KEY POINTS OF THE ARTICLE:

• The US Dollar has entered a sequence of technical rebound since the Forex session of Thursday, January 7, 2021 and this, against a basket of major currencies.
• Several factors combine and are at the source of this rebound, in particular a steepening of the yield curve in the United States.

THE US DOLLAR HAS ENTERED A SEQUENCE OF TECHNICAL REBOUND SINCE THE FOREX SESSION OF THURSDAY, JANUARY 7, 2021 AND THIS, AGAINST A BASKET OF MAJOR CURRENCIES

A fact was established during the stock market report of the year 2020; the lowest common denominator of the financial markets last year was, by far, the downward momentum of the US dollar against a basket of major currencies, against a backdrop of a significant increase in the quantity of money in the United States. However, the movements of all asset classes should not be reduced to a mere form of correlation with the USD. I often hear that the rise in BTC is related to the fall in USD, but BTC/USD gained 270% in 2020, for a 7% decline in the US dollar against a basket of major currencies over the same period.

The first chart above shows the Japanese candles of the US dollar on the left and the US 10-year bond yield on the right. There is a positive correlation between USD's technical rebound on Forex and a resistance over the US 10-year.

SEVERAL FACTORS COMBINE AND ARE AT THE SOURCE OF THIS REBOUND, IN PARTICULAR A STEEPENING OF THE YIELD CURVE IN THE UNITED STATES

It is a combination of factors that explain why the US dollar is finally managing to rebound and naturally, the credit market is the main source. The victory of the Democrats in Congress and the Presidency of the United States will allow the implementation of the fiscal and budgetary programs of Joe Biden's team, with an immediate impact on the steepening of the yield curve in the United States.

The rebound of the US dollar can also be read as a sequence of small profit taking on risky assets, a process of buying "shorts" on the US dollar that results in a retracement of eur usd below the technical resistance at $1.2275.