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Business / Finance

THE EUR/USD. Bulls pairs counterattack: the fed could cut rates by 50 points

RSS feed for Forex Review 04.09.2019 at 16:53

Daily analytical reviews of the Forex market

The Pair Euro dollar yesterday reaching a new year (and also two-year) price low, reaching 1,0926, but today trying to gain a foothold in the 10th figure. And although the turning point speech does not go yet, a couple can develop sufficient scale correction, if the rumors are relatively aggressive easing in monetary policy will continue to increase. The dollar index, which recently was in the area of 99 pips, gradually "came down from heaven", reflecting the General negative dynamics. The European currency, in turn, takes the character, even though she is under the weight of fundamental problems. Given the contradictory fundamental background, correctional growth of the eur/usd pair is given to bulls with great difficulty. And yet traders clearly discouraged the intentions of the fed, whereas the intention of the European Central Bank discussed a long time ago.

However, any explicit intent of the Federal reserve while that is too early. His point of view was expressed by only a few members of the fed, which, however, have the right to vote this year. Their position is diminished considerably relative to previous performances. The same James Bullard, consistently acting for monetary policy easing, at the beginning of July declared that "rates are at an optimum level," and there is no need in further reduction of no. But yesterday, he stunned the market with a proposal to reduce the rate by 50 basis points. In this case, according to Bullard, the regulator "adequately react" to the current situation. According to him, the bids are "too high", so the Fed should act decisively, and don't move "small steps".

the Position of Bullard was unexpectedly supported by the head of the Federal reserve Bank of Boston President Eric Rosengren. He also this year has a vote in the Committee, so his comments have aroused much excitement in the market. Rosengren expressed concern over the inversion of the yield curve and the weakness in the global economy. And although he has not voiced any specific values in the context of the prospects for interest rates, however, noted that the Fed should resort to "aggressive measures", if voiced, the risks begin to materialize.

In this context, tomorrow's data on the US labor market has acquired a special significance for the U.S. currency. Nonfermi usually support dollar bulls, so if the key performance indicators fail traders grinbek extends its downtrend, as the chance of a 50-point rate cut at the September meeting will increase. According to preliminary estimates, data on the labor market again will support the American currency, but the optimism of traders may remain contained due to weak growth in wages. So, the unemployment rate should remain at its lowest level of 3.7%, with fairly significant growth in the number of employees (+160 thousand). But here a separate line it should be noted the rate of growth of average hourly wages. Experts expect the slowdown of the indicator in annual terms, it should be reduced to the three-percent mark (after reaching 3.2 per cent). If the declared numbers are confirmed, then the dollar will get some support, but weak wage growth can lubricate the overall positive picture.

If the release as a whole will be released in the "red zone", the panic about the possible outcomes of the September meeting of the Federal reserve will only intensify, which will undoubtedly affect the dynamics of the pair eur/usd.

By the way, the position of the U.S. currency yesterday fell not only because of the "dovish" comments from fed officials. Traders had quite a strong reaction to the publication of the ISM manufacturing index, which fell to three-year lows. This figure was below the 50 level, indicating that the slowdown in this sector of the economy. In August it dropped sharply to the level of 49.1 points, despite the positive forecasts of experts. This fact put additional pressure on the us dollar, fueling the interest to buy eur/usd.

the Indirect the pair was supported and political events in Italy. In Rome, the two parties finally reached a coalition agreement, approving the composition of the new government, which will be headed by Giuseppe Conte. He was Prime Minister and the political crisis in the country, so this news was welcomed by investors. "Coup" Matteo Salvini ended in failure – although if he had sought re-election, it would have probably been at the helm of the government. Question Brekzita also contributed to the process of corrective recovery couples. At the moment the UK Parliament is still considering a bill that would effectively block the implementation of the "hard" scenario, at least 31 October. This decision, of course, does not solve the problem in General, but foreign exchange market still will sigh with relief and stop counting the days until the "hour IKS".

So, tomorrow Nonfermi can either enhance correctional growth of the pair to either return the price to the base 10-figure with subsequent testing of the 9-th price level. To be precise, now the question is as follows: either of a pair of bulls at the end of Friday will be able to pull the price above the 11 figure (in the range 1,1090-1,1210), or the South trend will continue – by the middle of the seventh figure, where there is the most powerful level of support 1,0750 (the lower line of the Bollinger Bands on the monthly chart).

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