Gold Remains Weak Ahead of Fed’s Interest Rate Decision

• Gold remains weak ahead of the Fed’s interest rate decision on Wednesday.
• Oil gapped down as the market speculated an increase in oil supply in 2025.
• BTC reached a new all-time high on optimism to include BTC in the U.S. strategic reserve.

Market Summary

Gold has declined over the past two sessions as the market braces for a pivotal Fed interest rate decision this week. Robust U.S. economic data has reinforced expectations of a hawkish stance from the Federal Reserve, bolstering the dollar and putting downward pressure on the precious metal. Should Fed officials signal a more aggressive monetary policy outlook, gold could face significant downside risk. Meanwhile, the Bank of Japan (BoJ) and the Bank of England (BoE) are both expected to maintain their current interest rate levels in their decisions this Thursday. The Japanese yen continues to weaken amid diminishing expectations for a BoJ rate hike.

In the oil market, prices opened the week with a gap down after reports suggested a potential increase in oil supply from non-OPEC nations in 2025, weighing on sentiment.

On the cryptocurrency front, Bitcoin (BTC) surged to a new all-time high, climbing above $106,000. The rally is fueled by optimism over speculation that BTC could be designated as part of the U.S. national strategic reserve under Trump’s administration, should he assume office next year.

Current rate hike bets on 18th December Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (18%) VS -25 bps (82%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index retreated from a strong resistance level as investors turned their attention to the Federal Reserve's final monetary policy decision for 2024. While a rate cut appears to be priced in, market participants are focused on guidance for potential rate cuts in 2025. The Fed's updated summary of economic projections, set to be released during the meeting, will provide further insight into policymakers' expectations for the rate path moving forward.

The Dollar Index is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 56, suggesting the index might extend its losses since the RSI retreated sharply from overbought territory. 

Resistance level: 107.45, 108.60

Support level: 105.80, 104.45

XAU/USD, H4

Gold prices pulled back after testing a critical resistance level, driven by profit-taking ahead of the Federal Reserve’s monetary policy decision. Some investors have opted to reduce their gold holdings in the short term, adopting a wait-and-see approach. However, the longer-term outlook for gold remains bullish, supported by potential aggressive rate cuts from the Fed, ongoing uncertainties surrounding U.S.-China trade relations, and geopolitical tensions in the Russia-Ukraine conflict. These factors continue to sustain the appeal of gold as a safe-haven asset.

Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 38, suggesting the commodity might extend its losses after breakout since the RSI stays below the midline. 

Resistance level: 2720.00, 2780.00

Support level: 2650.00, 2605.00

GBP/USD，H4

The GBP/USD pair faced significant pressure last week, plunging to its lowest level in December as the strengthening U.S. dollar dominated market sentiment. However, with the Bank of England's interest rate decision due this Thursday, expectations of the central bank maintaining its current rate levels may lend support to the Pound Sterling, offering a potential reprieve for the pair.

GBP/USD has reached its lowest point in December, suggesting a bearish bias for the pair. The RSI is close to the oversold zone while the MACD continues to slide after breaking below the zero line, suggesting the bearish momentum is gaining. 

Resistance level: 1.2700, 1.2790

Support level:1.2505, 1.2410

EUR/USD，H4

The EUR/USD pair appears to be easing its bearish momentum, breaking above the downtrend channel and reaching its previous high, signaling a potential trend reversal. Market participants are eyeing the eurozone PMI readings and a scheduled speech by the ECB chief later today, events likely to heighten volatility for the pair.

The EUR/USD has broken above from the downtrend channel, suggesting a potential trend reversal for the pair. The RSI is climbing from the oversold zone while the MACD is edging higher, suggesting that the bearish momentum is easing. 

Resistance level: 1.0607, 1.702

Support level: 1.0440, 1.0324

AUD/USD, H4

The AUD/USD remains confined within its downtrend channel but appears to have found support at the 0.6345 mark. A break above the 0.6415 level could signal a bullish reversal for the pair. Last week’s robust Australian job data has lent some support; however, the pair continues to face pressure from the recently strengthened U.S. dollar.

The AUD/USD traded in a lower-low price pattern in December, but the bearish momentum is seemingly easing. The RSI remains below the 50 level while the MACD has crossed below the zero line, suggesting that the bearish momentum is easing. 

Resistance level: 0.6420, 0.6500

Support level: 0.6345, 0.6275

USD/JPY, H4

The USD/JPY pair is testing its next critical resistance level at the 154.20 mark, with a break above signaling further bullish momentum. The Japanese Yen remains under pressure due to dovish expectations ahead of the BoJ interest rate decision scheduled for Thursday. With the dollar strengthening, the Yen is likely to trade on a softer note until the decision is announced.

The pair has surged to its highest level since November, suggesting a bullish bias for the pair; a break above its resistance level at 154.15 mark will be seen as a bullish signal for the pair. The RSI is breaking into the overbought zone while the MACD continues to edge higher, suggesting an increase in bullish momentum for the pair. 

Resistance level: 157.15, 160.05

Support level:  151.55, 149.00

CL OIL, H4

Oil prices closed Friday at their highest levels in three weeks, buoyed by expectations of tighter supply due to potential sanctions on Russia and Iran. The European Union agreed to a 15th sanctions package targeting Russia’s shadow tanker fleet amid the ongoing conflict in Ukraine. Concurrently, the U.S. is considering imposing tariffs to further pressure Russian oil exports. Additionally, expectations of lower interest rates in Europe and the U.S. have improved the demand outlook for crude oil.

Oil prices are trading flat while currently near the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 60, suggesting the commodity might experience technical correction since the RSI retreated sharply from overbought territory. 

Resistance level: 71.20, 72.55

Support level: 69.25, 67.20