Stock market on January 26: S&P 500 and NASDAQ open week lower

[Ben Graham]

Last Friday, equity indices closed mixed. The S&P 500 rose by 0.03%, while the Nasdaq 100 added 0.28%. The Dow Jones Industrial Average plunged by 0.58%.

Today, the dollar fell against most major currencies. Budget disagreements, risks of a US government shutdown, and potential US involvement in currency interventions in Japan weighed on sentiment toward the global reserve currency. Gold topped $5,000 for the first time amid demand for safe?haven assets. Asian currencies benefited from the weaker dollar: the Malaysian ringgit rose to its strongest level since 2018, the South Korean won reached its highest level in about three weeks, and the Singapore dollar strengthened to its highest level since 2014.

Volatility in FX markets followed comments from Japan's top currency official Atsushi Mimura that Tokyo will act in close coordination with its counterparts in Washington. Earlier, Japanese Prime Minister Sanae Takaichi warned markets that the government stood ready to take action. In current conditions, policy coordination from the Fed is an important signal. If markets interpret coordination as a willingness to accept softer global conditions for the dollar, especially combined with a dovish Fed reaction, that could accelerate the dollar's decline. Traders also read actions by the New York Fed as a sign that the central bank is preparing to assist Japanese authorities in intervening directly in currency markets to support the yen.

Treasuries firmed slightly amid threats of US tariffs on Canada and rising geopolitical tension. Equity indices fell in Japan, South Korea, and Hong Kong.

Meanwhile, as noted above, gold exceeded $5,000 per ounce for the first time, continuing a rapid rally driven by shifts in international relations under Trump and a flight from government bonds and currencies. Silver jumped by more than 6%, reaching a record high. The focus is expected to shift further toward commodities. Demand for safe?haven assets will be driven by worsening geopolitical tensions, continued dollar weakness, and the presence of ample liquidity and lower Fed policy rates.

Concerns about another US government shutdown intensified. Senate Democratic leader Chuck Schumer vowed to block a large spending package unless Republicans strip funding from the Department of Homeland Security. Traders are also watching geopolitical tensions after Trump deployed naval forces to the Middle East, prompting fresh speculation that he may carry out threats against senior Iranian leadership amid the brutal suppression of nationwide protests.

As for the technical outlook for the S&P 500, the immediate task for buyers today is to overcome the nearest resistance level of $6,914. Overcoming that level would signal upside and open the path to $6,930. An equally important objective for bulls is to secure control above $6,946, which would strengthen buyers' positions. In case of a downside move amid waning risk appetite, buyers must assert themselves around $6,896. A break below this level could quickly push the instrument back to $6,883 and open the way to $6,871.

The material has been provided by InstaForex Company - www.instaforex.com