DBG Markets: Market Report for Dec 20, 2024

Market Overview

he Federal Reserve announced a 25-basis-point rate cut yesterday. Despite this move, the dollar gained strength rather than weakening, contrary to some market expectations. This unexpected resilience stems from the Fed‘s more hawkish outlook for 2025, which aligns with concerns about inflationary pressures linked to Trump’s policies and his administration's potential handling of the Israel-Iran conflict. Trump has indicated his readiness to counter Iran to prevent it from achieving nuclear capabilities, raising concerns about oil reserves and supply stability.

Following a significant sell-off on December 18—when the Dow Jones Industrial Average dropped 2.6%—the market showed signs of recovery. The Dow closed up 0.5% at 43,828.06, rebounding slightly after its longest losing streak in over 50 years. The S&P 500 also rose 0.3%, while the Nasdaq Composite slipped by 0.1%, reflecting mixed investor sentiment.

The sell-off was largely driven by the Feds projection of only two interest rate cuts in 2025, down from the previously anticipated four. This cautious stance has added to market volatility, pushing Treasury yields higher as investors adjust their monetary policy expectations.

Major tech stocks displayed resilience, with companies like Nvidia and Tesla posting gains despite mixed performances in other sectors. However, Micron Technologys shares fell 12% due to a disappointing earnings outlook, dampening investor confidence in the semiconductor sector.

Asian markets mirrored this volatility, with Japanese stocks opening lower and Australian shares declining by around 2%. Concerns over future rate hikes and slower economic growth have prompted cautious trading globally.

The CBOE Volatility Index (VIX), known as Wall Street‘s “fear gauge,” spiked following the Fed’s announcements, highlighting heightened investor anxiety about interest rate trajectories.

GOLD - Gold prices remained relatively flat from yesterday, hovering near 2,586.289. However, charts indicate continued bearish momentum. The MACD recently crossed downward, signaling further selling potential, while the RSI reflects a healthy trend supporting the bearish move.

SILVER - Silver prices continued their downward trajectory, breaking below 29.9000. The MACD and RSI both signal strong bearish momentum, reinforcing expectations for further declines.

DXY - The dollar continues to exhibit strength with no clear signs of slowing. While the MACD shows a bearish cross, prices remain elevated, reflecting strong upward momentum and ongoing buying interest.

GBPUSD - The pound weakened further as the dollar gained against global currencies. The MACD indicates rising selling momentum, and the RSI, though above oversold levels, points to increasing bearish pressure. Given these conditions, no buying opportunities are apparent, and further declines are expected.

Fundamentally, the unchanged rate announcement was accompanied by a more dovish outlook for the coming year, contributing to the pounds weakness.

AUDUSD - The Aussie dollars selling trend persisted, with the RSI signaling overbought conditions during a brief pullback above the 20 mark. Although the MACD turned bullish during the pullback, lighter histogram bars suggest an imminent cross back into bearish territory. More selling pressure is expected for the Aussie dollar.

NZDUSD - Similar to the Aussie, the Kiwi dollar shows continued selling pressure. However, the market appears slightly more consolidated, as the RSI approaches oversold levels despite minimal price movement. Prices remain above the previous swing low, suggesting a possible short-term upward move before resuming the downward trend.

EURUSD - The euro continues its bearish momentum, with prices moving lower. The RSI shows overbought levels despite a slight upward move, while the MACD nears a bearish cross, indicating increasing selling pressure. Further declines are anticipated in the coming days.

USDJPY - After lagging initially, the yen strengthened, reaching 157.720. Both the RSI and MACD indicate healthy momentum and volume for an upward trend. Further buying is expected as the bullish momentum gains traction.

USDCHF - The franc remains consolidated between 0.90054 and 0.89431. The RSI signals oversold conditions at the recent swing low despite limited price movement, and the MACD is nearing a bullish cross with growing momentum. Continuation of the upward trend is likely as price action aligns with these signals.

USDCAD - The CAD shows signs of a potential bullish breakout as the RSI at the recent pullback swing low indicates oversold conditions with rising momentum. The MACD is also approaching a bullish cross, suggesting that prices could move above 1.44440.