Yesterday was a difficult day for the stock market as it was going through a roller-coaster ride amid the struggle between greed and fear. However, the capital volume in the securities market is still huge. Amid this factor, the US dollar spent the session without significant changes. On Friday, the US dollar index is staying near the mark of 90. Speculators are constantly pushing it up and down in an attempt to determine the direction.
In the morning trade, the US dollar bounced to the upside, while the sellers were also active in the afternoon. Despite the fact that the US currency was trading in negative territory, both long-term and medium-term trends are moving up. The boundary is found at the 90.4 mark. Until the price breaks through this level, long positions will remain relevant.
However, in practice, things can develop unpredictably, given an extremely unstable uptrend and highly volatile trading.
The greenback made several successful attempts to advance, especially against the yen. However, it was losing ground against the pound and the euro.
The EUR/USD pair is holding above the level of 1.21, although the bull's activity is rather sluggish. Still, the bullish trend may accelerate and send the pair higher to 1.22. Let's analyze possible scenarios for the euro/dollar pair.
So, the euro is holding steady, although two members of the ECB Governing Council have already mentioned that a rise in the euro rate is unwelcome. Was it a hasty verbal intervention from the European regulator? First of all, Washington can strongly disapprove of this statement. Janet Yellen made it clear yesterday that any attempts to artificially influence the rates of national currencies will be suppressed. Secondly, there is no need in verbal interventions. The vaccination process is very slow in Europe. Unlike the European region, the United States will be able to avoid the second wave of recession. In his scenario, the EUR/USD is likely to slide.
Other factors force the euro bulls to defend their positions rather than start an attack. This explains weak activity of the buyers.
On the other hand, the auction placement of US government bonds has finished this week, and it is not going to be held next week. This may weaken the US dollar.
Friday's economic reports for the euro area are also important. Moderately positive data will allow the euro to rebound.
According to preliminary estimates, GDP in Germany decreased by 2.9% in the fourth quarter against the forecast of a 3.4% decline. Economic growth in the second largest European economy, France, contracted by 1.3% over the same period. Analysts predicted a deeper fall of up to 4%.
GDP in Germany (YoY)
The euro has a chance for a short-term uptrend. Yet, the US dollar is likely to advance as well. The vote on additional stimulus measures in the US is due to take place next week. If a package of $1.9 trillion is approved, the national currency will inevitably rise in the short term. What is the reason for this? Such a large-scale placement of debt represents the withdrawal of the dollar supply. This actually means that the liquidity of $1.9 trillion will be withdrawn from the market.
Until then, the euro may rise to the 1.22 area against the US dollar. However, the dynamic strengthening is unlikely to happen. You can consider selling the EUR/USD pair with the targets at 1.18-1.17.
