US Dollar Index

On the first trading day of 2025, positive US jobless claims data pointed to a healthy labor market, which can be interpreted as an indicator of economic strength. This is generally bullish for the dollar as it suggests that the Federal Reserve is likely to continue its monetary tightening policy. The dollar rose to the top of the foreign exchange trading list, rising more than 7% against a basket of major world currencies in 2024, after a sharp rise in the first three quarters of the year, with a strong acceleration in the past three months. The US dollar index rose to 108.48 for the whole year last year, as the broader market kept one foot firmly on the safe-haven currency. Traders may not be the biggest fans of the US dollar in terms of policy, but the dollar remains the de facto default winner against the backdrop of the shaky global economic situation. The US dollar index rose sharply at the beginning of the new year to celebrate the opening of the 2025 trading season, rising about 0.8% to hit the 109.56 level for the first time since November 2022. US monetary policy and inflation are among the main drivers of the dollar, and the dollar's safe-haven appeal during turbulent times of geopolitical and economic uncertainty also helps the dollar's trend.

The latest shift in the Fed's monetary policy views triggered a strong rally in the last quarter of 2024, driven by the new reality of still rising inflation and the incoming Trump administration's commitment to a major boost to the US economy. The bullish positive momentum remains strong on all larger time frames (daily/weekly/monthly). The new bulls imposed significant technical resistance at 108.97 (61.8% Fibonacci retracement of 114.78 to 99.58 for bears), and after breaking here, this helped the US dollar index to send a strong signal and climb to 109.56, a 26-month peak last week. This will open the way for a test of the psychological 110 barrier and the 111.19 level (76.4% Fibonacci retracement). On the other hand, the overbought research (daily and weekly RSI moving averages are above 70) is expected to see a technical adjustment, 107.54 (5-week moving average), and 108.00 (market psychological level) will provide initial support and extend the decline, find a solid foundation in the 106.97 (9-week moving average), and 107.18 (50.0% Fibonacci rebound level) area, and keep the larger bulls unaffected.

Today, consider shorting the US dollar index around 109.10, stop loss: 109.30, target: 108.60, 108.50

WTI spot crude oil

Last week, oil prices rose, mainly benefiting from the cold weather in Europe and the United States and the economic stimulus policies issued by China, which pushed oil prices to the highest level in more than two months in the previous trading day. WTI crude oil prices closed at $73.57 per barrel this week, up 5.01%. Growing concerns about China's weakening economy have fueled expectations that policy measures will spur growth in the world's largest crude oil importer. On the other hand, forecasts of increased demand for heating oil due to cold weather in some regions have also provided support for oil prices. Cold weather in Europe and the United States may be driving demand for crude oil, and one factor holding back oil prices is that the dollar is expected to have its best week in two months. The market expects the U.S. economy to continue to outperform other countries globally, while U.S. interest rates will remain relatively high. Higher interest rates raise borrowing costs, which can dampen economic growth and reduce crude oil demand.

In terms of recent technical trends, WTI crude oil has just broken through a two-and-a-half-month high of $73.83, and the outlook is more optimistic. Last week, the oil price broke through the key resistance areas of $72.23 (50.0% Fibonacci rebound from $77.93 to $66.53), and $72.54 (November 7 high), which will trigger buying interest from bulls (of course, it may also trigger stops on short positions), while the 14-day relative strength index (RSI) on the daily chart has risen above the 69 level, further supporting the development of bullish tendencies. Another breakout of the $73.83 and $74.00 range is the next buy signal, with targets at $75.00 (200-day moving average), and $75.24 (76.4% Fibonacci rebound from $77.93 to $66.53). Failure to break through the 73.83 - 74.00 area keeps the oil price in a sideways range and may fall back to the $73.00 mark. The next level will point to the $72.23 - $72.54 level.

Today, consider going long on crude oil around 73.30, stop loss: 73.10; target: 74.70; 75.00

Spot gold

Gold's outstanding performance in 2024 has led to a gain of more than 27%. Last week, although under pressure from a stronger dollar, gold prices rose 0.87% to $2,638 for the week, hitting their highest level since December 13 earlier in the session. The new president's agenda of supporting higher tariffs has boosted the dollar and put huge potential pressure on the metal market. The dollar index posted its strongest weekly performance since mid-November, making gold more expensive for overseas buyers. But Shah said of the potential impact of Trump's proposed trade tariffs: "For most metals, a slowdown in global trade is usually accompanied by a slowdown in the economy, which leads to a slowdown in metal demand." He added that a stronger dollar may continue to be a headwind for gold, but debt in the United States and other countries looks set to continue to rise, and geopolitical issues are not going to end soon, so gold should remain supported. On the other hand, January has been the month with the most gains in gold prices in the past 20 years as investors and asset allocators have opened new long positions and of course due to strong jewelry sales during the festive period.

