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Is the US dollar bull run over?

USD - United States Dollar

Since the onset of coronavirus lockdowns, the currency markets have been in lock step with equity markets. When equities rose, the euro, the pound and Canadian and Australian dollars climbed. And when equity markets fell, the US dollar climbed in value against those currencies.

However, the value of the US dollar has dropped steadily for the last 3 months against nearly all major currencies. And with several levels of turmoil on the US front, the dollar may be at the end of its bull run.

The combination of several factors impacted the dollar. EUR/USD reached a high after the European Union passed a €750-billion stimulus package. The China-US trade relations reached another valley of tension, and it impacted the value of the GBP/USD. And at home, the US continued to grapple with COVID-19. The country’s inability to contain the virus, combined with the Federal government’s disagreement with additional financial support for those impacted by the virus, cast a shadow over America’s economic growth for the next several months.

Key Movers

The pound's rally will be watched with caution though as Brexit talks stalled last week over the chances of securing a free trade agreement, with Brussels deeming it "unlikely", but London holding out hope one could be reached in September. This mixed with other euro positive news has prevented GBP/EUR moving in a similar direction to GBP/USD, the pair has fallen from last week’s high of 1.1102 down to 1.0950 where we currently trade at the time of writing.

The Australian dollar maintained its upward momentum through trade on Monday, pushing back above 0.71 amid broad based US dollar weakness. Having opened below 0.7090 the AUD climbed steadily throughout the day marching back toward 0.7150 and intraday highs at 0.7151. Despite a sustained demand for risk assets the AUD fell short of last week’s 15-month high at 0.7183, meeting and bouncing off resistance as concerns over growing COVID-19 infections in Victoria weighed down the upturn. Victoria reported 532 new coronavirus infections on Monday, the country’s worst daily increase since the Pandemic began. Lockdown and social distancing measures in force through the last two weeks appear to have done little to force a downturn in daily infections, raising concerns level 4 restrictions will need to be enforced in the coming days. With fears mounting the outbreak could spread into NSW there is a risk the broader national recovery may be derailed.

Expected Ranges

USD/CAD: 1.333 - 1.340 ▼

USD/AUD: 1.393 - 1.404 ▼

GBP/USD: 1.284 - 1.294 ▼

EUR/USD: 1.170 - 1.177 ▼