Dollar up ahead of Fed meeting

Despite Monday’s violent short squeeze, U.S. equities are likely to resume falling again at the opening of Tuesday. German business climate beat expectations in January, and the Federal Reserve begins its two-day policy meeting. Microsoft and General Electric lead a cast of thousands reporting quarterly earnings.

The dollar index rose on the back of the Fed’s hawkish stance expectations. The index is holding at the edge of a descending resistance line around 96.26. A sustained break above this barrier will signal the continuation of the rally towards 96.44. However, RSI reading at the verge of the overbought area suggests that buyers may take a breather before pushing the index higher.

The rising dollar puts EUR/USD on the back foot. On the four-hour chart, EUR/USD sellers were encouraged to clear a short term support level at 1.1290, aiming for 1.12620. with the 50-EMA crossing below the 200 EMA, more bears are likely to take cues from the death crossover and rein the market.

The single currency can fall to the 1.12459 hurdle if selling forces intensify. If this handle can’t cut more losses, a two-month low of around 1.12183 is expected to offer support.

Otherwise, in the event that buyers retake control, the previous level of interest at 1.12902 will challenge the upside bias. Overcoming this obstacle can send the price towards the previous top resistance at 1.13347, which lines up with 50 EMA.

Events of today

On the data calendar, the most important data comes from the housing sector. Moreover, the Richmond Federal Reserve also conducts a monthly business survey and the Conference Board’s Consumer Confidence survey.

Consumer confidence data will be closely watched for clues on the economy following the recent spike in COVID-19 cases due to the Omicron variant.