Daily Analysis 28/01/2025

• GBP/USD Price: The GBP/USD pair has reversed its three-day winning streak, trading under heavy pressure below 1.2450 in early Tuesday trading. Market sentiment has shifted against the Pound amid renewed strength in the US Dollar, driven by cautious optimism ahead of key Federal Reserve policy updates.
• UK Economic Data: Recent UK data, including soft inflation, retail sales, labor market figures, and sluggish GDP growth in December, has increased the likelihood of a 25-basis point rate cut by the Bank of England (BoE) in February. This dovish outlook has added to the Pound's challenges, weighing further on the pair.
• Trump’s Tariffs: Although President Trump’s tariff threats toward Colombia turned out to be empty, global markets are increasingly wary of the volatility surrounding US trade policies. This uncertainty continues to provide support for the US Dollar as investors seek safer assets.
• Fed's Stance: The Federal Reserve is expected to maintain its benchmark rate at the January meeting. However, the Fed’s cautious tone, stemming from economic uncertainties linked to Trump’s policies, has strengthened the Greenback’s appeal, pressuring GBP/USD lower.
• US Economic Data: Traders are closely watching US Durable Goods Orders, the Conference Board’s Consumer Confidence Index, and the Richmond Fed Manufacturing Index for further insights into the health of the US economy. Better-than-expected results could add momentum to the Dollar’s rally.

Closing statement: GBP/USD remains vulnerable below 1.2450 as weak UK fundamentals and rising BoE rate cut expectations add downward pressure. Key US economic data and the Fed's upcoming policy decision will play a pivotal role in determining the pair's near-term direction, with resistance at 1.2500 and support near 1.2350.

• Gold Prices: Gold prices are under pressure as rebounding US bond yields increase demand for the US Dollar, weighing on the XAU/USD pair. Despite an overnight recovery from a multi-day low, the pair has failed to capitalize on gains, reflecting a bearish sentiment.
• Universal Tariffs: US Treasury Secretary Scott Bessent's proposal for universal tariffs, starting at 2.5% on all imports and rising gradually, has intensified market concerns. This protectionist move supports the US Dollar as safe-haven demand increases but further undermines Gold prices.
• Trump's New Remarks: President Trump’s announcement of new trade tariffs on critical industries such as steel, semiconductors, aluminum, and copper has reignited trade war fears. The uncertainty over global trade policies continues to negatively affect market sentiment, indirectly impacting Gold’s performance as investors reassess risk.
• China's Manufacturing PMI: The National Bureau of Statistics (NBS) reported a contraction in China’s manufacturing sector in January, which has dampened investor sentiment. This economic slowdown in a major Gold-consuming country adds further headwinds to XAU/USD.
• AI Sector Sell-Off: The global AI sector experienced turmoil following the fallout from China’s low-cost AI model, DeepSeek. With AI leader Nvidia's shares plummeting 18%, the ripple effects have contributed to broader market risk aversion, but Gold has not benefited as usual amid USD strength.

Closing statement: XAU/USD remains vulnerable as the USD recovery and global trade tensions dominate market sentiment. Resistance lies near ATH, around $2,790, while support is expected around $2,715. Investors will closely monitor developments in global trade policies and economic data for further cues.

• WTI Prices: West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $73.60, extending its decline as recent US sanctions appear ineffective in curbing Russian oil exports. The oversupply concerns from Russia weigh heavily on crude prices, limiting bullish momentum.
• Trump’s Pressure: President Trump reiterated his intent to push Saudi Arabia and OPEC to lower oil prices. This political uncertainty regarding Trump’s energy and tariff policies creates headwinds for crude, as markets anticipate potential supply adjustments or demand disruptions.
• China’s Economic Struggles: China’s economic weakness continues to suppress oil demand prospects. The National Bureau of Statistics (NBS) reported a contraction in its Manufacturing PMI to 49.1 in January from 50.1 in December, signaling a decline in industrial activity and energy consumption in the world's largest oil importer.
• AI Developments: Chinese AI startup DeepSeek's rise to the top of Apple's US App Store has sparked concerns about the energy consumption needed to power expanding AI infrastructure. This trend, combined with China's economic slowdown, raises doubts about future energy demand growth.
• Fed Interest Rate: The US Federal Reserve’s interest rate decision on Wednesday is expected to influence crude prices further. With rates likely to remain unchanged amid global economic uncertainties, the decision may impact the USD and, by extension, oil prices.

Closing statement: Crude oil prices remain vulnerable amid geopolitical uncertainty, weak demand signals from China, and muted impacts from US sanctions on Russia. Key support lies at $73.00, while resistance is around $75.20. Investors will closely monitor the Fed's decision and OPEC-related developments for further direction.

• Technical Outlook: The DAX daily chart shows a pullback near the upper boundary of its ascending channel, indicating a short-term correction amid an otherwise strong bullish trend. Despite the retracement, overall momentum remains positive, supported by resilient corporate performance and steady investor confidence.
• German Ifo Index: The German Ifo Business Climate Index increased slightly to 85.1 in January, up from 84.7 in December. However, the index remains below November's 85.6, underscoring Germany's ongoing stagflation struggles. This reflects persistent economic stagnation paired with elevated inflationary pressures.
• AI Race: Global markets are closely watching the implications of China’s DeepSeek AI model, which is raising competitive concerns for U.S. Big Tech firms. These developments, though distant from Germany, could influence tech-related sectors and investor sentiment on the DAX.
• Fed Rate Cuts: The Federal Open Market Committee (FOMC) is anticipated to hold interest rates steady at 4.25–4.5% during its upcoming meeting. Markets view this decision as a sign of confidence in the robust U.S. economy and a pause in monetary easing, which could indirectly support DAX-listed exporters reliant on a stable EUR/USD exchange rate.
• EU Response: In response to potential tariffs from U.S. President Donald Trump, European Union Economic Commissioner Valdis Dombrovskis reassured markets of a proportional EU reaction. While tensions may weigh on sentiment, clarity around the EU’s stance reduces uncertainty for DAX investors.

Closing statement: The DAX faces a potential short-term correction amid broader bullish momentum. Investors remain watchful of Germany's stagnant economic recovery, AI-driven market shifts, and geopolitical developments. Key resistance is around 21,500, while support lies near 21,000, with Fed and EU tariff responses likely to steer market direction.