US Dollar Index

The US dollar index, which measures the value of the US dollar against a basket of currencies, rebounded 0.94% last week to close at 106.98. Earlier, South Korean President Yoon Seok-yeol announced an emergency martial law and the French parliament passed a no-confidence motion to remove the prime minister, which stimulated safe-haven buying and stimulated the US dollar index to strengthen again after last week's adjustment. In addition, the European Central Bank cut interest rates by 25 basis points as expected, the euro hit a new low in a week, and the US dollar index returned to above 107. Earlier, China released new economic data and announced more details of the stimulus plan that the Chinese government is launching. In addition, the US dollar seems to have gained some traction due to rising US Treasury yields, which seems to offset the market's actual expectations that the Federal Reserve will decide to cut interest rates this week. In the short term, the seasonal weakness of the US dollar in December, coupled with the fading impact of political turmoil on the market, is expected to continue to fluctuate in a narrow range; as for the medium term, the trend of the US dollar mainly depends on the policies of the new US government, and it is estimated that the US dollar still has room to strengthen against multiple currencies next year.

From the daily chart, the US dollar index continued to rebound last week and fluctuated around the weekly high of 107.00, maintaining its recovery from the recent decline. Before the weekend, the US dollar index managed to stay above the key level despite mixed sentiment and speculation about the Fed's next move. The 14-day relative strength index (RSI) and MACD indicators of technical indicators show that the US dollar index has recovered some lost ground and it is estimated that the US dollar index trend may remain in the range of 105.50 to 107.50 until the end of this year. Therefore, the index should face the first resistance around 107.50. If the index breaks through this area, it may retest the levels of 108.00 (market psychological level), and 108.07 (November 22 high), but the momentum seems to be slowing down, which may limit further gains in the short term. As for the downward trend, 106.45 (support trend line extending upward from the September low of 100.16) and 106.40 (10-day moving average) are the first target positions. Further will point to 106.00 (market psychological level), and 105.86 (34-day moving average) area levels.

Today, you can consider shorting the US dollar index around 107.10, stop loss: 107.25, target: 106.60, 106.50

WTI crude oil

Last week, after experiencing continuous downward pressure, WTI oil prices showed signs of stabilization and finally rebounded above $70.00 again. The weekly increase exceeded 5.5%, achieving the first weekly increase in three weeks. Behind this trend, there are both intensified concerns on the supply side and potential support on the demand side. The market sentiment presents a complex long-short game pattern. The OPEC+ report is a good factor for higher oil prices, plus, the market reacted significantly to the tightening of sanctions against Russia and Iran last week. The news that Europe/US took the lead in taking new sanctions has aroused market concerns about supply disruptions, especially Russia's key role in global oil exports, which has further enhanced the market's sensitivity to future supply and demand balances. However, the market may face excess pressure in the medium term, which will become an important factor in suppressing the upward trend of oil prices. On the whole, the current crude oil market presents a complex situation where supply concerns are intertwined with expectations of demand recovery. In the short term, the supply uncertainty caused by the sanctions on Russia and Iran will provide some support for oil prices, and the boosting effect of China's economic stimulus measures on demand is also worth looking forward to. However, considering the potential risk of oversupply in the medium term and the uncertainty of global economic recovery, oil prices may continue to operate in a range of fluctuations.

From the technical trend analysis of recent weeks, the $71.43 (105-day simple moving average), and $71.38 (November 22 high) are being tested, and need to see a hold and daily closing price above it to become support. For further gains, the 100-day moving average of $71.46 and $71.12 will act as strong resistance areas. If oil traders can break through this level, $72.23 (50.0% Fibonacci retracement from $77.93 to $66.53), and $72.54 (November 7 high) will become the next key levels. A breakout points to the $73.00 (round mark), and $73.57 (61.8% Fibonacci retracement) areas. On the downside, it is too early to tell if $70.00 will fall again. This means that $69.22 (23.6% Fibonacci retracement), and $69.17 (34-day moving average) remain the first solid supports nearby. A breakout will bring $68.50 (large descending triangle resistance on the daily chart) to the market, followed by the November 18 low of $66.53.

Consider going long on crude oil near 70.50 today, stop loss: 70.30; target: 71.80; 72.00

Spot gold

Gold prices fell as the dollar held steady at its highest level in more than two weeks. Gold prices lost bullish momentum after failing to stabilize above $2,700 an ounce. The technical outlook highlights the hesitation of buyers in the near term. But it still rose 0.60% for the week to around $2,647 an ounce. Gold prices have experienced an explosive year and are now entering the year end. There may be some pullbacks in the last few weeks, but this will be short-lived and I believe that gold prices will continue to rise sharply. Supported by loose monetary policy, strong central bank purchases and safe-haven demand, gold prices have broken multiple historical highs this year. Central banks generally maintain high interest rates to curb inflation, which in turn increases the opportunity cost of holding non-yielding gold. Overall, the US economy is expected to be stronger next year, which will reduce the room for interest rate cuts and thus reduce the positive impact on gold. In fact, the median forecast of the policy rate by the end of 2025 by Fed officials is 3.4%. If the 2025 rate forecast is lowered, that is, the rate cut is more than 100 basis points, it may have a direct impact on the US dollar. In this case, the US Treasury yield may fall back, pushing up the price of gold.

