On Wednesday (December 25), the US dollar index maintained strength at 108.16, as the Richmond manufacturing index confirmed contraction, and strong pricing for a pause in interest rate cuts in January 2025. China is set to issue 3 trillion yuan in special treasury bonds, with the government seeking to support consumer subsidies and boost the Asia-Pacific stock market. Gold rebounded to $2616 after the Houthis launched a series of large-scale attacks, and Israel vowed to escalate the situation in Yemen, targeting Houthi leaders. Bitcoin surged towards the $98,000 level, as MicroStrategy held a shareholders meeting to raise funds for purchasing more Bitcoin.
Israel vows to escalate the situation in Yemen targeting Houthi leaders.
The well-known financial blog ZeroHedge reported that following several significant rocket attacks by the Houthis in Yemen, Israeli leaders vowed to escalate military retaliation against Houthi leadership and their military infrastructure.
Last Saturday, the Houthis launched one of the largest attacks to date. Reports indicate that a hypersonic ballistic missile struck Tel Aviv, injuring 16 people. On Tuesday, the Houthis fired another missile at Israel, marking the third attack by the Houthis within a week. The Iran-linked Houthis have vowed not to stop their attacks unless Israeli forces withdraw from Gaza.
Israeli Defense Minister Yoav Gallant now states that the leaders of the Yemeni terrorist organization have made themselves targets for attacks. Eliminating them will now become the Israeli military's top priority. In his comments on Tuesday, he stated: 'Just as we dealt with Sinwar in Gaza, Haniyeh in Tehran, and Nasrallah in Beirut, we will also deal with the Houthi leaders in Sanaa or anywhere in Yemen.' He referred to the assassinated leaders of Hezbollah and Hamas.
He promised while inspecting the Arrow air defense system battery that had just intercepted the latest missile attack from the Houthis: 'We will take action against their infrastructure and themselves to eliminate the threat.'
He also called out Iran again, warning that 'whoever supports the Houthi terrorism in Hudaydah or Sanaa will pay the full price.' For years, the US has recorded Iran's support for the organization, including advanced missile and drone technology. This has greatly increased the threat in Yemen.
In recent days and weeks, Israel has conducted intermittent airstrikes on the Houthis, but attacks on individual leaders would mark a new advancement in Israel's airstrikes.
(Times of Israel) notes: 'Firing at Houthi leaders seems to mark an escalation of Israeli actions in response to multiple drone and ballistic missile launches from Yemen, with Israel having conducted multiple strikes against port infrastructure and military bases to date.'
China is set to issue 3 trillion yuan in special treasury bonds as the US Richmond manufacturing index confirms contraction.
According to Reuters on Tuesday, Chinese policymakers plan to issue a record 3 trillion yuan, approximately $411 billion, in special treasury bonds in 2025. The Chinese government seeks to support consumer subsidies, corporate equipment upgrades, and investments in key technologies and advanced manufacturing.
The market expects China to inject 3 trillion yuan, causing Asian stocks to rise. Europe, however, struggles to benefit from this tailwind and remains sluggish, while US futures markets rise.
French Prime Minister Francois Bayrou hopes to reach an agreement with the parliament on the 2025 budget to reduce the deficit to close to 5%, nearing the level of his predecessor Michel Barnier.
The US December Philadelphia Fed non-manufacturing activity index was released, with an actual value of -6, compared to a previous value of -5.9. The Richmond Fed manufacturing index was -10, below the expected -9 and down from the previous -14.
The CME Fed Watch tool predicts that the Federal Reserve will hold its first meeting of 2025 on January 29, with a 91.4% probability of maintaining a stable policy rate and only an 8.6% probability of a 25 basis point cut.
The US 10-year benchmark interest rate is at 4.59%, the highest point of last week.
Dollar Technical Analysis
FXStreet analyst Filip Lagaart stated that the trading range of the dollar index was relatively narrow on Tuesday. An increasing number of traders are currently not participating in the market, meaning prices have almost no reaction unless significant news occurs. Therefore, it seems that the dollar index will close near its highest point in two years before Christmas Eve.
