US Dollar Index

The US dollar exchange rate has been volatile following the inauguration of President-elect Donald Trump. Trading floors in the US will remain closed due to Martin Luther King Day, but the US dollar index plunged to 107.92 as the market awaits further details of Trump's economic plan, with an uncertain outlook. The dollar ended its weeks-long upward momentum, pushing the US dollar index under pressure soon after it broke through the 110.00 mark on January 13. Meanwhile, the price action of the US dollar fluctuated between potential statements from the Trump administration, disappointing fundamental data, and speculation around the Federal Reserve's plans for the January meeting. The US dollar index was on the defensive every day, except last Friday, when it managed to make decent progress. The highlight of the week is expected to be Donald Trump's inauguration day on Monday. Looking ahead, the weekend will see the release of preliminary S&P Global Manufacturing and Services PMIs, Existing Home Sales, and the final data on the Michigan Consumer Sentiment Index.

The US dollar index is under pressure, with Federal Reserve Governor Christopher Waller's bold call for a rate cut in March surprising traders and not factored into market expectations. On the upside, 108.60 (last week's low) remains a key resistance to beat. The next big upside level before further gains remains 109.00 (round number). Once above this, it reaches 109.47 (Monday's high). On the downside, the US dollar index formed a "head-and-foot" bearish pattern on the daily chart yesterday, so the short-term is retesting the support level around 107.92 (Monday's low). If it falls further, the next support level is 108.27 (55-day moving average). Going further down, the next level that may stop any selling pressure is the 107.00 (market psychological level) level.

Consider shorting the US dollar index near 108.25 today, stop loss: 108.40, target: 107.70, 107.70

WTI spot crude oil

WTI crude oil prices retreated for the third consecutive trading day on Monday, opening the new trading week with a new test of $76/barrel. Although new President Donald Trump insisted that he would set a task to push US crude oil producers to increase production, the slowdown in this area remains suppressed as energy producers focus on returning profits to investors rather than bankrupting the US government on behalf of the US government. WTI prices fell ahead of President-elect Donald Trump's inauguration on Monday due to risk aversion. The price traded near $76.20 per barrel during the Monday session. Oil market traders took a cautious approach ahead of President-elect Donald Trump's inauguration later in the day. US markets will be closed on Monday due to the commemoration of Martin Luther King Day. Easing tensions in the Middle East may limit further gains in crude oil prices.

From the recent technical chart, we can see that a large double bottom (66.60 -66.80) is currently forming. The last time it attacked the 80 mark was on August 13 last year, when the high was 80.15, but it was unsustainable and then fell all the way to the September low of nearly 65 US dollars; at this stage, it is expected that the nearest resistance will first point to the 78.57 US dollars (61.8% Fibonacci rebound level from 87.12 to 64.75) mark, and if it breaks, it will see 79.37 US dollars (last Friday's high), and 79.80 US dollars (200-week moving average), and then 80.00 US dollars (psychological mark). The support level is estimated to be behind the support line of 75.93 US dollars (50.0% Fibonacci rebound level), and 75.90 US dollars (previous week's closing price), and continue to break through the support level of 74.20 US dollars (the central axis of the weekly horizontal channel).

Consider going long on crude oil near 76.00 today, stop loss: 75.80; target: 77.20; 77.40

Spot Gold

Gold prices remained in positive territory above $2,700 on Monday as improving risk sentiment made it difficult for the dollar to find demand. The market awaits the speech of U.S. President Donald Trump at his inauguration. Gold prices extended a corrective decline from the monthly high of $2,724 into early Monday trading. Traders will continue to cash out their long gold positions ahead of the inauguration of U.S. President-elect Donald Trump and the Martin Luther King Day holiday in the U.S. In addition to profit-taking, several other factors were at play, leading to the latest round of declines in gold prices, mainly the easing of geopolitical tensions in the Middle East. Moreover, China is the world's largest gold consumer and any stimulus measures from China are likely to benefit the non-yielding gold price. However, as the market now expects the U.S. Federal Reserve to cut interest rates twice this year and the mild inflation data for December released last week, the downside for gold prices may be limited. Gold prices still face a two-way volatile price action, and the thin holiday market and speculation surrounding Trump's "Day One" executive order may exacerbate volatility.

