What difficulties will the dollar face in 2019?

Trading 02 jan 2019 Commentaire »

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After an unexpected rally, which led to the dollar falling to an 18-month low at the end of 2018, in the coming year, the currency will face new and old problems.

It is possible to single out an overestimation, a weakening boom in the stock market, a noticeable decline in the repatriation of funds by US companies and a high probability that the Fed will not raise interest rates as many times as it had planned. Given these circumstances, there is every reason to believe that the dollar will complete 2019 by about 5 percent below current levels, although this goes against the current trend when futures point to the dollar near historic highs. There is an opposite opinion: a monthly investor survey of Merrill Lynch showed that the dollar will return the crown. However, there are fewer supporters of this theory. Last year, investors experienced several powerful blows at once, large rates failed in the segment of cryptocurrency, technology, and at the end of the year, the dollar failed.

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Fundamental Analysis of GBPUSD for January 2, 2019

Trading 02 jan 2019 Commentaire »

GBPUSD is currently quite impulsive with the bearish momentum after rejecting off the 1.2750 area with a daily close recently. Ahead of NFP with optimistic expectations and interest rate hike recently, USD is expected to gain further momentum over GBP while UK struggles with the BREXIT issues in the coming weeks.

Recently GBP Housing Equity Withdrawal report was published with decrease to -8.5B from the previous figure of -6.4B which was expected to increase to -6.0B. Despite the positive Manufacturing PMI report published today with increase to 54.2 from the previous figure of 53.6, GBP is struggling to maintain the bullish momentum which does indicate the strength of USD in the process. Moreover, tomorrow EURO M3 Money Supply report is going to be published which is expected to decrease to 3.8% from the previous value of 3.9% and Private Loans is expected to increase to 3.3% from the previous value of 3.2%.

On the other hand, ahead of NFP this week USD managed to gain impulsive momentum over GBP which might lead to further bearish pressure in the coming days. Today US Final Manufacturing PMI report is going to be published which is expected to be unchanged at 53.9 and tomorrow ISM Manufacturing PMI report is going to be published which is expected to decrease to 57.7 from the previous figure of 59.3. On Friday, Average Hourly Earnings report is expected to show increase to 0.3% from the previous value of 0.2%, Non-Farm Employment Change expected to increase to 178k from the previous figure of 155k and Unemployment Rate is expected to be unchanged at 3.7%.

As of the current scenario, USD is expected to dominate GBP further in the coming days as UK continues to struggle with the BREXIT and worse economic reports whereas positive economic results on USD is expected to lead to further gains with greater sustainability of the bearish momentum in the future.

Now let us look at the technical view. The price is currently residing below 1.2700 area with a daily close as well as below the dynamic level of 20 EMA. A daily close below 1.2700 area is expected to lead to further bearish momentum in the pair with target towards 1.2500-50 support area in the coming days. As the price remains below 1.2750 area with a daily close, the bearish bias is expected to continue.

SUPPORT: 1.2500-50, 126.50

RESISTANCE: 1.2700-50, 1.2850

BIAS: BEARISH

MOMENTUM: VOLATILE

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Technical analysis of NZD/USD for January 2, 2019

Trading 02 jan 2019 Commentaire »

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Overview:

Pivot: 0.6882.

The NZD/USD pair broke resistance which had turned into strong support at the level of 0.6705 this week. The level of 0.6705 coincides with a golden ratio (61.8% of Fibonacci), which is expected to act as major support today. The Relative Strength Index (RSI) is considered to be overbought, because it is above 70. The RSI is still signaling that the trend is upward as it is still strong above the moving average (100). Besides, note that the pivot point is seen at the point of 0.6882. This suggests that the pair will probably go up in the coming hours. Accordingly, the market is likely to show signs of a bullish trend. In other words, buy orders are recommended to be placed above 0.6800 with the first target at the level of 0.6882. From this point, the pair is likely to begin an ascending movement to the point of 0.6882 and further to the level of 0.6984. The level of 0.6984 will act as strong resistance. On the other hand, if there is a breakout at the support level of 0.6705, this scenario may become invalidated.

