ATFX Market Outlook 13th January 2025

ATFX Market Outlook 13th January 2025

Fed Rate Cut Expectations Adjusted Amid Inflation Concerns

Opinion Today:

Due to ongoing inflation expectations and a strong labour market, the Federal Reserve is expected to cut interest rates twice in 2025, down from three. These cuts are anticipated in June and December 2025, with an additional reduction possible in 2026, lowering the terminal rate to 3.5% and 3.75%. This adjustment follows strong December nonfarm payroll data, which reduced the need for immediate cuts. The Fed initially planned a 1% reduction through 2024 but has revised its 2025 forecast from four cuts to two, with timing influenced by economic data and potential trade tariffs under President Trump.

The dollar index increased for the fourth consecutive day, reaching its highest since November 2022. Strong US jobs data supported the increase, indicating the Fed may pause rate cuts. In commodities, gold prices rose 0.73% to $2,689.63 an ounce amid uncertainty over the new Trump administration. Oil prices increased by over 3% to a three-month high, driven by U.S. sanctions on Russian oil and gas, with U.S. crude futures up $2.65 to $76.57 a barrel.

The Japanese market was closed on Monday for a holiday, and limited data was available from Europe and America. As a result, the market continued to evaluate last Friday's U.S. December jobs report. On Tuesday, attention will focus on the U.S. December PPI to see if it remains at or above an annual rate of 3%, which could indicate ongoing price pressures affecting the Fed's rate cut plans.

Key Data:

Japan Holiday

11:00 CN Trade Balance DEC ** 

15:00 GB Manufacturing Production NOV ** 

Tomorrow

21:30 US PPI YoY DEC *** 

EUR/USD

1.0278/1.0303 Resistance

1.0197/1.0172 Support 

EUR/USD remains around 1.0240 for the fifth session, influenced by a stronger US Dollar following December's job growth. Nonfarm Payrolls rose by 256K, exceeding expectations and lowering the Unemployment Rate to 4.1%, suggesting that the Federal Reserve may keep rates steady in January. The Euro faces challenges as traders anticipate four ECB rate cuts by summer, with policymakers indicating a dovish stance due to manageable inflation in the Eurozone.

GBP/USD

1.2262/1.2296 Resistance 

1.2156/1.2123 Support 

The US jobs report reinforced the strength of the US dollar. Last Friday, the sterling hit its lowest level against the US dollar since November 2023, and the weekly line recorded its lowest level since November last year. It is currently hovering at the 1.2200 mark, which is the key to determining whether it will continue to expand its downward trend. If it falls below, it will enter the low range of October 2023.

USD/JPY

158.33/158.58 Resistance

157.06/156.81 Support 

Sources suggest that a positive wage outlook and a weak yen may prompt the Bank of Japan to adjust its inflation forecast in January. Last Friday, the dollar-yen pair peaked at 158.88, its highest level since July, but fell for two days. Further declines could stabilise if it stays above the 10-day moving average.

USD/CAD

1.4464/1.4486 Resistance

1.4370/1.4348 Support

The USD/CAD pair experienced four consecutive gains on the last trading day, the first occurrence in three weeks. Despite rising oil prices, the pair held most of its gains. Expect upward movement after breaking above the 10-day moving average, with resistance around the recent high of 1.4450. Watch for potential short-term adjustments.

U.S Crude Oil Futures (Feb)

79.10/79.83 Resistance 

77.45/76.72 Support

Due to cold weather and U.S. sanctions on Russia, Canada plans to raise crude tariffs for the U.S. This uncertainty caused crude oil prices to surge 4%, the most significant jump since last October. Prices rose this morning, nearing $78.42. If surpassed, the trend could target $80.11, but caution is advised around the $80 mark.

Spot Gold

2696/2702 Resistance

2671/2665 Support

Spot Silver

30.59/30.73 Resistance

30.02/29.89 Support 

Following the U.S. jobs report released last Friday, spot gold fluctuated, dropping below $2,670 before recovering and nearing $2,700. Despite the rising dollar, gold experienced four consecutive days of gains, reaching its highest level since December 12. However, this morning, it began to give up some gains, indicating resistance near $2,700, with attention now on the area below $2,680.

US30

42549/42954 Resistance 

41641/41242 Support 

The strong US jobs report triggered a sell-off in U.S. stocks because the market expects the Fed's probability of not cutting interest rates this year has increased from 13.4% to 25.3%. Last Friday, U.S. stocks fell collectively. The Dow futures recorded its most significant drop in three weeks, reaching its lowest since early November last year. The failure to hold the 42,000 mark means the previous low is around 41,650 as the target.

NAS100

21013/21229 Resistance

20586/20317 Support 

Rising U.S. Treasury yields are pressuring the stock market and leading to declines in major technology stocks. Last Friday, the Nasdaq fell below 21,000, its lowest level since late November. While the market may trend toward 20,500, the downward trend line from late December provides temporary support.

BTC (Bitcoin)

97056/98406 Resistance

93029/91337 Support

Bitcoin rose 3% on Friday to $95,800, ending a three-day decline. However, it lost momentum on Monday in Asia, struggling to stay above $95,000 due to ETF outflows. If Bitcoin surpasses $95,800, it will test resistance at $97,056/98,406. If it falls below $93,023, it will target $92,200 and $91,337 support. 

About ATFX 

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