The short-term technical outlook suggests that gold prices may continue to pull back before new buying emerges. This month's symmetrical triangle breakout is still in play, supporting the bullish scenario. The 14-day relative strength index (RSI), a technical indicator on the daily chart, remains above the midline and is currently close to 60, adding credibility to the bullish outlook for gold prices. Gold prices are focused on breaking through the key static resistance level of $2,724-2,726 (the triple top bullish pattern formed in November last year; December 12; and January this year), and a break will extend the rally to the psychological level of $2,750. The next target is a record $2,790. If the pullback intensifies, gold prices may test the January 15 low of $2,670, and a break below this point will threaten the 21-day moving average at $2,653. Further declines will challenge the strong support area of ​​$2,644.70.

Consider going long on gold today before 2,705.00, stop loss: 2,700.00; target: 2,725.00; 2,730.00

AUD/USD

The apparent sell-off in the US dollar has allowed AUD/USD to regain strong upside momentum and reach a multi-day high just below the key 0.6300 mark at the beginning of this week. On Monday, the Australian dollar ended a two-day losing streak against the US dollar, benefiting from rising metal prices. The US market will be closed on Monday due to the Martin Luther King Day holiday. As China and Australia are close trading partners, any changes in the Chinese economy may have an impact on the Australian market. The Australian dollar also received support due to strong economic data from China. China's gross domestic product (GDP) grew 5.4% year-on-year in the fourth quarter of 2024, and the Australian dollar may face challenges as the market expects that the Reserve Bank of Australia may start cutting interest rates as early as next month. Traders are now focusing on the Australian quarterly inflation report, which will be released, for clues on the future direction of interest rates.

On Monday, AUD/USD traded above 0.6200, attempting to break out of the descending channel on the daily chart. A successful breakout would weaken the existing bearish bias. However, the 14-day relative strength index (RSI) of the technical indicator rebounded above 50, suggesting that the bearish bias may turn. Initial support is seen at 0.6211 (20-day moving average). A stronger support is located at the psychological level of 0.6200. If it falls below this level, AUD/USD may find a respite around 0.6164 (Monday's low). On the upside, AUD/USD faces immediate resistance at the key 0.6300 level, followed by 0.6300 (round number), and 0.6340 (50-day moving average) area levels.

Today, consider going long on AUD before 0.6255, stop loss: 0.6240; target: 0.6295; 0.6310.

GBP/USD

The US Dollar Index accelerated its decline on Monday, falling to a fresh two-week low in the sub-108.00 region. Investors are expected to continue to focus on announcements from the Trump administration in the absence of relevant data releases on Tuesday. The GBP/USD pair started the new week slightly positively, reversing some of Friday’s losses, though the upside lacked follow-through or bullish confidence. Spot prices are currently trading around the upper 1,2300 region. The US dollar struggled to capitalize on Friday’s positive moves amid expectations that the Federal Reserve may not rule out a rate cut before the end of the year. Apart from this, the generally positive risk tone has weakened demand for the safe-haven dollar, which is seen as providing some support to the GBP/USD pair. Moreover, the Federal Reserve is expected to pause its rate-cutting cycle later this month, which should limit the dollar’s ​​losses. This, coupled with stagflation risks and concerns over the UK’s fiscal health, may discourage traders from making bullish bets around the British pound (GBP) and limit gains in the GBP/USD pair.

