USD’s rally takes a pause, while riskier assets are modestly rising.
Daily News: the USD is above $95
- On Wednesday, the US dollar index finally managed to close above $95. As a result, today the index is moving up. Traders will look at final GDP and unemployment claims data (15:30 MT time). The forecast is not too encouraging as the GDP is supposed to stay at the same level and the number of claims is anticipated to rise. However, if the actual data are more positive than the forecast ones, the USD will get an additional support. The next resistance is at $95.50. If the index will turn around, the support will lie at $95.
- The euro is trying to recover. Spanish flash CPI data was the same as the forecast. Later, traders will look at German prelim CPI data, if the actual one is greater than the forecast, the euro will have more chances to rise. Up to now, the pair has been trading above the support at 1.1550. The resistance lies at 1.1615. However, if the USD is stronger, EUR/USD will go down to 1.1450.
Take into consideration that the EU Economic Summit starts today. It’s supposed to be a lot of interesting news.
- The Chinese yuan is at the lowest level since December 2017. Up to now, the USD/CNY has been trading at 6.625.
As a result, Financial institutions see risks of the CNY’s depreciation.
According to one of the institutions, a stronger depreciation may be counterproductive to China's internationalization objectives such as attracting foreign equity and bond capital. It sees a possibility of the further CNY’s fall. USD/CNY can reach 6.75 because of the weakness of emerging markets’ currencies.
CASS researcher supposes that 6.7 level will make the People’s Bank of China worry. As a result, the Bank may react with economic measures such as suspending of the operation of devaluing yuan, actions to dampen volatility, a usage of forex reserves or reintroduction of the counter-cyclical factor into fixing formation mechanism.
The UOB sees a steady GDP growth for 2018 and a de-escalation of trade tensions. As a result, the CNY will remain weak in the near-term, however, it can quickly stabilize if there is any sign of a trade tensions’ easing.
- USD/JPY is rising again. Although the Japanese yen tried to take the situation under control, the US dollar managed to strengthen. According to the Barclays survey of Japanese bond investors, a further depreciation of the yen is anticipated.
Up to now, the pair has tested the resistance at 110.20 (200-day MA). The further rise of the USD will pull the pair to 110.90. However, if there is some negative news on trade tensions, the pair will trade within 109.770-110.20.
- The New Zealand dollar is weaker after the RBNZ meeting. The central bank kept the interest rate on hold as anticipated. However, analysts assessed the RBNZ statement as bearish. Firstly, the Central Bank declared more risks to the global economic outlook. Secondly, the Bank announced that weaker GDP causes marginally more spare capacity in the economy than anticipated. Thirdly, "the Government's projected spending impulse is also slightly lower and later than anticipated".
Up to now, NZD/USD has been trading below the support at 0.6765. No important economic data will be released today. As a result, the risk of the trading below the support is high. The next support is at 0.67.
That’s all for today! Follow market news with FBS!
Poor US data, slow vaccine distribution, rising virus cases worsened the market sentiment and underpinned safe-haven currencies like the USD, and JPY.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
PMI reports from the EU, the UK, and the USA will be released during the day!
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
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