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August 4, 2019

First, a review of last week’s events:

  • USD. Two events took place last week, more precisely on Thursday 01 and Friday 02 August, that could shake the markets. But they did not shake them.
    On Thursday, for the first time since 2008, the US Federal Reserve lowered its key rate from 2.50% to 2.25%. The event was quite expected. Markets usually react to such a move, by dropping quotes. However, in this case, instead of falling, the dollar rose, although not by much (the increase against EUR was a little more than 100 points) and not for long (as of Friday, the euro won back 85 points).
    The main reason for the growth of the American currency was the comment by Jerome Powell, in which the Fed chief said that this rate cut by 25 basis points would not necessarily mark the beginning of a consistent easing policy. Indirectly, his words were confirmed by the fact that the rate was reduced by only 0.25%, and not by 0.50%, and two FOMC members voted against any reduction.
    Thus, the Federal Reserve was the least “soft” against the background of the central banks of other countries pursuing a policy of easing, which led to a short-term growth of the dollar. 
    The second planned event was the release of statistics on the US labor market. As predicted, NFP fell slightly (from 193K to 164K), to which the market reacted rather sluggishly, especially since the main newsmaker at the end of the week was - unexpected for many! - Donald Trump. (Well, who can do without him!)
    For a start, the US president called Powell's behavior a betrayal, and then put an end to the fragile truce in the US-China trade war, announcing the introduction of a 10% duty on Chinese goods worth $300 billion on September 1. Such a move by Trump sharply increased the chances further easing of the Fed’s monetary policy, in spite of Powell's statements. Thus, the probability of the next rate reduction in September increased from 64% to 92%, in December - from 42% to 75%.
    The threat of a new round of hostilities in the war with China brought down the American stock market, and investors once again turned their attention to a safe haven currency such as the Japanese yen, which strengthened against the dollar by 275 points at the end of the week;

As for the forecast for the coming week, summarizing the opinions of a number of analysts, as well as forecasts made on the basis of a variety of methods of technical and graphical analysis, we can say the following:

  • EUR/USD. The pair in its fall is now close to Pivot Point 2015-2016. And, although the rebound up on Friday, August 02, colored the indicators on H4 in a neutral gray color, 90% of the oscillators and trend indicators on D1 still insist on the continuation of the downward trend. 65% of experts agree that the American currency still has potential for growth, and it will continue to put pressure on the euro. The immediate goal for the pair is 1.0950, the next one is 100 points lower.
    At the moment, only 35% of analysts turned out to side with the bulls, however, in anticipation of easing the monetary policy of the Fed, when moving to the medium-term forecast, their number rises to 55%.
    If we turn to the indications of graphical analysis, it draws first the movement of the pair in the range of 1.1070-1.1165 on H4, and then its growth to the horizon of 1.1225. The next resistance is at 1.1285;
  • GBP/USD. Since April 2018, the British currency weakened against the US dollar by 2,300 points. The last days did not become an exception: the pound lost 430 points since July 25. The reason is the same, Brexit. The coming to power of Boris Johnson and his promise to part with the EU on October 31 on a “tough” scenario make investors nervous and the pound fall.
    75% of experts expect to see the pair in the 1.2000 zone soon. And if it manages to break through this support, it will be able to “fly” down another 100-150 points. This development is supported by 95% of the trend indicators and 90% of the oscillators on D1. 
    The remaining 10% of oscillators give signals about the pair being oversold. A respite is also expected by graphical analysis on D1 and by 25% of analysts, according to whom the pair can go to a side movement in the channel 1.2100-1.2250 for a while. In the case of any positive news regarding Brexit, growth of the pair to the level of 1.2375 is not excluded.
    As for the medium-term forecast, according to 70% of analysts, the Bank of England will eventually be forced to acknowledge the serious risks of a “tough” exit from the EU and sharply tighten monetary policy. Thus, it will be the only large central bank to raise interest rates, which should lead to an increase in quotations of the British currency and their rise above the level of 1.2800. However, this can happen only when at least the basic conditions for the British exit from the EC become known;
  • USD/JPY. The escalation of trade confrontation between the United States and China and the reduction in the interest rate on the US dollar increase the attractiveness of the yen as a safe haven currency. Therefore, 60% of analysts expect the pair to continue to decline in an effort to reach the January 2019 low around 105.00. 100% of the trend indicators and 85% of the oscillators on D1 also look to the south. However, 15% of oscillators are already giving signals about the pair being oversold. Resistance levels are 107.80, 109.00 and 110.00;

NordFX EU


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