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Here we are, the last day and the last trading day of the year. It’s now been about two years that ChatGPT was launched and it’s been two years that the AI buzz pushed some US Big Tech companies to ... the sky, really. Nvidia, which has become the icon of the AI rally, gained almost 1000% since then, the Magnificent 7 nearly 100% since last November, and the S&P500 – where the market cap of the Big Tech stand for about a third of the total market cap – is set to close the year with a 25% advance, after a similar advance the year before. At the start of the year, the Big Tech rally was expected to broaden to the other sectors – which it did – but the broadening of the rally didn’t prevent the Magnificent 7 stocks to contribute to the much of the S&P500’s performance this year, the other sectors were mostly flat, the S&P500 equal-weight index played catch up with the normal-weighted, technology-heavy one, but investors gave in since the beginning of December, where we started seeing the Big Tech appetite take over. Apple for example – which remained on the backfoot with the AI progress and couldn’t do much on that platform yet, rallied 33% this year, and has fallen just 5 sessions since the beginning of the month – just five. Unfortunately, the last few days, even the tech appetite was weak. Santa didn’t show up – perhaps considering that we had enough gifts throughout the year - the S&P500 lost more than 1% for second session in a row, and Magnificent 7 was to blame. Together, they gave back 2% on Monday.

Of course, this week, the trading volumes are low, everyone – or almost everyone – is on holiday and the slightest moves in the market lead to exaggerated price action. But on the other hand, it’s also normal to start thinking that the AI rally will – one day – fizzle out, or at least we will see a sizeable correction given that the valuations went too high, and the expectations today have become very difficult to satisfy. But still, all those who called for a correction have so far happened to be wrong, and Wall Street analysts spent the year rising their price targets.

The consensus is that 2025 should be a good year, that the easing central bank policies and falling yields should help the US Big Tech rally to further broaden toward the non-tech pockets of the market, and beyond the US, with Europe seen as a good buy target for those betting that the European stocks will converge with their US peers – partly because their cyclical nature is favourable when global financial conditions ease, and partly because the valuation gap between the two

The Stoxx600 index did well between January and May this year, but then remained rangebound for the rest of the year with a marked selloff in summer. The European Central Bank (ECB) rate cuts certainly helped keeping the index in the upper Fibonacci range for a good part of the year, but it’s only a handful of companies that supported the gains. Among them, Siemens eked out the best performance of the year, the banks did well, but the luxury-stuff makers, the carmakers and heavy names like Nestle and Novo Nordisk have done poorly. You would say that it’s not very different in the US - that a few names shoulder the rally and the rest is sleeping. But in Europe, the overall growth and economic activity remains poor, which certainly pushes – and will continue to push – the ECB to be more aggressive with the rate cuts than the Federal Reserve (Fed).

And that positive divergence of the US economy was also noticeable in the valuation of the US dollar beyond the euro. The US dollar index is, in fact, having its best year since 2015. The dollar index is now consolidating gains at the highest levels in more than 2 years, and could continue to extend gains on the back of a gradually less dovish Fed outlook, based on the fact that the US economy did not weaken as much as it was expected to. On the contrary, the US GDP grew by more than 3% last quarter, versus 0.4% for the eurozone. The euro lost up to 6% against the greenback this year and up to 5% against sterling. The single currency has more room to weaken against both currencies. The pound on the other hand had a good year, but a bad selloff since September. But Cable is preparing to close the year just 1% lower against the dollar, while the USDJPY is behaving like its good, old self: the expectation that the Bank of Japan (BoJ) will normalize its policy gives hope to the bulls, but the BoJ remains short of expectations, then the yen gets sold, then the authorities step in to cool down the selloff by direct intervention and the BoJ helps by saying that they will tighten policy, and the cycle begins again.

In commodities, gold had a stellar year and could see more gains in case of a downside correction in global equity markets. While crude oil – which trades past the 100-DMA today for the first time since October – will likely close the week in the bearish consolidation zone, below the $72.85pb level, as the expectation of an average 1mbpd supply glut next year and China’s inability to reverse weakness will probably limit the upside potential.

• USDCAD reversed from resistance zone
•  Likely to fall to support level 1.4400

USDCAD currency pair recently reversed down from the resistance zone surrounding the major long-term resistance level 1.4400 (which stopped the sharp uptrend at the start of 2020) intersecting with the upper weekly Bollinger Band.

The downward reversal from the resistance level 1.4400 stopped the previous medium-term impulse wave (5).

Given the strength of the support level 1.4400 and the overbought reading on the weekly Stochastic indicator, USDCAD currency pair can be expected to fall to the next support level 1.4315.

• AUDCAD reversed from resistance level 0.8980
• Likely to fall to support level 0.8900

AUDCAD currency pair recently reversed down from the key resistance level 0.8980 (former support from the start of December) intersecting with the 38.2% Fibonacci correction of the downward impulse from last month.

The downward reversal from the resistance level 0.8980 continues the active short-term impulse wave c of the ABC correction 2 from the end of September.

