Dollar Strengthen on Strong Economic Performance

• Upbeat U.S. economic indicators, added to strong U.S. treasury yield, push the dollar higher. 
• Oil prices bolstered on tighter OPEC oil supply. 
• BTC and ETH faced significant sell-offs as risk appetite in the market shrank. 

Market Summary

The U.S. 10-year Treasury yield continued its ascent, reaching a high of 4.65%—its strongest level since last April—and is expected to approach 5% as markets brace for Donald Trump's inauguration this month. This has provided support for the dollar, which rebounded from its recent bearish trend. Positive U.S. economic data, including upbeat PMI readings and JOLTs job openings, have fueled inflation concerns, weighing on Wall Street, which closed sharply lower.

In the commodities market, gold faced downward pressure, retreating from the $2665 level as a stronger dollar overshadowed the safe-haven asset, leaving it to trade inversely to the greenback's strength. Oil prices rose, supported by a drop in OPEC output in December and strong U.S. economic data, which bolstered demand expectations. Meanwhile, risk-off sentiment in the broader market led to a sharp sell-off in cryptocurrencies, with Bitcoin and Ethereum both falling over 5% in the last session.

Current rate hike bets on 29th January Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (90.4%) VS -25 bps (9.6%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index advanced further, supported by better-than-expected U.S. economic data. The ISM Non-Manufacturing PMI came in at 54.1 (vs. expectations of 53.5), while the Prices component jumped to 64.4 (vs. expectations of 57.5). Additionally, the JOLTS Job Openings report showed 8.098M openings, beating forecasts of 7.730M. These strong data points underscore resilience in the U.S. services and labor markets, reducing the likelihood of immediate rate cuts. The U.S. rate futures market now indicates a 95% probability of a rate pause this month, with only a 4.8% chance of easing, according to LSEG estimates.

The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 54, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 109.50, 110.60

Support level: 107.50, 105.75

XAU/USD, H4

Gold prices declined following robust U.S. economic data and expectations of a potential rate pause rather than cuts. Rising Treasury yields reduce the appeal of non-yielding assets like gold. However, losses were capped by persistent uncertainties surrounding upcoming U.S. policy implementations. Traders will closely watch the U.S. Nonfarm Payrolls (NFP) report for additional clues.

Gold prices are trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 51, suggesting the commodity might extend its losses since the RSI retreated sharply from overbought territory. 

Resistance level:  2665.00, 2685.00

Support level: 2640.00, 2615.00

GBP/USD，H4

The GBP/USD pair faced downward pressure from a stronger U.S. dollar in the previous session, recording a notable decline. Despite this, the pair held above the 38.2% Fibonacci retracement level at 1.2460, indicating it remains within a bullish trajectory in the short term. However, from a longer-term perspective, the dollar is expected to strengthen further as Donald Trump prepares to assume the presidency. This anticipated dollar strength could eventually weigh on the pair, posing downside risks moving forward.

The pair traded with extremely strong bullish momentum in the previous session. However, it faced a technical correction in the last session. The RSI retraced, while the MACD was poised near the zero line, which gave a neutral signal for the pair. 

Resistance level: 1.2505, 1.2620

Support level: 1.2405, 1.2310

EUR/USD，H4

The EUR/USD pair has broken its uptrend structure and declined but managed to find support above the 1.0330 level. A break below this critical support could signal further bearish momentum for the pair. The euro gained some strength following the release of the eurozone CPI data, which came in higher than the previous reading, indicating signs of economic improvement in the region. However, despite this positive development, the pair faced renewed downside pressure due to a stronger U.S. dollar, supported by upbeat U.S. economic indicators.

The pair declined by nearly 0.5% yesterday, suggesting that bullish momentum has drastically eased. The RSI has dropped to near the 50 level, while the MACD hovers at the zero line, suggesting that bullish momentum is softening. 

Resistance level: 1.0458, 1.0564

Support level: 1.0330, 1.0230

USD/JPY, H4:

The USD/JPY pair remained subdued in the last session as the Japanese yen offset the dollar's strength, which was fueled by upbeat U.S. economic data. The yen gained support after Japan's 10-year bond auction yielded 1.140%, higher than the previous reading, providing buoyancy to the currency. A drop below the 157.50 mark may signal a bearish outlook for the pair.

The USD/JPY has remained sideways for the past three weeks. A break from either side of the price consolidation range will give a relative signal for the pair. The RSI remains close to the 50 level, while the MACD flows flat at near the zero line, suggesting a neutral signal for the pair. 

Resistance level: 159.15, 160.50

Support level: 156.05, 154.10

USD/CAD

The USD/CAD pair found support near the 1.4300 level and recorded a technical rebound as the U.S. dollar strengthened in yesterday's session. However, the pair has yet to reclaim its previous high, indicating that it remains within a bearish trend. Meanwhile, the Canadian dollar remains under scrutiny amid political uncertainty following Prime Minister Justin Trudeau’s announcement to step down, adding a layer of caution to the market outlook.

The pair was kept at its next resistance level at the 1.4365 mark. A break above this level would be a trend reversal signal for the pair. The RSI remains below 50, while the MACD is below the zero line, suggesting that the pair remains trading with bearish momentum. 

Resistance level: 1.4440, 1.4520

Support level: 1.4300, 1.4240

BTC/USD，H4

Bitcoin briefly breached six-digit levels on Tuesday, continuing its recent recovery. However, gains were pared as profit-taking emerged. Strong U.S. economic data led to rising Treasury yields, which typically weigh on the crypto market due to higher opportunity costs. Investors are now focusing on potential policy announcements from President-elect Donald Trump and the upcoming U.S. jobs report for further direction.

BTC/USD is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 75, suggesting the crypto might enter overbought territory. 

Resistance level: 102990.00, 107570.00

Support level: 98970.00, 93255.00

CL OIL, H4

U.S. crude oil futures edged higher after the American Petroleum Institute (API) reported a substantial decline in crude inventories. Stockpiles fell by about 4 million barrels for the week ended Jan. 3, significantly exceeding economists' expectations of a 250,000-barrel draw. The data highlights tightening supply, providing bullish momentum for oil prices.

Oil prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 67, suggesting the commodity might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 74.85, 75.95

Support level: 73.55, 72.75