As we head into Friday, January 31, 2025, global markets are poised for heightened volatility following a series of significant U.S. economic data releases, particularly the GDP report, Core PCE Price Index, and Initial Jobless Claims. The U.S. dollar remains the center of attention as traders digest the latest economic indicators and anticipate further movement in key forex pairs.
The EUR/USD pair witnessed sharp fluctuations, reflecting the impact of the Eurozone GDP release and ECB rate decision, while the USD/JPY pair saw bearish momentum following the Federal Reserve’s rate decision. Meanwhile, USD/CAD remained choppy as Canadian GDP figures and oil price movements influenced price action.
EUR/USD
Technicals in Focus
The EUR/USD pair exhibited high volatility, initially surging to 1.0465 before retracing lower to 1.0421. The Eurozone GDP release came in weaker than expected at 0.0% (QoQ) for Q4, causing an initial dip, but later the ECB rate decision at 2.90% led to a temporary euro recovery.
On the technical side:
- MACD suggests indecision as momentum fluctuates between bullish and bearish phases.
- Stochastic Oscillator shows the pair is exiting overbought conditions, indicating potential downside pressure.
- 14-day RSI remains neutral, suggesting consolidation in the near term.
Trading Strategy: Neutral to Sell
- Sell below 1.0430-1.0410 with targets at 1.0380-1.0350, with a stop loss above 1.0460.
- Alternatively, buy above 1.0460 with targets at 1.0490-1.0515, with a stop loss below 1.0410.
USD/JPY
Technicals in Focus
The USD/JPY pair continued its downward trajectory, declining to 154.17 following the Fed’s rate decision at 4.50%. The weaker-than-expected U.S. GDP growth (2.3% vs. 2.7% forecast) fueled further dollar weakness, pushing the pair lower.
On the technical side:
- MACD indicates bearish momentum with downward pressure.
- Stochastic Oscillator suggests oversold conditions, signaling a possible corrective rebound.
- RSI remains weak, reflecting sustained bearish bias.
Trading Strategy: Neutral to Sell
- Sell below 154.20-154.00 with targets at 153.70-153.40, with a stop loss above 154.50.
- Alternatively, buy above 154.50 targeting 155.00-155.30, with stops below 154.00.
USD/CAD
Technicals in Focus
The USD/CAD pair displayed choppy movement, currently trading near 1.4413. The pair initially surged as U.S. PCE inflation data (2.5% YoY) came in higher than expected, signaling continued inflationary pressures. However, weaker Canadian GDP (-0.1% MoM) limited CAD strength.
On the technical side:
- MACD remains neutral, indicating lack of clear momentum.
- Stochastic Oscillator suggests overbought conditions, indicating a potential pullback.
- 14-day RSI is in the neutral zone, suggesting a range-bound scenario.
Trading Strategy: Neutral to Buy
- Buy above 1.4420-1.4450 targeting 1.4480-1.4510, with a stop loss below 1.4380.
- Alternatively, sell below 1.4380 targeting 1.4350-1.4320, with a stop loss above 1.4420.
Market Outlook
Looking ahead, traders will closely monitor the U.S. Core PCE Price Index and Employment Cost Index, as they could provide further direction on the Fed’s next policy steps. Meanwhile, the Eurozone GDP report has reinforced concerns about slowing economic momentum, which could weigh on the euro.
For USD/CAD, focus will remain on Canadian economic data and oil price trends, as these factors will drive price action. JPY traders will watch for further Fed-driven U.S. dollar weakness, which may sustain USD/JPY’s bearish trend.
Volatility is expected to persist as markets react to these key events, with traders adjusting their positions accordingly.