Forex News
EUR is likely to edge lower, but any decline is unlikely to reach the major support at 1.1650. In the longer run, bias remains tilted to the downside, but EUR must close below 1.1680 before a move toward 1.1650 can be expected, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
EUR is likely to edge lower
24-HOUR VIEW: "Following EUR’s price action on Monday, we indicated yesterday that EUR 'appears to have entered a range-trading phase, and it is likely to trade between 1.1695 and 1.1750'. EUR subsequently rose to 1.1742, dropped back down to 1.1683 before closing on a soft note at 1.1687 (-0.28%). The slight increase in downward momentum suggests EUR is likely to edge lower today, but any decline is unlikely to reach the major support at 1.1650. Note that there is another support level at 1.1680. On the upside, resistance levels are at 1.1715 and 1.1730."
1-3 WEEKS VIEW: "Two days ago (05 Jan, spot at 1.1715), we highlighted that 'the bias is tilted to the downside toward 1.1680'. After EUR dropped to 1.1658 and rebounded strongly, we indicated yesterday (06 Jan, spot at 1.1715) that 'while the bias remains tilted to the downside, EUR must close below 1.1680 before a move toward 1.1650 can be expected'. We will continue to hold the same view as long as 1.1755 (‘strong resistance’ level was at 1.1765 yesterday) is not breached."
- Silver prices fall as investors take profits after the rally toward record highs.
- Precious metals retreat as the US Dollar strengthens ahead of ADP Employment and ISM Services PMI.
- Safe-haven Silver struggles as risk appetite rises amid easing geopolitical tensions after the US intervention in Venezuela.
Silver price (XAG/USD) depreciates by 1.75% after three days of gains, trading around $79.30 per troy ounce during the European hours on Wednesday. The price of the grey metal declines as investors lock in profits following its rally toward record highs.
The dollar-denominated precious metals, including Silver broadly pulled back as the US Dollar (USD) strengthened ahead of the upcoming US key economic data that could shape expectations for Federal Reserve (Fed) policy.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is gaining ground for the second successive day and trading around 98.60 at the time of writing.
US ADP Employment Change and ISM Services Purchasing Managers’ Index (PMI) data for December will be eyed later in the day. Traders will shift their focus toward the US Nonfarm Payrolls (NFP) due on Friday, which is expected to show job gains of 55,000 in December, down from 64,000 in November.
Fed Governor Stephen Miran said on Tuesday that the US central bank should cut interest rates aggressively this year to sustain economic momentum, while Minneapolis Fed President Neel Kashkari warned the unemployment rate could “pop” higher. The CME Group's FedWatch tool suggests Fed funds futures continue to price in about an 82.8% probability that the US central bank will keep rates unchanged at its January 27–28 meeting.
The safe-haven Silver struggles amid increased risk appetite as traders have so far largely shrugged off escalating geopolitical tensions worldwide following the United States (US) intervention in Venezuela and the capture of President Nicolas Maduro.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
The impact of the Venezuelan shock has largely faded, with oil, equities, and FX markets reverting to pre-January levels as investors step back from trading geopolitical headlines. Attention now turns to US data, where ADP and JOLTS carry downside risks for the dollar despite a neutral-to-slightly bullish near-term USD outlook, ING's FX analyst Francesco Pesole notes.
Dollar firms on seasonality, not geopolitics
"The Venezuelan shock has largely faded. Oil softened yesterday but remains near pre‑4 January levels, equities extended gains, and FX markets have turned away from geopolitics. This reflects the post‑'Liberation Day' reluctance to trade the headlines and lean to more sanguine views."
"The dollar regained some ground yesterday – but that is probably due to some seasonal inflows and a modest uptick in front-end swap rates rather than geopolitics. Unless the US escalates threats on Greenland or intervenes again in Venezuela, markets should refocus on data in the second half of the week."
"Today, ISM services are expected to come in soft, but it will probably be ADP (consensus 50k) and JOLTS job surveys driving price action. Interestingly, ADP payrolls undershot consensus in seven of the last 10 prints, and given our dovish view on the US jobs market, we are inclined to see US jobs data events as bearing asymmetrical downside risks for the dollar. Beyond today, our short-term view remains neutral to slightly bullish on the greenback."
- Gold faces rejection near $4,500 as the underlying bullish sentiment prompts profit-taking.
- Rising geopolitical tensions and dovish Fed expectations could support the precious metal.
- Investors now look forward to important US macro releases for some meaningful impetus.
