Oil Strong on Improve Demand Outlook

• Wall Street ended its 4 straight decline sessions and jumped last Friday.

• The U.S. dollar is hovering near 109.00 ahead of today's PMI reading, and the market is awaiting Friday's NFP reading.

• Oil prices continue to gain on the back of Chinese economic stimulus package optimism.

Market Summary

Wall Street surged in the last session, buoyed by a strong performance in tech stocks, with the Nasdaq Composite climbing 1.70%. However, investor focus this week shifts to key U.S. economic data, including the Nonfarm Payrolls (NFP) report scheduled for Friday, which could provide insights into the Feds monetary policy outlook.

The U.S. dollar remains elevated, hovering near its recent highs, applying downward pressure on gold prices. The precious metal slid 0.8% in the last session, as expectations of a hawkish Fed stance strengthened the dollar and undermined safe-haven demand.

In the oil market, prices extended gains, driven by short-term demand expectations amid cold weather and optimism over Chinese stimulus measures, which are expected to boost economic activity and oil consumption.

In cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH) rebounded as risk appetite improved. Notably, Metaplanet, a Japanese firm specializing in Bitcoin, announced plans to acquire 10,000 BTC by 2025, fueling optimism and supporting BTC prices in recent sessions.

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

Source: CME Fedwatch Tool

0 bps (90.4%) VS -25 bps (9.6%)

Market Movements

DOLLAR_INDX, H4

The Dollar Index (DXY), edged lower due to technical correction, but long-term prospects remained bullish. This rally was supported by stronger-than-expected U.S. economic data, signaling resilience in the economy. The ISM Manufacturing PMI for December rose to 49.3, marking its highest reading since March 2024 and exceeding the forecast of 48.2. Additionally, ISM Manufacturing Prices surged to 52.5, well above expectations of 51.5, reflecting robust activity in input costs. The data underscores optimism around U.S. economic recovery, bolstering the dollar's strength.

The Dollar Index is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 58, suggesting the index might extend its losses since the RSI retreated sharply from overbought territory.

Resistance level: 109.50, 110.60

Support level: 108.60, 107.60

XAU/USD, H4

Gold prices retreated from a key resistance level, pressured by a stronger U.S. dollar and the robust U.S. economic outlook. Investors are anticipating the Federal Reserve's December meeting minutes, to be released on Wednesday, which may provide further clarity on the Feds rate policy after delivering its third consecutive 25-basis-point rate cut in December. Traders should closely monitor this release for potential market signals that could influence gold's trajectory.

Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 54, suggesting the gold might extend its losses since the RSI retreated sharply from overbought territory.

Resistance level: 2665.00, 2685.00

Support level: 2635.00, 2615.00

CL OIL, H4

Oil prices ended last week higher, supported by increased demand expectations due to cold weather in Europe and the U.S., as well as economic stimulus flagged by China. A decline in U.S. crude inventories also underpinned prices. However, oils gains may face pressure from the stronger dollar, which continues to strengthen on expectations that the U.S. economy will outperform its global peers and maintain relatively higher interest rates.

Oil prices are trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 61, suggesting the commodity might experience technical correction since the RSI retreated from overbought territory.

Resistance level: 74.65, 75.95

Support level: 73.55, 72.75