The euro is extending its advance against the dollar for the second consecutive session, supported by a dramatic weakening of the US currency after fresh trade statements from US President Donald Trump.
Possible technical scenarios:
As we can see on the daily chart, EUR/USD has recouped its January losses but remains within the broad 1.1494–1.1788 range, leaving technical potential for a move toward either boundary.
Fundamental drivers of volatility:
The euro is strengthening for the second consecutive session, as the US dollar has weakened sharply following new trade statements from President Donald Trump. The pair rose in response to threats of additional 10% tariffs against European countries opposing US plans regarding Greenland. These remarks reignited a ‘sell America’ strategy, similar to the market reaction seen after tariff announcements in April.
Pressure on the dollar is increasing through outflows from US assets. Investors are trimming exposure to USD and US Treasuries, pricing in the risk of a prolonged trade conflict between the US and the EU.
The macroeconomic backdrop in the eurozone remains restrained, but it is not stopping the euro from rising. In Germany, producer prices fell by 0.2% month-over-month in December versus expectations of -0.1%, while the annual decline deepened to -2.5% from -2.3% in November. Eurozone inflation for December was revised down to 1.9% year-over-year, while the core reading held at 2.3%.
Despite deflationary pressure in the manufacturing sector, the FX market is currently focused on trade risks and political uncertainty in the US, which is temporarily supporting the euro.
Intraday technical picture:
Judging by the developments on the 4H chart, within the 1.1494–1.1788 range, the downtrend has been broken, which does not rule out continued growth toward 1.1788.
The pound strengthened against the dollar following mixed but broadly strong UK labor market data, while the US dollar weakened due to Washington’s trade conflict with the EU and the UK.
Possible technical scenarios:
As evidenced by the daily chart, GBP/USD found support at the local dotted level of 1.3339 and is now attempting to break out resistance at 1.3436. If the pair manages to consolidate above it, growth may continue toward the January highs and the 1.3630 target.
Fundamental drivers of volatility:
Sterling rose after official data showed the UK unemployment rate holding at 5.1% in the three months to November, while the market had expected a decline to 5.0%. At the same time, employment increased by 82K after a 17K contraction in the previous three-month period, pointing to stabilization in the labor market.
Wage dynamics suggest a gradual cooling of inflationary pressure. Average pay excluding bonuses rose 4.5% year-over-year, matching forecasts but slowing from 4.6% previously. Including bonuses, wages came in at 4.7% year-over-year versus expectations of 4.6%, but still below the prior period’s revised 4.8%. These data boost expectations that the Bank of England may be able to start cutting rates over time without facing a sharp re-acceleration in inflation.
Additional support for the pound is coming from US dollar weakness. The dollar index declined amid a renewed ‘sell America’ trade after President Donald Trump announced 10% tariffs against several EU countries and the UK, linked to the Greenland dispute. Markets are pricing in the risk of a prolonged political and trade confrontation, which reduces the appeal of US assets.
Investor focus remains on UK inflation data for December, due out on Wednesday. Bank of England officials previously stated that inflation could return to the 2% target by mid-2026. Rates may normalize earlier than expected if the regulator maintains a course toward gradual policy easing.
Intraday technical picture:
As suggested by the unfolding scenario on the 4H chart, GBP/USD has technical potential to strengthen toward the upper boundary of the 1.3339–1.3533 range, between the two dotted lines.
USD/JPY is balancing under the influence of conflicting fundamental drivers from both Japan and the US.
Possible technical scenarios:
The daily chart shows that USD/JPY failed to overcome resistance at 158.93 and reversed lower. From here, the price has sufficient room to move down toward support at 156.71.
Fundamental drivers of volatility:
Political decisions in Tokyo are serving as the key driver for USD/JPY, pushing aside traditional factors tied to demand for the yen as a safe-haven asset.
The announcement of a snap election on February 8 and the government’s pledge to remove the 8% food tax for two years triggered a sharp rise in long-dated Japanese bond yields. The 30-year JGB yield jumped by 25 basis points, while 40-year bonds hit record highs. The market is viewing fiscal stimulus as a threat to Japan’s already strained budget, which is undermining confidence in the debt market and accelerating outflows from the yen.
The rise in yields is being accompanied by higher inflation expectations: a measure based on nine-year inflation-linked bonds climbed to 1.90%.
Meanwhile, the Bank of Japan is acting cautiously and is not rushing to further tighten the policy after raising the rate to 0.75%, which is the highest level in 30 years. As a result, real interest rates continue to decline, which is becoming a key factor behind yen weakness.
