Global macro overview for 26/02/2018

Calm Monday trading as markets awaits Powell hearing

The rebound on the Asian stock markets following the optimistic end of the last week on Wall Street brings stable trading in currency markets with a mild weakening of the US Dollar and the strengthening of the emerging markets. Gold is trying to rally, Crude Oil remains stable.

The most important event of this week is the hearing of Fed Chairman J. Powell before the Financial Services Committee of the House of Representatives ( scheduled for Tuesday at 03.00 pm GMT) and some important data from the largest economies. This will be Powell second public appearance after taking over the Fed presidency after J. Yellen.

The Fed's rate hike at the March 21 meeting is practically a foregone conclusion, but the market has not yet fully discounted it. Meanwhile, in economist discussions, there are even possible 4 hikes of 25 basis points in the whole of 2018. From the point of view of the US Dollar, higher interest rates have so far no positive impact on its value. The shape of yield curves and differences in interest rates on the long-term US and German government bonds are more important in this respect. In recent days the advantage in this aspect is again getting the American currency. A series of weaker readings from the Eurozone economy indicating some inhibition of the recovery dynamics at the beginning of the year moves the players' attention to profits from simpler, "certain" investments, for which it is certainly the generation of differences in interest rates (carry trades).

Let's now take a look at the EUR/USD technical picture in the H4 time frame. The economists expect that at least until the next Fed meeting the US Dollar will be making up for losses to the EUR (minimum target: 1.21) and other currencies. So far at the H4 time frame, the market has bounced from the golden trend line support and currently is heading towards the nearest technical resistance at the level of 1.2366.The momentum is pointing to the upside but still remains under its fifty level, so the rally might be only a temporary corrective bounce.

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