Why was the dollar spared by the trade war? (2)

Last month, the ECB reaffirmed its non-aggressive policy, which helped renew the dollar's appreciation. The euro fell 0.7 percent against the dollar at the ECB meeting on June 14. Then the dollar rose the most against the euro in two years.
The outlook for the US economy is the best among developed economies, according to Marvin Loch, chief strategist at BNY Mellon. The Fed remains the most aggressive in its tone, compared to the other central banks around the world. Since the beginning of the year, the Reserve has raised the interest rate twice, and is expected to make two more hikes until the end of the year.
At the same time, the ECB is unlikely to raise interest rates by the end of the year, barely stopping the stimulus for that period.
In addition, credibility among bullish investors for the euro is diminishing as a result of the emerging trade war between the US and Europe. Experts point out that serious threats to foreign exchange markets may be an extraordinarily high short-term growth in the US economy, which would trigger a further strong appreciation of the US currency.
Investors continue to worry about the minimum slope in the interest rate curve, which continues to raise fears of an impending recession.

Forecast on EUR/USD for April 10

The euro/dollar pair strengthened during Monday's trading and reached 1.2325 by the end of the session.
The pair received support at the beginning of the week thanks to the weak labor market data released on Friday. In addition, the main event is the possible development of a trade war between the US and China.
At the weekend, US President Donald Trump reiterated that countries can reach an agreement without war, but markets suggest the worst option possible. The European currency was received after the speech of the member of the Board of Governors of the ECB Benois Kera. He said that, contrary to low current inflation, the probability of a target level of 2% and the beginning of a buy back of assets in the near future is high.
The opposite position was taken by another representative of the ECB, Peter Prat. According to him, there is a discrepancy between economic growth and inflation, and a significant degree of stimulus for monetary policy remains necessary. The latest economic publications in the Eurozone do not speak of continuing strong growth, so the ECB is likely to have to take this parameter into account.
In my forecast for Tuesday, I expect further growth of the euro/dollar pair to resistance levels of 1.2350, 1.2375 and 1.2400.

Dollar collapsed today

Today, the dollar index DXY (that is, the dollar's rate to the basket of six world reserve currencies) collapsed to the lows that were last seen at the end of December 2014. Since the beginning of this year, the index has dropped by 2.6%. The dollar also lost in value and in relation to each of the world reserve currencies separately, "losing weight" against the euro by 0.75%, to the British pound sterling by 1.4%, to the Japanese yen by 0.8%, to the Canadian dollar - by 0.5%.
The most obvious reason for the fall of the dollar was the statement by US Treasury Secretary Stephen Mnuchin that a weak dollar is supporting the economy. In principle, he did not say anything new, just confirmed the economic pattern that a weak national currency supports production in exporting industries. American exchange speculators reacted "patriotically", because a weak dollar supports the US economy, and speculators from other countries helped the growth of their national currencies.

German economy in great shape

The German economy reported a 0.6% growth in its GDP in the third quarter. This was accelerating the rise in the economy compared to the second quarter of the year. The result responded to the average market expectations.
At the same time, the growth of Italy's economy also rose to 0.5%, according to the forecast.
All this leads investors to expect that the eurozone economy will maintain its robust growth performance since the beginning of the year and in the third quarter.
The data triggered an increase of the euro against other major currencies. The single currency returned to more than 1.1700, trading on peaks at 1.1720 levels. The rise in the euro, after the results, amounted to 0.4%.
The ECB, of course, did not miss the opportunity to underline its function of the observed growth, saying that the measures taken to repurchase assets began to produce its results and was "extremely successful", according to vice-president Vitor Constanceo.
Now, investors are rising expectations that the ECB will resort to further action to normalize its monetary policy at upcoming meetings.

The dollar is close to its highest levels in anticipation of the ECB

The dollar changed slightly yesterday, sticking to its highest values ​​in two weeks before the decision of the ECB later this week.
The dollar index was traded late last night at 93.94 points. The euro traded 0.1% up against the US dollar, at 1.1760, against its 1.1750 prior day.
This week will be extremely saturated at meetings of central banks. There are decisions about the monetary policies of the Bank of Canada, the Swedish and Norwegian central banks, and the ECB on Thursday.
The dollar has found some support after rising interest rates on US government bonds, with 10-year bonds reaching 2.4 percent.
Data released yesterday about activity in the industry sector showed a steady performance of the US economy this month.

