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The Bank of Japan and the ECB deliver policy decisions today as hopes of significant fiscal stimulus supports demand for riskier assets. COVID-19 updates could test, however.
For the EUR
It’s a relatively quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.
While there are no stats, the ECB is scheduled to deliver its first monetary policy decision of the year.
With the markets expecting the ECB to stand pat on policy, the ECB press conference will likely be the key driver.
Last week, ECB President Lagarde stood by the ECB’s growth forecasts for this year, in spite of extended lockdown measures.
We can expect plenty of discussion on price stability and the outlook during the presentation and the Q&A.
Away from the economic calendar, COVID-19 vaccine news along with the latest COVID-19 figures will provide direction.
At the time of writing, the EUR was up by 0.16% to $1.2125.
For the Pound
It’s a relatively quiet day ahead on the economic calendar. CBI Industrial Trend Orders are due out later today.
With little else for the markets to consider, expect the stats to influence.
Ultimately, however, COVID-19 news updates will likely remain the key driver near-term.
At the time of writing, the Pound was up by 0.15% to $1.3674.
For the USD
It’s a busy day ahead on the economic calendar. Key stats include the weekly jobless claims figures and December’s Philly FED Manufacturing PMI.
Housing sector data for December, including building permits and housing starts are also due out. These will likely have a muted impact on risk sentiment, however.
Away from the economic calendar, President Biden’s first moves as U.S President together with COVID-19 news will also influence.
At the time of writing, the Dollar Spot Index was down by 0.15% to 90.340.
24-hour view: “Our expectation for USD to ‘trade sideways’ was wrong as it dropped to 103.43 before closing on a soft note at 103.52 (-0.36%). Further weakness is not ruled out and while USD could dip below the strong support at 103.40, oversold conditions suggest 103.00 is unlikely to come into the picture. Resistance is at 103.75 followed by 103.90.”
Next 1-3 weeks: “Yesterday (20 Jan, spot at 103.90), we highlighted that USD ‘could continue to trade sideways, likely within a 103.40/104.40 range’. USD is currently approaching the bottom of the range at 103.40 and shorter-term momentum is beginning to improve. The bias is tilted to the downside but any weakness is likely limited to a test of the major support at 103.00. On the upside, a break of 104.20 would indicate the current mild downward pressure has eased.”
The price action on Mon – Weds indicates the direction of the EUR/USD the rest of the week will likely be determined by trader reaction to 1.2074.
The price action on Monday through Wednesday indicates the direction of the EUR/USD the rest of the week will likely be determined by trader reaction to 1.2074.
A sustained move over 1.2074 will indicate the presence of buyers. If this move creates enough upside momentum then look for a possible surge into 1.2202 to 1.2236 over the short-run.
A sustained move under 1.2074 will signal the presence of sellers. Taking out 1.2054 will change the main trend to down. This move could trigger a further break into 1.2025. This price is a potential trigger point for an acceleration to the downside with the next major target the November 23 main bottom at 1.1800.
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