The euro extended its recovery against the US dollar on Monday, with EUR/USD trading near the 1.1690 mark at the time of writing, around 0.4% higher on the day. The pair rebounded sharply from one-month lows around the 1.1620 region earlier in the session, as a combination of improving Eurozone sentiment data and renewed political pressure on the US Federal Reserve weighed heavily on the greenback.

Support for the single currency was reinforced by an upbeat reading from the Eurozone Sentix Consumer Sentiment Index, which surprised modestly to the upside and helped ease concerns that fragile consumer confidence could further undermine the region’s already sluggish growth outlook. While the broader Eurozone macro picture remains mixed, the data provided a timely catalyst for euro buyers, particularly against a dollar struggling to find a fundamental anchor.

The US dollar, meanwhile, came under renewed selling pressure following fresh political developments in Washington that have unsettled investors and revived concerns over the Federal Reserve’s independence. According to a report published by The New York Times on Sunday, Federal Reserve Chairman Jerome Powell is facing a criminal investigation linked to testimony he delivered before the Senate Banking Committee regarding the renovation of a Federal Reserve building.

Powell responded swiftly, releasing a video statement in which he described the investigation as “unprecedented” and framed it as part of a broader campaign of political intimidation aimed at forcing the central bank to cut interest rates. Markets appeared to interpret the episode as another escalation in the long-running conflict between the US administration and the Fed, raising fears that political interference could undermine policy credibility at a critical juncture for the US economy.

From a market perspective, renewed attacks on the Fed have tended to weaken the dollar, as they inject uncertainty into the outlook for US monetary policy and risk destabilising long-term inflation expectations. Traders appear increasingly wary that sustained political pressure could influence the Fed’s decision-making process, particularly as financial conditions remain tight and growth signals show early signs of cooling.

Geopolitical risks also linger in the background, adding another layer of complexity to market sentiment. Violence escalated sharply in Iran over the weekend, with reports suggesting that hundreds of protesters were killed by the regime amid widespread unrest. The situation has heightened concerns about regional instability, while the looming threat of potential US intervention has added to global risk unease. Although such developments have traditionally supported the US dollar via safe-haven flows, the currency has so far failed to benefit, suggesting that domestic political concerns are currently exerting a stronger influence.

The economic calendar is relatively light at the start of the week, but market participants will be paying close attention to remarks from Atlanta Fed President Raphael Bostic later on Monday. Any commentary on inflation dynamics or the timing of potential rate cuts could shape near-term dollar sentiment. Looking further ahead, attention will turn sharply to the release of US Consumer Price Index (CPI) data on Tuesday, a key input into the Fed’s policy calculus, followed by a series of speeches from Fed officials throughout the week.

In my view, the dollar’s near-term vulnerability reflects a growing disconnect between resilient headline US data and rising political and institutional risks. Unless US inflation surprises meaningfully to the upside, the greenback may struggle to regain momentum, leaving room for the euro to extend its corrective rebound despite its own structural challenges.

From a technical standpoint, EUR/USD has staged a convincing bounce from one-month lows near 1.1620, suggesting that buyers are defending the lower boundary of the recent trading range. However, the pair continues to trade within a broader descending channel that has been in place since the late-December highs, indicating that the medium-term bias remains cautiously bearish unless key resistance levels are cleared.

Momentum indicators on the four-hour chart have turned more constructive. The Moving Average Convergence Divergence (MACD) has crossed above its signal line, pointing to a gradual fading of bearish pressure, while the Relative Strength Index (RSI) has pushed decisively above the 50 threshold, signalling improving upside momentum.

On the topside, the immediate area of interest lies near 1.1700, where the upper boundary of the descending channel converges with the January 7 high. A sustained break above this zone would likely open the door for a move toward the January 6 peak at 1.1740. Failure to clear resistance, however, could see the pair drift back toward support levels, with 1.1620 remaining a critical line in the sand for euro bulls.

