The dollar goes into monetary policy

In the spring of 2018, the theme of trade wars overshadowed the main driving force of exchange rate formation on the Forex - the monetary policy of central banks. If in 2014-2016 the divergence in monetary policy of the ECB and the Fed pushed the USD index to 13-year highs, and in 2017 talk of normalization and convergence allowed the euro to strengthen by 14% relative to its main rival, then this year the EUR/USD pair entered the medium-term consolidation in the range of 1.215-1.255. Investors do not know what to cling to. The slowdown in the eurozone economy makes the European regulator a "dovish", and protectionism does mix all the cards.

The dispute between the US and China resembles a game of poker. Washington introduced import duties on steel and aluminum - Beijing responded with tariffs of $3 billion. The US raised rates to $50 billion - China accepted the challenge. Trump decided on $100 billion from above, knowing full well that he had more than $500 billion at his disposal. There is nothing to say to the enemy: the volume of US exports to the Asian country in 2017 was just over $130 billion. We will have to move to other areas. For example, talk about selling US Treasury bonds from the reserves of the People's Bank of China. I do not think that Beijing will not beat around the bush.

However, all this tragicomedy leaves the markets indifferent so far: the JP Morgan FX Volatility volatility index moves in a narrow range of 7.6-8% more than a month. The same thing happens with the yield of treasury bonds: an escalation of the trade conflict should lead to a reduction in the rates of the debt market and put pressure on the US dollar, but this does not happen. Such insensitivity of indicators indicates that investors do not know how to react to the factor of the trade war. Most likely, from the scoring of threats to their implementation will take several months, so that you can switch to something else. For example, the monetary policy of central banks.

Dynamics of the yield of treasury bonds and USD index

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And here everything is in favor of the "bears" for EUR/USD. The eurozone economy is slowing in the first quarter, which is facilitated by bad weather, and the flu epidemic, and a strong euro, and limited potential. Even a surge in March inflation can be explained by the Easter factor. Most likely, we are talking about the usual market noise, and in the future, HCPI will continue to be characterized by sluggish dynamics. If so, the ECB will remain a "dove" for a long time and will stick to QE until the last. The Fed, on the contrary, believes that under the influence of a fiscal stimulus, US GDP will accelerate during the remainder of the year. The central bank is ready to raise rates, which allows us to talk about divergence in monetary policy. The one that pushed the US dollar upwards in 2014-2016.

Technically, if the "bears" for EUR/USD manage to gain a foothold below 1.225, the risks of implementing the target by 113% on the pattern of the "Shark" will increase. In this scenario, the "Expanding Wedge" pattern will play, and the correction in the direction 1.209-1.2115 will continue.

EUR / USD, daily chart

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Global macro overview for 06/04/2018

On Friday morning, the US Dollar was valued at over 4.05 Turkish Lira. Previously, the USD/TRY exchange rate reached its historic maximum at 4.0657. Over the past 12 months, the Turkish currency has weakened against the dollar by 8.5 percent, and for three years lost as much as 36% of its value.

Looking at the long-term chart, one can come to the conclusion that the Turkish currency is actually on a permanent downward trend. But it intensified after the unsuccessful military coup of July 2016. The attempted coup proved unsuccessful, and as a result, President Recep Tayyip Erdogan carried out purges in the state apparatus, education, and media, including practically the Sultan rule in Turkey. At the same time, the Turkish economy is facing serious structural problems. Although the GDP growth rate is 7.3% (in Q4) and it may be impressive, the country is struggling with serious macroeconomic imbalances. The first symptom is the rapidly growing current account deficit, which in January deepened to USD 7.1 billion against USD 2.7 billion a year earlier. This means that Turkish enterprises and households are getting heavily indebted abroad. Secondly, investors are worried by the price rally, which in March amounted to 10.23% towards 10.26%. in February. CPI inflation at double-digit level has been in Turkey for over a year. And there are not very clear views about anything that could be improved in the near future. The Turkish central bank remains under strong political pressure not to raise interest rates.

Let's now take a look at the USD/TRY technical picture at the daily time frame. The market is still in the uptrend the recent high was made at the level of 4.0600. This might not be the end of the advance, as there is a Fibonacci extension target level located at 4.0850. The momentum remains strong, but first clues of a potential bearish divergence between the price and the momentum indicator are present.

