17.11.202001:53 Forex Analysis & Reviews: The vaccine is killing the dollar

The dollar exchange rate against the basket of competitors was kept in the red zone on Monday. Investors started the new week with relative optimism after the economic data from Asia and hopes for a successful COVID-19 vaccine. Thus, they bet on the positive in the somewhat distant future, but refuse to notice what is happening now.

In the US session, the dollar's decline increased. The latest news about the vaccine contributed to this dynamic. Another company announced the creation of a medicine for coronavirus and informed them about the successful tests reported by Pfizer and BioNTech.

The biotech company Moderna said that at the end of the third phase of testing, the drug showed an effectiveness of 94.5%. Markets are pinning high hopes on a vaccine that should save the global economy and are abandoning the dollar in favor of riskier currencies.

As for the optimism around the economic recovery, investors are playing down Japan's third-quarter GDP data. According to the first estimate, the growth was 5%. In annual terms, the economy expanded by 21.4%. The indicator increased for the first time in four quarters. It seems that the Japanese economy is more successful in dealing with the consequences of the pandemic than the US, which increases the attractiveness of investing in the yen. In addition to the fundamental weakness of the dollar, strong support for the Japanese currency on Monday was provided by published macroeconomic data. The USD/JPY pair declined during the trading session, continuing to develop the corrective momentum of the previous week.

Pressure on the dollar increased, in particular, due to the fact that in the United States for the first time 150 thousand new cases of coronavirus infection were detected. The number reached new records in more than a dozen States. Weak statistics also contributed to the decline. The preliminary consumer sentiment index in November was 77.0 compared to October's 81.8. Markets expected the indicator to be 81.5.

Market players are becoming more confident in their expectations regarding the latest monetary stimulus measures for the US economy. A decision can be made as soon as possible.

The US dollar now is not just weakening but is at the very beginning of the decline path, credit Agricole notes. After Joe Biden officially takes office as President of the United States, his first priority will be to fight the pandemic. The very fact of Donald Trump's departure will be a positive factor for world trade and the further recovery of the global economy.

This will make the dollar the main loser of the currency market. The major exporters - Europe and China - should benefit the most from the yuan and Euro and the repatriation of foreign exchange earnings will increase demand for their currencies.

The Euro is undervalued against the US currency according to Bank strategists. They are also optimistic about the pound. As for the Swiss franc, its fall is due to the General withdrawal of investors from protective assets after the US presidential election and good news about vaccines.

Meanwhile, the EUR/USD pair is surrounded by short-term uncertainty. The Euro went up to 1.1855. A new test and a confident consolidation above the 1.19 mark on the dollar's weakness could be the start of a big rally. The nearest target is 1.20. In General, there is a potential for strengthening to 1.23. In the event of a new trend reversal that confirms the weakness of the euro bucks, the 1.16 mark will return to the spotlight.