empty
 
 
19.07.2019 09:44 AM
EURUSD: the Fed continues to prepare the markets for lower interest rates through the statements of its leaders, but do not expect a strong decline in the US dollar

The data on the American economy as a whole, released in the afternoon on Thursday, were interpreted by the market as positive, however, the speeches of representatives of the Federal Reserve System were brightly negative, which led to a weakening of the US dollar by the end of the day.

After the markets began to study in more detail the statements on the need to lower interest rates, the panic subsided a bit, and the US dollar at the beginning of the Asian session regained a number of positions against the euro and the pound.

As for yesterday's reports, the US labor market remains in good order, even despite the small weekly increase in the number of applications, which continues to remain near historic lows.

According to the US Department of Labor, the number of initial claims for unemployment benefits rose by 8,000 over the week from July 7 to July 13, to 216,000. Economists also predicted that the number of applications would be at 216,000. The moving average for four weeks dropped by 250 and amounted to 281,750.

This image is no longer relevant

Production activity in the area of responsibility of the Federal Reserve Bank of Philadelphia has grown, which is a good signal for the economy. As a result of a good report, optimism about growth over the next six months also increased.

According to the Fed-Philadelphia, the business index in July 2019 rose to 21.8 points against 0.3 points in June, while economists had expected the index to be 3.9 points in July. The index of new orders was 18.9 points, and the supply index was 24.9 points.

The leading Conference Board index, which determines the trends in the US economy, declined in June. A slight fall was observed for the first time since the beginning of this year. The decline was due to weak orders in the manufacturing industry and a sharp drop in construction permits.

According to the Conference Board, the index in June was 111.5 points, while economists had expected it to remain unchanged from the previous month.

As noted above, the harsh tone of Fed statements on the need to lower interest rates undermined the faith of even the most persistent market participants, who until recently believed that the committee would not change the monetary policy conditions by taking a longer pause to assess future economic conditions

This image is no longer relevant

As stated by New York Fed Chairman John Williams, the Fed should act aggressively in the face of unfavorable forecasts and, if adverse situations arise, make changes to monetary policy. Williams is also confident that the current low inflation is an international problem, and the decline in US inflation is due to systemic problems.

New York Fed Chairman also noted that when rates are near the lower limit of the zero range, they should be left low for a longer time.

Approximately, the same conclusions were made after the speech of the President of the Federal Reserve Bank of St. Louis, James Bullard, who said that he did not lose hope of lowering interest rates by a quarter percentage point at the July meeting of the Federal Open Market Operations Committee.

Let me remind you that it was for this decision that he voted at the meeting in June.

As for the current technical picture of the EURUSD pair, a large resistance level in the area of 1.1285, which was formed on July 10, limits the growth potential of risky assets for the time being. Only its confident breakdown will form a stronger upward trend, allowing to count on the return of the trading instrument to the resistance area of 1.1340 and 1.1400. As for the levels of support in the short term, that is, the middle of the side channel of 1.1240, as well as its lower border in the area of 1.1200.

Jakub Novak,
Analytical expert of InstaForex
© 2007-2024
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $8000 more!
    In March we raffle $8000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

Can't speak right now?
Ask your question in the chat.
Widget callback