US Dollar Index

The US dollar index climbed to around 108.29 before the Fed's policy announcement. The Fed will hold interest rates steady at 4.25%-4.50%, with a focus on Powell's guidance. Investors assess how Trump's economic policies, including 25% tariffs on Canada and Mexico, will affect monetary policy. Weak consumer confidence and durable goods orders add to uncertainty about the Fed's outlook. Market sentiment deteriorated after renewed concerns about tariffs and weak US economic data, including lower-than-expected durable goods orders and a decline in consumer confidence. Despite these headwinds, the US dollar index has managed to stay above its recent lows, suggesting some resilience. The dollar rebounded after the tariff news resurfaced.

Market liquidity is likely to decrease further this week due to the Chinese Lunar New Year market closures, which could even exacerbate FX volatility. The US dollar index showed resilience as it recovered to around 108.00, driven by a pick-up in safe-haven demand. However, the picture on technical indicators is mixed. While the RSI remains below 50, suggesting weak momentum, the MACD shows increasingly flat lines, indicating continued bearish pressure. On the positive side, if the downward movement is overdone, the upward correction may extend. Immediate resistance is located at 108.61 (20-day moving average), and 109.00 (round mark). Failure to maintain above 108.00 (market psychological mark) may allow the US dollar index to return to the support level near 107.44 (40-day moving average). A break below this level will test the 107.22 (last week's low), then the 107.18 (65-day moving average), and 107.00 (round mark) area levels.

Today, consider shorting the US dollar index near 108.12, stop loss: 108.25, target: 107.65, 107.60

WTI spot crude oil

US WTI crude oil prices fell on Wednesday, eroding some of the gains from the previous day's slight recovery from a near three-week low. Oil prices rose midweek, rebounding from multi-week lows as the White House said U.S. President Donald Trump still plans to impose tariffs on Canadian and Mexican imports this week. Concerns about weaker demand due to warmer temperatures elsewhere capped gains. Trump's comments on tariffs have kept the market on edge. "Tariffs could disrupt the flow of energy products between the United States and Canada and Mexico. Local protesters in Libya on Tuesday blocked crude oil loading at the ports of Es Sider and Ras Lanuf. However, the Libyan National Oil Corporation said after talks with protesters that export activities were operating normally and concerns about supply disruptions were eased. Weather forecasts show that temperatures in the United States will be above normal this week, which also puts pressure on demand for heating fuels after extremely cold weather pushed up natural gas and diesel in the previous few trading days.

From the daily chart, WTI crude oil prices recently fell below $73.08 (50% Fibonacci retracement level from 66.80 to 79.37). But the 14-day relative strength index (RSI) of the technical indicator fell to 45.60, also providing pressure for oil prices to rebound. On the other hand, $74.18 (200-day moving average), and $74.56 (38.2% Fibonacci retracement) constitute strong resistance levels, and the reaction here is likely to determine the recent trend of oil prices. If the rebound stalls below this level, the overall bearish trend will continue and provide better selling levels for further declines to $72.30 (40-day moving average) and $71.60 (61.8% Fibonacci retracement). On the contrary, if it can effectively break through $74.18-74.58, it will release a reversal signal, and the next level will look at $75.00 (round mark) and $75.10 (10-day moving average). Breaking through will point to $75.93 (50.0% Fibonacci rebound level from 87.12 to 64.75) and $76.00 (psychological mark) levels.

Today, you can consider going long on crude oil near 72.50, stop loss: 72.30; target: 74.00; 74.20

Spot gold

Gold prices pared their intraday losses and rebounded above $2,750 after the Federal Reserve decided to keep its benchmark interest rate unchanged. The words of confident Chairman Powell put short-term pressure on the dollar. In early Asian trading on Wednesday (January 29), spot gold fluctuated narrowly, trading around $2,763 an ounce. Gold prices rebounded by more than $20 on Tuesday as investors remained interested in this safe-haven asset due to the growing uncertainty over U.S. President Trump's proposed tariffs; in addition, the poor performance of U.S. durable goods orders on a monthly basis also increased the momentum for gold prices to rebound. Gold prices fell 1% on Monday as technology stocks led the overall market sell-off, marking the biggest drop since December 18. The European Central Bank will hold a meeting on Thursday this week. Central bank interest rate cuts generally result in a lower opportunity cost of holding gold, which tends to support gold prices. In addition, Trump said on Monday that he plans to impose tariffs on imported computer chips, pharmaceuticals and steel, which could trigger a trade war, thereby increasing safe-haven demand for gold.

