Forex Signals Brief Feb 12: Attention on US Inflation and Tariffs Today!
Yesterday markets were quiet as Powell offered nothing new, but we might see volatility from US CPI inflation data and trade tariffs today.
The US dollar steadily weakened throughout North American trading, despite strong yields providing some support. A wave of dollar selling pushed EUR/USD and GBP/USD higher, though there was no clear catalyst behind the move. Meanwhile, US stocks showed resilience, managing to climb after opening lower. Some market participants had feared that Fed Chair Jerome Powell might strike a more hawkish tone, but instead, he reaffirmed the Fed’s patient approach, reiterating that they are in “no hurry” to raise interest rates.
This aligns with the consistent ‘wait-and-see’ stance among Fed officials. Gold surged during the Asian session, setting a fresh record high at $2,942, before retreating below $2,900 later in the US session as risk sentiment improved. A contributing factor may have been the announcement that steel and aluminum tariffs—originally expected to take immediate effect—were delayed until March 12. This fueled speculation that tariff rhetoric is more about negotiation leverage rather than economic punishment, supporting risk-on sentiment and weighing on the USD.
Stock markets ended mostly higher, with Germany’s DAX and the UK’s FTSE 100 reaching new all-time highs, while the Nasdaq edged lower, dragged down by another 7% decline in Tesla’s stock. The EV giant continues to face headwinds after a downward revision in its price target, reflecting waning investor confidence in its outlook.
Today’s Market Expectations
The latest US CPI data shows a month-over-month increase of 0.3%, down from the previous 0.4%, while the year-over-year CPI remains steady at 2.9%. Meanwhile, core CPI M/M rose 0.3%, up from 0.2%, and the core CPI Y/Y is expected at 3.1%, slightly lower than the prior 3.2%. While softer-than-expected numbers would be more reassuring, these figures are not alarming, as the Federal Reserve remains primarily focused on inflation progress rather than short-term fluctuations.
Despite a hawkish shift in market sentiment last Friday, driven by strong Non-Farm Payrolls (NFP) data and higher inflation expectations from the University of Michigan consumer sentiment survey, the forecast for two Fed rate cuts by year-end remains unchanged. The NFP data was solid, but the increase in average hourly earnings isn’t worrisome, given the decline in weekly hours worked.
As for inflation expectations, the recent rise is largely attributed to concerns over tariffs, rather than underlying inflationary pressures. These fears are likely to ease in the coming months, as trade war anxieties subside, reducing the impact on market expectations.
The contrasting price movements of gold and cryptocurrencies highlight the mixed sentiment in financial markets. Gold continues to climb as investors seek a safe haven amid uncertainty, while Bitcoin and Ethereum struggle with resistance and volatility. Traders are closely monitoring key technical levels and macroeconomic developments to anticipate the next major market shifts.
The 20 SMA Keeping Gold Supported
The divergence between GOLD and cryptocurrencies reflects the mixed sentiment in financial markets. Gold continues to rally, breaking through the $2,900 mark and hitting a record high of $2,910 after a $45 surge. This marks the sixth consecutive weekly gain, fueled by trade tensions, inflation fears, and macroeconomic uncertainty. During the Asian session, gold reached a fresh peak at $2,942 before pulling back below $2,900 in the US session, as improved risk sentiment led to some profit-taking. However, it found support at the 20-day SMA, prompting a buy signal in gold.
XAU/USD – H4 Chart
EUR/USD Buyers Face MAs Above
In the forex market, EUR/USD has been in a steady downtrend since October, shedding 10 cents despite occasional rallies, such as those above 1.05 in January and 1.04 last week. Buying momentum remains weak, with lower highs confirming a bearish trend. The European Central Bank’s dovish stance continues to weigh on the euro, while the US dollar stays supported by economic resilience and the Federal Reserve’s cautious approach. If this trend persists, EUR/USD could drift closer to parity.
EUR/USD – Daily Chart
Cryptocurrency Update
Bitcoin Getting Squeezed Between MAs
Meanwhile, Bitcoin has struggled to maintain momentum, mirroring broader risk asset trends. Following Trump’s tariff announcement in early February, BTC/USD briefly fell below $90,000 before rebounding above $100K. However, the rally lacked follow-through, and Bitcoin gradually slipped back below $95K, where the 100-day SMA had been offering critical support. At the same time, 16 US states, including Texas and Florida, are exploring Bitcoin adoption through proposed legislation that could allow them to invest up to 10% of excess reserves in digital assets. This move could ignite a global trend toward Bitcoin as a reserve asset, but BTC must first reclaim the 50-day SMA and hold above $100K to retest January’s all-time high near $110K.
BTC/USD – Daily chart
Ethereum Holds Above $2,500
Elsewhere, Ethereum has faced steep selling pressure, failing to sustain gains after nearing $4,000 in late 2024. A flash crash on Monday wiped out 50% of its value, briefly sending ETH down to $2,000 before a modest recovery. Despite persistent bearish pressure, Ethereum could still rebound if technical support holds near $2,000 and broader market sentiment improves.
ETH/USD – Daily Chart
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