The events of the last week had a noticeable negative impact on the exchange rate of the American dollar, which was able to initially receive support against the background of incoming negative data on the US economy, but then the mood of market players has changed dramatically.

So what really happened and what should be expected in the near foreseeable future?

The local appreciation of the dollar until the middle of last week was due to weak business activity indices in both the manufacturing and non-manufacturing sectors of the US economy. This has raised fears that the US economy risks falling into a recession by the end of this year, but the Fed, as represented by its members, has not signaled that it is ready to really start supporting the economy. The mixed opinions of the leaders of federal banks led the markets to believe that the Fed would not take any action in the coming months, that it would take an observer position.

This is why the dollar received support as a currency of refuge amid weakness in other major currencies. However, the situation changed sharply by Tuesday, and on Wednesday, was already on the wave of weak data on the number of new jobs, the dollar "flew" down. And first of all, support was given to protective assets - government bonds of economically developed countries, gold, as well as the Japanese yen and the Swiss franc. By Friday, investors clearly began to panic, selling risky assets, primarily company shares and commodity assets. This behavior could be explained by a certain balance of the situation, in which the amount of negativity came to an equilibrium point, when the Fed would be forced to take saving actions for the economy and financial markets.

On Friday, weak numbers of new jobs allowed the markets to overcome the equilibrium point and already fully hope that this month at its meeting the Fed will be forced again to lower interest rates by another 0.25%, as well as a signal that it will undertake not only REPO operations to support the liquidity of the financial sector in the States, but also something even more significant, paired with the fact that the markets called QE4.

Given this state of affairs, we believe that the market will consolidate in anticipation of a speech by Fed Chairman J. Powell on Tuesday, as well as the publication of the protocol of the September meeting of the regulator, which will be released on Wednesday, and the release of consumer inflation data on Thursday. Before taking any action, investors will expect confirmation of the beginning of a promising further reduction in rates and incentive measures.

Forecast of the day:

EUR/USD lost its incentive to grow on the wave of market expectations for Powell's performance, as well as the publication of the Fed protocol and consumer inflation data this week. We expect that it will be consolidated in the range 109.40-1.1000.

The USD/JPY pair will behave the same as the EUR/USD pair, consolidating in the range 106.70-107.15, but at the same time, there is a risk of its decline to 106.20 if the level 106.70 will be broken down.