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Forex Analysis & Reviews: Tension in the markets continues to grow (We expect a local recovery of AUD/USD and GBP/USD pairs)
time 18.06.2019 12:02 PM
time Relevance up to, 20.06.2019 09:14 AM

The coming week is expected to whip up financial markets earnestly and some positive is not expected. The focus of the market is still the trade conflict between the US and China, which seems to have reached its apogee and it is unclear how this will end. The second most important factor remains the theme of a possible reduction in the interest rates of the Fed against the background of signals of slowing down the growth of the American economy and reducing inflationary pressure.

The investors' next hopes that Americans would be able to reach an agreement with the Chinese at the G20 summit were somehow quietly blown away after the statement by the US Secretary of Commerce that there would be no negotiations on the trade issue at the meeting. Although some hopes were present, but they are weak. The main reason for the fall of these hopes is the personality of the American president, who, as they say, talks a lot about the success of the negotiation process. Yet at the same time, he does everything so that it does not exist.

Of course, anxiety grows in world markets on this wave as the trade conflict has a strong negative impact on the growth rate of the world economy and as we see, it may cause the Fed to decide to begin the process of lowering interest rates. It should also take into account the decision of Trump to go for a second presidential term and for him, the positive dynamics in the local stock market can only be accelerated under current conditions by lowering the cost by borrowing, is crucial. That is why again, after a pause, he resumed his criticism of the Fed and calls to start lowering interest rates.

Against the background of this state of affairs, commodity group currencies turn out to be under pressure, with the exception of the Russian ruble, which is growing by leaps and bounds due to strong demand for OFZs from foreign investors seeking profitability. The current situation has a strong negative impact on the Australian and New Zealand dollars, for which the trade conflict is the strongest negative.

The fall of these currencies is only intensifying in the wake of the futility of waiting for a settlement of the US-China trade conflict in the near foreseeable future. The minutes of the last meeting of the RBA was published today, which clearly showed that the regulator is considering the need to lower interest rates. We believe that the same decision should be expected from the RBNZ, which will be the basis for continued sales of the New Zealand currency.

In general, we believe that until the outcome of the Fed meeting this Wednesday. The tension in the markets will remain high, as investors will wait for the Fed's signal as to whether it will start lowering interest rates or not.

Forecast of the day:

The AUD/USD pair is under pressure in the wake of the expectation of lowering RBA interest rates. In the short term, it may recover to 0.6865. If this level resists, we should expect a reversal of the pair and the resumption of its fall to 0.6775 after overcoming the local minimum of January 2016 at 0.6825.

The GBP/USD pair remains under pressure in the wake of the Brexit factor and the government crisis in Britain. It can recover to 1.2570 but only if it overcomes the 1.3545 mark. We consider it possible to resume sales from this level with a target of 1.2520.

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Pati Gani,
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