Currency Traders Retreat from the U.S dollar over COVID-19 ConcernsThe American dollar plunged at London’s trading session on Monday afternoon, pulling back its earlier gains. Currency traders reversed from the safe-haven asset amid optimism over U.S. economic data scheduled to be out later today.
“When it comes to dollar/yen, recovery expectations are supporting the dollar, but worries about the virus are capping the upside,” Masafumi Yamamoto, chief currency strategist at Mizuho Securities, told Reuters.
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This gives the U.S dollar index ta short-term bearish outlook as the U.S dollar index presently trades below a strong support level of 97. On the flip side, a move above last week’s high of 97.50 will invalidate this prediction.
The financial market remains torn between robust economic data in America, as Citi’s surprise indexes printing off the charts versus a rise in US COVID-19 caseloads.
The American dollar index had been trading around the 95.80 -97.85 in the past few weeks as the resurgence ofCOVID-19 infections in America increased concerns among currency traders.
A steady surge in COVID-19 infections in major economies has discouraged many currency traders from actively taking part in the currency spot market thereby preferring to stay on the sidelines, but most currency market players and global investors remain optimistic about the major economies will continue to recover.
In addition, the pressure on the U.S dollar increased as American leading investment bank Goldman Sachs meanwhile revised its economic projections for the world’s biggest economy stating a downward rate of 4.6% contraction in 2020 versus a previous estimate of -4.2%.
“The healthy rebound in consumer services spending seen since mid-April now appears likely to stall in July and August as authorities impose further restrictions to contain the virus spread,” Goldman analysts said in a note.