CFD Markets News and Forecasts — 07-02-2025

• Silver retreats over 1% from $32.64 as rising US Treasury yields undermine gains.
• Technical outlook suggests consolidation possible between $31.00 and $32.60, with resistance at $33.00.
• Downward pressure may test support levels at $31.10 and $31.00, near critical moving averages.

Silver's price retreats after hitting a weekly high of $32.64 and drops below the psychological figure of $32.00 after the release of mixed US jobs data. The jump in US Treasury bond yields and Greenback’s remaining bid were headwinds for the grey metal. Therefore, Silver (XAG/USD) trades at $31.82, with losses of over 1%.

XAG/USD Price Analysis: Technical outlook

Despite reaching a two-month high, XAG/USD seems poised to consolidate around $31.00 - $32.60 unless buyers drive prices above $33.00 a troy ounce. Momentum has shifted bearish in the short-term, as portrayed by the Relative Strength Index (RSI), but buyers are in charge as the RSI remains above its neutral line.

XAG/USD needs to surpass $33.00 for an extension of the uptrend. A breach of that level could propel prices to test the October 29 swing high of $34.54, ahead of challenging last year’s peak at $34.86.

On the flip side, a further downside is seen below the 100-day SMA at $31.10, followed by the $31.00 figure. Once those levels are cleared, the next support would be the 50-day SMA at $30.47, followed by the 200-day SMA at $30.27

XAG/USD Price Chart – Daily

• Gold gains as traders react to President Trump's threat of new reciprocal tariffs, enhancing its safe-haven status.
• US Nonfarm Payrolls fall short of expectations, yet a declining Unemployment Rate suggests a resilient labor market.
• PBoC’s increased Gold reserves and cautious comments from Fed officials contribute to the metal's price dynamics.

Gold resumed its uptrend on Friday amid the escalation of the trade war between the US and China and a mixed US employment report. The XAU/USD trades at $2,862, up 0.24%.

US President Donald Trump's plans to announce reciprocal tariffs on many countries next week lent a lifeline to Bullion traders as the yellow metal rose on those remarks. Therefore, tensions over the weekend could increase flows to Gold’s safe-haven appeal.

US data revealed that Nonfarm Payrolls in January missed the mark, but the Unemployment Rate dipped compared to estimates and December’s reading. The data suggests the labor market remains strong, which might prevent the Federal Reserve (Fed) from easing policy.

Following the data, Bullion prices jumped to the session's highs of $2,886, but once the dust settled, Gold retraced to its previous level.

Earlier, reports emerged that the People’s Bank of China (PBoC) resumed buying Gold with reserves increasing from 73.29 million ounces to 73.65 million ounces.

Meanwhile, Fed speakers crossed the newswires, continuing with their patient rhetoric.

Minneapolis Fed President Kashkari sees the policy rate “modestly lower.” Chicago Fed President Goolsbee said recently that NFP data was solid and that rates would be lower, but the pace “will be slower with more fogginess.”

Fed Governor Adriana Kugler said the inflation rate “has gone sideways,” adding that “it makes sense to hold the policy rate where it is.”

Daily digest market movers: Gold price climbs alongside the US Dollar

• The US Dollar Index (DXY) edges up 0.32% and sits at 108.04 after hitting a daily low of 107.51.
• The US 10-year Treasury bond yield rises five basis points to 4.487%.
• US real yields, which correlate inversely to Bullion prices, climbed three basis points to 2.062%, a headwind for XAU/USD.
• US Nonfarm Payrolls in January dipped from 256K to 143K, missing the mark of 170K. The Unemployment Rate slid from 4.1% to 4%.
• Money market fed funds rate futures are pricing in 39 basis points of easing by the Federal Reserve in 2025.

XAU/USD technical outlook: Gold prices set to challenge $2,900

Gold’s trend is up yet bulls have failed to clear the $2,900 figure. The Relative Strength Index (RSI) is in overbought territory, while XAU/USD’s price action shows signs of exhaustion.

If Gold drops below $2,800, the next support would be the psychological $2,750 area, followed by the January 27 swing low of $2,730. Conversely, if the yellow metal rises above $2,900, the next key resistance would be the psychological $2,950, followed by $3,000.

United States (US) President Donald Trump hit newswires for a second time on Friday, during a news conference with Japanese Prime Minister Shigeru Ishiba. President Trump reiterated his desire to "work out" the US' trade deficit with Japan, which currently sits around $65 Billion per year. Shares in US Steel were halted on Friday after President Trump directly addressed his willingness to allow the takeover of the domestic metals producer by Japan-based Nippon Steel.

Key highlights

• The Dow Jones shed 300 points after US NFP figures missed the mark.
• US consumer inflation fears rose, while their outlook deteriorated.
• US President Donald Trump puts tariffs back on the board.

The Dow Jones Industrial Average (DJIA) took a fresh beating on Friday after Nonfarm Payrolls (NFP) missed market forecasts, and the University of Michigan’s (UoM) Consumer Sentiment Index showed a sharp downturn in consumers’ overall economic outlook. United States (US) President Donald Trump also put his long-awaited trade war back on the table, dropping hints of things to come with threats of reciprocal tariffs on countries that have their own tariffs on US goods.

US NFP preliminary payrolls came in softer than expected in January, adding a net 143K new worker positions over the month, even lower than the forecast 170K. Still, it wasn’t all bad news on the labor front: December’s NFP print was revised significantly higher to 307K, and the Unemployment Rate ticked back down to 4.0% from 4.1%.

The UoM Consumer Sentiment Index for January contracted sharply to a new seven-month low of 67.8 as US consumers turned increasingly gloomy on their economic outlook. The sentiment index’s last score was 71.1. According to the UoM’s comprehensive survey results, US consumers are also battling renewed inflation fears with 12-month inflation expectations jumping to 4.3% versus the last print of 3.3%. Higher inflation expectations are taking root, with 5-year inflation expectations also ticking higher to 3.3% from 3.2%.

US President Donald Trump hit markets with a fresh round of rambling tariff threats, just to keep investors and markets on their toes and remind everyone that his plan is still to address the US’ debt problems with import fees on his own citizens. The President signed an executive order to begin preparing for de minimis, or minuscule, tariffs on China that are largely symbolic in nature, but promised via social media that he is preparing a wider package of reciprocal tariffs on “many countries”.

Dow Jones news

Market sentiment whipsawed on Friday, churning in both directions before getting jolted lower by fresh trade war headlines. Most of the Dow Jones equity board has turned lower, with thin gains getting overshadowed by steep losses from Amazon (AMZN).

Amazon posted better-than-expected earnings and revenue in Q4, but the megacompany also cautioned that headwinds may be on the horizon. It lowered its forward guidance for Q1 and sent investors running for the hills. Amazon's stock dropped 3.5% on Friday, sinking to $230 per share.

Dow Jones price forecast

The Dow Jones has extended into a second straight down day, shedding 300 points and falling back to the 44,400 region. The 44,000 handle is back in view, and the index is down over 1.5% from another failed attempt to muscle the major equity index over the 45,000 key price level. The immediate target for a bearish retracement is parked at the 50-day Exponential Moving Average (EMA) near 43,730. 

Dow Jones daily chart

• Mexican Peso treads water as inflation figures hint at further easing by Banxico.
• Despite US payrolls falling short, a lower unemployment rate boosts the USD against the Peso.
• Interest rate forecasts suggest further easing in Mexico, with the Fed maintaining a cautious outlook for 2025.

The Mexican Peso (MXN) reversed its course and depreciated against the Greenback on Friday after inflation data in Mexico justified the 50 basis points interest rate cut by Banco de Mexico (Banxico) on Thursday. In the United States (US), job data was mixed, as payrolls missed the mark but the Unemployment Rate edged lower. The USD/MXN trades at 20.60, up 0.86%.

Inflation in Mexico edged lower in January, exceeding estimates revealed by the Instituto Nacional de Estadistica Geografia e Informatica (INEGI). Headline and core inflation remained within the Banxico 3% plus or minus 1% range, and improved compared to the latest report, opening the door for further easing by the Mexican central bank.

On Thursday, Banxico lowered borrowing costs from 10% to 9.50% and hinted that it could lower rates by the same magnitude in further meetings. Banxico’s officials added that inflation would converge to 3% in the third quarter of 2026.

The USD/MXN pair extended its gains after the release of the last US Nonfarm Payrolls report. Although the figures came short of expectations, an improvement in the Unemployment Rate spurred a leg-up in the exotic pair.

Furthermore, the interest rate differential between Mexico and the US will narrow. Banxico is expected to drop the primary reference rate to 8.50%, according to the cCentral bBank’s latest private economist poll. Conversely, the Federal Reserve (Fed) paused its easing cycle and projected two rate cuts in 2025, as revealed by last December’s Summary of Economic Projections (SEP).

Daily digest market movers: Progress on Mexican inflation, weighs on Mexican Peso

• Mexico's Consumer Price Index (CPI) for January increased by 3.53% YoY, down from 4.21% the previous month and beneath estimates of 3.61%. Core CPI rose by 3.66% YoY, up from 3.65%, but below forecasts of 3.70%.
• The evolution of the disinflation process in Mexico and last quarter's economic contraction of -0.6% QoQ were the main drivers of Banxico’s 50 bps reduction in borrowing costs.
• Banxico’s decision was not unanimous, as Deputy Governor Jonathan Heath voted for a 25-bps cut. Currently, the board is split between four doves, and Heath is the only “hawk.”
• US Nonfarm Payrolls in January dipped from 256K to 143K, missing the mark of 170K. The Unemployment Rate slid from 4.1% to 4%.
• Trade disputes between the US and Mexico remain in the boiler room. Although countries found common ground, USD/MXN traders should know that there is a 30-day pause and that tensions could arise throughout the end of February.
• Money market fed funds rate futures are pricing in 39 basis points (bps) of easing by the Federal Reserve in 2025.

USD/MXN technical outlook: Mexican Peso poised for further losses

USD/MXN has consolidated within the 20.30 – 20.70 area for the last four days, following Monday’s volatile session due to Trump’s tariffs on Mexico. The pair remains upward biased, with strong support at the 50-day Simple Moving average (SMA) at 20.57.

If USD/MXN rises past 20.70, the next resistance would be the January 17 daily peak at 20.90 before testing 21.00 and the year-to-date (YTD) high at 21.29.

Conversely, if USD/MXN drops below the 50-day SMA, the next support would be the 100-day SMA at 20.22. Once cleared, further downside is seen, and the pair could challenge 20.00.

United States (US) President Donald Trump hit social media hard on Friday, noting through a series of posts that his plans to execute widespread tariffs on most of the US trading allies are back on the table as a means of addressing the US federal deficit. Without any changes to funding sources, the US' budget shortfall is expected to swell under President Trump's stewardship as his proposed tax cuts will cause the federal government's inflows to evaporate.

President Trump also voiced his desire to "end the trade deficit with Japan", which currently stands at $65 billion annually.

Key highlights

Federal Reserve (Fed) Board of Governors member Adriana Kugler noted on Friday that US growth and economic activity remain healthy overall, but noted that progress toward the Fed's inflation goals has been somewhat lopsided.

Key highlights

According to the University of Michigan's (UoM) Consumer Sentiment Index, American consumers are beginning to grow increasingly concerned about US President Donald Trump's approach to economic policy and international trade. Trade war fears have knocked back consumer confidence, and consumer inflation expectations have also climbed.

The Preliminary UoM Sentiment Index showed that aggregate consumer outlook contracted in January, falling to 67.8 compared to investors' median forecasts of a climb to 71.8 from December's 71.1. It's the lowest reading in the UoM's main sentiment index since July of last year, and the average US consumer may not be in as great shape or feeling as confident as Wall Street might have originally thought.

UoM Consumer Inflation Expectations also rose across the board, climbing to 3.3% over the next 5 years and jumping to 4.3% over the next 12 months as multiple rounds of tariff threats take hold of the economy at the consumer level.

Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee hit markets on an already-volatile Friday with more bad news, noting that inconsistent policy approaches from the US government cause a high level of economic uncertainty that make it difficult for the Fed to draw a bead on where the economy, and inflation specifically, are likely heading. 

Key highlights

• WTI crude oil surges as US labor market data fuels demand optimism.
• Nonfarm payrolls miss expectations, but wage growth remains strong.
• Labor force participation rate edges higher, supporting energy demand outlook.

The West Texas Intermediate (WTI) crude oil prices climbed on Friday to around $70.80, buoyed by renewed optimism over energy demand following the latest US labor market report. While Nonfarm Payrolls (NFP) data revealed a weaker-than-expected 143K job additions in January, the overall labor market resilience and steady wage growth helped drive crude prices higher.

Despite the soft job additions, the US unemployment rate held firm at 4%, aligning with expectations. Wage growth remained solid, with average hourly earnings rising 0.5% month-over-month, in line with forecasts, while the year-over-year figure reached 4.1%, surpassing the anticipated 3.9%. Additionally, the labor force participation rate ticked up to 62.6%, reinforcing expectations of sustained economic activity and energy consumption.

It worth noticing that weak economic dat might prompt the Fed to consider sooner rate cuts and hence economic activity might flourish which could push demand for oil higher and benefit the price.

WTI crude oil is trading above $70.50 per barrel, testing a key resistance level at $71.00. A successful break above this threshold could pave the way for further gains, while immediate support lies at $70.00. Traders will closely monitor upcoming macroeconomic developments for additional market direction.

Canadian labour markets surprised broadly on the upside for a second straight month in January, with employment rising solidly and the unemployment rate unexpectedly slipping lower, RBC Economics’ Assistant Chief Economist Claire Fan notes.

