Tin tức thì trường

• GBP/USD climbed 0.6% on Tuesday as tariff threats ease.
• President Trump’s trade war threats are fading into the background.
• Data remains mid-tier until BoE’s rate call on Thursday and Friday’s US NFP.

GBP/USD continued to grind higher on Tuesday, extending a recovery after the week’s early plunge on trade war concerns sparked by US President Donald Trump’s sweeping threats to impose stiff tariffs on his own constituents in an effort to punish some of the US’ closest trade allies. Tariffs, which were supposed to go into effect on Tuesday, have been kicked down the road another 30 days, marking President Trump’s third consecutive walk back of his own threats as he secures concessions that were largely already given to the previous administration. 

The midweek session will be a thin affair on the economic data docket with geopolitical headlines fading into background noise as investors tune out President Trump’s long-winded diatribe of perceived grievances. Even if his tariff talk had a chance of materializing, the UK is unlikely to draw any specific trade ire from Donald Trump.

US ADP Employment Change figures are due on Wednesday, but the janky figure is unlikely to spark much momentum. US ISM Services Purchasing Managers Index (PMI) activity survey results for January are also expected, but the figure is forecast to shift to 54.3 from 54.1. The key US print this week will be Friday’s Nonfarm Payrolls, slated to ease to 170K from 256K.

The Bank of England’s (BoE) upcoming rate call on Thursday is broadly expected to deliver a quarter point cut to markets. With the US Federal Reserve (Fed) firmly embedded in a wait-and-see stance over inconsistent US policy, Cable’s interest rate differential is set to widen slightly this week, capping bullish potential.

GBP/USD price forecast

GBP/USD climbed a little over six-tenths of one percent, clawing back to 1.2480, but the pair still remains capped below the 1.2500 handle as the 50-day Exponential Moving Average (EMA) weighs on near-term price action.

A successful break to the upside could send Cable bids back into the 200-day EMA at 1.2700, but a return to recent lows near 1.2100 is also on the cards as price action wastes a bullish turnaround in the Moving Average Convergence-Divergence (MACD) oscillator.

GBP/USD daily chart

• USD/JPY faces continued pressure, potentially closing below 155.00 as US-China trade war escalates.
• Technical indicators suggest further downside, with pair now trading within the Ichimoku Cloud.
• Resistance and support levels closely watched, with potential rebounds facing hurdles at 155.76 and 156.29.

The USD/JPY drops below 155.00 for the second straight day and seems poised to achieve a daily close below the latter. Falling US Treasury yields and the escalation of the “trade war” between the United States (US) and China would underpin the Japanese Yen (JPY) due to its safe-haven appeal. At the time of writing, the pair posts losses of 0.28%.

USD/JPY Price Analysis: Technical outlook

Developments over the weekend developed a huge 190-pipe candle on February 3, which lately closed below 155.00 for the first time since January 30. Additionally, the USD/JPY pair cleared the 50-day Simple Moving Average (SMA) at 155.02 and registered back-to-back bearish close days, which could pave the way for further downside.

Of note is that the USD/JPY spot price lies inside the Ichimoku Cloud (Kumo), which indicates “sideways price action.”

If USD/JPY edged below the January 30 low of 153.79, this could open the door to challenge the Senkou Span B at 153.76, followed by the January 27 low of 153.71. If those levels are cleared, the next support would be the 200-day SMA at 152.81.

Conversely, if USD/JPY climbs above the 50-day SMA, the next resistance would be the Senkou Span A at 155.76, ahead of challenging the Tenkan-Sen at 156.29

USD/JPY Price Chart

• NZD/USD advances to 0.5650 on Tuesday, extending recent gains.
• The pair breaks above the 20-day SMA, reinforcing bullish sentiment.
• An overall bullish trend wouldbe confirmed if it breaks above 0.5800.

The NZD/USD pair continued its upward trajectory on Tuesday, rising 0.39% to 0.5650 and breaking above its 20-day Simple Moving Average (SMA). This move suggests a potential shift in sentiment, with buyers gaining control after a prolonged period of range-bound movement. The breakout above this technical level could pave the way for further gains in the near term so the pair should focus in building support around this area to secure it.

From a technical perspective, indicators point to growing bullish momentum. The Relative Strength Index (RSI) has climbed to 50, confirming increasing buying pressure, while the Moving Average Convergence Divergence (MACD) histogram prints rising green bars, reinforcing the improving outlook.

Looking ahead, if NZD/USD manages to hold above the 20-day SMA, the next resistance levels to watch are at 0.5680 and 0.5725. On the downside, immediate support lies at 0.5620, with a break below this level potentially leading to a retest of 0.5585. Maintaining a position above the 20-day SMA will be crucial for sustaining the current bullish bias.

NZD/USD daily chart

• Gold hits an all-time high of $2,845, gaining over 1% as trade war fears intensify safe-haven demand.
• Chinese retaliatory tariffs on US goods and export controls amplify market uncertainties.
• Upcoming Fed speeches may influence gold's trajectory, with potential hawkish shifts tempering gains.

Gold reached a record high of $2,845 late Tuesday during the North American session as the US Dollar tumbled, weighed down by falling US Treasury bond yields. The “trade war” between the United States (US) and China sparked a flight to the yellow metal's safe-haven status. The XAU/USD trades at $2,843, up more than 1%.

Geopolitical issues are driving bullion prices. Although US President Donald Trump delayed tariffs on Mexico and Canada, duties of 10% on Chinese goods kicked in, sparking retaliatory actions by China.

China applied tariffs on specific products, such as coal, Liquefied Natural Gas (LNG), Crude Oil, farm equipment and electric trucks imported from the US. Additionally, it has decided to impose controls on exports of some metals, which are critical for electronics.

The escalation of the US-China trade war weighed on the Greenback, which, according to the US Dollar Index (DXY), fell 0.43%, below the 108.00 figure.

Therefore, the non-yielding metal is set to extend its rally, initially towards $2,850, ahead of the $2,900 figure.

However, Federal Reserve (Fed) speakers could cap Gold’s advance if they become slightly hawkish. San Francisco Fed President Mary Daly said the Fed’s job is not done on inflation, adding that the US economy is in a good place and the Central Bank is in a strong position to wait and see and assess tariffs' impact.

Daily digest market movers: Bullion prices underpinned by falling US yields

• Gold price soars underpinned by falling US yields. US real yields, as measured by the 10-year Treasury Inflation-Protected Securities (TIPS), tumble almost six basis points (bps) down from 2.13% to 2.072%
• The US 10-year Treasury bond yield falls four bps to 4.51%.
• US Jobs Openings and Labor Turnover Survey (JOLTS) data showed that job openings are decreasing, indicating a strong labor market. Job openings plunged to 7.6 million in December, revealing that the Department of Labor had decreased from November 8.156 million and was below forecasts of 8 million.
• US Factory Orders fell -0.9% in December, below forecasts of a -0.7% contraction.
• Money market fed funds rate futures are pricing in 48 basis points (bps) of easing by the Federal Reserve in 2025.

Source: Prime Market Terminal

XAU/USD technical outlook: Gold prices set to hit record highs

Gold’s uptrend remains intact as bullish momentum grows, as depicted by the Relative Strength Index (RSI). The RSI gives overbought signals, but due to the trend's strength, the most extreme level moves up from 70 to 80. Therefore, as the RSI is at 74, bulls could remain hopeful that higher prices lie ahead.

The next resistance would be $2,850 ahead of the 161.8% Fibonacci (Fib) extension at $2,889, ahead of $2,900 as seen on the 4-hour chart.

Conversely, if sellers clear the 50-period Simple Moving Average (SMA) at $2,780, this will be followed by the January 27 swing low of $2,730. The next stop below there would be $2,700.

• AUD/USD advanced to 0.6255 on Tuesday, extending Monday’s rebound.
• China announced tariffs on specific US goods.
• Market sentiment improves on expectations of softer US data and potential RBA easing.

On Tuesday, the AUD/USD rose to 0.6255 as the pair extended Monday’s comeback. The recovery comes after renewed US tariffs on China prompted by President Trump followed delays in tariffs on Canada and Mexico, the latter of which have eased trade war fears.

Meanwhile, aggressive bets on a February Royal Bank of Australia (RBA) rate cut and concerns over China’s economic slowdown continue to weigh on the AUD.

Daily digest market movers: Aussie up as China imposes tariffs on US

• President Trump first announced a 25% duty on goods from Canada and Mexico but then agreed to postpone these tariffs for a month, easing immediate trade tensions. In tandem, a 10% tariff on Chinese imports remains in effect, while China has signaled it will contest these measures at the WTO.
• The US Dollar experienced volatility after a brief rally that pushed the Dollar Index toward three-week highs near 110.00 and then fell toward 108.00.
• On the data front, JOLTS Job Openings fell to 7.6 million in December, missing the 8 million consensus estimate.
• On the home front, Australian CPI data for December is anticipated to show subdued inflation, forecast at around 2.5% YoY compared to 2.8% previously, which has bolstered market bets on a 25 bps RBA rate cut in February.
• However, persistent concerns over China's weak recovery and sluggish domestic economic momentum continue to weigh on the Aussie.
• Broader market risk sentiment remains cautious following recent volatility in global equity and bond markets, while renewed geopolitical concerns and technology sector sell-offs have also added safe-haven demand for the US Dollar.

AUD/USD technical outlook: Bulls step on the gas, outlook improves

The AUD/USD pair edged up to 0.6255 on Tuesday as it navigated within a narrow trading range between 0.6200 and 0.6300. The Relative Strength Index (RSI) is at 53, positioned in positive territory and rising sharply, which signals growing buying interest.

Simultaneously, the Moving Average Convergence Divergence (MACD) histogram displays green bars, suggesting that while bullish momentum is emerging, it is still tempered by prevailing market uncertainties. With support firmly established near 0.6200 and resistance around 0.6300, a break either way will dictate the pace of the pair.

The US Dollar shed further ground on Tuesday as market participants continued to evaluate the US tariffs narrative and the potential retaliatory measures by China.

Here is what you need to know on Wednesday, February 5:

The US Dollar Index (DXY) failed to regain upside impulse, keeping the trade well above the 108.00 barrier amid tariffs concerns and higher US yields. The ADP Employment Change report will gather all the looks seconded by MBA’s Mortgage Applications, the final S&P Global Services PMI, the ISM Services PMI, and the EIA’s weekly report on US crude oil stockpiles. In addition, the Fed’s Jefferson, Barkin, Goolsbee, and Bowman are all due to speak.

EUR/USD picked up a strong pace and reversed six days of losses, advancing to the vicinity of the key 1.0400 mark on Tuesday. The final HCOB Services PMIs in Germany and the euro area are due, seconded by Producer Prices in the bloc and the speech by the ECB’s Lane.

GBP/USD added to Monday's advance and revisited the boundaries of the key 1.2500 barrier on the back of the persistent offered bias in the Greenback. All the attention will be on the publication of the final S&P Global Services PMI.

USD/JPY kept the erratic performance well in place, reversing Monday’s retracement and revisiting the 155.50 zone. The final Jibun Bank Services PMI and Average Cash Earnings will be released.

AUD/USD rebounded from Monday’s multi-year lows. Although it failed to extend the bounce further north of the 0.6260 region, it printed marked gains for the day. The Ai Group Manufacturing Index is next on tap in Oz.

WTI prices managed to stage a marked comeback after hitting new lows near the $70.00 mark per barrel, eventually ending the day with humble gains.

Gold prices rose to an all-time high around $2,840 per ounce troy amid the Dollar’s pullback and steady jitters surrounding Trump’s tariffs plan. Silver prices gathered extra steam and surpassed the $32.00 level per ounce for the first time since mid-December.

Federal Reserve (Fed) Bank of San Francisco President Mary Daly noted on Tuesday that the Fed is firmly planted in wait-and-see mode, specifically noting the chilling effect that economic uncertainty has on policymaking.

Key highlights

• China responded to President Trump’s additional 10% tariff by applying targeted tariffs on US coal and other goods, as well as opening an antitrust case on Alphabet.
• US President Donald Trump agreed to a 30-day suspension on the proposed 25% tariffs on China and Mexico in exchange for border reinforcement.
• JOLTS Job Openings miss expectations, falling to 7.6 million from 8.09 million in November.
• Traders shift focus to the upcoming US NFP report, a key event for Fed’s policy outlook.

The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, loses momentum on Tuesday after struggling to revisit the 110.00 level and declined below 108.00. Recent developments include President Trump's imposition of a 10% tariff on Chinese imports, while tariffs on Canadian and Mexican goods have been paused for 30 days following negotiations. Investors are concerned that these tariffs could contribute to inflationary pressure within the US economy.

Meanwhile, traders brace for Friday’s US Nonfarm Payrolls (NFP) data, which is expected to shape the Federal Reserve’s (Fed) monetary policy direction.

Daily digest market movers: US Dollar softens after soft economic data, US tariffs paused

• 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.
• Canada has pledged to deploy advanced technology and additional personnel along its border with the United States. The country will also initiate collaborative efforts to combat organized crime, fentanyl smuggling, and money laundering.
• Mexico has agreed to strengthen its northern border by deploying 10,000 National Guard members to curb the flow of illegal migration and drugs.
• On the data front, JOLTS Job Openings fell to 7.6 million in December, missing the 8 million consensus estimate.
• The US labor market remains stable with total separations little changed at 5.3 million in December.
• Equities push higher as the weaker JOLTS report increases expectations for a Fed rate cut later this year.
• The CME FedWatch Tool projects an 86% chance that the Fed will keep rates unchanged at its March meeting.
• The US 10-year yield climbs to nearly 4.55%, recovering from Monday’s yearly low below 4.50%.
• The upcoming NFP report for January is set to be the key market catalyst for the US Dollar. The overall consensus expects that job creation cooled off slightly in the first month of 2025.

