On Thursday (January 9), the dollar index rose to 109.03. The Fed's meeting minutes show that officials are eager to slow the pace of rate cuts, and initial jobless claims in the U.S. fell below expectations, boosting hawkish buying sentiment. U.S. media reports indicate that President-elect Trump may announce a national economic emergency on January 20. The global trade war has heightened risk aversion, with gold prices fluctuating sharply at $2,659. Bitcoin fell sharply to $95,000, and the cryptocurrency liquidation wave exceeded $700 million.
Trump suddenly sends shockwaves: Will he declare a national economic emergency on January 20?
CNN reported on Wednesday, citing anonymous sources, that U.S. President-elect Donald Trump vowed to impose a 10% tariff on global imports and a 60% tariff on Chinese products, and he is considering declaring a national economic emergency to provide legal grounds for imposing a series of broad tariffs on allies and adversaries. The inauguration is scheduled for January 20.
Reports indicate that this move will allow Trump to utilize the International Economic Emergency Powers Act (IEEPA) to establish a new tariff plan, which grants the president the authority to manage imports during a national emergency.
According to Reuters, declaring a national emergency under the International Economic Powers Act has long been seen as an important legal tool Trump may invoke to quickly fulfill his campaign promise of imposing at least a 10% broad tariff on all goods imported into the U.S.
Three weeks after being elected president in November 2024, Trump stated on social media that after taking office on January 20, 2025, he would sign "all necessary documents" to impose a 25% tariff on Mexico and Canada unless illegal immigration and fentanyl trafficking were stopped.
Trade experts believe this action may involve an emergency declaration under the IEEPA. In 2019, Trump invoked the International Economic Emergency Powers Act, threatening to impose a 5% tariff on Mexican imports to protest illegal immigration. However, after Mexico agreed to strengthen border security and detain migrants within its territory, Trump withdrew this threat.
During his first term, Trump imposed tariffs of up to 25% on approximately $370 billion worth of Chinese goods. On Monday, Trump denied media reports that his team was considering scaling back these plans to cover only key imported products due to inflation concerns.
Trade lawyers stated that Trump is using Section 301 of the Trade Act of 1974 (a regulation against unfair trade practices) to support his past tariffs on China and may use this tool again. He may also invoke the Trade Expansion Act of 1962, Section 232, to further implement broad tariffs. Section 232 has been used to support the U.S. tariffs of 25% on global steel and 10% on aluminum.
Federal Reserve Meeting Minutes: Officials eager to slow down the pace of rate cuts.
Bloomberg reports that against the backdrop of rising inflation risks, Federal Reserve officials adopted a new stance on rate cuts in December, deciding to slow down the pace of rate cuts in the coming months.
The minutes from the Federal Open Market Committee (FOMC) meeting on December 17-18 showed: "Participants indicated that the FOMC committee has reached or is close to an appropriate point to slow the pace of policy easing. Many participants noted that various factors underscore the need for caution in monetary policy decisions in the coming quarters."
The minutes released on Wednesday in Washington indicated that Federal Reserve officials pointed out that rising inflation data, sustained strong spending, and reduced downside risks to labor market and economic activity outlooks. The U.S. central bank officials lowered the benchmark lending rate by 25 basis points to a range of 4.25% to 4.5% at this meeting.
Fed staff made a "placeholder assumption" regarding potential policy changes following Trump's inauguration, leading to a slight slowdown in economic growth forecasts, while inflation is expected to remain robust.
The minutes show that "some" policymakers indicated they included placeholder assumptions in updated economic forecasts. The minutes state: "Almost all participants believed that the upside risks to the inflation outlook have increased."
Officials expect the U.S. job market to remain strong. However, they "generally noted that labor market indicators warrant close attention."
The U.S. Bureau of Labor Statistics will release the next monthly employment report on Friday. The December rate cut marks a total of 100 basis points cut since September. Such a rapid pace of rate cuts has triggered votes against it in both September and December, which is rare during Powell's tenure.
Powell stated at the post-meeting press conference that the rate cut in December was "closer" than previous cuts. The minutes state: "Some participants indicated that keeping the federal funds rate target range unchanged would be beneficial. Most participants pointed out that their judgment on the appropriate policy action for this meeting was carefully weighed."
