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The dollar index closed last week below its 200-day moving average. This is a bearish signal, but it is not final yet, a trend reversal may occur this week. Now we are rather witnessing a tug of war between buyers and sellers of the dollar, which have started a struggle around an important level. In such a situation, short-term traders should ride out the storm.
The trump card for the US currency remains statistical data and high expectations for the country's economic recovery. This background allows it to compare favorably with other world currencies, whose economies are in a depressed state, and the fight against the pandemic does not bring the expected results.
Dollar traders should also watch the movement of Treasury yields. If it continues to rise, the dollar will receive support. Inflation data, which will be published on Tuesday, may influence the dynamics of government bond yields and the greenback.
The fact that the US Treasury is going to place bonds worth $271 billion this week may also play on the side of the dollar. On Monday, 96 billion will be offered. As a rule, massive placements cause capital inflows into the US currency. At this time, investors dump other securities and currencies to buy USD.
The Treasury did not place securities last week, which to some extent explains the pressure on the dollar in early April and the strengthening of buying in shares. Liquidity was directed towards risky assets, not defensive securities.
Considering the above, it is quite logical to assume in the coming sessions an insignificant pullback of the American markets and a pull in the dollar. Strengthening purchases in the dollar can return the US currency index above the 200-day average, then we can talk about the return of the upward trend in the dollar.
Interestingly, this week begins the reporting season of American companies. Market players will need to choose between defensive and risky assets. This can set a trend for several weeks ahead.
If there is no rush in dollar purchases in the next couple of sessions, and the markets survive large bond placements without losses, the pressure on the US currency may increase by the end of the week. With this scenario developing, it will again be necessary to talk about the development of a downward trend.
The EUR/USD pair continues to trade under the pressure of the dollar dynamics. A significant rise in the US currency will send the euro back below the 200-day SMA. In the meantime, the pair is trading within a weak bullish signal. It is expected to break through the resistance of 1.1905, which will increase the desire to buy and send the quotes to the nearest target of 1.1970.
It is worth noting that for such a development of events, the euro should stabilize above the support area of 1.1870, and this mark is held uncertainly on Monday. If today ends with a decline in the EUR/USD pair, this will be a good signal for the return of the downward trend. In this case, we will talk about a decline in the direction of 1.1830 and 1.1770.
The pound sterling has come under severe pressure from the use of the failed AstraZeneca vaccine amid blood clot issues. The sterling/dollar exchange rate fell to a 2-month low after reaching a near 3-year high in February. Back then, Britain relied on aggressive vaccination rates to help the country's economy recover faster from the effects of the pandemic.
However, today the GBP/USD pair returned to growth, despite the persistence of unresolved problems. It is supported by the lifting of restrictions in Britain.
Although at the moment we are dealing with the growth of the GBP/USD pair, it is still trading under downward pressure. However, it bounced off the 1.3670 level several times, indicating some stability. A breakout of the 1.3770 mark by the buyers of the pound will send the pair up.
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