Dollar Rises on Strong US Jobs, Gold Holds Firm (01.14.2025)

The Japanese yen gained strength, stabilizing at 157.6 per dollar, amid speculation of a potential Bank of Japan rate hike. Gold rebounded to $2,670 per ounce despite a strong U.S. dollar, supported by its role as an inflation hedge. The GBP/USD pair weakened further to $1.215, reflecting economic divergence between the UK and the U.S. Meanwhile, silver prices slipped below $30 per ounce but remain supported by industrial demand and supply concerns.

Yen Strengthens to 157.5 on Deflation Concerns

The Japanese yen stabilized around 157.6 per dollar on Tuesday after climbing for three consecutive sessions. This followed remarks by Bank of Japan Deputy Governor Ryozo Himino, who indicated that the board might discuss a potential rate hike at next week’s policy meeting. Himino noted that while inflation trends and price expectations have largely aligned with projections, both domestic and global risks persist.

The yen has received some support from speculation that the BOJ could raise its inflation forecasts during the meeting, possibly paving the way for additional rate hikes. However, the currency remains under pressure from a strong dollar, driven by signs of resilience in the U.S. economy, which have tempered expectations for Federal Reserve rate cuts this year.

The key resistance level appears to be 158.60, with a break above it potentially targeting 160.00 and 161.00. On the downside, 154.90 is the first major support, followed by 153.40 and 152.40 if the price moves lower.  

Gold Holds Ground Despite Strong US Jobs Data

Gold climbed to $2,670 per ounce, rebounding from a more than 1% decline in the previous session driven by a strong U.S. dollar and rising Treasury yields. The approaching inauguration of President-elect Donald Trump has sparked concerns that his proposed tariffs and trade policies could escalate inflation and provoke trade conflicts, boosting gold's attractiveness as an inflation hedge.

The precious metal’s broader outlook remains optimistic, supported by geopolitical uncertainties and sustained central bank buying. Investors are now focused on key U.S. economic data releases this week, including producer and consumer inflation reports, retail sales, and weekly jobless claims, which may offer further clarity on the economy and the Federal Reserve’s interest rate plans.

Technically, the first resistance level will be 2725 level. In case of this level’s breach, the next levels to watch would be 2750 and 2790 consequently. On the downside 2660 will be the first support level. 2630 and 2600 are the next levels to monitor if the first support level is breached. 

GBP/USD Pressured by Diverging UK-US Economy

The British pound fell further to $1.215, its weakest level since November 2023, following a 1.7% decline the previous week, as fiscal challenges and rising gilt yields weighed on UK assets. Market sentiment has turned bearish, with options data indicating strong interest in contracts targeting levels below $1.20, and even as low as $1.12. The turbulence in UK markets last week, driven by persistent inflation, high borrowing costs, and concerns over policies linked to Donald Trump, has left the pound vulnerable, drawing comparisons to the market turmoil of 2022. Sterling's decline was further pressured by unexpectedly strong U.S. jobs data, which heightened concerns that the Bank of England may have limited room to cut rates to support the economy. Traders now predict 43 basis points of rate cuts by December 2025, down from the 50 basis points predicted just days earlier.

The first resistance level for the pair will be 1.2265. In the event of this level's breach, the next levels to watch would be 1.2350 and 1.2460. On the downside 1.2100 will be the first support level. 1.2080 and 1.2000 are the next levels to monitor if the first support level is breached.

Silver Remains Strong as Markets Eye U.S. Inflation

Silver prices fell below $30 per ounce on Monday, giving up some of last week’s gains as the dollar strengthened following unexpectedly robust U.S. jobs data. The strong data reduced expectations for additional Federal Reserve interest rate cuts this year, with a stronger dollar making dollar-priced commodities like silver less affordable for holders of other currencies, thereby easing demand.

Investors are now turning their attention to upcoming U.S. inflation data for further clues on the Fed’s policy trajectory. Despite the recent dip, silver posted a nearly 3% increase last week, its best weekly performance since mid-November. The metal remains supported by robust industrial demand, especially in renewable energy and electronics, alongside lingering supply concerns.

Technically, the first resistance level will be 30.35 level. In case of this level’s breach, the next levels to watch would be 30.70 and 31.00 consequently. On the downside 28.81 will be the first support level. 28.50 and 28.00 are the next levels to monitor if the first support level is breached.