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Key Highlights

• WTI Crude Oil prices started a recovery wave above $56.50.
• A key bearish trend line is forming with resistance at $58.30 on the 4-hour chart.
• Gold started a fresh increase above $4,380 and $4,400.
• EUR/USD extended losses and declined below the 1.1700 level.

WTI Crude Oil Price Technical Analysis

WTI Crude Oil price started a decent increase above $56.50 against the US Dollar. The price settled above $57.00 to enter a positive zone.

Looking at the 4-hour chart of XTI/USD, the price tested the $59.00 zone before there was a downside correction. The price retested the $56.50 support and recently recovered some losses. It reclaimed the 100 simple moving average (red, 4-hour) but remained below the 200 simple moving average (green, 4-hour).

On the upside, immediate resistance is near the $58.50 level. There is also a key bearish trend line forming with resistance at $58.30 and the 200 simple moving average (green, 4-hour).

The first key hurdle for the bulls could be $59.00. A close above $59.00 might send Oil prices toward $60.00. Any more gains might call for a test of $62.00 in the near term.

On the downside, the first major support sits near the $56.50 zone. The next support could be $55.50. A daily close below $55.50 could open the doors for a larger decline. In the stated case, the bears might aim for a drop toward $54.00.

Looking at Gold, the bulls remained in action, and the price started a fresh increase above the $4,400 resistance.

Economic Releases to Watch Today

• Fed's Barkin speech.
• US S&P Global Composite PMI for Dec 2025 – Forecast 52.9, versus 53.0 previous.

Bitcoin (BTC/USD) has successfully rebounded, passing the important $93,000 price point that many market participants have been watching.

Following a lackluster end to 2025, Bitcoin has started 2026 on the right foot. The worlds largest cryptocurrency by market capitalization has risen from around the 87500 mark to a high of 94295 over the first 5 days of the year.

This is Bitcoins first real run toward the $95000 mark since mid-November. At the same time we heard today that Strategy, a major corporate holder of bitcoin, disclosed more purchases. In a Jan. 5 SEC filing, the company said it bought 1,283 bitcoin between Jan. 1 and Jan. 4 for $116.0 million and held 673,783 coins as of Jan. 4, with the purchases funded through an at-the-market share-sale program. Strategy also reported a $5.40 billion unrealized loss on digital assets for 2025 and said its U.S. dollar reserve was $2.25 billion.

Despite the recovery, the rally is fragile and could be derailed if global conflicts worsen, causing investors to flee risky investments for safety.

It is also vulnerable to new US economic data that might force interest rates and bond yields to rise unexpectedly.

Meanwhile, the cryptocurrency market which trades 24 hours a day remains prone to sudden price drops caused by a lack of available buyers. This lines up with onchain data which showed that crypto trading volumes are at their lowest levels since late 2023.

Technical Analysis - BTC/USD

The confluence of positive structural and technical factors lends strong support to bullish forecasts heading into 2026.

Looking at structure though (on the H4 chart), and price has just printed a higher high just shy of the key 95000 handle.

This move sees the period-14 RSI enter into overbought territory with the likelihood of a potential pullback, growing.

Bitcoin (BTC/USD) Four-Hour Chart, January 5, 2026

Source: TradingView.com (click to enlarge)

Dropping down a H1 chart and the pullback is already underway.

Immediate support may be found at the 93000 handle before the 91800 and 90000 psychological handles come into focus.

On the upside, the first hurdle would be consolidation above the 93000 mark with a break of the 95000 handle opening up a potential rally toward 100000.

Bitcoin (BTC/USD) One-Hour Chart, January 5, 2026

Source: TradingView

Heading into 2026, the US Dollar faces a complicated path driven by a conflict between the Federal Reserve and the government. While the Fed tries to stabilize the economy, the government is aggressively spending money through the new "One Big Beautiful Bill" Act.

Experts predict a "V-shaped" year for the currency: the dollar is expected to weaken in the first six months, dropping from its current level of 99.00 down to around 94.00, as the Fed cuts interest rates to protect jobs.

However, this dip should be temporary. By the second half of the year, the effects of the new government spending and trade tariffs will likely boost inflation, forcing interest rates back up and pushing the dollar back to or even above its starting level. Despite this predicted rebound, the dollar faces significant risks, including potential political fights over the debt limit, the possibility of the AI stock bubble bursting, and challenges from rival nations in the BRICS alliance.

Source: Created by Zain Vawda

The Macroeconomic Landscape: A Tale of Two Halves

Uneven Economic Growth (US vs. Europe) The U.S. economy is expected to outperform the rest of the world in 2026, though the growth will happen in two distinct phases. The year will likely start slowly as the lingering effects of high interest rates drag down spending, but the economy is projected to rebound strongly in the second half as new government stimulus kicks in. This temporary "soft patch" early in the year will allow the Federal Reserve to cut interest rates, which may briefly weaken the dollar.

