Forex Signals Brief Jan 24: Time for the ECB to Close the Central Bank Run


Forex Signals Brief January 25: Time for the ECB to Close the Central Bank Run for the Week

Skerdian Meta•Thursday, January 25, 2024•3 min read

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Early yesterday the People’s Bank of China announced that they would cut the RRR by 50 bps, which is a large move after only two 25 bps cuts last year. This will unleash around 1 trillion Yuan into the economy and help increase the demand. That set the tone for most of the day, as market sentiment improved and risk assets surged higher, while the USD crashed 150 pips lower across the board.

Besides that, the PMI reading from Europe leaned on the positive side, particularly from the UK. That continued in the US session with manufacturing PMI up to 50.3 points, from 47.9 points in December, which means out of contraction and came as a surprise after the miss in other manufacturing indicators this month. The Services PMI also moved higher to 52.9 points from 51.4 points in December. This stopped the decline in the USD and reversed the course in the US session.

The Bank of Canada closed the day, with its policy decision, keeping interest rates at 5.0% as predicted.  Following the report, USD/CAD surged 100 pips higher, as a result of the BOC’s removing allusions to prospective rate hikes, which is a dovish signal. Crude Oil also remained bullish throughout the day, helped by the PBOC move and a large drawdown in EIA inventories due to freezing weather in the US, but that didn’t help the CAD.

Today’s Market Expectations

In a few minutes, we will have the  German Ifo Business Climate index which is expected to show a slight improvement. However, the sentiment remains pretty weak in Europe. But, most traders will ignore it and focus on the ECB meeting, which is anticipated to hold rates steady once again at 4.00%, although traders will be interested in the statement and press conference for any hints on rate cuts. ECB officials have pushed back against market expectations of aggressive cuts, but the Core CPI YoY inflation kept declining, so we might get a wink from Lagarde today.

Following the ECB, we have the unemployment claims numbers from the US, which have been surprisingly strong in recent weeks. Initial jobless claims continue to linger around cycle lows around or below 200K, while continuing jobless claims are also declining, which shows that the labor market is in good shape. This week Initial Claims are expected to come at 199K which is still below the 200K mark. Later in the afternoon, we have the New Home Sales which are expected to show an increase of 58K.

BTC/USD – Daily Chart 

Opening Another Buy Ethereum Signal 

ETHEREUM also reversed lower from above $2,700 after the BTC ETFs approval, however, the trend remains positive overall. The price moved below the 20 daily SMA (gray) yesterday but it remains above the 50 SMA (yellow) which remains the ultimate support indicator on deeper pullbacks such as this one. We are looking to open another long term buy ETH signal at the 50 SMA, although we’ll observe how the price action is down there.

Ethereum – Daily Chart

ETH Buy Signal
Entry Price: $2,290
Stop Loss: $2,590
Take Profit: $1,750

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