17.08.202013:42 Forex Analysis & Reviews: EUR / USD: Dollar's decline slows down, euro positions look shaky

Over the past three weeks, the main currency pair has not been able to go beyond the range of 1.1700-1.1910. Moreover, the boundaries of fluctuations have become more narrow with the range of 1.1710-1.1865.

According to National Australia Bank, "The good news at the moment is that the trade deal between the US and China remains in effect and without any changes. However, there are other uncertainties that need to be addressed, namely: the policy of the United States ahead of the presidential elections and new hot spots for the spread of coronavirus in the EU, which may challenge the notion that the euro is in an upward trend, "

"The growth of the euro against the US currency in recent years looks excessive, so it is quite likely that EUR / USD pair will roll back to about 1.15 in a three-month perspective," said Rabobank strategists.

"We also see the risk that global market sentiment may deteriorate after the release of the third quarter statistics, which could benefit the US dollar. However, the new direction of movement of EUR / USD, most likely, will not form until the liquidity returns to normal levels in September, "they added.

The greenback came under pressure in late March when the Fed pledged to provide unlimited liquidity to support the national economy hit by the COVID-19 pandemic. Since then, the greenback has been depreciating amid low rates in the US and the fall in real yields on 10-year Treasuries to record lows in negative terms.

The USD is currently trading near 92.96, roughly in the middle of the range, it has held since falling to two-year lows in late July.

Although many market participants expect a further weakening of the greenback, its decline may be more restrained and gradual than in early April, after the American Central Bank sharply lowered the interest rate, bringing it to almost zero levels, and launched a number of stimulating programs for the national economy.

According to data that was released by the US Department of Labor on Thursday, the wave of layoffs has subsided and the rate of hiring is growing. This is an encouraging signal that the weakness of the previous data could only be a temporary phenomenon and not a tipping point.

Thus, it is worth being more cautious about building up short USD positions.

This week the focus of traders' attention is the minutes from the Fed and the ECB meetings held in July, as well as the data on business activity in the US and the eurozone for August.

The EUR / USD pair faced serious resistance around 1.1850. A breakdown of this level will aim the pair at 1.1900 and further at 1.1915-1.1920. Support at 1.1690-1.1700 should contain the pair's decline.