In contrast, Europe is facing stagnation and deep structural issues, forcing the European Central Bank to cut rates even more aggressively. Ultimately, the gap between a robust US and a weak Europe will provide long-term support for the dollar.

The AI Investment Boom A massive wave of spending on Artificial Intelligence is acting as a safety net for the US economy. With up to $3 trillion projected to be spent on data centers and tech infrastructure, this boom is creating jobs and demand even as traditional manufacturing slows down. Since the tech giants driving this spending like Microsoft and Google are American, global investors continue to pour money into US markets. This constant flow of capital creates a "floor" for the dollar, keeping it relatively strong. However, relying so heavily on a single industry does create a significant risk if the tech sector suddenly stumbles.

Inflation and Tariff Shocks While inflation was originally expected to fall to 2.4% in 2026, new trade policies could reverse that trend. The proposed "Liberation Day" tariffs, which include a 10% tax on imports, are expected to push prices up by an additional 1% to 1.5%. This creates a difficult scenario where growth might slow down while prices remain high ("stagflation"). Because the Federal Reserve would need to keep interest rates higher to fight this tariff-induced inflation, the dollar is likely to strengthen as higher rates attract foreign investors.

Monetary Policy: The Federal Reserve’s High Wire Act

The Fed vs. The Market The Federal Reserve is currently walking a tightrope. Although they cut interest rates slightly at the end of 2025, they sent a "tough" message that they aren't ready to lower them much further.

There is now a major disagreement between the Fed and investors: the Fed plans to keep rates relatively high (around 3.4%) through the end of 2026 to keep inflation in check, while investors are betting on deeper cuts (down to 3.0%) to help the economy. This gap between what the Fed plans to do and what the market expects will likely cause the dollar's value to jump up and down significantly.

A Year of Two Halves Most experts predict that 2026 will play out in two distinct phases. In the first half of the year, the economy is expected to look weak, which will likely force the Fed to cut interest rates earlier than planned (possibly in January and April) to protect jobs. This would temporarily push the value of the dollar down.

However, in the second half of the year, new government stimulus and trade tariffs are expected to heat up inflation again. This will force the Fed to stop cutting rates while other countries continue to cut theirs, making the dollar strong again by the end of the year.

Higher Rates are Here to Stay Underlying all of this is a structural change in the economy. Economists believe the "neutral" interest rate, the sweet spot where the economy runs smoothly, is permanently higher now than it was before the pandemic, meaning rates won't return to rock-bottom levels.

Furthermore, because the US government is borrowing massive amounts of money, it must offer higher returns (yields) on its long-term bonds to attract lenders. These higher yields tend to attract foreign money, which provides a long-term safety net for the dollar's value.

Fiscal Policy: The "One Big Beautiful Bill" and Debt Dynamics

Government Spending Saves the Day (Eventually) The "One Big Beautiful Bill" Act is a massive spending plan that extends tax cuts and creates new benefits. While this increases the national debt significantly, it acts as a powerful stimulus package. By the second half of 2026, the extra money from these tax cuts will flood into the economy, boosting growth and strengthening the dollar right when the economy needs it most.

Borrowing More, But Attracting Cash To pay for these tax cuts, the US government must borrow huge amounts of money by selling bonds. Usually, having too much debt makes a country's currency look weak. However, because US bonds pay higher interest rates than those in Europe or Japan, global investors are expected to keep buying them. This constant demand for US bonds keeps money flowing into the dollar, keeping it strong despite the high debt levels.

The Debt Limit Fight A major political risk returns on January 2, 2026, when the limit on how much the US government can borrow (the debt ceiling) kicks back in. The government can use emergency accounting tricks to keep running until the summer, but a political standoff is expected. Paradoxically, this drama often strengthens the dollar temporarily; when investors get scared by political fighting, they often rush to hold US cash as a "safe haven" until the crisis is resolved.

Source: Created by Zain Vawda

Structural Risks: The Black Swan of 2026

About 26% of major investors believe the biggest risk in 2026 is an Artificial Intelligence (AI) crash. The concern is that companies are spending a massive $3 trillion on AI technology, but it might not generate enough profit to justify the cost. If big tech companies (the "Mag 7") fail to deliver results, their stock prices could collapse.

This would hurt the US dollar in two ways: first, foreign investors would sell US stocks, driving the dollar down; second, if the crash causes a recession, the Federal Reserve would cut interest rates to zero, potentially crashing the dollar index below 90.

