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Jan 19 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Rebound Latches Onto Risk Rally

By Randolph Donney  —  Jan 19 - 02:41 PM

The dollar slipped on Tuesday as U.S. President-elect Joe Biden's nominee for Treasury Secretary urged lawmakers on Tuesday to "act big" on coronavirus relief nL1N2JU1MJ, cheering risk markets and channeling flows away from the safe-haven U.S. currency.

Janet Yellen, the former Fed chair, also said that the value of the U.S. dollar and other currencies should be determined by markets and that targeting of exchange rates for commercial advantage was "unacceptable." nW1N2HO03I

EUR/USD was extending its rebound after holding above the 55-day moving average during Monday's drop to 1.2054 on EBS and the 38.2% Fibo of the November-January advance at 1.2063.
The lower 21-day Bolli by Tuesday's 1.2075 low buttressed the recovery.

Above-forecast euro zone and German ZEW results nL8N2JU2A9 helped to offset concerns about extended lockdowns nL1N2JU0FZ, but EUR/USD will need to close above Friday's 1.21615 high to solidify the recovery and reduce the risk of a squeeze of bulky dollar shorts versus the euro nL1N2JU1GO.

The haven yen was the only major currency to lose ground to the dollar, as risk-on flows tied to Biden-Yellen fiscal expansion plans lifted the S&P 500 and Treasury yields, including 10-year TIPS yields that USD/JPY is positively correlated to.

But TIPS yields sank in New York trading, and S&P's dipped briefly, helping to trim early USD/JPY gains.
Tuesday's 104.08 high met supply on the approach to the primary down trend-line from March, now at 104.16.

That trend-line and the falling daily cloud will put this month's recovery from trend lows to the test nL1N2JU1C6.
It's also crucial for the largest net short spec position at the IMM since 2011.
The downside pivot point is at 103.50, which is the 50% Fibo of January's 102.595-4.40 recovery and the kijun line.

Sterling followed S&P's and EUR/USD's early risk-on flows, that after Monday's lows uncovered buyers by the 30-day moving average.
GBP/USD bulls still need to prove gains can be maintained above 1.3700 to keep the post-Brexit rally running nL1N2JU1B5.

Wednesday's economic release calendar is light, while BOJ and ECB meetings on Thursday aren't expected to result in any major policy changes.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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