CFD Markets Analysis: News and forecasts for 27 January 2025

23:53

EUR/USD falls back below 1.05 as Fiber bulls blink on fresh tariff threats EURUSD

EUR/USD shed 0.5% on Monday as buyers flub the 1.0500 handle.
Markets are recoiling from trade war headlines pouring out of the White House.
Fed rate call and EU growth figures due later in the week.

EUR/USD backslid one-half of one percent on Monday, falling back below the 1.0500 handle and paring recent gains as broad-market risk sentiment takes a step lower. Trade war headlines are back on the offering following a weekend spat between US President Donald Trump and Colombia over migrant deportations, and newly-minted Treasury Secretary Scott Bessent has immediately pivoted into favoring global tariffs across the board, mere minutes after getting confirmed by the US Senate.

The Fed is expected to maintain interest rates for January. However, if Chair Jerome Powell sounds unsure during his mid-week press conference, market hopes for increased Fed rate cuts in 2025 could diminish. Markets have raised expectations for rate cuts this year, with a total of 50 bps anticipated.

Political headlines are affecting markets again as US President Donald Trump engaged in a social media feud with Colombia over the travel conditions of migrants being extradited, threatening 50% tariffs on US-bound Colombian exports. Although the threat proved to be bluster, markets are wary of the rapidity of Trump-imposed tariffs.

Late Monday, President Trump reinvigorated trade war fears by announcing plans to impose trade tariffs on key trade industries that the US economy overwhelmingly relies on, including steel, computer chips, aluminum, copper, and other semiconductors. Trump’s insistence that the only way to avoid trade tariffs will be to build production facilities within the US faces a steep uphill climb as the American economy is exorbitantly expensive to operate in, far over and above any purported costs that could be levied onto the US consumers in order to retaliate against countries that export to the US.

EUR/USD price forecast

EUR/USD’s Monday backslide has dragged Fiber back below 1.0500, halting the pair’s brief bullish reprieve after hitting a 26-month low in mid-January. The 50-day Exponential Moving Average (EMA) near 1.0450 is dragging bids back into the low side as EUR/USD gears up for a bearish turnaround.

EUR/USD daily chart

Euro FAQs

What is the Euro?

The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

23:50

Japan Corporate Service Price Index (YoY) down to 2.9% in December from previous 3%

23:50

US President Donald Trump will place tariffs on computer chips, pharmaceuticals

US President Donald Trump on Monday announced plans to levy tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper. The purpose is to bring production to the United States, boosting domestic manufacturing and aiding the production of military hardware.

Key quotes

We will place tariffs on computer chips in the near future.

We will also place tariffs on producers of pharmaceuticals.

If you want to stop placing the tariffs, you need to build the plant in the U.S.

We will look at steel and other industries for tariffs.

I will also place tariffs on aluminum and copper.

Market reaction

The US Dollar Index (DXY) attracts some buyers following this headline. At the press time, the DXY is up 0.44% on the day to trade at 107.80.

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

23:34

SNB’s Schlegel: We can't rule negative interest rates out

Swiss National Bank (SNB) Chairman Martin Schlegel said on Monday that while the central bank does not favor negative interest rates, it cannot completely rule them out, per Reuters.

Key quotes

"The SNB doesn't like negative interest rates, at the same time we can't rule negative interest rates out.”

"We have seen that negative interest rates have served their purpose.”

"But is not something the SNB would do lightly.”

"It is possible that we will be individual months with negative inflation, but that is not a problem.”

"Our concept is price stability over the mid term.”

Market reaction

At the press time, the USD/CHF pair is up 0.29% on the day to trade at 0.9044.

SNB FAQs

What is the Swiss National Bank?

The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.

How does the Swiss National Bank interest-rate policy affect the Swiss Franc?

The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

Does the Swiss National Bank intervene in the forex market?

Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.

When does the Swiss National Bank Governing Council decide on monetary policy?

The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.

23:21

GBP/USD continues to struggle near key levels GBPUSD

GBP/USD dropped a doji candle on Monday as Cable middles.
UK data remains limited this week, and markets focus on the Fed.
Technical signs of exhaustion could spell the end of the Pound rally.

GBP/USD got hung up on key technical levels for the second trading day in a row, dropping a spinning top candle near the 1.2500 handle and leaving Cable traders facing a bearish downturn depending on how the Federal Reserve’s (Fed) rate call goes later this week.

UK data is extremely limited this week, leaving Cable bidders to face Wednesday’s upcoming Fed rate call entirely alone. The Fed is broadly expected to stand pat on interest rates for January, and depending on how confident the Fed’s Chair Jerome Powell sounds during his mid-week press conference, market hopes of an uptick in the pace of Fed rate cuts in 2025 could get thrown in jeopardy. Markets have stepped up their expectations of Fed rate cuts through the year, doubling the pace of rate cuts through the calendar year to 50 bps in total.

Political headlines are again gripping markets after US President Donald Trump got into a social media spat with Colombia as the two countries battled over the travel conditions of migrants from Colombia being extradited from the US, culminating in Donald Trump threatening massive tariffs of 50% on all US-bound exports from Colombia. The tariff through ultimately turned out to be all bluster, no bite, but countries and markets are taking notice of how quickly Trump-imposed tariffs can come out of the woodwork.

GBP/USD price forecast

A spinning top candlestick pattern bodes poorly for Cable bulls, with GBP/USD continuing to get hung up on the 1.2500 price handle. The pair has run aground of further technical resistance from the 50-day Exponential Moving Average (EMA) descending into 1.2500, and bullish momentum that has given the pair a leg up appears to be draining out of the charts.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

23:21

Scott Bessent pushes a starting 2.5% universal US tariff plan

Donald Trump’s Treasury Secretary pick, Scott Bessent, is pushing for new universal tariffs on US imports to start at 2.5% and rise gradually, per the Financial Times.

Additional takeaways

New universal tariffs on imports to the US would start at 2.5%.

Would then rise gradually.

Would move higher by the same amount each month.

Reasoning being, it'd give the business time to adjust.

Could rise as high as 20%.

Market reaction

At the press time, the US Dollar Index (DXY) is up 0.18% on the day to trade at 107.51.

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

23:09

USD/CAD posts modest gains above 1.4350 amid Trump tariff uncertainty USDCAD

USD/CAD trades with a mild positive bias near 1.4370 in Monday's early Asian session.
The BoC will go ahead with another cut to its benchmark interest rate on Wednesday.
Fears of a trade war with the US weigh on the Loonie.

The USD/CAD pair trades with mild gains around 1.4380 during the early Asian session on Tuesday. Traders continue to digest the narrative of further tariff policies from the US President Donald Trump administration. All eyes will be on the Bank of Canada (BoC) and the US Federal Reserve (Fed) interest rate decision on Wednesday.

