EURUSD, GBPUSD, USDJPY

US CPI --> EUR/USD

In the US, inflation has been going down over time, but the CPI shows that the drop in the last few months has stopped short of bringing it all the way down to 2%. Although Fed officials are hopeful that prices will continue to fall over the next few months, the strong US economy is proving to be a problem for them. This is because strong domestic demand makes it more likely that inflation will start to rise again, especially if wage growth picks up a lot. On Tuesday, the consumer price index is forecasted to fall to 2.9% y/y in January from 3.4% y/y before. 

In FX markets, EUR/USD has been stubbornly pushing for some recovery after the bounce off the medium-term ascending trend line at 1.0725. A successful climb higher could meet the short-term falling trend line near the 200-day simple moving average (SMA) at 1.0830 which is ready to post a bearish cross with the 20-day SMA. If not, the 1.0725 support and even lower the 1.0655 barrier could be the next levels to watch.

UK CPI and GDP --> GBP/USD

The rate of inflation in the UK experienced a significant decline towards the end of 2023, followed by a minor increase. If both the headline and core Consumer Price Index (CPI) experienced a further decrease in January, this would be a source of relief for the Bank of England, but it is unlikely to have a positive impact on the value of the pound. The headline CPI is predicted to jump to 4.2% y/y from 4.0% y/y previously on Wednesday. Concerns of a recession were heightened by the 0.1% contraction in UK GDP in the three months leading up to September. On Thursday, however, figures are expected to reveal that the UK economy escaped a recession and saw flat growth in the fourth quarter.

The rejection within the 1.2495-1.2520 support level could make GBP/USD move higher towards the bearish cross within the 20- and the 50-day SMAs at 1.2670. Even higher, the market could revisit the 1.2785 resistance level. On the other hand, a drop below 1.2495 could clear the way towards the 1.2370 support before hitting the medium-term uptrend line at 1.2330. 

Japan GDP --> USD/JPY 

The fourth quarter preliminary gross domestic product figures from Japan are scheduled for Wednesday, and all eyes will be on them. The economy is predicted to have recovered from a steeper-than-expected third-quarter contraction in the last three months of 2023, with growth rebounding by 0.3% q/q.

Technically, USD/JPY would confirm a bullish bias if there is a clear step above the 149.70 resistance level in the next few sessions. The market is travelling well above the SMAs and may test the 151.90 barricade again. Alternatively, a decline below the 148.80 support and the 20-day SMA may take the market towards the 145.90 mark, which moves near the 50-day SMA at 145.60 if the Japanese GDP data be optimistic.