January 28 Market Watch: The U.S. Dollar Breaks Below the 96 Threshold Amid Upcoming Fed Meeting
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January 28 Market Watch: The U.S. Dollar Breaks Below the 96 Threshold Amid Upcoming Fed Meeting
Volatility in precious metals intensifies, increasing the risk of a silver correction; the U.S. dollar may stage a technical rebound due to hawkish Fed commentary; cryptocurrency liquidity remains fragile.
Navigating Web3 tides with focused insightsBy Ma Mengniu, TechFlow
Dollar Index: Breaks Below 96, Hits Three-Month Low
On Monday, the U.S. Dollar Index plunged 0.84%, closing at 96.219—breaching the 96 threshold and hitting a three-month low. This marks a continuation of the dollar’s sustained weakening trend since early 2026, declining from around 103 at year-end to a cumulative drop of nearly 7%.
Donald Trump also played a role: on Tuesday, when asked whether he believed the dollar had fallen too far, he responded that its performance was “very good.” His remarks intensified pressure on the dollar, sending the exchange rate to a near four-year low.
Markets are now holding their breath ahead of the Federal Reserve’s monetary policy meeting on January 29. Economists unanimously expect the Fed to hold rates steady at 3.50%–3.75%. The real focus, however, lies in Chair Jerome Powell’s commentary. Under political pressure from the Trump administration—including threats from the Department of Justice to launch a criminal investigation into Powell—the Fed Chair’s ability to balance policy independence against market expectations will directly shape the dollar’s trajectory going forward.
The dollar’s weakness reflects deeper structural issues: its share of global foreign exchange reserves has fallen below 60%, while gold’s share of total foreign exchange reserves has risen to 25.94%. Trump’s tariff policies—including threats to impose a 100% tariff on Canadian goods and already-raised tariffs on South Korean imports to 25%—further erode dollar credibility. Markets are witnessing the dollar’s transition from a “privileged currency” back to a “normal currency.”
Precious Metals: Gold Holds Above $5,000; Silver Suspends Subscriptions
Spot gold held above $5,000, briefly surging past $5,200. Gold’s share of total foreign exchange reserves rose to 25.94% in January 2026—a record high. China’s central bank has increased its gold holdings for 14 consecutive months, underscoring an accelerating global “de-dollarization” trend.
Silver surged over 5% on Monday, breaking above $110 per ounce. Robust retail demand in China and India has prompted manufacturers to shift production from silver jewelry toward investment-grade products. Notably, China International Capital Corporation (CICC)’s silver futures ETF suspended subscriptions effective January 28—an indicator often associated with overheated markets.
Institutional views diverge: Citigroup forecasts silver rising to $120, while China International Capital Corporation (CICC) cautions that gold may face short-term pressure if geopolitical risks fail to escalate—though any correction would likely be limited. Huaxi Securities projects gold price gains for 2026 within a range of 10%–35%.
U.S. Equities: Tech Stocks Diverge; Healthcare Sector Plummets
U.S. equities opened with sharp divergence on Monday: the Dow Jones Industrial Average fell 0.62%, the Nasdaq Composite rose 0.57%, and the S&P 500 gained 0.27%. The technology sector performed strongly—Apple rose 3%, Meta climbed 2.1%, and Microsoft gained 0.9%. In contrast, healthcare plan-related stocks led losses across the board: UnitedHealth Group tumbled nearly 17%, Humana dropped over 16%, and CVS Health fell nearly 10%, dragging down the Dow.
This was the final trading day before the Fed’s January 28 meeting. Markets are digesting two key developments: first, speculation that Trump may appoint a new Fed Chair this week (Powell’s term ends in May); second, renewed concerns about a potential U.S. government shutdown.
U.S. equities in 2026 have exhibited pronounced style rotation: the small-cap Russell 2000 Index has outperformed the S&P 500 for 14 consecutive days—the longest such streak since 1996. Investors are rotating away from AI-driven tech giants toward defensive sectors and small caps, reflecting concerns over stretched valuations and uncertain AI profitability. Capital expenditures by Microsoft, Alphabet, Amazon, and Meta are projected to rise 34% to $440 billion—but the return timeline remains unclear.
Ray Dalio, founder of Bridgewater Associates, stated bluntly: “The AI boom is currently in the ‘early stage of a bubble.’ Markets await answers: after three years of bull-market gains, can AI continue to drive indices to new highs?”
Cryptocurrencies: Struggling in the Shadow of Precious Metals
Bitcoin and Ethereum remain under pressure. Market participants are voting with their feet: when true safe-haven demand emerges, capital flows toward millennia-old precious metals—not decade-old cryptocurrencies. Against a backdrop where silver is up over 50% year-to-date and gold up 17%, the “digital gold” narrative appears especially hollow.
Another notable shift: exchanges worldwide are rapidly listing new trading pairs for U.S. equities and precious metals. Where liquidity goes, attention follows—and cryptocurrencies remain range-bound, awaiting consolidation and recovery.
Core Logic: Restructuring of the Credit System
The essence of this market shift is a structural contraction in the U.S. dollar’s credit system. As the Trump administration disrupts global order through tariff policies—and as the Department of Justice threatens to investigate the Fed Chair—markets are repricing the dollar’s long-term value.
The Fed’s upcoming meeting will reveal how policymakers intend to navigate this dilemma: further rate cuts could ignite inflation and accelerate dollar depreciation, while maintaining high rates risks harming economic growth. The absence of a “risk-free path” represents the greatest source of uncertainty in today’s markets.
Risk Warning: Volatility in precious metals is intensifying; silver faces elevated pullback risk; the dollar may stage a technical rebound on hawkish Fed commentary; cryptocurrency liquidity remains fragile.
This article is for market observation only and does not constitute investment advice.
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