ATFX Market Outlook 3rd January 2025

ATFX Market Outlook 3rd January 2025

Dollar Soars to Two-Year High Amid Optimum US Economic Outlook 

Opinion Today:

The dollar is set for its best weekly performance in over a month, reaching a two-year high of 109.54 against other currencies due to expectations of fewer Federal Reserve rate cuts and a strong U.S. economy. Initial jobless claims dropped to an eight-month low, indicating a resilient labour market. Despite opening higher, the three major U.S. stock indexes closed lower, with the Dow Jones falling by 0.3%, the S&P 500 by 0.2%, and the Nasdaq by 0.16%.

The dollar index rose by 0.77% to 109.38, while the euro and the pound fell to their lowest levels since late 2022 and April 2022, respectively. 

Gold prices increased to their highest over two weeks, closing up 1.32% at $2,658.52 per ounce, driven by safe-haven buying amid the Fed's interest rate outlook. U.S. crude oil prices rose by 2% to $73.13 a barrel, supported by optimism about China’s economic recovery.

On Friday, investors are focusing on the German employment report to see if the unemployment rate remains at 6.1% for the third month and if the number of employed people has increased by over 10,000. A continued slowdown in the job market may raise concerns about the German economy and prompt the ECB to consider additional interest rate cuts. Later in the evening, the U.S. December ISM Manufacturing PMI is expected to contract at 48.4. However, the data is more substantial than expected, and the dollar asset will increase. 

Key Data:

16:55 EU Germany Unemployment Rate DEC ** 

23:00 US ISM Manufacturing PMI DEC *** 

Key Data and Events Next Week

US Services & Composite PMI Final DEC 

US API Crude Oil Stock Change 

US ADP Employment Change DEC 

FOMC Minutes 

US Non-Farm Payrolls DEC 

EUR/USD

1.0296/1.0313 Resistance

1.0241/1.0224 Support 

EUR/USD fell 0.8% to 1.0250, its lowest since November 2022, driven by weak Manufacturing PMI data and dovish remarks from ECB's Yannis Stournaras about ongoing interest rate cuts. With the Fed expected to cut rates more slowly, the interest rate gap may widen, increasing downward pressure on the Euro. Analysts foresee potential parity with the Dollar this year, and bearish MACD signals suggest further losses, with resistance at 1.0313.

GBP/USD

1.2421/1.2441 Resistance 

1.2338/1.2323 Support 

GBP/USD dropped over 1% to below 1.2400, its lowest in nearly ten months, amid risk-off sentiment. With low UK data and the US ISM Manufacturing PMI expected at 48.4, traders remain cautious. The Fed's plan for fewer rate cuts in 2025 may push GBP/USD down toward 1.2300.

USD/JPY

158.07/158.31 Resistance

156.81/156.51 Support 

On Thursday, the USD/JPY pair reached 157.84, close to December's peak of 158.07. Political uncertainty in the U.S. and geopolitical tensions have weakened the yen. Speculation about prolonged inflation under a potential Trump presidency suggests the Federal Reserve may keep rates high. The pair shows resistance at 158.07 and target levels of 158.31, with key support at 156.81/156.51. 

USD/CAD

1.4422/1.4436 Resistance

1.4350/1.4332 Support

The USD/CAD pair fell to about 1.4395, aided by rising crude oil prices and a Canadian Manufacturing PMI increased to 52.2 in December. However, US tariffs and political uncertainty may pressure the CAD. Traders are focused on upcoming US economic data for clues on the economy and potential Fed rate cuts.

U.S Crude Oil Futures (Feb)

73.92/74.36 Resistance 

72.53/72.08 Support

Oil prices rose on Friday, targeting a second weekly gain driven by optimism about China's economic growth. WTI is set to gain 3.6%, and Brent nearly 3%. Lower interest rates are expected to boost growth and fuel consumption, but investors eyeing potential Fed rate cuts and proactive policies from US and China trade tension could limit the upward potential. 

Spot Gold

2673/2683 Resistance

2652/2642 Support

Spot Silver

29.98/30.21 Resistance

29.21/28.96 Support 

Gold prices (XAU/USD) climbed to nearly $2,650 in North America on Thursday, driven by safe-haven demand ahead of President-elect Donald Trump's administration. Expected policies, such as higher tariffs and lower taxes, could increase inflation and benefit gold. Additionally, declining 10-year US Treasury yields near 4.54% make gold more attractive as a hedge against economic uncertainty. 

US30

42705/42952 Resistance 

41888/41637 Support 

The U.S. stock market displayed fatigue at the end of last year and continued into the new year. Last week, first-time unemployment claims were lower than expected. The Dow Jones Industrial Average fell for the fourth consecutive day, nearing last week's low of 42,146. Attention now shifts to whether this support can be maintained; a drop below 42,000 is possible if it doesn't hold, with resistance at the 10-day moving average around 42,750.

NAS100

21224/21439Resistance

20580/20310 Support 

At the start of the new year, U.S. technology stocks diverged, with Tesla's shares falling over 6% due to a decline in full-year deliveries for the first time in over a decade. After two consecutive days of losses, the Nasdaq dropped below 21,000, indicating potential further selling. Investors are awaiting preliminary guidance from the U.S. ISM Manufacturing PMI for December.

BTC (Bitcoin)

98681/99953 Resistance,

95657/94643 Support

Bitcoin reached $97,750 on Thursday, rising 7% after MicroStrategy's $200 million purchase. However, user activity is 30% below last month's peak, leading to profit-taking. Doubts about Trump's crypto policies persist as he prepares to take office, which could limit further breakout at $108,000. 

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