USD correctional growth
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Market Watch review. 11.01.2021

In today's release, we’ll cover the following topics:

  • US dollar renews highs. 
  • Steady growth of US stock indices. 
  • Oil market correction. 

The current week started with another wave of growth of the US dollar, which is largely due to the weakening of European and commodity currencies. As a result, the US dollar index is now close to 90.4, having gained a little less than 1.5% from its previous low. Nevertheless, the activity of USD buyers remains moderate against the background of Biden's statements about trillions in financial aid - this is a strong bearish fundamental factor for the American currency.

I would like to draw your attention to the relatively steady growth of US stock indices, which is due to expectations of active financial assistance, which was repeatedly announced by Joe Biden. And only the coronavirus pandemic continues to hold back the US stock market from developing a more powerful wave of growth. But as we have seen before, the financial assistance of the US government is able to fully compensate for all the negative consequences of quarantine restrictions.

Now let's move on to the foreign exchange market. Even before the start of the European trading session, the quotes of the EUR/USD pair collapsed to the level of 1.2170, but the activity of sellers under the marked support level remains weak. Accordingly, only the update of the current week's low will confirm the willingness of sellers to continue the decline to 1.2150 and further to 1.2100. This scenario will be in priority until the quotes are fixed above the level of 1.2200.

I will also pay attention to the growth of the USD/JPY currency pair, which is due not only to the strengthening of the USD, but also to the moderate weakening of the JPY. Let me remind you that on Thursday, the Japanese government held a meeting to discuss the exchange rate of the national currency. Yes, the Japanese economy is extremely unprofitable for a strong yen, so the approach of the pair's quotes to the psychological level of 100 will unite the efforts of the Bank of Japan and the government in an attempt to weaken the national currency. We saw a similar situation in 2016.
Shifting to the oil market, I will pay attention to the corrective decline in quotations of the American WTI crude oil to $51.5 per barrel. At the same time, the price range 50.50–51.00 is a more powerful support. Therefore, it is extremely difficult to exclude a further decline in oil prices. In the longer term there is a potential for price growth, which will happen in the event of a reduction in oil production by Saudi Arabia.

Closely monitor the news background and be prepared for all the surprises of the market.

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