Being the dominant one in the EUR/USD pair, the US dollar is trying to increase. The market is worried about its dynamic slowdown, since it greatly influences the state of the Euro currency. Therefore, experts are scared that the dollar's burden will drag the euro farther below.
There is a critical situation at the moment: the rising problems in the US dollar that lead to its weakening, gives the euro an opportunity to increase, but at the same time, it stops its dynamics. This resulted in a slowdown in the euro, which rose last Wednesday.
Based on the observations of analysts, the EUR/USD updated the record for the current month last October 21. However, experts were alarmed by the euro's growth, not supported by fundamental factors. It is possible that this rise will continue until the ECB meeting scheduled for next Thursday, October 29. At the moment, analysts believe that a large-scale increase in demand from investors is the only reason why the euro is rising. At the same time, market participants get rid of the US dollar, as they buy the euro.
Today, the EUR/USD pair has slightly slowed down, showing corrective dynamics during yesterday's trading. After an impressive multi-week peak of 1.1880, the decline of this pair is more surprising than its growth. The dollar's rising pressure played a key role in this rise, which keeps the market in suspense. Here, the main factor was the expectation of the next fiscal stimulus measures in the US.
Experts say that the EUR/USD pair currently retains the growth potential above 1.2000. Despite the current difficulties and slow down in the dynamics, the indicated pair still hope to further rise. Today, it is trading near the range of 1.1797-1.1798, trying to break through the resistance of the downward trend. Nevertheless, we have on the pair's side the technical indicators that signal a possible decline in the dollar and consolidation in the euro at the level of 1.2000 and above.
Now, currency strategists at Bloomberg noted that the BBDXY dollar index has completed the formation of the "head and shoulders pattern." Thus, we should wait for the break of the so-called neck line.
Moreover, the growth in the long treasury yields is also considered as another factor why the dynamics of the US dollar is slowing down. Previously, such transactions served as a strong impulse for the dollar's growth, but now it is unclear. The increasing long treasury yields no longer has a noticeable effect on the dollar's dynamics and does not provide an additional impulse for its growth. More recently, such measures have increased the attractiveness of the US currency for investors, but there is now a tense expectation in the markets and a slight decline in interest in major currencies.
On the other hand, the interest of risky assets arose against the background of the falling USD. Currently, the US currency is in the grip of a possible adoption by the US monetary authorities of a new fiscal stimulus package. Analysts believe that this can further weaken the dollar, which is already unbalanced.
Another thing that undermines the dollar's position is the political uncertainty in the United States, related to the election race. Now, investors are attentive of Mr. Biden's possible victory. Given that he takes control, public spending in America will increase dramatically, primarily related to supporting the economy in the face of the ongoing COVID-19. The implementation of this scenario will lead to a long-term preservation of the USD among the outsiders of the market. In this situation, the advantage will be given to risky assets, and the USD will need to gain additional points to avoid falling.
