The US Dollar Index (DXY) trades near its recent highs, showing strength as volatility eases during the Christmas holidays. Despite the quiet trading hours, the Greenback remains poised for potential gains. Unemployment claims data on Thursday could provide further direction for the index. However, activity may remain subdued due to the holiday season.
On the other hand, oil prices are trending higher, driven by China’s announcement of a massive $411 billion special treasury bond sale. This move indicates additional economic stimulus, raising short-term demand expectations for crude. Brent oil (BCO) trades around $73.70, while WTI crude oil (CL) consolidates near $70.25. However, the long-term trend for oil remains uncertain.
Meanwhile, natural gas (NG) is gaining momentum as cold weather forecasts for early January fuel expectations of increased demand. This weather-driven rally underscores natural gas’s sensitivity to seasonal factors and its significant role in energy markets.
WTI crude oil trades in a neutral zone during the Christmas holidays. The price is bound within multiple triangles’ apex and waits for further direction. It attempts to form a bottom and start a rally from this support level. However, a break above $72.20 is required for oil prices to initiate an upward move. The price has turned upward from the 50-day SMA, and the RSI is rising from the mid-level, indicating positive momentum.
The 4-hour chart for WTI crude oil shows that the price has broken out of the triangle and retested multiple times. The rebound in price after the retests has generated positive momentum in the oil market, pushing prices higher in the short term. However, the price must exceed $72.50 to confirm sustained upward momentum. The RSI is trending upward from the mid-level, indicating positive momentum in the short term.
The daily chart for natural gas shows that the price has broken above the key level of $3.60, initiating a strong upward move. Natural gas prices have gained bullish momentum, driven by strong demand due to cold weather forecasts. The breakout from the cup-and-handle pattern at $3, followed by positive consolidation between $3 and $3.60, has strengthened bullish momentum in natural gas prices. The subsequent breakout above $3.60 further solidified this upward trend.
The 4-hour chart for natural gas shows that the price is trending within an ascending channel and continues to increase. After breaking above $3.60, the price has reached the channel’s resistance and is consolidating. In the short term, the price may correct back to the $3.50–$3.60 range, but the overall trend remains upward.
The daily chart for the US Dollar Index shows that the index broke above the 107 resistance level before the Christmas holidays. This breakout occurred following the Federal Reserve’s rate cuts in December. The PCE inflation data has complicated the outlook by initiating a correction in the US dollar. The correction after the PCE inflation data caused the consolidation of the US dollar.
However, these consolidations have contributed to positive momentum for the US dollar, with the price appearing poised to trade higher. The recent rally in the US dollar from the 105.60 support level began when the RSI rebounded from the mid-level. The daily candles following the bounce from 105.60 indicate that the index may continue to trade higher.
The 4-hour chart for the US Dollar Index shows that the index is trading within an ascending channel and appears to be moving higher. It has formed an inverted head-and-shoulders pattern at the support level of the ascending channel, indicating positive momentum toward the target of 110. This target is derived from the resistance area of the ascending channel.
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.