The US currency is trying to determine its direction recently. Now, it is faced with a choice: try to increase to new peaks or try to consolidate in current positions, so as not to end up in a financial hole?
For several days, the US dollar tried to stay around the current price range, but the collapse was inevitable. The pull of the downward trend succeeded, so the national currency lost most of its positions. On Monday, it plunged to one-and-a-half-month lows amid a collapse in US government debt yields. This trend continued the following day. In fact, even strong data on the US economy could not hold the US dollar.
The growth of the USD, which was recorded when this year started, was supported by large-scale placements of US government bonds. This was facilitated by the adoption of a $ 1.9 trillion stimulus package. However, this "backup" has now lost its relevance, and so, the dollar began to decline. At the same time, the yield on 10-year US government bonds declined to 1.5280% during the past week from a more than one-year high of 1.7760%. According to the Reuters news agency, this has sharply reduced the attractiveness of the US currency.
Meanwhile, experts considered its strengthening from January to March 2021 to be a manifestation of an upward correction within the framework of a bearish trend. Since April of this year, the situation has changed, and the US dollar is under steady pressure, threatening to develop into a long-term negative trend. However, economists are counting on the normalization of the external background and the dollar's dynamics.
On April 19, the EUR/USD pair broke through the psychologically important level of 1.2000. Analysts believe that this paved the way for the instrument to a record level of 1.2350. On the morning of April 20, the main currency pair simultaneously reached a high near the level of 1.2047, increasing by a figure. According to experts' calculations, the pair is in a correction stage, which varies from 50% to 61.8%. Today, the EUR/USD pair was near the 1.2050 mark, trying to consolidate at the current levels.
Forecast for the Euro currency: Overviews of its nearest dynamics
The euro rose above the level of 1.2000 for the first time since early March before the ECB meeting scheduled on Thursday (April 22). This resulted in a rising optimism from experts of the largest investment bank Goldman Sachs. The bank believes that the European economy will recover at a rapid pace, which will lead to the strengthening of the euro and weakening of the dollar. They recommend investors to open long positions in the EUR, that is, to buy the specified currency and take advantage of the decline in USD. Goldman Sachs experts also improved their estimate of the euro's growth against the dollar for the next three months to the level of 1.2500, while maintaining the 12-month forecast at 1.2800. At the same time, they raised its estimate of the growth of European stocks for the STOXX 600 index. Analysts expect that the total yield on securities in the EU will be 10% in the next 12 months.
Experts of large companies, such as Global FX, Rates and EM Strategy, also recommend buying euros with a target price of 1.2500 and a stop order of $1.175. At the same time, economists warn investors against excessive optimism, noting that the European economy is very vulnerable during the period of mass lockdowns. In such a situation, the euro should not be expected to grow as soon as possible. Currently, Europe is far behind the United States in terms of the pace of economic development, while the printing press launched by the ECB is in full swing in the euro area. In this case, experts are sure that the consolidation of the EUR/USD pair above the level of 1.2000 mark is impossible.
JPMorgan experts are also skeptical about the euro's strengthening. Analysts believe that the weakness of the US dollar is a temporary phenomenon, and it is supported by the exceptional position of the American economy. The bank's experts maintain a long position on USD against EUR, while admitting that the EUR/USD pair may approach the 1.3000 mark.
In relation to the US dollar, analysts' forecasts resemble a swing, leaning from relatively positive to deeply pessimistic. At the moment, the dollar has not only plunged against the euro, but also against a wide range of currencies and assets. Experts note that its collapse coincided with the decline in long yields of US government bonds. Nevertheless, some analysts are confident that the dollar will receive support due to the placement of assets of the US Treasury, scheduled for this week. Thus, it is likely to rise after the ECB meeting. Experts allow the EUR/USD pair to return to 1.1800, since they believe in the dollar's strength.