USD Rises As Reddit Traders Rattle The Markets

Jan 28 21, 10:23 GMT

The USD strengthened yesterday against a number of its counterparts as traders also worried about the possible effects of an alignment of reddit retail traders. The US stockmarkets were rattled yesterday, as a high number of retail traders aligned against short sellers in the market and pushed certain stocks up causing a squeeze in large investor positions, going against all fundamentals. The phenomenon was so large that drew the attention of US Treasury Secretary Yellen as well as Fed Chairman Powell, commenting on the situation. Also it should be noted that the Fed maintained its monetary policy, practically unchanged at yesterday’s meeting, keeping also a dovish tone. Fed Chair Powell stated that there are pointers towards improvement later in the year, yet also that the US economy is still a long way from full recovery. Should the market uncertainty be maintained, we may see the USD getting more safe haven inflows yet traders also focus on the US GDP advance rate for Q4.

AUD/USD tumbled yesterday breaking consecutively the 0.7725 (R2) and the 0.7680 (R1) support lines, both now turned to resistance and continued lower to test the 0.7625 (S1) support level. As the pair broke the R1 which was the lower boundary of its past sideways movement we switch it in favor of a bearish outlook. Also, please note that the RSI indicator below our 4 hour chart has reached the level of 30, which one the one hand confirms the dominance of the bears, yet on the other may imply that AUD/USD’s short position may be somewhat overcrowded. Should the bears maintain control over AUD/USD’s direction we may see it breaking the 0.7625 (S1) support line aiming for the 0.7570 (S2) level. Should the bulls take over, we may see the pair aiming if not breaking the 0.7680 (R1) resistance line and continue higher.

EUR weakening as ECB policymakers eye EUR exchange rates

The common currency was on the backfoot yesterday against the USD, GBP and CHF as some statements made by ECB officials tended to show that the bank may be worried for the common currency’s appreciation especially against the USD. The chief of Netherland’s central Bank, also an ECB policy maker, stated that the ECB is monitoring the strengthening in the euro, while the market may have underestimated the odds of a possible rate cut by the bank. Also he mentioned that Euro strength would take prominence for ECB if it threatens the inflation outlook, practically inviting the bears in for EUR yesterday. Also wide confusion about EU’s negotiations with AstraZeneca about the number of vaccines to be received by the Union tended to discourage traders. Should doubts for the common currency’s outlook tend to remain we main see EUR slipping further today, yet traders may also eye the financial releases.

EUR/USD dropped yesterday breaking the 1.2155 (R2) support line as well as the 1.2100 (R1) support level both now turned to resistance levels. We maintain a bearish outlook for the pair as the downward movement seems to be strong and given that the RSI indicator below our 4 hour chart is aiming for the reading of 30, underscoring the presence of the bears at the current moment. Should the selling interest of the market persist, we may see EUR/USD breaking the 1.2050 (S1) support line and start aiming for the 1.2000 (S2) level. Should buyers take the initiative, we may see EUR/USD reversing course, breaking the 1.2100 (R1) resistance line and aim for the 1.2155 (R2) resistance level.

Other economic highlights today and early Tuesday:

Today during the European session, we Eurozone’s economic sentiment and final consumer confidence indicators , both for January, yet the main release is expected to be Germany’s preliminary HICP rate for the same month later on. In the American session, all lights fall on the release of the preliminary US GDP growth rate for Q4, but we also note the weekly initial jobless claims figure, Canada’s building permits for December and the US new home sales figure for December. In the Asian session, we get from Japan Tokyo’s inflation measures for January and the preliminary industrial output for December.

AUD/USD H4 Chart