The US dollar experienced a rise at the start of the trading week, driven by negative market sentiment and heightened demand for safe-haven assets. However, despite the initial uptick, investors advise caution as the week ahead is packed with key economic indicators.

The FED and the European Central Bank are set to make their interest rate decisions, while Japan is expected to release its employment data. These factors have the potential to significantly impact the market and influence the value of the US dollar. As the week progresses, investors will closely monitor these developments to gauge the market’s direction and the US dollar’s stability.

Economic Data Releases

Investors are eagerly awaiting the key economic data releases this week, with a focus on the rate decisions from the European Central Bank (ECB) and the Federal Reserve (FED). On Tuesday, Australia is set to release its retail sales report, which is expected to show a 3% drop.

Meanwhile, China’s statistics bureau will release PMIs for manufacturing and non-manufacturing, with analysts expecting improvement in both sectors. Wednesday will be an important day for investors as the ECB and FED announce their respective rate decisions.

Analysts believe the ECB may increase rates by half a point while the FED may slow down to a quarter-point increase. These decisions will significantly impact the market, and investors closely monitor the outcome.

On Monday, the market closely watched Japan as a panel of experts suggested that the Bank of Japan (BOJ) should make its 2% inflation target permanent. The panel also recommended raising interest rates to reflect current economic conditions and normalizing Japanese bonds.

Despite the recommendation, BOJ Governor Haruhiko Kuroda stated that the 2% target is attainable given the current growth levels. The pair USD/JPY initially fell earlier in the day to 129.20 but regained strength and ended the day at 130 due to high demand for the US dollar.

Technical Analysis

The EUR/USD pair had a mixed start to the trading week. Despite starting well and crossing the 1.0900 level, the pair fell by the end of the day to 1.0850. The dip in the pair can be attributed to the underwhelming performance of the German economy.

According to reports, Germany’s annual growth in 2022 was only 1.1%, which fell short of the analyst’s predictions of 1.3%. The Spanish economy also hurt the EUR/USD pair, as the sudden increase in inflation by 5.8%, according to the HICP (Harmonized Index of Consumer Prices), raised red flags before the ECB’s announcement on Wednesday.

The cautious outlook on the economy of both Germany and Spain contributed to the dip in the EUR/USD pair by the end of the day. The GBP/USD pair started the day well but ended lower at 1.2340. Analysts attribute this drop to the ongoing geopolitical chaos in the region.

Meanwhile, the AUD/USD pair remained in flux, ending the day at 0.7050. The Australian dollar could not gain traction ending the day at 0.7050, as investors weighed the impact of the recent retail sales report, which showed a 3% drop.

In contrast, the USD/CAD pair significantly increased, ending the day at 1.3390. This rise was due to a combination of factors, including the US dollar’s strength and expected rate hikes. The crude oil market also dropped, ending the day at $77.70. This drop is due to the negative sentiment in the market and the uncertainty surrounding the global economic outlook.