U.S. dollar struggled to continue rally Monday. Why’s that? 

U.S. dollar weakens while traders await Powell's speech

The U.S. dollar tried to continue rallying on Monday, but it struggled after the longest losing streak in a decade. Recent declines left the greenback vulnerable. The market was also structurally short of dollars.

On Friday, a better payroll report pushed Treasury yields higher into this week’s massive $112 billion debt sale. However, it still was not enough to boost the dollar further. The U.S. currency ended lower for the seventh week in a row.

J.P.Morgan’s analysts stated that their portfolio had been positioned for the last few weeks for a narrowly weaker dollar due to the independent rise in COVID-19 infections in the U.S. That surge has opened up a decent gap in near-term economic performance, especially against Europe. On Monday, the euro climbed up to $1.1791, after already hitting a two-year high of $1.1915 the previous week.

There is still considerable uncertainty about whether U.S. policymakers can agree on a new fiscal support package for the economy. On Sunday, Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi stated that they were open to restarting COVID-19 aid talks.


How was the greenback trading today?


The dollar was slightly firmer against a basket of currencies at 93.339, trading just above a two-year trough. Against the Japanese Yen, the greenback traded at 105.75, rising above the recent low of 104.17. However, it faced stiff resistance at 106.46.

Traders were concerned about the still rising Sino-U.S. tensions. Even though Washington imposed sanctions on senior Hong Kong and Chinese officials, trade talks are still scheduled for August 15.

In case of any breakdown in talks, the dollar and the safe-haven Swiss franc would benefit at the expense of the yen and commodity currencies such as the Australian dollar.

Meanwhile, investors are waiting for U.S. consumer prices data on Wednesday and retail sales on Friday. They expect the later to show a solid bounce in spending. A set of Chinese figures is also due this week. According to forecasts, they will show a continued recovery, along with EU production data.

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