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The U.S dollar continues to sink lower against the Japanese yen currency, with price-action trading as low as 108.80 during early Thursday trading. The USDJPY pairs fast decline is largely due to the depreciating value of the greenback, with the U.S dollar index now trading around the 88.80 level, marking downside levels not seen in well over three-years. Traders will now turn their attention to key levels on the U.S dollar index, U.S Trade Balance Figures and the release of the Bank of Japan Meeting Minutes later this evening.

The USDJPY pair is further bearish while trading below the 108.98 technical level, further selling towards 108.60 and 107.32 seems likely.

If USDJPY buyers can push price-action back above the 108.98 level, a relief-rally towards 109.58 and 110.00 may occur.

On Wednesday, Weiss Ratings released its first ratings of cryptocurrencies.

In their ratings, the analysts at Weiss looked at four key elements for all currencies they analyzed. They looked at the cryptocurrency risk index, the reward index, the technology index, and the fundamental index.

The risk index dealt with the fluctuations of the price over a period while the reward index compared the price movements against the moving average, benchmarks, and smoothed returns.

The technology index looked at the underlying technology and other details like energy efficiency, governance capabilities, and scaling.

Finally, the fundamental index looked at several factors including the acceptance by the public, participation by the developers, and the transaction speed.

In yesterday's ratings, ethereum received a B while bitcoin and ripple received a C+. In their ratings, a B stands for good while a C stands for fair.

The ratings helped push ethereum up by 13% to the current price of $1094.

As shown below, ETH/USD established a floor on Tuesday when its price fell to $906.88. It then started moving upwards, establishing lower highs and higher highs at significant Fibonacci retracement levels. The next levels traders should now pay close attention to are $1104 and $1158, which form ideal support and resistance areas.

Economic data and monetary policy headline an active release schedule on Thursday, culminating in a high-profile interest rate decision by the European Central Bank (ECB).

Action begins at 07:00 with a report on German consumer confidence courtesy of the GfK institute. Two hours later, the CESifo Group will report on German business conditions for the month of January. The business climate, current assessment and expectations indicators are forecast to hold relatively steady.

Elsewhere in Europe, the Italian government will report on trade and industrial production for the month of November. The reports will be released at 09:00 GMT.

In monetary policy, the ECB will issue its interest rate decision at 12:45 GMT. Although no change in monetary policy is expected, the central bank could provide clues about the direction of quantitative easing later this year. Policymakers have already committed to scaling back on monthly bond purchases, but are keeping their options open in the event that the economy doesn't perform up to par. Until now, that hasn't been a concern as the Eurozone recovery deepens.

Shifting gears to North America, the US government will release the latest trade and jobless claims numbers at 13:30 GMT. Later in the morning, the Department of Commerce will report on new home sales for the month of December. The Kansas Federal Reserve Bank will also issue the manufacturing activity survey at 16:00 GMT.

North of the border, the Canadian government will report on retail sales at 13:30 GMT. Receipts at retail stores are forecast to rise 0.7% in November after surging 1.5% the month before.

In currency news, the US dollar is trading at its lowest level in three years, as concerns over trade policy continue to weigh. The US dollar index (DXY) fell below 90.00 on Wednesday for the first time since late 2015.

USD/CAD

The Canadian dollar benefited from a slumping greenback on Wednesday, with the USD/CAD bottoming out near 1.2300. The pair was last seen trading at 1.2319, having declined 0.2% from the previous close. The pair remains in a firm downtrend, which could expose last September's lows near 1.2200.

EUR/USD

The euro set another multi-year high against the dollar Wednesday, as the EUR/USD spiked above 1.2400 for the first time since 2014. The pair was last seen trading at 1.2420, with the bulls eyeing the 1.2500 level. On the downside, immediate support is located around 1.2350.

GBP/USD

Cable's momentous rally continued on Wednesday, as the GBP/USD approached 1.4300 for the first time since Brexit. The pair is well supported near 1.4100, with the bulls likely to make another run higher amid the dollar's perpetual slump. Investors should keep a close eye on upcoming US data, as this could influence the performance of dollar pairs.

Here are the latest developments in global markets:

FOREX: The dollar index traded marginally lower on Thursday, extending the significant losses it posted on Wednesday. Meanwhile, the British pound skyrocketed, supported by strong jobs data and increasing optimism that Britain can secure a favorable Brexit deal.

