GBP/USD. The EU is taking a calm stance and is waiting for further action from Johnson, who is putting the UK’s reputation

Trading 19 sept 2020 Commentaire »

analytics5f659c77da3fb.jpg

All the latest rumors and conversations concerning the UK are exclusively related to Boris Johnson, his latest bill "on the internal market of Great Britain", as well as about a possible conflict with the European Union. Traders were completely uninterested in the Bank of England meeting and completely forgot about the failed negotiations between London and Brussels regarding the trade deal. All the attention of traders and also the international community is now focused on the British Parliament, which has already pre-approved the Johnson bill. Thus, most likely, after it has been finalized and corrected, the parliament will also approve and adopt it. There is one very important remark here. Formally, "the parliament will accept it", in fact - "it will be accepted by the Conservative Party", which formed a "majority government", so it does not depend on the opinion of the opposition forces. Therefore, it should be clearly understood that Johnson's law is approved only by Johnson's followers, but not by the opposition, former politicians, former Prime Ministers, and other high-ranking officials. However, at the very beginning of his administration, Johnson quickly made it clear to party members that those who disagree with the party's policies will not be members of this very party. Therefore, there is no doubt that the conservatives are simply afraid of Johnson, thus, they will blindly follow him, approving almost any laws and bills.

The most important thing that the whole world can't understand right now is Boris Johnson's tactics. On the one hand, it seems to be a sign of a good player in the international arena, a good politician and leader. On the other hand, Johnson is just not proven to be a good politician and leader (in our humble opinion). The world community does not understand what Johnson is trying to achieve? His bill, which openly violates the agreement with the European Union, is an attempt to put pressure on the European Union to be more compliant in negotiations on a trade agreement? But then why did this bill "come up" only in mid-September, and not in July, for example, when there was simply more time for further negotiations? Boris Johnson is trying to "spread the straw" in case the European Union does not agree to the terms of London and leaves it without free trade? Johnson himself said that the European Union can apply a "food blockade" and it is for insurance that the bill "on the internal market of Great Britain" is needed. In fact, this bill allows the British government to change, cancel the rules of customs transport on the border between Northern Ireland and England, if London and Brussels do not agree on a trade agreement before January 1. That is, in fact, London has not yet violated any points of the agreement with the European Union on Brexit. The same bill clearly prescribes the supremacy of decisions of the British government. If the second option is true, then Boris Johnson cannot fail to understand that in the event of a real violation of the agreement with the EU, sanctions will inevitably follow, courts will follow, and proceedings that may drag on for many years. And this is not just a trial, there will be consequences. And not only from the European Union, which will act as the affected party. Already, for example, Joe Biden said that if the agreement with the EU is violated, it will greatly complicate negotiations with Washington on a trade deal with the United States. Not to mention the fact that it will be possible to put an end to the trade deal with the European Union, which in theory can be concluded at any time and after January 1, 2021. Thus, it is very difficult to find the goal that Boris Johnson actually pursues.

Or perhaps there is no hidden goal. Perhaps Boris Johnson is simply acting on the principle of Donald Trump, who, if he doesn't get what he wants, begins to pour accusations, begins to openly conflict. Maybe Johnson, not having received a free trade agreement, simply starts openly plotting the EU's machinations. It certainly sounds quite strange, given that we are talking about the highest political circles, however, this option cannot be completely excluded. Moreover, the bill was criticized by everyone who could do it. In other words, almost everyone understands what the consequences will be for Britain if Johnson really goes to violate international law. This is a disgrace to Britain and a blow to its reputation.

Meanwhile, the head of the European Commission, Ursula von der Leyen, said that a deal with London could still be concluded. It cannot be said that after these words of Ursula, the pound soared up, because in the world, in principle, few people believe in the possibility of signing this agreement. "It is better not to be distracted by questioning the existing international agreement that we already have, and focus on achieving it - we have little time," the head of the European Commission said. And, frankly, her words make you wonder if the European Union is going to be saved under Johnson's pressure. Is there some secret trump card in Johnson's sleeve that the EU knows about? Top officials of the European Union regularly stated that London itself fails the negotiations, delays them, does not make concessions when it needs an agreement more. EU leaders have criticized the actions of Boris Johnson, who refused to extend the "transition period" and set deadlines for negotiations on his own. Now it turns out that in the last month of negotiations, "we should not be distracted and focus on reaching an agreement"? It looks very strange, and market participants don't even seem to know how to react to it. In addition, Ms. Von der Leyen called London's demarche "a very unpleasant surprise", although we would call it "arbitrary".