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BITCOIN Analysis for April 6, 2018

Bitcoin is still quite bearish in nature having smaller candles recently, explaining the low market participants in the market. Due to the recent break below $7,000 price area, it is getting harder for speculators to keep an optimistic view on further momentum of bitcoin. Most of the social media like Facebook and Twitter have already banned the advertisement regarding cryptocurrencies and most of the countries including India are also trying to withdraw all kinds of support for the crypto industry. As for the current scenario, the price is expected to proceed lower towards $5,500-5,800 price area before showing any bullish intervention in the market. The Bullish Regular Divergence is still operational in the market whereas a certain push from the key level will provide confluence for the upcoming bounce off the area with a target towards $7,500 price area.

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Daily analysis of EUR/JPY for April 6, 2018

EUR/JPY

There is a weak "buy" signal on this cross, and it may become more significant when price begins to move further northwards. The EMA 11 is above the EMA 56, and the RSI period 14 is above the level 50. The possibility of price going upwards is stronger than the possibility of it going significantly southwards.

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There is now a Bullish Confirmation Pattern in the market, and that would become more important as price goes further northwards, reaching the supply zones at 131.50 and 132.00 very soon. A movement to the upside would mean bulls reign.

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Daily analysis of USD/JPY for April 6, 2018

USD/JPY

From the weekly low of 105.67, price has gained about 170 pips this week. Now above the demand level at 107.00, price can go towards the supply levels at 107.50 and 108.00. Any risk of pullbacks along the way may not take price below the demand level at 106.50, as price is expected to go further and further higher.

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The EMA 11 is above the EMA 56, and the RSI period 14 is above the level 50. There is a Bullish Confirmation Pattern in the 4-hour chart, and thus, price is expected to go further upwards, reaching other supply levels at 107.50 and 108.00.

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Daily analysis of USD/CHF for April 6, 2018

USD/CHF

This pair is trading in a bull market in the short-term. Price has risen significantly this week and it is above the support level at 0.9600, going towards the resistance level at 0.9650. When the resistance level is broken to the upside, the price would go towards another resistance level at 0.9700, which is the ultimate target for Friday or next Monday.

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The EMA 11 is above the EMA 56, and the Williams' % Range period 20 is in the overbought territory. There is a Bullish Confirmation Pattern in the 4-hour chart, and thus, the price is expected to go further upwards, irrespective of temporary pullbacks along the way.

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Fundamental Analysis of USD/CHF for April 6, 2018

USD has been the dominant currency against CHF recently which has led the price to be non-volatile with the bullish gains despite downbeat economic reports published in the US recently. Ahead of the upcoming macroeconomic reports on the USD side today, CHF has been pushing the price lower with the support of positive economic reports. Today, Switzerland's Foreign Currency Reserves report was published with an increase to 738B from the previous figure of 732B. The positive economic report encouraged some gains on the CHF side but it is expected to be quite temporary as US reports on the labor market could provide USD with solid support. Today, US Average Hourly Earnings report is going to be published which is expected to increase to 0.3% from the previous value of 0.1%, Non-Farm Employment Change report is expected to decrease to 188k from the previous figure of 313k, and Unemployment Rate is expected to decrease to 4.0% from the previous value of 4.1%. As for the current scenario, USD is expected to gain more momentum over CHF as the expectation of the high impact economic reports are quite optimistic. So, better than expected economic reports are sure to push the price much higher in the coming days.

Now let us look at the technical view. The price is currently residing above 0.96 price area from where it is expected to proceed higher towards 0.97 and later towards 0.9850 area. The bullish trend is still non-volatile and expected to be impulsive in the coming days as well. As the price remains above 0.94 area, the bullish bias is expected to continue.

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Bitcoin analysis for April 06, 2018

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The Bitcoin (BTC) has been trading downwards. As I expected, the price tested the level of $6.455. The cryptocurrency mining market in North America is facing a major consolidation as one of the biggest players is taking over another. The resulting combined company will be publicly traded and control over 21,000 rigs, consuming 28 MW of power with an ability to grow to over 90 MW. Technical picture looks bearish.