STOCKS: Asian markets were mostly in the red. Japan’s Nikkei 225 and Topix indices fell 1.1% and 0.9% respectively, weighed on by the risk of an escalation in US-China trade tensions and a stronger JPY, which negatively affects Japanese exporting firms. In Hong Kong, the Hang Seng corrected lower by 0.8%, while in Europe, futures tracking the Euro stoxx 50 suggest the index could open slightly lower. Over in the US, the S&P 500 and Nasdaq composite closed in negative territory. Nonetheless, the Dow Jones managed to end the day slightly higher. Futures tracking the Dow, S&P and Nasdaq 100 are all currently in the red, albeit marginally.

COMMODITIES: Oil prices shot through the roof yesterday, and moved even higher today, with WTI and Brent crude trading 0.8% and 0.5% higher respectively during the Asian trading session Thursday, reaching fresh multi-year highs. The advance came after the weekly EIA inventory data showed a drawdown in US crude stockpiles for the tenth straight week. The broad USD weakness probably helped the move too, as a softer greenback makes the dollar-denominated oil appear more attractive for foreign buyers. In precious metals, gold is 0.2% higher, extending the gains it posted yesterday, also buoyed by the softer dollar.

Major movers: Cable touches 1.43; Mnuchin talks down the dollar

Sterling bulls were an unstoppable force yesterday. Sterling/dollar skyrocketed to briefly break above the 1.4300 zone, before pulling back a little during the early European morning Thursday. The move began after the publication of stronger-than-anticipated UK employment data for November, and was exacerbated by the dollar’s weakness throughout the day. Some optimistic comments from Brexit minister David Davis that he expects a transitional Brexit deal before the end of March may have played a role as well. The Brexit risk premium on the pound seems to have declined substantially, and although that may be a little premature considering the absence of major developments in the negotiations, momentum is clearly in favor of the GBP at the moment.

The collapse of the US dollar continued yesterday, with the dollar index reaching a fresh multi-year low at 89.10. The catalyst for the selloff were some comments from US Treasury Secretary Steven Mnuchin. Speaking at the World Economic Forum in Davos, he talked down the currency by indicating that “a weaker dollar is good for us”. Coming on top of concerns around protectionism and the risk of a trade war with China, Mnuchin’s comments likely gave traders another reason to trim their long-dollar positions.

Euro/dollar surged on the back of the dollar’s weakness, breaking above the 1.2400 zone. Today, investors turn their attention to the ECB policy meeting, where there is a risk that President Draghi echoes recent remarks from his colleagues and expresses discomfort with the recent strength of the euro, triggering a correction lower. However, even in that case, any dip in euro/dollar could remain relatively short-lived, considering the increasing pessimism around the dollar. For the pair to stay down, Draghi & Co may need to deliver something more than simply talking down the currency.

Elsewhere, the NZD plunged overnight before recovering somewhat, after New Zealand’s inflation surprisingly slowed in the fourth quarter. The CPI rate came 1.6% in yearly terms, notably below the forecast for staying unchanged at 1.9%. The disappointment likely scaled back expectations regarding the prospect of a rate hike from the RBNZ this year.

Day ahead: ECB decides on monetary policy; Japanese inflation pending in Asia session

Thursday will be a relatively busy day for FX markets as several economies are expected to release economic figures, while eyes will be mainly focused in the Eurozone where the ECB will meet to decide on monetary policy.

At 1245 GMT, ECB policymakers are widely expected to keep interest rates unchanged at 0.0%. However, what could shake the euro is the press conference following the meeting at 1330 GMT where investors will be eager to hear any comments on the central bank’s quantitative easing program and its appetite to make future changes on the plan. In addition, views on the strengthening euro are also anticipated to attract attention.

Earlier, Norway’s central bank, the Norges Bank, is also projected to maintain rates at record lows of 0.5%. Still, this is likely to bring moderate volatility to the Norwegian Krona as in the previous meeting, policymakers signaled that a rate hike is likely to come only in December.

Out of Europe, monthly retail sales in Canada – due at 1330 – are said to slow down in November, growing by 0.8% compared to a rise of 1.5% seen in the previous month, while excluding automobiles the measure is forecasted to grow at October’s pace of 0.8%. Meanwhile, in the US, initial jobless claims are seen slightly higher at 240,000 in the week ending January 19, though, data on the US new home sales available at 1500 GMT might be of greater importance to the dollar. Particularly, forecasts are for a large decline of -7.9% m/m in December after the gauge posted the biggest expansion rate since 2013, jumping by 17.5% m/m in November.

