US Dollar Index

The dollar fell after the release of the December Producer Price Index. Traders were nervous about possible comments from President-elect Donald Trump on the above headlines. The US Dollar Index fell below 110.00 and sought support to rebound. The market rebalanced after the latest US jobs report, expecting a tighter Fed policy in 2025. The US Dollar Index briefly touched 110.00 and sought to consolidate at these highs, keeping the US Dollar bullish due to the strong non-farm payrolls data last Friday and the Fed's cautious attitude towards easing policy in last week's minutes. The market's repricing of fewer rate cuts from the Fed this year (if any) boosted the US Dollar, which rose to a new cycle high. The US Dollar Index saw the 110.18 mark for the first time since November 2022 due to rising yields and market expectations that the Fed will only cut once this year.

The daily chart shows that the US Dollar Index surged to its highest level since November 2022, briefly testing the 110.00 threshold. The 14-day RSI indicator is close to the overbought zone, suggesting a possible short-term pause or shallow correction. However, strong labor data and the hawkish Fed reinforce the bullish trajectory of the dollar. If profit-taking intensifies, support may emerge in the 109.06 (10-day EMA) - 109.00 (psychological level) range, providing a buffer for the continued upward trend. A breakout will turn to the 108.55 (weekly uptrend line) level. If the US dollar index can break through 110.00 (psychological barrier) again, and 110.18 (more than two-year high), then 110.43 (upper Bollinger Band line on the weekly chart) will become the next levels.

Consider shorting the US dollar index around 109.30 today, stop loss: 109.40, target: 108.80, 108.70

WTI spot crude oil

WTI retreated from a more than three-month high, although the decline seems to have eased. US sanctions on Russia have heightened concerns about tightening global supply and provided support. The recent break above the very important 200-day moving average favors bullish traders. On Tuesday, WTI crude oil prices traded around $77.20. WTI prices climbed to their highest level since October 8 as US sanctions on Russian oil threatened to tighten global supply. The Biden administration in the United States has imposed new sanctions on Russia. Heightened concerns about supply disruptions may support black gold prices in the short term. Supply is a key driver in the short term. In addition, encouraging Chinese economic data may support WTI prices. On the other hand, an optimistic US December jobs report reinforced market expectations that the Federal Reserve will not significantly cut interest rates this year. A stronger dollar could reduce energy demand as dollar-denominated commodities such as oil become more expensive for buyers using other currencies.

In terms of near-term technicals, continued positive momentum could be further attributed to last Friday's technical buy above the very important 200-day simple moving average (73.00) for the first time since August 2024. That said, the 14-day relative strength index (RSI) on the daily chart could be slightly overbought (74.60), which could prevent bullish traders from making new bets on crude oil prices and limit any further appreciation. First support on the downside is at $75.58 (250-day moving average), and $75.91 (38.2% Fibonacci rebound from 93.98 to 64.75), followed by the 200-day simple moving average at $74.63. On the upside, consider $77.80 (high at the beginning of the week), $77.90 (high on October 8 last year), and a breakout points to the $80.00 (market psychological level).

Today, consider going long on crude oil around 76.90, stop loss: 76.70; target: 78.00; 78.20

Spot gold

Gold prices are currently looking for a bottom to rebound after a weak performance on Monday, when concerns about the Fed's policy rate took over market sentiment, and recovered slightly on Tuesday, trading near $2,675. During the Asian trading session on Tuesday, gold prices found new buyers around the $2,660 area and regained buying. The US dollar consolidated the overnight correction, while US Treasury yields repaired their wounds in early trading on Tuesday, allowing gold prices to once again attack the $2,700 mark. US inflation data is crucial to confirm the Fed's hawkish expectations, and high inflation data may re-boost US dollar demand and resume the correction of gold prices. The market is preparing for Wednesday's CPI report. It is worth noting that any discussion about Trump's tariff plan may also play a key role in the trend of gold prices. Gold prices retreated from monthly highs on Monday despite rising inflation concerns in the era of incoming US President Donald Trump 2.0. Gold prices are seen as a hedge against inflation. In addition, gold prices failed to benefit despite the sharp correction of the US dollar and US Treasury yields after a Bloomberg report.

From the daily chart, the uptrend of gold prices resumed after the formation of the "head-breaking" chart pattern, attracting buyers to step in and push prices to a high of $2,677. The 14th relative strength index (RSI) indicator of the technical indicator fell back to around 56.60, reflecting that the short-term bullishness is still valid. If gold breaks through $2,700, the next resistance level will be the high of $2,726 on December 12, followed by the record high of $2,790. Conversely, if XAU/USD falls below $2,650, the next support will be the 50-day simple moving average at $2,640.60, followed by the 100-day simple moving average at $2,636.80.

Consider going long on gold today before 2,672.00, stop loss: 2,668.00; target: 2,688.00; 2,693.00

AUD/USD

AUD/USD rose on Tuesday, managing to break above 0.6200 at one point, driven by further selling on the US dollar, while investors were optimistic about US CPI data and Australian labor market report. Data on Tuesday showed that consumer confidence fell for the second consecutive month. The Westpac Consumer Confidence Index fell 0.7% to 92.1 points in January 2025, highlighting the continued pessimism among consumers. AUD/USD is under downward pressure as the market expects a 75% chance of a rate cut by the Reserve Bank of Australia next month. Investors are expected to closely watch Australian employment data due later this week for further clarity on the Reserve Bank of Australia's policy outlook. The Australian dollar has also received some support from China's recent stimulus measures, and given the close trade relationship between Australia and China, any changes in China's economic conditions could have a significant impact on the Australian market.

