Lateral dynamics of the markets will continue until March

Financial markets are still captive to the trade war between the United States and China. The endless comments of the American politicians, including the president, on the topic of the negotiations on trade with China that they are already successful, do not seem to impress. The hollowing of the American side and the silence of the Chinese only indicate that there is really no progress, which means that the risk of raising the customs duties of the American side on March 1 from 10% to 25% for goods from China in the amount of $ 200 billion is becoming more real and more real.

The narrowing of the window of the probability of reaching an agreement makes investors nervous, which is the cause of high volatility in the markets. If at the moment the interest of bidders is maintained as a whole, for example, by the positive reporting of American companies, then there are sharp fluctuations in the foreign exchange market, which, nevertheless, it should be recognized, in pairs where there is a dollar, move in ranges.

Against the background of a state of uncertainty, which is generated not only by the lack of positive news from the talks between Washington and Beijing, but also by clear signs of a slowdown in the global economy and a possible onset of recession in Europe this year, the dynamics of the foreign exchange market are characterized by sudden and sometimes unexpected movements. For example, after at the end of last year, Fed members began to signal a possible pause in raising interest rates, the dollar came under pressure, which was aggravated by a prolonged interruption in the work of the US government, but at the end of last week, the situation radically changed. Investors, using positive data from the labor market, began to actively buy the dollar, and it began to grow in foreign exchange markets, and this dynamics is likely to continue today.

We have previously indicated and now we will confirm that this behavior of the foreign exchange market is not due to local strength or weakness of the US currency. In our opinion, the market dynamics is due to the lack of a clear understanding by investors of what to expect in the near future. That is why there is, in general, the movement of currency pairs, where the dollar is in the lateral ranges. But currencies-opponents of the dollar do not have the "forces" to form a clear and stable trend precisely because of the extreme degree of uncertainty that dominates the markets.

We believe that such dynamics will continue at least until the beginning of March.

Forecast of the day:

The currency pair AUD / USD is trading below the level of 0.7085. We expect the pair to continue to fall to 0.7035.

The currency pair NZD / USD is at the level of 0.6750. We continue to expect it to fall to 0.6690 if the pair does not consolidate above the level of 0.6750.

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