The EUR/USD ended last month with its longest monthly increase since 2013

The euro ended its longest monthly appreciation against the dollar since January 2013, following expectations of rising interest rates in the United States and political uncertainty in Europe.
Market expectations for another US interest rate hike by the end of this year are on the rise, following Janet Yelan's latest comments.
In addition, President Trump's plans for tax cuts seem closer to realization, which causes market players to bet on a strong dollar.
Finally, but not least, the political situation in Germany, as a result of the unconvincing victory of Angela Merkel, can not be ignored.
According to a number of market observers, however, despite all that has been said so far, the prospects for the euro against the dollar are generally positive.
The reason - the expectations Draghi to signal the end of the stimulus program in the euro area at the next ECB meeting in October.
The average expectations of Toronto Dominion Bank analysts are that the euro will end the year at 1.26 dollars.

The euro with a one-month minimum against the dollar

The euro fell below 1.1800 against the dollar, following Yellen's comments on Tuesday and political uncertainty in Germany after the weekend elections.
The single currency is traded at levels around 1.1750, or the lowest in more than a month.
The start of the depreciation for the euro was set by the election results in Germany and Merkel's indecisive victory. According to market observers, it will probably take several months to form a government, a situation that brings uncertainty to the markets.
In addition, in a statement Tuesday, Janet Yellen confirmed the Fed's position for further gradual raise in interest rates. Yellen, however, also said she was not sure about inflation development.
The breakthrough of the key level of support at 1.1810 could also pave the way for further sales of the single currency against the dollar, according to some technical analysts.
Further clarification on the future direction of the single currency is expected to be given by the ECB meeting, which will be held on 26 October. Until then, EUR/USD is likely to be traded in a range.

The dollar is nearly at two-year low against the euro, following Draghi's comments

The dollar registered its lowest value for two years against the euro on Friday, following Mario Draghi's comments. Draghi said we can see a change in ECB's asset repurchase policy in the autumn.
The dollar index, following the US currency against six major currencies, fell to 94.31 points and was not far from its lowest value since August of 2016 - at a level of 94.09 points. For the week, the index was down by 0.8%.
The euro closed the week at 1.16635.
Draghi announced that there is no specific date scheduled to change the ECB's ultra-stimulus policy on negative interest rates and asset repurchase, but specifies the season when it can happen.
His comments were considered aggressive by market participants, which was also the basis for the appreciation of the single currency.

The dollar rises after Dudley's comments

The dollar has appreciated against other major currencies, following comments by New York head of state, William Dudley, in support of the future policy of the reserve, on raising interest rates.
Green money rose by about 0.4 percent after Dudley said he was convinced of the economic recovery and strong performance in the labor market, which would eventually trigger inflation. Prior to the expert's statement, trading on the foreign exchange markets was relatively weak.
The statements of the official representatives of the reserve can continue to be at the heart of the investor's interest, as well as that of Stanley Fischer, in Amsterdam.
Dudley's comments come less than a week after the Fed's interest rate hike, when it hinted at another increase by the end of the year.
Meanwhile, some analysts start talking about two more Fed interest rises by the end of the year.
The dollar appreciated against all major currencies, with the highest appreciation against the African rand. To this, the US dollar rose by 1.9%.
The Canadian dollar proved to be the most stable currency against the dollar, to which the US currency appreciated by only 0.1% despite the continuing decline in oil prices.
The election victory of Emmanuel Makron's party has failed to support the euro seriously. The single currency fell to levels of 1.1143 against the dollar.

The ECB kept interest rates, cutting its inflation forecasts

The ECB, as expected, kept the interest rate at 0%. The bank, however, has removed its comments for further interest rate cuts and said it will continue with its bond repurchase program.
In his statement, Draghi said interest rates are expected to remain at their current levels for an extended period of time, but added that he would be ready to extend the buy-back program if needed.
The speculation led to a momentous depreciation of the euro as the single currency declined to 1.1200 against the dollar after it had previously exchanged at 1.1240 levels.
Mario Draghi also said the ECB considers risks to the ECB's economy as "broadly balanced".
That he did by revising the financial institution's downward inflation expectations. The main reason for this is the cheaper oil, which will most likely continue to weigh above the growth in consumer prices.
The ECB is currently expecting an inflation rate of 1.5% this year, 1.3% next year and 1.6% in 2019. This is a decline compared to the March forecast for inflation of 1.7% this year, 1.6% in the next and 1.7% in 2019.

