The greenback continues to balance growth and decline, trying to use every opportunity to attack the positions of its main competitors. It is supported by investors' hopes for the recovery of the US economy after the coronavirus crisis. However, the deadlock around the new stimulus package in the US is limiting the growth of the USD.
According to Nancy Pelosi, Speaker of the House of Representatives, the positions of the Democrats and the White House are very far from each other, which does not allow hopes for an early deal.
The stumbling block, in particular, is the size of the new stimulus package. Larry Kudlow, chief economic adviser to the President of the United States, said Democrats are asking for too much money.
It is clear that without a sustained recovery plan, the US economy will not be able to get back on its feet quickly, and this is the main reason for the recent weakening of the dollar.
The USD index sank to a weekly low of 92.9 points. However, a jump in US government bond yields and worsening risk sentiment due to disappointing statistics on China stopped the fall of the dollar.
In July, retail sales in China unexpectedly fell for the seventh month in a row, while industrial production growth in the country fell short of expectations.
The US dollar came close to breaking a seven-week losing streak against the risk-sensitive Australian namesake, which stalled around $ 0.7149.
At the same time, sluggish demand in the US long-term government bond auction on Thursday boosted Treasury yields, drawing some investors, especially from Japan, back into the USD.
The yen is close to showing its weakest week in two months against the dollar. The USD / JPY pair rose nearly 0.9% compared with the closing of last Friday, to 106.84.
The biggest loser was the Kiwi, which came under pressure at $ 0.6538 when New Zealand faced a repeat COVID-19 outbreak, and after the country's central bank ramped up purchases of government bonds this week and reiterated the prospect of negative interest rates.
"Although risk sentiment is weakening, it is too early to say that the downtrend in the USD is over. At the same time, the greenback has the potential for corrective growth. At least this is what Aussie and Kiwi are talking about, "Westpac said.
As for the major currency pair, investor confidence in the recovery of Europe and doubts about the next stimulus package in the United States keep the euro afloat despite attempts by the greenback to rebound.
Since the end of July, the pressure on the EUR / USD pair has been increasing as it reaches lower levels.
However, the bears have not yet managed to seize the initiative. So far, EUR / USD has found support on dips towards 1.1700. This testifies to the persistence of bullish sentiment and gives buyers time to breathe before another storm.
According to experts, it will be possible to speak about the final victory of bulls or bears only after the main currency pair leaves the range of 1.1700-1.1900.
"Resistance is noted at 1.1865, followed by 1.1916-1.1926 (on the downtrend line and top of early 2018). A breakdown of these levels will confirm the upward trend and target the bulls at 1.1997 and 1.2145-1.2155. In case of a bearish breakout of 1.1781, the pair will aim at the next support at 1.1755 and further at 1.1710. However, only a breakdown of 1.1697 will mean that EUR / USD has formed a top and is ready to continue moving downward towards 1.1622-1.1630 (38.2% Fibonacci retracement from the rally at the end of June), "strategists at Credit Suisse noted.
