```html
US Dollar Insights:
- Last week, the US Dollar (DXY) found a firm support level at 105.44, observed during the NFP release, aiding its recovery.
- During the previous webinar, EUR/USD was testing significant support near 1.0500, a crucial factor in the DXY given its 57.6% influence on USD price movements.
- Anticipation is building for tomorrow’s US CPI report, with the headline expected to rise to 2.7% annually from 2.6%, while core inflation is projected to remain unchanged at 3.3%. Following this, the Federal Open Market Committee (FOMC) meeting is scheduled for next week.
- Gold has notably broken out of its recent trading range and is making strides toward the next resistance level ahead at 2700.
In November 2016, Donald Trump's election victory sparked a significant rally in US markets, leading to gains in both the US Dollar and equities through year-end. Yet, as trading commenced in 2017, despite the Federal Reserve adopting a more hawkish approach with three interest rate hikes that year, the US Dollar experienced a pronounced decline.
A similar pattern emerged following the 2024 election results, where the US Dollar surged alongside rising US equity markets. The Dollar continued to climb for several weeks post-election, eventually reaching the 108.00 level in late November, before yielding a pullback.
This pullback remained orderly until the recent NFP report, seeing DXY drop to 105.44, a level that coincides with a prior swing high and a significant descending trendline. This area successfully supported the low established last Friday, and thus far this week, prices have retraced back to the gap created during the last November FOMC meeting, situated between 106.50 and 106.88.
US Dollar Daily Price Chart
From a weekly perspective, additional insights stand out. The blue and red boxes denote the post-election rally and subsequent sell-off from 2016 to 2017. The purple box highlights the robust US Dollar trend driven by the Fed's hawkish tone in 2022. This USD surge negatively impacted US equity markets, a scenario the Fed likely aims to prevent going forward, amplifying the potential for mean reversion of the US Dollar as we approach 2025.
US Dollar Weekly Chart
EUR/USD Overview
The Euro constitutes a significant 57.6% of the DXY, making it unusual for the US Dollar's trends to occur independently of it. Both markets have shown a range-bound behavior over the past two years, although this trend is now being tested, with USD pushing against resistance and EUR/USD probing for support.
During the USD spike in 2022, equities in both the US and Europe faced turmoil. It was only when the exchange rate stabilized that the stock markets found their footing. The two-year range that followed the 2022 sell-off remained predominantly between the 1.0500 and 1.1200 levels until a recent breach of support occurred last month.
EUR/USD Weekly Chart
EUR/USD Short-Term Analysis
In recent trading, sellers have shown a persistent effort to breach resistance in EUR/USD, yet they have increasingly struggled to maintain price levels below 1.0500.
In last week’s webinar, the resistance area noted played a crucial role in capping highs at the 1.0611 Fibonacci level during the NFP report announcement.
The 1.0500 level re-emerged as a focal point for support, reinforced by an emerging trendline drawn from the higher lows established since late November.
EUR/USD Four-Hour Chart
USD/JPY Observations
While EUR/USD engages support, USD/JPY is attempting to break through resistance at the 151.95 mark, which aligns with the 200-day moving average—a significant benchmark for this pair in the last couple of years.
USD/JPY Weekly Chart
USD/JPY below 150
Examining the daily chart shows critical context: the pair quickly turned bearish in late November, breaching the pivotal 150.00 psychological level. However, entering December, sellers began to falter, leading to a series of higher lows and, more recently, higher highs coinciding with this morning’s test at 151.95.
USD/JPY Daily Chart
Impact of USD/JPY on USD
During the aggressive sell-off of the USD in Q3, a significant component was the unwind of the Yen carry trade. The recent stall in the USD and its subsequent reversal in October mirrored this theme within USD/JPY.
For the DXY to maintain its longer-term range and potentially benefit US equities, weak performance in USD/JPY may prove essential. With a BoJ policy review expected after next week’s FOMC meeting, this scenario remains one to watch closely. The forthcoming resistance for USD/JPY corresponds with the previous support from a descending triangle that failed weeks back, positioning the 153.41 level for future attention. For reference, 151.45 acts as support, but bulls will need to hold above 150.77 for sustained control.
USD/JPY Four-Hour Chart
Gold Market Update
Throughout much of this year, gold demonstrated a strong upward trend before pulling back around the time of the U.S. Presidential Election. Over several weeks, it retraced 50% of its gains from June to October, finding support around mid-November. This recovery encountered resistance at the 14.4% retracement of the major move, establishing a trading range that followed for a couple of weeks, which was discussed in last Friday's update.
Gold Daily Chart
Gold Range Breakout and Targeting 2700
In last week's webinar, it was noted that gold was facing resistance within the 2643-2650 range. Following a pullback that tested the 2617-2621 zone, bullish momentum has restarted. Continuing to mark higher highs and lows, gold is now targeting the psychological level of 2700. However, a prior resistance at 2685 may offer support, although the primary focus will be within the range of 2671-2675, an area derived from a prior Fibonacci level and yesterday morning's resistance.
Gold Four-Hour Chart
--- authored by James Stanley, Senior Analyst
```