Thus, European leaders have criticized London's actions, but have not yet begun to take any retaliatory actions. In fact, the European Union can now wait for the actual violation of the current agreement and only then start working in this direction. It seems that this bill is another bluff by Boris Johnson, which has so far led to nothing but casting a shadow over the UK. Well, we can only monitor the situation, but it will be extremely difficult for the pound to show growth in the coming weeks or even months. Salvation can only come from across the ocean.

analytics5f65bee887efb.jpg

Trading recommendations for the GBP/USD pair:

The pound/dollar pair began to correct after a strong round of downward movement. The pair entered the Ichimoku cloud on the 24-hour timeframe and is now trading inside it. The further fall in the pound depends entirely on the fundamental background of the UK. Overcoming the Senkou Span B line will strengthen the current "dead cross" and increase the probability of continuing the downward movement. Thus, we recommend that you wait until the correction is completed and resume trading downwards with the targets of 1.2832 and 1.2683 after the MACD indicator turns down.

The material has been provided by InstaForex Company - www.instaforex.com

EUR/USD. US dollar – European currency.

Trading 19 sept 2020 Commentaire »

analytics5f659c2f0f622.jpg

The past trading week has clearly shown that the market does not have enough ghostly hints from Jerome Powell that the economy is recovering at a higher pace and in general everything can be fine. Recall that since mid-March, the European currency has been rising in price almost non-stop in a pair with the US dollar. If the first weeks of this growth were clearly associated with the recovery after the severe fall of the euro currency (markets in the first weeks of the pandemic rushed to buy the US dollar, believing that it is the most stable currency and the best choice during the next crisis), then in the following weeks and even months, traders have more consciously invested in the euro currency. The reasons for this behavior of market participants all this time lay on the surface. Such a number of crises that the United States faced in 2020 could not but provoke a sell-off of the US currency. As a result, the US dollar lost 14 cents and froze in place. For almost two months, trading has been held in a narrow range, with a width of only 200 points. Buyers can not find new reasons for new purchases of the euro currency after it increased by 13-14 cents. Further, sellers simply can't find reasons for their activities, which involve selling euros and buying dollars. Indeed, what are the reasons to buy the dollar now? There are no economic reasons. Even though the US economy has started to recover and the forecasts for GDP, unemployment, and inflation have been revised for the better by the Fed, we should not forget that the US economy suffered a record loss of 32% in the second quarter. We have talked about this many times, however, it is really an extremely important factor. However, the European economy lost just 12% in the second quarter. Now there is a reasonable question: is it easier to recover from 32% or 12%? Thus, even with the increased pace of recovery, the economic situation in America may remain worse than in the European Union. Given the fact that traders persistently do not want to buy the dollar, even taking into account the need for a corrective movement, it seems that they agree with our conclusions and arguments.

However, not only economic reasons are important for the currency market now. The epidemiological picture of the European Union and the United States also eloquently indicates which of the currencies should become more expensive. In the US, in fact, there was no first or second "wave" at all. There was one wave that started back in March of this year. Almost immediately, the incidence rates rose to 30-40 thousand per day, then followed a small rollback to about 20 thousand new cases per day, then an increase to 60-80 thousand cases and now a new rollback to 40-50 thousand. Thus, if you look at this graph, you can actually see two waves, however, we believe that in the case of an epidemic, a new outbreak can be considered a wave. For example, in the European Union, in the most affected Italy, the number of cases of "coronavirus" increased in March and April and at highs was 6-7 thousand per day. However, from April to July, the indicator decreased and eventually came to the figures of 200-300 new cases per day. In other words, the incidence rate has dropped to almost zero. The wave ended. Only in recent weeks, the indicator has slightly increased and now it is 1-1.5 thousand cases per day. However, this is not a flash, it is only a small increase. In Spain, there is really a new outbreak, as 10-25 thousand new cases are recorded daily. It's the same in France. Thus, among all EU countries, only France and Spain are again at risk. Therefore, we believe that the epidemiological situation also remains more favorable in the European Union.