A day after Trump's trade remarks caused gold prices to fall by more than 1%, gold prices recovered most of their losses and continued their upward trend. The trigger for gold to jump above $2,750 opened the door for bulls to take new long positions as investors saw the all-time high of $2,790. If gold prices rise above $2,790, it may challenge the $2,800 level. Psychological levels such as $2,850 and $2,900 will also follow. On the other hand, if the bears step in and push the precious metal price below $2,750, the next support will be the 10-day simple moving average of $2,742. If the above support levels are broken, the next test of the $2,735 (Tuesday's low) and $2.724.80 (14-day moving average) areas will continue.

Consider going long on gold today before 2,754.00, stop loss: 2,750.00; target: 2,772.00; 2,776.00

AUD/USD

AUD/USD fell further, approaching the key 0.6200 mark, on additional buying pressure on the US dollar and expectations of a possible rate cut by the Reserve Bank of Australia in February. The Australian dollar extended its decline against the US dollar for the third consecutive day, as the Australian Consumer Price Index data released on Wednesday was lower than expected. Australia's CPI grew 0.2% month-on-month in the fourth quarter, lower than the market's expectation of 0.3%. Easing inflationary pressures by the end of 2024 strengthens the case for a possible rate cut by the RBA in February. The central bank has kept the official cash rate (OCR) at 4.35% since November 2023, stressing that inflation must "sustainably" return to the target range of 2%-3% before considering any rate cut. The Australian dollar also faces challenges due to US President Donald Trump's tariff threats. President Trump announced late Monday that he plans to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper, with the goal of moving production to the United States to boost domestic manufacturing.

On Wednesday, the AUD/USD pair traded around 0.6230, breaking below the ascending channel on the daily chart, indicating a bearish turn in sentiment. Moreover, the 14-day relative strength index (RSI) of the technical indicator has fallen below the 50 level, further reinforcing the bearish sentiment in the market. The decisive breakout of the lower line of the key support range further reinforces the bearish outlook. This could push the AUD/USD pair towards 0.6200 (round number), and a break below that could further test the 0.6131 level, which is the lowest point since April 2020, recorded on January 13. On the upside, immediate resistance is at the 40-day moving average of 0.6264. A rebound above this level could shift the bias back to bullish and head towards 0.6300.

Consider going long on AUD before 0.6220 today, stop loss: 0.6205; target: 0.6260; 0.6270.

GBP/USD

The GBP/USD exchange rate recovered along with market sentiment after the FOMC announcement. The pair met buyers around the 1.2400 mark and pushed up daily highs as Fed Chairman Jerome Powell poured cold water on market concerns. GBP/USD remained stable after recording losses in the previous session and traded around 1.2440 in the Asian session on Wednesday. The downside of the pair can be attributed to the increase in risk aversion triggered by the tariff threats issued by US President Trump. In addition, as the pound remains under pressure. Traders currently expect the Bank of England to cut interest rates by 25 basis points in its first monetary policy decision on February 6, 2025, which will reduce the borrowing rate to 4.5% in response to the weak economic outlook. The pound traded cautiously despite British Prime Minister Keir Starmer's optimistic remarks on the economy in an interview with Bloomberg on Tuesday.

