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Dollar: The last rally before the collapse

UNITED STATES (OBSERVATORY) –┬áThe American currency for a long time accumulated strength and finally began to grow. Why now we can see the strongest dollar rally and why can it be the last?

The situation on the US debt market continues to develop not in favor of the US: yields are growing, while the position of speculators, aimed at lowering the value of securities, has reached a near record.

The yields of the 10-year Treasury have tested an important 3% mark for the first time since January 2014.

Such a picture should in theory put pressure on the dollar, but in recent days we see the reverse dynamics – the US currency is strengthening. The dollar index to the basket of six major currencies reached at the moment of highs since January of this year.

Let’s also note that the speed of strengthening the dollar the day before was impressive. This is already the fifth day of growth, and it looks like the dollar is ready to go for a breakthrough of the established range and start a powerful trend.

Do not pay attention to the short-term factors that affect the dynamics of currencies, it is much more important what trend will be formed. Considering the fact that the dollar has actually stood in a narrow range for three and a half months, the way out of it is likely to turn into a powerful movement. By the way, the growth the day before became the strongest since the election of the president in the United States.

In general, while everything turned out for the US currency is not the best way, however this is a market, and the situation may change, even if it does not look quite logical.

Economic commentator Grigory Beglaryan expressed the opinion that in case of a breakdown of the EUR / USD pair of support at around 1.2060, quotations will go to parity. That is, we are on the verge of a powerful trend, but perhaps the last growing trend for the dollar. You can say the final splash.

Many experts repeatedly drew attention to the dynamics of interbank dollar rates LIBOR and the stress indicator LIBOR-OIS. Sooner or later the movement was to begin, and then – the matter of technology.

For example, one must understand that the net speculative position on the dollar is at a minimum for three years, that is, a huge number of market participants are playing against the US currency.

As soon as a powerful movement against this whole crowd begins, speculators will begin to liquidate their positions, which will provoke the dollar rally.