The USD decline and the EUR rally were really the big stories to end the trading week. On Friday we saw an improved CPI number coming out of the US. The level of inflation was a real concern for the US Federal Reserve in recent meetings, but that now appears to be easing.
That opens to door for the proposed three rate hikes this year. The interesting thing was how the USD reacted. We had seen the Greenback trading in a range between 92.80 and 91.80. On Friday the big support level got smashed and we cracked all the way down to 91.00.
At the same time, there were huge amounts of strength in the EUR/USD and GBP/USD. The Euro, in particular, is looking like a strong bullish trend that is worth riding.
Bitcoin (BTC/USD) and the other cryptocurrencies have continued to decline. Looking from a technical perspective, BTC is now going to have yet another test of 13,000. That’s a level that has been holding up strongly after a number of attempts. The crypto market has had a tough few weeks where we haven’t really been able to regain any bullish momentum.
Top Economic Events This Week
The week ahead sees the BOC rate decision and Eurozone CPI, which are some of the biggest events of the week. Monday is Martin Luther King Day in the US, so there is the potential for reduced volumes.
Where to for the USD?
The US Dollar Index (DXY) has taken a real beating in the last few weeks. Friday was really just another nail in the coffin. As it stands we are holding up around 91.00, however, this support level looks weak.
The next key support level appears to be 90.00 (another round number). There is a really good chance that we will see a test of 90.00 in the near future. I would be looking for a decent break and pullback as the best way to enter. Trade might be choppy, but we have strong technical and fundamental factors now pointing to more weakness in the USD.