Greenback Rallies on Fed Hike Bets

• Dollar Strengthens: Positive U.S. labor data fuels Fed tightening expectations.
• Oil Declines: Dollar strength and profit-taking weigh on prices despite China stimulus optimism.
• Gold Rises: Geopolitical risks drive safe-haven demand.

Market Summary

The Dollar Index gained momentum as resilient U.S. labor data, with jobless claims at 219K versus 223K forecasted, reinforced expectations of a hawkish Fed stance in 2025. Strong labor market performance continues to support the Greenback's upward trajectory.

Oil prices retreated during holiday trading due to dollar strength and profit-taking after recent gains driven by optimism over a Chinese stimulus plan involving 3 trillion yuan in special treasury bonds. This potential stimulus offsets trade war concerns but has limited impact on current market weakness.

Gold prices rose amid geopolitical tensions in the Middle East, where failed ceasefire talks between Hamas and Israel increased safe-haven demand. Meanwhile, the Japanese yen remained bearish, weighed down by weak factory output despite steady Tokyo inflation data, leaving rate hike expectations uncertain ahead of the BOJ’s January meeting.

Current rate hike bets on 29th January Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (91.4%) VS -25 bps (8.6%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index, which measures the Greenback against a basket of six major currencies, maintained its positive trajectory as investors speculated that the Federal Reserve might tighten monetary policy in 2025. This sentiment was further supported by better-than-expected U.S. Initial Jobless Claims, which came in at 219K compared to the forecast of 223K, signaling continued resilience in the U.S. labor market. The strong labor data reinforces expectations for a more hawkish monetary stance, providing upward momentum for the dollar.

The Dollar Index is trading flat while currently near the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 57, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 108.60, 109.50

Support level: 107.60, 106.75

XAU/USD, H4

Gold prices edged higher, supported by safe-haven demand amid persistent geopolitical tensions. The fragile situation in the Middle East intensified as Hamas and Israel failed to finalize a ceasefire agreement. Accusations exchanged between both parties, with Israel alleging that Hamas reneged on prior understandings, highlight the ongoing uncertainty. Such geopolitical risks continue to bolster gold prices despite broader market stagnation during the holiday season.

Gold prices are trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 56, suggesting the commodity might extend its gains since the RSI stays above the midline. 

Resistance level: 2656.00, 2718.00

Support level: 2615.00, 2555.00

USD/JPY，H4

The Japanese yen remained relatively flat but exhibited an overall bearish trend due to mixed economic data. On the positive side, core inflation in Tokyo accelerated in December, with steady services inflation supporting the case for potential rate hikes. However, factory output fell in November for the first time in three months, reflecting weak overseas demand and weighing on sentiment. The Bank of Japan (BOJ) is likely to scrutinize these factors in its upcoming policy meeting on January 23-24, where expectations for an interest rate hike remain mixed.

USD/JPY is trading lower following the prior retracement from the resistance level. MACD and RSI had illustrated bearish divergence indicators, suggesting the pair might extend its losses on a short-term basis. 

Resistance level: 158.10, 160.00

Support level: 156.10, 153.40

NASDAQ，H4

Wall Street ended Thursday’s session mixed, with light trading volumes and directionless movement following the Christmas holiday. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite struggled to sustain the initial optimism of a “Santa Claus rally.” The key factors driving market uncertainty include the extent of monetary easing by the Federal Reserve in 2025, potential tariff policies under President Trump, and ongoing geopolitical tensions. Investors are advised to monitor these developments closely to assess their impact on equity markets in the coming year.

Nasdaq is trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 57, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 21820.00, 22590.00

Support level: 21045.00, 20395.00

BTC/USD, H4

Bitcoin (BTC) showed resilience during the holidays, nearing $100,000 after falling below $93,000. However, the rally stalled at $99,800 before retreating to $95,000 as Asian markets opened. Rising 10-year Treasury yields, now at 4.63% and near 2024 highs, continued to weigh on cryptocurrency demand.

BTC/USD is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 45, suggesting the crypto might extend its losses since the RSI stays below the midline. 

Resistance level: 98970.00, 103000.00

Support level: 93255.00, 87740.00

 HK50, H4

The Hang Seng Index remained positive, supported by expectations of aggressive Chinese stimulus to boost economic growth. However, gains were limited by uncertainties surrounding potential trade tensions under President Trump’s administration, tempering investor confidence.

The Hang Seng Index is trading higher while currently testing the resistance level. MACD has illustrated increasing  bullish momentum, while RSI is at 59, suggesting the index might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 20180.00, 21260.00

Support level: 19070.00, 18290.00

CL OIL, H4Oil prices retreated in light holiday trading, pressured by dollar strength, which diminishes the appeal of dollar-denominated commodities. Additionally, profit-taking activity drove a technical correction after recent sharp gains. These gains had been underpinned by optimism over a potential Chinese stimulus plan, including the issuance of 3 trillion yuan worth of special treasury bonds in 2025. The plan, aimed at revitalizing China’s economy, offers a counterweight to headwinds such as the ongoing trade war.

Oil prices are trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 46, suggesting the commodity might extend its losses since the RSI stays below the midline. 

Resistance level: 70.50, 71.35

Support level: 68.55, 66.95