USD

The US Dollar Index measures the value of the US dollar against a basket of major currencies, including the euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc. The index's movements are typically influenced by various factors such as US economic data, labor market conditions, and monetary policy.

Yesterday, the job vacancies in the United States for October dropped to 8.7 million, reaching a 28-month low, further confirming that the labor market is cooling in response to higher interest rates. Meanwhile, the November ISM Non-Manufacturing PMI rebounded from a five-month low of 51.8 to 52.7. Following the release of this data, the US Dollar Index continued its upward trend, with the latest price around 103.50 during the early Asian trading session on Tuesday, December 5.

Both the stock and bond markets have seen declines at the beginning of this week, indicating that traders may have overestimated the aggressive pricing of a rate cut by the Federal Reserve. The US Dollar Index continued its rise early in the week. Investors will be watching the unemployment rate for November, to be released this Friday, as well as the Automatic Data Processing (ADP) Employment Change report scheduled for Wednesday.

Despite mixed signals regarding the cooling of the US labor market and economic inflation, Federal Reserve officials have hinted at the possibility of further tightening of policies, indicating a nuanced hawkish stance. Key labor market data this week will impact expectation models and the policy trajectory of the Federal Reserve, potentially determining the short-term trajectory of the US dollar.

After facing pressure at the beginning of the week, the US dollar rebounded amid a reversal in commodity prices and support from rising US Treasury yields. Prior to the release of crucial US data, the US Dollar Index rose from levels near 103.00 to 103.80. Fueled by a strong rebound in US Treasury yields, the US dollar exhibited a bullish turnaround on Monday, measured by the US Dollar Index.

Against the backdrop of softening risk sentiment, the US Dollar Index rallied, briefly surpassing the key area of 104.00. From a broader perspective, the speculation about a possible interest rate cut for the first half of 2024 has been growing, reflecting concerns about further deflationary pressure and a gradual cooling of the labor market. However, the resilience of the US economy and ongoing hawkish remarks from some Federal Reserve rate setters continue to provide support for the US dollar.

Currently, the index remains in an upward trajectory. If it effectively breaks through the levels of 103.85 (Monday's high) and 104.00 (psychological market barrier), the next targets are set at 104.21 (weekly high on November 22) and 104.23 (38.2% Fibonacci retracement level from 107.11 to 102.46), opening the way to 104.72 (200-day moving average) and ultimately reaching 105.00 (psychological market barrier). Conversely, the current contested targets are 103.00 (psychological market barrier). If it falls below 103.00, the next targets are set at 102.46 (monthly low on November 29) and then 102.00 (psychological market barrier).

Today, it may be considered to short the US Dollar Index near 104.10, with a stop loss at 104.30 and targets at 103.70 and 103.55.

WTI crude oil

On Tuesday, December 5th, WTI crude oil in the spot market fell for the fourth consecutive trading day, dropping by 1.67% to $72.14 per barrel. This was attributed to a strengthening US dollar and market speculation that the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) would not implement further production cuts after their recent decision. The OPEC+ coalition, led by Saudi Arabia, collectively decided to significantly reduce oil production by approximately 2.2 million barrels per day in early next year. However, market disappointment with the scale of the production cut from the previous decision, along with doubts about future cut prospects, led to the expected downward reaction last week.

Moreover, as global tightening monetary policies impact economies worldwide, uncertainty about the future demand for crude oil has opened up a downside economic space for WTI. Simultaneously, the United States is set to release crucial labor market data this week, with the non-farm employment report scheduled for Friday. If economic data proves that further tightening policies are justified, the US economy (the world's largest consumer of oil) may face more challenges, negatively impacting oil demand.

The daily chart indicates that the outlook for WTI crude oil has turned bearish. This is primarily due to technical indicators such as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) being in deep negative territory. Additionally, WTI crude oil has broken below the 20-day (76.02), 100-day (82.16), and 200-day (77.82) moving averages, indicating a dominant bearish trend in both short and long-term cycles.

From a technical perspective, WTI oil prices are currently hovering around the support level of $73.00 per barrel, which is the latest low in mid-November. Given the current situation, $71.18 (July 7th low) and subsequently $70.00 could be long-term downside targets for traders, unless there is a later rebound in prices. It's worth noting that there is a strong resistance zone above, particularly the lower line of the small downtrend channel on the daily chart at $75.50-76 and the $77.82 level (200-day moving average), with the next level expected to be $80.00 (psychological market barrier).

