- The US Dollar remains steady, unaffected by reports of increased bond sales in China next year.
- Chinese policymakers plan to issue a record 3 trillion yuan in special treasury bonds in 2025.
- The US Dollar Index (DXY) holds above 108.00, nearing a potential two-year high.
The US Dollar (USD) posts modest gains on Tuesday, with the DXY Index trading slightly above 108.00 as markets wind down ahead of the Christmas holiday. The Greenback showed little reaction to reports from Reuters that China’s policymakers are considering issuing nearly 3 trillion yuan (CNH) in special treasury bonds in 2025, aimed at stimulating the country’s sluggish economy.
The US economic calendar remains quiet, featuring only minor releases like the Philadelphia Fed Non-Manufacturing Activity Index and the Richmond Fed Manufacturing Index for December. A key takeaway from recent data is the continued weakness in the US manufacturing sector, with multiple indicators signaling a deeper contraction.
Daily Digest: Market Movers – Richmond Manufacturing Confirms Contraction
- Chinese policymakers plan to sell a record 3 trillion yuan ($411 billion) in special treasury bonds in 2025, aiming to support consumption, business upgrades, and investments in key technology and advanced manufacturing sectors, Reuters reported Tuesday.
- French Prime Minister François Bayrou seeks a 2025 budget agreement with parliament to reduce the deficit to around 5%, near the level of his predecessor Michel Barnier, according to Bloomberg.
- At 13:30 GMT, the Philadelphia Fed Non-Manufacturing Activity Index for December was released, showing a reading of -6, slightly worse than the previous -5.9.
- The Richmond Fed Manufacturing Index came in at -10, below the expected -9 and an improvement from -14.
- Asian equities surged following news of China’s anticipated 3 trillion yuan bond issuance, though European markets struggled to capitalize on the positive news and remained sluggish. US futures are in the green.
- The CME FedWatch Tool indicates a 91.4% chance that the Fed will maintain its policy rate at the January 29, 2025 meeting, with an 8.6% probability of a 25 basis point rate cut.
- The US 10-year benchmark rate is trading at 4.59%, maintaining the high reached last week.
US Dollar Index Technical Analysis: Approaching Key Resistance
The US Dollar Index (DXY) is trading within a narrow range this Tuesday, with market activity slowing as traders begin to wind down for the holiday season. As a result, price movements are likely to remain muted unless a significant headline emerges. The DXY appears poised to close near a two-year high by Christmas Eve.
On the upside, a trend line from December 28, 2023, is acting as a dynamic resistance level, with the next major resistance at 109.29, the peak reached on July 14, 2022. A break above this level could open the door to the 110.00 psychological level.
On the downside, the first support level is 107.35, which has recently turned from resistance into support. The next key support lies at 106.52, followed by 105.53. Additionally, the 55-day Simple Moving Average (SMA) is rising toward the 105.23 level, adding further support to this area.
