US Dollar May Bloom on FOMC Outlook, Corporate Earnings

US DOLLAR FORECAST, FOMC RATE DECISION – Talking Points

  • US Dollar may rise on FOMC outlook, corporate earnings
  • Fading coronavirus fears may also uplift market sentiment
  • EUR/USD technical outlook: pair may re-test 3-month lows

APAC RECAP: AUSTRALIA CPI UPLIFTS AUD

The Australian Dollar ticked modestly higher after a cascade of CPI data was released and showed price growth for the fourth quarter had picked up. Asia-Pacific equities nursed their wounds from the prior selloff amid fears about the spread of the coronavirus. However, those concerns are now ebbing as risk appetite is showing signs of recovery.

FOMC PREVIEW

The US Dollar may rise along with local equity markets if the FOMC re-affirms its neutral position and pours cold water over future easing expectations. Fed Chairman Jerome Powel will likely cite robust consumption and tight labor market conditions as empirical evidence that looser credit conditions are not warranted. Having said that, the tune of the chairman will not likely be entirely optimistic.

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Concerns pertaining to rising corporate debt, the coronavirus and US-Iran tensions may be referenced as risks which could undermine growth and induce market volatility. The détente in trade tensions between Washington and Brussels may positively add to the Fed’s baseline projections. However, President Trump’s recent aluminum and steel tariffs measures may cause growth to slow and stoke easing expectations.

Q4 CORPORATE EARNINGS

Market mood may also be boosted by the release of Q4 earnings from corporate giants like Facebook, Tesla and others as the potency of fear about the coronavirus continues to subside. On January 28, Apple published better-than-expected earnings and helped uplift market mood as a whole. Considering its significant weighing in the S&P 500 index relative to its counterparts, buoyancy in APPL naturally rippled out across markets.

See a more extensive list of corporate earnings here!

EUR/USD TECHNICAL ANALYSIS

EUR/USD may re-test November 2019-lows as the pair hover below December support at 1.1039. A break below the 1.0989-1.0981 range with follow-through opens the door to further losses since traders may interpret such a move as a continuation of the prior broader downtrend.

EUR/USD – DAILY CHART

Chart showing EUR/USD

EUR/USD chart created using TradingView

US DOLLAR TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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