The daily chart shows that GBP/USD sellers hold the downside breakout of the six-week-old falling wedge pattern, which was confirmed a week ago. The 14-day relative strength index (RSI) of the technical indicator rebounded from the oversold area, but is still below 45. Leading indicators show that any rebound in major currencies may encounter strong supply forces. Adding credibility to the bearish potential, if sellers regain control, the currency pair may retest 1.2200 (round mark), and the next level will point to 1.2160 {last Friday's low) level. On the contrary, if it can stand above 1.2300, it is expected to start a meaningful recovery, with targets at 1.2390 (20-day moving average), and 1.2400 (market psychological mark), breaking through to 1.2479, the high of January 7.

Today, it is recommended to go long on GBP before 1.2310, stop loss: 1.2300, target: 1.2360, 1.2370

USD/JPY

The yen strengthened due to optimistic core machinery orders data. Firm expectations for another rate hike by the Bank of Japan this week also supported the yen. A slight decline in the US dollar further contributed to the intraday decline in USD/JPY. Ahead of Trump's inauguration speech, the positive risk tone capped the safe-haven yen. The yen attracted some bargain-hunting buying at the beginning of the week and halted its correction decline from a near four-week high hit on Friday. Japan's core machinery orders increased for the second consecutive month, indicating a further recovery in capital spending. In addition, market bets that the Bank of Japan will raise interest rates at its policy meeting later this week supported the yen, which, together with a slightly weaker dollar, pushed USD/JPY back below the 156.00 mark. The recent pullback in US Treasury yields has led to a narrowing of the US-Japan yield gap and provided additional support to the yen. Nevertheless, uncertainty over US President Donald Trump's incoming trade policy may prevent yen bulls from making new bets ahead of the Bank of Japan meeting that begins on Thursday.

From a technical perspective, the rebound from the support of the lower line of the multi-month ascending channel on Friday was blocked near the 156.55-156.60 area. This area should now act as an immediate obstacle, and a breakout could trigger fresh short-covering that could take USD/JPY back to the 157.00 round mark. Further gains to the 157.40-157.45 intermediate barrier could follow, leading to the 158.00 mark and the 158.85 area, the multi-month high hit on January 10. On the other hand, the ascending channel support currently located in the 155.25 area may continue to protect the upcoming downside, ahead of the 155.00 psychological mark. A sustained breakout and acceptance of the latter will be seen as a new trigger for bearish traders and drag the USD/JPY towards the 154.60-154.55 area. The spot price may fall further to the 154.00 mark level.

Today, it is recommended to short the US dollar before 155.85, stop loss: 156.10; target: 155.10, 155.00

EUR/USD

In line with the rest of the risk-correlated complex, EUR/USD managed to regain significant buying pressure and hit a three-week high around 1.0435 on Monday. EUR/USD recovered some of the losses from the previous session, however, upside for the pair was limited as markets remained cautious ahead of the inauguration of President-elect Donald Trump later in the day. US markets will be closed on Monday for the Martin Luther King Day holiday. Concerns about Trump's policy promises, such as imposing tariffs, extending tax cuts and deporting illegal immigrants, have driven US Treasury yields higher and supported the dollar ahead of his swearing-in. The euro faces headwinds as dovish expectations for the European Central Bank persist. Markets expect a 25 basis point rate cut at each of the next four ECB policy meetings, reflecting concerns about the eurozone economic outlook and expectations that inflationary pressures will remain contained.

From a technical perspective, a break above the weekly high around 1.0354 area yesterday could turn into direct support, with EUR/USD rebounding sharply to 1.0400 (round mark) and climbing further to 1.0435 area, which should serve as a key pivot point. Sustained strength would indicate that the spot price has formed a short-term bottom and pave the way for some meaningful rebounds to 1.0470 (55-day moving average), as well as the 1.0500 mark. On the other hand, EUR/USD may find some support around 1.0351 (25-day moving average). Subsequent selling could drag the EUR/USD pair to the 1.0300 psychological mark and expose the more than two-year lows hit on Monday around the 1.0180-1.0175 area.

Today, it is recommended to go long on the euro before 1.0400, stop loss: 1.0385, target: 1.0450, 1.0460.

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