It looks like all the fun these days is always in the US session, innit? So far today, major currencies are keeping little changed with the dollar holding steadier following the fall yesterday. The drop is putting the dollar in a rather vulnerable spot though, so it belies the quietness we're seeing for now.

FX 14-02

EUR/USD is nudging closer towards a test of 1.0500, which stifled the January push higher. Meanwhile, GBP/USD looks to be coming up for air in a push above 1.2500 and starting to draw towards its 100-day moving average - seen at 1.2693 currently.

Besides that, USD/CAD has also broken to a fresh two-month low and is setting its sights on 1.4100 next amid a break below key technical support here.

We also have AUD/USD which is nearing its own January high of 0.6330 and eyeing a firmer technical bounce after a testing start to the month on Trump's tariffs scare.

As for USD/JPY, the pair remains very much tied to the bond market. The sharp fall yesterday erases the gains from Wednesday after the US CPI report. We're drawn back towards a test of the key daily moving averages with the 200-day moving average in focus at 152.68 currently. That comes as 10-year yields in the US saw a notable reversal from a high of 4.66% on Wednesday to 4.53% now.

But as market players are less fearful about tariffs and taking on a stronger belief that they will mainly be used as a negotiating tool instead, it will be tough to find much upside in yields from hereon. That unless US inflation runs much hotter in the months ahead and causes a rethink at the Fed.

For now though, the bar is relatively high for that to happen in my view.

And with markets already close to pricing in just one rate cut for the year (~33 bps currently), it's tough to find much more upside for the dollar and rates unless we start to walk into the realms of a rate hike again. But as mentioned, the threshold for that to be triggered is relatively high at the moment.

Looking elsewhere, risk trades are continuing to hold up well. European indices are poised for a seventh straight week of gains and US equities are also nearing fresh record highs again. At this point, if tariff fears aren't enough to keep this market down then the onus will fall back on inflation.

But if rate hikes aren't going to come into the picture, there's only so much more pessimism that can be fed into the chimney at this point.

And perhaps a surprise, or perhaps not really, in all of this is gold. The precious metal got a bit of a check earlier in the week but is now trading back up to $2,930 levels. It is also poised for a seventh straight week of gains. $3,000 can't come soon enough. 🚀

Source: Forex Live