← Back to posts🧠Warsh risk lifts dollar as gold and cyclicals exhale

🧠Warsh risk lifts dollar as gold and cyclicals exhale

Published: 1/30/2026

Good morning traders from a crisp, mostly-sunny IntelliTrade desk. It is a bright 1°C outside, the pavements are still frosty, and inside the big thaw is in gold and AUD, not the weather.


Overall Market Sentiment



The mood has shifted to mild risk-off, dollar-firmer. The US Dollar Index has bounced to about 96.5–96.6, up roughly half a percent on the day and off its four year lows, as markets price a higher chance that a more hawkish Fed chair could be nominated.


Gold is finally cooling after its vertical move. Spot prices have dropped roughly 4–5 percent from yesterday’s intraday record above 5,550 dollars to around 5,150–5,200, though they are still up about 20 percent for January.The S&P 500 closed just under 6,970 after a choppy session that saw tech and Microsoft weigh on indices, leaving equities sitting near record territory but looking more nervous.





Geopolitics and policy



Two policy stories are dominating the macro narrative this morning: Fed leadership and Iran tensions.


On the Fed side, betting markets now heavily price former governor Kevin Warsh as the leading candidate to replace Jerome Powell, with odds surging above 90 percent on some platforms.Warsh is seen as more hawkish on inflation and more skeptical of unconventional policy, which helps explain why the dollar is stabilising and why gold has finally met some profit-taking after one of its strongest months on record.


Geopolitically, oil markets are increasingly focused on the risk of US military action against Iran. Brent traded above 69 dollars yesterday and sits around 68.5–69 now, near a four month high, as supply risk from the region is priced back in.That keeps an energy premium under global inflation expectations and supports commodity-linked FX such as CAD and, to a lesser extent, NOK and AUD.


In FX micro-geopolitics, USDJPY has firmed back toward 153.5, after sliding sharply earlier this week on intervention chatter. Softer Japanese data this morning have tempered the more hawkish BoJ narrative, which, together with Warsh speculation, reduces immediate pressure on the pair even if authorities remain uncomfortable with levels near the mid-150s.


Key global gauges today:


  • DXY 96.5–96.6, trying to put in a floor after a 4 percent month-to-date drop.
  • Gold 5,150–5,200, still historically high but off the blow-off top.
  • Brent 68–69, near recent highs as an Iran risk barometer.






Today and the rest of the week



Today, Friday


  • The US data focus is on manufacturing: PMI final readings, ISM manufacturing and associated sub-indices like prices and new orders, plus construction spending, all clustered around the US morning. These numbers will test whether the Fed’s “solid growth, somewhat elevated inflation” language still fits.
  • Markets are watching closely for any official news on the Fed chair nomination, which could lock in a more hawkish or more dovish medium-term policy bias and influence the durability of the dollar bounce and gold correction.



Into next week


  • The early part of next week brings US labour market updates (including ADP employment) and services PMIs, key for understanding whether wage growth and services inflation remain sticky.
  • In Japan, markets will continue to digest the contrast between softer Tokyo data and the BoJ’s still optimistic projections, which is central to whether USDJPY can sustain the recent bounce or re-test the lows.
  • In Europe, the focus shifts toward Eurozone and German data that will show whether the region is stabilising after last year’s stagnation, which matters for how comfortable the ECB is with a stronger euro.






Currency outlooks




🔺 USD – Warsh speculation and data focus give the dollar a foothold



The dollar is finally finding some traction. The Dollar Index has climbed back to around 96.5, up about 0.5 percent today and almost 1 percent off this week’s lows, as markets scale back the most extreme weak-dollar bets and position for a potentially more hawkish Fed leadership.


The macro backdrop still shows an economy growing well above trend with inflation easing only slowly toward target, which was already enough for the Fed to justify holding rates at 3.50–3.75 percent and signalling patience on cuts. A Warsh nomination would tilt expectations further in the direction of fewer or later cuts, particularly if long-term inflation expectations remain anchored.


