Weekly Forex Forecast – USD/JPY, USD/CAD, Gold, Coffee, Corn – 09 February 2025

Fundamental Analysis & Market Sentiment

I wrote on 2nd February that the best trade opportunities for the week were likely to be:

-- Long of Gold in USD terms (also known as XAU/USD). The price rose by 2.13% over the week.
-- Long of Corn futures (CORN etf can also be used) following a daily close of the next ZC future at or above 498. This did not set up.
-- Long of Coffee futures (COFF etf can also be used). The price rose by 5.55% over the week.
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The weekly gain of 7.68% equals 2.56% per asset.

Last week saw several data releases affecting the Forex market:

1. US Average Hourly Earnings – this was notably higher than expected, showing a 0.5% month-on-month increase while a value of 0.3% was widely forecasted. This reinforced the now widespread belief that the Federal Reserve will make only one more rate cut of 0.25% during 2025.
2. US Non-Farm Employment Change – a little lower than expected, with 143k net new jobs when 169k was forecasted.
3. Bank of England Policy Meeting – as expected, the Bank cut its interest rate from 4.75% to 4.50%, but Governor Bailey’s dovish talk on the expectation of further cuts throughout 2025 helped sink the Pound by the end of the week.
4. US JOLTS Job Openings – this was a little lower than expected.
5. US ISM Services PMI – this was a little lower than expected.
6. US ISM Manufacturing PMI – this just a little higher than expected.
7. US Unemployment Rate – this was lower than expected at 4.0% while 4.1% was widely forecast.
8. US Unemployment Claims – this was just a fraction higher than expected.
9. Canadian Unemployment Rate – this was much better than expected, at 6.6% while 6.8% was forecasted.
10. New Zealand Unemployment Rate – as expected, the rate rose to 5.1%.
Last week’s key takeaways were:

1. A general continuing decline in inflation and the continuation of rate cuts in G7 nations (this time, it was the UK), with the notable exception of the USA, which saw average hourly earnings increase unexpectedly beyond the forecasted amount. The Fed is now expected to make only one more rate cut in 2025 of 0.25%.
2. The Japanese Yen has continued to strengthen firmly as Japanese wage inflation beats expectations and the Bank of Japan looks more likely to begin hiking rates.
3. US President Trump secured climbdowns from Canada and Mexico after threatening new 25% tariffs on their imports (excepting Canadian energy which would be taxed at 10%). Both nations agreed to make concessions to the USA in return for a month-long freeze on the new tariffs while negotiations continue. The Canadian Dollar and Mexican Peso both made very strong recoveries following the temporary agreements.
4. China responded to the new 10% US tariff with a retaliatory tariff of its own on US imports, which President Trump dismissed as “fine”.
Interestingly, these two developments should be helping an increase in the relative value of the USD, which is still in a valid long-term bullish trend. However, the US Dollar Index decreased in value last week, and technically, its price action seems to be ranging between support and resistance.

A few commodities have been performing strongly and breaking to new record highs, while a few others are also advancing in value.

The Week Ahead: 10th– 14th February

The coming week has a lighter schedule of releases, so we are very likely to see a lower level of activity and volatility in the Forex market.

The coming week’s important data points, in order of likely importance, are:

1. US CPI (inflation)
2. Fed Chair Powell testifies before US Congress
3. US Retail Sales
4. US PPI
5. UK GDP
6. Swiss CPI (inflation)
7. New Zealand Inflation Expectations
8. US Unemployment Claims
Tuesday is a public holiday in Japan.

Monthly Forecast February 2025

For February 2025, I forecasted that the EUR/USD currency pair will decline in value. The performance so far is shown below.

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Weekly Forecast 9th February 2025

Last week, I made no weekly forecast. This week, I forecast that these currency crosses will rise in value over the coming week:

-- AUD/JPY
-- CHF/JPY
-- EUR/CAD
-- EUR/JPY
-- NZD/JPY
The Japanese Yen was the strongest major currency last week, while the US Dollar was the weakest, putting the USD/JPY currency pair in focus. Volatility increased last week, with 52% of the most important Forex currency pairs and crosses changing in value by more than 1%. It is likely to remain relatively high over the coming week.

You can trade these forecasts in a real or demo Forex brokerage account.

Key Support/Resistance Levels for Popular Pairs

Technical AnalysisUS Dollar Index

Last week, the US Dollar Index moved lower against the long-term bullish trend, after making a bearish reversal near the resistance level at 110.00. However, the price also rejected the nearest support level at 106.85.

