The corrective recovery of the dollar was short-lived, and the abundant increase in the money supply returned to the focus of traders. On Tuesday, the dollar retreats as sellers pushed the US dollar index below 90 points. This happened for the first time since January 13.
The downward movement is facilitated by a favorable environment for the growth of risk demand. This is supported by good fundamental data for the US. Last week, there was a jump in retail sales. However, at the moment, the market continues to receive news that the initially proposed size of fiscal stimulus remains unchanged. The rise in the independent momentum of the US economy, coupled with incentives from government spending, may provoke a stronger search for profitability and inflation expectations. This combination of facts will negatively affect the dollar.
Further decline is favored by both the fundamental and the technical picture. Fixing below the 90-point mark will indicate a prolonged downward trend in the dollar. Analysts are confident that the dollar will decline and recommend selling it.
This week, attention is focused on Jerome Powell's speech to the US Congress. The monetary policy report will also be published, which comes out every six months. Market players are hoping that this will clarify exactly what the Fed means by the new concept of inflation targeting. It is important to understand what dynamics of inflation will prompt the regulator to tighten monetary policy.
Of course, a change in rates is a distant prospect, however, long-term investment instruments can react to new information. This will be the reaction of the markets.
Today's speech may contain signals on which path the US Federal Reserve will take next: will it support the dollar or low rates and markets. This could be one of the main triggers for the entire 2021.
The Australian and New Zealand dollars renewed 3-year highs against the dollar on Monday. The pound continued to rise above 1.40 as British Prime Minister Boris Johnson presented the government's plan to end the quarantine.
Further, as expected, the GBP/USD pair will continue to rise, approaching the level of 1.41. Its breakout is not excluded. If buyers manage to make this manipulation, then the next target may be the level of 1.43. The expected trading range for Tuesday is between 1.40 and 1.417.
The euro was also striving to highs yesterday, supported by optimism in the German economy. Traders bought the euro after receiving further confirmation of a marked recovery in business sentiment in Germany. Today, the EUR/USD pair is trading just below yesterday's high at 1.217, getting rid of overbought levels. Given that the euro remains stable above the level of 1.206, analysts recommend continuing to adhere to the "bullish scenario". After the breakout of 1.2173, growth may resume with the target of 1.23.