In a year where sellers dominated the currency, it’s become increasingly difficult to expect anything different to happen. For Q1 of 2021, I’m looking for a continuation in the bearish backdrop that’s become so incredibly loud around the US Dollar.
There are numerous fundamental reasons for it, as Mr. Kicklighter has highlighted in the Fundamentals portion of this forecast: But there’s a litany of technical reasons, as well, and that was on full display in the last eight months of 2020 trade.
Perhaps one of the more difficult parts of a continued bearish stance around the USD is just how aggressively that trend has already built-in. The US Dollar is oversold from a few different vantage points and, logically, there’s only so far that this can run.
This theme of USD-weakness got another fresh shot in the arm after I had written the forecast (but before it was released) during the December FOMC rate decision when Chair Powell seemed even less interested in asset prices than he had in the past.
This helped the USD to push down to yet another fresh two-year-low, eventually finding a bit of support at what was the first downside target for Q1, 2021. That support was furnished by the psychological level of 90.00, and this may be a theme to keep an eye on in USD next year for a few different reasons.