Risk of a Weakening Dollar Remains

The risk of weakening the dollar’s position due to a slowdown in the US economy is becoming increasingly obvious. However, this is a longer-term process, and in the near future, the EUR / USD pair is unlikely to fulfill the forecast of BofA Merrill Lynch 1.25. The main currency pair is also not breaking the level of 1.185 the other day, as was previously expected. Greenback, apparently, still drink blood from rivals.

So, last year, the dollar grew due to the accelerating dynamics of the US economy over its main competitors. In the coming year, its fate will depend on who will slow down faster. The first to suffer from the recession are regions such as the eurozone and China, investors calculated, which allowed the EUR / USD “bears” to launch a quick attack. For the first time in a year and a half, business activity in the PRC went into the red zone, and the indexes of purchasing managers in Spain and France turned out to be worse than market forecasts. In addition, Apple said that the company’s financial performance collapsed due to the slowdown in the Chinese economy. Of course, the United States has its own difficulties, but in the eurozone and the PRC, there may be a lot more.

The question arises if the US economy slows down more slowly than the global one, is it worth it then to get rid of the dollar? Meanwhile, looking at the fundamental factors (the fading of the fiscal stimulus, the tightening of financial conditions, the drop in oil), the US GDP should slow down faster than the global economy. Perhaps this will happen, but not in the coming days. At the very beginning of the year, greenback showed its competitors that it is not necessary to be so self-confident, perhaps this dollar trick will demonstrate once again.

At the moment, currency strategists advise sticking to the forecast of 1.125-1.165 for the EUR / USD pair.TK7UP-nfcXOi9Ss2EXwPfywPXQLi1OYTmGg3bIVm

As for the other currencies traded in a pair with the dollar, the Nordea experts are pessimistic about the greenback. They recommend in the first quarter to look at its sales against the yen, the Australian dollar, and the Norwegian krone. The currencies of Japan and New Zealand may continue to show advancing dynamics since the speculative short positioning on them is too “bearish” by historical standards.


It is expected that by March, the US Treasury will fill the country’s banking system with liquidity and the dollar will weaken. This is due to the fact that the current size of the US government debt ($ 21.9 trillion, according to USDebtClock) is significantly higher than the statutory limit of $ 20.456 trillion. A year ago, for political reasons, the Congress decided not to increase its size, but temporarily (until March 1, 2019) allowed to take new loans. It is worth noting that in March of this year, all funds raised will be added to the official state debt, and members of Congress will have to raise its limit by the appropriate amount.

The material has been provided by InstaForex Company – www.instaforex.com

Source:: The dollar still breaks up

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