EUR/USD. Market believes Mnuchin: dollar celebrating a small victory, but you should not rush to sell

The euro-dollar pair updated the local high today, reaching 1.1371. The last time the price was at this level was almost a month ago - on June 11. The rapid increase in the number of COVID-19 cases in the US weakened the greenback, the price fell across the market. But buyers failed to keep their positions once again. A few hours after the beginning of the US session, EUR/USD bears took the initiative and returned the price to the area of the 12th figure. There was no price breakthrough: the pair stayed in the range of 1.1260-1.1350, within which it "walks" throughout the current week. There is a feeling that traders of the pair are experiencing a kind of crisis, when the incoming news flow is not able to reverse or continue the trend.

Looking ahead, it is worth warning that despite the current downward momentum, short positions look risky - unless, of course, we are talking about scalping. In all other cases, do not rush to make trading decisions. The decline in the price of EUR/USD is emotional and is based on the comments of US Treasury Secretary Steven Mnuchin. He said that the next bill on measures to help the economy in the conditions of coronavirus is "at the final stage of its development." Mnuchin added that he "will do everything to ensure that the bill is approved by Congress before the end of July." He also said that he supports new direct payments to citizens, but he did not specify what level of income restriction the White House will support.

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In general, he made it clear that the administration will offer a more modest bill compared to a similar document that was previously passed in the House of Representatives. In particular, this applies to the payment of unemployment benefits. According to the secretary of the Treasury, "generous insurance keeps some people from returning to the workplace, since they earn more at home than at their work." Mnuchin also said that the options developed by the White House for providing financial assistance will be "more targeted". According to American journalists, almost every item of the announced program goes against the initiatives of representatives of the Democratic party.

Let me remind you that in early June, the Democrats initiated the adoption of their financial assistance package. They were able to pass it in the House of Representatives, but at the same time became the object of criticism from the White House and Republicans. US President Donald Trump made it clear that the bill is too expensive, and therefore will not pass the millstone of the Senate and in any case will not be signed by him. Against the background of such events, it is unlikely that the legislative initiative of the White House will be received by Democrats with cordiality. It is also necessary to remember that the US presidential election is less than five months away, so all legislative initiatives are now considered through the prism of the election race.

Thus, the fundamental background for the dollar is still negative. First of all, this is not the first time Mnuchin has voiced such promises – the last time he promised to present and introduce the above-mentioned bill to Congress was at the end of May. Second, the ongoing political differences between Democrats and Republicans will not allow the White House to automatically adopt a new stimulus package (it should be recalled here that the Democratic party controls the House of Representatives). And third – no one has canceled the coronavirus yet, so tomorrow's statistics could plunge dollar bulls into depression, especially if the daily increase in infected people exceeds the 60,000 mark again.

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Continuing the topic of coronavirus, it is necessary to say one more fundamental factor that supported the dollar today. The statement from the Director of the National Institute of Allergy and Infectious Diseases, Anthony Fauci. He said that a coronavirus vaccine could be created by the end of this year or the beginning of the next. The US currency reacted quite sharply to this phrase, strengthening its position throughout the market. But behind the headlines lies an important clarifying comment from Fauci – he said that the third phase of clinical trials "can probably begin" by the end of July.

The fact is that at the moment, pharmacists in many countries of the world are developing more than ten versions of vaccines – but no company has yet passed the third stage of clinical trials. So far, only the Chinese have reached the last stage – this month they will start the final tests in the UAE. Therefore, it is premature to talk about the appearance of a vaccine - according to the most optimistic estimates, the drug will appear in six months or a year.

In summary, it should be noted that despite the strong downward momentum (the EUR/USD pair lost almost 100 points in just a few hours), the bears could not even approach the support level of 1.1260 (the average line of the Bollinger Bands indicator coincides with the Tenkan-sen and Kijun-sen lines on the daily chart). All this suggests that dollar bulls are not confident in their abilities, and sellers rushed to close deals as soon as the pair began to slow down its downward course. Therefore, it is now advisable to take a wait-and-see position for the pair. Tomorrow, after the publication of new data on the rate of spread of COVID-19 in the US, the fundamental picture of EUR/USD may change dramatically.

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