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03.03.2021: USD loses momentum against its rivals: outlook for USD/JPY, AUD/USD

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On Wednesday, market sentiment is quite buoyant. It improved significantly after Joe Biden announced that the US would have enough Covid-19 vaccine doses by the end of May, two months ahead of schedule. This is why many investors are quite optimistic about the pace of recovery in the US economy.

US Treasury yields declined again amid such news. As a result, the US dollar index, which measures the strength of the greenback against a basket of six major currencies, fell to the level of 90.80.

Meanwhile, recent drop in the stock market has fueled speculation that the Federal Reserve may soon adjust its policy to ease concerns about a rapid jump in long-term US Treasury yields.
Today, trading sentiment on the US dollar will depend on the publication of the ISM manufacturing PMI index, as well as the ADP national employment report for February.

At the end of the Asian session, the dollar/yen pair is consolidating near a 7-month high. After a steady rise, the pair is stuck in the range between the levels of 106.50 and 107.00. Technical analysis experts are betting on a jump to the level of 107.35.

The yen is down as Japan's services sector has been contracting for the 13th straight month in February. Such dismal results were due to the weakening of business activity amid restrictions imposed to stop the virus spread. Japan's lower house approved a $1 trillion draft budget for fiscal 2021, its largest ever. The government stresses the need for spending on coronavirus countermeasures that comes on top of already huge welfare and defense costs.

The AUD/USD pair is climbing up counter to the signals of technical indicators. The upward correction may push the pair to the level of 0.7875. Yet, there is still a possibility of a downward movement if the pair dips below the level of 0.7765.

The rally of the Aussie is likely to be short-lived as it was largely due to the release of data on Australia’s GDP growth for the 4th quarter of 2020. As it turned out, the economy expanded by 3.1% in the last three months of 2020. On a yearly basis, GDP was down by 1.1% - again exceeding expectations for a decline of 1.8%.

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