Update on Currencies: Jan 27, 2022

EURUSD finally broke down, meaning DXY finally broke out. We set the 1.0999 target over two months ago, reasoning that a breakdown in equities would send the dollar higher and the EURUSD lower. The DXY broke out two days later – even though the equity correction was delayed by year-end equity-propping silliness that saw DXY stuck in a holding pattern for over two months.

Since the US is a net importer, the value of the USD is an important tool in the Fed’s inflation fighting toolkit. All evidence to the contrary, the Fed insists they actually care about inflation. We’ll take a fresh look at the currencies this morning to see what they suggest about inflation and the overall markets.