Tariff Tensions and Fed Outlook Drive Euro, Yen Gains, and Metal Rallies (01.27.2025)

Global markets are reacting to renewed trade tensions and shifting expectations for central bank policies. The euro struggles against the dollar amid concerns over President Trump’s new tariffs, while the yen gains on hawkish BOJ signals and strong inflation data. 

Gold extends gains above $2,770, buoyed by safe-haven demand and Fed rate cut hopes, and silver remains near six-week highs, supported by ongoing industrial needs and supply constraints. Traders now watch upcoming Fed and ECB updates, as well as trade developments, for further market direction.

EUR/USD Steady as Fed, PCE Inflation Data in Focus

The EUR/USD pair trades near 1.0464 on Monday, while the US Dollar Index climbs above 107.7, recovering last week’s losses. This follows Trump’s announcement of tariffs and sanctions on Colombia, after Colombia blocked US military planes deporting migrants. The Federal Reserve is expected to keep rates unchanged this week, though Trump is pressuring for rate cuts, with a March cut still possible. Markets also await the PCE price index report, the Fed’s preferred inflation gauge.

From a technical perspective, the first resistance level is at 1.0490, with further resistance levels at 1.0515 and 1.0550 if the price breaks above. On the downside, the initial support is at 1.0355, followed by additional support levels at 1.0270 and 1.0225. 

JPY Gains as Fed Cut Expectations Narrow Yield Gap

The Japanese Yen starts the week strong, supported by safe-haven demand amid renewed trade war concerns and the BoJ’s hawkish rate hike last Friday. Optimism over strong spring wage negotiations also fuels expectations of further BoJ tightening. The USD/JPY pair dropped below the mid-155.00s, nearing a one-month low, though a slight USD recovery may limit losses.

Expectations of two Fed rate cuts this year, driven by Trump’s push for lower rates, have pressured US Treasury yields, narrowing the US-Japan yield gap and favoring JPY strength. Traders now look to upcoming US macroeconomic data for short-term opportunities.

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. 

Safe-Haven Demand Drives Gold to Fourth Weekly Gain

Gold climbed above $2,770 per ounce on Friday, nearing its October high of $2,790, following President Trump's call for immediate rate cuts. Lower rates boosted gold's appeal as a non-interest-bearing asset, while uncertainty over Trump's proposed tariffs and immigration policies drove demand for safe havens. A weaker US dollar further supported gold's rise. Investors are now focused on central bank policies, with the BoJ expected to raise rates, the Fed likely holding steady, and the ECB anticipated to cut rates. Gold is on track for its fourth straight weekly gain.

Technically, the first resistance level will be 2790 level. In case of this level’s breach, the next levels to watch would be 2800 and 2820 consequently. On the downside 2730 will be the first support level. 2660 and 2630 are the next levels to monitor if the first support level is breached. 

GBP/USD Slips 0.20% as Trade War Fears Lift Dollar Index

The GBP/USD pair starts the week lower, retreating from Friday's rally to the 1.2500 level, trading around 1.2460, down 0.20%, amid slight US Dollar strength. The pullback lacks strong selling pressure or a bearish bias.

The US Dollar Index (DXY) recovers from a one-month low as safe-haven demand rises following President Trump’s 25% import tariffs on Colombia. This came after Colombia blocked US military planes carrying deported migrants. Trump warned tariffs could rise to 50% next week, heightening global trade war fears and reducing risk appetite.

The first resistance level for the pair will be 1.2430. In the event of this level's breach, the next levels to watch would be 1.2460 and 1.2500. On the downside 1.2265 will be the first support level. 1.2100 and 1.2080 are the next levels to monitor if the first support level is breached.

Tariff Uncertainty and Fed Expectations Keep Silver Near Highs

Silver dipped below $30.30 per ounce on Monday but stayed near six-week highs as President Trump’s tariff threats increased safe-haven demand. Trump hinted at a 10% tariff on Chinese imports starting February 1, following threats of 25% tariffs on Mexico and Canada. Hopes persist for a more cautious tariff approach, with no action yet taken.

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

Technically, the first resistance level will be 31.00 level. In case of this level’s breach, the next levels to watch would be 31.80 and 32.50 consequently. On the downside 29.85 will be the first support level. 28.80 and 28.50 are the next levels to monitor if the first support level is breached.