Late in the day, Japan will report on inflation for the month of December at 2330 GMT, with the potential to extend or reverse the yen’s recent rally if the results deviate far from the forecasts. According to Reuters forecasts, the core CPI which is closely watched by the BoJ is projected to remain flat at 0.9% y/y.

In stock markets, Caterpillar, 3M Company and Union Pacific Corporation are among companies to report on quarterly earnings prior to the US market Open.

Technical analysis – EURGBP close to oversold levels; bearish in short-term

EURGBP holds a bearish bias in the short-term as prices are currently trading below the Ichimoku cloud and the simple moving average lines (SMA). However, momentum indicators suggest that the market might be oversold, hinting that a trend reversal might emerge in the near-term. The RSI is slightly above 30 and Stochastics are already well below 20 but both indicators have flattened out, meaning that the market might keep consolidating before a potential trend reversal occurs.

Should prices head down, immediate support is likely to come from the 0.8600 key level, exiting the medium-term neutral phase. Steeper declines would also target the area between 0.8400-0.8500.

On the flip side, if the pair moves higher, resistance might come first from the 0.8700 handle before the market finds a stronger barrier between the Tenkan sen (0.8800) line and the 50-day SMA (0.8844).

The Euro remains firm on Thursday and hit new high at 1.2459, the highest since mid-Dec 2014, in extension of strong rally on Wednesday when the single currency surged on significantly weaker dollar.

The greenback fell sharply across the board on Wednesday after US Treasury secretary Steven Mnuchin welcomed weaker US currency on his speech at World Economic Forum in Davos.

This could be seen as continuation of the general monetary policy of Trump’s administration which favored weaker dollar even from the presidential campaign, signaling shift from the traditional policy which was adopted in late 1990’s.

The Euro rallied strongly against US dollar on Wednesday and broke two round-figure barriers (1.2300 and 1.2400), focusing 1.25 zone (1.2514 is high of 17 Dec 2014), with extended gains to look for test of next key barrier at 1.2597 (Fibo 61.8% of larger 1.3992/1.0340 descend).

The Euro eased at the beginning of European session, with dips being so far contained at 1.2400 support zone.

Overbought daily studies warn of corrective action, but lacking firmer signals as indicators are still pointing higher in deeply overbought territory. Immediate focus turns towards ECB’s policy meeting, due later today, with traders awaiting for reaction of ECB’s President Mario Draghi on rapidly appreciating Euro.

Obviously, the central bank is not happy with strong currency and Draghi will likely try to curb Euro’s strength. But his position became much more difficult after Mnuchin’s comments and a tough job is awaiting ECB’s chief today.

Strengthening EU economy could be seen as initial signal for rate hike in the near future, but Draghi will need to pour cold water on this idea today and downplay the prospect of early monetary policy normalization in order to curb Euro’s strength.

Draghi’s verbal intervention today is something that markets are expecting.

The Euro could dip to 1.23 zone (rising daily Tenkan-sen lies at 1.2312 and rising 10SMA at 1.2273) where dips should be ideally contained.

However, stronger pullback cannot be ruled out (depending on Draghi’s wording on his press conference) and such scenario would risk extension towards next key supports at 1.2165/36 (18 Jan trough/rising 20SMA).

Break here would generate stronger bearish signal for deeper correction.

Res: 1.2459, 1.2500, 1.2514, 1.2597
Sup: 1.2384, 1.2323, 1.2312, 1.2273

A growing sense of anticipation and excitement was felt across financial markets on Thursday ahead of the European Central Bank’s first policy meeting of the year.

Although markets widely expect the ECB to leave monetary policy unchanged in January, much of the action and volatility may be created during Mario Draghi’s press conference in the afternoon. While economic growth in Europe continues to follow a positive trajectory, stubbornly low levels of inflation still remain a headache for policymakers. With an aggressively appreciating Euro complicating the ECB’s efforts to hit the 2% inflation target by making exports less attractive and imports cheaper, doves could easily make an unwelcome appearance.

