US Dollar Index

Last week, the dollar further held around 109.00 to find direction. The market was confused as it assessed new low-level data before Trump's inauguration after comments from Fed's Waller suggested that a March rate cut was still under consideration. The US Dollar Index, which tracks the dollar against six major currencies, was repeatedly weak last week, rising to a two-year high of 110.18 at the beginning of the week before falling below 109.00 to a weekly low of 108.60 driven by profit-taking selling. It then fluctuated in a narrow range around 109.00 for the rest of the trading session. However, the dollar encountered difficulties as weak US retail sales and continued inflation data boosted market expectations that the Federal Reserve will cut interest rates twice this year. The increased dovish sentiment around the Federal Reserve led to a decline in US Treasury yields, with the 2-year and 10-year Treasury yields at 4.23% and 4.60%, respectively. Both yields are expected to fall by more than 3% this week.

The daily chart shows that after a short period of dragging the dollar lower driven by profit-taking transactions, the US dollar index has regained above 109.20. Despite intermittent selling, the US dollar index is still close to multi-year highs. Significantly, the 20-day simple moving average (latest at 108.73), and 108.60 (last week's low) directly prevented deeper selling and became a strong support line for bullish traders. It directly repelled sellers from further shorting the dollar and became a solid foothold for bulls. If it falls below the above levels in the future, it is not ruled out that the US dollar will continue to test the 108.00 (market psychological level) and 107.96 (34-day moving average) areas. However, as the market weighs the continued inflation and the Fed's gradual policy approach, coupled with the 14-day relative strength index (RSI) of technical indicators staying above 60, it proves that the continued rise of the US dollar is still optimistic. The overall upward trend of the US dollar index may reappear quickly. The next major resistance is at 109.56 (January 2 high), and if it breaks, it will re-test the previous high of 110.18.

Today, you can consider going long on the US dollar index around 109.20, stop loss: 109.05, target: 109.55, 109.60

WTI spot crude oil

Last week, international oil prices maintained an upward trend throughout the week. It strengthened for the fourth consecutive week as the latest US sanctions on Russia's energy trade exacerbated concerns about oil supply disruptions. It exacerbated market concerns about oil supply disruptions. Brent crude oil futures fell 0.6% to close at $80.79 per barrel, but rose 1.3% this week. US WTI crude oil spot rose 1.4% for the week. It was reported at $77.30 per barrel. US sanctions on Russia have led to tight supply in Europe, India and China. At the same time, investors are also evaluating the possible impact of Donald Trump's return to the White House on Monday. Trump's nominee for Treasury Secretary said he was ready to impose tougher sanctions on Russian oil. In addition, market expectations that Yemen's Houthi rebels would suspend attacks on Red Sea ships after the Gaza ceasefire agreement also put pressure on oil prices. Oil prices have continued to rise in recent days due to the sanctions announced by the United States last week, which nearly doubled the number of tankers on the sanctions list. These measures will have a significant impact on Russian crude oil and its product exports, although the impact will be short-lived.

Since the beginning of December last year, the upward trend of WTI crude oil has intensified. The weekly chart shows that oil prices broke through the resistance area of ​​73.47 (34-week moving average), and $74.20 (the middle axis of the horizontal channel) to a near 7-week high of $79.37, marking an increase of more than 10.0% in the past four weeks. The upward trend line remains unchanged. In addition, it is noted that the RSI index of the technical indicator is around 57, highlighting the strong bullish sentiment of the market on WTI prices. The first possible target for bulls is the $78.57 (61.8% Fibonacci retracement level from 87.12 to 64.75) resistance level. Breaking this level will see $79.37 (Friday's high), and $79.80 (200-week average), and then $80.00 (psychological level). For the bearish outlook, oil prices are expected to break through the $75.93 (50.0% Fibonacci retracement level), and $75.90 (previous week's closing price) support line, and continue to break through the $74.20 (weekly horizontal channel middle axis) support level. The next possible target for bears could be the $73.47 (34-week average) support level.

Consider going long on crude oil near 77.10 today, stop loss: 76.90; target: 78.50; 78.60

Spot Gold

Last week, gold prices broke through the key $2,700 level as the market again bet on further rate cuts amid uncertainty over incoming President Donald Trump's policies. Gold hit a more than one-month high of $2,724.80, just a stone's throw away from the all-time high of $2,790.00 set in October last year. This is the third consecutive week of gains. The market is now eagerly awaiting Trump's inauguration on January 20, which will bring challenges to the gold market. Uncertainty about President Trump's upcoming policies has been one of the factors supporting gold. Investors have questions about the status of tariffs and how they will be implemented. If these new policies hurt economic growth, many investors see gold as a way to hedge some of the downside risk. Despite the recent strong performance of gold prices, market participants believe that gold still needs to break out of the consolidation period of the past two months before it can usher in greater gains.

