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Market picture

Crypto market capitalization rose another 3.4% in 24 hours to $3.5 trillion, recovering to levels seen before the January 7 sell-off. Both the decline at the beginning of the month and the latest recovery are due to U.S. economic data, which temporarily has an unusually strong impact on cryptocurrencies. Recently, crypto lacks its own drivers, other than Ripple’s case against the SEC and its impact on XRP.

Bitcoin briefly climbed above $100K on Wednesday evening and Thursday morning, stabilizing near $99,600 by the start of active trading in Europe. The price closed Wednesday above the 50-day moving average (bullish signal), but this may just be another test of a meaningful round level. The selling activation after surpassing $100K is still clearly visible.

The XRP price soared to $3.20, pulling back later to $3.0. The coin was only above this mark for minutes in January 2018. This is an area of historical highs where you should prepare for increased volatility. Bulls are intrigued by the potential for a Fibonacci extension pattern with a potential target of $4.40. On the other hand, many long-term holders will probably want to get rid of this coin after years of losses, and some will want to lock in profits after a 10-fold increase in two years.

News background

The average purchase price through the Bitcoin ETF is $94K, and falling below that level can cause sell-offs in the BTC ETF.

Thanks to developments in blockchain infrastructure and clarifying legislation, 2024 was a positive year for USDC, Circle’s annual report notes. Compared to 2023, the asset’s turnover increased by 78%.

The U.S. SEC has extended by 45 days the deadline for a decision on an application to convert an index fund from Bitwise into an ETF. The Bitwise 10 Crypto Index Fund (BITW) product tracks the 10 “most valuable proven cryptocurrencies” weighted by market capitalization.

According to Bloomberg, the CFTC may open an investigation against Crypto.com. The commission questioned the legality of the exchange’s futures contracts, which allow users to bet on sporting events.

The British pound has edged lower on Thursday. In the European session, GBP/USD is currently trading at 1.2205, down 0.22%.

UK GDP posts weak gain of 0.1%

The UK economy climbed out of negative growth for the first time in three months but not by much. After GDP contracted by 0.1% in September and October, November saw a small gain of 0.1%, missing the market estimate of 0.2%. In the three months to November, GDP showed no growth.

The small uptick in growth in November was welcome news for the government but the economic outlook is not very bright. The recent “tax and spend” budget will see tax increases take effect in April, including a rise in employer National Insurance contributions. This will hurt the business sector and many firms will cut back on spending and investment, which in turn will dampen economic growth. Inflation remains high and combined with low growth, stagflation is a real danger.

Another headache for the government is Donald Trump, who has promised to slap tariffs on US trading partners. The UK is heavily reliant on its export sector and a trade war with the US would be devastating for the fragile UK economy. As well, Trump’s protectionist trade polices could lead to higher inflation which could derail much of the progress made to contain inflation. This week’s soft UK inflation and GDP reports have raised expectations that the Bank of England will lower interest rates at the next meeting on Feb. 6.

In the US, December’s inflation release presented a mixed picture, as headline CPI rose for a third straight month, while core CPI eased slightly. Expectations for a rate cut rose in the aftermath of the inflation report, sending the US dollar lower against many of the majors.

GBP/USD Technical

• GBP/USD tested resistance at 1.2242 earlier. Above, there is resistance at 1.2310
• 1.2176 and 1.2108 are the next support levels

Eurozone goods exports fell -1.6% yoy to EUR 248.3B in November. Good imports fell -1.0% yoy to EUR 231.9B. Trade balanced showed a EUR 16.4B surplus. Intra-Eurozone trade fell -7.0% yoy to EUR 214.8B.

In seasonally adjusted term, goods exports rose 3.2% mom to EUR 240.6B.Goods imports rose 0.7% mom to EUR 227.8B. Trade balance widened from October's EUR 7.0B to EUR 12.9B, larger than expectation of EUR 7.2B. Intra-Eurozone trade fell -1.7% mom to EUR 210.4B.

Full Eurozone trade balance release here.

