Soft CPI Reading, Reinforces Fed Rate Cut

• U.S. CPI reading aligned with the market consensus, reinforced by Fed rate cut speculation. 
• Gold prices stood firm at above the $2700 mark on the back of a softened dollar. 
• Australian dollar boosted by upbeat job data. 

Market Summary

Yesterday's US CPI report, which aligned with market expectations, strengthened market bets on a December Fed rate cut. The dovish Fed outlook pressured the dollar, which struggled to hold recent highs. Wall Street rallied on the news, anticipating lower borrowing costs.

In the commodity market, Safe-haven gold benefited from the weaker dollar and geopolitical tensions in the Middle East, trading above $2700. Traders are monitoring developments in the region, which could further boost gold prices. Meanwhile, oil prices climbed to a weekly high as the Biden administration considers additional sanctions on Russian and Iranian oil, potentially disrupting global supply.

In today's Sydney session, the Australian dollar surged on better-than-expected domestic job data. Meanwhile, the euro is under pressure ahead of today's ECB meeting, where a 25bps rate cut is widely anticipated.

In addition, Bitcoin rallied above $100K in yesterday's session, benefiting from increased expectations of a Fed rate cut. The cryptocurrency had briefly pulled back in previous sessions.

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 US Dollar Index remained relatively unchanged following the release of the US Consumer Price Index (CPI) report. The in-line CPI data reinforced market expectations for a 25-basis-point interest rate cut by the Federal Reserve in the upcoming week. The lack of surprising data had prompted investors to maintain their wait-and-see mood, and the dollar went flat. 

The Dollar Index is trading flat 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: 106.75, 107.60

Support level: 105.70, 104.55

XAU/USD, H4

Gold prices continued to rise, primarily due to the anticipated Fed rate cut and increased geopolitical tensions, including those in the Middle East and Eastern Europe. The lack of surprising developments in the US CPI report further shifted investor focus towards the potential for a rate cut, bolstering gold's safe-haven appeal.

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: 2720.00, 2755.00

Support level: 2655.00, 2615.00

GBP/USD，H4

The GBP/USD pair has broken below its uptrend channel, forming a lower-high price pattern, suggesting a bearish bias. While the recent easing of US dollar strength following the CPI report and expectations of a December rate cut supported the pair, a weaker-than-expected Initial Jobless Claims report due today could further pressure the pair towards its next short-term resistance level at 1.2720.

GBP/USD has been gradually forming a lower-high price pattern, a break below from its short-term support level shall be a bearish signal for the pair. The RSI is on the brink of breaking below the 50 level while the MACD is edging lower, suggesting that the bullish momentum is vanishing. 

Resistance level: 1.2790, 1.2850

Support level: 1.2700, 1.2620

EUR/USD，H4

The EUR/USD has fallen to a one-week low as the euro weakens on dovish ECB expectations. The ECB's interest rate decision is due today, with the market anticipating a 25 bps rate cut. The pair is nearing its critical short-term support level of 1.0472. A break below this level would signal a bearish trend for the pair.

The EUR/USD pair has shifted in momentum, with the bearish momentum gaining. The pair is trading with a lower-high and lower-low price pattern while both the RSI and MACD have been edging lower, suggesting a bearish bias for the pair. 

Resistance level: 1.0525, 1.0607

Support level: 1.0440, 1.0324

AUD/USD, H4

The Australian dollar surged over 0.6% after a surprisingly strong jobs report released in Sydney today. Employment increased by 35.6k, significantly higher than the previous month's 12.2k. Additionally, the unemployment rate declined to 3.9% from 4.1%, bolstering expectations of a hawkish Reserve Bank of Australia (RBA) stance to combat inflation.

AUD/USD jumped from its recent low level but has yet to reach its previous high and form a trend-reversal signal for the pair. The RSI remains below the 50 level while the MACD stays at the bottom, suggesting that the pair will continue trading with bearish momentum. 

Resistance level: 0.6490, 0.6550

Support level: 0.6345, 0.6275

NASDAQ, H4

The US equity market, particularly the Nasdaq, experienced significant gains, driven by the technology sector. This surge was primarily attributed to the in-line CPI data, which strengthened expectations for a Fed rate cut. Key tech companies such as Google and NVIDIA led the rally. Additionally, Alphabet's recent quantum computing breakthrough and Tesla's post-election optimism contributed to the market's positive sentiment.

Nasdaq is trading higher while currently near the resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 71, suggesting the index might enter overbought territory. 

Resistance level: 21955.00, 22000.00

Support level:  21170.00, 20395.00

BTC/USD H4:

Bitcoin surged nearly 5% yesterday, reclaiming the $100K level and signaling a bullish trend. The cryptocurrency's rally was primarily fueled by the tepid US inflation data released yesterday, which reinforced expectations of a Fed rate cut. The dovish Fed outlook positively impacted the broader risk-on market, including cryptocurrencies.

BTC jumped sharply to above its psychological resistance level at $100k mark, suggesting a bullish bias for BTC. The RSI is moving higher while the MACD has a golden cross and is breaking above the zero line, suggesting the bullish momentum is gaining. 

Resistance level: 102000.00, 107700.00

Support level: 96800.00, 92330.00

CL OIL, H4

Oil prices increased significantly following the EU's decision to impose additional sanctions on Russian oil. This move could potentially tighten global crude supplies. Furthermore, China's announcement of a more accommodative monetary policy in 2025, coupled with increased crude oil imports, also supported oil prices.

Oil prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 69, suggesting the commodity might extend its gains since the RSI stays above the midline. 

Resistance level: 70.35, 72.35

Support level: 68.15, 66.95