The US currency once again found itself in the grip of conflicting factors. The greenback is under pressure from both the easing of the Fed's monetary policy and geopolitical problems. However, the market is not discouraged and still believes in the dollar, since the global currency has long established itself as resistant to any difficulties.
Opposition to negative factors on the part of the dollar began with the moment of a radical change in the strategy of the Federal Reserve. Previously, the regulator raised the interest rate, maintaining equilibrium in the US economy. Last year, after the strongest 20% correction in the country's stock market, which lasted from October to December 2018, the Fed policy changed 180 degrees.
Earlier, before the correction, the Fed adhered to the policy of raising the key rate, but under the pressure of negative factors was forced to reconsider its views. Large-scale correction in the US stock market was the strongest driver of this change. The caustic comments of US President Donald Trump, who criticized the Fed for its inability to quickly cut rates and provide additional liquidity to the country's financial system, added fuel to the fire. The regulator surrendered under the pressure of these circumstances, starting the process of easing monetary policy.
Active reduction in interest rates was not in vain for the US currency. The dollar began to sag, losing stability and gaining ground. Its traditional status as a safe haven currency has also been called into question. The situation improved in the future, but anxiety remained. Analysts were concerned about the fact that the greenback has increased by 0.7% against a basket of leading world currencies since the beginning of this week. What is the faith of investors in the dollar based on? Mainly on the expectation of a positive outcome of trade negotiations between Washington and Beijing, as well as on the traditional ability of the greenback to rise from the ashes. According to experts, the greenback's current rise was significantly affected by strong macroeconomic data from the United States. Many analysts believe that this margin of safety is enough for some time to adjust the Fed's immediate plans and let it not chase the cuts in rates. However, a small percentage of analysts still bet on another decline in December 2019.
The staggering dollar was supported not only by positive statistics on the US economy, but also by a decrease in appetite for risky assets. The greenback was extended by investors who continue to invest in the US economy amid long-term geopolitical risks. On Wednesday, November 6, the greenback strengthened against major world currencies, including the euro, which is balancing on the verge of falling for the third consecutive day. On Thursday morning, November 7, the EUR/USD pair pushed near the levels of 1.1061–1.1062, making timid attempts to rise.
After a while, the pair slid to the level of 1.1059. The market flinched, carefully following the dynamics of the pair. There was still hope for growth.
Further attempts at recovery were successful. The EUR/USD pair leveled off, showing an upward trend. The pair reached the 1.1072–1.1073 bar, but did not stop there.
Having made a spectacular reversal, the EUR/USD pair soared to 1.1082–1.1083. At the moment, the pair is trying to conquer the next peaks.
Analysts draw attention to a number of technical factors contributing to the dollar's potential growth. Its weakening, recorded last month, sent the greenback to the lower boundary of the upward trend. Yesterday, the greenback stormed the long-term line of this trend at the price level with which the process of lowering rates began. If the current trend changes, the driver of which may be a positive outcome of trade negotiations between the US and China, the situation will not be in favor of the greenback. The implementation of such a scenario will give odds to the European currency, analysts are certain. It will strengthen, pushing the dollar and, perhaps, try to push it off the pedestal.
The potential advantage of the euro revived the market, providing food for thought and analytical calculations. Most analysts agree that now is the right time to sell the dollar and buy the euro. Specialists at Morgan Stanley, the largest bank, are confident that economic growth in the United States has exhausted itself, which cannot but affect the greenback dynamics. These changes will be with a negative sign, experts said. They emphasize that the current differential in interest rates in the United States and the level of profitability do not play in favor of the dollar. Many analysts are confident that in the next two years, the dynamics of the US currency may change so much that the greenback will lose its status as a safe haven currency.
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