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New Year’s stock and currency markets start in negative

Trading 02 jan 2019 Commentaire »

After 2018 was recognized as the worst for global stock markets in the last 10 years. The new year began with the same fears associated with a slowdown in economic growth as heightened trade tensions and rising interest rates that held markets back for most of the second half of last year.

hNdd5xdLKCS7Qmh0tASk8156x2F-gAR5XeJ_2UTfThe first negative news of the new year was the December business reviews from around the world and the news that the manufacturing sector in China declined for the first time in 19 months. As a result, the Shanghai stock market lost more than 1 percent and the Hong Kong market lost almost 3 percent. At the same time, the Nikkei in Tokyo was marked by growth but on the contrary, further strengthening of the safe yen does not cause questions. Given that markets currently do not expect an increase in interest rates in the current cycle, the Fed has indicated at least two more approaches while the dollar has remained in the red since the end of last year. The dollar against the yen updated the annual minimum of 109 yen. The dollar index DXY also turned out to be lower and the euro rose to the level of 1.15 dollars for the first time since the beginning of November.

The US currency and stock market are under pressure from domestic political problems. Washington can not solve the issue of stopping the work of the Federal Government caused by the confrontation of the White House and Congress. If we add to this the aggressive stance of Washington's trade hawks, who are not ready to give relief to China despite the president's desire to make a deal and calm down financial markets, t the signals about economic growth remain grim.

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Fundamental Analysis of EURJPY for January 2, 2019

Trading 02 jan 2019 Commentaire »

EURJPY has been quite impulsive with the recent bearish momentum which lead the price to reside below 125.00 support area. EURO having certain issues like German Strike and European shares starting with the year 2019 with deep in red did lead the currency to lose significant momentum against JPY recently.

Japan observing 4 days of Bank Holiday recently gained momentum against EURO, whereas JPY is expected to continue the pressure further in the coming days. Though JPY has been struggling with certain economic reports and events earlier, but it managed to gain sustainable momentum over EURO in the process.

On the EURO side, German's largest union called a nationwide strike on Tuesday due to unsuccessful wage talks recently. The strike is expected to continue till Friday until a favorable negotiation is considered by the union. As the strike is being done by the drivers of cash transports in the country, it is expected to affect the gains of EURO in the coming days. Moreover, today Spanish Manufacturing PMI report was published with decrease to 51.1 from the previous figure of 52.6 which was expected to be at 52.4, Italian Manufacturing PMI increased to 49.2 from the previous figure of 48.6 which was expected to decrease to 48.5, French Final Manufacturing PMI was published unchanged as expected at 49.7 and German Final Manufacturing PMI was also published unchanged at 51.5.

As of the current scenario, EURO has been quite mixed with the economic reports today while having high impact event in Germany which lead to further losing of grounds against JPY in the process. Though JPY is still quite silent as of the observation of holiday, but any positive economic results is expected to lead to further gains on the JPY side in the future.

Now let us look at the technical view. The price is currently quite impulsive with the bearish pressure which took the price quite far from the mean average of 20 EMA in the process. As of the current scenario, the price is expected to push higher towards 125.50-126.50 area where the dynamic level of 20 EMA resides and from there if any bullish rejection or bearish momentum observed is expected to lead to continuation of the trend in the coming days. As the price remains below 130.00 area with a daily close, the bearish bias is expected to continue with target towards 123.50 and later towards 120.00

SUPPORT: 120.00-50, 122.00, 123.00-50

RESISTANCE: 125.00, 125.50, 126.00, 127.50

BIAS: BEARISH

MOMENTUM: NON-VOLATILE and IMPULSIVE

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Yen strengthened as an asset to the Pacific Harbor "safe haven"; all focused on China data

Trading 02 jan 2019 Commentaire »

During trading in the Asia-Pacific region , the Japanese currency increased in value due to the reduction in stock markets on the first trading day.

The yen went up in pairing with the dollar as traditionally an asset of a "safe haven". The USD/JPY pair fell by 0.3%, reaching 109.42 yen since most Asian indices were trading in the red zone today.

