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The Israeli cabinet just approved a unilateral ceasefire in the Gaza war. This truce will begin on Sunday, January 18th, at 00:00 GMT, or 02:00 in the middle east.

After 3 weeks of intense fighting in Gaza, the conflict might reach it’s end, as this ceasefire is backed by the Palestinian authority, Egypt and major European countries. Chancelor Angela Merkel of Germany, President Nicola Sarkozi of France and PM Gordon Brown of Britain will arrive in Egypt and Israel on Sunday to see that it really happens.

The reaction of Hammas isn’t clear, but analysts expect it to respect the ceasefire.

If the Gaza war is really over, this wil cause another drop in oil prices. And, a drop in oil prices will impact the forex market as well: the Canadian and Australian dollars, that have already been beaten in the last week, will suffer more. Watch out for USD/CAD and AUD/USD.

In addition, the side effect of a drop in oil prices is a rise in stock markets in the US. The end of the Gaza war + Obama’s inauguration should send the stock market up, and support the dollar against many currencies, even against the Japanese Yen. Watch out for moves in USD/JPY that are directly impacted by these two major geo-political events this week.

A weekly forex trading outlook will be published later.

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