Near term, risks for USD lean modestly to the upside: the combination of a hawkish-leaning Fed setup, softer gold and a modest risk-off tone is supportive. The bigger question is whether this becomes a sustained trend or more of a corrective phase in a still-fragile dollar environment shaped by fiscal and political worries.


Markets are watching DXY 96.0 as near support and the 97.0 area as the first significant resistance band that would need to give way to signal a more durable dollar recovery.





⚖️ EUR – Pausing after the breakout, torn between data and dollar



EURUSD has eased to around 1.19–1.194, after peaking near 1.20–1.2045 earlier in the week when dollar selling was at its most intense.


The euro has been supported by a reduced trade-risk backdrop, stabilising sentiment around Eurozone activity and an expectation that the ECB will ultimately cut more cautiously than the Fed. However, today’s softer French data and the prospect of a more hawkish Fed chair cap enthusiasm and remind markets that European growth still looks weaker and more fragile than US growth.


For the coming days, EUR risks versus USD look mixed. A sustained dollar rebound on Warsh news or strong US data could pull EURUSD back toward the mid-1.18s, while any disappointment in US numbers or dovish rhetoric would quickly put the 1.20 handle back in play.


Key reference areas: 1.1850–1.19 as support, which is roughly where the prior breakout zone sits, and 1.21–1.22 as the next resistance band that would signal a more extended euro upswing if cleared.





🔺 GBP – Still elevated, helped by carry and softer dollar



GBPUSD is holding near 1.37–1.375, just below recent multi-month highs, and has so far weathered the modest dollar rebound reasonably well.


The pound benefits from comparatively high UK front-end yields and from the perception that the Bank of England will be slow to cut while wage and services inflation remain sticky, even if growth is only moderate. That combination, plus the earlier soft-USD environment, has left GBP as one of the better-supported G10 currencies.


For the rest of the week, risks for GBP versus USD still lean very slightly to the upside, but from stretched levels: the currency is sensitive to any renewed equity wobble or a stronger US data run that emboldens the dollar.


Key levels: 1.37 as immediate support and 1.38–1.40 as the resistance zone where markets see the pound as quite rich relative to current fundamentals.





⚖️ CAD – Stronger oil vs. stronger dollar keep loonie in balance



USDCAD is trading around 1.35–1.352, near its strongest levels for CAD in several months, after a sharp two-week retreat from above 1.39 as oil rallied and US dollar longs were cut back.


Brent around 68–69 dollars provides a clear terms-of-trade tailwind for Canada, while domestic data have been respectable and inflation sits close to the middle of the Bank of Canada’s target band.


At the same time, the Fed’s steady stance and Warsh speculation have given the dollar some support, limiting further near-term CAD gains. For the days ahead, risks for CAD versus USD look broadly balanced: stronger oil and neutral BoC messaging help the loonie, while a firmer dollar and any risk-off shock would push USDCAD back toward the mid-1.35s or higher.


Key zones: roughly 1.35 as immediate support for CAD strength and 1.37–1.38 as the resistance region that would likely re-emerge if the dollar recovery gathers pace.





⚖️ CHF – Franc still firm, but dollar bounce tempers the move



USDCHF is sitting near 0.768–0.77, still close to multi-year lows for the pair, although slightly higher than the trough from earlier in the week as the dollar attempts a recovery.


The franc remains underpinned by extremely low Swiss inflation, a near-zero policy rate and continued demand for “quiet” havens that are not directly entangled in US politics or intervention stories. At the same time, a softer gold price and a marginally stronger USD have taken some of the urgency out of the move.


Short term, CHF risks look neutral: the currency is likely to remain firm in real terms, but further outsized gains versus USD may depend on another leg lower in US yields or a renewed shock that sends gold back to fresh extremes.


Reference areas: markets are watching 0.76–0.77 in USDCHF as a strong support band for CHF strength and 0.79–0.80 as the top of the recent corrective range.





⚖️ JPY – Caught between hawkish-chair risk and intervention nerves



USDJPY trades around 153.5, having bounced from the lower 152s as speculation around a more hawkish Fed chair and softer Japanese data offset earlier intervention anxiety.


