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11 Jan 2021
4 min read

US Dollar Moves Higher, Gold Remains Steady After a Dip

US Dollar Moves Higher, Gold Remains Steady After a Dip

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Key Takeaways

  • Positive movements for the US dollar
  • Slow vaccination processes characterize Europe

The US dollar moved higher against a basket of other currencies in the initial market hours of the European session on Monday. The EUR/USD pair has been falling since the start of trading, making an intraday low of 1.2155. Currently, the pair has recovered slightly and is trading near 1.2170. The EUR/USD exchange rate has been in a decline for a third consecutive day. Last week, the euro traded at a 2.5-year top, reaching a high of 1.2349 against the greenback, a level not seen since April 2018.

The oversold US dollar is drawing bids against other currencies, too. The USD/JPY now sits above the 104.00 level, nearing a one-month top. The pair continues its upside move on Monday, following three consecutive days of gains. Since the lows near 102.50 on Wednesday, the USDJPY is staging a recovery and has climbed over 1.50% to reach a high of 104.22. The USD/CHF is also moving strongly to the upside. The pair is trading near session highs close to 0.8900 in its fourth day of upside momentum. USD/CHF reached a multi-year low on Wednesday, sliding near 0.8750, an area last seen in January 2015. The USDCAD pair is also trading higher today, reaching towards 1.2800, currently hovering around 1.2770 – 1.2775.


The Yellow Metal Depreciates

On the back of a stronger dollar, gold responded by depreciating at the start of the Asian session on Monday, reaching a low of $1,816. Gold buyers saw the chance to go long and supported the precious metal, which resulted in a strong intraday bounce from the one-month low. The price of gold is now gravitating towards $1,850 as the market is already in the European session. The strong rebound of roughly $40 indicates that buyers are still in favor of the precious metal amid a continued surge of coronavirus cases across the US and Europe. Additionally, the markets today indicate a softer risk appetite with all European indexes in the red and US futures pointing to a negative open.

On Friday, following a week of records for the US stock market, gold plunged more than 4.50%. The yellow metal dropped from $1,913 to $1,828 and briefly went under the 200-day moving average before it was supported by the bullish camp and managed to close above it at $1,848. So far, the year has been highly volatile for gold as it surged to a high of $1,959 right out of the gate when trading opened in 2021. If bulls don’t succeed in their attempt to bring gold above its opening price, the decline today will mark a fourth straight day of losses.

In the meantime, the coronavirus pandemic continues to rage both across Europe and the US. The vaccination pace remains slow and below expectations with about 2% of the American population vaccinated. For most European countries, the vaccination rate is below 1% as authorities are looking for more efficient and faster ways to distribute the vaccine across health institutions. Europe’s sluggish rollout is expected to pick up the pace in order to stimulate the economic recovery later in the year.

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