28.04.202112:52 Forex Analysis & Reviews: Will the dollar collapse or strive for new heights?

Over the past few days, the dollar has been facing a dilemma: to surrender to the mercy of the global financial system and go with the flow, waiting for a collapse, or to continue the fight, striving for new heights. Experts believe that the predicament will clear up after the April meeting of the US Federal Reserve.

The next meeting of the Federal Reserve is scheduled for Wednesday, April 28. The current day promises to be busy for the US currency. On the morning of Wednesday, April 28, it began with a brief rise, although it had previously steadily declined. The EUR/USD pair moved in the direction of 1.2077, trying to overcome new steps on the way to the rise, but with varying success. Later, the tandem sank to 1.2062.

This week, strong macro statistics from the United States provided significant support to the US currency. According to analytical data, the US consumer confidence index this month rose to 121.7 points from the March figure of 109 points, which was previously revised. In the second month of spring, this indicator reached the highest value recorded since February 2020. Many analysts attribute the current strengthening of the USD to the positive expectations of investors regarding the Fed. Some market participants believe that in the near future, the regulator will stop stimulating the national economy by constantly pouring money into it. However, analysts of The Wall Street Journal believe that changes are unlikely now and only after the June meeting that serious changes in the Fed's strategy will be possible.

A brief technical analysis of the EUR/USD pair:

The fragile balance in the EUR/USD pair may break the bias towards a negative attitude towards the euro zone economy. Currently, the tandem is experiencing a correction, which occurred when the EUR/USD pair briefly fell to 1.2055. According to analysts' calculations, the pair does not need to rise above 1.2000 now. The sell-off of the US currency, recorded on the evening of Tuesday, April 27, sent the EUR/USD pair to the last support – the psychologically important Fibonacci level (1.2103). Later, analysts recorded a small consolidation in the classic tandem.

The "anchor" for the EUR/USD pair is the tense economic situation in the eurozone, because of which the euro may be at the bottom. The current situation is unfavorable for the EUR, as experts fear a recession in the EU economy. Experts do not rule out the possibility of the collapse of the eurozone's GDP in the first quarter of this year, and in the second quarter the negative will increase.

Currently, the US economy looks advantageous against the background of the European one, showing strong growth. In the event of the publication of encouraging economic data, like the national currency, it will receive a powerful boost for growth. On Thursday, April 29, the report on US GDP for the first quarter of this year is expected. Experts believe that the US economy, supported by fiscal stimulus, will increase by 6.9%. The rapid recovery of the US economy will trigger a mechanism for tightening monetary policy on the part of the Fed. Experts are certain that the implementation of such a scenario will support the course of the dollar to the euro.

According to analysts, the key event of this week will be the decision of the Committee on Open Market Operations (FOMC). The agency, having recorded the acceleration of economic growth in the country, is likely to ignore the question of curtailing the program of quantitative easing (QE). Earlier, Fed chairman Jerome Powell stressed that the regulator does not need to abandon ultra-soft policy. However, the possibility of the Fed's exit from the QE program may provoke a rise in the dollar. The current appreciation of the dollar is also supported by an increase in the yield of 10-year US government bonds to 1.63% from the previous 1.54%. In the event of a favorable development of events, the dollar will again be prepared, looking down on its rivals in the financial market. Experts believe that the main thing for the US currency is to decide on the direction.