The interest rate differential between Canada and the United States (US) could exert some selling pressure on the Canadian Dollar (CAD). The Canadian central bank has cut its policy rate a total of 1.75 percentage points in five consecutive decisions, cutting by 50 basis points (bps) in October and December amid signs of weakness in the economy and growing fears that inflation could drop too far below the 2% target. The BoC is likely to deliver a 25-bps rate cut in its benchmark interest rate on Wednesday, while the Fed is expected to hold its rates steady on the same day.

Additionally, Trump threatened to impose a 25% tariff on all goods imported from Canada from February 1. This, in turn, contributes to the Loonie’s downside due to its heavy dependence on US trade. "A lot of what has been driving the loonie lately has been the noise out of the White House," said Étienne Bordeleau-Labrecque, Portfolio Manager at Ninepoint Partners.

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

How do the decisions of the Bank of Canada impact the Canadian Dollar?

The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

How does the price of Oil impact the Canadian Dollar?

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

How does inflation data impact the value of the Canadian Dollar?

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

How does economic data influence the value of the Canadian Dollar?

Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

22:42

NZD/JPY Price Analysis: Sharp decline extends bearish outlook

NZD/JPY drops on Monday, settling at 87.95 as selling pressure intensifies.
Momentum indicators remain subdued, reflecting persistent bearish sentiment.
Key support levels are in focus as the pair approaches critical technical thresholds.

The NZD/JPY pair saw a steep decline on Monday, falling 1% to land at 87.95 dropping below its 20-day Simple Moving Average (SMA). This move extends the bearish trajectory observed in recent sessions, with the pair breaking below near-term support levels. The broader sentiment remains negative, as traders grapple with intensified selling pressure and uncertain momentum.

Technical indicators highlight the challenges facing NZD/JPY. The Relative Strength Index (RSI) has dropped sharply to 45, remaining in negative territory and signaling continued downward momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram remains flat with green bars, pointing to a lack of directional clarity and suggesting that bearish momentum has yet to fully abate.

Traders will closely monitor critical levels for the next directional move. Immediate support is seen at 87.50, with a break below this potentially opening the door to 87.00. On the upside, resistance at 88.20 and the 20-day SMA must be reclaimed for any signs of recovery to materialize. Until then, the outlook is likely to remain bearish, with further downside risks dominating near-term sentiment.

NZD/JPY daily chart

22:16

Gold price retreats below $2,750, over 1%, amid stock market sell-off

Gold declined due to profit-taking amid AI sector overvaluation fears.
Market sell-off driven by interest in Chinese AI firm, DeepSeek, dampens gold's appeal despite lower bond yields.
Global economic worries grow as China's PMI data reveals contractions in services and manufacturing.

Gold price slid over 1% late on Monday during the North American session, sparked by a broader market sell-off spurred by interest in Chinese AI company DeepSeek. The yellow metal has failed to gain traction as US Treasury bond yields plunge, though the Greenback pared some of its losses, yet below the 108.00 figure. The XAU/USD trades at $2,738 after hitting a daily high of $2,772

Jim Wyckoff, analyst at Kitco, mentioned that traders booking profits could be the main reason behind Gold's drop. The launch of DeepSeek's language model, cheaper than those of US companies' models, spooked investors, who seemed to assess that stocks linked to the AI industry might be overvalued.

According to Bloomberg “The sudden emergence of DeepSeek calls into question the underpinnings of the rally that’s added $15 trillion to the value of Nasdaq 100 Index companies since the end of 2022.”

In the meantime, the US 10-year Treasury bond yield plunges almost nine basis points (bps) to 4.528%. Nevertheless, Bullion failed to capitalize on falling yields.

The National Bureau of Statistics (NBS) in China revealed that Services and Manufacturing PMIs entered contractionary territory, hinting that the global economy may slow down.

Data-wise, the US economic docket features the Chicago Fed National Activity Index for December, which exited negative territory, an indication that the economy is improving.

This week, the US economic docket will feature US Durable Goods Orders, the Federal Reserve’s monetary policy meeting, Gross Domestic Product (GDP) figures for the last quarter of 2024, jobs data, and the release of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index.

Daily digest market movers: Market turmoil weighed on Gold, US yields and USD

Gold price rose ignoring the advance of real yields. Measured by the 10-year Treasury Inflation-Protected Securities (TIPS), yield sits at 2.19%, down four basis points (bps).
Bullion failed to capitalize on the overall weakness of the Greenback, as the US Dollar Index (DXY), which tracks the performance of the American currency against six others, fell 0.12% to 107.33.
Market participants are pricing 54 basis points of interest rate cuts by the Fed. The Fed is expected to cut rates toward the end of 2025, with the first reduction occurring in June.

XAU/USD technical outlook: Gold stumbles below $2,750

Gold price retraces and consolidates as buyers take a breather before pushing XAU/USD prices higher to challenge the record high of $2,790. In the near term, XAU/USD pullbacks below $2,750, which could pave the way to test $2,700. Once surpassed, the next stop will be the confluence of the 50 and 100-day Simple Moving Averages (SMAs) at around $2,655-$2,660. On further weakness, the $2,600 could act like a magnet.

Conversely, if buyers lift the golden metal past $2,750, look for a test of the record higher at $2,790. Above this lies $2,800, followed by key psychological levels exposed at $2,850 and $2,900.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

20:53

NZD/USD Price Analysis: Pair retreats to 0.5685 and approaches key support NZDUSD

NZD/USD declines on Monday, falling back toward recent support at 0.5685.
Mixed technical signals highlight uncertainty, with momentum indicators losing clarity.
Traders eye key levels, with market sentiment appearing to shift cautiously bearish.

The NZD/USD pair faced renewed selling pressure on Monday, declining by 0.45% to settle near 0.5685. This movement underscores the pair’s ongoing volatility, as sharp swings and alternating price levels characterize its recent performance. Despite earlier signs of bullish momentum, the pair now appears to be losing steam, keeping traders cautious about the near-term outlook.

Technical indicators present a mixed picture. The Relative Strength Index (RSI) has slid to 54, remaining in positive territory but showing a sharp decline, signaling a waning bullish bias. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram remains flat with green bars, suggesting a lack of clear directional momentum. This divergence between indicators reflects growing uncertainty and raises the possibility of a shift in sentiment toward bearishness.

Key levels are likely to guide the pair’s trajectory in the short term. Immediate support is seen at 0.5670, with a break below this level potentially exposing 0.5630. On the upside, resistance remains at 0.5710, and a sustained move above this level would be required to reinvigorate the bullish case. The broader market sentiment and technical clarity will be critical in determining the pair’s next moves.

