* Stocks start busy week strong with eyes on Mag 4 of Mag 7 results

* Dollar weakens across the board as yen climbs on intervention risk

* Bets on US government shutdown spike after latest civilian death in Minnesota

* Gold and silver surge continues as USD falls to 4-month low

FX: USD sunk below December lows and also a long-term trendline from 2011 and 2021 lows. Investors appear to looking to hedge dollar exposure, though this won’t be known for sure until figures are released. The strong yen move and bid for precious metals – hard assets – away from the dollar seems to be in play. The key low is from September last year at 96.21. Attention this week looms on the unchanged Fed rate decision on Wednesday, a possible Fed Chair announcement from Trump, US-EU trade relations, and any geopolitical updates surrounding Iran or Ukraine/Russia.

EUR made a high at 1.1906 before paring gains modestly. The mid-September top resides at 1.1918. The daily RSI is very close to overbought territory though the move beyond the December peak should keep prices buoyant. Everything is currently sentiment driven, with German business IFO data marginally missing estimates.  

GBP popped up to 1.3713, not far off the September high at 1.3726. There weren’t any real domestic drivers with sentiment moving the FX space. That said, domestic politics have got interesting with an apparent alternative choice for PM in the Labour Party denied the opportunity to run as an MP. This threat of a leadership challenge is a story likely to develop.

JPY soared as the major continued lower after “rate checks” by both the MoF and the NY Fed. The prospect of bilateral Japan-US intervention is understandably a more powerful one than mere passive unilateral from Tokyo alone, which often isn’t effective. Resistance is at 154.81 with next major support below 152.

AUD touched long-term resistance from the September 2024 high at 0.6942, as it built on last week’s surge. Eyes are on the quarterly CPI data released on Wednesday, with a 60% chance of a RBA rate hike next month.

US stocks: S&P 500 added 0.5% to close at 6,950, the Nasdaq was up 0.42% at 25,713 and the Dow Jones was higher 0.64% at 49,412. Eight sectors were in the green with Communication Services and Tech leading the gainers. Consumer Discretionary was the biggest laggard with Consumer Staples and Real Estate very narrowly negative. CoreWeave jumped over 10% at one stage after it strengthened its collaboration with Nvidia who said it would invest $2bn in the CRWV. NVDA closed down 0,.64%. Apple was up 3%, Meta up 2% and Microsoft up 0.9% ahead of their earnings later this week on Wednesday and Thursday after the closing bell. But Tesla slid 3.1%.

Asian stocks: Futures are mostly green. APAC stocks were muted on various issues including Canada tariff threats and a possible US government shutdown. The ASX 200 was on holiday. The Nikkei 225 underperformed, as a stronger yen and intervention concerns had investors subdued. The Hang Seng and Shanghai Comp were also indecisive as stocks also failed to benefit from news that China told the biggest tech firms they can prep NVIDIA orders.

Gold smashed through the historic milestone of $5,000. Geopolitical tensions, central bank buying, and structural supply deficits all underpin long-term bullion support. Silver too keeps on rising, its tight physical market making moves parabolic.

Day Ahead – Focus on yen, dollar and precious metals

The week kicked off with more dollar selling amid among many catalysts, including a US polar vortex causing a spike in natural gas prices and a potential Democrat-led government shutdown. Precious metals may be part of the dollar trade as obviously these are cheaper to foreign inflows when the dollar drops. But a double-digit surge for example, in silver, does scream of a distinct FOMO trade which will see a sharp correction at some point. Indeed the candle today looks like a potential blow-off top with a very long wick and prices closing near to the lows of the day after spiking higher, often known as a pin bar. That said, the long-term drivers should underpin support, including industrial demand and haven qualities.

The dollar is now trading around long-term support from 2011 lows with Fed policy autonomy, expensive US stocks and fracturing global alliances all encouraging over-indexed global investors to reduce further or hedge USD exposure. Tense domestic US politics may be another headwind for the buck amid rising risks of another government shutdown. We need to add the excitement about possible joint co-ordination in yen intervention, not seen this century. But this is not a fundamentally driven move as yen real interest rates are still negative. In addition, the snap Japanese election on 8 February could still see more pressure emerge on Japanese Government Bonds and the yen. For the dollar, poor domestic news or a very hawkish FOMC meeting is needed to hold up the sell-off. 

Chart of the Day – Gold bursts through $5,000

Gold is up around 18% so far this year, and could enjoy its best month in many years, after its robust performance in 2025. The very recent move has been driven by a series of geopolitical shocks, that include uncertainty about Washington’s stance on Greenland and lingering concerns about potential US-Iran escalation. Of course, a breakdown in   the dollar is helping, while lower real yields and ongoing policy uncertainty have reinforced investor appetite for hard assets. Round numbers are targets for bugs, though we note the monthly RSI currently sits at 95. That warns of a pullback, and today’s bearish pin bar candlestick is ripe for a correction.