On the Mend After Plunge

Central Bank

Summary:

U.S. equity index futures opened higher on Thursday, indicating a potential market rebound following the previous session's selloff. Investors are keen to capitalize on the lowest levels post-selloff to purchase equities.

BUY US30

EXP

TRADING

42499.44

Entry Price

44628.00

41400.00

42944.90 +428.45 +1.01%

0.0

Pips

Flat

41400.00

Exit Price

42499.44

Entry Price

44628.00

Fundamentals

U.S. equities experienced a modest uptick in early trading on Wednesday, only to plummet later in the day influenced by the Fed's monetary policy statement. All major indices closed significantly lower. The Dow Jones Industrial Average (DJIA) broke its short-term upward trajectory, marking a streak of 10 consecutive trading days of declines.

The major stock indices closed near their intraday lows with significant declines. The Dow Jones Industrial Average (DJIA) fell by 1,123 points, or 2.6%, to close at 42,326. The Nasdaq Composite Index dropped by 716 points, or 3.6%, to 19,392. The S&P 500 Index declined by 178 points, or 3.0%, to 5,872.

The DJIA's substantial drop on the day set the longest losing streak since 1974, reaching the lowest closing price in over a month. The S&P 500 also closed at its lowest level in a month.

The Fed announced the widely anticipated rate cut, lowering rates by 25 bps. However, the projected rate cuts for the coming year are expected to be less than previously anticipated. Subsequently, a selloff emerged on Wall Street.

Given the market's near-universal expectation of a rate cut from the Fed, the focus of the statement was on the latest economic projections from Fed officials. The updated projections indicate that rates will be between 3.75% and 4.0% by the end of 2025, compared to the September forecast of 3.25% to 3.50%

If the Fed cut rate by 25bps, the projection for next year is now only two rate cuts, down from the previously anticipated four.

Fed officials expect higher inflation in 2025 than previously forecasted, with consumer price growth projected at 2.5%, compared to the September forecast of 2.1%. Consequently, the number of projected rate cuts is expected to decrease.

Federal Reserve Chairman Powell stated in a post-meeting press conference that the central bank would seek more progress on inflation before considering further rate cuts. He also noted that the annual price growth rate has been moving sideways recently.

Market Observation. With investors having bet on more aggressive action from the Fed to lower borrowing costs, all three major Wall Street indices reacted with declines to the Fed's revised outlook. However, we view Wall Street's selloff as "healthy." The Fed's cautious projections for future rate cuts provide a reality check for investors. Considering Trump's potential to avoid any backlash from the stock market, actual tariffs may not be as severe as the market fears.

Technical Analysis

The hawkish stance from the Fed could potentially be detrimental to the stock market and may lead to a short-term downward phase in U.S. equities. However, it is noteworthy that the Fed's slower pace of rate cuts may only exert short-term pressure on U.S. stocks. Currently, we have not seen any significant bearish reversal signals in the U.S. stock market.

The DJIA appears to be on the verge of a correction. Investors can prepare for a bounce trade around intraday lows or levels around 42,158 to 41,933.

Trading Recommendations

Trading Direction: Buy

Entry Price: 42500

Target Price: 44628

Stop Loss: 41400

Valid Until: January 3, 2025, 23:55:00

Support: 42170/41922/41685

Resistance: 42891/43695/44546

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Eva Chen

Commodity

Central Bank

Summary:

Following the conclusion of its final monetary policy meeting for the year, the Federal Reserve, as anticipated, reduced the federal funds rate by 25 basis points, signaling a deceleration in the easing cycle through 2025, which has led to a substantial liquidation in gold prices.

BUY XAUUSD

Close Time

CLOSED

2613.77

Entry Price

2706.00

2575.00

2623.41 +28.97 +1.12%

261.6

Pips

Loss

2575.00

2587.61

Exit Price

2613.77

Entry Price

2706.00

Fundamentals

In the aftermath of the Federal Open Market Committee's (FOMC) final monetary policy session for the year, the committee, in line with market expectations, lowered the federal funds rate to a target range of 4.25% to 4.50%.

The FOMC reaffirmed the uncertainty surrounding the economic outlook, with escalating risks to its dual mandate.

The monetary policy statement highlighted: "Recent data indicate that economic activity has been expanding at a moderate pace. Overall, labor market conditions have shown signs of easing since earlier this year, with the unemployment rate ticking higher, yet remaining at a low level. Inflation has made progress toward the committee's 2% objective, albeit remaining somewhat above that level."

