The dollar recovers the overnight losses as it continues to dominate its peers. The week is about to end on risk aversion as the stock market struggles after the biggest dump since October.
The rebound on wall street is quickly fading as the dollar regains the lead overnight. EURUSD is back at the 1.21 critical level. The sterling is starting the week with some beating while high-betas yield to the overnight risk-off tone. Gold bled beneath 1850 at the start of London, as the dollar is now preferred as investors’ safe-haven asset. Meanwhile, oil prices go range-bound but still maintain the short-term bearish outlook.
Senate hearing on GameStop
The dollar is leaning on the risk-averse tone after the Wednesday FOMC. The greenback is now off to a bullish January with Reuters noting ”The dollar edged higher on Friday, heading for a weakly gain, as lingering jitters about a coordinated assault on hedge fund short positions in the united states boosted demand for safe-haven assets”. In other headlines, the US Senate panel is set to hold a hearing on the current position of the stock market amid the GameStop situation. In the London and New York sessions on Friday, the risk tone is expected to be very much influential.
Covid & Vaccines
More covid vaccines are seeking approval. Novavax vaccine was said to be 89% effective according to a UK study. However, the vaccine was tested to be 49-60% effective against the new South African variants. vaccination has sped up this week. Globally, over 82 million doses have been administered while the rate of spread reduces.
Light macros on Friday. Japan reported a better than expected CPI and unemployment rate. Similar situation in the euro-zone as the preliminary quarterly GDP of the zone came better than the consensus. Later today, CAD monthly GDP will be released. The market expects a 0.4% expansion in the last month.
The market mood should maintain the current risk-off to cap a very bullish week for the dollar. The DXY should break above 90.87 (Thursday high) to 91. However, the 90.4 support level should be watched. DXY to 91 should eventually drag EURUSD below 1.21 toward the 1.205 support. A return to risk-on should otherwise support the EURUSD rally to 1.22. USDJPY has been the most active major FX. The currency pair is up by 1% this week after crossing 104.5 and off to the 105 psychological level. The bullish US 10-Yr bond yield could attract more bullish traction for the pair. AUDUSD and NZDUSD are in minor correction. These two pairs are expected to follow the S&P 500 closely. Technical outlook suggests further rallies toward 0.79 and 0.74 respectively if the stock market stage sharp recoveries. Otherwise, we might see a retest of their respective intraday lows at 0.759 and 0.71. For USDCAD, the 1.288 resistance should be watched. A rejection and break to 1.28 could attract the bears toward 1.26.
The current rally in Gold is corrective. Therefore, more decline to 1825-1830 is very much likely. However, the larger bullish correction should follow to 1900. A similar scenario could play out on oil prices. WTI corrective phase could hit $51.3 before the next lift toward the $55 target.
Bitcoin broke upside after a retest of the $29,000 low. The current surge should be enough as the current stock woes could increase the bid for Bitcoin. Further rallies above the $42,100 high should follow. However, altcoins might go behind the premier crypto again. Ethereum could dip to $1,000 before the next surge while XRP and LTC might also flow downside in the meantime.
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