The Federal Reserve speeds up its quantitative tightening, and this is certainly bullish news for the USD. At the same time, this is a negative factor for the American stocks, which have entered their seasonally worst month.
Weekly Forex Outlook: January 15-19
The demise of the US dollar continues. After recovering to 92.50 at the start of the week, the US dollar index then fell below 92.00. A decline below January lows will lead the USD to September lows at 91.50. American economic figures mostly disappointed, especially producer price index. Comments of the Federal Reserve members were also mostly negative for the greenback. The upcoming US data drivers include industrial production, building permits, and consumer sentiment.
The euro initially slid to 1.1915, but then surged to September high just below 1.2100. After the ECB released the minutes of its December meeting, traders increased expectations that the central bank was preparing to reduce its monetary stimulus program. EUR/USD has potential to strengthen towards 1.23, although it will likely need to correct on its way. Supports are at 1.2000 and 1.1915. GBP/USD is also pressuring September highs, but to strengthen further the pound needs higher inflation release. The indicator will come out on Tuesday.
Japanese yen strengthened because of the same reasons as the euro. USD/JPY fell to the lowest levels since the end of November. A decline below 111.00 will lead the pair to the long-term support around 110.00.
Important events to watch in the upcoming days include the Bank of Canada’s meeting on Wednesday. The regulator is expected to raise the benchmark interest rate from 1% to 1.25%. If this comes true, USD/CAD will head to 1.2440 and 1.2425. If the central bank disappoints, the pair will recover to 1.2650 and 1.2700.
Finally, China will release GDP and industrial production on Thursday. A good reading will help currencies like Australian and New Zealand’s dollars and depress the yen.
The gold has made a perfect retest, but will it hold against the rising dollar? Also, the Jackson Hole Symposium and Jerome Powell's speech may become critical for most assets, and finally, more economic releases and earnings reports await you.
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