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EUR / USD drops below 1.1200

EUR / USD drops below 1.1200

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Erik Holm - Head of media

The euro lost some of the points scored yesterday, and EUR / USD fell back to daily lows around 1.1190 / 80.

On Tuesday, the pair is trading lower due to the growth of the US dollar and risk aversion on the markets. Investors continue to take a wait-and-see stance due to the lack of news from the US-China “trade front” and the situation in Hong Kong, where mass protests continue for several weeks.

Today, German published the final CPI, and the data completely coincided with the preliminary assessment. Next, we are waiting for the ZEW Institute indexes in Germany and the Eurozone. During the North American session, the United States will publish inflation data and a weekly report by the American Institute of API oil reserves.

The reluctance of the euro to decline in an environment of risk aversion may be due to the already begun “repatriation” of assets, as well as the fact that funding currency. Another source of uncertainty was the political situation in Italy. The growth of the single European currency will remain limited as the ECB prepares to introduce new policy easing measures, potentially including a cut in interest rates, the resumption of QE, as well as the introduction of a multi-level system of deposit rates in September. The main factor of the pessimistic mood of the ECB and the weakening euro is the worsening forecast for the Eurozone economy and the lack of inflation in the region.

Support takes place at 1.1161 (minimum of August 12), 1.1101 (minimum of July 25), and 1.1026 (minimum of August 1 and 2019). Resistance is noted at 1.1232 (55-day MA), 1.1282 (high on July 9), and 1.1292 (200-day SMA).

 

EUR/USD approaches 1.1200

EUR/USD approaches 1.1200

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Jim Anderson - Public Relations

The pair EUR / USD today is consolidating in a narrow range just below 1.1200. After rising to weekly highs near 1.1250, the pair previously correctively fell below 1.1200 but remains above the support level of 1.1180. Against the background of some lull in the trade war between the USA and China, the political focus of Italy turned, and in particular the split in the coalition government, which increased the likelihood of early elections. If the elections take place, the victory may well go to the party of the Northern League Matteo Salvini.

Germany today releases its June trade balance figures, reflecting a narrowing surplus of up to € 16.8 billion. The current account surplus unadjusted to the time of year for the same period amounted to € 20.6 billion. Further, the focus of players will be US producer prices for July.

The growth of the single European currency will remain limited as the ECB prepares to introduce new policy easing measures, potentially including a cut in interest rates, the resumption of QE, as well as the introduction of a multi-level system of deposit rates in September. Earlier, the Central Bank has already changed the rhetoric: now it believes that rates will remain at "current level or lower", at least until mid-2020. The main factors of the pessimistic mood of the ECB and the weakening euro are the worsening forecast for the Eurozone economy and the lack of inflation in the region.

Resistance is noted at 1.1249 (monthly maximum on August 6), 1.1282 (maximum on July 9), and 1.1295 (200-day SMA). Support takes place on 1.1154 (10-day SMA), 1.1101 (minimum July 25), and 1.1026 (minimum August 1 and 2019).

The dollar is drawn into the war

The dollar is drawn into the war

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Erik Holm - Head of media

The stabilization of the Chinese yuan and the worst decline in industrial production in Germany in almost a decade in June somewhat dampened the fervor of the bulls for EUR / USD. There are rumors on Forex that China is unlikely to seriously devalue its own currency. Theoretically, this will create a competitive advantage and make life easier for exporters, but in practice, it's more complicated. When most bills are paid in US dollars, USD / CNY rally leads to lower trading volumes.

According to IMF research, a 1% increase in the USD index slows world trade by 0.6%. At the same time, strengthening the greenback puts a spoke in the wheels of foreign investors. Most likely, PBOC's reluctance to hinder the USD / CNY rally above the psychologically important mark of 7, as experts expected, is a common weapon demonstration.