Gold (XAU/USD) trims a part of its intraday losses, though it retains its negative bias through the first half of the European session on Wednesday and remains well below the $4,500 psychological mark. As investors digest the recent US attack on Venezuela, the underlying bullish sentiment turns out to be a key factor that prompted some profit-taking around the precious metal. The downside for the commodity, however, remains limited amid rising geopolitical tensions and dovish US Federal Reserve (Fed) expectations.
In fact, US President Donald Trump threatened to annex Greenland following confrontational rhetoric toward Colombia and Mexico earlier this week. Moreover, traders have been pricing in the possibility of two more interest rate cuts by the US central bank, which acts as a headwind for the US Dollar (USD) and offers some support to the non-yielding Gold. The XAU/USD bears also seem reluctant ahead of this week's important US macro releases, including the closely-watched Nonfarm Payrolls (NFP) report on Friday.
Daily Digest Market Movers: Gold bulls remain on the sidelines and opt to wait for key US macro releases
- Investors appeared to shrug off worries stemming from the US attack on Venezuela over the weekend, with the S&P 500 and the Dow Jones Industrial Average notching fresh record highs on Tuesday.
- Meanwhile, US President Donald Trump openly signaled that Colombia and Mexico could also face US military action as part of a widening campaign against criminal networks and regional instability.
- Moreover, the White House said on Tuesday that Trump is discussing options for acquiring Greenland, including potential use of the US military, in a revival of his ambition to control the strategic island.
- This comes on top of the lack of progress in the Russia-Ukraine peace deal, unrest in Iran, and issues surrounding Gaza, which keeps geopolitical risks in play and should support the safe-haven Gold.
- According to the CME Group's FedWatch tool, traders are pricing in the possibility that the US Federal Reserve will lower borrowing costs in March and deliver another rate cut by the end of this year.
- Richmond Fed President Thomas Barkin said that further changes to the short-term rate will need to be tuned to incoming data amid the risks to both the central bank's employment and inflation goals.
- Friday's release of the closely-watched US Nonfarm Payrolls (NFP) report and the US consumer inflation figures, due next Tuesday, could offer more cues about the Fed's further rate-cut path.
- This, in turn, will play a key role in influencing the USD price dynamics in the near-term and help in determining the next leg of a directional move for the non-yielding yellow metal.
- In the meantime, Wednesday's US economic docket – featuring the ADP report on private-sector employment, ISM Services PMI, and JOLTS Job Openings – might provide some impetus.
Gold needs to find acceptance below $4,450-4,445 to back the case for further losses
The 100-hour Simple Moving Average (SMA) rises and sits beneath spot prices, suggesting underlying trend support near the $4,400 mark. The Moving Average Convergence Divergence (MACD) slips below the Signal line and holds in negative territory, with the histogram expanding on the downside. The Relative Strength Index (RSI) eased to 48.58, neutral, reflecting balanced momentum after recent softness.
In the near term, momentum would need to stabilize to reassert the bullish tone. A MACD turn toward a bullish crossover and an RSI push back above 50 would support an upswing, while failure to improve could keep the bias heavy and expose a retest of the 100-hour SMA. With price still above that rising baseline, dips could remain contained, but a close beneath it would open room for further downside.
(The technical analysis of this story was written with the help of an AI tool)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- NZD/USD treads water below 0.5800 with technical indicators turning lower.
- FX markets move within tight ranges, awaiting US employment figures.
- Kiwi's rejection at 0.5800 has printed the left shoulder of a potential H&S pattern.
The New Zealand Dollar is moving without a clear bias against the US Dollar, trading within a tight range around 0.5780 on Wednesday. Technical indicators, however, are turning lower after failing to break above the 0.5800 line on Tuesday.
Risk sentiment remains subdued, with investors looking from the sidelines ahead of the release of key US employment and services sector activity figures, which are expected to provide further insight into the US Federal Reserve’s (Fed) rate path.
Technical Analysis: A bearish Head & Shoulders pattern in progress
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In the 4-hour chart, NZD/USD trades at 0.5785, little changed on a daily basis. The Moving Average Convergence Divergence (MACD) holds slightly above the zero line after turning positive, suggesting only modest bullish impetus, while the Relative Strength Index (RSI) is flattening around the 50 level, showing a lack of direction.
The rejection at 0.5800 keeps the 0.5735 area on the bears' focus. This is the neckline of a bearish H&S pattern. A breach of that level would confirm a trend shift, adding pressure towards the November 28 lows, near 0.5700, and the intra-day support, at 0.5662. The H&S's measured target is at 0.5625.
On the upside, immediate resistance aligns at 0.5814 (Tuesday's high), followed by the December 23 high, at 0.5853.
(The technical analysis of this story was written with the help of an AI tool)
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