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USD/CHF's rally from 0.8374 continued last week, but retreated after forming a temporary top at 0.9136. Initial bias is turned neutral this week for some consolidations first. Further rise is expected as long as 0.8956 resistance turned support holds. Above 0.9136 will target 0.9223 key resistance next.

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. However, decisive break of 0.9223 will be an important sign of bullish trend reversal.

In the long term picture, price action from 0.7065 (2011 low ) are seen as a corrective pattern to the multi-decade down trend from 1.8305 (2000 high). Fall from 1.0342 (2016 high) is seen as the second leg. Sustained break of 55 M EMA (now at 0.9131) will indicate that the third leg has already started. However, rejection by 55 M EMA again, followed by break of 61.8% retracement of 0.7065 to 1.0342 at 0.8317, will pave the way back to 0.7065.

AUD/USD edged lower last week but lost momentum just ahead of 0.6169 key support. Further decline remains in favor as long as 0.6273 resistance holds. Decisive break of 0.6169 will target 138.2% projection of 0.6941 to 0.6511 from 0.6687 at 0.6074. However, considering bullish convergence condition in 4H MACD, break of 0.6273 resistance will indicate short term bottoming, and turn bias back to the upside for stronger rebound.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term consolidation to the down trend from 0.8006, and could have completed at 0.6941 already. Firm break of 0.6169 support will confirm down trend resumption for 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806 next. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6587) holds.

In the long term picture, the down trend from 1.1079 (2011 high) should have completed at 0.5506 (2020 low) already. It's unsure yet whether price actions from 0.5506 are developing into a corrective pattern, or trend reversal. But in either case, fall from 0.8006 is seen as the second leg of the pattern. Hence, even in case of deeper fall, strong support should emerge above 0.5506 to contain downside to bring reversal.

USD/CAD stayed in consolidation below 1.4466 last week. Initial bias stays neutral this week first. Outlook will stay bullish as long as 1.4304 support holds. Break of 1.4466 will resume larger up trend to 1.4667/89 long term resistance zone. However, firm break of 1.4304 will turn bias to the downside for deeper pull back.

In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

In the longer term picture, price actions from 1.4689 (2016 high) are seen as a consolidation pattern, which might have completed at 1.2005. That is, up trend from 0.9506 (2007 low) is expected to resume at a later stage. This will remain the favored case as long as 1.3418 support holds.

GBP/JPY retreated sharply after edging higher to 198.94 last week but stays above 194.04 support. Initial bias stays neutral this week first and outlook is unchanged. Corrective pattern from 180.00 is still extending. On the upside, above 199.79 will will target channel resistance (now at 203.90). However, firm break of 194.04 will turn bias to the downside for 188.07 support instead.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

In the longer term picture, while a medium term top was formed at 208.09 (2024 high), it's still early to conclude that the up trend from 122.75 (2016 low) has completed. But GBP/JPY is at least in a medium term corrective phase, with risk of correction to 55 M EMA (now at 173.52).

EUR/JPY edged higher to 164.89 last week but retreated sharply from there. But overall outlook is unchanged that corrective pattern from 154.40 is still extending. Initial bias remains neutral this week first. Above 163.30 minor resistance will bring retest of 164.89 first. Break there will target 166.67 resistance next.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.

In the long term picture, while 175.41 is at least a medium term top, it's still early to conclude that up trend from 94.11 (2012 low) has completed. A medium term corrective phase is in progress with risk of deeper fall back to 55 M EMA (now at 148.21).

EUR/GBP stayed in sideway trading in range of 0.8221/8326 last week and outlook is unchanged. Initial bias remains neutral this week first. On the upside, firm break of 0.8326 resistance will confirm short term bottoming at 0.8221, ahead of 0.8201 key support. Intraday bias will be turned back to the upside for 0.8446 structural resistance next.

