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Dollar weakened broadly in early US session as reports from The Wall Street Journal indicated that Donald Trump, during his inauguration, will only outline his trade vision but avoid imposing new tariffs for now. While this temporarily calms market fears of immediate disruptions, the situation remains dynamic, and unexpected developments could trigger sharp reversals, especially if the WSJ report proves inaccurate.

According to the report, Trump plans to issue a memorandum directing federal agencies to study trade policies and assess trade relationships with key partners, including China, Canada, and Mexico. The memorandum is expected to focus on addressing persistent trade deficits and investigating unfair trade and currency practices.

Specific directives include examining China’s compliance with the 2020 trade deal and reviewing the US-Mexico-Canada Agreement, which is up for re-evaluation in 2026. These steps suggest Trump is prioritizing groundwork over immediate action, but the spotlight remains on the possibility of future tariffs.

Technically, immediate focus is now on 1.4301 support in USD/CAD's with today's sharp reversal. Firm break there would at least bring deeper pull back to 55 D EMA (now at 1.4194). There is prospect of even deeper fall to 38.2% retracement of 1.3418 to 1.4484 at 1.4077 should CPI and retail sales data from Canadian Dollar later in the week are Loonie supportive. Or, at least, Canadian Dollar could have a breather until Trump's tariffs are really imposed.

In Europe, at the time of writing, FTSE is extending its record run and rises 0.12%. DAX is down -0.03% while CAC is up 0.02%. UK 10-year yield is up 0.041 at 4.701. Germany 10-year yield is up 0.016 at 2.548. Earlier in Asia, Nikkei rose 1.17%. Hong Kong HSI rose 1.75%. China Shanghai SSE rose 0.08%. Singapore Strait TImes fell -0.07%. Japan 10-year JGB yield fell -0.010 to 1.197.

ECB's Holzmann: January rate cut not as certain with elevated inflation risks

Austrian ECB Governing Council member Robert Holzmann expressed skepticism over a potential rate cut at ECB's upcoming January meeting. In an interview with Politico, Holzmann stated, “A cut is not a foregone conclusion for me at all,” emphasizing his commitment to approaching the discussion with an "open mind."

Holzmann highlighted that ECB decisions are fundamentally data-driven and noted that inflation remained “well above” 2% in December, with January figures expected to reflect similar levels. He cautioned that "cutting interest rates when inflation rises faster than anticipated, even temporarily, risks hurting credibility."

As a known policy hawk, Holzmann also revealed increased doubts about inflation settling around ECB’s 2% target by the end of the year. He cited unexpected developments since the December decision, including faster-than-expected depletion of gas reserves due to colder weather, the effective closure of the Ukraine gas transit, and the risks of persistently high energy prices.

China maintains LPR as offshore Yuan recovers ahead of key support

China’s central bank maintained its benchmark lending rates unchanged on Monday. The one-year loan prime rate was steady at 3.1%, while the over-five-year LPR, which influences mortgage rates, remained at 3.6%.

The offshore Yuan strengthened notably against the Dollar, continuing to draw support from a a key long-term level. This comes despite market speculation that China might allow Yuan to weaken further to counteract the economic effects of new tariffs introduced under Donald Trump’s presidency.

A weaker currency would bolster export competitiveness by making Chinese goods more affordable internationally. However, Beijing faces a dilemma: while a controlled depreciation could help exporters, an uncontrolled fall could lead to heightened volatility in domestic financial markets and reduced investor confidence.

Acknowledging these risks, PBOC Governor Pan Gongsheng reaffirmed the central bank’s commitment to exchange rate stability last week, stating, “We will resolutely prevent the risk of the exchange rate overshooting, ensuring that the Yuan exchange rate remains generally stable at a reasonable, balanced level.”

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0247; (P) 1.0289; (R1) 1.0313; More...

EUR/USD is still capped below 1.0435 resistance despite extending rebound from 1.0176. Intraday bias remains neutral and outlook stay bearish. Firm break of 1.0176 will resume whole fall from 1.1213. However, decisive break of 1.0435 will confirm short term bottoming, and turn bias back to the upside for stronger rebound to 38.2% retracement of 1.1213 to 1.0176 at 1.0572 first.

In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

• Gold prices found stability above $2700/oz after an initial drop.
• Historically, gold prices saw an initial two-day rally followed by a decline after Trump’s 2017 inauguration, driven by safe-haven demand and uncertainty.
• Technically, gold appears to be in a “wait and see” mode, with a bounce off the 2700 handle suggesting potential upside.
• Markets will be keeping an eye on the proposed tariffs and policy changes under the new.

Gold prices dropped following the market open yesterday but has since found some stability above the $2700/oz handle. Markets had expected a bout of volatility which I still believe will begin tomorrow and potentially later in the day.

