Dollar Holds Steady as Fed Rate Outlook Guides Year-End Trading (12.31.2024)

Global markets wrap up the year with the euro near $1.04 and the yen showing slight gains, as the Federal Reserve’s 2025 outlook limits rate cut expectations. 

Gold remains stable above $2,600 despite subdued holiday trading and a cautious Fed stance, while silver dips below $29 amid weaker industrial demand and central bank hawkishness. Investors look to upcoming U.S. data releases for clues on future policy and market direction.

EUR/USD Steady as Strong Dollar Dominates Year-End Trading

The EUR/USD trades near 1.0410, while the dollar index holds steady at 107.9 on Tuesday, close to two-year highs as the year ends. The US dollar is set to gain over 6% annually, driven by the Fed's hawkish stance and reduced expectations for 2025 rate cuts, now forecasted at 50 basis points. Support also comes from expectations that President-elect Donald Trump's pro-growth policies, including tax cuts, tariffs, and deregulation, will fuel inflation and sustain high US yields.

From a technical perspective, the first resistance level is at 1.0465, with further resistance levels at 1.0515 and 1.0575 if the price breaks above. On the downside, the initial support is at 1.0330, followed by additional support levels at 1.0300 and 1.0230. 

Yen Rises Ahead of Holidays Despite 10% Drop in 2024

The Japanese yen strengthened to 156.4 per dollar on Tuesday, extending gains ahead of New Year’s holiday closures. Investors assessed the BoJ's interest rate outlook, balancing last week’s inflation surge against December meeting minutes hinting at a possible near-term rate hike. Traders also monitored potential intervention after Finance Minister Katsunobu Kato warned against excessive yen volatility. The yen is set to drop over 10% in 2024, marking its fourth consecutive annual decline against the dollar.

The key resistance level appears to be 158.30, with a break above it potentially targeting 160.00 and 161.00. On the downside, 154.90 is the first major support, followed by 153.40 and 152.40 if the price moves lower. 

Gold Holds Firm Despite Fed Outlook and Q4 Pressures

Gold held above $2,600 per ounce on Tuesday after two days of declines, with minimal movement as investors awaited market drivers. Traders focused on the US economy, Trump’s tariff policies, and the Fed’s monetary stance, which could influence gold’s direction. Persistent inflation and strong labor data led the Fed to project fewer rate cuts, weighing on gold in Q4. Still, gold is set for a 27% annual gain, its best since 2010, driven by safe-haven demand amid global conflicts and significant central bank purchases, including from the PBoC, which helped push prices to a record $2,790 in September.

Technically, the first resistance level will be 2635 level. In case of this level’s breach, next levels to watch would be 2655 and 2670 consequently. On the downside 2600 will be the first support level. 2575 and 2545 are next levels to monitor if first support level is breached.

GBP/USD Steady at 1.2550 as Markets Await Key US Data

The pound started Tuesday trading at 1.2550. With no significant data flow on the final trading day of the year, the PMI and unemployment data to be released in the US later this week will be important.

The first resistance level for the pair will be 1.2600. In case of this level's breach, the next levels to watch would be 1.2645 and 1.2700. On the downside 1.2535 will be the first support level. 1.2500 and 1.2460 are the next levels to monitor if the first support level is breached.

Silver Drops Below $29 on Fed Hawkishness and Weak Demand

Silver fell below $29 per ounce, its lowest since September, pressured by the Fed’s hawkish stance and weak industrial demand. Persistent inflation led the Fed to project fewer rate cuts next year, reducing silver’s appeal as a non-yielding asset. Despite a 23% rise in silver prices this year, weak industrial demand caused it to underperform gold. Overcapacity in China's solar panel sector and a government-regulated supply program dampened demand, while potential yuan devaluation from China’s looser monetary policy further pressured prices, lowering export prices from a key silver supplier.

Technically, the first resistance level will be 29.85 level. In case of this level’s breach, the next levels to watch would be 30.20 and 30.70 consequently. On the downside 28.50 will be the first support level. 28.00 and 27.50 are the next levels to monitor if the first support level is breached.