DXY technical outlook: Bearish momentum builds as 108.50 breaks

The US Dollar Index is losing traction with technical indicators reflecting growing downside pressure. The Relative Strength Index (RSI) has dropped below 50, signaling a shift toward bearish momentum. Additionally, the index has slipped below its 20-day Simple Moving Average (SMA) at 108.50, increasing the likelihood of further declines.

If selling pressure persists, the next key support zone lies near 107.80, while resistance remains at 109.00. A sustained move below 108.00 could reinforce bearish sentiment, potentially leading to a deeper correction.

• Mexican Peso treads water after failing to clear support at 20.30.
• Mixed economic data in Mexico weighed on the Mexican currency.
• Traders await Banxico’s monetary policy meeting and Fed speakers.

The Mexican Peso (MXN) registered losses against the US Dollar (USD) on Tuesday, but still it remains up in the week after United States (US) President Donald Trump delayed tariffs on Mexico, following discussions held with Mexican President Claudia Sheinbaum. The USD/MXN trades at 20.47, up 0.74%

The USD/MXN pair has found strong support near the 20.30 area despite losing over 1.30% on Monday. Yesterday, the US and Mexico reached an agreement to pause tariffs a month from now, as President Sheinbaum compromised to increase security at the border to stop drug traffic and illegal migration.

Investors cheered the news as risk appetite improved, and the Mexican currency finished strong in Monday’s session.

In addition, Mexico’s economic data revealed that January’s Business Confidence improved, though business activity contracted, according to S&P Global. Manufacturing activity contracted for the seventh straight month in January, indicating that the economy is slowing down.

Meanwhile, US job openings dropped by the most in 14 months, according to US Department of Labor data. The data revealed that the labor market and the economy remain strong, keeping the Federal Reserve (Fed) on hold at least until June.

Given the backdrop, further upside in the USD/MXN is seen, though traders must be aware of Fed official speakers during the rest of the day. Ahead in the week, Banco de Mexico (Banxico) is expected to cut rates by Thursday.

Uncertainty surrounds the size of the cut, as some Central Bank officials had opened the door for larger than a quarter of a percentage point of easing.

Daily digest market movers: Mexican Peso on the defensive as the Greenback counterattacks

• Mexico's Business Confidence deteriorated slightly from 52.0 in December to 51.4 in January, revealed the Instituto Nacional de Estadistica Geografia e Informatica (INEGI). The manufacturing sub-component grew from 51.4 to 51.7 for the same period.
• S&P Global Manufacturing PMI in January dropped from 49.8 to 49.1, showing that manufacturing activity is slowing down.
• Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said: “Mexican manufacturers began 2025 on a weaker footing, going deeper into retrenchment mode as current demand conditions and a bleak outlook prompted them to seek cost savings and protect cashflows.”
• Banxico’s private economists survey showed that Mexico’s economy is expected to grow by 1% in 2025, down from 1.2% in December. Inflation is expected to tick higher from 3.80% to 3.83%, while core prices are foreseen at 3.74%, up from 3.72%.
• Economists estimate the USD/MXN pair exchange rate to finish the year at 20.90, up from 20.53 in December, and estimate 150 basis points of easing from Banxico.
• US Job Openings and Labor Turnover Survey (JOLTS) in December dipped from 8.156 million to 7.6 million, below estimates of 8 million.
• Money market fed funds rate futures are pricing in 48 basis points (bps) of easing by the Federal Reserve in 2025.

USD/MXN technical outlook: Mexican Peso weakens past 20.50 as buyers target 20.90

The USD/MXN has recovered after hitting a five-day low of 20.39 as Trump paused tariffs on Mexico. During the North American session, the exchange rate climbed above the 50-day Simple Moving Average (SMA) of 20.42, opening the door for further upside.

A daily close above the psychological 20.50 area could pave the way to test the previous yearly high of 20.90. If surpassed, look for the current year’s high at 21.29.

Conversely, if sellers push USD/MXN below 20.30, it could fall to the 100-day SMA at 20.15. ahead of the 20.00 figure.

• The Canadian Dollar recovered a steep 1.55% on Tuesday.
• US threats of tariffs on Canadian goods have evaporated.
• US NFP and Canadian labor figures loom ahead late in the week.

The Canadian Dollar (CAD) surged on Tuesday after market sentiment recovered from a bout of tariff fears, sending the Canadian Dollar just high enough to crash back into familiar consolidation territory after a brief test of two-decade lows. 

A stiff 25% tariff on all Canadian goods and a 10% import fee on Canadian energy products was waved off for 30 days by US President Donald Trump on Monday. The US has agreed to temporarily suspend its plans to tax its own citizens for demanding Canadian-made goods, which includes approximately 60% of all US-consumed fuel and roughly 40% of all vehicles purchased. With a third kick of the can on President Trump’s tariffs, investors will likely view any further threats of import tariffs as simply a strongarm measure for Donald Trump to secure concessions from key trade allies with the US, most of which were already agreed to with the previous US administration.

Daily digest market movers: Canadian Dollar recovers ground post-tariff rout

• The Canadian Dollar rebounded 1.55%, sending USD/CAD back into consolidation range.
• US trade tariffs on Canada have been waived for 30 days.
• Investors are likely to disregard future tariff threats as pure posturing, limiting their effectiveness in the future.
• Canadian labor figures are due later this week, slated for Friday. The Canadian Unemployment Rate is expected to tick higher to 6.8% from 6.7%, and the Net Change in Employment is expected to ease to 25K from 90.9K in January.
• Canadian labor prints are likely to be entirely overshadows by US Nonfarm Payrolls figures due at the same time. US NFP net job gains are expected to ease to 170K from 256K, and back-dated revisions are also expected.

Canadian Dollar price forecast

The Canadian Dollar’s crash-and-bounce sent USD/CAD briefly to two-decade highs near 1.4800 before correcting sharply back below the 1.4400 handle on Tuesday. Despite firm gains behind the Loonie, Tuesday’s correction was only enough to plant USD/CAD back into its recent consolidation range between 1.4300 and 1.4500.

Price action continues to grind into a familiar pattern, albeit with quick spikes in either direction as the pair muddles along the midrange.

USD/CAD daily chart

• The Dow Jones is hitting a comfortable midrange around 44,450 on Tuesday.
• Threats of nearly-global tariffs have evaporated over 24 hours.
• Trade tensions remain an issue with China, but tariff breaks are priced in.

The Dow Jones Industrial Average (DJIA) is testing the 44,450 region on Tuesday, with equities slowing their recent pace of volatility as United States (US) President Donald Trump walks back nearly all of his recent trade war blustering and kicks his self-imposed tariff can down the road for a third time. US import tariffs on goods from Mexico and Canada have been delayed for up to 30 days, while planned tariffs on China are still on the table and warnings of tariffs on goods from the European Union are also in the pipe.

Despite all the trade war bluster, the Trump administration's three straight walkbacks have left investors with a strong sense that the tariffs were never meant to be an implemented part of the US’ trade strategy. Instead, they were President Trump’s best efforts to work twice as hard to accomplish half as much, strong-arming some of America’s closest trading partners to the negotiating table and obtaining concessions that were largely already agreed to with the previous US federal administration. Tariff threats are likely to be treated less seriously by markets moving forward as investors focus on material issues.

US JOLTS Jobs Openings figures from December printed on Tuesday, showing a slight cooling to 7.6M from 8.09M. JOLTS has an abysmally low respondent rate of around 30%, and December’s print is also a preliminary figure, due for a number of revisions throughout the calendar year. Regardless, the trend in patchy job openings data remains clear as the indicator grinds into two-year lows.

Dow Jones news

Over two-thirds of the Dow Jones equity board is testing into the high side on Tuesday, with investor sentiment brushing off its recent overreaction to trade war gesticulations by the US. Merck & Co tumbled over 10% and fell below $90 per share despite topping Wall Street earnings expectations after the drug supplier softened its forward guidance, warning investors that demand for vaccines in China has not recovered to expected levels and will be pausing further shipments to mainland China to alleviate a supply buildup.

Dow Jones price forecast

A back-and-forth tussle on daily candlesticks has the Dow Jones strung along a near-term midrange, with price action hung up near the 44,500 level. Bids found a technical floor near the 44,000 major price handle this week, but topside momentum remains thin as investors struggle to climb over 45,000. A further cooling period may be required as technical oscillators churn in overbought territory.

Dow Jones daily chart

• EUR/USD rises to 1.0335 on Tuesday, gaining bullish momentum.
• The pair surges past the 20-day SMA at 1.0360, signaling a potential trend shift.
• RSI climbs to 50 in positive territory, while the MACD histogram remains flat with green bars.

The EUR/USD pair extended its upward movement on Tuesday, advancing to 1.0335 and showing renewed buying interest. The rally helped the pair break above the critical 20-day Simple Moving Average (SMA) at 1.0360, a key level that had previously capped gains. This move could indicate a shift in sentiment, with buyers regaining control after recent range-bound trading.

From a technical perspective, momentum indicators present a cautiously optimistic outlook. The Relative Strength Index (RSI) has climbed to 50, confirming the return of bullish pressure. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram remains flat with green bars, suggesting a neutral but improving momentum stance.

In the near term, if EUR/USD sustains its position above 1.0360, further gains toward 1.0400 could be expected, with additional resistance at 1.0435. On the downside, immediate support lies at 1.0320, followed by a stronger floor at 1.0280. A failure to hold above the 20-day SMA could see renewed selling pressure, keeping the broader outlook uncertain.

EUR/USD daily chart

• GBP/USD gains for a second consecutive day, influenced by halted US tariffs on Mexico and Canada.
• Technical stance remains bearish unless GBP/USD surpasses 1.2503 SMA and 1.2576 resistance.
• Sellers need to breach 1.2436 to reignite bearish momentum, potentially targeting lower supports.

The Pound Sterling (GBP) post gains versus the US Dollar (USD) for the second straight day after US President Donald Trump tariff threats on Mexico and Canada were delayed, due to negotiations beginning between the parties, aimed to improve fighting against fentanyl traffic and illegal migration. The GBP/USD trades at 1.2476 up 0.62%.

GBPUSD Price Forecast: Technical outlook

Despite extending its gains, the GBP/USD remains biased downward, unless buyers lift the pair above the 50-day Simple Moving Average (SMA) of 1.2503 and above the January 7 peak of 1.2576. Once that happens, the market would be in equilibrium, but with momentum skewed to the upside.

The Relative Strength Index (RSI) suggests that buyers are gathering momentum in the short term.

For a bearish continuation, the GBP/USD must drop below February 3 high of 1.2436, which would pave the way for challenging 1.2400. On further weakness the next support would be April 22, 2024 swing low of 1.2299.

GBPUSD Price Chart – Daily

Global Macro: US imposes 10% China tariffs. Beijing retaliates immediately, in a targeted, measured way. 10% US tariffs not a game changer, but more could come, ABN AMRO Senior Economist Arjen van Dijkhuizen notes.

Tariffs on China may move much higher if no agreement is reached

“Immediately after the US tariffs went into effect, Beijing responded by imposing a 15% tariff on LNG and coal imported from the US, and a 10% tariff on crude oil and agricultural equipment. That is a measured, non-proportional reaction, in line with our expectations, leaves the door open for further negotiations, and does not disturb China’s commodity inflows that much. In 2024, around 6% of China’s total LNG imports came from the US, while China hardly imports any coal from the US.”

“China also announced it would put Google under investigation for antitrust violations, while putting another two US firms (including PVH Corp, the owner of Calvin Klein) and widening exports controls to the US with tungsten-related materials. Beijing also stated it had filed a complaint with the World Trade Organization in response to the new US import tariffs.”

“Although the first tariff implementation now seems to have come even earlier than anticipated in our Global Outlook, The Year of the Tariff, in our base case we already anticipate a material (gradual) stepping up of US import tariffs on China to an average effective tariff rate of 45% per Q2-2026. While talks between Trump and Xi may potentially smoothen the risk of a further escalation for now, Trump stated earlier this week that he sees the 10% tariffs as a first salvo, with tariffs on China potentially moving much higher if no agreement is reached.”

• USD/JPY gains sharply above 155.00 as investors underpinned the US Dollar against the Japanese Yen in a risk-on market mood.
• US President Trump delayed a 25% tariff order on Canada and Mexico for 30 days.
• Investors await Japan PM Ishiba’s meeting with US Trump this week.

The USD/JPY pair climbs above 155.00 in Tuesday’s North American session. The asset strengthens as the safe-haven demand of the Japanese Yen (JPY) has diminished more than the US Dollar (USD). Investors dump the Yen as United States (US) President Donald Trump has deferred his orders to impose 25% tariffs on Canada and Mexico by 30 days.

President Trump announced an immediate suspension of his tariff orders after North American peers agreed to cooperate on restricting the flow of drugs and undocumented immigrants into their economy.

The scenario has resulted in a sharp decline in the appeal of safe-haven assets. Investors expect tariffs from President Trump to be more a tactic to get better deals against US trading partners than a source to fund tax cuts.

Going forward, the Yen will be influenced by the outcome of Prime Minister Shigeru Ishiba’s meeting with Trump later this week. Given Japan's large trade surplus with the US, investors will look for cues on how the nation will address tariff risks.

Meanwhile, the US Dollar (USD) gives up its intraday losses and turns slightly negative as the appeal of risk-perceived assets improves. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks lower to near Monday’s low of 108.40.

On the domestic front, investors await the US JOLTS Job Openings data for December, which will be published at 15:00 GMT. The number of Job Openings is expected to be 8 million, marginally lower than the 8.1 million in November.

