Market Focus: Key Inflation Data and Fed Policy Signals

The January employment report, published last Friday, was met with a lukewarm reaction from market participants. The number of new jobs in the US for January fell short of expectations (143K vs 169K). On the positive side, the unemployment rate declined (4.0% vs 4.1%), and the average wage growth indicator increased (0.4% vs 0.3%). Major currency pairs tested recent highs following the release of NonFarm Payrolls but failed to break out of their medium-term range-bound movements. Today, market attention is on US inflation data and Jerome Powell’s speech. The Fed Chair may provide further insights into the regulator’s monetary policy, which could, in turn, drive increased volatility in key currency pairs.

USD/JPY

At the end of last week, a "doji" candlestick pattern formed in the USD/JPY pair, which could indicate the start of an upward correction. A technical analysis of USD/JPY suggests a possible test of the key range at 154.50–154.20. If buyers manage to push above 154.50, a medium-term uptrend could resume, with a potential retest of the January highs at 158.00. A rebound from 154.20, or from current levels, may lead to another test of 152.40–152.00.

In the upcoming trading sessions, the following events may influence USD/JPY price movements:

• Today at 16:30 (GMT+2): US Consumer Price Index (CPI)
• Today at 18:00 (GMT+2): Speech by Federal Reserve Chair Jerome Powell
• Today at 22:00 (GMT+2): US Federal Budget Report

USD/CAD

Despite a strong bearish formation on 3 February, USD/CAD sellers failed to break the six-week support level at 1.4260. Volatility in the pair remains extremely low. Depending on upcoming news-driven momentum, a breakout of the 1.4380 resistance level or a breakdown below 1.4260 could occur.

The following events may be crucial for USD/CAD:

• Today at 15:00 (GMT+2): OPEC Monthly Report
• Today at 18:30 (GMT+2): US Crude Oil Inventories
• Today at 21:30 (GMT+2): Bank of Canada Meeting Summary

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