Japanese Yen Remains Subdue ahead of BoJ’s Decision

Market Summary

The market is focused on the upcoming Bank of Japan (BoJ) interest rate decision, with expectations of a 25 bps rate hike, potentially raising rates to an 18-year high. However, Japanese equities have rallied ahead of the announcement, suggesting the decision is already priced in, which may limit its impact on the yen. Meanwhile, markets are digesting Trump’s speech at the World Economic Forum, where he urged OPEC to increase oil supply to lower prices. Oil prices dropped to a 10-day low following the remarks, while the dollar softened on expectations of reduced inflation if oil prices fall. In contrast, Wall Street gained on optimism surrounding Trump’s efforts to control inflation, which could encourage a dovish tilt from the Fed.

In the forex market, attention is on eurozone and UK PMI readings due today, as a weakening dollar may support gains in the euro and pound. In the crypto market, bearish momentum has eased, with cryptocurrencies staging a technical rebound from the previous session.

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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 Overview

Economic Calendar

(MT4 System Time)

Source: MQL5 

Market Movements

DOLLAR_INDX, H4

The U.S. Dollar Index weakened following disappointing labor data. Initial Jobless Claims rose from 217K to 223K, exceeding expectations of 221K and signaling continued labor market weakness. Treasury yields also declined after Trump called for immediate interest rate cuts, arguing that both domestic and global rates should be lowered. However, the upcoming Federal Reserve meeting remains in focus as traders assess whether the central bank will maintain its independence.

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 34, suggesting the index might extend its losses after breakout since the RSI stays below the midline. 

Resistance level: 109.00, 110.00

Support level: 107.80, 106.80

XAU/USD, H4

Gold prices extended their rally, rising over 0.5% in the last session to reach a fresh high, reinforcing a bullish outlook. The metal’s gains were fueled by a softened U.S. dollar following Trump’s speech at the World Economic Forum. His push to lower oil prices as part of efforts to control inflation has raised expectations for a more dovish Federal Reserve monetary policy, further weakening the dollar and supporting gold’s upward momentum. 

Gold prices reached a new high after finding support at its short-term support level at near the $2745 mark, suggesting a bullish bias for gold. The RSI has been hovering close to the overbought zone while the MACD has been flowing at the elevated level, suggesting that the bullish momentum remains strong. 

Resistance level:  2789.00, 2830.00

Support level: 2745.00, 2718.35

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GBP/USD，H4

The GBP/USD pair continues to trade within its uptrend channel, rebounding from its support level in the last session, signaling a bullish bias. The pair capitalized on a weakened U.S. dollar following Trump’s speech at the World Economic Forum, which fueled expectations of a dovish Federal Reserve and weighed on the dollar’s strength. However, upcoming UK PMI readings, expected to come in lower than the previous figures, could limit the Pound Sterling’s momentum and potentially introduce downside pressure on the pair.

GBP/USD remains within its uptrend trajectory and has traded to a new high, suggesting a bullish bias for the pair. The RSI is poised to break into the overbought zone while the MACD remains elevated, suggesting that the bullish momentum remains strong. 

Resistance level: 1.2505, 1.2620

Support level: 1.2310, 1.2220

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EUR/USD，H4

The EUR/USD pair has maintained support above its uptrend line and edged higher, indicating a bullish bias. However, the pair is approaching a significant resistance level near the 1.0460 mark, with a breakout above this level likely confirming further bullish momentum. The U.S. dollar has remained subdued in recent sessions, providing additional support for the euro. Meanwhile, the market’s focus will be on eurozone PMI readings, which are anticipated to show improvement compared to the previous data. Positive results could reinforce the euro’s upward trajectory and drive the pair higher.

The EUR/USD continues to edge higher after breaking the bearish price structure, suggesting a bullish bias for the pair. The RSI remains close to the overbought zone while the MACD has a deadly cross on the above, suggesting that the bullish momentum may be easing. 

Resistance level: 1.0510, 1.0607

Support level: 1.0331, 1.0232

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USD/JPY, H4:

Despite a minor technical correction, the USD/JPY pair has found support and continues to trade above its long-term uptrend support level, maintaining a bullish bias. Traders are closely watching the Bank of Japan’s (BoJ) interest rate decision scheduled for today, with a 25 basis point hike already priced in by the market. However, attention will also be on the BoJ’s accompanying monetary policy meeting, as any insights into future policy directions could significantly impact the Japanese Yen’s movement and the pair’s trajectory.

USD/JPY has seemingly found support after a technical correction from its weekly high, suggesting a bullish bias for the pair. The RS has gotten above the 50 level, while the MACD is poised to break above the zero line, suggesting that the bearish momentum has vanished. 

Resistance level: 157.30, 158.55

Support level: 155.15, 154.20

S&P 500, H4: 

The S&P 500 reached an all-time high on Thursday, fueled by strong corporate earnings and Trump’s Davos speech, where he reiterated calls for lower interest rates. Lower borrowing costs typically drive capital into equities, boosting sentiment. Additionally, Trump announced a multi-billion-dollar AI investment, further lifting tech stocks and reinforcing bullish market momentum.

S&P 500 is trading higher following the prior breakout of the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 70, suggesting the index might enter overbought territory. 

Resistance level: 6160.00, 6280.00

Support level: 6015.00, 5785.00

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Crude Oil, H4

Oil prices dropped 1% after Trump urged Saudi Arabia and OPEC to lower crude prices during his World Economic Forum speech. Concerns over the potential impact of Trump’s tariffs and energy policies on global economic growth and energy demand also weighed on oil markets.

Crude oil is trading lower following the prior breakout below the previous support level. MACD has illustrated increasing bearish momentum, while RSI is at 35, suggesting the commodity might extend its loose since the RSI stays below the midline. 

Resistance level: 77.05, 78.75

Support level: 72.95, 70.35

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