Summary:
- The dollar dropped slightly while the U.S. stocks created another new high as the drama surrounding U.S. government shutdown out of the way.
- The dollar inched lower against the Japanese yen after the BOJ announced today it decided to maintain its benchmark interest rate unchanged.
The dollar pulled back slightly against a basket of six majors on Monday 22 January as the drama surrounding U.S. government shutdown out of the way. However, new risks are looming for the dollar as we will see the start of the 6th negotiation of NAFTA and WEF annual meeting in Davos today. An “America First” stance from U.S could cause ripples to the markets. The dollar inched lower by about 20 pip against the Japanese yen, evolved in a range of about 40 pips, after the BOJ decided to maintain its benchmark interest rate unchanged in Asian session today though the central bank sounded optimism on the growth and inflation outlook in Japan.
Technical
The dollar index (DXY) inched lower on Monday and saw its choppy consolidation came to an end day by day. Watch the short-term price actions closely in recent days. Its short term moving averages turned lower again in a state of divergence while its long term moving averages remained bearish and stable in a state of divergence on the 4 hour chart. Look for the potential extension of the downtrend.
As to non-U.S. currencies, the euro climbed in the choppy London and New York sessions Monday with weakened upside momentum. Given traded in a triangle pattern, the breakout direction in the shared currency when we came to the tip of the configuration will be important to observe. The British pound created a new recent high, extending its uptrend. However, be aware of the risks of chasing in the extended up move in the short term, with the battle field both for the bulls and bears lying at 1.4 handle. The Aussie dollar formed a lower high, indicating an impending corrective pull-back ahead in the short term, with downside support at H4-period EMA30.
Switching gears to precious metals now, the gold traded sideways for most of Monday before inched higher in early Asian session today, with downside support still at H4-period rising trend line. Its short term moving averages seemed to turn higher and divergent again on the 4 hour chart, with intermediate resistance at highs printed on 19/15 January.
Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.