The US dollar remains in favor in the global currency market, reaching a four-month high against a basket of major currencies.
As we have previously indicated, the reason for the strengthening of the dollar is, on the one hand, an optimistic outlook on the US economy, which is confirmed by the latest positive economic statistics, and on the other, it receives support in the wake of some reduction in fears of a significant spread of the Chinese coronavirus. Moreover, an additional positive its course was the termination of the topic of impeachment around D. Trump.
On the other hand, the ICE dollar index has been increasing steadily for the second week now, testing the 98.75 point mark and approaching the maximum values of October last year.
At the same time, the problems for the euro are not impressive values for the region's economy unlike the dollar. The risks of falling industrial production and the obvious long-term preservation of the current soft exchange rate of the ECB. So, on Monday, the presented data on industrial production in Italy was extremely disappointing. However, this is the third economy of the euro area. The annual industrial output in Italy declined by 4.3% against a 0.8% decrease a year earlier and a forecast of a decrease of only 0.2%. In December, the indicator declined 2.7% against weak growth in January by 0.1% and expectations for a decrease of 0.5%.
In addition to the risk of a slowdown in economic growth in the region, the negativity is the increasing pressure from the United States and, as a consequence, the high probability of increasing duties on car imports to America, as Trump has repeatedly stated earlier.
The clear negative outlook of market participants regarding the near future prospects for the single currency is clearly reflected in the dynamics of the Euro currency futures, which, according to the latest data from the Commitments of Traders (COT) report last Friday, reflecting the mood of market players is biased towards a short net position. An important aspect is the generally stable and constantly growing recently short (bearish) position of large market players (Large Traders). The degree of such sentiments is fully reflected in the behavior of the euro in the spot market.
This can be explained not only by fears of the prospective weakness of the eurozone economy, but also by a clear softening of the position of the ECB, which, although it does not openly demonstrate this, confirms this with all its actions, including the latest statements by Lagarde, the Bank's President.
Given this state of affairs, we believe that the main euro / dollar currency pair will remain under general pressure in the near future.
Forecast of the day:
EUR/USD is trading above the level of 1.0905. We consider it possible to resume sales of the pair after it crosses this level with the local target of 1.0880 and 1.0840.
GBP/USD is trading below the level of 1.2920. This may lead to a resumption of the pair's decline to the level of 1.2835, if the UK's GDP data confirms the decline of the indicator.