Last week, gold prices traded in a range of $2,600.00 (psychological level) - $2,692 (December 13 high) per troy ounce, with the daily chart showing a bullish bias. Gold prices have climbed above the 9-day moving average (2626.30), indicating a strengthening of bullish momentum in the short term. In addition, the daily chart shows that the 14-day relative strength index (RSI) has re-crossed the 50 level, opening up space for further gains in gold prices, supporting the development of a bullish bias. On the upside, gold prices may explore the key 50-day moving average above $2,653. If buyers regain momentum, the next relevant upside target is $2,665.50 (December 16 high). Then $2,692 (December 13 high), and above the $2,700.00 round mark. A break below that will challenge the December 12 high of $2,726.00. On the other hand, if the 9-day moving average (2626.30) is breached and a close below $2,626.30 is reached, it will negate the recovery momentum and push gold prices back down to $2,600.00 (market psychological level), and $2,602.80 (December 31 low). Next is the December low of $2,583.40.

Consider going long gold before 2,634.00 today, stop loss: 2,630.00; target: 2655.00; 2660.00

AUD/USD

The minutes of the Reserve Bank of Australia's December monetary policy meeting showed that the authorities are more confident that inflation will continue to return to the target and remain vigilant to the risk of an unexpected increase in unemployment. The Australian dollar has fallen against the US dollar for four consecutive trading weeks. According to a report from the Financial Times, the People's Bank of China expects to cut interest rates at an appropriate time this year, which has supported the Australian dollar. As a close trading partner, any fluctuations in the Chinese economy tend to affect the Australian market. AUD/USD rebounded, with the Australian dollar recovering from a two-year low as stronger commodity prices, especially oil and gold, provided support, benefiting from Australia's position as a major exporter of these key resources. Oil and gold stocks rose notably, including Woodside Energy and Northern Star Resources. The Australian dollar found support after the release of China's Caixin Manufacturing Purchasing Managers' Index (PMI) on Thursday. Wang Zhe, an economist at Caixin Insight Group, commented: "Supply and demand expansion. Manufacturers' output and demand continued to grow as the market improved. The output indicator remained in the expansion range for the 14th consecutive month, while total new orders increased for the third consecutive month."

From the weekly chart, AUD/USD is currently trading around 0.6200, having earlier collapsed to a 26-month low of 0.6179, and the short-term outlook remains bearish as it is still operating within the "downward channel" of the weekly chart. However, the technical indicator 14-week relative strength index (RSI) rebounded above 30, indicating that despite the downtrend, an upside correction is possible in the short term. AUD/USD may face immediate resistance at 0.6245 (previous week high), and 0.6265 (upper line of the weekly chart's descending channel), with the next hurdle at 0.6300 (round number), and 0.6311 area of ​​the 7-week moving average. Regarding its support, AUD/USD's initial support may be at 0.6179 (last week's low), and 0.6150 (the middle axis of the "descending channel"), if the AUD pair fails to maintain its recovery above 0.6245 - 0.6265, then more downsides will occur, with the nearest low being 0.6100 (market psychological level) level.

Consider going long on AUD today before 0.6210, stop loss: 0.6200; target: 0.6250; 0.6260.

GBP/USD

GBP/USD closed below 1.2550 on the last trading day of 2024. The pair is down 1.7% for the year, the lowest among the major currencies against the dollar. GBP/USD continued to be weak at the start of the new trading season and fell more than 1%. It broke through the key support of 1.2400 for the first time in nearly ten months. Market volumes remained light after the mid-week New Year holiday, but the orders that were about to be placed were clearly in a risk-off state. The key takeaway for GBP exchange rate traders during the first trading week of 2025 will be the interest rate differentials in the first half of 2025. Governor Bailey said that economic uncertainty has increased and he could not promise the timing of the next rate cut and the extent of the rate cut next year. The market estimates that the UK interest rate may fall faster than expected next year. On the other hand, the Fed's rate cut this year will be much lower than previously expected. As pointed out in the Summary of Economic Projections (SEP) released by the US central bank in December, the Fed itself expects only two 25 basis point rate cuts by 2025.

