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Market Overview

The crypto market cap has fallen by more than 5% to $2.42 trillion. This is a return to last April’s lows, but the bad news is the higher rate of price decline. The cryptocurrency market has become more experienced and saturated with institutional investors, which adds liquidity and suppresses volatility, but does not change the direction. The liquidation of unprofitable cryptocurrency reserves by corporations and funds may exacerbate the downward trend.

Bitcoin was approaching $70K on Thursday morning and now trades at $71K. At current levels, Bitcoin has returned to an area that was a strong resistance from March to October 2024. This explains the current interest of bargain hunters. The RSI on daily timeframes fell to 22, the lowest since August 2023. If we look at a similar phase of the market cycle, a similarly intense sell-off in May 2022 ended with price consolidation around one level for a month, followed by a deeper dive.

News Background

44% of Bitcoin supply is in unrealised loss territory, according to Glassnode. A 30% decline from the recent peak of $108K has reduced the share of profitable coins from 78% to 56%. If the 2022 bear market scenario repeats itself, BTC could fall another 20% to $60K.

Despite the ‘disturbing similarity’ to the selloffs of 2018 and 2022, an 80% collapse of Bitcoin from its highs is unlikely due to institutional adoption, regulated product inflows and interest rate easing, according to K33 Research.

Bitcoin reserves on Binance show no signs of outflows despite market turbulence, CryptoQuant notes.

Ethereum founder Vitalik Buterin said that the original concept of layer 2 (L2) solutions is outdated and proposed a new model for ecosystem development, shifting the focus from simple scaling to unique project features.

Solana could grow to $2,000 by the end of 2030, despite lower near-term targets, according to Standard Chartered. The target level for the end of 2026 has been lowered from $310 to $250. The blockchain will need more time to scale new use cases.

Retail sales across the Eurozone fell -0.5% mom in December, a steeper decline than the expected -0.2% drop.

Detail shows a clear split between essentials and discretionary items. Food-related sales rose slightly by 0.1% mom, but non-food purchases excluding fuel slumped 1.2%, pointing to continued restraint on big-ticket and discretionary spending. Fuel sales were flat, offering little offset to the broader weakness.

The weakness was broad-based across the European Union, where retail sales also fell 0.5% on the month. Among reporting countries, Portugal (-3.1%), Sweden (-1.9%) and Denmark (-1.6%) recorded the largest declines, while Luxembourg (+7.0%), Slovakia (+3.1%) and Croatia (+1.8%) posted solid gains.

Full Eurozone retail sales release here.

• GBPUSD pulls back from multi-year highs as BoE decision approaches.
• Bears eye a daily close below 1.3600 to extend downside momentum.

GBPUSD has turned weekly gains into losses after a quiet week, slipping toward the 1.3600 level early on Thursday as traders' position ahead of the Bank of England’s rate decision. The central bank is expected to leave rates unchanged, with markets focused on guidance over the duration of the pause and the scope for easing later in the year, despite still-elevated inflation.

The policy decision comes as the pair is testing a key support near 1.3615 after resuming its pullback from the 4½-year high of 1.3868. A break lower could meet the 20-day SMA at 1.3565 and the 38.2% Fibonacci retracement of the November–January rally at 1.3540. Then, all the attention could shift to the crucial floor near 1.3500, where the 50- and 200-day SMAs and the rising trendline from November converge. Failure to pivot there would violate the upward trajectory from 1.3000.

While momentum indicators point lower, the stochastic oscillator is entering oversold territory, suggesting downside momentum may be losing steam. Nevertheless, a bullish reversal would require a close above Wednesday’s resistance at 1.3730, which could open the way towards the 1.3815–1.3840 zone ahead of the 1.3900–1.3950 region.

In summary, GBPUSD may remain subdued in the near term, with bearish momentum likely to resume on a sustained close below 1.3615.

GBP/USD fell to 1.3627 on Thursday. Investors are awaiting the outcome of today's Bank of England meeting.

UK interest rates are expected to decline throughout the year. However, the regulator is unlikely to provide clear signals about the timing and scale of easing, as it needs to wait for a clearer picture of inflation.

