USD On The Back Foot As The Week Begins

Jan 25 21, 11:15 GMT

The USD seems to be on the backfoot as the week begins during today’s Asian session, as the risk on mood of the market seems to be on display. Despite the country having surpassed the milestone of 25 million coronavirus infections, the number of new cases seem to be on the decline creating some hopes among investors. At the same time, the Biden administration in the US, seems to be pushing ahead with its $1.9 trillion fiscal stimulus plan, yet US lawmakers seem to resist the idea of such a large amount, also as a $900 billion plan was approved recently. Given Biden’s personal insistence that the relief bill must be given bipartisan support, we may see the package shrink and be delayed somewhat, which could create some uncertainty in the markets and some safe haven inflows for the USD. Should the risk on mood of the markets continue to be present, we may see the USD weakening and the US stock markets getting some support.

EUR/USD stabilised after breaking the upward trendline incepted since the 20th of January on Friday and continued to hover just above the 1.2155 (S1) support line. As EUR/USD has broken the prementioned upward trendline we switched our bullish bias in favour of a sideways movement, at least initially until the pair decides the direction of its next leg. Please note that the bulls may have a slight advantage, given that the RSI indicator below our 4-hour chart remains above the reading of 50. If the bulls regain control over the pair’s direction, we may see it aiming if not breaking the 1.2215 (R1) line aiming for higher grounds. If the bears take over, we may see EUR/USD breaking the 1.2155 (S1) line aiming for the 1.2100 (S2) level.

Pound strengthens as the vaccination is ongoing

The pound strengthened against the USD, EUR and JPY during today’s Asian session, as a note of optimism seemed to characterize pound traders. Vaccination is ongoing in the UK and the government’s decision to delay the second dose of the vaccine in order for a wider part of the population to get the first one seems to be gaining traction and should it provide a wider immunity faster it could support the UK economic outlook as well. On the other hand, Johnson’s statement about the possibility of the new variant of Covid 19 being more deadly tended to increase worries. Should optimism continue to characterize pound traders, we may see it strengthening further today and even maybe tomorrow.

GBP/USD maintained an upward motion, breaking the 1.3700 (S1) resistance line, now turned to support. We maintain a bullish outlook for the pair, as long as it remains above the upward trendline incepted since the 24th of September, yet we note that the pair seems to find increasing resistance. If buyers continue to have the upper hand, we may see cable aiming if not breaking the 1.3835 (R1) line moving upwards. If a selling interest is displayed, GBP/USD could break the 1.3700 (S1) line and aim for the 1.3585 (S2) level.

Other economic highlights today and early Tuesday:

Today during the European session, we highlight Germany’s Ifo indicators for January and please note that ECB President Lagarde and BoE Governor Bailey are scheduled to speak.

As for the rest of the week

On Tuesday, we get UK’s employment data for November and the US consumer confidence for January. On Wednesday, we note the release of Australia’s CPI rates for Q4, Germany’s GfK Consumer Sentiment for February, the US durable goods orders for December, the Fed’s interest rate decision and New Zealand’s trade data for December. On Thursday, we get Japan’s retail sales for December among a slew of data, Germany’s preliminary HICP rates for January, the US GDP advance for rate for Q4 and the US weekly initial jobless claims figure. On Friday, we get from Japan Tokyo’s inflation rates for January and preliminary industrial output for December, France’s preliminary GDP for Q4, UK’s nationwide House Prices for January, Germany’s preliminary GDP rate for Q4, the US Consumption rate for December and Canada’s GDP rate for November.

EUR/USD H4 Chart