Gold Rallies to Zenith Amid Uncertainty

• The market is eyeing on this Wednesday's FOMC decision to gauge the strength of the subdue U.S. dollar.

• The Japanese yen remains lacklustre despite a BoJ rate hike last Friday; I will be eyeing Japans CPI reading tomorrow.

• Gold faced strong resistance after rallying to near its all-time high levels.

Market Summary

This week, the financial market remains focused on the U.S. dollar, which has been heavily influenced by Donald Trump‘s statements and proposed tariff policies. The president-elect recently threatened Columbia with high tariffs over immigration issues, adding support to the dollar’s strength. Meanwhile, attention is on Wednesdays FOMC interest rate decision, with the market anticipating a hawkish stance from the Federal Reserve that could further buoy the dollar.

Despite a rate hike last Friday, the Japanese Yen has struggled in recent sessions. Traders will look to tomorrow‘s CPI reading for clues on the Yen’s strength. In the commodity market, oil prices continue to decline amid concerns over a potential increase in supply by 2025, coupled with disappointing Chinese PMI data that has weighed on demand.

In the gold market, the precious metal faced resistance near its all-time high, retreating by 1%. However, if gold can hold above the $2,754 support level, it may continue to trade within a bullish trajectory, given its safe-haven appeal in the face of global uncertainties.

Current rate hike bets on 29th January Fed interest rate decision:

Source: CME Fedwatch Tool

0 bps (97.9%) VS -25 bps (2.1%)

Market Movements

DOLLAR_INDX, H4

The U.S. dollar fell on Friday as dovish expectations grew following President Donald Trumps renewed calls for immediate interest rate cuts. Speaking at the World Economic Forum in Davos, Trump urged global central banks to lower rates, hinting at potential political pressure on the Federal Reserve ahead of its upcoming policy meeting. Investors reacted by reducing dollar exposure, though uncertainty remains over whether the Fed will respond to Trump's rhetoric.

The Dollar Index is trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 38, suggesting the index might experience technical correction since the RSI rebounded from oversold territory.

Resistance level: 107.95, 108.90

Support level: 107.15, 106.45

XAU/USD, H4

Gold prices edged lower as traders took profits, leading to a technical correction. However, the long-term outlook for gold remains bullish, as Trumps call for lower interest rates could increase demand for safe-haven assets. If the Federal Reserve adopts a more accommodative stance in response to economic concerns, gold could see renewed upside momentum.

Gold prices are trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 42, suggesting the commodity might experience technical correction since the RSI rebounded from oversold territory.

Resistance level: 2780.00, 2800.00

Support level: 2750.00, 2720.00

GBP/USD，H4

The GBP/USD pair has climbed to a three-week high, continuing to trade within its established uptrend channel, signaling a bullish outlook. This upward movement has been supported by last Friday‘s UK PMI readings, which strengthened the Pound Sterling. However, traders should remain cautious ahead of Wednesday’s FOMC interest rate decision, as it could significantly influence the pair's price trajectory.

GBP/USD remains trading within its uptrend channel, suggesting a bullish bias for the pair. The RSI remains close to the overbought zone, while the MACD continues to edge higher, suggesting that the bullish momentum remains strong.

Resistance level: 1.2505, 1.2620

Support level: 1.2407, 1.2310

USD/JPY, H4:

The Japanese yen gained after the Bank of Japan (BOJ) raised its benchmark interest rate by 25 basis points—the first-rate hike since the 2008 financial crisis. The move signals growing confidence in Japans economic recovery, supported by rising wages and sustained inflation. With this shift, the BOJ moves further away from its ultra-loose monetary policy, reinforcing expectations of a stronger yen in the near term.

USD/JPY is trading lower following prior retracement from the resistance level. MACD illustrated increasing bearish momentum, while RSI is at 47, suggesting the pair might extend its losses since the RSI stays below the midline.

Resistance level: 156.60, 158.05

Support level: 155.00, 154.05