Tips for traders, 30 March 2021
Expectations of fresh liquidity in markets are on the rise again. Right after the $1.9 trillion bill passed by President Biden, which is expected to be distributed in the near future, another bill on infrastructure is expected to be passed. Mr Biden has just announced the infrastructure bill, which is going to be used for building schools, hospitals and other public facilities. This could be good for the dollar because it might strengthen the American economy and generate jobs, so there is considerable optimism in American markets.
On the other hand, inflation remains in focus: high government spending might trigger more increases in the rate of inflation. Some participants in markets even expect a rate hike by the Fed. The result in general is appreciation by the greenback over the last few weeks.
As seen over the last few days, the dollar index has completed a very subtle rejection. If this rejection is followed by another bearish candlestick within the green box, a small range might be created. This might show continuation if the upper boundary is breached; otherwise, the index could reverse or retrace depending on the circumstances later.
For now, the potential for continuation in the range is quite high with the assumption that the market is waiting for something to happen at the beginning of the month. This period usually showers traders with many announcements.