Eyes on Trump Return

• The financial market is expected to be quieter as the U.S. observes a public holiday.

• The market is watching the implications of Trump's return to the dollar's strength and Wall Street'sof Wall Street.

• Trump's official cryptocurrency launch has rattled the cryptocurrency market.

Market Summary

The U.S. equity market stalled after its recent rally spurred by last Wednesday's softer-than-expected U.S. CPI reading. The Dow Jones Industrial Average appears to lack bullish momentum, suggesting the potential for a pullback to fill the gap created during the post-CPI surge.

As Wall Street transitions into the first quarter earnings report season, market volatility is expected to intensify. Investors will closely analyze corporate earnings and forward guidance to gauge the broader economic outlook, adding uncertainty to the Dow's near-term trajectory. This combination of factors may keep the index under pressure while traders await fresh catalysts. The market is now awaiting for Trumps inauguration today and its direct impact on both the U.S dollar as well as Wall Street.

In addition, Bitcoin (BTC) briefly surged to the $106,000 mark before experiencing a sharp sell-off. Notably, the debut of Donald Trump's official cryptocurrency has sent shockwaves through the crypto market, attracting billions of dollars in trading volume during recent sessions.

The sudden influx of attention and capital towards Trump's cryptocurrency has disrupted market dynamics, diverting liquidity from established assets like Bitcoin and leading to struggles across the broader crypto space

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 remains in a cautious trading mode as investors await clarity on President-elect Trumps policies. While near-term sentiment is mixed, the long-term outlook remains bullish, supported by rising U.S. Treasury yields. FX options indicate increased volatility, with potential swings post-inauguration. A hawkish trade stance from Trump could drive the dollar higher alongside Treasury yields.

The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 59, suggesting the index might extend its gains since the RSI stays above the midline.

Resistance level: 110.00, 111.75

Support level: 109.00, 108.20

XAU/USD, H4

Gold prices retreated as traders took profits ahead of key events, while optimism over a Hamas-Israel ceasefire further dampened demand for safe-haven assets. The recent release of Palestinian prisoners and ongoing negotiations have boosted risk appetite, pressuring gold. However, any geopolitical instability could still support gold in the longer term.

Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 50, suggesting the commodity might extend its losses after breakout since the RSI retreated sharply from overbought territory.

Resistance level: 2720.00, 2755.00

Support level: 2690.00, 2660.00

Nasdaq, H4:

The U.S. equity market appears to be moderating its recent downtrend momentum, buoyed by anticipation surrounding Donald Trumps inauguration and the softer U.S. CPI reading, which has tempered expectations of aggressive monetary tightening by the Federal Reserve. The pause in trading on Monday due to a public holiday in the U.S. has offered the market a moment of consolidation. If the index maintains levels above the critical 21,350 mark upon the market's reopening, it could signal a potential trend reversal, suggesting a shift toward a bullish bias.

The Nasdaq has found support from its critical liquidity zone at the near 20800 mark and has rebounded, suggesting a potential trend reversal for the index. The RSI is moving upward while the MACD is about to break above the zero line, suggesting that the bearish momentum is vanishing.

Resistance level: 21820.00, 22600.00

Support level: 21250.00, 20750.00

USD/JPY, H4

Japanese yen edged slightly higher, with hawkish expectations from BoJ. The Bank of Japan‘s upcoming interest rate decision remains a key market catalyst. While the central bank previously held rates steady due to economic uncertainties, rising inflation and wage growth have increased speculation of a 0.25% rate hike. Markets are now pricing in an 80% probability of an increase, making the BOJ’s decision critical for yen movements.

USD/JPY is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 52, suggesting USD/JPY might extend its losses after breakout since the RSI retreated from overbought territory.

Resistance level: 156.15, 157.15

Support level: 155.10, 154.10