Trading recommendations:

According to the 30M time - frame, I found that the price did a successful breakout of the bearish pennant in the background, which is a sign that sellers are in control. I also found weak demand after the breakout, which is another sign of weakness. My advice is to watch for potential selling opportunities. The downward targets are set at the price of $6.289 and at the price of $5.935.

Support/Resistance

$6.754 – Intraday resistance

$6.440– Intraday support

$6.289 – Objective target 1

$5.936 – Objective target 2

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Analysis of Gold for April 06, 2018

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Recently, Gold has been downwards. The price tested the level of $1,319.50. According to the 15M time – frame, I found that sellers are in control and that buying looks risky. I also found a potential third wave is building and my advice is to watch for potential selling opportunities. The downward targets are set at the price of $1,308.60 and at the price of $1,293.85.

Resistance levels:

R1: $1,333.38

R2: $1,340.21

R3: $1,345.52

Support levels:

S1: $1,321.25

S2: $1,315.93

S3: $1,309.10

Trading recommendations for today: watch for potential selling opportunities.

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Breaking forecast 04/06/2018

Breaking forecast 04/06/2018

EURUSD: We are waiting for movement on the US employment report.

The main event of the last days - the "Trump Trade War - China" - is still taking a back seat. The US administration said on Thursday it was in high-level talks to find a compromise in the matter of balancing the trade deficit with China. Senior US officials from the Ministry of Finance and Trade Department are involved in the negotiations. The issue will be resolved within 60 days.

The markets have so far put off the issue of the "trade war", believing that there will be no worse option.

On the agenda - the report on US employment for March today April 6 at 12:30 PM London time. We expect strong data.

We sell the euro from 1.2215, stop at 1.2260, the profit is 1.2000.

Alternative: Buy on the breakthrough 1.2350, stop at 1.2305, profit at 1.2680.

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Trading plan 06/04/2018

Trade plan 06/04/2018

EUR/USD: We are waiting for the report on employment and traffic. The overall picture shows Trump raises rates

On Thursday, it seemed that the issue regarding Trump's trade war with China fend off, as US officials said they were having negotiations with China in an attempt to regulate the mutual increase in tariffs caused by Trump's demand to rise by $ 50 billion on Chinese goods, while the Asian country provided an immediate response.

However, Trump was not like that. On Friday morning, the reports said that Trump demanded new measures in response to the Chinese reaction to the rise of tariffs on the new $ 100 billion of Chinese imports. US officials clarified this also, that in the case of a new $ 100 billion, it will question the sum of goods value subject to a new taxation and not the sum of new tariffs.

Moreover, this indicates a new round of escalation. Further details provided in the afternoon. In addition, the US employment report will be issued today at 1:30 PM London time and we expect strong data. We are expecting for the strengthening of the dollar.

GBP / USD:

Buy only with a strong decline from 1.3700 or a breakthrough 1.4100

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

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GBP/USD analysis for April 06, 2018

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Recently, the GBP/USD pair has been downwards. The price tested the level of 1.3965. According to the 15M time – frame, I found that price is trading inside of the downward channel, which is a sign that sellers are in control. I also marked waves inside of the channel and I expect fifth wave to develope. My advice is to watch for potential selling opportunities. The downward projection for the fifth wave is set at the price of 1.3890.

Resistance levels:

R1: 1.4080

R2: 1.4155

R3: 1.4210

Support levels:

S1: 1.3948

S2: 1.3890

S3: 1.3815

Trading recommendations for today: watch for potential selling opportunities.

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Technical analysis of USD/JPY for April 06, 2018

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USD/JPY is under pressure and expected to continue its downside movement. The pair has fallen to levels below both the 20-period and 50-period moving averages and is striking against the lower Bollinger band, calling for acceleration to the downside. Downward momentum is further evidenced by the relative strength index, which is badly in the 30s. The intraday outlook has turned bearish and the pair is expected to sink further toward 106.85 before targeting 106.65. Only a return to 107.50 would bring about a bullish reversal.

Chart Explanation: The black line shows the pivot point. The present price above the pivot point indicates a bullish position, and the price below the pivot point indicates a short position. The red lines show the support levels, and the green line indicates the resistance levels. These levels can be used to enter and exit trades.

Strategy: SELL, stop loss at 107.75, take profit at 106.85

Resistance levels: 106.85, 106.65, and 106.30

Support levels: 108.00, 108.35, and 108.75.

