Forex Signals Brief January 9: Disinflation in China Shows Consumer Strain
Today the main event was the negative Chinese inflation for December, which showed again that the Chinese consumer is in difficulty despite the measures taken by Chinese authorities.
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Yesterday, the US dollar outperformed other currencies, cementing its position as the global safe haven amid growing concerns about potential tariffs under Trump. Market tensions persisted, with no expectation of softer rhetoric even after Trump assumes office. The pound was the day’s biggest loser, dropping to 1.2320 before US trading hours, driven by soaring gilt yields reaching their highest since 2008.
Meanwhile, EUR/USD slipped below 1.03 following weak German retail sales, underscoring challenges for European consumers and industrial output. In Asia, Australian CPI inflation jumped by 2 points to 2.3% during the early session, but the AUD ended lower against the USD. US economic data offered mixed signals: jobless claims fell, supporting employment, but the ADP report missed expectations.
Fed Governor Waller’s unexpectedly dovish comments suggested rate cuts may persist, though the Fed Minutes released later were largely ignored. Bond markets continued pricing in higher US deficits or inflation, reflecting global uncertainty. US equities were subdued, with the Dow posting minor gains while the Nasdaq and S&P 500 closed flat. Commodities saw erratic moves, and Bitcoin experienced a sharp drop before recovering. A 30-year Treasury sale with a 0.7 basis point stop provided some relief, temporarily shifting focus away from mounting fixed-income concerns.
Today’s Market Expectations
Today the important events are already past. Despite stronger Australian trade data for November 2024, including a 4.8% m/m increase in exports (up from 3.6%) and a 1.7% rise in imports (up from 0.1%), the market’s focus remained on mixed global developments. Australian retail sales rose by 0.8% m/m, slightly missing the 1.0% expectation but still an improvement from the prior 0.6%. Annual sales growth reached 3.0%. These releases coincided with subdued trading due to the US market closure for the Carter funeral.
In China, December 2024 inflation data reflected ongoing weakness. CPI narrowly avoided deflation at +0.1% y/y, down from the prior +0.2%, while PPI slipped further into negative territory at -0.1% m/m, reversing from +0.1% previously. Annual PPI remained deeply negative at -2.3%. These figures underscore persistent economic challenges in China.
Yesterday it was quiet in the US session but the market started the week pretty volatile in the European session, with the USD continuing to push higher on sentiment regarding tariffs. We remained long on the USD which proved to be a good strategy in this environment again, ending the day with four winning forex signals and two losing trades.
Gold Climbs Above the 50 Daily SMA
In December Gold failed to surpass the key resistance level of $2,725, triggering a sharp $100 decline. The price dropped below the 100-day Simple Moving Average (green), but buyers returned, however the 50 SMA (yellow) acted as resistance late last week. Despite a partial recovery, buyers couldn’t push the price above the 50-day SMA, but yesterday they managed to break the 50SMA where gold ultimately closed above it.
XAU/USD – Daily Chart
EUR/USD Heads Back Toward the Lows
EUR/USD remained under bearish pressure. The pair found support in early December around 1.0330–1.0350, following the Fed’s hawkish rate cut in November. However, late 2024 brought strong selling momentum against the euro, driven by a strengthening US dollar. This pressure caused the pair to drop two cents, breaking key support levels and paving the way toward parity at 1.00. Recent retracements faced selling pressure, and the pair fell below 1.04. Yesterday sellers continued to push the price lower and EUR/USD fell below 1.03 again, solidifying the bearish trend.
EUR/USD – Daily Chart
Cryptocurrency Update
The Support Above $90K Continues to Hold for Bitcoin
Bitcoin experienced sharp volatility in the cryptocurrency market, briefly rising above $108,000 early in the week before retreating after a 25-basis-point rate cut. Prices plunged below $100,000 and reached the low $90,000s. While Bitcoin managed to recover to $95,000, bouncing off the 50-day SMA, it was rejected near the 20-day SMA, stabilizing around $90,000. Attempts to reclaim $100,000 were short-lived, with prices falling below this level again and this week we have been seen a retreat toward the support zone, which still seems to be holding, offering us a good opportunity to go long on BTC.
BTC/USD – Daily chart
Ethereum Approaches the $4,000 Level Again
Ethereum saw even more pronounced swings, climbing from $3,000 to nearly $4,000 midweek before losing momentum and dropping below $3,500. Over the past two weeks, Ethereum recovered some losses and found solid support at the 50-day SMA. However, bearish sentiment returned, driving the price below $3,500 once more and yesterday the downside extended to $3,200.
ETH/USD – Weekly Chart
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