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• The US Treasury is proposing a gradual increase in universal tariffs, causing uncertainty in the US Dollar and market expectations.
• The Federal Reserve meeting tomorrow is expected to result in an extended pause due to tariff uncertainties and potential inflation impact.
• Gold maintains a bullish bias due to uncertainties around tariffs and their impact, with safe-haven flows to support prices.

Gold prices dropped yesterday as markets digested a host of factors which included tariff threats and a market shock thanks to Chinese AI startup DeepSeek. The precious metal has edged its way higher since printing a low of $2730/oz to trade around $2750/oz at the time of writing.

Yesterday’s price drop in Gold may also have been down to some profit taking following an impressive rally last week. Given the US Federal Reserve interest rate meeting is tomorrow, market participants may have opted for some profit taking ahead of a potentially volatile Wednesday.

Tariff Threats Back in Focus – Bessent vs Trump?

The threats of tariffs came back to the fore yesterday as well. The Financial Times reported that new Treasury Secretary Scott Bessent is pushing for a gradual increase in universal tariffs, starting at 2.5% and possibly going up to 20%. President Trump later said he wants even higher tariffs and is considering specific taxes on products like steel, copper, and semiconductors.

This goes against market expectations that tariffs would be applied on a case-by-case basis, like with Colombia, rather than across the board. Since these plans are being actively developed by the Treasury and not just hinted at by Trump, the US Dollar has been making moves with a lot of whipsaw price action experienced by the Dollar Index (DXY).

FED Meeting Ahead –  Extended Pause?

The Federal Reserve meeting tomorrow should result in an extended pause given the ongoing uncertainties around tariffs. Despite Fed Chair Powell’s comments in the lead up to the December meeting that policymakers do not concern themselves with the political side of things, the meeting minutes showed that policymakers are concerned about tariffs.

The threat of tariffs continues to shake markets when mentioned, and strengthens the US dollar. The impact on inflation however, is where the concern lies for the Fed with Trump’s comments yesterday around specific taxes on products like steel, copper and semiconductors likely to lead to an increase in price pressures down the line.

Markets are now pricing in around 48 bps of rate cuts from the Fed through December 2025.

Source: LSEG (click to enlarge)

Final Thoughts

Personally I still maintain a bullish bias on Gold largely from the fact that the uncertainties around tariffs and their impact will keep safe haven flows elevated. As we saw yesterday, the US Dollars safe haven appeal may be waning with the JPY and CHF faring better during the DeepSeek inspired market rout.

Geopolitical and growth concerns may also factor in and thus lend a supporting hand to Gold prices in the days and weeks ahead.

Technical Analysis Gold (XAU/USD)

From a technical analysis standpoint, this analysis is a follow up from the technicals last week. Read: Gold (XAU/USD) Price Steady On Inauguration Day, the Calm Before the Storm?

Golds breakout after President Trumps inauguration fell short of the al time highs as the precious metal rejected at the 2785 handle.

Yesterday’s selloff has not resulted in a trend change with bulls coming back in to push prices above the 2750 handle.

Gold (XAU/USD) Daily Chart, January 28, 2025

Source: TradingView (click to enlarge)

Dropping down to a H4 chart and as you can see below, the trend has changed to bearish with a lower high followed by a lower low. However there is a descending trendline in play with the swing high resting at 2770.

A candle close above the descending trendline, could lead to a retest of the 2770 ahead of the FOMC meeting.

A 4-hour candle close above the 2770 handle could be seen as a pre-cursor for fresh all-time high for the precious metal.

Keep an eye out for comments around tariffs or any other geopolitical comments from the Trump administration as this could have a knock on effect on global markets.

Gold (XAU/USD) Four-Hour H4 Chart, January 28, 2025

Source: TradingView (click to enlarge)

Support

• 2750
• 2739
• 2724

Resistance

• 2758
• 2770
• 2785

The dollar index was firmer on Tuesday and recovering from Monday’s turbulence, sparked by DeepSeek shockwave.

Today’s gap higher opening and (so far limited) bounce were sparked by Trump’s renewed tough tariff rhetoric.

The action is calmer compared to Monday’s wide swings and signal potential recovery (if talks about tariffs do not fade again) after Monday’s dip to five-week low was contained by the top of ascending daily Ichimoku cloud (106.75) that now offers solid support.

However, recovery so far did not show significant results, as initial barriers at 108.00 zone (Fibo 38.2% of 110.00/106.75 pullback /10DMA) is still intact.

Conflicting signals from daily chart (momentum remains negative / RSI is heading north, and MA’s are in mixed setup) do not provide adequate support, although dollar is still afloat.

