EUR/USD. The shutdown completed – but the dollar is no better

Late Friday night, the House of Representatives of the U.S. Congress unanimously supported the adoption of the provisional budget, and within hours, the US president signed a bill to stop the shutdown. However, they didn't put an end to this issue - this is a temporary "truce" that will last until February 15. During this time, congressmen and the White House must find a compromise on the allocation of additional funds for the construction of the wall on the border with Mexico. To date, this issue has remained in limbo.

The US currency actually ignored these events: the dollar index shows minimal growth, remaining within 95 points. Similarly, the euro/dollar pair behaves, which, although it has not conquered the 14th figure, but with enviable persistence, has been besieging this level for more than a week. Dollar bulls are still unable to reverse the situation on the pair due to the remaining problems.

According to American political analysts, it will be extremely difficult for the parties to find a common denominator in the migration issue, as Trump offers an unequal exchange: he promises to soften his position in the legislative field, while in return he requires $5 billion for the construction of the notorious wall. Therefore, with a certain probability we can say that the shutdown may have a relapse, especially in February, Republicans and Democrats will start another political battle – this time about the limit of public debt of the country.

The single currency is also under the burden of its problems – the data published last week from ZEW and IFO eloquently demonstrated the slowdown of key economic indicators in Europe, including Germany. ECB head Mario Draghi also did not present any surprises, keeping the "dovish" position on the prospects of monetary policy. After the January meeting of the regulator, the pair did not collapse just because traders expected softer rhetoric from the Draghi. However, he kept a certain balance, optimistic about the prospects for inflation in the eurozone. Therefore, instead of the expected fall, the EUR/USD pair showed an unexpected growth, however, the 14th figure was again too tough for bulls.

All this suggests that the tone of trading on the pair is set by the dollar, which, in turn, focuses on the political climate in the US, the position of the Federal Reserve and the US-China trade negotiations. All these factors, unfortunately, are now opposed to the US currency. The shutdown is only suspended for three weeks, while Republicans and Democrats are not ready to make concessions to each other. Do not forget that next November presidential elections will be held in the United States, so all the events taking place in Washington should be considered in this aspect as well.

The record for the duration of the shutdown strongly hit on the electoral positions of Trump - and the Democrats simply could not fail to draw the appropriate conclusions. Therefore, with a high degree of probability we can say that political conflicts will continue to shake the United States. By the way, at the end of last week, the former political adviser to the American president Roger Stone was arrested: he is accused, in particular, of putting pressure on witnesses, obstructing justice and giving false testimony (total of 7 counts). Since this is the sixth arrested adviser to Trump (though with the prefix "ex"), the American press started talking about the fact that the results of the investigation of US Special Prosecutor Robert Mueller can "hurt" the positions of the head of state.

As for the prospects of monetary policy, there is also no reason for optimism. First, many representatives of the Fed recently almost in unison stated that the regulator can "be patient" this year. It is expected that at the January Fed meeting Jerome Powell will confirm these "dovish" intentions. In addition, according to the American press, the US central bank plans to accelerate the process of reducing its balance sheet. This factor also has a background pressure of the greenback, considering all other circumstances.

The US-China conflict has also stopped fueling dollar growth, despite conflicting rumors about the failure of the negotiation process. So, representatives of Washington last week said that the parties are" too far " from progress. Earlier in the media, information emerged that the negotiations "stalled": the stumbling block was the issue of protecting the intellectual property of American companies. But against all odds, trade talks will resume again this week – this time in Washington. This news reduced the demand for defensive tools, including the US dollar.

Thus, the US currency is still under some pressure, which may increase following the results of the January Fed meeting. The events of the weekend did not change the general fundamental alignment of the pair, forcing traders to maintain a cautious position. The single currency, in turn, also has no arguments for growth, especially given tomorrow's Brexit vote. Thus, the EUR/USD pair is likely to fluctuate in the flat, waiting for powerful news drivers.

Analysis are provided by InstaForex

Intraday level for USD/JPY, Jan 31, 2019

In Asia, Japan will release the Housing Starts y/y, and Prelim Industria lProduction m/m and the US will also publish some economic data such as Natural Gas Storage, Chicago PMI, Unemployment Claims, Unemployment Claims, Personal Income m/m, Personal Spending m/m, Employment CostIndex q/q, Core PCE Price Index m/m, and Challenger Job Cuts y/y. So there is a probability the USD/JPY pair will move with a low to a medium volatility during this day.

