04.08.202210:29 Forex Analysis & Reviews: Fight to the last dollar: USD has taken strong macro data as allies

The greenback gained new support in the middle of this week – positive data on the US services sector. Experts are betting that the peak of USD growth has not yet passed.

On Wednesday evening, August 3, the US currency rose significantly against the European one after the release of reports on business activity in the US services sector. According to estimates by the Institute for Supply Management (ISM), in July, the business activity index in the US services sector rose to 56.7% from June's 55.3%. This inspired market participants and analysts who expected a decline from the indicator to 53.5%.

To date, the greenback has managed to recover its previous losses and demonstrate growth against other currencies, primarily the euro. The EUR/USD pair was in the range of 1.0181-1.0182 on Thursday, August 4, trying to move to another level.

Analysts are concerned about the economic situation in the euro area. According to current data, the index of business activity in the euro area services fell to 51.2% in July, falling below the June figure of 53%. At the same time, in June, the level of retail sales in the euro area amounted to -3.7% in annual terms, compared with 0.4% recorded in May. Against this background, the euro suffers significant losses and is hardly recovering.

This situation plays into the hands of the greenback, whose recovery is not hindered by a slight slowdown in US economic growth. However, this fact worried the Federal Reserve a bit and became a reason for more careful monitoring of economic indicators. The central bank intends to monitor the situation until the next meeting on monetary policy, which is scheduled for September. In making its interest rate decision, the Fed will take into account a number of economic indicators in the US. The priority is to fight inflation and stabilize the economic situation in the country. However, the overly aggressive policy of the Fed may provoke a fall in the USD, experts warn.

Currency strategists at TD Securities are confident that the greenback will continue to strengthen in the coming months on the back of strong US macro data. Currently, the US economy is showing resilience, despite short-term subsidence. Analysts note the prospects for the dollar's growth in the medium and long term planning horizons. According to experts, the greenback is supported by the current course of monetary policy followed by the Fed. This support will continue until the beginning of autumn, analysts are certain. Going forward, the USD may weaken if the Fed changes its strategy.

According to a number of currency strategists, the dollar's strength has not yet reached its peak, but it will happen on the horizon from three to six months. At the same time, many are sure that the dollar has passed its peak. Against this background, the issue of the parity of the euro with the dollar has again become topical. Some analysts believe that the euro will reach parity with the US or go below this level. At the same time, TD Securities believes that the future rate of the dollar "will be closely related to the growth prospects of the US economy and other factors, in particular with the global stock market."