AUDCAD currency pair can be expected to fall to the next support level 0.8900 (former support from August and the target price for the completion of the active wave 2).

WTI oil price advanced around 1.3% in holiday-thinned trading on Monday, underpinned by increased fuel demand on holiday season that was reflected on stronger than expected drop in crude inventories.

Near-term picture is turning positive on improving daily technical studies (positive momentum / daily Tenkan/Kijun-sen in bullish setup) and signals attack at key barriers at $71.39/48 (peaks of recent range) after bulls broke above 100DMA ($70.84) and $71.09 (Fibo 38.2% of $78.45 / $66.54).

Sustained break of $71.39/48 to generate fresh bullish signal and open way for further gains, with targets at $72.50 and $72.85 (50% retracement / Nov 7 high) to come in focus.

However, larger picture is still negative, as oil price was down around 0.8% in 2024, with minimum impact from key factors – supply / demand and geopolitics.

Markets await releases of economic data from China (Tuesday) and the US (Friday) for fresh signals from two largest economies and oil consumers.

Focus will be also on anticipated action from new US administration after Donald Trump returns to the White House on Jan 20.

Res: 71.48; 72.00; 72.50; 72.85
Sup: 71.09; 70.84; 70.00; 69.64

Energy is expected to regain the attention of market speculators next year due to both technical and fundamental factors.

WTI has repeatedly rallied on attempts to break below $67, which has been a turning point on dips since early 2023. A break below the 50- and 200-week moving averages was a bearish signal, but it has not fully materialised. Continued support leads us to consider the bottoming scenario followed by a global reversal.

Technically, oil could rally relatively easily to the $75 level, where it will begin to struggle with its 50-week and 200-day moving averages.

Natural gas, the closest substitute for oil, has rallied almost 90% from its early August lows and is approaching the highs of the past two years thanks to increased demand for US LNG amid Russian energy sanctions. Fears of a cold winter in Europe are also pushing gas higher, which is bullish for oil.

In industry news, we note the five-week decline in US commercial crude oil inventories. Stocks are now 4.5% lower than a year ago and remain near the lower end of the range over the past decade. The picture is complemented by a series of six-week declines in gas inventories, which have moved from the upper end of the range to the middle of the range.

An important factor is the dominance of the Republicans in US politics, among whom the oil industry lobby is strong. The agenda of US energy exports around the world and declining support for alternative energy sources should favour oil.

If our expectations are realised, oil could push off the bottom and start to rise. The easiest part of the rise is seen to be to the $75 level. If the rally continues, the next target will be the $80-86 area. The prospect of an end to the Russia-Ukraine conflict, however elusive, creates moderate downside risks. However, if this or China’s stimulus measures boost global growth, this will have a positive impact on the oil price, taking it to $100 within two years.

Daily Pivots: (S1) 1.0404; (P) 1.0424; (R1) 1.0443; More...

EUR/USD is still bounded in range trading and intraday bias stays neutral at this point. Stronger recovery cannot be ruled out, but outlook will remain bearish as long as 1.0629 resistance holds. Firm break of 1.0330 will confirm resumption of whole decline from 1.1213. Sustained trading below 1.0404 fibonacci level will carry larger bearish implications.

In the bigger picture, focus stays on 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404. Strong rebound from this level will keep price actions from 1.1273 (2023 high) as a medium term consolidation pattern only. However, sustained break of 1.0404 will raise the chance that whole up trend from 0.9534 has reversed. That would pave the way to 61.8% retracement at 1.0199 first. Firm break there will target 0.9534 low again.

Daily Pivots: (S1) 1.2526; (P) 1.2559; (R1) 1.2614; More...

Range trading continues in GBP/USD and intraday bias stays neutral. While another recovery cannot be ruled out, outlook will stay bearish as long as 1.2810 resistance holds. On the downside, break of 1.2474 will resume the fall from 1.3433 to 1.2298 cluster support zone.

In the bigger picture, price actions from 1.3433 medium term are seen as correcting whole up trend from 1.0351 (2022 low). Deeper decline could be seen to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. But strong support is expected there to bring rebound to extend the corrective pattern.

Daily Pivots: (S1) 157.49; (P) 157.74; (R1) 158.14; More...

No change in USD/JPY's outlook and intraday bias stays mildly on the upside despite weak momentum. Current rise from 139.57 is still in progress for 61.8% projection of 139.57 to 156.74 from 148.64 at 159.25 next. Firm break there will pave the way back to 161.94 high. On the downside, though, below 156.88 minor support will turn intraday bias neutral again.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 0.8995; (P) 0.9011; (R1) 0.9038; More…

USD/CHF's rally continues today and intraday bias stays on the upside. Rise from 0.8374 is in progress for 61.8% projection of 0.8374 to 0.8956 from 0.8735 at 0.9095. On the downside, below 0.8983 minor support will turn bias neutral and bring consolidations again first.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with rise from 0.8374 as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes.