Buy 0.9050 for 0.9250 with a stop below 0.8940.
Starting in March 2020, the US dollar had been on a decline and this decline had brought price to a low of 0.8756 on 6 January 2021. This price low was accompanied by a divergence warning from MACD and it also came in the form of an Inverse Head and Shoulder chart pattern. Price has broken above the neckline of this chart pattern and had also broken above the cloud, which confirms the change in price trend from bearish to bullish. Two days ago, price had broken above the recent high and in the process created an Ichimoku reversal which has a price target of 0.9220. There is a possibility price can rise to test the previous high of 0.9295. Conversion and Base lines had a bullish crossover, hinting of a bullish price trend. Lagging Span is above price of 26 days ago and above the cloud, confirming the bullish price trend.
A US stimulus relief package of US$1.9 trillion proposed by US President Joe Biden is likely to be passed into legalization by the end of this week. This package will help the country and its citizens cope with the coronavirus pandemic, which has led to business failure and many of its citizens out of jobs. Expectations are high this pandemic relief package could get the U.S. as well as the global economy out of a pandemic induced recession. This massive amount of money is also expected to lead to a rise in inflation, with bond yields already rising, which are likely to support the US dollar.
Fed’s Chairman Powell said in his semi-annual report to Senate Banking Committee on Tuesday that interest rates will remain low and the Fed will keep buying bonds to support the U.S. economic recovery and pushed back on suggestions that loose monetary policy risked unleashing inflation. This has whet investors risk appetite leading to an increased demand for riskier currencies and dampened the safe haven Swiss franc
The number of coronavirus cases continues to decline in the US and risk sentiment has also increased as a result of a vaccine. There are hopes with more people vaccinated against the coronavirus, the number of cases will start to fall and over time, this pandemic will die down. With the pandemic ending, the US and the global economy will recover and ends 2021 in positive GDP growth rate.