Ella 
In the week ahead, market dynamics continue to unfold with notable movements in key financial indicators. The US dollar is experiencing a downward trend as traders anticipate an aggressive series of rate cuts in the coming year. Falling US Treasury yields pose a risk to the greenback, a vulnerability highlighted by Thursday’s below-expectation US GDP figures and Friday’s disappointing core PCE readings.
The revision of US Q3 GDP lower has further dragged down the Dollar Index, amplifying concerns about its stability. Simultaneously, gold has seen an upswing, reaching $2,070/oz. on Friday after the release of the US data. The precious metal’s ascent is attributed to a weakened US dollar and diminished US Treasury yields, factors enhancing gold’s attractiveness. Analysts predict a renewed attempt to breach the December 4th spike high at $2,147/oz. in early 2024.
Retail trader data reveals a nuanced sentiment in the market, with 59.65% of traders net-long. The ratio of traders long to short stands at 1.48 to 1, reflecting a 6.22% decrease in net-long positions from yesterday but a 1.59% increase from the previous week. Meanwhile, net-short positions have risen by 2.46% from yesterday and 5.68% from last week.
As for the US equity markets, they continue to thrive in the risk-on environment, concluding Friday a fraction below recent multi-year highs. Positive sentiment pervades the equity space, hinting at a potential upward push across various indices when trading resumes in January.
In the technical and fundamental landscape for the week commencing December 25th, the British Pound remains resilient, pushing higher despite growing calls for rate cuts. Global government bond yields are engaged in a race to the bottom, with central bankers signaling a series of interest rate cuts in 2024.
The Euro, on the other hand, faces a slow week with the absence of significant data and thin liquidity. EUR/USD breached the psychological 1.1000 level before the weekend, but sustained gains may be contingent on the momentum in the New Year.
Gold’s weekly forecast suggests a continued upside rally, with XAU/USD looking to maintain levels above $2050 in the last trading week of 2023. The softer US inflation outlook contributes to gold’s positive trajectory.
In the US dollar realm, the currency appears to be on thin ice, with key setups analyzed for EUR/USD, USD/JPY, and GBP/USD in the final days of 2023. Technical outlooks and crucial price thresholds are scrutinized to provide insights into potential market movements.