As for the vaccine, we would not pay attention at all to all these loud statements by Donald Trump that vaccination will begin in October and other messages of a similar nature. In this issue, as in all other issues related to the "coronavirus", you need to trust doctors and epidemiologists, and not Trump or other politicians who simply pursue their own personal goals. And even if these goals are expressed in the interests of the state, this does not change the picture of the state of affairs in this matter. Trump currently needs to be re-elected for a second term, so he will promise a vaccine before the election, vaccinate the entire population, start using a vaccine that has not passed all the necessary clinical trials, and in case of problems, blame all the doctors and pharmaceutical companies. Doctors and virologists have said almost from the very beginning that creating a new vaccine is a very long process that can take from a year to two years. Actually, in practice, this is likely to happen. The vaccine, which will be available to the public, should be expected by the middle of next year.

And the third factor, which is also very important, is political. Elections in the United States is a special process. An election involving Donald Trump is an even more special process. The US dollar is probably under pressure due to the fact that investors and traders do not understand who will be the next US president and what to expect from him. Usually, all candidates make campaign promises, but in general, the course of the country remains unchanged. It is slightly changed, adjusted by the new president. In the case of Trump, this rule does not work. Trump has started a trade war with China, intends to continue it if he wins the election, and also intends to start a war with American companies that have moved their production to countries with cheap labor. Trump is not interested in the motivation of these companies. It is obvious that every company tries to reduce the cost of its production, which is impossible in America. The American president believes that companies should return their factories to the United States, otherwise he will raise taxes for these companies and cancel all government orders for their products. In general, a war. I don't even want to think about how this confrontation might end. We have already seen how the confrontation between China and the United States ended. Two years of a trade war, a "weak" agreement, most of the duties and sanctions remained in force, a "coronavirus epidemic", the true causes of which are hidden in the fog.

Based on all the above, now the US dollar can count on maximum technical corrections, and the positions of the European currency look much more attractive.

analytics5f65bbe4aa89e.jpg

Trading recommendations for the EUR/USD pair:

The technical picture of the EUR/USD pair on the 24-hour timeframe shows that the price continues to trade in the side channel of $ 1.17 - $ 1.19, occasionally making attempts to exit it. A slight upward bias is present, however, this is not a trend. The Bollinger Bands clearly show that the flat is currently continuing. Thus, you can trade between the upper and lower bands or wait for quotes to exit this channel.

The material has been provided by InstaForex Company - www.instaforex.com

Dollar Recovers After Early Weakness, Gains Against Peers

Trading 19 sept 2020 Commentaire »

After spending much of the day's session in the red, the dollar index turned mildly positive in the final minutes of the session on Friday.

Worries about rising coronavirus cases and growing uncertainty about the pace of economic recovery triggered the demand for the safe-have currency.

Coronavirus cases spiked in France. According to reports, the country registered close to 10,600 new cases on Thursday. Spain is battling a resurgent second wave of Covid-19, although the mortality levels are far lower than they were in spring.

The regional director of The World Health Organization, Dr Hans Kluge, said on Thursday that surging coronavirus cases across Europe shoud serve as "a wake-up call."

The dollar index, which fell to 92.77 recovered to 92.99, netting a small gain.

Against the Euro, the dollar was up marginally in late afternoon trades at $1.1841, recovering from $1.1872.

The Pound Sterling was weaker by over 0.4% with a unit of Sterling fetching $1.2920 a little while ago.

The Yen was firmer at 104.57 a dollar, recovering from 104.87 in the Asian session.

The Aussie lost ground against the dollar, with the latter firming up to 0.7289 a unit of the Australian currency, after having weakened to 0.7313 at the open.

The Swiss franc weakened to 0.9113 a dollar, losing ground from 0.9083 a dollar on Thursday evening.

The Loonie was weaker by nearly 0.3% at C$1.3203, drifting down from C$1.3167.

A report released by the Conference Board showed a continued increase by its reading on leading U.S. economic indicators in the month of August, although the pace of growth slowed compared to recent months.

The Conference Board said its leading economic index jumped by 1.2% in August after surging up by 2% in July and spiking by 3.1% in June. Economists had expected the index to increase by 1.3%.

The University of Michigan's report showed consumer sentiment continued to improve in the month of September.

The preliminary report said the consumer sentiment index climbed to 78.9 in September from 74.1 in August. Economists had expected the index to show a much more modest uptick to 75.0.

The index reached its highest level since March but is still well below the pre-pandemic reading of 101.0 seen in February.


