USD Remains Steady On Market Uncertainty

Feb 01 21, 11:23 GMT

The USD tended to remain steady against a number of its counterparts during today’s Asian session , as market uncertainty seems to be on the rise. It should be noted that the battle between Wall Street hedge funds and retail traders is still ongoing, fuelling uncertainty even further. On the US political theatre, it should be noted that the Republicans are pressuring Biden to scale down his proposal for a $1.9 trillion fiscal stimulus plan, which also tends to create some uncertainty in the market, given that it is considered as crucial for the US economy’s speed of recovery. We expect the USD to strengthen should market uncertainty be maintained, while US stock markets could weaken.

After testing the 1.2875 (R2) resistance level, USD/CAD dropped on Friday and broke clearly the 1.2800 (R1) support line, now turned to resistance. Given that the pair broke the downward trendline characterising its movement since late April, we maintain a bias for a sideways motion temporarily until the pair decides on its next leg. Should Friday’s selling interest persist we may see USD/CAD breaking the 1.2700 (S1) support line and aim for the 1.2610 (S2) level which reversed the pair’s drop on the 21st of the month. Should USD/CAD find extensive buying orders along its path, we may see it breaking the 1.2800 (R1) resistance line and aim for the 1.2875 (R2) level.

Aussie traders eye RBA’s interest rate decision

Aussie traders may have been disappointed by the drop of China’s manufacturing PMIs today. Tomorrow during the Asian session, we get RBA’s interest rate decision, and the bank is widely expected to remain on hold at 0.10% given that AUD OIS imply a probability of 99.74% currently for such a scenario to materialize. Analysts seem also to expect that the bank may announce an extension of the bank’s QE program, meaning that the bank would continue to flood the market with liquidity after April. Also a dovish tone could be expected that could weigh on the Aussie and is our base scenario for now. RBA Governor Philip Lowe is scheduled to speak the next day and could grab some headlines.

AUD/USD dropped on Friday breaking the 0.7680 (R1) support line, now turned to resistance. We tend to maintain a bias for a sideways motion, given that AUD/USD’s prices remain between the 0.7680 (R1) line and the 0.7625 (S1) level. Should the bears be in charge of the pair’s direction, we may see it breaking the 0.7625 (S1) line and aim for the 0.7570 (S2) support hurdle. Should the bulls take over, we may see USD/CAD breaking the 0.7680 (R1) resistance line and aim for the 0.7785 (R2) level.

Other economic highlights today and early Tuesday:

Today during the European session, we note Germany’s retail sales for December as well as January’s final Markit manufacturing PMIs for Germany, UK and later the US. Also in the American session, we highlight the US ISM manufacturing PMI for January, while Fed policymakers Bostic and Rosengren are scheduled to speak.

As for the rest of the week

On Tuesday, we get UK’s nationwide house prices for January, France’s preliminary CPI (EU Normalised) for January, Eurozone preliminary GDP for Q4 and New Zealand’s employment data for Q4 employment data for November. On Wednesday, we note the release of Australia’s building approvals for December, China’s Caixin services PMI for January, France’s, Eurozone’s and UK’s final Markit services and composite PMIs for January, Eurozone’s preliminary HICP rate for January and the US ISM nonmanufacturing PMI for January. On Thursday, we get Australia’s trade data for December, UK’s BoE interest rate decision the US weekly initial jobless claims figure, from the Czech Republic CNB’s interest rate decision and from the US the factory orders growth rate for December. On Friday, we get from Australia the final retail sales growth rate for December, Germany’s industrial orders for December, UK’s Halifax House prices for January the US employment report for January with it NFP figure, as well as Canada’s employment data for January.

USD/CAD H4 Chart