TODAY'S TECHNICAL LEVEL:

Resistance. 3: 109.54.

Resistance. 2: 109.32.

Resistance. 1: 109.11.

Support. 1: 108.85.

Support. 2: 108.64.

Support. 3: 108.42.

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

NZD/USD Approaching Support, Prepare For Bounce

NZD/USD is approaching its support at 0.6860 (61.8% Fibonacci extension, 23.6% Fibonacci retracement, horizontal pullback support) where it could potentially bounce to its resistance at 0.6936 (horizontal swing high resistance).
Stochastic (55, 5, 3) is nearing its support at 1.65% where a corresponding bounce could occur.
NZD/USD is approaching its support where we expect to see a bounce.
Buy above 0.6860. Stop loss at 0.6796. Take profit at 0.6936.

Analysis are provided by InstaForex

GBP/USD. Results of the day. New grounds for the fall of the pound will be received?

The amplitude of the last 5 days (high-low): 90p - 62p - 72p - 74p - 128p.
Average amplitude for the last 5 days: 85p (88p).

The British pound sterling, having completed the second support level of 1.2942, rebounded from it and began a weak upward correction. Yesterday's decline was very noticeable, so a correction is logical. Tomorrow, more precisely, Fed Chairman Jerome Powell will hold a speech by tonight, which could potentially have an impact on all currency pairs, including the US dollar. Given the "dovish" rhetoric of representatives of the Federal Reserve in recent months, now we can hardly expect its change into the direction of a "hawk". At the same time, it should be recognized that even Powell's "dovish" rhetoric did not have a lasting positive effect on the British pound. There are so many problems and uncertainties in the UK, and all are connected with Brexit, that the pound will be prone to fall, even if the Fed starts lowering the key rate. The likelihood that a "soft" scenario for Brexit will be implemented has again decreased in recent days. In addition, the results of the meeting of the Bank of England will be announced tomorrow. No change in monetary policy is expected. But a new portion of the fears and warnings from the head of the Bank of England Mark Carney is expected. And the stronger his fears are, the more chances that we will see another decrease in the British pound. From a technical point of view, the current correction is negligible and can be completed at any time. Thus, we recommend to be ready for a sharp resumption of the downtrend. So far, the full potential of the pound's fall is limited to the level of 1.2500.

Trading recommendations:
The GBP/USD currency pair has started a low correction. Thus, it is not recommended to open shorts until the MACD indicator turns back down. After the reversal, the targets will be 1.2883 and 1.2841.

Long positions will become relevant not earlier than the consolidation of the price above the critical Kijun-sen line. In this case, the target will be the level of 1.3175, but this will require serious fundamental grounds.

In addition to the technical picture, fundamental data and the timing of their release should also be taken into account.

Explanation of illustration:
Ichimoku Indicator:
Tenkan-sen-red line.
Kijun-sen – blue line.
Senkou span a – light brown dotted line.
Senkou span B – light purple dotted line.
Chikou span – green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD:
Red line and histogram with white bars in the indicator window.

Analysis are provided by InstaForex

Forecast for USD/JPY on February 11, 2019

The yen continues to build up strength before breaking out on the resistance of the Krusenstern line daily scale. The price is held by the balance line on the chart of the smaller period-H4. The Marlin line seeks to go out into the growth zone. On the daily chart, the line of this oscillator unfolds in the continuation of growth. The price exit over 110.04 - resistance of the Krusenstern line, will make it possible for the price to attack the Krusenstern line of the higher chart and rise to 110.36 - the resistance of the trend line of the price channel on the daily. Exit above this line opens the way to the resistance of the next line at 111.24.

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

EUR/AUD Approaching Support, Prepare For Bounce

EUR/AUD is approaching its support at 1.5888 (100% Fibonacci extension, 50% Fibonacci retracement, horizontal pullback support) where it could potentially bounce to its resistance at 1.5972 (50% Fibonacci retracement, horizontal swing high resistance).

Stochastic (89, 5, 3) is nearing its support at 2.4% where a corresponding bounce could occur.

EUR/AUD is approaching its support where we expect to see a bounce.

Buy above 1.5888. Stop loss at 1.5845. Take profit at 1.5972.

