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Forex Traiding

volatile dollar growth and astounding euro resilience

DATE OF PUBLICATION: 2021-01-13 18:35:34 Over the past two months of 2020, the US currency has depreciated by almost 5%, and most market participants were betting on a further weakening of the greenback in 2021. However, after the Democrats won the Senate elections in Georgia On January 5, the new ruling party had carte blanche for almost any measure, including the allocation of trillions of dollars to support the US economy weakened by the coronavirus, which led to a sell-off in the US government bond market and a sharp rise in Treasury yields, which helped stem the dollar’s decline. 89.2 points, which became the minimum for the American currency for almost three years, the USD index rose to 90.7 points. According to experts, the dollar reversal may continue until the yield rates in US government securities return to average annual values ​​in the region 2.5%, which is also close to the Fed’s inflation target, which means the market is only halfway through and the greenback is likely to remain The USD index may well rise to 92 points in the coming weeks. At the same time, analysts warn that there is no long-term trend in favor of the strengthening of the American currency, therefore, it is worth playing on the USD rise with great caution. “There is little evidence of sustained growth dollar while the yield curve in the US remains very steep. The uncertainty in the global economy is diminishing, and the global outlook is improving. Therefore, any rally in the dollar will be limited, “strategists at Deutsche Bank say. They are currently neutral on the EUR / USD pair and predict that it will enter a prolonged period of consolidation in the 1.2000-1.2500 range, given that the fact that the United States is ahead of the EU in vaccinating its population. The single currency is showing remarkable resilience, despite new quarantine measures across Europe fueling fears of a double recession in the region. A similar picture was already observed last fall, when the EUR / USD pair ignored the first signs of a second wave of the pandemic. Is there a significant correction for the pair? Perhaps, however, this may require a significant drawdown of the US stock market. In this regard, investors should carefully monitor possible signals of a reversal of stock indices. These signals may come from the Federal Reserve. Previously, many experts expected that the US Central Bank would indicate its intentions to keep under control the yield of long-term government bonds. Until now, the regulator has avoided direct instructions on this matter. A further rally in Treasury yields may force the Fed to take this step, however, it is just over two weeks before the next FOMC meeting, and it is still unclear how the regulator will act. A new surge in demand for the dollar has already sent the main currency pair below 1.2200. the psychologically important level of 1.2125, we may witness a deeper drawdown of EUR / USD. Further support lies at 1.2000. The pair will hardly be able to break through it without a strong catalyst. The nearest strong resistance is at 1.2230 and further at 1.2270 and 1.2310. Material provided by InstaForex – Source – InstaForex

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