Equities gain on hints of gradual US tariffs
Chinese equities climbed and led gains across Asia, while the dollar lost ground, after reports emerged that the incoming US administration may adopt a measured plan for raising tariffs. The dollar gauge slipped for the first time in six sessions, with New Zealand’s currency outperforming its Group-of-10 peers. Shares in Hong Kong trended upward alongside those in Sydney and Taiwan. US equity futures also advanced, extending the modest gains recorded by the S&P 500 on Monday.
Expectations of a step-by-step approach to tariffs lifted market sentiment, considering that earlier threats of levies reaching 60% on Chinese exports had loomed over Asian trading. The prospect of more moderate tariffs could ease some inflation concerns and potentially reduce upward pressure on Treasury yields, allowing the Federal Reserve greater flexibility in managing interest rates. Meanwhile, investors are watching closely for US inflation figures due this week, seeking more clarity on the Fed’s policy outlook.
BOJ signals potential rate hike
In Japan, the 40-year bond yield reached its highest level since that maturity was introduced in 2007, reflecting a global wave of debt selling and speculation that the Bank of Japan may eventually lift interest rates. Deputy Governor Ryozo Himino indicated that the possibility of a rate increase is on the table for next week, noting that the board plans to discuss the idea and that the bank’s economic projections are gradually being realized.
While the yen held steady against the dollar, Japanese stocks dipped following a holiday break on Monday. Market participants are closely monitoring any shift in the BOJ’s guidance, as higher rates would mark a notable change for Japan’s long-standing ultra-loose monetary stance.
US inflation seen easing slightly
Underlying US inflation is expected to have moderated only slightly at the close of 2024, supported by a robust job market and steady economic performance, which together reinforce the Federal Reserve’s cautious approach to further rate reductions. Concerns that price pressures may remain uncomfortably high have prompted some investors to exit equity positions.
Economists surveyed project that December’s core consumer price index, which excludes food and energy, will rise 0.2% after four consecutive monthly increases of 0.3%. Core CPI is forecast to advance 3.3% from a year earlier, matching the previous three months. The official data, due Wednesday, will be followed by December retail sales figures on Thursday, which are expected to confirm strong holiday spending.
DXY: Potential reversal in sight
The US Dollar Index briefly approached 110.15 during the previous session before slipping back to about 109.50 by the close of US trading. This price action formed a reversal candle on the daily chart, suggesting a possible correction to the downside in the near term—though a clear catalyst is still needed. The next support lies at 109.25, and a break below that level would open the door for deeper declines toward 109.0 and possibly 108.50.
Euro: Holding above 1.02
The Euro dipped below 1.02 for the first time since 2022 but ultimately managed to settle above that level by the end of the session, leaving a bullish shooting star candle behind. This pattern could be an early signal that a rebound is on the horizon, supported by gradually improving technical indicators. Key resistance now stands at 1.0250, and pushing above it would potentially pave the way for further gains toward 1.03 and 1.0340.
Gold: Testing support levels
Gold retreated toward the 2658 support zone yesterday after testing resistance near 2695 earlier in the week. This pullback appears to be a short-term move before the broader uptrend resumes in the coming weeks. Technical indicators continue to lean bullish across most time frames, while the critical support remains between 2670 and 2650. On the upside, important resistance levels to watch are 2695 and 2700; breaking above them would likely clear a path to 2717.
Crude: Struggling below key resistance
Brent crude attempted to break above the $81 mark in the previous session but failed and ultimately closed below it. With technical indicators showing significant overbought signals, there’s a heightened risk of another pullback in the days ahead. The next support lies at 80.50, followed by 80.0, and a move below that area would likely deepen the decline toward 79.0 in the near term.
Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.
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