Intraday technical picture:
As we can see on the 4H chart, USD/JPY is consolidating in the middle of the 156.71–158.93 range. A series of consecutively lower highs creates the preconditions for a move lower, although the decline may unfold with pullbacks.
USD/CAD is declining for the second day in a row due to a weaker US dollar, while the Canadian dollar received temporary support after Monday’s mixed consumer inflation data.
Possible technical scenarios:
Judging by the look of things on the daily chart, USD/CAD fell below 1.3861, opening the way lower toward 1.3799 and 1.3744.
Fundamental drivers of volatility:
The key fundamental factor for the Canadian currency remains oil price dynamics. Crude is under pressure as deteriorating relations between the US and the EU weigh on global demand expectations. For Canada, which stands as the largest oil supplier to the US, this directly affects currency flows and reduces the appeal of CAD, even without negative domestic surprises.
As far as the US is concerned, the dollar is being constrained by political risks tied to Donald Trump’s statement that 10% tariffs on goods from eight European countries and the UK will be introduced from February 1 in the context of the Greenland dispute. The EU has already signaled readiness for retaliatory measures, which supports the overall uncertainty backdrop and restrains demand for the dollar.
On the flip side, US macro expectations are shifting toward a more hawkish policy outlook. Recent labor market data prompted markets to push back expectations for the next Fed rate cut to at least June. A number of Fed representatives have emphasized there is no urgency to ease further without a steady slowdown in inflation toward the 2% target. Against this backdrop, major banks, including Morgan Stanley, have revised their forecasts and now expect only two rate cuts in 2026 (in June and September), which could provide medium-term support for the dollar against the Canadian currency.
Intraday technical picture:
The 4H chart also supports the likelihood of a decline within the 1.3744–1.3861 range. Locally, downside may be halted by the dotted level at 1.3799.
Gold posted a fresh all-time high against the backdrop of a sharp deterioration in global sentiment due to the escalation of the trade and political conflict between the United States and the European Union, which triggered US dollar weakness.
Possible technical scenarios:
On the daily chart, gold has consolidated above 4635.63, opening the way for medium-term growth toward the next target at 4939.80.
Fundamental drivers of volatility:
The rally in the precious metal is directly linked to actions by the US administration. Donald Trump has put more pressure on European allies, seeking a revision of Greenland’s status and threatening additional tariffs. In response, the EU will be holding an emergency summit in Brussels on Thursday to coordinate retaliatory steps. These developments triggered selling in US equities and Treasuries and sparked capital flows into safe-haven assets, primarily gold.
Additional support came from the US dollar’s FX dynamics. The dollar slipped to a weekly low amid tariff threats and weakening confidence in US assets. A weaker dollar increased gold’s attractiveness.
Since the start of Trump’s second term, gold has risen by more than 70%, reflecting persistent demand for protection against trade conflicts and political uncertainty.
Intraday technical picture:
The 4H chart does not provide any additional information or clarity for analysis. A consolidation above 4635.63 creates the preconditions for further growth toward 4939.80.
Oil has traded without a clear direction for the third consecutive session, balancing between rising geopolitical risks and factors supporting demand.
Possible technical scenarios:
As suggested by the current situation on the daily chart, Brent is holding above support at 63.23. If this level holds, a recovery toward resistance at 65.02 is possible. Otherwise, the next downside target will be the 61.10 horizontal level.
Fundamental drivers of volatility:
On one hand, prices are being restrained by US trade threats. Donald Trump announced plans to impose additional 10% duties from February 1 on goods from eight European countries, with a possible increase to 25% by June if no agreement is reached on Greenland. These measures increased investor caution and heightened fears of a slowdown in global trade, which directly reduces expected oil demand.
On the other hand, the market is receiving support from the FX factor. The dollar has weakened, reducing the cost of dollar-denominated oil contracts for buyers in other currency zones. Against this backdrop, prices are holding relatively steady despite the worsening news flow and heightened uncertainty around US trade policy.
An additional supportive factor was data coming from China. The economy expanded by 5.0% last year, fully meeting the government’s target. At the same time, refinery throughput in 2025 increased by 4.1% year-over-year, and oil production rose by 1.5%. Both readings reached record highs. The strength of the world’s largest oil importer is partially offsetting risks stemming from the US and Europe.
Intraday technical picture:
As we can see on the 4H chart, Brent is at a crossroads between a recovery toward 65.02 and a decline toward 61.10. Which scenario plays out will depend on whether the current support at 63.23 holds.
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