This week might offer an increase in volatility. While the US Dollar is losing momentum the potential chance of another rate cut by the Federal Reserve seems to cause a shift in markets. The weakness of the Dollar keeps increasing and hence continues to support positive risk sentiment. So far this has helped most assets valued in Dollars being inflated more. Gold, silver and oil prices continue to rise and the current trend remains strong. Especially oil might indicate that the trend and underlying support of the economy could push the “liquid gold” even higher.

On another note, also the interest rate decision from the Bank of Canada might move markets. While it is not expected that rates will be changed the tone during the press conference might offer more insights, here.

Furthermore, the Consumer price index from Australia might be interesting as well. A potential rise in prices might continue to support the AUD moving higher as well. The Australian Dollar has been gearing up sharp momentum, among the rise of the positive risk sentiment.

Important events this week:

– BoC interest rate decision– the odds of a potential further rate cut in the United States keeps increasing. Yet, it is not expected that that Federal Reserve will reduce rates but the Dollar is losing sharp momentum. The trust in the US with the escalation of geopolitical tensions also supports this view. 

USDCAD monthly chart

The monthly chart shows, that the market has lost momentum at the technical resistance zone at 1.14050. The same zone was important in January 2016 as well as April 2020. With the market now breaking lower from that range a break below the level of 1.1600 could be on the cards. Currently, a bearish pinbar candlestick pattern is forming and this would be a strong sign of a further slide in this market at the end of the month. If the interest rate differential narrows the Canadian Dollar might start to gear up steam again. The rate decision will be held on Wednesday, 28^th of January.

– US Fed interest rate decision– With the Fed another important rate decision is brewing this week. It is not expected that rates will be cut. A surprise cut might lead to further weakness of the Dollar. On the other hand, some dovish words might also support market participants with more pressure for the Dollar. This allows us to focus on the USDJPY currency pair. There had been no rate adjustment in Japan recently but the chances that the BoJ will eventually tighten rates might be on the cards, should the development of the economy allow.

USDJPY weekly chart

As the weekly chart above shows, the market has been weakening after the comments. The week ended with a bearish looking candlestick pattern right on top of this important resistance level at 158.00. Should the market respect this zone and not break above it a slide in prices might be found. A potential target could be found at around the 149.50 area, where also the 50- moving average comes into play. The rate decision will be held on Wednesday, 28^th of January.