On the upside, a trend line that began on December 28, 2023, is acting as a moving upper limit. The next solid resistance level is 109.29, which is the peak from July 14, 2022, and has a good track record as a key level. Once this level is broken, the integer level of 110.00 will come into play.
The first downside obstacle is at 107.35, which has now turned from a resistance level to a support level. The second level that could prevent any selling pressure is 106.52. From there, even 105.53 may be considered, while the 55-day simple moving average (SMA) at 105.23 is advancing towards that level.
Gold Technical Analysis
FXEmpire analyst Bruce Powers stated that gold has been consolidating in recent days, trying to strengthen towards the 20-day moving average to test its resistance level. So far, gold has not achieved much success, hitting a high of $2633 on Monday. Since the fluctuation low of $2582 last week, gold has created three smaller daily highs but remains within the price range from last Wednesday, which usually leads to consolidation. The resistance level is near the small upward trend line drawn from the fluctuation low on November 26.
Unless there are significant bullish signals in the near term, gold is expected to pull back once it tests the resistance level. Gold created a lower fluctuation high on December 12 (C), allowing it to depict a descending ABCD pattern (in purple) within a downward parallel channel. Two weeks ago, gold completed a weekly bearish shooting star candlestick pattern and triggered downward movement last week. Additionally, last week's closing price was below the previous week's bearish signal, confirming the weekly bearish signal. This week, gold is expected to trade within the week, and as holiday season volatility eases, it is likely to end in this manner.
The trend resistance level indicated by the convergence of the top downward trend line and the 20-day moving average shows that the current 20-day moving average is at $2643. The 50-day moving average trend indicator is slightly higher at $2667. A sustained upward movement and daily closings above the 50-day moving average are needed before the outlook becomes more optimistic. Of course, sustained upward movement above the 20-day moving average would provide an early signal of strength.
A red top trend line has been added to the chart, starting from the October high point (A) and connecting recent fluctuation highs (C). It establishes a possible new descending angle for the downward channel and dynamic resistance line, provided that the gold price rises above the 50-day moving average. Until then, downward pressure remains. However, if the gold price can break through and hold above the 20-day moving average, the likelihood of ultimately testing lower support levels before the correction ends will decrease.
If the gold price breaks below the recent fluctuation low of $2582, that point has essentially tested the support level near the 78.6% Fibonacci retracement of the minor rise. It may then test the support level around $2532. If this price area fails to maintain support, the gold price may decline to the target area of $2477, which includes the 61.8% retracement at $2473 and the completion level of the downward ABCD pattern at $2474.
Bitcoin Technical Analysis
CoinTelegraph noted that after a volatile opening this week and re-testing the December low, Bitcoin rebounded and attracted a new round of buying. The latest data from monitoring resource CoinGlass shows that Bitcoin short liquidations approached $40 million in 24 hours, with a total of $150 million across cryptocurrencies.
MicroStrategy held a special shareholders meeting to seek approval to increase its authorized shares to support its $42 billion Bitcoin acquisition plan, known as the 21/21 plan.
The proposal includes increasing the authorized shares of Class A common stock and preferred stock to provide more flexibility for future stock issuances. Since October, MicroStrategy has significantly accelerated its Bitcoin purchasing pace, buying 42,162 Bitcoins just in December. As of December 22, the company holds over 444,000 Bitcoins, valued at approximately $43.5 billion at current prices.
'Bitcoin performed well on Tuesday,' the analysis account Bitcoindata21 continued, attaching a chart showing the volume-weighted average price (VWAP) level needed for the next recovery.
'So far, we have broken through the first VWAP resistance level (green arrow), and if we can break through the second resistance level of $98,500, we will break through the historical high. The Coinbase premium also seems to want to break the downward trend (blue line).'
The chart also shows a rebound in Coinbase premiums, reflecting increased buying pressure during US trading hours.
However, renowned trader and analyst Rekt Capital expressed a cautious view, writing: 'On Tuesday, Bitcoin showed some signs of rebound, after which the price nearly fell to a new low. Bitcoin rebounded again and returned to the original support level. Overall, as long as the previously lost support level turns into a new resistance level, further declines should be expected. Conversely, reclaiming these previously lost support levels is clearly bullish.'