Japan’s policy rate remains at 0.75 percent, far below US levels, and the BoJ’s upbeat projections contrast with more sluggish Tokyo inflation and retail sales, which tempers expectations of rapid further tightening. That keeps the yen structurally weak and attractive as a funding currency, even though intervention risk caps how far USDJPY can run on the upside.


For the coming sessions, JPY risks look roughly balanced. A confirmed Warsh nomination and higher US yields would lean toward renewed yen weakness, but any renewed official comments or sudden risk-off episode could quickly pull USDJPY lower again.


Key zones: 152–153 as support and the 155–157 area as the band where intervention chatter would likely intensify if revisited.





⚖️ AUD – Momentum cools after three-year highs and softer PPI



AUDUSD is consolidating near 0.705, having backed off slightly from a spike above 0.709 that marked its highest level in about three years.


Australia’s producer inflation slowed to 0.8 percent quarter-on-quarter in Q4, below expectations, which marginally eases some of the pressure on the RBA to keep pushing in a more hawkish direction. That, combined with a modest risk-off tone and the dollar bounce, has taken some heat out of AUD after a very strong January.


Near term, AUD risks look more two-sided. The currency is still supported by earlier gains, solid commodity prices and a more hawkish RBA backdrop than a year ago, but after such a run and with global risk sentiment wobbling, corrections lower are likely to be larger when they come.


Key reference areas: 0.70 as initial support and 0.71 as a resistance zone that would signal any renewed attempt at highs.





⚖️ NZD – Still near recent highs, correcting from overbought



NZDUSD sits around 0.605–0.606, just under its recent high near 0.609 after ten consecutive days of gains gave way to some profit-taking and intraday corrections.


The kiwi has been bolstered by stronger New Zealand data, including foreign trade and confidence, and by the broader soft-USD environment. With inflation hovering slightly above the top of the RBNZ’s 1–3 percent target band, markets expect the central bank to be cautious about cutting, which offers some rate support.


For the next few sessions, NZD risks look broadly neutral versus USD. The pair can stay elevated if global risk appetite steadies and the dollar bounce remains modest, but given recent strength and high beta characteristics, it is also vulnerable to sharper pullbacks if US data surprise to the upside or if Iran headlines spark deeper risk aversion.


Key levels: 0.60 as nearby support and the 0.61–0.62 region as the next resistance band and potential confirmation of a larger trend shift if broken.





Cross-asset wrap



  • 🪙 Gold:
    After reaching intraday records above 5,550 dollars, gold has fallen back toward 5,150–5,200, still up more than 20 percent for January and on track for its best monthly performance since the early 1980s. The pullback reflects a firmer dollar, overbought conditions and speculation that a more hawkish Fed chair could be nominated, but the structural drivers of demand, such as central bank buying and geopolitical hedging, remain in place.
  • 🛢 Oil:
    Brent is trading near 68.5–69 dollars and WTI in the low 60s, close to recent four month highs. The move is being driven by rising concern over potential US military action against Iran and by evidence of tightening supply, even as global demand growth remains moderate. This combination keeps a visible risk premium in energy, reinforces inflation worries and supports commodity currencies such as CAD.
  • 📈 Stocks:
    The S&P 500 continues to treat 7,000 as a key psychological ceiling, closing around 6,969 after a slight pullback driven by tech and Microsoft weakness. Volatility remains modest, and breadth is still reasonable, but the mix of record gold, high oil and a wobbling dollar has made investors somewhat more cautious on Big Tech while still constructive on broader risk.
  • ₿ Crypto:
    Bitcoin is under pressure, testing the low-80,000s after slipping from the 90,000 area earlier in the month, with roughly 8.8 billion dollars of BTC and ETH options expiring today in a risk-off setting. Crypto continues to trade as a high beta macro asset rather than a primary haven, reacting to shifts in dollar strength, real yields and equity sentiment, and the current backdrop of a firmer USD and nervous tech is weighing on prices.





This is general, educational macro and FX commentary. It is not investment advice and not a trading signal.


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