The EUR/USD pair continues to strengthen for three consecutive days in view of investors' lingering hopes that new economic stimulus measures for the US can be agreed on before the presidential elections.
The financial markets became optimistic due to the recent news regarding the negotiations on a stimulus package between N. Pelosi and S. Mnuchin. Mr. Meadows, White House Chief of Staff, stated that good progress was made during the negotiations of Pelosi and Mnuchin, although they still have a long way to go before reaching an agreement. Thus, this not only supported the demand for risky assets, but also greatly contributed to the growth of Treasury yields, which is undoubtedly negative for the US currency.
This morning, the yield on the benchmark 10-year Treasuries rose by more than 4% and is growing by 3.21% to 0.823%. In general, we should note that the yield of the benchmark this month is rising steadily compared to last month, not allowing the US dollar to significantly strengthen, despite the local drop in investors' hopes for the likelihood of accepting new incentives.
The main currency, the euro/dollar pair, is rising for three consecutive days, being supported by the fundamental weakness of the US currency and high probability of new stimulus measures from the ECB, which Lagarde does not forget to remind almost every public speech.
Assessing this condition, we believe that the EUR/USD pair has a potential to grow to the level of 1.1900 today or tomorrow. However, if there will be no decision and all negotiations between the interested parties turned into nothing, a strong decline in demand for risky assets, respectively, an increase in demand for US Treasury government bonds and, as a result, US dollar's strengthening followed by a decline in the EUR/USD pair can be expected.
This scenario is likely, since the only thing we saw so far are the assurances that the negotiations are ongoing and both parties perceive it in a positive way. But all this may turn out to be just part of the pre-election and nothing more, and whoevers wins the US election will make the decision on incentives.
Forecast of the day:
The EUR/USD pair is rising amid a weak US dollar in anticipation of new stimulus in America. If the price breaks through the level of 1.1865, it will lead to its growth to 1.1900.
The AUD/USD found support at 0.7020 amid hopes for a stimulus agreement in the US. The pair is above the level of 0.7070, which may further rise to 0.7115, and then to 0.7140.