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US dollar price forecast 12 April 2021

2021-04-12

2021-04-12

Dollar wants revenge. Forecast as of 12.04.2021Dmitri Demidenko

In spring, the EURUSD trend depends on the US securities market. The Treasury yields growth and the stock indexes correction press the pair down, and vice versa. Will anything change in mid-April? Let us discuss the Forex outlook and make up a [EURUSD][1] trading plan.

Weekly US dollar fundamental forecast

Everything changes. In March, the US dollar was the best Forex performer. In the first week of April, the greenback showed the worst performance since December. The reason was the US stock market rally and a halt in the US Treasuries’ sell-offs. Nonetheless, the [S&P 500][2] cannot be rising all the time, and the strengthening of the US economy suggests that the Treasury yields should soon resume growing rather than remain at the current levels. However, the [EURUSD][1] bulls could have new advantages.

The confidence in the US economic rebound, massive stimulus, and the expectations of significant corporate profits have sent the [S&P 500][2] 10% up in 2021. The stock index has already broken through its all-time highs twenty times since the beginning of the year. It seems natural, as the Wall Street experts have upgraded the forecasts for the companies’ profits included in the stock index from 16% to 24%. However, the real reason is the low calculation base, because corporations faced serious problems last year due to the recession.

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Source : Wall Street Journal

The crucial question for the market is whether all good news has been priced. Some analysts say the [S&P 500][2] will continue the rally if companies perform better than expected, not just meet the optimistic forecasts. One of the first to start is the banking sector. Let’s see how strong it is.

The “buy the rumors, sell the news” principle is not the only advantage of the US stock indexes bears. According to FactSet, the [S&P 500][2] P/E is at 22.6 with a 5-year average of 18.14. It’s been a long time since the stock market looked so expensive, while the resumption of the rally in Treasury yields may discourage not only the stock indexes buyers but also the [EURUSD][1] bulls.

Financial markets will be challenged by the US inflation data release. According to Bloomberg experts, consumer prices will accelerate to 2.4%. Experts polled by the Wall Street Journal believe that in June, CPI will jump to 3% and then decline to 2.6% by December. This is due to the rapid recovery of the US economy, which is likely to outperform the European one by 2% in 2021. The last time it happened was in early 2017, and then the euro cost significantly less than now - $ 1.05.

Growth gap between US and euro area

Source : Wall Street Journal

If the [S&P 500][2] is corrected and the Treasury yields resume their rally, the [EURUSD][1] bulls will be discouraged. The same thing happened in March when the major currency pair collapsed to the lowest levels since early November. However, the euro is likely to perform much better in the second quarter than in the first one due to the potential acceleration of vaccination. In January-March, the EU received 107 million doses of vaccines, but the figure will increase to 360 million in April-June.

Weekly [EURUSD][1] trading plan

I suppose the breakout of the resistance at 1.193 will enable the [EURUSD][1] bulls to drive the price to 1.2. Conversely, if the price drops below the support at 1.185, it will continue falling to 1.179. By and large, the pair still tends to the medium-term consolidation.

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