DISCLAIMER: The information produced by aQuant is of a general nature only. It is not personal financial advice. It does not take into account your objectives, financial situation, and personal needs.

So far, the week is very bearish for the US dollar. After the rally of the previous week that brought the USD to the highest price of the last 1.5 years, this week draws a different picture. It has already lost 1.35% compared to last week’s close price.

In the Eurozone, earlier today the inflation was announced at 5.1% in January, a rate that made an impression to most of the analysts that had estimated a price of 4.4%. This fact may cause chain reactions to the ECB: tighter monetary policy and interest rates hike, although all the statements so far excluded this case in 2022.

EURUSD (current price 1.1319) is very bullish this week. The anticipation of a tighter monetary policy and the highest probability for interest rates hike in the eurozone, have helped the pair to recover after a bearish rally that brought it below the critical support of 1.1170. There were signs from the beginning of the week as the German inflation announced pretty high as well, at 5.1% vs estimations for 4.7%. The unemployment rate in the Eurozone dropped to 7% and in Germany, dropped to 5.1%, helping the outlook of the EURUSD a bit more. A bullish breakout above 1.1370 may accelerate the pair’s rise.

GBPUSD (current price 1.3570) has three bullish days in a row this week. The weakness of the dollar dominates on the pair but the UK sterling has reasons to be strong as well. Many analysts predict an interest rates hike of 25 bps (or 0.25%) in tomorrow’s Bank of England interest rates decisions. But it may be only the beginning as there are estimations that there will be 4 or 5 interest rate hikes in total, during 2022. This anticipation has left behind the hawkish outlook of the Fed, giving an extra boost to the cable. Above 1.3660, we may buyers targeting 1.38.

USDJPY (current price 114.24) has lost more than 100 pips during the current week, mostly due to the weak USD and due to the mild correction of the bond yields (today the US 10-year bond yield is at 1.78%, losing 1.28% on a daily basis).  The unemployment rate in Japan was announced at 2.7% in December, a bit lower than the 2.8% that was previously. The Japanese yen has no specific reasons to be strong because the market expects that the loose monetary policy from the Bank of Japan will carry on. Below 113.50 the bearish market becomes more clear but in a bullish reaction above 115, the pair will possibly return to its long-term uptrend during the last year.