As we head into Tuesday, January 7, 2025, global markets are poised for heightened activity, with traders focused on key U.S. economic events. Recent PMI data and the anticipation of U.S. trade balance figures are driving volatility across currency markets. The U.S. dollar remains in the spotlight, bolstered by a combination of risk-off sentiment and strong economic fundamentals. Meanwhile, other major currencies are reacting to their respective economic calendars, setting the stage for an active trading session.
EUR/USD
Technicals in Focus
The EUR/USD pair witnessed significant volatility, climbing back to the 1.0400 level after testing lows near 1.0350. Eurozone PMI figures came in mixed, with the Composite PMI registering 49.6, just below the expected 49.9, signaling contraction.
The dollar maintained its strength due to firm U.S. PMI figures released earlier. On the technical side, the MACD indicator is showing increasing bullish momentum, with histograms rising above the zero line. The Stochastic Oscillator, however, is entering overbought territory, indicating a potential pullback. The 14-day RSI is approaching 55, signaling a recovery but with caution.
Trading Strategy: Neutral to Buy
- Buy above 1.0400-1.0420 with targets at 1.0450-1.0480 and 1.0500-1.0520, with a stop loss below 1.0370.
- Alternatively, sell below 1.0350 with targets at 1.0320-1.0300, with a stop above 1.0385.
GBP/USD
Technicals in Focus
GBP/USD showed a sharp upward movement, rising above 1.2520 after bouncing from support near 1.2440. The move followed better-than-expected U.K. Halifax House Price Index data, which showed a year-over-year increase of 4.8%. However, the pair remains influenced by U.S. dollar strength, particularly as traders await U.S. trade and labor market data later this week.
On the technical side, the MACD is showing signs of a bullish crossover, while the Stochastic Oscillator is trending toward overbought levels. The RSI at 60 supports continued upward momentum in the near term.
Trading Strategy: Neutral to Buy
- Buy above 1.2530-1.2550 with targets at 1.2580-1.2610 and 1.2650-1.2670, with a stop loss below 1.2480.
- Consider selling below 1.2440 with targets at 1.2410-1.2380, with a stop above 1.2475.
USD/CAD
Technicals in Focus
USD/CAD experienced sharp swings, testing support near 1.4300 before rebounding to the 1.4360 level. The Canadian dollar remains pressured amid soft crude oil prices and weaker-than-expected Ivey PMI data (55.4 vs. 56.3 forecast). Upcoming U.S. trade data could further impact the pair’s direction.
Technically, the MACD is neutral with limited momentum, while the Stochastic Oscillator suggests a potential upside as it emerges from oversold conditions. The RSI at 50 shows a balanced market.
Trading Strategy: Neutral to Buy
- Buy above 1.4360-1.4380 with targets at 1.4400-1.4420 and 1.4450-1.4470, with a stop loss below 1.4330.
- Alternatively, sell below 1.4300 with targets at 1.4280-1.4250, with a stop above 1.4335.
Market Outlook
Looking ahead, the U.S. trade balance and ISM Non-Manufacturing PMI data will be the key drivers for market sentiment. Any surprises in these figures could significantly impact the U.S. dollar and its major counterparts. Additionally, traders are watching Canadian trade data for clues on the USD/CAD trajectory, alongside the broader performance of crude oil prices.
In Europe, mixed PMI data suggests lingering economic challenges, keeping the euro under pressure. The British pound may see continued volatility as traders digest the latest housing market data and react to broader dollar movements. Overall, markets are expected to remain reactive to incoming U.S. data, which could set the tone for the rest of the week.