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US dollar price forecast September 28 2020

2020-09-28

2020-09-28

Dollar doesn’t care for anything. Forecast for 28.09.2020Dmitri Demidenko

The greenback doesn’t react to the bearish forecasts. Investors are now focused on the US presidential election. Let us monitor the approval ratings and polls to make a [EURUSD][1] trading plan.

Weekly fundamental US dollar forecast

The dollar is strong despite the gloomy forecasts. In summer, when the epidemiological situation in the US was deteriorating, and the stock market was rising, Forex analysts suggested the greenback has lost its status of the primary reserve currency. The USD was expected to drop by 30% and more, as it was in the 1970s and 1980s. The share of the US dollar in the central banks’ FX reserves, international settlements, and cross-border lending should have declined. In late September, it became clear that the forecasts do not meet reality.

Dollar share in FX reserves and operations

Source : Financial Times

The week through September 25 has become the best for the USD since April. The second COVID-19 wave in Europe and the drop of the US stock market sent the [EURUSD][1] pair to the bottom of figure 16. Uncertainty and disappointment are back in Forex. The greenback usually strengthens under such conditions. In August, investors were selling off the dollar because of the divergence in the economic expansion of the US and the euro-area. In autumn, this idea stopped working. The [S&P 500][2] correction also weighs on the euro.

The market turmoil also results form the US upcoming election. After Donald Trump abandoned the peaceful transfer of power, referring to possible fraudulent mail-order voting, the baseline scenario for the markets has been unclear. According to USB, once the voting result is known, it will have a significant, but not excessive, impact on the market. Investors do not know how to react to the possibility that the situation will turn into complete chaos. The [S&P 500][2] is sliding down, the Forex volatility is growing along with the USD rate, and the majority is betting on the sharp moves of the assets. Moreover, the focus is on those currencies that didn’t previously react to the US presidential election. For example, the Russian ruble could crash if Joe Biden becomes the president. In this case, there might be additional sanctions against Russia.

The potential reaction of currencies to the results of the US

presidential election and the S&P dynamics

Source : Wall Street Journal

According to the Survation poll of the asset managers managing $3 trillion, 60% of respondents believe Joe Biden will win the election on November 4. 48.3% of investment specialists suggest that Republicans will maintain control of the Senate. 43% expect that Democrats will take control of the Senate. 88.5% of those polled believe that Democrats will continue to dominate the House of Representatives. 60% of asset managers say the US stock indexes will enter a bear market if Democrats win on all three fronts. 15% of the respondents suggest the victory of Democrats will support the rally of the US stock market.

Weekly trading plan for [EURUSD][1]

Joe Biden is currently the leader, according to polls. However, things are not going on according to the plan. The greenback isn’t falling despite the rule “what is good for Donald Trump is good for the dollar.” It is risky to buy the [EURUSD][1] as the uptrend could break if the second pandemic wave in Europe is more severe than the first one. I suggest expecting the bars of the breakouts of the supports at 1.158-1.16 and 1.149-1.151 to close and putting pending orders at the highs of these bars.

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Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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