Forex Signals Brief Feb 7: Can the NFP Save the USD Before the Weekend?
Today the NFP report is expected to show around 100K fewer new jobs in January, so a positive number could help the USD regain some of this week’s losses.
The Bank of England cut interest rates and lowered its growth projections as expected, placing the British pound in focus. Markets quickly responded by pricing in additional rate cuts, with expectations shifting toward a potential reduction in May rather than June. This led to an immediate drop in GBP/USD from 1.2420 to 1.2360 before stabilizing and gradually rebounding.
Broader US dollar weakness contributed to the pound’s recovery, along with possible short-covering activity, especially after Donald Trump clarified that UK trade would not be affected by his tariff plans. This reassured investors and added to the positive risk sentiment seen across markets.
The general market tone remained upbeat, as confidence grew that Trump’s trade policies would not prioritize aggressive tariff measures. Meanwhile, political developments in the US are moving swiftly, with the House working on a reconciliation bill that could offer insight into how tariffs might be used to fund tax cuts. However, volatility remains, as seen with an unusual intraday dip in US equities, reportedly triggered by a large $10 billion futures sell-off.
Earnings reports also influenced market moves, with Amazon shares declining 6% after hours due to weaker-than-expected Q1 sales guidance. The company projected revenue between $151 billion and $155.5 billion, below the expected $158 billion. However, Q4 results came in slightly above forecasts at $187.8 billion versus $187.3 billion expected.
Today’s Market Expectations
The upcoming employment reports for Canada and the US will play a crucial role in shaping market expectations, particularly regarding monetary policy and economic stability. While both economies have shown signs of slowing job growth, the reports will help determine whether the labor market remains resilient enough to sustain current policy stances.
Canada: Modest Job Gains Amid Tariff Uncertainty
- Canada is expected to have added 25K jobs in January, a significant slowdown from 90.9K in December.
- The unemployment rate is projected to rise slightly to 6.8% from 6.7% in December.
- Wage growth has been declining, indicating a softening labor market.
- Despite recent aggressive rate cuts, the Canadian dollar (CAD) has struggled to strengthen, largely due to concerns over Trump’s proposed tariffs.
US: Labor Market Resilience in Focus
- The Non-Farm Payrolls (NFP) report is expected to show 170K new jobs in January, down from 256K in December.
- The unemployment rate is forecasted to remain steady at 4.1%.
- Average Hourly Earnings are anticipated at 3.8% YoY, slightly lower than 3.9% previously, while the M/M wage growth holds at 0.3%.
Implications for Federal Reserve Policy
The last jobs report was stronger than expected, leading to a hawkish shift in interest rate expectations. However, with slower wage growth and declining job openings, the Fed’s primary concern remains inflation rather than labor market pressures. A solid NFP report could delay rate cuts, while a weaker-than-expected number may reinforce expectations for easing later in the year. Traders will be closely watching for any signs that hiring momentum is fading as the economy adjusts to higher interest rates.
US Labor Market & Gold Surge
The US Jobless Claims report remains a key focus, as it provides a real-time snapshot of labor market conditions. While there has been some easing in claims, continuing claims remain near cycle highs, and initial claims have remained in the 200K–260K range since 2022.
- Last week’s Continuing Claims: Declined from 1,900K to 1,858K.
- Initial Claims Forecast: Expected at 215K vs. 207K prior.
The contrasting price movements in cryptocurrencies and gold highlight the mixed sentiment in financial markets. While Bitcoin and Ethereum struggle with resistance and volatility, gold continues to push higher, attracting investors looking for stability in uncertain times. Traders are closely watching key technical levels and macroeconomic indicators to determine the next major market moves.
Gold Prepares for the Next Push Toward $3,000
Gold has maintained its strong upward momentum, breaking past $2,790 to reach a new record high of $2,798.40. The precious metal is benefiting from ongoing political and economic uncertainty, reinforcing its status as a safe-haven asset. With strong bullish sentiment, a move beyond $2,800 seems imminent, and a climb toward $3,000 is becoming increasingly likely. Recent US GDP data further bolstered gold’s appeal, allowing XAU/USD to sustain its breakout. Although gold briefly dipped to $2,772 due to intraday volatility, it quickly rebounded to $2,830, showing resilience and strong market demand.
XAU/USD – H4 Chart
USD/CAD Stabilizes Above Support
Following the tariff news over the weekend, there were notable fluctuations in the forex market for USD/CAD. Following Trump’s tariff statement, the pair first surged to a 20-year high of 1.4793, opening with a two-cent gap higher. Nevertheless, the Canadian dollar appreciated following Trump and Trudeau’s call, which was said to have gone “very well,” and the USD/CAD fell below 1.43, where it stabilized yesterday.
USD/CAD – Daily Chart
Cryptocurrency Update
Bitcoin Stays Below $100K
Bitcoin has shown greater stability compared to Ethereum and other major altcoins. It reached an all-time high of $109,870 in January but has struggled to maintain levels above $100,000. While sellers appear reluctant to push the price much higher, there is also strong support above $90,000, preventing a deeper decline. This suggests a key accumulation zone, making it an attractive level for long-term buyers who expect the bullish trend to continue.
BTC/USD – Daily chart
Ethereum Snaps A Small Gain
Ethereum has struggled to sustain its gains, failing to reach a new all-time high in late 2024, unlike Bitcoin. The price briefly touched $4,000, but sellers quickly took over, preventing it from holding that level. The recent flash crash on Monday sent Ethereum tumbling to $2,000, wiping out half its value before a short-lived rebound during the US session. Despite the temporary rally, selling pressure has resumed. However, if moving averages hold and the broader trend remains favorable, Ethereum could still present a buying opportunity near the $2,000 mark.
ETH/USD – Daily Chart
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