Gold hits record highs, dollar on rollercoaster: Who is quietly downgrading the US's "credit rating"?
2026-01-12 19:54:42
On Monday (January 12), the US dollar index traded around 98.75 during the European session. It had previously fallen to a low of 97.7479 before stabilizing and rebounding. It then rebounded to a high of around 99.2679 before encountering resistance and falling back.
Overall, the current price is in a corrective rebound process, but there is obvious upward pressure, and a one-sided upward trend has not yet formed. From a technical perspective, the MACD DIFF is -0.0059, the DEA is -0.1303, and the MACD histogram has turned positive to 0.2489, indicating that the downward momentum is weakening and the bullish forces are beginning to recover. The RSI (14) is at 53.3049, which is in the neutral to strong range, indicating that the market is still in a stalemate between bulls and bears, and it is unlikely that a one-sided market will emerge in the short term.
Against this backdrop, the key support level of 98.2000 becomes a key point of observation. If the subsequent pullback does not fall below this level, the rebound structure is expected to continue; once it is breached, it may reopen downside potential. It is worth noting that this volatile trend is not simply driven by technical factors, but reflects a deeper fundamental divergence—the market's pricing logic is shifting from "economic data-driven" to "concerns about institutional stability."
What has truly stirred sentiment in the foreign exchange market recently is not a particular economic data point, but rather a sudden political development: Federal Reserve Chairman Jerome Powell disclosed that the Justice Department has issued a grand jury subpoena to the Fed regarding his testimony before the Senate Banking Committee last June. The focus is on the approximately $2.5 billion renovation project of the Fed headquarters, a historic building, but Powell clearly stated that the core issue is not the project itself or the budget details, but rather the attempt by outsiders to use legal means to interfere with the central bank's ability to formulate interest rate policy based on economic evidence.
This statement quickly ignited market concerns about the independence of monetary policy. The dollar index subsequently fell sharply, U.S. long-term Treasury futures and stock index futures weakened in tandem, while gold prices broke historical highs. This rare combination of "the dollar falling alongside risk assets while safe-haven assets surge" typically only occurs during systemic crises of confidence. It means that funds are no longer simply assessing inflation and employment, but are recalculating the premium for institutional stability.
However, U.S. Treasury futures stabilized after a brief period of volatility, suggesting that traders have not yet fully priced in the extreme scenario of the Federal Reserve completely losing its independence. The market appears to be waiting to see how things develop, which explains the technical recovery in the dollar after its rapid decline. In other words, the first wave of selling stemmed from panic, but its sustainability depends on whether more substantial shocks follow.
Just as systemic risks are escalating, some economic data have shown resilience, offering the dollar a brief respite. Data released last week showed that the US unemployment rate fell to 4.4%, lower than the previous 4.6% and the expected 4.5%; average hourly wages grew by 3.8% year-on-year, exceeding expectations and further rising from the previous 3.6%. These figures signal a still-tight labor market, implying that the downward path of inflation may be more sticky, thus limiting the Federal Reserve's room for significant interest rate cuts in the short term.
Meanwhile, another set of data paints a different picture: excluding non-cyclical sectors such as healthcare and social assistance, private non-farm payrolls actually decreased by 1,500 in December, averaging a decrease of 19,400 per month over the past three months. This indicates that new job creation is increasingly reliant on a few counter-cyclical sectors, and the foundation for overall economic expansion is weakening. If this trend continues, pressure on interest rate-sensitive sectors will gradually emerge, and market expectations for further interest rate cuts will rise accordingly.
The tug-of-war between these two forces is the core reason for the current volatile trend of the US dollar. On the one hand, wage growth and improved unemployment support high interest rates, which is beneficial to the dollar; on the other hand, institutional uncertainty pushes up risk premiums, suppressing the dollar's valuation. Therefore, despite the short-term strength of the data, the market has not chased the dollar higher in a large way, and the rebound is more of a technical correction than a trend establishment.
Next, market focus will be on the upcoming December US Consumer Price Index (CPI). Economists expect core CPI to rise to 2.7% year-on-year, slightly higher than the previous value of 2.6%; overall CPI is also expected to be 2.7% year-on-year. If the actual data meets or exceeds expectations, it will reinforce the narrative of "stubborn inflation and delayed interest rate cuts," and the US dollar may receive some support. Conversely, if inflation unexpectedly cools down, coupled with renewed discussions about the deteriorating employment structure, market bets on easing will resurface, and the dollar's rebound will be suppressed.
More importantly, with the narrative of "the Fed's independence being threatened" still lingering, even if data is favorable for the dollar, the market may act more cautiously. For example, even if inflation is strong, traders may choose to sell on rallies rather than chase the rise, resulting in limited upward momentum for the dollar.
The current situation, with gold hitting record highs and the dollar weakening in tandem, indicates that the market is more inclined to believe the latter—that institutional risks are eroding the dollar's credibility. Therefore, the 98.2000 level is not only technical support but also a bottom line for confidence. If subsequent events continue to unfold and long-term interest rates steepen significantly (reflecting fiscal financing pressure or declining policy credibility), the dollar may face a deeper pullback. Conversely, if the situation develops smoothly, the bond market remains stable, and inflation data is robust, the dollar may have the opportunity to continue recovering from its current level and retest the resistance level of 99.2679.
