There's a light week ahead as far as economic events go that will begin with a holiday in the US - Martin Luther King Day. The main events traders will watch for will be the BOJ press conference and inflation data in the UK and Canada. We'll probably not hear anything significant from the Fed, as their blackout period will start soon.

There is also a political scandal in the UK surrounding Boris Johnson but it’s not clear what impact this will have on the GBP, if any. In the Euro Area there were a lot of discussions about the possibility of ECB rising rates in December, but the bank made it clear it won’t raise rates this year. Of course, surprises can happen, but analysts think it's not likely, at least in 2022.

Many analysts are watching if inflation will run hot in Japan, as it does in the rest of the world. The Bank of Japan will hold a press conference next week and, according to unnamed sources speaking to Reuters, the Bank is debating when it could start signalling an interest rate hike. Inflation will likely exceed the 2% target soon, which the bank has been working towards for a long time, being fuelled by broadening price rises and a more hawkish Federal Reserve outlook. While analysts expect the BOJ to maintain its current ultra-ease policy for the rest of the year, Reuters sources pointed out that the Bank never actually committed to keep the rate on hold until inflation hits 2%.

EUR/USD expectations

There are some reasons for the EUR to depreciate further in the medium term. The European gas prices have fallen recently due to rising weather temperatures in Europe and LNG supplies from the US that meet the current demand. However, if the weather conditions revert and gas demand rises again the Euro can lose some strength.

The EUR managed to appreciate against the US dollar recently, but this was due to the USD weakening. Another reason that could impact the euro and lead to depreciation in the future is political instability in Italy. General elections in the country are expected next year and this could weigh on the EUR, even though in the short-term EUR/USD looks bullish.

EUR/USD didn’t manage to break the 1.1450 resistance yesterday and entered a period of consolidation, which will probably last until next week unless something significant happens

The pair also looks overbought, so a correction is expected until EUR strengthens. On the H4 chart the next support is at 1.1340 and if rejected EUR/USD could appreciate further. The next resistance is 1.1540.


USD/CAD expectations

Seasonal trends suggest that the best months against the US dollar for the CAD are February and April when it usually outperforms.

From a fundamental viewpoint, the Canadian data for the labour market looks good. The US dollar's weakness and the steady crude prices favoured the CAD over the past few days. The BOC is expected to raise rates in March, with analysts from Scotiabank looking for relatively more tightening from the Bank through 2023.

On the H4 chart, from a technical perspective, the USD/CAD looks good for selling opportunities. The next resistance is 1.2600, which if rejected, could resume its downtrend and test the support at 1.2415.


GBP/CHF expectations

The CHF outperformed GBP this week. The SNB's monetary policy is still negative and is expected to remain so for the time being. The CHF will continue to act as a safe haven and tends to appreciate when the situation in Europe is not good.

GBP/CHF traded sideways today and it’s near the 1.2485 support. If breached the next support is at 1.2450. On the upside the next resistance is at 1.2550.


Article written by Gina Constantin