Forex Signals Brief Feb 3: EZ Inflation to Weigh on Euro After trade Tariffs
EUR/USD opened with a gap lower last night after weekend tariffs and it might continue lower toward parity if today’s Eurozone inflation report comes weak.
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Last week opened quite volatile for stock markets, after the release of DeepSeek, which sent shock waves through the tech market, as it offered a much cheaper alternative to the competition. Nvidias stock dived 17%, but then stabilized around $220, however, the tariffs have opened stock markets with a bearish gap over the weekend.
The currency and cryptocurrency markets were pretty quiet, with traders thinking that tariffs might be postponed as a Reuters article suggested, which improved the sentiment for a brief moment. We had two rate cuts from the ECB and the Bank of Canada, which are another reason for the Euro and the CAD to be bearish, with USD/CAD opening to an all-time high this morning after the tariffs. Gold on the other hand, was quite bullish, breaking above $2,800 and putting a record high as well, however it reversed lower last night.
This Week’s Market Expectations
This week has also started in a volatile manner, after the weekend news, which have propelled USD/CAD above 1.47 and EUR/USD down to 1.02 lows. But, we will also have the Eurozone CPI inflation report today, which might send this pair even lower.
Key Economic Events for the Week
Monday – Manufacturing and Inflation Data Dominate
- Bank of Japan (BoJ) Summary of Opinions – Insights into the BoJ’s latest policy discussions, potentially signaling future monetary policy shifts.
- Australia Retail Sales – A crucial indicator of consumer spending, influencing RBA rate expectations.
- China Caixin Manufacturing PMI – A key gauge of private-sector factory activity, reflecting economic momentum.
- Switzerland Manufacturing PMI – Measures industrial health, impacting CHF sentiment.
- Eurozone Flash CPI – Inflation data that could shape ECB rate expectations and the euro’s direction.
- Canada Manufacturing PMI – A barometer of industrial activity, relevant for CAD movements.
- US ISM Manufacturing PMI – A major indicator of the health of the US factory sector, influencing Fed outlook.
Tuesday – Labor Market in Focus
- US Job Openings (JOLTS) – Provides insight into labor market strength and potential wage pressures.
- New Zealand Employment Report – Key data on job growth and wage trends, impacting NZD outlook.
Wednesday – Services Sector and Employment Trends
- Japan Average Cash Earnings – A measure of wage growth, important for inflation expectations.
- China Caixin Services PMI – Indicates private-sector service activity, crucial for overall economic sentiment.
- Eurozone Producer Price Index (PPI) – Tracks inflation at the wholesale level, influencing future CPI trends.
- US ADP Employment Report – A prelude to NFP, offering a snapshot of private-sector job growth.
- Canada Services PMI – Reflects business conditions in the services sector, affecting CAD sentiment.
- US ISM Services PMI – A key indicator of service sector performance, significant for Fed policy direction.
Thursday – Central Bank and Labor Market Data
- Switzerland Unemployment Rate – A labor market health check for CHF traders.
- Eurozone Retail Sales – A key gauge of consumer activity, influencing ECB rate policy.
- Bank of England (BoE) Policy Decision – Market-moving event with potential rate guidance from the BoE.
- US Jobless Claims – Weekly data on layoffs, providing a near-term labor market trend.
Friday – Major Employment Reports and Consumer Sentiment
- Canada Employment Report – A critical release for CAD traders, impacting BoC expectations.
- US Non-Farm Payrolls (NFP) – The most closely watched labor market indicator, shaping Fed rate projections.
- US University of Michigan Consumer Sentiment – Offers insight into consumer confidence, influencing USD direction.
Risk assets, including stock markets and commodity-linked currencies, saw strong buying momentum last week, leading to a volatile but ultimately weaker U.S. dollar. Across 26 forex trades, we secured 19 wins and 7 losses, maintaining a predominantly long stance on equities and gold.
Gold Returns Below $2,800 Again
GOLD continues to exhibit strong bullish momentum, setting a new all-time high of $2,798.40 earlier today and holding above the previous peak of $2,790. Buyers remain firmly in control, signaling a likely move above $2,800 and potentially toward the $3,000 mark. The global economic and political climate remains supportive of safe-haven assets, reinforcing gold’s bullish outlook. The US GDP report provided a catalyst for XAU/USD, pushing it above the late October high near $2,790.
XAU/USD – H4 Chart
EUR/USD Heads to Parity Again
Meanwhile, the European Central Bank’s latest rate decision aligned with its December stance, delivering another dovish cut. This boosted the DAX to a new record and lifted broader European stock markets, though the euro saw only a temporary spike. EUR/USD briefly jumped 60 pips to 1.0460 but quickly retreated, later falling below 1.04 following tariff-related comments from Donald Trump.
EUR/USD – Daily Chart
Cryptocurrency Update
Bitcoin Returns Below $100K
BITCOIN also experienced heightened volatility, dipping to the low $90,000s after the ECB’s rate cut and briefly dropping below $90,000. A rebound toward $95,000 met resistance at the 20-day SMA, but overall, Bitcoin has surged 10% in the past week, peaking near $110,000 before stabilizing around $100,000. Positive sentiment has been reinforced by remarks from Republican Senator Cynthia Lummis, who remains optimistic about crypto regulation.
BTC/USD – Daily chart
Ethereum Falls Below $3,000
ETHEREUM mirrored Bitcoin’s fluctuations, initially finding support near its 50-day SMA before slipping below $3,500 and later under $3,200. A broad crypto sell-off briefly pushed ETH below $3,000, but strong buying lifted it back above $3,500. Despite resistance at the 20-day SMA, broader crypto market strength has helped Ethereum stabilize, with the potential for further gains if buying pressure sustains.
ETH/USD – Daily Chart
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