After a weak 2020, the greenback has showed real signs of strength this year. The eur/usd started the year at $1.2300 and is now trading at $1.1740. The pair fell to current levels, ($1.1700) in the first quarter, only to bounce back to $1.2300 in June. Factors that have contributed to the volatility and uncertainty:
The Fed and Monetary Policy: The Fed cut rates to a record low and introduced their Quantitative Easing program which weighed on the USD through 2020. And then came the talk of interest rate hikes being introduced earlier than 2024 and tapering, ie. slowing down the bond purchasing, before the end of the year. Inflation targets of 2% were on track.
With hopes of COVID lockdowns being behind us, it was risk-on which is not USD positive. And then the Delta variant changed the positive global outlook and again, when investors get nervous as economic uncertainty takes over, they turn to the safe haven status of the USD.
So how does a trader use all this data in determining potential longer- term trades? As always, I believe that technical analysis provides us with the tools we need to make our trading decisions. No emotion and guesswork, rather cold facts as reflected on the charts. The numbers don’t lie, regardless of the reasons.