Will the USD Squeeze Continue?
The USD revival continued on Jan 18 as the greenback steadied versus a basket of currencies, roughly 0.25 points away from breaching 91, racing to a three-month high. This comes despite US Yields easing. Interesting, this firmness is a few days before Trump's term ends. It could stem from investors' calming nerves, confident that this is the end of the political and economic turmoil that affected markets in the last few months.
The USDX march could be short-lived depending on whether primary resistance levels are cleared this week. Despite what Biden's administration plans to pencil in, investors are confident that economic recovery and arresting of the coronavirus spread would sit well for the USD. Notably, in 2020, investors spent their time dumping the greenback against everything in their path. Therefore, as it is, sellers are overstretched, and it won't take much for their positions to unwind, boosting USD bulls. The Euro, GBP, and commodity currencies are retracing from their technical peaks as counter positions spur the USD's demand.
Impact on the USD:
Bullish. On Wednesday, Joe Biden will be inaugurated. Buyers are flocking to the USD in risk aversion. This will most likely push the USDX higher. Thereafter, odds of yields rising will be high, a move that will fan demand for the USD, extending the squeeze to February 2021.
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