GBP has unwound some of the gains it made against the EUR yesterday indicating that the market is not convinced that the pound is a robust hedge against the likelihood of a step up in trade tensions between the EU and the US, Rabobank’s FX analyst Jane Foley notes.

MPC to tweak its language to reflect growing downside risks

“Of course, the 30 days reprieve that the Trump administration granted to both Canada and Mexico yesterday suggest that the President may not be willing to slap harsh tariffs on his allies. While this may have allowed a collective sigh of relief in Europe in addition to Canada and Mexico, Trump’s rhetoric towards the EU has been clear. On Sunday he stated that he would definitely impose tariffs on the EU, describing the bloc’s trade deficit with the US as an atrocity.”

“While GBP has re-priced this year to take account of a poorer UK growth and budget outlook than was expected at the time of last year’s July election, Germany and France have their own structural issues. Our central view remains that EUR/GBP can edge gently lower this year, though the January sell-off has shaken our faith in the pound. Near-term, the BoE policy meeting is also in view.” 

“In addition to the politics, the markets also have the BoE meeting in view this week. The Bloomberg survey shows that all but two forecasters are expecting a 25 bps rate cut from the MPC this week. While we expect the MPC to maintain its gradual approach to policy easing, we anticipate some language tweaks to reflect growing downside risks, which could weigh on the pound in the short-term and push yesterday’s low around EUR/GBP0.8250 out of sight for now.  Rabobank’s foresees four 25bp cuts in 2025.”

• AUD/USD bounces back above 0.6200 as the US Dollar surrenders its intraday gains.
• US Trump’s decision to delay tariffs on Canada and Mexico has resulted in a decline in USD’s risk premium.
• China has retaliated with tariffs on the US, which would take place from February 10.

The AUD/USD pair rebounds sharply above the round-level figure of 0.6200 in Tuesday’s North American session. The Aussie pair recovers as the US Dollar (USD) gives up its intraday gains on the back of United States (US) President Donald Trump’s decision to push the order to impose 25% tariffs on Canada and Mexico on hold for 30 days. This scenario has resulted in a decline in the risk-premium of the US Dollar, given its safe-haven feature.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops to near 108.50 after a short-lived recovery move to near 109.00.

However, Trump’s decision to put 10% tariffs on China has come into effect, which keeps fears of a trade war intact. In retaliation, China has also announced tariffs on the US, which will be executed in February. This has negatively impacted the Australian Dollar’s (AUD) outlook, given that the currency is a proxy for China’s economic status.

Investors expect that an absence of immediate execution of tariffs by China suggests that the economy is continuing to negotiate with Trump.

This week, the major trigger for the US Dollar will be the US Nonfarm Payrolls (NFP) data for January, which will be released on Friday. Market participants expect the official employment data to influence speculation for the Federal Reserve’s (Fed) monetary policy guidance.

AUD/USD posts a fresh four-year low around 0.6100. The 20-week Exponential Moving Average (EMA) near 0.6375 slopes downwards, suggesting that the overall trend is bearish. The 14-week Relative Strength Index (RSI) oscillates inside the 20.00-40.00 range, indicating a strong bearish momentum.

More downside would appear if the pair breaks below the immediate support of 0.6100, which would let it towards the psychological support of 0.6000 and 26 March 2020 low of 0.5870.

On the flip side, a sustenance move above the January 13 high of 0.6330 will open doors to the round-level resistance of 0.6400 and the December 5 high of 0.6456

AUD/USD weekly chart

The Pound Sterling (GBP) is trading down a little on the session after a two-cent rebound from yesterday’s intraday low and stretch gains against the EUR to retest the mid-0.82 zone on the cross, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

40-day MA caps recovery for GBP/USD

“The UK’s exposure to US tariffs is somewhat less than the Eurozone’s which should allow the GBP to outperform on the cross in the coming weeks and months. But the UK government will have to balance its ambitions to rebuild ties with Europe against the need to stay as close as possible with President Trump very carefully.”

“GBP’s reversal from yesterday’s intraday low stalled around 1.2450, the 40-day MA which has been curbing GBP gains since Early December. Sterling’s technical position looks potentially positive— certainly relative to its peers—but more work needs to be done to bolster upside potential. Near-term gains above 1.25 would add to short-term bull momentum. Support is 1.2350/75.”

Eurozone officials are bracing for Trump’s tariff focus to turn to the EU shortly, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR is trading off lows

“Hefty tariffs would prove significantly costly for the EU in growth terms. Officials are hoping a negotiated settlement can be reached but are prepared to retaliate. The EUR is underperforming slightly on the day, reflecting concerns that after Mexico, Canada and China, Europe will be next on the tariff hit list.”

“Spot set a new cycle low near 1.0140 yesterday before rising strongly and closing net higher on the day. A major bull ‘hammer’ signal on the chart would ordinarily point to a deep reversal in recent weakness but scope for EUR gains is likely limited for now. Support is 1.0250/55. Resistance is 1.0450.”

USD/CAD peaked just under 1.48 yesterday and traded back to a little under 1.44 just before the close in one of the wildest days of spot movement since the GFC, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD may slip back into old range

“There is clearly a strong sense of relief that tariffs have been avoided—for now—but the uncertainty about the Trump team’s goals will remain. The CAD can perhaps settle into a trading range in the short run as markets assess the lie of the tariff land in the next few weeks but scope for CAD gains will remain limited.”

“Canadian yields have firmed up a little from yesterday’s levels, when markets were seriously mulling the risk of an off-cycle BoC rate cut, but spreads remain a major headwind for the CAD.”

“Hefty net USD losses from a major new cycle high yesterday should spell some significant, bearish technical pressure on the USD. But it likely won’t result in a major improvement in the CAD, given non-technical factors. At best, the CAD should be able to settle back into the range that prevailed through mid-December/January between 1.4250/1.4510.”

That was exhausting. Yesterday brought a mix of news on tariffs that likely reflects the sort of swings in sentiment we will have to expect as President Trump wields the tariff hammer on the US’ main trading partners, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD eases modestly overall in calmer trade

“Mexico’s President said it had an agreement for a 1-month reprieve from border-related tariffs, lifting markets, then it didn’t—apparently, according to Trump who said that nothing had been agreed. But it actually did. Canadian officials weren’t hopeful they would get a temporary pass. But then they did. President Trump said last night the 30-day stay would allow time for a final ‘economic’ deal to emerge. China announced retaliatory tariffs on a limited number of US goods as US tariffs came into effect.”

“Volatile trading across all asset classes yesterday has calmed as investors take stock. Developments yesterday supported hopes that tariffs are not going to be a permanent fixture of the economic landscape. But clarity on whether tariffs are a temporary measure to obtain (limited, in yesterday’s cases) concessions or will be used to raise revenue and fund tax cuts elsewhere, as Trump has suggested—and are therefore liable to remain in place—is still lacking.”

“The US Dollar (USD) traded well off the intraday high and closed net lower on the day yesterday overall. A little more softness has crept in this morning, suggesting perhaps that markets feel Trump’s tariff bark is worse than the bite – but that remains to be seen. There are more data reports from the US this morning, including JOLTS data and Factory Orders. Markets are keener on following headlines on tariff developments than tracking data, however.”

• The US Dollar whipsaws across the board in major crosses against other currencies. 
• US President Trump pauses Mexico and Canada tariffs while China retaliates. 
• The US Dollar Index (DXY) tries to hold ground above 108.00 while looking for direction through tariff headlines.

The US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, is having a tough Tuesday, hitting 109.00 before falling back to the lower 108.37 level. The DXY trades around 108.50 at the time of writing. Markets are reacting to a mixture of headlines with a sigh of relief from Mexico and Canada, which saw the imposition of US tariffs delayed. Meanwhile, China has retaliated against US President Trump’s tariffs by issuing its own levies over US imported goods. 

The economic data calendar is taking its shape in the runup towards Friday’s Nonfarm Payrolls data. The US JOLTS Job Openings report will be released later in the day and could give more insights into the tightness of the labor market. In addition, two Federal Reserve (Fed) speakers, Atlanta Fed President Raphael Bostic and San Francisco Fed President Mary Daly, will speak and might leave comments for markets to consider. 

Daily digest market movers: Tariff fog 

• China has announced this Tuesday a 15% levy on less than $5 billion in US energy imports, such as Coal and Liquified Natural Gas (LNG), and a 10% fee on American Oil and agricultural equipment, and it will also investigate Google for alleged antitrust violations, Bloomberg reports. Meanwhile, Canada and Mexico are seeing US-imposed tariffs being delayed thanks to their actions to comply with US President Donald Trump. 
• At 15:00 GMT, the monthly Factory Orders for December are due. Expectations are for a further decline of -0.7% from -0.4% in the previous month.
• At the same time, the TechnoMetrica Institute of Policy and Politics (TIPP) will release its monthly Economic Optimism reading for February. The consensus is for an uptick to 53, coming from 51.9.
• The US JOLTS Job Openings for December will be released as well. A small decrease to 8 million job openings is expected,  down from 8.098 million in November. 
• The Federal Reserve has two speakers lined up as well: 
  • Atlanta Fed President Raphael Bostic moderates a conversation with Atlanta Mayor Andre Dickens at a National Housing Crisis Task Force meeting at Atlanta at 16:00 GMT. 
  • San Francisco Fed President Mary Daly will participate in the Walter E. Hoadley Annual Economic Forecast panel, hosted by the Commonwealth Club World Affairs of California at 19:00 GMT.
• Equities are in the red, unable to find a clear direction, having difficulties to digest the string of tariff headlines. 
• The CME FedWatch tool projects an 86.5% chance of keeping interest rates unchanged  in the Fed’s next meeting on March 19. 
• The US 10-year yield is trading around 4.575%, up from its fresh yearly low at 4.46% seen Monday. 

US Dollar Index Technical Analysis: Moves and counter-moves

The US Dollar Index (DXY) is all over the place, though zooming out, actually going nowhere. A range is defined as 107.00 on the downside and 110.00 on the upside. Expect to see the DXY keeping range trading between these two bigger levels for now. 

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 55-day Simple Moving Average (SMA) at 107.75 and the October 3, 2023, high at 107.35 acts as a double support to the DXY price. For now, that looks to be holding, though the Relative Strength Index (RSI) still has some room for the downside. Hence, look for 106.52 or even 105.89 as better levels. 

US Dollar Index: Daily Chart

• USD/MXN recovers to near 20.50 as Mexican Peso gives up some gains that were driven by a delay in tariff imposition on Mexico by US President Trump.
• The safe-haven appeal of the USD diminishes as investors expect Trump’s tariff agenda would be less fearful than anticipated.
• Investors await the US JOLTS Job Openings data, which will demonstrate the current status of labor demand.

The USD/MXN pair bounces back to near $20.50 in Tuesday’s European session after nosediving from Monday’s high of 21.29. The pair gains as the Mexican Peso gives up some gains that were inspired by United States (US) President Donald Trump’s decision to postpone his orders of imposing 25% tariffs on Mexico and Canada.

President Trump delayed his tariffs plans on Mexico after it agrees to support the US to restrict the passage of drugs and undocumented immigrants to their economy. In a way to dodge tariffs, Mexican President Claudia Sheinbaum took the matter seriously and supported Trump’s agenda of tightening immigration controls by sending 10,000 troops on the border. The event also frozen risks of economic damage to the Mexican economy for now.

Meanwhile, investors are expecting that Trump’s tariff agenda is mere a tool to have a dominant position in negotiations with US’s trading partners, which has diminished safe-haven risk premium of the US Dollar (USD). The USD faces a sharp selling pressure in every attempt of revival from Monday, with the US Dollar Index (DXY) trading cautiously around 108.40.

Going forward, the major trigger for the US Dollar will be the US JOLTS Job Openings data for December, which will be published at 15:00. The economic data will show the current status of labor demand. Economists expect that employers posted 8 million fresh jobs, marginally lower than almost 8.10 million in November.

Investors will pay close attention to the job openings data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.

• USD/CAD struggles above 1.4400 as US President Trump postpones his 25% tariff orders on Canada and Mexico.
• The BoC sees the risk of inflation undershooting their target of 2%.
• Investors await the US JOLTS Job Openings data for December.

The USD/CAD pair trades with caution around 1.4430 in Tuesday’s European session. The Loonie pair is almost 2.6% down from its Monday’s high of 1.4800 as the Canadian Dollar (CAD) strengthens after United States (US) President Donald Trump postponed his order to impose 25% tariffs on Canada and Mexico.

President Trump decided to delay tariff plans for 30 days after his North American peers agreed to tighten restrictions on their borders through which illegal immigrants and fentanyl were entering the US. This scenario has resulted in a sharp increase in the appeal of the Canadian Dollar (CAD).

The event has also indicated that Trump is using the tariff tool to gain an upperhand in negotiations with his trading partners and close better deals. The scenario has offered a big relief to the Canadian Dollar in the short-term but its longer-term outlook remains uncertain on the back of growing fears that inflation in Canada will undershoot the Bank of Canada’s (BoC) target of 2%.

Investors expect the BoC to reduce interest rates by 25 basis points (bps) to 2.75% in the policy meeting in March.

Meanwhile, the US Dollar (USD) has weakened as Trump’s decision to postpone tariffs on Canada and Mexico has diminished its safe-haven appeal. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, strives to gain ground near Monday’s low of 108.40.

On the economic front, investors will focus on the US JOLTS Job Openings data for December, which will be published at 15:00 GMT. Economists expect that employers posted 8 million fresh jobs, marginally lower than almost 8.10 million in November.

