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The demand for the greenback rose sharply in March this year when the global economy faced a crisis as a result of restrictions imposed around the world to contain the spread of COVID-19. However, measures taken by national governments as well as central banks have supported the stock markets and contributed to the weakening of the greenback's position.
The USD index climbed to three-year highs in March in the region of 103 points, and most recently dropped below 94 points, reaching its lowest levels in almost two years.
Investors remain skeptical about the situation, this includes the expiration of the US unemployment benefits program, the prospect of a double-digit decline in US GDP, and the Fed's ultra-soft policy.
However, the pace of USD decline slowed down ahead of the July FOMC meeting and the upcoming approval by US legislators of another stimulus package to support the national economy.
The Fed meeting will begin later on Tuesday, and on Friday, the US Congress will consider a bill on unemployment benefits.
According to experts, the outcome of these events is unpredictable enough to bring some nervousness to the game against the dollar.
Currently, the USD index is trying to move away from the two-year lows reached yesterday in the region of 93.49 points. Greenback lost more than 3.5% in July and needs a stronger rebound to avoid the worst month in nearly a decade.
The EUR / USD pair has rallied in eleven of the last twelve trading days and has gained more than 7% in two months. This is a very solid increase in such a short period of time.
Obviously, the European economy is recovering faster than that of the US. This is confirmed by the July releases on business activity in the eurozone and the United States released last week.
The publication of the US GDP data is expected on Thursday, while the GDP of the currency block is scheduled Friday. Analysts expect the former to shrink 35%, while the latter only 12%.
On Monday, the EUR / USD pair renewed 22-month highs around 1.1780 but then retreated from these levels.
"The short-term charts are signaling strong overbought, which means that the bullish phase, which started about a week and a half ago, needs a break. At the same time, only a breakdown of the strong support at 1.1630 will mean that the current rally of the pair has exhausted itself. Until that happens, bulls will continue to break through to 1.1830. The next major resistance is at 1.1950, "said UOB strategists.
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