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Long-term review

The fundamental background for the euro / dollar pair changes with a kaleidoscopic rapidity. The greenback and the single currency are alternately under pressure from various factors, and as a result, the pair is actually marking time, balancing between 13 and 14 figures.Today's decision of the European Commission regarding Italy was expectedly ignored by the market. In the second half of yesterday, the yield of Italian government bonds began to grow unexpectedly quickly, putting pressure on the stock market. This fact worried traders more than today's Brussels verdict. A miracle did not happen. Members of the European Commission rejected the draft Italian budget again and recommended starting a disciplinary procedure against Rome. Here, it is necessary to remind again that this procedure will take a lot of time. For example, within the next two weeks, EU members should express their opinion on the verdict of the European Commission, and only after that, Brussels will finally decide whether to apply financial sanctions to Rome or not.

Exchange Rates 22.11.2018 analysis

In other words, until it comes to a real fine, about 1.7 billion euros, it can take about one and a half to two months (according to other estimates, up to five months). Such a time gap eliminates the negative effect of this fundamental factor. The Italian question, although it will exert background pressure on the euro, will not become the locomotive of the southern trend (unless the budget issue turns into a political crisis and re-election).Moreover, today, there are rumors on the market that Rome will still review the budget deficit not because of the threats of Brussels, but because of the growth in profitability of Italian government bonds. Earlier, representatives of the Italian government through the press (albeit anonymously) stated that Rome was ready to revise the budget if the situation in the financial markets went out of control. It is difficult to say whether Italians scared yesterday's volatility but if they really go at least to the minimum concessions in the issue of the budget deficit, then the Italian question can be considered exhausted.Thus, today's events had little effect on the dynamics of the euro. The EUR / USD pair still clings to the 14th figure, although now we can only talk about a corrective pullback. The bulls are not able to break the trend and provoke a full-scale offensive. Even very weak American statistics did not provide them with adequate support. Although the published data on the volume of orders for durable goods greatly disappointed the market.

Exchange Rates 22.11.2018 analysis

Taking into account transport equipment, the indicator updated the annual minimum, reaching -4.4%, the last time the indicator was at this level in July 2017. In addition, the previous figure was revised downwards (from 0.7% to -0.1%), increasing the negative effect of the release. The weakening of investment intentions is an alarming signal for both traders and members of the Fed, especially in the aspect of the prospects for raising interest rates next year. By itself, the fact of slowing down this indicator is not able to reduce the determination of the members of the regulator, however, if such a dynamic affects the country's GDP growth in the fourth quarter, then the Fed can soften its rhetoric regarding its future intentions.According to some experts, the growth of the country's economy will slow down significantly next year (primarily due to a decrease in the stimulating effect of tax reform and the trade war with China), but even the fourth quarter of this year may show a weak result. Thus, according to estimates of currency strategists of investment banks, GDP growth will slow to 2.5% (compared with 3.5% in the third quarter), but in 2019, downward dynamics will be recorded throughout all four quarters, from 2.2% and 2% at the beginning of the year to 1.7% and 1.5% at the end.The background pressure on the US dollar is also exerted by the situation in the US housing market. Sales in the primary and secondary markets show negative dynamics (in particular, the implementation of the "primary", at the minimum since December 2016). According to analysts, this situation is due to two reasons, this is a weak growth in wages and the tightening of monetary policy conditions. Today's release confirmed negative dynamics. Sales of secondary housing in annual comparison remain in a negative area (-5.5%). This is the maximum decline in the last four years.

Exchange Rates 22.11.2018 analysis

Thus, the euro-dollar pair is trading against the background of numerous checks and balances. The negative fundamental background of the euro is overlapped by negative fundamental factors on the dollar. Bulls of the pair still need to exceed the mark of 1.1470 (the upper line of the Bollinger Bands on the daily chart) to confirm the northern spurt, while the bears need to push the price below the mark of 1.1340 (the Tenkan-sen line on D1). In this case, the Ichimoku Kinko Hyo indicator will form the bearish signal "Parade of lines", which will open the way for bears to a further decline, up to the middle of the 12th figure. Until the traders overcome the above levels, the price will continue to be traded.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Performed by Irina Manzenko,
Analytical expert
InstaForex Group © 2007-2019
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