The 14-day relative strength index (RSI) indicator on the daily chart retreated but managed to stay above 50, reflecting sellers' hesitation. GBP/USD fell as buyers failed to push the price above the 50-day simple moving average of 1.2514 and 1.2523 (this week's high). If the price closes this week below the January 27 low of 1.2425 and the 1.2400 (round mark) area. The next stop will pave the way for 1.2345 (20-day moving average). If GBP/USD stabilizes above 1.2450, a test of 1.2500 (psychological mark) and the 50-day moving average of 1.2514 is possible. Further gains to the January 7 high of 1.25756 are expected.

Today's recommendation is to go long GBP before 1.2438, stop loss: 1.2425, target: 1.2480, 1.2490

USD/JPY

The Federal Reserve kept the federal funds rate steady, citing a resilient labor market and balanced economic risks. U.S. Treasury yields and the U.S. dollar index rose slightly due to the Fed's slightly hawkish inflation stance. Market participants are awaiting Fed Chairman Powell's press conference for further directional guidance. The Japanese yen remained on the defensive against its U.S. counterpart during the Asian session on Wednesday, although bearish confidence was lacking as the market expected further rate hikes from the Bank of Japan. Apart from this, the recent decline in U.S. Treasury yields, as the market bets that the Fed will continue to cut interest rates until 2025, should limit the downside of the low-yielding yen. Meanwhile, concerns about the economic impact of U.S. President Donald Trump's threatened tariffs, as well as generally positive risk sentiment, weakened the safe-haven yen. Moreover, the strong positive trend of the U.S. dollar overnight helped the USD/JPY pair trade with a positive bias above the mid-155.00 level. However, traders may choose to wait and see ahead of the Fed’s monetary policy decision.

Having broken below the multi-month ascending channel this week, negative oscillators on the daily chart favor bearish traders. Therefore, any subsequent gains above the 156.00 round number mark may be seen as a selling opportunity with the 156.60-156.70 supply zone capping it. However, some follow-up buying may trigger a short-covering rally and push the USD/JPY pair above 157.00 towards the 157.50 barrier. On the other hand, the 155.00 psychological mark now seems to protect the upcoming downside, followed by the 154.55-154.50 levels and the 154.00 round number mark. This is followed by the weekly swing low of the 153.70 area hit on Monday, below which USD/JPY may further accelerate its decline towards the 153.00 mark.

Today, we recommend shorting the US dollar before 155.40, stop loss: 155.60; target: 154.60, 154.40

EUR/USD

There was no respite from the weekly correction in EUR/USD on Wednesday, which briefly retreated below the 1.0400 support level ahead of further gains in the US dollar and a key ECB meeting on Thursday. The euro slipped further amid the pessimism at the start of the week, retreating to just below the key support area of ​​1.0400, a two-day low, as a significant buying bias for the US dollar re-emerged. In fact, the dollar regained its composure amid another round of US tariff threats, while cautious sentiment around DeepSeek news remained. Against this backdrop, the US dollar index re-emerged near the 108.00 mark, reaching a new weekly high, while US yields also recovered across the cycles. Meanwhile, speculation about President Trump's trade tariff policy continued to spread, keeping investors on edge in a week dominated by key interest rate decisions from the Federal Reserve and the European Central Bank. The market is also closely watching Trump's decision to postpone trade tariffs on the eurozone. Although this provides some short-term relief for the euro (EUR), the shadow of future tariffs still looms, which may drag down the region's economy and currency.

From the daily chart, EUR/USD rebounded about 350 points to a high of 1.0533 after finding immediate support at a more than two-year low near 1.0177. The currency pair is currently above 1.0400, while the 14-day relative strength index (RSI) is oscillating above the 50 level, further reinforcing the market's bullish sentiment. This may push EUR/USD back to 1.0533, this week's high), and a break will further test 1.0600 (round mark) and the peak of 1.0629 in December 2024. On the downside, the 1.0367 (14-day moving average) and 1.0356 (23.6% Fibonacci rebound from 1.0937 to 1.0177) levels are the most likely targets. If selling pressure re-emerges, traders will keep a close eye on these levels, with a breakout towards 1.0300 (market psychological barrier).

Today, we recommend buying the euro before 1.0405, with a stop loss of 1.0390 and targets of 1.0460 and 1.0470.

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