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January 18, 2022

A USD Surge Is Coming

Frank Cabibi

It is likely we see a USD surge in the near future as we get closer to the Fed meeting in March. Bond yields hit yearly highs this morning as the dollar begins to look stronger. A prominent "risk-off" attitude in the markets is showing now, and it looks like investors will be getting out of stocks and gold in the anticipation of higher interest-yielding bonds. Goldman Sachs (GS) reported a miss in earnings sending the company's stock down by 8%.

What To Do About This USD Surge

Because investors will be pricing in these moves ahead of time, the dollar will probably continue to gain up until the March meeting. The heat map indicates increased volatility on all USD pairs as we expect rocky trading sessions in the meantime with a bullish favor towards the dollar. If you are invested in the stock market, I would not say to sell out of your positions, rather make sure that you have enough cash on the side and look to pad your accounts with potential USD longs.

So, with risk-off sentiment, higher rate expectations, and a rough start to stock earnings, USD looks like the better play this week at least as we inch closer to the Fed decision day.

Pairs To Watch

USD surge
USDCHF comes back above the rising trend line and pushes above the 200 DMA after bouncing from support in the 0.91060s. The pair is facing more resistance above at 0.92122.
USD surge
USDJPY looks like it could test resistance around 115.400s although its recent candle looks bearish as of now. With a support zone and 50 DMA just below price, the pair could bounce back to test if price continues lower today.

These pairs look especially strong as we expect little to no monetary policy for the yen and a weaker franc this week after it missed PPI expectations.

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