(MENAFN– Daily Forex) Fundamental Analysis & market Sentiment
I wrote on 19th January that the best trade opportunities for the week were likely to be:
Short of the EUR/USD currency pair . Unfortunately, his currency pair rose by 2.07% over the next week.
Long of bitcoin in USD terms following a New York close above $106,187. This did not set up.
Long of Corn futures . Corn futures rose by 0.45% over that week.
The weekly loss of 1.62% equals 0.54% per asset.Last week saw several very key data releases, and the directional movement was above average:
US Federal Reserve Policy Meeting – the Fed left its interest rate unchanged as widely expected, but the Fed also gave a minor hawkish tilt as it made clear it was in no rush to cut rates further over the near term.
US Core PCE Price Index – this was expected, showing a month-on-month increase of 0.2%.
European Central Bank Policy Meeting – no surprises with the 0.25% rate cut, but the Bank warned about the deteriorating Eurozone economy, and this helped push the Euro to fall in value over the week.
US Advance GDP – this was considerably lower than expected, showing an annualized rate of only 2.3% when 2.7% was expected, giving a tailwind to the recent decline in the USD.
Bank of Canada Policy Meeting – cut rates by 0.2% as expected, for the sixth consecutive policy meeting.
German Preliminary CPI – surprisingly, this was negative at -0.2% over the month, when a 0.1% increase was expected, suggesting declining inflationary pressure, which may increase pressure for further rate cuts and help sink the Euro.
Australian CPI – this was a fraction lower than expected.
Canadian GDP – this showed a decline a fraction lower than expected, confirming the recent weakening of the Canadian economy.
US CB Consumer Confidence – a fraction lower than expected.
US Employment Cost Index – exactly as expected.
US Unemployment Claims – this was a little better than expected.
Chinese Manufacturing PMI – this was a little worse than expected.Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money Last week’s key takeaways were:
A general continuing decline in inflation and the continuation of rate cuts in G7 nations, with the notable exception of the USA, which is finding inflation sticky although not far from its 2% target.
US President Trump has made good on his threats to impose tariffs on Canada and Mexico and China, with new tariffs taking effect last Saturday of 25% on Canada and Mexico (only 10% on energy imports) and 10% on China. President Trump has also begun to threaten BRICS nations with a 100% tariff if they do not drop plans to create an alternative global reserve currency to the USD.Interestingly, these two developments should be helping an increase in the relative value of the USD, which is still in a valid long-term bullish trend. The US Dollar Index did increase in value last week, after a few weeks of relative weakness.Canada has just responded to the new US tariffs by imposing a blanket 25% tariff on all imports from the USA.Both the US and Canadian Dollars look likely to be interesting currencies to watch over the coming week, which will likely put the USD/CAD currency pair in focus over the coming days.The Week Ahead: 3rd – 7th FebruaryThe coming week has a lighter schedule of releases, so we are very likely to see a lower level of activity and volatility in the Forex market.The coming week’s important data points, in order of likely importance, are:
US Average Hourly Earnings
US Non-Farm Employment Change
Bank of England Policy Meeting
US JOLTS Job Openings
US ISM Services PMI
US ISM Manufacturing PMI
US Unemployment Rate
US Unemployment Claims
Canadian Unemployment Rate
New Zealand Unemployment RateMonday is a public holiday in China and Thursday is a public holiday in New Zealand Forecast February 2025 For February 2025, I forecast that the EUR/USD currency pair will decline in value.For January, I forecasted that the USD/JPY currency pair would rise in value and that the EUR/USD currency pair would fall in value. The final performance of this forecast was: Weekly Forecast PerformanceWeekly Forecast 2nd February 2025Two weeks ago, I made no weekly forecast as there were no unusually strong price movements in currency crosses, which is the basis of my trading strategy.The Japanese Yen was the strongest major currency last week, while the Australian Dollar was the weakest. Volatility declined last week, with 37% of the most important Forex currency pairs and crosses changing in value by more than 1%. It is likely to fall further over the coming week.You can trade these forecasts in a real or demo Forex brokerage account .Key Support/Resistance Levels for Popular Pairs Technical AnalysisUS Dollar IndexLast week, the US Dollar Index printed a bullish candlestick that continued the long-term bullish trend, after bouncing off an area of support. There were two further price action signs:
The price closed right at the high of the week’s range.
