Caution and Holidays are Slowing Market Momentum

U.S. Dollar Index (USDX)

The U.S. dollar stabilized in early European trade, trading just above a seven-month low on rising expectations that the Federal Reserve will slow the pace of its interest-rate hikes.

Declining inflation has led to expectations that the U.S. Federal Reserve is nearing the end of its rate-hike cycle and that rates will not go as high as previously expected.

The dollar index trades under heavy selling pressure and remains committed to the downtrend that started in early November. Meanwhile, the hourly chart shows robust selling pressure despite the overselling readings from RSI and MACD.

Pivot Point: 102.10

Japanese Yen (USDJPY)

The yen rose 0.4% to 127.32 against the dollar, reaching its highest level since late May ahead of a BOJ policy meeting later this week.

The currency has been solid since the central bank unexpectedly struck a hawkish tone during its December meeting by widening the band within which it allows the yields on its benchmark government bonds to trade. Yields on Japanese 10-year bonds rose above the 0.5% upper end set by the BOJ for a second consecutive day. However, the BOJ is expected to keep interest rates unchanged at ultra-low levels.

Data showing a massive current account surplus in November also indicated that some facets of the Japanese economy remained strong despite broader headwinds.

Pivot Point: 128.50

Spot Gold (XAUUSD)

Gold prices steadied around recent peaks on Monday as investors are extra cautious before data that is expected to show a slow of major economies. The yellow metal rallied sharply in recent weeks on increasing bets that the U.S. Federal Reserve will raise interest rates at a slower pace in the coming months, taking some pressure off non-yielding assets.

Spot gold fell 0.1% to $1,918.49 an ounce, while gold futures were steady at $1,921.50 an ounce. However, trading volumes in metals markets are expected to be lower on account of a U.S. holiday.

Spot gold remains solid and hits the strong resistance at 1,930 while keeping the buying pressure at the highest levels in a few months. Gold remains supported above the range between 1,910 and 1,920 despite the correction from 1,930 to 1,915.

Pivot Point: 1,915

WTI Futures (CL-OIL)

Oil prices fell on Monday as traders turned cautious and locked in some profits ahead of demand forecasts from the OPEC and the IEA. Crude prices rallied over 8% last week on the prospect of a rebound in Chinese demand after the country reopened its borders and essentially confirmed a pivot away from its strict zero-COVID policy.

Brent oil futures fell 0.5% to 85.09 a barrel, while WTI futures fell 0.6% to $79.67 a barrel in early Asian trade.

Oil prices have been buoyed by a slide in the dollar to a nearly nine-month low, reinforcing expectations the Federal Reserve would slow the pace of rate hikes. A weaker greenback tends to boost demand for oil as it makes the commodity cheaper for buyers holding other currencies.

Pivot Point: 79.50