USD Weekly Forecast – FOMC Statement and First Q4 GDP Reading Due

The Fed is up this week! What are markets expecting from the central bank?

More importantly, how long will it affect the dollar’s broader trends?

I’ve listed down a few points that might help you trade the Greenback this week:

FOMC Statement (Jan 27, 7:00 pm GMT)

As expected, the Fed made no policy changes in December
Governor Powell and his team raised their growth forecasts on vaccine optimism
USD initially popped up but soon erased its gains when traders priced in the Fed’s continued bond-buying and dovish policies
Market players don’t expect policy changes from the Fed this week
The Fed could express optimism over the vaccine rollout and likelihood of more fiscal stimulus
To avoid the markets getting ahead of themselves (and pushing long-term govt bond yields higher), Powell will likely cool down talks of any near-term tightening

The first reading of Q4 2020 GDP is expected to reflect the slower growth from tighter COVID-19 restrictions that led to lower employment and consumer activity (Bitcoin buying doesn’t count lol)
Quarterly growth is seen at 4.0% from a 33.4% jump in Q3
Much lower economic activity would highlight the need for more stimulus and faster vaccine distribution

Expectations of stimulus in the U.S. could continue to promote risk-taking and weigh on the dollar this week
Disappointing U.S. earnings reports, doubts on the size and schedule of the stimulus bill, global lockdown prospects, and end-of-month profit-taking could push the safe-haven dollar higher against its higher-yielding counterparts

Stochastic considers the dollar “oversold” against the pound on the daily time frame
USD is mostly in neutral zones against its other counterparts

EMAs show the dollar’s short AND long-term bearish trends against most of its major counterparts
We could be seeing retracement or reversal setups on USD/JPY this week