Last week, the US dollar ended in the red on a wave of a number of reasons that, in our opinion, can further contribute to its weakening.
The first, as before, is the actual beginning of the incentive program, which is very similar in terms of the parameters of the first QE, that began back in 2009, but at the same time is ashamed by the Fed and personally its leader. The second reason is, of course, the expectation of continued interest rate cuts. Also, although the Federal Reserve in this case denies the actual beginning of the cycle of cutting rates, he will have to do it most likely, in the wake of the risk of the American economy collapsing and in a recession. And one more, the third reason for the weakness of the dollar is the decline. However, so far, only partly the tension around Brexit and the negotiation process on trade between the US and China.
With regard to Brexit, it can be noted that Britain, trying to sit on two chairs, received a delay of three months once again, which, in our opinion, caused some weakening demand for protective assets such as gold, the Japanese yen, the Swiss franc and government bonds economically strong countries. Moreover, the absence of both negative and positive news by and large led to an increase in the yield of American treasuries. Thus, the benchmark yield of 10-year-old treasuries rose from 1.713% to 1.754% last week. This increase in electronic trading continues today on Monday.
The reason for the increase in positive moods was also the generally good reporting of American companies, which seemed to convince investors that trade disputes between Washington and Beijing did not yet have a noticeable effect on company earnings. But, despite some positive background, we should still be careful, since any negative news or noticeably failed economic statistics in the United States can unfold markets one hundred and eighty degrees.
Last week, China's latest GDP data was published, which turned out to be worse than expected and showed a decline to around 6.0%, but after a little excitement, the markets calmed down, since the Central Bank of China considers this value to be acceptable in the field and as the lower limit of the likely range of GDP.
This week, market players will turn their attention to the publication of data on orders for durable goods in the States, in addition to the final decision of the ECB on monetary policy. The Chinese Central Bank left, as expected, the key interest rate at the same level, 4.2%, which did not have a noticeable effect on trading in Asia.
Forecast of the day:
EUR/USD is trading below the level of 1.1170. It can continue limited growth if it overcomes it. In this case, we should expect its increase to the level of 1.1230.
AUD/USD is trading above the level of 0.6860. It forms a "double bottom" reversal pattern. We believe that in order to maintain current sentiment in the markets, the pair may grow to 0.6895. But also on the wave of local overbought, it can adjust to 0.6830, if it does not hold above the level of 0.6860. Lastly, we consider it possible to buy the pair on the correction as a priority.
