The dollar tries to recover, but investors distrust US monetary policy

The dollar tries to recover, but investors distrust US monetary policy

The ‘Greenback’ is ready for a rebound entity, but need a catalyst.

Experts are in favor of the bears maintain control for the moment. UBS revises its outlook for the euro and pound six months and stands at 1.28 and 1.45 dollars respectively.

Investors in the forex market are preparing to lay off January with the still scrambled encouragement by the events of last week, which left echoes of the currency war ringing in their ears. The dollar back timidly against the euro and the pound, after the statements of US President, Donald Trump, the country has not abandoned monetary policy remains from the late 90s to support a strong dollar, but the distrust still dominates the operation of major junctions.

The US currency back to the vicinity of $ 1.24 against the euro, and tries to put land in between with at least three years on Thursday when it reached $ 1.2540. Against the pound, the US currency managed to advance to $ 1.4123, from its worst pre-Brexit change in the $ 1.4345 where the bulls Pound met with significant resistance level at its peak towards $ 1.45. However, the dollar did not just get rid of the doubts spread among investors that Washington still really committed to his strength.

However, for experts as the founder of BK Asset Management, Kathy Lien, after six straight weeks of losses and the high volatility, the US currency appears poised for a turnaround to occur, but “needs a catalyst” he says. Anything can promote the turn, explains, “from an intervention by the Federal Reserve (Fed) to support the currency, a new intervention of a member of the Trump management, good economic data or a correction on Wall Street”.

“Any of the above events is plausible given the aggressive moves that have experienced currency markets and actions,” said Lien, who, however, said that “until this happens, we must be prepared because the bears maintain control” . At the moment, the data of GDP last Friday sent a boost to the currency, thanks to the strength of consumption and capital spending shown by the indicator. Looking ahead, the week is full of opportunities that bulls could use to re-master operations.

The Federal Reserve will hold its first monetary policy meeting of the year on Friday, the US employment report and President Trump give his first speech on the state of the Union shall be published. “We do not expect much volatility Open Meeting Monetary Policy Committee (FOMC English) this month,” says Lien. The most important is to be the last of the outgoing president, Janet Yellen. No press conference, and considering that there has been some since the last policy meeting, more deterioration than improvement in the US economy, there is little reason to Yellen change the melody of the Fed just before passing the baton to his successor in office, Jerome Powell, “Lien said.

BAD TIMES FOR THE BUCK

But while the dollar may go up in the short term or, failing that, a new range of motion for the euro / dollar established as you pass this “busy week” as expected by analysts of Danske Bank, the truth is that experts increasingly they take ‘short’ positions in the US currency against the dollar and the pound.

“For now, the maximum resistance January 25 is maintained and the support is drawn in the landmark Jan. 17, and 1.2323 dollars,” explained from the Danish state. Like Lien, do not expect the Fed to move the market, but believe that we must pay attention to the speech of Trump on Tuesday, “because the Republican can send new signals about his policies on foreign trade”, warn . In addition, they note that “regardless of the wishes of the White House about the direction of the dollar, we believe that in the medium term the dollar will weigh the growing deficit in the balance of payments,” anticipate from the company based in Copenhagen.

Thus, the headwinds are blowing for the US currency and are not likely to abate after Treasury Secretary Steven Mnuchin, gave wings to the downside last week with its support for a weak dollar. For more than Trump try to undo the damage, this is done and the decline of the dollar which has embarked since November, shows no sign of letting up.

For this reason, UBS analysts have revised their forecasts for the euro / dollar and pound / dollar to six months ahead. Now they are betting that the euro is put at $ 1.28 in summer, from the previous figure of $ 1.22 per pound and $ 1.45 to do so on from the Swiss bank forecast of $ 1.36. “The European currency has been strengthened by the setting of the European Central Bank (ECB) in economic strength, which underpins the euro,” says Lien, meanwhile. While the prospect of an agreement on the Brexit and good economic prospects in the UK keep the pound buoyant “he concludes the analyst.

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