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The euro is reverting to the mean

The market is subdued, and the ranges set last week are holding. The forex heatmap is more risk-on so we can expect moves into commodities and equities with a void of any market-moving news today

Market Brief

The euro remains on the backfoot which is allowing the US dollar index finds support around the $95.50 and takes out Friday's NFP high. Along with the US dollar strength, we also have the NZD which is higher today after RBNZ governor Orr addressed a conference of Angel Investors and said that innovation is key to the future of money and cash. In the released statement it noted that “The Bank is commencing Central Bank Digital Currency (CBDC) proof-of-concept design work, taking into account the public’s feedback received during a recent consultation. The work will be a multi-stage and multi-year effort, and no decision has yet been made on what form of CBDC was right for New Zealand.”

Currently, China’s central bank is premiering its digital yuan during the Winter Olympics, and there is a possibility that this becomes a template for other central banks.

I’m currently short the EURUSD as I am predicting we retest the 1.1300 level once again sometime this week and probably after the US inflation data. 1.13294 is potentially the first support level as it was a daily high, but the majority of the volume traded over the last 3 months has been around the 1.1300 pivots.

Last night the US consumer credit data showed that there had been a dramatic decline in credit offered by the banks. This is not good during a period where the Federal government is also reducing the amount of money they’re pumping into the system. There could come a point where there is a shortage of US dollars which will then push the greenback higher.

Also out today is the US balance of trade which is set to increase for the second consecutive month. This is a net drag on the US GDP.

The ActivTrades sentiment indicator shows that traders on the platform are extremely short. The USDJPY has started to move higher and has now broken out a few days of compression.

The swing high of 115.690 is the significant high that will confirm the resumption of an uptrend. The US 10-year yields are rising rapidly and are now hovering just below 2%. This could help keep pushing the USDJPY higher as the two move in tandem and the Japanese exporters suffer from higher fuel costs too.

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