Outlook is mixed; USD is likely to trade between 7.2950 and 7.3400. In the longer run, a breach of 7.2950 would mean that USD is likely to trade in a range instead of advancing further, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Below 7.2950, USD is likely to trade in a range

24-HOUR VIEW: “We expected USD to ‘rise further’ yesterday, but we pointed out that ‘overbought conditions suggest 7.4000 is unlikely to come into view.’ We did not expect the sharp drop that reached a low of 7.3020. The rapid swings have resulted in a mixed outlook. Today, we expect USD to trade between 7.2950 and 7.3400.”

1-3 WEEKS VIEW: “We expected ‘further advance in USD’ yesterday, but we pointed out that the 7.4000 level to provide resistance.’ USD rose to 7.3765 and then plunged to a low of 7.3020. The buildup momentum is beginning to fade, and a breach of 7.2950 (no change in ‘strong support’ level from yesterday) would mean that USD is likely to trade in a range instead of advancing further.”

LME Copper has recently defended the ascending trend line drawn since 2022 (now at 8860), BBH analysts report.

The Head and Shoulder pattern points towards potential upside

“It has formed a small base in the form of an Inverse Head and Shoulders. The pattern generally points towards potential upside. A bounce towards the neckline at 9350 can’t be ruled out; this is an important resistance. A move beyond 9350 will confirm the pattern and indicate possibility of a short-term up move. Defence of the trend line at 8860 is crucial to avert extended decline.”

US Dollar (USD) could continue to trade in an erratic manner, probably in a range of 154.50/156.00. In the longer run, for the time being, USD is likely to trade in a 153.70/156.70 range, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

USD is likely to trade in a 153.70/156.70 range

24-HOUR VIEW: “Our view for USD to rise above 156.00 yesterday was incorrect. USD rose to 155.88, plummeted to 154.00 before rebounding quickly to close at 154.75. It continues to rise in early Asian trade today. We are unable to derive much from the price movements. Today, USD could continue to trade in an erratic manner, probably in a range of 154.50/156.00.”

1-3 WEEKS VIEW: “We indicated yesterday that ‘while short-term upward momentum is building, it is premature to expect a sustained advance.’ We added, ‘the bias is tilted to the upside, but at this time, we view any advance as part of a higher trading range of 154.30/157.20.’ USD then fell below 154.30 before rebounding strongly from 154.00. The buildup in short-term momentum has eased. From here, we expect USD to trade in a broad range, probably between 153.70 and 156.70.”

USD/CNH has struggled to overcome crucial graphical hurdle of 7.37 representing highs of 2022/2023, BBH FX analysts report.

Short-term price action can remain constricted

“A brief pullback is taking shape after this test. The pair has failed to defend the 50-DMA denoting lack of steady upward momentum. Recent pivot low of 7.24/7.23 is an important support zone. Short-term price action could remain constricted within limits of 7.24/7.23 and 7.37; a break beyond one of these bands would be crucial for confirming a directional move.”

Gold rose to a new all-time high after US President Donald Trump imposed tariffs on Canada, Mexico and China, driving investors to safe havens, ING’s commodity analysts Warren Patterson and Ewa Manthey notes.

Gold is at a new record high

“However, the strength in the USD did provide some strong headwinds to Gold prices through the day yesterday. Despite the US coming to a deal with Canada and Mexico, which will see tariffs delayed by at least a month, the uncertainty over trade and tariffs continues to buoy Gold prices. ”

“Total known Gold ETF holdings have increased by more than 590k oz this year to 83.4m oz amid a move to safe-haven assets.”

The pound emerged as a safe haven among pro-cyclical currencies yesterday, and seems to be retaining some solid footing after an American trade war was averted, ING’s FX analysts Francesco Pesole notes.

EUR/GBP may not return to the 0.8450 soon

“The reason is simple: the UK does not have much to lose from US tariffs. UK exports to the US are less than 2% of GDP and those to China less than 1%. Incidentally, Trump seems in no rush to hit the UK with tariffs, also considering its goods trade balance with the US is arguably negligible. Trump also seemed to be on rather amicable terms with UK Prime Minister Keir Starmer after a recent call.”

“Another factor contributing to sterling strength was Starmer’s trip to Brussels. That was officially aimed at strengthening an EU-UK defence path, but on which markets may be double reading an intent by Starmer to gradually reconnect with the EU politically. That is inarguably positive for sterling, which remains highly sensitive to any development that can improve a worsening growth outlook.”

“There are however some downside risks for the pound this week, as we expect headlines today confirming the fiscal headroom for the UK Chancellor has evaporated due to higher borrowing costs, and on Thursday the Bank of England may deliver a dovish rate cut. Still, EUR/GBP may not return to the 0.8450 January peak soon.”

Outlook is unclear; New Zealand (NZD) could trade in a range between 0.5570 and 0.5670. In the longer run, current price movements are likely part of a 0.5510/0.5705 range trading phase, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Current price movements are likely part of a range

24-HOUR VIEW: “NZD fell sharply early yesterday morning. We highlighted that ‘the sharp drop in NZD this morning appears to be excessive.’ However, we held the view that NZD ‘could drop further and test 0.5510 before stabilization can be expected.’ NZD fell less than expected to 0.5517 and then jumped, closing at 0.5629 (-0.14%). The outlook is unclear after the sharp swings. Today, NZD could trade in a range, expected to be between 0.5570 and 0.5670.”

1-3 WEEKS VIEW: “When NZD was at 0.5545 yesterday (03 Feb), we were of the view that ‘the risk for NZD is on the downside.’ However, we pointed out that ‘it is worth noting that 0.5510 is a significant support level, and NZD must break and remain below this level before a move to 0.5450 is likely.’ NZD subsequently dropped to 0.5517 and then, in a sudden move, surged above our ‘strong resistance’ level at 0.5630. The breach of the ‘strong resistance’ indicates that the downward pressure has faded. The current price movements appears to be part of a range trading phase, likely between 0.5510 and 0.5705.”

To sum up yesterday’s events, the US struck a deal with Mexico first and Canada and all parties agreed to delay tariffs by at least a month. Trump managed to obtain greater commitment to border security from both countries, although there seemed to be limited discussion on trade, ING’s FX analysts Francesco Pesole notes.

Case for a structural flow against USD appears weak

“The US Dollar (USD) may not experience big rallies against directly and indirectly impacted currencies simply on the back of a tariff announcement, but only after duties effectively come to place and there are indications that they will stay. Let’s look at AUD, NZD and the China tariffs for instance. US tariffs on China are due to come into effect today, and Beijing has already announced a retaliatory 10-15% duties on US energy exports and farm equipment, coming into effect on 10 February. ”

“Markets are not fully pricing out the tariff threat just yet. That’s because tariffs have been only delayed by a month, and secondly because the rollercoaster of trade news in the past few days does leave markets with a higher degree of uncertainty and unpredictability that harms high-beta currencies both due to direct protectionism exposures and due to risk sentiment implications.”

“We can reasonably expect another correction in the dollar across the board if the US and China move towards a de-escalation in the coming days. But now that Trump has more concretely introduced the tariff threat into daily market news, the case for a structural flow against the dollar appears weak, and we would still expect support to DXY around 108.0. Today, the highlight in the US calendar will be December JOLTS jobs figures, although readjustments after the tariff scare should still dominate.”

• EUR/USD rebounds sharply to near 1.0350 as US President Trump postpones his ordersof tariffs on Canada and Mexico for 30 days.
• Trump’s intentions to impose tariffs on China remain intact.
• The ECB is expected to cut interest rates three times more this year.

EUR/USD bounces back from the intraday low of 1.0270 and rebounds to near 1.0350 in Tuesday’s European session. The major currency pair finds buyers’ demand as United States (US) President Donald Trump’s decision to postpone tariffs on Canada and Mexico has diminished the safe-haven appeal of the US Dollar (USD).

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, surrenders its intraday gains and trades at 108.44 at the time of writing, right on track to Monday’s low of 108.40.

US President Trump suspended tariff imposition on his North American partners after they agreed to cooperate to stop the flow of fentanyl. On the other hand, the president’s proposal of imposing 10% tariffs on China is still on the table, and moreover, he has even proposed to go further. "China hopefully is going to stop sending us fentanyl, and if they're not, the tariffs are going to go substantially higher," Trump said.

Meanwhile, China has delivered a swift response to Trump’s tariffs with higher levies of 15% on Coal and Liquified Natural Gas (LNG), and 10% for Crude Oil, farm equipment, and some autos.

Such a scenario indicates that the trade war will not go global and will remain majorly between the US and China, which has weighed on demand for safe-haven assets.

On the economic front, the US Dollar will be guided by a slew of labor market-related economic indicators this week, such as JOLTS Job Openings, ADP Employment Change and Nonfarm Payrolls (NFP) data, and the US ISM Services PMI figures.

The labor market data will influence market speculation for the Federal Reserve’s (Fed) monetary policy outlook for the entire year. Currently, the Fed is in a waiting mode in interest rates until it sees any “real progress in inflation or at least some weakness in the labor market”.

Daily digest market movers: EUR/USD recovers at US Dollar’s expense

• The recovery move in the EUR/USD pair has come from some weakness in the US Dollar, while the outlook for the Euro (EUR) continues to remain uncertain as investors expect the Eurozone would be the next to face lethal tariff threats by US President Trump. Over the weekend, Trump said that he will definitely impose tariffs on the Eurozone after accusing the old continent of not buying enough US cars and farm products. He added that the EU takes “almost nothing and we take everything from them”.
• In response to Trump’s tariff threats, French President Emmanuel Macron said that the European Union (EU) would retaliate if its interests were targeted. “If our commercial interests are attacked, Europe, as a true power, will have to make itself respected and therefore react,” Macron said, The Guardian reported.
• Market experts believe that trade and investment between the old continent and the US are one of the largest globally, and a trade war between them would accelerate inflation and lead to an economic disruption. Higher Eurozone inflation would also create troubles for the European Central Bank (ECB), which is on the policy expansion path amid confidence that price pressures will sustainably return to the central bank’s target of 2% this year. 
• The ECB reduced its Deposit Facility rate by 25 basis points (bps) to 2.75% and guided that the monetary policy path is clear. Traders are confident that the ECB will deliver three more interest rate cuts by the summer.

Technical Analysis: EUR/USD rebounds from 1.0210

EUR/USD recovers from its three-week low of 1.0210 to trade near 1.0350 on Tuesday, but is still trading below the 20-day and 50-day Exponential Moving Averages (EMAs) around 1.0379 and 1.0439, respectively, suggesting a bearish trend.

The 14-day Relative Strength Index (RSI) holds above 40.00. A bearish momentum could trigger if the RSI breaks below that level.

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.

• Gold printed a fresh record high at $2,830.70 on Monday.
• China retaliates and issues tariffs on US imports as countermeasures. 
• Gold faces stretch intraday resistance levels due to the volatile move on Monday. 

Gold’s price (XAU/USD) consolidates its recent move to new all-time highs and looks for direction on Tuesday after China retaliated against US tariffs issued over the weekend. Beijing imposed a 15% tariff on less than $5 billion of US energy imports, such as Coal and Liquified Natural Gas (LNG), and a 10% fee on American Oil and agricultural equipment. It will also investigate Google for alleged antitrust violations. Markets are unclear on what to do with these retaliatory tariffs and are showing whipsaw patterns on Tuesday’s price action. 

On the economic data front, the calendar is light ahead of the runup to the Nonfarm Payrolls report, scheduled on Friday. On Tuesday, the JOLTS Job Openings for December could be of interest later in the day, followed by two Federal Reserve (Fed) speakers, Atlanta Fed Raphael Bostic and  San Francisco Fed Mary Daly. 

Daily digest market movers: Tit for tat

• China retaliated to US President Donald Trump’s opening trade war tariffs by targeting a handful of American companies and slapping levies on some US goods, in a move seemingly designed to avoid escalating tensions between the world’s two biggest economies, Bloomberg reports. China's response was seen as "measured and appropriate" and "targeted to send Trump a warning without hurting its own access to important commodities."The tariffs are set to kick in on February 10, potentially leaving room for negotiation.
• At 15:00 GMT, the December JOLTS Job Openings report is due. Expectations are that there will be a decrease to 8 million job openings, down from 8.098 million in November. 
• At 16:00 GMT, Atlanta Fed President Raphael W. Bostic moderates a conversation with Atlanta Mayor Andre Dickens at a National Housing Crisis Task Force meeting in Atlanta.
• At 19:00 GMT, Federal Reserve Bank of San Francisco President Mary Daly will participate in the Walter E. Hoadley Annual Economic Forecast panel, hosted by the Commonwealth Club World Affairs of California.
• The CME FedWatch tool shows an 86.5% chance of keeping interest rate unchanged in the March 19 meeting, compared to 13.5% for a 25 basis points rate cut. 

Technical Analysis: Choppyness begins

This is where the boys will be separated from the men in trading after China counteracted on Tuesday President Trump’s tariffs slapped over the weekend. Whipsaw moves and headline-driven volatility will take over the logic price action from here on out. Stay loyal to the bigger levels, which will act as support or resistance intraday and in the longer term. 

The first support comes in at the $2,800 round level, followed by $2,790, which was November’s high. The low of Monday in the chaotic opening of this week at $2,772 should act as the next support. Once that level should snap, a quick sprint to $2,721 could be underway. 

Analysts and strategists have called for $3,000, but the region around $2,800 looks like a good starting point for profit-taking. Based on Monday’s price action, technical analysis (pivot points) shows $2,839 and $2,864 as the next daily resistance levels. These will become important, along with the logic big figures such as $2,850 and $2,880.

XAU/USD: Daily Chart

Silver prices (XAG/USD) rose on Tuesday, according to FXStreet data. Silver trades at $31.62 per troy ounce, up 0.35% from the $31.51 it cost on Monday.

