The first trading day of the new year was not marked by anything new in the foreign exchange market. The dollar continued its downward movement not only against the basket of major competitors but also against the currencies of developing countries. During the US session, the USD slowed down and still remains in the territory of the 89 mark, which suggests its further decline.

There are two reasons why the dollar will continue to grope for new lows against other major world currencies. First, these are some guarantees of low rates for a long period. At the last meeting, all FOMC officials said they did not expect the first rate hike before 2023. No other major central bank can beat the Fed in easing credit conditions, and it is unlikely to do so now. The bottom of the recession, as many analysts note, has passed, and the world's central banks, with the exception of the Federal Reserve, will smoothly move to normalize policy, increasing the difference in the softness of credit conditions between the Fed and other regulators. This factor keeps the dollar in a bearish market.

The rapid acceleration of inflation in the United States may hinder the implementation of this scenario. This will require monetaries to raise in an emergency order, but here everything is thought out. Given the new inflationary concept of the regulator, inflation should try hard to force officials to act. Therefore, this potential hindrance to long-term policy softness can be excluded from the accounts.

Second, domestic political events in the United States may contribute to the sale of the dollar within a week or two. In mid-January, as you know, there will be a second round of elections in Georgia, where Democrats and Republicans will fight for two crucial seats in the Senate. Now the chances of Democrats being able to deprive Republicans of a majority in the Senate have dramatically increased.

As the recent battles over the fiscal deal have shown, the economic initiatives of representatives of the Democratic Party are associated with a more active increase in the national debt. For the dollar, this prospect threatens devaluation. Rumors on the markets are already spreading, and the classic sell-off of the USD before the event in Georgia may well happen.

From a technical point of view, the dollar index has stalled in a downward-sloping channel, despite attempts to break higher on the holidays. Be that as it may, short positions are now a priority. Given that the correction from 89.5 has been played out, the next target may be 89.0 and 88.7

As reported in the US Commodity Futures Trading Commission (CFTC), speculative bets on the decline of the dollar reached a new record value since March 2011. The vast majority of investment banks are betting on the continuation of the downward trend in the dollar in 2021. Goldman Sachs and Citi warn that this year the US dollar can lose 5-20% more in relation to a basket of competitors.

A similar scenario is followed in Credit Agricole. Bloomberg strategists point to the probability of a 15% decline in the dollar index.

However, not everyone agrees with such forecasts. Some strategists continue to insist on the recovery of the dollar. In their opinion, the dollar will still be able to surprise everyone.