US dollar price forecast September 29 2020

2020-09-29

Dollar is a Forex anti stress toy. Forecast as of 29.09.2020Dmitri Demidenko

During the stress time, investors buy the greenback even if the global financial stress is the US. Let us see the Forex sentiment and make up a [EURUSD][1] trading plan.

Weekly fundamental US dollar forecast

It is useful when you have something to rely on. The rally of the US stock indices, the Chinese yuan, and the British pound encouraged the [EURUSD][1] bulls to go ahead, and the pair didn’t go below the bottom of figure 16. However, investors do not want to sell safe havens. There is growing uncertainty around the second wave of the COVID-19 pandemic and the most unpredictable US presidential elections in recent decades.

Due to the divergence between monetary policies and economic growth, the Chinese yuan continues strengthening. According to Morgan Stanley, annual inflows of foreign capitals to China’s stock and bond markets through 2030 will be $100 billion and $80-$120 billion accordingly. The strong currency of the country that is the world’s largest consumer of goods and services, is a bullish factor for the currency of the export- led euro-area. There are also talks that the UK and EU will strike a Brexit deal at the last moment. It is a positive factor for both the pound and the euro. However, the [EURUSD][1] trend is not yet clear.

The euro has fallen as investors exited dollar shorts, which, in the week through September 22, have reached the highest level since November 2017. Forex analysts claim that, over the past twenty-five years, the market has never been as confident of the long-term weakness of the greenback as it is now. This confidence is significantly shaken in late September.

Dynamics of USD and speculative positions

Source : Bloomberg

It seems the dollar should be under pressure now as the political risks in the US are the highest among G10 currencies (except for the UK, perhaps). However, the greenback is strengthening. According to HSBC, investors buy out the US dollar during stress, even if the stress originates from the USA. BofA Merrill Lynch expects the dollar to appreciate before the US presidential election, or maybe even after it, sending the [EURUSD][1] down to 1.14 in late 2020.

Mizuho Bank argues that when Joe Biden strengthens his rating advantage over Donald Trump in the TV debates, the greenback will slide down. Everything good for the current US president is good for the dollar. If the Democratic candidate wins the election, the US twin deficit should expand, and the dollar will weaken.

Approval ratings of Trump and Biden

Source : Financial Times

Weekly trading plan for [EURUSD][1]

The Conservatives and the Democrats, which offered and new $2.2 trillion plan, could still agree on the fiscal stimulus. In this case, the US stock indexes will rise, and the safe-haven demand should weaken. The euro could also be supported by the deal between the UK and the EU. On the other hand, the deflation in the euro-area, as well as the talks about a boost in the European QE and the second pandemic wave, press the [EURUSD][1] down. The pair could start consolidation in the range of 1.161-1.177. If the price breaks out the resistance at 1.17, it should continue rising to the top of the consolidation range.

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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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