The Dollar Faces Venezuelan Uncertainty & The Fed Pivot

1. Geopolitics & Macro Shock

This weekend marks a historic turning point that will weigh heavily on the market open. The US military operation conducted yesterday, Saturday, January 3rd, resulted in the capture of President Nicolas Maduro and his extradition to New York.

Although President Trump announced that the US would ensure a "transition" to "get the oil flowing," this unilateral intervention creates an immediate risk premium.

• Impact on the Dollar: Contrary to the "Strong US = Strong Dollar" intuition, this escalation creates major uncertainty regarding regional stability and the cost of potential occupation. This political risk, coupled with a Federal Reserve (Fed) poised to cut rates in 2026 to support employment, constitutes a fundamentally bearish cocktail for the Greenback.

Sentiment (COT Report): Speculator positioning (Non-Commercials) continues to lighten on the Dollar. We are observing a gradual capitulation of "Longs," clearing the path for a deeper correction if employment figures (NFP) disappoint on Friday.

2. Currency Overview

Beyond the DXY, here is how this context impacts the majors:

• EUR (Euro): The main beneficiary of Dollar weakness. If the DXY breaks support, EUR/USD has a technical runway to target upper liquidity pools, especially if European PMI indices show resilience against the US slowdown.

• CAD (Canadian Dollar): Double pressure this week. On one hand, chaos in Venezuela (holder of the largest oil reserves) is shaking the energy market. On the other, Canadian unemployment figures on Friday will be decisive. A rise in oil (WTI) due to instability would benefit the CAD, but beware of extreme volatility.

• CHF & JPY (Safe Havens): With sabers rattling in Caracas, the Swiss Franc and Yen should regain their "safe haven" appeal. Tuesday's Swiss CPI will tell us if the SNB still has room to maneuver, but capital flows are seeking safety outside the USD.

3. My Technical Bias

Weekly Bias: BEARISH on DXY

Graphically, the Dollar Index is showing signs of exhaustion within a major gap. Current political uncertainty acts as a catalyst to validate the reversal structure.

Plan: I will look for Dollar shorts on technical bounces (intraday), targeting December's liquidity lows. Focus: Long EUR/USD - GBP/USD - XAUUSD - XAGUSD

4. Economic Calendar: An Explosive Week

Volatility will be present from the opening bell Monday through to the climax on Friday.

• Monday (Industry & Reaction):

  • Post-Venezuela Reaction: Watch for opening Gaps (Oil/Gold).

  • 🇺🇸 ISM Manufacturing PMI: Expected weak. If the US manufacturing sector contracts further, it validates the urgency for the Fed to cut rates.

• Tuesday (Inflation & Jobs):

  • 🇨🇭 Swiss CPI: Direct impact on USD/CHF.

  • 🇺🇸 Unemployment Claims: The market is nervous about jobs; any rise in claims will weigh on the Dollar.

• Wednesday (The Pivot Point):

  • 🇦🇺 AUD CPI: Australian inflation (Impact AUD/USD).

  • 🇺🇸 JOLTS Job Openings & ADP: If job openings (JOLTS) drop, it is the precursor signal to a catastrophic NFP.

  • 🇺🇸 ISM Services PMI: The last bastion of the US economy.

• Friday (The Judge):

  • 🇨🇦 Canada Unemployment: Will create volatility on USD/CAD simultaneously with the NFP.

  • 🇺🇸 NFP (Non-Farm Payrolls): The King number. A weak report would confirm the US economy is slowing too fast, forcing the Fed's hand and potentially breaking Dollar support.

5. Conclusion

Between the arrest of Maduro redrawing the geopolitical map and the NFP report deciding the pace of rate cuts, the watchword is caution. The context favors a weak dollar, but "flight to safety" moves can be unpredictable.

Have a good trading week.