Forex Today: Santa’s rally continues, Dollar rebounds

The focus is on 2024, particularly considering that the first week will be a busy one. On the last trading day of 2023, the economic calendar is light. The attention will be on Spain's preliminary December consumer inflation figures.

Here is what you need to know on Friday, December 29:

Data from the US released on Thursday revealed that Initial Jobless Claims rose by 12,000 in the week ended December 23 to 218,000, above the market consensus of 210,000. Continuing claims reached 1.875 million, the highest level in four weeks. Pending Home Sales remained flat in November, falling short of expectations for a 1% increase. On Friday, the Chicago PMI is due. Regarding economic reports, the focus is on next week's employment figures.

The US Dollar Index (DXY) bottomed at 100.86, marking the lowest level since July, and then rebounded sharply, rising to 101.25. Higher US Treasury yields helped boost the Greenback, with the 10-year yield rising to 3.85% following the auction of the 7-year note.

The Greenback staged a correction, trimming weekly losses, even as the rally on Wall Street continued. The Dow Jones was on track for another all-time high close. The USD overall trend remains downward, but the correction appears to have further potential.

EUR/USD experienced its worst decline in two weeks. The pair hit a fresh monthly high at 1.1139 before pulling back to the 1.1055 area. The most relevant report of the day will be Spain's inflation figures, with the preliminary reading of the December Consumer Price Index (CPI). Eurostat will release the figures for the Eurozone on January 5.

GBP/USD also retreated from monthly highs, falling from above 1.2800 to around 1.2700. The final economic report of 2023 in the UK will be the Nationwide Housing Prices for December.

Another volatile day for USD/JPY, which fell to 140.23, the lowest level since July, but then trimmed losses and rose to 141.40, supported by higher yields.

AUD/USD peaked at 0.6871 but failed to sustain gains, and retreat to 0.6835 as bullish momentum faded. The pair has immediate support in the 0.6825 zone, while a move above 0.6850 could strengthen the Aussie.

Gold experienced a pullback from $2,088 to $2,065 due to the rebound in the US Dollar and yields. The main trend remains upward, but the current conditions point to a downside bias ahead of the Asian session.