EURUSD and AUDUSD: Demand for the US dollar returns. The RBA left rates unchanged but warned of a long period of stimulus

Trading 05 nov 2019 Donner votre avis

Despite a weak report on manufacturing orders in the US manufacturing sector, the US dollar managed to strengthen its position against the euro and the pound amid expectations that the Federal Reserve will no longer lower interest rates this year and will pause this cycle. The statements made by the representatives of the committee in this regard also inspire confidence in such actions. The update of historical highs in stock markets also provides some support to the US dollar.

As noted above, according to the US Department of Commerce, production orders in September of this year fell slightly more than expected and fell by 0.6% compared to August and amounted to 496.7 billion dollars. Excluding the transport sector, orders fell only by 0.1% from the previous month. Excluding defense orders, the decline was 0.6%. Orders for durable goods fell by 1.2%. Decreased orders for durable goods indicate a more conservative approach by Americans to large spending amid weaker economic growth over the past few quarters.

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Yesterday, a report was published by S&P Global, which indicated that activity in US foreign trade in goods in September of this year decreased by 4.0% compared with the same period of the previous year. The fall is quite rapid, which indicates the impact of the rupture of trade relations between the United States and China. Despite attempts to reach a trade agreement, a decline in trading activity indicates a further slowdown in the US economy by the end of the year.

Yesterday's reports from the Conference Board, where the US employment trends index for September this year was revised up to 110.87 points from 110.97 points and data from ISM-New York on the index of current business conditions, which in October rose to 47.7 points against 42.8 points in September were ignored by the markets.

Another important leading indicator that indicates further growth in the US economy was the survey of the Fed. It shows that the demand of companies for loans in the 3rd quarter of this year fell significantly, due to a slowdown in investment. The decline occurred even against the background of lower interest rates, while lending rules in the 3rd quarter as a whole did not change.

As noted above, yesterday's statements by the Fed representatives on the topic of the necessary pause in lowering interest rates supported the US dollar.

The President of the Federal Reserve Bank of Minneapolis, Neel Kashkari, yesterday made it clear that he was satisfied with the current monetary policy after the US Federal Reserve once again made a rate cut last week. However, it would be premature to talk about further rate cuts.

The president of the Federal Reserve Bank of San Francisco, Mary Daly, also said yesterday that the Fed still has enough tools to influence the economy, but at present, we are not even talking about the inclusion of negative interest rates.

As for the current technical picture of the EURUSD pair, further movement will depend on whether the buyers of risky assets will be able to regain the resistance of 1.1140 or not. A failed attempt to rise above this range will be a direct signal to open short positions, which will lead to the update of new support levels in the area of 1.1100 and 1.1080. If the bulls manage to turn the market to their side, and this will happen only after the pair consolidates above the resistance of 1.1140, it will be possible to count on the continuation of the upward trend in the area of the highs of 1.1180 and 1.1230.

AUDUSD

The Australian dollar strengthened its position against the US dollar after the Reserve Bank of Australia left its key rate unchanged at the meeting today, saying that it is necessary to strike a balance between the need to lower rates and the unwillingness to cause unintended damage to the country's economy.

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Let me remind you that the last time the RBA lowered the key rate in October, bringing it to the level of 0.75%. The regulator also noted that rates will remain low for quite a long period, as in the context of a slowing global economy, Australia may need the availability of free resources to maintain growth and achieve the inflation target.

During a press conference, RBA Governor Philip Lowe said he was ready to lower rates if necessary.

As for the technical picture of AUDUSD, further medium-term growth will be limited by the policy of the Central Bank. As large resistance levels, you can pay attention to 0.6960 and 0.7020. The downward correction will be limited to support at 0.6840 and 0.6800, where the moving averages are held. Most likely, it will be in this wide lateral channel that the steam will remain in the next few months.

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

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