US Dollar Index

DXY showed negative bias for the second day in a row, but the decline seemed limited. The US dollar rebounded yesterday as the Fed's hawkish shift still supported rising US bond yields. Geopolitical risks and trade war concerns may help limit losses in the safe-haven dollar. The dollar's weakness at the beginning of the week gave other currencies a chance to recover some much-needed losses as the market prepares for another US non-farm payrolls report to be released this weekend. The US dollar index slowly fell, returning below the 109.00 mark and once saw a one-week low of 107.75. The US dollar index continued to consolidate at a high level. Fed official Daly said that inflation is still "uncomfortably" above the target, but does not want to see a further slowdown in the job market. Overall, the US economic outlook is still better than that of other major countries, and the US dollar continues to be supported against the backdrop of the widening monetary policy divergence between the Fed and other major central banks. The US dollar is expected to continue to consolidate at a high level. In the short term, the recovery of risk appetite in the market has pushed the safe-haven dollar lower across the board. The US non-farm payrolls report released on Friday will be the key data this week.

Given that the dollar has risen sharply in the past six months, the unexpected downside in US data this week, especially the non-farm payrolls report, may weaken the dollar's momentum. Daily momentum is mildly bullish, while the 14-day relative strength index (RSI) of technical indicators has retreated from overbought conditions. A potential bearish divergence is observed in the daily RSI. A correction down cannot be ruled out. Therefore, the first support level is 107.75, the low at the beginning of the week, and 107.58 (25-day moving average). A break points to 107.00 (round mark). As for the upward resistance, 108.69 (5-day moving average) can be considered first, followed by 108.97 (61.8% Fibonacci rebound level from 114.78 to 99.58), and 109.00 (round mark) as major near-term technical resistance levels.

Consider shorting the US dollar index near 108.80 today, stop loss: 108.90, target: 108.40, 108.30

WTI spot crude oil

WTI crude oil prices rebounded to near $74.00 yesterday after falling at the beginning of the week on Tuesday, closing at $73.90 per barrel. Crude oil prices are supported by bullish factors, including rising energy demand driven by cold weather and Beijing's economic stimulus measures. Crude oil prices may be supported as oil production from the Organization of the Petroleum Exporting Countries (OPEC) fell in December, mainly due to the United Arab Emirates (UAE)'s efforts to implement supply cuts to stabilize global oil markets. U.S. President Joe Biden plans to ban new offshore oil and gas development along most of the U.S. coastline, a decision that may be difficult for President-elect Donald Trump, who has pledged to increase domestic energy production, to overturn. Beijing's economic stimulus measures are boosting oil demand in the world's largest crude oil importer.

As seen in the daily chart, WTI oil prices rose above the 100-day moving average (70.35) last week, and rose for six consecutive trading days to $74.48 before technically retreating at the beginning of this week. On the technical level, the daily chart of US crude oil tested the downtrend line and then fell again. On the one hand, the average deviation value was large, and on the other hand, the upward momentum of the MACD indicator weakened, but it was still within the bullish range. Crude oil prices are expected to rise further, and the market's ability to stay above the 10-day moving average (71.58) strengthened the bullish sentiment. Then test the key support level of $73.70, and the price needs to stabilize above this level to ensure that the upward trend can continue to the high of $74.48 at the beginning of the week, and $74.89 (200-day moving average). On the contrary, once the $73.00 level is effectively broken, the intraday price will see a move towards $72.23 (50.0% Fibonacci rebound from $77.93 to $66.53), $72.54 (November 7 high), and $71.23 (120-day moving average).

