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*The market is eyeing on this Wednesday’s FOMC decision to gauge the strength of the subdue U.S. dollar.
*The Japanese yen remains lacklustre despite a BoJ rate hike last Friday; I will be eyeing Japan’s CPI reading tomorrow.
*Gold faced strong resistance after rallying to near its all-time high levels.
Market Summary
This week, the financial market remains focused on the U.S. dollar, which has been heavily influenced by Donald Trump’s statements and proposed tariff policies. The president-elect recently threatened Columbia with high tariffs over immigration issues, adding support to the dollar’s strength. Meanwhile, attention is on Wednesday’s FOMC interest rate decision, with the market anticipating a hawkish stance from the Federal Reserve that could further buoy the dollar.
Despite a rate hike last Friday, the Japanese Yen has struggled in recent sessions. Traders will look to tomorrow’s CPI reading for clues on the Yen’s strength. In the commodity market, oil prices continue to decline amid concerns over a potential increase in supply by 2025, coupled with disappointing Chinese PMI data that has weighed on demand.
In the gold market, the precious metal faced resistance near its all-time high, retreating by 1%. However, if gold can hold above the $2,754 support level, it may continue to trade within a bullish trajectory, given its safe-haven appeal in the face of global uncertainties.
Current rate hike bets on 29th January Fed interest rate decision:
Source: CME Fedwatch Tool
0 bps (97.9%) VS -25 bps (2.1%)
Market Movements
DOLLAR_INDX, H4
The U.S. Dollar Index weakened following disappointing labor data. Initial Jobless Claims rose from 217K to 223K, exceeding expectations of 221K and signaling continued labor market weakness. Treasury yields also declined after Trump called for immediate interest rate cuts, arguing that both domestic and global rates should be lowered. However, the upcoming Federal Reserve meeting remains in focus as traders assess whether the central bank will maintain its independence.
The Dollar Index is trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 34, suggesting the index might extend its losses after breakout since the RSI stays below the midline.
Resistance level: 109.00, 110.00
Support level: 107.80, 106.80
Gold prices extended their rally, rising over 0.5% in the last session to reach a fresh high, reinforcing a bullish outlook. The metal’s gains were fueled by a softened U.S. dollar following Trump’s speech at the World Economic Forum. His push to lower oil prices as part of efforts to control inflation has raised expectations for a more dovish Federal Reserve monetary policy, further weakening the dollar and supporting gold’s upward momentum.
Gold prices reached a new high after finding support at its short-term support level at near the $2745 mark, suggesting a bullish bias for gold. The RSI has been hovering close to the overbought zone while the MACD has been flowing at the elevated level, suggesting that the bullish momentum remains strong.
Resistance level: 2789.00, 2830.00
Support level: 2745.00, 2718.35
The GBP/USD pair continues to trade within its uptrend channel, rebounding from its support level in the last session, signaling a bullish bias. The pair capitalized on a weakened U.S. dollar following Trump’s speech at the World Economic Forum, which fueled expectations of a dovish Federal Reserve and weighed on the dollar’s strength. However, upcoming UK PMI readings, expected to come in lower than the previous figures, could limit the Pound Sterling’s momentum and potentially introduce downside pressure on the pair.
GBP/USD remains within its uptrend trajectory and has traded to a new high, suggesting a bullish bias for the pair. The RSI is poised to break into the overbought zone while the MACD remains elevated, suggesting that the bullish momentum remains strong.
Resistance level: 1.2505, 1.2620
Support level: 1.2310, 1.2220
The EUR/USD pair has maintained support above its uptrend line and edged higher, indicating a bullish bias. However, the pair is approaching a significant resistance level near the 1.0460 mark, with a breakout above this level likely confirming further bullish momentum. The U.S. dollar has remained subdued in recent sessions, providing additional support for the euro. Meanwhile, the market’s focus will be on eurozone PMI readings, which are anticipated to show improvement compared to the previous data. Positive results could reinforce the euro’s upward trajectory and drive the pair higher.
The EUR/USD continues to edge higher after breaking the bearish price structure, suggesting a bullish bias for the pair. The RSI remains close to the overbought zone while the MACD has a deadly cross on the above, suggesting that the bullish momentum may be easing.
Resistance level: 1.0510, 1.0607
Support level: 1.0331, 1.0232
Despite a minor technical correction, the USD/JPY pair has found support and continues to trade above its long-term uptrend support level, maintaining a bullish bias. Traders are closely watching the Bank of Japan’s (BoJ) interest rate decision scheduled for today, with a 25 basis point hike already priced in by the market. However, attention will also be on the BoJ’s accompanying monetary policy meeting, as any insights into future policy directions could significantly impact the Japanese Yen’s movement and the pair’s trajectory.
USD/JPY has seemingly found support after a technical correction from its weekly high, suggesting a bullish bias for the pair. The RS has gotten above the 50 level, while the MACD is poised to break above the zero line, suggesting that the bearish momentum has vanished.
Resistance level: 157.30, 158.55
Support level: 155.15, 154.20
The S&P 500 reached an all-time high on Thursday, fueled by strong corporate earnings and Trump’s Davos speech, where he reiterated calls for lower interest rates. Lower borrowing costs typically drive capital into equities, boosting sentiment. Additionally, Trump announced a multi-billion-dollar AI investment, further lifting tech stocks and reinforcing bullish market momentum.
S&P 500 is trading higher following the prior breakout of the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 70, suggesting the index might enter overbought territory.
Resistance level: 6160.00, 6280.00
Support level: 6015.00, 5785.00
Oil prices dropped 1% after Trump urged Saudi Arabia and OPEC to lower crude prices during his World Economic Forum speech. Concerns over the potential impact of Trump’s tariffs and energy policies on global economic growth and energy demand also weighed on oil markets.
Crude oil is trading lower following the prior breakout below the previous support level. MACD has illustrated increasing bearish momentum, while RSI is at 35, suggesting the commodity might extend its loose since the RSI stays below the midline.
Resistance level: 77.05, 78.75
Support level: 72.95, 70.35
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31 January 2025, 03:15 Eye on Today’s PCE
30 January 2025, 04:23 Powell Hawkish Statement Bolsters Dollar’s Strength
29 January 2025, 03:11 Dollar Holds Firm as Markets Await Fed Decision
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