The USD saw some gains during this week as sentiment worsened, but the rally was only mild, and it looks like traders are immediately selling it.
The US Congress has finally approved the new fiscal stimulus, although the amount of 900 billion USD seems fairly low. US President Donald Trump has already said he wants more money for US families, so there could still be some complications.
The Federal Reserve (Fed) seems to be aware of this, pumping an astonishing 120 billion USD into the financial system last week.
During the height of its monetary policy response to the Great Financial Crisis of 2008, the Fed was printing 80 billion USD in new money per month. It just printed 120 billion USD in a single week.
The dollar index has been falling since March and dropped to levels last seen in April 2018. The next support could be in the 89 region, where 2018 lows are seen. If that support is surpassed, the long-term bearish status would be confirmed, and we might see another large leg lower, targeting the 80 zone.
The last time the USD was that weak was in 2014, just ahead of the European debt crisis, which brought the EURUSD pair from 1.40 to 1.05.
Basically, the fundamental reasoning is simple – as long as the Fed continues printing billions and billions of US dollars, the greenback will continue to slowly decline. That should be bullish for equities, as investors are hedging by buying other financial assets. Metals should also perform well in this environment. However, they have been underperforming notably recently.
Provided by Axiory