Trump’s Inauguration Fluctuate Dollar’s Strength

• The dollar encounters wide market volatility as the market reacts to Trump's tariff policies.

• Wall Street is expected to open high when the market resumes today.

• Gold trade to a new high as the uncertainty surrounding Trump's policies stokes safe-have demand.

Market Summary

The U.S. dollar experienced heightened volatility as markets reopened following Monday‘s U.S. public holiday. Initially, the Dollar Index declined by over 1% during the Sydney session, reflecting market sentiment that President Donald Trump might delay imposing tariffs. However, the narrative shifted dramatically when Trump took executive action to announce a 25% tariff on imports from Mexico and Canada, effective February 1. This aggressive stance bolstered the dollar, reversing earlier losses and driving the Dollar Index higher. Wall Street futures responded positively to Trump's assertive policies, suggesting a potential rally when the New York session begins. Investors appear optimistic about the administration’s proactive measures, fueling risk appetite in equity markets.

In the forex market, attention now turns to key economic data releases. The UK‘s job market report and Canada’s CPI reading are expected to influence the Pound Sterling and Canadian dollar, respectively, providing fresh direction for currency pairs tied to these economies.

In the commodities market, gold prices have climbed to near $2,720 as investors hedge against uncertainties surrounding Trump‘s policies. The precious metal’s recent rally underscores its appeal as a safe haven amidst geopolitical and economic shifts. Conversely, oil prices face downside risks, with Trumps pledge to boost U.S. oil output potentially exacerbating supply concerns in an already soft demand environment.

The cryptocurrency market saw Bitcoin retreat by over 6% after Trump‘s inauguration, reflecting a "buy the rumor, sell the news" sentiment. Despite this correction, Bitcoin remains firmly above the $100,000 mark, supported by indications of Trump’s interest in the crypto market.

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 extended its decline as Treasury yields dropped, with the 10-year yield falling nine basis points to 4.54% following Mondays holiday.This development has led investors to reassess expectations for Federal Reserve policy adjustments, with market participants now pricing in a higher probability of rate cuts later this year.

The Dollar Index is trading flat while currently testing the support level at 107.95. MACD has illustrated increasing bearish momentum, while RSI is at 32, suggesting the index might extend its losses after breakout since the RSI stays below the midline.

Resistance level: 109.00, 110.00

Support level: 107.95, 106.80

XAU/USD, H4

Gold prices surged to a new high, supported by a weaker dollar in recent sessions. Additionally, uncertainty surrounding President Trump's policy decisions has increased demand for the safe-haven asset. However, gold traders should remain cautious, as a potential rebound in the dollar, driven by Trump's executive actions, could limit gold's upward momentum.

Gold prices have broken above their sideways trend, suggesting a bullish bias for gold. The RSI remains close to the overbought zone, while the MACD remains elevated, suggesting that gold remains trading with strong bullish momentum.

Resistance level: 2755.00, 2789.00

Support level: 2718.35, 2665.00

GBP/USD，H4

The GBP/USD pair broke above its downtrend resistance, signaling a potential bullish trend. The pair benefited from an initial decline in the dollar's strength, driven by market expectations of a softer trade stance from Trump‘s administration. However, the dollar is anticipated to recover following Trump’s announcement of high tariffs on Canada and Mexico, which could support the greenback. Meanwhile, traders will focus on the UK‘s job data, which may influence the Pound Sterling’s strength and the pair's further direction.

GBP/USD returned to its previous high level near the 1.2305 mark, suggesting a bullish bias for the pair. The RSI is moving upward while the MACD is breaking above the zero line, suggesting that the pair is trading with bullish momentum.

Resistance level: 1.2408, 1.2506

Support level: 1.2220, 1.2140