• Hawkish speeches from BoJ officials coupled with a softer US core CPI print for December put an interim ceiling on US dollar strength against the yen.
• The leading 10-year yield spread of the US Treasury note against the JGB has staged a bearish breakdown condition.
• Medium-term uptrend of USD/JPY from 16 September 2024 low is at risk of shaping a potential multi-week corrective decline sequence.
• Watch the key medium-term resistance of 158.35/80 on the USD/JPY.

Since the start of the new year, the persistent US dollar strength against the Japanese yen seen in the last quarter (Q4) of 2024 has started to ease.

Fig 1: Year-to-date performance of the US dollar against major currencies as of 16 Jan 2025 (Source: TradingView, click to enlarge chart)

Based on the year-to-date rolling performance as of Thursday, 16 January, the performance of the US dollar is the weakest against the yen versus other major developed nations’ currencies as the USD/JPY shed -0.77% (see Fig 1).

This week, speeches from the Bank of Japan (BoJ) Governor Ueda and his deputy Himino have mentioned encouraging remarks on a stronger positive outlook towards Japanese corporations raising employees’ salaries compared to December.

These positive remarks on wage growth in Japan have signalled a rate hike chance at the BoJ’s next policy meeting to be concluded on Friday, 24 January which in turn softened the USD/JPY’s prior bullish momentum coupled with a softer core US CPI print for December that eased to 3.2% y/y from November print of 3.3% and came in slightly below expectations of 3.3%.

Longer-term US Treasury yield premium shrinkage over JGB

Fig 2: 10-year yield spread of US Treasury/JGB with USD/JPY as of 16 Jan 2025 (Source: TradingView, click to enlarge chart)

The yield spread between the 10-year US Treasury note and the 10-year Japanese Government Bond (JGB) has a direct correlation movement with the USD/JPY (see Fig 2).

Based on past observations, the movement of the 10-year yield spread of the US Treasury against JGB has a lead time over the USD/JPY where the yield spread inched downwards on 5 November 2024 and broke below its 20-day moving average thereafter on 20 November 2024.

This prior bearish movement of the yield spread between the 10-year US Treasury note over the JGB took precedence ahead of the USD/JPY medium-term decline of 7% from 14 November 2024 to 2 December 2024.

Right now, a similar bearish movement of the 10-year yield spread of the US Treasury against JGB has been detected from 13 January 2025 to 14 January 2025 where the US Treasury yield premium declined from 3.6% to 3.7% and broke below the 20-day moving average at this time of the writing.

Hence, if the yield spread between the 10-year US Treasury note over the JGB continues to inch lower, the USD/JPY may see further downside pressure.

Bearish momentum detected

Fig 3: USD/JPY medium-term & major trend phases as of 16 Jan 2025 (Source: TradingView, click to enlarge chart)

The daily RSI momentum indicator of the USD/JPY has flashed on a recent bearish divergence condition at its overbought region since 8 January 2025 and just broke below the 50 level at this time of writing.

These observations suggest that the medium-term uptrend from the 16 September 2024 low of 139.58 is in jeopardy of shaping a potential multi-week corrective decline sequence.

Watch 158.35/80 key medium-term pivotal resistance and a break below 152.90 (also the 200-day moving average) may trigger the corrective decline to expose the next medium-term supports at 149.30 and 144.80 (see Fig 3).

On the other hand, a clearance above 158.80 invalidates the bearish scenario for a squeeze up to retest the 160.30/161.70 major resistance.

Weaker-than-expected US Consumer Price Index (CPI) data released yesterday triggered a downward correction in the US dollar. The USD/JPY pair lost more than 150 points in just a couple of hours, USD sellers in USD/CAD managed to push the price below 1.4400, and European currencies partially recovered earlier-formed reversal patterns for buying.

USD/JPY

On the daily timeframe, the USD/JPY pair has broken out of a three-week consolidation range of 158.40–156.20. If sellers manage to secure the price below the lower boundary of this range, further downward movement towards 154.50–154.00 is possible. A resumption of the upward trend may occur if the price returns above 156.20.