Analysis are provided by InstaForex

Technical analysis: Intraday Level For EUR/USD, Feb 15, 2019

When the European market opens, some Economic Data will

When the European market opens, some economic data will be released such as Trade Balance and Italian Trade Balance. The US will also publish the economic data such as TIC Long-Term Purchases, Prelim UoM Inflation Expectations, Prelim UoM Consumer Sentiment, Industrial Production m/m, Capacity Utilization Rate, Import Prices m/m, and Empire State Manufacturing Index, so amid the reports, the EUR/USD pair will move with a low to a medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Breakout BUY Level: 1.1346.
Strong Resistance: 1.1340.
Original Resistance: 1.1329.
Inner Sell Area: 1.1318.
Target Inner Area: 1.1292.
Inner Buy Area: 1.1266.
Original Support: 1.1255.
Strong Support: 1.1244.
Breakout SELL Level: 1.1238.

Analysis are provided by InstaForex

EUR/USD: the next resistance level is 1.1370

The dollar index goes down, while the euro rises in price for almost all currency pairs: the first trading day of the week continued the trend from Friday, when the EUR/USD pair rebounded from the annual low and restored all lost positions. Today, the downward price dynamics have continued.

The main driving force behind the EUR/USD's price growth is the news background on the prospects for trade relations between the US and China. Let me remind you that this week the parties will resume the negotiation process, which may culminate in the conclusion of a "truce" between the two countries. To be more precise, the parties can only come to a framework agreement, where only the main positions of the future document will be indicated. This "letter of intent" will form the basis of a future deal, the details of which will be discussed between the leaders of the People's Republic of China and the United States during a personal meeting.

Over the weekend, Donald Trump said that "great progress" had already been made on the issue of concluding a trade deal, and he is optimistic about the prospects for the upcoming talks. A similar position was voiced by the leader of China Xi Jinping. According to him, the parties managed to achieve significant success in resolving trade disputes. In unison with their leaders, the negotiations and high-ranking officials, in particular, the US Treasury Secretary, the US Trade Representative, and the Vice-Premier of the State Council of the People's Republic of China, Liu He, appreciated the negotiations.

Such optimism was reflected in market sentiment. The US dollar, which is usually in demand against the backdrop of increasing global problems, began to actively slow down. The dollar index moved away from local highs in the area of 96.9, not finding the strength to test the 97th figure. And although the decline in this indicator is fairly smooth, the causal link is obvious: the closer Beijing and Washington are to the deal, the weaker the position of dollar bulls.

However, the EUR/USD did not increase only because of this factor. The Brexit theme also concerns traders of the pair, given the approaching deadline. It is worth noting that the news flow regarding the prospects of the "divorce process" does not always affect the pair (unlike the pound, where this topic is in indisputable priority). The single currency reacts to Brexit news mainly when the parties closely approach the red lines of the negotiation process. This week Theresa May will hold talks with the EU leadership (in particular, with Juncker) and with the leaders of the EU countries.

The central issue is the regime of the Irish border, namely, the mechanism of the backstop, which is the main irritating factor for the majority of British deputies. During the weekend there were rumors that the representatives of France offered Brussels to make some certain concessions on this issue, so that the negotiations would move from a dead point. Although journalists later denied this information, traders are still optimistic about the future, in the hope of a long-awaited compromise on the backstop issue. The European currency follows the pound, although at the moment there are no significant reasons for the price increase: there are a lot of rumors around the upcoming talks, which sometimes contradict each other.

In such circumstances, it is impossible to make any clear predictions, so this fundamental factor can not be called reliable. By the way, a UK government spokesman said today that following a European voyage by the prime minister, the Cabinet could change the terms of the deal or even delay Brexit. This suggests that London doubts that Theresa May will be able to convince her colleagues that the terms of the deal need to be revised. But traders are still inclined to believe optimistic rumors, so both the pound and the euro show a positive trend.

The Bundesbank report published today also provided indirect support to the EUR/USD pair. Recently, news from Germany does not please investors: economists of the German government revised the forecast of GDP growth downwards, and macroeconomic indicators for December and January were released in the "red zone".

The report of the German central bank also acknowledged the slowdown of the main parameters of the national economy. But at the same time, members of the regulators stressed that they did not observe any signs that a slowdown in GDP growth would turn into a decline in the economy. Such an unexpected conclusion was supported by the European currency, especially against the background of Monday's nearly empty economic calendar. During the European session, the Bundesbank report became the only more or less significant source of news, while the American sites are closed today on the occasion of the celebration of Presidents Day.