Unemployment rate is still up almost a percentage point from a year ago

“It is probably too early to give labour markets the all clear – the unemployment rate is still up almost a percentage point from a year ago and wage growth slowed to its lowest year-over-year rate since May 2022. But the unemployment rate may be closer to peaking (or have peaked) earlier than feared.”

“The BoC signaled following their January rate cut that further reductions would be contingent on economic data continuing to look soft so another round of firm looking labour market data reduces the urgency for the BoC to cut again in March.”

“Still, interest rates are at relatively high levels relative to a soft economic backdrop, household spending has shown signs of picking up, but business spending is still very soft. There remain significant risks that U.S. tariffs could be announced before the March policy meeting, and another round of labour market and inflation data still to be released before then.”

• GBP/USD ascends to 1.2451, buoyed by disappointing US NFP figures showing only 143K jobs added.
• US unemployment rate improves to 4%, with a notable increase in Average Hourly Earnings hinting at robust consumer spending.
• Market anticipates Fed rate cut in June 2025, while recent BoE rate cut minimally impacts Pound's performance.

The Pound Sterling registered gains versus the US Dollar on Friday following a softer-than-expected US Nonfarm Payrolls report. The GBP/USD seesawed within a 1.2418 – 1.2491 range and traded at 1.2451, up 0.15%.

The Pound appreciates following a weak US jobs report

January US NFP data was softer than expected, with the economy adding 143K people to the workforce, below the 170K estimated. The Unemployment Rate ticked lower from 4.1% to 4%, a sign that the labor market remains strong. At the same time, Average Hourly Earnings surged, which would likely keep consumer spending strong.

Following the data, futures linked to the Fed funds rate showed that traders estimate the Fed’s first rate cut in 2025 will be in June, as expected following the US Central Bank's first policy meeting.

Meanwhile, the Pound remained unfazed after the Bank of England (BoE) cut rates by 25 basis points on Thursday, reducing the interest rate differential between the US and the UK.

Recently, the University of Michigan revealed that Consumer Sentiment deteriorated in its preliminary February reading, with the index dipping from 71.1 to 57.8, as expected.

GBP/USD Price Forecast: Technical outlook

The GBP/USD downtrend remains intact, but in the short term, it could rise toward the 50-day Simple Moving Average (SMA) at 1.2493. If buyers clear the latter the 1.2500 psychological level is up next.

Momentum turned bullish, as depicted by the Relative Strength Index (RSI). If GBP/USD achieves a daily close above 1.2500, buyers could drive the exchange rate to its December 30 peak of 1.2607.

On the other hand, if GBP/USD tumbles below 1.2450, the next support would be the February 6 swing low of 1.2359, ahead of 1.2300.

The exceptional run of U.S. labour market strength persisted in January, RBC Economics’ Senior Economist Claire Fan notes.

US unemployment rate drops to 4%

“The exceptional run of U.S. labour market strength persisted in January, even with a small miss in payroll employment gain (143k vs. consensus 170k) and large and negative backward benchmark revisions to the level of payroll employment.”

“The unemployment rate dropped to 4% (and would have been 3.9% without annual adjustments to the population controls) and wage growth among private sectors remained elevated.”

“Today's report confirms our expectations that a stable and strong U.S. jobs market does not need support from further Fed rate cuts. We continue to expect the central bank will hold Fed Funds steady at the current 4.25% - 4.5% range throughout 2025.”

Copper prices continue to rally, but our advanced positioning analytics suggest that no reasonable scenario for prices will catalyze CTA buying activity over the coming sessions, TDS’s Senior Commodity Strategist Daniel Ghali notes.

Buying to remain modest at best

“A big uptape could lead to some buying activity by this time next week, but our estimates suggest it would remain modest at best, which ultimately places the onus on other cohorts to keep prices from finding a local top.”

“Discretionary trader participation has also picked up lately, suggesting the latest strength in prices may be supported by additional buying activity from this cohort, but our estimates suggest it has now grown to its highest levels since the squeeze on the Comex Copper arb last year.”

Tariff risk premia evaporates. Two talking points dominate client discussions — tariffs and positioning, TDS’ FX analysts Jayati Bharadwaj and Mark McCormick note.

Markets can remain long USD for an extended time

“Markets have been a bit too quick and optimistic in pricing out tariff premia in USD/CAD which seems premature. Tariffs are a means to an end, even if not the end itself. With Canada, the goal is to restructure USMCA where discussions have not even begun yet. Tariffs, even if bargaining chips, might need to be implemented for some period of time to bring Canada to the negotiating table.”

“Our in-house positioning model shows that the USD has gone from an extreme long to more neutral based on a 6m scale. Now seems to be a good time to buy the USD on dips, especially vs currencies where Trump risks are under-priced like CAD, EUR. Positioning, in itself, is no longer a strong argument to be a USD bear. In fact, we find that markets can remain long USD for an extended time (like during the trade war of 2018-2019).”

“We recently went long USD/CAD call spreads with 3m expiry. Our quant macro framework MRSI now assigns a large negative trading weight to CAD, driven by rates, growth, carry and equity (factors where the USD scores strongly). Poor fundamentals, a relatively weak macro story, rising trade uncertainty, and domestic political uncertainty restricting Canada's fiscal response to potential tariffs should ultimately push USD/CAD higher again.”

• USD/CAD falls to near 1.4300 after the release of the employment data for both the US and Canada.
• Surprisingly upbeat Canadian employment data has provided some support to the Canadian Dollar.
• The US NFP data misses estimates and came in lower at 143K.

The USD/CAD pair falls to near 1.4300 in North American trading hours on Friday. The Loonie pair drops after the release of the employment data for January in both the United States (US) and Canada.

The Canadian labor market report came in surprisingly stronger than expected. The report showed that the economy added 76K workers in January, beating the estimate of 25K but remaining lower than the December reading of 91K. The Unemployment Rate decelerated to 6.6% from expectations of 6.8% and the previous release of 6.7%.

Signs of strong labor market data are expected to provide a big relief for the Canadian economy, which is facing the risk of economic slowdown. It appears that the impact of interest rate cuts yet taken by the Bank of Canada (BoC) is coming into effect. However, upbeat labor market data is unlikely to force traders to pare BoC dovish bets as risks of inflation undershooting the central bank’s target of 2%

Meanwhile, the US employment data showed that the labor demand remains weak. The Nonfarm Payrolls (NFP) report showed that employers hired added 143K job-seekers in January, significantly lower than estimates of 170K and the former release of 307K, upwardly revised from 256K. The Unemployment Rate decelerates to 4% from the estimates and the prior reading of 4.1%.

However, the Average Hourly Earnings data, a key measure of wage growth, surprisingly came in higher than projected. On year, the wage growth measure rose at a faster pace of 4.1%, compared to 3.9% in December. Month-on-month Average Hourly Earnings data rose at a faster pace of 0.5% against estimates and the former release of 0.3%.

Hot wage growth data is likely to boost market speculation that the Federal Reserve (Fed) will keep interest rates at their current levels for longer.

In an interview with CNBC on Friday, Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari said that he would move towards supporting further rate cuts if they see good inflation data and the labor market stays strong, as reported by Reuters.

Key takeaways

"10-year yield rise even as fed cut rates looks mostly about real rates, with uncertainty about where neutral rate is."

"Could also be from fiscal deficits."

"Fed will get inflation back down."

"Most important data today is the 4% unemployment rate."

"It's still a good labor market."

"Economy is strong, businesses optimistic."

"We are in a good place to sit here until we get more information on administration's policies."

"Inflation is coming down."

"We have a lot of confidence that housing inflation will help bring inflation down."

The Pound Sterling (GBP) weakened following yesterday’s BoE policy decision, with the initial reaction driven by a dovish tilt to the policy vote split (hawkish MPC member Mann and one other voted for a 50bps cut), Scotiabank's Chief FX Strategist Shaun Osborne notes. 

Markets reassess BoE policy outlook

"Governor Bailey stressed a cautious and gradual approach to policy adjustment moving forward. BoE forecasts for weak growth and higher inflation may add to concerns that Chancellor Reeves fiscal plans may be disrupted by the sluggish economy. BoE economist Pill speaks shortly." 

"Despite this week’s volatility, the GBP is sustaining the technical improvement seen since the mid-January bull reversal from 1.21 by holding above the four-month bear trend line that guided the pound lower from its late September peak." 

"Solid net gains on the week suggest more sustained gains above 1.25 in the short run which would support a push through to 1.2610 (38.2% Fib retracement of the late September/January decline)."

After German Factory Orders data yesterday surprised positively, Industrial Production data for December slumped a larger-than-expected 2.4% on weaker auto output, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

German Industrial Output slides in December

"November’s output gain was revised down slightly to 1.3%. German Trade data reflected a larger than expected surplus (EUR20.7bn) as exports jumped 2.9% in the month. The data had little impact on the EUR which is little changed intraday." 

"The EUR is little changed and is just about holding on to its 40-day MA support at 1.0376. Significant EUR gains from the early week low and net gains on the week are positive but residual bearish momentum here remains strong and there are still significant net bearish price signals on the longer run chart that suggest the EUR must push through 1.0535 to show some technical strength."

The Canadian Dollar (CAD) is one of the weaker major currencies on the session but losses versus the USD amount to a little more than 0.1%. he CAD continues to consolidate early week volatility, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

USD/CAD may face more pressure on key support at 1.4250/60

"The recent trends in hiring have been tracking a little firmer since mid-year, supported by stronger gains in hiring in energy-producing provinces. Data also reflected decent gains in hours worked late last year, rising at a roughly 2.5% annualized clip in Q4 which suggests decent growth momentum into yearend."

"Speaking last night, BoC Governor Macklem cautioned that tariff uncertainty was already weighing on Canadian household and business confidence but stressed that policymakers would have to balance growth and inflation risks in the event of hefty tariffs being imposed on Canada."

"Spot is consolidating but the USD is holding below the 40-day MA (initial resistance at 1.4379) and very significant net USD losses on the week look very bearish on the longer-term chart (outside week/key week reversal). All else equal, this should put more pressure on key support at 1.4250/60 in the coming week and reinforce USD resistance in the 1.4550/1.4600 zone."

• USD/CAD retreats to 1.4305 after softer-than-expected US NFP data.
• US Unemployment declined to 4% while hourly earnings remained stable.
• Canadian unemployment falls to 6.6%, but remains above forecasts.

The USD/CAD pair pulled back to 1.4305 following the release of January's Nonfarm Payrolls (NFP) data, which fell significantly short of expectations. The report showed the US economy added just 143K jobs, well below the 307K forecast, triggering a pullback in the US Dollar. Meanwhile, the unemployment rate ticked down to 4%, aligning with market projections, while wage growth remained firm.

While the headline NFP figure disappointed, wage growth remained stable. Average hourly earnings rose by 0.5% month-over-month as expected, while the annual figure edged up to 4.1%, surpassing the 3.9% estimate. Additionally, the labor force participation rate improved slightly to 62.6% from 62.5%, suggesting continued resilience in employment metrics despite weaker hiring trends.

On the Canadian side, unemployment declined to 6.6%, improving from 6.8% but still exceeding the projected 6.7%. The data suggests that while job conditions in Canada have somewhat improved, lingering softness in the labor market could keep the Bank of Canada (BoC) cautious regarding future rate adjustments.

USD/CAD Technical outlook

USD/CAD retraced to 1.4305, marking a moderate pullback but indicators including the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) look weak on the daily scale. The pair remains in an downtrend in the short-term after losing the 20-day Simple Moving Average (SMA), but buying pressure could persist if sellers fails to secure the 1.4300 support zone.

• GBP/JPY recovers strongly to near 189.50 as investors digest BoE’s dovish policy outlook.
• The BoE halved UK GDP growth for the year to 0.75%.
• BoJ Tamura sees interest rates rising to at least 1% by April 2026.

The GBP/JPY pair bounces back to near 189.50 in Friday’s North American session after posting a fresh four-month low of 188.00 earlier in the day. The cross recovers strongly as the Pound Sterling (GBP) outperforms across the board, with investors starting to digest Bank of England’s (BoE) dovish communication on the monetary policy outlook and downwardly revised Gross Domestic Product (GDP) forecasts for the year to 0.75% from 1.5% projected in November.

On Thursday, the BoE reduced its key borrowing rates by 25 basis points (bps) to 4.5%, as expected. However, the vote split was more dovish than what the market participants had anticipated.

Out of nine members-led-Monetary Policy Committee (MPC) committee, seven members voted in favor of an interest rate of 25 bps and two for 50 bps, including Catherine Mann, an outspoken hawk. Market participants have projected that eight members will support a reduction in interest rates, and one would vote for keeping interest rates steady.

Meanwhile, the Japanese Yen (JPY) underperforms its peers even though traders raised Bank of Japan (BoJ) hawkish bets after board member Naoki Tamura said that interest rates must increase at least 1% by the second half of the fiscal year beginning in April, Reuters reported. Tamura’s hawkish guidance was based on the assumption that there will be broad-based pay increases, which would lift price pressures.

GBP/JPY discovers strong buying interest after diving to near the four-month low of 188.00. The outlook of the pair remains bearish as the 20-day Exponential Moving Average (EMA) is sloping downwards, which trades around 192.10.

The 14-day Relative Strength Index (RSI) slides into the 20.00-40.00 range, suggesting that the downside momentum is intact.

More downside would appear towards the September 18 low of 185.80 and the September 16 low of 183.77 if the pair breaks below the intraday low of 188.00.

On the flip side, a further recovery move above the February 4 high of 193.18 will drive the asset towards the January 24 high of 194.76, followed by the January 9 high of 195.90.

