Forex Brief Jan 31: USD Traders Anxious Ahead of FED Meeting, Powell Speech

Most forex pairs ended little changed yesterday, but the FX market was not as quiet at all, as the volatility indicated. The US dollar made a quick jump in response to growing JOLTS job vacancies, indicating that the labor market is still holding strong. But soon after, there was increased emphasis on the declining job quit rate which reversed the USD back down where it was.

EUR/USD fell by about 30 pips on the headline number before gradually moving higher again. Similar tales played out in commodity currencies, with all of which ended the day with gains. The news hit the wires that US President Biden might strike in the Middle East, which aided crude Oil making a turnaround, helping commodity dollars in the process.

Oil spiked higher ahead of the data release from the US, but crashed $20 lower despite dropping treasury rates, while USD/JPY held most of the gains after the 80 pips surge. In Europe, the GDP numbers came mixed, with Germany and France in recession, however the expansion in periphery countries helped the Eurozone avoid technical recession.

Today’s Market Expectations

The day starts with the Australian CPI which is expected to decline across all metrics. Inflation is anticipated to make a major fall to 4.3% on an annualized basis from 5.4%, while in Q4 CPI is expected to fall to 0.8% from 1.2% in Q3. The RBA is more concerned with underlying inflation indices, which are likely to decrease as well. Trimmed Mean CPI YoY is predicted to be 4.4%, down from 5.2% in November, while the quarterly figure is expected at 0.9%, down from 1.2% previously.

The US Employment Cost Index for the last quarter of 2023 will be released in the afternoon and it is predicted to tick lower to 1.0% from 1.1% in Q3. This is the most complete measure of labor expenses, so the Federal Reserve pays special attention to this signal. Wage growth has slowed in the last two years, although it still remains reasonably high. ADP employment is expected to cool off to 148K, but that comes after a jump in the previous month to 164K.

The GDP report from Canada will be released at the same time, which is expected to show a slight expansion of 0.1% in November, however this is old data. In the evening, we will have the FOMC meeting, with the interest lying at the press conference from Chairman Powell, since there are not expected to be any changes. Powell will undoubtedly be questioned about the aggressive easing of financial conditions since the December meeting and the falling inflation rate.

BTC/USD – Daily Chart 

Ethereum Testing the 50 Daily SMA 

ETHEREUM has also been negative, sliding from above $2,700 following the debut of BTC ETFs, although the general trend remains favorable because it has not yet reached lower lows. The price fell below the 20 daily SMA (gray) yesterday, but it remains above the 50 SMA (yellow), which serves as the final support indicator during deeper pullbacks like this one. We are attempting to build another long-term buy ETH signal near the 50 SMA, but we will see how the price movement unfolds.

Ethereum – Daily Chart

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