Caught between a wave of conflicting narratives—the loose monetary policy and projection of higher inflation, the USD price action remains choppy but bullish against major currencies. However, this advance could be accelerated more so if there are positive comments from the Federal Reserve chair, Jerome Powell. Admittedly, the US is not out of the woods yet. Therefore, while analysts expect Jerome to walk the tightrope by saying there is a need for more capital injection, he should also express his confidence in the economy as the coronavirus vaccine gets wider distribution.

Details: 

Judging from recent developments, both politically and hard cold numbers, the theme for Q1 2021 will be policymakers and central bankers charting the best way forward on matters introducing appropriate measures to combat the virus and further flatten the curve, and means of jump-starting the economy. USD's fundamentals will be conflicted, but the greenback is highly to recover due to the economy's positive outlook. Subsequently, the USD might recover as a result now that conditions in Europe, especially France that might go back to another lockdown, are getting out of hand even as the economy recovers.

Impact on the USD: 

Bullish. The USDX remains in range below $91. However, the candlestick arrangement favors bulls who may build on Jan 22 advances against major pairs to breach major resistance levels. If Jerome Powell reassures the investment community on the FED's policy while concurrently holding out hope for the economy, there could be more upsides for the USD in the medium term.

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