Sovereign Debt Crisis With government debt at record highs worldwide, there is a risk of a financial crisis. A crisis in the US caused by excessive government spending (the "OBBBA" bill) would be a disaster, potentially destroying the dollar's reputation as a safe asset.

However, experts think it is more likely that a debt crisis will hit Europe or developing nations instead. Paradoxically, if other countries face a crisis, investors will likely rush to buy US dollars for safety, making the dollar stronger.

Major Currency Pairs Outlook

Source: Created by Zain Vawda

Conclusion: The Resilient Greenback

In short, the U.S. Dollar is expected to stay resilient in 2026, even if the ride gets bumpy. While the dollar might dip early in the year as the Federal Reserve adjusts interest rates, it is supported by strong underlying forces that other countries simply cannot match. The massive new government spending bill ensures the US economy will grow faster than its rivals, keeping interest rates high and attracting investors. Furthermore, the U.S. advantage in AI technology and energy independence creates a solid safety net for the currency.

Investors should expect a "check mark" pattern for the dollar this year: a temporary drop in the first six months, which will be a good chance to buy, followed by a strong recovery. In a world full of risks from wars to slow growth in Europe and China the US Dollar remains the best option available, or the "cleanest dirty shirt" in the laundry. The time of easy, calm markets is over; a new era of volatility and US strength has begun.

The ISM Manufacturing Index fell to 47.9 in December, down from November's reading of 48.2.

Only two industries reported growth last month, down from four in November. The share of manufacturing GDP reporting a contraction increased sharply to 85 percent, up from 58 percent in November.

Demand conditions remain in contraction but improved somewhat. New orders, new export orders, and the backlog of orders all registered small gains.

The production index remained in expansion territory at 51.0, down slightly from November's 51.4.

The pace of price gains was identical to November's reading, coming in at 58.5. And while the employment index remains in contractionary territory, it increased modestly to 44.9 from 44.0.

Key Implications

One survey respondent described the recent month as "trough conditions continue" and this characterization is hard to argue with. Respondents in several industries highlighted challenges with lower revenue in 2025, lower orders for 2026, and higher input costs. The slowdown in manufacturing activity is broad-based, covering nearly all industries. The two industries which showed growth in December, electrical equipment, and computer products, affirm that the momentum in growth right now is still coming from the tech sector and AI-related investment.

Price pressures have not completely abated, though they have come down considerably. While December's reading of 58.5 is elevated, the index had hovered around 70 in early/mid-2025, and now seems to have durably come down – suggesting the FOMC can remain more focused on the employment side of its dual mandate.

Markets

Geopolitical risk flared up over the weekend but the fall-out of former Venezuelan president Maduro’s capture by the US was contained, even non-existent. If it weren’t for the rise of gold prices ($4414) you’d hardly notice something has happened. Equity markets kick off the first day of 2026’s first full trading week in good spirits. Asia’s constructive risk mood spilled over into Europe. The EuroStoxx50 rises another 0.75% to a new record high, building on last Friday’s strong momentum. Global core bonds gained a little with Treasuries moderately outperforming Bunds. Yield losses are technically insignificant (between -1 and -2.4 bps) and temporarily wiped out at the first US dealings. That coincided with Fed’s Kashkari being the first this year to voice his thoughts on policy. Kashkari is now a voting member in 2026 and said rates are close to neutral. He thinks monetary policy hasn’t been putting much downward pressure on the economy. Kashkari in his comments tends to be more focused on stubborn inflation than the cooling labour market but in the end it’s the data that’ll determine the course. European rates lose up to 2.3 bps at the long end of the curve, undoing some of last week’s sharper uptick. The likes of the 10-yr tenor in Germany and in the swap market remain close to the symbolically important 3% mark. Japanese rates this morning jumped towards new multidecade highs (eg. 30-yr +6.5 bps), showcasing the steepening trend remains very much alive. This recent curve steepening wasn’t particularly linked to a specific event. Instead it may have been investors bracing for what typically is a jampacked month of sovereign (but also corporate) bond supply. Germany is tapping the market twice this week, France has a triple offering and Spain even a quadruple one on Thursday and a 10-yr & 30-yr auction by Japan is closely watched as well. And as the week progresses, we expect some new benchmark deals to be announced as well (eg. Slovenia today). The dollar in currency markets enjoys a solid bid but whether it’s safe haven is up for debate since the likes of GBP also rise. Anyway, DXY hit an intraday high at 98.86 before paring gains a bit to 98.69 currently. A two-day slide brought EUR/USD back below 1.17 (1.1678 currently), the weakest level since mid-December. GBP/USD steadies around 1.346 but EUR/GBP nosedives to mid-October levels of around 0.8677 with the risk of breaking below the Nov-Dec-Jan downward trend channel.