All eyes are on Wednesday’s FOMC rate decision, which is widely expected to result in unchanged US interest rates, but markets want to hear more from Chief Powell, particularly about the central bank’s rate trajectory in 2025.

Most economists expect 50 basis points cut in total in 2025, with first 25 bps cut to possibly occur in the second half of the year.

Elevated inflation in the US and expectations for further price pressure on President Trump’s election promise about strongly boosting US economic growth, should further support the dollar.

Res: 108.00; 108.37; 108.75; 109.25
Sup: 107.50; 106.89; 106.75; 106.12

The US dollar rose on Tuesday, adding 0.65% against a basket of popular world currencies amid Donald Trump’s statements about his desire to increase the universal tariff on all imported goods above the current 2.5%.

News of the tariffs supports the US dollar as it suggests a reduction in the US trade deficit and an increase in demand for local goods. Currently, this represents a market reaction to plans that have yet to be implemented, but the information has supported the dollar from a technical analysis perspective.

Last week, the DXY index finished below its 50-day moving average, breaking a four-month uptrend. However, a quick return above that level this week allows the decline on Friday to be viewed as a temporary deviation.

With further growth of the dollar, the decline of the previous two weeks can be interpreted as corrective, which allowed to fix profits and clear the way for further growth with the renewal of the January highs. The Fibonacci extension points to a potential target for the DXY index around 116, which corresponds to a rise to 161.8% of the initial momentum. But in practice, the path may be less straightforward.

Later this week, the Fed meets, where no change in the key rate is expected. The focus will be on plans for 2025 and whether expectations of two rate cuts are confirmed.

Tariff threats may encourage the Fed to stick to tighter monetary policy, but this is at odds with Donald Trump’s recent demands for rate cuts to stimulate growth. In the currency market, low rates help weaken the dollar, offsetting the effect of higher tariffs, with the economy receiving an additional boost to inflation. This raises the question of the Fed’s tolerance for inflation. Both in Trump’s first term and immediately after the last election, the Fed tightened its rhetoric at the prospect of the effects from tariffs.

Higher inflation at healthy growth rates could help the US reduce its government debt-to-GDP ratio by depreciating the dollar’s real purchasing power. However, this is a complex process that requires a high level of international coordination. The United States succeeded in the 1980s with the Plaza Accord, but the question remains whether it can do so again.

US Conference Board Consumer Confidence Index dropped to 104.1 in January, down from 109.5 and falling short of expectations at 105.7. Present Situation Index saw steep decline by -9.7 points to 134.3. Expectations Index fell by -2.6 points to 83.9, but remained above the critical recession signal threshold of 80.

Dana Peterson, Chief Economist at The Conference Board, noted that consumer confidence has been fluctuating within a relatively stable range since 2022. While January marked the second consecutive monthly decline, the index still falls within that range, albeit closer to its lower boundary.

Peterson added that consumers’ optimism about future business conditions and income also declined. Notably, December’s growing pessimism about future employment prospects was confirmed in January.

Full US consumer confidence release here.

Daily Pivots: (S1) 1.0453; (P) 1.0493; (R1) 1.0532; More...

Intraday bias in EUR/USD remains neutral for the moment. On the downside, break of 1.0371 support will indicate rejection by 38.2% retracement of 1.1213 to 1.0176 at 1.0572 and retain near term bearishness. Retest of 1.0176 low should be seen next. On the upside, though, decisive break of 1.0572 will raise the chance of bullish reversal, and target 61.8% retracement at 1.0817.

In the bigger picture, outlook is mixed as fall from 1.1274 (2023 high) could either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. Strong support from 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will favor the former case, and sustained break of 55 W EMA (now at 1.0722) will argue that the third leg might have started. However, sustained trading below 1.0199 will favor the latter case and bring retest of 0.9534 low.

Daily Pivots: (S1) 1.2443; (P) 1.2483; (R1) 1.2540; More...

Intraday bias in GBP/USD remains neutral for the moment. Rebound from 1.2099 is seen as a corrective move. While another rise cannot be ruled out, strong resistance could be seen 38.2% retracement of 1.3433 to 1.2099 at 1.2609 to limit upside. On the downside, below 1.2292 minor support will bring retest of 1.2099 low. However, sustained trading above 1.2609 will raise the chance of reversal and target 61.8% retracement at 1.2923.

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

Daily Pivots: (S1) 153.40; (P) 154.82; (R1) 155.94; More...

