Forex Today: Dollar eases ahead of Federal Reserve’s announcement

FXStreet Team FXStreet

What you need to know of Wednesday, January 27:

The market’s mood was sour at the beginning of the day but improved during the European session, in the detriment of the American dollar. The greenback edged lower against most major rivals, despite investors were cautious throughout the US session.

Wall Street posted a modest intraday advance, while US Treasury yields ticked higher, but held near its weekly lows.

The BOJ published the Minutes of its latest meeting and said it will remain vigilant of FX moves. Also, the ECB expressed concerns about the exchange rate and would study the impact of ECB vs Fed policy on it. Dollar’s weakness is becoming a concern, despite the economy baring quite well with the pandemic. Still, the latest macroeconomic figures coming from the country were generally discouraging.

Focus remains on US events, starting this Wednesday with the Durable Goods Orders report and the Federal Reserve announcement on monetary policy.

Coronavirus vaccines remain in the eye of the storm, amid delayed delivery. On a positive note, Pfizer announced it will look into a booster dose, one day after Moderna announced the same. Meanwhile, Johnson & Johnson said that it will publish coronavirus vaccine trial data next week and that the company is very optimistic that they will be releasing a very robust data set.

Commodity-related currencies were the best performers against the greenback, while GBP/USD flirted with the year high at 1.2745. Major pairs remained within familiar levels.

Commodities eased modestly, with gold ending the day at $1,851 a toy ounce and WTI at $52.50 a barrel.

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EUR/USD looks weak below 1.1800

EUR/USD has slipped back under pressure, breaking through the 1.1800 support and drifting towards the weekly lows near 1.1770 ahead of the opening bell in Asia. The move reflects renewed strength in the US Dollar, with steady geopolitical tensions keeping its demand firm. Moving forward, the release of the German labour market report and flash inflation figures should keep European investors entertained on Friday.

GBP/USD threatens the 200-day SMA near 1.3440

GBP/USD rapidly leaves behind Wednesday’s strong advance, coming under heavy pressure and retesting the 1.3440 zone, where the critical 200-day SMA is located. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold trims gains, slips back to around $5,170

Gold is now facing some downside pressure, hovering around the $5,170 region on Thursday. The yellow metal surrenders part of its earlier gains on the back of the resurgence of the buying interest in the Greenback. In the meantime, geopolitical tensions in the Middle East continue to limit the downside potential for now.