The Week Ahead: Wait And See

USDCHF Sinks to 6-Year Lows

The US dollar’s rebound has mirrored the pause in the equity market. This probably has more to do with profit-taking than anything else.

Indeed, optimism is hard to fade when Janet Yellen, President-elect Joe Biden’s nominee for Treasury Secretary, called for “act big” on stimulus. This week’s Fed meeting might not be eventful but policymakers are expected to maintain the liquidity flow for at long as possible.

As the greenback is heading towards lows from 2015, trend-followers would be eager to sell into strength. 0.8500 is the next target while 0.9000, the support-turned-resistance may cap any upward pressure.

GBPNZD Bounces as UK Vaccine Campaign Speeds Up

With the Brexit theme out of the picture, the pound sterling has benefited from the bullish sentiment across the board, even outperforming riskier currencies like the kiwi in its latest rebound.

As the UK accelerates the rollout of the vaccine markets have started to price in the inflection point in restrictions in late spring. This would put the pound in an enviable position compared to its European and American counterparts.

Buyers have gained a foothold near last July’s low of 1.8600. The recent breakout above 1.9100 is a sign of sellers getting out of their positions, which may lead to a gradual recovery.

AUDCAD Rises on Brighter Domestic Data

As the dust settles down in Washington DC, the prospect of a larger stimulus is exactly what global markets need to sustain the exuberance.

Combined with an improvement in domestic employment data, the commodity-linked Australian dollar still has room to the upside. Should this week’s CPI read above the consensus of 1.5%, the Reserve Bank of Australia might consider cutting back on its easing program, another strong tailwind for the Aussie.

The pair is grinding up along the bullish trendline established last October. In case of a deeper pullback, 0.9700 is a key support level to keep the optimism intact.

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