FX.co ★ Demand for riskier assets may significantly decrease. Forecast for USD, NZD, AUD

The US House of Representatives moved closer to impeaching President Trump for a second time on Monday. Democrats called on Vice President Mike Pence to invoke the 25th Amendment to strip President Trump of power or they would impeach the president if he refused.

The impeachment resolution states that the current president must be removed from office due to the spreading of the fake news that he lost the November presidential election due to falsification in votes counting, including that notoriously known speech to his supporters minutes before the violence began. Trump made statements that emboldened his supporters and ultimately led to the Capitol takeover.

The House of Representatives will vote on the article of impeachment on Wednesday but the chances of passing it through the Senate are low since Republicans are unlikely to support this move and will not allow collecting 2/3 of the votes. Nevertheless, the S&P500 declined by 0.66% at the end of the day amid political turbulence caused by Democrats. There are also rumors that the US economy is recovering faster than predicted. Since June of last year, the Fed has been indirectly supporting riskier assets. The possibility that cash flow may be less than expected can lead to a strong correction of risk-on assets.

We need to wait for more clarity on the political situation in the United States, as well as the Biden government's position on tax incentives. Until recently, investors were anticipating large injections in the economy in the case of the blue wave. Now Congress is controlled by Democrats, Biden is practically the President. So, investors are now switching their attention from incentives to a possible quick recovery of the economy and rising inflation bolstered by high demand for US Treasuries.

Perhaps traders should lock in profits as the trajectories of the most popular risk-on currencies are clearly showing that it is time to take profit.

NZDUSD

The net long position on NZD remains quite strong despite a slight decline in the first New Year week by 26 million to 870 million but the bullish momentum is weakening. The price has turned down. Although it is still above the long-term average, there is a growing probability that the kiwi will go into correction.

The sentiment for NZD/USD remains bullish. There are no reasons to wait for a reversal since there are no signs of strong bearish calls. At the same time, the slowdown of the rally signals that some investors are focusing on safe-haven assets. So, the correction may begin this week. The pair may try to rise to the strong support zone of 0.6850/6900.

AUDUSD

The CFTC report did not affect the Australian dollar. The net speculative position remained short but decreased by 192 million to -303 million. There is no clear direction. At the same time, the price turned down and went below the long-term average. This is a strong signal for a correction.

Final retail trade data for November showed a jump of 7.1% MoM as Victoria once again eased quarantine restrictions. Australia is handling the pandemic well as the onset of summer in the southern hemisphere contributes to a decrease in seasonal viral activity. An unofficial inflation report from the Melbourne Institute forecasts that in December consumer prices may grow by 0.5% versus 0.3% in November and by 1.5% YoY versus 1.3% a month earlier.

The Australian dollar took advantage of the situation. In November and December, the AUDUSD pair reached the low on the first day of the month and the high on the last. Two months of growth might be followed by a correction. Even the weakening demand for riskier assets is unlikely to affect its trajectory.

The Aussie may drift lower to the support level of 0.7420 amid the correction, remaining within the ascending channel. However, now there is no reason for a deeper correction. Yet, it is also unlikely to soar to 0.8134.