USD Edges Slightly Higher

Mar 16 21, 10:48 GMT

The FX market was rather mixed with little volatility on a rather quiet Monday, yet the greenback was still able to gain somewhat against its peers. There seems to be some cautiousness in the market just ahead of the FOMC’s interest rate decision being released tomorrow. Despite the cautiousness of the market, it should be noted that US stock markets were able to make some gains, also rising just a bit, yet some indices have reached new record highs. The stock market movement could also have been encouraged by a slight drop of US bond yields and characteristically the 10 year yield retreated further after last week’s peak. Despite market focus being on the FOMC’s interest rate decision, due out tomorrow, we also expect today’s financial releases to play a role in USD’s direction while market sentiment looks like the calm before the storm.

USD/CHF retreated after unsuccessfully attempting to break the 0.9300 (R1) resistance line. We tend to maintain a bias of a sideways motion, given the pair’s movement since 9th of March and the breaking of the upward trendline characterising its movement prior to that. Also note that RSI indicator below our 4-hour chart, seems to be running just below the reading of 50, implying maybe a rather indecisive market. Should the pair find fresh buying orders along its path, we may see it breaking the 0.9300 (R1) resistance line and aim for the 0.9375 (R2) level. Should a selling interest be displayed by the market, we may see USD/CHF aiming if not breaking the 0.9190 (S1) support line and if S1 is broken the way opens for the 0.9090 (S2) support level.

Europe’s vaccination program into question

The common currency sent some mixed signals yesterday as it remained relatively unchanged against the USD, gained some ground against the pound, yet retreated against safe haven CHF. The recent decisions of Germany, Italy and France to suspend the Astra Zeneca vaccination shots, seems to be creating a void in the area’s vaccination program given that Johnson and Johnson’s vaccine cannot be distributed yet, while Russia’s Sputnik is not available as it has not been approved yet by EU authorities. The decision was made after reports for serious side effects, yet WHO has reported that there is no proven link with the vaccine. The decision could have adverse effects on Eurozone’s recovery given other EU countries have also suspended the use of the prementioned vaccine. The criticality of the situation is highlighted by the fact that Germany seems to be at the verge of a third wave, Italy is reported to be intensifying lockdowns and the French health care system may be nearing its full capacity in the Paris area. The news could weigh on the EUR should not alternative be found, while EUR traders may be keeping an eye out also for financial releases.

EUR/USD maintained a sideways motion above the 1.1905 (S1) support line yesterday. We tend maintain our bias for a sideways movement between the 1.1905 (S1) support line and the 1.1990 (R1) resistance line. Also supportive of a bias for a sideways motion is the fact that the RSI indicator below our 4-hour chart runs along the reading of 50, implying that the market may have not made its mind up yet regarding the pair’s next leg. Should the bulls take charge of the pair’s direction, we may see it breaking the 1.1990 (R1) resistance line and continue higher for the 1.2100 (R2) level. Should the bears take over on the other hand, we may see EUR/USD breaking the 1.1905 (S1) support line and aim for the 1.1830 (R2) level.

Other economic highlights today and early Tuesday:

Today during the European session, we note France’s final HICP rate for February, while later on we highlight Germany’s ZEW indicators for March and in the late European session we get New Zealand’s Milk Auctions. In the American session, we get from the US the retail sales and industrial output growth rates, both being for February, while oil traders may be more interested in API weekly crude oil stock figure just before the Asian session starts. During Wednesday’s Asian session, we get Japan’s trade data for February, while from Australia, RBA assistant Governor Kent is scheduled to speak.

USD/CHF H4 Chart