• DXY remains under pressure, testing 107.35 support despite upbeat ADP and S&P Global PMI data.
• ISM Services PMI disappoints, signaling weaker than expected service sector growth and moderating price pressures.
• US 10-year yield rebounds, hovering around 4.40% after touching a yearly low.

The US Dollar Index (DXY), which measures the USD against a basket of currencies, struggled to recover losses on Wednesday and declined against most major peers. Despite stronger than expected ADP Employment and S&P Global PMI data, the ISM Services PMI fell short of forecasts, casting doubt on the strength of the US economy.

The Fed Sentiment Index, which previously sat at 130.00, has cooled off, signaling a less hawkish tone from policymakers. As a result, traders are reassessing the Federal Reserve’s (Fed) rate path, contributing to the DXY’s weak price action around 107.35 support.

Daily digest market movers: US Dollar struggles as mixed data weighs on sentiment

• ADP Employment Report showed that private sector employment jumped by 183,000 in January, exceeding the 150,000 forecast. Consumer-facing industries drove job creation, while manufacturing saw weaker gains.
• S&P Global PMI data revealed that the final readings for January saw minor upward revisions with the Services PMI at 52.9 (vs. 52.8 expected) and the Composite PMI at 52.7 (vs. 52.4 prior).
• ISM Services PMI: Disappointed at 52.8, missing the expected 54.3, while the Prices Paid index eased to 60.4 from 64.4, indicating softer inflationary pressures.
• All eyes are now on Friday Nonfarm Payrolls for January, which is seen printing a weak result that might add more weakness to the USD.

DXY technical outlook: Bears eye 107.00 support

The DXY’s momentum indicators reflect a shift toward bearish traction. The Fed Sentiment Index cooling off from 130.00 aligns with weaker ISM data, weighing on the USD.

The Relative Strength Index (RSI) has dropped below 50, while the index has fallen beneath the 20-day Simple Moving Average (SMA) at 108.50. If downside pressure persists, the next key level to watch is the psychological support at 107.00.

• The Canadian Dollar added a thin 0.5% as the Greenback drifts lower.
• Upbeat US employment data is sending risk appetite higher.
• Meaningful Canadian data remains limited until Friday.

The Canadian Dollar (CAD) tested higher against the Greenback on Wednesday, chalking in a scant one-fifth of one percent gain following the early week’s sharp recovery from multi-decade lows. Us data dominated market headlines during the midweek market session, and a general improvement in trader risk appetite is stepping down on the US Dollar, giving the Loonie a leg up.

Economic data from Canada is strictly low-tier until Friday’s labor print. US Purchasing Managers Index (PMI) figures missed the market on Wednesday, but the key reading for US data came from ADP jobs change data, which showed a potential upswing in US net job gains. Traders are keeping a close eye on employment preview numbers in the run-up to Friday’s Nonfarm Payrolls (NFP) report.

Daily digest market movers: Canadian Dollar gains ground on sentiment uptick

• The Canadian Dollar gained a few points on easing Greenback flows.
• Canadian Trade Balance numbers for December rebounded, but less than expected. Markets overwhelmingly overlooked the data print.
• US ISM Services PMI survey results from January softened to 52.8 from a revised 54.0, missing the forecast 54.3.
• US ADP Employment Change swung higher to 183K, stepping over the previous revised 176K and beating the 150K forecast.
• Canadian labor figures are due on Friday, but market attention will be fully focused on US NFP jobs figures due at the same time.

Canadian Dollar price forecast

The Canadian Dollar (CAD) managed to eke out thin gains on Wednesday, dragging USD/CAD back down to the 50-day Exponential Moving Average (EMA) near the 1.4300 handle. Loonie traders remain aware that any gains on the CAD side are coming from generalized weakness in USD flows, but gains are gains and the Loonie has recovered solidly from 21-year lows set earlier this week.

The downside of the CAD’s rebound is USD/CAD is once again back into a congestion range as the pair grinds through a volatile but immovable sideways channel. Momentum is unlikely to meaningful break through the bottom near 1.4000, and the technical ceiling remains in place near 1.4500, albeit with some new holes.

USD/CAD daily chart

Here is what you need to know on Thursday, February 6:

The US Dollar Index (DXY) dropped for the third day in a row, extending the breakdown of the 108.00 support helped by lower yields across the board and intense risk-on mood. The usual Initial Jobless Claims are due, along with Challenger Job Cuts, and advanced Unit Labor Costs. In addition, the Fed’s Jefferson, Waller, and Daly are all due to speak.

