Merry Christmas, Everyone! Markets Stay Subdued Amid Holiday Cheer

Market Summary

The Dollar Index remained flat as markets slowed down for Christmas, with limited economic data revealing continued contraction in the US manufacturing sector. Gold prices stayed stagnant during thin holiday trading, weighed down by the Fed's cautious stance on reducing borrowing costs, keeping a bearish tone in the market.

US equities closed higher in a shortened session, driven by tech giants and chipmakers like Broadcom (+3.2%) and Arm Holdings (+3.9%), marking the continuation of the Santa Claus rally despite rising Treasury yields.

Oil prices climbed over 1%, supported by tightening US crude supplies and optimism around Chinas fiscal stimulus plans. Meanwhile, Hong Kong equities surged above the 20,000 level, their best performance in two weeks, fueled by expectations of aggressive economic policies from China for 2025.

Current rate hike bets on 29th January Fed interest rate decision:

Source: CME Fedwatch Tool

0 bps (91.4%) VS -25 bps (8.6%)

Market Movements

DOLLAR_INDX, H4

The Dollar Index traded flat as markets began winding down for the Christmas holidays. With a sparse economic calendar, minor releases like the Philadelphia Fed Non-Manufacturing Activity Index and the Richmond Fed Manufacturing Index highlighted ongoing contraction in the US manufacturing sector. Recent data confirmed the sector's persistent challenges, underscoring an economic slowdown in industrial activity.

The Dollar Index is trading flat while near the resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 58, suggesting the index might edge lower since the RSI retreated from overbought territory.

Resistance level: 108.60, 109.50

Support level: 107.60, 106.75

XAU/USD, H4

Gold prices remained stagnant during thin holiday trading sessions. A more bearish sentiment prevails in the gold market as the Fed signals caution in lowering borrowing costs further, supported by stable unemployment rates and slow inflation improvements. Investors await clearer trends as the holiday lull continues and will focus on upcoming Fed decisions for future price direction.

Gold prices are trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 47, suggesting the commodity might extend its losses after breakout since the RSI stays below the midline.

Resistance level: 2656.00, 2718.00

Support level: 2556.00, 2485.65

GBP/USD，H4

GBP/USD trades lower, pressured by the appreciation of the US Dollar. However, trading volumes remain subdued due to the Christmas holidays. On a broader scale, the Greenback retains its strength, supported by expectations of a slower pace of interest rate cuts from the Federal Reserve in the coming year. This outlook continues to weigh on GBP/USD's appeal.

GBP/USD is trading lower while currently near the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 43, suggesting the pair might extend its losses since the RSI stays below the midline.

Resistance level: 1.2620, 1.2700

Support level:1.2506, 1.2410

CL OIL, H4

Oil prices climbed over 1% amid light trading, driven by tightening US crude supply data and optimism over China‘s fiscal stimulus plans. API data showed a significant draw in crude and distillate inventories, while China's issuance of 3 trillion yuan in special treasury bonds provided additional support. Beijing’s increased fiscal spending is expected to boost oil demand and support WTI crude prices in the near term.

Oil prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the commodity might extend its gains since the RSI stays above the midline.

Resistance level: 71.20, 72.35

Support level: 69.90, 68.25