Thus, the euro-dollar pair has the potential for further correctional growth: today, the price tested the first resistance level of 1.1340 (the Tenkan-sen line on the daily chart). If the pair bulls overcome this barrier, they will approach a stronger level - 1.1370 (the middle line of the Bollinger Bands on the same timeframe).

Analysis are provided by InstaForex

EUR/USD. What will the minutes of the Fed reveal?

The minutes of the January Federal Reserve meeting will be published tonight - the so-called "minutes". The results of the regulator's first meeting this year were disappointing for the US dollar. The Fed finally confirmed its policy of slowing down the tightening of monetary policy. In the text of the accompanying statement, as well as during the speech of the Fed chairman, the word "patience" was often mentioned, therefore the market does not expect any "hawkish" notes from the minutes.

A certain intrigue of today's release remains. The market will first of all evaluate - how monolithic the decision to slow down the rate of rate increase looks. If the number of "doves" will significantly exceed the "hawkish" wing, then the dollar will again be under additional pressure. Yesterday's comments by Loretta Mester (which, by the way, has no voting rights this year) have weakened the greenback throughout the market. This suggests that dollar bulls are still sensitive to the soft statements of members of the Federal Reserve, even though the other central banks of the leading countries of the world have also taken a "defense position". The monetary policy outlook of the Fed is gradually coming to the forefront against the background of the expected breakthrough in the US-China trade negotiations. If Beijing and Washington find a common denominator this week and make a deal before March 1 (or announce it by extending the deadline for additional approvals), the dollar will lose a significant trump card for its growth.

Under these circumstances, the Fed may either increase pressure on the greenback, or become a "saving straw", especially against the background of softening the rhetoric of the ECB and other central banks. It is worth noting that the Fed's report, which will be published today, might provide unexpected support for the US currency. The fact is that the market expects too soft rhetoric from the members of the regulator. If the minutes demonstrates some disagreement within the Committee, the market reaction may disappoint EUR/USD bulls. In my opinion, the dollar can collapse throughout the market only if the regulator hints at a possible pause until the end of this year. And although this option is unlikely, it cannot be ruled out, given the recent speeches of Fed members.

This is not just about Loretta Mester, who was mentioned above. Today, her position was repeated by one of the most influential members of the regulator - the head of the Federal Reserve Bank of New York, John Williams. Moreover, he stated that he did not see the need to raise the rates - only if circumstances of a "shocking" nature emerge. In his opinion, the rate has already reached its neutral level - at least the lower limit of this range.

This rhetoric is very consonant with the position of Fed Chairman Jerome Powell, who at the end of last year designated the neutral level range of 2.5% -3.5%, while declaring that the monetary tightening cycle was gradually coming to an end. This year, the US regulator can more clearly articulate its idea: the rate has reached a neutral level, then the Fed will act according to circumstances, responding to incoming data. Although these findings have long been floating in the air, their "fixation" will provoke strong volatility in the market, and this volatility will not be in favor of the dollar. By the way, Williams in today's speech added that the Fed will continue to reduce the volume of the bond portfolio on the balance sheet - according to his estimates, the reduction process may end when the balance drops to one trillion dollars.

In general, the dynamics of today's trading confirms the fears of investors: the euro/dollar pair froze in a flat, especially against the background of a half-empty economic calendar. Here it is worth recalling that, in addition to the publication of the Fed minutes, the results of the meeting between the British prime minister and the head of the European Commission will be announced. If, despite all the circumstances, they will be able to move the situation from a dead point, the single currency will receive a strong enough support, which will undoubtedly affect the dynamics of the EUR/USD pair.

Thus, the events of today's evening can either lead the pair to the borders of the 14th figure (with an attempt to test), or return to the area of the 12th figure). Fundamental factors are too unpredictable, so it is almost impossible to talk about the probability of the implementation of a particular scenario.

From a technical point of view, it is important for EUR/USD bulls to stay above 1,1305 (Tenkan-sen line) in order for it to not lose the potential for growth and approach the next resistance level of 1,1390 (the lower limit of the Kumo cloud on the daily chart). Bears of the pair, in turn, need to consolidate below 1.1270 – in this case, the Ichimoku indicator will form a bearish "Parade of lines" signal, and the price itself will be between the middle and lower lines of the Bollinger Bands indicator on the same timeframe.

Analysis are provided by InstaForex

Trump gave up the slack

It seems that Donald Trump will not be able to achieve the desired in negotiations with the Chinese on trade. As usual, last weekend, he reported on his Twitter account that the negotiations were "productive" and he decided to extend the truce after March 1.

