Dollar Buoys by Strong U.S. Treasury Yield

Market Summary

The financial market remains exceptionally quiet as the New Year holiday approaches, with most asset classes trading in a sideways manner. The dollar index has also been range-bound since last Monday, but the U.S. Treasury yield continues to climb, reaching its highest level since May—a factor that could potentially strengthen the dollar further.

Heightened hawkish expectations surrounding the Federal Reserve have weighed on the equity market, causing all three major indices to close lower last Friday. This sentiment is likely to keep Wall Street under downward pressure as trading continues.

In the forex market, the USD/JPY pair surged to its highest level since July, with a potential break above the 158.00 mark signaling further bullish momentum for the pair.

In the commodity market, gold has managed to stay buoyed above the $2610 level despite a strengthening dollar. If the dollar experiences a technical retracement, gold could seize the opportunity to climb higher.

Meanwhile, the crypto market remains lackluster, with both BTC and ETH continuing to trade in a bearish manner. The bearish momentum for cryptocurrencies is expected to persist, as market sentiment appears to favor further downside pressure heading into the new year.

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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 Overview

Economic Calendar

(MT4 System Time)

N/A

Source: MQL5 

Market Movements

DOLLAR_INDX, H4

With light trading volumes ahead of the New Year holiday and limited economic data, the U.S. Dollar remained flat but resilient in the long term. The Dollar is on track for a 7% annual gain, bolstered by expectations of robust U.S. growth and cautious Federal Reserve rate cuts due to President-elect Trump’s tax cuts, tariffs, and deregulation plans. Moving forward, investors should monitor Trump’s policies closely for directional cues.

The Dollar Index is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 48, suggesting the index might extend its losses since the RSI stays below the midline. 

Resistance level: 108.60, 109.50

Support level: 107.60, 106.75

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XAU/USD, H4

Gold prices held near $2,625, supported by geopolitical tensions and global trade uncertainties, including Trump’s trade policies, Middle East conflicts, and the Russia-Ukraine war. Safe-haven demand remains strong, though expectations of limited Fed rate cuts in 2025 may cap further gains. Thin volumes ahead of the holiday have muted price movements.

Gold prices are trading higher following the prior rebound from the support level. However, MACD has illustrated increasing bearish momentum, while RSI is at 49, suggesting the commodity might experience technical correction since the RSI stays below the midline. 

Resistance level: 2656.00, 2718.00

Support level: 2615.00, 2555.00

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GBP/USD，H4

The GBP/USD pair has jumped, rising above its previous high at the 1.2560 mark, signalling a potential trend reversal. Despite the U.S. dollar reaching its highest level in two years, the dollar index indicates that the dollar’s strength has begun to ease and is currently trading sideways—providing room for the GBP/USD pair to trade higher. A break above the 1.2600 psychological mark, followed by sustained trading above this level, would likely be interpreted as a bullish signal for the pair, paving the way for further gains.

The GBP/USD pair has found support at 1.2505 and jumped nearly 0.4% in the last session, suggesting a potential trend reversal for the pair. The RSI has been rising while the MACD is on the brink of breaking above the zero line, suggesting that the bearish momentum has eased. 

Resistance level: 1.2620, 1.2700

Support level: 1.2505, 1.2408

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EUR/USD，H4

The EUR/USD pair has been trading within an ascending triangle pattern, forming a higher-high price structure, which suggests a bullish bias for the pair. Given the lack of catalysts for the euro, the pair remains primarily influenced by dollar-related macroeconomic factors. The U.S. dollar has shown sideways movement and is easing from its bullish momentum, providing an opportunity for the EUR/USD pair to trade higher. A break above the 1.0450 mark, coupled with sustained trading at higher levels, could signal a bullish breakout, potentially paving the way for further upside gains.

The pair is testing its resistance level at the 1.0450 mark; a break above such a level shall be a bullish signal for the pair. The RSI has been climbing while the MACD is poised to break above the zero line, suggesting that the bearish momentum is van singing. 

Resistance level: 1.0515, 1.0608

Support level: 1.0323, 1.0238

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NASDAQ，H4

U.S. equity markets struggled to maintain momentum as high Treasury yields challenged lofty valuations. Wall Street remained mixed in thin holiday trading, with many investors opting for profit-taking amidst the absence of significant market catalysts. While China’s PMI surveys and the U.S. ISM report due later this week offer some potential for direction, the focus for 2025 will likely remain on Federal Reserve interest rate decisions and the growth trajectory of the tech sector. Investors are expected to maintain a cautious stance, awaiting clearer signals for the year ahead.

Nasdaq is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 49, suggesting the index might extend its losses since the RSI stays below the midline. 

Resistance level: 21820.00, 22590.00

Support level: 21105.00, 20395.00

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USD/JPY, H4

The USD/JPY pair has been trading in an extremely sideways manner, consolidating within a tight range. It is now poised to break above its near resistance level at 158.10, which could serve as a key breakout point. A decisive break above 158.10, especially following this prolonged consolidation, may signal an extremely strong bullish move for the pair. The Japanese Yen continues to be weighed down by dovish expectations from the Bank of Japan (BoJ), as policymakers maintain a cautious stance toward rate hikes. In contrast, the U.S. dollar is supported by a hawkish Federal Reserve outlook, with expectations of higher-for-longer interest rates, providing sustained upward momentum for the pair.

The pair is testing its highest level since July, suggesting a bullish bias for the pair. The RSI has been hovering in the overbought zone while the MACD is sliding, suggesting the bullish momentum is easing. 

Resistance level: 158.00, 160.05

Support level: 156.00, 154.85

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BTC/USD, H4

BTC continues to face downward pressure, sliding to its key support level near $93,000. A break below this level could signal a bearish continuation for the cryptocurrency, amplifying selling pressure. The biggest cryptocurrency has already declined by more than 13% from its recent peak, as the “Trump effect”—which had fueled optimism for a crypto-friendly environment—has lost momentum. Looking ahead, crypto traders may shift focus to the January U.S. presidential inauguration, where Donald Trump is expected to take the oath of office as the 45th President. This event could potentially revive sentiment in the crypto market, especially if policies perceived as pro-crypto are highlighted during the transition period.

BTC is trading in a conspicuous downtrend manner with a lower-high price pattern spotted. The RSI has been kept below the 50 levels, while the MACD failed to break above the zero line and is heading lower, suggesting that BTC remain trading with bearish momentum. 

Resistance level: 94650.00, 98730.00

Support level: 91430.00, 87750.00

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CL OIL, H4

Oil prices were relatively flat as the market grappled with mixed signals. Analysts forecast a supply surplus in 2025, driven by increased production from non-OPEC+ countries such as the U.S., Brazil, and Guyana. This surplus could result in supply exceeding demand by as much as 1 million barrels per day, keeping Brent and WTI crude prices near $70 per barrel. Additionally, President-elect Trump’s pro-drilling policies and deregulation initiatives are expected to accelerate U.S. output. On the other hand, rising geopolitical uncertainties, including potential policy shifts toward Iran, Venezuela, and Russia, could disrupt supply dynamics and exert upward pressure on prices.

Oil prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 62, suggesting the commodity might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 70.70, 71.35

Support level: 69.50, 68.60

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