• The US Dollar trades broadly stable in very calm holiday trading 
• Monthly Industrial Production in Japan fell by 2.3%, less than the expected 3.5%, while big Chinese manufacturers also reported falling profits.
• The US Dollar Index (DXY) resides at 108.00, close to a two-year high.

The US Dollar (USD) is trading within a very tight range on Friday, with the DXY index holding above 108.00, as markets remain cautious and trading desks are short-staffed due to the Christmas holiday. The Dollar failed to react to more action in Asian markets, with data signaling further contraction in Japan’s Industrial Production and Chinese industrial companies reporting lower profits.

The US economic calendar is very light on Friday, with the preliminary Goods Trade Balance and the Wholesale Inventories data. Not much movement is expected from these data points. So a rather steady trading session is expected. 
 

Daily digest market movers: Markets indigestion

• At 13:30 GMT both data points from the US for this Friday will be released:
  • The November Goods Trade Balance is expected to show a widening deficit of 100.9 billion USD against the previous 98.7 billion USD deficit.
  • November Wholesale Inventories are expected to grow at a stable 0.2%.
• Equities trade mixed on Friday, with all US equity futures trading in the red before the opening bell. 
• The CME FedWatch Tool for the first Fed meeting of 2025 on January 29 sees an 89.3% chance for a stable policy rate against a small 10.7% chance for a 25 basis points rate cut.  
• The US 10-year benchmark rate trades at 4.60%, not far from this week’s high at 4.64%.
   

US Dollar Index Technical Analysis: Not much going on

The US Dollar Index (DXY) is not expected to attack any firm levels this Friday given the low liquidity and only a handful of market participants present between Christmas and New Year. Any big movements aren’t expected unless an outside event takes place on the geopolitical front. It looks like the DXY will head into New Year’s Eve trading just above 108.00.

On the upside, a trend line originating 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. 

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 105.83 is making its way up to that level. 

(Click on image to enlarge)

US Dollar Index: Daily Chart

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