Daily Market Outlook 29/1/26

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute…

As the US dollar weakens and geopolitical tensions rise, investors are gravitating towards tangible assets for protection, driving the commodities market to new highs. Gold surged 2.4%, trading near $5,550 per ounce, marking a staggering monthly gain of around 28%. Silver’s meteoric rise shows no signs of slowing, with its value soaring by approximately 65% this year after more than doubling in 2025. Meanwhile, copper saw a 5% jump in London trading, and Brent crude oil reached its highest levels since September. The softer dollar played a significant role in these price hikes, as commodities priced in the US currency tend to become more attractive. The Australian dollar also rode this wave, climbing for the ninth consecutive session—its longest winning streak in nearly a decade. However, the rally in commodities came at the expense of bonds. US Treasury prices dipped as fears of rising input costs reigniting inflation weighed on investors, just as central banks are attempting to ease monetary policy. Political uncertainties added to the pressure, especially after former President Donald Trump issued a stern warning to Iran, demanding a nuclear deal or threatening military action far harsher than last year’s US strike.

Equity markets showed greater resilience amidst the turbulence. Asian stocks inched up by 0.3%, and futures for US and European indices pointed toward gains, buoyed by strong earnings reports from tech giants like Tesla, Microsoft, and Meta Platforms. Despite these gains, market sentiment remains cautious. Investors are exercising caution rather than rushing into risky bets due to mixed signals from major tech earnings and growing debates over whether significant investments in AI will yield worthwhile returns. Market volatility has intensified, particularly in bond and currency sectors, as uncertainty mounts. This circumstance has been exacerbated by Trump’s renewed clashes with European allies over Greenland and his administration’s continued pressure on the Federal Reserve’s independence.

The FOMC was widely expected to leave the Fed funds rate unchanged at its January meeting, and while divisions remain, with both Waller and Miran advocating for a further 25bps cut, the likelihood of any significant near-term policy shift seems slim. Chair Powell highlighted a strong consensus among the rest of the board and expressed greater confidence in the balance of risks. Although some tension persists between inflation persistence and the weak labour market, the gap has narrowed significantly since December. Additionally, there is strong optimism that economic growth will accelerate in the first quarter, supporting the stability already evident in the labour market. Powell reassured that a robust economy is unlikely to reignite inflationary pressures, citing the productivity surge as a sign that capacity is expanding faster than demand. He stated that rates are now close to neutral, albeit at the upper end of the range, leaving room for potential cuts later in the year. However, any further adjustments during Powell’s remaining two meetings as Chair seem improbable unless employment faces additional strain. During the press conference, much of the discussion centered on recent political developments, including the Lisa Cook case and Powell’s comments following the DOJ subpoena. Powell deflected these inquiries with his characteristic “no comment,” maintaining focus on monetary policy.

European shares were poised for slight gains on Thursday after mixed U.S. Big Tech earnings and modest Wall Street gains, while the Fed maintained unchanged rates. EuroSTOXX 50 and FTSE contracts rose by 0.2%, but Germany's DAX futures dropped 0.1%, impacted by concerns in the software sector. Deutsche Bank recorded its largest profit since 2007; Roche's earnings rose 5% but missed expectations, and Sanofi announced a €1 billion share buyback. ING exceeded profit forecasts, and Swedbank proposed a larger dividend increase.

Overnight Headlines

• Nvidia, Microsoft, Amazon In Talks To Invest $60B In OpenAI

• Microsoft Earnings Surge Overshadowed By Data-Center Spending

• Samsung Profit Triples On AI Chip Demand, Warns Of Shortages

• IBM Revenue Tops Forecasts On Software Strength

• Meta Boosts CapEx On Superintelligence Push, Shares Rally

• ServiceNow Outlook Disappoints, Fails To Ease AI Disruption Fears

• Tesla To Invest $2B In Elon Musk’s xAI Project

• Trump’s Dollar Comments Walked Back By Trsy’s Sec Bessent

• BoC Holds Rate At 2.25%, Flags Fed Independence Threat

• Japan’s Takaichi On Track To Expand Majority, Early Polls Show

• Vietnam, EU Upgrade Ties To Strategic Partnership

• UK Car Output Slumps To Lowest Since 1956 After JLR Shutdown

• Chinese Property Stocks Jump On ‘Three Red Lines’ Easing Report

• Brazil Keeps Rate At 15% As Inflation Pressures Persist

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries and is more magnetic when trading within the daily ATR.)

• Thursday, January 29, 2026, there are no significant FX option expirations noted, which means that trading sentiment will likely be influenced more by bond markets and overall market risk appetite.

FX Month End Rebalancing ( BarCap)

USD Neutral Month-End Signal: passive model indicates no strong dollar bias vs majors (weak EURUSD buy signal), driven by offsetting US rates demand and equity gains. 

FX Rebalancing Flows: Foreign equity inflows (+$500bn) and GBP bond outflows (-$100bn) signal directional hedging flows for month-end FX positioning.

Holding Period Strategy Impact: Shorter holding periods (k=1) deliver 1.12x higher cumulative returns with superior risk-adjusted returns (information ratio) in volatile markets.

CFTC Positions as of January 23rd:  

• Equity fund speculators have reduced their S&P 500 CME net short position by 48,733 contracts, bringing it down to 400,381. Meanwhile, equity fund managers have decreased their S&P 500 CME net long position by 49,679 contracts, resulting in a total of 882,629 contracts. 

• Speculators have cut their net short position in CBOT US 5-year Treasury futures by 132,601 contracts to 2,136,519 and have also trimmed the CBOT US 10-year Treasury futures net short position by 214,865 contracts to 655,640. The CBOT US 2-year Treasury futures net short position has been reduced by 79,758 contracts to 1,225,122. In contrast, speculators have raised their CBOT US UltraBond Treasury futures net short position by 23,725 contracts, now totaling 258,822. Additionally, speculators have shifted CBOT US Treasury bonds futures to a net short position of 23,070 contracts, compared to 13,835 net longs the previous week. 

• The current Bitcoin net long position stands at 298 contracts, while the Swiss franc has a net short position of -43,207 contracts. The British pound is showing a net short position of -21,980 contracts, and the Euro has a net long position of 111,695 contracts. Finally, the Japanese yen reflects a net short position of -44,829 contracts.

Technical & Trade Views

SP500

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 6970 Target 7050

• Below 6930 Target 6890

EURUSD 

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 1.1950 Target 1.2150

• Below 1.1750 Target 1.1615

GBPUSD 

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 1.3770 Target 13950

• Below 1.3430 Target 1.3290

USDJPY 

• Daily VWAP Bearish

• Weekly VWAP Bearish

• Above 154.35 Target 156

• Below 153.50 Target 151

XAUUSD

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 5350 Target 5675

• Below 5200 Target 5100

BTCUSD 

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 90.5k Target 92k

• Below 90k Target 84.3k