BUY EURUSD

ENTRY PRICE: 1.1690

STOP LOSS: 1.1650

TAKE PROFIT: 1.1740

A Reuter's survey indicates a slight decline in OPEC production in December, with Iran and Venezuela's supplies hampered by sanctions and domestic factors, providing short-term market support. However, overall production increase commitments and alternative supplies from Russia, Venezuela, and U.S. shale oil maintain market caution regarding long-term supply gaps.

Meanwhile, the IEA has slightly upwardly revised its 2026 demand forecast, suggesting a modest growth trend overall. This indicates that demand improvement exists but with limited magnitude—creating a scenario where supply and demand dynamics make prices more susceptible to sharp fluctuations in response to news developments.

Furthermore, the weekly official U.S. data and industry (API) inventory trends directly impact intraday trading dynamics: the latest EIA weekly report indicates fluctuations in refinery utilization rates and production-sales cycles, causing market to repeatedly digest inventory levels and demand expectations in the short term.

In summary, the fundamental outlook presents a mixed signal characterized by "geopolitical or country-specific supply tightness, overall supply remaining fundamentally unshrunk, and limited demand recovery."

In the 1D timeframe, WTI’s overall candlestick pattern has broken above the lower boundary of the descending channel last week, indicating a potential short-term bullish reversal. The primary target is to test the resistance level at 62.00 upwards.

In the 4H timeframe, after surpassing the upper boundary of the descending channel and breaking through the 58.50 resistance level, WTI’s upward momentum has further expanded. Currently, the candlestick pattern has formed a breakout retest structure, awaiting confirmation signals of stabilization and support, suggesting that WTI may continue its upward trajectory.

Trading Direction: Buy

Entry Price: 58.60

Target Price: 61.80

Stop Loss: 57.40

Valid Until: January 26, 2026 23:00:00

Support: 58.50, 57.50

Resistance: 60.00, 62.00

The market's anticipation of the Bank of England implementing two additional interest rate cuts by 2026 continues to intensify, potentially dampening traders' aggressive bullish positions on the GBP and constraining the GBPUSD currency pair's momentum. Traders are likely to adopt a wait-and-see approach ahead of the release of upcoming U.S. inflation data—specifically, the Consumer Price Index and Producer Price Index—scheduled for Tuesday and Wednesday this week. Additionally, the UK’s monthly GDP report due on Thursday is expected to provide some upward impetus for the GBPUSD pair in the latter half of the week. Recently, political developments in the UK have centered around two critical issues: intense disputes during post-Brexit negotiation re-engagement with the EU and the UK’s ongoing substantial military support to Ukraine. These issues collectively delineate the UK’s positioning within a complex international landscape. The UK-EU negotiations have become entangled in the controversy surrounding the so-called “Farage clause.” During the UK Labour Party’s Starmer-led efforts to revive Brexit negotiations, the EU proposed a highly contentious safeguard mechanism—referred to privately as the “Farage clause”—which stipulates that if the UK unilaterally withdraws from the agreement in the future, it must pay substantial compensation to the EU to cover potential additional costs, such as border quarantine infrastructure. This measure aims to mitigate the risks associated with political upheaval, particularly in light of the possibility of Nigel Farage, a staunch Eurosceptic reformist, returning to power.

