All Eyes on BoJ’s Interest Rate Decision Tomorrow

• The dollar and Wall Street are relatively quiet ahead of the BoJ interest rate decision.

• Gold remains strong due to heightened uncertainty surrounding Trump's administration.

• BTC faced short-term selling pressure and slid in yesterday's session.

Market Summary

The excitement surrounding Donald Trump‘s return to the White House subsided in the last session, with both the dollar and Wall Street trading in a more subdued manner. Attention now shifts to tomorrow’s Bank of Japan (BoJ) interest rate decision. If the BoJ raises rates to an 18-year high, it could tighten global liquidity, potentially weighing on risk assets such as equities and cryptocurrencies. The dollar's volatility is also set to increase with the release of U.S. initial jobless claims today, which could directly impact its strength.

In the commodities market, gold remains elevated above $2,750 as caution lingers over Trump‘s second term. Conversely, oil prices are under pressure due to uncertainty around Trump’s proposed trade tariffs, which could harm demand. Meanwhile, Bitcoin remains above the critical $100,000 level but faces short-term selling pressure as traders adopt a “buy the rumor, sell the news” approach following Trump‘s inauguration. Despite this, the broader crypto market remains optimistic about Trump’s favorable stance on digital assets, with BTC likely to rally further if solid policies are introduced.

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

Despite the risks, market reactions were muted, as the proposed tariffs are far lower than the 60% Trump suggested during his campaign. The U.S. dollar remained subdued, while gold held near record highs as investors adopted a wait-and-see approach.

The Dollar Index is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 42, suggesting the index might experience technical correction since the RSI rebounded sharply from oversold territory.

Resistance level: 109.00, 110.00

Support level: 107.95, 107.05

XAU/USD, H4

Gold prices extended their rally, reaching their highest level since last October, indicating a strong bullish momentum. The precious metal benefited from a subdued dollar, allowing it to gain further traction. Additionally, market participants remain cautious about the potential policies of the Trump administration, which could heighten financial market uncertainty and support gold's safe-haven appeal. In the short term, gold is expected to maintain its bullish trajectory as long as prices remain above the critical $2,744 level.

Gold prices remain within their bullish trajectory. Traders may eye on the support level at the near $2744 mark. The RSI remains in the overbought zone, while the MACD reached a new high in the recent session, suggesting that gold is trading with strong bullish momentum.

Resistance level: 2789.00, 2830.00

Support level: 2718.35, 2665.00

GBP/USD，H4

The GBP/USD pair has reached above its previous high which suggests a structural break and a bullish bias for the pair. As the dollar has been soft in the recent session due to uncertainty surrounding Trump‘s executive actions. the Pound Sterling is able to seize the chance and trade higher against the dollar. The U.S. initial Jobless Claims is due today which may serve as a pivotal factor for the pair’s price movement.

GBP/USD traded above its previous high level and formed a higher-high price pattern, suggesting a bullish bias for the pair. The RSI is flowing above the 50 level while the MACD remains above the zero line, suggesting that the pair is trading with bullish momentum.

Resistance level: 1.2410, 1.2505

Support level: 1.2220, 1.2140

USD/JPY, H4:

The Japanese yen is likely to extend its gains as markets anticipate the Bank of Japan‘s largest rate hike in 18 years on Friday. Governor Kazuo Ueda is expected to raise the overnight call rate by 25 basis points to 0.5%, signaling confidence in sustained inflation and economic normalization. If confirmed, this would mark the BoJ’s most significant move since 2007, reinforcing expectations of further yen strength.

USD/JPY is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 57, suggesting the index might extend its gains since the RSI stays above the midline.

Resistance level: 156.00, 158.05

Support level: 155.00, 154.05