NZD/USD daily chart

20:30

Australia Dollar falls as market awaits Fed, Australian CPI

AUD/USD slips towards 0.6270 on Monday.
Trade tensions between the US and Colombia subside, dampening the Greenback.
Fed expected to maintain rates at 4.25%-4.50% on Wednesday.
All eyes are on Australian CPI for RBA policy clues.

AUD/USD declined at the start of the week towards 0.6270 as US Dollar (USD) gains evaporated following signs that United States (US) friction with Colombia could be cooling. Meanwhile, the Federal Reserve (Fed) is widely anticipated to keep interest rates unchanged this week, with traders searching for any insight into policymakers’ stance amid ongoing calls from President Donald Trump for immediate cuts.

The Australian Dollar (AUD), however, faces headwinds ahead of the release of domestic inflation data, which will determine the Reserve Bank of Australia’s (RBA) February rate decision.

Daily digest market movers: Aussie loses ground as markets await Fed and Aussie’s CPI

The US Dollar initially firmed after President Trump threatened a 25% levy on Colombia for rejecting deportees. The Greenback later fell back as the White House confirmed Colombia’s acquiescence, dousing trade-war fears.
Fed policy will be the focus. The US central bank meets on Wednesday and is likely to leave rates within 4.25%-4.50%.
Market participants will examine how policymakers react to Trump’s demands for swift interest-rate cuts and assess the potential for future moves.
Australian CPI will be pivotal. Fourth-quarter inflation data due Wednesday are forecast at 2.5% year-on-year, down from 2.8%, and a 0.3% quarterly increase following the previous 0.2%.
Weak prints could fortify bets that the RBA may begin rolling back its policy tightness as early as the upcoming meeting.

AUD/USD technical outlook: Indecision reigns as traders seek clarity

The AUD/USD retreated to 0.6270 on Monday, experiencing choppy price action between 0.6200 and 0.6330 since last week. Despite opening the week at 0.6315, the pair settled near 0.6270, hinting at a mild bearish tone. The Moving Average Convergence Divergence (MACD) shows flat green bars, indicating some underlying bullish undercurrents, but the Relative Strength Index (RSI) at 55 points downwards, suggesting declining momentum. With key central bank decisions and inflation data on tap, participants are awaiting a clearer narrative before driving any substantial directional moves.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

19:45

What is DeepSeek, and why is it important?

What is DeepSeek?

Several Chinese companies pivoted into making their various AI model offerings open source last week, sending shockwaves through the tech sector. Chinese tech startups look set to disrupt the AI space, which has, until recently, been almost singularly dominated by high-priced US tech giants and soaring valuations. Chinese competitors are poised to prove that you can compete with the US giants in the AI game for pennies on the dollar, prompting a steep pullback in key companies that service the AI sphere, specifically Nvidia (NVDA).

Since the launch of OpenAI’s ChatGPT in late 2022, the running assumption among tech investors was that to compete in AI, you needed access to eye-wateringly expensive chipsets, and a bankroll deep enough to set up the necessary data-crunching space that AI models need to be “trained” effectively. Those exact chipsets, and that amount of funding, were previously believed to be locked away behind the walls of the US market, safely embedded in Silicon Valley after the US imposed strict trade restrictions that prevented Chinese companies from accessing US silicon.

DeepSeek comes for OpenAI's throne

DeepSeek, a tech startup funded by Chinese hedge fund High-Flyer, which stepped into the AI market to compete, has challenged US AI dominance on two fronts: they’ve proven that you can compete with expensive US AI models, and that you can do it cheaply. DeepSeek-R1, the company’s latest LLM-based offering, has made strong first impressions in the tech segment, displaying a technical capacity that rivals incumbent ChatGPT. The company also has declared that it was able to create its latest model for a mere $6 million USD, far below the billions of venture capital dollars that have been showered on the US tech segment focused on AI development.

Adding to pressures on US-based tech companies, DeepSeek made its models open source; squelching investor hopes that the key to eventual profitability in the AI game would be the proprietary nature of current AI giants. Some tech commentators have come out of the woodwork to point out that markets don’t know the exact investment cost of DeepSeek’s model-building but that the price tag likely runs much higher than DeepSeek has claimed.

19:25

Forex Today: Markets shift the attention to US data ahead of the Fed

The US Dollar began the new trading week on the back foot as market participants continued to digest the narrative of further tariffs from the Trump administration, while investors started gearing up for the FOMC meeting on Wednesday.

Here is what you need to know on Tuesday, January 28:

The US Dollar Index (DXY) printed moderated losses, although it managed to regain some traction after bottoming out near 107.00. Durable Goods Orders will be released in the first turn, seconded by the FFA’s House Price Index, the Conference Board’s Consumer Confidence, and the Richmond Fed Manufacturing index, all ahead of the API’s weekly report on US crude oil inventories.

EUR/USD rose to fresh yearly peaks around 1.0530 on the back of the offered stance in the Greenback, just to reverse part of those gains towards the end of the day. The ECB’s Cipollone and Lagarde are due to speak.

GBP/USD alternated gains with losses around 1.2480 following an early move beyond the 1.2500 milestone. The BRC Shop Price Index should give a view of how inflation pressure fared in the first month of the year.

USD/JPY retreated sharply to six-week lows near 153.70 on the back of investors’ repricing of further tightening by the BoJ. The publication of the BoJ Minutes will be the next salient event in Japan on January 29.

AUD/USD suffered the disheartening prints from the Chinese PMIs over the weekend and deflated to the sub-0.6300 region on Monday. Next on tap in Oz will be the release of the Business Confidence gauge by NAB.

WTI remained well on the defensive and flirted with the area of yearly lows near the $72.00 mark per barrel on the back of steady uncertainty surrounding President Trump’s tariffs plans.

Gold prices corrected lower from the vicinity of their all-time peaks seen last Friday and retested the area of multi-day lows near $2,730 per ounce troy. Silver prices followed suit and traded at shouting distance from its key 200-day SMA around the $30.00 mark per ounce.

19:21

Mexican Peso tumbles as Trump threatens then backtracks on Colombia tariffs

Mexican Peso under pressure following Trump tariff threat on Colombian goods.
Banxico's new monetary program hints at aggressive rate cuts, a headwind for the Peso.
Traders await upcoming Mexican economic reports on unemployment and preliminary Q4 GDP.

The Mexican Peso plummeted against the Greenback on Monday after US President Donald Trump announced on Sunday that he would impose tariffs on Colombian goods after Colombian President Gustavo Petro wouldn’t allow planes from the United States (US) to carry migrants on deportation flights. Trump then backtracked on the tariffs on Monday morning once the two leaders came to a deal to allow the deportations. This and Banco de Mexico's (Banxico) dovish rhetoric sponsored a leg-up in the exotic pair. The USD/MXN trades at 20.70, up by more than 2%.

