Yesterday's trading was characterized by the weakening of the dollar in the world markets. At the same time, if in USD/JPY and USD/CHF pairs such dynamics can be explained by the flight of investors from risk against the background of the collapse of the US stock market, the weakening of the dollar against the euro and the British pound seems to me have no a fundamental basis for that. The flow of positive news on Brexit is reminiscent of a carrot that looms in front of a donkey and makes him run forward. All messages related to the negotiation process for the UK exit from the EU are currently just statements by a number of officials, whose main task is to calm the markets. Till today, no real results have been achieved, and the “X” hour is getting closer and closer. In addition, in my opinion, the sharp decline in stock indices around the world, as a reaction to the high yield of US government bonds, indicates an increasing probability of strengthening of the US currency in the near future. The exceptions are the currency pairs mentioned above with the presence of traditional defensive assets (Japanese yen and Swiss franc). The technical picture of the market continues to be replenished daily with signals of a corrective nature, which reinforces the point of view that the supporters of the US dollar will soon become a period of superiority.
Today in the afternoon, the US data unit about consumer inflation for September is published. Yesterday's data on production inflation turned out to be somewhat worse than participants' expectations, which contributed to the weakening of the dollar during the evening hours of trading. Today, it is also predicted that the actual values of inflation indicators will be somewhat lower than expected, which may locally lead to another wave of dollar sales. However, these statistics will only delay for a short time the beginning of a confident rise of the American currency.
On Wednesday, the EUR/USD quotes continued to rise. As a result, prices reached the area of 1.1560-1.1570, which is a local resistance zone. In early October, it was namely from this area where began a decline in prices, which continued until Monday this week when prices fell to the level of 1.1431. At the same time, the formed convergence between the local lows of prices and the corresponding values of technical indicators pointed to the probability of price growth, which was recorded in the last few days. Today, it is predicted the resumption of negative dynamics and a new attempt to update the local lows of prices. This opinion is based on the increase in turbulence in the world financial markets, which traditionally leads to a weakening of the European currency relative to its American counterpart. The differential in the monetary policies of the regulators and the correlation of the rates of economic development of the EU and the USA also contribute to that.
The support zone today is the area 1.1515-1.1525.
Resistance is in the range of 1.1575-1.1585.
In the last hours of Wednesday quotes GBP/USD pair broke up 1.3200 and reached this morning the area of 1.3230-1.3240. The positive dynamic was fueled by the news flow on Brexit, according to which the Parties are steadily moving forward to achieve the long-awaited Agreement. As noted above, at the moment no real results have been achieved in the negotiation process, which suggests some artificiality in this information flow. From a technical point of view, the update of local maximum prices is accompanied by the formation of corrective signals. On the GBP/USD H1 chart, a yellow marker shows a divergence between the price highs and the corresponding MACD indicator values. Based on this, today the quotes are expected to decline to 1.3150.
The support zone today is located in the 1.3130-1.3150 area (green oval).
The resistance zone is in the range 1.3255-1.3275 (red oval).
The collapse in global stock markets led to a drop in risk appetite of investors. This circumstance contributed to an increase in the rate of decline for the USD/JPY pair, which fell to the level of 112.00 on Thursday morning. Thus, the pair continues to implement a set of signals of technical analysis, indicating the probability of a significant strengthening of the Japanese yen.
Today, the continuation of negative dynamics is predicted, although the rate of quotations’ decline according to closing the support around 111.00 mark, will significantly reduced. In the following days, lateral movement is expected. The pair will experience the effects of two multidirectional factors: the projected strengthening of the US currency in world markets and the use of the Japanese yen as a protective asset in the background of growing nervousness of the market players.
The support zone is the range 111.00-111.20 (green oval).
The zone of resistance is located in the area 112.70-112.90 (red oval).
The achievement of quotes for the pair USD/CHF of support in the area of 0.9865-0.9875, next to which is also the 200-period MA on the H1 time frame, suggests a stabilization of the situation. Today, the side dynamics of prices is foreseen. In the following days, amid rising turbulence in world markets, it is expected to resume the negative dynamics of quotations. This will contribute to the strengthening of the Swiss franc, traditionally used as a protective asset.
The support zone is in the area of 0.9865-0.9875 (green oval).
Resistance zone is present in the range 0.9900-0.9910 (red oval).
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