Bears rule: the market on Friday found no reason to rejoice

On the evening of Friday, the US dollar lost against the euro and let it grow. The main currency pair is above 1.1720. The risk for the euro is Italy with its political imbalance, besides some of the politicians again mention the possibility of the country's exit from the euro area - this is not the driver at which the single European currency can rise in price.
In oil, the "bulls" are trying to win back part of the weekly sales, but in the last couple of weeks, no one has gone up for black gold effectively. A barrel Brent opens the week with worth about $73.07, the resistance is at $73.50 and $73.75 respectively.
The gold closed last week near historically low levels, at a price of $1,233.60.

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.

The ECB ends with incentives at the end of the year, the euro collapses

The ECB was fully expected to keep its short-term interest rates unchanged. What the bank surprised, however, from its meeting in Riga, was postponing the end of the bond repurchase program.
The bank hinted that "quantitative easing" or incentives would only end at the end of the year. The majority of market participants were counting on ending the stimulus in October or at the latest in November.
The European Central Bank will continue to buy eurobonds for €30 billion a month until September, as previously planned.
From next October, however, purchases are expected to be halved - up to 15 billion euros, but on the assumption that economic data confirms the 2% inflation forecast by the financial institution.
Overall, the results of the Bank's meeting were accepted by market participants as too weakly aggressive, not meeting market expectations before. Investors reacted violently by selling the euro against the dollar. The single currency fell to trading levels at about 1.1630 late at night, or about 2% below its price yesterday.

Nomura: Shorten the dollar in the summer

Temperatures are rising, and hence the tensions in foreign exchange markets. Japan's largest financial institution, Nomura Holdings Inc., has one offer for currency traders. And it is - to shorten the dollar in the summer.
The financial institution is of the opinion that a short dollar may be a good idea for the next three to four months. The recommendations are to shorten the dollar against the yen and the euro.
Since January, green money has been the strongest base currency, backed by Fed's rising interest rates.
Yesterday, the Fed kept the level of interest unchanged, warning that inflation was almost at the target level. Nonetheless, Nomura is of the opinion that the interest rate increase, which was not implemented yesterday, may begin to slow down.
And in an environment of expectation of ending the incentives from other leading banks around the world, the dollar may begin to decline compared to other major currencies, Nomura said.
Together with rising US inflation, Nomura believes that further interest rates, albeit at a slow pace, will have a very negative impact on the bond market.

Fed kept interest rates unchanged

The Fed kept the interest rate unchanged yesterday, but signaled that the inflation target was reached. Thus, the reserve, though disappointing investors expected an increase in interest rates at this meeting, opened its way to a June increase in interest rates.
The dollar initially declined, but subsequently recovered its losses. The euro returned at trading levels below 1.2000, with the pound continuing with its exceptionally strong impairment. Early this morning, a pound is exchanged for 1.3595 dollars.
The renewal of the Fed's inflation target is a major step after nearly six years in which consumer price growth in the world's largest economy is below the target of 2%.
The Fed also commented on the weak recent data on the labor market, saying labor market activity was slowing down, but it has performed well over the past few months.
In any case, at the next meeting on June 12-13, the Fed is expected to raise interest rates by 25 basis points after not doing so yesterday. Or, the market has bet almost 100%, that we will see a rise next month, unless something really dramatic happens.

Analysis on pound

While the pound remains below 1.3950, it is vulnerable to further downturn, but if it breaks above this important level, it can expect more substantial recovery. Negotiations on the withdrawal of the UK from the EU are not going well, as the parties are still unable to reach an understanding on the single market, the customs union and the border between Ireland and Northern Ireland. Last week, there was no progress, and neither side is going to step back. The next important date for negotiations is March 22, when EU leaders will meet in Brussels to sign an agreement on the beginning of the transition period. They will also discuss the basic principles of conducting further negotiations on a number of issues, including trade.
The British economic data was not bad: activity in the service sector accelerated, judging by the latest index, and although the trade balance deficit has slightly increased, the volume of industrial production fell back at the beginning of the year. As there will be no fresh data in the UK this week, the GBP outlook is entirely dependent on the demand for the euro and US dollar. I expect that EUR/GBP will continue to fall in price.

The euro confirms its status as a "rescue island" (2)

Eurozone interest rates are still close to their record low, and the euro has to break the psychological limit of $1.20.
However, the general attitudes of the market are that the ECB will hardly be able to find justification in order to continue to maintain its incentives for the economy.
At the end of last week, Mario Draghi said wages should start rising, which would help inflation to move to the target of 2%.
For the last week, the euro rose by more than 1% to $1.1795. Bloomberg analysts' expectations are for levels of 1.22 dollars per euro next year and 1.25 dollars in 2019.
Analysts at Goldman Sachs Group Inc. predicted that the euro would rise to 1.20 over the next 12 months.

