I noted these insights on the 8th. Here’s a recap of the significant trades for February.
- Holding the Dow Jones Industrial Average led to a weekly drop of 1.09%.
A few key market data points from the past week:
- US CPI (Inflation) – This rose by 0.2% month-over-month, which was a bit lower than the anticipated 0.3%. Surprisingly, it didn’t seem to affect the market much.
- US average hourly wage – It increased slightly more than expected, which helped bolster the dollar’s strength earlier in the week.
- US Retail Sales – This came in worse than expected, remaining unchanged month-over-month when a rise of 0.4% was anticipated. This has resulted in a somewhat softer outlook regarding a potential US rate cut in 2026.
- Changes in US non-farm employment – Came in slightly better than anticipated, reinforcing the points mentioned above.
- Swiss CPI (Inflation) – An unexpected month-on-month change led to a deflation of 0.1%, strengthening the Swiss Franc.
- UK GDP – Met expectations.
- US unemployment rate – Unexpectedly fell from 4.4% to 4.3%.
- U.S. unemployment claims – In line with expectations.
Last week’s data did somewhat influence the broader view on the US dollar and risk appetite. Initially, things looked like a rate cut was likely, but then shifted slightly as the week progressed. The CME FedWatch Tool indicated a narrow expectation for three rate cuts of 0.25% in 2026 (June, September, and December), reflecting a dovish turn for the dollar.
In bigger news, the Japanese Yen saw remarkable gains, climbing nearly 3% against the US dollar and less so against other currencies. This surge was largely fueled by the recent election victory that gave the Japanese government unprecedented power. Investment in Japan’s stock market has heightened, which contributed to the yen’s rise. Traders are moving away from short carry trades in the yen, possibly anticipating a rate hike from the Bank of Japan. Yet, there are doubts about how much further the yen can climb, as it seems to be overbought with a potential bullish retracement approaching.
The US and Iran are set for a second round of discussions in Geneva this Tuesday, amidst ongoing military escalation against Iran by the US. President Trump, it seems, might wait for three additional weeks for a favorable negotiation outcome before considering military options. Prediction markets like Polymarket suggest that the US is unlikely to take military action against Iran before the end of June.
Looking ahead, here are the key data points to watch next week:
- US Core PCE Price Index
- US GDP advancement
- US FOMC Minutes
- Trends in UK claims
- UK CPI (inflation rate)
- Canadian CPI (inflation rate)
- RBNZ Official Cash Rate / Interest Rate Statement / Monetary Policy Statement
- US/Germany/UK Flash Services and Manufacturing PMI
- UK retail sales
- U.S. unemployment insurance claims
- Australian unemployment rate
Monday will be a public holiday in both the U.S. and Canada, while China enters a week of holidays.
For February, I had anticipated an increase in the value of the EUR/USD pair.
Last week saw a particularly volatile cross, so I made the following predictions:
- Short AUD/JPY – This resulted in a 2.23% win.
With some active yen crosses, we expect these to rise next week:
- Long AUD/JPY
- Long EUR/JPY
- Long GBP/JPY
- Long NZD/JPY
- Long CAD/JPY
In the previous week, the Japanese yen emerged as the strongest major currency, while the US dollar lagged behind. Volatility picked up slightly, with over a third of major pairs changing by more than 1%. The yen had exhibited notable volatility and appreciated considerably.
Next week’s volatility might remain similar, possibly a tad lower.
These predictions can be acted upon through real or demo Forex brokerage accounts.
Last week, the USD formed a bearish candlestick engulfing the previous two bullish ones. However, it had a prominent lower wick, and the price action is only slightly bearish.
Overall, last week’s close was among the lowest in over a year. A long-term bearish trend is apparent in pricing yet, interestingly, the last year has been solid.
Furthermore, the interest rate outlook for the USD turned more bearish, with the market now bracing for three 0.25% cuts in 2026 as opposed to just two.
A weak bearish bias seems reasonable, but one can’t rule out a slight rise for the dollar over the coming week.
The USD/JPY pair was central to last week’s foreign exchange dynamics, showing a powerful move as the dollar weakened and the yen surged. This shift stemmed from strong inflows into Japan, driven by a robust stock market following a sweeping election win for the government.
Despite this, I anticipate the yen will likely relinquish some of its gains next week. Important support levels around 152.14 and a bullish trend line at 151.61 could play crucial roles.
A rebound from these support lines might provide a good opportunity for long trades, particularly amid the current volatility.
The S&P 500 has enjoyed a lengthy bull market, but it seems to have hit a ceiling for about the last nine weeks after reaching a new all-time high. While support below 6737 appears critical, a merging support level at 6,500 seems even more pivotal due to its alignment with the 200-day moving average.
Although we’re still technically in a bull market, any closures above 7,025 could signal a new high. The reluctance to push higher may indicate a deeper decline is on the horizon, which could signal a turning point for the bull market.
The Nasdaq 100 Index appears susceptible to notable declines as well.
BTC/USD has dipped below long-standing support levels, entering a pronounced bear market and reaching a 16-month low. This is technically significant from a bearish perspective. However, this week’s candlestick presents signs of a possible reversal. While cautious about bullish sentiment, a close above around $81,000 might signal a shift in momentum.
If prices fall below recent lows of around $60,000, that would be notably bearish, possibly prompting further declines toward the $50,000 threshold.
Gold, like silver, saw a sharp drop at the end of January, plummeting from around $5,600 to $4,400 but has rebounded with a mix of volatile price actions. According to the Fibonacci measurements, a mid-level around $5,000 has gained traction yet failed to maintain as robust support.
Trends suggest a slow upward consolidation, reducing volatility as the market finds its rhythm.
Despite a growing likelihood of weak bullish signals for gold, I’m not ready to re-enter until it closes above a significant multi-month high.
Interestingly, gold seems to be leading among precious metals.
This week, I believe the top trades are:
- Long S&P 500 Index following a daily close above 7,025.
- Long JPY currency crosses, excluding CHF/JPY.
These trades may be executed through our list of notable forex brokers.
