All eyes on Powell press conference

Alpari

The single currency fell by 0.22% against the US dollar to 1.1301 on Tuesday, January 25. The DXY index rose to a multi-month high of 96.26. The gains came amid a decline in the EURUSD pair, since the euro component of the index is 57.6%.

Germany's higher-than-expected IFO failed to lend support to the euro.

The pair remains under pressure due to a strong dollar amid heightened geopolitical tensions and an ambiguous outlook in the US fixed income and stock markets.

Today’s macro agenda (GMT+3)

12:00 Switzerland: Credit Suisse economic expectations index (December)
16:30 US: trade balance (December)
18:00 Canada: Bank of Canada interest rate decision
18:00 US: new home sales (December)
18:30 US: EIA weekly petroleum status report
19:00 Canada: BoC Governor Tiff Macklem press conference
22:00 US: Fed interest rate decision
22:30 US: Fed press conference

Current outlook

By the time of writing, major currencies were trading in positive area. The euro stood at 1.1301, hovering below the 55-day SMA (balance line). The focus remains on the Fed’s two-day meeting. The central bank may accelerate steps to raise interest rates and shrink the volume of its UST bonds, which have inflated the balance sheet to $8.8 trln.

Given that the market has priced in three interest rate hikes in 2022, the dollar might retreat sharply across the board after Fed Chair Powell’s speech in line with a correction.

According to media reports this morning, China Evergrande Group will hold an investor call at 13:00 GMT on Wednesday. This is good news for risk-sensitive assets as the company has been attempting to avert default and restructure its debt.

On the hourly timeframe, EURUSD continues to trade in the range of 1.1220-1.1385. The range for the evening session is 1.1195-1.1420.

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