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.
Risk-on is back on the market
The market sentiment has switched to risk-on, driving upwards stocks and riskier currencies and weighing on the US dollar.
- US officials have almost reached a deal over fiscal stimulus. The sum is expected to be 2 trillion dollars. It encouraged investors and pushed riskier assets higher, offsetting the negative effect of yesterday’s intense US debates.
- All the US economic data came out better than analysts expected: the final GDP for the second quarter, pending home sales, and Chicago PMI. Besides, ADP beat estimates as well, which gave a hint for better-than-expected NFP this Friday.
- Chinese Manufacturing PMI turned out 51.5, which was almost as a planned number of 51.3. Since China is the world’s second-largest economy, the optimistic data improved the overall sentiment.
- ECB’s President Christine Lagarde claimed that the Fed’s inflation approach is worth examining in the EU. If the central bank imposes it, lower rates will drive the euro downward. However, it hasn’t done it still, and for now, EUR/USD is rising amid the risk-on mood.
- All eyes on US ISM Manufacturing PMI and unemployment claims today as those reports in combination with ADP will help to predict what to expect from Friday’s NFP.
The most traded pair is trying to break through the strong resistance of 1.1750, which it has failed to cross a few times so far. The move above this level will drive the pair upwards to the 100-period moving average at 1.1770. On the flip side, if it falls below yesterday’s low of 1.1710, the way to the next support of 1.1675 will be open. Follow unemployment claims and US Manufacturing PMI as they will be two main drivers of the price movement today.
As mentioned above, stocks have been pushed up by the overall risk-on sentiment. S&P 500 has broken through the 50-day moving average of 3 350, therefore the way to 3 425 is open now. If the price crosses it too, it may jump to 3 480 then. Support levels are 3 330 and 3 290.
XAU/USD is staying just below the significant resistance of $1 900. If it eventually passes it, the high of September 22 of $1 920 will be open. In the opposite scenario, the move below the support of $1 880 will drive the yellow metal to September’s low of $1 850.
The aussie is edging higher, driven by the improved sentiment. The move above the 50-day moving average of 0.7200 will drive AUD/USD upwards to 0.7335. Otherwise, the move below the significant support of 0.7100 will push the price to the key psychological mark of 0.7000.
- US unemployment claims will be out at 15:30 MT time.
- Follow ISM Manufacturing PMI at 17:00 MT time. The better-than-expected reading will drive the USD upwards, the worse-than-expected – downwards. Stay tuned!
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.
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This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
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.