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Will The USD Reach New Highs In January?

FOREX
  • Historically, January has been the best month for the greenback with the DXY Index averaging nearly 1% in monthly returns since 1971.
  • Hence, investors have questioned themselves if the USD could reach new highs in the short term after pausing below the 97 level in the past 6 weeks.
  • Next resistance to watch (above 97) on the DXY stands at 97.7190, which corresponds to the 61.8% Fibo retracement of the 89.21 - 102.98 range (2020/2021 high low).
  • On one hand, the 'hawkish' tone from US policymakers (with Fed accelerating its tapering and probability of 4 hikes this year rising) should support the Dollar in the short term.
  • On the other hand, the USD trade is now getting 'crowded' with the cumulative net long specs positions standing at the high of their historical 5-year range.

Source: Bloomberg/MNI

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