02.09.202013:05 Forex Analysis & Reviews: EUR/USD: The level of 1.2000 as a barrier

The EUR/USD currency pair has moved to another high. Meanwhile, the dollar, despite the total weakening, followed the Eurocurrency, which almost reached the psychologically significant level of 1.2000, but could not overcome it.

It is noteworthy that the euro reached a two-year high yesterday amid positive signs of a recovery in the European economy. Yesterday, the European enjoyed its victory being at $ 1.1999, however, it didn't last long, although analysts are confident that this barrier will be overcome over time. According to specialists' observations, there is an option barrier at around 1.2000, the presence of which slightly frightened the traders.

The current rise in the euro occurred amid aggressive easing of the US Federal Reserve's monetary policy. It should be recalled that the Fed changed the target average inflation rate to 2% last week. Along with this, the regulator announced a priority in the US labor market, in particular in favor of high employment. The Fed attributed the refusal to preemptively raise interest rates to curb inflation as most cost-effective.

Analysts say that the current situation threatens the global domination of the dollar and prevents its further growth. According to Ulf Lindahl, Chief Investment Officer of AG Bisset, USD will decline in price by 36% in relation to EUR in 2021. The US dollar could plunge to a level that has not been seen in over a decade. In general, Wall Street experts adhere to the "bearish" forecasts for the USD, which is not surprising since it is trading near the lowest level in 27 months, sinking to 11% from the peak of the current year. The bearish mood also prevails among investors.

As a result, market participants expect the dollar to further depreciate amid extremely low interest rates in the US. This is such a negative factor for the USD as the strengthening of the prospects for economic growth in Europe and fears of a financial "bubble" worsen the situation. On the contrary, experts admit corrective bounces from the dollar in the short term, and its fall may be beneficial for the market – it can improve the global financial climate, increase profits for American exporters and make it easier to service dollar debt to other countries.

Yesterday, the EUR/USD pair almost reached the key round level of 1.2000, which is the highest in the last two years. The current dynamics of the pair has inspired analysts who believe that when this level is reached, the EUR/USD pair will quickly rise to 1.2500. According to experts, this may happen even before the US presidential elections.

However, it is difficult to move upwards, and the level of 1.2000 became a huge barrier for both the American and European currencies. Currently, the pair has fallen heavily, having pulled back from the highs. This morning, the EUR/USD pair was trading near 1.1907-1.1908, and then further declined. At the moment, it does not show any hint of the previous high levels, as if they did not exist. This confuses the market, which is expecting to overcome this barrier.

With regard to the prospects for the EUR/USD pair, analysts expect a further drawdown for the dollar, while an upward trend for the euro. The rally of the single currency, which inspires the markets, will continue this year. The USD should prepare for rising turbulence, which can result in a series of ups and downs that can weaken it.