Forex Signals Brief January 21: USD Weakness and Crypto Volatility As Trump Re-Enters White House, New High in BTC
Yesterday the USD tumbled and BTC slopped below$100K ahead of Trump’s inauguration, but while Bitcoin reversed and made a new record high, the Dollar remained at the lows.
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Yesterday Donald Trump entered the White House for a second term and the most significant market movement was a weakening U.S. dollar. The currency declined by more than one cent after it was revealed that Trump would not impose tariffs immediately. Instead, he plans to draft a document to review trade relations with key partners such as China, Mexico, and Canada. Initially, the dollar gained strength when he mentioned potential tariffs in his inaugural speech, but those gains quickly faded, with the currency ending the day near its lowest levels. This indicates a strategy focused on negotiations before any tariff implementation.
Meanwhile, the Trump coin saw a sharp 40% retreat, driven by a sell-the-news reaction, adding to the broader market volatility. Bitcoin briefly fell toward $99,700 early in the day but rebounded to a new record high of $108,260. The lack of any mention of cryptocurrency in Trump’s early statements left many in the crypto community feeling disappointed, but traders are expecting tweets about cryptocurrencies which might push BTC to another record high.
This Week’s Market Expectations
The UK employment report is expected to show that the unemployment rate will remain steady at 4.3%, with the addition of 35,000 new jobs in the three months leading up to November, a significant decline from the 173,000 added in October. Wage growth is also expected to show an upward trend, with average earnings excluding bonuses predicted to rise to 5.5%, compared to the previous reading of 5.2%. Meanwhile, earnings including bonuses are anticipated to increase to 5.6%, up from 5.2% previously. The Bank of England (BoE) has taken a cautious stance due to persistent wage pressures; however, central bank officials still anticipate implementing four rate cuts by the end of the year. Market expectations suggest an 82% probability of a 25-basis-point rate cut at the next policy meeting, with a total of 65 basis points of easing projected by year-end.
In Canada, inflation data is expected to show a decline, with the monthly CPI projected at -0.4%, down from the previous 0.0% reading. On an annual basis, CPI is forecasted to ease to 1.8% from 1.9%. Core inflation measures are also expected to decline, with the median CPI anticipated at 2.4% compared to the previous 2.6%, while the trimmed mean CPI is forecast to fall to 2.4% from 2.7%. At the most recent policy meeting, the Bank of Canada (BoC) reduced interest rates by 50 basis points but removed its previous guidance that suggested further rate cuts would be likely if economic conditions aligned with their forecasts. This shift implies that the BoC may have reached the peak of its dovish stance and will now transition to smaller 25-basis-point cuts at a slower pace. Market participants currently see an 81% probability of a 25-basis-point cut at the upcoming meeting, with a total of 58 basis points of easing expected by the end of the year.
In New Zealand, inflation is expected to continue its downward trajectory in the fourth quarter. The quarterly CPI is forecasted to increase by 0.4%, compared to the previous 0.6% reading, while the year-over-year measure is anticipated to come in at 2.1%, down from 2.2% previously. At its last meeting, the Reserve Bank of New Zealand (RBNZ) implemented a widely expected 50-basis-point rate cut. Looking ahead, market expectations indicate a 61% chance of another 50-basis-point cut in February, with a total of 103 basis points of easing projected throughout the year.
Yesterday the markets turned quite volatile ahead of Donald Trump entering office, as the USD turned dovish on the report that there won’t be tariffs right away, which was confirmed later, which got many traders on the wrong foot. We had two losing trades early in the day, but made up later with more winning forex signals.
Gold Climbs Above $2,700 Again
Gold (XAU/USD) has regained its upward momentum this month after finding strong support at the 20-week simple moving average (SMA) and yesterday’s price action points to further gains. Last month, gold prices fell by $100 after failing to break the key resistance level at $2,725. However, the price stabilized near the 20-week SMA, where the formation of a doji candlestick signaled a potential bullish reversal. This was followed by three consecutive bullish weekly candles, and yesterday, the price managed to climb above $2,700. For further upside, buyers need to push the price beyond the critical $2,730 resistance level.
XAU/USD – Daily Chart
GBP/USD Surges 2 Cents Higher
In the forex market, GBP/USD has been under sustained selling pressure after turning bearish from levels above 1.34 in late September, however it made a strong bullish move yesterday, mostly due to the weak USD. Despite a brief rally following softer inflation readings, which helped the pair recover after dipping below 1.21 last Monday, sellers quickly regained control. The pair faced renewed downward momentum early this month, however last week we saw some price consolidation and yesterday this pair jumped almost 200 pips higher.
GBP/USD – Daily Chart
Cryptocurrency Update
Bitcoin Climbs Above $105K Ahead of Donald Trump’s Presidency but Falls back to $100K
Bitcoin (BTC/USD) has experienced significant volatility in recent sessions, with the price falling below %100K yesterday before reversing up and making a new record high. After a 25-basis-point rate cut, Bitcoin tumbled below $100,000, having started the week near $108,000, and eventually hit the low $90,000s. A short-lived recovery to $95,000 was met with resistance around the 20-day SMA, causing another decline. However, earlier this week, BTC/USD rebounded by 10% following an initial $3,000 drop, closing above the $100,000 mark yesterday.
BTC/USD – Daily chart
Ethereum Returns Lower to MAs
Ethereum (ETH/USD) has also seen considerable price swings. After initially finding support near its 50-day SMA, selling pressure drove the price below $3,500 and subsequently under $3,200. A sell-off on Monday pushed ETH briefly below $3,000 before renewed buying interest spurred a recovery. Midweek, Ethereum surged to $4,000 but failed to sustain those gains, quickly retracing below $3,000. However, the broader cryptocurrency market has shown signs of improvement over the past two weeks, helping Ethereum recover back to the $3,500 level.
ETH/USD – Weekly Chart
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