The dollar index fell to its lowest level since September 2018 at the start of trading. At the moment, the indicator is already testing the 93rd figure, reflecting the attitude of investors to the US currency. The dollar has lost its status as a protective instrument, so now the outbursts of anti-risk sentiment play against this currency. While the yen and gold "skim the cream" from the current situation (for example, gold has updated its record price high during the Asian session).
The focus of traders, by and large, is only two fundamental factors: firstly, it is the coronavirus, and secondly, the relationship between the United States and China. In both cases, we can talk about negative trends that aggravate the position of the US currency.
Let's start with the coronavirus. According to the latest data, the daily incidence is gradually decreasing worldwide, although it remains at a high level. However, the situation continues to be difficult in the United States. There were almost 60,000 new infections in the United States even during the Sunday period, when the "weekend factor" often operates. In general, the daily growth did not fall below the 60,000 level last week, and a local anti-record was reported at 76,884 cases of infection on July 23. The most alarming situation is observed in the southern states of the country, and especially in Florida. For example, yesterday this state became the second after California in terms of the number of diseases, and the total number of infected people increased to 423,855 (an average growth rate of 10,000 per day). California is in first place with 448,497 cases. New York, which was the epicenter of the pandemic back in April, is in third place.
Against the backdrop of such trends, American doctors and scientists began to sound the alarm: on Saturday they published an open letter urging Congress and the White House to return strict quarantine restrictions to the country. The appeal was signed by over 150 doctors, medical experts, health workers and scientists. They were joined by the chief epidemiologist of the United States, Dr. Anthony Fauci. According to him, many southern states need to "back up" in the matter of restarting the economy and getting out of quarantine. He noted that quarantine restrictions in the country were much weaker than, say, in Europe. According to the epidemiologist, only strict quarantine helped the European community overcome the peak of the epidemic, while the United States remains among the leaders in the anti-rating. And if the current rate of infection is maintained, more than 200,000 people can die from coronavirus in the United States by November 1 in the United States. At the same time, Fauci warned that even in the most optimistic scenarios, the vaccine will not be available to the public until spring 2021. It should be noted that the governors of some states have already heeded the opinion of experts and have increased quarantine restrictions.
However, the coronavirus is not the only factor that puts pressure on the greenback. Political battles in Congress, whose deputies are soon to consider a bill on a new package of assistance to the economy, contributed to the negative fundamental picture. Just yesterday, speaker of the House of Representatives Nancy Pelosi (representative of the Democrats from California) publicly criticized US President Donald Trump for his approach to fighting the pandemic, calling the American leader "Mr. Make Matters Worse". At the same time, Pelosi made it clear that the Democrats, who control the majority in the Lower House of Congress, are insisting on approving their "bailout" bill, with a volume of three trillion dollars. While the White House offers to allocate only one trillion dollars for these purposes. The ongoing debate over this issue is putting background pressure on the US currency. Moreover, some economic indicators are already causing alarm. In particular, after a 14-week decline, the increase in the number of applications for unemployment benefits again showed a negative trend. Instead of the predicted decline to the level of 1.3 million, the indicator rose to 1.416 million last week. The pullback is relatively small, but the trend itself is important here, especially against the background of the worsening epidemiological situation in the country.
The fundamental picture is aggravated by the uneasy relationship between the US and China. A new rift occurred along the "diplomatic line." Let me remind you that on July 21, the US State Department demanded Beijing to close its consulate in Houston. Chinese diplomats were accused of industrial espionage related to the theft of information about American high-tech developments. In turn, the American diplomats left the consulate building in the Chinese city of Chengdu at Beijing's request.
Thus, the US currency is plunging all over the market for good reason. This suggests that the downward dynamics of the dollar index may continue. Consequently, the euro-dollar pair retains the potential for further growth. From a technical point of view, on all higher timeframes (except for the monthly chart), the EUR/USD pair is on the upper line of the Bollinger Bands indicator and above all the lines of the Ichimoku indicator, which has formed a strong bullish Parade of Lines signal. This indicates a clear advantage of the upward movement. The bullish momentum is so strong that it is too early to talk about a price correction: the bears can expect a temporary price pullback only if tomorrow's Federal Reserve meeting inspires investors. Otherwise, the priority will remain with growth. The main target of the upward movement is located at the lower border of the Kumo cloud on the monthly chart, that is, at around 1.1750.
