The decline in the US dollar has slowed down if we compare its dynamics since the beginning of the month. Nevertheless, the downward trend continues. Buyers hoped that its rate would strengthen against the basket of competitors after the release of strong retail data, but this did not happen. It looks like the greenback can only respond with growth to positive data if Treasury yields grow in parallel. And here there is no good news for the dollar, 10-year bond yields have reached monthly lows.
This may be due to the expectations of market players, who no longer bet on a sharp acceleration in US inflation and increasingly trust the Fed. Powell managed to convince the markets that the current rise in consumer prices will be temporary, inflation will very quickly stabilize near the 2% mark. And if so, then the American regulator will have no reason to start the rate hike earlier than planned.
So far, the dollar has no reasons to strengthen. All factors are against it, the forecast announced earlier does not lose its relevance.
The dollar index is trading below the 200-day mark, and there is a confident bearish sentiment. Sellers may well break down the 90.00 point mark soon. Thus, the greenback may well return to the pessimistic levels at which it traded at the end of last year.
The situation differs in that other major world currencies, such as the euro and the pound, cannot play on the continuing weakness of the dollar. The EUR/USD pair tramples around the 1.2000 mark to no avail. There is no way traders for the pound can beat the 1.3800 mark, let alone the 1.4000 against the dollar, which was broken late last year.
Is this a prolonged tug-of-war, or is it the unwillingness of buyers and sellers to take the lead? It seems that everyone has taken a wait-and-see attitude. On the one hand, you can understand. Weak vaccination rates are strangling Europe. On the other hand, there are hopes for a positive outcome. In the near future, it is possible to eliminate the problem of the shortage of drugs against coronavirus. By this quarter, Europe may receive three times more doses of vaccines compared to the first quarter. This will accelerate the rate of immunization of the population, which means that the economy of the region will begin to recover.
At the beginning of the week, it was said that the European currency could stop its upward movement, now little has changed, such a development of the scenario is quite possible. The question is when you can connect to sales. This is hardly worth doing now, when the quotes are moving around the strong resistance of 1.2000. It will not be easy to break it, but it is possible in case of a strong impulse to buy. Analysts recommend looking at short positions on the euro only after the EUR/USD pair moves away from the 1.2000 mark and a clear downward reversal is seen. First of all, we should see "bearish engulfing" on the daily chart. The current or subsequent session should close lower than the previous days.
On Friday, the euro is trading slightly above the 1.1980 mark, while the Stochastic is showing positive dynamics. In this regard, it is worth waiting for the growth of the quotes to the area of 1.2060. If there is a breakdown of the support level of 1.1940, we will talk about a correctional decline of the euro against the dollar with the target of 1.1880.
Today, the focus of EUR/USD traders is on the publication of data on inflation and the trade balance in the eurozone. The United States will issue statistics on the volume of new home construction, the number of construction permits issued, and a number of indicators from the University of Michigan will also be published.