The US dollar continues to strengthen against all major currencies except the Japanese one. Therefore, it looks like the dollar rally is not yet completed.

It can be recalled that COVID-19 is the main reason why the rate of the US dollar made a sharp reversal. The high probability of a second wave in Europe, and then, possibly, in North America, forces investors to exit risky assets — company shares and then buy the dollar, Japanese yen and government bonds of economically developed countries. The outbreak of COVID-19 last spring and the quarantine measures that followed are pushing markets to respond to the worsening situation in Europe, in particular in the UK.

The second reason appeared to be the Fed's "too" optimistic forecast for the US economy, the labor market and the prospects for inflation. This pushed stock managers to close deals on shares of companies that have gained significantly this year, rewriting to pandemic highs. This was actually a start to the strengthening of the dollar in connection with the growing expectations that the Fed will start the process of raising rates earlier than expected.

Another reason which could also contribute to the growth of the dollar rate were statements from some Central Banks. For example, the Bank of England stated that the regulator could move to negative interest rates. In this case, the dollar will naturally receive support due to the difference in its favor in the level of interest rates. It should be noted that they are still positive, although they are not so high in the States, just above zero.

Given this state of affairs, the dollar rally is expected to continue until the end of this month. The main supporting factors will be fears of new quarantine measures against COVID-19 and a sell-off in the US stock market. This trend will continue as long as these reasons persist, with regard to the optimistic forecast. However, there is also a pessimistic one. The essence of which is that a broader fight against COVID-19 will begin in Europe by reintroducing quarantine. The same will begin in America. As the US presidential election approaches, which is another negative factor in the wake of uncertainty about its outcome and consequences, this factor will also stimulate demand for dollars.

In general, we can say that the dollar's strengthening on the wave of negativity can be established before November 4, the day of the US presidential elections.

Forecast of the day:

The EUR/USD pair broke out of the range 1.1740-1.1915. We believe it is necessary to sell it with a likely price decline to 1.1600.

The NZD/USD pair is under pressure amid the result of the RBNZ meeting, high demand for the US dollar and the formation of a "double top" reversal pattern. Thus, we believe it should be sold after overcoming the "neck" line of 0.6600 with a likely decline to 0.6615.