Despite the global risk-off sentiment intensifying and market expectations of a more aggressive easing stance by the Federal Reserve diminishing, concerns over the Fed's independence have resurged, exerting downward pressure on the US dollar and strengthening the GBPUSD exchange rate. In fact, Fed Chair Jerome Powell stated in a release that the U.S. Department of Justice is threatening to bring criminal charges against him. Powell added that the basis for potential prosecution is because the Fed has consistently prioritized public interests over aligning with the President's preferences. Last Friday, the U.S. Department of Labor released December employment data showing a net increase of 50,000 jobs, below the Reuters survey's forecast of 60,000, while the unemployment rate decreased from the revised 4.5% in November to 4.4%. Following this data release, market traders are betting that Powell will conclude his rate cuts before his term ends on May 15, with subsequent monetary policy decisions likely to be transferred to his successor, appointed by President Donald Trump, whose candidate is expected to be announced this month. Reflecting on last year's policy measures, the Federal Reserve, under Powell's leadership, reduced the benchmark federal funds rate by a cumulative 75 basis points to prevent further weakening of the labor market. This move sparked concerns among hawkish colleagues, who believed that rate cuts might delay or even jeopardize inflation returning to target levels. The latest employment figures have provided the Fed with policy buffer space, enabling it to keep short-term borrowing costs steady to continue containing inflation—aligning with Powell's policy stance last month, which indicates a preference among policymakers to maintain the status quo in the near term.

In the 1D timeframe, the GBPUSD pair has experienced a correction and stabilized near the middle Bollinger Band. The MACD has generated a death cross, with the MACD line and signal line currently pulling back toward the zero-axis at a considerable distance, indicating the corrective phase is incomplete. The RSI's peak has begun to decline, likely retracing toward the EMA50 or EMA200 at approximately 1.336 and 1.3288, respectively. With an RSI reading of 53, market sentiment remains cautious. In the 4H timeframe, Bollinger bands are narrowing, SMAs are flattening, and the price has broken above the descending channel's upper boundary. The MACD's bearish momentum is diminishing, and a golden cross is imminent for the MACD line and signal line, suggesting a short-term bullish momentum. Resistance levels are identified around the EMA50 and psychological round figures at approximately 1.345 and 1.35. The RSI stands at 47, indicating market sentiment remains somewhat bearish but shows signs of recovery, with the RSI lows gradually rising. Therefore, it is recommended to go long before going short.

Trading Direction: Buy

Entry Price: 1.34

Target Price: 1.36

Stop Loss: 1.33

Support: 1.33, 1.29, 1.28

Resistance: 1.35, 1.36, 1.373

USD/CAD traded around the 1.3900 mark on Friday at the time of writing, posting a modest 0.25% gain on the day, as a combination of U.S. macroeconomic resilience and Canadian fundamental headwinds underpinned the Greenback against its northern counterpart. The pair’s strength comes amid a backdrop of mixed labor market data from the United States and ongoing weakness in global Oil markets, which continue to weigh on Canada’s terms of trade.

The U.S. Dollar found support following the release of December’s labor market data, which presented a nuanced picture of economic momentum. Nonfarm Payrolls (NFP) rose by fewer than expected, suggesting a gradual cooling in employment growth. However, the Unemployment Rate declined and wage growth accelerated, indicating that the labor market retains a degree of underlying strength. Analysts interpret this as a signal that the Federal Reserve is likely to maintain a cautious approach at its upcoming January policy meeting. Market expectations largely center on a pause in interest rate adjustments, with futures pricing leaving open the possibility of a gradual easing path later in the year, should inflation dynamics stabilize.

“The U.S. labor market continues to demonstrate resilience despite slowing hiring trends. Wage growth and falling unemployment support the Dollar, even in the face of softer payroll gains,” noted a senior FX strategist at a New York-based investment bank. “This divergence in labor market conditions compared to Canada is giving USD/CAD a clear near-term bias to the upside.”

Conversely, the Canadian Dollar remains pressured by persistent softness in Oil prices, a critical driver of Canada’s external balance and fiscal revenues. Recent reports indicate that increased Venezuelan Oil exports to the United States could heighten competition for North American heavy crude, which is a key component of Canada’s export mix. Such developments risk constraining Canada’s energy revenues and limiting the Loonie’s appeal relative to the U.S. Dollar.

Domestically, Canada’s labor market also reflects an uneven recovery. RBC Economics noted that modest job gains paired with a higher Unemployment Rate signal a gradual yet choppy improvement in economic conditions. These findings align with the Bank of Canada’s (BoC) wait-and-see stance on interest rates, offering little immediate support for the Canadian Dollar. Analysts suggest that unless Oil prices stabilize or domestic economic momentum improves, the Loonie may remain on the defensive against a relatively stronger U.S. Dollar.