Over the weekend, US President Donald Trump informed his social network of Petro’s decision, which sparked several US retaliation measures including the tariff threat. Consequently, the Mexican Peso, used as a proxy for other Latin American currencies, weakened in early trading on Monday.

In the meantime, the Instituto Nacional de Estadistica Geografia e Informatica (INEGI) revealed that the Balance of Trade posted a surplus in December. However, seasonally adjusted, the deficit narrowed compared to November figures.

Meanwhile, Banxico presented its Monetary Program for 2025, in which the Central Bank hinted that the Governing Board is eyeing cuts to its main reference rate of a greater magnitude than previously seen in 2024.

Banxico’s Governor Victoria Rodriguez Ceja said that they see an adverse scenario with Trump, adding that some of his policies could pressure Mexico’s economy.

She added, “On the one hand, greater economic weakness would tend to moderate pressures on prices and, on the other hand, a greater exchange rate depreciation represents an upward risk for inflation. These effects in opposite directions could even offset each other, but we would have to be attentive, if necessary, to the measures that could be implemented.”

Ahead this week, Mexico’s economic docket will feature the Unemployment Rate for December, along with the release of preliminary Q4 2024 Gross Domestic Product (GDP) figures.

Daily digest market movers: Mexico’s Balance of Trade failed to bolster the Peso

INEGI revealed that the Balance of Trade for December was 2.567 billion, up from a -0.133 billion deficit. Seasonally adjusted, the trade deficit narrowed from -0.775 billion to -0.684 billion for the same period.
Economists polled by Reuters project GDP to dip -0.2% QoQ from an expansion of 1.1%. On an annual basis, GDP is foreseen to edge lower from 1.6% to 1.2%.
Citi revealed its Expectations Survey, in which Mexican private economists revised GDP figures for 2025 downward to 1%.
Regarding inflation expectations, analysts estimate headline and core inflation to dip below 4%, each at 3.91% and 3.68%, while the exchange rate would likely end near 20.95.
Economists estimate that Banco de Mexico (Banxico) will lower rates by 25 basis points (bps) from 10.00% to 9.75%, though some analysts expect a 50 bps cut at the February 6 meeting.
Money market futures have priced in 54 bps of Fed rate cuts in 2025, according to CME FedWatch Tool data.

USD/MXN technical outlook: Mexican Peso treads water as USD/MXN approaches to year-to-date (YTD) high

The USD/MXN pair resumed to the upside after clearing the 50-day Simple Moving Average (SMA) at 20.38 since early trading during the Asian session. Trump’s tariff threats on Colombia weakened the Mexican Peso amid a risk-averse scenario, as the Peso plunged to a four day low of 20.74.

If traders clear the USD/MXN record high of 20.90, buyers would be in charge and challenge the 21.00 mark. On further strength, the next resistance would be the March 8, 2022 peak at 21.46, ahead of the 22.00 figure.

Conversely, if USD/MXN falls below the 50-day SMA of 20.38 and extends its losses toward the 100-day SMA at 20.06, bears could aim to push prices toward the 20.00 mark.

Mexican Peso FAQs

What key factors drive the Mexican Peso?

The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.

How do decisions of the Banxico impact the Mexican Peso?

The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.

How does economic data influence the value of the Mexican Peso?

Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.

How does broader risk sentiment impact the Mexican Peso?

As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

18:28

United States 2-Year Note Auction dipped from previous 4.335% to 4.211%

18:06

US Dollar weakens despite positive data, Fed decision looms

The Dollar Index remains under heavy pressure, slipping below 108.00 and testing the critical 107.00 level.
New Home Sales in December beat estimates, rising to 698,000 units versus expectations of 670,000.
President Trump’s tariff threats on Colombia imports and Wednesday’s Federal Reserve decision add uncertainty to the Dollar’s trajectory.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against a basket of currencies, continues to slide on Monday, breaking below the psychological 108.00 mark. Concerns over AI-related market valuation, combined with geopolitical tensions from President Donald Trump’s tariff threats against Colombia, contribute to bearish sentiment. Economic data highlights some resilience in the United States (US) economy, but the Dollar remains under pressure ahead of the Federal Reserve’s (Fed) Wednesday decision on interest rates.

Daily digest market movers: US Dollar under pressure amid Fed anticipation and geopolitical tensions

The Chicago Fed National Activity Index for December rebounded to 0.15 from -0.01 in November, reflecting stronger economic activity.
December New Home Sales surged to 698,000 units, surpassing the forecast of 670,000 and November's 674,000 figure.
President Trump’s proposal to impose 50% tariffs on Colombian imports over deportation disputes rattles trade markets and global sentiment.
Markets will look for further clues on the incoming president’s plans on tariffs on its North American neighbors.
Federal Reserve’s Wednesday meeting looms large; markets are watching closely for updates on rate decisions and economic outlook with a hold priced in.
Both the statement and Chair Jerome Powell’s tone will be closely looked upon by the markets.

DXY technical outlook: Bearish momentum builds further

The US Dollar Index remains below 108.00, showing persistent downward momentum. The Relative Strength Index (RSI) continues to linger under the neutral 50 mark, indicating weak relative strength. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram deepens in the red, signaling intensifying bearish pressure. Although the index is testing oversold conditions, the downside risks remain, with the potential to breach 107.00. A corrective bounce could occur if the movement becomes overstretched, but recovery beyond 108.50 appears challenging unless sentiment shifts significantly. For now, the path of least resistance points further downward.

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

18:05

United States 5-Year Note Auction down to 4.33% from previous 4.478%

17:33

Canadian Dollar eases on Monday as BoC rate call looms ahead

The Canadian Dollar shed 0.3% on Monday as Loonie flows dry up.
The Bank of Canada is due to cut interest rates again later this week.
Little else is on the economic data docket to drive the Loonie this week.

The Canadian Dollar (CAD) fell back once again into familiar consolidation against the US Dollar (USD) on Monday, shedding a recently-gained one-third of one percent and continuing to send the USD/CAD pair on a sideways grind around the 1.4400 handle.

The Bank of Canada (BoC) will be delivering its latest rate call later this week, and the Canadian central bank is broadly forecast to deliver another 25 bps rate cut. Even this is still going to be cast within the lens of Greenback moves: the Federal Reserve (Fed) is due for its own rate cut, slated to release within hours of the BoC rate call.

