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The US dollar significantly recovered on Friday against a basket of major currencies. In the evening session, it gained more than 0.5% and traded around 93.40. It seems that the American currency stopped a long series of declines. It has all chances to finish the week with a rise for the first time in eight weeks.
Traders began to reconsider their attitude to the US dollar after the publication of the Fed's minutes the day before. Today, the US currency was supported by macroeconomic statistics. The housing market is one of the few areas in the American economy that shows its resilience in the face of a pandemic-induced crisis. In July, the US existing home sales increased by 24.7% compared to June data. The indicator reached 5.86 million. At the same time, market players had expected an increase of 14.7% to 5.38 million.
As far as the euro is concerned, it seems that today is not a good day as the macroeconomic data turned out to be weak. The PMI figures for France, Germany, and Europe as a whole showed that progress from monetary stimulus fizzled out. In this regard, the market may again succumb to anxiety and despair, or begin to listen to the speeches of individual populists.
However, the statistics made the bears on the single currency become more active on Friday. Thus, the euro/dollar pair fell to fresh lows. Thus, there is a question: may the recent data reverse the pair? It is obvious, that the answer is negative. But it is important to understand that there are other factors. The currency may be under pressure in August due to an outbreak of coronavirus in certain regions of Europe. Do not forget about the US dollar that is struggling for its dominance. The situation with the spread of the virus in the United States is alarming. However, if the Americans improve the situation and large states resume economic activity, the euro/dollar pair will face a lot of problems.
It is also important to be purely objective. The mood of buyers of the European currency may improve in the event of a recovery in activity or after news about the development of an effective vaccine against the coronavirus. This means that the currency has all chances to maintain its potential for growth despite the fall this week.
It is worth noting that sellers need to see a clear reversal pattern for further movement, which will indicate that the local peak has actually been passed. This may be a breakdown of previous lows around 1.1690–1.1700. If these predictions come true, the pair may test the previous resistance level near 1.1500. A further decline is also possible.
If this bearish scenario does not come true, the euro buyers are likely to go on the attack again, heading for the psychological barrier of 1.2000.
There is an extremely ambiguous situation on the market. We can say that the euro/dollar pair certainly looks weak now. However, it is not necessary to anticipate events and bet on the decline of the euro.
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