Intraday bias in USD/JPY remains neutral for the moment. On the upside, break of 156.74 resistance will indicate that fall from 158.86 has completed as a correction. Intraday bias will be back on the upside for 158.86 and above to resume the whole rally from 138.57. On the downside, below 153.70 will resume the fall from 158.86 to 38.2% retracement of 139.57 to 158.86 at 151.49.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Markets

The dust settled after yesterday’s violent sell-off in the US tech sector. Dip-buying already emerged during the day in certain individual companies. Others closed near or at their intraday lows only to be picked a day later. US indices as a whole kick off more or less unchanged though. Core bond yields recoup some marginal ground with Treasuries trading on par with German Bunds. Rates in both areas add between 2-3 bps across the curve. Some second-tier economic data failed to inspire. US durable goods unexpectedly dropped 2.2% on a monthly basis but that’s due to a 46% plunge in commercial aircraft orders. Stripping for such notoriously volatile items, core gauges printed much better. These include a 0.6% m/m gain in capital goods shipments that excludes military equipment and commercial aircraft (and as such gives a glimpse on GDP-related business investments). The ECB in Europe released its fourth-quarter Bank Lending Survey, offering some last-minute input to Thursday’s policy meeting. Banks reported a renewed net tightening of credit standards for company loans. The most pronounced tightening since 2023Q3 was driven by higher perceived risks related to the economic outlook and a lower risk tolerance, especially in France and Germany. Both suffered from heightened political uncertainty during the survey’s reference period. Banks expect a further tightening of standards in 2025Q1. Credit standards for household loans for house purchases were more or less unchanged after three quarters of easing with increased competition offsetting a lower risk tolerance. On the demand side, firms’ net demand for loans continued to increase but remained weak overall with little improvement expected in the running quarter. Demand for housing loans increased strongly again whereas other consumer credit demand picked up, be it only slightly. Both were supported by declining interest rates.

Currency markets are more or less a reversal of yesterday. The US dollar prints some of the biggest gains whereas JPY and CHF take a breather. Dollar strength was inspired by early-morning comments from president Trump. Treasury Secretary Bessent in the Financial Times is said to favour a step-by-step tariff approach, applying a 2.5% universal levy that increases by the same amount each month. Trump responded he wants “much bigger” tariffs than that. EUR/USD stumbles towards 1.043 & DXY tried to take out 108. USD/JPY is back above 155. Sterling is on track for a four-day winning streak. EUR/GBP tested support around 0.838.

News & Views

French consumer confidence rose from 89 to 92 in January, the highest level since October. Details showed consumers turning less pessimistic on their (future) personal financial situation and the standard of living. The reversal of some of the initial 2025 budget proposals played a role here. New PM Bayrou will likely face a no-confidence vote linked to that budget as soon as next week. In a similar vein, they turned slightly more optimistic on the likelihood of future unemployment (47 from 54). Indicators measuring savings capacity and purchasing opportunities remained unchanged.

The Hungarian central bank kept its policy rate as expected unchanged at 6.5% and vowed to keep it that way for a sustained period. Hungarian inflation rose more than expected in December (4.6% Y/Y) and will continue to rise in January. The MNB flags an increased risk of a higher inflation path this year with CPI returning to the tolerance band later than projected in the December inflation report. The council closely monitors pricing decisions in the services sector while household inflation expectations have been on an upward trend since July. Anchoring inflation expectations, preserving financial market stability, and a disciplined monetary policy are crucial for the consumer price index to return to the central bank target in a sustained manner. The MNB also calls for disciplined budget deficit targets to help improve Hungary’s risk perception. A careful and patient approach to monetary policy remains warranted. In the Council’s assessment, geopolitical tensions, a volatile financial market environment, and risks to the outlook for inflation warrant the maintenance of tight monetary conditions. They by far outweigh downside risks to the economy. On FX markets, the bottom below the Hungarian forint (EUR/HUF 415) is becoming stronger. The pair is trying to paint a technical double top with neckline support located around 406.50. A break below would improve the short term technical picture of the forint.

Daily Pivots: (S1) 0.8966; (P) 0.9019; (R1) 0.9074; More…

Intraday bias in USD/CHF remains neutral for the moment. Rise from 0.9374 remains intact so far with strong support support seen from near term rising channel. On the upside, break of 0.9107 will target 0.9200 and 0.9223 key resistance. On the downside, however, break of 0.8964 will resume the fall from 0.9200 to 38.2% retracement of 0.8374 to 0.9200 at 0.8884 next.

In the bigger picture, as long as 0.9223 resistance holds, price actions from 0.8332 (2023 low) are seen as a medium term corrective pattern. That is, long term down trend is in favor to resume through 0.8332 at a later stage. However, sustained break of 0.9223 will be an important sign of bullish trend reversal.