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It is no secret that all segments of the global financial market are interconnected. If something happens, for example, some noticeable general dynamics in the stock market under the influence of events of a fundamental nature, then this will definitely affect the dynamics of the currency market, the precious metals market and further along the chain. And the change in the yield of government bonds, for example, in the States of 2-year or 10-year, and, as often happens, all together, forces the exchange rate of the US dollar to change. Moreover, all historical analogies or previously working patterns of technical analysis break down.
And now, huge stimulus measures from the Fed and the US Treasury are simply "killing" the dollar, turning it from a solid safe-haven currency into a funding currency. Extremely low interest rates, truly huge financial volumes, thrown into stimulation, will kill the dollar, making its rate lower and lower, primarily against major currencies. Moreover, there is a struggle in Congress for the future of the new measures to support ordinary Americans and business proposed by D. Trump. They are estimated to be around $ 1 trillion and whether this program is accepted or not will not help the dollar. His main verdict is the abrupt drop in Treasury yields, which has not been noted for many decades, which indicates the ongoing process of their purchases.
The fact that the dollar exchange rate depends on the Treasury dynamics has long been known, and it was fully proven once again on Monday. Positive data on manufacturing indicators in the United States led to bond sales and, as a result, to higher yields. This immediately affected the dollar rate, which began to receive support, although it did not last long. The monetary policies of the Federal Reserve and the Ministry of Finance, aimed at pumping a huge amount of liquidity into the system, smooth out all the "attempts" of the dollar to increase.
Another blow to the dollar's performance is the growing hopes for a vigorous recovery in the American, European and Chinese economies around the world. If we continue to observe generally positive figures for the economies of these countries and the euro region, and this will certainly be, then the dollar will be under another factor of influence - the demand for risky assets. To simply put it, investors will increasingly buy stocks and commodities. Against this background, the single currency will definitely enjoy increased interest and strengthen its growth against the US currency. A similar picture will be observed in other major currency pairs, however, the currencies of emerging economies will not be easy. Capital outflow from their market is likely to continue, as the assets of advanced economies in a situation like the current one are always more attractive.
In this situation, the currency market very clearly demonstrates everything that happens in the markets, accumulating these processes. The dollar acts as a clear marker of emerging trends, so its behavior is important not only in determining the future dynamics of currencies traded against it, but also as a trend in other segments of the global financial market.
Assessing the current dynamics, we believe that the global weakening of the dollar will continue after the publication of data on employment in America.
Forecast of the day:
The EUR/USD pair is likely to consolidate in the range of 1.1700-1.1900 by the end of this week in anticipation of the release of US employment data.
The USD/CAD pair declined below the support level of 1.3330 on a wave of positive manufacturing data from China, the US and Europe, supporting oil prices. This pair is expected to continue to decline to the level 1.3200.
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