Investors remain focused on the high volumes of dollar liquidity, which is already significant against the background of the current incentive programs, but after the adoption of the Biden aid program, it will reach a colossal size, which will forcibly push up the demand primarily for shares of American companies. In these conditions, it will be difficult for the dollar to grow against the major currencies, even against the background of a renewed increase in the yield of treasuries.
This remains the most important factor in the markets, and no one doubts the high hopes that the expansion of vaccination will lead to a sharp recovery, primarily of the American economy from the Western ones.
If investors are ready to continue buying shares of companies, why do we not see a resumption of strong growth in stock indices this week?
There are two reasons for this. First, the market understands that the rally is never endless, and only new stunning news of a positive nature can make market players buy and buy again. But these drivers are not present. Both the expectation of expanding the vaccination process and the $1.9 trillion support measures are already topics that are largely taken into account in the index quotes. Therefore, we believe that the market, as they say, needs to "settle," investors look around, because if you do not consider this state of affairs, you can fall under the profit taking of large players, which will lead to the closure of a significant number of long positions, which are already on the market in overabundance, and a new fairly noticeable correction.
The situation in the foreign exchange market fully reflects that in the stock markets. The expectation of new stimuli in America, the assurances of officials from the US Treasury Department and the Federal Reserve that fiscal policy will remain extremely soft, puts pressure on the US currency and forces it to decline. This is also happening in the wake of a stop in the growth of treasury yields, which, we recall, previously contributed to the strengthening of the dollar's position in the Forex market.
Observing everything that is happening, it is believed that the current situation is likely to continue this week.
Forecast of the day:
The EUR/USD pair is getting support in the wake of the general weakness of the US dollar. Its consolidation above the level of 1.2110 will lead to its further increase to 1.2185.
The USD/CAD pair is trading above the 1.2685 mark, overcoming which will lead to its further decline to 1.2625. The main negative factors for the pair are the general weakness of the dollar and the rise in crude oil prices.