Additional pressure on the US dollar stems from the delay in the publication of key US labour market data due to the partial government shutdown. This increases uncertainty about the Fed's future policy.

By the end of the year, global markets are pricing in around 35 basis points of Bank of England easing – one 25 bp cut and a second cut priced with a probability of around 40%.
Political risks remain in the UK. Investor attention is focused on the by-elections in Gorton and Denton County on 26 February, alongside the May local elections. Pollsters show a rise in support for the Reform UK party. It is ahead of both Prime Minister Keir Starmer's Labour Party and Kemi Badenoch's Conservatives, despite the general election not being scheduled until 2029.

Technical Analysis

On the H4 chart, after a sharp rally in the second half of January and a fresh high in the 1.3850–1.3880 zone, GBP/USD entered a correction phase. The price has turned down from the upper end of the Bollinger Bands and is now testing the 1.3620–1.3650 support area. Upward momentum has weakened, leaving the structure short-term neutral-to-bearish. At the same time, the broader upward context has not yet been breached.

On the lower H1 chart, a descending corrective channel has formed. The price is consistently posting lower lows and remains near the lower Bollinger Bands. Selling pressure persists, with the nearest support at 1.3520–1.3550. To stabilise, the market would need a return above the 1.3660–1.3700 zone.

Conclusion

In summary, GBP/USD is experiencing a tactical pullback driven by pre-BoE caution and delayed US data, which is creating a temporary dollar squeeze. The technical correction appears orderly and is testing key support within a larger bullish structure. The near-term trajectory hinges almost entirely on the Bank of England's tone today: any dovish hints could extend the correction towards 1.3520, while a neutral or hawkish hold could trigger a recovery attempt. Political uncertainty in the UK adds a layer of medium-term risk, but for now, the primary focus remains on monetary policy signals and the defence of the 1.3620 support zone.

As the XTI/USD chart shows, the price of a barrel rose above $65 yesterday, reacting to the risk of talks between Iran and the United States on the nuclear deal breaking down. These negotiations could begin on Friday.

According to Axios, Arab world leaders have urged Donald Trump not to follow through on his threats to withdraw from the talks and shift towards military action after demands put forward by Iran. This news prompted a pullback in prices below $64.

The news backdrop is further complicated by conflicting reports regarding India’s refusal to purchase Russian oil, alongside other global factors. All of this is contributing to heightened volatility in the oil market, a trend also confirmed by the ATR indicator.
Technical Analysis of XTI/USD

On 14 January, we:

• → analysed swings in WTI crude prices to identify a breakout from a descending channel (shown in red) and outline an upward trajectory (shown in blue);
• → noted that the breakout level (around $58.35) was acting as support;
• → suggested that the market was vulnerable to a corrective move.

Indeed, on the same day (as indicated by the blue arrow), the price formed a bearish impulse towards this support, where the market found some balance.

However, geopolitical developments since the second half of January have supported higher prices, providing grounds to draw a broad ascending channel (shown in purple). In this context:

• → its lower boundary is acting as support, with the long lower wick on the 3 February candle confirming aggressive buying interest;
• → the $65 level appears to be a key resistance. Broad price swings formed there on 29–30 January — a sign of “smart money” activity — after which prices declined. Yesterday, the market again reversed sharply from this level.

It is therefore reasonable to assume that this resistance will pose a significant hurdle for bulls if they attempt to keep prices within the ascending purple channel. At the same time, the further direction of WTI oil price movements will most likely be determined by developments surrounding Friday’s Iran–US nuclear talks in Oman.

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The heavy software selloff triggered Tuesday by news that Anthropic is rolling out a new tool to handle legal and research work spilled over into the broader tech sector yesterday. Big Tech and semiconductors pulled back aggressively, sending the Nasdaq 100 below two key levels: its 100-DMA and the psychological 25K support.

AMD — which announced better-than-expected earnings — fell 17% yesterday, yes, 17%, down to the $200 support. Nvidia slipped 3.41%, while Google retreated more than 2% into its earnings and fell as much as 7% in after-hours trading immediately after the results were released before paring back losses.

Yet the earnings were great. The company generated over $113bn in revenue, roughly $2.5bn more than pencilled in. Cloud growth accelerated to 48% (!) — far above forecasts — confirming that its AI and cloud businesses are not only growing strongly, but even faster than sky-high expectations. And its AI, infrastructure investment pays off.