From the daily chart, the short-term technical outlook for gold prices continues to favor gold bulls as gold prices are firmly above all major daily simple moving averages. The 14-day relative strength index (RSI), a technical indicator, is flattening above the midline and is currently close to 59.38, indicating that gold prices may see a brief correction before rising. At this stage, the 21-day (2649) and 100-day (2642) are forming a "golden cross" bullish pattern. At the same time, gold prices have repeatedly risen within the "upward channel" formed by the daily chart, so bulls need to pay attention to the key resistance area of ​​$2,724-2,726 (the triple top bullish pattern formed in November; December last year and January this year) to continue the rally to the psychological barrier of $2,750. The next target is the record high of $2,790. If the correction unfolds, gold will find initial demand at $2,695 (lower line of the upward channel), and the previous day's low of $2,690, below which it will test the low of $2,670 on January 15. A deeper decline will challenge the strong support level near $2,642.70 (100-day moving average).

Today, consider going long on gold before 2,697.00, stop loss: 2,692.00; target: 2,715.00; 2,720.00

AUD/USD

Last week, the US dollar index fell below 109.00 several times due to disappointing US data and dovish remarks from Fed Waller. Meanwhile, the Australian dollar has again rebounded from its lowest level since April 2000 at 0.6131, and the pair has taken a full-day defensive after rebounding above 0.6200 for three consecutive days. Although the Australian dollar has struggled in the face of a strong US dollar, it has recently recovered, thanks to a slight pullback in the US dollar. The rise in the US dollar began in October and, together with the so-called "Trump trade", has significantly suppressed the Australian dollar. Domestically, the Reserve Bank of Australia is considering a rate cut in February as it faces the dilemma of slow economic growth and muted inflationary pressures. Market expectations for a rate cut are currently around 60%. Further weighing on the Australian dollar is the loss of momentum in domestic fundamentals and confidence indicators, as well as concerns about a slowdown in China's economy (China's GDP data did not provide much support for the Australian dollar after it was released), which is crucial for Australian exports. Weak commodity prices have also exacerbated these challenges.

From the recent technical trend, although AUD/USD rebounded from the nearly 5-year low of 0.6131 last week to above 0.6200, the outlook is still bleak and fragile. On the other hand, the 14-day relative strength index (RSI) of the daily chart is still near the level of 41 and further slipped into the negative area, indicating a potential recovery momentum from the decline. At the same time, the moving average convergence/divergence (MACD) histogram continues to show an increase in green bars, suggesting a certain bullish effort. Another technical indicator, ADX, exceeds 27, pointing to some strength in the trend. Therefore, in this case, the upside first focuses on 0.6251 (30-day moving average), followed by 0.6300 (round number), and 0.6302 (January 6 high) area levels. Further resistance is at 0.6346 (50-day moving average) level. On the downside, initial support is at 0.6161 (Tuesday's low), followed by 0.6131 (nearly 5-year low). More substantial support is around the 0.6100 mark.

Consider shorting AUD today until 0.6215, stop loss: 0.6230; target: 0.6160; 0.6150.

GBP/USD

Last week, GBP/USD fell to 1.2099, the lowest since October last year. GBP/USD fell sharply due to multiple negative factors, such as weak UK retail sales data and a stronger US dollar, as the Office for National Statistics (ONS) reported that retail sales unexpectedly fell in December, further exacerbating the weak economic outlook. The decline in personal spending has increased market expectations that the Bank of England will cut interest rates by 25 basis points to 4.5% at its February policy meeting. Speculation has risen that the Bank of England will cut interest rates next month as inflationary pressures ease and government borrowing costs rise. Meanwhile, surging gilt yields remain a key factor in policy easing. The 30-year gilt yield surged to 5.48%, the highest level in 26 years. The rise in gilt yields comes as investors are cautious about the economic outlook due to stubborn inflation and a possible trade war with the United States under President-elect Donald Trump, assuming he will significantly increase import tariffs, which will hit the pound exchange rate.

From the daily chart, GBP/USD resumed its downward trend after a brief recovery to 1.2306 close to the 10-day moving average (then at 1.2331) earlier last week, and fell below the 1.2200 mark to around 1.2160. From a technical perspective, the outlook for GBP/USD remains bearish, while the 14-day relative strength index (RSI) remains in the 30.00 - 33.00 range, indicating strong bearish momentum. The pair’s failure to break above the short-term 10-day moving average (latest at 1.2290) and the subsequent slide favor bearish traders. That said, on the downside, the pair is expected to fall back below the 1.2200 round psychological mark and weakness may find some support around the 1.2150 - 1.2140 area. A breakout further points to the lows of early last week around 1.2099. The key psychological level of 1.2000 will eventually be challenged. Meanwhile, the 1.2200 (round mark), and 1.2211 (23.6% Fibonacci retracement from 1.2576 to 1.2099) area now appear to be an immediate barrier area before 1.2281 (38.2% Fibonacci retracement). A strong breakout through the aforementioned barriers may shift the bias in favor of bullish traders and pave the way for further gains to 1.2306 (previous high).

