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Gold, US Dollar, and EUR/USD Technical Analysis: Navigating Holiday Market Trends

By:
Muhammad Umair
Published: Dec 25, 2024, 02:28 GMT+00:00

Key Points:

  • Gold (XAU) remains in a neutral zone during the holiday week.
  • The US Dollar remains strong and indicates further upside potential.
  • EUR/USD experiences bearish pressure due to US Dollar strength.
Gold, US Dollar, and EUR/USD Technical Analysis: Navigating Holiday Market Trends

In this article:

The US Dollar Index (DXY) trades around 108.00 with limited movement as markets slow down due to the Christmas holiday. Despite China’s potential issuance of nearly 3 trillion Yuan in special treasury bonds by 2025 to revitalize its economy, the Greenback showed little reaction. This week, the market will likely remain range-bound without significant movements with a light US economic calendar.

Similarly, EUR/USD remained range-bound as the US Dollar Index traded within a tight range. Thin holiday trading volumes kept EUR/USD movements minimal as Forex markets prepared for Christmas and Boxing Day. The broader USD outlook remains strong due to the Federal Reserve’s more measured approach to rate cuts. The Fed anticipates only two 25-basis-point cuts in 2025, a reduction from earlier projections. This adjustment reflects persistent inflation and a resilient labor market. Investors are closely monitoring upcoming US Unemployment Claims data on Thursday, which is expected to show a slight decline.

Gold (XAU) hovered above $2,600, with upside potential limited by the strong US Dollar. Geopolitical tensions and trade uncertainties support demand for gold, but the Fed’s hawkish stance on interest rates continues to cap gains. A break above $2,720 is required for gold to start the next move higher.

Gold (XAU) Technical Analysis

Gold Daily Chart – Neutral Zone

The daily chart for gold shows that the price is consolidating within a neutral zone, awaiting its next direction. The Christmas and New Year holidays have led to thin market volatility, keeping prices confined within the consolidation range. The RSI trades below the mid-level but remains steady, indicating no clear direction. However, the price stays above the 200-day SMA, which suggests a bullish trend.

Gold 4-Hour Chart – Consolidation

The neutral zone in the gold market is highlighted on the 4-hour chart, where the price trades within the $2,720 and $2,550 range. The RSI fluctuations within these boundaries indicate a range-bound market.

US Dollar (DXY) Technical Analysis

US Dollar Daily Chart – Bullish Momentum

The daily chart for the US Dollar Index shows that it has broken the key level 107 and remains strong. The strong price momentum developed after the Federal Reserve’s rate cut in its December policy meeting. The Fed’s hawkish tone drives this bullish momentum in the US Dollar. The emergence of a bullish hammer at 105.60 and the continued momentum after the breakout indicate further upside potential for the US Dollar Index.

US Dollar 4-hour Chart – Ascending Channel

This bullish momentum in the US Dollar Index is also observed on the 4-hour charts. The index is trading within an ascending channel, showing positive price action. A move above the blue dotted trendline indicates that the index is heading toward 110, which serves as the upper resistance of the ascending channel.

EUR/USD Technical Analysis

EUR/USD Daily Chart – Bearish Pressure

The daily chart for EUR/USD shows that the pair remains under pressure as the US Dollar Index gains bullish momentum. After the US Dollar Index broke above the 107 level, EUR/USD fell below the $1.047 level, exhibiting bearish pressure beneath this threshold.

EUR/USD 4-Hour Chart – Descending Channel

This bearish pressure is also evident on the 4-hour chart for EUR/USD, which shows the formation of a descending channel. The price failed to break above $1.06 and continues to trend lower within this channel. The RSI remains below the mid-level, indicating the continuation of bearish momentum in EUR/USD. The black dotted trend within the descending channel defines the immediate bearish trend, indicating further downward momentum.

 

About the Author

Muhammad Umair, PhD is a financial markets analyst, founder and president of the website Gold Predictors, and investor who focuses on the forex and precious metals markets. He employs his technical background to challenge the prevalent assumptions and profit from misconceptions.

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