Technical trend of the US Dollar Index and cross-asset market opportunities under the shift in Federal Reserve policy expectations

Macroeconomic Background: The Tug of War Between Strong Economic Data and Policy Expectations

US Q3 GDP initial estimate reports a 4.3% quarter-over-quarter annualized growth, surpassing market expectations of 3.3% and marking the fastest growth in recent years. Simultaneously released, the core Personal Consumption Expenditures (PCE) Price Index(Core PCE) grew 2.9% quarter-over-quarter, remaining in line with expectations. This data should have reinforced the Federal Reserve’s stance to maintain high interest rates, but political variables introduce new interpretative angles for the market. The future policy direction of the Fed faces uncertainty, exerting clear downward pressure on the US dollar index.

US Dollar Index: Key Support Broken, Downside Risks Alert

On December 23, the US dollar index fell 0.37% in a single day, reaching a low of 97.74, marking two consecutive days of decline. More notably, the index has effectively broken below the 98.0 level, hitting a low not seen in nearly two and a half months at 97.85. In the liquidity contraction environment brought by the Christmas holiday, short- to medium-term downside risks cannot be ignored.

If the dollar index cannot hold the 98.0 support, further downside potential may open up, with close attention needed on the critical support level at 95.2. Technically, the current price has broken through key levels, possibly leading to further decline in market participation.

Technical Reference Levels:

• Support: 96.5, 95.2, 93.5
• Resistance: 98.0, 99.0, 100.0

LME Copper: Breakthrough of Key Resistance Brings Upward Opportunity

As of December 24, LME copper rose over 1% during the session, reaching a high of $12,276, breaking through a critical resistance zone established earlier. The MACD indicator shows a strong bullish signal, with market sentiment clearly leaning bullish, and the formation of higher highs suggests the upward trend remains intact.

If LME copper can stabilize above the $12,000 level, subsequent rebounds could challenge $13,000 and even higher levels, providing new reference points for bullish asset allocators.

Technical Reference Levels:

• Support: 12,000, 11,600, 11,200
• Resistance: 12,400, 13,000, 14,000

Gold: Further Upside Potential After Breaking Through $4,500

Gold experienced a modest but decisive increase on December 24, rising 0.12% during the session to a new high of $4,525.8, successfully breaking above the $4,500 level. From higher lows, the structure of the uptrend remains solid, with technicals supporting further gains.

If gold can stay above $4,500, the next targets are $4,620 and $4,770. Of particular note is the January 6 timeframe, which may bring new market turning points.

Technical Reference Levels:

• Support: 4,500, 4,400, 4,220
• Resistance: 4,550, 4,620, 4,770

WTI Crude Oil: Signs of a Corrective Rebound Initiation

WTI crude oil rose 0.9% on December 23, reaching a high of $59.56, forming three consecutive days of upward momentum. The AO momentum indicator shows increasing buying strength, possibly indicating that the downward cycle since June this year is facing a correctional rebound opportunity.

If WTI can break above and stabilize at $59.0, subsequent rebounds could extend toward $61.5 and $64.5. Conversely, if it falls below support at $57.0, there is a risk that the previous downtrend may continue further.

Technical Reference Levels:

• Support: 57.0, 55.0, 52.0
• Resistance: 59.0, 61.5, 64.5