The US dollar’s weakness offered a boost to emerging-market currencies and oil.
Forex today: worries for the US dollar
- The US dollar is falling after the 3-day rise. On Wednesday, the Fed released the interest rate and gave comments on its decision. As anticipated, the interest rate remained unchanged at 1.75%, however, the comments were not supportive for the greenback. The Fed’s words about the “symmetric” nature of its 2% inflation target seemed to signal an excess of the target. Furthermore, the FOMC removed the line saying the outlook had strengthened from its statement that added worries to investors.
Investors are waiting for the trade negotiations between US and China in Beijing that begin on Thursday. Moreover, some important economic data for the US dollar will be released on Thursday and Friday. If actual data are greater than forecast ones, the US dollar will have chances to recover.
- EUR/USD reached 200-day MA that appeared to be the resistance. So the pair rebounded. Thursday economic data are weaker than anticipated that is why there is a possibility that the pair will move to the support at 1.1920. However, a further depreciation of the US dollar will give chances to the euro to continue its rise. The resistance will be again at 200-day MA.
- UK Services PMI data was weaker than expected (52.8 vs 53.5). As a result, the pound is suffering. GBP/USD reached the support at 1.3570 but did not break it. As no important data for the UK currency is anticipated on Thursday and Friday, the pair may break the support and move further to the 200-day MA at 1.3525.
- The Australian dollar managed to find a support to recover. Today’s economic data appeared to be greater than expected: trade balance 1.53B vs 0.68B; building approvals 2.6% vs 1.1%. As a result, the AUD/USD pair broke the resistance at 0.7513 and now it is trying to move further. If the pair is able to close above this level, the next resistance will lie at 0.76.
- USD/JPY could not stick above the resistance at 109.80 and moved down. An extensive trading is not anticipated as it is a bank holiday in Japan until next week. Now the pair is trading near 50.0 Fibonacci retracement. If the US dollar does not find a support, the pair will move to the pivot point at 108.75. However, if US-China trade negotiations are successful and the US economic data are positive, the pair will turn around. The resistance will lie at 110.20 (200-day MA).
- Oil lost some points on Wednesday as crude oil inventories data showed a significant surplus: actual 6.2M vs forecast 1.0M. However, concerns about US sanctions on Iran overshadowed the surplus and oil managed to increase. Brent is near $73.50 a barrel, WTI is slightly above $68 a barrel. Let’s see whether the US will find an opportunity to withdraw from the agreement.
- On Wednesday Bitcoin rebounded from the 100-day MA and closed above $9,000. Today the Bitcoin trading is not showing a significant movement, however, the cryptocurrency is still above $9,000.
Goldman Sachs, one of the largest financial institutions in the US, announced a launch of a Bitcoin trading desk. The company will offer its clients future contracts. Let’s see how Bitcoin will react.
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Poor US data, slow vaccine distribution, rising virus cases worsened the market sentiment and underpinned safe-haven currencies like the USD, and JPY.
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.