On Thursday (December 19), the US dollar index hit 108.18, gold prices fell to $2,591, and Bitcoin was close to falling below the $100,000 mark. The Federal Reserve decided to cut interest rates by 25 basis points, but predicted that the interest rate in 2025 would be 3.9%, higher than the expected 3.4%. Chairman Powell also sent out hawkish signals, saying that future interest rate cuts will require new progress in inflation. Palestinian negotiators revealed that the ceasefire negotiations in Gaza have entered the final stage, suppressing the safe-haven buying of precious metals.
Palestinian negotiator: Gaza ceasefire talks have entered the final stage
According to the British BBC, after months of stalemate, there are new signs that Israel and Hamas may be close to reaching an agreement on a ceasefire in Gaza and the release of hostages. A senior Palestinian official involved in indirect negotiations disclosed to the British media that the negotiations are at a "decisive and final stage."
Israeli Defense Minister Israel Katz also said the two sides were closer to a deal than ever before. In recent weeks, the United States, Qatar and Egypt have resumed mediation efforts, indicating that both sides are more willing to reach an agreement in the 14-month war. Currently, an Israeli delegation known as a "working level" is in Doha, the capital of Qatar, where diplomatic activity is intense.
Palestinian officials outlined a three-phase plan that would free civilians and female soldiers held in Gaza within the first 45 days, while Israeli forces would withdraw from the city center, coastal roads and strategic locations along the border with Egypt. The official said there would be a mechanism to allow displaced Gazans to return to the north of the region. The second phase would free the remaining hostages and withdraw troops, and the third would end the war.
Of the 96 hostages still being held in Gaza, Israel estimates that 62 are still alive. The plan appears to be based on a deal proposed by U.S. President Joe Biden on May 31, with reports from all sides stressing that there are still key details to be worked out. A round of talks in mid-October failed to produce an agreement, with Hamas rejecting a short-term ceasefire proposal.
“We have never been this close to an agreement on the hostages since the last deal,” Katz told members of the Knesset’s foreign affairs committee on Monday, according to his spokesman, referring to a November 2023 exchange of hostages and Palestinian prisoners in Israel.
Powell's "hawkish rate cut", the Fed's forecast for next year's interest rate is off the charts, and the dollar buying breaks through 108
The Federal Open Market Committee (FOMC) on Wednesday voted 11-1 to lower the federal funds rate to a range of 4.25-4.5%. Cleveland Fed President Beth Hammack voted against the move, preferring to keep rates unchanged.
As the market digested the Federal Reserve's decision to cut interest rates by 25 basis points as expected, the dollar remained strong and broke through the 108 mark.
The updated forecast shows an interest rate of 3.9% in 2025, up from 3.4%, and a target rate of 3.4% in 2026, reflecting a slightly more hawkish medium-term stance, with a more cautious but slightly hawkish policy stance. Despite economic uncertainties such as a weak labor market and persistent inflation, the Fed's gradual adjustment of policy shows that it has struck a careful balance between controlling price pressures and supporting growth.
Economic conditions remain mixed, with inflation still above 2% and signs of labor market weakness, prompting the Fed to remain data-dependent.
Powell emphasized the uncertainty of the interest rate outlook, suggesting that the central bank will gradually adjust its policy and pay close attention to growth and inflation trends. He mentioned that he believes economic activity will continue to be strong, but the direction of interest rates will depend on subsequent data.
He said: "With today's action, we have reduced the policy rate by a full 100 basis points from the peak, and our policy stance is now significantly less stringent. As a result, we can be more cautious when considering further adjustments to the policy rate. Rates remain With the economy suppressed, the Fed is expected to continue cutting interest rates, but officials will have to see more progress on inflation before cutting rates further."
New quarterly projections show several officials anticipating fewer rate cuts next year than they forecast just a few months ago and see much slower progress in inflation in 2025. They now see the benchmark rate at a range of 3.75% to 4% by the end of 2025, according to the median estimate, implying two 25 basis point cuts each.
