous month. Australian retail sales, a key indicator of consumer spending, rose 0.8% month-on-month in November, up from 0.5% growth in October. However, the data was lower than the market's expectations of 1.0% growth.

On Thursday, AUD/USD hovered around 0.6200, maintaining a bearish outlook and continued to trade within the descending channel on the daily chart. The 14-day relative strength index (RSI) of the technical indicator is slightly above 30, indicating that the bearish momentum may intensify. On the downside, AUD/USD may approach 0.6179 (26-month low), and 0.6150 (mid-axis of the descending channel) levels. Immediate resistance is seen near the 20-day moving average at around 0.6242, followed by this week's high at 0.6302. Stronger resistance is seen near the 34-day moving average at around 0.6327.

Consider going long AUD before 0.6185 today, stop loss: 0.6170; target: 0.6230; 0.6240.

GBP/USD

GBP/USD pared some of its early losses to trade around 1.2300 after falling to a 14-month low below 1.2250. The pair is recovering after a corrective decline in UK gilt yields that surged to multi-year highs after a two-day sell-off. Markets have been watching for comments from central bank officials. Midweek, GBP/USD fell nearly a full percentage point, retreating from the 1.2500 mark that was too hard for sterling bidders to reclaim. The pair briefly fell below 1.2250, with the pound poised to fall further to multi-month lows. A lack of meaningful economic data from the UK was the theme of the first full trading week of 2025. GBP traders will still face broad market flows in and out of the US dollar as traders prepare for a tense end to the week.

GBP/USD has been under pressure for the third consecutive trading day, hovering around 1.2350 during Thursday's Asian trading session. Technical analysis on the daily chart shows a clear bearish bias, with the pair falling back into a descending channel pattern. The 14-day relative strength index (RSI) of the technical indicator is close to the 33 level, indicating a strengthening of bearish momentum, reflecting weak short-term price dynamics. On the downside, GBP/USD may test yesterday's low of 1.2238, which has not been seen since November last year, followed by 1.2200 (a psychological level in the market). A break below this level may strengthen the bearish sentiment. On the upside, GBP/USD may encounter near-term resistance levels around 1.2368 (Thursday high), followed by 1.2400 (round mark).

Today's recommendation is to go long GBP before 1.2295, stop loss: 1.2285, target: 1.2350, 1.2360

USD/JPY

The yen strengthened on strong wage growth data from Japan. Uncertainty over the timing of the next Bank of Japan rate hike may limit the yen. A hawkish Fed and rising US bond yields should support the USD/JPY pair. The yen rose against the dollar after government data released on Thursday showed that Japan's basic wages grew at the fastest pace in more than three decades. In addition, news that large Japanese companies may increase wages by an average of about 5% by 2025, together with growing inflationary pressures, supports the case for another rate hike by the Bank of Japan. Apart from this, cautious market sentiment supported the safe-haven yen and pulled USD/JPY back from multi-month highs in the 158.55 area hit on Wednesday. However, the Fed’s hawkish signal of slowing the pace of rate cuts through 2025 has further widened the US-Japan rate differential, which could cap the low-yielding yen.

From a technical perspective, any subsequent decline could attract some dip buying around the 157.55-157.50 levels. However, further selling could accelerate the USD/JPY pair’s decline towards the 157.00 round-figure mark and further towards the next relevant support at the 156.75 area and weekly lows at the 156.25-156.20 area. This is followed by the 156.00 mark, which could shift the bias in favor of bearish traders if decisively breached. On the other hand, the 158.55 area, the multi-month high hit on Wednesday, now appears to be an immediate barrier. Sustained strength could push USD/JPY towards the 159.00 round-figure mark. Momentum could extend further to the intermediate barrier of 159.50 before the spot price targets the recapture of the psychological 160.00 mark.

Today, it is recommended to go short until 158.35, stop loss: 158.55; target: 157.50, 157.30

EUR/USD

EUR/USD is trading within familiar levels around 1.0300, although the dollar edged higher amid a calm holiday atmosphere. On Friday, the focus shifted to US non-farm payrolls. The EUR/USD pair traded around 1.0300 after falling to 1.0275. Employment data, a cautious Fed and President-elect Donald Trump's tariffs shook the financial committee and kept investors cautious. EUR/USD rose to around 1.0350 during the European morning session on Wednesday. However, the potential upside for this major currency pair may be limited given the Fed's potential slowdown in rate cuts in 2025. Thereby supporting the US dollar. Moreover, hawkish comments from Fed officials could help boost the dollar. On the European front, the market continues to expect a sharp rate cut from the ECB in 2025 despite rising inflation. This, in turn, could exert some selling pressure on EUR/USD.

From a technical perspective, the daily chart of EUR/USD has maintained small gains during the week, but again encountered sellers around the bearish 20-day simple moving average (1.0396). Further, the 100-day MA area crossed below the 200-day MA, 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 (market psychological level), and 1.0258 (January 3 low). Meanwhile, technical indicators retreated from overbought readings, although they remain well above their midlines. The 1.0400 round number provides short-term resistance, and a break will point to 1.0437 (this week's high), which is a key level for the dollar to resume its bullish trend.

Today, it is recommended to go long on the euro before 1.0285, stop loss: 1.0275, target: 1.0350, 1.0360.

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