The dollar index did not hold its position and again collapsed in the region of 95 points, demonstrating the inability of the greenback to large-scale actions. Despite attempts at recovery, the dollar cannot ignore the burden of existing problems, from the political crisis to the dovish attitude of Fed members. Even the single currency, which is also under pressure from a negative fundamental background, shows character and does not allow the EUR / USD pair to drop below the 13th figure. Moreover, in my opinion, the dollar at the moment is an overvalued currency, which is in certain demand only "by inertia", after many years of stable growth.
The US Senate yesterday, predictably, failed two legislative initiatives that were aimed at ending the record-breaking shutdown. And the senators did not support both the Democrats project (which is expected, because they don't have a majority in the Upper House), nor did Trump's proposal. 51 senators voted for the presidential bill, 47 voted against (60 votes are needed for approval). Democrats offered to restore the work of the government before February 8, but without any concessions in the context of financing the border wall. But the head of state, on the contrary, offered to allocate $ 5.7 billion for the wall and $ 800 million for a humanitarian aid program for migrants. But the Senate blocked both proposals, thus continuing the shutdown, which lasts 34 days.
After that, the press started talking about the fact that Trump is preparing to declare a state of emergency in the country, allocating $ 7 billion to bypass the Senate for the construction of the wall and other actions in this direction. This idea does not like neither politicians nor ordinary Americans. According to the results of opinion polls, the vast majority of US citizens do not support the idea of introducing an emergency. Nevertheless, according to the same polls, Shutdown significantly weakened Trump's position in the eyes of the population, and his rating decreases, as they say, not by day, but by the hour. Therefore, if he retreats on this issue, he will lose electoral attractiveness among those Americans who support a tough anti-immigration policy. Given this fact, the likelihood of a state of emergency in the United States is large enough, despite all the risks of a political crisis, which will undoubtedly follow.
And here it is worth recalling that very soon, in February, Republicans and Democrats will start another political battle, this time on the limit of the national debt of the country. The fact is that the government has the right to increase unlimited loans only until March 1 of the current year. After that, the so-called public debt ceiling will be earned, which will not allow borrowing above the level of debt that has been reached by this date. According to a number of experts, the budget deficit of the United States by next year will reach one trillion dollars, and by 2028 the size of the debt will reach 96% of the country's GDP. Trump also set a record in this area. So, during his tenure as president, public debt increased by two trillion dollars, reaching its record value in the last 70 years.
All this suggests that the political struggle regarding the limit of public debt will be tough enough, and the country may again plunge into the swamp of the political crisis. Against the background of all other problems, the dollar will receive another "anchor", especially if the major rating agencies (S & P, Moody's and Fitch Ratings) lower the US credit rating. Rumors about this are also exaggerated in the American press, although representatives of these agencies have not yet voiced such intentions.
Thus, the overall fundamental picture does not bode well for the dollar in the foreseeable future. Earlier this week, Greenback enjoyed a certain demand due to rumors that the trade negotiations between the United States and China had stopped due to insurmountable disagreements. However, yesterday, the Ministry of Commerce of China officially denied this information, after which the dollar was no longer interesting as an "island of security."
In general, the behavior of the EUR / USD pair is dictated by the dynamics of the American currency. Yesterday's PMI data, which was published in Europe, did not actually affect the mood of the traders (although the German data sank quite badly). Today's data from IFO produced a similar effect, confirming market benchmarks.
From a technical point of view, the situation has not changed much this week. Bulls EUR / USD needs to overcome the mark of 1.14240 to confirm their dominance. In this case, the Ichimoku Kinko Hyo indicator will generate a bullish Parade of Lines signal, which will open the way to the top line of the Bollinger Bands indicator, the mark of 1.1525. The support level is at 1.1310, this is the bottom line of the Bollinger Bands on the daily chart.
The material has been provided by InstaForex Company - www.instaforex.com