US DOLLAR HOLDS STEADY AS FOCUS SHIFTS TO THE FED DECISION

The US dollar was relatively unchanged against other currencies as investors reflected on the latest US inflation numbers and the flattening yield curve. Data published by the Bureau of Labor Statistics (BLS) on Friday showed that the country’s inflation rose from 6.2% in November to 6.8% in November. This was the highest level it has been in a few decades. Excluding food and energy prices, inflation rose by almost 5%. The focus for the US dollar will be the upcoming Federal Reserve interest rate decision as the yield curve flattens.

US futures tilted upwards on Monday morning as the focus shifted to the Federal Reserve decision. Analysts expect that the bank will continue reducing the amount of money it is printing through its quantitative easing program. The bank will also signal that it will hike interest rates in 2022 in a bid to deal with inflation. Stocks will also react to key companies that are scheduled to publish their results this week. For example, Rivian, the electric pick-up company will publish the first earnings as a public company. Also, Lennar Corp will publish its results this week. Its results are watched closely because it is a leading homebuilder. Other companies that will publish their results are FedEx and Adobe.

The euro and sterling were also unchanged ahead of key economic data and central bank decisions scheduled for this week. The Bank of England (BOE) will publish its decision on Thursday. Analysts expect that the bank will sound a bit cautious because of the Omicron variant. The British pound will also react to key numbers like employment, inflation, and retail sales. The European Central Bank (ECB) will also meet this week.

EURUSD

The EURUSD pair held steady after it rose following the release of the latest US inflation data. The pair is trading at 1.1312, which is slightly above last Friday’s low at 1.1267. On the four-hour chart, the price is along the upper side of the Bollinger Bands. It also moved slightly above the 25-day moving average while the Relative Strength Index (RSI) and Stochastic have moved upwards. Therefore, the pair will likely pull back as focus shifts to the FOMC decision.

USDCHF

The USDCHF pair declined after the US inflation numbers. Now, the focus shifts to the upcoming Fed and Swiss National Bank (SNB) decision. It is trading at 0.9200, which is lower than last week’s high of 0.9273. On the four-hour chart, the pair moved above the 61.8% Fibonacci retracement level. It is also slightly below the 25-day moving average. Therefore, the pair will likely resume the upward trend ahead of the two central bank decisions.

AUDUSD

The AUDUSD pair is trading at 0.7170, which is slightly below the key resistance at 0.7187. On the four-hour chart, the pair has formed a small double-top pattern. It is also between the upper and middle lines of the Bollinger Bands. The pair is above the 25-day moving average. Therefore, because of the double-top pattern, the pair will likely have a pullback.