Powell and economic data could add to a more bullish tone surrounding the greenback in the coming days
The dollar turned positive on Monday after a sell-off seen on Friday in reaction to the disappointing December Nonfarm Payrolls reading. The USD index, which dropped to 95.70 zone, is back near the 96.00 figure, adding nearly 0.20% on the day, as the 10-year US Treasury bond yield stays around the highest level in nearly two years on rising Fed rate hike bets. Against this backdrop, EURUSD slipped from the 1.1360 area and was holding just above the 1.1320 immediate support during the European hours. As the common currency is back under pressure, it looks like the pair could lose the 1.1300 handle in the short term, especially as traders expect Fed’s Powell to express a hawkish tone on Tuesday. Furthermore, the US CPI report is widely expected to add to the dollar’s bullishness on Wednesday, suggesting the euro will stay on the defensive in the coming days.
The cable retains a bullish bias on Monday while also staying slightly above the 100-DMA, currently at 1.3550. Earlier in the day, the pair briefly derailed the 1.3600 figure for the first time in two months but came off fresh multi-week peaks in recent trading as the dollar bulls have reentered the game. On the four-hour charts, the pound is holding above the ascending 20-SMA while the RSI hasn’t entered the overbought territory just yet, suggesting there is room for fresh bullish attempts in the near term. However, it looks like GBPUSD would struggle to make a decisive break above 1.3600 in the near term as the dollar stays elevated while risk sentiment looks mixed at this point. In a wider picture, however, the technical outlook has improved after the prices exceeded the 20-week SMA, currently at 1.3550.
USDJPY keeps retreating gradually from five-year highs seen last week around 116.35. On Friday, the dollar extended the downside correction to 115.55 to finish the week around the lower end of the range. Today, the prices struggle to regain the upside bias while holding barely above the 115.50 area. Should the overall dollar demand pick up again anytime soon, the pair would try to regain the 116.00 level, but it looks like the greenback would fail to confirm a decisive recovery above this hurdle on a daily closing basis. On the hourly timeframes, the technical picture looks more bearish, with the pair now trading below the 20-SMA while the RSI is nearing the oversold territory. Should the downside pressure intensify anytime soon, USDJPY would retarget the 115.30 support zone, followed by the 115.00 figure.
Gold prices dipped to mid-December lows around $1,780 on Friday before attracting the buying pressure and the eventual rebound. However, the XAUUSD pair finished the week with deep losses while also staying below the $1,800 psychological level. On Monday, the precious metal extends the recovery, flirting with the $1,800 level where the 20- and 200-DMAs arrive. It looks like the bullion would need an extra driver to make a decisive break above this immediate barrier in the near term, with downside risks persisting as the dollar is back on the offensive after a sell-off witnessed on Friday. The XAUUSD pair needs to overcome the mentioned moving averages in order to retarget last week’s highs at around $1,830. Of note, this zone capped the bullish potential in December as well, suggesting the barrier could be too strong for the gold bulls as long as the greenback stays afloat.
The BTCUSD pair came off last week’s lows seen around $40,500 but stays weak and vulnerable to further losses. The leading cryptocurrency by market capitalization is treading water just below the $42,000 figure on Monday. Struggling for direction these days. On the upside, the coin needs to make a decisive break above the $43,000 initial target in order to bring the market focus back to the 20-DMA, currently at $46,600. As long as the prices stay below this moving average, bearish risks continue to persist in the short term. On the downside, the mentioned lows followed by the $40,000 psychological level stay in the market focus. Should the digital currency fail to hold above this critical support zone, the technical picture would deteriorate further.