Daily digest market movers: Canadian Dollar continues to grind through consolidation

The Canadian Dollar fell 0.3% on Monday, pushing USD/CAD back up toward 1.4400.
BoC is widely expected to cut interest rates by a quarter of a point.
Fed is forecast to hold rates steady.
Despite the Fed’s expected hold, markets are expecting more rate cuts from the Fed this year than before.
The CME’s FedWatch Tool shows rate traders pricing in a total of 50 bps in Fed rate cuts through 2025.

Canadian Dollar price forecast

The Canadian Dollar just can’t catch a break, continuing to grind between key technical handles and keeping USD/CAD chart prints hobbled between 1.4400 and 1.4300. The pair has ground through chart paper in a sideways pattern since mid-December, and momentum remains absent from the pair despite the Loonie routinely testing multi-year lows against the Greenback.

A rising 50-day Exponential Moving Average (EMA) testing into 1.4250 is pricing in a technical floor beneath price action, limiting Loonie bulls’ options for a runaway CAD bid to pick up speed. On the high side, 1.4500 remains the key level for Greenback bidders to beat, though even CAD sellers are struggling to justify the excessively high USD/CAD bids.

USD/CAD daily chart

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

How do the decisions of the Bank of Canada impact the Canadian Dollar?

The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

How does the price of Oil impact the Canadian Dollar?

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

How does inflation data impact the value of the Canadian Dollar?

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

How does economic data influence the value of the Canadian Dollar?

Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

16:43

Price weakness to catalyze a large-scale CTA selling in Copper – TDS

CTAs are selling Copper and Aluminum, TDS' Senior Commodity Strategist Daniel Ghali notes.

Trump dampens his tone with respect to tariffs on China

"CTAs are selling Copper and Aluminum, with price action playing into the significant asymmetry in expected flows following President Trump's dampened tone with respect to tariffs on China."

"With no scenario for price action over the coming week likely to attract subsequent buying programs, the weakness in prices is now sufficiently large to catalyze large-scale CTA selling activity in the red metal, with up to -25% of algos' max size likely sold this session."

16:38

XAU/XAG ratio sits at the highs – TDS

The set-up for algo flows in Silver are not very promising, TDS' Senior Commodity Strategist Daniel Ghali notes.

A breakout appears imminent

"Over the coming sessions, subsequent CTA selling activity can hit the tapes, but we expect that new ATHs in Gold could finally catalyze a breakout in Silver markets, where we see unique implications from the dislocations in metals markets associated with tariff threats. The market is sleepwalking into a silversqueeze with flat prices thus far showing little appreciation for the recent developments in physical trading activity."

"A breakout appears imminent given a) the XAU/XAG ratio sits at the highs, b) CTAs and discretionary traders both hold significant dry-powder to deploy, c) SHFE Silver aggregate open interest sits at multiyear lows, but the largest traders in Shanghai have been adding to their books over the last months."

"D) London Silver continues to trade tight, e) assumptions that any potential silversqueeze will easily be resolved fail to recognize that pressure release valves require higher prices first before they can kick in. Explosive upside convexity in Silver markets remains severely underpriced."

15:52

Dow Jones Industrial Average twists as investors shake off overnight dip

The Dow Jones tumbled during the overnight session before Monday’s opening bell.
Trade war fears are back on the table after Trump gets into a political scuffle with Colombia.
Fresh rate cut hopes are bolstering equities from early week lows.

The Dow Jones Industrial Average (DJIA) dipped into the 44,000 handle during Monday’s early overnight session, driven lower by a fresh bout of souring in investor risk appetite after a Chinese company globally released an open-source competitor to US-based AI models that have been largely proprietary up to this point. Investor sentiment was driven further into the floorboards by a political spat between United States (US) President Donald Trump and Colombia over the weekend after a disagreement between the two countries over the return of Colombian migrants from the US led to President Trump losing his cool and threatening a 50% tariff on all goods imported into the US from Colombia.

Equities rallied in the early hours of the US market session as investor focus pivoted to rate cut hopes from the Federal Reserve (Fed). The Fed is due to deliver its latest rate call later this week, and although the US central bank is broadly expected to stand pat on rates for the time being, traders are ramping up their bets of further rate cuts in 2025. According to the CME’s FedWatch Tool, rate markets are pricing in a full 50 bps of rate trims through the rest of the year, up from last week’s bets of 25 bps.

The tech sector got rattled after a Chinese artificial intelligence lab released their DeepSeek-R1 AI model, making it open source and proving that anybody can develop a heavy-hitter AI model without heavy investment in expensive US-produced silicon and microchips, something that US trade barriers were explicitly instituted to keep out of the hands of the Chinese. With DeepSeek making waves in the AI space, investors are questioning the point of keeping up silicon trade barriers with China and investors who have bought into US-based tech companies providing chip solutions for AI projects are getting nervous.

Dow Jones news

Despite struggling to pare losses and return to Friday’s closing bids, most of the Dow Jones’ listed securities are on the rise during Monday’s US trading session. However, losses are largely contained within key tech darlings, keeping the DJIA off-kilter. Nvidia (NVDA) is taking it on the chin on Monday, down around 13% on the day and testing below $125 per share with the silicon-puncher’s dominance in the AI space getting threatened by spunky Chinese upstart DeepSeek hinting that Nvidia’s market dominance may not last forever, or even for the rest of the year.

Dow Jones price forecast

The Dow Jones kicked off the new trading week with a fresh test of the 44,000 handle, but the index’s early pivot into the bearish side is facing a fresh upshot from bidders, and it has climbed back into range of 44,400. Despite near-term declines, the major equity index is still tilted firmly toward the bullish side, closing in the green for all but two of the last ten consecutive trading days.

The Dow Jones is still trading on the wrong side of record highs above 45,000 posted last November. Still, equity traders are pushing stocks back up the same old hill as the DJIA climbs from the last major swing low into the 41,700 region.

Dow Jones daily chart

Dow Jones FAQs

What is the Dow Jones?

The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.

What factors impact the Dow Jones Industrial Average?

Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

What is Dow Theory?

Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.

How can I trade the DJIA?

There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.

15:50

CTAs are to be back on the bid in Gold in any price scenario – TDS

There's an ongoing algo selling activity in Gold, TDS' Senior Commodity Strategist Daniel Ghali notes.

Gold selling activity to remain short-lived

"The yellow metal is being swept into this round of deleveraging and CTA liquidations, but our simulations of future prices suggest that CTAs will be back on the bid in Gold in any scenario for prices over the coming sessions, suggesting this round of selling activity will remain short-lived."

"Further, macro funds & discretionary traders have replenished their war chest of dry-powder to deploy, with evidence suggesting macro fund purchases are back on the rise. After all, rates markets are already priced for a hawkish outcome, whereas the USD's relentless rally has not only failed to weigh on precious metals amid signs of Mystery Buying, but US10y yields are notably strengthening into this risk-off trading activity, and geopolitical uncertainty remains elevated."