Against this backdrop, and based on the latest economic projections, a marginal upward adjustment is anticipated for the year 2025. The Fed projects that the federal funds rate will decline to 3.9% by year-end, suggesting only two rate cuts for the following year, below the September projection of 3.4%.

The current median forecast indicates that the FOMC anticipates just two 25bps rate reductions in 2025. Prior to September, the dot plot had forecast a reduction of 100bps, strongly implying a more gradual shift towards a neutral policy stance in the coming year.

Gold prices oscillated for the majority of Wednesday's trading session but experienced a sustained decline following the Fed's rate cut, with the drop expanding to approximately 2.3%. While the 25bps rate reduction was largely expected, the forward guidance provided by the Fed exerted pressure on gold and broader market sentiment.

The Fed's downgraded projection for rate cuts in 2025, and the primary source of uncertainty for this adjustment, remains the incoming Trump administration. The fiscal, trade, and immigration policies of the Trump administration are collectively expected to contribute to reflation, which is a cause for concern. The Sell-Off Wave Set to Swiftly Subside_1

The Sell-Off Wave Set to Swiftly Subside_1

Technical Analysis

From a technical perspective, gold bulls maintain a technical advantage in the near term, albeit diminished. The price action on the daily chart remains in an uptrend, albeit a minor one.

The subsequent upside price objective for the bulls is beyond the robust resistance level at $2,706. The initial resistance level is at yesterday's high of $2,652, followed by Tuesday's high at $2,667.

The subsequent near-term downside price objective for the bears is the solid technical support level at $2,537. The initial support level is at $2,578, followed by $2,554.

Trading Recommendations

Trading Direction: Buy

Entry Price: 2612

Target Price: 2706

Stop Loss: 2575

Valid Until: January 3, 2025, 23:55:00

Support: 2578/2554/2537

Resistance: 2652/2667/2776

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Summary:

Bitcoin experienced a correction, falling 2.9% to $103,173 after reaching record highs earlier this week. Profit-taking and uncertainty ahead of the Federal Reserve's expected interest rate cut contributed to the pullback.

BUY BTC-USDT

Close Time

CLOSED

101993.2

Entry Price

120000.0

98000.0

95787.8 -1736.3 -1.78%

3993.2

Pips

Loss

98000.0

Exit Price

101993.2

Entry Price

120000.0

Bitcoin's recent surge came to a halt on Wednesday, as the leading cryptocurrency pulled back by 2.9% to $103,173 at Bitstamp. This marks the first decline in four sessions, a retreat from its near-record highs following an impressive run. The pullback, which saw a session-high of $106,523, is primarily attributed to profit-taking, as traders adopted a more cautious stance ahead of the Federal Reserve's highly anticipated policy meeting later today.

The Federal Reserve is expected to cut interest rates for the third consecutive time this year, a move that is likely to inject further liquidity into markets, including the cryptocurrency space. Bitcoin's recent climb has mirrored an influx of capital into speculative assets as the central bank has loosened its monetary policy in response to weakening economic conditions. A reduction in borrowing costs could serve as a catalyst for more cash flow into riskier assets, including Bitcoin, a trend that has sparked optimism among long-term investors in the digital asset class.

Bitcoin's latest retreat came after the cryptocurrency touched a record high of $108,364 earlier this week, fueled by a 0.25% gain on Tuesday that marked its third consecutive profit. However, the broader crypto market, which had hit a peak market value of $3.975 trillion on December 17, suffered a significant loss on Wednesday. The total market capitalization of cryptocurrencies shrank by $110 billion, settling at $3.805 trillion as Bitcoin underwent its correction.

Despite this short-term pullback, the overall bullish sentiment surrounding Bitcoin remains intact. MicroStrategy, a business intelligence firm known for its large Bitcoin holdings, further confirmed its commitment to the digital asset by announcing another major purchase of 15,350 BTC, worth $1.5 billion. The company, led by CEO Michael Saylor, spent between December 13 and 15 at an average price of $100,386 per Bitcoin, bringing its total reserves to a staggering 439,000 BTC. Saylor's ongoing support for Bitcoin underscores the long-term optimism surrounding the asset, particularly as institutional demand continues to rise.