It seems clear that the dominant price action is a ranging one, between 106.85 and 110.00.

The Dollar is likely to continue rise over the coming week. The price has room to rise to at least the next resistance level at 110.00.

USD/JPY

The USD/JPY currency pair is in a strong short to medium-term bearish trend but has no dominant long-term trend. The bearish momentum is strong and has persisted for a while and is backed by the fundamental change in the Bank of Japan’s monetary policy, which seems to have fully turned the corner and gotten established on a more restrictive path as Japanese wage growth begins to take off.

There is also a feeling that the Japanese Yen is benefiting from haven flow as a safe haven, with few risky currencies advancing over the past week.

So, although these sound like good reasons to be short, it should be remembered that the US Dollar is in a long-term bullish trend, so if you want to be long of the Yen, it might be better to find another currency to use for the short side, maybe the Euro.

USD/CAD

The USD/CAD currency pair printed a huge bearish outside candlestick which closed very near to its low. It has been years since this currency pair made such a large directional price movement in only one week.

The story here is of course the threatened 25% US tariff on Canadian imports (10% on energies), with its threatened imposition seeing the Canadian Dollar sell off strongly and push the price of this currency pair up to a new 4-year high price, before the temporary climb down and agreement which then triggered massive buying of the Loonie, leaving the price firmly lower on the week.

I had not expected such a fast concession by Canada, so I had thought that the rise would continue for a few days – I was wrong about that.

It is tempting to go short here, with another factor being the bid in Crude Oil which is also giving a tailwind to the Canadian Dollar, but I think the price will probably consolidate over the next week as the bearish move has already more or less run out of momentum.

XAU/USD

Gold advanced last week to reach a new all-time high last Friday above $2,886 per ounce. However, later in the day on Friday, the price gave back much of its earlier gain to close below Wednesday’s record high closing price, which should be a factor of some caution to bulls.

This trend may see a relatively slow rise, but we can see how steadily and strongly Gold gained over the past year, so this looks likely to be a solid trend.

I am far from sure that Gold will reach $3,000 per ounce over the coming week, but this target is certainly in sight now.

The traditional safe haven assets of the Japanese Yen and Gold seem to be doing well in the current market environment, although I note Gold often acts as a surrogate for risk appetite.

As we saw a slight bearish element creep in at the end of last week, I’d like to see a new record high daily closing price before entering any new long trade – above $2,867.25.

Coffee Futures

The price chart below shows that Coffee futures have been breaking out to long-term high prices over a period of more than 6 months, with last week’s price rise being a relatively strong one. This is suggestive of a climax, which would make going long dangerous, and this is reinforced by the fact that Friday’s close was not the highest daily close.

Taking long trades when major commodities break out to new 6-month highs has historically been a very profitable trading strategy, which is the main reason that I want to look for a long trade here.

Due to the bearish factor that came in here on Friday, I want to see a closing price above 403.95 before entering a new long trade. It is not just the lower daily close which is worrying to bulls, but the fact that the three-candle pattern includes a bearish pin bar and a sharp V-shape.

Unfortunately, Coffee futures are quite expensive and usually just too large for retail traders, but there is an ETF called COFF which can be used to participate in increases in the price of Coffee. However, note that this ETF does not always cleanly mirror the price action of coffee futures, so if you are using the ETF, be careful.

Corn Futures

Corn futures have been breaking to new highs recently, although the price action over recent days, which is shown in the price chart below, it is looking very much as if a bearish top has been formed.

I think Corn is a buy only if it makes a new daily high closing price, and this does not likely to happen.

Although we clearly have a medium or maybe long-term bullish trend in Corn, this bullish move is relatively new and may already have run out of steam, which is why I am cautious.

Many analysts see this move as mostly seasonal in nature, and do not think the price is going to make a new high and time soon.

I will be prepared to enter a new long trade only if we see Corn futures make a new 6-month high closing price at the end of any day over the coming week, above 498.

Bottom Line

I see the best trading opportunities this week as:

-- Long of Gold in USD terms (also known as XAU/USD) following a daily close of spot Gold above $2,867.25.
-- Long of Corn futures (CORN etf can also be used) following a daily close of the next ZC future at or above 498.
-- Long of Coffee futures (COFF etf can also be used) following a daily close of the next C future at or above 403.95.
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