Bank of England Meeting and UK Economic Outlook: Markets anticipate the BoE’s monetary policy decision and its impact on GBP amidst economic slowdown concerns.
US Non-Farm Payrolls Report: A critical event amid debates on the Fed’s monetary stance and Trump’s criticisms of restrictive policies.
Canada Employment and Trump’s Tariffs: Canadian labor market data and Trump’s tariff policies are set to influence USDCAD significantly.
What Now?
This week, global markets focus on the interplay of central bank decisions, labor market dynamics, and geopolitical developments. The Bank of England (BoE) meeting on Thursday comes amidst rising economic pressures in the UK. With inflation slowing and retail spending softening, the BoE is expected to cut rates by 25 basis points, which could further weigh on the GBP. The GBP/USD pair is trading within a descending regression channel, and the anticipated dovish stance may drive the pair towards lower levels.
In the US, January’s Non-Farm Payrolls (NFP) report on Friday will be crucial. Standard Chartered estimates that undocumented immigrants accounted for two-thirds of 2024’s job growth, raising questions about the robustness of recent labor market data. Trump’s aggressive immigration policies, including deportations and stricter work permit regulations, could disrupt labor supply, potentially pressuring the Fed to adopt a more accommodative stance to prevent an employment downturn. However, the associated risks of inflationary pressures complicate the outlook.
The USD has shown resilience, with Treasury yields supporting its strength despite Trump’s criticism of the Fed’s “unnecessarily tight” policies. A robust NFP print could reinforce expectations for the Fed to maintain rates, while a weaker outcome might accelerate calls for rate cuts.
In Canada, labor market data on Friday coincides with Trump’s tariff threats on Canadian goods, including a proposed 25% levy. These developments create a volatile backdrop for USDCAD. The pair’s bullish setup, supported by a hidden divergence between price and RSI, suggests potential for further upside within its rising regression channel.
Global equity markets remain buoyed by easing fears over China tariffs after Trump’s softened rhetoric. However, his continued pressure on Canada and Mexico adds uncertainty, while gold’s rise towards record highs signals investor caution.
Upcoming Data and Events:
Times are in GMT+2
Monday, February 3, 2025:
5:00 PM – USD – ISM Manufacturing PMI: Signaling contraction in manufacturing activity.
The pair continues to trade within a descending regression channel, retreating from the upper boundary. The anticipated BoE rate cut of 25 bps could further weaken the GBP, targeting lower levels.
Main Scenario:
A break below 1.23110 (50% Fibonacci level) may lead to 1.22610 and 1.21898 (61.80% and 78.60% Fibonacci levels).
Alternative Scenario:
A reversal above 1.24228 (23.60% Fibonacci level) could signal bullish momentum towards 1.25227.
Key Levels:
Support: 1.23110, 1.22610, 1.21898
Resistance: 1.24228, 1.25227
USD/CAD – Daily Chart:
The pair is rebounding from the lower edge of a rising regression channel, supported by bullish hidden divergence between price and RSI. Trump’s tariff threats on Canadian imports add upside risks.
Main Scenario:
A break above 1.45436 (127.20% Fibonacci level) could lead to 1.46205 and 1.47054 (161.80% and 200% Fibonacci levels).
Alternative Scenario:
A decline below 1.43983 (61.80% Fibonacci level) may trigger bearish corrections towards 1.42610.
Key Levels:
Support: 1.43983, 1.42610
Resistance: 1.45436, 1.46205, 1.47054
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