FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%
EUR/USD
1.1730
BTC/USD
43 916.48
GBP/USD
1.3661
USD/JPY
109.4855
USD/CHF
0.9284
USD/CAD
1.2816
EUR/JPY
128.4265

The dollar's final surge before the 20% drop


1 April 2021

In the early months of the year, the dollar seemed to be trying to prove its right to remain the world’s main reserve currency, steadily adding against its major rivals amid talk of the end of its era. The dollar gained 5% against a basket of major competitors and tripled against gold.

This strengthening should serve as a stark reminder that the world’s primary reserve currency is too early to go to its grave. In reality, it may turn out that we will see a final surge of the dollar before a prolonged fall against its major counterparts.

Three factors have been behind the dollar’s rise since the start of the year. To finance huge support packages, the US borrowed in the markets, sucking liquidity from other market sectors (investment banks preferred government bonds to corporate bonds or IPOs, SPOs). The realisation of these packages and the mass vaccinations improved the economy’s growth prospects, justifying the dollar’s attractiveness on the macroeconomic side. Meanwhile, unlike its Japanese and European central banks, the Fed allowed the crisis measures to expire and did little to adjust the optimistic market expectations.

Biden decided that it was necessary to borrow while this investment works. Overnight he came up with another two trillion-dollars bazooka stimulus. These plans should eventually boost borrowing in the near future, sustaining a rising dollar momentum but putting an even bigger time bomb on it. How America will pay its debts is becoming crucial, and now US President Biden is bringing back corporate taxes and tightening the rules for collecting them. 

Arguably, the dollar may well get a boost in the coming weeks, as these factors will work further for the dollar’s strength, thanks to the new stimulus plan from Biden. Strategically, however, one has to be prepared because this bounce in the dollar could be a good opportunity to reduce positions before a new, prolonged and deep round of weakening US currency.

The dollar index in the current wave of growth has chances to jump another 1.5% to 95, returning below 90 by the end of the year and falling back to 80 by the end of next year. For EURUSD, this scenario opens the way for a decline to 1.1500, followed by a reversal to 1.2300 by the end of the year and a rise to 1.4000 by the end of 2022. GBPUSD would fall to 1.3500 under these conditions to then reverse to rise to 1.5000.

#source

Related

Dollar starts Fed week on front foot, stocks hit by Evergrande fallout
Dollar starts Fed week on front foot, stocks hit by Evergrande fallout

Fears of global contagion from the worsening crisis in China's property sector continued to weigh heavily on sentiment at the start of trading on Monday as markets...

20 Sep 2021

Dollar jumps, gold slumps, stocks nervous
Dollar jumps, gold slumps, stocks nervous

Worries that the US consumer is rolling over were dealt a major blow yesterday after the nation’s retail sales for August overpowered some gloomy forecasts. The retail sales...

17 Sep 2021

Energy is the play: how we get to $100 crude
Energy is the play: how we get to $100 crude

Natural gas futures in Europe and the UK are flying, while our natural gas (NG) CFD (the underlying is traded on the NYMEX) pushed over $5.60 and into 7-year highs...

16 Sep 2021

Are investors sleeping on systematic risk in China?
Are investors sleeping on systematic risk in China?

It’s time to talk about China. The situation is getting dicier as the nation’s second-largest property developer - Evergrande - is on the verge of default. Trading in the company...

16 Sep 2021

Sentiment sours as the S&P 500 tests key support
Sentiment sours as the S&P 500 tests key support

We head to quadruple witching in the US on Friday and notably options expiration (OPEX), and the weakness we see time and again in the week before seems...

15 Sep 2021

Dollar unscathed by soft inflation, equities resume slide
Dollar unscathed by soft inflation, equities resume slide

Dollar takes little damage despite signs US inflation has peaked - Wall Street resumes selloff - all eyes on China contagion risks - Canadian data coming up ahead of elections, gold wakes up...

15 Sep 2021


Forex Forecasts

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
Vantage FX information and reviews
Vantage FX
78%
Moneta Markets information and reviews
Moneta Markets
77%

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.