Silver prices have increased by 9.43% 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 89.08 on Tuesday, down from 89.40 on Monday.

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

• GBP/JPY appreciates despite a dampened market sentiment amid US-China trade tensions.
• China retaliated by slapping a 15% tariff on US coal and LNG imports; and an additional 10% tariff on crude Oil.
• The JPY could gain ground due to rising odds of further BoJ’s rate hikes.

The GBP/JPY cross reaches back to near 193.00 during the European session on Tuesday after recovering its daily losses. The cross gained support as investor confidence improved following US President Donald Trump’s decision to delay tariff plans on Canada and Mexico, weakening demand for the safe-haven Japanese Yen (JPY).

However, the upside for GBP/JPY is capped, as signs of uncertainty and escalating US-China trade tensions could have driven safe-haven flows toward the JPY. This follows China's finance ministry imposing tariffs on US goods—including crude oil, farm equipment, and automobiles—in immediate retaliation to Trump's 10% tariff on Chinese imports.

However, expectations of further rate hikes by the Bank of Japan (BoJ) could attract buyers. The BoJ’s Summary of Opinions indicates policymakers discussed the potential for additional rate increases, reinforced by Tokyo’s core inflation rising at its fastest annual pace in nearly a year. This strengthens the case for further BoJ policy tightening, offering some support to the JPY.

The GBP/JPY cross may depreciate as the Pound Sterling (GBP) may face risks due to expectations that the Bank of England (BoE) will restart its policy-easing cycle, likely cutting interest rates by 25 basis points (bps) to 4.5% on Thursday.

Traders anticipate a dovish stance from the Bank of England amid signs of slowing inflation, despite accelerating wage growth in the United Kingdom (UK). The BoE’s Monetary Policy Committee (MPC) is expected to vote 8-1 in favor of a quarter-point rate cut to 4.5%, with one member likely advocating for maintaining current rates for another meeting.

• Silver climbs back closer to over a one-month high retested the previous day.
• The technical setup favors bulls and supports prospects for additional gains.
• Any meaningful corrective slide might now be seen as a buying opportunity. 

Silver (XAG/USD) attracts buyers for the second straight day on Tuesday and sticks to its positive bias, above mid-$31.00s through the first half of the European session. The white metal, however, lacks follow-through and remains below the $31.70-$31.75 barrier, or its highest level since December 12 retested on Monday. 

From a technical perspective, last week's breakout through the $31.00 confluence – comprising the 38.2% Fibonacci retracement level of the October-December fall and the 100-day Simple Moving Average (SMA) – was seen as a key trigger for bulls. Apart from this, oscillators on the daily chart have been gaining positive traction and suggest that the path of least resistance for the XAG/USD is to the upside. 

That said, it will still be prudent to wait for some follow-through buying beyond the $31.70-$31.75 immediate resistance before positioning for any further gains. The XAG/USD might then aim to surpass the $32.00 mark and test the next relevant hurdle near the $32.30-$32.40 area, nearing the 61.8% Fibo. level. The momentum could extend further towards reclaiming the $33.00 round-figure mark. 

On the flip side, the $31.10-$31.00 confluence resistance breakpoint now seems to protect the immediate downside, below which the XAG/USD could accelerate slide further towards the $30.25 support zone. This is followed by the $30.00 psychological mark. A convincing break below the latter might prompt aggressive technical selling and drag the white metal to the $29.55 region en route to the $29.00 mark.

Silver daily chart

AUD could rise, but any advance is likely part of a higher 0.6155/0.6265 range. In the longer run, downward momentum has largely faded; AUD is expected to trade in a range between 0.6080 and 0.6310, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Any advance is likely part of a higher 0.6155/0.6265 range

24-HOUR VIEW: “We indicated yesterday that ‘the sharp plunge today appears to be overdone.’ We pointed out that ‘there is a chance for AUD to drop further, but given the deeply oversold conditions, a sustained decline below 0.6080 appears unlikely today.’ AUD fell less than expected to 0.6089 before staging a sharp rally, reaching a high of 0.6237 in the late NY session. Today, AUD could rise, but any advance is likely part of a higher 0.6155/0.6265 range. In other words, we do not expect AUD to break clearly above 0.6265.”

1-3 WEEKS VIEW: “While we indicated yesterday (03 Feb, spot at 0.6140) that AUD ‘is under pressure’, we also indicated that ‘it is too early to determine if there is enough momentum for AUD to drop towards the significant support level at 0.6000.’ AUD subsequently dropped to 0.6089 before reversing sharply, breaking above our ‘strong resistance’ level of 0.6230 (high has been 0.6237). Downward momentum has largely faded. For now, we expect AUD to trade in a range, probably between 0.6080 and 0.6310.”

• The US JOLTS data will be watched closely ahead of the release of the January employment report on Friday.
• Job openings are forecast to reach 8 million in December.
• The state of the labor market is a key factor for Fed officials when setting policy.

The Job Openings and Labor Turnover Survey (JOLTS) will be released on Tuesday by the United States (US) Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of job openings in December, alongside the number of layoffs and quits.

JOLTS data is scrutinized by market participants and Federal Reserve (Fed) policymakers because it can provide valuable insights into the supply-demand dynamics in the labor market, a key factor impacting salaries and inflation. Job openings have been declining steadily since coming in above 12 million in March 2022, indicating a steady cooldown in labor market conditions. In September, the number of jobs declined to 7.44 million, marking the lowest reading since January 2021, before rising to 7.8 million and 8.09 million in October and November, respectively. 

What to expect in the next JOLTS report?

Markets expect job openings to be around 8 million on the last business day of December. Following the January policy meeting, the Federal Reserve (Fed) noted that economic activity has been expanding at a solid pace, with the unemployment rate stabilizing at low levels and labor market conditions staying robust. In the post-meeting press conference, Fed Chairman Jerome Powell said that the labor market seemed to be broadly in balance.

It is important to note that while the JOLTS data refers to the end of December, the official Employment report, which will be released on Friday, measures data for January. 

In December, Nonfarm Payrolls (NFP) rose by 256,000, surpassing the market expectation for an increase of 160,000 by a wide margin. Commenting on the employment situation in the US, Chicago Fed President Austan Goolsbee said: “We will have to process if retail gains were a strong holiday season or something more general.” He added that he does not see the job market as a source of inflation.

The CME FedWatch Tool currently shows that markets are pricing in a less-than-15% probability of a 25 basis points (bps) rate cut in March. Although the job openings data is unlikely to influence the Fed rate outlook, a significant negative surprise, with a reading at or below 7 million, could weigh on the US Dollar (USD) with the immediate reaction. On the other hand, the market positioning suggests that the USD doesn’t have a lot of room on the upside even if the data comes in better than forecast. 

"Over the month, hires and total separations were little changed at 5.3 million and 5.1 million, respectively," the BLS said in its November JOLTS report. "Within separations, quits (3.1 million) decreased, but layoffs and discharges (1.8 million) changed little."

When will the JOLTS report be released and how could it affect EUR/USD?

Job opening numbers will be published on Tuesday at 15:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his technical outlook for EUR/USD:

“EUR/USD returned within the descending regression channel coming from late September after failing to stabilize above its upper limit. Additionally, the Relative Strength Index (RSI) indicator on the daily chart dropped below 40, reflecting a buildup of bearish momentum.”

On the downside, 1.0200 (mid-point of the descending channel) aligns as immediate support before 1.0100 (round level) and 1.0000 (psychological level, lower limit of the ascending channel). Looking north, first resistance could be spotted at 1.0400 (50-day Simple Moving Average (SMA), upper limit of the descending channel) before 1.0500 (static level) and 1.0640 (100-day SMA).”

European natural gas prices remain well supported with TTF settling a little more than 1% up on the day at EUR53.79/MWh, ING’s commodity analysts Warren Patterson and Ewa Manthey notes.

Unplanned outages in Norway add to supply concerns

“Concerns over the quicker-than-expected draw in EU storage continue to support the market. EU storage is now a little under 53% full, below the 69% seen at the same stage last year and below the five-year average of 60%. However, the EU met its intermediary target of having storage at least 50% full by 1 February.”

“In addition, some unplanned outages in Norway have only added to supply concerns. However, Russian flows via Turkstream were stronger over January with flows totalling 1.4bcm, up 1.7% MoM and up 26% YoY.”

Rapid rise has scope to extend, but any advance is unlikely to break clearly above 1.2475. In the longer run, for the time being, GBP is expected to trade in a range of 1.2245/1.2530, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

GBP is expected to trade in a range of 1.2245/1.2530

24-HOUR VIEW: “Yesterday, when GBP was at 1.2310, we indicated that ‘while the sharp drop in GBP today has scope to extend, we expect the 1.2245 level to provide support.’ GBP subsequently dropped to 1.2249 and then reversed sharply, soaring to a high of 1.2455. This time around, the rapid rise has scope to extend, but any advance is unlikely to break clearly above 1.2475. The major resistance at 1.2530 is not expected to come under threat. On the downside, support levels are at 1.2380 and 1.2330.”

1-3 WEEKS VIEW: “We noted early yesterday (03 Feb, spot at 1.2310) that ‘despite dropping sharply upon opening today, there has been no significant increase in downward momentum.’ However, we were of the view that GBP ‘is likely to trade with a downward bias towards 1.2245.’ GBP subsequently dropped to within a few pips of 1.2245 (low of 1.2249) and then in a sudden move, surged above our ‘strong resistance’ level of 1.2435 (high of 1.2455). Downward momentum has fizzled out, and for the time being, we expect GBP to trade in a range of 1.2245/1.2530.”

• WTI price depreciates amid rising fears following US-China trade war escalation.
• China slapped a 15% tariff on US coal and LNG imports, along with an additional 10% tariff on crude Oil.
• OPEC+ confirmed its plan to gradually increase Oil production starting in April.

West Texas Intermediate (WTI) crude Oil price continues to decline for the second consecutive day, trading near $71.50 per barrel during European hours on Tuesday. The downturn comes amid dampened market sentiment following China's announcement of new tariffs on US goods in retaliation to US President Donald Trump’s trade measures, fueling concerns of a potential trade war between the world’s two largest economies.

China’s Commerce Ministry imposed a 15% tariff on US coal and liquefied natural gas (LNG) imports, along with an additional 10% levy on crude Oil, farm equipment, and certain automobiles, effective February 10. Additionally, China introduced export controls on key metals—including tungsten, tellurium, ruthenium, and molybdenum—citing national security concerns.

Market participants are closely monitoring trade negotiations. On Monday afternoon, President Trump stated he expected to speak with China within 24 hours, warning of "very, very substantial" tariffs if a deal is not reached. Meanwhile, he postponed planned tariffs on Canada and Mexico for a month after securing agreements to strengthen border security and combat drug smuggling.

In energy markets, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) reaffirmed its policy of gradually increasing Oil output from April and removed the US Energy Information Administration (EIA) from its list of monitoring sources. Since returning to office in January, Trump has urged OPEC to lower Oil prices, arguing that elevated prices are benefiting Russia amid its ongoing war in Ukraine.

The oil market gave back a lot of its gains yesterday after Mexico and Canada came to a deal with the US, which saw a delay in the implementation of tariffs. Both Mexico and Canada agreed to put more resources on their border to combat the flow of fentanyl to the US. The delay has seen crude oil prices coming under further pressure in early morning trading today with NYMEX WTI down more than 1%, while NYMEX RBOB and ULSD are under relatively more pressure, ING’s commodity analysts Warren Patterson and Ewa Manthey notes.

OPEC+ recommends no change to its output policy

“Unsurprisingly fears over tariffs on Canadian oil saw the differential for West Canada Select (WCS) widening relative to WTI. The differential widened by US$1.55/bbl to a discount of US$17.84/bbl yesterday – the weakest the differential has been since July 2024. The differential has been weakening for much of this year, given concerns over tariffs. Clearly, with still plenty of uncertainty over trade it would be wise for Canada to start investing in further pipeline capacity from its producing regions to its east and west coasts.”

“OPEC+ held its Joint Ministerial Monitoring Committee (JMMC) meeting yesterday, and as widely expected the group recommended no change to its output policy. This suggests that the group is likely to go ahead with the unwinding of their additional voluntary supply cuts from April. The group is scheduled to bring back around 2.2m b/d of supply over an 18-month period starting in April. Obviously, the return of this supply will still be dependent on market conditions.”

“Preliminary production numbers show that OPEC production fell by 70k b/d MoM to 27.03m b/d in January according to a Bloomberg survey. Iraq led the declines, with its output falling by 110k b/d to 4.01m b/d. This reduction was largely due to a fire at the Rumaila oilfield.”

Euro (EUR) could continue to trade in a choppy manner, probably between 1.0255 and 1.0370. In the longer run, risk is for further EUR weakness; it remains to be seen if it can break and remain below 1.0100, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Risk is for further EUR weakness

24-HOUR VIEW: “EUR gapped lower and plummeted when it opened yesterday. We noted that ‘while it is already oversold, the weakness has not stabilized, and EUR could continue to decline.’ We pointed out ‘support levels are at 1.0175 and 1.0100, and the latter level is likely out of reach for now.’ The subsequent price movements did turn out as we expected. EUR fell to 1.0210 before soaring to close at 1.0344 (-0.17%). The volatile price action has resulted in a mixed outlook. Today, EUR could continue to trade in a choppy manner, probably between 1.0255 and 1.0370.”

1-3 WEEKS VIEW: “We continue to hold the same view as yesterday (03 Feb, spot at 1.0245). As indicated, ‘the risk is for further EUR weakness.’ However, we highlighted that ‘it remains to be seen if it can break and remain below 1.0100.’ Overall, only a breach of 1.0380 (no change in ‘strong resistance’ level) would indicate that the weakness in EUR has stabilized.”