Cleveland Fed President Loretta Mester disagrees, favoring keeping rates unchanged, with the latest forecast showing that three other officials also agreed with this view. In September, Fed Governor Michelle Bowman voted against a 50 basis point rate cut, leaning towards a smaller cut.
U.S. data strongly supports the "hawkish" sentiment as initial jobless claims unexpectedly fell below expectations.
Due to high supply, long-term U.S. bond yields continue to rise; the 10-year bond yield hovers around 4.70%, while the 30-year bond yield is nearing 4.93%.
Labor data shines: Weekly initial jobless claims fell to 201,000, below the expected 218,000.
In December, private sector employment rose by 122,000, but it was below market expectations.
Automatic Data Processing (ADP) noted that hiring and wage growth have slowed, but healthcare will lead job creation in the second half of 2024.
Reports of strong U.S. economic performance continue to delay market expectations for Fed rate cuts.
Dollar Technical Analysis
FXStreet analyst Patricio Martín stated that the dollar index held above the 20-day simple moving average, confirming potential bullish momentum. Technical indicators show continued upward movement but are not yet close to overbought territory, indicating further room for increase.
Any declines may be shallow, with buyers emerging in search of safe-haven funds and strong yield attractiveness. Unless there is a significant shift in sentiment, the dollar index seems poised to maintain its constructive bias in the coming trading days.
Gold Technical Analysis
FXEmpire analyst Bruce Powers stated that on Wednesday, gold prices rose to a new short-term trend high of $2,670 but encountered resistance, leading to an intraday pullback. The 61.8% Fibonacci retracement level is at $2,671. Therefore, it can be said that the pullback has completed today. Gold prices are expected to provide new bullish signals, as there have been no closing prices above the 50-day moving average since the recent high swing low of $2,582 in mid-December. A closing price above the previous trend high and last week's high of $2,665 would be considered a stronger bullish signal.
The breakout above the $2,665 high on Wednesday triggered the continuation of a short-term upward trend. Note that the 61.8% retracement level does not fall below the downtrend line, which is another potential resistance area. The key question is whether demand for gold can continue to strengthen enough to break above the downtrend line. If it does break above the downtrend line and holds above it, gold has a chance to surpass the recent high of $2,726 from this correction. This is a lower swing high, and if it breaks that high, it will trigger a bullish reversal signal.
Before this, gold will continue to trade within a bearish downtrend channel. This means that the current upward movement may still encounter resistance and pull back. However, the higher swing high from mid-December provides a clue for a potential bullish resolution. Nevertheless, if Wednesday's high is broken, potential resistance lies near the downtrend line. The 78.6% retracement level is also near $2,696, which can provide another guide.
Potential support areas to consider start at the nearby 50-day moving average of $2,652. The low on Wednesday was $2,645, and the 20-day moving average is $2,640. A temporary higher swing low was established at $2,615 on Monday, successfully testing the support of the previous downtrend line (dashed line). This swing is part of the recent upward price structure.
A narrow trend line has been added to the chart connecting this low point. It indicates that momentum has increased because the slope of this line has increased relative to the lower rising line connecting the December swing lows. Therefore, breaking below $2,615 will be more significant than higher price levels. Once this price level fails, the $2,582 swing low will be at risk.
Bitcoin Technical Analysis
According to CoinGlass data, the cryptocurrency market experienced significant fluctuations in the past 24 hours, resulting in a total liquidation amount of $712 million for 237,375 traders.
Long positions are the hardest hit in the liquidations, accounting for 88.83% of the total liquidation amount, with a liquidation amount of $631.21 million, while short position liquidations amount to $79.35 million. Bitcoin's liquidation amount is $130 million, while Ethereum's is the highest at $150 million.
CoinTelegraph points out that Bitcoin's failure to maintain above $100,000 may tempt short-term buyers to take profits, leading to a price drop below the moving average on January 7.
Both moving averages are flattening, and the relative strength index (RSI) is slightly below the midpoint, indicating that bullish momentum is weakening. Bitcoin could fall to $90,000, which may become a solid support level. Sellers must pull the price below the support level of $90,000 to $85,000 to signal a short-term trend reversal.
Conversely, if the price rebounds from current levels and breaks above the moving average, it indicates that there are buyers at each small dip. This would increase the likelihood of a rebound above $102,725. If this occurs, Bitcoin may retest its historical high of $108,353.
