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25.11.202008:57 外汇市场分析评论: Stock market is growing, but US dollar remains under pressure

The general risk appetite allowed the AUD/USD pair to consolidate above 0.7300. Therefore, buyers of the indicated currency pair approached the 73rd figure for two and a half weeks, however, they failed each time returning to the range of 0.7220-0.7280. On the other hand, recent events in the currency market weakened the US dollar index, after which the Australian dollar managed to impulsively change the price level. Now, bulls of the AUD/USD pair have two price goals – round level of 0.7400 and the upper line of the Bollinger Bands indicator, which corresponds to the level of 0.7450. If the US dollar continues to lose position, its Australian counterpart will be able to test the first resistance level before this month ends.

The US dollar shows contradictory dynamics, amid growth in the stock market. The price of the indicated currency, which was in high demand during the electoral political tension, is declining. In contrast, the stock market feels more than confident in view of the general optimism associated with the arrival of the New US President Joe Biden and its team in the White House. But the Democratic leader will only become the official owner of the Oval Office only in January, after his inauguration. Nonetheless, the outlines of future appointments to key positions are already being drawn, and these outlines are being positively perceived by the markets.

Exchange Rates 25.11.2020 analysis

In particular, we are talking about Ms. Janet Yellen, who is likely to take the post of Minister of Finance. Given her experience of working in the Federal Reserve System (including at the head of the Fed), traders reasonably assume that the interaction between the Ministry of Finance and the Central Bank will be positive, as there is currently an open conflict between the departments. It should be recalled that Mr. Mnuchin demanded the Fed to return unspent $ 455 billion from the coronavirus fund. We are talking about the funds that were allocated to the Fed as part of the first package to stimulate the US economy, which was approved by Congress in March this year. However, it turned out that the Central Bank used only a small part of the allocated funds. The Ministry of Finance, under the leadership of Mnuchin, openly (and officially) demanded them to return this money. The Fed, in turn, openly (and officially) denied this. It can be assumed that with the arrival of Yellen, this conflict will be settled. Moreover, its designation increases the probability of additional budgetary incentives being adopted.

Markets' optimism is also linked to the success of pharmacologists. So, Donald Trump stated that vaccines and drugs for the treatment of COVID-19 may begin to arrive in the United States as soon as early-December. In connection to this, Pfizer and BioNTech have already submitted a request to the regulator for emergency use of the vaccine, which is 95% effective.

Considering such a fundamental background, it is not surprising that the Dow Jones index exceeded 30,000 points for the first time in history before yesterday's trading ended. The Nasdaq electronic exchange index also noted a growth of 1.17% (12020.17 points), while the S&P 500 broad market index rose by 1.53% (3632.41 points). It is clear that mass vaccinations can help restore global economic growth in the long term, which will give additional support to stocks. Many stock market traders are ahead of events, playing out optimistic moods.

In turn, the US dollar, which market used as a safe-haven until recently, remained under pressure: the dollar index declined to multi-month lows amid low demand and fundamental factors negative for the currency. In particular, most experts think that the Fed will maintain a "dovish" attitude for quite some time – regardless of the vaccination process or the presence of the first signs of economic recovery in the US. The current dynamics so far suggest the opposite. For example, yesterday's publication of CB Consumer Confidence indicator showed a decline to 96.1 (it was above the 100-point value for the last two months). Earlier, disappointing data on retail sales and inflation were published.

Exchange Rates 25.11.2020 analysis

It can be concluded that trading on the side of the US dollar is quite risky at the moment. Any sign of corrective growth can be seen as a reason for a more profitable sale. It is also worth noting that the US trading floors will be closed tomorrow, due to Thanksgiving Day. Therefore, unusual price movements are likely today since many traders will take profits.

Nevertheless, if we look at the medium-term prospects, the longs are still relevant for the AUD/USD pair: the first goal is located near the level of 0.7375 (today's high), while the main goal is slightly higher, that is, to the level of 0.7400. However, if we talk about testing the upper line of the Bollinger Bands indicator on the daily chart (0.7450), buyers of the AUD need to go to the area of the 0.7400 mark and consolidate above it. Therefore, it is suggested not to consider this price level as a trading goal yet.

*这里的市场分析是为了增加您对市场的了解,而不是给出交易的指示。

Irina Manzenko,
分析专家
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