According To IG: The USD Will Begin 2023 On The Back Foot

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Currency markets are down.

Currency market trading has been relatively quiet on this first major trading day of 2023, as traders prepare for some crucial data to be announced later this week.

Let's start with the Federal Open Market Committee (FOMC) minutes tomorrow. At the end of the most recent Federal Reserve (Fed) meeting in mid-December, Fed chairman Jerome Powell announced a 50-basis-point hike in the Fed funds rate, which is currently at its highest level in 15 years. This marked the end of a year in which the US Federal Reserve raised interest rates by a total of 425 basis points.

Investors are also anticipating job data this week. On Thursday, ADP will disclose private payrolls and weekly jobless claims, with December non-farm payrolls following on Friday.

Here's a basic rundown of what we're expecting: According to preliminary estimates, 200,000 new jobs were created last month. The unemployment rate is predicted to continue at 3.7%, with average hourly wages increasing by 5% year on year.

The basket of US dollars

I'd like to show you this graph. This is the dollar basket or the dollar trading versus the whole G10 currency basket. As you can see, we are still challenging this line of support at 10307.

We witnessed the resumption of trading today, testing that region at 10307 once again, and if that area is broken down to levels not seen since June 9th, the next line of support to monitor is 10110.

EUR/USD

How do you deal with this？ It revolves around euro/dollar trading. The euro has lost ground versus the US dollar for the second day in a row, despite the US dollar's decline to those levels. The line of support is at 10616, which I've shown above, and represents the highs we experienced on June 27th. And we just saw that region challenged again; it has been an area of attention at 10616. At the time, we are trading 10657. And, with the Fed minutes due out tomorrow, we'll be hoping for a continuation of the current trend of a higher euro versus a lower US dollar.

If you're confident in this strategy and are long at 10656, your stop would be set below the 106 level.

About IG

IG is a forex broker. Forex (short for “foreign exchange”) refers to the buying and selling of currencies, and it is a global, decentralized market where financial institutions, businesses, and individuals can trade currencies. IG is a UK-based company that was founded in 1974 and has since grown to become one of the largest and most respected forex brokers in the world. IG offers a wide range of forex products and services, including spot forex trading, CFD trading, and spread betting, as well as a range of educational resources and trading tools for traders of all levels.

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