In the real world, there are plenty of deviations from theoretical constructions. Contrary to the large-scale trade war, China's exports grew by 3.3% in July. The main reason is the desire of American companies to get more goods from Chinese partners before activating a 10% tariff on $300 billion in imports from September 1. On the other hand, warehouses in the United States are overloaded, so we should not expect that net exports will contribute to a rebound in China's GDP from the region of the 28-year-old bottom.

Along with the slowdown of the global economy under the influence of a trade conflict, the Fed may be nervous about pulling it into a currency war. The central banks of New Zealand, India, and Taiwan have weakened monetary policy, and this is happening around the world! According to most of the 60 Reuters experts, if the federal funds rate drops by 75bp before the end of 2019, the US dollar will weaken significantly. The consensus forecast for EUR / USD after 12 months is 1.15, the lowest rating in the last 2 years. In the short term, a breakthrough in one of the boundaries of the consolidation range of $1.1175-1.1245 will help the euro to decide on the direction of further movement.

Yen, yuan and Australian Dollar. All you need to know about currencies today

Yen, yuan and Australian Dollar. All you need to know about currencies today

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Jim Anderson - Public Relations

The US dollar declines slightly against the yen on Wednesday after rising the day before, the Australian dollar is significantly cheaper against the US currency on the assumption that the Central Bank of Australia will follow the example of the New Zealand central bank and reduce the rate at the next meeting. Meanwhile, the Chinese yuan again declined against the dollar as the National Bank Of China (Chinese Central Bank) set the reference exchange rate at 6.9996 yuan per $1.

The Chinese national currency earlier this week reached a psychological mark of 7 yuan per $1, provoking criticism from US President Donald Trump against the Chinese Central Bank and worrying about the global market. The yuan is trading at 7.0439 yuan per $1, compared with 7.0264 per $1 on Tuesday.

The Australian dollar fell against the US dollar at 8:00 London time by 0,64% to $0.6718 against $0.6761 on the previous business day. At a certain point in trading, the Australian national currency fell to $0.6677, reaching a minimum, last recorded in 2009. The pressure on the Australian dollar was exerted by the decision of the Central Bank of New Zealand to reduce the key rate by 50 basis points – more significantly than analysts had expected. The regulator explained his decision by an attempt to prevent the consequences of a slowdown in the global economy.

The dollar against the yen at 8:11 London time fell by 0.2% to 106.26 yen compared to 106.47 yen at the close of the previous session. The euro against the yen also fell by 0.2% to 119.00 yen against 119.24 yen the day before. The value of the euro against the dollar grew to $1.1201 compared with $1.1199 following the session on Tuesday. The New Zealand dollar fell 1.84% against the US dollar to $0.6529 at the end of the previous trading day.

 

Fed and trade war: double strike

Fed and trade war: double strike

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Erik Holm - Head of media

Judging by the dynamics of the futures, on Wednesday the US stock market will open up with a sharp growth the day after the largest daily decline for the year due to the escalation of the trade conflict between the US and China. At 1 p.m. London time, the DOW blue-chip index futures rose by 250 points or 1%, futures on the S&P 500 rose by 27 points or 1%, and futures on the high-tech Nasdaq 100 traded higher by 87 points or 1.2%.

Wall Street recorded the worst trading session in 2019 on Monday. The S&P 500 index fell by 3% amid a tougher trade was between the US and China. The S&P 500 index declined for six consecutive trading sessions until Tuesday and is 6% below its record level recorded on July 26.

Sales on stock markets began last week when Fed Chairman Jerome Powell made statements in favor of a tighter monetary policy compared to forecasts of market players. These statements were made at a press conference on July 31 after the end of the Fed meeting. On Monday, the negative reaction of the markets became more apparent when the Chinese authorities allowed the yuan to drop below the psychologically important level of 7 yuan per dollar when the yuan fell to its lowest level since the global financial crisis of 2008. Some investors see the change in the Chinese currency rate as an immediate response to Trump's latest threat to impose new duties on Chinese goods

This led Washington to call China the currency manipulator for the first time since 1994, which sharply increased tensions in the ongoing trade conflict between the two largest economies in the world.