Forex Trading Forecast: U.S. Dollar to Strengthen Against Euro

by Trader Rich

Greenback expected to strengthen against euro again in currency trading
This past week has seen the euro regain its superiority over the U.S. dollar in forex trading. However, the current situation may not last. The forex trading forecast calls for the U.S. dollar to strengthen again on the currency market as the global recession stubbornly refuses to go away.

The U.S. dollar is widely seen as a stable and liquid safe haven currency. Central banks, although there are occasional noises about the euro as the new reserve currency, still overwhelmingly prefer the greenback. Indeed, reserve switches to the euro, which had started before the financial crisis, have slowed significantly.

Concerns over the euro zone economy continue to mount, especially after the decision by the European Central Bank to widen the rate corridor. This is likely to affect the banking sector — and one thing the banking sector does not need is more pressure.

And, while concerns remain over how the euro zone economy will do, the U.S. is indiscriminately throwing money around for the purpose of economic stimulus. While this may not work in the long run, it does give traders a feeling that the U.S. economy will recover — and likely before the rest of the world does.

When one looks at the probabilities, it does appear that the global recession will continue for a while, and that means that safe haven currencies, like the U.S. dollar and the Japanese yen, will be preferred. The euro may have recovered some this week in forex trading, but the long-term forecast says that another dollar rally is on the way.