24.08.202021:31 Forex Analysis & Reviews: USD may extend losses after Powell's speech at Jackson Hole symposium

On Monday, the US dollar index showed both a rise and a fall, but it is still trading near the same level of 93.00. Nevertheless, most analysts suppose that this week, the greenback will lose in value against a basket of major currencies. It is highly possible that the US dollar will hit new multi-year lows. Thus, the index is expected to decrease below 92.00.

Let's take a close look at the main reasons for such predictions. First of all, this week will be full of events that will surely influence the US dollar. Thus, the US will report on its inflation and GDP. All previous reports were quite weak that is why analysts predict slower economic recovery than expected. Almost everything depends on the epidemiological situation and measures that the government could take to contain the virus spread.

At the moment, traders are focused on the opening of the Fed's annual conference in Jackson Hall. Jerome Powell is likely to confirm his commitment to a low-rate policy as well as his reluctance to control the bond yield curve. Given the reaction of traders to the publication of the minutes of the last meeting, Powell's comments may put serious pressure on the US dollar. Sellers may become more active in case of additional monetary policy easing.

If we take a closer look at the conditions that led to the US dollar depreciation in the previous two months, we can see that there were forecasts of economic growth in the US and expectations of aggressive easing by the Fed. Now, both conditions are under question. The recent Fed's minutes showed that the regulator may soften policy but in a less aggressive way. In addition, the macroeconomic data turned out to be weak.

Of course, the US dollar has reasons for a decline. However, it can be quite difficult to reach new lows. Anyway, the Jackson Hole symposium will clarify a lot. The Fed will indicate the key issues of its policy, and using this information, traders will try to predict the greenback's movement. It is possible that it will also be new and unexpected.

As far as the euro is concerned, we can say that it could once again benefit from the weakness of the US dollar. Today, its growth is mainly triggered by an increased appetite for risks caused by the success achieved in the US-EU trade negotiations. The parties agreed to reduce tariffs and expressed hope that this agreement would be followed by new deals in the field of trade. In general, the euro/dollar rally is losing momentum.

The euro bulls have reasons for concerns including a large number of long positions, a decrease in the number of new cases of COVID-19 in the United States, and a rise of virus cases in European countries. However, sellers' activity is quite tepid. JPMorgan, for example, keeps the forecast for the EUR/USD pair for the third quarter at 1.19 and for the fourth quarter - at 1.20.

Bank strategists admit the possibility of consolidation and even correction, However, there are no significant reasons for the development of a downward movement. They also suppose that the pair's correction to 1.17 or below this level is a good opportunity to open buy deals.