In the bigger picture, focus remains on whether 0.8201 key support (2022 low) is strong enough to complete the whole down trend from 0.9267 (2022 high). In any case, medium term outlook will be neutral at best until decisive break of 0.8624 key resistance. Risk will stay on the downside even in case of strong rebound.

In the long term picture, price action from 0.9499 (2020 high) is seen as part of the long term range pattern from 0.9799 (2008 high). Range trading should continue between 0.8201 and 0.9499, until there is clear signal of imminent breakout.

EUR/AUD's deep retreat last week confirmed short term topping at 1.6800. Yet, it recovered just ahead of 38.2% retracement of 1.5963 to 1.6800 at 1.6480. Initial bias is turned neutral this week first. Risk is now mildly on the downside as long as 1.6800 resistance holds, in case of extended recovery. Firm break of 1.6480 will bring deeper correction 61.8% retracement at 1.6283.

In the bigger picture, EUR/AUD is holding on to 1.5996 key support despite brief breach. Larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5995 will indicate that such up trend has completed and deeper decline would be seen.

In the longer term picture, rise from 1.4281 is seen as the second leg of the pattern from 1.9799 (2020 high), which is part of the pattern from 2.1127 (2008 high). As long as 55 M EMA (now at 1.6073) holds, this second leg could still extend higher. However, sustained trading below 55 M EMA will open up the bearish case for extending the decline through 1.4281 low.

EUR/CHF reversed after edging higher to 0.9440 last week but stayed in near term rising channel. Corrective rebound from 0.9204 could still extend higher. But upside should be limited by 0.9481 fibonacci resistance. On the downside, firm break of 0.9284 support will argue that the correction has completed, and bring retest of 0.9204 low.

In the bigger picture, while rebound from 0.9204 might extend higher, strong resistance could be seen from 38.2% retracement of 0.9928 to 0.9204 at 0.9481 to limit upside. Down trend from 0.9928 (2024 high) is still in favor to resume through 0.9204/9 support zone at a later stage.

In the long term picture, fall from 1.2004 (2018 high) is part of the multi-decade down trend. Corrective pattern from 0.9407 (2022 low) might have completed with three waves to 0.9928. Decisive break of 0.9252 (2023 low) will confirm long term down trend resumption to 61.8% projection of 1.1149 to 0.9407 from 0.9928 at 0.8851. For now, outlook will stay bearish as long as 0.9928 resistance holds, even in case of strong rebound.

Monday, Jan 6, 2025

Tuesday, Jan 7, 2025

Wednesday, Jan 8, 2025

Thursday, Jan 9, 2025

Friday, Jan 10, 2025

• The US dollar started 2025 strong, reaching a two-year high, while US equities were disappointing due to a lackluster Santa Rally.
• Global equity funds saw an 86% drop in inflows compared to the previous week, attributed to rising bond yields and potential portfolio rebalancing.
• The week ahead focuses on the US NFP jobs report and its potential impact on USD dominance.
• Australia’s CPI, retail sales, and trade balance data will provide insights into its economy.

Week in Review: King Dollar Starts 2025 on the Offensive… More to Come?

A week that started in 2024 and ended in 2025 showed glimpses of what many had been expecting from the year ahead.

The main one being that the US Dollar is set to remain king in 2025 as the Dollar Index started 2025 on the front foot. The DXY has hit a two year high above the 109.50 handle. A sign of things to come?

US Equities disappointed with regards to the Santa Rally this year. The S&P 500 index suffered 5 successive days of losses beginning on December 26. However, as discussed in my Thursday article titled (S&P 500, Nasdaq 100 Update – Are Wall Street Indexes Set for a January Jump?), January or at least the first half of January has historically been a positive month for US stocks.

Looking at fund flows, data from LSEG Lipper showed that investors added a net $4.93 billion worth of global equity funds, an 86% drop in inflows compared with about $35.1 billion worth of net purchases in the prior week. This has been attributed to rising bond yields as the US 10Y yield rose to 4.64%, the highest since May 2, but it could be down to portfolio rebalancing as well.

