The US Dollar (USD) is trading with small gains on Tuesday. The US Dollar Index (DXY) is trading slightly above 108.00 as markets start to unwind ahead of the Christmas holiday. The Greenback didn’t move much despite news that China’s policymakers are planning to sell nearly 3 trillion Yuan (CNH) in special treasury bonds in 2025. This additional capital is meant to boost the slowing Chinese economy.
Light US Economic Calendar
The US economic calendar is quite light on Tuesday. There are just minor indicators like the Philadelphia Fed Non-Manufacturing Activity Index and the Richmond Fed Manufacturing Index regional surveys for December. One important point from the recent data is that the US manufacturing sector is showing signs of trouble. Several indicators confirm it’s falling further into contraction.
Daily Digest of Market Movers
China’s Bond Sale Plan
Policymakers in China plan to sell a record 3 trillion Yuan ($411 billion) of special treasury bonds in 2025. They aim to support consumption subsidies, business equipment upgrades, and investments in key technology and advanced manufacturing sectors.
French Budget Plan
French Prime Minister Francois Bayrou aims to reach an agreement with parliament on a 2025 budget that would reduce the deficit to close to 5%, near the level of his predecessor Michel Barnier.
Economic Index Releases
Near 13:30 GMT, the Philadelphia Fed Non-Manufacturing Activity Index for December was published. The actual number came in at -6 against the previous reading of -5.9.
The Richmond Fed Manufacturing Index came in at -10, which is below the -9 that was expected and is a change from -14.
Market Reactions
Asian equities got a boost after news of the 3 trillion Yuan expected injection from China. However, Europe is struggling to benefit from that tailwind and remains sluggish. US futures are in the green.
The CME FedWatch Tool for the first Fed meeting of 2025 on January 29 shows a 91.4% chance for a stable policy rate and an 8.6% chance for a 25 basis points rate cut.
The US 10-year benchmark rate trades at 4.59%, which is the high of last week.
US Dollar Index Technical Analysis: End of the Line
Narrow Trading Range
The US Dollar Index (DXY) is trading in a rather narrow range this Tuesday. As more and more traders won’t participate in the markets today, there will likely be almost no reaction in prices unless a major headline comes up. It seems the DXY is set to close on Christmas Eve very close to a two-year high.
Upside Resistance Levels
On the upside, a trend line starting from December 28, 2023, is acting as a moving cap. The next firm resistance comes in at 109.29, which was the peak of July 14, 2022, and has a good track record as a pivotal level. Once that level is surpassed, the 110.00 round level comes into play.
Downside Support Levels
The first downside barrier comes in at 107.35, which has now turned from resistance into support. The second level that might be able to halt any selling pressure is 106.52. From there, even 105.53 could come under consideration while the 55-day Simple Moving Average (SMA) at 105.23 is making its way up to that level.
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