China will increase economic stimulation in 2019

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China announced its intention to increase the monetary and fiscal stimulus in 2019. The monetary policy of the Celestial Empire will maintain a balance between tightening and softening.

The authorities announced that next year, a significant tax cut will be implemented. Citizens will be able to count on tax deductions in the amount of 1 thousand yuan ($ 144) to 2 thousand yuan per month depending on the category of expenses. In addition, the Chinese authorities plan to continue to open domestic markets and to achieve a trade agreement with the United States.

The government also noted that, despite the weakening growth of the Chinese economy, Beijing does not intend to embark on full-scale incentives to avoid a negative impact on the yuan.

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USD / CAD: long positions are still in priority

After a small short-term correction, the pair USD / CAD still reached its one-and-a-half-year highs, finally consolidating itself within the 35th figure. The Canadian is under pressure from the oil market, which continues to fall in price actively. At the moment, a barrel of Brent crude is already trading around $ 52, the last time the price was such a low last September. WTI crude oil shows a similar trend, dropping to $ 45. Traders of the USD / CAD pair are obviously nervous, especially on the eve of a long New Year's weekend, when low liquidity contributes to sharp price fluctuations.

In general, the problems of the Canadian currency can be divided into two parts. First, this is the devaluation of "black gold", and secondly, the slowdown of key indicators of the Canadian economy. In fact, the Canadian dollar was without any support. Even the dovish Fed meeting had a temporary impact on the pair. The American regulator announced a rate hike next year, while the Bank of Canada took a more cautious position after a fivefold increase, noticeably softening its rhetoric.s6hOAYtre_W2Xdmb5hBfUdf490ohIWHhlEIZDmblThe oil market is declining for many reasons, but mainly because of well-founded concerns about the impending overabundance of "black gold" amid increasing shale oil production in the United States. According to most analysts, preventive measures by OPEC + are ineffective. According to them, the Cartel members needed to reduce production at least by 1.7-2 million barrels per day. As a result, oil only rose by a few days to $ 62, and then collapsed to current levels. The probable slowdown of the world economy, as well as the alarming signals voiced by the head of the Fed, only heightened the doubts that the demand for oil would remain at least at the level of the current year.

The Canadian dollar reacts quite sharply to the current situation, which is also aggravated by internal factors. Thus, in Canada, there is a shortage of pipeline infrastructure, which is why the delivery of oil produced in Alberta to the NFZ and for export is stalled. Let me remind you that Alberta is the main oil-producing region of Canada, where they recently decided to reduce oil production by almost 10% in order to reduce the excess oil reserves. This measure will be effective from January until all stocks (35 million barrels) are sold. However, due to the lack of pipeline capacity, this task will be difficult to accomplish.

Such perspectives so alarmed Canadians that they came to the protests, demanding that the authorities intervene. As a result, members of the Canadian government agreed to help oil companies by giving them loans of 1.6 billion Canadian dollars, which will be issued through state credit agencies. According to officials, these funds will be enough to purchase new equipment although some experts doubt it.

Despite the measures taken, representatives of the Canadian regulator have already expressed concern that the profitability of the Canadian oil sector has been declining lately, both due to external factors and due to internal factors. Given the continuing decline in the oil market, it can be assumed that the members of the Central Bank will continue to soften their rhetoric. By the way, after the last Fed meeting in the market, they started talking about the fact that the Bank of Canada will not be in a hurry with tightening monetary policy. A month ago, the probability of a January increase was quite large but now, the market has looked more soberly at the prospects for next year. Some experts have even suggested that the Central Bank of Canada will take a pause until 2020, or at least until the end of the next one. In their opinion, the problem is not only in low oil prices but also in reducing real estate investments.xCwPBKQIvoBJkJrxlsFdz3E8m6wOsX2m-MNqFoh1The latest data on inflation and retail sales are also not encouraging. On a monthly basis, the consumer price index in November fell to a negative area, reaching -0.4%, and in annual terms fell to 1.7% (the weakest result since January of this year ).

The retail sales index also did not reach the forecast values, being in the "red zone". The situation was somewhat smoothed over by the Canadian GDP growth report. After falling in October, the indicator showed a positive trend (+ 0.3% m / m and 2.2% y / y). However, this fact is unlikely to deploy a pair of USD / CAD. Traders are fully focused on the oil market, projecting the dynamics of oil prices on the prospects of monetary policy.cxR1u0KdqajHbmR0J3kOZwLaLFwPpjrb811uryIOThus, any more or less significant price pullback can now be used to open long positions until the oil market turns north or at least does not suspend the southern dynamics. All older timeframes indicate the priority of the upward movement of USD / CAD, where the main target is the mark of 1.3610, this is the upper line of the Bollinger Bands on the monthly chart.

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"Bulls" note: the euro will fall to $ 1.09 before it reaches $ 1.22

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The dollar's position is strongly undermined by lowering the Fed's forecasts, the sale of shares and political turmoil in Washington, suggesting a partial government closure since Saturday. On Friday, the US currency fell to most of its colleagues from the "Group of 10", showing the worst dynamics in 10 months. It should be noted that Powell's words on Wednesday that there is "significant uncertainty" regarding future rate hikes have become the most powerful factor in the fall of the dollar.

The lowest point since September 7 (110.81) on the eve of the pair USD / JPY. The Japanese yen was most likely to rise on the weakening dollar this week, as the sale of shares increased the demand for safe-haven assets. The growth of the Japanese currency was 1.8%.

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If on Thursday the movements on the market were powerful, then on Friday, the traders are set to correct. The dollar is partially restored in the absence of fresh fundamental factors. The Nikkei, which holds above the psychological level of 20,000, is hindering the continuation of the yen rally today.

As for the euro, the growth of the last days is encouraging for the bulls in this currency. However, BMO does not have much hope for the growth of the euro in the short term. This is due to the fact that the market has not yet fully considered the political problems of Europe.

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Before the EUR / USD pair goes higher, we will witness its fall to fresh lows, according to banking analysts. In May, there will be elections to the European Parliament, and political uncertainty will certainly put pressure on the euro. The negatives are the deterioration of the prospects for economic growth, the further development of the scenario of Britain's exit from the EU. In such circumstances, EUR / USD will move to 1.09 in the perspective of three months.

The euro will have a chance of recovery after the elections when the focus of market participants will be shifted to other factors. If the ECB does decide to gradually move away from negative rates in the fourth quarter, then EUR / USD may well develop the recovery and complete the year 2019 at 1.22.

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