14.01.202111:26 Forex Analysis & Reviews: US dollar's gradual growth in anticipation of stimulus measures

The markets are currently focusing on the expectation of stimulus measures from the new US administration, led by Joe Biden. In view of this, the US currency gained confidence and started to gradually increase after the significant decline recently.

On January 14, they are patiently waiting for an information from the elected state head of the United States. It should be recalled that Joe Biden was preparing to present his plan to recover the US economy. He previously announced his readiness to provide a package of economic assistance amounting to trillions of dollars. Thus, markets are set for the introduction of strong stimulus measures by the US president-elect.

Experts believe that this package will include funds for rapid vaccination of the population and financial support for the unemployed, as well as expanded payments to all groups of the population and other subsidies. However, analysts warn that the adoption of a massive stimulus package will provoke a strong rally in risky currencies.

The current situation contributes to the growth of the US currency. It is slowly gaining impulse before Joe Biden's decision. On the other hand, the rise in the dollar index on Wednesday continues today, amid investors' refusal to bearish rates on USD. It should be noted that the national currency has grown steadily for the last four sessions, as the prospect of introducing new incentives put pressure on US government bonds. As a result, the US Treasury bonds yield exceeded 1% for the first time since March last year.

Moreover, it is noteworthy that market participants have been actively shorting the US dollar since mid-March 2020, as the increased appetite for risky assets reduces the demand of investors for the US currency. Now, market players are sure that the increase in stimulus measures in the US will support the risk appetite, which will put pressure on the dollar.

In the current situation, the volatility of the EUR/USD pair increases, which is below the 20-day moving average for the third day in a row. Experts believe that the classic pair exiting below the level of 1.2130 will open the way to December 2020's lows. Today, the EUR/USD pair is trading near the range of 1.2157-1.2158, while waiting for news from the United States.

Analysts' opinions regarding the short-term and long-term prospects of the greenback are negative. Currency strategists at BofA Securities predict that the US dollar will weaken in the near future and fall throughout 2021. Experts say that the pressure on the US dollar will increase in the long-term planning range amid the introduction of US stimulus measures.