After reaching a 5-month high, the U.S. dollar retreated

April 05, 2021 14:00

The U.S. dollar continued its upward trend last week and on Wednesday the reserve currency index reached the highest point since early November 2020. But in the second half of the week, buyers transferred the initiative to sellers and the U.S. dollar adjusted slightly from the highs.

USD

U.S. data was positive and showed a further recovery and strengthening of the country’s economy, and the rapid vaccination process supports high expectations to see more activity in the summer and a return of tourism. Labour market data exceeded expectations and 916 thousand new jobs were created, and the unemployment rate fell to 6%. The country’s consumer confidence index jumped from 90.4 to 109.7 points and was at its highest level in the last 12 months and the start of the pandemic in the country. The number of new jobless claims rose slightly from 0.68 to 0.79 million a week.

The pandemic situation in the world has prompted a further rapid spread of infections, with the weekly average of 586,000 new cases per day rising from 536,000. U.S. data showed a moderately growing number of cases, with the weekly average rising from 60,000 to 66,000 new cases per day. The number of vaccines injected in the country rose from 137 to 158 million and the change was 19 million and remained stable compared to the previous week. Overall, the number of people vaccinated with at least one dose in the U.S. has risen from 27.7% to 30.7% of the population. Globally, the number of people receiving at least one dose in Britain rose from 44% to 47%, while in Lithuania the figure rose from almost 12% to 13.5%.

Euro

The main currency pair EUR/USD mainly reflected the sentiment of the U.S. dollar, so it depreciated and reached the level of 1.171 at the beginning of the week, but later recovered and had risen to 1.178. Among the economic data, preliminary inflation in March in Europe was 1.3% per year, and in Germany 1.7%. In Germany, the number of unemployed fell by 8,000 and it was already 9 positive months in a row, and the unemployment rate was 6.0%. Retail sales in Germany in February were -9.0% lower than a year ago, but higher by 1.2% compared to January 2021. The EUR/USD pair closed the week with a fall of -0.3%.

JPY

The main Asian pair, USD/JPY, continued to rise, reaching 110.9 on Wednesday, the highest level since March 2020. Among the economic data was the actual manufacturing PMI index, which stood at 52.7 points and showed expansion. Retail sales contracted by -1.5% year-on-year in February. Industrial production volumes were -2.6% lower than a year ago. USD/JPY ended the week up 0.9%.

GBP

The British pound and the U.S. dollar pair fell to 1,371 points at the beginning of the week, but later rose to 1,384 points and ended the week with a positive result. There was little relevant economic data, most notably the manufacturing PMI index with a score of 58.9 points, significantly better than 55.1 last month. GBP/USD ended the week up 0.3%.

Economic Events

This week will start calmly, since Monday will be a non-working day in Europe and the ISM services PMI index will be published in the U.S. No important data is planned for Tuesday, and PMIs for the services sector in other major economies will be monitored on Wednesday. The minutes of the last meeting of the U.S. Federal Reserve will be announced on Wednesday evening. German industrial order data will be monitored on Thursday, and German export volumes on Friday.

According to Admiral Markets market sentiment data, 68% of investors have long positions in the EUR/USD pair (down 5 percentage points from last week). In the main Asian pair USD/JPY, 26% of investors have long positions (up 7 percentage points). In the GBP/USD pair, 35% of participants expect a rise (down 3 percentage points). Such market data is interpreted as contraindicative, so USD/JPY and GBP/USD are expected to rise and EUR/USD to depreciate. The analysis of positioning data needs to be combined with fundamental projections and technical analysis.

Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com

 

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