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11 December 2024,04:49
Daily Market Analysis
11 December 2024, 04:49
*The U.S. Dollar is strong, while the Equity market is lacklustre ahead of the U.S. CPI reading.
*Gold rose above the $2700 mark as Syria’s political issue arose.
*Eye on today’s BoC interest rate decision.
Market Summary
Wall Street struggled for direction on Tuesday as investors awaited the U.S. Consumer Price Index (CPI) report, expected to offer critical insights into the Federal Reserve’s monetary policy outlook. A higher-than-anticipated CPI reading could strengthen the U.S. dollar and weigh on equity markets as concerns over extended tightening persist.
Chinese markets, in contrast, rallied sharply following reports of the government preparing its largest economic stimulus package in a decade. The Hang Seng Index and China A50 Index surged on optimism for renewed economic growth in the region.
In forex, the U.S. dollar maintained its upward momentum, driven by strong jobs data and expectations of a robust CPI report. Meanwhile, the market is eyeing the Bank of Canada’s interest rate decision and Australia’s employment data, both of which could introduce volatility for their respective currencies.
Gold climbed to a psychological resistance level at $2,700, supported by Chinese central bank purchases and geopolitical uncertainty in Syria. Oil prices remained muted but could gain momentum with reports of potential new U.S. sanctions on Russian oil and OPEC+ extending supply cuts through April.
The cryptocurrency market remained subdued, with BTC and ETH trading narrowly. Traders are watching Microsoft’s upcoming vote on a proposal to add Bitcoin to its balance sheet, which, if approved, could boost market confidence.
Current rate hike bets on 18th December Fed interest rate decision:
Source: CME Fedwatch Tool
0 bps (18%) VS -25 bps (82%)
Market Movements
DOLLAR_INDX, H4
The Dollar Index extended its gains ahead of US inflation data, which could influence the Federal Reserve’s monetary policy. Markets estimate an 86% chance of a 25-basis-point rate cut next week, but the CPI report remains critical. Despite rate cut expectations, US Treasury yields rose, reflecting potential tightening in 2025. Meanwhile, US small business optimism surged, with the NFIB index climbing to 101.7, exceeding forecasts.
The Dollar Index is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 57, suggesting the index might experience technical correction since the RSI retreated from overbought territory.
Resistance level: 106.60, 107.80
Support level: 105.70, 104.55
Gold prices extended gains, breaking through the $2,695 psychological level for the first time since November 25. The primary driver for gold’s rally is the high likelihood, as per the CME FedWatch Tool, that the Fed may cut interest rates in December. Additionally, uncertainties in the Middle East and potential trade war risks have further supported gold’s appeal. Key US economic data scheduled for this week include the Consumer Price Index (CPI), Producer Price Index (PPI), and Initial Jobless Claims.
Gold prices are trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 72, suggesting the commodity might enter overbought territory.
Resistance level: 2705.00, 2755.00
Support level: 2655.00, 2615.00
The GBP/USD pair continues to trade within its uptrend channel, but the upward momentum appears to be losing steam. With the Pound Sterling lacking significant catalysts, the pair faces pressure from a strengthening U.S. dollar. The greenback remains firm ahead of today’s U.S. CPI release, which is expected to show a strong reading, further bolstering dollar strength.
GBP/USD, despite trading in an uptrend trajectory but the bullish momentum is easing, a break below from the uptrend channel shall be a bearish signal for the pair. The RSI remain above the 50 level while the MACD flowing flat at above the zero line suggests the pair remain trading with bullish momentum.
Resistance level: 1.2790, 1.2850
Support level: 1.2700, 1.2620
The USD/JPY pair has broken above its resistance level at 151.80, signalling bullish momentum. The Japanese Yen remains under pressure as market sentiment shifts away from the likelihood of a December BoJ rate hike. Meanwhile, the U.S. dollar continues to gain strength ahead of today’s CPI release, with expectations leaning toward a higher-than-forecast reading.
The USD/JPY pair has broken above its resistance level, suggesting a bullish signal for the pair. The RSI has been moving upward while the MACD edge is high after breaking above the zero line, suggesting that the bullish momentum is gaining.
Resistance level: 154.15, 157.55
Support level: 149.35, 146.50
The Australian dollar continued its decline despite the Reserve Bank of Australia (RBA) maintaining its Official Cash Rate (OCR) at 4.35% during its final policy meeting of 2024. RBA Governor Michele Bullock attributed the decision to a need for vigilance despite easing inflationary pressures. However, the Aussie dollar faced downward pressure due to a pessimistic outlook for the Chinese economy. China’s consumer inflation dropped to a five-month low in November, increasing by just 0.2% year-on-year, missing market expectations.
AUD/USD is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 38, suggesting the pair might extend its losses after breakout since the RSI stays below the midline.
Resistance level: 0.6455, 0.6545
Support level: 0.6365, 0.6290
The USD/CAD pair has surged to its highest level since July 2020, signaling bullish momentum. The Canadian dollar remains under pressure ahead of today’s dovish BoC interest rate decision, with markets pricing in a potential 50 bps rate cut. This speculation has further weakened the Canadian dollar. Meanwhile, the pair is also buoyed by the strengthening U.S. dollar, driven by recent robust job data.
The pair has been trading in a higher-high price pattern and has broken above its resistance level, suggesting a bullish bias for the pair. The RSI remained elevated while the MACD edged higher, suggesting that the bullish momentum remains strong.
Resistance level: 1.4237, 1.4303
Support level: 1.4095, 1.4030
Bitcoin has established support near the $95,000 level and is attempting to retest its previous high. Traders are closely watching the outcome of Microsoft’s vote on including BTC in its corporate investments. If approved, adding BTC to Microsoft’s balance sheet could bolster confidence in the crypto market and potentially drive BTC prices back into all-time high territory.
BTC remain trading in its downtrend trajectory but the bearish momentum is easing. The RSI remain close to the oversold zone while the MADC has broken below the zero line, suggesting the bearish momentum remains intact with BTC.
Resistance level: 100765.00, 103805.00
Support level: 92330.00, 88620.00
Oil prices edged higher on Tuesday, supported by optimism over rising demand in China and concerns about potential supply constraints in Europe this winter. Brent crude rose to $72.19 per barrel, while WTI settled at $68.59. This rebound was bolstered by China’s plans for “appropriately loose” monetary policy in 2025 and increased crude imports, which appear to be driven by stockpiling rather than actual demand growth. Additionally, hedge funds are positioning for tighter European winter supplies.
Oil prices are trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 53, suggesting the commodity might extend its gains since the RSI stays above the midline.
Resistance level: 69.90, 71.20
Support level: 68.00, 66.90
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