As Bank of America Merrill Lynch said recently, the most popular strategy in the market after “buy shares” is “sell the dollar”. Speculative short positions in the dollar have risen to a two-year high. The US index (DXY) has fallen below 90, while it was at 102.82 on March 15, 2020. As for the retreat of the dollar in recent days, it is taking place against the background of the discussion in the US Congress of an additional package of fiscal stimulus. At the end of the day, every new dollar poured into the country’s economy will lead to a decrease in its purchasing power.
The Fed’s meeting last Thursday had no effect on the market sentiment. Interest rates remained at the same level, as the blissful pre-Christmas mood prevailed at the press conference: nothing new was said about the prospects for further quantitative easing and no worries about the current state of the economy were voiced. Even though, such passivity was caused not only by the Christmas season, but also by the new US Presidency. Joe Biden has not yet settled in the White House and Trump is already a duck lame on both legs.
True, thanks to the hopes of investors for the future growth of the S&P500 and for a positive outcome of the Brexit negotiations, the pair still continued its movement northward, adding about 140 points in a week. As for the final chord, it sounded at the height of 1.2250;
Although this week traders are facing low liquidity due to Christmas, we remain bullish as the dollar is expected to continue to weaken.