Last Friday, the U.S. dollar sharply given the slack, which affected the dynamics of the movement of many currency pairs at Forex market. For example, the EUR/USD reached 1,335 and the GBP/USD reached the level of 1.564. Such a strong weakening of the dollar is associated with the outflow of investment in the debt market in the U.S. as well as with the weakness of the stock market and the increase in the money supply.
In a few days U.S. bond yields rose significantly: the 10-year-olds - to 2.76%, 30-year-olds - up to 3.82%. A volume of U.S. bonds sales by foreign investors amounted to $ 66.9 billion. The interest to U.S. bonds falls from August 2012. Typically, if investors are leaving the market of bonds, the stock market is growing and vice versa.
Current trend can be explained by growing fears of a quick reduction of quantitative easing program in the US. We believe that this can happen at the end of the year. Investors are afraid of a new possible crisis in the United States and refuse risky assets. The resulting excess cash is invested in metals.
It is important to note that the Americans once again launched a printing press and increased the money supply by $ 52 billion in just one week. It is a huge amount for such a short term. Thus, the money supply was increased and the USD weakened.
At the end of last week, after a very quiet European session was resumed a selling of the U.S. dollar against other currencies. The reason for this was the publication of fundamental data from the U.S. in the field of construction. EUR/USD reached a weekly maximum at around 1.3380.
Technical indicators remain in positive territory. In the case of continued bullish momentum, the EUR/USD should find resistance at 1.3400/15. If the index of consumer confidence by the University of Michigan will change the mood of the market, the first goal for the sellers will be at 1.3300/30.
In the future, we expect further growth of the EUR/USD, which will last as long as investors do not realize that a recession in the euro area continues, despite last week’s positive news by officials.