The US dollar is gaining impulse at the beginning of this week in order to strongly reverse by the middle of it. According to analysts, the USD has grown steadily against the EUR in anticipation of the publication of the minutes of the Fed meeting, scheduled on Wednesday, August 18.
China's disappointing economic reports contributed to the current growth of the US currency. The negative information from the said country helped the dollar to compensate for recent losses after a shocking decline in consumer sentiment last Friday. In relation to commodity currencies, primarily the Australian and Canadian dollars, the price of the US dollar has significantly risen. This happened amid a decrease in risk appetite, which was facilitated by weak economic data from China, the political conflict in Afghanistan and the spread of the COVID-19 delta strain.
Experts have recorded an impressive increase in long positions on the dollar, which rose to the highest levels since March last year. According to them, this indicates the temporary nature of the current decline of the indicated currency The failure of the US dollar was short-term, and its further rise crossed out all statements about the beginning of a structural downward trend.
In view of this, the Euro currency slightly fell, giving a head start to its rival. The US dollar was quick to take advantage of the generous offer and steadily gained momentum. On the morning of August 17, the EUR/USD pair was trading at the level of 1.1770. This means a noticeable decline for the euro (from the previous 1.1785), starting from the moment of the previous close.
According to experts, the nearest target for the euro bulls is the level of 1.1800. If it breaks down, a new resistance level will be formed around the level of 1.1900. However, the current attempts of the EUR/USD pair to break through the resistance line of 1.1800 have been unsuccessful. At the same time, experts warn that the impossibility of a repeated successful assault on the 1.1800 mark may provoke the sale of the EUR/USD pair, returning it to the lows of this year (to 1.1700).
The further dynamics of the pair will depend on the results of the Fed report. It can be recalled that the regulator will publish the minutes of the July meeting of the Open Market Committee (FOMC)on Wednesday, August 18. Investors expect to extract important information from this publication, primarily about the possible reduction of the financial asset repurchase program.
Currency strategists of MUFG Bank are confident that after the publication of the Fed minutes, the US dollar will rise in price. They drew attention to this trend, which has been recurring over the past year. "The trend for the strengthening of the dollar, although moderate, can be traced after the publication of the FOMC protocol," MUFG emphasizes. At the same time, experts note that there is a risk of an unexpectedly strong market reaction when the Fed's policy is approaching the pivot point, and this breaks the usual system of a quiet trading period.
At the moment, the US dollar is set for a further rise, seeking to remove the euro from the leading position. These attempts are most often successful, although the Euro currency manages to rise temporarily. According to analysts, the Fed will have the decisive word in this confrontation. It will affect the short-term prospects of the USD and the likelihood of a reduction in the bond purchase program by the end of 2021.
