Forex Signals Brief January 29: USD, Stocks, XRP Steady Ahead of the FOMC

Yesterday stock markets rebounded while XRP and the USD steadied ahead of today’s FED meeting, following the crash in Nvidia and stock markets on Monday as a result of DeepSeek launch.

As the market continues to digest the fallout from Monday’s historic Nvidia selloff and its broader implications for AI and the economy, currency markets remained subdued during North American trading yesterday. Most FX pairs traded sideways, with the euro hovering around 1.0430 after earlier declines in the Asian session. The dollar managed to recover slightly throughout the day, aided by a mix of deflation concerns tied to AI developments and lingering worries about US tech dominance.

Nvidia provided a key narrative for the day, as it rebounded sharply from yesterday’s steep losses. After briefly dipping below key support levels early in the session, Nvidia’s stock rallied 9%, lifting its market cap back to $3.16 trillion, a significant recovery from the prior day’s $600 billion drop. The Nasdaq followed suit, closing up 2%, though investor enthusiasm seemed tempered by anticipation of major earnings reports set to begin tomorrow. The oil market also closed higher, brushing off headlines about unrest in Libya. Meanwhile, Ripple (XRP) experienced significant volatility, recovering strongly from Monday’s 15% drop.

During the US session, XRP surged 20% to reach $3.20, signaling robust buying momentum and raising hopes for a potential new all-time high. However, late-session selling pressure pushed the price back down, ending the day near $3. The events of the day underscore the market’s reactive nature, with dips often met by eager buyers. Yet, the broader implications of Nvidia’s initial plunge and ongoing AI-related adjustments leave room for caution, especially as traders await key earnings and macroeconomic updates.

Today’s Market Expectations

Today started with the CPI inflation report from Australia.

Bank of Canada and Policy Shifts

The Bank of Canada (BoC) is expected to reduce its policy rate by 25 basis points, bringing it down to 3.00%. This follows a larger 50 bps cut in the last policy meeting, during which the BoC dropped its forward guidance about further rate reductions. This shift signals that the central bank may have reached its most dovish stance and is now transitioning to a more gradual pace of easing.

Recent Canadian economic data paints a mixed picture. The latest employment report exceeded expectations, showing resilience in the labor market, while inflation figures aligned with forecasts, confirming that the BoC has successfully managed to rein in inflation. However, despite this relatively strong domestic data, the Canadian Dollar (CAD) has been largely unresponsive, with market attention shifting toward external factors. Chief among these is Trump’s threat to impose 25% tariffs on Canadian imports as early as February 1st, which could significantly dent the Canadian economy.

Meanwhile, the USD/CAD rate remains range-bound, trading within a 150-pip band. Even optimism around softening US-China tariff rhetoric has failed to lift the CAD, which continues to underperform relative to its peers.

Federal Reserve’s Stance and Market Expectations

The Federal Reserve (Fed) is widely anticipated to keep its policy rate unchanged at 4.25-4.50%. At its December meeting, the Fed reduced rates by 25 bps while adjusting its growth and inflation forecasts, as well as scaling back its projected 2025 rate cuts from 100 bps to 50 bps, aligning with market expectations at the time.

Fed officials have signaled a wait-and-see approach, emphasizing the need for additional data before deciding on further easing. Notably, Fed Governor Waller recently left the door open for a potential rate cut in March, which caught markets off guard with its dovish tone.

Recent US inflation data came in softer than anticipated, helping to temper aggressive rate cut expectations. Prior to this, the market was even pricing in the possibility of no cuts in 2025. However, a series of benign inflation reports has brought projections back in line with the Fed’s outlook, now suggesting nearly two rate cuts by year-end.

Although this meeting is unlikely to significantly alter market expectations, any positive rhetoric on inflation progress could pressure the US Dollar further, especially given the general weakness seen recently amid softening tariff tensions.

Last week the volatility went against the US dollar, with some strong buying momentum in risk assets such as commodity currencies and stock markets. We opened 26 trading signals in total, remaining mostly long on stocks and Gold, and ending the week with 19 winning forex signals and 7 losing ones.

Gold Rebounds Off Support

The EUR/USD pair has faced consistent selling pressure since late September, with its value plummeting by over 10 cents from levels above 1.11. However, Monday brought a notable recovery, driven by a weakening US dollar. During the US trading session, the pair briefly surged to 1.2456, but it struggled to maintain gains above the 50-day SMA. Renewed buying interest following President Trump’s speech at Davos helped the pair reclaim this moving average, indicating the potential for renewed bullish momentum.

XAU/USD – H4 Chart

EUR/USD Finds Support at the 50 Daily SMA Ahead of the FED Meeting

The EUR/USD pair has faced consistent selling pressure since late September, shedding nearly 10 cents from levels above 1.11. However, Monday saw a strong bullish rally fueled by a weaker US dollar. During the US trading session, the pair briefly reached 1.2456 on the daily chart but struggled to sustain gains above the 50-day SMA. Following President Trump’s speech at Davos, renewed buying interest pushed the price back above this moving average, signaling potential upward momentum.

EUR/USD – Daily Chart

Cryptocurrency Update

Bitcoin Consolidates Around $100K

BTC/USD – Daily chart

Ethereum Stuck between MAs

Ethereum has also experienced notable volatility in recent weeks. Initially, ETH found support near the 50-day SMA, but selling pressure pushed prices below $3,500 and subsequently below $3,200. During Monday’s broad cryptocurrency sell-off, Ethereum briefly dropped below $3,000. However, renewed buying interest sparked a recovery, and ETH attempted to surge midweek toward $4,000. Despite this effort, resistance at the 20-day SMA drove prices back below $3,000. Nonetheless, the broader strength in the cryptocurrency market over the last two weeks has supported Ethereum’s recovery, enabling it to reclaim levels above $3,500.

ETH/USD – Weekly Chart

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.