Weekly Forex Outlook: Jan. 29

The US dollar made a spectacular decline last week as American Treasury Secretary Steven Mnuchin said that a weaker dollar is good for American trade. After that, he said that his words were taken out of context, but the damage was done. The US dollar index fell below 90.00. The general downtrend of the US currency continues. For now, it managed to find support at 88.37 (200-month MA), but investors are not likely to have much faith in the greenback, so any recovery should be limited.

As the USD declined, other major currencies rose. Now everyone wonders whether they will correct down. It’s time to consult the charts.

USD/JPY closed the week below 100-week MA and support line since 2016. This line is now a resistance at 110.45 and should limit recoveries. The key support is at 107.30.

EUR/USD rose to a 3-year high at 1.25 as the ECB didn’t appear concerned with the euro’s strength. However, the pair failed to close above that level. Buyers are likely to take profit. Support is at 1.2250 and 1.2070.

GBP/USD made its biggest weekly advance since September and rose to 1.4345. British economy seems to be doing better than expected: GDP growth accelerated in Q4 from 0.4% to 0.5%. Corrections should find support at 1.3900 and 1.3630.

Let’s also have a look at this week’s economic calendar. Donald Trump will deliver "The State of the Union Address" on Wednesday. This speech may influence the market – watch whether Trump tries to diminish the talk about a weaker USD or, on the contrary, speaks in favor of it. In addition, on Wednesday, the Federal Reserve’s meeting will take place, although no policy changes are expected. The USD volatility will surely surge on Friday as America will release Nonfarm Payrolls, unemployment rate and average earnings. It’s difficult to predict these data and they often differ from forecasts provoking strong moves.

As for events in other countries, the euro area will release flash CPI, Britain will publish manufacturing and construction PMI and the Bank of England Governor Carney will testify in the parliament.