The weakness of the dollar ends, the euro will remain in the range with the upward trend, and the pound is under pressure

Trading 05 nov 2019 Donner votre avis

As expected, a positive release on the labor market did not provide significant support to the dollar, as weak data on manufacturing ISMs have a strong negative impact. Today, the ISM index for the services sector will be published. The forecasts are optimistic and growth is expected from 53.6p to 53.4p, respectively, the dollar may receive a small boost to growth.

On Tuesday morning, positive market expectations dominated. Positive sentiment is supported by data on improving the situation in China, as well as relative clarity on trade negotiations between China and the United States. It is assumed that before the end of November, the parties will sign the first stage of the agreement. The US is forced to make certain concessions. On the other hand, the stop of Chinese purchases triggered the worst crisis in agriculture for several decades, US production in the 4th quarter was in recession, production orders fell again in September, and measures must be taken to prevent weakness from spreading to the services sector.

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A further reduction in the Fed rate seems inevitable, however, the recent generally positive data suggests that there will be no decline in December. The Fed may take a break, in any case, futures on the CME give only 7% probability of decline as of Tuesday. Meanwhile, Friday's report on CFTC showed that speculators mainly remain in long positions on the dollar, that is, the current weakening is not a sign of the beginning of a global trend.

Positive in the markets will thus continue to dominate. Stock indices will continue to grow, although protective assets are not in demand - gold and bonds will be sold, while oil is in positive territory.

EUR/USD

The euro began the week with a slight decline, but did not go out of the range, which gives reason to expect resumption of growth. In September, the lowest PMI in the industry was recorded since 2013, and thus, October data indicate that there is no reason to expect a turn up in the 4th quarter.

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Today, Christine Lagarde will deliver her first speech as the head of the ECB today at 11.30 UTC+00. She is expected to support the course of his predecessor, in particular, the need to switch to tax incentives. Possible comments on the monetary policy of the ECB can increase the volatility of the euro.

The euro is held in an upward channel and is technically able to resume growth with the first target of 1.1175 / 80. Passing this level can enhance growth, and then continue to the next goal which is 1.1250 / 75.

GBP/USD

The pound is falling from the levels on Friday, as the uncertainty with Brexit, which, it would seem, managed to be overcome, is replaced by a new uncertainty - the December 12 elections. Brexit party leader Nigel Farage is set to present 600 candidates in a general election, claiming he will challenge the Tories across the country. Farage's plans can divide potential voters, which will lead to a decrease in the seats of the Conservative Party and may interfere with the passage of the bill to recall the prime minister through parliament, and this result will put strong pressure on the pound.

Despite the fact that the PMI in the UK manufacturing sector rose in October from 48.3p to 49.6p, it remained below 50p, indicating a further slowdown. The construction sector has been steadily declining for a long time, retail sales are weak, and the threat of lower consumer activity remains high.

Today, Markit's report on the service sector will be published, and the main event of the week is expected on November 7. "Super Thursday" includes a meeting of the Bank of England and the publication of updated macroeconomic forecasts, as well as a speech by Mark Carney.

As a result, the pound is still trading in the range and the mood is moderately bearish. The probability of returning below the trend line 1.2843 is high, the next support is 1.2800, however, it is unlikely to get out of the range down this week.

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

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