The Central Bank of Australia signals a decrease in rates in June

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The Central Bank of Australia will consider lowering interest rates next month to support the economy, head of the Central Bank Philip Lowe said, calling on the recently re-elected government to make its contribution by reducing income taxes and increasing spending. "The lower rate will promote employment growth and bring closer the time when inflation will meet the goal. Given these factors, at our meeting in two weeks, we will consider the issue of lowering interest rates," said Lowe. The reduction will be the first after the Reserve Bank of Australia (RBA) in August 2016 lowered rates to a record low of 1.50%.

Investors and analysts welcomed this move, saying that it could help revitalize the housing market in the country. The main result of the changes should be a significant increase in the maximum volume of loans for the purchase of real estate. Australian economic growth has slowed to 0.8% year on year, and there are signs that the recession will continue. Inflation also remains below the RBA target range of 2-3%, while the unemployment rate has risen to an eight-month high of 5.2%. Lowe pointed to the slowdown in household consumption as the main cause of the economic downturn. The head of the Central Bank called on the government to help accelerate economic growth, including through additional fiscal support, infrastructure spending and changes in government policies to increase business investment.

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The dollar will continue to rise, the euro and the "Aussie" under pressure

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The dollar does not plan to leave the recently occupied 2-week maximum in the near future, support for the currency provides the status of a safe haven amid growing concerns that trade tensions between the US and China may escalate after Washington's statements about Huawei. The dollar has established itself as a safe haven, it is in high demand when stocks fall and market volatility increases. In addition, a rebound in the yield of US Treasury bonds is another factor supporting the dollar. Given that the Fed did not give clear hints of a rate cut this year, the recovery in yield may continue for some time.

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Recall, Fed Chairman Jerome Powell said that it is too early to talk about the impact of trade conflicts on monetary policy. The yield on 10-year Treasury bonds rose to an eight-day high of 2.428%, while a few days ago the yield fell to 2.354%, its lowest level since March 28. Currently, among industrialized countries, only Italy has a higher rate than the United States. In such conditions, traders have almost no other choice but to turn to the dollar.

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The euro fell to $1.1165 and is likely to feel downward pressure until the end of the European parliamentary elections scheduled for May 23-26. The Australian dollar fell by 0.25% to $0.6891, its growth was stopped by a statement from the head of the Reserve Bank of Australia, Philip Lowe, that the Central Bank will consider reducing interest rates at its policy meeting in June. The decline will be the first since August 2016. The Australian added almost 0.6% a day earlier after the unexpected victory of the country's conservative government in elections. Investors evaluated the economic policies of the opposition Labor Party as less favorable to business, and the unexpected defeat of the Labor Party led to a rally in Australian markets.

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Technical analysis of GBP/USD for May 21, 2019

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Overview:

The GBP/USD pair continues to move downwards from the level of 1.2905. This week, the pair rose from the level of 1.2905 to a top around 1.2800 and it set around the spot of 1.2800. The first resistance level is seen at 1.2905 followed by 1.2963 , while daily support 1 is seen at 1.2798 (38.2% Fibonacci retracement). According to the previous events, the GBP/USD pair is still moving between the levels of 1.2700 and 1.2610; so we expect a range of 90 pips in coming hours. Furthermore, if the trend is able to break out through the first support level at 1.2662, we should see the pair climbing towards the double bottom (1.2436) to test it later. Therefore, sell below the level of 1.2800 with the first target at 1.2610 in order to test the daily resistance 1 and further to 1.2436. Also, it might be noted that the level of 1.2436 is a good place to take profit because it will form a double bottom. On the other hand, in case a reversal takes place and the GBP/USD pair breaks through the resistance level of 1.2905, then the stop loss should be placet at 1.2930.

The material has been provided by InstaForex Company - www.instaforex.com

Overview of GBP/USD on May 21. The forecast for the "Regression Channels". The collapse of the pound will continue this week

4-hour timeframe

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Technical data:

The upper linear regression channel: direction – down.

The lower linear regression channel: direction – down.

The moving average (20; smoothed) – down.