The euro confirms its status as a "rescue island" (1)

The European currency, which just a few years ago was synonymous with political instability and speculated whether it would ever exists, attracts a large number of buyers at a time when risky assets around the world are being sold out.
Part of this is predetermined by the focus on "rescue assets" and the improving state of the euro area economy and inflation.
The rise of the euro is a reality, despite the "backwards direction" of the ECB's incentives. Mario Draghi has said several times that we need to see inflation first before a more serious normalization of interest rate policy.
And while investors do not plan to raise interest rates from the ECB, at least until 2019, according to experts, improving the economic situation on the "old continent" is hard to ignore.

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 euro area economy remains stable

The economy of the eurozone has kept its strong performance since the beginning of the year, with good performance stimulating companies to recruit new staff at the fastest pace in ten years.
The PMI index for manufacturing and services fell to 55.9 in October, compared to 56.7 in September, according to IHS Markit.
And although the indicator has fallen to the lowest level in two months, the rate of new job in the industrial sector has risen to the highest level since 1997.
Good data comes true shortly before the ECB's meeting this week, which is expected to cut its record-breaking stimulus to the economy.
Currently, the ECB buys back assets worth 60 billion euros, which are expected to be reduced by between 20 and 30 billion dollars from the beginning of next year.
And while inflation is still far below the expectations of the central bank, the first steps towards reducing incentives are expected to be released shortly.

The dollar stops with its growth

The dollar and interest on US bonds are on track to end their four-week rise after several Fed officials have expressed fears of inflation. This reduced the expectations for another US interest rate hike this year.
The euro has risen by about a cent above its seven-week minimum, reached in last Friday.
The pound has appreciated against other major currencies, following strong export growth in the country over the past month.
The appreciation of the British currency was also prompted by the speculation that Europe would offer the UK a two-year transition to leaving if Britain respects its financial obligations to the union.
The yen rose after the news of a slight earthquake as a result of North Korea's nuclear attempts. According to South Korea, however, the earthquake was the result of natural forces.

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 pound has stabilized after better sales data

The pound continued its appreciation against the euro after better-than-expected retail sales in the UK in July.
The British pound cut off its five-day drop against the single currency after it became clear that retail sales rose by 0.3% on a monthly basis, against an expected 0.2% growth.
The results become a reality day after it became clear that Britain's unemployment rate has fallen to its lowest level since 1975, and salaries has seen higher than expected growth.
The euro fell by 0.2% against the pound to 0.9109 after adding 0.9% over the previous five days to Wednesday.
Meanwhile, the pound has stabilized against the dollar as well, trading at 1.2890 levels after having previously reached the lowest values of 1.2842 or levels unseen since July 12.

The euro falls after ECB meeting

The euro has fallen, along with European indexes since the last ECB meeting. It has been expressed by officials that the euro may be too "hot". US dollar futures fell and the dollar rose.
The index, tracking the performance of the major European companies - the Stoxx Europe 600 Index momentarily changed its direction of decline, but subsequently reverted to a negative territory.
Some market observers think the ECB may postpone its plans to end monetary stimulus and normalize its interest rate policy beyond September.
At this stage, the market predicts that this will happen at the forthcoming meeting in September. It was these expectations, which also triggered the strong growth of the euro against the dollar and other major currencies.

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.

Draghi appreciated the euro

The euro has appreciated, and US bonds have fallen, as ECB chief Mario Draghi has hinted that inflationary deterrents are temporary. This was accepted by market participants as a serious hint of the forthcoming normalization of the ECB's interest rate policy.
Interest rates on 10-year bonds rose by 3.7 percentage points to 2.175 percent. Bonds on two-year bonds added 2.4 basis points to 1.377%, while 30-year-olds rose by 3.3 basis points to 2.731%.
Draghi said a series of factors delayed the inflationary process, but they are generally temporary and should not cause inflation to deviate from the medium-term.
Market participants, however, read in Draghi's comment a signal for normalizing interest and monetary policy. Monetary incentives in the euro area are scheduled to end in December. It is entirely possible that they will not be prolonged beyond that period.
Interest rates on European government bonds also increased. 10-year German bonds rose by 6.4 basis points to 0.311 percent, while 10-year French bonds rose by 7.7 basis points to 0.684 percent.

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.

Forex forecast for EUR/USD for April 17 - 21, 2017

According to poll amongst forex analysts and looking at techical picture, the forecast for EUR/USD for the next week looks as follows:
Both analysts, and technical analysis, based on the oversold pair EUR/USD, last week expected its rebound up, which actually happened. Infact, the strength of the bulls in this case was enough only to raise the pair to a height of 1.0690 (instead of the expected 1.0750), after which it fell to the support zone around 1.0610.
For the next week, most analysts (60%), supported by almost 90% of the indicators, are still on the side of the bears, expecting the pair fall to the 1.0500 zone. The alternative point of view, together with 40% of experts, is presented on the graphical analysis on H4. In their view, the pair is moving in the medium-term upwards channel, which began in December 2016, and it will first rise to the level of 1.0690, and then 130 points higher - to a high of 1.0820.