All Eye on Today’s CPI

• 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 todays 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 Reserves 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 Microsofts upcoming vote on a proposal to add Bitcoin to its balance sheet, which, if approved, could boost market confidence.

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

XAU/USD, H4

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

GBP/USD，H4

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 todays 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

USD/JPY，H4

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