So what went wrong? The company said it will accelerate its capex spending to $175–185bn this year — massively above the roughly $120bn expected by analysts — which immediately cast a shadow over otherwise stellar results. Voilà.

The market continues to scream: stop spending. Big Tech continues to respond: we need to spend more to avoid running out of capacity amid the avalanche of AI demand and computing needs coming our way.

But at the end of the day, investors have the last word. If they want their Big Tech darlings to slow spending — and they express that feeling by sending stock prices into a freefall — spending will have to slow, regardless of expectations that computing needs will reach yottaflops in the next five years.

At this point, we have already collected important clues about what comes next. Meta, Microsoft and Google have reported so far — I am not counting Apple among AI plays. All delivered better-than-expected results, and all pledged to invest more — much more.

AI revenue and monetisation channels are notable at Meta and Google, especially for Google. The company offers TPU chips, which appear to be boosting cloud demand; it owns Waymo — the self-driving unit valued at $126bn — and it has a major partnership with Apple to bring Gemini to iPhones, potentially reaching around 2.5bn devices worldwide.

But when it’s no, it’s no. Investors don’t agree with current spending levels.

My guess is that if these earnings — and improved analyst expectations — can’t lift sentiment, it will be hard to prevent a broader selloff. A 10–20% pullback in the Nasdaq 100 looks plausible, which would take the index into the 20K–23.5K range.

The S&P 500 could outperform, benefiting from rotation into value names. Value stocks have been outperforming growth stocks by the widest margin since 2022. The S&P 500 equal-weighted index is catching up with the traditional market-cap-weighted, tech-heavy version.

Potential Federal Reserve (Fed) rate cuts could further support the rotation trade — toward value, cyclicals and non-US assets.

On that note, yesterday’s US ADP report came in weak — and weaker than expected. The US economy added just 22K private jobs in February, a very small number. It’s almost laughable when you consider that US GDP grew more than 4% last quarter. Relative to that pace, 22K job additions is quite rikiki, as the French would say.

The services PMI surprised to the upside, but the US 2-year yield eased, suggesting the soft jobs number tilted the balance toward the Fed doves.

This divergence between US growth and labour data reflects the fact that a large share of US growth is fuelled by AI investment. That spending boosts GDP — and judging by recent commitments, will continue to do so — but it does not necessarily create jobs in its early stages. On the contrary, it enables companies to cut costs and reduce headcount, as one person becomes capable of doing the work of an entire team with the help of AI tools.

Add potential weakness from trade disruptions, and the jobs outlook looks far from sunny.

The Fed pointed to a stabilising labour market at its latest meeting, but if job gains remain this weak, the Fed may have to play the rate-cut card — especially as new Fed leadership under Mr Walsh is likely to refrain from expanding the balance sheet. Rate cuts could instead be justified by the argument that AI boosts productivity, eases inflationary pressures, and puts more jobs at risk. Just as Warsh argues.

Fed funds futures now price around a 60% probability of a 25bp cut in June — about 5pp higher than before the ADP release. If Fed expectations turn more dovish — and credibly so — that would likely keep pressure on the US dollar and support major currencies.

Interestingly, the US dollar index has not followed the US 2-year yield lower since yesterday. Instead, it is gaining ground against the euro and sterling this morning. The EURUSD finds support near 1.1785 ahead of the European Central Bank (ECB) decision, while cable slips to a two-week low ahead of the Bank of England (BoE) verdict.

Both central banks are expected to keep rates unchanged, meaning the focus will be on guidance. Recent data point to slowing PMI readings and easing inflation. Euro-area inflation fell to 1.7%, below the ECB’s target, while core inflation eased to 2.2% from 2.3% a month earlier.

Slower growth and tame inflation could open the door to a more dovish ECB stance, provided the bank continues to anchor its outlook to incoming data. If so, EURUSD bulls may be forced to abandon the 1.20 target in favour of a retreat toward 1.15 over the next three months.

The BoE on the other hand should weigh in the still sticky inflation, a heavy fiscal policy and the bleak economic outlook.

