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Forex Traiding

Will the dollar change the stick for the carrot?

DATE OF PUBLICATION: 2021-01-22 13:03:46 Appeals by the new US administration led by Joe Biden to Congress for a new package of fiscal stimulus of $ 1.9 trillion, Janet Yellen’s unwillingness to contribute to the weakening of the dollar, as well as moderate optimism from the ECB allowed “ bulls ”on EURUSD to recover some of the losses incurred in the first half of January. Deprived of support from rising bond yields, the US dollar has lost its gains, but the euro has not been able to take full advantage of the favorable situation. The steady rise in global risk appetite is forcing the USD index to sink, but the single European currency is also sinking, albeit less quickly than its main competitor. Slow vaccinations in continental Europe, extended lockdowns and heightened risks of a double recession are keeping EURUSD buyers from spreading their wings. Eurozone private sector business activity fell to 47.5 in January (below 50 indicates a contraction in GDP), and the purchasing managers’ index for services fell at the fastest pace since May. European and US Vaccination Trends Investors who were betting on fast vaccinations and the rapid growth of the economy of the currency block in the first half of the year, begin to doubt the realism of their forecasts and close longs on EURUSD. Alas, it is difficult for the US dollar to cling to something. In early January, he was helped by the rising yields on US bonds. The market rightly believed that Joe Biden’s new $ 1.9 trillion stimulus package would boost emissions. The FRS will continue to buy assets for $ 120 billion. This alignment should facilitate the sale of securities in the secondary market and increase rates on them. Alas, the rise in bond yields turned out to be a temporary phenomenon. As soon as the indicator went down, the US dollar weakened. The dynamics of the difference between the issue of US bonds and the volume of purchases of assets of the Federal Reserve System for the strengthening of the “American” needs more solid reasons. It is possible they will be found in trade wars or in problems with the adoption of new incentives from Joe Biden by Congress. The Senate is divided, with Kemala Harris holding a small majority in the hands of the Democrats, but the Republicans are not going to throw out the white flag. They still control the commissions and demand concessions from their opponents when voting. According to the Petterson Institute analysis, in 2020 China has fulfilled only 58% of its commitments to the United States on the trade deal, while Janet Yellen’s aggressive rhetoric towards the Middle Kingdom suggests that the new head of the White House is not going to trade the carrot for the carrot. will please the bears on EURUSD. The Fed is likely to focus on its willingness to hold rates near zero for a long time and implement QE at least until the end of 2021. Technically, a breakout of resistances at 1.221 and 1.224 will be a buy signal with a 161.8% target on the AB = CD pattern in the hope of recovery of the upward trend in EURUSD. On the contrary, the inability of the pair to hold above 1.2125 and 1.208 is a sure sign of bulls’ weakness. In such a situation, sales will be relevant. EURUSD, daily chart Material provided by InstaForex – Source – InstaForex

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