Dollar Index

The dollar did not enjoy safe-haven inflows on Monday amid AI valuation concerns. U.S. President Donald Trump threatened to impose a 50% tariff on Colombian imports in a dispute over deportations. The dollar index briefly fell below 107.00 to 106.96. The dollar fell last week and posted its worst weekly performance in more than a year as investors expect U.S. President Trump to impose tariffs lower than previously feared. The prospect of high tariffs on goods from places such as Canada, Mexico and the eurozone has raised concerns about renewed inflation, which has driven U.S. Treasury yields and the dollar higher in recent months. However, there was a partial reversal of that trend last week, with traders betting that tariffs may not be as large or widespread as previously feared. Part of the reason for the dollar's pullback last week may be technical, after the dollar had risen 10% since the end of September. Much of the good news in the United States has been priced in, and if the Federal Reserve keeps interest rates steady while the European Central Bank, the Bank of Canada and the Swedish Riksbank all cut rates, the dollar's strength may be tested.

The dollar index has hit its highest level since November 2022 at 110.17. The US dollar index fell 1.79% last week, the largest weekly drop since November 2023. It finally fell below the key psychological level of 108.00, showing continued vulnerability to bearish momentum. The 14-day relative strength index (RSI), a technical indicator on the daily chart, remains below 50, indicating a weak short-term trend, while the MACD histogram bars deepened in the negative area, indicating further declines. At this stage, the market psychological level around 108.00 is now a key resistance level. If this level is recovered, it may lead to additional rebounds, and the next resistance area will appear around 108.43 (10-day simple moving average). Conversely, below 108.00 may weaken the outlook for the dollar and further declines to 107.22 (last week's low), then 107.07 (65-day moving average), and 107.00 (round mark) area levels. A breakout points to the target position of 106.41 (80-day moving average).

Consider shorting the US dollar index around 107.50 today, stop loss: 107.65, target: 107.10, 107.00

WTI spot crude oil

Oil prices fell sharply on Monday (January 27), hitting a two-week low. Oil prices were under pressure from unfavorable economic data from China and Germany, as well as concerns that the tariff plan proposed by US President Donald Trump could further suppress economic growth and energy demand. WTI crude oil prices gave up the gains of the previous trading day and traded around $73.50 per barrel during the Asian trading session on Monday. Crude oil prices came under pressure as US President Donald Trump raised trade concerns and urged OPEC+ (the Organization of Petroleum Exporting Countries and its allies) to lower crude oil prices. On Friday, Trump reiterated his call for OPEC+ to lower oil prices to hit the finances of oil-rich Russia and help end the war in Ukraine. However, OPEC and its allies, including Russia, have not yet responded to Trump's call, and OPEC+ representatives pointed out plans to increase oil production from April. In addition, data from the U.S. Energy Information Administration showed that the United States imported 228,000 barrels of crude oil and products from Colombia in 2023.

WTI crude oil prices fell below $74 this week, showing a significant weakening of the market's technical momentum. The daily chart shows that the market is in a bearish trend in the short term, and the current market's main key resistance is $75.01 (last Friday's high). Then refer to 75.93 (50.0% Fibonacci rebound from 87.12 to 64.75). Only when the price continues to stand above this level can the bullish momentum be re-stimulated to the resistance level of $76.74 (14-day moving average). The oil price fell below the main support area at $73.29 (38.2% Fibonacci rebound level), and the next level is $72.33 (January 9 low). Then there is the $72.00 round mark, which may trigger a deeper correction. Although the long-term trend of the crude oil market remains upward, this week's technical indicators show that the market's bearish sentiment has clearly increased. The shift in technical momentum has heightened market concerns about short-term downside. The key to the long-short split is whether the $70 mark can be held.

