The US Dollar Reaches New Highs: Impact on EUR/USD and GBP/USD

The US dollar has been making waves in the foreign exchange market, reaching new highs against certain currencies. This article will delve into the key developments that have led to this shift, explore the current market trends, and examine the regulatory implications of these changes.

Key Developments

_The US Employment Report: A Boost to the US Dollar_

The US employment report released last Friday provided significant support to the US dollar. The increase in new jobs at 256,000, against a forecast of 164,000, and the drop in the unemployment rate to 4.1%, versus the expected 4.2%, suggest that a change in the Federal Reserve’s monetary policy may be anticipated in the near future.

_The Upcoming Inauguration of President Donald Trump: A Threat to EUR/USD_

The upcoming inauguration of President Donald Trump and the associated threats of new trade wars are putting additional pressure on EUR/USD. On Tuesday, sellers of the EUR/USD pair managed to break the current year’s low at 1.0220. The price quickly bounced back, forming a reversal pattern, a “hammer.”

EUR/USD Market Analysis

Technical analysis of EUR/USD indicates a potential continuation of the upward correction if buyers manage to hold above 1.0340. However, if the price drops below 1.0230, the recent low could be revisited. Factors that may influence EUR/USD pricing include:

– Today at 10:45 (GMT+2): Harmonised Consumer Price Index (CPI) of France
– Today at 11:00 (GMT+2): Speech by European Central Bank Vice-President Luis de Guindos
– Today at 18:00 (GMT+2): US Core Consumer Price Index (CPI)

GBP/USD Market Analysis

The British currency has also been under downward pressure in recent weeks. After bouncing off 1.2570, the pair lost over 400 points and tested significant support at 1.2100. Technical analysis of GBP/USD suggests a potential correction towards 1.2370-1.2300, if buyers can hold above 1.2250. In addition to US inflation data, the following events could influence GBP/USD movement:

– Today at 10:00 (GMT+2): Consumer Price Index (CPI) for the UK
– Today at 12:30 (GMT+2): UK House Price Index
– Today at 13:00 (GMT+2): UK 10-year Government Bond Auction

Market Trends

– The US dollar is expected to continue its upward trend, driven by the strong employment report and the potential for a change in the Federal Reserve’s monetary policy.
– The EUR/USD pair is likely to experience a correction towards 1.0340, but may revisit the recent low if it drops below 1.0230.
– The GBP/USD pair is expected to test significant support at 1.2100, with a potential correction towards 1.2370-1.2300.

Regulatory Implications

– The US employment report and the potential for a change in the Federal Reserve’s monetary policy may lead to increased volatility in the foreign exchange market.
– The upcoming inauguration of President Donald Trump and the associated threats of new trade wars may lead to increased uncertainty and risk aversion in the market.
– The European Central Bank’s monetary policy decisions may also impact the EUR/USD pair, particularly if there are any changes to interest rates or quantitative easing.

Conclusion

The US dollar’s recent highs against certain currencies have significant implications for the foreign exchange market. The strong employment report and the potential for a change in the Federal Reserve’s monetary policy are driving the US dollar’s upward trend. The EUR/USD and GBP/USD pairs are expected to experience corrections, but may revisit recent lows if certain levels are broken. As the market continues to evolve, it is essential to stay informed about the latest developments and regulatory implications to make informed trading decisions.

Source: Fxopen.com

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