Dollar Surge on High CPI

• U.S. CPI came higher than the previous reading and pushed the dollar higher.
• Wall Street rally halted as the market perceived a more restrictive policy from the Fed.
• Gold faced strong downside pressure amid the strengthening dollar. 

Market Summary

The U.S. CPI release aligned with market expectations at 2.6%, reflecting a rebound in inflation within the country. Coupled with Donald Trump’s election victory, this trend strengthens the likelihood of the Fed maintaining a restrictive stance to counter inflationary risks. This cautious Fed outlook contributed to a pause in Wall Street's recent rally, with the three main indexes trading sideways over the past two sessions. The dollar gained support from the CPI data, while safe-haven gold dropped to its lowest level since September as risk sentiment stayed elevated.

Meanwhile, oil prices remain under pressure, weighed down by forecasts for increased global production amid muted demand expectations. In forex, the Australian dollar faced selling pressure following disappointing job data, with employment change figures showing a stark decrease to 15.9k from the previous 64.1k reading. In the crypto space, BTC surged past the $93,000 level, fueled by post-election optimism and renewed advocacy from Elon Musk, sustaining bullish momentum in the digital asset market.

Current rate hike bets on 18th December Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (32.2%) VS -25 bps (67.8%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index continued its rally against six major currencies as investor optimism centred around Trump’s inflationary policies. October’s U.S. inflation data met expectations, with the Labor Department reporting a 0.2% rise in the Consumer Price Index (CPI) for the fourth consecutive month, which had minimal immediate effect on the dollar. Nevertheless, the broader dollar uptrend remains bolstered by Trump’s recent election victory, with market expectations leaning toward inflationary tariffs. This sentiment has left the dollar well-supported for further advances.

The Dollar Index is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 71, suggesting the index might enter overbought territory. 

Resistance level: 107.15, 108.00

Support level: 106.15, 104.55

XAU/USD, H4

Gold fell sharply on Wednesday as the U.S. Treasury yields increased, and the dollar hit a year-to-date (YTD) high. Despite briefly peaking at $2,618, gold saw significant downward pressure, driven by rising Treasury yields; the 10-year benchmark note yield increased by 2.5 basis points to 4.453%. Dollar-denominated gold is less appealing in this climate of strong dollar demand, and the inflation data’s alignment with forecasts provided no relief for the precious metal’s bearish sentiment.

Gold prices are trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 28, suggesting the commodity might enter oversold territory. 

Resistance level: 2660.00, 2705.00

Support level: 2595.00, 2550.00

GBP/USD，H4

The GBP/USD pair continues its downtrend with sustained bearish momentum, targeting the next support level near 1.2620—a key pivot point in prior sessions. This downward pressure stems largely from a stronger dollar, which has appreciated to its highest level since last November. The Pound Sterling struggles to gain support, weighed down by recent weak U.K. economic indicators that have failed to bolster its strength against the greenback. The ongoing economic underperformance in the U.K. contrasts with U.S. dollar resilience, intensifying selling pressure on the pair.

GBP/USD reached a new low, suggesting a bearish bias for the pair. The RSI has broken into the oversold zone while the MACD edge is lower, suggesting the bearish momentum is gaining. 

Resistance level: 1.2750, 1.2815

Support level: 1.2620, 1.2540 

EUR/USD，H4

The EUR/USD pair has broken below the 1.0574 support level, indicating strong bearish momentum. This downward movement was driven by a strengthened dollar following a U.S. CPI reading that surpassed the previous figure, suggesting that the Fed may adopt a more hawkish stance in the near term, supporting dollar appreciation. For the euro, traders are focused on the eurozone GDP data and an upcoming speech from the ECB President, which could provide insights into the euro’s potential resilience amid ongoing dollar strength.

The EUR/USD continued to slide and declined by more than 1.5% this week, suggesting a bearish bias for the pair. The RSI remains in the oversold zone while the MACD edging lower, suggesting the bearish momentum is gaining. 

Resistance level: 1.0575, 1.0623

Support level: 1.0529, 1.0470

AUD/USD, H4

The Australian dollar encountered selling pressure following the release of domestic job data in today’s Tokyo session. Although the unemployment rate met expectations at 4.1%, the employment change came in at only 15.9k, significantly lower than the previous reading of 64.1k. This weaker employment growth suggests a softening labour market, which has dampened the strength of the Aussie dollar, adding downside risks as traders assess potential implications for future RBA policy moves. 

The AUD/USD has reached a new low below the 0.6500 mark, suggesting a bearish bias for the pair. The RSI remains below the 50 level while the MACD continues to slide below the zero line, suggesting that the bearish momentum remains strong. 

Resistance level: 0.6550,  0.6610

Support level:  0.6420, 0.6350

USD/JPY, H4

The USD/JPY pair hit a new high as the Japanese Yen weakened further amid ongoing uncertainty around the Bank of Japan's rate-hike timeline. Persistent selling pressure on the Yen reflects market sentiment dismissing the likelihood of intervention by Japanese authorities. Meanwhile, the U.S. dollar maintained its strength, recently reaching fresh highs, as market participants anticipate a more hawkish stance from the Federal Reserve in upcoming policy decisions, reinforcing the pair's bullish momentum.

The USD/JPY has surged to a new high above the 156.00 mark, and the next strong resistance will be at near the 158.00 mark. The RSI has broken into the overbought zone while the MACD continues to edge higher, suggesting the bullish momentum is gaining. 

Resistance level:  156.25, 157.75

Support level:  155.00, 153.80 

CL OIL, H4

Oil prices experienced a mild recovery on Wednesday, driven primarily by technical correction and short-covering after touching near two-week lows following OPEC’s latest demand forecast cut. However, gains were capped by the dollar’s strength, which surged to a seven-month high, raising the cost of oil for international buyers. OPEC’s fourth consecutive downward revision on 2024 and 2025 global demand forecasts has cast a shadow over long-term demand expectations, particularly with weak economic signals from China and India. 

Oil prices are trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 40, suggesting the commodity might extend its gains since the RSI rebounded sharply from oversold territory. 

Resistance level: 69.85, 72.55

Support level: 67.10, 65.50