FX.co ★ Is the US dollar hiding its real condition?

The US dollar experienced another shock last Friday: Its rate declined after D. Trump and his wife were infected by COVID-19. Currently, the dollar is doing its best to recover lost positions, but these attempts are held with varying success.

Due to the illness of the US President, all the cards for the USD were confused, throwing it first to low indicators, and then allowing it to gain height. It was supported by the fact that the presidential election in the country is at stake. If earlier, the scales were leaning in favor of D. Trump, the current favorite of fortune has become his rival, Democrat Joe Biden.

Experts say that the majority of forces towards the US Democratic Party may upset not only the political, but the economic balance. The first step towards such an imbalance can be severe volatility among risky assets. Now, the priority for the market are the risk sentiments, and they strongly depend on the dollar's dynamics. Analysts emphasize that the lack of financial incentives can bring them down, creating chaos in the market.

According to economists, the dynamics of risk sentiment is now more important for the US currency than the prospects for budget deficit and inflation growth in view of increased spending by Democrats. It should be noted that the representatives of the US Democratic Party recently adopted a law on a new stimulus package in the amount of $ 2.2 trillion. This is much less than the $ 3 trillion they proposed earlier, but could really support the further growth of the dollar and the national economy. However, D. Trump's sudden illness is capable of violating this agreement, which can result in the slow down of the dollar. At the moment, the EUR/USD pair is trading in a relatively acceptable range of 1.1729-1.1730, however, this balance can disappoint at any moment.

Currency strategists and economists are trying to predict the future direction of the US currency. However, the dynamics of the dollar remains unclear, and analysts can only guess where its vector will turn. Like the US President, the US dollar seems to have put on a mask that hides its real condition. Therefore, experts are trying to figure out what it is hiding: is it hiding unknown trump cards or additional power that it is accumulating for the next rally? Analysts agreed that the dollar hides its strength disguised as weakness, which can turn out to be a time bomb that will show itself if the situation allows.

Experts believe that the balance of power in the EUR/USD pair will depend on the planning range – long, medium and short-term. Analysts predict a rise in the long-term and sharp declines in the medium and short term, which will be replaced by growth. Moreover, experts draw attention to the high risk of a prolonged correction of the EUR/USD pair against the background of political uncertainty and potential surprises due to the unpredictable dynamics of the USD.