Amid the US-Canada-Mexico tariff saga – which was the main driver of EUR/USD yesterday – eurozone flash CPI estimates for January came in slightly hotter than expected. The core measure was unchanged at 2.7% (expected 2.6%) for a fifth consecutive month and the headline inched higher for the fourth month in a row, again challenging the ECB’s rather optimistic stance on disinflation, ING’s FX analysts Francesco Pesole notes.

US-China trade deal to take EUR/USD close to 1.040

“This means that upside risks remain significant to inflation, but we are still confident that the trajectory remains deflationary for the remainder of the year. We still expect rates to be cut at least to 2.0% in the eurozone. Sentiment in the eurozone has improved on the back of expectations that a deal can be struck and protectionism averted. Still, extra caution is warranted in this sense.”

“If part of Trump’s motive to delay tariffs on US neighbours was domestic backlash for potential immediate economic pain for US consumers, that is not necessarily true for EU tariffs. On those, Trump can afford to play the longer game, and perhaps keep them in place for a prolonged period, making the EU feel some ‘pain’ before striking a deal. Crucially, the motives for tariffs on the EU would not be border-related, where a deal is arguably quicker to achieve as we saw yesterday, but on trade imbalances, which often require longer negotiations.”

“With all this in mind, we are somewhat skeptical that the euro is bound for a major rally. Trump has already hinted the EU is next on the tariff list, and markets may probably find better value in buying the dips in currencies that have passed the protectionism peak against the euro, which is still to face the worst of it. We would expect a US-China trade deal to take EUR/USD close to 1.040, but the rally may lose steam around those levels.”

• The Pound Sterling drops to near 1.2400 against the US Dollar as investors worry that a trade war between the US and China could intensify.
• China retaliates to US President Trump’s tariffs and announces levies on various imports from the US.
• This week, investors will keenly focus on the BoE’s policy decision and the US NFP data.

The Pound Sterling (GBP) declines to near 1.2400 against the US Dollar (USD) in Tuesday’s European session. The GBP/USD pair hits profit-booking after a strong upside in North American trading hours on Monday, following the United States (US) President Donald Trump’s decision to pause 25% tariff imposition on Canada and Mexico for 30 days.

President Trump agreed to a 30-day pause in return for concessions on border and crime enforcement with the two neighboring countries, Reuters reported. The announcement led to a sharp sell-off in the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, retreated to 108.34 after posting a fresh over two-week high of 109.88 on Monday, but has rebounded to near 108.90 at the press time.

The delay of tariff orders by the US on its North American peers has resulted in an interim relief for risk-perceived assets across the globe. However, Trump is still on with his decision of a 10% levy on China and has also threatened to go beyond. Such a scenario would limit the risk appetite of investors. In retaliation, China has also slapped tariffs on imports from the US. The Chinese finance ministry said that it would impose levies of 15% on coal and Liquefied Natural Gas (LNG) and 10% on crude oil, farm equipment, and some autos, according to a Reuters report.

Going forward, the next trigger for the US Dollar will be the US Nonfarm Payrolls (NFP) data for January, which will be released on Friday. The official employment data is expected to significantly influence market expectations for how long the Federal Reserve (Fed) will keep its waiting mode on interest rates. Fed Chair Jerome Powell stated last week that only “real progress in inflation or at least some weakness in labor market” could force us to make some adjustments in the monetary policy stance.

In Tuesday’s session, investors will focus on the JOLTS Job Openings data for December, which will be published at 15:00 GMT. Economists expect that employers posted 8 million fresh job offers, marginally lower than almost 8.10 million in November.

Daily digest market movers: Pound Sterling will be influenced by BoE’s policy decision

• The Pound Sterling exhibits a mixed performance against its major peers on Tuesday as investors await the Bank of England’s (BoE) monetary policy decision, which will be announced on Thursday. 
• According to money market expectations, traders have priced in an 81 basis points (bps) interest rate reduction this year, suggesting there will be more than three 25 bps interest rate cuts by December. The first is seen coming this week, which will push borrowing rates lower to 4.50%.
• Meanwhile, yields on 30-year United Kingdom (UK) gilt have declined to near 5.04%, the lowest level seen in almost two weeks, in anticipation that US President Trump won’t pick a lethal trade fight with Britain. Over the weekend, Trump’s comments indicated that he is not sure about imposing tariffs on the UK and he was sure that a deal could be made as Prime Minister Keir Starmer has been "very nice".
• UK gilt yields had a strong run from November 29 to January 13 as investors were worried about the economic outlook on the back of potential tariff hikes from the US.

Technical Analysis: Pound Sterling corrects slightly from 1.2455

The Pound Sterling retraces from Monday’s high of 1.2455 to near 1.2400 on Tuesday. The GBP/USD pair returns above the 20-day Exponential Moving Average (EMA), which trades around 1.2400. However, the near-term outlook for Cable remains uncertain as the 50-day EMA continues to be a barrier for the Pound Sterling bulls, hovering 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 act as key support zones for the pair. On the upside, the December 30 high of 1.2607 will act as key resistance.

• NZD/USD could struggle as the risk-off mood increases amid the US-China trade war.
• China slapped a 15% tariff on US coal and LNG imports, along with an additional 10% tariff on crude Oil.
• Trump said on Monday afternoon that talks with China would take place probably over the next 24 hours.

NZD/USD hovers around 0.5610 during early European trading on Tuesday, facing volatility as risk-off sentiment rises due to escalating US-China trade tensions. China retaliated against the new 10% US tariff that took effect Tuesday by imposing its own tariffs: a 15% levy on US coal and liquefied natural gas (LNG) imports, along with an additional 10% on crude Oil, farm equipment, and certain automobiles.

Additionally, China’s Commerce Ministry announced export controls on tungsten, tellurium, ruthenium, molybdenum, and related products to "safeguard national security interests."

Markets are closely watching tariff negotiations. On Monday, US President Donald Trump stated he expected to speak with China within 24 hours, warning that tariffs would be "very, very substantial" if no deal is reached.

Meanwhile, Chinese exporters are accelerating efforts to offshore production to avoid US tariffs, considering relocation to the Middle East and other regions. Some are passing costs onto US consumers or seeking alternative markets, according to the Financial Times.

The New Zealand Dollar (NZD) remains under pressure amid expectations of further rate cuts by the Reserve Bank of New Zealand (RBNZ), with markets pricing in a 50bps reduction to 3.75% this month and a potential policy rate drop to 3.0% within a year.

• EUR/JPY gains ground to around 159.95 in Tuesday’s early European session, adding 0.42% on the day. 
• Trump paused new tariffs on Mexico and Canada for one month. 
• The prospect of a BoJ rate hike might cap the downside for JPY. 

The EUR/JPY cross edges higher to near 159.95 during the early European session on Tuesday.  US President Donald Trump's decision to delay plans to impose tariffs on Canada and Mexico boosts investors' confidence, which drags the safe-haven currency like the Japanese Yen (JPY) lower. 

Late Monday, Trump said that he will pause the 25% tariffs on goods entering the United States from Mexico and Canada for one month. The risk-on sentiment lifts the Euro (EUR) from monthly lows against the JPY. 

On Tuesday, China's finance ministry announced a package of tariffs on a range of US products, including crude oil, farm equipment, and some autos in an immediate response to a 10% tariff on Chinese imports announced by US President Donald Trump. Any signs of uncertainty or escalating trade war tension could boost the safe-haven flows, benefiting the JPY. 

Furthermore, Tokyo core CPI hit 2.5%, marking the fastest annual pace in nearly a year, well exceeding the Bank of Japan’s (BoJ) 2% target and keeping alive market expectations for further interest rate hikes. This, in turn, might help limit the JPY’s losses. 

"Just looking at inflation, the BOJ might see scope to raise interest rates once or twice this year. But much depends on whether consumption and the broader economy hold up,” said Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute.

Here is what you need to know on Tuesday, February 4:

Following Monday's wild fluctuations that were triggered by headlines surrounding US President Donald Trump's tariff policy, markets seem to be settling down early Tuesday. In the second half of the day, JOLTS Job Openings data will be featured in the US economic docket. Several Federal Reserve (Fed) policymakers will also be delivering speeches during the American trading hours.

The US Dollar (USD) benefited from the risk-averse market atmosphere at the beginning of the week after Trump announced over the weekend that they will impose 25% tariffs on Canadian and Mexican imports and 10% on Chinese goods. In the American session on Monday, Mexico's President Claudia Sheinbaum said that the US has agreed to pause tariffs on Mexico for 30 days for further negotiations. Similarly, Canadian Prime Minister Justin Trudeau announced late Monday that Trump will postpone tariffs on Canadian imports for at least 30 days. Following the rally seen in the first half of the day, the USD Index reversed its direction and closed virtually unchanged on Monday. 

During the Asian trading hours on Tuesday, China’s Commerce Ministry said they will impose 15% tariffs on US coal and liquified natural gas (LNG) imports. "Additional 10% tariffs will be imposed on crude oil, farm equipment and some automobiles," the Ministry said. Markets remain cautious early Tuesday, with US stock index futures losing about 0.2% on the day. In the meantime, the USD Index stays in positive territory slightly below 109.00.

After falling sharply early Monday, EUR/USD staged a rebound and erased a majority of its daily losses. The pair, however, struggles to hold its ground in the European morning on Tuesday and trades slightly below 1.0300.

GBP/USD benefited from the improving risk mood in the American session and posted daily gains on Monday. The pair stays on the back for early Tuesday and fluctuates at around 1.2400.

USD/CAD reached its highest level since April 2003 near 1.4800 on Monday but declined sharply in the second half of the day to close with a daily loss of more than 0.6%. The pair edges higher to begin the European session on Tuesday and trades above 1.4450. Similarly, USD/MXN made a U-turn after reaching a multi-year high at 21.2950 and lost more than 1.5% for the day to close at 20.3435. USD/MXN stays relatively quiet early Tuesday and trades near Monday's closing level.

Gold touched a new all-time-high of $2,830 on Monday but retraced a portion of its daily rally in the American session. XAU/USD stays in a consolidation phase and holds above $2,810 early Tuesday.

• EUR/GBP remains on the back foot for the third successive day on Tuesday. 
• Concerns about Trump’s trade tariffs and dovish ECB weigh on the Euro.
• The downside remains cushioned ahead of the BoE meeting on Thursday.

The EUR/GBP cross turns lower for the third successive day following an Asian session uptick and currently trades around the 0.8300 mark, just above a near one-month low touched the previous day. Moreover, the fundamental backdrop seems tilted in favor of bearish traders and supports prospects for further losses.

The shared currency continues with its relative underperformance in the wake of concerns that US President Donald Trump would slap tariffs on goods from the European Union. This comes on top of the European Central Bank's (ECB) dovish stance, which, to a larger extent, overshadows a rise in the Eurozone Harmonized Index of Consumer Prices (HICP) at an annual rate of 2.5% in January. 

In fact, the ECB lowered borrowing costs by 25 basis points (bps) last Thursday, as expected, and left the door open for more rate cuts by the end of this year. This is seen weighing on the Euro and validates the near-term negative outlook for the EUR/GBP cross. Traders, however, might refrain from placing aggressive bets and opt to wait for the Bank of England (BoE) meeting on Thursday. 

Nevertheless, the aforementioned factors support prospects for an extension of a nearly two-week-old downtrend, suggesting that any attempted recovery might still be seen as a selling opportunity and remain capped. That said, traders might still opt to move to the sidelines in the absence of any relevant macroeconomic data on Tuesday and heading into the key central bank event risk.

• USD/CHF holds positive ground around 0.9125 in Tuesday’s early European session. 
• China announced a levy of additional tariffs of up to 15% on select US imports starting February 10. 
• Swiss Real Retail Sales rose 2.6% YoY in December. 

The USD/CHF pair trades with mild gains around 0.9125 during the early European session on Tuesday. The markets might turn cautious later in the day as traders await the developments surrounding tariff negotiations with China.

China's finance ministry on Tuesday announced a package of tariffs on a range of US products, including crude oil, farm equipment, and some autos, in an immediate response to a 10% tariff on Chinese imports announced by US President Donald Trump that went into effect at 05:01 GMT on Tuesday. 

The development surrounding trade tariff policies will be closely monitored. Economists said the tariffs are widely expected to push up U.S. inflation, supporting the USD by keeping US interest rates higher for longer.

On the Swiss front, the country’s Real Retail Sales climbed by 2.6% YoY in December, compared to 1.4% (revised from 0.8%) prior, according to the Federal Statistical Office on Friday. This reading came in hotter than the 0.6% expected.

China’s Commerce Ministry announced on Tuesday that It would impose 15% tariffs on US coal and liquified natural gas (LNG) imports.

“Additional 10% tariffs will be imposed on crude oil, farm equipment and some automobiles,” the Ministry said.

The Commerce Ministry added that to "safeguard national security interests" the country is imposing export controls on tungsten, tellurium, ruthenium, molybdenum and ruthenium-related items.

China retaliated after the new 10% tariff on all Chinese exports to the US comes into effect.

Market reaction

The Chinese-proxy, the Australian Dollar (AUD), remains under selling pressure amid expectations of counter-tariffs from China to US President Donald Trump’s tariffs. At the press time, AUD/USD is down 0.63% on the day, trading near 0.6185.

• EUR/USD loses ground as China is hit with a 10% across-the-board tariff on Tuesday.
• Trump said on Monday afternoon that talks with China would take place probably over the next 24 hours.
• The Euro remains under pressure due to ongoing dovish sentiment surrounding the European Central Bank’s policy outlook.