The price of gold once rose above $2,700 to a nearly 5-week high of $2,726.00 in the second half of last week, and then fell back to the 75-day simple moving average of $2,642 before finding support. The 14-day relative strength index (RSI), a technical indicator of the daily chart, also fell again and remained below the 50 level (the latest report is around 48.50). If the gold bulls hope to resume the rebound momentum in the short term, they may first retest $2,673 (the central axis of the horizontal channel on the daily chart), and $2,674 (the 40-day simple moving average). After breaking through this level, it will re-challenge 2,700 (market psychological level), and the five-week high of $2,726. And $2,750 (the confluence of the psychological barrier and the high of November 5) may become a difficult resistance to break. If gold prices fail to hold $2,642 (75-day simple moving average), and $2,640, sellers will once again target the 89-day moving average of $2,619.50, and 2,618.00 (the lower line of the horizontal channel). Breaking through will point to the $2,605 (November 26 low), and $2,600.00 (market psychological level) area levels.

Consider going long on gold before 2,642.00 today, stop loss: 2,638.00; target: 2,668.00; 2,672.00

AUD/USD

The AUD/USD pair continued to struggle near 0.6336, which hit another one-year low last week. The Trump administration's tariff threats have boosted the US dollar across the board and created headwinds for the AUD/USD exchange rate. Australia's main trading partner China saw its top leaders and policymakers consider devaluing the yuan in response to the expected sharp increase in US tariffs, putting downward pressure on the Australian dollar. In addition, speculation about a possible 10% tariff on Chinese goods could drag the Australian dollar lower as China has been Australia's largest trading partner. The Australian dollar briefly found support after the release of mixed domestic employment data last Thursday. The seasonally adjusted employment change increased by 35,600, bringing the total number of employed people in November to 14,535,500. Meanwhile, the unemployment rate fell to 3.9%, the lowest since March, below the market expectation of 4.2%. On the other hand, the US dollar appreciated after the US PPI released last week was higher than expected. The US Producer Price Index rose 0.4% month-on-month in November, the largest increase since June, after rising 0.3% in October. This reading was better than the expected 0.2%.

Last week, AUD/USD hit another one-year low of 0.6336. The daily chart analysis shows that the bearish tendency is strengthening as the currency pair moves downward in the descending channel pattern. The 14-day relative strength index (RSI) of the technical indicator is also at the low 35 level, indicating a continued bearish momentum in the short term. At this stage, 0.6336 (1-year low), and 0.6348 (yearly low on August 5) can serve as temporary support. A successful break above this level could strengthen the bearish bias and push the AUD/USD pair towards 0.6270 (26 Oct 2023 low), and 0.6190 (lower line of the descending channel) levels. On the upside, a break above 0.6381 (5-day EMA) could find initial resistance near 0.6400 (market psychological barrier), and 0.6407 9-day moving average area. The next hurdle is seen at 0.6460 20-day EMA, with 0.6470 (38.2% Fibonacci rebound from 0.6687 to 0.6336) becoming a key resistance area. A decisive breakout above this channel could push the pair towards the market psychological barrier level of 0.6500.

Consider going long on AUD before 0.6342 today, stop loss: 0.6330; target: 0.6390; 0.6400.

GBP/USD

After trading in a narrow range in the first half of last week, the pound fell sharply against major currencies in the second half of the week, while GBP/USD fell below 1.2700 to a two-week low of 1.2600. The US producer price index (PPI) rose 3% on an annual basis in November. Exceeding market expectations of 2.6%, it pushed up US Treasury yields and boosted the dollar. In addition, the dollar benefited from the risk-averse market environment as major Wall Street indexes fell after the opening. The UK Office for National Statistics reported that monthly gross domestic product (GDP) and factory data unexpectedly contracted in October. The report showed that the economy fell by 0.1% as in September. UK industrial and manufacturing output both fell by 0.6% month-on-month, also falling for the second consecutive month. In this situation of one rising and the other falling, GBP/USD plunged sharply. In the short term, the weak economic data is expected to still have an impact on GBP, but looking at the medium-term trend, the market is still optimistic about GBP, mainly because the Bank of England is less dovish than the Federal Reserve, and the UK fiscal budget is expected to support domestic economic growth and stabilization of the job market.

Last week, GBP/USD fell sharply from the high of 1.2800 at the beginning of the week to the low of 1.2608 before the weekend, a drop of more than 1.5%. Previously, it failed to maintain above the 34-day moving average near 1.2752. The sharp sell-off in GBP/USD seems to be excessive, so GBP/USD fell to the upward trend line before 1.2610, which started from the low of 1.2035 near the low of October 2023, and 1.2600 (market psychological level) showed a wave of technical rebound. The 14-day relative strength index (RSI) of the technical indicator fell to around 42.00. If the RSI falls below 38-40, it will trigger further bearish momentum. Looking down, the pair is expected to find a buffer around 1.2563 (76.4% Fibonacci retracement of 1.2487 to 1.2811), and 1.2500 (psychological support barrier). On the other hand, since the sharp sell-off in GBP/USD seems overdone, it is not ruled out that the pair will re-cross 1.2700, and a break will point to 1.2734 (23.6% Fibonacci retracement), and the 34-day moving average level around 1.2752.

