14.07.202012:59 Forex Analysis & Reviews: Dollar takes geopolitics as allies

The greenback is getting more expensive in relation to most of its main competitors amid growing tension between the USA and China, as well as an increase in the number of COVID-19 cases in the world.

The United States has officially declared illegal claims of China on offshore resources of most of the South China Sea. Moreover, Washington accused Beijing of trying to gain control of these resources through threats. China, in turn, called such statements "completely unjustified."

Market participants also continue to monitor the situation of the coronavirus. Johns Hopkins University has already reported 13 million cases of COVID-19 infection in the world. Meanwhile, in the United States, quarantine restrictions are gradually increasing. Authorities in California announced the closure of public institutions and a number of other measures.

Such reports contribute to a decrease in risk appetite and support the demand for the greenback, which is traditionally considered a more reliable asset.

Currently, the USD index , showing the ratio of the US dollar to a basket of major currencies, is trading up 0.1% at 96.5 points.

The recovery of the dollar triggered a correction in the EUR / USD pair , forcing the euro to return part of the points scored during yesterday's growth.

Last night, the pair reached monthly highs in the region of 1.1374 but then rolled back to 1.1340.

The euro strengthened on Monday on expectations of an improvement in the sentiment of ECB officials. In addition, the German Ministry of Economics announced that the worst was left behind. At the same time, the French authorities believe that the current volume of consumption in the country is only 5% below the normal level.

"We still expect that the EUR / USD pair will consolidate for some time in the range of 1.1200-1.1380. Yesterday, it completed trading on a fairly confident note (+ 0.37%). The bullish momentum increased somewhat, and the chances of closing the pair above 1.1380 increased. If this happens in the coming days, we will expect the absorption of the June maximum of 1.1422. However, at the moment, the likelihood of such a scenario is low, but it will increase if the bears fail to break through strong support at 1.1270 in the next one or two days, "UOB strategists said.

On Tuesday, the pound against the US dollar slipped to a weekly low after new data showed that British GDP rose in May, but the rebound was weaker than expected.

According to the National Statistical Office (ONS), in May the UK economy accelerated 1.8% after falling a record 20.4% in April. Experts expected an increase of 5.5%.

According to analysts at OCBC Bank, the pound is also under pressure from concerns that London and Brussels will not be able to reach a consensus on Brexit.

"The GBP / USD pair has weakened the bullish momentum after another unsuccessful attempt to break through the 1.2650 area. It seems that the UK is preparing for the possibility that there may not be a deal with the EU, and this casts doubt on the recent optimism of the market regarding the pound, "they said.