EUR/USD extends its losing streak after surrendering daily gains, trading around 1.0280 during the Asian session on Tuesday. The pair loses ground as the US Dollar appreciates due to a 10% tariff implementation on China. However, Trump said on Monday afternoon that talks with China would take place “probably over the next 24 hours.” He also said, “If we can’t make a deal with China, then the tariffs will be very, very substantial.”

The EUR/USD pair also loses ground as United States (US) tariffs specifically targeting the European Union (EU) remain on the table. US President Donald Trump stated that he would suspend steep tariffs on Mexico and Canada after their leaders agreed to deploy 10,000 soldiers to the US border to combat drug trafficking. The tariffs on Mexico and Canada have been postponed for at least 30 days.

The Harmonized Index of Consumer Prices in the Euro Area increased to 2.5% year-over-year in January, up from 2.4% in December, slightly surpassing market expectations of 2.4%, according to a preliminary estimate. This marked the highest inflation rate since July 2024, driven mainly by a significant rise in energy costs.

In contrast, inflation for non-energy industrial goods remained unchanged at 0.5%. The core inflation rate, which excludes the often volatile food and energy sectors, held steady at 2.7% for the fifth consecutive month, slightly above the expected 2.6%, though still the lowest it has been since early 2022.

The EUR/USD pair may also face challenges as the Euro remains under pressure due to ongoing dovish sentiment surrounding the European Central Bank’s (ECB) policy outlook. Last week, the ECB cut its Deposit Facility Rate by 25 basis points (bps) to 2.75%, while the Main Refinancing Operations Rate dropped to 2.9%, as anticipated.

• USD/CAD regains positive traction and reverses a part of the previous day’s sharp slide. 
• Declining Oil prices undermine the Loonie and lend support amid a modest USD uptick.
• The divergent Fed-BoC policy outlook supports prospects for a further appreciating move.

The USD/CAD pair attracts some dip-buying near the 1.4385 region during the Asian session on Tuesday and for now, seems to have stalled the previous day's sharp retracement slide from its highest level since April 2003. The move-up is sponsored by a combination of factors and lifts spot prices back closer to the 1.4500 psychological mark. 

Crude Oil prices attract sellers for the second successive day on Tuesday and drop to over a one-month low, which undermines the commodity-linked Loonie and acts as a tailwind for the USD/CAD pair amid a pickup in US Dollar (USD) demand. US President Donald Trump's decision to delay the newly imposed tariffs on imports from Canada and Mexico eases worries over potential supply disruptions from two of the primary oil suppliers to the US. Furthermore, the prospects of lower fuel demand – led by the anticipated domino effect from Trump's policies on global economic growth – exert additional downward pressure on the black liquid. 

Meanwhile, expectations that Trump's policies could push up inflation and give the Federal Reserve (Fed) less impetus to cut interest rates further trigger a modest bounce in the US Treasury bond yields. Adding to this, concerns about the potential economic fallout from Trump's protectionist policies assist the safe-haven USD to regain some positive traction following the previous day's dramatic turnaround from the vicinity of over a two-year high. This, in turn, offers additional support to the USD/CAD pair. Apart from this, the Bank of Canada's (BoC) dovish outlook suggests that the path of least resistance for spot prices is to the upside.

• AUD/JPY gains traction to around 96.20 in Tuesday’s early European session, up 0.53% on the day. 
• The cross keeps the negative outlook below the 100-period EMA with the bearish RSI indicator. 
• The initial support level is seen at 95.05; the key upside barrier to watch is 97.00. 

The AUD/JPY cross attracts some buyers to near 96.20 during the early European session on Tuesday. US President Donald Trump's decision to delay plans to impose trade tariffs on Canada and Mexico weighs on the safe-haven currency like the Japanese Yen (JPY). Nonetheless, the upside for the pair might be limited amid rising bets that the Reserve Bank of Australia (RBA) could consider a rate cut in February.

Technically, the bearish outlook of AUD/JPY remains in place as the cross remains capped below the key 100-period Exponential Moving Average (EMA) on the 4-hour chart. Furthermore, the downward momentum is supported by the Relative Strength Index (RSI), which is located below the midline, suggesting that the path of least resistance is to the downside. 

The lower limit of the Bollinger Band at 95.05 acts as an initial support level for the cross. A decisive break below the mentioned level could expose 94.62, the low of February 3. Further south, the next contention level is seen at the 94.00 psychological mark. 

On the bright side, the key resistance level for AUD/JPY emerges near 97.00, representing the 100-period EMA and the upper boundary of the Bollinger Band and round figure. Sustained trading above this level could pave the way to 97.95, the high of January 14. Extended gains could see the next hurdle at 98.34, the high of January 22. 

AUD/JPY 4-hour chart

• Gold price attracts buyers for the fourth straight day amid worries about Trump’s tariffs.
• Bets for more Fed rate cuts and inflation concerns further benefit the XAU/USD pair.
• Rebounding US bond yields and a modest USD uptick might cap gains for the commodity.

Gold price (XAU/USD) trades with a positive bias around the $2,820 region during the Asian session on Tuesday and remains close to the all-time peak touched the previous day. Investors remain concerned about the potential economic fallout from US President Donald Trump's trade tariffs, which is seen driving flows towards the safe-haven bullion for the fourth straight day. Furthermore, expectations that Trump's protectionist policies would result in higher US inflation further benefit the precious metal's status as a hedge against rising prices.

Apart from this, bets that the Federal Reserve (Fed) will lower borrowing costs twice by the end of this year suggest that the path of least resistance for the non-yielding Gold price remains to the upside. Meanwhile, Trump's decision to temporarily pause tariffs on Mexico and Canada, after striking a border security deal with both nations, boosts investors’ confidence. This is evident from a generally positive tone around the equity markets. The risk-on flow pushes the US Treasury bond yields higher and might cap the upside for the precious metal. 

Gold price continues to attract haven flows on the back of trade war fears

• US President Donald Trump's tariff plans continue to fuel concerns about a global trade war and its impact on the economy, lifting the safe haven Gold price to a fresh all-time peak on Monday. 
• The Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index climbed from 49.3 in the previous month to 50.9 in January, beating expectations for a reading of 49.8.
• Additionally, the Prices Paid Index—which measures inflation—rose to 54.9 from 52.5, while the Employment Index increased to 50.3 from 45.4, and the New Orders Index improved to 55.1.
• This comes on top of speculations that Trump's trade tariffs could push up inflation and give the Federal Reserve less impetus to cut interest rates further, which underpins the US Dollar. 
• The view was echoed by comments from Chicago Fed President Austan Goolsbee, who warned that uncertainty over Trump’s policies could delay the central bank’s plans to cut interest rates. 
• Separately, Atlanta Fed President Raphael Bostic noted on Monday that although the US labor market remains surprisingly resilient, tariff threats throw a wrench in outlook expectations.
• Trump's policies could push up inflation, which, along with expectations for further policy easing by the Federal Reserve, turn out to be another factor benefiting the non-yielding yellow metal.
• Trump temporarily paused tariffs on Mexico and Canada after striking a border security deal, which boosts investors' confidence and might cap any further move-up for the safe-haven XAU/USD.
• The US Dollar attracts some dip-buyers following the previous day's turnaround from the vicinity of over a two-year high and might hold back bulls from placing fresh bets around the commodity.
• Tuesday's US economic docket features the release of Job Openings and Labor Turnover Survey (JOLTS) and Factory Orders data, which might provide some impetus to the USD and the Gold price. 

Gold price needs to consolidate recent strong gains before the next leg up

From a technical perspective, the Relative Strength Index (RSI) is already flashing slightly overbought conditions on the daily chart. This makes it prudent to wait for some near-term consolidation or a modest pullback before the next leg up. That said, any corrective slide below the $2,800 immediate support might still be seen as a buying opportunity and remain limited near the $2,773-2,772 horizontal resistance breakpoint. Some follow-through selling, however, could pave the way for a further decline towards the $2,755 zone en route to the $2,725-2,720 region and the $2,700 mark.

On the flip side, bulls are likely to pause near the $2,830 area, or the record peak touched on Monday. Some follow-through buying, however, will set the stage for an extension of a well-established trend witnessed from the December swing low, around the $2,583 region. 

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

The price for Gold stood at 7,891.21 Indian Rupees (INR) per gram, up compared with the INR 7,879.94 it cost on Monday.

The price for Gold increased to INR 92,042.18 per tola from INR 91,910.02 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.)

• The Indian Rupee weakens in Tuesday’s Asian session. 
• A firmer USD, ongoing Foreign Institutional Investors (FIIs) outflows, and downbeat Indian economic data weigh on the INR. 
• Fed’s Bostic and Daly are set to speak later on Tuesday.

The Indian Rupee (INR) softens on Tuesday, pressured by the stronger US Dollar (USD). Furthermore, persistent foreign capital outflows since late-2024 and downbeat India’s Gross Domestic Product  (GDP) data undermine the INR. The country's economy is estimated to grow at a slower pace in the coming years, as its run of 8% annual growth proved to be unsustainable.

On the other hand, US President Trump's one-month pause on tariffs against Canada and Mexico could weigh on the Greenback and provide some support to the INR. Additionally, the intervention by the Reserve Bank of India (RBI) by selling the USD might help limit the INR’s losses. 

Looking ahead, traders will monitor the development surrounding Trump tariff policies. China is due to be hit with across-the-board tariffs of 10% that begin at 05:00 GMT on Tuesday. Federal Reserve (Fed) Raphael Bostic and Mary Daly are scheduled to speak later on Tuesday.

Indian Rupee edges lower amid tariff jitters

• Late Monday, Trump said that he will pause the 25% tariffs on goods entering the United States from Mexico and Canada for one month. While Mexico and Canada have had tariffs postponed for at least 30 days, China stands alone in facing the new Trump levies. 
• The US Manufacturing PMI rose to 50.9 in January from 49.3 in December, according to the Institute for Supply Management (ISM) on Monday. This reading came in better than the estimation of 49.8.
• Boston Fed President Susan Collins said on Monday that it’s really appropriate for policy to be patient, careful, and there's no urgency for making additional adjustments, especially given all of the uncertainty. 
• Chicago Fed President Austan Goolsbee said that a very lack of clarity requires a go-slower approach on interest-rate cuts.
• Markets reduce expectations of rate cuts from the Fed in the wake of the tariff news, with futures pricing in just a 50% odds of two cuts this year, according to the CME FedWatch tool.  

USD/INR maintains its positive view, but an overbought RSI warrants caution for bulls

The Indian Rupee remains weak on the day. The strong bullish outlook of the USD/INR pair remains in play as the price has broken above the trading range and is well-supported above the key 100-day Exponential Moving Average (EMA).

Nonetheless, the 14-day Relative Strength Index (RSI) moves beyond the 70.00 mark, warranting some caution for bulls. The overbought condition suggests that further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation. 

The immediate resistance level for USD/INR emerges at the 87.00 psychological mark. Sustained gains above this level could see a run to 87.28, the all-time high. 

On the flip side, the initial support level emerges at 86.51, the low of January 31. . A breach of the mentioned level could drag the pair lower to the next downside target at 86.31, the low of January 28. 

FX option expiries for Feb 4 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0175 982m
• 1.0250 1.1b
• 1.0280 1.3b
• 1.0300 1.5b
• 1.0320 1.2b
• 1.0375 1.1b
• 1.0400 1.2b
• 1.0425 2.1b

GBP/USD: GBP amounts     

• 1.2195 525m

USD/JPY: USD amounts                                 

• 154.00 813m

AUD/USD: AUD amounts

• 0.6050 1.1b
• 0.6225 975m
• 0.6275 1.9b

USD/CAD: USD amounts       

• 1.4500 801m
• 1.4600 796m

• GBP/USD could lose ground as China is set to be hit with a 10% across-the-board tariff on Tuesday.
• Trump said on Monday afternoon that talks with China would take place probably over the next 24 hours.
• Traders expect the BoE to deliver a 25 basis point rate cut on Thursday amid signs of slowing inflation in the UK.

GBP/USD continues to gain ground for the second successive session, trading around 1.2430 during the Asian hours on Tuesday. The pair improved amid improved risk-on sentiment after US President Donald Trump announced late Monday that he would pause tariffs on Mexico and Canada.

However, market volatility remains a concern, with investors closely monitoring developments in ongoing tariff negotiations. President Trump stated that he would suspend steep tariffs on Mexico and Canada after their leaders agreed to deploy 10,000 soldiers to the US border to combat drug trafficking. The tariffs on Mexico and Canada have been postponed for at least 30 days.

The decision to postpone tariffs comes just two days after Trump imposed 25% tariffs on Mexican and Canadian goods and 10% tariffs on imports from China. China is set to be hit with an across-the-board tariff starting at 05:00 GMT on Tuesday. However, Trump said on Monday afternoon that talks with China would take place “probably over the next 24 hours.” He also said, “If we can’t make a deal with China, then the tariffs will be very, very substantial.”

The US Dollar Index (DXY), which measures the US Dollar’s (USD)value against six major currencies, stabilizes around 108.70 at the time of writing after giving up most of its gains in the previous session. However, the upbeat US economic data could provide some support to the Greenback. ISM Manufacturing PMI rose to 50.9 in January from 49.3 in December. This reading came in better than the estimation of 49.8.

The upside of the GBP/USD pair could be restrained as the Pound Sterling (GBP) may face risks due to expectations that the Bank of England (BoE) will restart its policy-easing cycle, likely cutting interest rates by 25 basis points (bps) to 4.5% on Thursday.

