Greenback kicked off the week on a firm footing and there are few signs of an impending U-turn in its corrective rally. A number of positive developments for USD may occur this week - ADP labor market report on Wednesday and NFP on Friday. Employment indicators released during March, in particular weekly unemployment claims, increased the odds towards a positive surprise in Payrolls data. Conceptually, the main trading idea for EURUSD this week will be continued advance of the US economy relative to the EU economy in the post-pandemic recovery race, which will be reflected in increased capital flows into US assets compared the EU’s. This, in turn, should determine direction of FX flows.

CFTC data as of March 23 showed that speculative short dollar bet continued to dwindle and reached 5.6% of open interest. In mid-January, it was at 19.6%. As the position inches closer to a neutral one, the space for short squeeze decreases, so the strengthening of the dollar in the uptrend is expected to be less active. The main resistance is expected at the November high of 94 points in DXY:

In addition to economic data, Biden's success in pushing his $3 tn infrastructure plan should be closely monitored. It will be more difficult to “sell” the project than the $1.9 tn fiscal stimulus, but fortunately, only support from party colleagues is needed. The story with corporate taxes and taxes on the rich will be one of the key factors of equity markets pressure. With the recovery of the economy, further development of this story is inevitable, since a new, huge borrowing plan cannot be fulfilled without guarantees that the government will increase its income.

Near-term dynamics of European indices and the Euro will depend on epi curves of covid, which correlate well with the level of severity of restrictions and indicators of consumer mobility. The downturn will tell us that the recent tightening of lockdowns has worked. EURUSD may be sensitive to headlines related to vaccination rates, as the European currency has recently been actively declining on news of the suspension of Astra Zeneca vaccine and the supply disruptions. The latest CFTC data showed that speculators didn’t cut their long positions in the euro, so there is room for a cut. A level 1.17, which constitutes the lower bound of the current trend channel, remains vulnerable on EURUSD in early April:

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