GBP/JPY daily chart

The US Dollar (USD) is narrowly mixed for the most part against the major currencies, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Technical signals lean bearish for DXY

"FX markets give the impression of limping into the weekend, with narrow ranges overall contrasting with the bigger moves and higher volatility that characterized early week trading. Tariffs have moved to the background, for now. "

"The GBP is a minor outperformer among the G10 currencies on the session as investors recalibrate thinking after yesterday’s BoE decision brought some mixed messaging on the policy outlook. The JPY has given back a lot of yesterday’s gains as US yield nudge marginally higher; it is underperforming alongside the CHF even though risk appetite looks a little fragile globally."

"Overall, the USD’s sharp reversal from its Monday peak leaves the DXY trading down sharply on the week. Net losses are a significant technical negative on the weekly charts which would—ordinarily, if markets really have switched off the tariff driver for FX—point to more losses ahead and strengthen the technical ceiling on the index in the 110 area. A push below 107 in the week ahead would indicate more weakness in store for the USD overall."

• AUD/USD stands around 0.6280 as markets await US NFP data.
• Fed expected to hold rates steady; June rate cut remains in focus.
• Australian Dollar vulnerable ahead of RBA's anticipated rate cut.

The AUD/USD moves around 0.6280 on Friday as investors turned their attention to the upcoming US Nonfarm Payrolls (NFP) report. With expectations set at 170K job additions, down from 256K in December, the data will be pivotal in shaping the Federal Reserve’s (Fed) monetary policy outlook. A stronger-than-expected print could reinforce the Fed’s cautious stance, while weaker figures may fuel rate-cut speculation.

The US labor market remains a focal point for traders, with the Unemployment Rate forecasted to hold steady at 4.1%. A robust reading would strengthen the case for the Fed to maintain its wait-and-see approach on rate adjustments. On the other hand, a weaker print could revive dovish bets, with markets already pricing in a rate cut by June, as per the CME FedWatch tool.

While the US job market takes center stage, the Australian Dollar faces its own challenges. Markets widely anticipate the Reserve Bank of Australia (RBA) to lower the Official Cash Rate (OCR) to 4.1% this month. With a rate cut almost certain, the Aussie may struggle to hold onto gains, especially if broader risk sentiment turns negative.

AUD/USD Technical outlook

The AUD/USD pair has gained traction, pushing past the 20-day Simple Moving Average (SMA) at 0.6230. The Relative Strength Index (RSI) stands at 57, indicating a neutral to mildly bullish bias, while the Moving Average Convergence Divergence (MACD) histogram shows decreasing green bars, suggesting a potential loss of upward momentum. If the pair sustains above 0.6250, further upside toward 0.6320 remains possible.

• USD/JPY rises to 152.10 amid a sour market mood.
• Markets await US jobs data, with NFP expected at 175k.
• Fed officials remain cautious on rate cuts despite easing inflation.

The USD/JPY pair climbed 0.48% to 152.10 on Friday, supported by the US Dollar’s resilience amid cautious commentary from Federal Reserve officials. With the US labor market remaining solid, traders are eyeing the upcoming Nonfarm Payrolls (NFP) report, which is expected to show a 175k job gain for January. A whisper estimate suggests a slightly stronger 199k reading, signaling continued labor market strength.

With expectations pointing to an unchanged unemployment rate of 4.1% and wage growth stabilizing at 3.8% YoY, markets remain attentive to any surprises in the data. Given recent jobless claims trends and other indicators, there is potential for an upside surprise, which could reinforce the Fed’s cautious stance on rate cuts.

Federal Reserve policymakers continue to push back against early rate cuts. Dallas Fed’s Logan noted that even if inflation moves closer to 2% in the coming months, it would not necessarily justify imminent easing. She emphasized that a stable labor market coupled with lower inflation would signal a neutral policy stance, leaving little room for near-term cuts. Meanwhile, Chicago Fed’s Goolsbee highlighted growing fiscal uncertainties, suggesting they could slow the pace of future rate reductions. Fed officials Bowman and Kugler are also set to speak later today, potentially providing additional insights on monetary policy direction.

In fact the Fed's sentiment index remains deep in hawkish territory and provides a cushion to the US Dollar but the bank's stance might change after today's data.

USD/JPY Technical outlook

USD/JPY continues to gain traction, with technical indicators recovering from recent lows. The Relative Strength Index (RSI) is near the 30 level which suggests intense selling pressure which could trigger a correction. If buying interest persists, the pair could extend gains toward resistance at 152.50, while support remains at 151.50. The outlook favors the bulls, provided the pair holds above key levels.

Outlook remains mixed, but US Dollar (USD) is likely to trade in a narrower range of 7.2500/7.3300. In the longer run, momentum indicators remain neutral; USD is likely to trade in a range of 7.2700/7.3000, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Momentum indicators remain neutral

24-HOUR VIEW: “USD traded between 7.2765 and 7.2991 yesterday, narrower than our expected range of 7.2650/7.3050. USD closed largely unchanged at 7.2880 (+0.07%). Momentum indicators remain neutral, and we continue to expect range trading, probably in a range of 7.2700/7.3000.”

1-3 WEEKS VIEW: “Two days ago (05 Feb, spot at 7.2915), we indicated that ‘the outlook for USD is mixed after the volatile price movements over the past couple of days.’ We were of the view that USD ‘could trade in a broad range of 7.2430/7.3580. While the outlook remains mixed, the decreasing volatility over the past couple of days suggests USD could trade in a narrower range of 7.2500/7.3300.”

• The US Dollar trades mixed this Friday ahead of the US Nonfarm Payrolls release. 
• Markets expect weaker Nonfarm Payrolls data to spark more interest rate cut expectations from the Fed.
• The US Dollar Index (DXY) is back near pivotal support at 107.35 and could rip through it on a weaker NFP print. 

The US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, trades at 107.65 at the time of writing on Friday, slightly lower in the runup to the US Nonfarm Payrolls (NFP) report for January. Consensus is for a substantially weaker print, taking into account the recent economic US numbers pointing to a slowdown or consolidation in the jobs market. A much weaker Nonfarm Payrolls number could spark hopes for more than two interest rate cuts from the Federal Reserve (Fed) in 2025.

Expectations for the Nonfarm Payrolls data are for 170,000 new workers in the month compared to 256,000 in December. The estimated range is between 105,000 at the lowest estimate and 240,000 at the high end of the range. Any print below 105,000 will spark substantial US Dollar (USD) weakness and might see the DXY break below 107.00.

Daily digest market movers: US NFP report and nothing else

• At 13:30 GMT, the US Nonfarm Payrolls report for January will be released:
  • Nonfarm Payrolls data is expected to come in at 170,000, from 256,000 in December.
  • Monthly Average Hourly Wages are expected to remain unchanged at 0.3%.
  • The Unemployment Rate should remain stable at 4.1%.
• At 14:25 GMT, Fed Governor Michelle Bowman delivers a speech on bank regulation at the 2025 Wisconsin Bankers Association Bank Executives Conference.
• At 17:00 GMT, Fed Governor Adriana Kugler speaks on "Entrepreneurship and Aggregate Productivity" at the 2025 Miami Economic Forum in Miami, Florida.
• Equities are looking for direction on Friday, with minor gains and losses in the European markets. US futures are roughly flat on the day. 
• The CME FedWatch tool projects an 85.5% chance that the Fed will keep interest rates unchanged at its next meeting on March 19. 
• The US 10-year yield is trading around 4.43%, recovering from its fresh yearly low at 4.40% printed on Wednesday. 

US Dollar Index Technical Analysis: No help in sight

The US Dollar Index (DXY) is in a tough spot at the moment. The current tariff implementations from US President Donald Trump are not clearly having the same impact on the Greenback as back in March of 2018, when the first tariffs on China were implemented. Markets are instead rather looking at US yields gapping lower and US economic data starting to open room for more than two interest rate cuts from the Federal Reserve this year. If the NFP print this Friday comes in substantially softer, expect markets to price in three interest rate cuts by the Fed for 2025 and the DXY fall to 106.00.

On the upside, the first barrier at 109.30 (July 14, 2022, high and rising trendline) was briefly surpassed but did not hold on Monday. Once that level is reclaimed, the next level to hit before advancing further remains at 110.79 (September 7, 2022, high). 

On the downside, the October 3, 2023, high at 107.35 is still acting as support while the Relative Strength Index (RSI) has used the rather calm last three days to catch a breather and now has more downside room to pull the DXY lower. Hence, look for 106.52 (April 16, 2024, high) or even 105.98 (resistance in June 2024 and 100-day Simple Moving Average) as better support levels. 

US Dollar Index: Daily Chart

Further weakness US Dollar (USD) is not ruled out; deeply oversold conditions suggest any decline may not reach 150.60. In the longer run, USD outlook remains negative; the level to monitor is 150.00, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

USD outlook remains negative

24-HOUR VIEW: “USD sold off sharply two days ago. Yesterday, we indicated that ‘despite the deeply oversold conditions, the weakness has not stabilised.’ We highlighted that USD ‘could drop further, but given the oversold conditions, it might not be able to break the significant support at 151.80.’ The 151.80 support was tested in Asian trade yesterday but held. However, the level gave way during NY session as USD plunged. The breach of the significant led to a sharp selloff to 151.23. While further USD weakness is not ruled out, deeply oversold conditions decline suggest that any decline may not reach 150.60 (minor support is at 150.00). Resistance levels are at 151.80 and 152.50.”

1-3 WEEKS VIEW: “We revised our USD outlook to negative yesterday (06 Feb, spot at 152.60), but we noted that ‘there is a significant support level at 151.80.’ We did not expect USD to breach the support level as quickly. The outlook remains negative, and the level to monitor now is 150.00. We will maintain our negative view as long as 153.30 (‘strong resistance’ level was at 154.30 yesterday) is not breached.”

Chance for New Zealand Dollar (NZD) to edge higher; any advance is unlikely to break above 0.5705. In the longer run, there has been a tentative buildup in momentum; NZD could rise gradually to 0.5725, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

There has been a tentative buildup in momentum

24-HOUR VIEW: “Yesterday, we held the view that NZD ‘could edge above 0.5705 before levelling off.’ However, NZD traded in 0.5652/0.5690 range. While upward momentum has not increased much, there is still a chance for NZD to edge higher today. That said, it is unlikely to be able to break above 0.5705. On the downside, support levels are at 0.5655 and 0.5640.”

1-3 WEEKS VIEW: “Not much has changed since our update yesterday (06 Feb, spot at 0.5685). As pointed out, ‘there has been a tentative buildup in momentum, and NZD could rise gradually to 0.5725.’ The upward pressure will remain intact as long as NZD remains above 0.5615 (no change in ‘strong support’ level from yesterday).”

• AUD/USD edges higher but remains below 0.6300 ahead of the US NFP data for January.
• The US NFP data would drive market expectations for the Fed’s interest rate outlook.
• Investors await the Trump-Jinping meeting to get more developments on the trade relations between China.

The AUD/USD pair ticks higher in Friday’s European session but continues to face pressure near 0.6300. The Aussie pair turns sideways as investors await the United States (US) Nonfarm Payrolls (NFP) data for January, which will be published at 13:30 GMT.

Market participants will keenly focus on the employment data, which will provide cues about how long the Federal Reserve (Fed) will keep interest rates steady between 4.25% and 4.50%.

According to estimates, the US economy added 170K workers last month, fewer than 256K in December. The Unemployment Rate is estimated to have remained steady at 4.1%. Signs of a strong job market would boost market expectations that the Fed will keep interest rates steady for longer. On the contrary, soft numbers would force traders to increase their dovish bets.

Ahead of the US NFP data, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades in a tight range below 108.00.

Meanwhile, the Australian Dollar (AUD) has performed strongly in the past few trading sessions amid expectations that US President Donald Trump and Chinese Leader XI Jinping will have a meeting to reach a deal and roll back tariffs. This week, China retaliated against 10% tariffs from Donald Trump by imposing 15% levies on coal and Liquified Natural Gas (LNG), and 10% for crude oil, farm equipment and some autos.

Such a scenario will be favorable for the Aussie dollar as Australia is the leading trading partner of China.

On the monetary policy front, traders have fully priced in a 25-basis points (bps) interest rate reduction by the Reserve Bank of Australia (RBA) in the policy meeting on February 18.

The Pound Sterling (GBP) is trading on the defensive against most major currencies and UK 10-year government bonds are underperforming global peers. Yesterday, the Bank of England (BOE) reduced the policy rate 25bps to 4.50% (widely expected) and stressed there would be ‘a gradual and careful approach’ to the further rate cuts. Markets imply an additional 75 to 100bps of cuts over the next 12 months, BBH FX analysts note.

GBP is trading on the defensive against most major currencies

“The MPC voted by a majority of 7–2 to cut rates. The two dissenting members, uber dove Swati Dhingra and surprisingly Dr. Catherine Mann, preferred a 50bps cut. Dr. Mann was a staunch hawk on the MPC, so her policy stance change lowers the bar for more BOE easing.”

“The BOE minutes highlights that for one of the two members that voted for a 50bps cut ‘a more activist approach at this meeting would give a clearer signal of financial conditions appropriate for the United Kingdom.’ Dr. Mann is an outspoken proponent of an activist monetary policy strategy.” 