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Technical analysis of USD/CHF for April 06, 2018

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All our targets which we predicted in previous analysis have been hit. USD/CHF is still expected to trade with a bullish outlook. The pair is heading upward, and is now challenging its resistance at 0.9660. A strong support base has formed around 0.9600, and should limit any downward attempts. Additionally, the process of higher highs and lows remains intact, which should confirm a bullish outlook. To conclude, as long as 0.9600 is not broken, likely advance to 0.9660 and 0.9680 in extension.

Chart Explanation: The black line shows the pivot point. The present price above the pivot point indicates a bullish position, and the price below the pivot point indicates a short position. The red lines show the support levels, and the green line indicates the resistance levels. These levels can be used to enter and exit trades.

Strategy: BUY, stop loss at 0.9600, take profit at 0.9660.

Resistance levels: 0.9660, 0.9680, and 0.9710

Support levels: 0.9575, 0.9555, and 0.9500.

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Global macro overview for 06/04/2018

In the US labor market report, market attention will again be on wage growth with expectations for a robust acceleration of 0.3%. The high rate of employment in the previous month was based on seasonal fluctuations in temperatures and now we are facing the risk of rebound, but this should not prevent the unemployment rate to drop to 4%. If high expectations are not met, the market will regard this as a confirmation of the good situation in the economy, but with no grounds for tightening the Fed's strategy, which will be positive for the risk appetite.

Employment increase by 313,000 in February was quite a surprise, it fell clearly above the average of the last 12 months (181,000), but the results were strongly disturbed by exceptionally warm weather, which according to the Fed's San Francisco branch, could have estimated about 90,000. Similar disturbances in January and February 2017 were reversed in the following months, and weather models suggest that last month's temperatures were below average. Taking as a reference point a solid ADP reading of 241,000 (where the weather element is not affected), the consensus before the NFP at 185,000 is conveniently set to take into account the correction for the weather. Each reading above 150,000 should be dropped due to weather-related disorders, while the result is above 200,000 it will be a positive sign that the high pace of economic activity will be maintained.

In February, the unemployment rate remained at 4.1% for the fifth month in a row, but with a high employment rate in recent months, the rate will very likely drop to 4.0%. If the rate remains at 4.1%, it will indicate that there are still underemployed manpower in the economy, which in the long run may hinder the acceleration of wages. However, it is unlikely that the reading out of the consensus would have a measurable effect on the markets.

Let's now take a look at the EUR/USD technical picture at the H4 time frame before the NFP Payrolls data are published. The market remains locked inside of the descending channel (dashed violet) and recently has made a new local low at the level of 1.2220. If the NFP data are better than expected, another slide towards the level of 1.2163 is expected. On the other hand, a worse than expected data will likely result in a temporary relief rally towards the level of 1.2345 again.

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Technical analysis of GBP/JPY for April 06, 2018

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GBP/JPY is expected to trade with a bearish outlook and continue its downside movement. The pair is facing the challenge of its major resistance at 150.70, which is expected to limit any upward attempts. A consolidation cannot be ruled out at the current stage, as the relative strength index is also turning down, and has broken below its neutrality area at 50. To conclude, as long as 150.70 isn't surpassed, look for a new decline to 149.85 and 149.55 in extension.

Chart Explanation: The black line shows the pivot point. Currently, the price is above the pivot point which is a signal for long positions. If it remains below the pivot point, it will indicate short positions. The red lines show the support levels, while the green line indicates the resistance levels. These levels can be used to enter and exit trades.

Resistance levels: 151.00, 151.40, and 152.00.

Support levels: 149.85, 149.9055, and 149.

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Trading plan for 06/04/2018

Tensions associated with the trade war are coming back with new comments from President Trump. The equity market is experiencing aversion to risk, but the currency market does not look nervous yet, because the attention stays anchored on the US labor market report.Futures contracts on the SP500 are losing 1%, although Nikkei drops by 0.2% in a more orderly manner. The Chinese market is still closed due to holidays, and the Hong Kong stock market makes up for Thursday's increases (+ 0.8 percent). USD/JPY initially dropped from 107.40 to 106.99 but managed to recover quickly. AUD, NZD and CAD are lower on a daily basis, but they distance themselves from session holes.

