FX.co ★ The dollar is aiming for the kings. The 100 mark on the index reappears on the horizon

In the near future, major players will begin to summarize the results of the outgoing year and balance their portfolios. The new week will be part-time, and the next one will smoothly move into December. On Thursday, November 25, American banks and markets are closed due to Thanksgiving, which gives rise to the New Year's holiday season. Friday will be shortened. This suggests that trading volumes will decrease towards the end of the week.

In general, the outgoing year turned out to be successful for the dollar and the US stock market, including. The S&P 500 has gained 25% since the beginning of the year to the current moment. This was particularly facilitated by the ultra-soft policy of the Federal Reserve and the asset purchase program, which until the November meeting amounted to $120 billion per month.

However, this month the central bank approved a plan to wind down the QE program. The process, according to the basic plan, should be completed by June next year. Since the Fed will carry out manipulations on a monthly basis, contributing to a decrease in dollar liquidity, the US currency, theoretically, should become more expensive. In principle, this is what is happening now. The question is how much the dollar will rise in price and how long the upward trend will last.

The word for the Fed

At the same time, despite the reduction in incentives, the Fed's policy remains soft, economists continue to insist on a temporary trend with an increase in inflation and there is no need to start raising rates unscheduled next year.

Low rates are still very comfortable for American business, and incoming macro data and corporate reports indicate an increase in company revenues. This means that the US economy will continue to recover. After it – stock indexes.

It's hard to say what will happen to the dollar next year, while everything is going to ensure that the current year the US currency will end quite well.

Now the main influence on the greenback is provided by the events related to the Fed. This is the US president's appointment of the new head of the central bank. Here the process takes a little longer. At the end of last week, as promised to the markets, US President Joe Biden never announced his candidacy. By the middle of the week or by Thanksgiving, a decision must be made. Biden promised again.

Apparently, the task is not easy, and various politicians and officials are trying to influence the president's decision, no matter how one turns it. The likelihood of Jerome Powell's reassignment is growing. As now is not the right time for some drastic changes in the leadership of the Fed. Republicans will accept the extension of Powell's powers calmly, while the only Democrat on the board of governors – Lael Brainard - will be taken with hostility.

To appoint a new head of the Fed means to change the entire board of governors of the central bank. The new chairman, of course, will choose a "new" environment. However, it is quite difficult to predict Biden's political decision. The presidential administration has recently been increasingly taking unpopular decisions, which is why the president's rating is falling.

The second event that investors will focus on in the coming sessions is the publication of the minutes of the Fed's November meeting. It is felt that the markets lack information about how the central bank is going to react to the still accelerating inflation. The so-called "minutes" can reduce the tension in this direction.

The euro forms the trend of the dollar

The weakening euro is now a kind of help for the growth of the dollar. The ECB was already not planning to change its dovish attitude in the near future, and now even more so.

Austria has announced a full lockdown. Similar measures can be introduced by Germany, a complex epidemic is also observed in France, the Czech Republic and Hungary. The coronavirus news further reinforced the basic idea that the Fed is preparing to normalize policy, and the ECB is lagging behind.

Initially, it was assumed that inflation would slow down faster in the eurozone than in the United States. With the introduction of quarantine, everything can change. Now there will be pressure on the services sector again, and the European Central Bank will most likely want to extend the PEPP program for the period after March 2022.

Thus, the coronavirus shock deprives the euro of the opportunity to think about recovery growth and opens the way to new lows.

The EUR/USD pair tested the 1.1250 mark again on Monday and remains vulnerable to further decline. The final breakout and consolidation below the 1.1250 level will aim at the bears at the lows since June last year - 1.1170.

A pullback is also not excluded, in case of such a scenario, you can consider short positions from the 1.1300 mark.

The nearest support is at 1.1250, then at 1.1200 and 1.1140 (static level, previously resistance). Resistance is at 1.1300, 1.1320 and 1.1370.

The risk-off in European markets certainly supports the dollar, which may swing to the highs of June last year. Today, the US currency index has quite easily played back the pullback from 96.20, so it has settled firmly above the 96.00 mark.

According to the technical picture, after absorbing the 96.25 mark, dollar bulls will enter the 96.71 level into the game, and then reach the peak level of the end of June 2020 at 97.80.

Then everything can go according to the already well-known scenario of the very height of the pandemic or the first wave of the coronavirus. Perhaps the markets will drive the greenback again to 100 on the index.