"While macro funds will redeploy their capital into the yellow metal's warm embrace, CTAs will contribute to further gains whereas a reversal in the current trends in price action would likely be mitigated by 'Mystery Buying' associated with Asian currency depreciation pressures."

15:38

EUR/GBP Price Forecast: Subdued near 0.8400 on risk-off mood EURGBP

EUR/GBP fluctuates within 30 pip range, holds above 0.8400 with a minor 0.02% increase.
Sterling faces pressure as China's manufacturing PMI downturn favors Euro gains.
Technical outlook suggests consolidation potential; key resistance at 200-day SMA of 0.8422.

The EUR/GBP is firm during the North American session, after seesawing in a 30 pip range, though buyers reclaimed the 0.8400 figure for a small gain of 0.02%.

Market mood remains negatively, on news that China’s business activity worsened in January according to the National Bureau of Statistics (NBS) Manufacturing PMI. This weighed on Sterling, which is weakened against the single currency.

EUR/GBP Price Forecast: Technical outlook

The EUR/GBP has extended its losses below the 200-day Simple Moving Average (SMA) at 0.8422, which has opened the door to test challenge lower prices, but bulls are stepping in around the 0.8400 figure.

The relative Strength Index (RSI) is bullish, though it has turned flat, an indication that the cross might consolidate, before resuming its ongoing uptrend.

For a bullish continuation, buyers must crack the 200-day SMA. If cleared, the next stop will be the January 24 daily high at 0.8462, ahead of the next cycle high at 0.8473 the January 20 peak.

On the other hand, if sellers push prices below the 0.8400 figure, the next support would be the latest pivot low of 0.8383 the January 14 low, followed by the 100-day SMA at 0.8347.

EUR/GBP Price Chart – Daily

Euro PRICE Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.03%	0.07%	-0.68%	0.20%	0.58%	0.48%	-0.48%
EUR	0.03%		0.17%	-0.54%	0.37%	0.62%	0.63%	-0.35%
GBP	-0.07%	-0.17%		-1.00%	0.20%	0.45%	0.48%	-0.51%
JPY	0.68%	0.54%	1.00%		0.94%	1.46%	1.41%	0.36%
CAD	-0.20%	-0.37%	-0.20%	-0.94%		0.18%	0.28%	-0.71%
AUD	-0.58%	-0.62%	-0.45%	-1.46%	-0.18%		0.05%	-0.92%
NZD	-0.48%	-0.63%	-0.48%	-1.41%	-0.28%	-0.05%		-1.20%
CHF	0.48%	0.35%	0.51%	-0.36%	0.71%	0.92%	1.20%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

15:28

EUR/JPY Price Analysis: Pair slides to 162.15 as bearish momentum intensifies EURJPY

EUR/JPY drops sharply on Monday toward key 162.00 support levels.
Technical indicators show mounting selling pressure, with the pair nearing the 20- and 100-day SMA convergence.
Focus shifts to whether the pair can stabilize around 162.00 or risk further downside.

The EUR/JPY cross extended its losses on Monday, falling by 0.90% to settle at 162.15. The move highlights increased bearish momentum as the pair approaches a critical technical juncture, with the 20- and 100-day Simple Moving Average (SMA) convergence at 162.00 set to serve as a significant support zone. The steep decline marks a continuation of the downward trend observed over recent sessions, putting buyers under renewed pressure.

Technical indicators reinforce the bearish outlook. The Relative Strength Index (RSI) has dropped sharply to 49, slipping into negative territory and signaling weakening buying interest. Simultaneously, the Moving Average Convergence Divergence (MACD) histogram displays decreasing green bars, reflecting fading bullish traction and a growing bearish bias in the short term.

Looking ahead, the 162.00 level, where the 20- and 100-day SMAs converge, will be crucial in determining the pair’s next move. A decisive break below this area could open the door to further losses, with the next support seen at 161.50. Conversely, stabilization above this zone may encourage buyers to regroup and attempt a recovery toward the 163.00 resistance level. The pair’s ability to hold its ground at these critical levels will shape its trajectory in the coming sessions.

EUR/JPY daily chart

15:26

GBP/USD spins its wheels near 1.25 GBPUSD

GBP/USD roiled near the 1.2500 handle on Monday.
Pound traders are taking a backseat as markets focus on the Greenback.
Investor sentiment spread in both directions to kick off the new week.

GBP/USD spun in a circle on Monday, driven by broad-market flows into and out of the US Dollar (USD) as Pound Sterling (GBP) traders get dragged along by the tides. It's a quiet week on the UK side of the economic calendar, and trade war murmurs as well as an impending Federal Reserve (Fed) rate call are keeping market attention off of the Cable trade for now.

The Federal Reserve (Fed) is expected to hold rates steady at their upcoming meeting slated for Wednesday, but overall market expectations of further rate cuts for the year are on the rise. According to the CME's FedWatch Tool, rate markets are pricing in a total of 50 bps in rate cuts through 2025, up from the previous forecast of 25 bps.

US President Donald Trump kicked off his first meaningful trade war spat over the weekend with Colombia of all countries, threatening a wide 50% tariff on all goods from Colombia imported into the US if the country refused to accept planes loaded with Colombian migrants being returned home from the US. Most of the spat took place on social media and had little measurable impact on global markets. Still, President Trump's tariff threats and his willingness to use them on short notice will likely ruffle some feathers for investors that have been used to a less-chaotic method of trade governance.

GBP/USD price forecast

GBP/USD has beaten footprints into the charts on both sides of the 1.2500 handle on Monday, chalking in an intraday high above 1.2520 before pivoting back into the low side near 1.2480. With price action getting hung up on tech levels just south of the 50-day Exponential Moving Average (EMA) at 1.2517, bids are at risk of pricing in a near-term ceiling and giving bears a foothold in the daily charts.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

15:00

United States New Home Sales (MoM) registered at 0.698M above expectations (0.67M) in December

14:39

GBP is trading steady around 1.25 – Scotiabank

The Pound Sterling (GBP) is trading marginally firmer on the session and has improved a little relative to Friday’s intraday peak, Scotiabank's Chief FX Strategist Shaun Osborne notes.

GBP holds solid technical gain from last week

"There were no UK data reports today and the GBP’s performance simply reflects the broader USD tone—and, perhaps, some signs of technical strength."

"GBP closed out last week firmly, cementing the third leg of a bullish “morning star” candle pattern on the weekly chart. Price also broke above bear trend resistance off the September peak."

"Solid gains again today so far, at least, support the more positive technical outlook and the prospect of a retracement towards the 1.26/1.27 range (1.2610 is the 38.2% retracement of the 1.34/1.21 decline). Support is 1.2415/25."

