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US dollar price forecast 25 November 2020

2020-11-25

2020-11-25

Dollar steps in the old path. Forecast as of 25.11.2020Dmitri Demidenko

In previous years, US presidents didn’t interfere in the foreign exchange market as often as Donald Trump did. Joe Biden is coming to power, and the Forex trends are to return to the former patterns. How will this affect [EURUSD][1]? Let us discuss the Forex outlook and make up a trading plan.

Monthly [EURUSD][1] fundamental forecast

Slogans and real actions are often two completely opposite things. US presidents from Bill Clinton to Barack Obama expressed their commitment to a strong dollar policy. However, because of this policy’s transparency, the greenback often fell during their terms of office. Donald Trump, on the contrary, talked about the advantages of a weak currency. Trump accused other countries of currency manipulations, called on the Fed to cut interest rates and resume the QE. Nonetheless, the USD was growing because of the certainty created by Trump’s administration. That is why I believe there are important bearish drivers for the greenback’s weakening in the future. Joe Biden comes back to the old slogan ‘String dollar reflects the strength of the US economy.’ Biden nominates Janet Yellen for Treasury Secretary.

The market should forget the shocks resulting from the President’s unexpected commentaries, which the US administration would try to smooth over the next day. During Trump’s term of office, forex analysts used to say that what was good for Trump was good for the dollar. As a safe- haven, greenback often benefited from the uncertainty, fueled by Trump’s unpredictable and eccentric tweets. Forex is coming back to old patterns. Besides, the hopes for the global economic recovery press down the safe-haven assets.

Investors discuss the controversial rally of the US stock indexes by 60% up from March’s low amid the US economy’s weakness. However, no matter how terrible they are, recessions rarely happen and end rather quickly, so everyone is rushing to buy stocks. For decades, investors have been guided by three principles: spare no money, buy and hold, and finally buy on the price fall. Such simple investment strategies have been and continue to be profitable! The [Do][2][w Jones][2] has hit level 30000 for the first time. The [S&P 500][3], according to the median gauge of 40 experts polled by Reuters, should be 9% up from the current levels by the end of 2021.

Dynamics of [Dow Jones][2] and US GDP

Source : Trading Economics

The major bullish factor is the hopes that the global economy should return to the pre-crisis levels in the second half of next year. Bloomberg suggests the global GDP will rise by 4.9%. Goldman Sachs expects that the vaccines and a fresh fiscal stimulus of $1 trillion provided by Congress will support the US economic growth by 5%. Furthermore, the recovery can come sooner because of the delayed demand. According to the Commerce Department,  households have paid down debt, and the personal saving rate was a high 14.3% compared with 8.3% before the pandemic. People are ready to spend money. So isn’t it the time to buy stocks now? Tomorrow it might be late.

Monthly [EURUSD][1] trading plan

The easing of political uncertainty and the [S&P 500][3] rally encourages the [EURUSD][1] bulls. My suggestion for the movement of the trading range from 1.16-1.2 to 1.18-1.22 seems to be correct. The price rebound from the bottom of figure 18 allowed us to enter longs. Continue holding up the longs and enter new ones.

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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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