Fed Holds Rate Cut While Gold and Dollar Move in Parallel

Ultima Markets Daily Market Insights – January 29, 2026

The Federal Reserve has pushed back against mounting political pressure. The FOMC chose to hold interest rates steady at 3.50% - 2.75%, with Fed Chair Jerome Powell reinforcing that the economy remains "solid" and that there is no urgency to perform an interest rate cut.

This firm stance triggered a modest rebound in the heavily oversold U.S. Dollar. Yet, Gold continues to defy expectations, holding its ground despite negative correlation.

Fed's January Meeting Recap A Firm Hold

The rate decision itself was widely anticipated, but the messaging delivered a more hawkish undertone than markets had positioned for.

Growth Upgrade

The Fed upgraded its assessment of economic activity from "moderate" to "solid," signalling resilience in underlying demand.

Labour Market Shift

The statement removed language around "rising downside risks" to employment, instead noting signs of labour market stabilization.

Inflation Still a Concern

Inflation was described as "somewhat elevated", with policymakers emphasizing continued vigilance.

Dissenting Votes

The decision passed 10 - 2, with Governors Waller and Miran voting for an immediate 25bp cut.

US Dollar Staging A "Short Squeeze" Rebound

Following the FOMC meeting, the US Dollar staged a rebound, reclaiming the 96.00 level. The move reflects positioning adjustments as expectations for a March cut are priced out.

However, from a technical perspective, the recovery still lacks conviction. Sustained upside will depend on the Dollar's ability to hold above 96.00 in the near term.

Key Levels

Support

96.00 level remains critical. A lower break would reopen downside risk.

Resistance

97.10 caps the rebound and preserves the broader downtrend.

Is The Gold Break Above $5,500 Sustainable?

Gold extended its rally during the Asian session, printing a fresh all-time high at $5,597. Though the rise is strong, Gold is now deep in overbought territory.

Risk Factor

A continued rebound in the Dollar and Treasury yields could trigger short-term profit-taking.

Key Pivot

$5,500 is now a key psychological level. A daily close below this zone may signal a false breakout and may spark a sharper pullback.

On a broader horizon, the $5,300 - $5,240 region continues to serve as solid trend support, while $5,600 stands as the next upside projection if momentum holds.

What To Watch Today

• U.S. Initial Jobless Claims (8:30 AM ET) - Markets will assess whether labour conditions truly align with the Fed's "stabilisation" narrative. A surprise increase in claims could quickly undermine the Dollar's rebound.
• Post-Fed Profit-Taking & Volatility - Sessions following Fed meetings often witness choppy price action as traders rebalance positions. Early-session breakouts should be treated with caution.
• Gold's Market Test - The focus remains on whether Gold can defend the $5,500 level. Holding above it keeps the broader uptrend intact despite Dollar strength.

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