At the time of concluding this report, the US manufacturing ISM is printing slightly softer than expected at 47.9. US yields and the dollar are easing marginally in a first reaction.

News & Views

The Hungarian manufacturing PMI broadly stabilized in December (53.7 from 53.6), ducking the feared setback towards 52. Details showed new orders continuing to show (more rapid) expansion (+1.8 percentage point). Production volumes were slightly lower compared with November (-0.2 ppt), but still rising. A rise in purchased inventories (+2.7 ppt) also bodes well for the near term future. Manufacturing companies also indicated employment growth, contrary to job cuts in November. Among foreign trade indicators, the import index fell by 4.4 ppt, while the export index rose by 0.2 ppt. Purchase prices increased, with the index rising by 5.8 ppt compared to the previous month.

News agency Bloomberg reports that Italy is ready to back the EU-Mercosur trade deal on January 9 when EU ambassadors are set to vote. This timeline would allow the EU to sign the treaty on January 12. The EU failed to finalize the free-trade deal (with Brazil, Argentina, Uruguay and Paraguay) at the December EU Summit with Italy & France leading the campaign to delay it. They wanted stronger farmer protections and monitoring mechanisms for the Mersocur deal. These include a rapid response to price or import surges, strict phytosanitary/standards checks, quarterly/biannual market reports, automatic tariff suspensions, compensation mechanisms and a reciprocity clause. If Italy switches sides, they would nullify French/Polish resistance given the qualified majority voting system of the EU (15 countries + 65% of EU population in favour). The European parliament and possibly national parliaments might eventually still have their say as well.

Minneapolis Fed President Neel Kashkari said US monetary policy is likely “pretty close to neutral”. Speaking to CNBC, Kashkari said policymakers now need clarity on whether inflation or labor market dynamics will prove the dominant force shaping the outlook. "And then we can move from a neutral stance, whatever direction is necessary," he added.

On inflation, Kashkari warned that the main risk lies in persistence, particularly as tariff-related price pressures may take "multiple years" to fully work their way through the economy.

Turning to geopolitics, Kashkari said the primary economic risk from the Trump administration’s capture of Venezuela’s leader over the weekend would come through higher oil prices. Drawing comparisons to Russia’s invasion of Ukraine, he noted that commodity shocks — rather than political events themselves — are the channel most likely to directly impact the US economy.

His comments carry added weight in 2026, with Kashkari holding a voting seat on the Federal Open Market Committee.

US manufacturing activity weakened further in December, with the ISM PMI slipping from 48.2 to 47.9, undershooting expectations of 48.3.

Beneath the headline, details were mixed. Production edged down from 51.4 to 51.0, remaining marginally in expansion, while new orders improved modestly from 47.4 to 47.7. Employment also ticked higher to 44.9 from 44.0, though it stayed deeply contractionary. Prices were unchanged at 58.5.

ISM noted that 85% of manufacturing GDP contracted in December, up sharply from 58% in November, with the share in strong contraction rising to 43%. Even so, the historical relationship between the PMI and the broader economy suggests the December reading is still consistent with 1.6% annualized real GDP growth.

Full US ISM manufacturing release here.

Daily Pivots: (S1) 1.1701; (P) 1.1733; (R1) 1.1753; More….

Intraday bias in EUR/USD stays on the downside at this point. Rebound from 1.1467 could have completed as a corrective rebound. Fall from 1.1807 is seen as the third leg of the whole pattern from 1.1917 high. Sustained trading below 55 D EMA (now at 1.1670) will affirm this case and target 1.1467 support and below. On the upside, above 1.1719 minor resistance will turn intraday bias neutral again first.

In the bigger picture, as long as 55 W EMA (now at 1.1408) holds, up trend from 0.9534 (2022 low) is still in favor to continue. Decisive break of 1.2 key psychological level will carry larger bullish implication. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep long term outlook bearish.

Daily Pivots: (S1) 1.3430; (P) 1.3466; (R1) 1.3498; More...

Intraday bias in GBP/USD stays neutral and more sideway consolidations could be seen. Further rally is in favor with 1.3356 support intact. Above 1.3533 will resume the rally from 1.3008 to retest 1.3787 high. However, firm break of 1.3356 will turn bias back to the downside for deeper pullback.

In the bigger picture, current development suggests that fall from 1.3787 is merely a corrective move, and larger rise from 1.0351 (2022 low) is still in progress. Firm break of 1.3787 will target 1.4248 (2021 high) key structural resistance. This will remain the favored case as long as target 38.2% retracement of 1.0351 to 1.3787 at 1.2474 holds, in case of another fall.