On Friday 6th of April, the event calendar is busy in important data releases, especially during the US session. The event of the day is the NFP-Payrolls data release, together with Average Hourly Rate, Unemployment Rate. Moreover, at the end of the trading day, FED Chair Jerome Powell will give a speech.

SP500 analysis for 06/04/2018:

Donald Trump ordered his administration to analyze the legitimacy of import duties from China worth an additional USD 100 billion. In a statement, Trump wrote that China has decided to do harm to American farmers and entrepreneurs, and China's response is "unfair". Trump also ordered the secretary of the economy to implement a plan to protect farmers' interests from the effects of Chinese activities. Presidential Trade Adviser Robert Lighthizer supported Trump's decision, defining it as responsible and correct. He added, however, that the additional duties would not be implemented until they had gone through the public consultation process. China responded to Trump's statement, recognizing the decision as violating the principles of international trade, but Beijing will defend its interests and is not afraid to go to a trade war, although it does not want it.

Let's now take a look at the SP500 technical picture at the H4 time frame. The bulls have managed to break through all of the intraday resistances and now the price is hovering just below the last technical resistance before the gap zone. The immediate support is seen at the level of 264.70, so if the NFP Payrolls data will beat the expectations, then the price might spike higher to fill the gap at the level of 270.30.

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Bitcoin analysis for 06/04/2018

The Central Bank of Russia is considering using its Masterchain software to send SWIFT financial messages under the Eurasian Economic Union (EAEU). The Russian FinTech Association, established under the supervision of the central bank, successfully carried out a trial of software based on Ethereum in 2016 and completed the final version in 2017. "We are actively discussing and we are exploring several high-quality technologies, including Masterchain. [...] I think we will discuss options for this project this year."- said Olga Skorobogatova, first deputy president of the Central Bank of Russia. Skorobogatova explained that Masterchain is being considered in the context of a broader analysis of how Blockchain could create a transnational payment infrastructure in EAEU, allowing the Member States to circumvent existing payment systems. The bank intends to first launch its platform in Russia and then implement it as a system covering the entire EAEU.

The Central Bank of Russia is actively involved in the Blockchain space and cryptocurrencies, with the latter being particularly rigorous. In 2017, the bank issued warnings about the risks associated with investments in cryptocurrencies and supported efforts to block websites selling digital currencies in that country.

Let's now take a look at the Bitcoin technical picture at the H4 time frame. Despite the initial breakout through the short-term descending trend line, the price was capped at the nearest technical resistance at the level of $7,500 and returned back to the local lows again. Any violation of the technical support at the level of $6,400 will lead to the test of the recent swing low at the level of $5,820.

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Fundamental Analysis of AUD/USD for April 5, 2018

AUD/USD has been volatile and corrective for a few days now. Currently, some bearish pressure is being observed, pushing the price below 0.77 area. Despite positive economic report today, AUD failed to gain momentum over USD whereas the market is currently traded with the bearish bias. Today, Australia's AIG Service Index report was published with an increase to 56.9 from the previous figure of 54.0 and Trade Balance report was published better than expectation of decrease to 0.68B but resulted to 0.83B which previously was at 0.95B. On the USD side, the economic reports today did not live up to the expectation. However, ahead of the upcoming high impact economic reports like NFP, Average Hourly Earnings, and Unemployment Rate reports the market seems quite biased on USD side. Today, US Unemployment Claims report showed a significant increase to 242k from the previous figure of 218k which was expected to be at 225k, Trade Balance report showed a greater deficit to -57.6B from the previous deficit of -56.7B which was expected to be at -56.9B and Natural Gas Storage report was published as expected at -29B decreasing the deficit of -69B. As for the current scenario, apart from the Natural Gas Storage reports, the US failed to provide upbeat economic reports to push its gains, whereas certain increase in Unemployment Claims indicates a higher probability of worse outcome of the upcoming macroeconomic reports tomorrow. If the US manages to provide better economic reports as the market sentiment suggests, further bearish pressure is expected, whereas USD is expected to dominate AUD further in the coming days.

Now let us look at the technical view. The price is currently residing below 0.77 price area with confluence to the dynamic level of 20 EMA as resistance where it is expected to proceed much lower if we see a daily close below 0.77 price area. As the price remains below 0.7750 area, the bearish bias is expected to continue further.

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