The US dollar index is moving around the 92nd mark, reflecting continued demand for the US currency. And although the excitement around the US dollar, provoked by the "hawkish" results of the Fed's June meeting, has noticeably decreased, the dollar bulls still remain calm. In general, the fundamental background contributes to the US dollar's strengthening at least in the short term, until the release of Nonfarm data, which will either strengthen its position or vice versa.
On another note, the US President revealed some details of a bipartisan bill to develop the country's infrastructure in Wisconsin yesterday. According to him, it is planned to allocate about $ 50 billion for the development of public transport (in particular, for the purchase of electric buses), for the replacement of about 80 thousand water supply lines, and for expanding access to high-speed Internet. The infrastructure plan also provides for the allocation of $ 109 billion to finance roads, bridges, and other major projects. At the same time, Biden emphasized that the plan does not provide for an increase in the gasoline tax or the tax rate for those Americans who earn less than $ 400,000 a year. He assured that the infrastructure package will create millions of "well-paid jobs" and help US companies become more competitive in the global economy.
It can be recalled that Biden previously announced that a political deal was concluded in Congress between Democratic senators and Republican senators. The infrastructure plan, which was initially estimated at $ 2 trillion 600 million, was cut short to $ 1 trillion 200 million. Despite the agreements reached, the bill itself has not yet been adopted, so the US President is still lobbying for its approval. For example, he refused an earlier ultimatum, which consisted of the requirement to consider a bipartisan bill only in pair with a larger (6-trillion) social initiative. But on Saturday, Biden clarified that he would not veto the infrastructure plan – he agreed that the bill on expanding social support would be coordinated and considered separately.
Also yesterday, the US dollar reacted to the growth of the American consumer confidence indicator. The CB Consumer Confidence indicator came out in the "green zone", reaching 127 points with a forecast of growth to 119 points. This is the strongest result since February last year. Several experts said that the improvement in American consumer confidence in June suggests an increase in consumer activity at the end of the second quarter. At the same time, the structure of the release indicates an increase in the share of those consumers who plan to make capital purchases (houses, cars, large household appliances).
Such a fundamental picture allowed the EUR/USD bears to update the local low, reaching the level of 1.1878 (a weekly price low). But despite the downward impulse, the instrument did not leave the price range of 1.1850-1.1970, within which it has been trading for the second week. Sellers could not even test the lower limit of the range, so the downward dynamics gradually ended During Tuesday afternoon, buyers were even able to win back some of the lost positions, especially since German statistics provided a formal reason for an upward pullback (annual inflation in Germany again exceeded the 2% mark).
Analyzing the intraday price delays, it can be concluded that the pair is actually marking time, showing a flat within a wide price range. The daily chart tells us that a bearish mood prevails for the pair, but at the same time, sellers are only capable of short-term and relatively weak counterattacks. Traders are clearly waiting for the key release of this week, without risking opening large positions in favor of the dollar or against it. As soon as the pair approaches the lower limit of the above range, market participants take profits, extinguishing the downward impulse. A similar situation occurs when the price creeps up to the middle of the 19th mark.
In other words, everyone is waiting for Nonfarm data that will determine the vector of further movement of the US currency in the medium term.
However, increased volatility is also expected today. Europe will release the main data, namely the inflation growth, and the ADP agency will publish a report in the United States. The consolidated position of most experts does not bode well for European inflation. In their opinion, the general consumer price index in June will slow down to 1.9% (from a 2% mark), and the core index will slow down to 0.9% (from 1%).
Given the dynamics of German inflation (the CPI growth rate in Germany has slowed down slightly in annual terms), it can be assumed that today's figures will come out in accordance with the forecast. Any deviation from the predicted scenario will provoke volatility – in favor of or against the euro (depending on the "color" of the release). But at the same time, it is unlikely that the pair will leave the above range at the end of today. As for the ADP report, the situation is similar here. If the number of people employed in the private sector comes out in the "green zone", the US dollar will receive additional support, but at the same time, the reaction of the market will be temporary.
In this case, we can stick to the previous trading strategy in the short term: a movement to the lower border of the above range can be used to open longs, while approaching the middle of the 19th mark can be considered as a reason to enter sales.