EUR/USD rose to three-day peaks and looked to consolidate the recent breakout of the 1.0400 barrier. The HCOB Construction PMI is due in the euro area and Germany, seconded by Factory Orders in Germany, and Retail Sales in the bloc. Additionally, the ECB’s Nagel is expected to speak.

Another solid day saw GBP/USD advance to three-week highs past the 1.2500 hurdle in response to further weakness hurting the US Dollar. The BoE gathering will take centre stage, seconded by the S&P Global Construction PMI and the speech by Governor Bailey.

USD/JPY weakened further and put the 200-day SMA to the test near the 152.50 zone amid extra appreciation of the Japanese yen. The weekly Foreign Bond Investment figures will be published, will the BoJ’s Tamura will also speak.

AUD/USD climbed to multi-day highs, extending its weekly rebound to the boundaries of the key 0.6300 barrier. The Balance of Trade results for the month of December will be in the spotlight Down Under.

Prices of WTI resumed their downtrend, rapidly leaving behind Tuesday’s uptick and refocusing on the key $70.00 mark per barrel amid tariffs uncertainty.

Prices of Gold rose to an all-time peak near $2,880 per ounce troy on the back of safe haven demand and further selling pressure in the Greenback. Silver prices retreated marginally soon after hitting three-month highs around $32.50 per ounce.

• Aussie nears 0.6300 amid cautious optimism on Wednesday.
• Investors eye possible February rate cut from RBA.
• Mid-tier US data came in mixed and weighed on the USD.

The Australian Dollar (AUD/USD) edges toward 0.6300, buoyed by mixed United States data that softened the Greenback and lifted broader risk assets. Nonetheless, anticipation of a dovish Reserve Bank of Australia (RBA) move next month tempers upside potential. Ongoing US-China trade tensions further cloud the outlook, restraining a more decisive rally in the Aussie.

Daily digest market movers: Aussie climbs amid mixed US data

• President Donald Trump’s additional tariff on Chinese imports remains in effect, prompting China’s plan for new countermeasures and an antitrust investigation into Alphabet.
• The United States has postponed a 25% duty on Canadian and Mexican imports for 30 days, contingent on border security commitments.
• The ADP Employment Change report surprised with 183,000 new private-sector jobs, surpassing market estimates of 150,000.
• Revised data from S&P Global show January Services at 52.9 and Composite at 52.7, both up from previous figures.
• The Institute for Supply Management’s Services PMI declined to 52.8, missing the 54.3 forecast, while the Prices Paid component dropped to 60.4.
• Markets are expecting that the Federal Reserve might hold rates steady in March, especially after mixed economic signals.
• On the other hand, speculation of a 25 bps cut by the RBA in February weighs on the Aussie since inflation remains subdued.

AUD/USD technical outlook: Pair flirts with key resistance near 0.6300

The pair’s advance above the 20-day Simple Moving Average (SMA) around 0.6230 highlights recovering momentum, with the Aussie rising 0.67% to near 0.6300. The Relative Strength Index (RSI) stands at 58, hinting at growing bullish pressure, while the Moving Average Convergence Divergence (MACD) histogram’s decreasing green bars suggest lingering caution. Although improved risk sentiment encourages short-term gains, market bets on a February RBA rate cut and persistent trade disputes could cap upside potential.

• NZD/USD advances nearly 0.70% on Wednesday, climbing to 0.5685.
• The pair maintains its position above the 20-day SMA, reinforcing bullish momentum.
• Bulls must conquer the 0.5700 area to confirm a recovery.

The NZD/USD pair extended its winning streak on Wednesday, posting a 0.67% gain to reach 0.5685. This upward move follows a breakout above the 20-day Simple Moving Average (SMA), which now acts as a key support level. The bullish sentiment appears to be strengthening, with the pair eyeing further gains toward the 0.5700 psychological threshold.

Technical indicators confirm the ongoing bullish trend. The Relative Strength Index (RSI) has surged to 58, indicating growing buying pressure, while the Moving Average Convergence Divergence (MACD) histogram continues to print rising green bars, reflecting a steady acceleration in momentum.

Looking ahead, NZD/USD faces an initial resistance zone at 0.5700, with a further upside target at 0.5735. On the downside, the 20-day SMA, currently near 0.5635, should act as the first line of support, followed by 0.5600 if a correction takes place. As long as the pair holds above the 20-day SMA, the short-term outlook remains in favor of the bulls.

NZD/USD daily chart

• USD/JPY sinks 1.13%, falling sharply to 152.59 as it moves decisively below the 200-day SMA and Kumo.
• Potential recovery hinges on reclaiming the 153.00 level, with resistance near the Kumo’s lower edge at 153.35/40.
• Continued downtrend could target longer-term supports at December lows of 149.36 and 148.65.

