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The “fallen” dollar has found a fulcrum. Market bets – a crutch or a springboard?

In the middle of this week, the greenback got a temporary break in the decline. This was facilitated by
growth in market interest rates. However, the delicate balance did not last long, and the USD resumed its decline.

On Tuesday evening, April 20, the American currency reached its lowest in Asian trading
level over the past seven weeks, however, has stabilized in Europe. The balance of profits and losses helped the USD dynamics
against global currencies, as US interest rates remained in a narrow range and vaccination prospects
in the EU have improved.

An important role in the sinking of the greenback was played by the fall in the yield of US government bonds. In the current
the month, the dollar has lost its positions strongly, as the yields of US bonds collapsed from 14-month highs
at 1.776%. According to experts, the decline in the US currency and yields indicate that the Fed is in no hurry
with tightening monetary policy (MP).

On Tuesday evening, April 20, the yield on 10-year US Treasuries traded
close to 1.60%, falling to 1.58% from the previous level of 1.59%. At the same time, over the course of the day, it decreased to 1.57% from the previous 1.61%. According to observations
analysts, this figure has been declining for the third week in a row. On Wednesday, April 21, this trend continued, dragging the dollar with it.
Recall that the USD rate follows the dynamics of the yield of American government bonds.

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With regard to the medium and long-term prospects of the American currency, experts maintain
negative attitude. Analysts expect further subsidence of the “American” in relation to the “European”, especially in connection
with an improved outlook for the European economy amid successful COVID-19 vaccinations. TD Securities Bank believes that
Forex and interest rate markets may be relatively calm in the near term as the Fed and ECB remain unchanged
its policy of key rates.

Positive news for the European currency is the receipt of an additional 100 million
doses of COVID-19 vaccine produced by BioNTech and Pfizer. TD Securities is confident that due to active immunization of the population
the recovery of the European economy will go faster. As a result, it may overtake the American economy, displacing the dollar.
The specialists are confident that the improvement in the economic situation in a number of countries will further reduce the USD. In the opinion
experts, the dollar “squeezed” everything possible from the fiscal stimulus program in the amount of $ 1.9 trillion, and now he will have to be content with
small. According to analysts at The Goldman Sachs, the current situation is conducive to a similar scenario, since the economic outlook
The EU is improving, and the near future of the greenback is a resumption of the downtrend.

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In the short-term planning horizon, many experts hold a negative outlook
for the American currency, highlighting the overvaluation of the USD. According to technical analysis, the dollar continues to retreat.
Analysts believe that the medium-term risks of a decline in USD are the threat of a decline in market sentiment due to the record incidence of COVID-19.
The danger for the “bears” on the dollar is that its decline often occurs against the backdrop of high-risk sentiment. but
there is no need for risk now as the global and US stock markets are at their peak on a number of indicators.

Analysts consider the current weakening of the USD to be the most noticeable trend in
currencies of the Big Ten (G10). Tuesday evening, April 20, couple EUR/USD immediately reached a new high of 1.2079.
The tandem then slipped to 1.2025. Wednesday morning, April 21, couple EUR/USD remained close to 1.2028. According to analysts, in
at the moment, in tandem, the correction in the range from 1.2350 to 1.1700 is completed, and in the near future it will return to the decline.

An expensive euro and a depreciated dollar? Unlikely: expert findings

According to experts, thanks to the placement of US Treasury bonds, planned in the near future, the dollar is supported. These measures will suspend the downward movement of the USD, experts say. Positive
sentiment is driven by the improved outlook for the global economy in the second half of 2021. Many market participants are confident
that active vaccination against COVID-19 will help defeat the virus and lead to rapid economic growth around the world.

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The implementation of such a scenario may increase the dollar’s fall on the growth of risk appetite. In a similar
situation, the decline will occur not only in relation to the euro, but also to other currencies. However, this option is unlikely, they say
experts. The dollar is far from depreciating, and the euro is far from winning the global financial arena. Against the backdrop of endless lockdowns
in a number of European countries, the eurozone economy may again show a decline in GDP. Note that during the two “failures”
quarters, the EU economy is at risk of falling into recession. If such a scenario is realized, the euro will not rise in price, they emphasize

With regard to market interest rates, analysts believe that they will not be a springboard for
dynamics of USD. However, they will not have to serve as a prop for the dollar either, since their role will be limited to temporary assistance for
greenback, who, despite the decline, is looking for ways to get out of this pit.

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Source: InstaForex

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