- US Markets
US equity markets closed relatively flat on Friday, with the SPX index falling 0.04% and the NDX index rising 0.25%. Although both indices opened with a gap down on Monday, the Asian session erased losses, with the SPX trading 0.06% higher and the NDX trading 0.03% higher.
The markets initially reacted to Trump’s threat of 100% tariffs on Canadian exports if the country makes a deal with China. The market focus is shifting towards the key Fed interest rate decision this week, with rates widely expected to remain stable. Along with these, markets are expected to face heightened volatility from two scheduled speeches by US President Trump, which are expected to provide some clarity on his stance on global tariffs. More than 90 S&P 500 companies are set to report earnings this week, including major earnings from Mag-7 companies like Apple, Meta, Tesla, and Microsoft. Expectations remain high, with the season strong so far, as 76% of the reported companies have beaten expectations.
From a technical perspective, the SPX index has recovered strongly intraday after opening with a gap down today, suggesting its strong bullish momentum. The SPX is trading near its 9-SMA on the daily chart at $6,919, and a sustained break above this level could signal further strength. The NDX has also recovered above all key moving averages, including the 9- and 21-SMA levels on the daily chart, suggesting a bullish short-term market structure.
- US Dollar Index
The dollar index fell to 97.17 on Monday, marking a third straight session at four-month lows as selling pressure mounts on the greenback. The dollar’s sharpest loss came versus the yen, which rallied after media reported that the New York Federal Reserve had conducted rate checks with dealers on Friday, interpreted as a warning of possible imminent coordinated U.S.-Japan intervention to prop up the Japanese currency for the first time in 15 years. The mere talk of intervention becomes a self-fulfilling prophecy, generating sustained dollar selling as traders square short yen positions amid official threats.
Meanwhile, concern about Federal Reserve independence is putting pressure on the dollar, as Donald Trump’s Justice Department pursues a criminal investigation into Chair Jerome Powell while the Supreme Court is set to rule on his ability to fire Governor Lisa Cook. The Fed is widely expected to leave interest rates unchanged at 3.50%-3.75% at the conclusion of its FOMC meeting this week, and all eyes will be on forward guidance about the timing of the rate cuts.
EUR/USD has reversed sharply off 1.1600 support, having broken through 1.1800 resistance and printing higher lows on the 4H chart. The pair remains bullish above the 1.1835-1.1820 support. A break above 1.188 will challenge 1.1920, while a 4H close below 1.1700 will invalidate the upside and reprice to 1.1650.
- Crude Oil
Oil is holding steady after Friday’s sharp ~2.8% rally, which was the strongest intraday advance in the past two weeks. Markets have repriced crude higher amid renewed U.S. focus on Iran. The deployment of American naval assets to the Middle East is raising concerns over potential escalation and supply disruption. This geopolitical risk premium, combined with recent operational uncertainty at the Caspian Pipeline Consortium (CPC), prompted hedge funds to increase bullish crude positions to their highest level since August in the week through January 20.
However, this near-term upside faces some risk. The CPC has restored an offshore mooring, easing immediate supply disruption risks along a key Black Sea export route that carries the majority of Kazakhstan’s crude shipments. In addition, traders are monitoring demand-side and operational risks from a severe winter storm sweeping across the U.S., which has already forced Exxon Mobil to shut some units at its Baytown refining complex in Texas. In the long run, expectations of a supply glut also pose a risk, as robust non-OPEC output and adequate inventories could limit the durability of price gains driven by geopolitical risk.
Brent is holding steady at $66.14. with the potential to rally further to $66.77, characterised by the mid-January highs. It has immediate support at $65.78, with the next support at $65.38. A Fibonacci retracement connecting mid-Dec’s low of $58.49 with mid-Jan’s high of $66.38 indicates the presence of 38.2% fic retracement support at $63.51. Meanwhile, WTI is holding around $61.36, with immediate support at $60.87 and next support at $60.42. It could encounter resistance at $62.20.
- Gold & Silver
Gold is currently trading at $5,088, while silver is trading at $107. The sharp ascent to these levels is supported by geopolitical uncertainty.
On a fundamental level, both gold and silver are past their psychological levels. The rally has been supported by several factors. On one front, renewed threats toward Iran regarding a potential US intervention have once again increased global uncertainty. Secondly, over the weekend, the US threatened Canada with 100% tariffs should it proceed with a deal with China. This deal slashed tariffs on Chinese EVs, which were previously 100% and are now 6.1%. China will also lower tariffs on canola seed oil from 84% to 15%. Lastly, the US stated it may potentially support Japan in strengthening the yen against the greenback. A weaker dollar further supports gold and silver.
In the options market, investors are anticipating higher volatility. One-month volatility has jumped past 26%, a level higher than the October 16 meltdown in gold, when prices fell by 10%. Silver, on the other hand, has volatility near 80%, suggesting traders are prepared for a pullback if one occurs. While news-driven events continue to push gold to new highs, the options market remains cautious.
Technically, gold is trading above its 9, 21, 50, 100, and 200-day SMAs. On the 4-hour chart, we see a spinning top candle, signalling market indecision. This is followed by a green candle, suggesting near-term bullishness. On the daily, 4-hour, and 1-hour charts, the RSI is at overbought levels. However, we have observed overbought conditions on the daily chart since January 20. On the upside, gold may face resistance near $5,100, while on the downside, it may find support at $4,929, Friday’s open.
Silver reached $109 before retreating to $108. On the hourly chart, a pullback is possible, though prices remain supported near $106. Silver is also trading above its 9, 21, 50, 100, and 200-day SMAs. On the upside, silver may face resistance at $110, while on the downside, it may find support at $106. A break below $106 could open the way toward $103, Friday’s close.