Today, consider going long on crude oil around 72.65, stop loss: 72.45; target: 74.00; 74.30

Spot gold

Spot gold faced strong selling pressure at the beginning of this week, trading around $2,730 lows during the US trading session. Despite the gloomy market sentiment, the bright metal failed to rise against the battered US dollar. In the early Asian session on Monday, gold prices fell below about $2,760, pressured by the recovery in demand for the US dollar. However, the potential downside for precious metals may be limited due to cautious sentiment and uncertainty surrounding US President Donald Trump's tariff measures. The US dollar strengthened as Trump launched a trade war. On Sunday, Trump imposed comprehensive retaliatory measures on Colombia, including tariffs and sanctions, after the South American country refused to allow two military planes carrying deported immigrants to land. The news put pressure on gold prices denominated in US dollars. The U.S. Federal Reserve will keep interest rates unchanged at its January meeting on Wednesday. At the World Economic Forum last week, Trump called for an immediate rate cut, which caused the dollar to fall to its lowest level in more than a month and supported gold prices. However, if Fed officials make hawkish remarks this week, this may drag down the price of non-yielding gold.

From the daily chart, the short-term technical outlook shows that gold is about to be technically overbought, indicating that there may be a downward adjustment before continuing to rise. Currently, the relative strength index (RSI), one of the 14 technical indicators of gold prices, has retreated from a high of 70 to around 61. On the upside, the first resistance range may be $2,750 (the central axis of the ascending channel), and $2,752 (last Friday's low). If gold can rise above this area and start using it as support, the next target may be $2,786 (last week's high), and the all-time high of $2,790. Looking down, the first support level may be $2,726.50 (10-day moving average). Then there are $2710-2700 (lower line of the ascending channel, round number mark) and $2690 (20-day simple moving average).

Today, consider going long on gold before 2,738.00, stop loss: 2,735.00; target: 2,755.00; 2,760.00

AUD/USD

AUD/USD found support around 0.6270 as the dollar fell as concerns about the trade war between the United States and Colombia eased. The Federal Reserve is expected to keep interest rates stable in the range of 4.25%-4.50% on Wednesday. Investors await Australian CPI data, which will affect the Reserve Bank of Australia's interest rate expectations. The Australian dollar ended a three-day winning streak against the US dollar due to increased risk aversion on Trump's policies. AUD/USD traded flatly after China released mixed Purchasing Managers' Index data on Monday. As a close trading partner, China's economic performance has a significant impact on the Australian economy. China's National Bureau of Statistics Manufacturing PMI fell to 49.1 in January, down from 50.1 in December and missing the market's expectation of 50.1. Similarly, the non-manufacturing PMI fell to 50.2 in January from 52.2 in December. The Australian dollar also failed to gain support from China's latest stimulus measures.

On Monday, AUD/USD traded around 0.6290, showing an upward trend within an ascending channel on the daily chart, suggesting a potential bullish bias. The 14-day relative strength index (RSI) of the technical indicator is above 50, supporting the positive market sentiment. On the upside, AUD/USD may retest last week's high of 0.6330, with the next target close to the upper line of the channel near 0.6350. A break below points to the 65-day moving average resistance of 0.6374, with the next target looking at 0.6400. Initial support is at the 9-day moving average of 0.6261, followed by the 20-day moving average of 0.6226. Stronger support is found around the 0.6200 psychological level.

Consider going long on AUD today before 0.6280, Stop Loss: 0.6270; Target: 0.6330; 0.6340.

GBP/USD

After climbing to a three-week high above the 1.2500 mark, GBP/USD lost some momentum on Monday, driven by a modest recovery in the US dollar, falling back to the 1.2490 range. The GBP/USD pair started the new week on a weak note, eroding part of Friday's strong gains, falling below the 1.2500 psychological level or a near three-week high. Spot prices are currently trading around the 1.2480-90 range as the US dollar strengthens modestly, although the decline lacks any follow-through selling or bearish conviction. The dollar index, which tracks the performance of the greenback against a basket of currencies, rebounded from a more than one-month low on risk aversion, as any significant appreciation of the dollar seems elusive given the growing bets that the Federal Reserve will cut borrowing costs twice before the end of the year, as inflationary pressures in the U.S. ease. Moreover, uncertainty over the prospect of a rate cut by the Bank of England in February also helped limit losses in the GBP/USD pair.

The daily chart shows that GBP/USD buyers have re-entered a six-week descending wedge pattern, testing the upper line of the wedge at 1.2425. On the road to recovery, the pair needs to recapture the key short-term resistance levels of 1.2500 (psychological mark), and 1.2502 (last week's high). Further upside will target the 1.2536 level. However, the 100-day moving average is about to cross the 200-day moving average from above, which could validate the death cross. In this case, GBP sellers may regain control and drag the pair back to the support level of the 1.2400 round number mark. Failure to hold the latter could expose downside risk, moving towards the 20-day moving average of 1.2351.

