Currency traders were relatively bullish in trading the US dollar at London’s trading session on Thursday.
The US dollar index that is used to track the U.S dollar against major global currency peers, was up 0.11% to trade at 92.933 earlier on Thursday.
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Why currency traders are going bullish on the dollar now
In spite of the world’s largest economy having a surge in COVID-19 caseloads, many currency traders believe that the U.S dollar index is showing an oversold signal, meaning that any time the value of the safe-haven currency drops below the 92.250 support level, traders increase their long positions.
Also, it should be noted that the United States in recent weeks, has been printing impressive economic data; this crucial macro tells forex traders that the worst of the COVID-19 onslaught is definitely over.
However, traders are waiting in the long term for the U.S election scheduled to hold in November for a clearer view on the safe currency horizon.
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That said, if President Trump wins this crucial election, it is believed, a stronger dollar will come to play. This is coming on the basis that the recent dollar weakness is really a vote of confidence on the US, particularly on the success of President Trump as he had been able to keep the U.S index value above 97.5 relatively, until the onset of COVID-19 pandemic.
Quick fact: The U.S. Dollar Index tracks the American dollar against other major currencies such as the Japanese Yen, British Pound Sterling, Swedish Krona, the Euro, and more. Individuals hoping to meet foreign exchange payment obligations, via dollar transactions to European countries, and Japan, would need fewer dollars in meeting such obligations.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in an explanatory note to Nairametrics, gave vital insights on the EUR/USD pair.
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“A decisive shift in the narrative in the Euro is unfolding, and the price action might not entirely be caught up to the new storyline just yet.
“The EURUSD is still grinding up the channel, but the narrative is less bullish than after the significant bull target of 1.2000 was soundly rejected.
“I guess that EURUSD grinds lower into the ECB meeting as the market reduces significant length into what is becoming an obvious event risk. The attraction of a dovish Fed on September 16 might not be strong enough to offset the ECB’s downside risks on September 10.
“As far as the US Fed is concerned, I do not think they were anywhere near as dovish as the market read. September easing looks possible but not likely, suggesting the Fed’s sense of urgency feels lower than it did a few weeks ago as both housing and manufacturing are booming.”
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However, in the short term, currency traders remain in a holding pattern ahead of Friday’s Non-Farm Payroll (NFP).