14:36

EUR regains low 1.05 area – Scotiabank

EUR/USD is holding close to last week’s high, supported by some further narrowing in EZ/US spreads as US yields retreat. The 2Y gap has narrowed to –195bps, the narrowest since early November, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Lower US yields compress spreads

"Germany’s IFO survey reflected a small improvement in the business climate reading for January while expectations eased slightly, reflecting an economy that continues to languish."

"Solid EUR gains through the low/mid 1.04 area last week are supporting a more positive technical undertone, at least in the short run. A deeper retracement of the EUR’s Q4/Q1 slide towards the 106 area (38.2% retracement resistance sits at 1.0572) appears likely. Support is 1.0450/55."

14:32

CAD little changed on risk aversion – Scotiabank

The Canadian Dollar (CAD) is recovering a little ground after weakening in early Asian trade on the broad risk-off tone to markets, Scotiabank's Chief FX Strategist Shaun Osborne note, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Technicals remain positive

"The CAD picked up some ground on the weaker USD last week but it lagged all of its major currency peers, except the JPY. While broader tariff risks appear to have eased for some, the threat being aggressively tariffed from February 1 hangs over Canada and Mexico and that threat is likely to preclude any major gains in the CAD for now."

"Beyond that, the CAD will have a hard time gaining significantly on the USD while interest rate differentials remain wide. The BoC is likely to cut its policy rate 25bps this week, with swaps more or less fully pricing in a ¼-point cut. USD/CAD fair value sits at 1.4210 this morning."

"There are some distinctly positive signs for the CAD on the charts. Last week, USD/CAD cracked trend support that has guided USD/CAD higher since September. Daily price action shows a developing broadening top signal and the weekly chart reflects a bearish key reversal week formed last week. Key support is 1.4255—23.6% retracement of the Q4/Q1 rally; a break below here targets a drop back to 1.40/1.41. Resistance is 1.4415 and 1.4445/55."

14:23

USD/JPY plummets to near 154.00 as Yen strengthens across the board USDJPY

USD/JPY dives sharply to near 154.00 as the Japanese Yen performs strongly on safe-haven demand.
The BoJ hikes interest rates by 25 bps but didn’t provide a specific interest rate hike path.
The US Dollar declines as Trump reverses the 25% tariff proposal on Columbia and an acceleration in Fed dovish bets.

The USD/JPY pair plunges to near 154.00 in Monday’s North American session. The asset weakens as the Japanese Yen (JPY) outperforms its major peers, with investors rushing to safe-haven fleet amid a sharp sell-off in United States (US) technology stocks.

Japanese Yen PRICE Today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.23%	-0.20%	-1.03%	0.10%	0.38%	0.23%	-0.75%
EUR	0.23%		0.11%	-0.66%	0.48%	0.63%	0.59%	-0.41%
GBP	0.20%	-0.11%		-1.06%	0.38%	0.52%	0.50%	-0.51%
JPY	1.03%	0.66%	1.06%		1.19%	1.61%	1.51%	0.43%
CAD	-0.10%	-0.48%	-0.38%	-1.19%		0.08%	0.12%	-0.88%
AUD	-0.38%	-0.63%	-0.52%	-1.61%	-0.08%		-0.00%	-0.99%
NZD	-0.23%	-0.59%	-0.50%	-1.51%	-0.12%	0.00%		-1.22%
CHF	0.75%	0.41%	0.51%	-0.43%	0.88%	0.99%	1.22%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

US technology stocks plunged after analysts predicted that DeepSeek’s Artificial Intelligence (AI) model of China performs on par with top chatbots like OpenAI at affordable costs. Apart from the Japanese Yen, the Swiss Franc (CHF) is also performing strongly, being a safe-haven asset.

The Yen is also trading strongly on the back of an interest rate hike decision by the Bank of Japan (BoJ). The central bank raised its borrowing rates by 25 basis points (bps) to 0.5% on Friday amid confidence that sustained wage growth would keep inflationary pressures above the desired rate of 2%. The BoJ refrained from committing a pre-defined policy-restrictive path but said that they would raise interest rates further if the economy continued to perform in line with their expectations.

On early Monday, the US Dollar (USD) also performed strongly on multiple tailwinds such as US President Donald Trump’s threat to impose 25% tariffs on Columbia for refusing to accept military flights carrying illegal immigrants from their nation and the uncertainty ahead of Federal Reserve’s (Fed) monetary policy meeting on January 28-29, but surrenders its entire gains and resumed its downside journey towards the seven-week low.

Later, Trump dialed back his proposal of placing tariffs on Columbia as the South American nation accepted his terms, which diminished the USD’s safe haven. On the monetary policy front, an acceleration in Fed dovish bets also weighed on the US Dollar.

Traders now expect the Fed to cut interest rates by 50 bps this year, but it is widely anticipated to keep interest rates steady in the range of 4.25%-4.50% on Wednesday.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

14:21

USD mixed to lower amid stock volatility – Scotiabank

The US Dollar (USD) is mixed to weaker in what is a rough start to the week for markets. Stocks are trading sharply lower following the emergence of a Chinese AI startup — DeepSeek — which could potentially challenge the US’ dominance in the field (and take some steam out of tech valuations). US equity futures reflect a near 4.1% drop in the Nasdaq 100, with the S&P 500 down 2.3%. Both are trading off early lows, Scotiabank's Chief FX Strategist Shaun Osborne note.

USD loses ground to havens

"European markets are down, but losses are less severe. Bond are bid and part of the USD’s slippage can be accounted for by the sharp fall in bond yields — US 10Y yields are down 12bps on the session while European government 10Y debt yields are down 5-7bps. Haven demand has spilled over into FX, with the JPY surging 1.3% and the CHF gaining 0.9% on the session."

"USD losses today add to the slide seen over the past two weeks amid as President Trump’s broad and severe tariff threats recede — to some extent. The DXY looks poised to extend losses in the short run and retest the late Nov/early Dec levels for the DXY in the low 106s."

"Focus will shift to interest rate policy later this week, with Fed likely to hold rates steady amid slow progress on inflation, resilient growth and the FOMC probably wanting time to assess the potential impact of the new administration’s policy priorities. Steady rates may prompt a response from the president—who has made it clear that he thinks rates should be lower."

13:49

USD/CAD falls back from 1.4400, BoC-Fed policy in focus USDCAD

USD/CAD retreats from 1.4400 as the safe-haven appeal of the US Dollar diminishes after Trump rolled back 25% tariff proposal on Columbia.
Investors expect the Fed to leave interest rates steady, while the BoC is anticipated to cut them by 25 bps on Wednesday.
US President Trump is expected to place 25% on Canada right on the first day of February.

