Logo

Posts

US dollar price forecast 1 December 2020

2020-12-01

2020-12-01

Dollar lost its shine: for how long? Forecast as of 01.12.2020Dmitri Demidenko

Euphoria often gives way to Disappointment in financial markets, especialy when the good news has already been price in the Forex rates. Will this fact send down the [S&P 500][1] and [EURUSD][2]? Let us discuss the forex outlook and make up a trading plan.

Weekly US dollar fundamental forecast

In November, the USD was 2.6% down, increasing the loss since the beginning of the year to 5% and hitting the lowest level since April 2018. The US dollar in November featured the worst drop since July amid mass sell-offs of the safe-havens. The major reasons are the increase in the global risk appetite and the easing of the political uncertainty in the USA. The greenback has lost its shine because of the euphoria in the US stock market, spurred by positive news about vaccines. The [Do][3][w Jones][3] in November performed the best growth since January 1987 (+12%), the [S&P 500][1] performed the best since April (+11%), [Nasdaq Composite][4] was 12% up. However, no euphoria could last forever.

Dynamics of major currencies in November

Source : Reuters

The universal vaccination is a matter of time, the global economy is recovering, the cheap money is ample. Therefore, the stock indexes are rising. Following a tough year, positive prospects become clearer. However, when investing, it is important not only to predict the future, but also to assess what has already been priced in. If investors have considered all the positive, they expect everything to be fine. If it turns out to be so, the market won’t have any room to grow. In the case of US stock indices, everyone expects that everything will not be just good, everything will be fantastic!

According to the American Association of Individual Investors, there were 43% of bears and 26% of bulls in the market in early October. In late November, the balance of power has dramatically shifted. 47% of investors believe the stocks will further rise, only 27% of them are bearish. Investors Intelligence polls show that two-thirds of investors share an optimistic view on the US stock market, which is the highest number since January 2018. At that time, the euphoria was soon replaced by the disappointment resulting in mass sell-offs.

Dynamics of investors’ sentiment

Source : Wall Street Journal

Currently, much of the positive news has already been priced, and the market ignores the negative. There are several negative factors, such as deterioration in the US domestic data and the difficult epidemiological situation. Furthermore, Jerome Powell warns that the next few months will be tough, and the government hasn’t agreed on the new fiscal stimulus package. The [S&P 500][1] can well go down in the correction, followed by the [EURUSD][2], which is closely correlated with the stock index. However, I don’t think the correction to be deep. History proves that even at a time when optimism in the US stock market was high, its decline most often led to consolidation, rather than a sharp drop.

The [EURUSD][2] bulls haven’t broken out level 1.2 amid a few negative drivers. The US stock indexes dropped on the last day of November. Germany’s inflation rate was down from -0.5% to -0.7% Y-o-Y, which is the worst performance for more than a decade. This fact increases the risk of the ECB’s monetary stimulus expansion.

Dynamics of consumer prices in Germany

Source : Bloomberg

Weekly [EURUSD][2] trading plan

Euro has rebounded from the strong level of the second time. However, the rally is now more likely to continues than in early September. It makes sense to buy out the corrections down to $1.1905 and $1.1845. It will be relevant to add up to the long positions when the price tests the high of November.

[EURUSD][5] current rate in the Forex market:

EURUSD = 1.20676

1-day change

0.01427 (1.2%)

Open an account with a reliable broker and start earning money on an easy-to-use platform in the global foreign exchange market.

[ Open account ][6]

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.

Rate this article:

{{value}}

( {{count}} {{title}} )

  1. my.liteforex.com/trading/chart?symbol=SPX&returnUrl=true
  2. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
  3. my.liteforex.com/trading/chart?symbol=YM&returnUrl=true
  4. my.liteforex.com/trading/chart?symbol=NQ&returnUrl=true
  5. my.lite.forex/trading/chart?symbol=EURUSD&returnUrl=true
  6. my.liteforex.com/?category=analysts-opinions&slug=dollar-lost-its-shine-for-how-long-forecast-as-of-01122020&openPopup=%2Fregistration%2Fpopup