Oil Rally on Russia-Ukraine Heighten Tension

• Oil prices rally amid heightened tension between Ukraine and Russia.
• Gold gained about 2% from the beginning of the week as geopolitical tension stoked safe-haven demand.
• Australian dollar strength on the back of Hawkish RBA meeting minutes. 

Market Summary

Oil prices continued to rally amid escalating geopolitical tensions in Eastern Europe, as the U.S. greenlit Ukraine's use of long-range missiles, intensifying regional strain. This geopolitical backdrop has spurred a safe-haven rally, with gold rising nearly 2% so far this week as the dollar softened. However, riskier assets have seen momentum pause. Bitcoin, which had been on a bullish run, has consolidated over the past week as investors assess potential geopolitical impacts on Wall Street. 

Meanwhile, the Australian dollar found support after the release of the RBA meeting minutes today, as the central bank signalled no immediate changes to its current monetary policy, with the tightening cycle expected to conclude next week. In contrast, the euro is under pressure following Trump's election win, as markets anticipate his administration might increase tariffs on European goods, posing potential challenges for the region’s economy.

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

Source: CME Fedwatch Tool

0 bps (32.2%) VS -25 bps (67.8%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index slipped after dovish monetary policy expectations from Wall Street analysts and Federal Reserve officials. Morgan Stanley projects the Fed to continue its streak of 25-basis-point rate cuts into 2025. Despite Donald Trump’s victory in the U.S. Presidential election, investors remain cautious, awaiting clarity on his policy agenda. With limited economic data on the horizon, traders are adopting a wait-and-see approach, focusing on potential policy developments to guide dollar movements.

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 65, suggesting the index might extend its losses after breakout since the RSI retreated sharply from overbought territory. 

Resistance level: 107.00, 107.80

Support level: 106.15, 105.15

XAU/USD, H4

Gold prices bounced back after weeks of losses as the dollar weakened. Investors have largely priced in Trump’s inflationary policy expectations and are now turning their focus to potential rate cuts by the Fed in 2025. The rising likelihood of monetary easing is boosting the appeal of non-yielding assets like gold, supporting its recovery.

Gold prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the commodity might extend its gains since the RSI stays above the midline. 

Resistance level: 2660.00, 2710.00

Support level: 2605.00, 2555.00

GBP/USD，H4

The GBP/USD pair has eased from its sharp decline, finding support near the 1.2615 mark as a wave of profit-taking softened the dollar's recent strength. Despite this technical rebound, the pound remains weighed down by weak economic data and the Bank of England's dovish policy stance, which has limited its recovery and pressured the pair lower. Traders will be closely watching today's speech by the BoE Governor, as any comments on economic growth or policy direction could impact the pound's near-term trajectory.

GBP/USD, despite a technical rebound, has yet to reach its previous high, suggesting the pair remains trading in a downtrend trajectory. If the pair is able to break above the 1.2715 mark, it may be a trend reversal signal for the pair. The RSI has gotten out from the oversold zone while the MACD has a golden cross, suggesting the bearish momentum is easing. 

Resistance level: 1.2800, 1.2950

Support level: 1.2615, 1.2474

EUR/USD，H4

The euro found support at the 1.0525 mark, rebounding from its one-year low as the dollar softened slightly in recent sessions. However, the pair continues to trade within a bearish trend, constrained by ongoing concerns over potential trade tariffs from the Trump administration that could weigh on Eurozone economic growth. ECB officials have expressed apprehension about the impact of such tariffs, which has further eroded confidence in the euro and may lead it to continue trading weakly against other major currencies.

EUR/USD is near its one-year low and is supported at the 1.0525 mark; a break below the key support level will be a bearish signal for the pair. The RSI has rebounded from the oversold zone, while the MACD has a golden cross at the bottom, suggesting that the bearish momentum has eased. 

Resistance level: 1.0607, 1.0680

Support level: 1.0525, 1.0440

USD/JPY, H4

Japanese yen remains in the spotlight after the Bank of Japan (BOJ) hinted at possible rate hikes. BOJ Governor Kazuo Ueda highlighted Japan’s progress toward wage-driven inflation and expressed concerns over prolonged low borrowing costs, signaling the possibility of a rate hike as early as next month. These comments, combined with potential currency intervention by Japanese authorities, have driven bullish momentum for the yen, making it a key focus for traders.

USD/JPY is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 41, suggesting the pair might extend its losses since the RSI stays below the midline. 

Resistance level: 157.25, 160.05

Support level:  153.65, 151.55

NASDAQ, H4:

U.S. equity markets remained largely flat, with the tech-heavy Nasdaq rebounding slightly. Tesla (NASDAQ: TSLA) surged over 5% following reports that the Trump administration plans to prioritize a federal framework for autonomous vehicles. Big Tech stocks, including Apple (NASDAQ: AAPL) and Alphabet (NASDAQ: GOOGL), gained over 1%, supported by investor optimism ahead of Nvidia's earnings report. However, uncertainties surrounding Trump's potential policy measures may introduce volatility, prompting investors to closely monitor developments.

Nasdaq is trading higher following the prior rebound from the support level. However, MACD has illustrated increasing bearish momentum, while RSI is at 46, suggesting the index might experience technical correction since the RSI stays below the midline. 

Resistance level:  21105.00, 21955.00

Support level:  20395.00, 19860.00

AUD/USD, H4

The AUD/USD pair rose over 0.7% in the last session, extending its rally after the release of the RBA meeting minutes. The Australian central bank maintained a hawkish stance, reiterating its commitment to curbing inflation through a restrictive monetary policy. This outlook has strengthened the Australian dollar, positioning it to trade robustly against its peers in the near term.

The AUD/USD pair eased from its bearish momentum and rebounded at the start of the week; a break above the psychological resistance level at the 0.6500 mark suggests a potential trend reversal signal for the pair. The RSI has surged past the 50 level while the MACD has a golden cross at the bottom, suggesting the bearish momentum is drastically eased. 

Resistance level: 0.6547, 0.6611

Support level: 0.6491, 0.6418

CL OIL, H4

Oil prices surged on Monday, fueled by output disruptions at Norway’s Johan Sverdrup oilfield and escalating conflict between Russia and Ukraine. Equinor’s suspension of production at Sverdrup, which accounts for a quarter of North Sea oil output, added to supply concerns. Simultaneously, geopolitical tensions rose after reports of the Biden administration permitting Ukraine to use U.S.-made missiles for deeper strikes into Russia. These developments, alongside OPEC's plans to increase output, have heightened supply uncertainty, bolstering crude prices.

Oil prices are trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 55, suggesting the commodity might extend its gains since the RSI remained above the midline. 

Resistance level: 69.95, 72.65

Support level: 66.90, 65.60