Considering the above, it may be reasonable to consider going long on crude oil near $71.85 today, with a stop loss at $71.55 and targets at $72.80 and $73.00.

AUDUSD

In the early session on Tuesday, the Australian Dollar/US Dollar (AUD/USD) breached the psychological level of 0.6600. Following the monetary policy meeting of the Reserve Bank of Australia (RBA), the AUD/USD faced some selling pressure. Currently, the AUD/USD is trading near 0.6600, with the lowest point at 0.6544. Members of the RBA board decided to maintain the interest rate at 4.35% during the December monetary policy meeting held on Tuesday. RBA Governor Blox stated that the decision to further tighten monetary policy to ensure the return of inflation to the target would be determined by data and evolving risk assessments. Blox further mentioned that keeping the cash rate stable at this meeting would give the RBA time to assess the impact of rate hikes on demand, inflation, and the labor market. On the U.S. Dollar side, Federal Reserve Chair Powell reinforced that there would be no rate hike at the December meeting, with the probability of a 25 basis points rate cut by the Fed exceeding 50% in March next year, up from about 21% a week ago. This could potentially weigh on the U.S. Dollar and contribute to an increase in the AUD/USD. Market participants will shift their focus to Australia's announcement of third-quarter Gross Domestic Product, expected to stabilize at 0.40%. These data may trigger market volatility and provide direction for the AUD/USD.

After reaching a four-month high of 0.6690 at the beginning of the week, the AUD/USD significantly retreated below 0.6600, touching a low of 0.6544. Failing to break the trendline resistance near 0.6665, the price reversed. If the decline deepens in the coming trading days, key support levels are at 0.6500 (psychological level) and 0.6479 (23.6% Fibonacci retracement from 0.6895 to 0.6270). Conversely, if bulls regain decisive control of the market and manage to push the exchange rate above 0.6600, upward momentum may strengthen, creating conditions for a rebound to 0.6670 (upper line of the weekly downtrend channel) and above 0.6700 (psychological level), paving the way to challenge the market's psychological level at 0.6800.

Consider going long on the Australian Dollar today at 0.6530, with a stop loss at 0.6510; targets at 0.6605 and 0.6615.

GBPUSD

Last week, expectations of a dovish policy adjustment by the Federal Reserve in 2024 fueled a weakening of the U.S. dollar, while the British pound benefited from hawkish comments by several Bank of England officials, including Governor Andrew Bailey, following robust UK Purchasing Managers' Index data. As a result, the GBP/USD touched its highest level in three months at 1.2733. So far this week, the pound against the U.S. dollar has hovered around recent lows of 1.2600 to 1.2578, with technical aspects being mixed and the U.S. dollar exerting pressure on the pound. The return of safe-haven demand at the beginning of this week has benefited the U.S. dollar and the U.S. Dollar Index. A significant amount of key data will be released in the coming week. After a week of consecutive gains for the pound, the strong comeback of the U.S. dollar has resulted in a decline of about 120 points in this currency pair, approaching the 1.2580 level. The escalation of tensions in the Middle East over the weekend and at the beginning of the week rekindled demand for the U.S. dollar. Amid these events, Houthi rebels in Yemen attacked three merchant ships over the weekend, and the United States shot down some drones in response. As tensions continue to escalate, investors are concerned that any misstep by either party could trigger a broader conflict in the region, potentially impacting the global economy significantly.

The GBP/USD failed to break above the 1.2700 level effectively in the past week, spending most of the week attempting to surpass higher levels. However, after reaching a near four-month high of 1.2733, the currency pulled back below 1.26 (psychological level) due to the strengthening U.S. dollar. The question now is whether the pound can continue its upward movement towards 1.2500 (psychological level) and above the 200-day moving average of 1.2476. Some mixed signals are currently present, with the daily chart showing the formation of a bullish golden cross as the 20-day moving average crosses above the 100-day and 200-day moving averages, suggesting a bullish momentum. However, in contrast to the bullish formation, the GBP/USD formed a bearish pattern at the close on Monday, which may indicate a further downside in the short term. Targets to watch for on the downside include the 200-day moving average at 1.2476, with the next level at 1.2448 (low on November 22). As for the upside, the key short-term resistance zone is at 1.2700 (psychological level). If the bulls successfully break above 1.27, it may target 1.2765 (upper line of the rising wedge) and 1.2768 (140-week moving average).

Today's recommendation is to go long on the British Pound at 1.2570, with a stop loss at 1.2550 and targets at 1.2640 and 1.2660.

