USD starts 2023 on the back foot
Analysts had suggested that the US dollar would continue its recent weakness with more downside and short traders have not been disappointed. That being said, the dollar is holding up against the euro.
(Video Transcript)
Currency markets subdued
Trading on the currency markets has been fairly subdued on this first main day of trade for 2023, as traders are gearing up for some important data to be released later on in this week.
Let's start tomorrow with the Federal Open Market Committee (FOMC) minutes. At the conclusion of the last Federal Reserve (Fed) meeting mid-December, Fed chairman Jerome Powell announced that 50-basis point increase of Fed funds rate of a range between four-and-a-quarter and four-and-a-half percent, now at the highest in 15 years. This was a conclusion of a year that saw the US Federal Reserve hiking by a cumulative 425 basis points.
Now investors are also expecting some employment data out this week. On Thursday, the ADP employment change, that's the private payrolls release and weekly jobless claims, and December non-farm payrolls coming on Friday.
A quick snapshot of what we're expecting there: early expectations point to 200,000 job creations last month. The unemployment rate is set to remain at 3.7% and average hourly earnings expected to rise by a margin of 5% year-on-year.
US dollar basket
I want to show you this chart. This is the dollar basket, the dollar trading against the whole basket of G10 currencies. And you can see we continue to challenge this line of support at 10307.
We saw the return of trade today, again testing that area at 10307, and if we do get a break of that within down to levels not seen since the 9th of June, and then the next line of support to watch out for is 10110.
EUR/USD
How do you trade this? Well, it's around the euro/dollar trade. It's the second day in a row of losses for the euro against the US dollar, despite the weakening of the US dollar down to those levels. The line of support is at 10616, which I've drawn on here, which were the highs we had back to the 27th of June. And we saw that area challenged again recently, it has been an area of interest at 10616. 10657 is what we are trading at the moment. And with the Fed minutes released tomorrow, we'll be looking for, I guess, a continuation of the recent trend that we've had with a stronger euro against that weaker US dollar.
If you're strong on this trade, if you’re long at 10656, your stop would go below the 106 level.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Start trading forex today
Find opportunity on the world’s most-traded – and most-volatile – financial market.
- Trade spreads from just 0.6 points on EUR/USD
- Analyse with clear, fast charts
- Speculate wherever you are with our intuitive mobile apps
See an FX opportunity?
Try a risk-free trade in your demo account, and see whether you’re onto something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See an FX opportunity?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from just 0.6 points on popular pairs
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See an FX opportunity?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
