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January 12, 2026

Dollar Slides After DOJ Subpoenas; Gold Runs to Record as EUR/USD Gains

Market snapshot — political risk knocks the dollar, bullion and euro rally

Markets turned risk-sensitive after US prosecutors served grand jury subpoenas related to Federal Reserve matters. The US Dollar Index (DXY) retraced part of last week’s rally, sliding roughly 0.4% to about 98.7, while gold extended to record territory and EUR/USD picked up upward momentum. Traders now enter a volatile window ahead of US CPI and potential headlines on Fed leadership that can quickly reverse moves.

What happened and why it matters

The Department of Justice action and a separate criminal probe into Fed Chair Jerome Powell have been interpreted as adding political pressure on Fed independence. Powell has stated the DOJ action is not linked to his testimony or the renovation matter, but markets remain sensitive: a perceived weakening of central-bank independence can lower the bar for easier policy expectations and push real yields down. With job data showing resilience but CPI due imminently, headlines will likely drive intraday FX and bullion swings.

EUR/USD — tactical long opportunities amid dollar risk

With the DXY down and political headlines weighing on the dollar, EUR/USD has room to benefit in the short term as traders price a higher probability of easier US policy. As our EUR/USD strength coverage shows, short-USD / long-EUR setups are attractive as event-driven trades, but there are clear risks: a stronger-than-expected CPI or a rapid re-pricing of the Fed path would reverse the move and could trigger tight stops.

Practical ideas for EUR/USD:

  • Consider event-aware long positions with defined stops and reduced size ahead of CPI; use smaller position sizing around headline risk.
  • Use volatility strategies (for example, straddles or staggered entries) if you expect large intraday swings but want to limit directional risk.
  • Automated execution via a forex trading bot can help enforce discipline and manage entry/exit rules during fast news windows.

XAU/USD (Gold) — record highs, buy-on-dip setups but watch overbought readings

Gold has pushed to fresh record levels and consolidated just below the $4,600 mark. Short-term technicals show momentum leadership but the RSI is extended, making pullbacks to support plausible. Safe-haven flows tied to geopolitical tensions and political risk around the Fed are key catalysts supporting further upside; see recent commentary on the Gold at $4,600 and the broader XAU/USD rally.

Practical ideas for XAU/USD:

  • Look for buy-on-dip opportunities toward the 50-SMA (~$4,430 area on the 4-hour) or the trendline floor near $4,470 if price retraces.
  • If you prefer directional exposure without immediate binary event risk, consider scaling into positions after a confirmed hold above near-term supports.
  • For event traders, options strategies can capture upside while limiting downside—elevated event risk favors measured use of premium.

Key risks to monitor

  • News flow on the DOJ investigation or any Fed leadership developments — escalation can produce outsized moves in USD crosses and safe havens.
  • US CPI and labour data: stronger data can re-strengthen the dollar and reverse current moves.
  • Technical vulnerability in gold from overbought momentum; a rapid USD rebound would likely weigh on bullion.

Execution and risk management tips

Given the heightened event risk, retail traders should emphasize position sizing, pre-defined stop levels, and contingency plans for headline spikes. Automated trading and algorithmic rule enforcement reduce emotional errors during fast markets—consider testing strategies with a Trade Assistant Bot for multi-asset execution. If you trade crypto as part of a diversified playbook, the same event-management tools used for forex and metals apply; explore a dedicated forex trading bot for FX strategies.

Actionable checklist for traders

  • Monitor live headlines on the DOJ/Fed and the Fed leadership nomination process.
  • Treat positions around the CPI release with smaller size or option-based hedges.
  • Prefer staged entries and targets for EUR/USD longs and buy-on-dip rules for XAU/USD.
  • Use automated trading or disciplined rule-based execution to manage volatility and enforce risk limits.

Conclusion

Political and legal pressure around the Fed has opened a window of elevated volatility that favors short-term long EUR/USD and buy-on-dip gold strategies, but the risk of rapid reversals is material, especially around US CPI and any new headlines on Fed leadership. Retail traders should combine strict risk management with tools that execute reliably in fast markets.

Test automated trading strategies with the Trade Assistant Bot to evaluate event-driven rules and risk enforcement.