In contrast to the American president, the Chinese side does not so vividly reflect the course of the negotiation process, I can even say it generally shows an enviable restraint of the "heavenly". The absence of any complete information from this side clearly indicates that there is no "productivity" in the negotiation process. Most likely, Trump has to back down and announce the continuation of the truce for this very reason, and he has more than enough reason for this.

Last year, the active actions of the American president led to a "failure" in trade between the United States and China, and not only with the latter. The desire to solve all the problems by stifling pressure on competitors in world trade led to a slowdown in the growth of the economy of the PRC, a large Europe and the USA, which led to a general slowdown in the growth of the global economy.

Trump, has not managed to solve the trade problem with China as a whole, and the desire to go to the second presidential term will force him to be more accommodating. Therefore, he will have to soften his position on this sensitive issue.

Taking this into account, one can expect that optimism with a new force will overwhelm the world markets, which will lead to the continuation of local growth in stock markets, while the US dollar will remain under noticeable pressure. The overall demand for risky assets, as well as the expectation that the Fed will not raise interest rates in the current year and even go to stop reducing the balance, will adversely affect the rate of the US currency. In many ways, the positive theme has already been played on the foreign exchange market. That is why in this situation, we also do not expect a noticeable strong growth in the currencies of competitors, since a truce does not solve all problems, but only pushes them away in time and it's hard to say what all this will result in.

Forecast of the day:

The EURUSD pair is in a very narrow range of 1.1220-1.1370 in anticipation of resolving the situation around Brexit. It is likely that it will continue until tomorrow's speeches by Theresa May and Jerome Powell. It seems that there is not enough local weakening of the dollar exchange rate for the further growth of the pair. Stronger drivers are needed, which May and Powell can provide.

The GBPUSD pair is trading in the range of 1.1260-1.1300, also in anticipation of Theresa May and Jerome Powell speeches.We believe that this range may continue until Tuesday.

Analysis are provided by InstaForex

Gold got rid of the ballast

Rebounding from support near two-week lows, gold quickly recovered and rushed to attack. The external background for the precious metal remains favorable, and the short-term correction is due to a partial profit-taking after a long rally and the statement of US trade representative Robert Lighthizer that there are still many issues in relations with China and the deal has not yet been concluded. Let me remind you that the conflict between the two largest economies in the world faithfully served the US dollar in 2018.

Despite the fact that gold is considered a safe haven asset and a hedge against inflation, it is growing amid the recovery of US stock indices and the slowdown in consumer prices in the United States. In fact, one of the main drivers of the S&P 500 rally is the reduction in the cost of borrowing in real terms. The negative correlation between the stock index and the yield of US Treasury bonds reached its highest levels since 2012, due to the Federal Reserve's desire to pause the process of normalizing monetary policy. 7 years ago, the central bank announced another round of quantitative easing.

The dynamics of the correlation of the S&P 500 and the yield of US bonds

However, the fall in real rates of the US debt market creates favorable conditions not only for the shares, but also for many assets of the commodity market, including gold, oil and copper. Precious metal does not bring interest income to its holders, so it cannot compete with bonds if their yield increases. Currently, it is falling, and investors are actively diversifying their portfolios in favor of XAU/USD.

The current consolidation of gold is due not only to profit taking by speculators after 9% of the winter rally, but also to the reluctance of the derivatives market to increase the chances of reducing the Federal funds rate in 2019. CME derivatives believe in the end of the normalization cycle, however, in order for them to adopt the idea of easing the Fed's monetary policy, further deterioration in macroeconomic statistics across the United States is necessary. Theoretically, it is very likely, because the traditionally bad weather for this time in the United States, the fading effect of the fiscal stimulus, the negative impact of the dollar's revaluation on exports and GDP, as well as the weakening of external demand due to trade wars draw moderately pessimistic prospects for US indicators. At least in the short-term investment horizon.

The dollar can recover in the medium-term. The euphoria about the de-escalation of the trade conflict has driven the S&P 500 too high. The rally does not have a solid foundation in the form of improved macroeconomic statistics. According to 65% of more than 90 experts from Reuters, US stock indexes are in danger of falling in the second half of this year. This will have a positive effect on safe-haven assets, including the US dollar.

Technically, if bulls on gold manage to keep quotes above $1,321 per ounce, the risks of continuing the rally in the direction of the target by 361.8% on the AB=CD pattern will increase.

Gold daily chart

Analysis are provided by InstaForex