Forex Signals Brief January 30: ECB and US GDP to Set the Tone Today
Yesterday the BOC delivered a 25 bps rate cut, while the FED remained on hold, today we have the ECB rate cut and the USD GDP report which will affect financial markets.
The Bank of Canada responded to potential tariff concerns by cutting interest rates by 25 basis points, bringing them down from 3.25% to 3%. In contrast, the U.S. Federal Open Market Committee (FOMC) chose to keep rates unchanged.
BoC Governor Tiff Macklem highlighted the connection between the Canadian dollar’s depreciation and trade threats from the U.S., noting that future policy decisions will increasingly factor in these risks. The Bank’s earlier rate cut was largely driven by tariff-related uncertainties, underscoring its focus on risk management. Meanwhile, USD/CAD managed to hold above 1.44, closing the day just 20 pips higher with support from a stronger U.S. dollar.
The Federal Reserve adjusted its language on inflation and economic conditions, stating that economic growth remains steady, while the labor market continues to perform well with a stable unemployment rate. This revision signaled reduced concerns about labor market weakness. Initially interpreted as having a hawkish tone, Fed Chair Jerome Powell later clarified that the inflation language adjustment was simply a “cleanup.” Following these developments, market expectations for rate cuts shifted: the probability of a March cut fell from 30% to 22%, the likelihood of a June cut declined from 75% to 71%, and December rate cut odds remained at 60%.
U.S. equities ended the session lower, led by declines in the Nasdaq:
- Nasdaq Composite: -100 points (-0.5%) to 19,632
- Russell 2000: -6 points (-0.3%) to 2,283
- Dow Jones Industrial Average: -137 points (-0.3%) to 44,713
- S&P 500: -28 points (-0.5%) to 6,039
Today’s Market Expectations
The European Central Bank (ECB) is expected to cut interest rates by 25 basis points, lowering the policy rate to 2.75%. The latest Eurozone CPI report showed that core inflation, especially in the services sector, has remained relatively stable. Despite ongoing concerns, recent Flash PMI data signaled a notable rebound in economic activity. This momentum could strengthen further if the Russia-Ukraine conflict moves toward resolution. Meanwhile, the European Union is ramping up efforts to compete with the U.S. and China by promoting artificial intelligence, advanced research, and clean technology. Alongside these initiatives, there is growing pressure to simplify regulations, encourage investment, and foster economic growth—raising optimism for a strong 2025 for the Euro and European equities.
In the U.S., the Advance GDP for Q4 is expected to show a 2.7% growth, while the Q3 GDP was revised higher from 2.8% to 3.1%. Although, the GDP price index will be more important, which is expected to show a jump from 1.9% in Q3 to 2.5% in Q4. the weekly Jobless Claims report remains a key labor market indicator. While some easing has been observed, continuing claims are still near cycle highs, and initial claims remain within the 200K–260K range established since 2022. Uncertainty persists regarding Continuing Claims, with the previous release showing an increase to 1.899 million from 1.853 million. For this week, Initial Claims are projected to come in at 220K, slightly lower than the prior 223K.
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 Remains Supported by MAs As Buyers Push Higher
Gold has been increasing since the middle of December, forming a steady uptrend, with moving averages acting as support on the h4 chart, indicated below. The 20 SMA (gray) was acting as support when the trend picked up pace, but then the price retreated lower after the failure to make a new record high last week. However, the 50 SMA (yellow) stopped the retreat and turned into support.
XAU/USD – H4 Chart
The 50 SMA Continues to Hold for EUR/USD
EUR/USD had been under sustained selling pressure since late September, losing over 10 cents from levels above 1.11. However, Monday brought a sharp rebound as the U.S. dollar weakened, briefly pushing the pair to 1.2456 during U.S. trading hours. Despite this, it struggled to hold above the 50-day SMA. Renewed buying interest, particularly after President Trump’s Davos speech, helped the pair reclaim its moving average, signaling potential for further gains.
EUR/USD – Daily Chart
Cryptocurrency Update
Bitcoin Consolidates Around $100K
Bitcoin has also faced heightened volatility. Prices dipped to the low $90,000s and even briefly below $90,000 following a 25 basis point rate cut. A recovery attempt toward $95,000 met resistance at the 20-day SMA. Still, Bitcoin surged 10% over the past week, reaching just below $110,000 before settling at $100,000. Strong buying activity, along with positive remarks from Republican Senator Lummis regarding crypto industry developments, has sustained Bitcoin’s bullish momentum.
BTC/USD – Daily chart
Ethereum Stuck between MAs
Ethereum has mirrored this volatility. Initially finding support near its 50-day SMA, ETH faced selling pressure that pushed it below $3,500 and later under $3,200. Monday’s broad crypto sell-off saw Ethereum briefly drop below $3,000 before a fresh wave of buying drove an attempted move toward $4,000 midweek. However, resistance at the 20-day SMA kept prices in check, forcing another dip below $3,000. Despite this, broader crypto market strength over the past two weeks has helped Ethereum recover above $3,500.
ETH/USD – Daily Chart
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