Good statistics from the United States and the expectation of signing an agreement on the "phase one" support the dollar

Trading 06 nov 2019 Donner votre avis

The topic of US-Chinese trade negotiations in its so-called "1st phase" probably reached its zenith, subjugating virtually all investors' attention.

In the wake of the flow of reports that the meeting between Xi Jinping and D. Trump is about to take place and that the negotiation process is positive, the dollar has received significant support against a basket of major currencies, and investor interest in protective assets has declined. In addition, the good news for the dollar was published on Tuesday, the values of US economic statistics.

According to the data presented, the index of business activity in the non-manufacturing sector from the Institute for Supply Management (ISM) rose sharply to 57.0 points versus the October value of 55.2 points and a forecast of increased to 55.0 points. Another important indicator also added significantly - the index of business activity in the non-manufacturing sector (PMI) from the Institute of Supply Management (ISM). The indicator rose to 54.7 points in October with a forecast of increase to 53.5 points and the September value of 52.6 points.

So what can still explain the growth of the dollar? In our opinion, the belief in the success of US-Chinese trade negotiations has reduced the interest of investors in protective assets, which has led to a weakening demand for US Treasury bonds and an increase in the yield of these securities, which in turn, supported the demand for dollars. The second reason is the generally positive quarterly reporting of US companies, which attracted foreign investors who bought dollars in order to acquire shares of companies. And, of course, the publication of strong economic statistics, which we reported above, became a kind of "cherry on the cake," which stimulated a sharp increase in the dollar on Tuesday.

Moreover, strong values of indicators can support the decision of the Fed to take a break in the further process of lowering interest rates, which in turn will be an important reason for the continuation of strengthening of the dollar in the currency exchange markets.

In our opinion, the main "losers" in relation to the dollar will be the single European currency, sterling, as well as shelter currencies: the Japanese yen and the Swiss franc. The euro and sterling will decline in the wake of Brexit's uncertainty factor, as well as the availability of broad incentive measures, especially with respect to the euro. The yen and the franc, in turn, may be held hostage by the fall in demand for defensive assets.

Forecast of the day:

The EUR/USD pair formed a double top reversal pattern, which from a technical point of view, on the wave of a general positive attitude towards the dollar, will lead to its implementation. If the price does not rise above the "neck" line of 1.1075, it is likely that the pair will continue to fall to 1.1000.

The USD/JPY pair is correcting down after a strong growth on Tuesday. If it holds above the level of 108.90, it may resume growth to 109.30.



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