The USD/CAD pair retreats after failing to break above the round-level resistance of 1.4400 in Monday’s North American session. The Loonie pair ticks down as the US Dollar (USD) falls back after its safe haven diminished. United States (US) President Donald Trump put his proposal of imposing 25% tariffs on Columbia on hold

Over the weekend, Trump threatened to raise 25% tariffs on its South American trading partner as they refused to accept the entry of military flights from the US carrying illegal immigrants who have the nationality of Columbia. This scenario boosted the US Dollar’s safe-haven appeal as investors expected that it would set the tone for a global trade war. However, Trump vetoed his proposal after Columbia accepted his terms, which squared the USD’s appeal.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, resumes its downside journey towards the seven-week low of 106.70.

Going forward, investors will focus on the Federal Reserve’s (Fed) monetary policy decision, which will be announced on Wednesday. The Fed is expected to announce a pause in the current policy-easing spell and leave interest rates unchanged in the range of 4.25%-4.50%, according to the CME FedWatch tool. Investors will pay close attention to Fed Chair Jerome Powell’s press conference after the policy announcement for fresh interest rate guidance.

Meanwhile, the Canadian Dollar (CAD) remains broadly weak as investors fear that Trump will impose 25% tariffs on Canada on February 1. The Wall Street Journal (WSJ) reported on early Monday that “momentum is growing among US President Trump’s advisers to place 25% tariffs on Mexico and Canada as soon as February 1.

Investors should brace for significant volatility in the Loonie this week. The Bank of Canada (BoC) is scheduled to announce its first monetary policy decision of 2025 on Wednesday. The BoC is expected to cut interest rates by 25 basis points (bps) to 3%.

Economic Indicator

BoC Interest Rate Decision

The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.

Daily digest market movers: All eyes on Wednesday

At 13:30 GMT, the Chicago Fed National Activity Index for December is due. The previous reading was at -0.12, with no forecast available.
At 15:00 GMT, New Home Sales data for December is due, with expectations for a jump in sales to 0.67 million units from 0.664 million in November.
The US Treasury will have its work cut out for this Monday with two auction moments due:
at 16:30 GMT, short-term 3-month and 6-month bills will be allocated.
At 18:00 GMT, medium-term 2-year and 5-year notes are due for auction.
Equities sink on Monday due to concerns over AI valuations and overestimated earnings in the tech sector. All European indices and US equity futures trade down over 1%.
The CME FedWatch tool projects a 43.8% chance that interest rates will remain unchanged at current levels in the May meeting, suggesting a rate cut that month. Expectations are that the Federal Reserve (Fed) will remain data-dependent with uncertainties that could influence inflation during US President Donald Trump’s term.
The US 10-year yield is trading around 4.526%, further away from its more-than-one-year high earlier this month at 4.807%.

US Dollar Index Technical Analysis: Turning ugly

The US Dollar Index (DXY) is overpassed in this Monday’s bid for a safe haven. Instead, investors are picking up more US bonds and the Japanese Yen (JPY). The latter is currently rallying over 1% against the US Dollar, weighting on the DXY as it accounts for 13.6% of weight. Expect volatile moves in the DXY by Wednesday during the Fed decision announcement.

There is a long road to recovery. First, the psychological level of 108.00 must be recovered. From there, 109.29 (July 14, 2022, high and rising trendline) is next to pare back last week’s losses. Further up, the next upside level to hit before advancing further remains at 110.79 (September 7, 2022, high).

On the downside, the convergence of the high of October 3, 2023, and the 55-day Simple Moving Average (SMA) around 107.56 should act as a double safety feature to support the DXY price. For now, that looks to be holding, though the Relative Strength Index (RSI) still has some room for the downside. Hence, rather look for 106.52 or even 105.89 as better levels for US Dollar bulls to engage and trigger a reversal.

US Dollar Index: Daily Chart

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

12:00

Mexico Trade Balance, $ rose from previous $-0.133B to $2.567B in December

12:00

Mexico Trade Balance s/a, $ climbed from previous $-0.775B to $-0.684B in December

11:46

WTI gains ground near $74.00 as Trump reverses tariff threats on Columbia

The Oil price holds key support of $74.00 as investors digest Trump’s tariff threats after he reversed proposed tariffs on Columbia.
US President Trump urged OPEC to reduce Oil prices.
China’s weak manufacturing sector activity weighs on Oil’s demand outlook.

West Texas Intermediate (WTI), futures on NYMEX, gains a firm-footing near $74.00 in Monday’s European session. The Oil price rises as the market sentiment turns cheerful after United States (US) President Donald Trump reverses tariff threats on its South American trading partner, Columbia. Trump takes back tariff threats after Columbia accepted the return of illegal immigrants from the US.

Investors should note that Columbia exports a significant amount of seaborne crude to the US. Technically, this development is negative for the Oil price but it gains as the scenario indicates that Trump tariff threats are not fearful that what market participants had anticipated earlier.

Last week, Trump also reversed the proposal of imposing tariffs on China, saying that he can reach a deal without slapping hefty tariffs. Market participants expect Trump will uses tariffs for getting a better negotiation against US’s trading partners.

However, the broader outlook of the US Dollar remains uncertain as Trump reiterated that OPEC should cut Oil prices, which would hurt Russia’s finances and eventually lead to a truce between Russia and Ukraine.

"One way to stop it quickly is for OPEC to stop making so much money and drop the price of oil, and that war will stop right away," Trump said at World Economic Forum (WEF) in Davos on Friday.

Also, China’s economic turmoil continue to weigh on Oil demand’ prospects. The National Bureau of Statistics (NBS) reported that the China’s Manufacturing Purchasing Managers’ Index (NBS) declined to 49.1 in January from 50.1 in December. Economists expected the factory data to have expanded at a steady pace.

Brent Crude Oil FAQs

What is Brent Crude Oil?

Brent Crude Oil is a type of Crude Oil found in the North Sea that is used as a benchmark for international Oil prices. It is considered ‘light’ and ‘sweet’ because of its high gravity and low sulfur content, making it easier to refine into gasoline and other high-value products. Brent Crude Oil serves as a reference price for approximately two-thirds of the world's internationally traded Oil supplies. Its popularity rests on its availability and stability: the North Sea region has well-established infrastructure for Oil production and transportation, ensuring a reliable and consistent supply.

What factors drive the price of Brent Crude Oil

Like all assets supply and demand are the key drivers of Brent Crude Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of Brent Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.

How does inventory data impact the price of Brent Crude Oil

The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of Brent Crude Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

How does OPEC influence the price of Brent Crude Oil

OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact Brent Crude Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.