Today, consider going long on crude oil around 73.75, stop loss: 73.50; target: 74.80; 74.90

Spot gold

Spot gold lost bullish momentum and fell back to the $2,650 area after the release of encouraging US macroeconomic data. The surge in US Treasury yields further supported the US dollar in the short term. In early trading on Tuesday, gold prices struggled at a short-term key barrier near $2,635, consolidating a two-day corrective decline from a three-week high of $2,665. Despite the two-way swings on Monday, gold prices are still hovering in a familiar range, and Goldman Sachs' postponement of its forecast for gold to reach $3,000 per ounce by the end of 2025 also put downward pressure on gold prices. However, gold prices found new buyers during the US trading session as the US dollar fell sharply across the board after the Washington Post reported that Trump's aides were exploring plans to impose tariffs only on industries deemed critical to the national or economic security of the United States.

The daily chart shows that the 14-day relative strength index (RSI) of the technical indicator is trading at the 50 level, keeping gold prices fluctuating in a fixed range. In the process, gold prices stuck to the 21-day simple moving average of $2,637.50 and failed to stay above it on the daily close on Monday. The immediate support is now at $2,624.70, the 14-day simple moving average, a break below which opens the way for a retest of $2,600.00 (market psychological level), and $2,602.80 (Dec. 31 low) immediate support. Gold buyers regain control above the 21-day (2637.50) simple moving average USD, with the next relevant upside hurdles at the three-week high of $2,665.00 and $2,659.80 (65-day moving average). Further upside, the $2,700 level will challenge bearish commitments.

Consider going long on gold before 2,644.00 today, stop loss: 2,640.00; target: 2662.00; 2665.00

AUD/USD

The Australian dollar saw a wave of technical pullbacks on Tuesday after strengthening against the US dollar for the third consecutive trading day. AUD/USD remains strong despite weaker-than-expected November building approvals data. Australia's new construction approvals fell 3.6% month-on-month to 14,998 units in November 2024, lower than the market's expectation of a 1.0% decline. The decline followed an upwardly revised 5.2% increase in October and marked the first decline in three months. Australia's monthly Consumer Price Index (CPI) for November will be released on Wednesday and will be closely watched. If the data is lower than market expectations, it may trigger the possibility of a rate cut by the Reserve Bank of Australia (RBA) at its February meeting, which will put pressure on the Australian dollar.

On Tuesday, AUD/USD traded at a high of around 0.6288 before retreating sharply to around 0.6230 in the US market and fluctuating within a "descending channel", maintaining a bearish outlook. However, the 14-day relative strength index (RSI), a technical indicator on the daily chart, rose sharply to 38 levels from last week's low of 25, indicating that the bearish momentum may weaken. On the upside, AUD/USD may retest the early week high of 0.6302, and the 0.6300 (psychological barrier) resistance area. On the support side, the pair will initially fluctuate around 0.6200 (market psychological barrier), and 0.6179 (26-month low). If it breaks, it will test 0.6150 (downward channel axis), and 0.6100 round number level.

Today, consider going long on AUD before 0.6215, stop loss: 0.6200; target: 0.6260; 0.6270.

GBP/USD

After hitting an intraday high of 1.2575, GBP/USD lost further traction and struggled to hold the 1.2500 mark. Stocks fell after the release of optimistic US data, providing new support for the dollar's rebound. GBP/USD rose for the third consecutive day during the Asian session on Tuesday, trading around 1.2530. The pair's upward momentum was driven by a weaker dollar. On Wednesday, the market will focus on the minutes of the Federal Reserve's December policy meeting. Trump refuted a report in The Washington Post that his team was considering limiting the scope of the tariff plan to cover only certain key imported goods. Traders are expected to closely monitor developments related to Trump's tariff strategy. British Retail Consortium (BRC) same-store retail sales rose significantly by 3.1% in December 2024, rebounding strongly from a 3.4% decline in the previous month. The surge exceeded market expectations of a 0.2% decline and was mainly driven by strong spending on Black Friday. This was the largest monthly increase since March 2024.

From the 14-hour relative strength index (RSI) indicator, one of the technical indicators on the 4-hour chart, which once rose to around 60, GBP/USD closed above the 25-hour simple moving average (1.2460), highlighting the strengthening of the recovery momentum. On the upside, 1.2551 (weekly high), and 1.2558 (100 hours) act as immediate resistance. Then 1.2600 (market psychological level). As for the downside, the first support may be located at 1.2460 (20 hour moving average), and finally point to the 1.2400 level.

