Dollar Remain Firm Ahead of CPI

• The dollar index (DXY) reaches a new high ahead of the U.S. CPI reading.

• Wall Street Retreat as the Treasury yield continues to surge.

• The gold was weighed on the strengthening gold and reached its recent low level.

Market Summary

The treasury market experienced intensified sell-off pressure, driving yields higher and boosting dollar strength in recent sessions. The Dollar Index (DXY) reached the 106.00 mark for the first time since June, with all eyes on the upcoming U.S. CPI reading, which could be pivotal for the dollar's trajectory. Rising yields have pressured Wall Street, leading to a pullback in the previous session; however, major indices like the Nasdaq and S&P 500 are still trending within an upward trajectory. Wall Street sentiment appears to echo in Asian markets, where the Hang Seng Index remains notably weak amid market disappointment over China's economic stimulus measures.

In commodities, gold is holding support above the $2,600 level, following a nearly 3% decline this week, as investors await the CPI data. Oil prices continue to soften, weighed down by a bleak demand outlook.

Additionally, traders will closely watch Australia‘s job data release in tomorrow’s Tokyo session. Given the Reserve Bank of Australia‘s continued stance on restrictive monetary policy, a robust job market could reinforce expectations of further tightening. This data will likely weigh into the RBA’s upcoming policy decisions, with stronger employment figures potentially supporting the case for sustained monetary restraint.

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, measuring the dollar against six key currencies, reached a six-month high as Trumps proposed inflationary import tariffs continue to push U.S. Treasury yields higher. Expectations that these tariffs will drive up prices and lead to a more hawkish stance from the Federal Reserve add further support to the dollar. Moving forward, the U.S. CPI report is a significant event, and its results could prompt notable shifts in dollar sentiment. Investors should watch closely, as inflation data is likely to impact the Fed's policy approach and subsequent dollar movements.

The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 68, suggesting the index might extend its gains since the RSI stays above the midline.

Resistance level: 106.15, 107.15

Support level: 105.15, 104.30

XAU/USD, H4

Gold prices fell below $2,600 for the first time since mid-September, with the Greenback hitting a six-month high and rising Treasury yields intensifying pressure on non-yielding assets like gold. Fed funds rate futures, as per Chicago Board of Trade (CBOT) data, have pushed the projected terminal rate up to approximately 3.99%, signaling expectations for a less dovish Fed stance. The CME FedWatch Tool further shows that the probability of a December rate cut has declined from 65% to 58%.

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

CL OIL, H4

Oil prices hovered near a two-week low after a 5% drop across two sessions, influenced by OPEC‘s downward revisions in demand growth forecasts, a stronger U.S. dollar, and lukewarm sentiment around China’s recent stimulus initiatives. OPECs adjustments mark the fourth consecutive demand growth cut, with global economic uncertainties compounding the bearish sentiment.

Oil prices are trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 35, suggesting the commodity might enter oversold territory.

Resistance level: 69.45, 72.55

Support level: 67.10, 65.45