The US holiday however, does mean that low levels of liquidity will be present during the US session and could mean any significant moves may materialize from tomorrow onward.

Golds Reaction to Trump 2.0

Historic data is always worth paying attention to even though at times they do not always pan out. Based on Trump’s first term, how did the price of gold fare after the inauguration?

Well, in 2017, January 20 when Trump was inaugurated Gold prices rose for an initial two-day rally before falling over 2.75% over the next three-days. At the time a lot of the rise in Gold was possibly down to safe haven demand as uncertainties about a Trump Presidency were rife.

This time around however, Trump does enjoy the support of the majority of Republicans which should allay fears within the US. However, Global Markets will be on edge in the coming days as they wait to see what plans Trump looks to implement when it comes to tariffs, border control and cryptocurrency.

This could lead to some wild price swings in the day ahead and thus warrants keeping a close eye on.

The return of Trump and proposed tariff hikes has lent strength to the US Dollar over the past 2 months. However, this is a double edged sword as high tariffs is likely to lead to a drop in gold prices at least temporarily while the uncertainty could keep haven demand active.

Is Gold about to enter a new phase of ‘consolidation’? We will soon find out.

The Week Ahead

The inauguration and first few days in office for President Trump do promise a lot and thus could overshadow data releases this week. The US does not have a lot of data scheduled for the week ahead with the S&P manufacturing and services PMI data due out on Friday.

In the interim i would suggest paying close attention to tariff chatter and the like as this could have material implications across a variety of markets and instruments.

Technical Analysis Gold (XAU/USD)

Gold appears to be in a wait and see mode at present.

Looking at the daily timeframe below and a bounce off the 2700 handle does bode well for bullish continuation.

That coupled with the overall trend leaves me to believe that we could be in for more upside in the days ahead.

Gold (XAU/USD) Daily Chart, January 29, 2025

Source: TradingView (click to enlarge)

Dropping down to a H1 chart and as you can see below, price is currently in no man’s land.

The H1 however, does appear to have changed structure and now also hints at further potential upside.

However a H1 candle close above the 2716 handle could help facilitate further upside and maybe even retest of the 2024 highs.

Gold (XAU/USD) One-Hour H1 Chart, January 20, 2025

Source: TradingView (click to enlarge)

Support

• 2700
• 2690
• 2673

Resistance

• 2716
• 2724
• 2739

WTI oil price eased further in early Monday trading, after last week’s multiple upside rejections at the base of daily Ichimoku cloud ($79.00) left a weekly bull-trap, prompting traders for a partial profit-taking.

All eyes are on inauguration of the US President Donald Trump and a number an executive orders he promised to sign in his first 24 hours in the White House.

Markets also speculate that Trump may relax some of energy related sanctions against Russia, in attempts to start moving the war in Ukraine towards the end.

Larger bulls faced headwinds from barriers at $80 zone (50% retracement of $95.00/$65.26 / 200WMA) as well as a ceasefire Gaza, which capped the latest rally.

Overall technical picture remains bullish, and is boosted by better than expected recent economic data from China, world’s top oil importer, which brightened demand outlook in coming months.

The recent formation of 10/200DMA golden cross was supportive, however fading bullish momentum suggests that there will be more room for deeper correction before broader bulls regain traction.

Initial supports lay at $76.33/10 (Fibo 23.6% of $66.54/$79.35 / daily Tenkan-sen), followed by 200DMA ($74.90) and Fibo 38.2% ($74.46) where deeper dips should find firm ground and mark a healthy correction.

At the upside, the latest top ($79.35) and $80 zone mark pivotal barriers, violation of which to expose targets at $83.64 (Fibo 61.8% of $95.00/$65.26) and $84.50 (June 30 lower top).

Res: 78.53; 79.00; 79.35; 80.00.
Sup: 76.33; 76.10; 74.90; 74.46.

The yen is almost unchanged on Monday. In the European session, USD/JPY is trading at 156.37, up 0.06% on the day. We can expect a quiet day, as the US observes Martin Luther King Day and Donald Trump will be sworn in as President.

The yen is coming off a busy week, with sharp swings on each of the past three trading days. The Japanese currency gained 0.95% last week, its best week since November. Still, USD/JPY remains high and investors are anxiously awaiting the Bank of Japan rate decision on Jan. 24.

BoJ expected to raise rates to 0.50%

There are no tier-1 releases out of Japan this week but investors will be busy keeping an eye on the Bank of Japan rate decision on Friday. The central bank tends not to telegraph its intentions but has hinted at a rate hike and the market will be on the lookout for any hints or signals from BoJ policy makers ahead of the rate decision. The BoJ is widely expected to raise rates to 0.50%, which would be the highest level since the 2008 global financial crisis. After decades of deflation and an ultra-loose monetary policy, inflation has taken root and the BoJ is slowly moving towards normalization.