Eurobulls are exhausted

At the auctions in Asia, the dollar rate was under pressure against its main competitors. The euro/dollar for the third time tested the level of 1.0818. The unsuccessful attempt to consolidate above 1.0820 led to a partial closure of long positions and a price drop to 1.0775. By 14.30 GMT, the euro/dollar currency pair revolves around the level of 1.0790.
The participants of the market, apparently, ended in patience. They can not decide whether to buy currencies against the US dollar or sell. The euro does not become more expensive or cheaper, it consolidates in the range of 43 points between the levels of 1.0775 and 1.0818. Negative impact on the single currency has the yield of 10-year German bonds, which fell by 9.13%, to 0.416% from the opening of the debt market in Europe. The yield on 10-year US bonds fell by 0.90%, to 2.412 and partially offset the negative background.
The overall technical picture on H1 for the euro/dollar pair indicates an increase to 1.0818. For this the pair need to pass the level 1,0800. If at the same time the yield of German bonds will increase, and the American yield will decrease, then there is a probability of climbing above 1.0818. The target for the next two days is 1.0849.

Indecisive EUR/USD

EUR/USD fell to 1.0640 yesterday, but then again rose back to 1.07 to the levels of the beginning of the day. This does not change the situation: the trend of growth of the pair is broken. At the same time, the question remains, when will come the impulse to reduce. Surely, bears feel the strength after taking support at 1.0620. Today there aren't scheduled publication of important statistics, so the data is unlikely to be a driver for the dollar. Markets will continue to be ruled by the positioning and reaction to companies statistics.

EUR/USD: A rise to 1.0740 is expected

On Monday, the euro trading ended slightly down. Despite falling to the level of 1,0620, eurobulls managed to partially restore the daily losses. The single currency fell against the dollar on the statements of the representative of the ECB Ewald Nowotny. He said that Brexit can lead to significant problems, and that the ECB will not discuss QE decrease until the autumn. The price in the American session returned to the level of 1.0709.
The ECB President Mario Draghi will have a speach today and Europe will publish preliminary data on GDP for the fourth quarter. The speaches of Draghi at the press conference after the ECB meeting usually has a strong influence.
On Tuesday it will begin a two-day meeting of the US Federal Reserve Open Market Committee. It is expected that the regulator will keep rates unchanged. The event is important for the markets, but it is unlikely to have a strong impact.
In this regard, the forecast for Tuesday is for decrease to the area of ​​1.0661 and a rise to 1.0740. According to the technical analysis of the intraday outlook: minimum for the day - 1.0662, maximum - 1.0740, closing - 1.0710.

The dollar is trading close to a 7-week low

The dollar is trading close to a 7-week low against a basket of other major currencies amid lingering concerns about the protectionist policies of Donald Trump.
The US Dollar Index, which shows the value of the dollar to a trade-weighted basket of six major currencies rose by 0.9% to 100.01 (after yesterday's low of 99.77 - the lowest value since December 8).
The decline of the dollar index reflects a concern about the uncertain Trump's economic policy, as well as fears that his protectionist stance can reduce corporate earnings and become a brake on economic growth.
On Wednesday, Trump confirmed plans to build a wall on the border with Mexico and has taken preparatory measures to combat illegal immigration.
The dollar rose against the yen: USD/JPY rose by 0.32% to 113.66, holding above a 7-week low of 112.51, recorded on Tuesday.
EUR/USD is down by 0.12% to 1.0737, close to a 7-week low of 1.0773 on Tuesday.
Pound updated 7-week high against the dollar. GBP/USD has risen by 0.21% to 1.2660.

The dollar fell because of concerns about Trump's protectionist measures

The dollar was held near seven-week lows in Asian trade on Tuesday under pressure from investors' concerns about the possible impact of protectionist position on trade of the US President Donald Trump.
The dollar index by 5.20 GMT increased by 0.1 percent to 100.070 after falling to 99.899 on Monday - the lowest level since Dec. 8.
The dollar against the yen gained 0.1 percent to 112.78, but earlier reached the level of 112.52 - the lowest level since 30 November, much below the maximum of 114.45, reached at night.
Trump on Monday formally brought the United States out of the Trans-Pacific Partnership Agreement (TTP), distancing America from its Asian allies. He also said that he intends to revise the North American Free Trade Agreement (NAFTA).
The negative impact on the dollar has also had a decrease in yields on US bonds. Yield on indicative 10-year Treasury bonds showed a biggest of more than two weeks in a one-day decline, as fears about the consequences of a tough stance of Trump on trade increased demand for safe bonds.
The euro fell by 0.1 percent to $ 1.0753, earlier reaching $1.0774 - the highest value since December 8th.