As the Federal Reserve prepares to conclude its two-day policy meeting, all eyes are on the central bank's actions. The market is almost unanimously expecting a 0.25% interest rate cut, with the Fedwatch tool indicating a 96% probability of such a move. This decision could have significant ramifications for risk assets, including cryptocurrencies, as a dovish policy stance may encourage greater investor appetite for speculative plays.

Technical Analysis

From a technical perspective, Bitcoin's price (BTCUSD) remains bullish, with the cryptocurrency attempting to move away from the support line of its current bullish channel. This suggests that a new bullish wave could be on the horizon, with potential price targets reaching as high as $104,900 and $120,000 However, to achieve these targets, Bitcoin must maintain its price above $100,320.

Traders should watch for any significant breaks below this key support level, as it could signal a deeper correction. On the other hand, Bitcoin's ability to hold above $100,320 and push towards higher resistance levels could validate the ongoing bullish trend. For today, the expected trading range is between the support at $99,000 and resistance at $105,500.

TRADE RECOMMENDATION

BUY BTCUSD

ENTRY PRICE: 102000

STOP LOSS: 98000

TAKE PROFIT: 120000

Risk Warnings and Disclaimers

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Warren Takunda

Commodity

Summary:

Gold prices fell sharply on Wednesday, following a rally in the dollar against major rivals after the Federal Reserve's decision to reduce interest rates.

SELL XAUUSD

Close Time

CLOSED

2620.00

Entry Price

2540.00

2670.00

2623.41 +28.97 +1.12%

152.5

Pips

Profit

2540.00

2604.75

Exit Price

2620.00

Entry Price

2670.00

Gold prices tumbled on Wednesday, taking a sharp downturn as the U.S. dollar soared in the wake of the Federal Reserve’s decision to cut interest rates for the third consecutive time. The dollar strengthened against most major currencies, further dampening the appeal of precious metals, especially gold. Spot gold prices fell by 1.3%, settling at $2,625.30 per ounce as of 19:48 GMT, while the U.S. Dollar Index (DXY) gained 0.9%, reaching 107.9, its highest point of the day.

The Federal Reserve’s rate cut of 25 basis points, announced earlier in the day, was largely in line with market expectations, bringing the federal funds rate to a range of 4.25% to 4.5%. This decision follows similar rate cuts in September and November, marking the third consecutive reduction since the Fed began reversing its aggressive tightening cycle in 2022. With inflation still hovering above its 2% target, the Fed has expressed its intent to bring price levels under control, even as the U.S. economy continues to expand at a steady pace. The central bank noted that the labor market remains strong, with unemployment remaining at historically low levels, adding to the resilience of the U.S. economy.

However, the Fed’s statement revealed a cautious stance. Despite its optimism about economic growth, the Fed acknowledged that inflation remains “somewhat high” and has not yet been fully tamed. This suggests that while the central bank is taking a more dovish approach by cutting rates, it may need to tighten again if inflation does not subside in the coming months. In fact, the Fed’s updated economic projections show a modest 2.5% GDP growth rate for 2024, a 0.5% increase from its previous forecast in September. However, growth is expected to slow to 1.8% in 2025.

On the labor front, the Federal Open Market Committee (FOMC) revised its unemployment forecast downward to 4.2%, a positive sign of continued strength in the U.S. job market. But even with the improving job market, inflation remains a point of concern. The FOMC raised its inflation forecast to 2.4%, slightly above the long-term target of 2%, and also raised its core inflation projection to 2.8%. These updated outlooks suggest that inflationary pressures, while reduced, are still above acceptable levels.

In response to the Fed’s actions, the U.S. dollar rose sharply, further diminishing gold’s appeal. Gold, which is often seen as a hedge against inflation and a store of value in times of economic uncertainty, typically moves inversely to the dollar. The strengthening dollar makes gold more expensive for foreign buyers, thereby curbing demand for the precious metal.

Technical Analysis

From a technical analysis standpoint, gold prices have been fluctuating around the $2,615 level, seemingly gathering momentum for a continued bearish trend. The price action since the morning session indicates that gold is likely to continue its decline, with the next target for the metal around the $2,540 mark.

The 50-period Exponential Moving Average (EMA50) is providing further support for this bearish outlook, signaling that the downward momentum is likely to persist unless gold breaches the $2,655 resistance level and holds above it.

The expected trading range for gold today is between $2,585 on the downside and $2,630 on the upside. Unless prices break above the $2,655 level, the trend is expected to remain bearish, with further downside potential in the near term.

