Risk Appetite Stays Supported, USD-traders Await ISM non-manuf. and ADP

Risk Assets Continue to Gain due to China’s Policy Steps

The dollar traded mixed against the other G10 currencies on Tuesday and during the early Asian morning Wednesday. It gained against JPY, CHF and EUR in that order, while it underperformed versus SEK, AUD, NOK and NZD. The greenback was found virtually unchanged against GBP and CAD.

NZD/JPY — Technical Outlook

Although NZD/JPY continues to trade below its short-term tentative downside resistance line drawn from the high of January 17 th, recently, the bulls have been very active by trying to push the rate back to that downside line. There is still a bit of room left until that line could get tested, but if the pair fails to break and stay above it, this may lead to another round of selling. That is why, overall, we will remain somewhat bearish, at least for now.

ISM non-manufacturing PMI and ADP Report on Today’s Agenda

Flying back to the US and the dollar, today its traders may pay attention to the ISM non-manufacturing PMI for January, as well as to the ADP employment report for the month. The ISM index is expected to have held steady to 55.0, which combined with the positive surprise in the manufacturing print on Monday and a potentially decent employment report on Friday may allow market participants to push further back the timing of when they expect another cut by the Fed. According to the Fed funds futures, investors have already pushed that action back yesterday, from July to September, perhaps due to expectations that China’s steps will not allow the virus to weigh much on other economies.

EUR/USD — Technical Outlook

After almost testing the short-term tentative downside line taken from the high of December 31 st, EUR/USD reversed back to the downside and seems to have set sail towards January low. The RSI and the MACD seem to be supporting the idea of seeing a bit more downside, as the RSI is below 50 and the MACD is below its trigger line, and has moved fractionally below zero. Therefore, as long as the pair remains below the above-mentioned downside line, we will continue aiming lower.

As for the Rest of Today’s Events

During the European morning, we get the final services and composite PMIs from the Eurozone and the UK. Again, the final prints are expected to confirm their preliminary estimates. Eurozone’s retail sales for December are also due to be released. The mom rate is expected to have declined to -0.5% from +1.0%, but this will push the yoy rate up to 2.5% from 2.2%.

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