Markets in Flux: Fed Signals, Geopolitical Tensions, and Oil Gains

• Hawkish Fed expectations keep the Dollar Index on a positive path despite flat movement.
• Geopolitical risks support gold, but rate hike concerns cap upside.
• Chinese stimulus hopes and OPEC+ cuts propel oil, tempered by weaker import data.

Market Summary

The Dollar Index held steady amid subdued holiday trading but maintained a positive trajectory, reflecting hawkish sentiment from the Federal Reserve. Fed officials signaled potential policy tightening in 2025, supported by a resilient economic recovery, keeping investors focused on upcoming US economic indicators for further direction.

Gold prices consolidated near the critical support level of 2610, with sentiment remaining cautious in light of geopolitical tensions and global economic uncertainty. While safe-haven demand provided a floor, the prospect of future Fed rate hikes weighed on the non-yielding asset.

Oil extended gains on optimism surrounding Chinese stimulus and OPEC+ supply cuts. However, the rally was capped by declining Chinese oil imports as electric vehicle adoption surged. Meanwhile, the British Pound struggled under pressure from stagnant UK economic data and dim growth prospects.

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

Market activity remained subdued due to holiday sessions, with the Dollar Index trading flat yet maintaining a positive trajectory. Investors continue to digest hawkish expectations from the Federal Reserve, supported by recent Fed statements hinting at potential monetary policy tightening in 2025 due to better-than-expected economic recovery. Despite this outlook, the dollar's future performance remains data dependent. Market participants should remain cautious, focusing on upcoming US economic indicators for clearer direction.

The Dollar Index is trading flat while near the resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 58, suggesting the index might edge lower since the RSI retreated from overbought territory. 

Resistance level: 108.60, 109.50

Support level: 107.60, 106.75

XAU/USD, H4Gold prices hovered around the strong support level of 2610, reflecting thin holiday trading. Investors are awaiting stronger catalysts to determine gold’s direction. Bullish drivers include geopolitical tensions (Russia-Ukraine and Middle East), a slowing Chinese economy, and uncertainties surrounding US President Donald Trump’s policies, which have supported safe-haven demand. Conversely, potential Fed monetary tightening in 2025 may pressure non-yielding assets like gold.

Gold prices are trading flat while currently testing the support level. However, MACD has illustrated increasing bullish momentum, while RSI is at 52, suggesting the commodity might edge higher since the RSI stays above the midline. 

Resistance level: 2656.00, 2718.00

Support level: 2615.00, 2555.00

GBP/USD，H4

The British Pound continues to struggle amid ongoing concerns about the UK’s economic outlook. Recent data revealed no growth in GDP during the first months of Prime Minister Keir Starmer's tenure, with the Office for National Statistics revising GDP growth for Q3 to 0.0% from 0.1%. The downbeat economic performance has dampened investor sentiment, weighing heavily on the Pound Sterling.

GBP/USD is trading lower while currently near the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 43, suggesting the pair might extend its losses since the RSI stays below the midline. 

Resistance level: 1.2620, 1.2700

Support level:1.2506, 1.2410

USD/CAD，H4

The Canadian Dollar faces downward pressure due to escalating political instability. Prime Minister Justin Trudeau is under intense scrutiny following Deputy Prime Minister Chrystia Freeland’s resignation over fiscal disagreements. The Liberal Party’s minority government risks losing support from its coalition partner, the New Democratic Party, which has withdrawn backing. Political turmoil coincides with CAD weakening further against the USD.

USD/CAD is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 69, suggesting the pair might enter overbought territory. 

Resistance level: 1.4440, 1.4560

Support level: 1.4170, 1.3950

BTC/USD, H4

Bitcoin rebounded as markets digested the potential for hawkish Federal Reserve policy. Speculation of crypto-friendly policies under President Trump in 2025 has driven early investor optimism. Additionally, Russian firms’ increased use of cryptocurrencies for international transactions, enabled by recent legislative changes to counter Western sanctions, further supported the crypto market.

BTC/USD is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 58, suggesting the crypto might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 98970.00, 103000.00

Support level: 93255.00, 87740.00

HK50, H4

The Hang Seng Index remains optimistic, bolstered by speculation of a significant fiscal stimulus plan from China. Reports suggest Chinese authorities plan to issue 3 trillion yuan ($411 billion) in special treasury bonds for 2025, the highest on record, aimed at revitalizing the struggling economy. This substantial increase from the current year’s 1 trillion yuan issuance aligns with efforts to mitigate potential impacts from expected U.S. tariff hikes under President-elect Donald Trump.

The Hang Seng Index 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: 20115.00, 21260.00

Support level: 19070.00, 18290.00

CL OIL, H4

Oil prices extended gains on expectations of aggressive Chinese stimulus measures to bolster economic and oil demand. Additionally, OPEC+'s decision to extend supply cuts until mid-2025 has supported prices. However, gains remain capped by a slump in Chinese oil imports, attributed to the rising adoption of electric vehicles.

Oil prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 60, suggesting the commodity might extend its gains since the RSI stays above the midline. 

Resistance level: 71.20, 72.35

Support level: 69.90, 68.25