The dollar is losing ground after the speech of Yellen, investors are waiting for the inauguration of Trump

Dollar lost momentum on Friday as the speech of the Fed's Janet Yellen of the gradual rise of interest rates was less harsh than expected. Investors are watching for the upcoming inauguration of Donald Trump on Friday.
The dollar index fell by 0.10 percent by 5.55 GMT to 101.050 points. The US currency has lost about 0.2 percent for the week.
The dollar moved away from the peak after the speech by the US Federal Reserve chairman Janet Yellen, which came in the early trading in Asia.
Yellen said that US regulators should continue to slowly raise rates to preserve the economy from the low inflation and employment, so as not to damage the economic recovery, the Fed is keen to support.
Now investors expect the inaugural speech of Donald Trump, in which they will be looking for indications of upcoming changes.
The dollar fell against the yen by 0.04 percent to 114.81 yen, heading for weekly increase by 0.2 percent.
The euro gained 0.08 percent to $1.0673, securing growth after the European Central Bank statements. For a week the single European currency has strengthened by 0.3 percent.
The ECB said yesterday that they will continue the policy of negative interest rates and buying up assets to stimulate growth.
The euro briefly fell during a press conference of ECB President Mario Draghi, who spoke about the decaying inflation and the need to further esing in Europe.
The euro fell to $1.0589 during Draghi's speech on Thursday, but later recovered after the words of the head regulator about the absence of policy changes.

EUR/USD: The market is waiting for the speech of Mario Draghi

On Wednesday, euro/dollar closed lower. Before the performance of the US Federal Reserve Chairman Janet Yellen euro corrected to the balance line. After her speech the euro fell against the dollar to 1.0624. She said that the regulator intends to increase the base interest rate several times until 2019. At the same time she refused to specify the timing and the pace of the increase. She said that the decision will depend on the performance of the US economy. Nevertheless, the dollar rose after her performance.
On Wednesday, the mid trendline was broken. Thus, the "bears" have opened their way to the trend line at 1.0571. Meanwile, the  mark 1.0623 must be broken too.
On Thursday, the focus of market participants will be on the ECB meeting and press conference by Mario Draghi. In this regard, the direction of the pair will be determined by Draghi's rhetorics. After yesterday's fall before the ECB meeting the euro could continue its upward correction to 1.0659. If strengthening is faster, the pair could go up to 1.0675.

The dollar moved away from the lows, investors expect Yellen's performance

The dollar took a little breather on Wednesday after falling to a seven-week low against the yen, while investors awaited the speech by Fed's governor Janet Yellen devoted to monetary policy.
The US currency strengthened by 0.6 percent to 113.30 yen after passing the minimum of seven weeks at 112.57 yen. The Japanese currency strengthened seven consecutive sessions.
The dollar index, showing the dynamics of the US currency against six major currencies, amounted to 100.640 points by 5.45 GMT, adding 0.3 percent. On Tuesday, the dollar fell to 100.26 points, its lowest level since December 8.
The euro was down by 0.28 percent to $1.0683, breaking the day before the mark of $1.07195, which is the maximum value from December 8.
In his speech, Yellen on Wednesday may contain indications of the direction of US monetary policy.

The era of the strong dollar has already come (Part 2)

According to Reuters survey results, the main key European economic parameters, especially inflation and GDP, will remain more or less stable only if the elections do not bring with them different kinds of stress. So, expectations for the eurozone in the first and second quarters of 2017 suggest a 0.4% increase on a quarterly basis, and the average expansion of the regional economy for the year will be about 1.5%. A similar growth is expected in 2018. The inflation target for this year and the next one is 1.5%. This is still below the ECB's 2% planned inflation, but much better than what we have seen in the past few years.
The elections could slow these figures. This in turn will very likely impact on fiscal policy of the European Central Bank and, as a consequence, the rates and the euro situation. This long-term view. And without an analysis of the effects of the upcoming elections, it is clear that the year for the euro will be as difficult as the previous one. The era of the strong dollar has already come, and from where it will come the next support for the dollar will be clear already after 20 January.

The era of the strong dollar has already come (Part 1)

Euro/dollar moved up for three consecutive days. And if in the middle of the week the dollar weakened because of the speech by Donald Trump and the subsequent disappointment of speculators, by the end of the week the euro is looking for its own reasons for strengthening. The main trades in EUR/USD are around 1.0650. During the second week of January, the euro/dollar has risen in price by 1.2%.
In the mid-term for the main currency pair, however, nothing yet changed. It remains within the limits of 1,0339-1,0760. And there is no compelling reason to believe that the range will be broken in either direction until the end of January.
The coming year will be exciting for Europe, and not only because of the readiness of the United Kingdom to start Brexit procedure. Germany and France are preparing for the elections, and if we consider that the political chances can provoke significant imbalance in the society and in the economy, then this factor is not reset from the accounts.