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Tough Fed rhetoric supports the dollar

November 22, 2022

EUR/USD: The euro declined on Monday as the greenback gained amid fresh COVID-19 curbs in China that fuelled worries over the global economic outlook. The dollar found additional support after Federal Reserve Bank of San Francisco President Mary Daly said that the U.S. central bank could lift its overnight target rate above 5% if inflation does not cool off. Investors will be parsing minutes from the Feds November meeting, due to be released on Wednesday, for any hints about the outlook for interest rates. Today, the dollar’s recovery may continue, putting additional pressure on the European currency. Immediate support is seen at 1,0220. A breakout below could take the pair towards 1,0150.

SELL STOP 1,0220/TP 1,0150/SL 1,0250

 

USD/JPY: The dollar advanced against the Japanese yen on Monday as the increase in the number of cases of covid in China triggered a selloff in risky assets. The new cases have cast doubt on hopes that the government could soon ease its tough restrictions, boosting the dollar, which is seen as a safe haven in times of global economic stress. St. Louis Fed President Bullard’s comments that the rate could be raised to 5-7% before the regulator takes a break also supported dollar bulls. According to the FedWatch tool, the probability of a 50 bp Fed rate hike in December is 80%. Strong resistance can be seen at 142,00. A breakout to the upside can trigger growth towards 143,00.

BUY STOP 142,00/TP 143,00/SL 141,70

 

USD/CAD: The Canadian dollar weakened to its lowest level in 11 days against the U.S. dollar on Monday as rising COVID-19 cases in China weighed on investor sentiment and speculation that OPEC would increase output led to volatility in the price of oil. The price of oil, one of Canada’s major exports, fell sharply on Monday amid reports that Saudi Arabia and other OPEC oil producers are considering increasing daily production by half a million barrels. However, this information has not been confirmed. Given the continued pressure on oil quotes, the Canadian currency may remain under pressure.

BUY STOP 1,3450/TP 1,3550/SL 1,3420