The euro-dollar pair failed to break through the resistance level of 1.1480 (the upper line of the Bollinger Bands indicator on the daily chart), after which it rolled back as expected to the bottom of the 14th figure. In general, the controversial fundamental background does not make it possible to talk about the unequivocal priority of the northern movement - with the general weakness of the dollar, the single currency is also under the weight of its own problems, including slowing down of key macro indicators and vague prospects of Brexit. As a result, the pair was stuck in the flat, waiting for the next news driver.
The dollar index today moved away from multi-month lows after 10-year treasuries, whose profitability consolidated at 2.70%. Interest in the dollar has slightly increased on the eve of two unrelated events. First of all, today the US president will speak for the first time from the White House with an "address to the nation". It will be about the shutdown, or rather, about the reasons that led to the partial suspension of the work of the US federal departments. Speech is scheduled for 21:00 EST.
It is worth noting that this is not an ordinary event: American presidents, as a rule, used appeals to the nation only to announce important or even momentous decisions. The largest US TV channels will broadcast it live - according to rumors, Trump will declare a state of emergency at the national level to receive funding for "border security", that is, for the construction of the notorious wall on the border with Mexico. Representatives of the Democratic Party, in turn, also demanded to give them airtime, as they are confident in the "false manipulation" by the American president.
In other words, certain anxiety is growing in the markets, having a corresponding effect on the mood of traders. This allowed the dollar to somewhat recover its position, since it is now again viewed as a "safe haven." According to many experts, Trump's idea of a state of emergency is a political adventure and an unprecedented event. After all, it is obvious to all that Trump thus wants to circumvent Congress and "against all odds" to fulfill his election promise (funds for the construction of the wall will be allocated from funds that are intended for use in emergency mode).
It is obvious that such a move by the president will further aggravate relations between the Lower House of Congress and the White House, and the question of financing the construction of a wall under the state of emergency will be the subject of legal proceedings. Meanwhile, US federal agencies have not worked for 17 days (at the time of January 8) - this is the third shutdown period in duration, of which there have been more than two dozen in the entire history of the United States.
In addition to the political battles on the political olympus of the United States, there is another fundamental factor by which the dollar "keeps afloat." This is a trade conflict between Washington and Beijing. Today, the two-day talks ended, but the parties have not yet voiced any comments on this issue. The dollar reacts sharply to the dynamics of the US-China conflict, and in this case the market interpreted the silence of the negotiators in its own way: interest in the greenback increased again.
It should be noted that the growth of the dollar index looks extremely unreliable. Dollar bulls focused on political events, although the main factors playing against the US currency, have not lost their relevance. The Fed still intends to slow down the pace of tightening monetary policy, while key macroeconomic indicators show a negative trend. In particular, Fed Chairman Jerome Powell turned his attention to a significant slowdown in the ISM manufacturing index. The indicator really updated the anti-record, dropping immediately to 54.1 points. On Monday, the ISM composite index for the non-manufacturing sector was also disappointing - the indicator also updated the semi-annual low, being at the level of 57.6 points. In both cases, the figures came out much worse than forecast expectations - so much worse that the head of the Federal Reserve paid attention to this.
Another risk factor for the dollar is Wednesday's publication of the minutes of the December Fed meeting. And although the minutes is unlikely to surprise the market with new information, an extra reminder of the dovish intentions of the Federal Reserve will have a corresponding impact on the dollar.
Thus, the strengthening of the US currency may be short-lived. If the general risk appetite resumes on the market, the EUR/USD bulls will again test the resistance level of 1.1480 and the next level of 1.1515 (the upper limit of the Kumo cloud). It is also worth noting that the single currency today was under certain pressure due to disappointing data on the growth of industrial production in Germany - however, even the Bundesbank in its press release urged not to dramatize the situation due to the influence of seasonal factors. In other words, the news background of tomorrow may give the pair another northern impulse, while the problems of the single currency will be relegated to the background.
The material has been provided by InstaForex Company - www.instaforex.com