After a short pause, traders were again selling the dollar. The US dollar index dropped below 91.00, the level last seen in early March. The downtrend is still in place since the 50- and 200-day moving averages are located above the price. Notably, in May, the greenback will have been moving in the downtrend for one year. It seems that there is one more year of decline ahead due to several factors, including stronger appetite for risk amid economic recovery and a sharp tax hike in the US. So, speculators can easily end up on the opposite side of the trend.
If the current trend persists for many years, USD bears will be able to push USDX under its lowest level of 2008 when the greenback fell to 70.00 against the basket of other majors.
However, it is a well-known fact that the foreign exchange market is never distinguished by one-direction movements. Ups and downs are normal on Forex. Moreover, fluctuations in the exchange rate may be quite strong, depending on different factors or expected events. In the coming days, markets will be focused on the meeting of the US Federal Reserve, so the US dollar may well fight back and reverse to the upside. In addition, the last days of April are usually marked with increased demand for the US dollar.
The US currency has been declining almost nonstop since early April and is now close to the oversold condition. In the short term, the US dollar may gain support from profit taking and change in the balancing between bulls and bears.
The heads of global central banks, Jerome Powell in particular, are not seeking to surprise the markets. As a rule, they give hints of any changes to come. Nevertheless, the upcoming Fed's meeting can reverse the current trend on the US dollar and make adjustments to the technical signals. Therefore, this week, USD has a chance of strengthening against the basket of competitors. Increasing concern ahead of the FOMC meeting as well as seasonal and technical factors may contribute to the dollar's rise.
Anyway, a sharp change in the trend direction is very unlikely. It may just be a short-term shake-up after which the greenback will continue its way down. This is good news for the euro.
Bulls on the EUR/USD pair conquered the mark of 1.2000. They even managed to climb above 1.2100 but lacked the strength to settle there.
The main currency pair is showing steady growth. The closest targets for the bulls are the levels of 1.2167, 1.2183, and 1.2200. At the same time, we should not ignore the upcoming overbought conditions on the euro which will mark the beginning of a correction in EUR/USD. In this case, a pullback to the levels of 1.2026 and 1.1993 is possible.
In general, the situation for the euro is quite optimistic. Major market players have been building up their net buy positions on EUR/USD for two weeks in a row, while earlier they had been reducing it for seven weeks. The net buy positions continue to rise compared to the lowest levels since the end of March last year.
Over the past week, the ratio of the number of buy contracts to the number of sell contracts has also increased. It is worth noting that traders were hastily buying the European currency in an attempt to make it before the last call, that is, before the uptrend ends. However, the trend may continue, and this may be not the last chance to follow it.
Analysts at UOB believe that the attractiveness of the euro will increase after EUR/USD reaches the level of 1.2185 as this is the next key resistance. As long as the single currency is trading above 1.2020, the phase of growth is still in place.