“In the current economic cycle, this strategy implies keeping rates on hold for longer until there are clear signs the remaining persistence in inflation dissipates. Once inflation persistence has been purged, it would then be appropriate to ease fast and forcefully. ”

AUD is facing mild upward pressure; it could test 0.6310, but a sustained break above this level is unlikely. If AUD closes above 0.6310, it could trigger an advance to 0.6355, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Break above 0.6310 can trigger an advance to 0.6355

24-HOUR VIEW: “When AUD was at 0.6280 during early the Asian session yesterday, we noted that ‘while conditions remain overbought, AUD could edge higher and test 0.6310.’ We pointed out that ‘support levels are at 0.6265 and 0.6245.’ Our expectations did not materialise, as AUD traded in a 0.6255/0.6288 range, closing largely unchanged at 0.6284 (-0.04%). Despite the relatively quiet price action, the underlying tone seems firm. Today, we continue to expect AUD to edge higher and test 0.6310. Given the mild momentum, a sustained break above this level is unlikely. Support is at 0.6265; a breach of 0.6245 would indicate that the current mild upward pressure has eased.”

1-3 WEEKS VIEW: “We highlighted yesterday (06 Feb, spot at 0.6280) that ‘upward momentum is beginning to build, and if AUD closes above 0.6310, it could trigger an advance to 0.6355.’ We also highlighted that ‘the chance of AUD closing above 0.6310 will increase in the coming days as long as 0.6200 (‘strong support’ level) is not breached.’ Our outlook remains the same.”

USD/CAD is stabilizing around key technical support at 1.4300, BBH FX analysts note.

Trade conflict can badly hurt economic activity in Canada

“Bank of Canada (BOC) Governor Tiff Macklem reiterated overnight that a long-lasting and broad-based trade conflict would badly hurt economic activity in Canada and put direct upward pressure on inflation. This complicates the BOC’s job as monetary policy cannot lean against weaker output and higher inflation at the same time.” 

“Canada’s January labor force survey is the domestic focus (1:30pm London). Consensus sees a 25k rise in jobs vs. 91k in December, while the unemployment rate is expected at 6.8% vs. 6.7% in December. Overall, the labor market remains soft and firms’ hiring intentions are muted.”

“Interest rate futures imply almost 75bps of BOC cuts over the next 12 months that should see the policy rate bottom at the lower end of the BOC’s neutral range estimate of 2.25% to 3.25%. Bottom line: FED/BOC policy trend, risk of all-out trade war between Canada and the US, and the Trump administration’s focus on lowering energy prices support a higher USD/CAD.” 

Yesterday's Czech National Bank meeting brought several surprises. Ahead of the meeting, data showed that inflation slowed less than expected, dropping to 2.8% year-on-year from 3.0% in December, mainly due to food prices, ING’s FX analysts Frantisek Taborsky notes.

EUR/CZK to remain higher in the 25.100-200 range

“We won't know the core inflation numbers until next week but the breakdown from the flash report suggests a weak number. However, the CNB did cut rates by 25bp to 3.75%. The central bank also unveiled a new forecast that is more or less in line with our expectations. The GDP outlook was revised down closer to our forecast, EUR/CZK and inflation were revised down, while the rates path is slightly higher this year but lower next year.”

“The press conference was accompanied by the usual hawkish tone, but we found the tone slightly softer compared to previous meetings. The CNB is visibly open to further rate cuts, but we also know that the Board believes it is close to the end of the cutting cycle.”

“The market remained essentially flat in the rates space however the koruna did rally some, much like the rest of the region. Although we dropped our bearish bias yesterday, EUR/CZK should remain higher in the 25.100-200 range, in our view. Today we will see the CNB meeting with analysts and details of the new forecast, which could tell us more. However, given weaker inflation, we can expect rate cuts to be on the table for the next meeting, which should keep the CZK at current levels.”

The Dollar Index (DXY) uptrend stalled near 110.15 last month, BBH FX analysts note.

MACD posts negative divergence

“Recent attempt to cross this hurdle has remained futile and the index has retracted towards the upper limit of previous multi-month range at 107. Daily MACD has been posting negative divergence denoting receding upward momentum.”

“Recent price action has evolved in a range defined by limits of 107 and 110.15. In the event that the index breaches 107, there would be risk of a deeper pullback towards 106.45 and perhaps even towards December low of 105.40/105.15.”

• Silver price moves higher to near $32.40 as bond yields trade cautiously ahead of the US NFP data for January.
• Investors expect the US economy to have added 170K workers last month.
• Upbeat US labor market data would force traders to raise bets supporting the Fed to keep interest rates steady for longer.

Silver price (XAG/USD) climbs to near $32.40 in European trading hours on Friday. The white metal gains as the US Dollar (USD) and bond yields tick lower ahead of the United States (US) Nonfarm Payrolls (NFP) data for January, which will be published at 13:30 GMT.

Investors will focus on employment data to gauge the Federal Reserve’s (Fed) monetary policy outlook. On Thursday, Dallas Fed Bank President Lorie Logan said she would support holding interest rates at their current levels until the “labor market doesn’t falter.”

The US NFP report is expected to show that 170K fresh workers were added to the labor force in January, fewer than 256K in December. The Unemployment Rate is estimated to have remained steady at 4.1%. Signs of strong labor demand would boost market expectations that the Fed will keep interest rates in their current range of 4.25%- 4.50% for longer. Such a scenario would be unfavorable for the Silver price.

Investors will also focus on the Average Hourly Earnings data, which is a key measure of wage growth. On year, the wage growth measure is expected to have decelerated to 3.8% from 3.9% in December.

Ahead of the US NFP, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades subduedly around 107.70. 10-year US Treasury yields tick lower to near 4.43%.

Silver technical analysis

Silver price strives to break above the immediate resistance of $32.50, which is plotted from the December 9 high. The outlook of the white metal remains bullish as the 20-day Exponential Moving Average (EMA) is sloping higher near $30.90.

The 14-day Relative Strength Index (RSI) oscillates in the 60.00-80.00 range, suggesting that the momentum is bullish.

Looking down, the upward-sloping trendline from the August 8 low of $26.45 will be the key support for the Silver price around $29.50. While, the October 31 high of $33.90 will be the key barrier.

Silver daily chart

Canada also releases January jobs numbers today, ING’s FX analysts Francesco Pesole notes.

USD/CAD to stay below 1.44 for now

“The slowdown is expected to be meaningful after December’s strong figures, with only 25k increases in hiring expected. Unemployment is seen inching higher to 6.8%. That would probably still argue against immediate additional easing by the Bank of Canada purely on the back of domestic data.”

“More cuts can however come on the back of US tariffs at a later stage, but for now, USD/CAD can stay below 1.44.”

The US Dollar’s (USD) bearish momentum has eased into today’s US jobs release. Most of the tariff shock from last weekend has been absorbed, and markets are also probably reconsidering the optimism on a US-China deal. Beijing’s retaliatory tariffs are due to come into effect on Monday, and the chances of a de-escalation before then have decreased. Also helping the dollar were some comments by Treasury Secretary Scott Bessent, who said the strong dollar policy remains in place, ING’s FX analysts Francesco Pesole notes.

A move to 107.0 in DXY is warranted

“The biggest driver for FX should be US payroll figures for January. The consensus is for a slowdown from 256k to 175k, but our estimate is closer to 160k. A lot of focus will be on annual benchmark revisions.”

“Last year's provisional revisions indicated that, upon cross-referencing with tax data, the Bureau of Labor Statistics had overestimated job creation by approximately one-third. This points to significant issues with their model, and we anticipate substantial adjustments to the monthly payroll numbers.”

“So, despite some support potentially coming from souring sentiment on China, we have a negative bias on the dollar today. Markets are pricing in 43bp of easing by year-end and there is room for a dovish repricing on the back of softer economic data. A move to 107.0 in DXY is warranted.”

Outlook is mixed; GBP could trade between 1.2390 and 1.2500. In the longer run, for the time being, GBP is likely to trade in a 1.2310/1.2550 range, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

GBP cad continue to trade in a choppy manne

24-HOUR VIEW: “Yesterday, we expected GBP to ‘consolidate in a 1.2460/1.2540 range.’ Our expectation was incorrect, as GBP plummeted to 1.2361 before rebounding strongly to close at 1.2438 (-0.54%). The price action has resulted in a mixed outlook. Today, GBP could continue to trade in a choppy manner, likely between 1.2390 and 1.2500.”

1-3 WEEKS VIEW: “Following GBP rise to 1.2550 two days ago, we indicated yesterday (06 Feb, spot at 1.2505) that ‘upward momentum is increasing, but not enough to suggest a sustained advance.’ We added, ‘for a sustained advance, GBP has to break and remain above 1.2550.’ Yesterday, GBP plummeted to a low of 1.2361. The breach of our ‘strong support’ level of 1.2370 indicates that the buildup in momentum has faded. To put it another way, GBP is not ready to break above 1.2550. For the time being, it is likely to trade in a 1.2310/1.2550 range.”

The European Central Bank will publish its staff revision on the neutral rate today, ING’s FX analysts Francesco Pesole notes.

EUR/USD to retest the 1.044 Wednesday highs

“President Christine Lagarde said last week that r-star is ‘a range that does not give a guideline or a destination’ and Olli Rehn added yesterday that ‘we should not constrain our freedom of action because of a theoretical concept’.”

“That said, with the next couple of cuts not particularly up for debate, a lot of the action in pricing is focused on the terminal rate. The scope and timing of US tariffs would have a big say, but while markets await Trump’s move on the EU, today’s report is all markets will get in terms of terminal rate guidance, and we expect a euro reaction.”

“Based on Rehn’s comments and the fact that r-star projections are model-based (i.e. embedding significantly higher inflation than in the past), our best guess is that today’s note will show a relatively high rate and send a hawkish signal. When adding downside risks for US payrolls, we favour a new leg higher in EUR/USD to retest the 1.044 Wednesday highs.”

• Gold’s rally hit a curb on Thursday and snapped its five-day winning streak. 
• Traders are on edge over the upcoming US Nonfarm Payrolls release on Friday. 
• Gold is still at odds to print a new all-time high on Friday if Nonfarm Payrolls disappoint. 

Gold’s price (XAU/USD) edges higher and trades back up near $2,865 at the time of writing on Friday after its rather sluggish performance the previous day. The pickup in the rally comes ahead of the US Nonfarm Payrolls (NFP) report later in the day. A weaker number would benefit Gold, with rate cut odds from the Federal Reserve (Fed) increasing.   

Meanwhile, headlines emerged on Friday that China’s central bank, the People's Bank of China (PBOC), has expanded its Gold reserves for a third month in a row. Even at fresh all-time high prices, the central bank bought roughly 0.16 million troy ounces in January, Bloomberg reports. Meanwhile, threats from US President Donald Trump to slap more tariffs on the Eurozone and other countries are keeping Gold supported as a safe haven for investors should the tariff war escalate further. 

Daily digest market movers: Central bank buying

• Gold reserves held by the People’s Bank of China rose by 0.16 million troy ounces last month, according to data released Friday. The central bank resumed adding Gold reserves in November after a six-month halt that ended an 18-month buying spree, Bloomberg reports. 
• The US-China trade war, fears that President Donald Trump will follow through on threats to impose tariffs on other nations, and his unconventional geopolitical possible interventions are supporting Gold’s role as a safe haven in uncertain times. The bull run looks set to continue, with prices likely to hit $3,000 an ounce within three months, Citigroup Inc. said in a note, Bloomberg reports. 
• Zimbabwe’s Gold output rose to 3,134.34 kg in January, up from 2,375.32 kg a year earlier, Fidelity Gold Refinery said on Friday in an emailed statement, Reuters reported. It was mostly the smaller-scale miners who were good for the increase in output, while the larger mines declined in production. 
• At 13:30 GMT, the US Nonfarm Payrolls employment report for January is due. Expectations are for 170,000 new workers in the month compared to 256,000 in December. However, broad expectations are for a much softer number, according to several bank analysts and forecasters. 

Technical Analysis: All-time high data-driven

With the Nonfarm Payrolls release on Friday, it is clear that if Gold hits a new all-time high, it will be due to a very weak number in employment data. However, as usual, caution needs to be taken with this build-up in expectations. Even a number in line with consensus could be enough to disappoint markets on their downside expectations, triggering  a knee-jerk reaction with Gold facing some profit-taking ahead of the end of the week. 

The Pivot Point level on Friday is the first nearby support at $2,854, followed by the S1 support at $2,835. From there, S2 support should come in at $2,815. In case of a correction, the bigger $2,790 level (the previous high of October 31, 2024) should be able to catch any falling knives.

On the upside, the R1 resistance comes in at $2,874, just slightly below the current all-time high at $2,882. In case the rally can pick up where it left off, the upside level to beat in terms of daily pivotal levels is the R2 resistance near $2,893 ahead of  $2,900 as a big figure.

XAU/USD: Daily Chart

• EUR/USD trades broadly sideways around 1.0400 as investors await the US NFP data for January.
• The Fed is expected to cut interest rates in the June policy meeting.
• ECB’s Cipollone expects the impact of tariffs on China to be deflationary for the Eurozone.

EUR/USD steadies in a tight range around 1.0400 in Friday’s European session as the US Dollar (USD) trades cautiously ahead of the United States (US) Nonfarm Payrolls (NFP) data for January, which will be published at 13:30 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks lower to near 107.60.

Economists expect the US economy to have added 170K workers, fewer than 256K in December. The Unemployment Rate is estimated to have remained steady at 4.1%. The official employment data is expected to drive market speculation about how long the Federal Reserve (Fed) will hold interest rates at their current levels.

Signs of a strong labor market would boost expectations that the Fed will remain in the waiting mode regarding interest rates for longer. On the contrary, soft numbers would stimulate Fed dovish bets. According to the CME FedWatch tool, the Fed is expected to announce its next interest rate cut in the June policy meeting.

