After a volatile week of trading, we look to Monday as we attempt to forecast the week ahead. There could still be some rocky sessions ahead. So, here is some fundamental analysis on our trading biases towards the USD major pairs.
The euro has given back some of its gains this morning as risk appetite fades once again. The rumored 75 basis point hike on the US dollar became expected and brought some hope to investors. On the other hand, the ECB is not expected to raise rates any time soon which has investors concerned for the euro. Risk-off still remains dominant in global markets, so the euro-dollar pair may continue to decline in the meantime.
Inflation in both the US and UK have reached 40-year highs while their central government’s take increasingly hawkish stances on their currencies. However, the Band of England couldn’t mimic the same hike in rates as the Fed which could be considered bearish for the pair. Both countries are in similar economic conditions, so it looks like the USD will be preferred over the pound because the UK couldn't match the Fed’s 75 basis point hike.
Aussie-dollar showed very similar price action behavior towards the FOMC decision and is now giving back most of its gains from the last two trading sessions. Fundamentals for this pair are the same for EURUSD and GBPUSD. The dollar looks stronger due to the more combative approach by the Fed than other countries.
Bias: Neutral, Bullish-leaning
The dollar has been extremely bullish against the loonie as oil prices decline. The commodity-driven economy has been showing more growth than in the US as the Canadian central bank works towards tapering while continuing with their tight policy. With the current shortage in supply and high demand for oil, Canada might still be able to have a leg up on the dollar, so the pair may have some volatile oscillations.
Dollar-swiss sank prior and during the SNB’s rate decision that brought interest from -.75% to -.25%, a 50 basis point increase. Yesterday’s drop could have been overblown as the USD still remains strong in many aspects. However, the Swiss Franc does look strong when matched against currencies like the yen, the euro, and buck which are lagging on their monetary tightening process.
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