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The Hang Seng index sank by 3.1%. Fears about the pace of global economic growth , the suspension of the US government and the prospects for reducing the current tightening cycle of the US Federal Reserve System became the drivers of the sale.

Also, disappointing data on the state of the economy of China affected the pressure on the shares of China.

The business index of Caixin / Markit for the last month fell to 49.7 from 50.2 as recorded in November. It fell for the first time in 19 months.

This fact confirmed the trend noted in the official report on business activity, which on Monday reflected a reduction to 49.4 in December.

The USD / CNY pair fell by 0.3 % to 6.8557 after the release of data.

The trade conflict between Washington and Beijing still holds the attention of the market. Reports that Donald Trump noted progress towards a possible resolution of the conflict, giving some reason for optimism but the state edition of China, People's Daily, warned last Wednesday that they did not give up and does not plan to make concessions in matters related with national interests.

The dollar index, which tracks the dynamics of the US dollar exchange rate against a basket of currencies of six countries - the main US trading partners, was trading sideways at 95.703.

According to reports released the day before, Donald Trump is ready to conclude a deal and resume the work of the government.

Partly, the work of the government was suspended 11 days ago, which affected 9 of the 15 federal departments, dozens of agencies and hundreds of thousands of workers, following the reports.

Australia's national currency slipped by 0.4% and reached 0.725 against the dollar, which indicates worsening growth prospects for the economy of the People's Republic of China.

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Exports of yellow metal from the United States increased by 23%

Trading 02 jan 2019 Commentaire »

According to analysts, the United States shipped 418 tons of gold to other countries from January to October last year. The net exports of precious metals amounted to 244 tons, which is 23% higher than the figure for the same period in 2017.

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In October 2018, America exported 37.1 tons of yellow metal and imported 15.8 tons. From January to October of the past year, precious metals weighing 418.4 tons were exported from the United States, which is 13.3 tons more than in the same period of 2017. According to the US Geological Survey (USGS), sixty-three percent of the yellow metal was sent in purified form. The USGS noted that during the reporting period, a hefty 174.4 tons of gold were imported to America. As a result, net exports of precious metals amounted to 244 tons, which is 23% more than last year.

Turkey, in which the demand for gold is traditionally high, does not lag behind America. According to the Central Bank of Turkey, the country's international reserves showed a significant increase by the end of 2018. The gold reserves of the Asian state by the end of November last year reached 15.74 million ounces or 489.56 tons. During this month, Turkey's gold reserves increased by 577 thousand ounces or 17.94 tons. Their cost is estimated at $18,499 million. In the international reserves of Turkey, the share of the yellow metal is 21%.

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Gold will halt

Trading 02 jan 2019 Commentaire »

December was the best month for gold over the past two years. Futures quotes reached 6-month highs due to the collapse of global stock indices, disabling the US government and increasing fears about a slowdown in global economic growth. First of all, this concerns Asia, where China's problems affect all countries in the region. Business activity of the Middle Kingdom fell below a critical 50, which indicates a potential recession. However, the US GDP is unlikely to boast similar success in 2018.

The loss of speed in the US economy, paired with the reluctance of inflation to move away from the target of 2%, makes it possible for the Fed to pause in the process of normalizing monetary policy. If four increases in the federal funds rate allowed the USD index to be marked by the best dynamics since 2015, then the loss of an important trump makes the dollar's prospects bearish. The inverse correlation of the "American" with the precious metal suggests that the XAU/USD rally of 1300 will not end. Fans of ETF products do not tire of increasing stocks of specialized exchange funds as they seriously count on the continuation of the northern gold campaign.

Gold dynamics and ETF stocks

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However, we are talking about medium and long-term prospects. In the short-term investment horizon, the gradual stabilization of stock indices and the successful resolution of the issue of the temporary suspension of the work of the US government increase the risks of a gold correction. Donald Trump called on the Democrats to make a deal, as he understands perfectly well what a simple executive authority for GDP can turn into. According to Standard & Poor's estimates, each week will cost $ 1.2 billion, so the longer the government does not work, the worse it will be for the economy.

