FX.co ★ US dollar should primarily resist pressure

The US currency has to use all its forces to resist external negative factors related to personnel changes in the government and the Fed's current actions. The indicated currency does not always manage to come out as the winner, but luck is often on its side.

Ms. Yellen's possible appointment as US Treasury Secretary this week seriously put pressure on the US dollar. But as soon as the topic about this appointment was settled, Fed's actions worsened the situation. Yesterday, there was a strengthening pressure on the US dollar after Fed's minutes was published. Analysts said that the central bank plans to increase its quantitative easing (QE) program. However, the regulator will most likely resort to such measures at the next meeting in December.

Experts note that the indecision in the actions of some Fed members lies in the asset purchase program, particularly its possible extension. The current "dovish" market expectations imply an increase in the terms of bond purchases, but the regulator is not in a rush to specify either the terms or the number of assets to be purchased. Based on the calculations of MUFG's currency strategist, Lee Hardman, the updated Fed minutes provides for continued purchases of securities worth $120 billion per month. At the same time, he emphasized that the volume of the QE program does not imply growth.

The disappointing macro statistics from the US was another factor that negatively affects the USD dynamics. Initially, the pressure factors include a significant growth in the number of applications for unemployment benefits. Last week, their figures soared from 748 thousand to 778 thousand, which is the worst indicator in the past five weeks. In general, the market was disappointed by the income data of American households, which declined by 0.7% amid the negative impact of the pandemic and repeated lockdowns.

The current situation also contributed to the further decline of the US dollar, so only the euro feels relatively calm in the EUR/USD pair, expecting positive news from the ECB. Experts say that if the quantitative easing program (QE) is increased or there is a reduction in the rate, then the euro will likely rise.

Analysts believe that the successful approval of the draft EU budget by most countries will support euro's further growth. However, US dollar's sales will continue, as well as the bullish rally of the EUR/USD pair. Therefore, experts expect this pair to move around the level of 1.2000, without a chance to leave this range. These assumptions were confirmed today, so the classic pair is now declining to the range of 1.1923-1.1924 from previous levels.

The US dollar declined not only amid pessimistic US economic data, but also growing confidence about the release of effective vaccines against COVID-19. Nevertheless, there are a lot of factors right now that favor the US dollar, so it is trying to make the most of the existing circumstances. Experts are confident that the efforts of this currency will be successful in the short and medium term.