Last week, Fed Chair Jerome Powell said the central bank would make monetary policy adjustments only after seeing “real progress in inflation or at least some weakness in labor market” after the Fed left interest rates unchanged in the range of 4.25%-4.50%.

Investors will also pay close attention to the Average Hourly Earnings data, which is a key measure of wage growth that drives consumer spending. The wage growth measure is estimated to have decelerated to 3.8% year-on-year from 3.9% in December. In the month, Average Hourly Earnings are expected to have grown steadily by 0.3%.

Daily digest market movers: EUR/USD steadies while Euro’s outlook remains uncertain

• EUR/USD seems steady at around 1.0400, but the outlook for the Euro (EUR) remains uncertain amid concerns that the Eurozone is likely to feel the pain of higher tariffs by US President Donald Trump. Last weekend, President Trump warned that Europe will definitely face tariffs for not buying enough American goods, but didn’t provide much information.
• Analysts at Macquarie said President Trump held back specific tariff threats on the Eurozone because of "the lack of a stable government in Germany and France.” Still, they warned that a US tariff bomb would likely find “fertile ground in the EU” and escalate unresolved issues rapidly into trade tensions, given that “Europe is target-rich”.
• In addition to global issues, the Eurozone outlook is also vulnerable because of domestic concerns. Growing risks of economic uncertainty have forced European Central Bank (ECB) officials to guide a dovish monetary policy outlook. ECB’s executive board member Piero Cipollone said in an interview with Reuters on Thursday that all officials agree “there is still room for adjusting rates downwards”.
• When asked about the impact of President Trump’s tariffs on the Eurozone, Cipollone said, “If tariffs are imposed on us, the most immediate impact will be on growth”. He also added that tariffs on China would compel it to look to the shared bloc for dumping its goods due to tariffs from the US. Such a scenario will be deflationary for the economy.

Technical Analysis: EUR/USD stays below 50-day EMA

EUR/USD ticks slightly higher at around 1.0400 in European trading hours on Friday ahead of the US NFP employment data. The major currency pair faces pressure near the 50-day Exponential Moving Average (EMA) around 1.0436, suggesting that the overall trend is still bearish.

The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, indicating a sideways trend.

Looking down, the January 13 low of 1.0177 and the round-level support of 1.0100 will act as major support zones for the pair. Conversely, the psychological resistance of 1.0500 will be the key barrier for the Euro bulls.

Silver prices (XAG/USD) rose on Friday, according to FXStreet data. Silver trades at $32.35 per troy ounce, up 0.27% from the $32.26 it cost on Thursday.

Silver prices have increased by 11.96% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 88.70 on Friday, up from 88.55 on Thursday.

(An automation tool was used in creating this post.)

Current price movements are likely part of a range trading phase, probably between 1.0355 and 1.0415. In the longer run, outlook is unclear; EUR could trade in a broad range of 1.0250/1.0490 for the time being, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

EUR can trade in a broad range of 1.0250/1.0490

24-HOUR VIEW: “EUR rose to 1.0442 on Wednesday and then pulled back. Yesterday (Thursday), we highlighted that ‘the pullback in overbought conditions and slowing momentum suggest that instead of continuing to rise, EUR is likely to trade between 1.0360 and 1.0430’. EUR then traded in a lower and narrower range of 1.0350/1.0406, closing lower by 0.20% at 1.0381 (-0.20%). The current price movements are likely part of a range trading phase, probably between 1.0355 and 1.0415.”

1-3 WEEKS VIEW: “Our most recent narrative was from two days ago (05 Feb, spot at 1.0375), wherein “the outlook is unclear for now, and EUR could trade in a broad range of 1.0250/1.0490 for the time being.” We continue to hold the same view.”

• USD/CAD struggles for a firm near-term direction and oscillates in a range on Friday. 
• Fed rate cut bets keep the US bond yields and the USD depressed, capping the pair.
• Rebounding Oil prices underpin the Loonie and also act as headwind for the major.
• Traders further seem reluctant ahead of the crucial US/Canadian monthly jobs report.

The USD/CAD pair extends its sideways consolidative price move for the third straight day and remains confined in a narrow trading band around the 1.4300 mark through the first half of the European session on Friday. Spot prices, however, manage to hold above the 1.4260 area, or the year-to-date (YTD) low retested on Wednesday, as traders await monthly employment details from the US and Canada before placing fresh directional bets. 

The popularly known US Nonfarm Payrolls (NFP) report will influence market expectations about the Federal Reserve's (Fed) interest rate outlook and play a key role in driving the US Dollar (USD) demand. This is likely to overshadow Canadian jobs data and provide some meaningful impetus to the USD/CAD pair. In the meantime, bets that the Fed will stick to its easing bias keep the USD bulls on the defensive and act as a headwind for spot prices. 

In fact, the markets are pricing in the possibility that the US central bank would lower borrowing costs twice by the end of this year. This keeps the US Treasury bond yields depressed near their lowest level since December and weighs on the USD. Apart from this, a goodish recovery in Crude Oil prices from over a one-month low underpins the commodity-linked Loonie and further contributes to capping the upside for the USD/CAD pair. 

Meanwhile, investors now seem to have digested US President Donald Trump's recent decision to delay 25% trade tariffs against Canada and Mexico. Apart from this, the Bank of Canada's (BoC) dovish outlook might hold back traders from placing bullish bets around the Canadian Dollar (CAD). This warrants caution before positioning for an extension of the USD/CAD pair's sharp pullback from over a two-decade high touched earlier this week.

• NZD/USD remains steady as traders adopt caution ahead of the US Nonfarm Payrolls release on Friday.
• The US Dollar extends its recovery amid rebounding US Treasury yields.
• The risk-sensitive NZD struggled as heightened risk aversion grew amid global trade and economic uncertainties.

NZD/USD remains steady after registering losses in the previous session, trading around 0.5680 during the European hours on Friday. The pair remains silent as sentiment turns cautious ahead of a key US jobs report. Traders brace for Friday’s US Nonfarm Payrolls (NFP) data, which is expected to shape the Federal Reserve’s (Fed) monetary policy direction.

The NZD/USD pair may face pressure as the US Dollar (USD) extends its recovery, supported by rebounding US Treasury yields. The US Dollar Index (DXY) has risen toward 107.70, while the 2-year and 10-year US Treasury yields stand at 4.22% and 4.44%, respectively, at the time of writing.

On the data front, US Initial Jobless Claims rose to 219K for the week ending January 31, as reported by the US Department of Labor (DoL) on Thursday. This print surpasses initial estimates of 213K and was higher than the previous week's revised tally of 208K (from 207K).

The risk-sensitive New Zealand Dollar (NZD) struggled amid heightened risk aversion due to global trade and economic uncertainties. However, trade negotiations between the United States (US) and China could temper this sentiment. US President Donald Trump and Chinese President Xi Jinping are set to discuss potential tariff rollbacks.

The Kiwi Dollar could face headwinds as the Reserve Bank of New Zealand (RBNZ) is widely expected to cut interest rates in February. Markets are currently pricing in a nearly 92% chance of a 50 basis-point cut to 3.75% on February 19, marking the third consecutive jumbo rate reduction.

• The Pound Sterling edges lower to near 1.2420 against the USD ahead of the US NFP data for January.
• Investors expect the US NFP to drive market expectations for the Fed’s monetary policy outlook.
• BoE’s Catherine Mann surprisingly supported a bigger interest rate reduction of 50 bps.

The Pound Sterling (GBP) ticks lower to near 1.2420 against the US Dollar (USD) in Friday’s European session ahead of the United States (US) Nonfarm Payrolls (NFP) data for January, which will be published at 13:30 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks higher to near 107.80

Investors will pay close attention to the US official employment data, which is expected to influence market speculation about how long the Federal Reserve (Fed) will keep interest rates steady in the range of 4.25%-4.50%. 

On Thursday, Dallas Fed Bank President Lorie Logan said she would support holding interest rates for “quite some time” until the “labor market doesn’t falter” even if inflationary pressures decelerate closer to the central bank’s target of 2%.

Last week, Fed Chair Jerome Powell also said that monetary policy adjustments won’t be appropriate until the central bank sees “real progress in inflation or at least some weakness in labor market”.

The US NFP report is expected to show that the economy added 170K workers in January, significantly lower than 256K in December. The Unemployment Rate is seen steady at 4.1%. Investors will also focus on the Average Hourly Earnings data, a key measure of wage growth that drives consumer spending. The wage growth measure is estimated to have decelerated to 3.8% year-on-year from 3.9% in December, with monthly figures growing steadily by 0.3%.

Meanwhile, the uncertainty over US President Donald Trump’s tariff agenda will also keep investors on their toes. Market participants expect President Trump to target Europe next for imposing tariffs.

Daily digest market movers: Pound Sterling trades with caution as BoE halves GDP forecasts

• The Pound Sterling trades cautiously against its major peers on Friday after a sharp sell-off on Thursday. Investors dumped the British currency the prior day after the Bank of England’s (BoE) policy meeting, in which the central bank reduced interest rates by 25 basis points (bps) to 4.5% and revised Gross Domestic Product (GDP) forecast for the year to 0.75%, lower from 1.5% projected in November.
• Investors had anticipated a 25 bps interest rate reduction, with an 8-1 vote split, but all officials supported easing the monetary policy further. However, the notable reason behind the sharp sell-off in the Pound Sterling was Monetary Policy Committee (MPC) member Catherine Mann, an outspoken hawk, joining official Swati Dhingra and favoring a bigger rate cut of 50 bps. This scenario indicated how much policymakers are concerned over the economic outlook.
• BoE Governor Andrew Bailey guided a cautious and gradual rate cut approach and warned that, due to higher energy prices, inflation could temporarily rise to near 3.7% in the third quarter of the year before falling back to the 2% path.
• BoE’s interest rate cut decision is expected to bring a big relief to the United Kingdom (UK) Chancellor of the Exchequer Rache Reeves, as it will stimulate economic growth. Still, downwardly revised GDP growth appears to be a wake-up call for her. Last week, Reeves was very optimistic about her economic plans, including a new runway at Heathrow Airport. 

Technical Analysis: Pound Sterling trades inside Thursday’s trading range

The Pound Sterling oscillates inside Thursday’s trading range against the US Dollar on Friday. The outlook of the GBP/USD pair remains weak as the 50-day Exponential Moving Average (EMA) continues to act as a resistance at around 1.2500.

The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, suggesting a sideways trend.

Looking down, the January 13 low of 1.2100 and the October 2023 low of 1.2050 will be key support zones for the pair. On the upside, the December 30 high of 1.2607 will act as key resistance.

• WTI price heads for a third consecutive weekly loss as Trump reaffirms plans to boost domestic Oil production.
• Oil prices depreciated following a sharp rise in US crude and gasoline stockpiles, signaling weaker demand.
• Saudi Aramco raised its prices amid growing demand from China and India, along with disruptions to Russian supply.

West Texas Intermediate (WTI) Oil price pauses its four-day losing streak but remains on track for a third consecutive weekly decline, trading around $70.80 per barrel during early European hours on Friday.

Crude Oil prices faced pressure after US President Donald Trump reaffirmed plans to increase domestic Oil production to push prices lower. His commitment came amid ongoing concerns over an already high supply.

Additionally, Oil prices declined following a sharp rise in US crude and gasoline stockpiles, signaling weaker demand. US crude inventories surged by 8.664 million barrels for the week ending January 31, 2025—the largest increase in nearly a year, far exceeding market expectations of a 2.6 million-barrel increase.

US-China trade tensions also weighed on the market, as Beijing imposed tariffs on US Oil, LNG, and coal in retaliation for Trump’s recent measures. However, the impact is expected to be limited due to China’s relatively small imports of US energy products. Despite this, hopes for easing trade tensions persist as President Trump and Chinese President Xi Jinping plan to discuss potential tariff rollbacks, according to Reuters.

Providing some support to prices, Saudi Aramco’s price hike was fueled by growing demand from China and India, coupled with disruptions to Russian supply resulting from US sanctions. Further supply risks remain as US President Donald Trump’s renewed efforts to eliminate Iran’s oil exports could potentially remove up to 1.5 million barrels per day from the market.

• NZD/USD weakens to around 0.5670 in Friday’s early European session. 
• The renewed trade war between the US and China spurs safe-haven demand and weighs on the China-proxy Kiwi. 
• The US January NFP report will be in the spotlight later on Friday. 

The NZD/USD pair trades in a negative territory near 0.5670 during the early European trading hours on Friday, pressured by a modest rebound of the US Dollar (USD). Traders prefer to wait on the sidelines amid the uncertainty ahead of key US Nonfarm Payrolls (NFP) data.

Following China's measured retaliation to US tariffs, President Donald Trump has said that he is not in a rush to talk with Chinese President Xi Jinping. On Tuesday, China's finance ministry issued a package of tariffs on a variety of US items, including crude oil, agricultural equipment, and certain automobiles, in response to US President Donald Trump's announcement of a 10% tariff on Chinese imports. Any signs of rising trade war tensions between the US and China could exert some selling pressure on the New Zealand Dollar (NZD), as China is a major trading partner to New Zealand. 

The US Federal Reserve (Fed) signaled that it had no plans to cut interest rates quickly, amid uncertainty over sticky inflation and Trump’s policies. All eyes will be on the highly-anticipated US Nonfarm Payrolls on Friday for more cues about the US interest rate outlook. In case of a weaker-than-expected outcome, this could drag the USD lower broadly. Economists expect the US economy to have added around 170,000 jobs in January, while the unemployment rate is estimated to hold steady at 4.1%. 