Events likely to influence USD/JPY pricing include:

• 16:30 (GMT+2): US Core Retail Sales Index
• 16:30 (GMT+2): Initial Jobless Claims in the US
• 16:30 (GMT+2): Philadelphia Fed Manufacturing Index (US)

USD/CAD

A retest of the critical resistance level at 1.4450 proved unsuccessful for USD/CAD buyers. The rejection from this level resulted in a 120-point decline, leading the pair back to the 1.4300 zone. Technical analysis of USD/CAD suggests a sideways movement. Currently, the pair could decline to the 1.4300–1.4280 area. If the pair rebounds from this zone, price strengthening towards 1.4450–1.4400 is possible.

Events that may trigger a breakout from the USD/CAD flat range include:

• 16:15 (GMT+2): Canadian Housing Starts
• 20:30 (GMT+2): Speech by Bank of Canada Deputy Governor Gravel
• Tomorrow at 16:30 (GMT+2): Foreign Investment in Canadian Securities

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The USD/JPY pair fell to its lowest level in a month during today’s Asian session, dropping below 155.5 yen per US dollar for the first time since 19th December.

As Reuters reports:

→ The yen’s strengthening was driven by hawkish comments from Bank of Japan (BOJ) Governor Kazuo Ueda, which prompted markets to bet on a potential interest rate hike next week.

→ A significant majority of surveyed economists anticipate the BOJ will raise rates at one of its two meetings this quarter, with most favouring a January hike.

The BOJ’s decision on rates may depend on market stability following Donald Trump’s return to the White House next Monday. His inauguration speech will be closely watched by policymakers worldwide to gauge his likely political direction.

Technical analysis of the USD/JPY chart shows:

→ The price has struggled to hold above the 158 yen-per-dollar level, which can be considered a critical barrier where bulls are unwilling to take on the risk associated with potential rate hikes.

→ The 157 level has been broken, transitioning from support to resistance (as indicated by the arrows).

Bulls might find support at the lower boundary of the ascending channel (marked in blue), which has been in place since November last year. However, given strong fundamental factors, such as the US presidential inauguration and BOJ rate decisions, USD/JPY is likely to experience spikes in volatility that could significantly shift the supply-demand balance—not just in the short term.

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Daily Pivots: (S1) 1.0248; (P) 1.0302; (R1) 1.0344; More...

Intraday bias in EUR/USD remains neutral as consolidation continues above 1.0176. Further decline is still expected with 1.0435 resistance intact. On the downside, break of 1.0176 will resume the fall from 1.1213 and target 61.8% projection of 1.1213 to 1.0330 from 1.0629 at 1.0083. However, considering bullish convergence condition in 4H MACD, firm break of 1.0435 will confirm short term bottoming, and turn bias back to the upside for stronger rebound.

In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

Daily Pivots: (S1) 155.56; (P) 156.85; (R1) 157.75; More...

USD/JPY's break of 156.01 support indicates short term topping at 158.86, on bearish divergence condition in 4H MACD. Intraday bias is back on the downside for 55 D EMA (now at 154.44). Firm break there will target 38.2% retracement of 139.57 to 158.86 at 151.49 next. For now, risk will stay on the downside as long as 158.86 resistance holds, in case of recovery.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.2176; (P) 1.2242; (R1) 1.2310; More...

GBP/USD is staying in consolidation above 1.2099 and intraday bias remains neutral. Outlook remains bearish with 1.2486 support turned resistance intact. Larger fall from 1.3433 is still expected to continue. On the downside, break of 1.2099 will resume the decline to 100% projection of 1.3433 to 1.2486 from 1.2810 at 1.1863.

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433, and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move.

Daily Pivots: (S1) 0.9090; (P) 0.9122; (R1) 0.9158; More…

USD/CHF is staying in consolidation below 0.9200 and intraday bias stays neutral. As long as 0.9007 support holds, near term outlook remains bullish. On the upside, decisive break of 0.9223 will carry larger bullish implications. However, break of 0.9007 will confirm short term topping, and turn bias back to the downside for 55 D EMA (now at 0.8930).

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with rise from 0.8374 as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes. However, decisive break of 0.9223 will be an important sign of bullish trend reversal.