FX.co ★ US dollar rose, but it has no reason for a global upward reversal

The US dollar increased as a result of Wednesday's trading. This growth was accompanied by a local increase in Treasury yields and a slight increase in the US stock indices.

Can the upward pullback of the US dollar be considered a general reversal of the trend in the currency market or not?

There is no reason to talk about a real change in market sentiment despite the fact that the dollar index surged above 90 points on Wednesday and is now at the level of 90.03 points, gaining 0.01%. Most likely, this dynamics can be explained by a local increase in line with the still continuing negative trend for it. After the US dollar has been under pressure all the last time and almost reached the lowest in January of this year on the ICE index, its pullback seems to be technical, since there is no new positive or negative news that has been reported in the markets.

Today, applications for unemployment benefits will attract attention. They are expected to decline to 425,000 last week against 444,000 a week earlier. The final US GDP data for the 1st quarter will also be released. The indicator is expected to rise by 6.5% compared to the previous quarter, where growth was 6.4%. Moreover, the values of basic orders for durable goods will be announced, where growth is forecasted to decline to 0.8% m/m from 2.3%, followed by the values of the index of unfinished sales in the real estate market, whose growth rate is also expected to slow down from 1.9% to 0.8%.

How will the market react to the expected economic statistics?

We believe that if they suddenly turn out to be generally higher than expected, even if only slightly, this will stimulate the growth of positive market mood, accompanied by an increase in stock indices and a weakening of the US dollar. Such a market reaction to the good news is traditional for the last time, which is due to the continuing hopes among investors that the slowdown in the recovery of the US labor market and other negative events in the economy will be local, as well as to the fundamental weakness of the US dollar, whose strengthening is harmful to the growth of the US economy. This is the reason why we believe that the Fed will not take any actions aimed at changing the current monetary policy, and will strive to maintain it in every possible way.

Forecast of the day:

The EUR/USD pair remains in a short-term upward trend and is trading above the level of 1.2170. We expect the pair to reverse upwards and rise to the level of 1.2265.

Gold's price will continue to rally amid the weakness in the dollar and the US economy, which seems to encourage some market participants to buy it as a risk insurance instrument. The price is held above the level of 1890.00, which may encourage its further growth to 1930.00.