Last week, global financial markets witnessed significant developments. The US Dollar, after an initial decline sparked by news of a criminal inquiry into Federal Reserve Chair Jerome Powell, managed to regain its strength and climb to higher levels. This dollar recovery was primarily driven by market expectations for interest rates to remain stable at 4.25% through April 2026.
The cryptocurrency market is also exhibiting different behavior. Unlike the past when all cryptocurrencies moved in sync, capital is now flowing selectively toward specific assets with higher market capitalization. Ethereum recorded the best weekly performance with a gain of 6.46%, while Litecoin showed the most weakness with a decline of 11.41%.
Key Events for the Week Ahead (January 18-24)
World Economic Forum in Davos
The 56th annual World Economic Forum convenes in Davos, Switzerland this week, with President Trump scheduled to speak on Wednesday. This event could have a significant impact on the USD/CHF pair and the overall forex market.
PCE Data Release
The most important economic data this week is the release of the Personal Consumption Expenditures (PCE) index for November, scheduled for Thursday. This indicator is the Federal Reserve’s preferred inflation gauge and could influence rate cut expectations. Currently, markets are pricing in a 61% probability for the first rate cut in June.
US Holiday Monday
Due to US markets being closed on Monday for the holiday, there’s a possibility that Japan’s Finance Minister could use this opportunity to intervene in the currency market. Therefore, USD/JPY traders should exercise extra caution.
Bitcoin Technical Analysis
Bitcoin was one of the few cryptocurrencies that closed last week with positive performance. In recent weeks, the price has started forming higher lows and higher highs, indicating the potential development of a new bullish channel.
Indicators:
- Both RSI and MACD are above their neutral levels, suggesting buying pressure dominance.
Key Levels:
- Major Resistance: $103,400 – This level aligns with the 50% Fibonacci retracement and the 200-period simple moving average.
- Nearby Barrier: $94,247 – A recent neutrality zone where prolonged consolidation could develop.
- Major Support: $90,355 – This level aligns with the 50-period simple moving average and the lower boundary of the potential bullish channel. A break below this area would put the current structure at risk.
EUR/USD Technical Analysis
The euro faced significant selling pressure against the dollar last week, declining approximately 0.3%. Dollar strength driven by rising US 10-year Treasury yields, which have climbed above 4.2%, has been the main factor behind this decline.
Technical Analysis:
- Since December 24, price has started forming lower highs, indicating a new short-term bearish trend.
- RSI maintains a downward slope and remains below the neutral 50 level.
- MACD histogram continues to oscillate below the zero line.
Key Levels:
- Major Resistance: 1.16524 – Aligns with recent highs and the 50-period moving average
- Nearby Barrier: 1.15837 – Aligns with the 200-period moving average
- Major Support: 1.15090 – The lower boundary of the long-term sideways range
Fibonacci support at 1.1593 was tested multiple times last week, but sellers’ response has been clear, with each bounce being faded so far.
USD/JPY Technical Analysis
The intervention threat is real in this currency pair. Japan’s Finance Minister Katayama has stated that she spoke with US Treasury Secretary Scott Bessent, and both expressed a similar desire to see the USD/JPY rate ease.
Important Notes:
- Chasing breakouts in this pair is becoming increasingly perilous
- Given the US holiday on Monday, the probability of Japanese intervention is higher
- Key support levels are at 156.67 and 157.17
For traders looking to avoid the USD altogether, GBP/JPY is testing a significant support area from prior resistance as we head into the weekend.
USD/CHF Technical Analysis
The USD/CHF pair has mounted a meaningful recovery from a well-defined multi-month support base, with the rebound now extending more than 2.2% off the December low. The price is currently testing a decisive resistance zone.
Technical Analysis:
- Price rebounded from the 0.7872-0.7882 support area, which includes the July, October, and November lows
- An ascending pitchfork from the December low is guiding the price
- Resistance at 0.8044 (61.8% Fibonacci extension) converges with the November trendline
Key Levels:
- Resistance: 0.8044, 0.8101, 0.8125
- Support: 0.7988, 0.7956, 0.7927
A daily close above 0.8044 would be needed to fuel the next major leg of the advance. The Davos summit this week could have a significant impact on this pair.
GBP/USD Technical Analysis
The British Pound remains the favored pair for USD-weakness scenarios. Despite bearish pressure this week, important support remains in play at the familiar 1.3353-1.3371 area.
Technical Pattern:
- A falling wedge formation is building, which is a bullish breakout pattern
- This pattern further points to the pair’s attractiveness if USD weakness plays through next week
Resistance Levels: 1.1616, 1.1656, and 1.1686
The setup remains constructive for a potential reversal if dollar weakness materializes.
Summary and Outlook
Financial markets are on the brink of a volatile week ahead. US Dollar strength is tied to expectations of stable interest rates, and this week’s PCE data could be a turning point. In the cryptocurrency market, selective capital behavior continues, with Bitcoin attempting to consolidate above $90,000.
Traders should pay close attention to the Davos events, PCE release, and the possibility of Japanese intervention. This week’s volatility could create attractive trading opportunities, but precise risk management is essential.
The combination of isolated rebounds and selective corrections confirms that indecision continues to dominate markets. Without relevant catalysts that benefit entire asset classes, this differentiated behavior may extend into the coming sessions, leading to increasingly unsynchronized price movements.
Key Takeaways:
- Dollar strength supported by stable rate expectations and rising Treasury yields
- Cryptocurrency market showing selective strength in large-cap assets
- EUR/USD forming a new short-term bearish trend
- USD/JPY facing intervention threats
- USD/CHF testing critical resistance ahead of Davos
- GBP/USD building bullish reversal pattern
Stay nimble into this holiday-shortened week and watch the close of key levels for guidance on the next major moves.