It is interesting how the bullish sentiment towards the European economy and growing expectations of QE ending before year-end, have elevated the Euro to levels not seen in more than three years. This same appreciation in the Euro has the potential to weigh heavily on inflation, consequently placing the central bank in a tricky position.

Any signs of Mario Draghi adopting a dovish stance and verbally intervening, could expose the Euro to downside risks. Market expectations are heated over the central bank ending QE before year end and today could be a good opportunity for Draghi to cool these speculations.

Taking a look at the technical picture, the combination of Euro strength and Dollar weakness has made the EURUSD heavily bullish on the daily and weekly charts. There have been consistently higher highs and higher lows, while prices are trading comfortably above the 50 Simple Moving Average. A breakout and daily close above 1.2440 could encourage a further incline towards 1.2500 and 1.2560, respectively. Alternatively, a failure for prices to secure a daily close above 1.2440 could invite a decline back towards 1.2300.

Dollar Index dips below 89.00

The Greenback extended losses against a basket of major currencies on Thursday morning after stumbling overnight on comments from US Treasury Secretary Mnuchin.

With Mnuchin stating a weaker Dollar is “good” for American trade, Dollar bearish investors ruthlessly attacked the currency pushing the Dollar Index below 89.00 during early trade. Sentiment towards the Dollar is turning increasingly bearish and this is reflected in the depressed price action. From a technical standpoint, the Dollar Index remains heavily bearish on the daily charts. A breakdown and daily close below 89.00 could open a clean path towards 88.00.

Commodity spotlight – Gold

Gold has jumped to levels not seen since August 2016, to above $1360 thanks to a heavily depressed US Dollar.

The yellow metal remains firmly bullish on the daily charts with further upside on the cards amid a vulnerable US Dollar. A decisive breakout and daily close above $1360 could encourage a further incline higher towards $1375. Bulls remain supported above the $1340 dynamic support level.

USDJPY remains under strong pressure over the last couple of days, while during today’s European session it plunged below the 109.00 psychological level and challenged a new 4 ½-month low of 108.72. The dollar weakness continues, and the pair is trading near the lower band of the medium-term symmetrical triangle.

From the technical point of view, in the daily timeframe, the RSI indicator entered the oversold zone with aggressive movement, whilst the MACD oscillator is falling with strong momentum below the trigger and zero lines, indicating further losses. Additionally, the 20-day simple moving average recorded a bearish crossover with the 40-day SMA, suggesting downside tendency.

It is worth mentioning that the price hit the 50.0% Fibonacci retracement of the up-leg from June’s 2016 low to December’s 2016 high at 108.80. If price action holds below the symmetrical triangle and the 50.0% Fibonacci mark the next immediate support to have in mind is 108.10. Breaking this level could see a re-test of the 107.30 barrier.

Conversely, in the event of an upside reversal, the next pause is the 110.20 resistance level. A break above this level could shift the short-term outlook to a more neutral one as it could take the pair towards the 38.2% Fibonacci retracement level of 111.10, which stands in the middle of the symmetrical triangle.

NZDUSD (0.7380): The New Zealand dollar fell after the release of the quarterly CPI data. However, the declines were limited as the Kiwi dollar was seen recovering on the back of a weaker USD. At the moment, NZDUSD is seen trading near the resistance level of 0.7354 level. We expect a potential reversal taking place at this level. Failure to post a higher high from the previous peak could potentially set the stage for NZDUSD to trade flat with the downside risks building up.

USDJPY (109.02): The USDJPY closed at 109.20 yesterday marking a fresh 4-month low. The declines could see USDJPY falling to the previous support level at 108.26 in the near term. The support level help stall the declines. On the 4-hour chart, resistance could be seen forming near 110.44 - 110.34 region that was recently breached. To the downside, unless we see an intraday bounce, USDJPY could be seen extending the declines down to the 108.26 level.

EURUSD (1.2436): The EURUSD extended gains to post a fresh 4-year high as price action was seen clearly rising above the 1.2300 level of resistance. At the time of writing, the EURUSD extended gains to trade near 1.2436. The strong gains came on the back of a weaker U.S. dollar. On the 4-hour chart, price action is seen trading near the outer median line which could offer some type of dynamic resistance level. A reversal at this level could signal a near term decline as price could be seen correcting to 1.2281. The ECB's meeting will be the main catalyst for the price action in EURUSD today.