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Bearish is the current week so far for the US dollar. The USD began by following the last week’s trend but on Tuesday the trend changed, mostly due to the latest developments regarding the Ukrainian crisis. More specifically, there was a de-escalation of the crisis after many media announced (and Russia confirmed) that there was a partial withdrawal of Russian troops from the Ukraine borders. Although many western officials are still skeptical about the true Russian intentions, the markets’ sentiment has already changed and a more risk-on mood has been developed.
The other important event of the day is the release of the Fed minutes (FOMC) January policy, later today, where we may become wiser & aware of the intentions of the Fed regarding the US monetary policy and the upcoming interest rates hike. Inflation in the US & worldwide remains the most critical issue of the global economies and markets.
The bond yields are rising this week and the US 10-year bond yield has managed to surpass the milestone price of 2%, being currently at 2.035%.
EURUSD (current price 1.1365) started by continuing the previous week’s downtrend but yesterday, things changed and it became bullish, recovering from the 1.1280 area. A possible full de-escalation of the Ukrainian crisis will be very beneficial for the European countries because a possible war would make the energy crisis issue even worse. The Q4 2021 GDP in Eurozone was announced at 4.6% (as expected) and the industrial production rose in December by 1.2%, much better than expected. These positive macro results give extra help to the bullish scenario of the EURUSD that has room to extend its uptrend, up to 1.15 unless the greenback begins to strengthen again (FOMC?) so the bears will return, looking for prices like 1.12.
GBPUSD (current price 1.3547) is neutral so far, as it began bearish on Monday but the two following days were not enough to make the pair develop a weekly uptrend. The unemployment rate in the UK remained unchanged at 4.1% and the inflation in January was announced at 5.5%. These facts should strengthen the sterling but the expectations of an interest rate hike by 0.50% in March from the Bank of England have created an over-optimist and now there are concerns that even a 0.25% hike could disappoint the markets. Below 1.3480, the bearish scenario earns more credits.
USDJPY (current price 115.68) is bullish this week, mostly due to the rise of the bond yields in a general positive markets sentiment after the partial de-escalation of the Russia – Ukraine conflict. The JPY is weak due to the continued loose monetary policy from the Bank of Japan as well as due to the announcement of the Japanese GDP (Q4 2021), at 5.4%, much below the markets’ estimation. There is much room for the USDJPY to move more upwards but let’s not forget the very important resistance at 116.35 which takes a lot of “fuel” to be broken out. Some sellers are possible to appear around 116.35, evaluating this price area as a selling opportunity.