CCI: -110.1798

The pound spent the first trading day of the week in absolute calm, and the bulls did not have enough strength even to start the correction against the background of a complete lack of macroeconomic events. Thus, the conclusion suggests itself, there are currently no bulls in the Forex market for the pair GBP/USD. Unfortunately, there are no new data on the topic of Brexit now either. Theresa May announced a "new and bold" proposal to Parliament, however it is unknown when it will be announced. It is only known that a new vote on the "deal" should take place in early June, that is, in two weeks. Meanwhile, the pound continues to depreciate, because the patience of traders banal ended. Three years after the referendum, Theresa May has been actively negotiating with the EU for the last year, but she hasn't been able to agree on a "deal". Local elections in the UK have shown that Theresa May and her party believe less and less of the electorate. And if earlier, the pound often grew on the expectations that the government of Theresa May will still be able to settle all the differences between the Parliament and the European Union, now there is almost no hope. But on the horizon looms the "wonderful" prospect of a second referendum, which the Parliament itself can initiate, if, for example, the fourth attempt to accept Theresa May's agreement fails.

Nearest support levels:

S1 – 1.2695

S2 – 1.2634

S3 – 1.2573

Nearest resistance levels:

R1 – 1.2756

R2 – 1.2817

R3 – 1.2878

Trading recommendations:

The pair GBP/USD continues its downward movement. Thus, short positions with targets at 1.2695 and 1.2634 are now relevant, before Heiken Ashi's indicator turns to the top, which will indicate a turn of upward correction.

It is recommended to consider long positions after consolidation of the pair above the moving average with the targets at 1.3000 and 1.3062. However, at the moment, there are almost no bulls on the market.

In addition to the technical picture should also take into account the fundamental data and the time of their release.

Explanation of illustrations:

The upper linear regression channel – the blue line of the unidirectional movement.

The lower linear regression channel – the purple line of the unidirectional movement.

CCI – the blue line in the indicator regression window.

The moving average (20; smoothed) is the blue line on the price chart.

Murray levels – multi-colored horizontal stripes.

Heiken Ashi is an indicator that colors bars in blue or purple.

The material has been provided by InstaForex Company - www.instaforex.com

Overview of EUR/USD on May 21. The forecast for the "Regression Channels". The calendar is empty but the US dollar still

4-hour timeframe

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Technical data:

The upper linear regression channel: direction – down.

The lower linear regression channel: direction – up.

The moving average (20; smoothed) – down.

CCI: -99.2453

The minimum correction of the EUR/USD pair ended near the Murray level of "-1/8" - 1.1169. It can already be noted that the indicator Heiken Ashi has turned down, which means the bears are ready for new sales of the euro. Thus, the short-term trend on the 4-hour timeframe is not too strong yet, and the euro, as we noted earlier, is likely to fall to the Murray level of "-2/8" - 1.1108. In fundamental terms, the currency market is now completely calm. In principle, this is noticeable even at the minimum volatility of the euro/dollar pair in recent days. Today, neither the European Union nor America will again have an important macroeconomic publication. Thus, traders can only rely on technical factors that clearly point down when making trading decisions. Donald Trump, who was recently the main newsmaker, turned his attention to Iran, so there is no new information on the topic of trade wars at the moment either. The bottom line is that we have a confident and moderate increase in the US dollar, which Trump most likely wants to influence exclusively through the Fed's monetary policy, on which he has no influence. Accordingly, there will be new attempts to put pressure on Jerome Powell to reduce the key rate.

Nearest support levels:

S1 – 1.1108

Nearest resistance levels:

R1 – 1.1169

R2 – 1.1230

R3 – 1.1292

Trading recommendations:

The EUR/USD currency pair continues to move down and overcome the level of 1.1169. Thus, the sell orders remain relevant with the target of 1.1108 until the new reversal of the Heiken Ashi indicator to the top.

It is recommended to consider short positions on the euro/dollar pair very carefully and with small lots not earlier than fixing the price above the moving average line with the first target of 1.1230.

In addition to the technical picture should also take into account the fundamental data and the time of their release.

Explanation of illustrations:

The upper linear regression channel – the blue line of the unidirectional movement.

The lower linear regression channel – the purple line of the unidirectional movement.

CCI – the blue line in the indicator window.

The moving average (20; smoothed) is the blue line on the price chart.

Murray levels – multi-colored horizontal stripes.

Heiken Ashi is an indicator that colors bars in blue or purple.

The material has been provided by InstaForex Company - www.instaforex.com