US dollar is having a hard time to continue rising. Overview of USD, EUR, GBP

Economic activity is picking up on both sides of the Atlantic, with Markit's PMIs released Friday outperforming growth in the US, UK and Eurozone. The data show a positive effect of breaking out of covid constraints, and increased vaccination will boost activity in the coming months.

Stock indices as a whole maintain their growth trajectory; global yields have also resumed growth after a downward rollback period. All this points to a strong demand for risk, which gives reason to expect an increase in commodity currencies in the short term.

analytics608663560ac2d.jpg

The dollar is under pressure, which is largely political. Biden's $ 2.2 trillion infrastructure support plan is likely to be seriously adjusted downward, as several Democratic senators have unexpectedly joined the Republicans who have proposed a counter plan of "only" $ 600 billion. Since the dollar's rise in the past few weeks has been largely driven by expectations of a positive effect from large-scale stimulus measures, the situation that has arisen will put bearish pressure on it.

On April 28, Biden will submit to Congress the next part of the plan to reform the economy, which implies an increase in the maximum tax rate to 39.6%. US stock indices are disapproved of the rise in taxes, and if it does happen, the indices will go into a deep correction. Uncertainty is also weighing on the dollar.

Also on April 28, the Fed will hold a meeting, which is expected to be a passing one, but Powell's press conference is not an ordinary event and an increase in volatility is possible.

EUR/USD

As expected, the results of the ECB meeting did not contain any surprises. The ECB confirmed rumors circulated the day before that asset purchases in the second quarter will proceed at a much faster rate, and refrained from forecasting purchases for the third quarter.

Christine Lagarde at a press conference dodged purchasing responses from Q3. Markets tend to interpret Lagarde's silence as unwillingness to provoke the euro growth, since the recognition of the readiness to start the contraction in the 3rd quarter would be tantamount to the announcement of the growth of yields in the euro area.

The CFTC report showed that the sell-off in the euro had stopped, a net long position in the euro had risen to a one-month high, and a simultaneous rise in the yield spread caused the settlement price to resume its gains. All this points to the resumption of EURUSD growth in the near future.

analytics608663638a710.jpg

On Monday morning, the euro exceeded 1.21 and reached the upper border of the descending channel. Attempts to go higher are likely, they may be triggered by an insufficiently strong report on durable goods orders in the US in March, which will be published today.

We assume that continued growth is more likely, and the euro in the coming days will make an attempt to go above the resistance of 1.2240, which will mean readiness to resume active growth.

GBPUSD

Britain continues to publish optimistic reports that are in line with expectations of an outstripping economic recovery. Retail sales grew by 5.4% in March, an annualized growth of 7.2%, managed to get above the dock levels, the trend is positive.

analytics608663861e8f5.jpg

The growth of the pound at the moment is fundamentally justified, but there is a strong political risk. On May 6, elections will be held in Scotland, which, among other things, will answer the question of Scotland's readiness to leave the UK. If the ruling party wins, it will initiate the exit process.

The target price moved above the long-term average, indicating strong upside potential.

analytics6086636d54084.jpg

We expect strong resistance at 1.40 to fall in the coming days and the pound to move higher towards the February high of 1.2202.

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

Pages