The US inflation data will be the key driver this week as market participants will closely monitor the CPI y/y data that will be released on Wednesday. The labor market data from the last week supported the US dollar as the unemployment rate in the United States has declined to 4.0% while hourly earnings increased by 0.5% in January. 

According to forecasts, yearly inflation in the United States is likely to remain unchanged at 2.9%. When it comes to producer price inflation, it may slow down to 3.1% from 3.3%. Current inflation readings meet the Fed inflation target expectations, while in general, the macroeconomic data favors the FOMC to avoid aggressive steps in the near future.

Jerome Powell’s comments this week are also in focus. Market participants expect the Fed Chair to shed light on the future steps of the central bank, including the possibility of cutting the interest rate at the beginning of summer.

EUR/USD: Trump Tariffs Are in Focus

The President of the United States has announced a new round of tariffs that will be imposed on imports from other countries. While he didn’t mention exact names, German chancellor Olaf Scholz admitted that Germany is ready to react and will answer in one hour to any measures from the United States. At the moment, the US President outlined tariffs on metals to increase production and reduce dependence on other nations.

The divergence between central bank strategies presses over EUR. While the Fed is going to cut rates at the beginning of the summer, the European Central Bank is likely to make the first step earlier and is likely to cut rates three times this year.

EUR/USD is trading below the SMA50 on the hourly chart and testing the moving average currently. While bears are still in control, the situation is unclear and market participants will wait for the US CPI data to make further decisions.

The closest support level is at 1.0290. The next support is at 1.0220. On the upside, if the currency pair manages to break above the simple moving average of 50, the next resistance level will be at 1.0350.

GBP/USD: Pound Sterling Is Under Pressure After Catherine Mann Comments

The voting member of the Bank of England, Catherine Mann has delivered a dovish commentary on Monday saying that businesses are unlikely to be able to raise prices this year due to lower consumer spending. Therefore, she is likely to vote for a larger interest rate reduction in 2025, which is a dovish signal for financial markets. Traders and investors are now waiting for the comments from the Band of England’s head to make their further decisions. GBP is likely to remain under pressure in the mid-term.

The currency pair is trading below the SMA50, which acts as a resistance level at the moment outlining the bearish overall sentiment in the market. The closest support levels are at 1.2340 and 1.2300. These are the closest targets for the GBP/USD currency pair on the downside.

On the upside, if the currency pair manages to break above the resistance, it will move towards 1.2420.

USD/CAD: New Trump Tariffs Weigh on the Loonie

While Canada avoided direct import tariffs from the United States, those on steel and aluminum are likely to hit the Canadian economy. Currently, traders and investors are waiting for Fed Chair Jerome Powell to testify before Congress. His comments may have a significant impact on price fluctuations.

The Fed is unlikely to make any further easing steps before June or July. According to the CME Group FedWatch Tool, most respondents expect the Federal Reserve to cut rates at the beginning of the summer. Moreover, the latest macroeconomic data releases support the Fed is being more cautious. The unemployment rate reached 4.0%, while wages grew to 0.5%. Currently, market participants are anticipating the US inflation data release to make any further decisions.

The currency pair stays right above the SMA50, which demonstrates a slight bullish dominance. However, in general, flat fluctuations outline the balance between the buyers and sellers. The closest resistance levels will be at 1.4400 and 1.4480. If the currency pair breaks below the simple moving average of 50, it will target 1.4280.

XAU/USD: Geopolitical Risks Support Gold

Again, gold is supported by economic and geopolitical risks. The US president has already applied import tariffs on China as well as on some raw materials, including steel and aluminum. China, in return, has applied tariffs on some goods from the United States. The trade war between the two giants is developing and traders and investors are looking forward to new steps.

Meanwhile, market participants will also monitor closely the Fed Head’s comments before Congress on Wednesday. Powell is likely to confirm that the Federal Reserve is likely to postpone the interest rate cuts, which is now expected at the beginning of the summer.

Gold fluctuates above the SMA50 and is testing the moving average currently. The bulls are still in control and is likely to resume their growth after Powell’s comments. On the upside, the closest resistance level is at 2,930. XAU/USD is going to target 3,000 after breaking this level.

On the downside, the closest support level is at 2,900. If XAU/USD breaks it below, Gold will likely hit 2,860.

BTC/USD: Bitcoin Struggles to Move Above 100,000

The global geopolitical and economic situation favors the US dollar and presses over Bitcoin. Moreover, the lack of news related to Bitcoin reserves in the United States distracts market participants from buying the cryptocurrency.  

BTC/USD is trading above the SMA50, which is still supporting the currency pair and demonstrates bullish power. The closest support level will be at 97,200, which prevents the currency pair from moving lower and targeting 96,400. On the upside, the resistance level is at 98,500. If BTC/USD manages to break above, the next target will be at 100,000.