USDJPY

In the early Asian session on Tuesday, December 5th, the USD/JPY was trading around 147.00. Further bets from hedge funds indicate that the belief among investors in the continued weakness of the Japanese yen is becoming more entrenched, despite overnight index futures reflecting the expectation that the Bank of Japan will end its negative interest rate policy by June next year. In contrast to the recent declines in EUR/JPY and USD/JPY, the recent strength of the yen is largely driven by the weakness of the U.S. dollar and the euro rather than the yen itself strengthening. This trend is expected to persist into this week. Japan is set to release a lot of economic data this week, but the market believes that these data points will not substantially alter the stance of the Bank of Japan, even though they may trigger short-term market reactions. Considering the crucial nonfarm payroll data to be released this week, which still concerns some members of the Federal Reserve, they seem to be the "biggest threat" at this stage. If this data significantly falls or exceeds expectations, the yen may face some volatility. The biggest risk for the yen this week may come from the movements of the U.S. dollar and the euro, with the latter's weakness largely driven by market expectations of early rate cuts by the Federal Reserve and the European Central Bank in 2024.

The USD/JPY experienced a significant decline last week and closed below 147.56 (23.6% Fibonacci retracement from 151.91 to 146.22). The 20-day moving average (149.26) crossed below the 50-day moving average (149.50), forming a bearish death cross pattern. However, on Monday, the price failed to break below the channel support near 146.00, suggesting a possible easing of the downward momentum and paving the way for a minor rebound above the 147.00 level. If the gains accelerate in the coming days, initial resistance will extend from 147.56 to 148.39 (38.2% Fibonacci retracement). If further strengthening occurs, the focus will shift to 149.50 (50-day moving average), followed by 150.00 (psychological level). In the case of a bearish reversal, technical support is located around 146.22 (Monday's low) and the region near 146.00. If the decline continues, market attention may turn to the psychological level of 145.00 and 144.57 (50% Fibonacci retracement from 137.24 to 151.91).

Today's recommendation is to short the U.S. dollar at 147.40, with a stop loss at 147.70 and targets at 146.50 and 146.40.

EURUSD

In the early Asian session on Tuesday, the Euro/US Dollar (EUR/USD) put an end to four consecutive days of decline. Nevertheless, renewed strength in the U.S. dollar provided some support for the EUR/USD, which is currently trading below 1.08. On Monday, data from the U.S. Census Bureau revealed a 3.6% month-on-month decline in U.S. factory orders for October, compared to the previous rise of 2.3%. Previously, the U.S. Institute for Supply Management (ISM) reported that the U.S. Manufacturing Purchasing Managers' Index (PMI) for November was weaker than expected, remaining unchanged at 46.7. Federal Reserve Chair Powell stated that the U.S. monetary policy is slowing the economy as planned, and the benchmark overnight interest rate has entered a restrictive range. While Powell emphasized the Fed's willingness to further tighten policy when necessary, the market believes the rate-hiking cycle has ended, subsequently putting downward pressure on the U.S. dollar. In the Eurozone, declining inflation has brought the European Central Bank's 2% inflation target back into focus for the first time since the summer of 2021. This may suggest that the ECB will adjust its monetary policy. ECB Vice President Luis de Guindos mentioned on Monday that recent inflation data is good news, but declaring victory now is premature, and the monetary policy stance will depend on data. Next, the ADP Employment Change will be released later this week, with the focus turning to nonfarm payrolls on Friday, expected to reach 180,000.

Euro bears made a comprehensive comeback at the beginning of this week, following a brief reprieve after the Euro fell below the three-week low of 1.0804 due to comments from Federal Reserve Chair Powell. If the EUR/USD continues to effectively break below the key support levels of 1.0820 (200-day moving average), 1.0804 (Monday's low), and 1.0799 (38.2% Fibonacci retracement from 1.0448 to 1.1017), this week, it may intensify the signals released by the daily chart's reversal pattern and open the door for further declines below the 100-day moving average at 1.0774, 1.0737 (50% Fibonacci retracement), and the psychological level of 1.0700. The bearish momentum on the daily chart supports a decline in the euro, but the moving average signals are mixed, and the oversold stochastic indicator suggests that bearish momentum may soon pause. The initial resistance level is provided by the 10-day moving average at 1.0904, with the next levels at 1.0959 (61.8% Fibonacci retracement from 1.1275 to 1.0448) and 1.0985 (trendline extending from the March low of 1.0516), paving the way for resistance.

Today's recommendation is to go long on the Euro before 1.0770, with a stop loss at 1.0750 and targets at 1.0835 and 1.0845.

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