The US dollar index keeps rounding above the 103.60 historical support level. The buyers have already defended this level for three weeks, highlighting their interest in the greenback. Thus, buying USD looks less risky right now.
How to trade EUR/USD and GBP/USD on Monday?
- The week has started with the mixed data from China. China’s data is important as it sets the risk sentiment. Industrial production with retail sales jumped, exceeding market estimates. However, it was offset by worse-than-expected numbers of fixed asset investment and unemployment rate. Overall, analysts consider China has still shown a strong rebound.
- These days, investors worry about inflation risks. We already can see it in the rotation in the stock market from growth such as Amazon and Facebook to value stocks such as Johnson & Johnson, Procter & Gamble as it’s considered values stocks will survive anyway.
- If inflation rises over 2%, Fed may break its promise to keep rates low for longer and will increase interest rates faster than the market expects. This will lead to the market shock: stocks and riskier assets will drop and the USD will surge.
- However, Treasury Secretary Janet Yellen reassured that the risk is “small and manageable” due to Biden’s $1.9 trillion stimulus.
EUR/USD has just broken through the 23.6% Fibonacci retracement level of 1.1930. Thus, the doors are open to the psychological mark of 1.1900, which the pair shouldn’t cross on the first try. The move below it will drive the pair down to the next support of 1.1875. On the flip side, if it reverses, it may jump to the intraday high of 1.1960 and then if it breaks it, the pair may rise to the 38.2% Fibo level of 1.1990.
GBP/USD is more likely to reverse from the 50-period moving average of 1.3900 and rise to the 38.2% Fibo level of 1.3950. The move above this resistance will drive the price to 1.4000. On the flip side, if the pound falls below the support zone of 1.3900-1.3885, the way to 1.3850 will be open.
USD/JPY is getting closer to the resistance of 109.50, which it’s unlikely to cross as the RSI indicator is above the 70.0 level, signaling the overbought area. Thus, the pullback should happen soon. Support levels are the low of March 10 at 108.35 and 107.00.
The Canadian dollar gained due to the high oil prices. USD/CAD is falling to the psychological level of 1.2400. The move below it will drive the pair down to the next round number of 1.2350. Resistance levels are at the recent highs of 1.2560 and 1.2610.
On the H4 timeframe, the US dollar index has formed a bullish falling wedge. At the beginning of the trading session, the price is testing the upper border of this wedge. Thus, in case of a higher-than-expected Core PCE Price Index m/m, the US dollar will skyrocket against other currencies.
Happy Wednesday, traders! We went through the Internet and found the best news for you, take a look!
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.
2022 was rough: inflation, energy crisis, and plenty of other controversial situations…