Traders anticipate a dovish stance from the Bank of England amid signs of slowing inflation, despite accelerating wage growth in the United Kingdom (UK). The BoE’s Monetary Policy Committee (MPC) is expected to vote 8-1 in favor of a quarter-point rate cut to 4.5%, with one member likely advocating for maintaining current rates for another meeting.

Bank of Japan (BoJ) Governor Kazuo Ueda told the Japanese parliament on Tuesday that the “BoJ is aiming to achieve 2% inflation, as measured by overall CPI, on a sustainable basis.”

Additional quotes

developing story ....

Market reaction

At the time of writing, USD/JPY is paring back gains to close in on 155.00, still 0.23% higher on the day.

• Silver price appreciates as traders assess the potential impact of uncertain US trade policies on the global economy.
• The US tariffs on Mexican and Canadian goods have been postponed for at least 30 days after two days of implementation.
• The non-interest-bearing Silver receives support amid dovish signals from major central banks.

Silver price (XAG/USD) continues its upward momentum, reaching near two-month highs and trading around $31.60 per troy ounce during Asian trading hours on Tuesday. Safe-haven metals, including Silver, are gaining ground as traders assess the potential impact of uncertain United States (US) trade policies on the global economy.

On Monday, US President Donald Trump announced a temporary suspension of tariffs on Mexico and Canada after their leaders agreed to deploy 10,000 troops to the US border to combat drug trafficking. The tariffs initially imposed two days earlier—25% on Mexican and Canadian goods have been postponed for at least 30 days. China stands alone in facing the new Trump levies. The world’s largest consumer of commodities is due to be hit with across-the-board tariffs of 10% that begin at 05.00 GMT on Tuesday.

Silver, a non-interest-bearing asset, continues to hold its gains amid dovish signals from major central banks. The Bank of Canada (BoC) has ended its quantitative tightening and joined Sweden’s Riksbank in cutting interest rates. Last week, the European Central Bank (ECB) lowered its Deposit Facility Rate by 25 basis points (bps) to 2.75%, and both the Reserve Bank of India (RBI) and the People’s Bank of China (PBoC) have indicated possible rate cuts ahead. Markets are also anticipating two rate cuts from the US Federal Reserve (Fed) this year.

Economic data released by the Institute for Supply Management (ISM) on Monday showed that the US Manufacturing PMI rose to 50.9 in January, up from 49.3 in December, surpassing expectations of 49.8. The stronger-than-expected data suggests renewed momentum in US factory activity, reinforcing Silver’s outlook as a key industrial metal, particularly in electrification technologies.

The Silver Institute recently projected a fifth consecutive year of significant market deficits for silver supply in 2025, driven by strong industrial demand and retail investment. These factors are expected to outweigh weaker consumption in the jewelry and silverware sectors.

• WTI drifts lower for the second consecutive day and remains close to a one-month trough.
• Trump’s decision to delay tariffs eases worries about supply disruption and exerts pressure.
• The OPEC+ remains committed to gradually phase-out of production cuts, lending support.

West Texas Intermediate (WTI) US Crude Oil prices extend the previous day's retracement slide from a one-week top and attract sellers for the second successive day on Tuesday. The commodity currently trades around the $72.00 mark, near a one-month low touched last week and just above the 100-day Simple Moving Average (SMA) support.

US President Donald Trump announced a one-month delay on newly imposed tariffs on imports from Canada and Mexico. This eases worries over potential supply disruptions from two of the primary oil suppliers to the US and weighs on Crude Oil prices. Furthermore, the prospects of lower fuel demand – led by the anticipated domino effect from Trump's policies on global economic growth – turn out to be another factor exerting downward pressure on the black liquid. 

Meanwhile, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) resisted calls from Trump to increase output to lower prices and maintained their current oil production plans. This could act as a tailwind for Crude Oil prices and help limit deeper losses. Hence, it will be prudent to wait for a sustained break below the 100-day SMA, currently pegged near the $71.00 mark, before positioning for an extension of the recent pullback from a multi-month high.

• The Australian Dollar strengthened as risk sentiment improved after Trump halted tariffs on Mexico and Canada.
• Traders monitor the development surrounding the tariff deal with China.
• Trump would suspend his tariffs after both countries agreed to send 10,000 soldiers to the US border to prevent drug trafficking.

The Australian Dollar (AUD) rebounds on Tuesday, ending its six-day losing streak as the AUD/USD pair rises amid a weakening US Dollar (USD). The USD depreciated after US President Donald Trump announced late Monday that he would pause tariffs on Mexico and Canada. However, market volatility remains a concern as investors closely watch developments in the ongoing tariff negotiations with China, Australia’s key trading partner.

President Trump stated that he would suspend steep tariffs on Mexico and Canada after their leaders agreed to deploy 10,000 soldiers to the US border to combat drug trafficking. The tariffs on Mexico and Canada have been postponed for at least 30 days. This decision comes just two days after Trump imposed 25% tariffs on Mexican and Canadian goods and 10% tariffs on imports from China.

The AUD may lose its ground due to the increased likelihood that the Reserve Bank of Australia (RBA) could consider a rate cut in February. The RBA 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.

Australian Dollar appreciates due to improved risk sentiment

• The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, stabilizes around 108.70 at the time of writing after giving up most of its gains in the previous session.
• Data released by the Institute for Supply Management (ISM) on Monday showed that the Manufacturing PMI rose to 50.9 in January from 49.3 in December. This reading came in better than the estimation of 49.8.
• The US Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, rose 0.3% MoM in December, up from 0.1% in November. On an annual basis, PCE inflation accelerated to 2.6% from the previous 2.4%, while core PCE, which excludes food and energy, remained steady at 2.8% YoY for the third straight month.
• Fed Chair Jerome Powell emphasized during the post-meeting press conference that the central bank would need to see “real progress on inflation or some weakness in the labor market” before considering any further adjustments to monetary policy.
• US Treasury Secretary Scott Bessent warned Key Square Capital Management partners a year ago that “tariffs are inflationary and would strengthen the US Dollar—hardly a good starting point for a US industrial renaissance.” However, according to the Financial Times (FT), Bessent last week advocated for new universal tariffs on US imports, proposing an initial 2.5% rate that would gradually increase.
• President Trump announced his threat on X (formerly Twitter) to levy 100% tariffs on BRICS nations if they attempt to introduce an alternative currency to challenge the US dollar in international trade.
• Australia’s Retail Sales declined by 0.1% month-on-month in December 2024, marking the first drop in nine months. Although the decline was less severe than the anticipated 0.7% contraction. The annual sales increased by 4.6% compared to December 2023. On a seasonally adjusted basis, sales rose 1.0% QoQ in the December quarter of 2024.
• China's Caixin Manufacturing Purchasing Managers' Index (PMI) declined to 50.1 in January, down from 50.5 in December. The reading fell short of market expectations, which had anticipated a steady 50.5.
• ANZ, CBA, Westpac, and now National Australia Bank (NAB) all anticipate a 25 basis point (bps) rate cut from the Reserve Bank of Australia (RBA) in February. Previously, the NAB had forecasted a rate cut in May but has now moved its projection forward to the February RBA meeting.
• The Reserve Bank of Australia released its January 2025 Bulletin, featuring a detailed analysis of how monetary policy changes influence interest rates in the economy and how fluctuations in interest rates impact economic activity and inflation.

Australian Dollar tests nine-day EMA barrier near descending channel’s upper boundary

AUD/USD hovers around 0.6210 on Tuesday, trading within the descending channel pattern on the daily chart, signaling a bearish bias. However, the 14-day Relative Strength Index (RSI) has rebounded toward the 50 level, signaling weakening downside momentum. A breakout above the channel and a sustained move above the 50 mark on the RSI could indicate a shift toward a bullish bias.

On the downside, the AUD/USD pair could test the descending channel’s lower boundary at the 0.6150 level. A break below the channel would guide the pair to navigate the region around 0.6087, the lowest since April 2020, recorded on February 3.

The AUD/USD pair tests its initial barrier at the nine-day Exponential Moving Average (EMA) of 0.6225, aligned with the upper boundary of the descending channel.

AUD/USD: Daily Chart

• The Japanese Yen attracts fresh sellers amid fading safe-haven demand. 
• Worries about Trump’s trade tariffs further seem to undermine the JPY.
• The divergent BoJ-Fed expectations should help limit losses for the JPY. 

The Japanese Yen (JPY) drifts lower during the Asian session on Tuesday as US President Donald Trump's decision to delay plans to impose trade tariffs on Canada and Mexico dents demand for traditional safe-haven assets. Adding to this worries that Japan will also be an eventual target for Trump's tariffs further seem to undermine the JPY and lift the USD/JPY pair back closer to the mid-155.00s.

Any meaningful JPY depreciation, however, seems limited amid bets that the Bank of Japan (BoJ) will hike rates further. This marks a big divergence in comparison to expectations that the Federal Reserve (Fed) will lower borrowing costs twice by the end of this year. The resultant narrowing rate differential between Japan and the US should contribute to limiting losses for the lower-yielding JPY. 

Japanese Yen is pressured by Trump’s decision to delay tariffs; BoJ rate hike bets favor bulls

• Investors took a sigh of relief after US President Donald Trump agreed to delay 25% trade tariffs against Canada and Mexico by 30 days, undermining the safe-haven Japanese Yen.
• Japan's Prime Minister Shigeru Ishiba is set to meet with Trump later this week and their conversation may provide more hints about the risk of tariffs as Japan has a large trade surplus with the US.
• Japan's Finance Minister Katsunobu Kato said on Monday that the government intends to monitor the impact of Trump's new tariffs on its currency amid worries about the potential economic fallout.
• Bank of Japan's Summary of Opinions released on Monday showed board members agreed that it will be necessary to continue hiking interest rates if economic activity and prices remain on track.
• Moreover, a rise in core inflation in Japan's capital city Tokyo, by the fastest annual pace in nearly a year, keeps alive expectations for further interest rate hikes by the Bank of Japan.
• The Institute of Supply Management's (ISM) Manufacturing Purchasing Managers' Index climbed from 49.3 in the previous month to 50.9 in January, beating expectations for a reading of 49.8.
• Additionally, the Prices Paid Index—which measures inflation—rose to 54.9 from 52.5, while the Employment Index increased to 50.3 from 45.4, and the New Orders Index improved to 55.1.
• This comes on top of speculations that Trump's trade tariffs could push up inflation and give the Federal Reserve less impetus to cut interest rates further, which underpins the US Dollar. 
• The view was echoed by comments from Chicago Fed President Austan Goolsbee, who warned that uncertainty over Trump’s policies could delay the central bank’s plans to cut interest rates. 
• Separately, Atlanta Fed President Raphael Bostic noted on Monday that although the US labor market remains surprisingly resilient, tariff threats throw a wrench in outlook expectations.
• Meanwhile, Fed governor Michelle Bowman said on Friday that rate cuts are still expected this year but added that future moves should be cautious and gradual, with time to assess data.
• Traders now look forward to the US economic data – Job Openings and Labor Turnover Survey (JOLTS) and Factory Orders – for short-term opportunities later during the North American session.

USD/JPY pair might continue to face stiff resistance and remain capped near the 156.00 mark

From a technical perspective, the USD/JPY pair might continue to confront stiff resistance near the 156.00 mark. This is closely followed by last week's swing high, around the 156.25 region, above which spot prices could climb to the 156.75 supply zone. Some follow-through buying, leading to a subsequent strength beyond the 157.00 round figure, will shift the bias in favor of bullish traders and pave the way for a move towards reclaiming the 158.00 mark with some intermediate hurdle near the 157.50 area. 

On the flip side, weakness below the 155.00 psychological mark now seems to find support near the 154.65 region ahead of the 154.30 area, the 154.00 round figure, and the 153.70 zone, or over a one-month low touched in January. A convincing break below the said support levels could make the USD/JPY pair vulnerable to accelerate the fall towards the 153.00 mark en route to the 152.60-152.55 region and the 152.30 area. The latter represents the 100-day Simple Moving Average (SMA) and should act as a strong base for spot prices.

The White House said in a statement late Monday that US President Donald Trump signed an executive order to begin developing a US government-owned investment fund, per Reuters.

Additional takeaways

Market reaction

As of writing, the US Dollar Index (DXY) is recovering at around 108.70, up 0.28% on the day.

The White House said in a statement late Monday that US President Donald Trump signed an executive order to begin developing a US government-owned investment fund, per Reuters.

Additional takeaways

Market reaction

As of writing, the US Dollar Index (DXY) is recovering at around 108.70, up 0.28% on the day.

• NZD/USD gains momentum to around 0.5630 in Tuesday’s early Asian session, up 0.62% on the day. 
• Trump has confirmed the postponement of his Canada and Mexico tariffs in a post on Truth Social. 
• Trump tariffs on China are due to hit at 05.00 GMT on Tuesday. 

The NZD/USD pair recovers some lost ground to near 0.5630 during the early Asian session on Tuesday. The US Dollar (USD) weakens after US President Donald Trump pauses tariffs on Mexico and Canada late Monday. However, investors will closely monitor the development surrounding the tariff deal with China, which might trigger the volatility in the markets. 

Trump said he will suspend his threat of steep tariffs on Mexico and Canada after both countries' presidents agreed to immediately send 10,000 soldiers to the US border to prevent drug trafficking. While Mexico and Canada have had tariffs postponed for at least 30 days, China stands alone in facing the new Trump levies. 

China is due to be hit with across-the-board tariffs of 10% that begin at 05.00 GMT on Tuesday. The threat of a global trade war could fuel safe-haven currency like the Greenback and act as a headwind for NZD/USD. However, the positive development surrounding tariff policies between the US and China could provide some support to the China-proxy New Zealand Dollar (NZD) as China is a major trading partner to New Zealand.