24.11.202016:55 Forex Analysis & Reviews: Dollar may decline upon Yellen's appointment as Treasury Secretary

The general risk appetite continues to weigh on the position of the US dollar. Investor sentiment is supported by hopes for the early start of the coronavirus vaccine. Markets also gave a very positive reaction to the news that Janet Yellen was nominated for the post of Treasury Secretary under the Biden presidency. The former Fed chair is associated with financial incentives for traders, so the news increased the desire to buy risk. If Yellen, indeed, becomes the head of the Department of Treasury, the dollar will increase to decline. If her candidacy is confirmed in the Senate, she will be the first woman to hold this post.

Moreover, Trump has already agreed to a conflict-free transfer of power, which is another reason for the positive markets.

The dollar index continues to balance around the important mark of 92 points. The day before, sellers had every chance to break through this mark, which would have allowed talking about a further systematic decrease in the greenback. However, this did not happen, the dollar was literally saved from failure by the confident PMI estimates in services and manufacturing in November. It is clear that this was short-term support. Judging by the news background, theUS dollar remains under significant pressure and it will still have to go under the 92 mark.

The EUR / USD pair was once again pushed back from the 1.19 level by a determined attack from the bears. Since the strengthening of the dollar was not associated with a flight to protective assets, the euro managed to recover most of the lost positions. Restoring risk appetite often plays against the dollar, forcing it to retreat even against the European currency. Thus, the greenback received local support at an important level but continues to retreat today.

The pair added about 0.3%. Despite the fact that the data on GDP in Germany was revised for the better, the tone for the euro was set by the decline in the dollar. The markets reacted to the optimistic statistics, which significantly exceeded the forecast, but weakly. Nevertheless, a positive shift in the main Forex pair can be traced, and we are watching another attempt by buyers to break through the level of 1.19. It will not be easy to take it and, more importantly, fix itself over it. Earlier, the estimates for Europe surprised by their weakness, the composite index fell from 50.0 to 45.1.

PMI indexes are important at a time of increased uncertainty, and in contrast to the US, Europe looks weaker. This once again did not let the EUR/USD pair above 1.19. However, there is a chance, the euro should take advantage of it. Next, the pair will storm the 1.20 level, at least the markets have long cherished hope for this.

According to Morgan Stanley, EUR / USD could rise to 1.25 when the Covid-19 vaccine begins to spread.

The dollar's reversal on Monday was a kind of push for the USD/JPY pair to pull back from the 103 mark. A significant part of this rally is not played out, moreover, it continues, bringing the pair closer to the value of 105. The increase in the USD / JPY exchange rate is often associated with increased purchases in the stock and commodity markets. Investors borrow in Japanese yen to fund purchases of risky assets, which weakens the yen during booming markets. This has not happened in recent months, as investors have found support in dollars and euros. It is worth noting that an additional reason for the yen is a new round of growth in Japanese securities. The Nikkei225 index went on to update almost 30-year highs.

The USD / JPY pair is expected to decline in the medium term due to broad dollar weakness. There will be no serious drop, and the pair will return to its current levels by the end of 2021. Its Decline will be triggered by the fact that the market will start pricing at the beginning of the Fed's rate hike cycle in 2023. This forecast was given in Morgan Stanley.