The Week Ahead: Any Color But Green

January 11, 2021

USDCHF Slides After Weak Jobs Data

A new presidential era might not be enough to turn the tide in favor of the US dollar. Actually, state-backed asset inflation has become business as usual. It would be economically and politically unwise to turn off the tap.

Now with Dems in control of the White House, Senate, and House of Representatives, Mr. Biden has a clear path to implement his stimulus agenda. As the labor market has shown signs of weakness, the greenback may remain under pressure for an extended period of time.

Bears are driving the price towards the next target of 0.8700. A rebound could turn out to be temporary and challenged by 0.9000.

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GBPJPY Faces Negative Rates Pressure

The pound has been grinding up against the Japanese yen but without much conviction. The UK’s half victory over the Brexit deal has left the market hesitant to commit. Traders now have their attention on the Bank of England.

The central bank may soon intervene aggressively, to mitigate the impact from the third lockdown and Brexit disruption. The pricing of negative rates in the first half of the year could be strong headwinds for the Sterling.

The pair is inching up towards the September high of 142.80. Stiff selling pressure ahead could drive the price back to test the trendline around 138.10.

AUDCHF Extends Rally Above 12-Month High

Risk sentiment heightened a notch following the blue sweep across the US Senate. Markets are pricing in future growth from the prospect of even larger and sustained stimulus spending.

Resilience in trade surplus and the domestic housing market has helped the Aussie stand firm against pullbacks.

On the technical side, after emerging above 0.67, the top of a 6-month long consolidation range, the Australian dollar is likely to continue on its ascent. A bullish break above last November’s high of 0.6900 could extend the rally to 0.7. On the downside, a retracement is likely to meet buyers around the trendline (0.6720).

EURCAD Nears End of Consolidation

While risk currencies are now mostly under the spotlight, the euro has been inching up steadily. General weakness in the US dollar and its Canadian counterpart have benefited the single currency.

Investors have shrugged off the fact that major European countries went into another lockdown, but put faith in unwavering support from governments and the ECB instead.

There are plenty of support levels on the chart along the 11-month long rally, which would give buyers enough confidence.

1.5400 is the closest one as the price approaches the end of a flag-shaped consolidation. On the upside, 1.5780 is the immediate resistance.

By Orbex