Overall, the current price is in a corrective rebound process, but there is obvious upward pressure, and a one-sided upward trend has not yet formed. From a technical perspective, the MACD DIFF is -0.0059, the DEA is -0.1303, and the MACD histogram has turned positive to 0.2489, indicating that the downward momentum is weakening and the bullish forces are beginning to recover. The RSI (14) is at 53.3049, which is in the neutral to strong range, indicating that the market is still in a stalemate between bulls and bears, and it is unlikely that a one-sided market will emerge in the short term.
Against this backdrop, the key support level of 98.2000 becomes a key point of observation. If the subsequent pullback does not fall below this level, the rebound structure is expected to continue; once it is breached, it may reopen downside potential. It is worth noting that this volatile trend is not simply driven by technical factors, but reflects a deeper fundamental divergence—the market's pricing logic is shifting from "economic data-driven" to "concerns about institutional stability."
A subpoena triggers a financial earthquake: the Federal Reserve's independence is challenged.
What has truly stirred sentiment in the foreign exchange market recently is not a particular economic data point, but rather a sudden political development: Federal Reserve Chairman Jerome Powell disclosed that the Justice Department has issued a grand jury subpoena to the Fed regarding his testimony before the Senate Banking Committee last June. The focus is on the approximately $2.5 billion renovation project of the Fed headquarters, a historic building, but Powell clearly stated that the core issue is not the project itself or the budget details, but rather the attempt by outsiders to use legal means to interfere with the central bank's ability to formulate interest rate policy based on economic evidence.
This statement quickly ignited market concerns about the independence of monetary policy. The dollar index subsequently fell sharply, U.S. long-term Treasury futures and stock index futures weakened in tandem, while gold prices broke historical highs. This rare combination of "the dollar falling alongside risk assets while safe-haven assets surge" typically only occurs during systemic crises of confidence. It means that funds are no longer simply assessing inflation and employment, but are recalculating the premium for institutional stability.
However, U.S. Treasury futures stabilized after a brief period of volatility, suggesting that traders have not yet fully priced in the extreme scenario of the Federal Reserve completely losing its independence. The market appears to be waiting to see how things develop, which explains the technical recovery in the dollar after its rapid decline. In other words, the first wave of selling stemmed from panic, but its sustainability depends on whether more substantial shocks follow.
The battle between data and narrative: The dollar oscillates between two forces
Just as systemic risks are escalating, some economic data have shown resilience, offering the dollar a brief respite. Data released last week showed that the US unemployment rate fell to 4.4%, lower than the previous 4.6% and the expected 4.5%; average hourly wages grew by 3.8% year-on-year, exceeding expectations and further rising from the previous 3.6%. These figures signal a still-tight labor market, implying that the downward path of inflation may be more sticky, thus limiting the Federal Reserve's room for significant interest rate cuts in the short term.
Meanwhile, another set of data paints a different picture: excluding non-cyclical sectors such as healthcare and social assistance, private non-farm payrolls actually decreased by 1,500 in December, averaging a decrease of 19,400 per month over the past three months. This indicates that new job creation is increasingly reliant on a few counter-cyclical sectors, and the foundation for overall economic expansion is weakening. If this trend continues, pressure on interest rate-sensitive sectors will gradually emerge, and market expectations for further interest rate cuts will rise accordingly.
The tug-of-war between these two forces is the core reason for the current volatile trend of the US dollar. On the one hand, wage growth and improved unemployment support high interest rates, which is beneficial to the dollar; on the other hand, institutional uncertainty pushes up risk premiums, suppressing the dollar's valuation. Therefore, despite the short-term strength of the data, the market has not chased the dollar higher in a large way, and the rebound is more of a technical correction than a trend establishment.
Inflation becomes the key factor in determining the outcome, and the future direction of the US dollar remains uncertain.
Next, market focus will be on the upcoming December US Consumer Price Index (CPI). Economists expect core CPI to rise to 2.7% year-on-year, slightly higher than the previous value of 2.6%; overall CPI is also expected to be 2.7% year-on-year. If the actual data meets or exceeds expectations, it will reinforce the narrative of "stubborn inflation and delayed interest rate cuts," and the US dollar may receive some support. Conversely, if inflation unexpectedly cools down, coupled with renewed discussions about the deteriorating employment structure, market bets on easing will resurface, and the dollar's rebound will be suppressed.
More importantly, with the narrative of "the Fed's independence being threatened" still lingering, even if data is favorable for the dollar, the market may act more cautiously. For example, even if inflation is strong, traders may choose to sell on rallies rather than chase the rise, resulting in limited upward momentum for the dollar.
The current situation, with gold hitting record highs and the dollar weakening in tandem, indicates that the market is more inclined to believe the latter—that institutional risks are eroding the dollar's credibility. Therefore, the 98.2000 level is not only technical support but also a bottom line for confidence. If subsequent events continue to unfold and long-term interest rates steepen significantly (reflecting fiscal financing pressure or declining policy credibility), the dollar may face a deeper pullback. Conversely, if the situation develops smoothly, the bond market remains stable, and inflation data is robust, the dollar may have the opportunity to continue recovering from its current level and retest the resistance level of 99.2679.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
