Dollar Buoys by Strong U.S. Treasury Yield

• The financial market is standing pat as the New Year holiday approaches.

• Gold has shrug-off from its bearish momentum but remains pressured by the strengthening dollar.

• BTC is trading lower as the "Trump effect" is easing.

Market Summary

The financial market remains exceptionally quiet as the New Year holiday approaches, with most asset classes trading in a sideways manner. The dollar index has also been range-bound since last Monday, but the U.S. Treasury yield continues to climb, reaching its highest level since May—a factor that could potentially strengthen the dollar further.

Heightened hawkish expectations surrounding the Federal Reserve have weighed on the equity market, causing all three major indices to close lower last Friday. This sentiment is likely to keep Wall Street under downward pressure as trading continues.

In the commodity market, gold has managed to stay buoyed above the $2610 level despite a strengthening dollar. If the dollar experiences a technical retracement, gold could seize the opportunity to climb higher.

Meanwhile, the crypto market remains lackluster, with both BTC and ETH continuing to trade in a bearish manner. The bearish momentum for cryptocurrencies is expected to persist, as market sentiment appears to favor further downside pressure heading into the new year.

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

With light trading volumes ahead of the New Year holiday and limited economic data, the U.S. Dollar remained flat but resilient in the long term. The Dollar is on track for a 7% annual gain, bolstered by expectations of robust U.S. growth and cautious Federal Reserve rate cuts due to President-elect Trumps tax cuts, tariffs, and deregulation plans. Moving forward, investors should monitor Trump's policies closely for directional cues.

The Dollar Index is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 48, suggesting the index might extend its losses since the RSI stays below the midline.

Resistance level: 108.60, 109.50

Support level: 107.60, 106.75

XAU/USD, H4

Gold prices held near $2,625, supported by geopolitical tensions and global trade uncertainties, including Trumps trade policies, Middle East conflicts, and the Russia-Ukraine war. Safe-haven demand remains strong, though expectations of limited Fed rate cuts in 2025 may cap further gains. Thin volumes ahead of the holiday have muted price movements.

Gold prices are trading higher following the prior rebound from the support level. However, MACD has illustrated increasing bearish momentum, while RSI is at 49, suggesting the commodity might experience technical correction since the RSI stays below the midline.

Resistance level: 2656.00, 2718.00

Support level: 2615.00, 2555.00

NASDAQ，H4

U.S. equity markets struggled to maintain momentum as high Treasury yields challenged lofty valuations. Wall Street remained mixed in thin holiday trading, with many investors opting for profit-taking amidst the absence of significant market catalysts. While Chinas PMI surveys and the U.S. ISM report due later this week offer some potential for direction, the focus for 2025 will likely remain on Federal Reserve interest rate decisions and the growth trajectory of the tech sector. Investors are expected to maintain a cautious stance, awaiting clearer signals for the year ahead.

Nasdaq is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 49, suggesting the index might extend its losses since the RSI stays below the midline.

Resistance level: 21820.00, 22590.00

Support level: 21105.00, 20395.00

USD/JPY, H4

The USD/JPY pair has been trading in an extremely sideways manner, consolidating within a tight range. It is now poised to break above its near resistance level at 158.10, which could serve as a key breakout point. A decisive break above 158.10, especially following this prolonged consolidation, may signal an extremely strong bullish move for the pair. The Japanese Yen continues to be weighed down by dovish expectations from the Bank of Japan (BoJ), as policymakers maintain a cautious stance toward rate hikes. In contrast, the U.S. dollar is supported by a hawkish Federal Reserve outlook, with expectations of higher-for-longer interest rates, providing sustained upward momentum for the pair.

The pair is testing its highest level since July, suggesting a bullish bias for the pair. The RSI has been hovering in the overbought zone while the MACD is sliding, suggesting the bullish momentum is easing.

Resistance level: 158.00, 160.05

Support level: 156.00, 154.85