On Tuesday, the AUD/USD exchange rate was around 0.6190 against the US dollar, maintaining a bearish outlook as it remains within a descending channel on the daily chart. The 14-day relative strength index (RSI), a technical indicator, has climbed sharply to around 38, indicating a recovery from oversold conditions. The pair faces immediate resistance at the 25-day moving average at 0.6243, followed by 0.6288 (7th high of this month). More important resistance is located at the psychological market level of 0.6300. On the downside, AUD/USD may test support at 0.6161 (Tuesday's low), and a break below it points to 0.6131 (Jan. 13 low) level.

Consider going long on AUD before 0.6180 today, stop loss: 0.6170; target: 0.6230; 0.6240.

GBP/USD

GBP/USD remains volatile, trading just above 1.2000. The British pound fell amid another rise in UK gilt yields, reflecting the instability in the bond market. The US dollar remains unattractive after the release of December PPI data. GBP/USD broke a five-day losing streak, rebounding from a 15-month low of 1.2099 set on Monday. GBP/USD remained above 1.2200 during Asian trading hours on Tuesday as the pound strengthened on the backdrop of improved investor confidence. However, the upside for the pound may be limited due to stagflation concerns caused by persistent inflation and stagnant economic growth in the UK. In addition, the recent surge in UK government bond yields has raised concerns about the country's fiscal health. Investors sold UK gilts due to concerns about increasing debt, weak growth and inflation risks. These concerns have led to a relatively weak pound.

GBP/USD continues to move down on the daily chart, with the pair exploring its lowest bids in more than a year. While bidding pressure is approaching swing lows, it is hard not to notice that these swing lows are still regularly breaking through old technical levels. Further downside targets are 1.2100 (round mark) - 1.2099 (weekly low), while the next key technical hurdle will be the technical support zone above 1.2000 at the end of 2023. As for the upside, the first resistance level is 1.2253 (5-day moving average), and the next level will point to 1.2300 (market psychological mark), and 1.2322 (last Friday's high) area levels.

Today, it is recommended to go long on GBP before 1.2190, stop loss: 1.2180, target: 1.2250, 1.2260

USD/JPY

USD/JPY rose to around 158.00, and the safe-haven demand for yen eased. Investors await U.S. inflation data for fresh interest rate guidance. The Fed's dovish bets on upbeat U.S. labor market data for December have recently waned. Bank of Japan Deputy Governor Ryozo Himino said on Tuesday that at next week's policy meeting, the board may discuss whether to raise interest rates and make a decision. The yen's gains against the dollar over the past three days were difficult to capitalize on and attracted fresh sellers during Tuesday's Asian session. Investors remain uncertain about the possible timing of another rate hike by the Bank of Japan. In addition, reports that top economic advisers to U.S. President-elect Donald Trump are considering a gradual increase in tariffs boosted investor sentiment and weakened the safe-haven yen. Moreover, the Fed's hawkish turn dashed hopes for an immediate narrowing of the U.S.-Japan yield gap, seen as another headwind for the yen. This in turn helped the USD/JPY pair halt its retracement slide from the multi-month highs hit last Friday. Meanwhile, easing concerns about damaging trade tariffs under Trump 2.0 triggered a modest pullback in U.S. Treasury yields, which kept the dollar below two-year highs.

USD/JPY's daily chart remains biased to the upside, but faces strong resistance at 158.00 amid concerns that the Bank of Japan may intervene in the foreign exchange market. The 14-day relative strength index (RSI) of the technical indicator hovers in the positive territory around 61, suggesting more upside. Momentum supports further upside, with the 50-day crossing above the 200-day simple moving average to form a "golden cross", suggesting further upside. For the bullish trend to continue, the first resistance level for USD/JPY will be 158.00, followed by the high of January 10, 158.88, after the release of Friday's US non-farm payrolls data. A break above the latter would expose 159.00. If USD/JPY falls below the 157.20-157.25 (last Friday's low) area, the next support level will be the low of January 6, 156.24, followed by the pivot low of December 31, 156.02, and the psychological level of 156.00.

Today, it is recommended to short the US dollar before 158.20, stop loss: 158.45; target: 157.30, 157.20

EUR/USD

The US dollar was on the defensive again on Tuesday, testing a two-day low and dragged down by another tariff story as well as disappointing US producer price index, while market participants prepared for the release of more relevant CPI on Wednesday. EUR/USD extended its overnight rebound from the 1.0180-1.0175 area (i.e. the lowest level since November 2022) on Tuesday and attracted follow-up buying for the second consecutive day. The rally was driven by the dollar's retreat despite the divergence in the outlook for monetary policy between the Federal Reserve and the European Central Bank, but lacked bullish confidence. At the same time, easing concerns about damaging trade tariffs during the Trump 2.0 period boosted investor confidence, as evidenced by the generally positive tone in the stock market. This became another factor that weakened the safe-haven dollar and provided some support to the EUR/USD pair.

The 14-day relative strength index (RSI) indicator has surged above 42.60, indicating a recovery from oversold conditions. However, EUR/USD remains below its 9-day and 14-day moving averages, indicating weakening short-term momentum and reinforcing the overall bearish outlook. On the downside, EUR/USD could revisit Tuesday's low of 1.0216, a breakout would turn to the 26-month low of 1.0177 set on January 14. A decisive break below this level could strengthen the bearish bias. EUR/USD could face major resistance near the 20-day moving average (1.0350), followed by 1.0400 (market psychological level).

Today, it is recommended to go long on EUR before 1.0290, with a stop loss of 1.0280 and a target of 1.0350, 1.0360.

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