Basic information
Preliminary US economic situation
The US dollar has largely fallen against other major currencies in the past week. Most of the decline occurred over the weekend due to two basic facts. The first is a statement from Fed Chairman Jerome Powell. Although Powell offers a favorable outlook for the economy - toward tightening policies, he still thinks the current policy is appropriate. Bond yields of the US also declined. Subsequently, White House economic adviser, Larry Kudlow, helped promote the US-China trade agreement, causing the S&P 500 and the Dow Jones Industrial Index to close at record highs. Risk-risk psychology has reduced demand for safe-haven assets, such as US dollars, which are highly liquid. Meanwhile, the expectation of Fed rate cut in 2020 has become more cautious with a reduction of only 25 percentage points in June since last Friday.
San Francisco Fed President Mary Daly, on Saturday told Reuters that low inflation gave FOMC space to keep interest rates low, which would lead to higher jobs.
Meanwhile, until this morning, the US dollar index compared to a basket of six major currencies, continued to extend its decline to a third consecutive day amid trade instability and expectations. sentence ”of the Fed. The US dollar index dropped -0.06% compared to the low of the previous week earlier today.
Economics of England and Europe
The euro was under downward pressure with limited price increases as buyers kept their hands in their pockets. The sell-off is likely to continue until the fiscal plan is agreed upon by the member states. The inflation and growth of the Eurozone is still low.
This week there is quite a bit of background information until Thursday, two days of notable news. The latest OECD economic outlook is released at 17:00 and is likely to highlight the weak growth and uncertainty in the Euro Area. The OECD interim September report reduced euro area growth expectations to 1.1% by 2020 and 1.0% by 2021, with global deflation risks continuing to rise. On Thursday night, the ECB Monetary Policy meeting will be announced, and it is likely that once again will show the ongoing weakness. On Friday afternoon, a series of Euro zone PMI information will be released, just minutes after new ECB President Christine Lagarde speaks in Frankfurt. This could be a volatile weekend for the Euro.
The deadline for the United States to impose tariffs on the EU, which was adopted on November 14, will be delayed much longer, according to various sources. However, in a speech earlier this week, US President Trump said that the EU imposed terrible trade barriers that were in many ways worse than China, increasing tensions between the two sides. Trade disruption plus additional tariffs will seriously affect the Euro.
Recent provisional third-quarter GDP figures show that the largest Euro-Zone member is close to facing a technical recession with the small 0.1% growth recorded between July and September. GDP in the second quarter of -0.1% has been lowered, however it has been -0.2%, resulting in growth in the last two quarters in Germany of -0.1%.
This week will be the first live broadcast debate between incumbent Conservative Prime Minister Borish Johnson and Labor Party leader Jeremy Corbyn. The pound dropped against other currencies in a basket of foreign currencies in May as the unreported Brexit rate increased after Mr. Johnson became prime minister, replacing Theresa May. The probability of that outcome is stable at around 30% for about a month, but the currency continues to decline until the recent vote with the Prime Minister's probability of winning reaches 88.4%.
The market is less concerned about the value of the Brexit deal when they are uncertain. If there is a predictable framework for UK and EU "divorce", investors will be able to adjust their portfolios accordingly. This will cause the Big Bang more volatility.
Therefore, all eyes will be on the voting numbers in the debate. If Johnson won, he would have the strength to push a deal through Parliament. Pound is likely to push higher.
Regarding the price of gold
The price of gold may rise if demand for gold as a hedge against inflation rises in the context of worsening fundamentals, prompting the Fed's loosening expectations. The risks of US-China trade war are pushing prices up while positive economic data is putting downward pressure on gold prices.
Last week, heterogeneous CPI reports made the price of gold almost unaffected. Volatility increased after Fed Chairman Jerome Powell lowered economic expectations and caused the metal price to drop. However, after news of the escalating US-China trade war, gold prices have recovered their momentum. Risk aversion comes after China says it does not want to commit to buying agricultural goods unless guaranteed by the United States.
However, it is important to note that gold during this period was not a haven. Instead, the appeal of gold as a store of value in an environment where investors are expecting interest rates to fall. Therefore, when the news was published that led traders to speculate that the Fed would cut interest rates, the price of gold often increased because the cost of holding it was relatively low, not counting the stress of the trade war.
This includes Washington's commitment to eliminate tariffs step by step with trade deal stages. However, US President Donald Trump has previously stated that phasing out tariffs is not something the United States has committed to doing. The reports also continue to show that both sides are still struggling to resolve core issues such as those related to intellectual property rights.
The meeting of the Federal Open Market Committee (FOMC) will probably be the most scrutinized event this week. Investors will pay attention to how policymakers perceive the outlook. If the meeting text is peaceful, the price of gold could go up.
Technical analysis
EURUSD pair
Technically, after a sharp decline in Demand on the daily chart, the EURUSD pair made a strong upward breakout. The first resistance will be located near Flipzone 1.107. If this zone is broken, the price will continue rising to the higher resistance zone at 1,117. In case the Demand zone fails to hold the price, the EURUSD currency pair may decline towards the previous downtrend line from 1.1412 to 1.1109. Specific reduction targets will be in the regions 1.095 and 1.089
REFERENCE STRATEGIES
Buy 1,103
Stop loss 1,098
Take profit 1.1078 - 1.1160
GBPUSD pair
GBPUSD, after falling back to retest the Flipzone 1.2784, had a strong upward move towards the peak of 1.301, the highest level since June. The target of the uptrend may be towards 1,314 and higher at 1,318.
In the opposite case, the zone of 1.2784 Flipzone is broken, the short-term recovery can push prices back to test the lower Demand zone at 1.25-1.26.
REFERENCE STRATEGIES
Buy 1,287
Stop loss 1.2763
Profit taking 1.3174
Gold price
For Gold, this metal price after testing the Demand 1446 area has rebounded quite well with the highest level established at 1474. It is expected that in the near future, the price of gold is likely to target Supply 1482 and higher is The trendline decreases from 1557 to 1516.
REFERENCE STRATEGIES
Buy 1455
Stop loss 1440
Take profit 1480-1490
Recommendation: This is forex Trading Idea only. For more accurate analysis, you should incorporate other indicators that you have mastered. In particular, always focus on capital management methods to prevent any possible market situation.
Author: Nguyen Chi Thanh
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