The US dollar’s weakness offered a boost to emerging-market currencies and oil.
Daily News: the USD is weak
- The US dollar index has been trading below the psychological level of $94.50. Although Monday economic data were positive, the US dollar index was weak. The market is waiting for Mr. Powell’s testifies on Tuesday and Wednesday (17:00 MT time). As the market anticipates two additional rate hikes this year, the speeches of the Fed’s Chairman will make sense for traders. If the Chairman sounds hawkish, the USD will be able to recover, otherwise, it will go further down. Targets are the support at $94, resistances at $94.50 and $95.
Morgan Stanley forecasts the weaker USD in the third quarter of 2019, the return to the weaker movement will happen in August 2018.
Forecasts for pairs within the 1 year:
USD/JPY 88.00 - 101.00.
EUR/USD 1.18 - 1.30.
GBP/USD 1.32 - 1.50.
AUD/USD 0.67 - 0.75.
- ANZ says that the Chinese yuan is undervalued.
According to ANZ, trade wars tensions were the main reason for the Asian currencies’ weakness. The Bank says that even if trade wars tensions don’t ease in the near future, the Asian currencies weakness may ease soon. However, the Bank adds that although the average fair value of the CNY is $6, the gap in the valuation unlikely will be covered soon.
Last week USD/CNH was trading near the highs of August 2017 at 6.7250. Up to now, the pair has been going down because of the weak USD. However, according to Morgan Stanley, traders shouldn’t anticipate the soon fall of the pair. Key targets are supports at 6.6780 (the pivot point) and 6.6275, resistances at 6.7250 and 6.7570. The stronger USD will pull the pair up.
- Although the USD is weak, it keeps appreciating against the Japanese yen. USD/JPY is trying to reach the high of the previous week at 112.80. However, the USD needs additional support to move higher. If the USD recovers, the pair will come to the resistance, otherwise, there are risks of the fall. The support lies at90.
- The weaker USD lets other currencies appreciate.
The pound is rising despite mixed economic data. Average earnings index and unemployment rate data were neutral while claimant count change’s figure was weaker than the forecast.
GBP/USD rebounded from the pivot point at 1.3235. Up to now, the pair has been moving to the resistance at 1.3280. If the USD is weaker, the pair will be able to break this level, the next resistance will be at 1.3315 (50-day MA). Otherwise, the pair will return to the pivot point at 1.3235 and there will be risks of the fall to 1.31.
- The New Zealand dollar shocked with a great rise. Although the CPI data was weaker than the forecast, NZD/USD surged. The RBNZ measure of core inflation is at the highest level since the second quarter of 2011. As a result, NZD/USD rebounded from the support at 0.6780 (the pivot point) and, up to now, it has been trading near the resistance at 0.6835. The resistance is strong as the trendline puts additional pressure on the pair. If the USD is weaker, NZD buyers can hope on the break of the resistance. The next one will lie at 0.69 (50-day MA). If the NZD doesn’t get additional support, the pair will turn around to the support at 0.6780.
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The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
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.