Gold Prices Rise, Yen Awaits BoJ Decision (01.24.2025)

This week, the markets saw notable movements as the EUR/USD rose near 1.0440 with the weakening Dollar Index, while gold surged above 2770 and silver held near six-week highs on rate cut hopes and safe-haven demand.

The Japanese yen remained steady at 156.5 ahead of an anticipated BoJ rate hike, and the British pound traded around 1.2400, weighed down by recession fears and a rising budget deficit, despite support from a weaker dollar.

EUR/USD Gains Ground as Dollar Weakens

The EUR/USD pair is trading near 1.0440 on Friday morning, while the Dollar Index has slipped below 108, marking a weekly decline of over 1%. This drop comes after President Donald Trump opted not to impose the aggressive tariffs widely expected following his inauguration. Speaking at the World Economic Forum, Trump called for an immediate interest rate cut, reiterated his support for low taxes on U.S.-based manufacturers, and pledged to introduce tariffs on companies producing goods overseas. Despite these remarks, the Federal Reserve is predicted to keep interest rates unchanged at its upcoming policy meeting. However, market sentiment has shifted, with expectations now leaning towards a rate cut in July and the possibility of additional cuts later in the year. The dollar has weakened, with the sharpest losses against antipodean currencies.

The first resistance level for EUR/USD stands at 1.0450, with further resistance at 1.0490 and 1.0515 if the price moves higher. On the downside, initial support is at 1.0355, followed by additional levels at 1.0270 and 1.0225.

Yen Under Threat Before Rate Hikes

The Japanese yen is holding steady near 156.5 per dollar as the Bank of Japan begins its two-day policy meeting. The central bank is expected to raise its policy rate to 0.5% on Friday, marking the highest short-term borrowing cost in 16 years. BoJ Governor Ueda recently stated that rate hikes would be considered if the economy remains strong, while Deputy Governor Himino noted that negative real interest rates would no longer be typical once Japan overcomes deflationary pressures. Meanwhile, December data revealed strong Japanese export performance, accompanied by growth in imports.

Globally, the yen could face downward pressure from a strengthening dollar with U.S. President Donald Trump’s pro-growth and inflationary economic policies.

From a technical perspective, key resistance is at 158.60, with further targets at 160.00 and 161.00 if the price breaks higher. On the downside, initial support is at 154.90, followed by 153.40 and 152.40 if the yen weakens further.

Gold Surges to October High on Rate Cut Hopes

Gold climbed above 2770 per ounce on Friday, nearing its record high of 2790. The rise followed President Trump's call for an immediate interest rate cut, boosting gold’s appeal as a safe-haven asset. Lower interest rates make the non-yielding metal more attractive. Uncertainty over Trump’s proposed tariffs and immigration policies, along with a weaker U.S. dollar, further supported the rally.

Investors are now eyeing key policy announcements from global central banks. The BoJ is expected to raise rates on Friday, the Fed is likely to hold rates next week, and the ECB is anticipated to cut rates. Gold is set to record its fourth straight weekly gain.

Technically, resistance is at 2790, with 2800 and 2820 as potential targets if breached. Support stands at 2730, followed by 2660 and 2630 if the price declines further.

Recession Fears Pressure Pound

The British pound is trading near 1.2400 as investors await clarity on U.S. President Donald Trump's tariff plans and express concerns about the UK’s financial outlook. According to the British Retail Consortium (BRC), consumer confidence in the British economy has reached a new low amid recession fears. Adding to the pressure, Britain’s December budget deficit exceeded expectations, with public sector net borrowing rising to £17.8 billion ($22 billion), over £10 billion higher than a year ago, increasing scrutiny on Finance Minister Rachel Reeves.

Trump has not immediately imposed tariffs on U.S. imports but is considering tariffs on Canada, Mexico, and China starting February 1, and on EU imports. Looking ahead, concerns over the UK’s economic weakness and anticipated rate cuts from the Bank of England, markets are pricing in around 65 basis points of cuts this year, pointing to a negative outlook for the pound. However, with the U.S. dollar index weakening, the GBP/USD pair is poised to end the week with gains.

Technically, the first resistance level is at 1.2430, with 1.2460 and 1.2500 as the next targets if breached. On the downside, initial support lies at 1.2265, followed by 1.2100 and 1.2080 if the pair moves lower.

Rate Cut Hopes Support Silver Prices

Silver prices dipped below 31 per ounce on Thursday but remained near six-week highs as U.S. President Donald Trump’s tariff threats spurred safe-haven demand. On Tuesday, Trump hinted at a 10% tariff on Chinese imports starting February 1, following earlier threats of 25% tariffs on Mexico and Canada. However, hopes persist that the administration may take a more cautious approach. 

Silver is also supported by expectations of further Federal Reserve rate cuts this year, which could weaken the dollar and increase commodity demand. Additionally, ongoing supply concerns, particularly in London vaults, and strong industrial demand from manufacturing support the metal's bullish outlook. 

Technically, resistance is at 31.00, with further levels at 31.80 and 32.50 if breached. Support is at 29.85, followed by 28.80 and 28.50 if the price declines further.