Kickstart North American FX trading day with a technical look at EURUSD, USDJPY & GBPUSD

The USD is mostly higher with most of the major currencies vs the USD up in volatile up and down trading as traders react to news headlines on tariffs (or the lack thereof). The USD is marginally lower vs the CHF and CAD (the USD is down around -0.10% in the snapshot). The NZDUSD is the biggest mover with a decline of -0.39% (higher USD). The USDJPY is up 0.36%. A snapshot of the changes shows:

In the video above, I take a technical look at the 3 major currency pairs – the EURUSD, USDJPY and GBPUSD – to kickstart the North American session.

In response to President Trump’s 10 percent tariff on all Chinese products overnight, Beijing announced retaliatory measures. These included additional tariffs on U.S. goods like liquefied natural gas, coal, and farm machinery, as well as restrictions on critical mineral exports used in high-tech products. China also launched an antimonopoly investigation into Google. The new U.S. tariffs, which add to previous levies, affect over $400 billion in Chinese goods purchased by Americans. Trump’s tariffs are part of a broader strategy to pressure China on issues like fentanyl shipments. Tariffs will go into effect on February 10. Trump has said he will speak to Chinese Pres Xi today

Yesterday, Canada and Mexico were granted a 30-day reprieve from tariffs after agreeing to deploy additional troops at the border and implement other measures aimed at reducing the flow of fentanyl and illegal immigration.

The news headlines sent the USDCAD to the highest level since early 2003 with the high reaching 1.4792. The truce, sent the pair sharply to the downside with the decline nearly reaching the low from Friday at 1.4368 (424 pips). The current price is at 1.4411 making new lows to start the new trading day (higher CAD). The low price earlier today stretched to 1.43857. The corrective price in the pair today stalled near the 100 hour MA at 1.4500. The price decline today has returned the price back into the “Red Box” (remember that box?). The price is also below the 200 hour MA at 1.4438 (green line). Stay below is more bearish for the pair.

Federal Reserve Bank of Chicago President Austan Goolsbee (dove and voter) expressed concerns about inflation in a recent radio interview. He highlighted that uncertainties in the economy may require the Fed to be more cautious and prudent when cutting rates. Goolsbee acknowledged the risks of inflation potentially rising again, especially if fiscal policies impact prices or employment. While noting strong growth and consumer activity, he also mentioned concerns about inflation and the challenge of distinguishing between rising prices being a sign of economic overheating or the temporary effect of tariffs. Due to these uncertainties, he suggested the Fed might need to slow the pace of rate cuts.

A blast from the past, former St. Louis Federal Reserve President James Bullard was speaking a predicts that inflation will significantly slow this year, with core PCE inflation dropping to 2.3% by the end of 2025, down from 2.8% at the end of 2024. He expects inflation to continue declining toward the 2% target but remain slightly above it. Bullard highlighted that the Fed has managed to reduce post-pandemic inflation without triggering a recession and is now in a fine-tuning phase of monetary policy. As markets recognized the Fed’s success, bond prices adjusted, helping to un-invert the Treasury yield curve. He anticipates two more 0.25% rate cuts in 2025, with a rate cut more likely later in the spring than in March. Bullard is now the dean of the Mitchell E. Daniels Jr. School of Business at Purdue University.

Some of the key earnings from this morning showed:

• PayPal Holdings Inc (PYPL) Q4 2024 (USD): Adj. EPS 1.19 BEAT, expected 1.12, Revenue 8.37B BEAT, expected 8.26B. Despite the beat, shares are down -6.3% in premarket.
• Regeneron Pharmaceuticals Inc (REGN) Q4 2024 (USD): EPS 12.07 BEAT, expected 11.29, Revenue 3.79B BEAT, expected 3.75B. Shares are up 2.87% in premarket.
• Merck & Co (MRK) Q4 2024 (USD): EPS 1.72 BEAT, expected 1.62, Revenue 15.62B BEAT, expected 15.49B. Shares are down -7.84% in premarket despite the BEAT on lower guidance, and trading at the lowest levels since October 2022
• PepsiCo Inc (PEP) Q4 2024 (USD): EPS 1.96 BEAT, expected 1.94, Revenue 27.87B BEAT, expected 27.88B. Shares are trading down -2.18% in premarket

Yesterday after the close Palantir beat expectations and the market liked it:

Palantir Technologies Inc (PLTR) Q4 2024 (USD): Adj. EPS 0.14, expected 0.11, Revenue 827.5M, expected 780M. Shares are up 22% to $102.12 in pre-market trading.

US stocks closed lower yesterday with the Nasdaq and the Russell 2000 down over -1.20%. The recap from yesterday showed:

• Dow Industrial Average fell -122 points of 00.28%
• S&P fell -45 points or -0.76%
• Nasdaq fell -236 points or -1.20%.
• The Rusell 2000 of small cap stocks also fell sharply with a fall of -1.26% on the day.

Today, the indices are trading mixed:

• Dow industrial average -78 points
• S&P index up 2.68 points
• Nasdaq index up 28 points

In the US debt market, the yields are higher with the exception of the 2 year

• 2 year yield 4.265%, unchanged
• 5 year yield 4.387%, +3.2 basis points
• 10 year yield 4.589%, +4.7 basis points
• 30 year yield 4.826%, +5.6 basis points

Looking at other markets to start the trading day:

• Crude oil is trading down $-1.52 or -2.08% and $71.65
• Gold is trading up nine dollars or 0.32% in $2823.21. Yesterday the price traded to a new intraday high of $2830.57 on flight to safety flows. The high price today reached $2824.65
• Bitcoin is trading back below the 100,000 level at $99,594, down $-1863 or -1.83%

On the economic calendar today

• US factory orders for December are expected to fall -0.7% versus -0.4% last month. Part of that report is durable goods orders which in the preliminary release showed a decline -2.2%. Last month the durable goods fell -2.0%. Nondefense capital ex air came in a +0.5%. That feeds into GDP.
• JOLTs job openings will start the flow of employment data culminating with the US jobs report on Friday were expectations are for a gain of around 170K. The JOLTS is expected to come in at 8.000M vs 8.098M last month.

This article was written by Greg Michalowski at www.forexlive.com.