Winding down US stimulus programs has started. Besides, the dollar continues to push back its rivals, moving into the area of 95.00 on the index at the end of the week. There are mixed views concerning further positioning of the US currency.There are mixed views on the further positioning of the US currency globally. Some analysts are excitedly awaiting a further rise of the dollar against the euro to 1.1300-1.1400 and the US currency index above 95.00 points. Others do not believe that the current QE tapering with no minimal signals of an impending rate hike will stimulate the dollar so much that it will soar to new highs.
The dollar is rising. However, it does not require to intensify its efforts as its rivals are weak. Besides, the euro has no stimuli for growth. The pound started increasing, but failed. On Thursday, the Bank of England made the pound drop, taking the decision to keep the rate for an indefinite period of time. GBP/USD lost 1.4% in one session. If buyers will not be able to keep the level of 1.3400, the fall will intensify.
On Friday, the markets are focused on October payrolls. A strong figure could be a significant fundamental for further buying. The unemployment rate fell to 4.6% from 4.8% in September and the number of nonfarm payrolls increased by 531,000. Both values came out better than forecast.
These are not just strong readings, in this case optimistic Nonfarm Payrolls will return the US to its status of the economic giant among developed countries. It will fulfil favourable conditions for further dollar strengthening. Besides, its bullish trend has been noticeable since the beginning of the year.
Overall, this week's news block has enough potential to allow the US index to hit next highs, i.e. to update the highs from September of the previous year. If buyers overcome the 94.80 level, the dollar will reach its all-time highs since July 2020.
With this scenario, it is possible to notice a sharp increase in buying the dollar, coupled with a wider upward trend.
Resistance is at 94.74 and 95.00. Support is at 93.42, 93.27 and 92.98.
The EUR/USD pair fell the day before as euro bulls could not find any reasons to continue buying amid the obvious divergence of the Fed and ECB monetary policy. On Friday, the bearish pressure intensified after the release of strong US labor market data.
The last euro recovery was considered a technical correction. Until the EUR/USD pair manages to close the weekly trading above 1.1620, the probability of further declines will remain.
If the greenback's bullish momentum starts to intensify with a gradual retracement of the latest US jobs report, EUR/USD may fall to 1.1500, the high of March 9, 2020, just below it.
Support is at 1.1525, 1.1500 and 1.1440. Resistance is 1.1620 and 1.1670.
Analysts are mainly pessimistic about the euro. Scotiabank executives expect the EUR/USD exchange rate to fall to 1.1000 next year. First, the euro will miss the level of 1.1500 due to the dovish ECB view. Then there will be a test of 1.1400, which economists expect it will perform quite easily. During 2022 the pair will continue to fall as far as the 10 figure.
Besides monetary policy, short-term risks associated with the spread of the COVID-19 pandemic are also an obstacle for the euro's growth.