Soft CPI Reading, Reinforces Fed Rate Cut

• U.S. CPI reading aligned with the market consensus, reinforced by Fed rate cut speculation.

• Gold prices stood firm at above the $2700 mark on the back of a softened dollar.

• Australian dollar boosted by upbeat job data.

Market Summary

Yesterday's US CPI report, which aligned with market expectations, strengthened market bets on a December Fed rate cut. The dovish Fed outlook pressured the dollar, which struggled to hold recent highs. Wall Street rallied on the news, anticipating lower borrowing costs.

In the commodity market, Safe-haven gold benefited from the weaker dollar and geopolitical tensions in the Middle East, trading above $2700. Traders are monitoring developments in the region, which could further boost gold prices. Meanwhile, oil prices climbed to a weekly high as the Biden administration considers additional sanctions on Russian and Iranian oil, potentially disrupting global supply.

In today's Sydney session, the Australian dollar surged on better-than-expected domestic job data. Meanwhile, the euro is under pressure ahead of today's ECB meeting, where a 25bps rate cut is widely anticipated.

In addition, Bitcoin rallied above $100K in yesterday's session, benefiting from increased expectations of a Fed rate cut. The cryptocurrency had briefly pulled back in previous sessions.

Market Movements

DOLLAR_INDX, H4

The US Dollar Index remained relatively unchanged following the release of the US Consumer Price Index (CPI) report. The in-line CPI data reinforced market expectations for a 25-basis-point interest rate cut by the Federal Reserve in the upcoming week. The lack of surprising data had prompted investors to maintain their wait-and-see mood, and the dollar went flat.

The Dollar Index is trading flat 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: 106.75, 107.60

Support level: 105.70, 104.55

XAU/USD, H4

Gold prices continued to rise, primarily due to the anticipated Fed rate cut and increased geopolitical tensions, including those in the Middle East and Eastern Europe. The lack of surprising developments in the US CPI report further shifted investor focus towards the potential for a rate cut, bolstering gold's safe-haven appeal.

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: 2720.00, 2755.00

Support level: 2655.00, 2615.00

NASDAQ, H4

The US equity market, particularly the Nasdaq, experienced significant gains, driven by the technology sector. This surge was primarily attributed to the in-line CPI data, which strengthened expectations for a Fed rate cut. Key tech companies such as Google and NVIDIA led the rally. Additionally, Alphabet's recent quantum computing breakthrough and Tesla's post-election optimism contributed to the market's positive sentiment.

Nasdaq is trading higher while currently near the resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 71, suggesting the index might enter overbought territory.

Resistance level: 21955.00, 22000.00

Support level: 21170.00, 20395.00

CL OIL, H4

Oil prices increased significantly following the EU's decision to impose additional sanctions on Russian oil. This move could potentially tighten global crude supplies. Furthermore, China's announcement of a more accommodative monetary policy in 2025, coupled with increased crude oil imports, also supported oil prices.

Oil prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 69, suggesting the commodity might extend its gains since the RSI stays above the midline.

Resistance level: 70.35, 72.35

Support level: 68.15, 66.95