From a technical perspective, USD/CAD has breached a key resistance level at 1.3865, supported by a dynamic upward trend above the 50-day exponential moving average (EMA50). Short-term momentum remains bullish, with the pair trading along a supportive trend line while relative strength indicators show that previous overbought conditions have eased, entering exaggerated oversold territory relative to the price action. This technical configuration suggests a potential near-term rebound, reinforcing the likelihood of continued gains for the pair in the coming sessions.

BUY USDCAD

ENTRY PRICE: 1.3890

STOP LOSS: 1.3780

TAKE PROFIT: 1.4000

The Australian Dollar (AUD) continued to face selling pressure on Friday, marking its third consecutive day of losses against the US Dollar (USD). During the late European trading session, the AUD/USD pair slipped to 0.6676, reflecting a market increasingly cautious ahead of the United States’ December Nonfarm Payrolls (NFP) report, scheduled for release at 13:30 GMT.

The US Dollar has demonstrated notable resilience in recent sessions, with the US Dollar Index (DXY)—which tracks the Greenback against six major currencies—hovering around 99.10, the highest level in roughly four weeks. Market participants are positioning ahead of the NFP data, which will provide fresh insights into the Federal Reserve’s (Fed) policy trajectory. Recent commentary from Fed officials has underscored a heightened sensitivity to the labor market, with policymakers expressing concern that weakening employment conditions may outweigh inflation risks, even as consumer prices remain above the central bank’s 2% target.

Economists forecast that US employers added 60,000 new jobs in December, slightly below November’s 64,000. The unemployment rate is expected to have fallen to 4.5% from 4.6%, signaling a modest tightening of the labor market. Meanwhile, Average Hourly Earnings—a key gauge of wage inflation—is anticipated to have accelerated to 3.6% on an annualized basis, up from 3.5% in November, with month-on-month growth projected at 0.3%, compared with the previous reading of 0.1%. Should these figures surprise to the upside, the USD may see additional support, reinforcing the AUD/USD’s downtrend.

Compounding the Greenback’s strength is the softening outlook for the Australian Dollar. The antipodean currency has come under pressure following November’s Consumer Price Index (CPI) report, which revealed a year-on-year inflation reading of 3.4%, below the 3.7% forecast and down from October’s 3.8%. This weaker-than-expected inflation print has prompted investors to scale back expectations for Reserve Bank of Australia (RBA) hawkishness at the February policy meeting. According to Reuters, the probability of a rate hike by the RBA in February now stands at just 24%, underscoring diminished confidence in further tightening.

From a technical perspective, the AUD/USD’s recent decline represents a decisive bearish breakout below the lower boundary of its ascending channel, signaling a potential shift in market sentiment. The bullish impulse that commenced on 5 January, previously marked by a short-term upward trend, has been fully neutralized by the current selling wave. Price action now suggests that sellers are firmly in control, and any attempt by bulls to push the pair back into the channel may encounter resistance around 0.6720, the level from which the sharp sell-off began on 8 January.

This technical configuration highlights the dominance of bearish momentum, with key support levels near 0.6660 and 0.6640 likely to be tested if selling pressure persists. Traders may also watch closely for a reaction to the US NFP report, which has the potential to either reinforce the USD’s strength or provide temporary relief for the AUD.

SELL AUDUSD

ENTRY PRICE: 0.6680

STOP LOSS: 0.6720

TAKE PROFIT: 0.6640

The euro remained under pressure against the US dollar on Friday, extending its decline for a seventh consecutive trading session as investors digested a mixed set of US labor-market figures that ultimately favored the greenback. The EUR/USD pair was trading near 1.1638 at the time of writing, struggling to stabilize as the dollar retained broad-based support amid resilient US macro fundamentals and persistent policy divergence expectations.