Today, it is recommended to go long GBP before 1.2460, stop loss: 1.2450, target: 1.2500, 1.2520

USD/JPY

USD/JPY is off multi-month highs but remains above 158.00 during the Asian trading session on Tuesday. After the Trump tariff speculation triggered a sell-off on Monday, doubts about when the Bank of Japan will raise interest rates again and the dollar's broad rebound have supported the pair ahead of the release of US employment data. The yen continues to perform relatively poorly due to doubts about the timing of another rate hike by the Bank of Japan. Additionally, the Fed’s hawkish signal of slowing the pace of rate cuts through 2025 has further widened the US-Japan yield differential, leading to outflows from the low-yielding yen. This, coupled with the generally positive risk sentiment, is seen as another factor that weakens demand for the safe-haven yen. This, along with the emergence of some dollar buying, has pushed USD/JPY to near six-month highs, breaking above the 158.00 mark during the Asian session on Tuesday. Meanwhile, Bank of Japan Governor Kazuo Ueda indicated that a rate hike could come at the January or March policy meeting. This could provide support to the safe-haven yen.

From a technical perspective, a sustained break above the 158.00 mark could be seen as a new trigger for bullish traders and support the prospect of further gains. The constructive outlook is reinforced by the fact that the oscillators on the daily chart are firmly in positive territory and are far from entering the overbought zone. Therefore, a subsequent strong move towards the 159.00 round mark, passing through the 159.45 intermediate barrier and the 160.00 psychological mark, looks a distinct possibility. On the other hand, the 158.00 round number now seems to protect the upcoming downside, ahead of the 157.55 - 157.50 area. Any further pullback may now be seen as a buying opportunity and limited around the 157.00 mark.

Today's recommendation is to go long before 157.80, stop loss: 157.55; target: 158.50, 158.60

EUR/USD

EUR/USD faced selling pressure in the early US trading after the release of US macroeconomic data. The December ISM Services PMI unexpectedly surged to 54.1, while the November JOLTS job vacancies increased to 8.1 million, also in line with expectations. During the Asian trading session on Tuesday, EUR/USD slipped to around 1.0380. The dollar rose after President-elect Trump said his tariff policy would not be cut. Trump denied a report in the Washington Post that his aides were considering narrowing the scope of the tariff plan, saying that the plan would only apply to a limited number of specific key imports. Traders will be closely watching the progress of Trump's tariff plan. If US tariffs are generally lower than what Trump promised during the campaign and only target "critical" industries, the global growth outlook should improve and the US dollar should weaken. Stronger-than-expected PMI data from the Eurozone could help limit the euro's losses. Moreover, political instability in Europe and the threat of a US trade war could drag the euro lower against the dollar.

From a technical perspective, the daily chart of EUR/USD shows that bullish potential remains limited. A bearish 25-day simple moving average provides dynamic resistance at 1.0433. Meanwhile, the 40-day (1.0470) and 50-day (1.0533) moving averages converge around 1.0500, showing a mild downward slope. Finally, the 14-hour relative strength index (RSI) rebounded sharply from the oversold 28 to 44 levels, but the gains have slowed in the negative territory. In the short term, according to the 4-hour chart, bullish potential remains. EUR/USD is firmly above 1.0300, while 1.0400 (round mark) provides dynamic resistance. Then comes the last 1.0437 (weekly high). On the other hand, once EUR/USD falls below 1.0337 (25-hour moving average) again. Looking down, support is at 1.0300 (market psychological mark).

Today, it is recommended to go long on the euro before 1.0328, stop loss: 1.0310, target: 1.0380, 1.0390.

Disclaimer: The information contained herein (1) is proprietary to BCR and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and, (4) does not constitute advice or a recommendation by BCR or its content providers in respect of the investment in financial instruments. Neither BCR or its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.