Site map
العربية Български 中文 Čeština English Français Deutsch हिन्दी Bahasa Indonesia Italiano Bahasa Malay اردو Polski Português Română Русский Srpski Slovenský Español ไทย Nederlands Українська Vietnamese বাংলা Ўзбекча O'zbekcha Қазақша

InstaForex Client Area

  • Personal settings
  • Access to all InstaForex services
  • Detailed statistics and reports on trades
  • Full range of financial transactions
  • System of managing several accounts
  • Maximum data protection

InstaForex Partner Area

  • Full information on clients and commissions
  • Graphic statistics on accounts and clicks
  • Webmaster instruments
  • Ready-made web solutions and wide range of banners
  • High data protection level
  • Company's news, RSS feeds, and forex informers
Register account
Affiliate Program
cabinet icon

Another Lamborghini from InstaForex!Maybe it will be you who will take the keys!

Just make a deposit of at least $1,000 to your account!

Get the best trading conditions and attractive bonus offers! We have already given 6 legendary sports cars! But it does not stop there! The next Lamborghini Huracan of the latest generation may be yours!

InstaForex – invest in your victories!

Instant account opening

Get a letter of instructions
toolbar icon

Trading Platform

For mobile devices

For trading via browser

Long-term review

The foreign exchange market is experiencing a period of increased volatility, showing strong price impulses. The dollar/yen pair has passed more than 400 points in the last day, the pound/dollar – almost 150, the "kiwi" and "loonie" – about 100. In all cases, the dollar for some time significantly strengthened its position, but then just as rapidly fell throughout the market. This difference in mood is due to the changeable fundamental background, which is clearly confusing traders.

Exchange Rates 04.01.2019 analysis

The fact is that the dollar last year (especially in the second half of it) actively enjoyed the status of a defensive instrument – even the negative events in the United States increased the demand for the greenback. The US currency had a powerful trump card in the form of the hawkish policy of the Fed, especially against the background of the uncertainty of the rest of the central banks of the leading countries of the world. Now the situation has changed somewhat: the problems in the US are still growing like a snowball, but the position of the Federal Reserve has softened significantly. The results of the December Fed meeting will "chase" the dollar for a long time, especially if the key US economic indicators show a decline in the first half of the year. Some representatives of the American regulator, who had recently voiced the "hawkish" position, added fuel to the fire. Now their rhetoric has changed significantly.

For example, the head of the Federal Reserve Bank of Dallas, Robert Kaplan, said today that the regulator should take a wait-and-see position for at least two quarters of 2019. The essence of his position boils down to the fact that the US-Chinese trade conflict has harmed not only the world economy and not only China – but also the United States. In view of this fact, he expects a slowdown in US GDP growth and inflation this year. The Fed, in his opinion, should react accordingly, so as not to aggravate the already precarious situation. Here it is worth recalling that in the autumn of last year Kaplan stated that 4 rounds of increase would follow to the neutral level of the rate (that is, the neutral level would be at the level of 3.25%). As we see, now his opinion has changed dramatically: now he stands for a six-month pause.

If the rest of the Fed members move to the "dovish" camp in the same way, the dollar finally loses its foothold. In this context, it is important to listen to Jerome Powell, who will speak at the economic conference tomorrow with his predecessors, Janet Yellen and Ben Bernanke. If the incumbent Fed chief also softens his rhetoric (or at least repeats the main points of the December meeting), the dollar index will continue its downward trend.

However, tomorrow is full of other events. First of all, we are talking about the Nonfarm, which can give an additional impetus to dollar pairs. According to preliminary estimates of experts, the number of people employed in the non-agricultural sector in December should increase by 180 thousand, while the unemployment rate will remain at the previous level of 3.7%. This is a good forecast, so if real numbers meet expectations, then the dollar will avoid another wave of sales.

Exchange Rates 04.01.2019 analysis

But as shown today, experts can make a big mistake in their estimates: the American manufacturing index ISM, contrary to all forecasts, fell to the mark of 54.1 - this is the weakest result since September 2016. This unexpected result discouraged dollar bulls, after which the EUR/USD pair was able to return to the 14th figure for a short time. If tomorrow's Nonfarm will present a similar "surprise", then the market reaction will be more extensive.

Another important release on Friday is the dynamics of wages. The indicator of the average hourly wage in the USA has been fluctuating in the range of 0.1% to 0.3% (m/m) for a long time, although in annual terms the indicator has grown slightly (up to 3.1%). For EUR/USD bears, it is important that the indicator does not cross the zero line on a monthly basis and does not "dive" under the three percent mark in annual terms. This indicator is closely monitored by the Fed, so its negative dynamics will affect the position of the US currency.

Also, we should not forget that tomorrow the release of data on the growth of European inflation is expected. The consensus forecast suggests that the consumer price index will drop again - to 1.8%. Core inflation should remain at the same level - 1%. Any deviations from the forecast scenario will cause strong volatility - depending on the direction in which the pendulum will swing. The recovery of inflation indicators will inspire the bulls of the EUR/USD pair, as the chances of a rise in the ECB rate this year will increase. If the price pressure continues to weaken, the euro will be too vulnerable - even against the background of an uncertain greenback.

Exchange Rates 04.01.2019 analysis

Thus, tomorrow may substantially change the overall fundamental background for the EUR/USD pair. Friday will either restore the dollar's position, or send it to the next knockdown. It is still important for the bulls of the pair to overcome the upper line of the Bollinger Bands indicator on the daily chart (which corresponds to the 1.1450 mark) to confirm the strength of the upward movement. But bears need to lower the price below 1.1290 (the lower line of the Bollinger Bands on D1) – in this case, the Ichimoku Kinko Hyo indicator will form a bearish "Parade of lines" signal, opening the way for a decline to the bottom of the 12th figure.

*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
Benefit from analysts’ recommendations right now
Top up trading account
Get a bonus from InstaForex

InstaForex analytical reviews will make you fully aware of market trends! Being an InstaForex client, you are provided with a large number of free services for efficient trading.