In the first months of the year, the dollar seemed to be trying to prove that it has the right to remain the main world reserve currency, confidently adding to its main competitors against the background of talk about the end of the era of its dominance.
As a result, by April 1, the American currency rose by 5% against the basket of its main competitors, and three times stronger against gold .
Such a strengthening should serve as a clear reminder that it is too early to bury the dollar, as well as predict a steady decline for it. However, in reality, it may turn out that we see only a short jump in the rate before a long decline to the main competitors.
Three factors were behind the dollar’s rise since the beginning of the year. To finance huge support packages, the States borrowed from the markets, sucking liquidity from other sectors (investment banks preferred government bonds to corporate or IPOs).
The implementation of these packages against the backdrop of large-scale vaccinations improved the prospects for economic growth, justifying the attractiveness of the dollar on the part of macroeconomic factors. Moreover, the Fed, unlike its colleagues from Japan and Europe, rolled back the crisis measures a year ago and did not correct optimistic market expectations.
Biden decided to borrow as long as possible, speaking the day before with another trillion-dollar stimulus program. As a result, these proposals will again have to raise the volume of borrowings in the near future, developing the impulse for the dollar’s growth and, at the same time, planting an even bigger bomb under it.
The question of how America will pay off the borrowed debts becomes urgent, and now President Biden is returning corporate taxes and tightening the rules for collecting them.
Perhaps, the strengthening of the dollar may well get its development in the coming weeks, since the above three factors will work on the strength of the American currency, thanks to a new stimulus plan from the government.
However, strategically, you need to be prepared for the fact that this surge in the dollar may become a good opportunity to reduce positions before a new, truly prolonged and deep round of weakening of the American currency.
The dollar index within the current wave of growth has a chance to jump another 1.5% to 95, returning below 90 by the end of the year and falling to 80 by the end of 2022.
The dollar index within the current wave of growth has a chance to jump another 1.5% to 95The dollar index within the current wave of growth has a chance to jump another 1.5% to 95
For EUR / USD , this scenario opens the way to a decline to 1.1500, followed by a reversal by 1.23 at the end of 2021 and an increase by 1.40 by the end of 2022.
For EURUSD, the path opens to a decline to 1.1500, followed by a reversal at 1.23 at the end of 2021 and an increase by 1.40 by the end of 2022.For EURUSD, the path opens to a decline to 1.1500, followed by a reversal at 1.23 at the end of 2021 and an increase by 1.40 by the end of 2022.
GBP / USD will decline to 1.3500 in these conditions, to further reverse up to 1.5000.
GBPUSD will decline to 1.3500 in these conditions, to further reverse upward to 1.5000GBPUSD will decline to 1.3500 in these conditions, to further reverse upward to 1.5000
Although it sounds rather strange now, under these conditions , the ruble will have the opportunity to grow to 60 per dollar by the final of 2022, winning back after its competitors the 20% failure of the USD.