Soft CPI Reading Boosts Wall Street

Market Summary

The U.S. CPI reading released yesterday came in below market expectations, reigniting speculation of continued Federal Reserve rate cuts in 2025. As a result, the dollar fluctuated but remained near its recent lows. However, with President-elect Donald Trump’s inauguration approaching, this event could potentially strengthen the dollar in the coming sessions.

Meanwhile, the softer inflation data has reduced the likelihood of aggressive Fed tightening, favoring Wall Street. All three major indices closed higher, led by the Dow Jones, which surged over 700 points, hinting that the bearish trend in equities might be ending.

In the forex market, the UK CPI reading disappointed, coming in below expectations and dampening the Pound Sterling’s strength. In contrast, Australia’s employment data exceeded market forecasts, boosting the Aussie dollar and reinforcing its bullish outlook.

In commodities, gold capitalized on the softened dollar, rallying to a one-month high. Oil prices also remain bullish as the EIA warned of supply disruptions following Russian oil sanctions, coupled with declining U.S. crude stockpiles, improving the demand outlook.

In the crypto market, Bitcoin has once again touched the $100,000 mark, signaling strong bullish momentum and reflecting heightened risk-on sentiment among crypto investors as Trump’s inauguration draws closer.

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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 Dollar Index declined following a weaker-than-expected US inflation report. The U.S. CPI revealed mixed inflation signals, with headline CPI meeting expectations at 2.9%, while core CPI fell short, coming in at 0.2% against the expected 0.3%. This, along with disappointing PPI data, has led to a shift in the US economic outlook, reinforcing expectations that the Federal Reserve will keep interest rates lower for a longer period. As a result, U.S. Treasury yields dipped further, signaling potential easing in monetary policy and weighing on the dollar’s strength.

The Dollar Index is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 61, suggesting the index might experience technical correction since the RSI retreated from overbought territory. 

Resistance level: 110.00, 111.75

Support level: 108.20, 106.30

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XAU/USD, H4

Gold prices remain resilient, buoyed by weaker-than-expected U.S. economic data and ongoing trade uncertainties. The latest CPI report revealed core inflation falling short of expectations, reinforcing market hopes for interest rate cuts, which support gold’s safe-haven appeal. As concerns around economic growth and geopolitical risks persist, gold remains a favored asset for investors seeking stability in uncertain times.

Gold prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 65, suggesting the commodity might extend its gains since the RSI stays above the midline. 

Resistance level:  2720.00, 2755.00

Support level: 2690.00, 2660.00

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GBP/USD，H4

The Pound Sterling weakened after a disappointing UK CPI report underscored ongoing economic challenges. The data has fueled speculation that the Bank of England may adopt a more dovish approach, potentially cutting rates in 2025 to combat slowing growth. However, uncertainties around the BoE’s future actions persist, making upcoming UK economic reports essential to gauge the trajectory of monetary policy and the potential for further pound weakness.

GBP/USD is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 47, suggesting the pair might extend its losses since the RSI stays below the midline. 

Resistance level: 1.2305, 1.2480

Support level: 1.2105, 1.2015

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EUR/USD，H4

The EUR/USD pair experienced fluctuations in the last session but maintained its bullish trajectory, supported by a technical rebound from recent lows. The primary catalyst was the U.S. CPI reading, which came in below market expectations, weakening the dollar and enabling the pair to remain elevated. Euro traders are now turning their attention to Friday’s eurozone CPI release, a key event that could significantly influence the euro’s performance. A stronger-than-expected CPI reading may bolster the euro, reinforcing the pair’s upward momentum, while a softer figure could challenge its bullish outlook.

If the pair remains trading above 1.0260 in the recent session, it signals that the pair remains trading within its bullish trajectory. The RSI remains at above 50, while the MACD has broken above the zero line, suggesting that the pair remains trading with bullish momentum. 

Resistance level: 1.0330, 1.0458

Support level: 1.0230, 1.0112

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AUD/USD, H4:

The AUD/USD pair extended its upward movement, gaining over 1% from its recent low, signaling a bullish bias. This rally was underpinned by robust Australian employment data, which exceeded both the previous reading and market expectations, providing a strong boost to the Aussie dollar. Should the pair hold above the critical psychological support level at the 0.6200 mark, it is likely to sustain its bullish trajectory. Market participants will continue monitoring global sentiment and U.S. economic developments, as these factors could influence further movements in the pair.

The AUD/USD continued to edge higher after the pair surged above the resistance level at 0.6200 mark. The RSI remains in the overbought zone, while the MACD remains elevated, suggesting that the bullish momentum remains strong. 

Resistance level: 0.6275, 0.6345

Support level: 0.6205, 0.6130

Nasdaq, H4: 

All three major U.S. indexes posted solid gains following a cooler-than-expected consumer price index (CPI) reading. Bank earnings dominated the market’s focus, with strong results from top names boosting sentiment. The Nasdaq enjoyed a robust recovery, snapping a five-day losing streak, while the S&P 500 and Dow both posted their third consecutive gains

Nasdaq is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 52, suggesting the index might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 21255.00, 21820.00

Support level: 20730.00, 20395.00

BTC/USD，H4

Risk appetite across the financial markets improved following the release of U.S. CPI data, which came in below market expectations. This fueled speculation of a less aggressive stance from the Federal Reserve, boosting investor sentiment. Bitcoin capitalized on the risk-on environment, surging by 3.4% in the last session and reclaiming the $100,000 mark. With President-elect Donald Trump’s inauguration approaching, optimism surrounding potential market-friendly policies is expected to provide further momentum for BTC. 

BTC remains bullish, as the prices have reached a new high in a week. The RSI continues to climb, while the MACD diverges after breaking above the zero line, suggesting that the bullish momentum is gaining. 

Resistance level: 102,000.00, 105,400.00

Support level: 98,650.00, 94,450.00

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CL OIL, H4

Oil prices surged on Thursday, following a strong rally the previous day, as a mix of factors supported the market. Softer-than-expected U.S. inflation data, fresh sanctions on Russian oil, and a significant drawdown in U.S. crude inventories all contributed to the price increase. Oil gained over 2% on Wednesday, driven by renewed expectations for interest rate cuts, which typically foster economic growth and increase oil demand. 

Oil prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 76, suggesting the commodity might enter overbought territory. 

Resistance level: 83.75, 87.45

Support level: 78.80, 72.95

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