GBP traders focus on employment data

We make a start with the European session and the pound. In the pound’s fundamentals we must note that the crisis for Boris Johnson seems to be deepening, given that headlines still reel in regarding parties that took place in government buildings and Johnson attended them. The political uncertainty could weigh on the pound as it could lead to the resignation of PM Johnson.

On the monetary policy front, market expectations for a 25-basis rate hike in BoE’s February meeting are still present, and such hawkish expectations could support the pound. As for financial releases we note the release of UK’s employment data today. Novembers’ unemployment rate is forecasted to remain unchanged and if so, could provide some bearish tendencies for the pound as UK’s unemployment rate seems to fail to contract further. Also, the unemployment change figure is expected to drop and could thus intensify the bearish tendencies.

Also, the average earnings growth rate is expected to slowdown and if so, could also have a negative effect on the pound as such a deceleration could have an adverse effect on the consuming side of the UK economy as well as on inflationary pressures. GBP/USD is dropping as it aims for the 1.3600 (S1) support line. As the pair is dropping it seems about to break the upward trendline guiding it since the 22^nd of December.

Should cable actually break the prementioned upward trendline, we would switch our bullish outlook for a sideways movement bias initially and until the pair decides on the direction of its next leg. Should the bears take over we may see the pair breaking the 1.3600 (S1) support line and aim for the 1.3430 (S2) level. Should the bulls regain control over GBP/USD’s direction, we may see the pair reversing course, aiming if not breaking the 1.3720 (R1) line.

Canada’s CPI rates eyed by Loonie traders

Last but not least we would also note Canada’s CPI rates for December. Market expectations for a tighter supply of oil, given also the recent tensions in the Middle East, may have provided some support for the commodity, and oil prices seem to remain in an uptrend. Oil traders could be keeping an eye out for today’s API weekly crude oil inventories figure and should last week’s reported drawdown widen we may see oil prices getting some support.

The Loonie could get some support from rising oil prices, yet we must note that today’s main release for CAD traders is expected to be Canadas’ December CPI rates. Should the rates accelerate, we may see the CAD gaining as such an acceleration cold provide confidence for BoC to maintain a hawkish stance. USD/CAD seems to have found some support on the 1.2495 (S1) support line during today’s Asian session. For our bias in favour of a sideways bias to shift towards a bearish outlook we would require a clear breaking of the prementioned support line and the pair to record a string of lower lows and lower highs.

Should a selling interest be actually displayed by the market we may see it breaking the 1.2495 (S1) support line and aim for the 1.2410 (S2) support level. On the flip side should buyers take over, we may see the pair aiming if not breaking the 1.2585 (R1) resistance line.

Other highlights for today and early tomorrow

For EUR traders we note the release of Germany’s ZEW indicators for January. Fundamentally, the Ukraine crisis is high on the agenda of EUR traders, as does the future of Nord Stream 2, while coronavirus worries also remain high. ECB’s accommodative policy is continued and on the monetary front, given the market’s hawkish expectations for the Fed, could weigh on the common currency against the USD.

As for financial releases, we note the release of Germany’s January ZEW indicators. The local current conditions seem to deteriorate, as the forecast for the relevant indicator is to drop, yet on the other hand the outlook for the German economy seems to improve as the economic sentiment is expected to rise.

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