Forex Signals Brief January 16: Spotlight on the BOE’s Baily and Canadian CPI

Yesterday there was some decent price action in the European session, however it slowed down in the US session as most markets in the United States were closed in honor of Martin Luther King Day. Overall, the US dollar was the strongest currency, outperforming all major currencies on the day.

The Euro showed the most resilience against the USD, after comments from ECB policymakers Holzman and Nagel making hawkish comments, suggesting that it will take quite some time for the European Central Bank to start lowering interest rates. Holzman indicated that the traders should not expect the ECB to start the easing cycle in 2024 while Nagel added that “it is too early to discuss rate reduction”.

Risk assets such as stock markets remained slightly bearish yesterday, as risk sentiment remained negative all day, after the People’s Bank of China failed to lower the MLF rate to 2.40% and left it at 2.50% instead. That kept commodity dollars bearish, with the NZD losing around 60 pips against the greenback. Even the CAD ended the day lower despite the increase in manufacturing sales which came at at 1.2% vs 1.1% expected.

The first major data today will be the employment report from the UK. The unemployment rate is predicted to remain unchanged at 4.2%, but the average earnings index is expected to fall by 4 points 6.8%, compared to 7.2% in November. Earnings without bonuses are expected to slow down even further, falling to 6.6%, compared to 7.3% previously.

The CPI report from Canada will be released next, and the yearly CPI is predicted to jump 2 points up to 3.3% from 3.1% in November. The monthly CPI is expected to turn negative though and come at -0.3% in December, down from 0.1% previously. The BoC wants to see more progress on inflation and wage growth, so this report might get the CAD moving today.

Later we have the Empire State Manufacturing Index from the US, which is expected to show an improvement to -4.9 points from -14.5 in the previous month. The Bank of England Governor Andrew Bailey will close the day, as he is due to testify on the UK economy before the Lords Economic Affairs Committee and might hint at upcoming rate cuts which would send the GBP down.

This year, ETH/USD has reached new highs, demonstrating that the trend has been bullish throughout the year, with moving averages pushing lows higher. Buyers returned this week after a temporary retreat, but they were unable to break the previous week’s high of $2,500. On Wednesday, the price fell to $2,127, but then recovered, with the 50 SMA (yellow) functioning as support on the daily chart, and the price soared beyond $2,500 yesterday.

• ETH Buy Signal
• Entry Price: $1,947.38
• Stop Loss: $1,490
• Take Profit: $2,500