Figures released by the US Bureau of Labor Statistics offered a nuanced snapshot of labor-market conditions. Nonfarm Payrolls increased by 50,000 in December, undershooting market expectations for a 60,000 rise and marking a slowdown from November’s 64,000 gain. While the headline job creation number pointed to a cooling pace of hiring, it stopped short of signaling any abrupt deterioration in employment conditions.

More supportive for the dollar was the unexpected improvement in the Unemployment Rate, which fell to 4.4% from 4.6%, beating forecasts that had penciled in a modest decline to 4.5%. The lower jobless rate suggests that labor demand remains firm enough to absorb slower hiring, reinforcing the view that the US economy is decelerating gradually rather than slipping into a pronounced downturn.

Wage data added another layer of complexity to the report. Average Hourly Earnings rose 0.3% month-on-month in December, in line with expectations and a notable pickup from November’s 0.1% increase. On an annual basis, wage growth accelerated to 3.8% from 3.6%, exceeding market forecasts. This acceleration in pay growth continues to underscore the stickiness of labor-related inflation pressures, an issue that remains central to the Federal Reserve’s policy calculus.

Taken as a whole, the employment report sent mixed but not alarming signals. Softer payroll growth contrasted with a tighter unemployment rate and firmer wage momentum, pointing to a labor market that is cooling at the margins while remaining fundamentally resilient. For currency markets, this balance has been sufficient to keep the dollar underpinned, particularly against a euro that lacks near-term supportive catalysts.

From a monetary policy perspective, the data reinforced expectations that the Federal Reserve will maintain a cautious stance. Markets remain confident that policymakers will leave interest rates unchanged at the January 27–28 FOMC meeting, while continuing to emphasize a data-dependent approach toward any rate cuts later in the year. Importantly, the combination of slower hiring and rising wages gives the Fed room to stay patient, avoiding premature easing that could reignite inflation pressures.

By contrast, the euro continues to be weighed down by uncertainty surrounding the Eurozone growth outlook and the European Central Bank’s likely policy trajectory. With inflation in the bloc easing more convincingly and growth indicators remaining fragile, investors increasingly expect the ECB to move toward rate cuts earlier than the Fed. This widening policy divergence has been a persistent headwind for the single currency and remains a key driver behind EUR/USD’s extended decline.

Attention now turns to the University of Michigan’s preliminary January Consumer Sentiment survey, which could provide fresh insight into US household confidence and inflation expectations. In addition, remarks from Richmond Fed President Thomas Barkin and Minneapolis Fed President Neel Kashkari will be closely watched for clues on how comfortable policymakers are with the current disinflation trend and whether wage growth is becoming a renewed concern. Any indication of lingering hawkishness could further reinforce the dollar’s advantage.

From a technical standpoint, the outlook for EUR/USD remains decisively bearish despite early signs of short-term exhaustion. The pair continues to trade below its 50-period exponential moving average, highlighting persistent negative momentum on an intraday basis. Price action remains confined within a downward-sloping channel, confirming that the broader move is corrective in nature but still firmly biased to the downside.

Momentum indicators, including relative strength measures, are stabilizing near oversold territory, suggesting that selling pressure may temporarily ease. However, such signals typically point to consolidation or shallow rebounds rather than a meaningful trend reversal. As long as the pair fails to reclaim the upper boundary of its descending channel, any recovery is likely to be corrective and vulnerable to renewed selling interest.

In practical terms, downside risks remain skewed toward a continued grind lower, with price action still gravitating toward lower liquidity zones within the prevailing structure. Bounces that lack follow-through and fail to attract sustained buying interest are likely to be viewed by market participants as opportunities to re-establish short positions rather than evidence of a shift in trend.

SELL EURUSD

ENTRY PRICE: 1.1625

STOP LOSS: 1.1670

TAKE PROFIT: 1.1540