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The dollar weakened and stocks advanced in Asia on mounting speculation that the Federal Reserve is nearing the end of its tightening cycle.

The US currency weakened against all its Group-of-10 peers after dovish comments from Federal Reserve officials last week bolstered bets that the central bank is done with its interest-rate hikes.

On the weekly chart, it is easy to spot the bearish engulfing candle, which deepens the bearish outlook. The index is now near the target at 103.40, which is likely to be achieved later this week.

A break through that support would clear the way for further declines, possibly towards 103.0 and 102.70. On the upside view, any upside retracement is likely to remain limited below 105.0.

S3	S2	S1	Pivot	R1	R2	R3
102.62	103.36	103.64	104.09	104.37	104.83	105.57

Bonds rally ahead?

The US 10-year yield confirmed a new trend following last week’s close according to the time and price method. It rallied by 135bps within 135 days. This relationship ended at the beginning of last week and was confirmed on Friday, which suggests that a new trend might currently be underway.

In the meantime, any upside retracement might remain capped below 4.7%, while the next support stands at 4.33% followed by 4.25%.

S3	S2	S1	Pivot	R1	R2	R3
4.25	4.34	4.39	4.43	4.48	4.52	4.61

Eyes on crude oil this week

Oil edged higher after a two-day swing as investors looked ahead to an OPEC+ meeting on supply policy that will shape market balances into 2024, and a weaker US dollar made commodities more attractive.

The Organization of Petroleum Exporting Countries and its allies are scheduled to meet over the weekend to review the global crude market and decide on priorities heading into the new year. With prices lower year-to-date after a run of four weekly losses, there’s speculation supply curbs will be extended.

The time and price method suggests that the downside pressure is likely to resume as long as Brent continues to trade below $83. A daily close above that level would confirm that the bearish relationship between the price and the time has ended, and a new trend would be in play.

S3	S2	S1	Pivot	R1	R2	R3
72.51	76.04	78.32	79.57	81.85	83.10	86.63

EURUSD over 1.09

Finally, after a few weeks of a tight range, the Euro broke out of its bearish trend and continued to rally to as high as 1.0930 today, while technical indicators are now overbought.

However, any downside retracement is likely to remain limited to above 1.0835, while the next key resistance stands at 1.0990 and 1.10 which could be seen later this week.

S3	S2	S1	Pivot	R1	R2	R3
1.0703	1.0794	1.0855	1.0885	1.0946	1.0976	1.1067

Yen at five-week high

The yen extended a rally to a five-week high on Monday, as speculation that the Federal Reserve is nearing the end of policy tightening drives the dollar lower. Japanese government bonds are mixed amid caution towards Tuesday’s 20-year debt auction.

Despite the current decline in USDJPY, a bearish trend is yet to be confirmed. The pair needs to stay below 150.0 this week. Otherwise, this decline could be another short-term retracement before the upside trend resumes.

Regardless, the Bank of Japan intervention remains a matter of time, but the next intervention might happen unless the USDJPY revisits last week’s high around 152.0. The next key support stands at 148.45, which should be watched carefully, while a break below that support may clear the way for further declines towards 148.0 and 147.80.

S3	S2	S1	Pivot	R1	R2	R3
146.71	148.29	148.96	149.87	150.54	151.45	153.03

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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