The material has been provided by InstaForex Company - www.instaforex.com

Treasuries Finish Another Lackluster Session Slightly Lower

Trading 19 sept 2020 Commentaire »

Treasuries turned in another lackluster performance during trading on Friday before eventually ending the day slightly lower.

Bond prices spent much of the day lingering near the unchanged line but moved to the downside going into the close. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1 basis point to 0.694 percent.

The modestly lower close by treasuries came following the release of a report from the University of Michigan showing a much bigger than expected improvement in consumer sentiment in the month of September.

The preliminary report said the consumer sentiment index climbed to 78.9 in September from 74.1 in August. Economists had expected the index to show a much more modest uptick to 75.0.

The index reached its highest level since March but is still well below the pre-pandemic reading of 101.0 seen in February.

A separate report released by the Conference Board showed a continued increase by its reading on leading U.S. economic indicators in the month of August, although the pace of growth slowed compared to recent months.

The Conference Board said its leading economic index jumped by 1.2 percent in August after surging up by 2.0 percent in July and spiking by 3.1 percent in June. Economists had expected the index to increase by 1.3 percent.

Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board, said the slowdown in the pace of improvement "suggests that this summer's economic rebound may be losing steam heading into the final stretch of 2020."

Trading activity remained somewhat subdued, however, as traders continued to digest the Federal Reserve's plan to leave interest rates at near-zero levels for years to come.

Congressional testimony by Fed Chair Jerome Powell may attract attention next week along with reports on new and existing home sales and durable goods orders.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auctions of two-year, five-year and seven-year notes.


The material has been provided by InstaForex Company - www.instaforex.com

Oil Futures Rebound To Close Higher, Gain About 10% In Week

Trading 19 sept 2020 Commentaire »

Crude oil futures settled higher on Friday as prices edged up despite a surge in coronavirus cases raising uncertainty about pace of economic recovery and causing worries about outlook for energy demand.

However, recent data showing a sharp drop in U.S. crude stockpiles, and the OPEC and allies's move to press for better compliance with output cuts supported oil prices.

West Texas Intermediate Crude oil futures for October ended higher by $0.14 or about 0.3% at $41.11 a barrel, recovering from a low of $40.30 a barrel.

WTI crude oil futures added about 10% in the week.

Brent crude futures advanced $0.55 to $42.75 a barrel, recording a gain of almost 7.5% for the week.

Oil prices were lower earlier in the session, weighed down by an announcement from Libya about lifting of its blockade of oil output for one month.

Reports about U.S. oil producers readying rigs in the Gulf of Mexico weighed as well. However, with the possibility of a tropical depression hitting the northern part of Gulf of Mexico, oil facilities could face some disruptions over the next few days.

A report from Baker Hughes today said oil rig count in the U.S. dropped by one this week to 179, the lowest count since mid-August.


The material has been provided by InstaForex Company - www.instaforex.com

Gold Futures Settle Modestly Higher On Safe-haven Appeal

Trading 19 sept 2020 Commentaire »

Gold prices moved higher on Friday as falling equities amid rising worries about coronavirus cases and uncertainty about pace of economic recovery prompted traders to seek the safe haven asset.

The dollar was somewhat slippery today. Although the dollar index spent much of the session in the red, its loss was just marginal at 92.90 and this probably limited gold's upside.

Gold futures for December ended higher by $12.20 or about 0.6% at $1,962.10 an ounce.

Gold futures gained about 0.7% in the week, recording their gains for a second successive week.

Silver futures for December closed higher by $0.029 at $27.129 an ounce, while Copper futures for December ended with a gain of $0.0450 at $3.1160 per pound.

A report released by the Conference Board showed a continued increase by its reading on leading U.S. economic indicators in the month of August, although the pace of growth slowed compared to recent months.

The Conference Board said its leading economic index jumped by 1.2% in August after surging up by 2% in July and spiking by 3.1% in June. Economists had expected the index to increase by 1.3%.

The University of Michigan's report showed consumer sentiment continued to improve in the month of September.

The preliminary report said the consumer sentiment index climbed to 78.9 in September from 74.1 in August. Economists had expected the index to show a much more modest uptick to 75.0.

The index reached its highest level since March but is still well below the pre-pandemic reading of 101.0 seen in February.


The material has been provided by InstaForex Company - www.instaforex.com