The USD/JPY plummeted 175 pips on Wednesday, posting losses of over 1.13% as the pair cleared the Ichimoku Cloud (Kumo). This cements the pair’s downtrend, with the Japanese Yen (JPY) set to appreciate in the short term. At the time of writing, the pair trades at 152.59.

USD/JPY Price Forecast: Technical outlook

Bears stepped in on Wednesday, pushing the USD/JPY below the Kumo and breaching the 200-day Simple Moving Average (SMA) at 152.80. This has opened the door for further downside.

Despite this, a leg-up is on the cards, if buyers clear the 153.00 figure, which could pave the way to test the bottom of the Kumo at 153.35/40, offering sellers a better entry price. However, if it surpassed, the next resistance would be the 154.00 mark, followed by the February 5 high at 154.46.

If the downtrend continues, the USD/JPY first support would be the December 6 low of 149.36, followed by the December 3 low of 148.65.

USD/JPY Price Chart – Daily

• USD/CAD trades with mild negative bias around 1.4315 in Wednesday’s late Amercian session. 
• Canada posts its first trade surplus in 10 months in December as exports continue to expand. 
• US ISM Services PMI eased to 52.8 in January vs. 54.3 expected. 

The USD/CAD pair posts modest losses near 1.4315 during the late American session on Wednesday. The Canadian Dollar (CAD) edges higher as Canada’s trade balance shifted into surplus and US President Donald Trump delayed his orders to impose 25% tariffs on Canada for 30 days.

Canada in December reported its first trade surplus in ten months, with exports outpacing imports due to US businesses building up inventory ahead of potential tariffs, supporting the Loonie. Additionally, US tariffs provided relief from the looming trade war threat. Trump on Monday agreed to a 30-day pause on his tariff threats against Mexico and Canada as trading partners took steps to appease his concerns about border security and drug trafficking.

“Tariff worries are easing – for now, at least – which is allowing the CAD to stabilize,” said Shaun Osborne, chief currency strategist at Scotiabank. “Unless trade talks deteriorate significantly again, there is a chance that the USD-CAD peak reached Monday near 1.48 will represent a significant high-water mark for spot,” added Osborne.

Data released by the Institute for Supply Management (ISM) on Wednesday showed that the US Services Purchasing Managers’ Index (PMI) declined to 52.8 in January from 54.0 (revised from 54.1) in December. This reading came in weaker than the estimation of 54.3.

The US Dollar (USD) weakens in an immediate reaction to the downbeat US economic data. The US labor market data on Friday will be in the spotlight. In case of the stronger-than-expected outcome, this could boost the Greenback against the CAD in the near term.

“China has requested WTO dispute consultations with the United States in regard to new tariff measures applied by the United States on goods originating in China,” the organization noted in a statement.

The Trump administration’s new 10% tariffs on all Chinese imports took effect on Tuesday. China reacted by imposing 15% tariffs on imports of liquefied natural gas (LNG) and coal from the United States.

Market reaction

At the press time, AUD/USD is down 0.05% on the day to trade at 0.6283.

• GBP/USD explored the high side on Wednesday but with little momentum.
• The pair remains constrained by key technical averages.
• BoE rate call due on Thursday, US NFP slated for Friday.

GBP/USD found some bidding action amid a broad-market easing in the Greenback. Market sentiment is drifting into the high end as investors recover from the early week’s trade war fears, and Cable traders are buckling down for the wait to the Bank of England’s (BoE) latest rate call.

US ADP Employment Change figures came in stronger than expected in January, showing a net increase of 183K in payrolls, beating the expected fall to 150K from December’s revised print of 176K. ADP job figures are a shaky forecast of US Nonfarm Payrolls (NFP) due at the end of the week, but the upswing is adding to investor confidence that the US economy remains on firm footing.

The BoE is widely expected to cut interest rates by 25 bps on Thursday. Median market forecasts expect the BoE’s Monetary Policy Committee (MPC) to vote eight-to-one to reduce interest rates to 4.5% from 4.75%, with the lone holdout expected to vote to keep interest rates steady for another meeting.

The key data print this week will be US NFP jobs additions on Friday. Investors expect January’s NFP print to ease to 170K from December’s print of 256K. Traders will also be keeping a close eye on revisions to previous months. Market participants hoping for rate cuts have been increasingly frustrated by the latent strength of the US economy, with labor figures routinely getting revised higher after the fact.

GBP/USD price forecast

Cable sprung higher on Wednesday, tapping a fresh three-week high of 1.2550, but price action was squeezed back to the middle. GBP/USD is getting hung up on the 50-day Exponential Moving Average (EMA) near the 1.2500 handle.

GBP/USD daily chart