The US currency declined against most of its major competitors on Thursday, as investors turned to more risky assets such as global stocks and raw materials.
According to experts, continuous concerns about the spread of COVID-19 in the world may keep some currency pairs in a narrow range, but dollar's losses are gradually increasing, as positive sentiment favors more risky rates for long-term economic growth.
This week, the USD index formed the so-called "death cross" (the "bearish" intersection of the 50- and 200-day moving averages).
According to analysts from Bank of America, such an intersection has been formed nine times since 1980, and in eight cases, this signal was followed by the weakening of the US currency.
"The Fed's accommodation policy, expectations of greater fiscal stimulus from the White House, as well as the stability of the technology sector, which is leading the stock market upward, all suggest that the dollar remains weak at the moment," the MUFG said.
The growth of global stock markets put pressure on a safe dollar, which contributed to the EUR/USD rally to monthly highs around 1.1365.
"The main currency pair was not able to break the level of 1.1200 in recent weeks, pushed off from it and reached its maximum values since June 11. At present, it can test the upper boundary of the current trading range 1.1200 - 1.1400," MUFG strategists said.
"The dollar is becoming more vulnerable as the coronavirus crisis subsides. Real US yields continue to show a more serious decline than in other Big Ten countries, and this is not yet fully reflected in the USD exchange rate," they added.
"The growth of the EUR/USD pair will continue amid softening of restrictive measures in Europe and the recovery of the global economy. Another factor favorable for the euro is the initiative to create an EU economic recovery fund. In the meantime, the dollar will be losing ground amid concerns over the Fed's inflated balance sheet and US government debt growth," UBS said.
Meanwhile, Danske Bank believes that one should not count on any significant directional movement in EUR/USD in the near future.
The bank said that although we are still waiting for the level of 1.15 to be tested in a three-month period, however, such a forecast is based solely on the possibility of increasing pressure on the dollar. The second wave of coronavirus in the USA gives cause for alarm and may cause a new monetary and fiscal reaction of the authorities. At the same time, the euro will be difficult to find fresh drivers for a leap higher: political risks, stimulating EU measures and optimism about the possibility of creating a single fund to help the region's economy are already taken into account in the EUR/USD rate.