Source: LSEG

Gold prices edged higher this week but remain largely rangebound. The reason for Gold’s malaise can be summed up by looking at all the competing narratives at play. Donald Trump’s proposed tariffs are likely to lead to a stronger US Dollar but the uncertainty surrounding the global economy, geopolitics and the impact of tariffs are likely to keep safe haven demand in play.

This makes the precious metal an intriguing proposition in 2025 and it will be interesting to see how prices and policy from the incoming US administration develops.

Brent crude oil enjoyed an excellent week following 7 or 8 weeks of consolidation. Brent is up around 4% for the week as US stockpiles continue to decline. The 2025 Oil outlook is not positive however as a recent Reuters poll indicated. Analysts are eyeing around $70 a barrel for Brent in 2025 after losses of around 3% in 2024 and a closing price of $ 75.19 a barrel.

The Week Ahead: NFP to Pose a Test for USD Dominance

Asia Pacific Markets

The week ahead in the Asia Pacific region still remains light on the data front.

The highlights include the Caixin Service PMI due on Monday from China. Markets will be keeping a close watch on China and developments this past week around the Yuan and Chinese Bonds are echoing Japan in the 90s.

Deflationary worries have risen while the Yuan hit fresh lows to the US Dollar. However, it may not be all doom and gloom as this past week’s manufacturing data remained on the positive end with a slight improvement. While a weaker Yuan might be a play by Chinese authorities in anticipation of proposed trade tariffs led by incoming US President Donald Trump

Such weakness in the Yuan is usually met by intervention of some sort, however the lack of action may suggest that this is a ploy in anticipation of tariffs.

Wednesday and Thursday the focus will shift to Australia where we have three high impact data releases this week. Monthly CPI data will be joined by retail sales and trade balance data. The data should provide further insights into the Australian economy which has been on a rollercoaster in 2024. This was largely down to the Australian Dollars commodity currency tag as well as concerns around China, a major trading partner.

Europe + UK + US

In developed markets, the US will steal the headlines next week with the NFP jobs report due. Given the US Dollars rocking start to 2025 markets will be paying close attention to the data as well as any adjustments to prior prints.

The initial prediction is that December’s non-farm payrolls will increase by 153,000, with estimates ranging from 125,000 to 200,000. These expectations will be updated throughout the week as more data, like job openings, ADP private payrolls, and ISM employment figures, are released.

The unemployment rate is expected to stay at 4.2%, and wage growth is anticipated to remain at 4% compared to last year. This aligns with a general slowdown in the job market. After the Fed cut rates by 100 basis points in 2024, market participants are pricing in around 50 bps of cuts for the year ahead.

In Europe, Inflation data will be due as the Euro reached two-year lows against the greenback. Market participants have been looking at the possibility of parity for EUR/USD. A drop in inflation could ramp up rate cut bets as the ECB continues to struggle from lackluster growth. Such a move could lead to further divergence in policy with the US Federal Reserve and thus drag EUR/USD closer to parity.

Chart of the Week

This week’s focus is back to the US Dollar index (DXY).

The DXY broke out of consolidation on January 2 to start the New Year with a bang. The Index rose toward the 109.50 resistance level which was also a two-year high.

However Fridays daily candle close is set to close as an inside bar bearish candle which would hint at a pullback in the week ahead. However, looking at recent history and pullback have tnded to be short-lived since the DXY rally began around the back end of September.

There is an ascending trendline which may come into play if we do get a deeper pullback. As things stand, immediate support rests at 108.50 before the 108.00 and 107.50 handles come into focus.

A push higher from current price will first need to break this weeks highs at 109.53 before the 110.00 and 110.50 handles come into focus.

US Dollar Index (DXY) Daily Chart – January 3, 2025

Source:TradingView.Com (click to enlarge)

Key Levels to Consider:

Support

• 108.50
• 108.01
• 107.50

Resistance

• 109.52
• 110.00
• 110.50