TRADE RECOMMENDATION

SELL GOLD

ENTRY PRICE: 2620

STOP LOSS: 2670

TAKE PROFIT: 2540

Risk Warnings and Disclaimers

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Alan

Commodity

Central Bank

Summary:

December 18 saw the Fed's interest rate decision align with market expectations, cutting rates by 25bps. However, it also signaled a slower pace of future cuts, potentially weighing on gold in the short term.

SELL XAUUSD

Close Time

CLOSED

2620.89

Entry Price

2551.00

2641.50

2623.41 +28.97 +1.12%

69.5

Pips

Profit

2551.00

2613.94

Exit Price

2620.89

Entry Price

2641.50

Fundamentals

On December 18, the Fed's latest rate decision showed a 25bp rate reduction, meeting market predictions. Simultaneously, the Fed projected a narrower 50bp cut for 2025.

The dot plot revealed a more hawkish tilt than in September, with diverse committee members supporting no change, 25bp, or 50bp cuts for 2025, hinting at a deceleration in rate cut frequency.

Moreover, Chairman Powell characterized the current phase as entering a "new stage," noting stronger economic growth, persistent inflation, and proximity to neutral interest rates after prior cuts.

Overall, gold might face downward pressure given the slowed future rate cut expectations.

Technical Analysis

After the interest rate decision, markets reacted with a straight decline, confirming that the rate cut was fully priced in, turning good news into bad. Followed by the slower future cut pace signal, gold tumbled sharply, reaching as low as $2,583.09.

Slowing Rate Cut Expectations May Drive Short-Term Downturn _1

A four-hour candlestick plunged below the previous support at $2,625, showcasing strong bearish force. Moving averages began tilting downwards, pointing to possible further decline.

Following the fall to $2,583.09, some shorts took profits, propelling a slight recovery. Gold now stands under resistance at $2,625. Weakening here suggests a continued decline, testing $2,575. Breaking $2,575 could prompt a revisit to the earlier low at $2,536.69.

Selling at highs is recommended.

Trading Recommendations

Trading direction: Sell

Entry price: 2620.00

Target price: 2551.00

Stop loss: 2641.50

Valid Until: Jan 2nd, 2025 23:00:00

Support: 2614.12/2583.09/2536.69

Resistance: 2625.00/2636.02/2651.62

Risk Warnings and Disclaimers

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Winkelmann

Cryptocurrency

Summary:

The Fed hints at slowing rate cuts next year, with no intent to hold Bitcoin, dealing a blow to the cryptocurrency.

SELL BTC-USDT

EXP

PENDING

103000.0

Entry Price

98000.0

106000.0

95787.8 -1736.3 -1.78%

Pips

PENDING

98000.0

Exit Price

103000.0

Entry Price

106000.0

Fundamentals

Trump won the U.S. election. Due to his crypto-friendly policies, along with his repeated advocacy for establishing a strategic Bitcoin reserve, Bitcoin surged to record highs, breaching the $100,000 threshold.

However, despite crossing the six-figure milestone, the uptrend noticeably decelerated. Following the Fed's expected December rate cut, Bitcoin experienced a crash, largely because the 25-basis-point cut passed by a slim margin, accompanied by Chairman Powell's hawkish tone indicating potential slower rate cuts in 2025. This led to a dollar rally and broad declines in equities including tech stocks. Moreover, Powell's disinterest in amending laws for a strategic Bitcoin reserve signaled the Fed's lack of appetite for holding Bitcoin, sparking sell-offs among bulls.

Technical Analysis

Fed's "Hawkish Cut" Puts Bitcoin on Hold _1

On the daily chart, although BTCUSDT remains in historically high territory, the recent ascent has clearly slowed, exhibiting a bearish divergence. A potential temporary peak may be reached if BTCUSDT keeps falling.

Fed's "Hawkish Cut" Puts Bitcoin on Hold _2

Regarding the 1H chart, Bitcoin staged a sharp reversal, forming a 'head and shoulders' pattern, favoring a bearish bias. If the price fails to break above the neckline, it may resume downward movement, implying room for further correction in the short term.

Selling at highs is recommended. Try to sell when BTCUSDT rebounds to 103300 and set the target price at the massive trading area near 98000. The stop-loss should be put above 105400.

