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Forex Traiding

euro fears surprises from the ECB, and dollar wonders what to expect from Biden

DATE OF PUBLICATION: 2021-01-20 18:26:11 The USD index retreated from monthly highs after US Treasury nominee Janet Yellen spoke in the Senate. She urged lawmakers not only to endorse her candidacy, but also to support the $ 1 economic stimulus package. 9 trillion The former head of the Federal Reserve also said that the US currency should be determined by the market. The latest data on market positioning suggests that investors are overwhelmingly shorting the dollar, as they believe that the deficit of the US government and current account will put pressure on the greenback. Nomura experts believe that the bearish trend in the USD may soon resume. “We think that J. Yellen is at best indifferent to the weakening of the dollar, and this may be enough to leave everything as it is.” said strategists at OCBC, referring to the downtrend that saw the US currency lose about 12% in value from last year’s peak. nk of America, in turn, noted that the results of the recent US presidential elections have strengthened the dollar’s downside potential in the short term, but a rally is likely later this year, as the recovery in the US economy should support the national currency. Comments by J. Yellen fueled inclination. investors to risk. Against this background, the greenback on Tuesday weakened against most of its main competitors. However, already on Wednesday the American currency was able to partially win back its losses, having risen above 90.5 points. On the eve of the inauguration of the 46th President of the United States, cautious sentiments returned to the market. “Although the transfer of power in the United States is proceeding peacefully, there are still a number of sensitive issues. Can the Biden administration speed up vaccinations and win the race against highly infectious COVID-19 strains? Will Congress support new incentive payments and other measures? In addition, the outgoing Donald Trump administration has taken quite aggressive measures against the Middle Kingdom, and the market may not like it if Biden does not soften the position indicated by the Republicans regarding Chinese companies and their placement on American exchanges, “Saxo Bank said. On the eve of the main currency pair rose to 1.2145, then it corrected somewhat, completing trading in the 1.2125 area. After a failed attempt to overcome the 1.2155-1.2160 area on Wednesday, the EUR / USD pair rolled back towards the 1.2100 mark. According to analysts, the pressure the single currency is being threatened by strengthening and expanding quarantine restrictions in the EU to combat the spread of COVID-19, as well as the slow pace of vaccination of the region against the virus. “We see more headlines that the current restrictions in the Old World will be extended further. This means that the eurozone is facing a double recession. This situation changes the alignment before tomorrow’s ECB meeting, which is likely to take place without any special events in terms of political statements, however, the market may receive from the regulator a signal of a possible easing of monetary policy in the future, ”Credit Agricole experts said. meeting of the ECB Governing Council this year. It is expected that the regulator will leave the interest rate unchanged, but may speak about the recent growth of the euro. However, attempts by the Central Bank to conduct a verbal intervention are unlikely to work without cutting the interest rate. According to Bloomberg, the ECB may resort to a strategy to control yield spreads to equalize the cost of lending in different European countries. This could put pressure on the euro. “Immediate support for EUR / USD moved to 1.2100 and further – to 1.2085. A close below 1.2054 would bring into play 1.2011 (September high) and 1.1945 (23.6% Fibonacci retracement level from the 2020-2021 rally), ”strategists at Credit Suisse noted. , 2167 will aim the pair at 1.2179-1.2180, and then at 1.2223 and 1.2231. However, only the breakdown of the last mark will neutralize the scenario with the formation of the top and will signal the completion of the corrective rollback and start the growth to the highs of this year in the area of ​​1.2350-1.2355, “they added. Material provided by InstaForex – Source – InstaForex

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