What could keep euro and sterling bulls in the game is weak US-Dollar demand and a relatively more dovish Fed. This morning, however, traders appear to have regained an appetite for the greenback.

In focus today

In the euro area, we expect the ECB to leave the deposit rate unchanged at 2.00% in line with consensus and market pricing. Lagarde is likely to face questions on the recent strengthening of the euro but provide a neutral answer, not highlighting any target level. We expect a muted market reaction as Lagarde refrains from giving new policy signals since the ECB awaits new staff projections in March. For details, see ECB Preview - Stronger euro? No problem, 30 January.

In the UK, the Bank of England is expected to leave the policy rate unchanged at 3.75%. With the January release of the strongest PMI since April 2024 as well as inflation at 3.4%, the decision to maintain the interest rate may be less split than the latest decisions.

In the US, the Bureau of Labor Statistics (BLS) announced yesterday the rescheduled dates for data releases that were delayed by the brief partial government shutdown. Tuesday's December JOLTs report will be released already today at 16:00 CET, and the Department of Labor confirmed that also the weekly jobless claims data will be published today as usual. Friday's Jobs Report will be delayed until next Wednesday and next week's CPI report will be pushed back from Wednesday to Friday. Note that as the shutdown took place after the data collection periods for both the Jobs Report and the CPI, the data quality should not be affected by the delay.

Economic and market news

What happened yesterday

In geopolitics, tensions between the US and Iran continue ahead of nuclear talks on Friday, which are scheduled to be held in Oman. The current discussions are focused on Iran's nuclear programme and come amid a heightened US military presence in the Gulf. On Wednesday, President Trump warned Iran's supreme leader Ayatollah Khamenei about potential military strikes.

In the US and China relations, there was a call between President Trump and President Xi Jinping ahead of multiple meetings this year and an expected summit in China in April. They discussed Chinese armed sales to Taiwan as well as trade and security. In December, the US announced a sales deal with Taiwan including USD 11.1bn in weapons that could be used to defend against possible Chinese attacks. Yesterday at the call, Xi stated that Taiwan would not be separated from China.

In the euro area, HICP inflation declined as expected to 1.7% y/y in January from 2.0% y/y in December. The main reason for lower headline inflation was a sharp decline in energy inflation to -4.1% y/y from -2.1% y/y in December owing to a significant base effect. Core inflation declined more than expected, falling to 2.2% y/y (cons: 2.3% y/y) down from 2.3% y/y in December. Core inflation was lower than expected due to a surprise in services that rose only 0.15% m/m s.a. The downward surprise in services inflation is slightly dovish for the ECB.

Also in the euro area, the final euro area PMI report for January was revised down slightly with the composite index at 51.3 (flash: 51.5) and services at 51.6 (flash: 51.9). The marginal change should not have any significant impact for the ECB's assessment of the economic situation. Focus is likely still on the stronger-than-expected GDP growth in Q4 2025.

In the US, the ADP national employment report showed that US employment increased by +22k private sector jobs in January, a bit below consensus at +48k. Sector-wise, education & health services was the biggest positive driver (+74k), while professional services and manufacturing recorded job losses (-57k and -8k, respectively). This is generally consistent with what we saw last year as well.

Additionally, the ISM report on the US non-manufacturing sector reported PMI at 53.8 in January (cons: 53.5, Dec: 53.8), appearing weaker than its manufacturing counterpart. Business activity growth remains robust, but new orders have slowed and price pressures remain elevated.

In Poland and in line with expectations, the National Bank of Poland maintained its policy rate at 4.00%. The decision is the second consecutive month of the interest rate being maintained, marking an end for now to the easing cycle that has resulted in a 175bp decrease throughout 2025.

In Sweden, the Riksbank minutes were released. They highlighted increasing contrasts within the board despite an unanimous decision in January. Discussions mainly centred on conditions for potential cuts, with limited focus on upside inflation risks, though most board members cite krona appreciation as a downside risk. Overall, the outlook for the Riksbank appears steady.

Also in Sweden, composite PMI for January fell to 54.8 from 56.0 in December, landing below its historical average (55.1). The decline in the composite index was driven by a drop in the services PMI, which decreased from 56.3 to 54.3. All components fell, with the main driver being lower new orders. The services PMI is now also below its historical average of 55.6.