Most economists surveyed by Bloomberg expect average interest rate expectations to point to three rate cuts next year.
US Dollar Technical Analysis
FXStreet analyst Patricio Martín said that from the technical perspective of the US dollar index, the indicator has rebounded sharply since this week, but the index still needs to hold the 107.00-108.00 area. If the US dollar index holds this range, it may continue to rise, otherwise, it may retest 106.00.
Gold Technical Analysis
Bruce Powers, an analyst at FXEmpire, said gold prices have fallen below their recent medium-term swing low of $2,605, falling to Wednesday's low of $2,587. This is a bearish signal that could lead to a fall in gold prices.
The $2,605 swing low established a higher swing low and set the stage for a bullish continuation above the $2,721 swing high on November 25. The market then attempted to break above the $2,721 level on December 12, setting a minor new high at $2,726. However, sellers quickly took back control from there, resulting in Wednesday’s decline.
A daily close below the $2,605 support level confirms the bearish signal and sets gold up to test lower support levels before completing the correction. Note the parallel descending trend channel on the chart. An attempt to break above the top channel line was made recently but failed a few days later as gold fell back below that line last Friday.
Moreover, recent attempts to reclaim the 20-day and 50-day moving averages have also failed. On Wednesday, gold found resistance near the 20-day moving average, after having been trading above it for the previous six days, while the 20-day moving average fell below the 50-day moving average on November 26 and has yet to return above it. These are bearish signals that now take on greater significance.
It looks like there is a good chance that the $2,537 swing low will be retested as support and that prices could fall as well. Generally speaking, once prices are rejected on one side of a channel and start moving in the other direction, there is a chance that the opposite trendline will eventually be touched. The weekly chart provides clues for this decline as last week's bearish weekly shooting star candlestick pattern was triggered on Wednesday. It represents the failure of the aforementioned early bull breakout. A failed pattern could lead to wild volatility.
Below $2537 is the 61.8% Fibonacci retracement level at $2473, which appears to mark the next lower potential support level for gold. The falling ABCD pattern also completed around $2475. It is also a good idea to watch for signs of support near the next lower trendline, which is the Fibonacci retracement level.
Bitcoin Technical Analysis
CoinTelegraph pointed out that Bitcoin has retreated after hitting an all-time high of more than $108,000 on December 17, indicating that bears have not given up and are selling at highs. Arthur Hayes, co-founder of BitMEX, wrote in a blog post that the crypto market may plummet after the inauguration of US President-elect Trump in January 2025. He said that the sell-off will occur after market participants realize that any crypto policy changes will take about a year to implement.
In contrast, Bitfinex analysts expect the downturn in Bitcoin’s uptrend to be short-lived in 2025 due to institutional demand. They estimate that Bitcoin will reach $145,000 by mid-2025, with the potential to reach $200,000 under “favorable conditions.”
Vetle Lund, head of research at K33 Research, pointed out that continued purchases by institutional investors pushed the total net assets of U.S. Bitcoin exchange-traded funds (ETFs) to more than $129 billion on December 16, slightly higher than U.S. gold ETFs. Bloomberg ETF analyst Eric Balchunas said in the article that it was "incredible" that the Bitcoin ETF was competing so fiercely with the gold fund just 11 months after its launch.
On December 16 and December 17, Bitcoin bulls pushed the price above the resistance line of the ascending channel pattern but failed to sustain the higher levels.
While the rising moving averages suggest favor among buyers, the negative divergence on the relative strength index (RSI) suggests that the uptrend is losing momentum. This increases the possibility of consolidation in the short term.
The 20-day exponential moving average at $99,974 is a key support level to watch. If the price rebounds strongly from the 20-day EMA, the possibility of breaking out of the resistance line increases. This could push Bitcoin to $113,331 and subsequently to $125,000.
This positive view will be invalidated in the short term if the price turns down and breaks below the support line. This can drag the price down to the 50-day simple moving average at $90,839.
