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The dollar’s black streak may end soon

Fundamental analysis of FOREX for April 30, 2021

The next block of strong statistics from the United States still managed to strengthen the yield on Treasury bonds, but unlike in March, this will practically not affect the dollar rate. The DXY index lags behind other forex currency indices and may close in the red zone for the fourth week in a row, which is the longest series of declines since July last year.

Rapid vaccinations and timely monetary and fiscal stimulus mechanisms allowed the United States economy to strengthen 6.4% in the first quarter. This is the best speaker since 1984. Only 1% is not enough to reach the pre-crisis level, and there is little doubt that this percentage will be worked out in the second quarter, especially since Joe Biden continues to promote economic stimulus programs. Now the authorities are discussing a $ 2.25 infrastructure reconstruction project and a $ 1.8 trillion social support program.

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Dynamics of consumer spending and US GDP

The United States and China are driving the global economic recovery. However, recently they are losing their exclusivity, which leads to synchronization of the growth of the world economy. The latter was clearly visible yesterday, when after the release of the US GDP data for the first quarter, the yield of not only American, but also European bonds increased.

The dollar has run out of old trump cards, but a new one may appear in May. The Dow Jones Market Data notes that in the first 100 days of Joe Biden’s presidency, the S&P 500 grew 11%, the best since Franklin Roosevelt in 1933. On average since 1929, the index has risen by 3.2%, and under Donald Trump has strengthened by 5.3%. The incentive conditions created are forcing stock indices to grow non-stop. However, many securities are already overvalued, so a surge in Treasury yields may cause a correction in indices, and return interest to the dollar through currency correlation.

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The likelihood of a correctional decline in stock indices is perhaps the main danger for EUR / USD buyers. It is too early to talk about a trend reversal, but no movement can continue indefinitely. Especially when it comes to the dollar – the national currency of the strongest world economy.

If the pair fails to gain a foothold above 1.2090 and 1.2060, then within the framework of the forex strategy of the day I do not exclude short-term sales, but I think that any decline will be quickly bought out by buyers.

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