Here is what you need to know on Friday, February 7:

The trading action in financial markets turns subdued early Friday as investors move to the sidelines ahead of key macroeconomic data releases. The US Bureau of Labor Statistics will publish January employment report, which will feature Nonfarm Payrolls, Unemployment Rate and wage inflation figures. Labor market data from Canada and comments from central bank officials will also be watched closely by participants.

The US Dollar (USD) Index closed marginally higher on Thursday, supported by the cautious market stance. In the European morning on Friday, the index fluctuates in a narrow range below 108.00. Nonfarm Payrolls in the US are forecast to rise by 170,000 and the Unemployment Rate is seen holding steady at 4.1% in January.

Mexico's central bank, the Banco de Mexico (Banxico), announced late Thursday that it lowered interest rates by 50 basis points (bps), as anticipated. The decision, however, was not unanimous as Deputy Governor Jonathan Heath voted for a 25 bps rate cut. USD/MXN edged lower and closed in negative territory on Thursday before stabilizing slightly above 20.45 on Friday.

EUR/USD snapped a three-day winning streak on Thursday, pressured by the broad USD resilience. Early Friday, the pair trades sideways below 1.0400. European Central Bank Vice President Luis de Guindos is scheduled to speak later in the European session.

The Bank of England lowered the policy rate by 25 bps to 4.5% after the February meeting, in a widely expected decision. Policymakers voted 7-2 in favor of the 25 bps cut. External Monetary Policy Committee (MPC) members Dhingra and Mann voted to cut rates by 50 bps. In the post-meeting press conference, "we expect to be able to cut bank rate further but we will have to judge meeting by meeting how far and how fast," BoE Governor Andrew Bailey said. GBP/USD lost more than 0.5% on Thursday but managed to stabilize above 1.2400 early Friday.

Nada Choueiri, Deputy Director of the International Monetary Fund’s (IMF) Asia-Pacific Department and its mission chief for Japan, said on Friday that the Bank of Japan (BoJ) is likely to raise interest rates again this year. USD/JPY extended its weekly slide and touched its lowest level in nearly two months near 151.00 in the Asian session on Friday. The pair stages a rebound in the European morning and trades in positive territory above 151.50.

USD/CAD fluctuated in a narrow channel on Thursday and closed the day virtually unchanged. The pair struggles to find direction early Friday and moves up and down in a tight range above 1.4300. The Unemployment Rate in Canada is forecast to tick up to 6.8% from 6.7%.

Gold corrected lower on Thursday following a five-day rally that saw the price hit a record-high above $2,880 on Wednesday. XAU/USD stays relatively calm early Friday and trades near $2,860.

• AUD/JPY trims its daily losses following the cautious remarks from the International Monetary Fund on Friday.
• The IMF cautioned that Japan should stay vigilant against potential spillover effects stemming from increased volatility in global markets.
• The AUD could face challenges due to the dovish mood surrounding the RBA’s policy outlook.

AUD/JPY remains subdued for the third consecutive day, hovering around 95.20 during Asian trading hours on Friday. The downside for AUD/JPY cross halts as the Japanese Yen (JPY) softens following cautious remarks from the International Monetary Fund (IMF) on Friday. The IMF warned that Japan should remain alert to potential spillover effects from rising volatility in global markets, which could impact liquidity conditions for its financial institutions.

Additionally, the IMF cautioned that Japan must closely monitor risks associated with the Bank of Japan’s rate hikes, including rising government debt-servicing costs and a potential uptick in corporate bankruptcies.

The AUD/JPY cross faces downside pressure as the Australian Dollar (AUD) weakens amid dovish sentiment surrounding the Reserve Bank of Australia's (RBA) policy outlook. Market expectations now place a 95% probability of an RBA rate cut from 4.35% to 4.10% in February.

The Australian central bank has maintained the Official Cash Rate (OCR) at 4.35% since November 2023, emphasizing that inflation must “sustainably” return to its 2%-3% target range before any policy easing is considered.

Additional pressure on the AUD stems from ongoing trade tensions between the United States (US) and China, Australia’s key trading partner. In response to the new 10% US tariff that took effect on Tuesday, China’s Commerce Ministry announced a 15% tariff on US coal and liquefied natural gas (LNG) imports, along with an additional 10% tariff on crude Oil, farm equipment, and certain automobiles. However, optimism over easing trade tensions lingers as US President Donald Trump and Chinese President Xi Jinping are set to discuss potential tariff rollbacks, per Reuters.

FX option expiries for Feb 7 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0225 1.6b
• 1.0250 848m
• 1.0300 874m
• 1.0350 814m
• 1.0400 2.5b
• 1.0500 950m

GBP/USD: GBP amounts     

• 1.2300 1b
• 1.2350 561m

USD/JPY: USD amounts                                 

• 151.00 606m
• 153.00 787m
• 153.50 1.2b
• 154.00 748m

USD/CHF: USD amounts     

• 0.9160 485m

AUD/USD: AUD amounts

• 0.6200 802m
• 0.6455 805m

USD/CAD: USD amounts       

• 1.4155 750m
• 1.4250 867m
• 1.4310 1.2b
• 1.4355 1b
• 1.4365 860m
• 1.4375 1.7b
• 1.4500 836m
• 1.4600 2.1b

EUR/GBP: EUR amounts        

• 0.8400 400m

• USD/CHF drifts higher to around 0.9060 in Friday’s early European session, adding 0.17% on the day. 
• Investors brace for the US January employment report, which is due later on Friday. 
• Escalating Middle East geopolitical tensions could boost the safe-haven flows, benefiting the CHF. 

The USD/CHF pair gains traction to near 0.9060 during the early European session on Friday. The renewed US Dollar (USD) demand provides some support to the pair. Later on Friday, the US employment data for January will take center stage. 

Despite the hawkish hold, LSEG statistics showed that markets continue to expect 46.3 basis points (bps) of Federal Reserve (Fed) rate reductions by December, with a quarter-point cut fully priced for July. The US January labor market data will be the highlight later on Friday as it might offer some hint about a US interest rate outlook. The weaker NFP report could trigger dovish Fed expectations, undermining the Greenback. On the other hand, the upside surprise outcome could affirm the Fed’s hawkish tone and could lift the USD broadly. 

The Middle East and Europe condemn Trump’s plans to take over Gaza. On Thursday, Trump said that Israel would hand over Gaza to the United States after the fighting was over and the enclave's population was already resettled elsewhere, which he said meant no US troops would be needed on the ground. Investors will closely monitor the development of surrounding geopolitical risk in the Middle East.

"What Trump is proposing is clearly catastrophic for Gaza, but it would also be destabilising for the countries in the region," Hugh Lovatt, a researcher at the European Council on Foreign Relations (ECFR), tells Euronews. Any sign of escalating tensions could boost the safe-haven currency like the Swiss Franc (CHF).

• EUR/GBP gains ground due to the increased likelihood of more BoE rate cuts in 2025.
• BoE’s Bailey signaled additional rate cuts with the market expecting two or three more cuts throughout the year.
• Trump described the trade imbalance between the US and the EU as an “atrocity,” insisting that tariffs “will definitely happen.”

EUR/GBP continues its upward trajectory for the fourth consecutive day, trading around 0.8350 during Friday’s Asian session. The pair strengthened as the Pound Sterling (GBP) came under pressure following the Bank of England’s (BoE) 25 basis point interest rate cut on Thursday.

The British Pound may face further downside as BoE Governor Andrew Bailey signaled the likelihood of additional rate cuts this year. Market expectations suggest the central bank could implement two or three more cuts throughout the year.

All nine members of the Monetary Policy Committee (MPC) supported a rate cut, with seven voting for a 25 bps reduction, while two more dovish members pushed for a more aggressive 50 bps cut. The policymakers' urgency in delivering a February rate cut highlights their stance on monetary easing.

However, EUR/GBP’s upside potential could be capped due to increasing risks of US President Donald Trump imposing tariffs on the EU. Trump described the trade imbalance as an “atrocity,” insisting that tariffs “will definitely happen.” In response, EU leaders have pledged to retaliate if the tariffs materialize.

Traders anticipate the European Central Bank (ECB) will continue its gradual approach to lowering interest rates. Last week, the ECB reduced its Deposit Facility rate by 25 basis points (bps) to 2.75%, with officials signaling the likelihood of further cuts this year.

On Wednesday, ECB policymaker and Bank of Portugal Governor Mario Centeno told Reuters that maintaining a downward trajectory for interest rates is "pretty clear." While Centeno did not specify the exact pace of policy easing, he emphasized the need to reach a neutral rate "sooner rather than later."

• EUR/JPY rebounds over 80 pips from a multi-month low touched earlier this Friday.
• IMF’s warning of spillovers from rising foreign market volatility weighs on the JPY.
• The divergent BoJ-ECB policy outlook keeps a lid on any further gains for the cross.

The EUR/JPY cross stages a goodish intraday recovery from the 156.75 area, or its lowest level since early December touched earlier this Friday and for now, seems to have snapped a two-day losing streak. The momentum lifts spot prices back above mid-157.00s during the Asian session and is sponsored by the emergence of some selling around the Japanese Yen (JPY).

A senior International Monetary Fund official said on Friday that Japan’s services inflation remains below the 2% target, which is why it remains appropriate for the Bank of Japan (BoJ) to maintain accommodative monetary policy. This, in turn, weighs on the JPY and assists the EUR/JPY cross to rebound around 85 pips from the daily low. That said, the growing acceptance that the BoJ will maintain its stance to steadily push up borrowing costs helps limit any further JPY depreciation.

In fact, Kazuhiro Masaki, Director General of the BoJ's monetary affairs department, said on Thursday that the central bank will continue to raise interest rates if underlying inflation accelerates toward its 2% target as projected. This marks a big divergence in comparison to the European Central Bank's (ECB) dovish stance. Adding to this concerns that US President Donald Trump would slap tariffs on goods from the European Union undermine the Euro and cap the EUR/JPY cross. 

Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom and positioning for any further appreciating move. Even from a technical perspective, the recent repeated failures near the very important 200-day Simple Moving Average (SMA) and a subsequent decline below the 160.00 psychological mark confirmed a bearish multiple-top breakdown, suggesting that the attempted recovery is likely to get sold into.

• The US Dollar Index may find its initial resistance at the nine-day EMA at 107.94.
• A successful break above the 50 mark would confirm the emergence of a bullish bias.
• The immediate support appears around the descending channel’s upper boundary at 107.30 level.

The US Dollar Index (DXY) continues its upward momentum for the second consecutive day, trading around 107.80 during Asian hours on Friday. A review of the daily chart suggests a weakening bearish bias as the index consolidates above the descending channel pattern.

The 14-day Relative Strength Index (RSI) remains just below the 50 level, indicating that bearish sentiment is still present. A decisive move above the 50 mark would confirm a shift from a bearish to a bullish bias. Furthermore, the US Dollar Index remains below its nine- and 14-day Exponential Moving Averages (EMAs), signaling weaker short-term price momentum.

On the downside, the upper boundary of the descending channel serves as the key support near 107.30, followed by the two-month low of 106.97, which was recorded on January 27. A drop below the latter could strengthen the bearish bias, pushing the index toward the lower boundary of the descending channel at 105.60.

Regarding resistance, the DXY may first challenge the nine-day EMA at 107.94, followed by the 14-day EMA at 108.03. A breakout above these levels could enhance short-term price momentum, potentially driving the index toward its three-week high of 109.80, last tested on February 3.

US Dollar Index: Daily Chart

• EUR/USD softens to around 1.0375 in Friday’s Asian session. 
• Trump’s tariff threats weigh on the shared currency. 
• US January employment data will be the highlights later on Friday. 

The EUR/USD pair trades on a softer note around 1.0375 during the Asian session on Friday. The uncertainty surrounding US trade policy and the risk-off sentiment weigh on the Euro (EUR). Traders will keep an eye on the German Industrial Production ahead of US Nonfarm Payrolls (NFP) on Friday. 

US President Donald Trump appeared to be using tariff threats towards the EU, calling the trade balance an “atrocity” and vowing that tariffs “will definitely happen.” EU leaders have promised to retaliate if Trump goes ahead with tariffs. The European Central Bank (ECB) policymaker Piero Cipollone said the central bank is set to cut interest rates further as inflation eases and warns that the trade war tensions could have a negative impact on the 20-nation eurozone. The escalating trade tensions might drag the shared currency lower against the US Dollar (USD).

Across the pond, the hawkish comments from US Federal Reserve (Fed) officials provide some support to the Greenback. Chicago Fed President Austan Goolsbee stated on Thursday that the uncertainty makes the environment for the Fed foggier, a reason to slow the pace of cuts. Meanwhile, Dallas Fed President Lorie Logan said that while inflation progress has been significant, the US labor market remains far too firm to push the Fed into rate cuts any time soon. 

Economists expect the US economy to have added around 170,000 jobs in January, compared to the 256,000 gain in December. The unemployment rate is estimated to hold steady at 4.1%, suggesting continued resilience in the labour market despite recent economic headwinds. The Average Hourly Earnings are expected to ease to 3.8% YoY in January from 3.9% prior. If the reports show a weaker-than-expected outcome, this could exert some selling pressure on the USD and create a tailwind for the major pair. 

• US Nonfarm Payrolls are set to increase by 170K in January after reporting 256K in December.
• The United States Bureau of Labor Statistics will publish the jobs data on Friday at 13:30 GMT.
• US labor data could offer fresh direction on the Fed interest rates and the US Dollar.

The United States (US) Bureau of Labor Statistics (BLS) will publish the all-important Nonfarm Payrolls (NFP) data for January on Friday at 13:30 GMT.

