Dollar Weakens as Risk-Appetite Increases

  • 25
    November, 2020

    Dollar Weakens as Risk-Appetite Increases

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    On Wednesday morning, the dollar nursed losses against a basket of major currencies as progress in the COVID-19 vaccines are on a positive mood and investors started to look for riskier currencies.

    The optimism from the investors is due to the possibility of the vaccine becoming available soon worldwide and economic recovery in many countries will be in grasp.

    The U.S Dollar Index edged down 0.17% to 92.067 by 11:55 PM ET (3:55 AM GMT).

    With AstaZeneca reporting positive results for their candidates last Monday, other companies such as Pfizer and Moderna Inc also reported their positive results over the past two weeks, thus increasing the mood of having a vaccine soon.

    The U.S. Dollars declines are also likely to continue further because U.S. President-elect Joe Biden’s next secretary relieved two big uncertainties for investors.

    “Rising yields may lend the dollar some support, but the overall direction is it will head lower,” Said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.

    “The trend has shifted to favor risk assets. Yellen will team up with the Fed and support the economy. U.S. rates will remain low for a long time.”

    Research suggesting that a COVID-19 vaccine availability before the end of the year has supported U.S. stocks and edged to record new highs and reduce the appeal of holding the dollar as a safe-haven currency.

    Risk-appetite also increased as incumbent Donald Trump cooperates with U.S. President-elec Joe Biden with the transition although reluctant and still continuing with his legal charges.

    Technical Outlook

    In the daily charts of GBP/USD, the pair edged higher early Wednesday morning in Asia session.

    As what we can see in the chart, the pair is still being support by the resistance level at 1.31776. Due to the weakening of the dollar and the optimism in the COVID-19 vaccine and Brexit deals, we may expect the sterling to test the resistance level at 1.34766 in the coming days. Possible breakout from this resistance level will record a new high from the sterling for the year.

    However, if the price will fall from, we may expect the pair the re-test the support level at 1.31776 before falling further.

    If the price will break down from the support level at 1.31776. we may expect the pair to fall further and test the support level at 1.26885.

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