For February, we focus on EUR/USD, Gold (XAU/USD), and Hong Kong 33, examining their potential medium-term movements based on macroeconomic developments. Key factors include US President Trump's trade policy and its impact on the US dollar, alongside technical signals pointing to possible reversals and bullish trends
For February, we will highlight three relevant instruments: EUR/USD, Gold (XAU/USD), and Hong Kong 33. The period to note is in the medium-term horizon (multi-week) according to the latest macro and momentum factors (technical analysis) developments.
Geopolitics override Fed monetary policy stance
The implementation of US President Trump’s “America First” policy will be the key focus for the global financial markets in February. The next hundred days after officially taking over the White House on 20 January is likely to offer more clarity on especially Trump’s flagship trade tariffs policy, where it does not require Congress approval under the umbrella of national security concerns.
The global markets had a moment of “joy and reprieve” during Monday's 20 January US session when Trump’s inauguration speech adopted a milder tone on trade tariffs targeted at US major trading partners. It avoided any mention of the quantum number of tariffs and instead mentioned studies will be conducted on China, Canada, and Mexico to assess any unfair trade practices.
The US dollar tumbled across the board on the news that Trump would refrain from immediately implementing aggressive tariffs, and the US Dollar Index futures declined by 1.2% at the end of Monday's 20 January US session to record its biggest daily slide since November 2023. In response, this ripple effect reverberated into the US stock market, where the S&P 500 erased all its losses since the first two weeks of the new year and soared to a new intraday record closing high of 6,118 on Thursday, 24 January as fears of inflationary resurgence from higher trade tariffs subside.
EUR/USD medium-term downside momentum has eased
Fig 1: EUR/USD medium-term trend as of 24 Jan 2025 (Source: TradingView)
The three-month plus downtrend phase of the EUR/USD that shed 9.2% from the 25 September 2024 swing high of 1.1214 to the recent 13 January swing low of 1.0178 may have ended.
The recent price actions from 17 January to 24 January have surpassed their 20-day and 50-day moving averages that have capped prior advances since 6 November 2024. In addition, the daily RSI momentum indicator staged a bullish breakout above a parallel descending resistance on 20 January. It flashed a prior bullish divergence condition after it hit the oversold region on 2 January.
These positive technical factors suggest a potential mean reverse rebound scenario on the EUR/USD to retrace a certain portion of the recent medium-term downtrend phase. Watch the 1.0200 key medium-term pivotal support on the EUR/USD with the next medium-term resistance coming in at 1.0600/0670, and above 1.0670 may expose 1.0770 resistance next (also the 200-day moving average) (see Fig 1).
On the other hand, failure to hold above 1.0200 invalidates the mean reversion rebound scenario to see another potential impulsive down move sequence to expose the next medium-term supports at 1.0090 and 0.9950.
Gold (XAU/USD) may have resumed its bullish impulsive move
Fig 2: Gold (XAU/USD) medium-term trend as of 24 Jan 2025 (Source: TradingView)
The recent softness seen in the US dollar also has a positive knock-on effect on Gold (XAU/USD). On Tuesday, 21 January, the price actions of Gold (XAU/USD) staged a bullish breakout from its prior two-month range configuration and continued to surge above its 50-day moving average (see Fig 2).
The daily RSI momentum indicator has continued to display bullish momentum readings and has not reached its overbought region. These positive technical observations suggest that a potential bullish impulsive upmove sequence may have materialized for Gold (XAU/USD) within its medium-term and major uptrend phases,
Watch the 2,658 medium-term pivotal support with the next medium-term resistances coming in at 2,850/886 and 2,933 after its current all-time high level of 2,790 printed on 31 October 2024.
However, a break below 2,658 invalidates the bullish tone to expose the next medium-term support at 2,537 (also the 200-day moving average).
Potential bullish reversal for Hong Kong 33 at 200-day moving average
Fig 3: Hong Kong 33 medium-term trend as of 24 Jan 2025 (Source: TradingView)
The medium-term downtrend movement of the CNH (offshore yuan) against the US dollar in place since 26 September has started to pause due to the recent broad-based US dollar weakness after US President Trump’s lack of clarity on the implementation of trade tariffs toward China exports to the US.
The offshore yuan has strengthened by 1.3% against the US dollar since 13 January at this time of the writing, which in turn triggered a positive feedback loop into Hong Kong and China stock markets.
The Hong Kong 33 CFD Index (a proxy of the Hang Seng Index futures) has managed to stage a rebound of 9% after a retest on its key 200-day moving average on 13 January.
In addition, the daily MACD trend indicator flashed out a prior bullish divergence condition before it inched higher above the centreline on 24 January.
These key technical factors suggest that the recent medium-term downtrend from the 7 October 2024 high to the 13 January 2025 low may have ended, and the price actions of Hong Kong 33 are now at an inflection point to see a potential trend change to bullish from bearish (see Fig 3).
Watch the 18,520 key medium-term pivotal support level with the next medium-term resistances coming in at 21,320 and 23,280.
On the flip side, failure to hold above 18,520 invalidates the bullish reversal scenario to allow the bearish force to resurface to expose the next medium-term supports at 16,910 and 16,130.