Amid lingering inflationary concerns under Donald Trump’s presidency, the January jobs report will be closely scrutinized to gauge the US Federal Reserve’s (Fed) interest rate outlook and the US Dollar (USD) performance in the near term.

Trump’s tariff war is seen as inflationary, calling for higher rates. 

What to expect from the next Nonfarm Payrolls report?

Economists expect the Nonfarm Payrolls to increase by 170,000 jobs in January, following a 256,000 job gain in December. The Unemployment Rate (UE) is likely to stay at 4.1% in the same period.

Meanwhile, Average Hourly Earnings (AHE), a closely-watched measure of wage inflation, are expected to rise by 3.8% year-over-year (YoY) in January, compared with December’s 3.9% growth.

Following the January policy meeting, the Fed held the benchmark policy rate in the 4.25%-4.50% target range but altered the language in the policy statement to a slightly hawkish tone. The US central bank removed the earlier statement saying that inflation "has made progress" towards its 2% inflation goal while noting only the pace of price increases "remains elevated."

Fed Chairman Jerome Powell, in his post-policy press conference, stated that the Fed wants to see further progress on inflation and could see a pathway for that, adding, “we don't need to be in a hurry to make any adjustments.”

Despite the hawkish hold, markets continue expecting 46.3 basis points (bps) of Fed rate cuts by December, according to LSEG data, with a quarter-point reduction fully priced for July. Therefore, the January jobs data hold the key to affirming the strength of the US labor market, which will likely have a strong bearing on the Fed rate cut expectations for this year.

Previewing the January employment situation report, TD Securities analysts said: “Payrolls are set to lose momentum at the start of 2025, with temporary shocks helping to keep the headline gain under the 200K mark.”

“The UE rate likely stayed unchanged at 4.1%. The BLS will also unveil material revisions for payrolls and household employment data,” they added.

How will US January Nonfarm Payrolls affect EUR/USD?

The US economic data releases are back in focus as trade war fears take a back seat for now, reflective of the ongoing decline in the US Dollar due to its reduced appeal as a safe-haven asset.

Earlier in the week, the BLS reported that the JOLTS Job Openings dropped to 7.6 million in December, down nearly half a million from November's 8.1 million. The Automatic Data Processing (ADP) announced on Wednesday that employment in the US private sector grew by 183,000 jobs last month, more than the estimated 150,000 and December’s 176,000 jobs creation.

The mixed US employment data failed to offer any comfort to the Greenback heading into Friday’s NFP release.

If the headline NFP figure shows a payroll growth below 150,000, the US Dollar downtrend could gain traction with the initial reaction to the data. Disappointing headline NFP print could revive dovish Fed expectations. In such a scenario, EUR/USD could swing back higher to the 1.0500 neighborhood.

On the other hand, an upside surprise to the NFP and wage inflation data could affirm the Fed’s hawkish tone, fuelling a fresh recovery in the USD while driving the EUR/USD pair back toward 1.0250.  

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD: 

“The EUR/USD turnaround from three-week lows of 1.0210 appears capped by the 50-day Simple Moving Averages (SMA) at 1.0408 in the countdown to the NFP showdown. Meanwhile, the 14-day Relative Strength Index (RSI) challenges the 50 level from above. These technical indicators suggest that the pair could resume its downside in the near term.”

“Buyers need a decisive break above the January 30 high of 1.0468 to target the 1.0500 key level. Acceptance above that level is critical to unleashing further recovery toward the static resistance near 1.0535. Conversely, if EUR/USD yields a sustained break of the 1.0300 mark, sellers will then aim for the three-week troughs just above 1.0200.”

Gold prices rose in India on Friday, according to data compiled by FXStreet.

The price for Gold stood at 8,062.54 Indian Rupees (INR) per gram, up compared with the INR 8,029.32 it cost on Thursday.

The price for Gold increased to INR 94,049.27 per tola from INR 93,652.40 per tola a day earlier.

FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.

(An automation tool was used in creating this post.)

• GBP/USD remains depressed for the second straight day amid the BoE’s dovish outlook.
• The BoE cut interest rates by 25 bps on Thursday and signaled further rate cuts this year. 
• Subdued USD price action helps limit the downside ahead of the crucial US NFP report.

The GBP/USD pair struggles to capitalize on the overnight bounce from a multi-day low and trades with a mild negative bias, around the 1.2425 area during the Asian session on Friday. This marks the second straight day of a downtick, though it lacks follow-through as traders seem reluctant to place aggressive bets and opt to wait for the release of the US monthly jobs data. 

The popularly known Nonfarm Payrolls (NFP) report is expected to show that the world's largest economy added 170K jobs in December, down from 256K in the previous month. Meanwhile, the Unemployment Rate is expected to hold steady at 4.1%. This, along with Average Weekly Earnings, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the GBP/USD pair. 

Heading into the key data risk, expectations that the Federal Reserve (Fed) will stick to its easing bias and lower borrowing costs twice by the end of this year keep the US Treasury bond yields depressed near their lowest level since December. This, in turn, fails to assist the USD to attract any meaningful buyers and might act as a tailwind for the GBP/USD pair, though the Bank of England's (BoE) gloomy outlook should cap the upside. 

In fact, the UK central bank lowered its benchmark interest rate by 25 basis points on Thursday and downgraded the growth forecast for 2025. Adding to this, BoE Governor Andrew Bailey told reporters that the central bank expects to make further rate cuts this year. This might continue to undermine the British Pound (GBP) and suggests that the path of least resistance for the GBP/USD pair remains to the downside.

• USD/CAD may test the lower boundary of the rectangle at 1.4280 level.
• The short-term price momentum is weaker as the pair remains below the nine- and 14-day EMAs.
• A break above EMAs would support the pair to test the rectangle’s upper threshold at 1.4530 level.

The USD/CAD pair remains silent around 1.4310 during the Asian session on Friday. The technical analysis of the daily chart indicates that buyers and sellers are unsure of the long-term direction of the asset as the pair consolidates within a rectangular pattern.

USD/CAD remains below the nine- and 14-day Exponential Moving Averages (EMAs), reinforcing bearish sentiment and suggesting weak short-term price action. This positioning reflects sustained selling interest and hints at further downside risks.

Additionally, the 14-day Relative Strength Index (RSI) consolidates below the 50 mark, signaling continued negative momentum and strengthening the bearish outlook.

On the downside, immediate support is found at a psychological level of 1.4300, followed by the lower threshold of the rectangle at 1.4280 level. A break below this critical support zone could strengthen the bearish bias and put downward pressure on the USD/CAD pair to navigate the region around the psychological level of 1.4200.

The USD/CAD pair could find its initial resistance at the nine-day EMA at 1.4372 level, followed by the 14-day EMA at 1.4381 level. A break above these levels would improve the short-term price momentum and support the pair to test the rectangle’s upper threshold at the 1.4530 level.

USD/CAD: Daily Chart

• Gold price continues to attract safe-haven flows on the back of trade war fears.
• Fed rate cut bets and depressed US bond yields also support the XAU/USD pair.
• Subdued USD price action favors bulls ahead of Friday’s crucial US NFP report. 

Gold price (XAU/USD) regains positive traction following the previous day's modest slide and remains within striking distance of the all-time peak during the Asian session on Friday. Escalating US-China trade tensions, along with concerns about the potential economic fallout from US President Donald Trump’s aggressive trade policies, continue to underpin demand for the safe-haven bullion. 

Meanwhile, bets that the Federal Reserve (Fed) would keep cutting rates in 2025 keep the US Treasury bond yields depressed near their lowest level since December. This fails to assist the US Dollar (USD) in attracting any meaningful buyers and also lends support to the non-yielding Gold price. Traders now look forward to the release of the US Nonfarm Payrolls (NFP) report for a fresh directional impetus. 

Gold price remains close to record high amid trade jitters, ahead of US NFP report

• China announced tariffs on some US goods in retaliation to US President Donald Trump's 10% levy on Chinese imports. This marks a new trade war between the world's top two economies and continues to underpin the safe-haven Gold price. 
• On the economic data front, the US Department of Labor (DoL) reported on Thursday that the number of US citizens filing new applications for unemployment insurance rose to 219K for the week ending February 1, from the previous week's revised tally of 208K.
• US Treasury Secretary Scott Bessent said on Thursday that the Trump administration was not particularly concerned about the Federal Reserve's trajectory on interest rates and that the focus is on bringing down 10-year Treasury yields.
• The yield on the benchmark 10-year US government bond fell to its lowest level since December 12 earlier this week amid bets that the Federal Reserve will cut rates twice by the end of 2025, further benefitting the non-yielding yellow metal.
• Chicago Fed President Austan Goolsbee noted that the appearance that inflation has stalled is largely due to base effects and that the central bank needs to be mindful of overheating and deterioration, but things are largely going well.
• Dallas Fed President Lorie Logan said that inflation progress has been significant, but the US labor market remains far too firm to push the central bank into rate cuts any time soon. This, however, does little to impress the US Dollar bulls. 
• Market participants now look forward to the US Nonfarm Payrolls report, which is expected to show that the economy added 170K jobs in January compared to 256K in the previous month and the Unemployment rate held steady at 4.1%.
• The crucial data will influence market expectations about the Fed's interest rate outlook, which, in turn, should play a key role in driving the USD demand in the near term and determining the next leg of a directional move for the XAU/USD.

Gold price needs to consolidate before traders start positioning for additional gains

From a technical perspective, the overnight bounce and the subsequent move up on Friday validates the near-term positive outlook for the Gold price. That said, the Relative Strength Index (RSI) is flashing slightly overbought conditions on the day chart and warrants some caution for bullish traders. Hence, it will be prudent to wait for some near-term consolidation before positioning for an extension of the recent well-established uptrend from the December monthly trough. 

In the meantime, the $2,855 horizontal zone, followed by the overnight swing low, around the $2,834 region, could offer some support to the Gold price ahead of the $2,815-2,714 region. This is followed by the $2,800 mark, which if broken decisively might prompt some technical selling and drag the XAU/USD towards the $2,773-2,772 resistance breakpoint. The latter coincides with the weekly low and a convincing break below should pave the way for a deeper corrective decline.

• Silver price holds ground near its three-month high of $32.56, recorded on February 5.
• The upside of the Silver appears limited as the US Dollar gains ground amid rebounding US Treasury yields.
• Traders await US Nonfarm Payrolls to gain fresh impetus regarding the Fed’s monetary policy direction.

Silver price (XAG/USD) remains in positive territory for the fifth consecutive session, trading around $32.30 per troy ounce during Asian hours on Friday. The precious metal maintains its position near its three-month high of $32.56, recorded on February 5. Traders are awaiting key US labor market data, including Nonfarm Payrolls (NFP), which could influence the Federal Reserve’s (Fed) monetary policy direction.

However, Silver's upside appears limited as the US Dollar (USD) extends its recovery amid rebounding US Treasury yields. The US Dollar Index (DXY), which tracks the USD against six major currencies, has climbed near 107.70, while 2-year and 10-year US Treasury yields stand at 4.22% and 4.43%, respectively, at the time of writing.

Safe-haven metals like Silver have gained ground amid heightened risk aversion due to global trade and economic uncertainties. However, trade negotiations between the United States (US) and China could temper this sentiment. US President Donald Trump and Chinese President Xi Jinping are set to discuss potential tariff rollbacks, which could ease market concerns and limit Silver’s upside.

Diminished fears of a US-China trade war also reduce the risk of rising US inflation, reinforcing expectations of two Federal Reserve rate cuts this year. As a non-yielding asset, Silver benefits from a dovish stance by major central banks.

Meanwhile, the Reserve Bank of India (RBI) is expected to announce a 25-basis-point rate cut on Friday. Last week, the European Central Bank (ECB) lowered its Deposit Facility Rate by 25 basis points to 2.75%, while the People’s Bank of China (PBoC) has signaled potential rate cuts. Additionally, the Bank of Canada (BoC) has paused its quantitative tightening, and Sweden’s Riksbank has cut interest rates.

• The Indian Rupee flatlines in Friday’s Asian session. 
• Rising RBI rate cut bets, weakness of Asian peers and uncertainties could undermine the INR. 
• RBI's interest rate decision will be closely watched on Friday. 

The Indian Rupee (INR) holds steady after falling to a fresh all-time low in the previous session. The local currency remains vulnerable amid expectations of a rate cut by the Reserve Bank of India (RBI). Furthermore, a broader decline among Asian currencies, the uncertainties surrounding US trade tariffs and continued portfolio outflows might undermine the INR. 

Nonetheless, the routine intervention by the RBI to sell US Dollar via state-run banks might help limit the INR’s losses. The RBI interest rate decision on Friday will be in the spotlight. Investors will also scrutinize the statement from the new RBI Governor Sanjay Malhotra to assess the direction of the central bank’s monetary policy. The attention will shift to the US labour market data later in the day, including Nonfarm Payrolls (NFP), Unemployment Rate and Average Hourly Earnings. 

Indian Rupee steadies ahead of RBI rate decision

• The RBI is expected to cut the interest rate by 25 basis points (bps) to 6.25% at the policy meeting concluding on Friday, in what would be its first rate cut in nearly five years.
• “The delay in implementation of universal tariffs by the incoming U.S. administration provides some tactical space for RBI to prioritize domestic growth... and space to cut policy rates,” said Ruhul Bajoria, an economist at Bank of America in India.
• Most of the economists surveyed by Bloomberg anticipate that the Indian central bank will lower the benchmark repurchase rate by at least 25 basis points (bps) to 6.25% on Friday.
• Chicago Fed President Austan Goolsbee noted on Thursday that the uncertainty makes the environment for the Fed foggier, a reason to slow the pace of cuts.
• Dallas Fed President Lorie Logan said that while inflation progress has been significant, the US labor market remains far too firm to push the Fed into rate cuts any time soon.  

