Giant U.S. stimulus packages have flooded so much easy money that it scares even the most die-hard investors when they see the influx of crisp-printed banknotes triggering a surge in inflation and unemployment in the country.
The fact that several trillions of dollars have already been poured into the economy will surprise no one, there is only the understanding that the whole show is not for good, without a corresponding increase in production, but only accelerates the already overheated prices.
Recent inflation figures have already shown inflation to rise to 4.2%, the all-time high since the 2008 global financial crisis. It is worth considering that during the period of quarantine restrictions, Americans have accumulated about $1.6 trillion while sitting at home, but now these savings have been used, and prices have skyrocketed behind them.
While the United States economy begins to overheat, the Federal Reserve System is keeping silent, attributing everything to local changes in connection with the coronavirus crisis and does not react in any way to the jump in inflation.
Is a sticky bubble really necessary to pay attention to problems?
Investors are taking a wait-and-see attitude since it is simply impossible to plan medium and long-term positions in this situation. The first signal that will help to answer a number of questions may be the June meeting of the Federal Open Market Committee, where the regulator will probably no longer be able to keep silent.
As long as the risks remain, the US dollar will continue to be under pressure, which is actively used by speculators.
While analyzing the dollar index (DXY) chart, many have already noticed a renewed downward cycle, leaving not a single hint of a reversal. From April 1 to the current day, we have a weakening of the index by more than 4%, which is quite a lot. And during the current day, the local minimum of February 25 at 89.68, which held back sellers in the period of May 18-24, was completely updated.
Everything indicates that short positions in the US dollar are growing, not decreasing, and speculators are not even afraid of the factor that only 0.5% remained to the minimum of the medium-term trend.
Analyzing the EUR/USD trading chart, you can see a powerful upward cycle, where the European currency has strengthened in value by more than 4.7%. There is practically nothing left of the large-scale correction at the beginning of the year, which suggests that the US dollar is considered very attractive in relation to its competitors.
Will the local maximum of the medium-term trend from January 6 be updated in the face of the value of 1.2349? Why not, if we have such a strong speculative excitement and work against the US dollar.
In fact, we already have a signal to prolong the upward cycle, where holding the price higher than 1.2250 will strengthen the position on the euro.
Analyzing the GBP/USD trading chart, we are talking not just about the recovery of the upward cycle relative to the corrective move 1.4241 -> 1.3668, but about the high chances of the medium-term trend prolongation to new levels.
During the period May 18-25, market participants were able to prove that they are not afraid of the high value of the British currency, the renewal of the maximum is only a moment in time. Is it really so bad with the dollar that even the overheated EUR and GBP currencies continue to push the quotes up, despite their own economic problems and levels of historical significance?
The market and time will answer this question, and we only have to work on local trading operations.
