Dollar Edges Higher When The Market Resumes

The U.S. dollar continued its ascent on the first trading session after returning from the New Year holiday.

The U.S. dollar continued its ascent on the first trading session after returning from the New Year holiday. All eyes are set on the upcoming U.S. Purchasing Managers' Index (PMI) reading scheduled for tomorrow, which will play a crucial role in gauging the strength of the dollar amid robust speculation of a Federal Reserve rate cut in early 2024. In contrast, Asian equity markets opened lower at the onset of the first trading session 2024, failing to meet the anticipation of a Santa Claus rally. Concurrently, oil prices experienced marginal gains as tension in the Red Sea escalated, with the Houthi Rebel force deploying warships in the Red Sea in response to the U.S. Navy's actions. The market anticipates a potential short-term disruption in oil supply amidst the escalating Red Sea tension.

 

Current rate hike bets on 31 January Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (85.0%) VS -25 bps (15.0%)  

 

Market Movements 

DOLLAR_INDX, H4

As the market resumes from the Christmas and New Year holidays, the U.S. dollar stands poised above the $101 trajectory. Persistent speculation regarding a potential Federal Reserve rate cut continues to shape market sentiment. Investors are eagerly awaiting the release of Friday's Nonfarm Payroll and Unemployment Rate data, seeking further clues for a potential shift in the Fed's monetary policy.

The dollar index continues to gain while currently trading above its long-term downtrend resistance level, suggesting a potential trend reversal for the dollar. The RSI has gained sharply from the oversold zone while the MACD is moving toward the zero line from below, suggesting the bullish momentum is forming. 

Resistance level: 101.75, 102.60

Support level: 100.80, 99.67

XAU/USD, H4

During the festive season celebrating Christmas and New Year, gold prices have remained subdued. The precious metal experienced a mild retracement from its recent bullish run, coinciding with a technical rebound in the U.S. dollar. Investors are now awaiting clues from tomorrow's U.S. Purchasing Managers' Index (PMI) reading to assess the strength of the dollar and its potential implications on gold prices.

Gold prices are traded below their uptrend channel, implying a potential trend reversal for gold. The RSI has dropped out of the overbought zone while the MACD has crossed above the zero line, suggesting the bullish momentum has decreased drastically.

Resistance level: 2069.40, 2088.00

Support level:  2052.00,  2028.50

 

GBP/USD,H4

The GBP/USD pair has achieved a breakthrough above its downtrend resistance level, though the current bullish momentum seems relatively minimal. The Bank of England (BoE) grapples with a nuanced stance, as inflation in the UK has significantly eased, according to the latest Consumer Price Index (CPI) reading. However, it remains distant from the targeted 2% rate. Simultaneously, efforts are underway to prevent the country from slipping into recession, adding complexity to the overall economic landscape.

The GBP/USD had broken above the resistance level, suggesting the bullish trend remains. The bullish momentum is lacking as the RSI has declined to near 50 levels while the MACD is declining toward the zero line. 

Resistance level: 1.2815, 1.2906

 Support level: 1.2631, 1.2528

EUR/USD,H4

The EUR/USD pair experienced a technical retracement, driven by the rebound of the U.S. dollar from its recent low level. The strengthening of the U.S. dollar was prompted by the recovery of the U.S. long-term treasury yield, although it has yet to reach the peak observed in October. Despite the rebound, the dollar continues to face headwinds, while the overall bias for the pair remains bullish.

The EUR/USD is yet to find support from its bearish trend and is heading to its Fibonacci Retracement level of 61.8%; a break below such a level might be a bearish signal for the pair. The MACD is on the brink of breaking below the zero line while the RSI has declined to below the 50 level, suggesting the bearish momentum is strong. 

 

Resistance level: 1.1140, 1.1225

Support level: 1.0954, 1.0866

USD/JPY,H4

The Japanese Yen emerged as the weakest currency among its major counterparts, primarily due to the Bank of Japan (BoJ) being the sole major central bank adopting a monetary easing policy in 2023. However, market anticipation is growing for a potential policy shift from the BoJ. If wage growth and the inflation rate in Japan continue to outperform expectations in the first quarter of 2024, there could be an end to the negative interest rate environment in the country.

USD/JPY declined last Friday and remains below its resistance level, suggesting the bearish momentum is strong. The RSI kept at below 50 level while the MACD hovered at below zero line, suggesting the bearish momentum remains intact with the pair. 

 

Resistance level: 141.65, 143.80

Support level: 138.88, 137.70

Dow Jones, H4

The Dow Jones index concluded 2023 with an impressive annual gain of over 13%, reaching its all-time high. This remarkable performance occurred despite the Federal Reserve's aggressive monetary tightening policy in March 2022. Anticipation of a potential rate cut has been influencing U.S. equity markets, including the Dow, to continue trading in a bullish manner. However, investors are cautioned to be mindful of the potential repercussions from the previous rate hike policy, which elevated the interest rate from 0% to above 5% in less than two years.

The down was subdued for the past few trading sessions as the market celebrated New Year. The index has been hovering at an elevated level, awaiting for the catalyst to trade higher. The RSI continues to flow in the overbought zone while the MACD has started declining, suggesting the bullish momentum is easing. 

Resistance level: 38520.00 , 39020.00

Support level: 36790.00, 36200.00

 

CL OIL, H4

Oil prices remain under substantial downward pressure, reflecting a prevailing pessimism in the demand outlook for 2024. Top oil importers are experiencing decreasing oil imports, further contributing to the challenges faced by the oil market. Despite the efforts from OPEC+, projections indicate an increase in oil supplies in 2024, exacerbating the existing downward pressure on prices.

Oil prices continued to drop and declined by nearly 1% in the last trading session of 2023. The RSI is declining while the MACD has broken below the zero line, suggesting the bearish momentum is gaining. 

Resistance level: 73.80, 77.23

Support level: 68.50, 64.75

 

 

 

Reglamento: FSA (Seychelles), FSCA (South Africa)
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