The dollar gained some ground against the Ringgit this Friday, trading at 4,2370, but is still within the sideways lateralization that began last Friday. The GDP news for the US brought a much lower number than expected by the market (6.5% real against 8.5% forecast). The fact that GDP came in well below expectations raises questions about the efficiency of the monetary policies adopted by the Fed so far, which has been trying to accelerate the economy at the cost of worrying inflation. The question now is: is the market getting addicted to liquidity? And what if the monthly 120 billion dollars being injected in the market begins to look too little, will the Fed need to increase the financial stimulus? And if the Fed needs to increase stimulus, how far can it safely go without jeopardizing the purchasing power of the American consumer by inflation? At what point will inflation be considered a real threat? These and other questions will only be answered in the long term. From a technical point of view, if the USDMYR breaks below the 4.2200 level, it could drop to 4.1750 in a few days.
The dollar has been on a strong downward trend since the Fed emergency cut the interest rate in March 2020. This Thursday the dollar fell again against the Chinese Yuan after the announcement of a GDP that came much lower than expected and is now traded at 6,4650. Initial Jobless Claims data also came in worse than expected, showing that the US economy is finding it difficult to fully recover, despite all the monetary stimulus. The market is now concerned if the efficiency of the Fed’s monetary policies to combat the effects of the pandemic will last much longer or it will have to increase the stimulus in the near future. From a technical point of view, if the USDCNH breaks down below the 6.4520 level, it could target the lowest level in the last 12 months at 6.3532.