Today, we recommend shorting GBP before 1.2182, stop loss: 1.2195, target: 1.2140, 1.2130

USD/JPY

Last week, the news that the Bank of Japan is likely to raise interest rates stimulated the yen to rise by more than 1.06% in a single week, and strengthened to around 155 against the US dollar. The yen fell back after hitting a one-month high against the US dollar. The Israeli-Hamas ceasefire agreement and the generally positive tone around the stock market weakened the demand for traditional safe-haven assets, including the yen. In addition, the emergence of some dollar dip buying helped USD/JPY to rebound from levels below 155.00. However, as bets on the Bank of Japan to raise interest rates again this week increase, it seems difficult for the yen to achieve any meaningful depreciation. Earlier speeches by Bank of Japan Governor Kazuo Ueda and Deputy Governor Himino raised investors' expectations. In addition, expectations that slowing US inflation will allow the Federal Reserve to cut interest rates further this year should keep a lid on the US dollar and the USD/JPY exchange rate. According to reports, if Trump does not trigger too many negative surprises after taking office as the US president, the Bank of Japan is likely to raise interest rates at this week's meeting. Currently, traders bet on the bank to raise interest rates by 25 basis points exceeds 85%.

From a technical perspective, USD/JPY briefly fell below the psychological barrier of 155.00 before the weekend and then rebounded slightly to slightly above 156.00, which indicates that 155.00 has become a short-term key support level. If it continues to break down from the short-term key support levels of 155.00 (integer psychological barrier); 154.97 (38.2% Fibonacci retracement of 148.65 to 158.88); and 154.84 (50-day moving average), it may pull the currency pair to the 154.31 (65-day moving average) area. Some follow-up selling will be seen as a fresh trigger for bearish traders and make the spot price vulnerable to accelerating down towards 154.00 and hence the next relevant support around the 153.76 (50.0% Fibonacci retracement) horizontal zone. On the other hand, investors attempting a recovery may now face stiff resistance around 156.00 (round-number mark) - 156.17 (30-day moving average). The next relevant hurdle is around the 156.46 (23.6% Fibonacci retracement) zone, above which USD/JPY may attempt to recapture the 157.00 level. The subsequent upside may push the spot price further up to 157.35 (20-day moving average) and hence towards the 158.00 mark area, or the multi-month high reached last week.

Today, it is recommended to short the US dollar before 156.30, stop loss: 156.50; target: 155.40, 155.30

EUR/USD

Last week, EUR/USD fluctuated in a narrow range around 1.0300 as market participants closely watched the upcoming inauguration of US President Trump and the economic policy changes that may come with it. After Trump returns to the White House, he is expected to introduce a series of policies, including tax increases and tariff hikes, which may have a profound impact on the global trade environment and the US economy. At the same time, the euro faces continued downward pressure due to the dovish stance of the European Central Bank. The minutes of the December meeting of the European Central Bank indicated that the pace of policy easing will continue, and the European Central Bank does not rule out a larger interest rate cut. Although the central bank ultimately decided to cut interest rates by 25 basis points, it discussed whether to take a 50 basis point cut, reflecting the ECB's high attention to the downside risks of economic growth. The trend of EUR/USD is still affected by the interweaving of political and economic uncertainties. Trump is about to take office and launch economic policies, and the market is highly concerned about how these policies will affect the global trade pattern and the future direction of the US economy. At the same time, the dovish policy stance of the European Central Bank and the continued difficulties of the eurozone economy have also put heavy pressure on the euro.

From a technical perspective, EUR/USD is still in a bearish trend. Currently, EUR/USD is trading at 1.0275, up 0.30% from the previous trading week, and continues to consolidate around the key psychological level of 1.0300. Although EUR/USD fell to a more than two-year low of 1.0177 at the beginning of last week, it rebounded sharply to 1.0354 before returning below the 1.03 psychological level. However, the overall bearish trend remains unchanged, and both the short-term and long-term smooth moving averages are trending downward, showing continued bearish momentum. The 14-day relative strength index (RSI), a technical indicator on the daily chart, has diverged, forming a low near 40.00, but the currency pair is still making lower lows. This divergence suggests that despite weak momentum, there may be some consolidation or a slight rebound in the short term. However, if a rebound occurs, it will also encounter strong resistance at 1.0354 (last week's high). A breakout points to the 1.0399 (34-day moving average), and 1.0400 (round number) area levels. Looking ahead, the psychological low of 1.0200 remains a key support level for EUR/USD. If this support is broken by the bears, it may further intensify the bearish sentiment to 1.0177 (last week's low). In the current fundamental environment, the possibility of a breakthrough is small unless there are major changes in the eurozone or US economy.

Today, it is recommended to short the euro before 1.0285, stop loss: 1.0300, target: 1.0240, 1.0230.

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