It is doubtful that the statistics on the States worsened at one moment. The Financial Times believes that the fiscal stimulus will continue to support GDP in the fourth quarter by approximately 1 percentage point This means that indicators coming out in January-February, will most likely please the eye as before. Against the background of the weakness of the eurozone, this allows us to count on the return of interest in EUR/USD sales, which, in turn, will somewhat cool down the fervor of bulls on XAU/USD. However, the situation may change radically since the second half of February. Traditionally, bad weather and the fading effect of tax reform will make a whipping boy out of "American".

I do not think that the S & P 500 and other US stock indices will fall as rapidly as in December. The economy is still strong, rates are low by historical standards, and the growing likelihood of a long pause in the process of normalizing the monetary policy of the Fed will return the bulls to the stock market. The precious metal may lose key growth drivers, which increases the risk of a correction.

This is confirmed technically. On the daily chart, gold reached a target of 200% using the AB = CD pattern. As a result, the probability of a rollback towards $ 1262 and $ 1250 per ounce has increased. Rebound from important support levels makes sense to use for the formation of long positions.

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The Chinese economy began its decline

Trading 02 jan 2019 Commentaire »

The new year in the Forex market began with the increasing pressure of the US dollar against major currencies with the exception of "defensive", which includes the Japanese yen and the Swiss franc. You should also pay attention to the dynamics of government bonds of US Treasury, the demand for which has resumed.

In our opinion, the main reason for such behavior in the market is the preservation of the general pessimism of market participants regarding the growth prospects of the global economy, which only intensified on the first working day after the publication of data from the manufacturing business index (PMI) from China's Caixin. It was assumed that the indicator, albeit slightly, would grow, remaining above the level of 50 points, which separates the overall dynamics of the indicator's growth from its fall. But that did not happen. The business activity index in the manufacturing sector fell to 49.7 points in December against the November value of 50.2 points and the forecast of increase to 50.3 points.

Despite the fact that today Europe continues to celebrate the New Year holidays, local financial markets are working and they show a strong drop in stock indices. Futures on US stock indexes are also in deep minus, anticipating a fall at the opening of the US stock market. In the foreign exchange market, the Japanese yen is primarily in demand. Interest in the Swiss franc is present, but not so strong. The United States dollar is in demand as a safe haven currency.

The fall in the overall demand for risky assets and in the dollar appreciation that is based is explained by data from China, which show not only a slowdown in growth, as it was before, but the beginning of its decline. This is the strongest signal for the markets, which indicates that the second largest economy in the world does not just slow down growth, but begins its decline. On this wave, we should also expect a noticeable decrease in demand for raw materials and commodity assets, which will hurt oil prices and metals that have a technical demand for production.

On this wave, a decline in commodity and commodity currencies against the US dollar has already been noted today. Undoubtedly, we should expect with the start of trading in Russia and the depreciation of the ruble.

In our opinion, we should expect the continuation of the local strengthening of the dollar with the start of trading in the States.

Forecast of the day:

The AUD / USD currency pair is above the level of 0.7000. Breaking this mark in the wake of negative data from China could lead to a fall in price to 0.6915.

The USD / JPY currency pair is trading below our previous target level of 109.60. We expect the pair to decline to 108.15.

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Technical analysis for Gold for January 2, 2019

Trading 02 jan 2019 Commentaire »

Gold price has reached our 61.8% Fibonacci retracement target area. Gold price remains in a bullish trend. There are some indications that price could pull back but we do not expect this pull back to create a major top.

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Gold line - RSI trend line support

Green line - major trend line support

Blue line - short-term trend line support

So far Gold price has respected all previous important lows and the support trend lines. Gold continues to make higher highs and higher lows. Gold price has reached our second target at the 61.8% Fibonacci retracement. The RSI is at overbought levels but with no divergence. This suggests that the up trend has room to run but we could soon see a pull back. Support is at $1,257 and next at $1,250. As long as we trade above $1,250 trend will remain bullish. Next target after a pull back would be the $1,300 level.

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