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*The financial market is expected to be quieter as the U.S. observes a public holiday.
*The market is watching the implications of Trump’s return to the dollar’s strength and Wall Street’sof Wall Street.
*Trump’s official cryptocurrency launch has rattled the cryptocurrency market.
Market Summary
The U.S. equity market stalled after its recent rally spurred by last Wednesday’s softer-than-expected U.S. CPI reading. The Dow Jones Industrial Average appears to lack bullish momentum, suggesting the potential for a pullback to fill the gap created during the post-CPI surge.
As Wall Street transitions into the first quarter earnings report season, market volatility is expected to intensify. Investors will closely analyze corporate earnings and forward guidance to gauge the broader economic outlook, adding uncertainty to the Dow’s near-term trajectory. This combination of factors may keep the index under pressure while traders await fresh catalysts. The market is now awaiting for Trump’s inauguration today and its direct impact on both the U.S dollar as well as Wall Street.
In addition, Bitcoin (BTC) briefly surged to the $106,000 mark before experiencing a sharp sell-off. Notably, the debut of Donald Trump’s official cryptocurrency has sent shockwaves through the crypto market, attracting billions of dollars in trading volume during recent sessions.
The sudden influx of attention and capital towards Trump’s cryptocurrency has disrupted market dynamics, diverting liquidity from established assets like Bitcoin and leading to struggles across the broader crypto space
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 remains in a cautious trading mode as investors await clarity on President-elect Trump’s policies. While near-term sentiment is mixed, the long-term outlook remains bullish, supported by rising U.S. Treasury yields. FX options indicate increased volatility, with potential swings post-inauguration. A hawkish trade stance from Trump could drive the dollar higher alongside Treasury yields.
The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the index might extend its gains since the RSI stays above the midline.
Resistance level: 110.00, 111.75
Support level: 109.00, 108.20
Gold prices retreated as traders took profits ahead of key events, while optimism over a Hamas-Israel ceasefire further dampened demand for safe-haven assets. The recent release of Palestinian prisoners and ongoing negotiations have boosted risk appetite, pressuring gold. However, any geopolitical instability could still support gold in the longer term.
Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 50, suggesting the commodity might extend its losses after breakout since the RSI retreated sharply from overbought territory.
Resistance level: 2720.00, 2755.00
Support level: 2690.00, 2660.00
The GBP/USD pair has been trading sideways but appears poised to challenge its downtrend resistance level. A successful breakout above this level would signal a bullish shift for the pair, potentially paving the way for further upside momentum. With the U.S. market closed for a public holiday, the Pound Sterling may capitalize on the subdued dollar activity to gain traction. However, market sentiment remains cautious as the inauguration of Donald Trump on January 20th approaches. His return to the White House is widely anticipated to bolster the U.S. dollar, potentially capping the upside for the pair in the near term.
GBP/USD traded sideways in the recent session, which gave the pair a neutral signal. The RSI remained near the 50 level, while the MACD remained below the zero line, which also gave the pair a neutral signal.
Resistance level: 1.2310, 1.2480
Support level: 1.2140, 1.2060
The EUR/USD pair held its ground at elevated levels, despite undergoing a technical retracement after reaching recent highs. Last Friday’s Eurozone CPI report matched market expectations, offering little support to the euro’s strength. Looking ahead, the euro is expected to experience heightened volatility this week, as a series of significant Eurozone economic data releases, including GDP, PMI, and unemployment rate figures, are set to provide fresh direction. Traders will closely monitor these indicators to gauge the health of the Eurozone economy and their potential impact on the European Central Bank’s monetary policy stance.
The pair has found support at the near 1.0270 mark and edged higher, suggesting that it remains within its bullish trajectory. The RSI remains above the 50 level, while the MACD is supported above the zero line, suggesting that it remains trading with bullish momentum.
Resistance level: 1.0330, 1.0458
Support level: 1.0230, 1.0112
The NZD/USD pair appears to be shaping an inverted head-and-shoulders pattern, a technical formation often associated with a potential trend reversal, at its lowest level since late 2022. Traders are eyeing the upcoming New Zealand CPI release on Wednesday, which could directly influence the Kiwi’s performance depending on the inflation outlook. However, the pair faces downside risks as market sentiment shifts towards a stronger U.S. dollar, with Donald Trump set to return to the White House this week. The anticipation of renewed policy actions under his administration may bolster the greenback’s strength, potentially weighing on the NZD/USD pair.
The NZD/USD has formed an inverted head-and-shoulders pattern, suggesting a bullish signal for the pair. The RSI is forming a higher-high pattern, while the MACD has broken above the zero line, suggesting that bullish momentum is forming.
Resistance level: 0.5665, 0.5735
Support level: 0.5543, 0.5465
The U.S. equity market appears to be moderating its recent downtrend momentum, buoyed by anticipation surrounding Donald Trump’s inauguration and the softer U.S. CPI reading, which has tempered expectations of aggressive monetary tightening by the Federal Reserve. The pause in trading on Monday due to a public holiday in the U.S. has offered the market a moment of consolidation. If the index maintains levels above the critical 21,350 mark upon the market’s reopening, it could signal a potential trend reversal, suggesting a shift toward a bullish bias.
The Nasdaq has found support from its critical liquidity zone at the near 20800 mark and has rebounded, suggesting a potential trend reversal for the index. The RSI is moving upward while the MACD is about to break above the zero line, suggesting that the bearish momentum is vanishing.
Resistance level: 21820.00, 22600.00
Support level: 21250.00, 20750.00
Japanese yen edged slightly higher, with hawkish expectations from BoJ. The Bank of Japan’s upcoming interest rate decision remains a key market catalyst. While the central bank previously held rates steady due to economic uncertainties, rising inflation and wage growth have increased speculation of a 0.25% rate hike. Markets are now pricing in an 80% probability of an increase, making the BOJ’s decision critical for yen movements.
USD/JPY is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 52, suggesting USD/JPY might extend its losses after breakout since the RSI retreated from overbought territory.
Resistance level: 156.15, 157.15
Support level: 155.10, 154.10
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20 January 2025, 06:14 Eyes on Trump Return
17 January 2025, 06:14 Dollar Hammers by Fed Governor’s Dovish Remark
16 January 2025, 05:10 Soft CPI Reading Boosts Wall Street
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