Trading Recommendations

Trading direction: Sell

Entry price: 103000

Target price: 98000

Stop loss: 106000

Support: 96000/100000

Resistance: 103300/105400

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Summary:

The Japanese Yen (JPY) hit a one-month low against the US Dollar (USD/JPY) as the Bank of Japan (BoJ) maintained its dovish policy, contrasting with the Federal Reserve's hawkish stance.

BUY USDJPY

Close Time

CLOSED

156.600

Entry Price

160.000

153.600

156.302 -1.112 -0.71%

107.0

Pips

Profit

153.600

157.670

Exit Price

156.600

Entry Price

160.000

The Japanese Yen (JPY) hit a one-month low against the US Dollar (USD) after the Bank of Japan (BoJ) decided to maintain its ultra-loose monetary policy, signaling no immediate plans for a rate hike. This decision, coupled with the Federal Reserve’s hawkish tone on interest rates, has created a challenging environment for the Yen, prompting it to lose further ground against its American counterpart. As market participants digest these developments, the JPY’s trajectory appears increasingly vulnerable to external pressures.

At the conclusion of its two-day policy meeting, the BoJ announced it would keep its short-term interest rate target in the range of -0.1% to 0.25%, consistent with its long-standing commitment to monetary easing. Governor Kazuo Ueda, in his post-meeting press conference, reiterated that the central bank’s focus remains on achieving sustainable inflation accompanied by higher wages and increased private consumption. However, the absence of fresh guidance on a potential rate hike, even as inflationary pressures loom, disappointed market participants. Ueda’s acknowledgment of uncertainties surrounding economic growth and prices further dampened hopes for a more proactive monetary stance.

The BoJ’s caution contrasts sharply with the Federal Reserve’s assertive approach. Despite global economic uncertainties, the Fed has consistently signaled its readiness to maintain higher interest rates for an extended period. This divergence in policy outlook has made the JPY less attractive, particularly against the backdrop of rising US Treasury yields.

The Federal Reserve’s latest monetary policy decision underscored its commitment to combating inflation. While the central bank lowered its benchmark rate by 25 basis points to the 4.25%-4.50% range, its updated “dot plot” projections revealed a less aggressive path for rate cuts in 2025. Fed Chair Jerome Powell emphasized that inflation remains above the 2% target, justifying the need for a restrictive policy stance.

This hawkish outlook has bolstered US bond yields, with the 10-year Treasury yield reaching its highest level since May 31. The surge in yields has, in turn, propelled the US Dollar to a two-year high, further exacerbating the JPY’s weakness. Investors are now pricing in the likelihood of prolonged monetary tightening in the US, a scenario that diminishes the appeal of lower-yielding currencies like the Yen.

While the broader macroeconomic environment weighs heavily against the Yen, geopolitical uncertainties and risk-off sentiment could provide intermittent support. Concerns over global trade tensions and regional conflicts have historically driven demand for safe-haven assets, including the JPY. However, the Yen’s role as a safe haven is being challenged by its diminished yield advantage and the allure of the USD.

Technical Analysis

The USD/JPY pair continues to exhibit a strong bullish bias, with prices breaching the key resistance level of 154.95. The pair is now testing its recent high of 156.74, indicating the potential for further gains in the near term. The immediate support level is seen at 154.50, while a break below 154.25 could trigger a corrective move towards 152.70.

Conversely, sustained momentum above 156.00 would pave the way for additional upside, reflecting the dominance of USD bulls in the current environment. Traders are advised to monitor US macroeconomic data, including the final Q3 GDP print and weekly initial jobless claims, for short-term trading opportunities.

TRADE RECOMMENDATION

BUY USDJPY

ENTRY PRICE: 156.60

STOP LOSS: 153.60

TAKE PROFIT: 160.00

Risk Warnings and Disclaimers

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On the Mend After Plunge

Fundamentals

Technical Analysis

Trading Recommendations

The Sell-Off Wave Set to Swiftly Subside

Fundamentals

Technical Analysis

Trading Recommendations

Bitcoin Pulls Back: Is It Time to Buy the Dip Before the Fed’s Policy Decision?

Gold Prices Decline as Dollar Strengthens Following Federal Reserve Rate Cut

Technical Analysis

Slowing Rate Cut Expectations May Drive Short-Term Downturn

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Technical Analysis

Trading Recommendations

Fed's "Hawkish Cut" Puts Bitcoin on Hold

Fundamentals

Technical Analysis

Trading Recommendations

BoJ’s Stance Keeps USD/JPY Elevated

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Risk Disclosure