Market Overview

Last Friday, the US dollar index experienced a modest rebound, gaining 0.087% to close at 99.27, as expectations for Federal Reserve interest rate cuts diminished significantly. Meanwhile, US Treasury yields increased across the board, with the 10-year benchmark yield climbing to 4.147% and the more Fed-sensitive 2-year yield closing at 3.612%.

Gold prices opened the week on a strong note, breaking above the psychologically important $4000 per ounce level and briefly challenging last month’s record high near $4245. However, hawkish comments from Federal Reserve officials swiftly reversed the market sentiment, leading to a sharp selloff. Spot gold plummeted nearly 2% on Friday, settling around $4085/oz, reflecting the market’s increased caution amid a tightening monetary policy outlook.

Oil markets showed notable resilience as well. Following drone attacks on Russia’s critical Novorossiysk port—responsible for exporting approximately 2% of global oil supply—WTI crude oil surged, briefly breaking above $60 per barrel several times before closing up 2.13% at $59.82. Brent crude oil prices also edged higher by 0.22% to $63.95 per barrel, as geopolitical tensions stoked concerns over supply disruptions.

Key Economic and Market Highlights

• The US dollar’s mixed performance last Friday saw gains against the euro but little movement versus the yen. The slight strength in the dollar was supported by a rebound in US equities, which helped alleviate risk-off sentiment among investors.

• Federal Reserve officials reiterated their cautious stance on further rate cuts, citing ongoing inflation risks. This contributed to a marked decline in market expectations for a December rate reduction, with the CME FedWatch tool now pricing roughly a 41% chance of a cut.

• The conclusion of the US government shutdown paves the way for a backlog of delayed economic data to be released throughout this week. Analysts expect that this “data vacuum” will end, possibly sparking renewed market volatility and providing clearer guidance on the US economy and Fed policy trajectory.

• The British pound weakened notably after reports emerged that the UK government abandoned plans to raise income tax rates. This sudden policy reversal, just weeks before the Budget announcement, fueled market concerns over the stability and direction of UK fiscal policy.

• Switzerland’s franc gained briefly on safe-haven flows. On the trade front, the US agreed to slash tariffs on Swiss goods from 39% to 15% under a new bilateral framework agreement, likely to impact trade dynamics positively.

• Oil price gains were largely driven by geopolitical risk. The drone attack on Russia’s Novorossiysk port led to a suspension of oil exports, heightening fears over supply shortages. Market analysts deem the strike significant, affecting a critical node in global energy logistics.

• Despite sanctions imposed on Russian oil firms and an uptick in US oil rig counts suggesting potential increases in supply, geopolitical uncertainties and sanctions enforcement continue to keep prices elevated.

Technical Analysis Summary

Dollar Index (DXY):
Resistance is encountered near 99.45–99.50, with critical resistance levels at 99.60–99.65. Support zones lie around 99.05–99.10, with key support at 98.80–98.85. A short-term rebound is likely capped below 99.50, and failure to break this level could see a decline toward the support band.

EUR/USD:
The pair finds resistance near 1.1640–1.1645, with major resistance at 1.1670–1.1675. Support exists near 1.1595–1.1600, with important support at 1.1575–1.1580. Holding above 1.1595 could trigger a rebound toward resistance levels.

Gold (XAU/USD):
Resistance is situated near 4189–4190, with key resistance at 4289–4290. Support zones are around 4011–4012, with critical support near 3932–3933. Gold may decline if it fails to break above 4190, with downside targets between 4011 and 3932.

Market Outlook and Trading Recommendations

• US Dollar: Consider short positions near the upper resistance zone of 99.50, with a stop-loss of 20 points above this level, targeting support near 99.05.

• EUR/USD: Long positions can be initiated near 1.1595, with a stop-loss 25 points below and targets set around 1.1645.

• GBP/USD: Look for buying opportunities near 1.3115, with a 40-point stop-loss, aiming for 1.3210 resistance.

• USD/CHF: Buying near 0.7895 with a 40-point stop-loss; target 0.7990.

• USD/JPY: Short positions near 155.00 with a 40-point stop-loss; target 153.85 support.

• AUD/USD: Sell near 0.6560, stop-loss 20 points above, target 0.6510.

• USD/CAD: Buy near 1.4010, stop-loss 30 points below, target 1.4060.

• Gold: Sell near 4190, stop-loss $20 above, target support near 4011.