China’s DeepSeek Triggers Nasdaq Plummet

• Nasdaq faced strong sell-down sentiment on the back of China's DeepSeek challenge.

• U.S. dollar regains strength on Donald Trump's tariff comment.

• Oil prices slid further as the market was concerned about Trump's tariff that could harm oil demand.

Market Summary

The Nasdaq experienced a significant sell-off in the last session, plunging over 600 points (3%) amid concerns about competition from China's DeepSeek. This open-source AI model, positioned as a cost-efficient alternative to U.S.-developed models like OpenAIs ChatGPT, has fueled market apprehensions about its potential disruption to the tech sector. Adding to the bearish sentiment, investors are closely watching the upcoming FOMC meeting to gauge the equity market's direction.

Meanwhile, the U.S. dollar strengthened following Donald Trump‘s reiteration of aggressive tariff policies. This protectionist stance has weighed on risk-sensitive currencies like the Australian and New Zealand dollars, which decline in the Asian session. The market is also eyeing Japan’s core CPI reading for further clues on the sluggish Japanese yen.

In the commodities market, gold continued its slide after facing rejection near its all-time high. The precious metal fell below its key support at $2,745, signaling a possible bearish trend reversal. Similarly, oil prices dropped to a three-week low as Trumps tariff comments raised concerns about future demand, exacerbating the pressure on the market.

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

Source: CME Fedwatch Tool

0 bps (97.3%) VS -25 bps (2.7%)

Market Movements

DOLLAR_INDX, H4

The Dollar Index held steady, though bearish sentiment lingers ahead of this week‘s FOMC meeting. While the Federal Reserve is widely expected to keep rates unchanged, traders remain cautious as President Trump continues to pressure the central bank for rate cuts. Market participants will closely watch Fed Chair Jerome Powell’s comments for any hints on future monetary policy adjustments, particularly as inflation expectations remain a key focus.

The Dollar Index is trading flat while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 49, suggesting the index might extend its gains after breakout since the RSI rebounded sharply from oversold territory.

Resistance level: 107.80, 109.00

Support level: 106.80, 105.75

XAU/USD, H4

Gold prices experienced a roller-coaster session, initially testing record highs before retreating due to heavy profit-taking. The broad sell-off in tech stocks also contributed to a liquidation of gold holdings, as institutional investors raised cash reserves. Moving forward, golds trajectory will hinge on the FOMC meeting, with expectations around monetary policy playing a crucial role in shaping safe-haven demand.

Gold prices are trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 41, suggesting the commodity might extend its gains since the RSI rebounded sharply from oversold territory.

Resistance level: 2760.00, 2785.00

Support level: 2740.00, 2720.00

USD/JPY, H4:

The USD/JPY pair has breached its long-term uptrend support level established since last September, signaling a structural break and a bearish outlook for the pair. Despite the strengthening U.S. dollar in the previous session, the pair continued to trade lower, indicating robust performance by the Japanese Yen. Traders are now focused on today‘s BoJ Core CPI reading, which could provide further insights into the Yen’s strength.

USD/JPY has formed a lower-high price pattern and has broken below its critical support level, suggesting a bearish bias for the pair. The RSI has gotten below the 50 level while the MACD is kept below the zero line, suggesting that the bearish momentum is overwhelming with the pair.

Resistance level: 156.00, 157.30

Support level: 154.25, 152.55

Nasdaq, H4:

The Nasdaq and major tech stocks suffered a sharp sell-off on Monday following the rise of China‘s DeepSeek AI, which introduced its R1 model—a low-cost alternative that reportedly outperformed leading U.S. AI models. Investors reacted negatively, driving Nvidia’s stock down 17%, as concerns grew over DeepSeek‘s ability to disrupt the AI industry at a fraction of the cost compared to U.S. tech giants like Microsoft, Google, and Meta. This development raises fears of intensified competition in the AI sector, potentially impacting U.S. firms that have heavily invested in Nvidia’s AI infrastructure.

Nasdaq is trading lower following the prior breakout below the previous support level. MACD has illustrated increasing bearish momentum, while RSI is at 43, suggesting the index might extend its losses since the RSI stays below the midline.

Resistance level: 21255.00, 21820.00

Support level: 20765.00, 20350.00