Risks of the USD Correction Increased (Weekly Review)

Last week, under the close scrutiny of financial market participants, the US FOMC Meeting was held, although no changes in monetary policy were expected from it. The Fed's unprecedented liquidity injection amid the coronavirus pandemic has deprived the USD of its attractiveness, and has led to significant weakening over the recent months.

In case of expansion of stimulus measures, there was a threat of a further fall in the USD, but the Fed, as was generally expected, did not follow the lead of the USD bears, although it indicated the long-term nature of low interest rates. The USD closed the week remaining under pressure from sellers, but in the absence of fresh bearish factors, the risks of correction increased.

Among the leaders of growth against the USD, the NZD should be named. Ignoring weak data on New Zealand's GDP and signs of recession, the Kiwi broke through the resistance at 0.6755, which was facilitated by the positive forecasts on the country's economic growth rate from the officials. However, the above factors in no way justify the growth of the NZD, so the bulls should be extremely careful.

Schedule for this week:

Monday, September 21
12:30 GMT - USA. Chicago Fed National Activity;
14:00 GMT - USA. Federal Reserve Chair Jerome Powell Speaks.

Tuesday, September 22
00:30 GMT - Australia. Reserve Bank of Australia Assistant Governor Debelle Speaks;
07:30 GMT - United Kingdom. Bank of England Governor Bailey Speaks;
14:00 GMT - Eurozone. Consumer Confidence;
14:30 GMT - USA. Fed Chair Powell Testifies  before the Joint Economic Committee.

Wednesday, September 23
01:30 GMT - Australia. Retail Sales;
02:00 GMT - New Zealand. RBNZ Interest Rate Decision;
02:00 GMT - New Zealand. RBNZ Rate Statement;
07:30 GMT - Germany. Markit Manufacturing Purchasing Managers Index (PMI);
07:30 GMT - Germany. Markit Composite Purchasing Managers Index (PMI);
08:00 GMT - Eurozone. Markit Composite Manufacturing Purchasing Managers Index (PMI);
08:30 GMT - United Kingdom. Markit Services Purchasing Managers Index (PMI);
13:45 GMT - USA. Markit Manufacturing Purchasing Managers Index (PMI).

Thursday, September 24
22:45 GMT - New Zealand. Trade Balance;
07:30 GMT - Switzerland. SNB Interest Rate Decision;
07:30 GMT - Switzerland. SNB Monetary Policy Assessment;
08:00 GMT - Germany. IFO Business Climate Index;
12:30 GMT - USA. Initial Jobless Claims;
14:00 GMT - USA. Treasury Secretary Steven Mnuchin Speaks.

Friday, September 25
12:30 GMT - USA. Durable Goods Orders;
19:10 GMT - USA. FOMC Member Williams Speaks.

Author: Anthony Porter, IAFT Analyst