Week review 30.09 – 04.10 – Forex
The euro/do
llar line of falling euro/dollar trend was observed last week. Prices fell from the level of 2017 to 1.0905 to a new low. They then recovered by 40 points by the end of the session.
Charts for the day and week clearly show the downtrend in the long term. The closest goal should be the initial level of the price gap from April 2016, which still cannot be closed. The underlying indicators also support the level of decline in the value of the pair, so the trend is likely to continue in the near future.
The main impetus for the fall in prices was at the beginning of the week, when there were indices of economic activity in Germany and the EU zone. The manufacturing and service sector indices were recorded with the worst expectations, which determined the dynamics of the pair on other days. The performance of the German economy may fall as a result of the technical recession in the quarter, and the performance of the manufacturing sector looks particularly vulnerable.
It is still possible to impose American duties on the European auto industry. In this case, Germany's losses in GDP will be considerable. The ECB reacted with a cut in interest rates due to weak economic data and announced that it was starting to buy assets. At this stage, the quantitative easing programme will begin in November and will continue until inflation in the region is close to the ECB's baseline. Meanwhile, unless there is an unexpected reversal on Monday, September will be another month of nine in a year when the value of the euro/dollar pair was falling. Since the beginning of the year, the quotations for the pair have fallen by 450 points and continue to continue the trend for further decline.
With the US dollar there was a strengthening last week against almost all assets. The representative of China said that he continued to maintain close contact with the United States and was ready to begin negotiations in October. Donald Trump says a trade deal could be struck earlier than expected. The trade conflict between the United States and China reduces its influence on financial markets. Both countries continue to struggle in politics and trade to gain an advantage in the signing of the agreement, but investors believe that negotiations will go on for a long time. Moreover, even negative forecasts about the trade war speak about the benefits of strengthening the US dollar, making the currency of America a reliable asset along with gold.When EUR / USD falls to a new low of 1.0905, we can expect a reversal and a correctional rise in prices that 1.1000. In the future, the weakening of the Single Currency may lead to a downtrend, but the momentum of the downtrend will remain weak, as in the first three quarters of this year.
Forecast – is expected to recover the euro/dollar pair to resistance levels of 1.0960, 1.0980, 1.1000, 1.1025 and 1.1050.
Pound/dollar
Last week showed that the pound/dollar lost more than 150 points and fell to the support level of 1.2300.Optimistic sentiment towards a successful completion of Brexit reached its peak a few weeks ago, and is now falling. Since Boris Johnson took over as prime minister, the chances of a successful deal between the UK and the EU have increased, but a more anticipated scenario is a new deal to be delayed until early February 2020. In addition to johnson's opposition to European Union leaders, he lost a domestic political battle with parliament and the opposition. If the agreement is not signed within three weeks, the British Prime Minister will have to ask Brussels for a new reprieve. This does not match Johnson's promises before the election, and it is not yet clear how he will behave on October 19 in case of disagreement. Friday. The main obstacle to the parties is the protection scheme, which aims to ensure northern Ireland's temporary stay within the EU Customs Union and the European single market after Brexit.
The UK does not agree to support these terms in the current draft contract. Earlier, the inability to reach an agreement on a key issue was the result of Theresa May's resignation as Prime Minister. Boris Johnson, who replaced her, has made no progress on tackling the problem. He proposed conditions for the draft contract, which had been rejected a week earlier by the European Union. This could also lead to further uncertainties, which are already putting enormous pressure on economic performance. In the quarter, the LEVEL of GDP of the UK fell mainly due to Brexit. The increase in investment in the business sector has slowed and for a long time was at a critical low. According to the latest inflation data, it is clear that in August there was a decline in price growth, it happened because of reduced consumer confidence. New changes in the dates of the country's exit from the European Union will exacerbate the current problems and may lead to active sales of the British currency. become the linchpin of the uptrend in the short term. The mood on the British currency has become worse, and demand for the US dollar is growing. The forecast for the growth of the U.S. economy in the quarter has changed, and the GDP of the British Kingdom may fall again. Pressure on the currency pair may increase before the Brexit deadline.
In our forecast, the pound/dollar is expected to decline further to support levels of 1.2290, 1.2265, 1.2230, 1.2200 and 1.2170.
