All Eye on Today’s PCE

• Todays PCE reading will be a pivotal factor for the dollar.

• RBNZ, as expected, cut the interest rate level by 50 bps.

• BTC faced strong selling pressure after failing to nudge above the $100k mark.

Market Summary

Ahead of todays U.S. PCE reading, most asset classes remained steady as markets await direction. A higher-than-expected reading could bolster the dollar, pressuring other assets. Meanwhile, Wall Street extended gains, with the Dow Jones hitting a fresh all-time high.

In forex, the New Zealand dollar unexpectedly rallied to its weekly high despite the RBNZ cutting rates by 50 bps. In commodities, gold steadied following reports of a ceasefire agreement between Israel and Hezbollah in Lebanon. Oil, however, failed to hold above the critical $68.75 support level, signaling potential bearish momentum.

In the crypto market, BTC remains under pressure after failing to breach the $100k milestone, with futures contracts indicating increased bearish bets, potentially pointing to further declines.

Current rate hike bets on 18th December Fed interest rate decision:

Source: CME Fedwatch Tool

0 bps (40.4%) VS -25 bps (59.6%)

Market Movements

DOLLAR_INDX, H4

The U.S. Dollar weakened following the announcement of a ceasefire agreement between Israel and Lebanon, as improving global risk sentiment reduced demand for safe-haven currencies. President Biden's confirmation of the truce and phased withdrawal of Israeli forces eased geopolitical concerns, prompting a shift toward riskier assets. However, caution lingers in the market as Donald Trump hinted at new tariffs on Canada, and Mexico, which could reignite trade tensions and support the dollar as a haven asset in the near term.

The Dollar Index is trading lower following the prior breakout below the previous support level. MACD has illustrated increasing bearish momentum, while RSI is at 50, suggesting the index might extend its losses since the RSI retreated sharply from overbought territory.

Resistance level: 106.95, 107.80

Support level: 106.05, 105.15

XAU/USD, H4

Gold prices retreated after news of a ceasefire between Israel and Lebanon improved global risk sentiment, leading to a sell-off in safe-haven assets. The easing of geopolitical tensions reduced gold's appeal, as investors shifted focus to risk-on assets. Nevertheless, uncertainties remain as Donald Trumps comments about potential tariffs on major economies could revive geopolitical and economic risks, providing underlying support to gold prices moving forward.

Gold prices are trading flat while currently near the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 46, suggesting the commodity might experience technical correction since RSI rebounded sharply from oversold territory.

Resistance level: 2655.00, 2710.00

Support level: 2615.00, 2555.00

USD/JPY, H4

The USD/JPY broke below its critical support at 153.65, signaling a bearish outlook. While the dollar remained steady ahead of todays PCE reading, the Yen strengthened on robust Japanese inflation and PMI data, raising prospects of an early BoJ rate hike. The Yen also gained appeal as a safe haven amid rising uncertainty.

The pair has broken below its critical support level and is trading at its lowest point in 2 weeks, suggesting a bearish signal for the pair. The RSI is on the brink of breaking into the oversold zone while the MACD edges lower after it breaks below the zero line, suggesting that the bearish momentum is gaining.

Resistance level: 153.65, 157.20

Support level: 151.20, 148.70