The current state of American and European currencies is not in a very good condition. If the dollar unconditionally dominated the market before, now, the situation has changed. It is almost as equal with the euro, experiencing the same pressure from a number of negative influences to which the "European" is also exposed.
According to analysts, the dollar was under the influence of two multidirectional factors: the growing demand for risk, which supports it a little, and under the pressure of the growing Fed balance sheet. Moreover, it shows the worst performance since 2018 due to the fact that most market participants buy risky assets by selling the dollar. Thus, experts fear that the dollar may lose its "armor", becoming extremely vulnerable to negative factors.
The European currency was negatively affected by weak data on the Eurozone manufacturing sector, which continued to drop in November 2019. It can be recalled that the Purchasing Managers Index (IHS Markit) fell in the current month to 45.9 from 46.9 points which recorded in November. This is much lower than level 50, which is the key and serves as a barometer of the economic situation. According to preliminary estimates by analysts, the eurozone economy is closer than ever to a recession and closes the current year on negative rather than positive. Its prospects for the coming year are also far from ideal, experts summarize.
In this situation, the EUR / USD is experiencing significant volatility. Along with disappointing statistics, the sword of Damocles of the US and China trade dispute hangs over the euro. On Monday, December 16, the EUR / USD pair reached the resistance level of 1.1153, but could not stay at this level for a long time.
At the moment, the pair declined to 1.1128, trying to find the bottom, and then recovering with difficulty later. Yesterday, the market, holding its breath, watched if the "European" could break through the bar at 1.1200, and if so, how would the greenback react to this? But unfortunately, the miracle did not happen.
On Tuesday morning, December 17, the EUR / USD pair started at 1.1143, and then later continued to run in this range, sometimes increasing to 1.1145. However, significant movements in the pair were not observed.
The litmus test for the dynamics of American and European currencies is the situation with the trade truce of Washington and Beijing. At the moment, the market is booming due to the successful negotiations between China and the United States. Moreover, it can be recalled that the parties managed to agree on mutual concessions, but do not indulge in euphoria, experts warn, due to the fact that the situation can radically change at any moment and then the dollar will be under attack. For the "European", the current instability does not bode well. The euro is in danger of introducing new US tariffs on Eurozone products, and this keeps the market tense.
According to analysts, the economic pressure experienced by the American currency along with the European one will not last long. Both key world currencies will be able to recover, but this process will be difficult. Therefore, the market believes in the strength and stability of the euro and dollar, despite unflattering forecasts in the near future.
