Gold Dive as Middle East Ceasefire Deal Breakthrough

• The dollar faced a retracement as the market down played Trumps tariff policy plan.

• Gold prices dipped yesterday as the ceasefire deal of the Middle East has made positive progress.

• BTC declined to below the $90,000 mark for the first time in 2 months, suggesting the crypto market is trading with strong downside pressure.

Market Summary

As President-elect Donald Trump‘s inauguration approaches, the market is keenly monitoring developments tied to his proposed policies, leading to notable market reactions. The U.S. dollar underwent a technical correction yesterday, driven by sentiment that the robust U.S. economy does not necessitate Trump’s aggressive protectionist measures. This perceived policy moderation allowed Wall Street to post gains, while the dollar experienced a sell-off, albeit remaining at elevated levels. Wall Street, however, has yet to decisively break out of its broader bearish trend.

Despite the dollar's dip, safe-haven gold failed to capitalize, remaining below the critical $2,700 mark. The metal's momentum was dampened by promising news from Doha, where negotiators from Gaza and Israel are reportedly finalizing a ceasefire agreement. Conversely, oil prices maintained their strength, supported by better-than-expected Chinese trade data and the impact of U.S. sanctions on Russian crude, which continue to bolster market optimism.

In the cryptocurrency market, Bitcoin dipped below the $90,000 mark for the first time in nearly two months, underscoring persistent bearish sentiment. However, with President Trump set to take the oath of office in a week, many crypto enthusiasts are anticipating a resurgence of the “Trump-trade” rally, which could potentially revive Bitcoin and other cryptocurrencies in the near term.

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 Dollar Index extended its rally, driving major currencies to multi-year lows as markets absorbed last week‘s strong U.S. jobs report. The robust labor data has solidified expectations for a prolonged high-rate environment, with analysts revising forecasts to anticipate only two rate cuts this year, down from the previously projected three. Investors now await Wednesday’s U.S. inflation report, expected to provide pivotal clues about the Federal Reserves policy direction and its approach to inflationary pressures.

The Dollar Index is trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 72, suggesting the index might enter overbought territory.

Resistance level: 111.00, 114.65

Support level: 107.35, 104.20

XAU/USD, H4

Gold prices recovered sharply after briefly dipping, bouncing off the critical 2665.00 support level—a signal of strong buying interest. Inflation risks stemming from Trump-era policies and ongoing geopolitical trade tensions are expected to underpin further gains in gold. With U.S. economic data in focus, market participants should closely monitor upcoming reports for insights into the precious metal's trajectory, particularly as inflationary expectations evolve.

Gold prices are trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 52, suggesting the commodity might extend its gains since the RSI stays above the midline.

Resistance level: 2690.00, 2720.00

Support level: 2665.00, 2635.00

GBP/JPY, H4:

The GBP/JPY pair, after experiencing a sharp 4% decline over the past week, managed a technical rebound in the last session but faced rejection at the fair-value gap, reinforcing its bearish trajectory. The pair's inability to sustain gains highlights persistent selling pressure. On the fundamental side, Japan's improved Trade Balance data compared to previous readings has lent strength to the Japanese Yen. This bolstered Yen performance is likely to continue weighing on the pair, especially as the broader market sentiment remains cautious. As such, GBP/JPY may struggle to break out of its bearish trend in the near term.

The GBP/JPY pair is trading within its bearish trajectory despite a technical rebound. The RSI rebounded slightly while the MACD was about to cross at the bottom, suggesting that the bearish momentum was easing.

Resistance level: 194.05, 196.00

Support level: 189.95, 187.80