15.11.201910:38 Forex Analysis & Reviews: The dollar - a sea of opportunity, the euro - the economic framework

American currency paired with European currency continues to amaze the market. The dollar, as a rule, seeks to strengthen its position, and it succeeds, and the euro is trying to keep the gains, but with varying success. By the end of the week, this struggle continues, experts say.

On Thursday, November 14, important events were the publication of data on macroeconomic statistics in Germany, namely the consumer price index, as well as the release of the report of the European statistical agency Eurostat. With regard to the consumer price index of Germany, it increased by 0.1% for the month, and on an annualized basis - by 1.1%. Eurozone industrial production data, on the other hand, disappointed the market, as in annual terms this indicator fell 1.7%. As for the eurozone GDP growth, it increased by only 0.2% compared to the previous quarter of 2019.

The single European currency, having experienced a weak report on Germany's GDP on Thursday, remained at a stable level of 1,1004 for some time. The EUR/USD pair sought to gain a foothold in this framework, but the attempt was unsuccessful.

After the release of negative data on the eurozone GDP, the single currency completely lost heart. The classic pair went down sharply, playing in the range of 1.0995–1.0996. In the future, the situation leveled out, but market participants remained in suspense.

Yesterday, while the dollar was strengthening, the euro was fighting for the level of 1.1000. According to analysts, the "European" managed to cope with this task. The pair EUR/USD broke through the specified level and fixed below the support level of 1.1000, continuing the downward momentum. It can be noted that the pair runs for the ninth day in a row as part of a bearish trend. For this reason, a number of analysts recommend selling this instrument.

According to experts, there is practically no reason for the growth of the euro at the moment, while the dollar continues to rush up. Even serious obstacles such as the growing US federal budget deficit and the recent threat of canceling the interim agreement between Washington and Beijing do not prevent this. It can be recalled that the Chinese authorities do not intend to sign an agreement with the United States on unfavorable conditions. In China, they demand the cancellation of previously introduced duties, while they do not assume any obligations for the purchase of agricultural products from America.

However, the greenback is not too worried. The main concern for analysts is the upcoming presidential election in the United States, which could deliver a stronger blow to the dollar. Experts considered three scenarios in which the USD rate can either go down or stay afloat.

1) If during the election victory remains for the Democratic Party, then the dollar will collapse, and yields on treasury bonds will fall.

2) If the Republican Party wins the election, the greenback will sharply strengthen, and the yield on American bonds will demonstrate a rally. Experts do not exclude that in this case, America will continue an aggressive trade policy.

3) If there is a split in the US Congress and not one of the parties gains the majority of votes, then the prospects for the dollar will also be negative. The implementation of such a scenario will lead to a weakening of the leading world currency, analysts are sure.

However, if the dollar can weaken only in the long term, then the European currency is under the economic pressure and is already sagging. The current situation in the Eurozone economy underlines the need for further stimulus measures by the ECB, experts are sure. They believe that in the medium term this will put significant pressure on the "European". In the EUR / USD pair, confrontation can begin, and only a trend fracture above the resistance level of 1.1025 will return confidence to euro buyers. Note that on the morning of Friday, November 15, the tandem came very close to this bar, reaching 1.1022.

Experts believe that a breakthrough above the level of 1.1025 will lead to the closure of short positions and to a rapid rise to a maximum of 1.1100. At the moment, the EUR / USD pair is trading near the levels of 1.1016–1.1017, periodically showing a downward mood.

As a result, the current situation is such that the greenback, unlike the "European", does not need to make a lot of effort and prove its worth. Only the upcoming US presidential election can shake the dollar's position, and then only for a short time. The European currency, in contrast, is driven into a tight economic framework in which it is difficult to demonstrate its capabilities. However, experts expect to maintain a balance in the EUR / USD pair not only in the near future, but also in the long term.