Inflation has been above the BoJ’s 2% target for almost three years and higher wage growth means that inflation should remain sustainable as it moves higher. The weak yen is another reason for the BoJ to raise rates and make the yen more attractive to investors.

The big question mark is Donald Trump, whose has promised tariffs on US trading partners, which threatens to shake up the financial markets and damage Japan’s crucial export sector. The Trump factor is unlikely to prevent a rate hike this week, but supports the case for the BoJ to wait several months before delivering another rate hike.

USD/JPY Technical

• USD/JPY tested support at 155.88 earlier. Below, there is support at 155.39
• There is resistance at 156.79 and 157.28

USDJPY, Daily

In the Daily timeframe, USDJPY has formed a rising wedge pattern. The price bounced off the lower trend line and MA50. The Stochastic is out of oversold range and indicates a possible upside.

• We may consider buying USDJPY on consolidation above 156.300 with a target to 158.400;

In this technical blog, we will look at the past performance of the 4-hour Elliott Wave Charts of SPX. We presented to members at the elliottwave-forecast. In which, the rally from the October 2022 low unfolding as an impulse structure. Also showed a higher high sequence with a bullish sequence stamp. Suggested that index should see more upside extension to complete the impulse sequence. Therefore, we advised members not to sell the index & buy the dips in 3, 7, or 11 swings at the blue box areas. We will explain the structure & forecast below:

SPX 4-Hour Elliott Wave Chart From 1.09.2025

Here’s the 4-hour Elliott wave chart from the 1.09.2025 update. In which, the short-term cycle from the 8.05.2024 low ended impulse sequence & larger wave ((3)) at $6099.97 high. Down from there, the index made a pullback in wave ((4)) to correct that cycle. The internals of that pullback unfolded as Elliott wave double three structure where wave (W) ended at $5832.30 low. Wave (X) bounce ended at $6049.75 high. Then wave (Y) managed to reach the blue box area at $5783.66- $5617.43. From there, buyers were expected to appear looking for the next leg higher or for a 3 wave bounce minimum.

SPX Latest 4-Hour Elliott Wave Chart From 1.18.2025

This is the latest 4-hour Elliott wave Chart from the 1.18.2025 Weekend update. In which the SPX is showing a reaction higher taking place, right after ending the double correction within the blue box area. Allowed members to create a risk-free position shortly after taking the long position at the blue box area. However, a break above $6099.97 high is yet to be seen to confirm the next extension higher in wave 5 towards minimum extension target at $6179.13- $6304.44 area.

Daily Pivots: (S1) 189.48; (P) 190.05; (R1) 190.75; More...

A temporary low is formed at 189.31 with current recovery. Intraday bias in GBP/JPY is turned neutral first. Some consolidations would be seen but risk will stay on the downside as long as 193.01 resistance holds. On the downside, below 189.31 will target 188.07 support. Firm break there will argue that corrective pattern from 180.00 has finished too, and larger decline from 208.09 might be ready to resume.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Daily Pivots: (S1) 159.82; (P) 160.42; (R1) 161.12; More...

Intraday bias in EUR/JPY remains neutral for the moment. Recovery from 159.74 might extend, but further decline will remain in favor as long as 162.88 resistance holds. On the downside, below 159.74 will target 156.16 support. On the upside, however, break of 162.88 will bring retest of 164.89 instead.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.

Daily Pivots: (S1) 0.8417; (P) 0.8436; (R1) 0.8458; More...

EUR/GBP's rally from 0.8221 picks up momentum again. With break of 0.8446 resistance, next target is 0.8624 key cluster resistance zone. For now, outlook will remain bullish as long as 0.8403 support holds, in case of retreat.

In the bigger picture, a medium term bottom was formed at 0.8221, just ahead of 0.8201 key support (2022 low). But outlook will be neutral as best as long as 0.8624 cluster resistance (38.2% retracement of 0.9267 to 0.8221 at 0.8621) holds. That is, larger down trend from 0.9267 (2022 high) might still extend lower. However, decisive break of 0.8621/4 should confirm trend reversal and turn outlook bullish.

Daily Pivots: (S1) 1.6541; (P) 1.6601; (R1) 1.6650; More...

Range trading continues in EUR/AUD and intraday bias remains neutral. Strong support is still expected from 38.2% retracement of 1.5963 to 1.6800 at 1.6480 to contain downside. On the upside, firm break of 1.6800 will resume the rally from 1.5963. However, sustained break of 1.6480 will bring deeper correction 61.8% retracement at 1.6283 instead.

In the bigger picture, EUR/AUD is holding on to 1.5996 key support despite brief breach. Larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5995 will indicate that such up trend has completed and deeper decline would be seen.