The dollar is declining, but it's temporary

The results of the EU summit were positive for the single European currency, which soared to news about the forum's achievement of some agreement which satisfied all 28 countries on the updated migration policy.

The news from the EU summit instilled optimism in investors thanks to the hopes that resolving the migration crisis will strengthen the unity of the association among 28 countries and allow it to concentrate on solving economic problems. Indeed, on the wave of this news, the main currency pair of Eurodollars increased significantly, having played it. And while the details of the agreement are unclear, we believe that the strengthening of the euro is still a local, speculative nature. The beginning of the liquidation of the migrant crisis is good news, but the euro does not yet have any significant reasons for a global upward turn. It is the reasons for the fundamental nature that could allow the markets, like a year ago, to buy it.

The main problem of the euro is the cautious position of the ECB regarding the change in the monetary policy. After almost one-year growth against the dollar, the euro in recent months has significantly surrendered its position, as the market has already outlined a previously forgotten trend of discrepancies in the interest rates of the Fed and the ECB, which is clearly not in favor of the euro. If the European regulator signals that it is not going to hurry in stopping incentive measures, as well as raising interest rates, the Fed has frankly pointed out that two more interest rates should be expected in total to a level of 2.50% this year.

Given this state of affairs, we believe that the local weakening of the dollar is a temporary phenomenon and occurs on the wave of fixing profits previously obtained on its purchases. While our general view on its strengthening is still in force. We prefer buying the dollar on its significant decline, since the negative factor of trade wars have not disappeared anywhere and will not only remind us of itself. In the meantime, we can expect an increase in the limited demand for the risk of buying shares in companies, commodity and raw materials against the background of the technical overbought dollar and the reduction of tensions in world markets.

Forecast of the day:

The USD/CAD pair is falling, breaking the 1.3265 mark on the wave of rising crude oil prices and easing tensions in financial markets, which contributes to the demand for risky assets. It is likely that after some recovery, it will continue to fall to 1.3150-55.

The NZD/USD pair adjusted higher against the background of a local weakening of the US dollar, but most likely this will be a temporary phenomenon and it will resume the decline to 0.6680.

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* The presented market analysis is informative and does not constitute a guide to the transaction.

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