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The US dollar kicked off a new week with a rise. It managed to strengthen against the euro even despite the uncertainty over the timing of the bond-buying program reduction.
Last week, the US regulator made several statements about the tapering of the QE program. Earlier, analysts assumed it could happen between the end of November and the middle of December 2021. Some experts predicted even a later date – the end of December or the beginning of next year. The Fed's decision will depend on many factors, primarily current macroeconomic reports and the general economic situation in the United States.
The short-term uncertainty has slightly shaken the US dollar. However, it quickly recovered and erased almost all losses. Now, it rapidly gaining momentum. It managed to rise against the euro. On September 20, the EUR/USD pair was trading at 1.1715.
Analysts highlight that bullish sentiment on the US dollar index is quote strong. The leading market players increased their long positions on the US dollar. Over the past week, long positions on USD opened by large funds grew by 5%. So, there was a decline on the volume of short ones. The US is likely to jump higher amid a strong bullish trend.
Last week turned out the be the worst one for the euro in September. It is still unable to recover. The uncertainty over the Fed's decision on monetary policy has a negative impact on the euro. The US dollar is more resilient now to the short term headwinds. Currently, market participants are focused on the upcoming Fed's meeting. They are looking for a signal about the tapering of QE, analysts at Westpac assume.
Now, investors are cautious. They are no in a hurry to make any decisions ahead of the Fed meeting scheduled for Tuesday, September 21. Traders are anticipating the current statements of FOMC members on monetary policy as well as the timing of a reduction in the QE program. The Fed may not specify the date. In this case, uncertainty will continue to weigh on the market. The long-term growth of US Treasury yields increases the likelihood of a hawkish stance from the regulator. At the same time, a further increase in government bond yields, which is possible in 2022, will be bullish for the US dollar.
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