Premium analysis by our dedicated team
Jan 25, 2021, 10:42 AM GMT

EURUSD Ready to Fall as U.S. MP and FP Finally Seem to be Aligning

The EURUSD failed to break out above the historic resistance level at 1.23000, which was the primary focus of our previous analysis of the pair, thereby, effectively concluding the preceding bullish trend. In that regard, the underlying trading setup remains the same - take advantage of the subsequent trend reversal into bearish territory.

There are plenty of fundamental factors that can contribute to the strengthening of the dollar starting this week and all of them are interconnected. Firstly, the recent uptick in headline inflation represents a step closer towards achieving FED's inflationary goals, which is a sign of economic stabilisation.

As a result of this upsurge in consumer prices, the FOMC (scheduled to meet this Wednesday) seems less likely to adopt an even more dovish monetary policy stance at the present rate by scaling up its quantitative easing policies. In other words, FED's envelope of net purchases is likely to remain virtually unchanged in January. Consequently, the historically low U.S. yields will not become even more damaging to the value of the greenback.

Meanwhile, President Joe Biden's comprehensive fiscal plan looks promising enough to finally match the Government's fiscal policy's scope to the Federal Reserve's substantial monetary policy, thereby making the two function in conjunction with each other.

Profit & Loss
Short Term Long Term Net % Gains
+ - + -
51 PIPS 0 164 PIPS 57 PIPS
Short Term
+ -
51 PIPS 0
Long Term
+ -
164 PIPS 57 PIPS
Net % Gains

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