Forex Today: All eyes on the US dollar and Biden's stimulus plan

Here is what you need to know Monday, January 14th 2021:

  • The comeback in the US dollar has been the focus in the forex space for the start of the year. On Wednesday, the greenback resumed its rebound from near three-week lows.
  • Hopes of higher government spending by President-elect Joe Biden's incoming administration and ongoing economic recovery from the coronavirus crisis as lead to a rise in US Treasury yields, supporting the greenback.
  • The greenback has also benefitted from expectations of a continued economic recovery in the United States while countries in Europe resort to lockdowns to fend off a second COVID-19 wave.
  • However, there was a temporary bump in the road on Wednesday for the greenback when US Treasury yields dipped on the back of the Treasury Department completing its final sale of $120 billion in coupon-bearing supply this week. Investors showed strong demand for long-dated bonds. Yields on the benchmark Treasury note slid to 1.071%. This is down from an almost 10-month high of 1.187% on Tuesday.
  • However, the rise in the 10-year Treasury yield above 1% has put a firmer floor under the mightily US dollar.
  • The  DXY was 0.37% higher at 90.359. The index has climbed 1.3% since falling to near a three-year low of 89.21 last week
  • In data, US December Consumer Price Index arrived were as expected. US December CPI was in line with expectations, rising 0.4% MoM, with core up 0.1% m/m. That left annual headline inflation at 1.4% YoY and core unchanged at 1.6% YoY. 
  • Comments from Fed speakers pushed back on the possibility of tapering bond purchases any time soon.
  • Richard Clarida, the Vice-Chair of the Federal Reserve System, said ''we are not going to hike until we actually get inflation to 2% and asset purchases are an important part of Fed strategy.';
  • The S&P 500 was up 0.3%, the Euro Stoxx 50 was up 0.1% and the FTSE 100 was down 0.1%. WTI lost 0.6% to USD52.9/bbl. Gold was flat and unchanged around $1,857.3/oz.
  • Cryptocurrencies posted modest recoveries with BTC rallying to print a higher high in its steep correction of the 2021 pull back. 
  • Coming up, as the news that US President Trump's impeachment was voted for by the House, US president-elect Joe Biden will reveal his stimulus plan on Thursday. Markets will be tuned in and time will tell as to whether the US dollar can withstand what is about to be unveiled. 

DXY technical analysis

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