As we head into Tuesday, December 31, 2024, global markets are ready to close the year with light trading volumes, typical of the holiday season. However, New Year’s Eve is not without its market-moving events, as lingering economic data and end-of-year adjustments come into play. The U.S. dollar remains under scrutiny as traders digest disappointing Chicago PMI data and revised housing figures, while preparing for early releases of economic indicators before the New Year.
In the currency markets, the EUR/USD pair experienced a significant sell-off in Monday’s session, reflecting investor caution amid thin liquidity and mixed signals from the U.S. economic calendar. Meanwhile, the USD/JPY pair extended its losses, influenced by subdued risk sentiment and year-end portfolio adjustments. The GBP/USD pair showed heightened volatility, pressured by weak U.K. housing data and positioning ahead of the New Year’s holiday closures.
EUR/USD
Technicals in Focus
The EUR/USD pair tumbled during Monday’s session, closing near the 1.0394 level after touching intraday lows. The sell-off was driven by a combination of thin trading conditions and renewed demand for the U.S. dollar following slightly stronger pending home sales data. On the technical front, the MACD shows bearish momentum, with the histogram widening below the zero line. The RSI has dipped below 40, indicating oversold conditions, while the Stochastic Oscillator remains in the lower range, suggesting further downside potential.
Trading Strategy: Neutral to Sell
- Sell below 1.0400-1.0380 with targets at 1.0350-1.0330 and 1.0300-1.0280, with a stop loss above 1.0430.
- Alternatively, consider long positions above 1.0450 with targets of 1.0480-1.0500, with stops below 1.0420.
USD/JPY
Technicals in Focus
The USD/JPY pair extended its downward trajectory, closing near the 156.93 level. This move reflects year-end profit-taking and risk-off sentiment that typically characterizes the final trading days of the year. Technically, the MACD shows increasing bearish momentum, with the signal line diverging lower. The RSI has dipped into the 30-40 range, suggesting a bearish trend, while the Stochastic Oscillator confirms oversold conditions, indicating a possible short-term bounce.
Trading Strategy: Neutral to Sell
- Sell below 157.00-156.80 with targets at 156.50-156.20 and 156.00-155.70, with a stop loss above 157.40.
- Alternatively, consider buying above 157.50 with targets of 157.80-158.10, with stops below 157.20.
GBP/USD
Technicals in Focus
The GBP/USD pair faced increased volatility, closing near 1.2543 after sharp intraday declines. Weak U.K. housing data added pressure, while the stronger-than-expected U.S. pending home sales lent support to the dollar. On the technical side, the MACD is crossing into negative territory, signaling a bearish bias. The RSI is hovering around the 40 level, while the Stochastic Oscillator is in the oversold range, pointing to a potential short-term correction.
Trading Strategy: Neutral to Sell
- Sell below 1.2550-1.2530 with targets at 1.2500-1.2470 and 1.2450-1.2420, with a stop loss above 1.2570.
- Alternatively, consider buying above 1.2580 with targets at 1.2610-1.2640, with stops below 1.2540.
Market Outlook
Looking ahead, trading activity is expected to remain subdued as markets prepare for the New Year holiday. However, investors will closely monitor early releases, including U.S. housing price index data and crude oil inventories. The Chicago PMI’s poor performance highlights ongoing concerns in U.S. manufacturing, which could weigh on the dollar into the new year. Additionally, thin liquidity may exaggerate price movements, creating opportunities and risks for traders.
Overall, the market’s focus will likely shift to 2025’s early indicators, with January’s economic releases and central bank actions setting the tone for the new year. Expect volatility to remain elevated in the coming sessions as traders finalize their end-of-year strategies.