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The U.S. Senate has approved the Biden administration's long-standing $ 1.9 trillion economic aid package. The bill provides for direct payments to citizens in the amount of $ 1,400 for each taxpayer, and considering the payments in the amount of $ 600 last December, US citizens will receive a total of $ 2,000. The additional assistance, in turn, will be given to local authorities, schools and businesses.
Commenting on the decision, Joe Biden said that he expects 6 million jobs to be created and GDP to rise by $ 1 trillion. If so, this will allow the country to surpass the rest of the world and, in particular, China.
And although the adoption of the bill was already expected for quite some time now, and is largely taken into account in the quotes, its positive role for the markets is considered to be significantly increasing the growing demand for risk. On Friday, the publication of the CFTC report showed that long positions in commodity currencies are rising in all countries without exception, but the euro and yen are being sold at a high rate.
The USD aggregate short position plunged by 1.372 billion. This is the second attempt to enter the growth trajectory in the dollar, as the first one happened last September-November and ended with another weakening wave. Nevertheless, there is a high possibility that the second attempt will be successful. The attention is drawn not only to the growth in demand for raw materials, in particular for oil, but also to a significant reduction in the long position on gold, which fell by 5.99 billion to 32.966 billion during the reporting week. This trend, with a simultaneous sell-off of the Japanese yen, indicates that investors are waiting for a strong increase in demand for risky assets.
The third factor that will contribute to the US dollar's demand is the growth of bond yields. It can be recalled that yields are rising due to the growing market belief that the US economy is emerging from the crisis. Friday's labor market report showed that employment in the non-agricultural sector rose by 379 thousand last month, against the forecast of +182 thousand. As for the private sector, employment increased by 465 thousand, respectively. In this case, the yield peaked at 1.625%, returning to the pre-crisis level.
A day earlier, Fed Chairman J. Powell, explained that the regulator would not ease monetary policy in response to the growth in government bond yields, but will keep the situation under control. In any case, the US dollar receives an additional incentive to grow due to the change in the yield spread in its favor.
As a result, commodity currencies and the dollar will be in favor next week, while gold and protective currencies will remain under pressure.
EUR/USD
Euro's net long position has declined again, this time by 1.973 billion. The estimated price is pointed downwards, so there are small chances of resuming growth.
On Thursday, the ECB will hold its next meeting. There are rumors that the regulator will not introduce specific targets for yield or yield spread, and given last week's decline in bond purchases, signifying weak concerns about higher yields, the pace of purchases under the PEPP program is unlikely to be boosted.
There is considerable disagreement within the ECB leaders on how to respond to rising yields, so the chances of any hints on a possible tightening of financial conditions are unlikely.
As a result, the Euro currency does not have a strong impulse to continue the upward trend. Last Friday, the support level of 1.1952 could hold out, so a decline will be most likely. In this case, it is very possible to reach the support level of 1.17.
GBP/USD
The pound's net long position rose by 415 million to 3.147 billion. We have a steady trend.
In contrast to the euro, the pound sterling has a number of features that allow it to be attributed to commodity currencies. One of which is oil's price growth, which is considered to be a bullish factor.
Another strong bullish factor is in terms of vaccination rates. The United Kingdom is ahead of both the US and Europe, which means that the economy will open earlier.
The GBP/USD pair is not expected to decline. It can be assumed that the pound will resume growth right after the opening of trade on Monday night. The support range is set at 1.37820/50, while the long-term target is to break through the level of 1.4370.
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