USD/INR paints a positive picture, overbought RSI warrants caution for bulls in the short term

The Indian Rupee trades on a flat note on the day. The constructive outlook of the USD/INR pair remains intact as the price holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. However, the 14-day Relative Strength Index (RSI) reaches overbought territory beyond the 70.00 mark, potentially signaling a temporary weakness or further consolidation in the near term. 

The immediate resistance level for USD/INR emerges at 87.62, an all-time high. Sustained trading above this level could pave the way to the 88.00 psychological level. 

On the downside, the initial support level for the pair is located in the 87.05-87.00 zone, representing the low of February 5 and the round mark. A breach of the mentioned level could drag USD/INR down to 86.51, the low of February 3. 

• The Japanese Yen touched a nearly two-month high against the US Dollar on Friday.
• Repositioning ahead of the US NFP triggers intraday short covering around USD/JPY.
• The narrowing US-Japan rate differential should limit losses for the lower-yielding JPY.

The Japanese Yen (JPY) prolongs its uptrend for the fourth successive day and advances to a nearly two-month high against its American counterpart during the Asian session on Friday. The recent hawkish signals from the Bank of Japan (BoJ) lift market bets on further interest rate hikes. The resultant narrowing of the rate differential between the BoJ and other major central banks, including the Federal Reserve (Fed), turns out to be a key factor that continues to underpin the lower-yielding JPY. 

Apart from this, the recent US Dollar (USD) sharp pullback from the vicinity of over a two-year high drags the USD/JPY pair below the 151.00 mark for the first time since December 10. That said, the uncertainty over US President Donald Trump's tariff policies keeps a lid on any further gains for the JPY. Furthermore, traders now seem reluctant and opt to move to the sidelines ahead of the US Nonfarm Payrolls (NFP) report, which assists the currency pair to rebound around 70 pips from the daily low. 

Japanese Yen bulls have the upper hand amid rising bets on more BoJ rate hikes

• Kazuhiro Masaki, Director General of the Bank of Japan's monetary affairs department, said on Thursday that the central bank will continue to raise interest rates if underlying inflation accelerates toward its 2% target as projected.
• Japan's Economy Minister Ryosei Akazawa told the parliament that the government's focus would be to eradicate a deflationary mindset with a goal to boost minimum wages and take measures to encourage firms to raise wages.
• This comes on top of the hawkish BoJ Summary of Opinions released on Monday, which showed that policymakers discussed the likelihood of raising interest rates further at the January meeting and continued to boost the Japanese Yen. 
• Adding to this, data released this week showed that Japan’s inflation-adjusted real wages rose 0.6% year-on-year in December, marking the second consecutive monthly gain and backing the case for further tightening by the BoJ. 
• The yield on Japan’s 10-year government bond remains near a 14-year high, while the benchmark 10-year US Treasury yield hangs near its lowest level since December amid expectations that the Federal Reserve would stick to its easing bias.
• US Treasury Secretary Scott Bessent said on Thursday that President Donald Trump's administration was not particularly concerned about the Fed's trajectory on interest rates and that the focus is on bringing down 10-year Treasury yields.
• Chicago Fed President Austan Goolsbee noted that the appearance that inflation has stalled is largely due to base effects and that the central bank needs to be mindful of overheating and deterioration, but things are largely going well.
• Separately, Dallas Fed President Lorie Logan said that inflation progress has been significant, but the US labor market remains far too firm to push the central bank into rate cuts any time soon. This, however, does little to impress the US Dollar bulls. 
• That said, traders opt to lighten their bets and move to the sidelines ahead of the release of the US Nonfarm Payrolls (NFP) report, prompting an aggressive intraday short-covering move around the USD/JPY pair on Friday. 

USD/JPY is likely to attract fresh sellers at higher levels amid a bearish technical setup

From a technical perspective, this week's breakdown below the 152.50-152.45 confluence – comprising the 100- and the 200-day Simple Moving Averages (SMAs) was seen as a key trigger for bearish traders. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This, in turn, suggests that the path of least resistance for the USD/JPY pair remains to the downside. Hence, any subsequent move up could be seen as a selling opportunity and remain capped near the 152.00 mark. Some follow-through buying, however, could lift spot prices further toward the next relevant hurdle near the 152.50-152.45 support-turned-resistance en route to the 153.00 round figure.

On the flip side, the 151.00 mark now seems to have emerged as an immediate support. A sustained break and acceptance below the said handle could drag the USD/JPY pair further towards 150.55-150.50 support. The downward trajectory could extend further towards the 150.00 psychological mark, below which spot prices could slide to the 149.60 horizontal support before aiming to test the 149.00 mark and the December swing low, around the 148.65 region.

Gita Gopinath, the First Deputy Managing Director of the International Monetary Fund (IMF), said Friday that “Japan’s services inflation remains below 2% target, which is why remains appropriate the Bank of Japan (BoJ) to maintain accommodative monetary policy.”

Additional quotes

Nada Choueiri, Deputy Director of the International Monetary Fund’s (IMF) Asia-Pacific Department and its mission chief for Japan, said on Friday that the “Bank of Japan (BoJ) is likely to raise interest rates again this year.”

Additional quotes

Market reaction

USD/JPY is holding mild gains near 151.50 following these comments, up 0.11% on the day.

• The Australian Dollar could depreciate due to market caution ahead of US Nonfarm Payrolls release on Thursday.
• The AUD receives downward pressure from increased risk aversion amid the US-China trade situation.
• US Initial Jobless Claims rose to 219K the previous week, against the expected 213K and 208K prior.

The Australian Dollar (AUD) remains weak against the US Dollar (USD) for the second consecutive day on Friday. The AUD/USD pair faces additional downward pressure due to risk-off sentiment fueled by escalating US-China trade tensions.

China, Australia’s key trading partner, retaliated against the new 10% US tariff that took effect on Tuesday. However, on Monday afternoon, US President Donald Trump stated that he would likely speak with China within 24 hours. Trump also warned, “If we can't reach a deal with China, the tariffs will be very, very substantial.” Despite this, no further updates have emerged.

Markets now price a 95% probability of a Reserve Bank of Australia (RBA) rate cut from 4.35% to 4.10% in February, further weakening the AUD’s resilience. The RBA has kept the Official Cash Rate (OCR) at 4.35% since November 2023, emphasizing that inflation must “sustainably” return to its 2%-3% target range before considering any policy easing.

Australian Dollar could decline amid market caution ahead of US jobs report

• The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, rises to near 107.70 at the time of writing. The Greenback could receive support as sentiment turns cautious ahead of a key US jobs report. Traders brace for Friday’s US Nonfarm Payrolls (NFP) data, which is expected to shape the Federal Reserve’s (Fed) monetary policy direction.
• US Initial Jobless Claims rose to 219K for the week ending January 31, as reported by the US Department of Labor (DoL) on Thursday. This print surpasses initial estimates of 213K and was higher than the previous week's revised tally of 208K (from 207K).
• The US ISM Services PMI eased to 52.8 in January from 54.0 (revised from 54.1) in December. This reading came in below the market consensus of 54.3.
• Federal Reserve Bank of Dallas President Lorie Logan made headlines late Thursday, stating that while inflation progress has been significant, the US labor market remains too strong for the Fed to consider rate cuts in the near future. Logan also acknowledged that even if inflation reaches the 2% target, it may not be sufficient on its own to prompt a rate reduction.
• On Thursday, Federal Reserve Vice Chair Philip Jefferson expressed his satisfaction with keeping the Fed Funds rate at its current level, stating that he would assess the overall impact of Trump's policies before making further decisions. He also emphasized that the Fed's rate remains restrictive for the economy, even with a 100-basis-point decline.
• President Trump has agreed to a 30-day suspension of the proposed 25% tariffs on Canadian and Mexican imports. This decision comes after Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum committed to enhancing border security measures to address concerns over illegal immigration and drug trafficking.
• China’s Commerce Ministry announced that it will impose a 15% tariff on US coal and liquefied natural gas (LNG) imports, along with an additional 10% tariff on crude Oil, farm equipment, and certain automobiles. Additionally, to "safeguard national security interests," China is implementing export controls on tungsten, tellurium, ruthenium, molybdenum, and related products.
• Australia's trade surplus fell to 5,085M in December, missing the expected 7,000M and down from the previous surplus of 6,792M. Exports increased by 1.1% MoM, slowing from November's 4.2% rise, while imports surged 5.9% MoM, up from 1.4% in the prior month.
• Australia’s Judo Bank Composite PMI climbed to 51.1 in January from 50.2 in December, reflecting modest growth in private sector activity. Meanwhile, the Judo Bank Services PMI rose to 51.2 from 50.8, marking the twelfth consecutive month of expansion in the services sector. Although growth was moderate, it was the strongest since August.

Australian Dollar remains steady below 0.6300, initial support appears at nine-day EMA

AUD/USD hovers near 0.6290 on Friday, maintaining position above the nine- and 14-day Exponential Moving Averages (EMAs) on the daily chart, signaling stronger short-term bullish momentum. Additionally, the 14-day Relative Strength Index (RSI) remains above the 50 level, reinforcing the bullish trend.

On the upside, the AUD/USD pair could test the seven-week high of 0.6330, last reached on January 24.

Immediate support lies at the nine-day EMA near 0.6260, followed by the 14-day EMA at 0.6254. A break below these levels could weaken the bullish outlook, potentially driving the AUD/USD pair toward 0.6087—the lowest level since April 2020, recorded on February 3.

AUD/USD: Daily Chart

On Friday, the People’s Bank of China (PBOC) set the USD/CNY central rate for the trading session ahead at 7.1699 as compared to the previous day's fix of 7.1691 and 7.2780 Reuters estimates.

• NZD/USD trades in positive territory around 0.5680 in Friday’s Asian session. 
• The employment report keeps the RBNZ on track to cut by 50 bps in February. 
• Fed officials said uncertainty creates the environment for the Fed to slow the pace of cuts.

The NZD/USD pair trades firmer near 0.5680 during the Asian trading hours on Friday. However, the upside for the pair might be limited ahead of the highly anticipated US Nonfarm Payrolls (NFP) data for January, which is due later on Friday. 

China filed a World Trade Organization challenge on Wednesday against US President Donald Trump's new 10% tax on Chinese imports and withdrawal of a duty-free exemption for low-value packages, citing "protectionist" acts that violate WTO regulations. Investors will closely monitor the development surrounding renewed trade war tensions between the US and China, the world's two largest economies. Any signs of escalation could weigh on the China-proxy Kiwi, as China is a major trading partner to New Zealand. 

The New Zealand employment data for the fourth quarter (Q4) will keep the Reserve Bank of New Zealand (RBNZ) on track to cut the Official Cash Rate (OCR) this month. This, in turn, might further weigh on the New Zealand Dollar (NZD). The markets are now pricing in nearly 92% odds that the RBNZ will deliver a 50 basis points (bps) rate cut to 3.75% on February 19. It would be the third consecutive jumbo cut.

The hawkish stance from the Federal Reserve (Fed) officials might provide some support to the Greenback. Chicago Fed President Austan Goolsbee noted on Thursday that the uncertainty makes the environment for the Fed foggier, a reason to slow the pace of cuts. Meanwhile, Fed Vice Chairman Philip Jefferson said late Tuesday that they were facing uncertainty around Trump’s policies, adding that the robust economy would allow them to adopt a cautious approach to further policy-easing. 

Bank of Canada Governor Tiff Macklem said late Thursday that a policy shift in the US was causing uncertainty and President Donald Trump's tariff threats were already impacting businesses and households, per Reuters.

Key quotes

Market reaction

At the time of writing, USD/CAD was unchanged on the day at 1.4305.

• EUR/USD remains stuck near the 1.0400 handle heading into Friday.
• European Retail Sales failed to kickstart Fiber trading.
• US NFP jobs data remains the key focus for the trading week.

EUR/USD churned some chart paper on Thursday, testing to the low side but wrapped up the day remaining stubbornly stuck near the 1.0400 handle. Euro bidders were entirely uninspired by Pan-EU Retail Sales figures that came in exactly as expected. Greenback traders treaded water ahead of Friday’s fresh print of US Nonfarm Payrolls (NFP) figures.

European Retail Sales growth came in at 1.9% YoY in December, matching median market forecasts and gaining slight ground over the revised previous figure of 1.6%. Despite the upswing in annualized figures, MoM Retail Sales actually contracted, printing at -0.2% compared to the previous month’s flat print of 0.0%, which was also revised slightly lower.

Economic data from the US was primarily mid-tier on Thursday, with weekly Initial Jobless Claims rising to 219K for the week ending January 31. Analysts had anticipated a figure of 213K, while the prior week’s number was slightly adjusted to 208K.

A new release of Nonfarm Payrolls (NFP) is set for Friday, with net job additions projected to decrease to 170K for January, compared to December’s figure of 256K. This week will see close scrutiny of revisions to older data. Historically, post-release revisions have tended to show stronger results in 2024, frustrating market participants who hoped to see weaknesses in the US job market that might encourage the Federal Reserve (Fed) to enact further rate cuts.

EUR/USD price forecast

EUR/USD saw some volatility on Thursday during the early hours, but ended the day down a scant 0.2% as price action remains stuck to the 1.0400 handle. Bids remain capped by the 50-day Exponential Moving Average (EMA) near 1.0440. Fiber managed to eke out a bullish recovery after the early week’s plunge toward the 1.0200 handle, but topside momentum remains limited.

EUR/USD daily chart