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Wednesday, December 2, 2020

US Dollar Predictions Amid Fed-Treasury Fight

The US dollar is keeping small losses of the week on track as they have marked seven consecutive weeks where the performances have alternately seen profits and losses throughout the week. Although the risk appetite has improved significantly owing to the positive news of the development of the COVID-19 vaccine trial. US dollar is seen to gradually crush lower in the stock market as participants discard all the currency of low yield safe haven.

However, the US dollar has been in the talk once again for some other reason. After the US election on 3rd November was won by Joe Biden, the Democrat, the soon leaving Treasury Secretary of US, Steven Mnuchin made a sudden request from Federal Reserve to return the unutilized funds that were allotted to improve Fed’s lending activities during this coronavirus pandemic. Several markets analysts and experts have suggested that this might be a deed to hamper the pre-existing tension in the transition of Trump and Biden.

US Dollar
US Dollar
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US dollar has not been very responsive so far and this gives some indication regarding the future. In case the disagreement of Fed-Treasury was meant to have a huge impact then the reaction to it must have been very volatile. This indicates that the decision of Mnuchin does not matter. On the other hand, if Mnuchin decides to claw back the massive $500 billion unused fund then Congress can also decide to allocate those relief funds of COVID-19 which has been in a deadlock situation for many months.

On 20th November, Friday, Jerome Powell, Chair of Federal Reserve, has made a statement regarding the workout arrangements being made by the Fed to return those unused funds of taxpayers’ money.

US Dollar And Fed

It is not a concern for the US dollar to consider the debate of who is right in contemplating the taxpayer’s money being used for the lending activities of the Fed. The outcome of easing the Fed lending might strike down the yields of the US that have been creating troubles for the US dollar throughout 2020.

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DXY Index was trapped from the end of July 2020. The end of September week followed by the beginning of October saw two consecutive weeks of directional moves. The DXY Index has experienced a downhill since March where the trendline has met the support range of multi-month.

The rally failed at 38.2% where the Fibonacci retracement approached a low range of 94.20 since the high in 2017. Following a bearish trend, the DXY Index kept dropping daily 5-, 8-, 13-, and then 21- the envelope of EMA.

About 27.38% of the market traders have a short-long-standing at 2.65 to 1. Net-long stands at 0.75% less than the previous day’s 20.80% which is less than the previous week.

The net-short is positioned lower than yesterday, however, it is more than the net-short of the previous week.

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