The close was within the upper half of the previous week’s candle’s range.The US Dollar got a tailwind last week from the Fed’s slightly hawkish tilt in its comments on inflation, and President Trump’s imposition of tariffs against Canada, Mexico, and China.The Dollar is likely to continue rise over the coming week. The price has room to rise to at least the next resistance level at 110.00. EUR/USDThe EUR/USD currency pair is in a valid long-term bearish trend. Just as I explained earlier about the US Dollar index, we see the same bearish technical signs. However, the price rose quite high over the previous week, so we are still some way off the long-term lows.This currency pair often has very reliable trends, so I am generally interested in being short.This is backed by fundamentals and sentiment. The Euro is weaker after the ECB not only cut its interest rate but more importantly, also warned against a weakening Eurozone economy, and the US Dollar is getting a boost from a hawkish Fed and the imposition of new tariffs by President Trump.I see this currency pair as a sell. It is probably the most reliable trade opportunity right now in the entire Forex market. USD/CADThe USD/CAD currency pair advanced strongly last week to a new 4-year high price, continuing the long-term bullish trend ad breakout which has been ongoing for a few months now.This trend has legs because the US economy is relatively strong while the Canadian one is relatively weak, but also, and more importantly over the short-term, President Trump has just imposed a 25% tariff on non-energy imports from Canada (energy will be subject to a 10% tariff). Canada has just announced a retaliatory 25% tariff, with Prime Minister Trudeau urging Canadians to“buy Canadian”.These tariffs are likely, overall, to boost the US Dollar and hurt the value of the Canadian Dollar.Technically although it is worth noting that the price gave up some of its gains, as shown by the upper wick of last week’s candlestick, this is due more to volatility than due to the end of an upwards spike.It is quite likely that this currency pair will continue to rise over the coming week. XAU/USDGold advanced last week to reach a new all-time high above $2,800 per ounce. The price gave up some of its gains towards the weekly close to end the week back below the round number of $2,800. However, looking at the weekly price chart below, we can see that the price closed above the previous record high made in December 2024.This trend may see a relatively slow rise, but we can see how steadily and strongly Gold gained over the past year, so this looks likely to be a solid trend.I am not sure that Gold will reach $3,000 per ounce over the coming week, but this target is certainly in sight now. Coffee FuturesThe price chart below shows that Coffee futures have been breaking out to long-term high prices over a period of more than 6 months, although last week’s strong price rise was the most aggressive seen through this time. This is suggestive of a climax, which would make going long dangerous, but the weekly closing price was very near the high price of the week, so that may not be the case.Taking long trades when major commodities break out to new 6-month highs has historically been a very profitable trading strategy, which is the main reason that I want to be long here.Arabica coffee has reached an all-time high, due partly to climatic factors such as the recent drought in Brazil, and partly due to political factors, both of which are working to reduce supply, while demand continues to be as high as it ever has been.Unfortunately, Coffee futures are quite expensive and usually just too large for retail traders, but there is an ETF called COFF which can be used to participate in increases in the price of Coffee. However, note that this ETF does not always cleanly mirror the price action of coffee futures, so if you are using the ETF, be careful.I think Coffee is a buy. Corn FuturesCorn futures have been breaking to new highs, although the last two days of last week saw the price decline for consecutive days.I think Corn is a buy but only if it makes a new daily high closing price.Although we clearly have a medium or maybe long-term bullish trend in Corn, this bullish move is relatively new and may already have run out of steam, which is why I am cautious.Many analysts see this move as mostly seasonal in nature, and do not think the price is going to make a new high and time soon.I will be prepared to enter a new long trade if we see Corn futures make a new 6-month high closing price at the end of any day over the coming week. Bottom LineI see the best trading opportunities this week as:
Long of Gold in USD terms (also known as XAU/USD).
Long of Corn futures (CORN etf can also be used) following a daily close of the next ZC future at or above 498.
Long of Coffee futures (COFF etf can also be used).
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