Today, it is recommended to go long on GBP before 1.2488, stop loss: 1.2475, target: 1.2530, 1.2540

USD/JPY

USD/JPY fell sharply to around 154.00 at one point, with the yen performing strongly on safe-haven demand. The Bank of Japan raised interest rates by 25 basis points, but did not provide a specific path for the hike. The dollar fell as Trump withdrew his proposal to impose 25% tariffs on Colombia and the Federal Reserve's dovish bets accelerated. The yen started the new week well, driven by global risk aversion, boosted by renewed trade war concerns and the Bank of Japan's hawkish rate hike on Friday. In addition, the spring wage negotiations are expected to bring strong wage increases again and allow the Bank of Japan to tighten policy further, which has become another factor supporting the yen. In turn, this has caused USD/JPY to fall back below 155.30 in the Asian session, close to a one-month low, although a slight rise in the US dollar may help limit losses. The narrowing of the US-Japan yield differential supports the prospect of further appreciation of the low-yielding yen, indicating that the path of least resistance for USD/JPY remains to the downside.

From a technical perspective, the 14-day relative strength index (RSI) on the daily chart remains around 40, which shows a weak short-term trend given that the RSI indicator has just begun to gain negative traction. Any subsequent decline may continue to find support in the 153.00 (market psychological level), and 152.85 (200-day moving average) areas. This is followed by the 152.56 (61.8% Fibonacci retracement of 148.65 to 158.88), and 152.00 (psychological level) support levels, which, if decisively broken, will be seen as new trigger points for bearish traders. On the other hand, any attempted rebound may now face some resistance around the 154.64 (65-day moving average) level. The next relevant obstacle is located near the 154.97 (38.2% Fibonacci retracement) supply zone. Follow-up buying, leading to a strong break above the 155.00 mark, should pave the way for a move towards the 155.47 (40-day moving average) area.

Short USD/JPY before 154.70 today, stop loss: 154.90; target: 153.80, 153.60

EUR/USD

EUR/USD lost traction and faded its initial bull run to the yearly peak area around 1.0530, all after the dollar rebounded late on a steady risk-off sentiment in global markets. EUR/USD fell slightly to around 1.0460 during Asian session Monday as the dollar index, which measures the value of the dollar against six major currencies, recovered from the monthly low of 107.22 hit on Friday. Uncertainty surrounding the impact of US President Trump's trade and immigration policies may support the Federal Reserve's cautious attitude towards rate cuts this year. However, the euro struggled due to dovish sentiment surrounding the ECB's policy outlook. The ECB is set to cut its deposit facility rate by 25 basis points to 2.75% on Thursday and will continue this process in the next three policy meetings as officials are confident that inflationary pressures will sustainably return to the target level of 2%. On the other hand, the EUR/USD recovery continues after the recent consolidation in a relatively narrow trading range. The ability of the currency pair to maintain upward pressure highlights the growing confidence of buyers as it approaches key resistance levels.

From the daily chart, EUR/USD seems to have moved further away from the recent cycle low near 1.0177. But after rebounding about 350 points to the near-daily high of 1.0521 in just three weeks, it temporarily took a breather before giving up to 1.0450 at the beginning of this week. Momentum indicators show mixed signals. The RSI is above the 60 level, supporting the rebound potential, but the ADX has fallen to about 27, indicating a weakening trend strength. In this context, key support levels include 1.0380 (34-day moving average), followed by 1.0356 (23.6% Fibonacci rebound from 1.0937 to 1.0177), and traders will keep a close eye on these levels if selling pressure re-emerges, with a breakout pointing to 1.0300 (market psychological level). On the upside, resistance is at 1.0521, the high of January 24, 2025, and a decisive break above this level will open the door to the next target of 1.0557 (50.0% Fibonacci rebound).

Today, it is recommended to go long on the euro before 1.0480, with a stop loss of 1.0465 and targets of 1.0530 and 1.0540.

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