Dollar seeks validation to start European morning trade

In case you missed it: Trump’s tariff team studying gradual hikes of 2 to 5% per month

It sort of ties back to this report last week here, as it appears Trump’s team is still concocting something on the tariffs front. They are exploring different options before rolling things out but knowing Trump, he will at least want to put on a big show. Or at least try and talk that up.

For now though, the multiple reports since last week point to the potential for tariffs to at least be watered down at the start. And that’s taking some of the pressure off major currencies against the dollar.

After the retreat yesterday, the greenback is instead now seeking validation to keep up with the positive momentum to start the new year. Taking a look at the near-term charts:

We can see EUR/USD going up against a test of its 100-hour moving average (red line) at 1.0273 now. Keep below that and the near-term bias stays more bearish. But break above and it turns more neutral with some scope to travel between that and the 200-hour moving average (blue line) of 1.0305.

Meanwhile, AUD/USD is facing up against a test of its own 200-hour moving average (blue line) at 0.6206. Keep below that and sellers will still have some voice in trying to wrestle back near-term control of the pair. But break above that and buyers will instead establish a more bullish near-term bias.

The 200-hour moving average is keeping a lid on things for now with price action roaming between that and the 100-hour moving average (red line) of 0.6182 currently.

Looking elsewhere, GBP/USD is keeping a downside bias still but is seeing a modest bounce off the low of 1.2100 yesterday to trade at 1.2210 now. As for USD/JPY, the pair continues to track more sideways as it nudges between 157.00 to 158.00 to start the new week.

This article was written by Justin Low at www.forexlive.com.