US dollar bulls are on the back foot with the index falling 0.35% today, following a similar drop on Monday and Tuesday. The greenback is under pressure as optimism still exists for a second stimulus bill from the United States government, which will come in somewhere around the $2 trillion figure.
The House Speaker had given a Tuesday deadline for progress after being locked in talks with Treasury Secretary Steven Mnuchin, and although that deadline passed, the former was still upbeat about the potential for a deal. Dollar bears know that even if a pre-election deal fails, then a post-election package is inevitable, especially in light of the recent surge in virus cases and further lockdown measures.
The Euro has been gaining against the U.S. dollar but European Central Bank President Christine Lagarde sounded an alarm about the virus. Lagarde told French t.v.:
“Most scientists in the euro zone were expecting the resurgence of the epidemic in November or December, with the cold. n Tuesday evening. It’s come earlier, and from that point of view that has surprised. It’s not a good omen.”
The virus situation leaves the dollar index hanging in the balance depending on how it affects the U.S. compared to the Eurozone. The ECB meet next week to decide on monetary policy, however, economists expect the bank to hold rates steady and wait for December before making any adjustments to stimulus or bond-buying programs.
I noted last week that the failure to hold the 93.82 level risked a further move to the downside. A test of the uptrend line from mid-September has also failed at the 93.00 level. We are touching support levels but a bearish close could see the dollar index back near the 92.00 level. A short could be taken on a bearish close with a stop loss above 93.00. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.
