US Dollar Volatility Amid Trade Policy Shifts
Recent trade policy uncertainties, driven by Donald Trump’s tariff threats and reversals involving Canada and Mexico, have weakened the US Dollar (USD). Despite this short-term dip, the long-term trend remains bullish, underpinned by broader economic factors.
Meanwhile, the 10-year Treasury yield has dropped below 4.5%, easing inflation concerns. The Federal Reserve’s decision to pause rate hikes has further reduced pressure on long-term interest rates. Lower yields have enhanced gold’s (XAU) appeal, as the opportunity cost of holding non-yielding assets declines. Consequently, gold prices have surged beyond $2,795, with $3,000 emerging as the next target. In contrast, silver (XAG) lags behind, reflecting its dependence on industrial demand, which currently lacks strong growth catalysts.
US Employment Data and Market Reactions
Private businesses in the US added 183,000 jobs in January, surpassing December’s revised 176,000 and exceeding forecasts of 150,000. ADP’s Chief Economist, Nela Richardson, noted that consumer-facing industries led job growth, while business services and production struggled.
However, initial jobless claims increased by 11,000, reaching 219,000, slightly above market expectations of 213,000. This data aligns with predictions of a mild labor market slowdown in 2025. The upcoming Nonfarm Payroll (NFP) report could significantly impact the USD, gold, and silver markets, shaping their next moves.
Gold Price Analysis: Bullish Momentum Strengthens
- Daily Chart: Gold is experiencing strong bullish momentum, forming an ascending channel and a broadening wedge pattern. After breaking above $2,795, gold could surge toward $3,000. A quick price correction on Thursday left a bullish wick, reinforcing strong upward pressure. Friday’s NFP data will be pivotal in determining the next move.
- 4-Hour Chart: Gold has extended gains above $2,820, indicating sustained bullish momentum. If gold breaks above the ascending channel resistance near $3,000, it could trigger a move toward the broadening wedge resistance zone.
Silver Price Analysis: Potential Breakout Ahead
- Daily Chart: Silver has reached the critical $32.50 level and is showing bullish strength. If silver breaks above this level, it may rally toward $34.80 and $43. However, weak industrial demand remains a headwind.
- 4-Hour Chart: Silver has broken its descending trendline, gaining positive momentum around $32.50. A sustained consolidation at this level could increase the chances of an upside breakout toward $34.80.
US Dollar Index (DXY) Analysis: Market Consolidation Continues
- Daily Chart: The US Dollar Index (DXY) is consolidating above 107, a key support level, while exhibiting high volatility. Despite this turbulence, the long-term trend remains bullish, supported by key moving averages. However, short-term uncertainty persists due to ongoing economic developments. The NFP data release on Friday could provide further direction.
- 4-Hour Chart: The US Dollar Index is forming an ascending broadening wedge, with strong price swings in a volatile zone. The failure to break above 110 suggests an increased risk of a bearish move. If the index drops below 107, it may decline further toward 105.60.
Conclusion: Key Market Drivers to Watch
With gold pushing toward $3,000, silver eyeing $34.80, and the US Dollar Index facing key resistance, Friday’s Nonfarm Payroll report will be crucial in determining the next major market trends. Investors should closely monitor employment data, Treasury yields, and Federal Reserve policy signals for further trading opportunities.
