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Many experts recorded the tricky techniques of the US currency for a long time. The dollar could show a decline, but at the same time quickly change direction, confusing the market. Analysts believe that traders are currently facing a similar situation.
The US currency, whose quotes fell noticeably at the end of last week, suddenly regained courage. The vector of its dynamics increased, which is why investors began to trade on the growth of USD. Last week, the net long dollar position amounted to 6,694 contracts, compared with the short position of 10,368 contracts recorded a week earlier. According to analysts, market participants believed in the dollar, despite the fact that it was not the best of times.
One of the key factors of pressure on the dollar is the position of US President Donald Trump, in particular, his harsh and sometimes contradictory statements. Basically, they relate to the country's monetary policy and relations with a trading opponent - China. It can be noted that the trade contradictions of Washington and Beijing, previously postponed, have now come forward. The emerging conflict could hit the US currency hard, and then any tricky move it made would not help the USD. In such a situation, experts are sure that the US dollar will decline strongly.
The upcoming presidential election, expected in November this year, hangs with a sword of Damocles over the dollar. According to analysts, they are the center of attraction for the global currency market. Earlier, many experts, like the head of the White House himself, were sure of the possible re-election of the current American leader, but now, the situation has changed. Amid the COVID-19 pandemic and current problems associated with it, the second term of the presidency of D. Trump is in doubt. The balance was leaning towards a negative result, and this adds nervousness to the market. Indirectly, the current negative is reflected in the dynamics of the dollar, which either shows a decline or is rising again.
Experts do not exclude that the European currency, the dollar's opponent for the EUR/USD pair, will take advantage of this situation. The euro will be able to capitalize on the contradictory dynamics of the dollar, which loses stability from time to time. Despite the rather noticeable drop recorded last week, the single currency has not lost its optimism and hopes for growth.
According to analysts at the largest bank, Unicredit, the euro could benefit from a weakening dollar in the short-term. The support for the euro is provided by a decline in demand for safe assets due to improved mood in the global market, as well as disappointing statistics from the USA, demonstrating the terrifying economic consequences of COVID-19. This week, Thursday, May 28, the market is awaiting information on orders for durable goods in the United States. Experts do not exclude the continuation of the negative March trend, aimed at further reducing the main economic indicators. According to analysts, the key indicator for durable goods will drop another 18.1%. Another publication on applications for unemployment benefits will not add optimism. According to experts' calculations, the unemployment rate in the United States may increase by another 2 million, and the number of secondary applications may exceed 25 million.
In this situation, the dollar will have to be tight, and the euro will most likely take advantage of the opponent's temporary weakness. Unicredit believes that the European currency will rise on a wave of optimism amid the increased probability of creating a vaccine against coronavirus, recovering oil prices and financing the eurozone economies thanks to the efforts of Germany and France. According to experts, the combination of these factors will increase further pressure on the dollar.
Analysts also fear another series of negative economic data from the United States, under the burden of which the dollar will collapse. If this scenario is noticed in the second quarter of 2020, the euro will rise above $ 1.1000, and the dollar will lose its previous gains. As a result, an imbalance will appear in the EUR/USD pair again, although now the pair is relatively balanced. On Monday morning, May 25, the EUR/USD pair started at the level of 1.0890, but subsequently the indicator went to low levels of 1.0881 - 1.0882. Experts estimate the current trend of the EUR/USD pair as bearish, but with the possibility of recovery in the near future.
According to experts, the dollar can present a number of surprises associated with a sharp change in dynamics in the near future. Basically, the US currency behaves stably, without making important turns. However, there are exceptions to all the rules, and the USD can become such an example by changing the vector of its direction. Nevertheless, experts are looking forward to a relative balance in the EUR/USD pair.
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