Today, we suggest going long on GBP before 1.2605, stop loss: 1.2595, target: 1.2650, 1.2560

USD/JPY

The dollar traded higher last week, near a three-week high of 153.75, as hopes of a Bank of Japan rate hike this week faded, helped by a widening gap between U.S. and Japanese government bond yields. Bloomberg quoted a Bank of Japan official as saying that the bank sees little cost in waiting for a rate hike. Market expectations for a Bank of Japan rate hike in December have adjusted slightly from last week, from about 65% to 40%, but expectations for a rate hike in January next year are still above 70%. Investors' expectations for a Bank of Japan rate hike in December have converged, and the yen has fallen against the dollar for four consecutive days. These comments have triggered market speculation and hit the yen across the board. Recently released economic data showed that Tokyo's CPI rose 2.6% year-on-year in November, significantly higher than the expected 2.2%; the annual increase in CPI excluding fresh food and energy prices expanded to 1.9%, in line with expectations. Data released in the United States were mixed, while the United States announced that the number of unemployment claims increased more than expected, and producer prices accelerated beyond market consensus. These figures, coupled with the strong US CPI data seen earlier last week, confirm that inflationary pressures are rising and support the view that the Fed will only gradually ease next year.

From the daily chart, USD/JPY rose last week, approaching a three-week high of 153.75, thanks to the widening gap between US and Japanese government bond yields. At this stage, the bullish momentum of USD/JPY remains unchanged and is expected to trend upward, but the 14-day relative strength index among technical indicators remains in the positive zone around 58.45, indicating that bulls dominate the market posture in the short term. From a technical perspective, USD/JPY easily rose above the 200-day moving average of 152.07 last week and then rose sharply to a near two-week high of 153.75. At the same time, the 5-day (152.41) and 200-day (152.07) formed a bullish "golden cross" pattern before the weekend. Therefore, some follow-up buying may push the spot price to 154.84 (76.4% Fibonacci retracement from 156.75 to 148.65), a break of which will target the 155.00 (round number), and 155.89 (November 20 high) area levels. On the other hand, any further break below 152.70 (50.0% Fibonacci retracement from 156.75 to 148.65) will further see the 200-day moving average at 152.07. It is more likely to find good support around 151.20 (upward trendline from the 148.65 low).

Today, it is recommended to short before 153.85, stop loss: 154.00; target: 153.00, 152.80

EUR/USD

Last week, the European Central Bank lowered the three major interest rate benchmarks by 25 basis points each, and lowered the economic and inflation forecasts for this year and next year. The market expects the ECB to continue to cut interest rates 4-5 times next year. The euro weakened and hit a weekly low of 1.0463. EUR/USD continued to be under pressure and closed in negative territory for the fifth consecutive day. The short-term technical outlook for the currency pair shows more room for downside. On the other hand, President Lagarde said at a press conference that weak economic growth and trade frictions in the eurozone continue to be a concern, and further easing of policies may be possible in 2025 to address the above risks. In the short term, considering the political risks in Europe and the dovish stance of the ECB, it is expected that the room for the euro to strengthen may be limited. In addition, the ECB's monetary policy statement showed some interesting changes. Policymakers removed the word “restrictive” when discussing monetary policy, adding that “the deflation process is progressing well.” Further, they noted that “most indicators of underlying inflation suggest that it will continue to stabilize around the 2% objective.”

The daily chart shows that EUR/USD made lower intraday lows and lower highs than the previous day late last week, in line with the dominant bearish trend. The same chart shows that the slightly bearish 20-day simple moving average provides resistance around 1.0525, which continues to attract sellers. Meanwhile, the 50-day (1.0695), and 200-day (1.0834) simple moving averages are firmly moving downwards, well above the shorter moving averages, also reflecting that short-term sellers are in control. On the other hand, technical indicators provide mixed signals, with the momentum indicator slightly rising above its 100 level and the 14-day relative strength index (RSI) indicator consolidating around 41. In the short term, EUR/USD seems ready to extend its decline. The 9-day (1.0522) and 20-day (1.0525) moving averages successfully formed a bearish "death cross" pattern before the weekend. EUR/USD is likely to fall to 1.0400 (round mark) and re-test the last low (November 22) of 1.0332. On the contrary, the 20-day simple moving average (1.0523) will be the first key obstacle for euro bulls. Once broken, the currency pair will further test the 1.0580 (30-day moving average) and even the 1.0600 (market psychological mark) level.

Today, it is recommended to go long on the euro before 1.0485, stop loss: 1.0470, target: 1.0540, 1.0550.

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