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US dollar price forecast 2 April 2021

2021-04-02

2021-04-02

Dollar: It is time of facts. Forecast as of 02.04.2021Dmitri Demidenko

The US jobs report for March could determine the [EURUSD][1] trend for the next month or even longer. Let us discuss the Forex outlook and make up a trading plan.

Fundamental US dollar forecast today

In March, the US dollar showed quite a good performance, often amid weak US domestic data. We shall see the dollar price moves when the economic data start improving steadily. The [EURUSD][1] reaction to the US jobs report could determine the market trend for the next month or even longer. We shall closely watch the market movements.

Daiwa Securities notes that not only speculators buy the greenback but also asset managers. The company says the USD index will continue the rally as long as the US economy grows and Treasury yields are rising. Nordea Markets shares the same opinion, suggesting the [EURUSD][1] is heading for 1.15. I do not think so.

Markets are rising on the expectations. It happened so that the US GDP forecasts for 2021 were upgrading amid massive fiscal stimulus and rapid vaccination, while the failure of the COVID-19 vaccination campaign in the EU, the extension of the lockdowns, and the third pandemic wave in Europe made JP Morgan and Deutsche Bank downgrade the euro-area growth forecasts from 5.8% to 5.3% and from 5.6% to 4.6%, respectively. Therefore, investors were selling off the [EURUSD][1] on the rumors, and now it is time to take the facts into account. The fact is that the euro-area PMIs are growing despite the restrictions, and the US economic recovery could support other world’s economies, including the euro area.

Dynamics of leading economic indicators

Source : Bloomberg

The euro-area manufacturing sector managed to provide a growth momentum for the composite PMI in March. Germany’s manufacturing PMI has featured the best growth over the 25-year history of records. Furthermore, the WTO increases international trade forecasts for 2021 to 8%, which is a strong argument for buying the export-led countries’ currencies. I mean euro. The WTO notes that Joe Biden’s $1.9 trillion stimulus will increase demand in North America by 11.4%. Most of the demand will be satisfied by the producers from Asia and Europe.

Therefore, [EURUSD][1] bulls lack only one thing, the acceleration of the vaccination campaign. In the EU, only 16.5% of the population received at least one dose, compared to 45.6% in the USA. I believe the situation should improve in the second quarter. The matter is in psychology, first of all. There are quite many people who are unwilling to vaccinate. Therefore, a quick start does not guarantee a victorious finish.

A strong jobs report will only convince the strong position of the US economy, which in the medium term is a benefit for export-led countries. In this regard, employment growth above 647,000 expected by Reuters experts may provoke a further rally in the [S&P 500][2] and support the [EURUSD][1]. On the other hand, if Treasury yields resume growth, the euro will come under pressure.

[EURUSD][1] trading plan today

The market reaction is interesting and should determine the [EURUSD][1] trend for the next month or even longer. It will be relevant to enter longs if the price breaks out the resistance levels of 1.18 and 1.184. If the EURUSD bulls fail to consolidate the price above the indicated levels, they will prove their weakness.

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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  1. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
  2. my.liteforex.com/trading/chart?symbol=SPX&returnUrl=true