Equities: Global equities ended the day 0.3% lower, in a defensive outperformance. The sell-off was driven by the Mag7 companies, where in fact 71% of the companies in the S&P500 ended the day higher. Mag7 was down 1.8% with the overall index down -0.5%. Nasdaq was 1.5% down while Russell2000 was 0.9% lower. Following a wobbly start to the year for Mag7 (-4% ytd), it is now just 4% higher than the overall index since the start of last year. Tuesday's selloff in software companies extended into Wednesday as well, albeit at a smaller scale. The Mag7 led sell-off also carried into Asia overnight, with equities weaker across the board. In particular the Kospi, which is our preferred way of expressing the AI/tech view, is down 3.5%. US futures are marginally weaker.

FI and FX: Triggered by Riksbank minutes to the dovish side, the SEK sold off yesterday, with EUR/SEK rising 10 figures and breaching 10.60, whilst the RIBA market added a few basis points worth of cuts to the front end. We deem the reaction in the krona as fair, having argued that the SEK rally had and still has gone too far. EUR/NOK made a smaller rebound and closed the US session above 11.40, which as a result pushed NOK/SEK toward 0.93, its highest level in a month amid another push on the oil price. The USD gained vs peers as the EUR/USD slipped to 1.18 and USD/JPY edged toward 157. The UST10y segment held steady while UST2y dropped in a slight bullish steepening.

Daily Pivots: (S1) 213.22; (P) 214.12; (R1) 215.08; More...

GBP/JPY retreated after brief breach of 214.83 and intraday bias stays neutral. On the upside. firm break of 214.83 will resume larger up trend to 220.90 projection level next. Rejection by 214.83 will bring more consolidations first. But in case of another dip, downside should be contained by 55 D EMA (now at 209.70) to bring rally resumption.

In the bigger picture, up trend from 123.94 (2020 low) is in progress. Next target is 61.8% projection of 148.93 (2022 low) to 208.09 (2024 high) from 184.35 at 220.90. On the downside, break of 205.30 resistance turned support is needed to indicate medium term topping. Otherwise, outlook will stay bullish even in case of deep pullback.

Daily Pivots: (S1) 184.26; (P) 184.77; (R1) 185.65; More...

EUR/JPY is staying in range below 186.86 and intraday bias remains neutral. On the downside, below 183.33 will bring retest of 181.76. Sustained trading below 55 D EMA (now at 182.56) should solidify the case that fall from 186.86 medium term top is correcting whole rise from 154.77. Deeper decline should then be seen to 38.2% retracement of 154.77 to 186.86 at 174.60. Nevertheless, firm break of 186.86 will resume larger up trend.

In the bigger picture, up trend from 114.42 (2020 low) is in progress and and met 61.8% projection of 124.37 to 175.41 from 154.77 at 186.31. Considering bearish divergence condition in D MACD, upside could be capped by 186.31 on first attempt. Still, outlook will stay bullish as long as 55 W EMA (now at 173.32) holds, even in case of deep pullback. Sustained break of 186.31 will pave the way to 78.6% projection at 194.88 next.

Daily Pivots: (S1) 0.8623; (P) 0.8636; (R1) 0.8660; More…

Intraday bias in EUR/GBP is turned neutral first with current recovery. On the downside, decisive break of 0.8631 cluster support (38.2% retracement of 0.8221 to 0.8663 at 0.8618) will carry larger bearish implications. Next target is 61.8% retracement at 0.8466. On the upside, however, break of 0.8744 resistance will suggest that fall from 0.8863 has completed as a corrective move.

In the bigger picture, rise from 0.8221 medium term bottom (2024 low) is seen as a corrective move. Upside should be limited by 61.8% retracement of 0.9267 to 0.8221 at 0.8867. Sustained trading below 55 W EMA (now at 0.8625) should confirm that this corrective bounce has completed. In this case, deeper fall would be seen back to 0.8201/21 key support zone. However, decisive break of 0.8867 will suggest that EUR/GBP is already reversing whole decline from 0.9267 (2022 high). That should pave the way back to 0.9267.