The past week, which took place under the sign of strengthening of the US currency, caused concern in the market. The dollar strengthened its position, despite the accompanying circumstances, both positive and not too good. In the current situation, analysts fear a cardinal reversal of the greenback, which may occur in the next couple of days.
Concerns about a potential change in the greenback dynamics are caused by some significant events that are expected this week. Among them are the publication of data on inflation and US retail sales, as well as speeches by US President Donald Trump and Federal Reserve Chief Jerome Powell. The main focus of the market is focused on the upcoming report by the Fed head to the US Congress, which will focus on monetary policy issues.
According to experts, the events planned for Wednesday and Thursday will cause a flurry of volatility in the market. They recommend waiting for it, and then, depending on the situation, watch how the dollar behaves in the EUR/USD pair. Until tomorrow, analysts advise not to carry out any noticeable manipulations with the EUR/USD pair and the greenback, and then act on the circumstances.
At the beginning of this week and at the end of last year, the US currency was supported by positive market expectations. Many traders and investors are confident that after three consecutive rate cuts, the Fed will take a long pause. Over the past week, the chances of maintaining the current rate to mid-2020 have greatly increased - from the previous 30% to the current 62%. Such a revaluation provoked an explosive increase in the yield of US government bonds, experts emphasize. It also helped the greenback strengthen.
Earlier, the strengthening of the dollar's position was facilitated by good news about a possible trade truce between Washington and Beijing. The market hoped that the upcoming trade deal would spur US economic growth. At the same time, an increase was recorded in world markets.
However, hopes remained in the field of dreams, and their realization moved beyond the horizon. Analysts warn that dollar growth should not always be considered good news. For almost two years, the strengthening of the greenback took place amid fears for the global economy. At the same time, the opposite effect is possible: strengthening the greenback can significantly weaken the growth of the global economy. In this situation, investors shift to US assets, ignoring the rest. This creates an imbalance in the global market, analysts said.
The strengthening of the US dollar and the apparent overheating of the global market raise investors' concerns about the prospects of other currencies. These concerns may increase if the greenback really reverses 180 degrees after the events of the next two days. Such a reversal can not only brings the EUR/USD pair into the zone of a prolonged fall, but also entrain other currencies.
The EUR/USD pair experienced noticeable volatility on Monday, November 11, cruising in a wide range from 1.1022 to 1.1033. According to experts, a critical level for the pair could be a fall below 1.1000, which will open the way to 1.0900.
The EUR/USD pair started quite upbeat on Tuesday morning, rising to the level of 1.1035. However, the pair could not continue the day on a positive note.
At a certain point, the EUR/USD pair fell to low levels of 1.1025–1.1026, demonstrating a dangerous tendency to grope for the bottom.
At the moment, experts consider the resistance level of 1.1050. To this level, the EUR/USD pair should go exactly half way, and now the pair is stuck in low positions 1.1027–1.1028. According to analysts, in the event of a breakthrough of resistance at the level of 1.1045, the EUR/USD pair is able to reach the level of 1.1110.
At present, three more factors have become an additional "fuel" for the dollar: fairly positive statistical data on the US labor market, the Fed's confidence in the strength of the American economy, and hopes for a breakthrough in US and Chinese trade negotiations. The combination of such incentives tuned the market for possible growth in the coming months. However, a positive attitude at any moment can turn into the opposite side, analysts warn.
A number of experts believe that a fateful reversal of the dollar in the coming days should not be expected, but certain changes in the dynamics of the greenback will appear. Analysts find it difficult to answer whether these changes will be marked with a positive or negative sign, but they will not pass without a trace for the greenback.
