Forex Signals Brief Feb 7: Will FOMC Members Push A Hawkish Rhetoric?

Yesterday markets were slow, with not much on the economic calendar. The USD retraced some of the gains it had mafe in the previous two trading days, with Gold increasing to $2,038, where it found resistance at the MA, which had been acting as support before. The low at 1.0720s held again in EUR/USD after a second test in the Asian session and later in the day this pair climbed to 1.0750s, but the bullish momentum seemed weak, which shows that the downside is favourable at the moment.

Treasury yields began to rectify some of the gains they made in the last few days, with the 10-year yield moving a low of 4.079%, as the US Treasury successfully auctioned its first coupon of the week, the three-year note. That auction featured -0.8 basis points and saw high foreign demand, but that didn’t help the USD which ended the day as the weakest currency.

Cleveland Fed President Loretta Mester shared her perspective too, aligning with Chair Powell’s talking points. Mester argues that monetary policy is in a good place to assess the future moves in interest rates. She hinted at the prospect of lowering interest rates later this year if the economy improves as expected, though any rate cuts would most likely be modest.

Today starts with the CPI report from China. The PBoC recently cut the RRR by 50 basis points, which was more than markets had expected, but traders appear to want more. The Chinese headline inflation YoY is expected to be -0.5% vs. -0.3% prior, while the MoM number for January is expected to increase to 0.4% vs. 0.1% in December. There is no consensus for the Core CPI YoY, though the prior figure showed a 0.6% rise, which was the same as for the previous two months.

In the afternoon, we have the Unemployment Claims figures from the US remain one of the most essential releases each week since it provides a more timely signal of the status of the labor market. Initial Claims continue to remain near cycle lows, albeit climbing in the previous two weeks, while Continuing Claims have resumed their upward trend and are now approaching the cycle high. This week’s consensus is for Initial Claims to be 220K, up from 224K the previous week, but there is no consensus for Continuing Claims, however, the previous report showed an increase to 1898K from 1828K.

ETHEREUM has also been bouncing in a range, falling from over $2,700 since the launch of BTC ETFs, but the overall trend remains positive because it has yet to reach lower lows. The price went below the 20 daily SMA (grey) yesterday, but it is still above the 50 SMA (yellow), which acts as the last support indication during deeper pullbacks like this one. We’re aiming to construct another long-term buy ETH signal near the 50 SMA, but we’ll see how the price movement plays out.

• ETH Buy Signal
• Entry Price: $2,290
• Stop Loss: $2,590
• Take Profit: $1,750