The dollar index recorded its worst week since June as traders awaited data due early next month that could confirm market expectations of further rate cuts by the Federal Reserve in 2026.
Due to the light trading volume this week caused by the holiday and the closure of the UK market on Friday, investors’ attention has mainly shifted to the major US economic reports expected to be released in the first few weeks of January. Particularly, the December employment report and consumer inflation data will help determine the next policy move of the Federal Reserve after it cut borrowing costs for the third consecutive time this month to support economic growth.
Institutional foreign exchange trader Andrew Hazlett said, “This week’s lack of liquidity has undoubtedly added to the woes of the already relatively weak US dollar. Looking ahead, we will focus on inflation data as a guide for the Fed’s next interest rate cut.”
As the US dollar declined, the yield on US Treasuries also dropped. This week, the yield on 10-year US Treasuries fell by about 2 basis points to 4.13%, roughly the same as the level in the past two weeks. Traders believe there is about a 90% chance that the Federal Reserve will keep interest rates unchanged next month. However, they expect the Fed to cut rates by 25 basis points again in the middle of the year and do so again a few months later.
Technical analysis:
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Gold: The buy limit order we gave last Friday at the blue breakthrough pullback was perfect, achieving a profit-to-loss ratio close to 3:1. For today, we need to remain vigilant against low liquidity sweeps and pay attention to the 4450/60 area. Meanwhile, we’ll watch if the recovery above 4530 can lead to a new upward trend, but we need to confirm this before attempting any action. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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The Nasdaq index: The price remains between 25,600 and 25,700, but there may still be short-term fluctuations. Coupled with weakened trading during the holiday, we will continue to maintain liquidity sweeps around 25,500 before considering capturing long signals. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: Trading was light during the holiday period, and the trend was calm. It is recommended to wait and observe for one day until the signals become clearer before making any decisions. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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