At the beginning of the new year, GBP/USD fell again, returning to below 1.2400 to a seven-month low of 1.2352. The currency pair fluctuated below the downward trend line since December 10, and is expected to fall further back to the 1.2300 handle. The 14-day relative strength index (RSI) index, a technical indicator of the daily chart, is at a low of 36. Looking down, GBP/USD may retest 1.2352 (last Thursday's low), and if it breaks, it will point to 1.2300 (market psychological level), and 1.2299 (last April 22 low). On the upside, the recent resistance level is the "double bottom" formed by 1.2485 (November 22) and 1.2475 (December 20), which has now become a key resistance area. Looking up, the next obstacle is at 1.2531 (14-day moving average), and if it breaks, it will point to 1.2570 (December 31 high) level.

Today, we recommend buying GBP before 1.2410, stop loss: 1.2400, target: 1.2470, 1.2480

USD/JPY

During the Japanese holiday season last week, the USD/JPY currency weakened, falling below 158.00 to 158.07, forming a "double top" bullish pattern with the previous week's high of 158.08. The verbal intervention of Japanese authorities provided some support for the yen. USD/JPY once fell to around 156.00. However, uncertainty surrounding the policy outlook of the Bank of Japan may cap the upside of the yen. As the Japanese market was closed last week. Traders will pay close attention to any foreign exchange intervention measures that Japanese officials may take to prevent the yen from depreciating. Japanese Finance Minister Katsunobu Kato reiterated his concerns about the decline of the yen and warned again to take appropriate measures to prevent excessive foreign exchange fluctuations. The Bank of Japan will release its quarterly report on regional economic conditions this week, which is likely to include an assessment of whether the interest rate hike has spread across the country. The report could shed some light on the Bank of Japan’s next policy decision on January 24. On the other hand, speculation of fewer Fed rate cuts in 2025 and optimism surrounding the US economy could broadly boost the dollar.

In recent weeks, USD/JPY has been making new highs and lows every day, supporting bullish continuation, while the 14-day relative strength index (RSI) on the daily chart is above 60 (latest at 61.96), reinforcing the bullish outlook for the dollar. Especially if the pair breaks above the “double top” formed by the December highs of 158.07-158.08 (December 26 and 28 highs). The pair’s gains exposed the weekly high of 158.85 (July 16). Looking further up, 160.00 (market psychological level) will appear as the next key resistance area level before the 2024 peak of 161.95 (July 3) level. On the other hand, initial support is at 156.02, last week's low, followed by the key 20-day moving average at 155.59. If this level is broken, the market may fall to the 154.48 (38.2% Fibonacci retracement of 148.65 to 158.08) area.

Today, it is recommended to short before 157.60, stop loss: 157.90; target: 156.50, 156.60

EUR/USD

Weaker-than-expected manufacturing PMI data and dovish comments from Governing Council member Stournaras weighed on the euro, which found temporary support before the weekend after falling to its lowest level in more than two years, near 1.0220, last week. The final reading of the eurozone's overall manufacturing PMI also fell 0.1 percentage point to 45.1. In addition, eurozone bank credit growth to households and businesses slowed to 0.9% and 1.0% respectively in November. The euro is expected to remain weak in the short term. The major currency pairs will further likely fall to parity (1:1) amid the different views of the Federal Reserve and the European Central Bank on the outlook for monetary policy. In the United States, Fed officials have guided for fewer rate cuts in 2025, while on the right, ECB policymakers believe that the policy easing cycle will continue at the current pace. According to the latest dot plot in the Fed's Summary of Economic Projections, Fed officials expect the federal funds rate to rise to 3.9% by the end of the year. This suggests that policymakers expect two rate cuts this year, compared with four rate cuts expected in September.

EUR/USD closed the last trading day of 2024 at around 1.0358. The pair has lost more than 6% for the whole year. Currently, EUR/USD paused its four-day losing streak and is trading around 1.0270. A review of the daily chart shows a persistent bearish bias, with the pair moving downwards within a descending channel pattern. The 14-day relative strength index (RSI), one of the technical indicators, hovers around the 30 level, indicating an oversold condition and a possible upward correction in the near term. However, the 9-day moving average (1.0364) is still below the 14-day moving average (1.0381), indicating weak short-term price momentum and reinforcing the overall bearish sentiment. EUR/USD is likely to find major resistance around the 9-day moving average of 1.0364, followed by the 14-day moving average of 1.0381. If the pair breaks through these levels, it may target the psychological level of 1.0400, and further gains may extend to the high of 1.0458 on December 30. On the downside, EUR/USD may find support areas around 1.0224 (last Thursday's low), 1.0222 (November 21, 2022 low), followed by the psychological level of 1.0200. A decisive break below 1.0200 may intensify the bearish bias and further push the pair to test 1.0160, the lowest level since November 11, 2022.

Today, it is recommended to go long on EUR before 1.0290, with a stop loss of 1.0280 and a target of 1.0350 and 1.0360.

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