News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • Technical analysis of charts aims to identify patterns and market trends by utilizing differing forms of technical chart types and other chart functions. Learn about the top three technical analysis tools here: https://t.co/KDjIjLdTSk https://t.co/HNqHcbL6vk
  • The US Dollar continues to push higher against ASEAN currencies after the FOMC rate decision. This leaves the USD/SGD, USD/THB, USD/PHP and USD/IDR outlook mostly tilted higher. Get your market update from @ddubrovskyFX here:https://t.co/zn56iTFBxM https://t.co/FbepD4RaFg
  • The US Dollar seems to be back on the offensive against its major counterparts, pressuring EUR/USD and NZD/USD lower as USD/JPY consolidates. USD/CHF surges past key resistance. Get your market update from @ddubrovskyFX here:https://t.co/MrLGSp7FYa https://t.co/XS0176LyOg
  • The Japanese Yen remains in focus with strength potential on risk aversion themes to go along with weakness on themes around higher rates. Get your weekly $JPY technical forecast from @JStanleyFX here: https://t.co/l4UICqJzJy https://t.co/dQ2pS0E4fp
  • Google finance-related search interest in 'Evergrande' has almost overtaken 'Covid'. 'Taper' doesn't even register on the scale https://t.co/P6H9sHFVIB
  • Gold prices gain as potential systemic risks out of China's Evergrande Group roil broader markets. Meanwhile, iron ore is ticking higher after a big drop on Monday as China steps up steelmaking curbs. Get your market update from @FxWestwater here:https://t.co/l4kAWDJ2wm https://t.co/b9m5ADIqqb
  • Gold remains higher despite positive Evergrande news out of China. Meanwhile, copper bulls are pushing prices upward as the potential for a housing crisis in China ebbs. Get your market update from @FxWestwater here:https://t.co/TK3MNntBdA https://t.co/14UKjR4w6M
  • GBP/USD has flattened overnight after its strongest rally in a month on Thursday. The British currency has been under pressure recently as an energy crisis has caused a number of gas providers to go bankrupt. Get your market update from @HathornSabin here:https://t.co/3D8s2eIVWv https://t.co/JDGNwKYyOn
  • Japanese candlesticks are a popular charting technique used by many traders, and the shooting star candle is no exception. Learn about the shooting star candlestick and how to trade it here: https://t.co/mfwJ0sIauS https://t.co/JIT5it2HAt
  • Gold could suffer further near-term losses due to rising U.S. Treasury yields and a weak technical picture for price action. Get your weekly gold forecast from @DColmanFX here: https://t.co/g9QvH3L4It https://t.co/Vz98E0Bl9U
US Dollar Forecast: Biden Ascends to Presidency - Will Greenback Descend? Levels for DXY Index

US Dollar Forecast: Biden Ascends to Presidency - Will Greenback Descend? Levels for DXY Index

Christopher Vecchio, CFA, Senior Strategist
Advertisement

US Dollar Forecast Overview:

  • The US Dollar has proved buoyant thus far in 2021. Will it continue now that administrations have changed? Depends on fiscal stimulus.
  • A quieter economic calendar leaves the US Dollar susceptible to news-driven event risk over the rest of the week.
  • Retail trader positioning sees more gains for the US Dollar vis-à-vis EUR/USD, GBP/USD, and USD/JPY rates.

US Dollar Hanging in There

The US Dollar (via the DXY Index) is trading higher as President Joe Biden officially begins his first term in office, yet still remains below the weekly open. Stronger risk appetite, as evidenced by ever-higher US equity prices, has diminished some of the recent demand for the US Dollar. But the US Dollar may not be done with its attempt to climb higher, in what appears to be a short covering-driven move: US fiscal stimulus speculation will be back in the headlines soon.

While Democrats now control both chambers of Congress and the Presidency, the slim margin in the Senate (50-50, with Vice President Kamala Harris serving as the tiebreaking vote) means that every aspect of the Biden stimulus plan will come under the microscope. Seemingly benign events like a Republican Senator holding up cabinet-level confirmation hearings may be interpreted as the canary in the coal mine for a difficult negotiating process when the next round of stimulus talks finally arise.

The impulse of US fiscal stimulus is likely to remain the key driver for the US Dollar in the coming days amid an otherwise quieter US economic calendar through the end of the week.

DXY PRICE INDEX TECHNICAL ANALYSIS: DAILY CHART (January 2020 to January 2021) (CHART 1)

US Dollar Forecast: Biden Ascends to Presidency - Will Greenback Descend? Levels for DXY Index

In our first DXY Index forecast update of 2021, it was noted that “if the DXY Index moves above 90 at all this week, then there could be a ‘reset’ in the market that sees the DXY Index return to the latter of these descending trendlines as January unfolds, potentially trading into the mid 91s before turning lower anew.”

The DXY Index continues to trade higher after finding a topside breakout from the bullish falling wedge relative to the November high. Thus far, the DXY Index’s advance has been stunted by the December 21 inverted hammer candle high at 91.02. However, the DXY Index remains well-below the descending trendline from the March and November 2020 highs.

The DXY Index’s momentum is slowly turning more bullish, will price above the daily 5-, 8-, 13-, and 21-EMA envelope, which remains inbullish sequential order. Daily MACD is still rising and nearing its signal line from below, while daily Slow Stochastics are still in overbought condition.

DXY PRICE INDEX TECHNICAL ANALYSIS: WEEKLY CHART (January 2011 to January 2021) (CHART 2)

US Dollar Forecast: Biden Ascends to Presidency - Will Greenback Descend? Levels for DXY Index

The longer-term view established in the latter half of December 2020 remains valid: “we thus view the latest development with hesitation, particularly when viewed in context of the longer-term technical damage wrought in recent months; the DXY Index remains below its multi-year uptrend, and could be working on a multi-year double top. So long as the rebound remains below 91.75, the DXY Index outlook remains bearish on a longer-term basis.”

IG Client Sentiment Index: EUR/USD RATE Forecast (January 20, 2021) (Chart 3)

US Dollar Forecast: Biden Ascends to Presidency - Will Greenback Descend? Levels for DXY Index

EUR/USD: Retail trader data shows 46.02% of traders are net-long with the ratio of traders short to long at 1.17 to 1. The number of traders net-long is 4.01% higher than yesterday and 5.64% higher from last week, while the number of traders net-short is 6.68% lower than yesterday and 3.40% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.

Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES