According to experts, the dollar can currently be considered as a universal protective asset that can save investors' funds during market turmoil. Despite its recent declines, experts believe that the dollar is the best currency for investments.
At the end of last week, many investors increased their purchases of the dollar, believing that its price is undervalued. The currency was supported by an impressive report on US employment, which confirmed that the scale of its recent decline was excessive. Meanwhile, analysts say that the panic in the market was provoked by the threat of the spread of the coronavirus, where on this wave, the yield of 10-year US government bonds fell by 0.740%, and the dollar sank slightly after the euro.
Meanwhile, according to the report of the US Department of Labor, the level of employment in the country soared by 273 thousand, which was much higher than forecasts of an increase of 175 thousand. After the release of this strong data, strategists from major banks, including TD Securities, recommended buying the dollar, and followed this example themselves.
This situation affected the dollar positively, making the currency as one of the best protective assets. Impressive statistics stopped the aggressive onslaught of EUR / USD bulls, raising the quotes of the pair to unprecedented heights.
Just last Friday, March 6, the EUR/USD pair almost did not leave the range of 1.1232–1.1234, but after a strong report on the US labor market, the situation changed.
On Monday morning (March 9), the pair broke the level of 1.1400, confidently going upwards. In the future, it could possibly reach 1.1463–1.1464, but it will not be able to stay there.
For some time, the pair traded near 1.1422–1.1423, leaving no attempts to get close to the previous peaks. Now, the EUR / USD pair is steadily going down.
The current situation was beneficial not only to the dollar, but also to the European currency, as the euro almost reached 1.1500. A small easing of the ECB's monetary policy played an important role in this, but, in the case of a long-term easing of monetary incentives, analysts believe that the euro may significantly decline.
Most market participants are betting on the EUR / USD rally, although the risks of a reversal of the euro are increasing. Experts consider the current oil price hikes to be the key driver of this reversal, as according to analysts, the continuation of the peak of the main grades of oil, Brent and WTI, can lead to an update of the minimum indicators of the S&P 500 index. If this scenario is implemented, a sharp decline in the currency may happen. The declining S&P 500 index, following the fall of oil, will lead to a noticeable correction of the EUR/USD pair to the level of 1.1390 and below.
According to analysts' calculations, the euro may slightly bypass the dollar in the short-term. However, in the long term, the dollar will remain as the winner. Even if the coronavirus epidemic intensifies and the global economic growth slows, the strength of the US economy will help the dollar recover, so experts believe that it will become an insurance policy for investors in the event of difficult situations.
