Dollar Faces Challenges in Sustaining Post-NFP Gains as Attention Shifts to Upcoming CPI Data

USD Performance: The US Dollar initially rose following a strong NFP report but lost gains as the market anticipates the upcoming US CPI report, which could significantly influence future rate cut expectations.

EUR Stability: The Euro remains stable as the ECB maintains interest rates and a cautious approach towards inflation, with traders eyeing potential rate cuts in 2026 if inflation data weakens.

EURUSD Technical Analysis: The EURUSD pair is consolidating around the 1.19 level, with traders awaiting the US CPI report to determine the next market direction, either towards 1.21 or 1.16.

Upcoming Economic Data: Key economic indicators to watch include today's US Jobless Claims and tomorrow's Eurozone Q4 GDP and US CPI reports, which are expected to impact market movements.

Dollar Performance: The dollar is slightly lower in European morning trade, struggling to maintain gains from a strong US jobs report, which showed positive payroll and unemployment figures.

Market Sentiment: Despite the solid jobs data, market expectations for the Federal Reserve's rate cuts remain largely unchanged, with traders delaying the first anticipated cut from June to July but still considering a significant chance of a June move.

Currency Movements: Major currency pairs like EUR/USD and USD/JPY are experiencing fluctuations, with EUR/USD testing key moving averages and USD/JPY facing declines amid intervention risks.

Upcoming Data: Traders are advised to remain cautious as more data volatility is expected, particularly with the US CPI report set to be released, which could influence market dynamics before the weekend.

US Dollar Movement: The US Dollar initially rose following a strong NFP report but later lost gains as the market anticipates the upcoming US CPI report, which could significantly influence future rate cut expectations.

Impact on CAD: The Canadian Dollar weakened due to concerns over US President Trump's potential withdrawal from the USMCA trade agreement, which could lead to increased tariffs and negatively impact the Canadian economy.

Technical Analysis of USDCAD: On various timeframes, USDCAD shows signs of potential buyer interest around recent lows, while sellers are looking for a breakout below these levels to extend bearish momentum.

Upcoming Economic Data: Key economic indicators, including US Jobless Claims and the US CPI report, are expected to influence market movements and trader sentiment in the coming days.

USD Overview: The US Dollar initially rose after a strong NFP report but lost gains as the market anticipates the upcoming US CPI report, which could significantly impact rate expectations and the dollar's strength.

JPY Overview: Following Takaichi's election victory, the JPY experienced a "sell the fact" reaction, with no new developments from the Bank of Japan, which maintains a steady interest rate while hinting at potential future hikes based on economic data.

USDJPY Technical Analysis - Daily: The USDJPY has retraced to a major trendline, where buyers are expected to enter, aiming for a rally towards 159.00, while sellers will look for a break below to target 145.00.

Upcoming Economic Data: Key economic indicators, including US Jobless Claims and the US CPI report, are set to be released, which will likely influence market movements and sentiment.

Strong Job Growth: The December non-farm payrolls report showed unexpected strength, reducing the unemployment rate to 4.3% from 4.4%, which may influence the Federal Reserve's decision on interest rates.

Market Reactions: Following the jobs report, the US dollar experienced volatility, with AUD/USD and USD/JPY showing significant fluctuations, while other currency pairs like EUR/USD and GBP/USD also saw minor declines.

Employment Data Concerns: Despite the positive jobs report, there were downward revisions to future employment figures and an increase in the number of unemployed individuals compared to the previous year, raising skepticism about the data's reliability.

Fed's Future Outlook: The report suggests the Fed may maintain its pause on interest rate changes for a longer period, with market expectations shifting regarding potential rate cuts, as Treasury yields increased across the curve.

US Dollar Performance: The US Dollar faced pressure due to weak Retail Sales and ECI data, with market expectations shifting towards 60 bps of easing by year-end. The upcoming NFP report is crucial, as strong data could lead to a hawkish repricing, while weak data may reinforce dovish Fed bets.

Australian Dollar Strength: The AUD is gaining strength following a hawkish stance from the RBA, which raised the Cash Rate to 3.85% and signaled potential further hikes. Market enthusiasm for the AUD is evident, driven by supportive comments from RBA officials.

AUDUSD Technical Analysis: The AUDUSD pair is nearing a significant swing level at 0.7150, with bullish momentum indicated by a trendline. Buyers are positioned for potential gains around this level, while sellers are eyeing a break lower towards the 0.68 level.

Upcoming Economic Reports: Key economic reports are on the horizon, including the US NFP report today, Jobless Claims figures tomorrow, and the US CPI report at the end of the week, which could impact market sentiment and currency movements.