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The dollar is keeping slightly firmer ahead of European trading as it looks past the Fed sticking with plans to keep policy unchanged for quite some time yet.
Risk aversion is the key theme driving the market to wrap up January trading and that looks set to continue into the session ahead despite the Fed remarks yesterday.
Meme stocks are bringing a lot of unwanted attention to Wall Street and that might have a small role to do with all of this but the general retreat in the market from all-time highs is but one that isn’t unfamiliar in this market.
It will be a test of dip buyers’ appetite once again but for now, perhaps the shove lower in risk assets could still run before we see a turnaround take place.
The softer mood is underpinning the dollar as we see EUR/USD hit a low of 1.2059 yesterday, testing key support around 1.2053-59 before bouncing a little.
GBP/USD retreated back below 1.3700 as well but is finding support from its 200-hour moving average around 1.3666 for the time being.
Meanwhile, USD/JPY has nudged back above 104.00 and closes in on its 11 January high of 104.40 with the 100-day moving average nearby @ 104.45.
Amid the risk retreat, commodity currencies are bearing the brunt of the decline with AUD/USD seen tracking lower to 0.7630 as near-term support closer to 0.7660-66 gives way and the pair is now down to a fresh one-month low.
NZD/USD is also threatening a further drop towards support at 0.7100 at the moment.
Elsewhere, gold is barely hanging on at its key trendline support from the March to November lows just above $1,830 while silver is also holding just above its 100-day moving average around the $25 level currently.
The technicals suggests that the dollar is flexing its muscles for now as risk aversion continues to take hold, with key levels being called into question.
But the picture narrative remains somewhat unchanged and while the dollar may find some footing for now with risk trades stuttering, the Fed put being in play should eventually see things flip back around sooner or later.
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